Holding

A contractual liability incurred by a statutory receiver in the management of a property attaches to that property and is enforceable against the person in whose name the property is vested.

Summary

M/s Mahalchand M. Mothari filed two suits in 1982 seeking damages for non‑supply of sugar that it had ordered from the statutory receiver managing Maheshwari Khetan Sugar Mill. The receiver, appointed by the Collector under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, entered into the contracts in February 1979 while a stay order on the Uttar Pradesh Sugar Undertakings (Acquisition) Ordinance, 1971 was in force. The mill had been deemed transferred to the Uttar Pradesh State Sugar Corporation on the "appointed day" of 3 July 1971 under Section 3 of the Ordinance/Act. The corporation argued lack of privity of contract and that the receiver acted for the former owner, not for it. The Supreme Court held that the receiver was a statutory receiver whose liabilities attach to the property he manages; such liabilities are recoverable from the owner of the property, i.e., the corporation, regardless of privity. Consequently, the corporation cannot escape liability and the trial court’s decrees were affirmed.

Issues considered

The nature and legal effect of a statutory receiver appointed under the 1950 Zamindari Abolition Act.
Whether contractual liability arising from the receiver's breach of contract attaches to the property and is enforceable against the corporation in whose name the property stands vested.
Whether the stay order on the 1971 Ordinance affected the "appointed day" and the vesting of the mill in the corporation.
The necessity of impleading the receiver as a party to the suits.

Legislation cited

Companies Act, 1956s. 617
Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950s. 279(1)(g), s. 286A

Subjects

statutory receivercontractual liabilityprivity of contractvesting of propertyappointed daystay orderU.P. Sugar Undertakings ActZamindari Abolition Actreceiver's liability

Judgment

U.P. STATE SUGAR CORPORATION AND ANR.
A v.
M/S. MAHALCHAND M. MOTHARI AND ORS.

OCTOBER 29, 2004

[D.M. DHARMADHIKARI AND P.P. NAOLEKAR, JJ.]
B

Civil Appeal Nos. 357-358 .of 1999:

U.P. Sugar Undertakings (Acquisition) Ordinance 197 I/Act 197I -
C Section 3-U.P. Zamiridari Abolition and Land Reforms Act, 1950-Sections
279(1) (g), 286A-Receiver of a mill appointed by Collector for recovery of
dues of cane growers-Statutory receiver-Powers of-Held, contractual
liabilities arising against the Receiver is not merely enforceable against him
but is a liability attached to the property in his receiver-ship-It can be
recovered from the party in whom the property stand vested-Further Held,
D since the receiver was not in possession of the property, he need not be
impleaded in the suit.

Words and Phrases-'Receiver'-'Statutory Receiver'-Meaning of

Respondent No. l filed two suits in 1982 in the Court of Assistant
E District Judge, Guwahati for recovery of damages caused to it as a result of
non-supply of sugar by the Receiver who was managing the Sugar Mill for
the orders placed by the plaintiff for supply of different quantities of sugar in
the year 1979 on payment of advance money. The prices of sugar having gone
up in the period of supply under the contract, the Receiver neither sent the
F quantity of sugar nor returned the advance price paid by the plaintiff. The
erstwhile Mill owner and the Appellant Corporation were made defendants to
the suits because by tliat time, Sugar Mill already stood transferred to, vested
in and been in actual possession of the Corporation in accordance with section
3 of the U.P. Sugar Undertakings (Acquisition) Act, 1971.

G The Appellant repudiated the claims made in the two suits pleading inter
alia that there was no privity of contract between the plaintiff and the
Corporation that the Receiver was managing the Sugar Mill on the date of
alleged non-supply of quantity of sugar; and that the erstwhile owner of. the
Sugar Mill had filed writ petition in the High Court of Allahabad challenging
the constitutional validity of the Uttar Pradesh Sugar Undertakings
H
762
U.P. STATE SUGAR CORPN. v. MAHALCHAND M. MOTHARI 763
' (Acquisition) Ordinance, 1971 in which operation of the Ordinance was stayed A
and the possession of the Sugar Mill was restored to the erstwhile owner on
specified terms and conditions of the.order of stay.

The Assistant District Judge, Guwahati decreed both the suits holding
inter alia that the Corporation cannot avoid its liability towards the claims of
the plaintiff as the Sugar Mill stood transferred to and vested in it from the B
'appointed day' i.e. 3.7.1971 under Section 3 of the Act.

The Appellant preferred two appeals to the High Court of Guwahati
which were allowed solely on the ground that the suits were not maintainable
as the Respondent No. l was not a registered partnership firm and was,
therefore, incompetent to sue as a firm. This Court, on appeal, remitted the C
appeals to the High Court for their decision on merits.

After remand, the High Court dismissed both the appeals of the
Corporation and confirmed the decrees granted by the trial court.

