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CASE NO.: Appeal (civil)  3908 of 1999

PETITIONER: Prabodh N. Shah                                          

RESPONDENT: S.B.I. & Ors.                                            

DATE OF JUDGMENT: 08/08/2003

BENCH: Shivaraj V.Patil &  D.M. Dharmadhikari.

JUDGMENT:

J U D G M E N T

Dharmadhikari J.

       The appellant claims to be in occupation as tenant of premises  described as Shop No. 828 in Parekh Market, Opera House, Bombay.  M/s Nikhil Diamonds [Respondent No. 4 herein] admittedly owns  amongst others the said premises in the market.  

       The three Banks  [respondents no. 1, 2 & 3 herein] filed Suit  No. 607 of 1995 in High Court of Bombay  on its Original Side for   recovery of loans advanced by them to respondent no. 4 and its  partners [respondents no. 5 to 11].  

       The Banks as plaintiffs in the said Suit sought appointment of  Court Receiver under Order 40 Rule 1 Code of Civil Procedure  (hereinafter referred to as ’the Code’ for short) for safe custody and  proper management of the properties of the defendants. The Single  Judge of the High Court rejected the prayer.  In appeal the division  bench of the Bombay High Court by its Order dated 03.11.1995,  accepted the prayer of the Banks and appointed a Court Receiver on  the properties which include the premises in question.  

       M/s Nikhil Diamonds and their partners as owners of the  building and the premises therein through their counsel appearing  before the division  bench stated that premises described as Shop No.  828 situated at Parekh Market, Opera House, Bombay, was in  possession of the appellant as a ’licensee/tenant since nearly ten  years’. The division bench while passing the order appointing Court  Receiver, expressed surprise how third parties got into possession of  the premises. The division bench then recorded the statement of   Respondent Nos. 4 to 11 and directed the Court Receiver that if he  would find third parties in possession of the premises of the building,  he would appoint them as agents on usual terms including security  and compensation. The relevant part of the order dated 03.11.1995  of the division bench, deserves to be reproduced which reads as  under :-  "In this usual Bank suit we find that the liability is virtually  undisputed, which runs into more than Rs.8.00 crores. In these  circumstances, the appointment of Receiver at least in respect of the  properties mortgaged or agreed to be mortgaged must follow. We,  therefore, appoint the Court Receiver, High Court, Bombay, as the  receiver in respect of the properties described in Exhibit "C-1" and  Exhibit "G" with a further direction to appoint the Ist Defendant as  the agent in respect of the said properties provided the Ist  Defendant is willing to accept the agency on usual terms, but without  security.

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During the course of arguments Mr. Mehta submitted that Shop No.  826 is in possession of P. Manish & Co. and Shop No. 828 is in  possession of one Mr. P.N. Shah. When we asked Mr. Mehta as to  how these two parties have come in occupation of the premises,  Mr. Mehta explained that as far as Shop No. 826 is concerned, there  is some oral understanding of exchange between P. Manish & Co. , and  so far as Shop No. 828 is concerned, Mr. Shah is a licensee/tenant  since nearly 10 years, we are not at all satisfied with the  explanation of Mr. Mehta. In case the Receiver finds third  parties in possession, it will be open for the Receiver to appoint  those third parties as agents on usual terms including security and  compensation.   [Portion highlighted for emphasis]

       Pursuant to the above order the Court Receiver took symbolic  possession of the properties on 27.3.1996.  After hearing the  appellant and other occupants of the premises he submitted a report  to the Court recommending enhancement of the occupation charges  of the premises in possession of the appellant to Rs. 12,500/- per  month.  For the purpose of fixing the above amount as occupation  charges or royalty, the Court Receiver relied on the Valuation Report  submitted by the Valuer.  

