Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4035 OF 2010 [Arising out of SLP(C) No.14199 of 2009]

Amal Kumar Ghosh & Ors. .......Appellants  

versus

Basanta Kumar Almal .....Respondent

O R D E R

R. V. Raveendran J.,

Leave granted.  We have heard learned counsel for the appellants, the  

first  respondent and the Receiver appointed by the High Court, who was  

impleaded on the direction of this Court as the second respondent.

2. The first  respondent  herein  filed a suit  for  specific  performance  

against the appellants herein.  That suit was dismissed by a learned single  

Judge of the High Court in the year 1981.  The first  respondent filed an  

appeal  against  the dismissal  of the suit  before the Division Bench of the

High Court.  During the pendency of the appeal, the parties (first respondent  

and appellants) arrived at a settlement and in terms of the said settlement,  

the  suit  was  decreed  on  5.8.1986.   Under  the  terms  of  settlement,  the  

appellants agreed to sell  90 Kottahs of land to the first respondent or his  

nominees at a price of Rs.10,000/- per Kottah. Clauses 3, 6 and 7 of the  

'Terms of Settlement' which are relevant, are extracted below:

“3. Immediately after  the  filing of these terms of settlement,  the plaintiff  shall  pay to the  defendants  a sum of  Rs.3,00,000/-  (Rupees  Three Lacs only)  in  part  payment  of  the  consideration  and  the  balance  sum  of  Rs.6,00,000/- (Rupees Six Lacs only) shall be paid of the time of  completion of the conveyance and if several deeds of conveyance  are executed for the parts of portions of the said premises then and  in that event the said amount of consideration shall be apportioned  and  such  amount  as  apportioned  shall  be  paid  of  the  time  of  execution of each deed of conveyance after taking into account the  advance payment of Rs.3,00,000/- (Rupees Three Lacs only) paid  by the plaintiff.

6. After  approval  of the  title  by the plaintiff  if  the defendants  fail  to  obtain a certificate  under section 230A of the Indian Income Tax Act, 1961 or fail to  obtain also permission of the competent authority if required under  the provisions of the Urban Land (Ceiling Regulations) Act, 1976  as  required  then  and  in  that  event,  Mr.  Dip  Narayan  Mitra  is  appointed Receiver over and in respect of the said property without  authority and without  remuneration  and is  directed to execute  a  Deed or Conveyance and/or conveyance in favour of the plaintiff  or his nominee as provided for under these terms of settlement.  

7. Simultaneously  with  the execution of the Deed or Conveyance in accordance with these  terms  of  settlement  as  hereinafter  mentioned  the  plaintiff  shall  make over to the defendants or to the Receiver as the case may be  the balance consideration money less any amount which may be  paid or deducted by the plaintiff on account of municipal taxes and  other outgoings in respect of the said property in accordance with  these Terms of Settlement. In that event, the balance consideration   is made over to the Receiver the same shall be made over by the   Receiver to the defendants and upon such payment the Receiver  shall stand discharged and filing of the account by the Receiver  shall be dispensed with.”

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(emphasis supplied) In  pursuance  of  clause  (6)  of  the  Terms  of  Settlement,  the  second  

respondent  herein  was  appointed  as  Receiver.  In  pursuance  of  the  

settlement, after payment of Rs.3,00,000/- to the appellants, the balance sale  

consideration of Rs.6,00,000/- was deposited with the Receiver.

3. By  letters  dated  7.10.1986,  11.12.1986  and  22.12.1986,  the  

appellants informed the Receiver that, in pursuance of the consent decree,  

they  had  transferred  the  suit  premises  to  eleven  nominees  of  the  first  

respondent under different deeds of sale and gave the following instructions  

to the Receiver in regard to  Rs.6,00,000/- deposited by the purchasers :

“It has been agreed between us and Mr. Basant Kumar Almal that  out of the said amount of Rs.6,00,000/- lying presently with you a  sum of Rs.3,00,000/- will be paid to Park Services Pvt. Ltd. of 119,  Park Street, Calcutta towards payment of the statutory liability and  other outgoings in respect of the said premises and such payment  shall be a full and effectual discharge of the payment to be made by  you. Out of the balance sum of Rs.3,00,000/- you are requested to  prepare three cheques of Rs.1,00,000/- each in the names of Amal  Kumar Ghosh, Debabrata Ghosh and Subrata Ghosh respectively.”