Before this Court, the Appellant contended that there was no privity of D
contract between plaintiff and the Corporation, therefore, it could not be held
liable towards the losses and damages caused to the plaintiff by alleged breach
of contract committed by the Receiver in not supplying the sugar, that for
transferring and vesting of Sugar Mill in the Corporation, the 'appointed day'
fixed under Section 3 of the Ordinance/Act was 3. 7.1971 but the erstwhile E
owner of the Sugar Mill challenged the validity of the Ordinance in the
Allahabad High Court and obtained a stay order on 09.7.1971 where under
the Receiver, who was already managing the Sugar Mill as a nominee of the
Collector under section 279(1 )(g) read with Section 286A of the Act of 1950,
continued in the management of the Sugar Mill for and on behalf of the
erstwhile owner that when two orders for supply of sugar were alleged to have F
been placed on 02.2.1979 and 09.2.1979 by the plaintiff, the Receiver was in
possession and management of the sugar mill, and that he was acting not for
the Corporation but for and on behalf of the erstwhile owner of the mill who
was in de Jure possession of the mill.

The respondent contended that the order obtained by the erstwhile owner G
of the Sugar Mill on 09.7.1971 staying operation of the Ordinance had been
vacated by the High Court on 29.7.1974 on the application of the Receiver,
that therefore, the Sugar Mill would be deemed to have stood transferred to
and vested in the Corporation on the 'appointed day' 03.7.1971, that the orders
for supply of sugar were placed after the stay against Ordinance had been H
764 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A vacated by the High Court, that therefore for the acts and omissions of the
Receiver, the Corporation, in whom the Sugar Mill stood vested, could not
have been allowed to repudiate its liability towards the breach of contract
committed by the Receiver.

Dismissing the Appeals, the Court
B
HELD: 1. From the proceedings of the writ petition, it is clear that
Receiver entered into alleged contract for Supply of agreed quantities of sugar
to the plaintiff respondent on 2.2.1979 and 9.2.1979 when stay order dated
9.7.1971 passed in the writ petition was in operation. (770-E-F)

c 2. From the provisions of the Act of 1950 and the Ordinance/Act, it is
clear that the Receiver who was in the management of the Sugar Mill on the
'appointed day' was not a Receiver appointed by any Court He was a Receiver
appointed by the Collector under the Act of 1950 and on the vesting of the
Sugar Mill on the appointed date3.7.1971, was in possession and management
D of the Sugar Mill not as an agent either of the erstwhile Sugar Mill owner or
the corporation. He was a statutory Receiver appointed under section 279(l)(g)
read with section 286-A of the Act of 1950 for the purpose of recovery of
dues of the cane-growers in the manner as arrears of land revenue. He was
allowed to continue in management of the Sugar Mill by the High Court on
the terms and conditions imposed in the order of stay passed during pendericy
E oftlie writ petition. (776-A-B-CJ

3. The liabilities incurred by a statutory Receiver in the course of
management of the Sugar Mill are liabilities attached to assets or properties
of the Sugar Mill because neither the erstwhile owner nor the Corporation,
F which later acquired the Sugar Mill, was responsible for the alleged losses
or damages caused to the plaintiff by the alleged breach of contract committed
by the receiver in non-supply of the quantity of sugar. (776-C-D-F(

4. A statutory Receiver is merely the legal representative of the property
placed in his hands as such. In determining his liability the court will only
G determine the liability of the property. It is not material whether the liability
existed before or has accrued since his appointment. A contractual liability
arising against the receiver during the course of management of the property
for acts or omissions committed by him for the benefit of the property, is not
merely enforceable against the receiver but is a liability attached to the
property in his receivership, which can be recovered from the property and
H through the person in whom the property vests. (776-H; 777-A-Bl
U.P. STATE SUGAR CORPN. i·. MAHALCHAND M. MOTHARI 765

Corpus Juris Secundum Vol. 75 Articles 325 & 187 at pages 833 and A
1000 and Words and Phares Permanent Edn. Vol. 36 at Pg. 742 from
"Representative of Property", referred to.

5. The liability arising from breach of contract committed by the
Receiver was not of the Corporation. It was an obligation attached to the
property of the Sugar Mill which was under the management of the Receiver, B
initially under the 1950 Act and continued under the order of stay passed by
the High Court. Since the liability towards breach of contract was attached to
the sugar mill under the management of the Receiver, the Corporation in
whom title of the sugar mill stands vested under Section 3 of the Act cannot
avoid the liability - it being a burden on the said property and recoverable C
from it. (777-G-H; 778-A)