       The present appellant along with other affected occupants filed  Chamber Summons for setting aside the directions of the Court  Receiver made on 12.5.1998. The appellant’s contention before the  Court was that he being statutory tenant on a rent of Rs.2500/-  per  month and fixation of rent being subject regulated by the Bombay  Rents Hotel and Lodging House Rates (Control) Act, 1947 (now  repealed and succeeded by the Maharashtra Rent Control Act, 1999)  the Court Receiver, who had limited power to manage and administer  the suit property, had no right to increase the rent five times from  Rs.2500/- to Rs. 12,500/- per month.  

       The  learned Singh Judge by his order dated 4.8.1998 rejected   objection of the appellant to the report  of the Court Receiver and  upheld enhancement of occupation charges of the premises on the  ground that the appellant’s status as tenant of the premises had not  been accepted by  division bench of the Bombay High Court when it  passed the order dated 3.11.1995 appointing Court Receiver.   According to the learned Singh Judge, the order of the division bench  dated 3.11.1995 was binding and he could not go ’beyond the said  order and the observations made therein.’  He also took into  consideration the fact that the appellant and the other occupants,   who claimed to be tenants, did not file any suit for declaration of their  status and rights as tenants of the premises. The court also  confirmed the quantum of royalty fixed by the Court Receiver on the  basis of the Valuation Report submitted by the Valuer.  The division  bench of the High Court of Bombay  also by its impugned order dated  28.4.1999, rejected his appeal.   The appellant, therefore, is before  this Court in this appeal.  

       Learned Senior Counsel appearing for the appellant assails the  order of the High Court.   It is submitted that the appellant was not a  party to the suit.  He was not heard on his claim of being a tenant of  the premises when the Division bench by its order dated 01.11.1995  appointed a Court Receiver and ensured the occupants of the  premises to be appointed as agents on usual terms of security and  compensation. It is submitted that the appellant being  not a party to  the suit and to the appeal  by which the Court Receiver was  appointed, the order dated 3.11.1995 of the division bench did not  bind the appellant.  

       The learned counsel, further contends that powers of the Court  Receiver are governed by Order 40 of the Code. The  Court Receiver

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has only powers to administer and manage the property during  pendency of the suit. The Court Receiver  has no power to alter the  terms of subsisting tenancy and the rights in that regard of landlord  and tenant which are regulated by Bombay Rent Legislation. Strong  reliance is placed on the decision of this Court in the case of  Anthoney C. Leo vs. Nandlal Bal Krishnan & Ors [1996 (11)  SCC 376].   

       On the opposite side learned counsel appearing for the  respondents/Banks opposes the appeal.  In reply it is submitted that  the borrowers who are defendants to the suit filed by the Banks for  recovery of loan have inducted the appellant and other occupants in  the premises of the building to create obstruction in the recovery of   dues of the Banks. It is submitted that the action is collusive between  the borrowers and the occupants of the premises. It is also submitted  that although the appellant was not a party to the suit and the appeal  in which the Court Receiver was appointed, he was fully heard by the  Court Receiver while fixing the royalty or occupation charges for the  premises.  He cannot now be heard to say that the quantum of  royalty fixed is disproportionate and contrary to his legal rights under  Bombay Rent Act. The decision of this Court in the case of  Anthony  C. Leo (Supra) is sought to be distinguished on the ground that  in  this case status of the appellant as tenant is itself in dispute and he  has not been recognized as tenant by Division Bench of the High  Court.  On behalf of the respondents, reliance is placed on another  decision of this Court in the case of Usha Harshadkumar Dalal vs.  ORG Systems & Ors. [2000 (1) SCC 742].  

       After hearing learned counsel appearing for the parties and on  appreciation of the nature of the controversy involved, we have  formed an opinion that the subject matter of the dispute concerning  the present appellant deserves to be remitted to the High Court on its  Original Side for  a fresh determination â\200\223 may be in a summary way  on the claim of the appellant to the status of tenant in the premises  in question.

       It is undeniable that in the order dated 3.11.1995 of the  Division Bench passed in appeal appointing a Court Receiver, the  statement of the defendants was recorded that the appellant is in  occupation of Shop No.828 as a licensee/tenant since nearly ten  years.  The Division Bench summarily rejected such claim of the  appellant being tenant without any further enquiry or investigation.   The appellant was not a party to the suit before the single Judge or  the appeal before the Division Bench.