(emphasis supplied)

4. In  pursuance  of  the  said  three  letters,  the  Receiver  paid  

Rs.300,000/-  to  the  appellants  at  the  rate  of  Rs.1,00,000/-  each.   The  

Receiver  issued a certificate  dated 2.1.1987 to  the  appellants  wherein he  

confirmed receipt of the instructions of the appellant as follows:

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“As advised and agreed,  I have retained a sum of Rs.3,00,000/-  (Rupees  three  lakhs  only)  for  payment to  Park Services  Private  Limited of No.119, Park Street, Calcutta  on account of statutory  liabilities and other outgoings in respect of Premises No.8/2 Palm  Avenue, Calcutta in terms of three letters dated 7th October, 1986  written by Sri Amal Kumar Ghosh, 11th December, 1986 written by  Sri  Debabrata  Ghosh  and  22nd December,  1986  written  by  Sri  Subrata Ghosh to me.”

(emphasis supplied)

5. But  the  Receiver  did  not  pay  the  sum  of  Rs.3,00,000/-  to  Park  

Services Pvt. Ltd. On the other hand, out of the said sum, he paid a sum of  

Rs.1,08,341.64p.  by  cheque  dated  13.1.1987  to  the  Calcutta  Municipal  

Corporation  towards  the  property tax due in  respect  of  the premises  and  

deposited the balance in a fixed deposit.   

6. On 6.12.1998, the appellants wrote to the Receiver requesting for a  

'Statement of Account' and also information as to whether the Receiver had  

incurred any expenses in respect of statutory liabilities etc. on their behalf.  

This  brought  forthwith  a  reply  dated  28.12.1998  from  the  Receiver  

informing the appellants that as on that date, as Receiver, he was holding a  

sum of Rs.5,29,717/- in fixed deposit towards the balance. Thereafter, the  

appellants wrote to the Receiver on 8.1.1999 requesting for payment of the  

amount.  The Receiver replied on 21.1.1999 that he will release the amount  

to the appellants on their obtaining a 'no objection certificate' from Parks  

Services Pvt. Ltd.  The appellants did not furnish 'no objection certificate'  

from  Park  Services  Pvt.  Ltd.,  but  again  wrote  a  letter  dated  24.3.2005  

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calling  upon  the  Receiver  to  pay  the  amount  that  was  held  by  him  as  

Receiver.  

7. The Receiver sent a reply dated 28.3.2005 to the appellants stating  

that whatever amount that had been lying with him had been made over by  

him to Mr. R.L. Gaggar, Solicitor and Advocate representing the purchasers  

of the premises in compliance with Mr. R. L. Gaggar’s letter dated 1.8.2002  

and, therefore, as far as he was concerned, the chapter was closed and he  

stood discharged.   A copy of  the  letter  dated 1.8.2002 sent  by Mr.  R.L.  

Gaggar, Solicitor acting on behalf of the ‘purchasers’ to the Receiver stated  

that  as  per  the  consent  decree,  the  balance  amount  had  to  be  paid  to  

appellants  and  the  Receiver  will  stand  discharged  on  such  payment  and  

filing  of  the  account.   Having  said  so,  Mr.  R.L.  Gaggar  requested  the  

Receiver to encash the fixed deposit amount and pay the same to him and  

confirmed that he will receive the same on behalf of the purchasers. It is  

pursuance  of  this  letter,  that  the  Receiver  paid  a  sum of  Rs.9,23,998/36  

(which was the balance amount with accrued interest till that date) to Mr.  

R.L. Gaggar on 23.8.2002.   