6. The legal status and position of a receiver aprointed by the Court
and a Receiver appointed under in a Statute are different. In the instant case,
the rlo!ceiver appointed under the Act of 1950 and continued by the High Court
on terms and conditions contained in the stay order during pendency of the D
writ petition, was a statutory receiver and his rights and liabilities were
attached to the property for the management of which he was appointed. The
receiver was not an agent of either of the parties. For his acts and omissions,
a third party could raise a claim against the party in whom the property stood
vested and to which the liability was attached. (778-E-FJ
E
7. The suits were filed by the plaintiff claiming losses and damages for
breach of contract committed by the receiver within the prescribed period of
limitation. On the date of filing of the suits, the receiver was not in possession
of the Sugar Mill as the actual possession of the Sugar Mill had been
restored to the Corporation. It was, therefore, not necessary for the plaintiff F
to implead the receiver as a party to the suits. The Receiver could not be
made personally liable for his acts and omissions in the course of management
of the Sugar Mill and which are not alleged to be malafide. As none of the
parties i.e. the erstwhile owner or the Corporation is personally liable for
the breach of contract committed by the receiver in the course of management
of the Sugar Mill, the contractual liability of the receiver towards the G
plaintiff is recoverable from the property of the Sugar Mill, and therefore,
through the Corporation in whom the property stands vested under the Act.
f778-G; 779-A-B/

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 357-358 of
1999. H
766 SUPREME COURT REPORTS (2004) SUPP. 5 S.C.R.

A From the Judgment and Order dated 16.7.98 of the Gauhati High Court
at Assam in F.A. Nos. 48 and 49 of 1989.

Pradeep Misra for the Appellants.

Arvind Minocha and R.K. Agarwal for the Respondents.
B
The Judgment of the Court was delivered by

DHARMADHIKARI, J. By Uttar Pradesh Sugar Undertakings
(Acquisition) Ordinance, 1971 which later became an Act No. 23 of the same
name [hereinafter referred to shortly as the 'Ordinance/Act'], Mis Maheshwari
C Khetan Sugar Mill Pvt. Ltd., [Respondent No. 2 herein] at Ramkola, District
Deoria in the State ofUttar Pradesh, was acquired by the appellant U.P. State
Sugar Corporation [shortly referred to as 'the Corporation'].

On the date of coming into force of the Ordinance, the Sugar Mill was
under management of Receiver appointed on 04.3.1970 by the Collector for
D recovery of dues of cane-growers as arrears of land revenue in accordance
with section 279(1)(g) read with Section 286A of the U.P. Zamindari Abolition
and Land Reforms Act, 1950 [shortly referred to as 'the Act of 1950'].

M/s Mahalchand M. Kothari which is a partnership firm carrying on
E trade in Guwahati in the State of Assam filed two suits in the Court of
Assistant District Judge, Guwahati for recovery of damages caused to it as
a result of non-supply of sugar under the contract entered into by the plaintiff
firm with the Receiver who was managing the Sugar Mill. The orders were
placed by the plaintiff for supply of different quantities of sugar in the year
1979 and advance money was paid to the Receiver for timely supply. The
F prices of sugar having gone up in the period of supply under the contract,
the Receiver neither sent the quantity of sugar nor returned the advance price
paid by the plaintiff. Both the suits Nos. 11 and 27 were filed in the year 1982.
The erstwhile Mill owner and the appellant Corporation were made defendants
to the suits because by that time, Sugar Mill already stood transferred to,
G vested in and been in actual possession of the Corporation in accordance
with section 3 of the Act.

The Corporation repudiated the claims made in the two suits pleading
inter alia that there was no privity of contract between the plaintiff and the

H
Corporation; the Receiver was managing the Sugar Mill on the date of alleged
non-supply of quantity of sugar; the erstwhile owner of the Sugar Mill had
-
U.P. STATE SUGAR CORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J.J 767

filed writ petition in the High Court of Allahabad challenging the constitutional A
vaiidity of the Uttar Pradesh Sugar Undertakings (Acquisition) Ordinance,
1971 in which operation of the Ordinance was stayed and the possession of
the Sugar Mill was restored to the erstwhile owner on specified tenns and
conditions of the order of stay.

The Assistant District Judge, Guwahati by two separate judgements, B
decreed both the suits holding inter alia that the Corporation cannot avoid
its liability towards the claims of the plaintiff as the Sugar Mill stood transferred
to and vested in it from the 'appointed day' i.e. 3.7.1971 under Section 3 of
the Act.

The Corporation had preferred two appeals to the High Court of Guwahati C
which were allowed on 26.6.1996 solely on the ground that the suits were not
maintainable as the plaintiff was not a registered partnership finn and was,
therefore, incompetent to sue as a finn. The plaintiff then had approached this
Court by Civil Appeal Nos. 3057 and 3058 of 1997 which were allowed on
25. 7.1997 as it was pointed out that original certificate showing registration D
of the finn had been produced before the trial court. This Court, therefore,
remitted the appeals to the High Court for their decision on merits.

The Division Bench of the High Court by the impugned judgment dated
16. 7 .1998 dismissed both the appeals of the Corporation and con finned the
decrees granted by the trial court in the two suits in favour of the respondent/ E
plaintiff.