       When the Court Receiver after hearing the parties by his report  dated 12.5.1998 fixed the royalty for the shop in occupation of the  appellant at Rs. 12,500/- per month, the appellant approached the  Court for taking out Chamber Summons.  In the Chamber Summons,  which was filed with a prayer to set aside the report of the Court  Receiver, the appellant took a clear plea  that the monthly rent which  he was paying to the landlord was Rs.2500/- and such rent could not  have been increased by the Court Receiver in contravention of the  provisions of Bombay Rent Act which regulates fixation of rent  between the parties.  The learned counsel appearing for the appellant  has pointed out to us specific pleadings in its Chamber Summons  raised on the provisions of Section 7 of the Bombay Rent Act and  ground urged on the limited powers of the Court Receiver under O.40  of the Code.

       The learned single Judge accepted the report of the Court  Receiver and rejected the Chamber Summons solely on the ground  that in the order of the Division Bench dated 3.11.1995 the  statement on behalf of the defendants of the appellant’s status as  tenant in the premises had not been accepted.  The other ground

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mentioned by the learned single Judge in rejecting the Chamber  Summons is that the appellant, who claims to be a tenant, did not file  any suit for declaration of his right and status with regard to Shop  No.828.

       From the resume of the above facts, it is clear that neither  before the Division Bench when it passed the order dated 3.11.1995  nor before the learned single Judge in the course of decision of the  Chamber Summons pursuant to the Court Receiver’s report, the  appellant had a fair chance of establishing even prima facie in a  summary way, his status in the premises as tenant with right of  being protected against increase of rent under the provisions of the  Bombay Rent Act.  The learned single Judge was clearly wrong in  stating in the impugned order dated 4.8.1998 that the order of the  Division Bench dated 3.11.1995 was binding on the appellant and the  court could ’not go beyond the said order and the observation made  therein.’  As has been found above, the Division Bench at the time of  summarily rejecting by its order dated 3.11.1995 the defendants’  claim of the occupation of the appellant as tenant did not notice or  hear the tenant in the appeal.  The order of the Division Bench,  therefore, could not have been held to be binding on the appellant to  conclusively negate his claim to the status of tenant to the premises  in question.  The learned single Judge was also in error in holding  that such a  claim of the appellant to the status of tenant was not  liable to be considered as he had not filed any suit for declaration of  his right and status.   

       The two decisions in the cases of Anthony C.Leo and Usha  Harshakumar Dalal (supra) support the contention advanced on  behalf of  the appellant that he was entitled to a hearing on his claim  even though in a summary way by the court in the proceedings of the  suit taken pursuant to the report of the Court Receiver  recommending enhancement of occupation charges of the premises  in question.           The case of Anthony C.Leo was on different facts where the  Court Receiver sought a direction from the court seeking permission  to remove certain additional constructions and fixtures made to the   tenanted premises by the tenant in occupation of the property but  which was in charge of the Receiver for management and  maintenance. Accepting the objection of the tenant to the proposed  action of Court Receiver’s action this court  observed: "It appears to us that since the court must be presumed to be fully  unbiased in deciding the allegation of unauthorised and illegal  activities of a tenant causing prejudice against the lawful owner in  the matter of preservation and maintenance of the property  pendente lite, the necessity of adjudication of such dispute by  another court by bringing a legal action before it, as a matter of  course, is neither necessary nor expedient.  It however, should be  made clear that if for the purpose of deciding the dispute of  unauthorized and illegal activity affecting maintenance and  preservation of the property in custodia legis it becomes necessary  to determine any right claimed under a statute or flowing from some  action inter parties as may be pleaded and required to be decided, it  is only desirable that the court would refrain from such  determination in the summary proceeding initiated before it on the  complaint of the receiver or a party to the suit and the court will  direct the receiver to seek adjudication of the dispute before a  competent court by bringing appropriate legal action.  Save as  aforesaid, it will not be correct to contend that in no case the court  exercising control and supervision of the property in suit by  appointing a receiver will be incompetent even to pass direction  against a third party for the purpose of preservation of the property,  once such third party pleads defence in justification of his action.   The question of summary adjudication by the court appointing the

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receiver or relegating the receiver  to a regular suit for adjudication  of the dispute concerning third party will depend on the nature of  dispute and the defence claimed by the third party."