8. In  these  circumstances,  the  appellants  made  an  application  to  the  

High Court seeking a direction to the Receiver to render accounts and make  

payments of the amounts due to them.  The High Court, after hearing the  

parties  and  the  Receiver,  passed  the  impugned  order  dated  8.12.2008,  

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holding that the reference to Park Services Pvt. Ltd. in the appellants’ letters  

dated  7.10.1986,  11.12.1986  and  22.12.1986  was  in  discharge  of  the  

obligation of the appellants to the first respondent in terms of the consent  

decree on account of municipal taxes and other outgoings and therefore the  

application was liable to be dismissed.  The said order is challenged in this  

appeal.

9. The order of the High Court  discloses that the High Court has not  

dealt  with  the  crucial  aspect  as  to  whether  the  Receiver  discharged  his  

obligations.  Paragraph 7 of the 'Terms of Settlement' required the balance  

amount to be paid to the appellants. That was not complied with.   It   is  

true   that    by letters dated  7.10.1986,  11.12.1986 and 22.12.1986,  the  

appellants had instructed the Receiver to pay Rs.3,00,000/- to Park Services  

Pvt. Ltd. towards statutory liabilities and other outgoings in regard to the  

property. But the Receiver did not comply with the said instructions as he  

admitted  that  the sum of Rs.3,00,000/-  was not  paid  by him to  the  Park  

Services  Pvt.  Ltd..   Nor  did  Park  Services  Pvt.  Ltd  make a  demand  for  

payment of the said amount by the Receiver.  There is also no explanation  

from  the  Receiver  as  to  why  he  directly  paid  Rs.1,08,341.64p.  to  the  

Calcutta Municipal Corporation as that was not part of the instructions in  

the  letters  dated  7.10.1986,  11.12.1986  and  22.12.1986.   The  Receiver  

should have either  complied with the terms of settlement  or should have  

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complied  with  the  instructions  contained  in  the  letters  dated  7.10.1986,  

11.12.1986 and 22.12.1986.   He did neither.   On the other  hand,  he has  

chosen to  release the amount to  the plaintiff  in the  suit  (first  respondent  

herein), acting on the request of his counsel Mr. R. L. Gaggar. Neither the  

consent decree nor the appellants’ authorization required the amount to be  

paid to the ‘purchasers’ or the first respondent. There was also no order of  

the court to pay the amount to first respondent.   The High Court has not  

examined these aspects.  We are, therefore, of the view that the order cannot  

be sustained.

10. It  is  relevant  to  note  here  that  when  appellants  (the  vendors)  

demanded the amount, the Receiver instructed the appellants to furnish a 'no  

objection certificate' from Park Services Pvt. Ltd. for releasing the amount.  

But when Mr. R.L. Gaggar, the Solicitor for the first respondent, wrote to  

him confirming that the balance amount had to be paid to the appellants, but  

made a demand that the Receiver should pay the amount to him acting on  

behalf of the ‘purchasers’, the   Receiver   did   not   insist   upon a 'no  

objection certificate' or a confirmation from the appellants but proceeded to  

directly pay the amount to the Solicitor for the first respondent. It should be  

noted that first respondent is different from the eleven purchasers and also  

different from Park Services Pvt. Ltd. There is also no material to show that  

except Rs.108,341/64 which was due as Municipal Tax, there was any other  

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outgoing in respect of the premises.  

11. We  are  unable  to  comprehend  how  the  sale  price  in  regard  to  a  

completed sale, entrusted to the Receiver, for payment to vendors, could be  

refunded to the agreement holder who nominated the purchasers. The sum  

of Rs. 3,00,000/- was left with the Receiver to pay to Park Services Pvt.  

Ltd., towards statutory dues and other outgoings in regard to the premises.  

Admittedly, Park Services Pvt. Ltd. never claimed from the Receiver, any  

amount towards any outgoings in regard to the premises. The only outgoing  

was  found  to  be  Rs.1,08,341/64  due  as  Municipal  Tax  which  was  paid  

directly by the Receiver to the Municipal Corporation. The instruction by  

the appellants to pay Rs.3 lakh to Park Services Pvt. Ltd. towards outgoings  

was an unilateral instruction to the Receiver and when the said amount was  

not claimed by Park Services Pvt. Ltd., the appellants were entitled to issue  

modified instructions by seeking payment to themselves.  But the demand  

for payment was ignored and the Receiver chose to pay the amount to the  

purchasers without any satisfactory explanation.  