The Corporation, therefore, after seeking leave is before this Court in
these two appeals.

Learned counsel appearing for the Corporation has taken us through F
the relevant dates and proceedings of the Allahabad High Court in the writ
petition which was filed challenging the Ordinance/Act. It is strenuously
urged that there was no privity of contract between plaintiff and the
Corporation. The Corporation, therefore, could not be held liable towards the
losses and damages caused to the plaintiff by alleged breach of contract G
committed by the Receiver in not supplying the sugar for which orders had
been pl~ced by the plaintiff. It is submitted that for transferring and vesting
of Sugar Mill in the Corporation, the 'appointed day' fixed under Section 3
of the Ordinance/Act was 3. 7.1971 but the erstwhile owner of the Sugar Mill
challenged the validity of the Ordinance in the Allahabad High Court and
obtained a stay order on 09.7.1971 whereunder the Receiver, who was already H
768 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A managing the Sugar Mill as a noJ!ljnee of the Collector under section 279(l)(g)
read with Section -286A of the Act of 1950, continued in the management of
the Sugar Mill for and on behalf of the erstwhile owner. It is rontended by
the counsel on behalf of the Corporation that when two orders for supply of
sugar were alleged to have been placed on 02.2.15)79 and 09.2.1979 by the
B plaintiff, the Receiver was in possession and management of the sugar mill.
He was acting not for the Corporation but for and on behalf of the erstwhile
owner of the mill who was in de jure possession of the mill as an effect of
the order of stay dated 09.7.1971 obtained in Writ Petition No. 4193of1971
filed in the Allahabad High Court challenging the constitutional validity of the
Ordinance. Under the terms of the order of stay, operation of the Ordinance
C was stayed and possession of the mill was restored to the erstwhile owner.

Learned counsel appearing for the respondent plaintiff heavily relied on
the photocopies of the order-sheets of the writ petition No. 4193 of 1971 filed
in the Allahabad High Court. An attempt has been made to show that the
order obtained by the erstwhile owner of the Sugar Mill on 09. 7.1971 staying
D operation of the Ordinance had been vacated by the High Court on 29.7.1974
on the application of the Receiver who was experiencing various difficulties
in managing and running the Sugar Mill. The learned counsel for the
respondent plaintiff contended that as the stay against Ordinance/Act passed
on 09.7.1971 stood vacated on 29.7.1974, the Sugar Mill would be deemed to
E · have stood transferred to and vested in the Corporation on the 'appointed
day' 03.7.1971. The orders for supply of sugar were placed on 02.2.1979 and
09.2.1979 by the plaintiff after the stay against Ordinance had been vacated
by the High Court on 29.7.1974. On behalf of the respondent plaintiff, it is,
therefore, submitted that for the acts and omissions of the Receiver the
Corporation, in whom the Sugar Mill stood vested, could not have been
F allowed to repudiate its liability towards the breach of contract committed by
the Receiver.

At the outset, it is necessary to put straight the factual position which
is discernible on a careful perusal of the proceedings of the writ petition in
the High Court in which the constitutional validity of the Act/Ordinance was
G challenged.

On behalf of the respondent plaintiff, an attempt was made to project
that the order dated 09. 7 .1971 granting stay against the Ordinance/Act, stood
vacated on 27.9.1974 on the application of the Receiver who prayed for
H unfettered right to manage the Sugar Mill. In the additional documents filed
U.P. STA TE SUGAR CORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J J 769
by the parties before us, a copy of the application filed by the receiver
seeking vacation of stay and photocopies of the order-sheets of the High A
Court in the writ petition have been produced. The Receiver had filed an
affidavit on 16.5.1974 in the High Court of Allahabad in which prayer was
made to vacate the interim order of stay.

On behalf of respondent plaintiff, reliance is placed on the order-sheet B
recorded in the writ petition on 29. 7.1974. It reads thus:-

'Hon. Gulati J.

29.7.1974. 'Application dated 17.3 .1974 allowed. List the writ
for hearing on 16.9.1974.'
c
Learned counsel for the respondent submitted that in the above quoted
order, the date of the application mentioned as 17.3.1974 should be correctly
read as 17.5.1974 as according to him the hand-written figure 3 showing the
month should be read as 5. We find that nothing turns on the fact whether
the application which was allowed on 29. 7.1974 was of date 17.3.1974 or D
17.5.1974. After 29. 7.1974, the writ petition stood adjourned to several dates
for hearing. The order-sheet of 22.5 .1976 reads thus :-

'Hon. Sapru J.,

22.5.1976 'An application to vacate the stay order has been filed
on 10.5.1976. A counter affidavit has been filed within E
three weeks. The rejoinder affidavit may be filed by 07th
of July, 1976. List it for orders on 08.7.1976.'

