TMI Blog1964 (10) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the plaintiff made an application on the 14th of August 1963 for appointment of a receiver alleging therein several acts of waste, negligence, damage, loss committed by the defendant in respect of the suit property. The defendant filed his answer to that application and the Court below on hearing both sides refused to appoint a receiver. Against that the plaintiff has brought this appeal to this Court. 2. The point involved in this appeal is simple and straight: Has the plaintiff made out a strong prima facie case? Neither party adduced any evidence. The written statement has been filed by the defendant since the impugned order was passed in the trial court. One has to judge if the plaintiff has any fair chance of success in his case. In other words, whether he had made out a prima facie strong case in his favour so that the question of appointment of a receiver may be decided on that basis. It is well known that a receiver is to be appointed as a matter of course when a partnership is dissolved under the orders of a court, or if the partnership has already been dissolved and any of the parties has come to the court for seeking his reliefs due to him as an ex-partner. A recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a party asks for the appointment of a receiver in respect of the subject matter of a suit. Some of those principles are that the applicant must have special equity in his favour and make out a strong prima facie case against the opposite party and show that he has a fair chance of success in the suit. If there is any apprehension of any danger or waste to the suit property or where the applicant makes out that the property is exposed to manifest peril, the court will feel inclined to prevent that by putting a receiver in charge of the same. A mere shadowy claim woven in the plaint with allegations which are inconsistent and apparently misleading cannot invoke the court's assistance in this respect. The cases of Bhupendra Nath v. Manohar Mukherjee, AIR 1924 Cal 456 at p. 458; P.C.L. Choudhuri v. K. Singha and H.C. Dutt, AIR 1922 Pat 318; Banwari Lal v. Moti Lal, AIR 1922 Pat 493; Kunhan Menon v. Kannan Menon, AIR 1924 Mad 482; Benoy Krishna v. Satish Chandra, 55 Ind App 131: (AIR 1928 PC 49); Alkama Bibi v. Istak Hussain, AIR 1925 Cal 970; Krishnaswamy v. Thangavelu, (S) AIR 1955 Mad 430 and Muniammal v. Ranganatha Nayagar, (S) AIR 1955 Mad 571 lay down such tests. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, constitute the property of the partnership. Property and rights and interests in property acquired with money belonging to the firm are also deemed to have been acquired for the firm, unless the contrary intention appears. In other words, either the partners can contribute property and their rights and interests in property to the partnership, or the partnership may acquire after its formation by purchase or otherwise any property. In the instant case the leasehold was acquired by the plaintiff and the defendant as co-lessees from the Jharkhand Mines and Industries, Ltd. by a registered indenture on the 8th of June 1951 for 99 years. This was a sub lease. The agreement of partnership between the plaintiff, defendant and another person Shibtara Banerji was formed on the 12th June, 1957 by a registered instrument. Shibtara Banerji retired soon after from the firm. Neither the deed of lease nor the partnership agreement mentioned that the sub-lease was taken by the plaintiff and defendant as partners or for the partnership. Learned Counsel for the defendant-respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees. Learned counsel for the defendant conceded that to be the position in law, even if the sub-lease is taken to have been acquired for that partnership. If the plaintiff and the defendant were the sublessees in their own right after the termination of the 1951 partnership, then either they should have contributed their lease hold interest in the suit property to the new partnership when it was formed on the 12th of June 1957 or the new partnership might have acquired the same from them after its constitution. Neither of the things has been stated in the plaint, application for receivership, show cause petition by the defendant or in his written statement filed later in the case. The partnership agreement of 1957 also does not state that. It is true that no written document or registered instrument is necessary for contributing any immoveable property or rights and interest in such property by a partner to a partnership (see Firm Ram Sahay Mall Rameshwar Dayal v. Bishwanath Prasad, AIR 1963 Pat 221). But all the same there must be evidence that such property was originally brought into stock of the firm. The pleadings, the deed of partnership of 1957 and the deed of release o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a transfer. There can be little doubt that the change of ownership from that of individuals to a partnership firm will be a a transfer. What will be the ultimate fate of such property on the dissolution of the partnership will not affect the nature of the transaction at the time such property is brought to the stock of the partnership. Rule 37 of the Mining Concession Rules, 1960, made under Section 13 of the Mines and Minerals (Regulation and Development) Act, 1957, prohibits any transfer of mining lease (which includes a sublease also) or any right, title and interest therein to any person (partnership is one in that sense) without the previous consent of the State Government in writing. Section 19 of the Act lays down that any mining lease granted, renewed or acquired in contravention of any provisions of the Act or the rules and orders made thereunder will be void and of no effect It follows, therefore, that before any partner could bring his mining leasehold property or interest therein to the stock of a partner-ship, he must obtain the consent of the State Government in writing previous to that. If it is not done, then such transfer will be void and the leasehold inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint owners with other partners, and, as such, he can transfer his interest in the immoveable property during the continuance of partnership though subject to the terms of the agreement of partnership in regard to such property; in the present case the deed of release being a registered instrument if taken as a transfer of the plaintiff's interest in the leasehold as a partner, that will be void as it was without the previous consent of the