       After making the above observation, this Court directed the  Court Receiver to initiate appropriate proceedings against the tenant  under the Rent Act.

       The decision of two-Judge Bench in Anthony C.Leo’s case  (supra) was considered and explained by three-Judge Bench of this  Court in the case of  Usha Harshadkumar Dalal (supra).  It is held  that it is not in every case where the occupant claims tenancy and  protection under the Bombay Rent Act that the Court Receiver can be  directed to resort to the remedies under the said Act.  The action of  the Court Receiver has to be judged by the court with reference to   specific pleadings of the parties and proof produced in support  thereof.  The relevant observations in the case of Usha  Harshadkumar Dadal (supra) on this aspect deserve reproduction:-

"The above observations in our opinion is the ratio of the judgment in  Anthony C.Leo case and it would not be correct to read the said  judgment to mean that if the trespasser or any person who obtains  the possession after the Receiver took over symbolic possession or  actual possession of the property and if such person pleads that he is  a tenant the only remedy for the Court Receiver is to approach the  Rent Court under the Bombay Rent Act.  For instance, a person who is  put in possession as an agent of the Receiver inducts a stranger and if  such a third person claims a tenancy the question is whether the  Receiver should be directed to adopt the proceedings under the  Bombay Rent Act for appropriate declaration and reliefs.  If such a  course is required to be followed, in our opinion, the very object of  order 40 Rules 1 and 3 of the Code of Civil procedure would be  defeated.  The High Court in our opinion has totally misread and  misinterpreted the ratio of Anthony C.Leo case.  We must, however,  make it clear that we are not laying down a broad proposition that in  every case the Receiver can resort to a summary proceeding of this  nature.  The question would have to be decided by the court with  reference to the pleadings of the parties and the proof thereof.  On  a perusal of the judgment of the High Court we find that the High  Court has not considered the various rival contentions raised by the  parties in their pleadings.  The High Court also not considered the  effect of non-renewal of the leave and licence agreement after the  expiry of its period nor has it considered the effect of Sections 15  and 15A of the Bombay Rent Act.  The High Court has also not  considered what would be the effect of changes in the composition of  Suhrid Geigy Trading limited after the Receiver took the symbolic  possession. All these various factual and legal contentions will have to  be considered bearing in mind the provisions of the Bombay Rent Act  as well as the Companies Act."

       From the two decisions of this  Court mentioned above, the  legal position is clear that the claim to the status of tenant raised by  the appellant is required to be considered on its own merits -  may be  in a summary way - by the High Court for deciding the question  whether the action of the Court Receiver in enhancing the royalty  payable for the premises was correct or not and whether the  Receiver or the appellant should be directed to resort to  appropriate legal remedies on the disputed claim of the appellant to  the status of tenant of the premises in question.

       For the aforesaid reasons, the appeal succeeds.  The impugned  order of the learned single Judge, only to the extent of his decision  concerning shop No.828 in occupation of the appellant, is set aside.   The appellant’s case is remitted to the learned single Judge of the  High Court of Bombay on Original Side for a fresh decision on the

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basis of pleadings in the Chamber Summons filed by the appellant  and the report of the Court Receiver.   

       Since the matter arises out of the report of the Court Receiver  fixing the royalty or occupation charges for the use of disputed  premises, the High Court shall make endeavour to take the decision  on the present contested issue as early as possible.   

       In the circumstances, we leave the parties to bear their own  costs in this appeal.