Office Report dated 07 .07.1976 reads thus :-

Misc. 5657176 dated 10.5. 76 (to vacate stay) F

In compliance of court's order dated 20.5.1976, neither counter nor
rejoinder affidavit has been filed. Put up for further orders.

On 08. 7.1976, as directed earlier, the case was listed before the Division
Bench which recorded the following order :- ' G
Hon. Yashoda Nandan J.,
Hon. H. N. Seth J.,
8. 7.1976 'We are infonned that the application for vacating the stay
order is part-heard before a Bench consisting of Hon. C.P.S. Singh and
Hon. Mahrotra JJ. List this application before the bench concerned at H
770 SUPREME COURT REPORTS [2004] SUPP. S S.C.R.

A an early date.'

From the above quoted subsequent orders, it appears that the parties
were repeatedly taking time to file additional pleadings and counters but no
orders on application for vacating stay was passed. The writ petition was
placed before various benches between July, 1997 to April, 1979. The writ
B petition challenging the validity of the Ordinance/Act was dismissed on
3.5.1979 which can be said to be the event whereupon the interim order of
stay of the .Ordinance/Act passed on 09 .7 .1971 stood automatically vacated.

From the resume of the above facts gathered out from the photocopies
of the proceedings of the writ petition, the fact which conclusively emerges
C is that the conditional interim stay granted on 9. 7.197 l in the writ petition
challenging constitutional validity of the Ordinance/Act stood vacated only
on the final dismissal of the writ petition on 03.5.1979. As is sought to be
projected on behalf of the respondent, the stay was not vacated on 29.7.1974.
On that date, some other application dated 17.3.1974 (details of which are not
D clear from the proceedings of the writ petition) happened to be allowed. The
further proceedings in the writ petition clearly go to show that the application
for vacating stay remained pending on 22.5.1976 and 08.7.1976. It was never
decided during pendency of the writ petition. The stay order stood vacated
only when judgment was delivered on 03.5.1979 and 'the writ petition
questioning the validity of the Ordinance/Act was dismissed.
E
On these facts culled out from the proceedings of the writ petition, it
is clear that Receiver entered into alleged contract for Supply of agreed
quantities of sugar to the plaintiff respondent on 2.2.1979 and 9.2.1979 when
stay order dated 9-7-1971 passed in the writ petition was in operation.

F Next, we have to consider what is the legal effect ()f the order of stay
passed by the High Court in the writ petition on 09.7.1971. To ascertain the
legal effect of the stay order passed in writ petition, it is necessary to
reproduce its contents and examine it critically.

ORDER
G
Issue notice.

Till further orders of this Court, the operation of U.P. Ordinance
No. 13 of 1971 shall remain stayed so far as the Receiver is concerned.
The status quo, as on July 2, 197 I, shall be restored and the petitioner
H company which admittedly, was running the mills 011 that date, will
U.P. STATESUGARCORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J.] 771

be put back in possession. This order will, however, not affect any A
other proceedings pending and any other orders that may be passed
by any competent court or authority hereafter. This order will be
further subject to the following condition:-

). The Receiver shall made arrangements for the off season repairs
of the machinery etc. and ifhe takes advances from Bank for this B
purpose, final orders regarding repayment of the same would be
passed at the time of the final disposal of the writ petition.

2 The amount of money to be spent on the repairs shall not exceed
the average amount spent in the last three y_ears.

3. The Receiver is restrained from removing or disposing of any c
property of the undertaking other than sugar, molasses and
waste products.
4. The Receiver shall maintain the plant and machinery in good
repairs to ensure the satisfactory running of the factory in the
coming crushing season. The Collector, Deoria, shall, however, D
have free access to the factory and will be consulted by the
receiver in matters of management. It will be open to the Collector
to prepare such inventory as he desires. If an inventory is
prepared, the Collector shall supply a copy thereof to the
Receiver. E
5. The Receiver shall not create any long term or unduly heavy
liabilities on the property including the mortgage of fixed assets;
any loans that he may raise shall be only for the purpose of
capital investment or working capital of the undertaking
concerned.
F
6. The Receiver shall make no changes in the terms and conditions
of any employee, except with the previous permission of this
Court.

Copies of this order may be supplied to the counsel for the parties on
payment of usual charges. G
[Emphasis supplied]

From the terms and conditions of the above quoted order of stay
passed on 9-7-1971, what seems to us is that the operation of the impugned
H
772 SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A Ordinance/Act was partially stayed on specified conditions to regulate the
power of the Receiver which was already managing the Sugar Mill under
section 279(l)(g) read with section 286A of the Act of 1950. The legal effect

-
of the order of stay (quoted above) was that the Receiver which was appointed
under the Act of 1950, was to continue in management of the Mill on the
B conditions imposed by the High Court. From term no. 3 in the stay order, it
is clear that the Receiver had only power to carry on day-to-day business of
the Sugar Mill and for that purpose, to sell sugar, molasses and waste
products. The Receiver, when entered into the alleged contract in February,
1979 to supply sugar to the plaintiff respondent was acting as a statutory
Receiver who was allowed with added conditions to continue in management
C of the Sugar Mill by the High Court in accordance with section 279(1)(g) and
Section 286-A of the Act of 1950. Under the terms of the stay order, the
status-quo as existing on 2.7.1971 i.e. a day before the 'appointed day' was
restored and the erstwhile owner was directed to be put back in possession
of the Sugar Mill. The dejure possession of the Sugar Mill was thus restored
to the erstwhile owner but de facto possession on terms and conditions
D contained in the order of stay was allowed to be retained by the Receiver with
right to manage the Sugar Mill.