State Government. Learned counsel for either side cited several decisions in respect of their respective contentions, but I do not think it necessary at this stage to refer to or deal with them. For whatever reason, if the parties accept the position that by the deed of release the plaintiff did not part with his leasehold interest, then that interest of his still subsists on the finding that the leasehold aid not become the stock the partnership firm. 10. It will be enough to say here that the concept of realty as distinguished from personalty under the English law and by the English lawyers and jurists is not always identical with what the Indian Law and lawyers understand. The idea of owner-ship of real estate by a Hindu coparcena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the Legislature has used them. In short, learned counsel wanted to propound that in this statute the import of the words void and of no effect should not be taken in the sense of absolute avoidance, if there has been any violation of any of the provisions of the Act or the Rules in any particular transaction. 11a. Before I proceed to examine this argument, it will be convenient to reproduce Rule 37 and Section 19: Rule 37. Transfer of lease.--(1) The lessee shall not, without the previous consent In writing of the State Government, which in the case of a mining lease in respect of any mineral specified In the First Schedule to the Act shall not be given except after previous approval of the Central Government- (a) assign, sublet, mortgage, or in any other manner, transfer the mining lease, or any right, title or Interest therein, or (b) enter into or make any arrangement, contract or understanding whereby the lessee will or may be directly or indirectly financed to a substantial extent by, or under which the lessee's operations or undertakings will or may be substantially controlled by, any person or body of persons other than the lessee. (2) Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is also to be possessed with a certificate of approval and income-tax clearance certificate. In order to ensure a proper check about the person who may actually control the working of any particular mine, the Mineral Concession Rules ensure that before a transfer of any mining lease is made the transferee's suitability must necessarily undergo the scrutiny of the State Government and in some case that of the Central Government; and that is why the transferor has been prohibited from making any such transfer before obtaining the consent of the Government in writing. 12. To find out the proper import and implication of any particular provision In an enactment, one has to keep in view the object for which that provision is made. One has to look to the import of the provision and the relation of that provision to he general object intended to be secured by the Act. Upon a review of the case in that respect one as to decide whether the statutory provision is what is called imperative or merely directive. View-ed in that light it cannot be accepted that Rule 37 is of a directive nature. If the requirements under that rule are not fulfilled, that will frustrate the very purpose f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute was to prevent excessive and deceitful gaming and for that purpose the Act provided that the securities should be void to all intents and purposes. The plaintiff in that action wanted to recover the bill, the consideration of which was money lost at play. The question arose whether that bill of exchange would be taken as void. Chief Justice Abbott observed: But, I think we must understand the language of the Legislature with reference to the object which they then had in view viz. the prevention of gaming and that will be effectually accomplished, by holding the securities to be void for any purpose of enforcing payment of the money won at play. The drawer, therefore of such a bill of exchange cannot maintain any action against the acceptor. Now if he could, by passing the bill to a third person, enable him to sue the acceptor, that would be within the mischief of the Act. It follows, therefore, that no person deriving title through the drawer, can be in a different situation from him so as to sue the acceptor .... But there is no case upon the Statute of Usury, where a drawer, after having parted with a bill for a good consideration, can afterwards set up as a def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of money advanced to him on the joint promissory note of himself and his sister. The proceeds of this advance were carried to the partnership account. It did not appear that B had any knowledge of that, although as partner, he took in fact the benefit of that advance. B became then bankrupt. The trustee in his bankruptcy claimed as against the bank a declaration that the trustee was entitled to the leasehold house. The argument was that the settlement was a voluntary settlement without valuable consideration and that, as such, was void under Section 47 of the Bankruptcy Act. Therefore, the bank could not make any title through or under the donee of the settlement. For the bank it was contended that the valuable consideration given by them related back so as to prevent the settlement being without valuable consideration. It was further contended that the word void in Section 47 meant voidable and, therefore, a purchaser for valuable consideration without notice prior to the avoidance of the settlement has a better title than the trustee, and that the fact that Section 47 contains no proviso in favour of purchasers for value, like that contained in another part of Section 48, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the present case. Similarly, the case of Valentini v. Canali, (1890) 24 QB 166 in which the Infents' Relief Act, 1874, was under consideration, can be of little help to the defendant's contention. Section 1 of that statute said that all contracts henceforth entered into by infants for the repayment of all accounts stated with infants shall be absolutely void. The fact of that case was that the plaintiff as infant agreed with the defendant to become tenant of his house and to pay certain sum for the use of the furniture therein. The plaintiff had paid the defendant part of this sum and occupied the house and used the furniture. He later on sued for recovery of the money on the ground that the contract was void under Section 1 of the Infants' Relief Act, 1874. Chief Justice Lord Coleridge held that when an infant had paid for something and had consumed or used it, it was contrary to natural justice that he should recover back the money which he had paid. He could not give back this benefit or replace the defendant in the position in which he was before the contract was made. The object of this statute, according to Lord Coleridge Chief Justice, seemed to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 37 is a reasonable restriction on one's power of disposal of property in the interest of the general public and its essential part is in regard to the previous consent of the Government. 