12. Receivers  appointed  by  court  are  expected  to  submit  periodical  

accounts/reports to the court with copies to parties. If their assigned task is  

completed, they should seek discharge. They cannot continue as Receivers  

for  decades,  without  doing  anything  and  holding  on  to  the  amounts  

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entrusted  to  them in  trust.  When  courts  appoint  Receivers  either  during  

pendency of the proceedings or post decree, the courts should ensure that  

the Receivers submit periodical reports and that once their assigned task is  

completed, they are discharged. If it is not done, it will cause unnecessary  

hardships and may give room for avoidable irregularities. Each court will  

have to keep track of Receivers (as also commissioners) appointed by it and  

ensure  that  they  duly  perform  their  functions  in  time  and  thereafter  

discharge them.

13. When any money belonging to the parties is entrusted to the Receiver,  

he should deal with it as per the directions of the court. If the appointment is  

post-decree, he should seek instructions from the court as to the manner of  

disposal of the funds entrusted to him, particularly when the Receivership is  

dormant  and  the  amount  has  been  lying  with  him  unclaimed  for  a  

considerable period. A Receiver cannot assume that unless the court directs,  

he need not submit accounts, or that he need not account for the amounts  

lying  with  him.  If  a  Receiver  pays  the  amount  belonging  to  vendor-

defendant,  to  someone  else  without  the  authority  of  the  court  or  

authorization from the vendor-defendant, it will amount to gross negligence  

or  wilful  default  on  his  part.  Consequently,  he  may  become  personally  

liable. If the part of the sale price which he was holding, is lost by payment  

to a wrong person, he will be answerable to the court and the vendor for the  

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amount.  

14. During  hearing,  Mr.  K.V.  Viswanathan,  learned  senior  counsel  

appearing  for  the  first  respondent  admitted  and confirmed  that  Mr.  R.L.  

Gaggar had received the amount from the Receiver on behalf of the first  

respondent  and that  the first  respondent  had in turn received the amount  

from his counsel Mr. R.L. Gaggar.  He further stated on instructions,  that  

the first respondent will deposit the entire sum of Rs.9,23,998/36 which was  

received  from the  Receiver,  before  the  Calcutta  High  Court,  within  one  

month from today, for being disbursed in accordance with the order  that  

may be made by the High Court.   

15. Having  regard  to  the  facts  and  circumstances,  and  the  aforesaid  

submissions, we allow this appeal and issue the following directions:

(i) The  order  dated  8.12.2008  of  the  High  Court  is  set  aside  and  the  

matter is remitted to the High Court.

(ii) The first respondent is directed to deposit a sum of Rs.9,23,998.36p.  

with the Calcutta High Court within one month from today. The question of  

liability  of  first  respondent  to  pay  interest  on  the  said  amount  from  

23.8.2002 to date of such deposit, shall be decided by the High Court. The  

amount to be deposited by the first respondent shall be kept in fixed deposit  

until the disposal of the appeal.

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(iii) The High Court will examine afresh the entire issue as to whether the  

Receiver  had  discharged  his  functions  properly  and  complied  with  the  

directions. If it is found that he has not complied with the same, appropriate  

action may be initiated. The High Court however will take note of the fact  

that the Receiver had at no time converted the funds to his personal use, but  

had maintained it separately.

(iv) The High Court will also decide as to who is entitled to the amount  

and pass appropriate orders. If the appellants are found to be entitled to the  

amount, then it is needless to say they will be entitled to it with interest upto  

the date of payment.  

(v) The  High  Court  shall  give  full  opportunity  to  the  second  

respondent  to  explain  his  conduct  as  Receiver,  and  decide  the  issue  

uninfluenced by the prima facie findings recorded by us in regard to his  

conduct in dealing with the funds entrusted to him.  

……………………….J.       ( R.V. RAVEENDRAN )

                                      ……….…...................J. (R.M. LODHA)

New Delhi; April 28, 2010.                 

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