The next legal question that arises is: what is the legal effect of vacation
of the order of stay on ultimate dismissal of the writ petition on 3.5.1979?

E The other related question is : what was the position of the Receiver
who was managing the Sugar Mill? Whether he was representing the erstwhile
owner or the Corporation or he was representing none of them but was
representing the Collector who had appointed him under the Act of 1950? For
the aforesaid questions, a brief survey of the provisions of the Ordinance/
F Act and the Act of 1950 would be necessary.

The Act of 1950 prescribes appointment of Receiver on the property of
the defaulter as one of the modes of recoYery of dues as arrears of land
revenue. Section 279 (l)(g) reads as under :-

G "Section 279. Procedure for recovery of an arrear of land revenue.-
'\
(l) An arrear of land revenue may be recovered by any one or more
of the following processes :

H
U.P. STATE SUGAR CORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J.] 773

(g) by appointing a receiver of any property, moveable or immovable A
of the defaulter.

Section 286A of the Act of 1950 is the other relevant Section which
empowers the Collector to appoint a Receiver for recovery of dues as arrears
of land. It reads as under :-
B
"Section 286-A. Appointment of Receiver.-(1) Notwithstanding
anything in this Act when [an arrears of revenue or any other sum
recoverable as an arrear of revenueJ. is due, the Collector, may in
addition to or instead of any of the processes hereinbefore specified~
by order -
c
(a) appoint, for such period as he may deem fit, a receiver of any
moveable or immovable property of the defaulter;
(b) remove any person from the possession or custody of the
property;
(c) commit the same to the possession, custody of management of D
the receiver ;
(d) confer upon the receiver all such powers, as to bringing and
defending suits and for the realization, management, protection,
preservation and improvement of the property, the collection of
the rents and profits thereof, the application and disposal of E
such rents and profits, and the execution of documents, as the
defaulter himself has or such of those powers as the Collector
thinks fit."

As the Statement of Objects and Reasons of the Ordinance/Act indicates
that the legislation is brought into force by the State to acquire such Sugar F
Mills where because of the mismanagement of the Mills, serious problems are
faced by the cane-growers and the labour with consequential adverse impact
on the general economy of the area where the mills are situated. Under the
Act, the scheduled Sugar Mills or undertakings are acquired by the State
which stand transferred to and vested in the Corporation from the 'appointed G
day'. Section 2(a) and (c) of the Act define 'appointed day' and 'Corporation'
respectively. Section 2(a) and (c) and section 3 of the Act read as under:-

Section 2. Definition.-In this Act, unless the context otherwise
requires-
H
774 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A (a) 'appointed day' in relation to the undertakings specified in
Schedule I means July 3, 1971 and in relation to the undertakings
specified in Schedule II means October 28, 1984.

(b) ·················
(c) "Corporation" means the Uttar Pradesh State Sugar Corporation
B Limited, a Government Company within the meaning of section
617 of the Companies Act, 1956 (Act I of 1956).

(d) ·····················
Section 3. Vesting.-On the appointed day, every scheduled
C undertaking shall, by virtue of this Act, stand and be deemed to have
stood transferred to and vest and be deemed to have vested in the
Corporation free from any debt, mortgage, charge or other encumbrance
or lien, trust or similar obligation (excepting any lien or other obligation
in re~pect of any advance on the security of any sugar stock or other
stock-in-trade) attaching to the undertaking :
D
Provided that any such debt, mortgage charge or other encumbrance
or lien, trust or similar obligation shall attach to the compensation
referred to in section 7, in accordance with the provisions of that
section, in substitution for the undertaking :

E Provided further that a debt, mortgage, charge or other encumbrance
or lien, trust or similar obligation created after the scheduled undertaking
or any property or asset comprised therein had been attached, or a
receiver apP.ointed over it, in any proceedings for realization of any
tax or cess or other dues recoverable as arrears_ of revenue shall be
void as against all claims for dues recoverable as arrears of revenue.
F
One of the consequences of vesting of the sugar mill in the Corporation
under section 3 of the Act, as provided in section 4(a), is that any receiver
appointed by the court on the scheduled undertaking/Sugar Mill shall cease
to function from the appointed day. Section 4(a) of the Act reads thus :-