14. Learned Counsel contended that in the present ease the defendant was a co-lessee with a certificate of approval and income-tax clearance certificate. A transfer of an interest in a mining lease to him only needed, at the most, a formal consent of the State Government under Rule 37. Absence of that has not caused any real mischief and in that view, the contravention of this Rule should be lightly viewed and the penalty provided under Section 19 should not be attracted. The amount of real injury or mischief by a contravention in a particular case should determine to what extent, if at all, the statutory penalty should be visited upon the contravener. I am afraid such a view cannot be accepted. Either a statutory restriction is reasonable or unreasonable, legal or illegal, valid or invalid. If it is valid then it has to be observed in disregard of that it may lead to different results in different cases; otherwise, there will be no certainty of the application of law and that is one thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e colliery was in operation on the date of that notification. If the working of the colliery was in conformity with the Rules framed under Mines and Minerals (Regulation and Development) Act 1948, then that was to be exempted from the operation of that notification. The estate where the lands comprising the colliery were situated had admittedly vested in the State under the Bihar Land Reforms Act, prior to the transfer in favour of the petitioner in that case. On the vesting of the estate, the lease in favour of the petitioner's predecessor became a statutory grant of mining lease in respect of the land in which the minerals belonged to Government and, therefore, Rule 37 of the Mineral Concession Rules was attracted and became applicable to such a transfer in favour of the petitioner. The transfer was not made admittedly with the previous sanction of the State Government as required under that rule. Therefore, it was illegal. This view of the Court clearly manifests that failure of Rule 37 would render a transfer invalid. From the other case, ILR 41 Pat 412 it is also manifest that even a Court has to secure previous permission of the State Government before it could put to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 19. This argument is equally unsound. The whole purpose of Rule 37 is to prevent a person not approved by the Government from working a mine or carrying on mining operations in a particular mine area and that is bound to be taken to be within the reference under Section 19. If learned counsel's argument in this respect would be accepted, the result will be that a lessee can very well hand over the working of a mine to another person by merely transferring his right, title or interest in the lease. That will only be a device to avoid the requirements of the statute and cannot be upheld. In this case, if there was any transfer, it was of the sublease, which is included in the definition of lease in the Act. 16. Learned counsel again contended that assuming that there was failure of Rule 37 in the present case and that it would render the transaction void under Section 19, the circumstances of the case prove that it has been subsequently ratified by the State Government. The question of ratification can only arise in case of a voidable transaction but not in the case of a void contract. If a contract is void there will be little scope for its ratification by any of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57 partnership or in favour of the defendant, did any act with the intention to ratify that illegal transfer. It will be useful in this connection to refer to the case of Premila Devi v. Peoples Bank of Northern India Ltd., AIR 1938 PC 284. 17. Another line of approach on behalf of the defendant before us was that the plaintiff having been a party to an illegal transaction cannot now turn back and challenge that transaction. Learned counsel wanted to rely on the maxim in part delicto potior est conditio possidentis and cited several decisions in support of his argument. That doctrine only means that one will not be assisted by any Court to derive any benefit out of a contract or a transaction to which he was a party and which was in violation of a statute or opposed to public morals or public policy. I cannot make out how in the present case the plaintiff can be said to be taking such a position. He wants to challenge the transaction, if any, which was in contravention of the statute or which was the result of practice of fraud, misrepresentation and the like. He does not want to gain any benefit out of that. I do not think it necessary to refer to the cases cited in this connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other partner may still carry on the partnership for the limited purpose although the partnership would stand dissolved on the retirement of one of the two persons. But in view of the fact that the defendant was in charge of the affairs of the partnership assets on the date of the suit and in that connection was operating on the suit leasehold property, it will be proper not to oust him from that position completely. If by any arrangement the interest of the plaintiff can be safeguarded and the suit property can be preserved while the defendant continues his position as before in regard to that, neither party is likely to suffer. In that view and in consideration of all the circumstances of the case, the defendant shall be appointed as the receiver of the suit property both in regard to the leasehold as well as the partnership assets subject to the control of the trial court. The plaintiff will be entitled, if he so chooses, to keep a man authorised by him at his own cost on the suit property to keep the plaintiff informed of the activities of the defendant in relation to the suit properties. He will have access to all parts of the suit premises including the pit mouth, depots an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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