G "Section 4. Certain consequences of vesting.-Notwithstanding
anything contained in any other law for the time being in force, and
save as otherwise provided in this Act, on and from the appointed
day

(a) every appointment of Receiver over any scheduled undertaking
H by any court shall cease;
. U.P. STA TE SUGAR CORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J.] 775

(b) A
[Emphasis supplied]

The aforesaid provision refers to any 'Receiver appointed by any the
court' and not a Receiver appointed by the Collector under the provisions of
the Act of 1950. The mode of delivery of possession of the acquired Sugar B
Mill is contained in section 5. It provides first delivery of possession oi the
Sugar Mill by the owner to the Collector who shall prepare inventory of
property, assets, books of accounts, registers etc., and thereupon shall deliver
the possession of the undertaking/Sugar Mill to the Corporation. Section 5
of the Act reads thus :-
c
"Section 5. Duty to deliver possession. (1) Where any scheduled
undertaking has vested in the Corporation under section 3, every
person in whose possession or custody or under whose control any
property or asset, book of account, register or other document
comprised in that undertaking may be, shall forthwith deliver the same D
to the Collector.

(2) The Collector may take all necessary steps for securing possession
of any such property or asset, book of account, register or document,
and in particular, may use or cause to be used such force as may be
necessary.
E
(3) The Collector shall prepare an inventory of all properties, assets,
books of account, registers and documents taken possession of under
this section, so far as practicable in the presence of the occupier or
his authorized representative.

(4} Deliver of possession to the Collector under this section shall F
amount to delivery of possession to the Corporation.

(5) Without prejudice to the provisions of the foregoing sub-sections,
any person referred to in sub-section (l) shall be liable to account to
the corporation for any such property or asset, book of account,
register or document which he has failed to deliver to the Collector. G

The entry at Serial No. 4 in Column Nos. 2 and 3 of Schedule I attached
to the Act, shows the Sugar Mill named Maheshwari Khetan Sugar Mil\s
(Pvt.) Ltd., Ramkola, District Deoria stands acquired and vested in the
Corporation on the appointed day on payment of fixed compensation of Rs. H
776 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.
•
A 11,00,000.

From the aforesaid provisions of the Act of 1950 and the Ordinance/
Act, it is clear that the Receiver who was in the management of the Sugar Mill ...
on the 'appointed day' was not a Receiver appointed by any Court. He was
a Receiver appointed by the Collector under the Act of 1950 and on the
B vesting of the Sugar Mill on the appointed date 3.7.1971, was in possession
and management of the Sugar Mill not as an agent either of the erstwhile
Sugar Mill owner or the corporation. He was a statutory Receiver appointed
under section 279(1 )(g) read with section 286-A of the Act of 1950 for the
purpose of recovery of dues of the cane-growers in the manner as arrears of
C land revenue. He was allowed to continue in management of the Sugar Mill
by the High Court on the terms and conditions imposed in the order of stay
passed during.pendency of the writ petition.

The liabilities incurred by a statutory Receiver in the course of
management of the Sugar Mill are liabilities attached to assets or properties
D of the Sugar Mill because neither the erstwhile owner nor the Corporation,
which later acquired the Sugar Mill, was responsible for thP alleged losses or
damages caused to the plaintiff by the alleged breach of contract committed
by the receiver in non-supply of the quantity of sugar.

The general rule is that a receiver takes the rights, causes, and remedies
E which were in the individual or estate whose receiver he is, or which were
available to those whose interests he was appointed to represent. Ordinarily
none of the parties to the suit in which a receiver was appointed is personally ·
responsible for losses and liabilities incurred in the administration of the
receivership, but, except as the receiver may be personally liable therefor,
F such losses and liabilities fall on the estate. [See statement of law in Corpus
Juris Secundum Vol.75 Articles 325 and 187 at pages 833 and 1000, respectively]

In the present suit, the Receiver has not been impleaded as a party-
defendant and there is no claim against him for any misconduct committed
by him in management of the Sugar Mill. He is not alleged to be personally
G liable for the alleged breach of contract. The liability, therefore, towards the
alleged loss or damage arising from breach of contract attaches to the Sugar
Mill and can be allowed to be realized from the person in whom the title of
_Sugar Mill stands vested.

A statutory Receiver is merely the legal_Lepresentative of the property
H placed in his hands as such. In determining his liability the court will only
U.P.STATESUGARCORPN. v. MAHALCHANDM. MOTHARI[DHARMADH!KARI, J.J 777

determine the liability of the property. It is not material whether the liability A
existed before or has accrued since his appointment. A contractual liability
arising against the receiver during the course of management of the property
for acts or omissions committed by him for the benefit of the property, is not
merely enforceable against the receiver but is a liability attached to the
property in his receivership, which can be recovered from the property and B
through the person in whom the property vests. [See Statement of law in
Words and Phrases, Permanent Edition Vol.36 at page 742 from the
Heading-Representative of property]

As is the admitted position, on the coming into force of the Ordinance,
the Sugar Mill stood transferred to and vested in the Corporation on the C
appointed date 3.7.1971. On that date, the Receiver appointed by the Collector
under_ the provisions of 1950 Act was already holding custody of the Sugar
Mill and was managing the same. During course of the Writ Petition filed by
the owner of the Sugar Mill in which the constitutional validity of the
ordinance/Act was challenged, a stay order, on the limited terms and conditions,
was passed on 9. 7 .1971. The terms and conditions of the order reproduced D
above, restored the de jure possession of the Sugar Mill to the erstwhile
owner but de facto possession and management of the Sugar Mill was
allowed to remain undisturbed with the receiver although with limited powers
to him. The Receiver was specifically allowed in accordance with term No.3
of the stay order to sell sugar, molasses and other waste products. By virtue E
of the order of stay passed by the High Court, during pendency of the writ
petition, the Receiver appointed under the Act of 1950, continued to manage
the Sugar Mill subject to the ultimate result of the writ petition. The Writ
Petition ultimately came to be dismissed on 3.5.1979 and the stay order
containing the terms and conditions (quoted above) passed on 9.7.1971 stood
automatically vacated. The natural consequence was restoration of full F
operation of the provisions of the ordinance/Act as was originally passed. In
accordance with Section 3 of the Act, the Sugar Mill stood transferred and
vested in the Corporation from the appointed date 3. 7 .1971. On vacation of
the stay order with effect from the appointed day-3. 7 .1971, the operation of
the Ordinance/Act was revived. The liability arising from breach of contract G
committed by the Receiver was not of the Corporation. It was an obligation
attached to the property of the Sugar Mill which was under the management
of the Receiver, initially under the 1950 Act and continued under the order
of stay passed by the High Court. Since the liability towards breach of
contract was attached to the sugar mill under the management of the Receiver,
the Corporation in whom title of the sugar mill stands vested under Section H
778 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A 3 of the Act cannot avoid the liability-it being a burden on the said property
and recoverable from it.

It is of no importance or consequence that actual or de facto possession
of the property was received by the Corporation under a formal·order of
Collector, Deoria on 23.5.1979, only after dismissal of the Writ Petition on
B 3.5.1979 and consequent discharge of the Receiver.

The Ordinance was stayed by the High Court to restore status quo ante
existing on 2. 7.1971 that is a day prior to appointed date 3. 7 .1971. But on the
dismissal of writ petition and automatic vacation of the stay order of the High
C Court, the operation of the Ordinance/Act with all legal consequences flowing
from the said law stood restored from the appointed date. The trial court and
the High Court are perfectly right in holding in their judgments that the order
of stay passed in writ petition could have no effect of postponing the
'appointed day; statutorily fixed under section 3 of the Ordinance/Act.

D The argument adva.nced on behalf of the corporation cannot bf;! iiccepted
that the Sugar Mill came to be transferred to tht Corporation only when its
actual possession was formally obtained from the Collector, Deoria on 23.5.1979
after dismissal of the writ petition.

The legal status and position of a receiver appointed by the Court and
E a Receiver appointed under in a Statute are different. In the instant case, the
receiver appointed under the Act of 1950 and continued by the High Court
on tenns and conditions contained in the stay order during pendency of the
writ petition, was a statutory receiver and his rights and liabilities were
attached to the property for the management of which he was appointed. The
.
receiver was not an agent of either of the parties. For his acts and omissions,
F a third party could raise a claim against the party in whom the property stood
vested and to which the liability was attached.

The suits were filed by the plaintiff claiming losses and damages for
breach of contract committed by the receiver within the prescribed period of
G limitation. On the date of filing of the suits, the receiver was not in possession
of the Sugar Mill as the actual possession of the Sugar Mill had been restored
to the Corporation. It was, therefore, not necessary for the plaintiff to implead
the receiver as a party to the suits. The Receiver could not be made personally
liable for his acts and omissions in the course of management of the Sugar
Mill and which are not alleged to be ma/a fide.
H
U.P. STA TE SUGAR CORPN. v. MAHALCHAND M. MOTHARI [DHARMADHIKARI, J.] 779

Our conclusion, therefore, is that as none of the parties i.e. the erstwhile A
owner or the Corporation is personally liable for the breach of contract
committed by the receiver in the course of management of the Sugar Mill, the
contractual liability of the receiver towards the plaintiff is recoverable from the
property of the Sugar Mill, and therefore, through the Corporation in whom
the property stands vested under the Act.
B
As a result of the detailed discussion of facts and law as above, both
the appeals stand dismissed with costs and tl).e decrees granted by the trial
court are hereby confirmed.

VM Appeals dismissed. C