Kurapati Venkata Mallayya and Another vs Thondepu Ramaswami And Co. and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 339/60

Decision Date: 12 December, 1962

Coram: J.R. Mudholkar, Syed Jaffer Imam, J.L. Kapur

In the matter titled Kurapati Venkata Mallayya and Another versus Thondepu Ramaswami and Co. and Another, the judgment was delivered on 12 December 1962 by the Supreme Court of India. The judgment was authored by Justice J R Mudholkar, and the bench comprised Justices J R Mudholkar, Syed Jaffer Imam and J L Kapur. The petitioners were Kurapati Venkata Mallayya and another, and the respondents were Thondepu Ramaswami and Co. and another. The case is reported in the 1964 All India Reporter at page 818 and in the 1963 Supplement to the Supreme Court Reports at page 995, with additional citations in later reports. The operative statutory provision concerned the appointment of a receiver by a court and the question of whether such a receiver could sue in his own name, a matter governed by Order 40, Rule 1 of the Code of Civil Procedure, 1908.

The factual background was that a receiver, who had been duly authorised and appointed by the District Munsiff’s Court in Guntur under Original Suit No. 275 of 1948, was tasked with collecting debts owed to the plaintiff‑respondent. Acting in that capacity, the receiver instituted a suit against the appellant‑firm and its alleged partners to recover the price of tobacco and the interest thereon. The appellant‑firm challenged the receiver’s right to sue in his own name. In response, the respondent‑firm amended the plaint, describing the plaintiff as “M/s T R & Co., represented by I Surayanarayana Garu, receiver appointed in O.S. 275 of 1948 on the file of the District Munsiff’s Court Guntur.” The appellant‑firm then filed an amended written statement, contending that the amendment of the plaint was barred by limitation, that it did not cure the original defect in the suit, and that consequently the suit was barred by limitation.

The trial court dismissed the suit on three grounds: first, that Surayanarayana was not entitled to institute the suit in his capacity as receiver; second, that the amendment of the plaint had been made beyond the prescribed time; and third, that the suit was therefore time‑barred. On appeal, the High Court examined these points and held that the receiver was indeed entitled to institute the suit. The High Court observed that, at most, there was a misdescription of the plaintiff‑firm in the cause title, a defect that could be corrected at any stage. Accordingly, the High Court concluded that the suit was within the period of limitation and that the plaintiff was entitled to a decree with interest calculated from the date of delivery of the goods until their realization.

The Supreme Court affirmed the principles articulated by the High Court. It held that a receiver invested with full powers to administer the property, which is described as custodia legis, or a receiver expressly authorised by the court to institute a suit for the collection of assets, may sue in his own name provided he does so in the capacity of a receiver. The Court emphasized that the receiver’s function is not limited merely to the preservation of the property; the court may, when necessary, confer upon the receiver the authority to take further steps, including instituting suits in the interests of the parties. Consequently, the suit as originally instituted was perfectly competent. The Court further affirmed that where there is a misdescription of parties, the court may allow amendment of the plaint at any time, and the question of limitation does not arise in such circumstances. This reasoning was supported by reference to earlier authorities, including Jagat Tarini Dasi v. Naba Gopal Chaki (1907) L R 34 Cal 305, and the Court indicated that it would not interfere with the concurrent findings of the lower courts on pure factual matters unless exceptional circumstances warranted a re‑examination of the entire evidence.

In this appeal, the Court observed that when a plaint is incorrectly described, the court may permit amendment at any stage, and therefore the limitation period does not become an issue; the Court relied on Jagat Tarini Dasi v. Naba Gopal Chaki (1907) r. L. R. 34 Cal. 305. The Court further held that it will not disturb the combined findings of the lower courts on a pure factual question unless exceptional circumstances or unusual reasons compel a full re‑examination of the evidence; in support of this principle the Court referred to Srimati Bibhabati Devi v. Kumar Ramendra Narayan Boy, (1946) L. R. 73 1. A. 246 and Sriniwas Ram Kumar v. Mahabir Prasad, [1951] S. C. R. 277. The judgment concerned Civil Appeal No. 339/60, an appeal from the judgment and decree dated 17 November 1955 delivered by the Andhra Pradesh High Court in A. S. No. 51/1951. Counsel for the appellants consisted of A. Banganadham Chetty, A. V. Rangam, A. Vedavalli and K. R. Chaudhri; counsel for the respondent included B. Ganapathy Iyer, R. Thiagarajan and G. Gopalakrishnan. The appeal was decided on 12 December 1962, and the opinion was authored by Justice Mudholkar. The plaintiff‑respondent, Ramaswamy & Co., a tobacco‑trading business located in Guntur, filed a suit against the appellant‑firm, which also engaged in tobacco trade at the same place, and against the alleged partners Kurapati Venkata Mallayya and Mittapalli Abbayya. The suit sought recovery of the price for one hundred twelve bales of DB tobacco strips sold on 5 June 1946, a sum of Rs. 14,099, together with interest accruing from the date of purchase to the date of filing the suit, and additionally interest from the filing date to the date of actual realization. The respondent claimed that the tobacco weighed twenty‑eight thousand one hundred ninety‑six pounds and that the appellant had agreed to pay a price of eight annas per pound. The respondent further asserted that the appellant had undertaken to pay interest on the principal amount at nine per cent per annum. The appellant‑firm denied that it had ever purchased one hundred twelve bales from the respondent, denied any agreement to pay eight annas per pound or any other rate, and also repudiated the existence of any agreement to pay interest. The appellant‑firm contended that in May 1946 it had obtained a contract to supply three thousand bales of inferior tobacco to the Russian Government at the rate of eight annas per pound. A certain Kottamasu Venkateswarlu, who was distantly related to the partners of the appellant‑firm, served as managing partner of the respondent firm. That firm possessed some inferior tobacco, and Venkateswarlu urged the appellant‑firm to take over one hundred twelve bales and deliver them toward the Russian contract, proposing that the appellant could deduct one anna per pound from the price received from the Russian Government to cover its expenses and commission. The appellant‑firm reluctantly accepted this proposal and dispatched ninety‑seven of the bales.

The appellant firm dispatched the 112 bales to Kakinada after obtaining an Agmark certificate for them with the assistance of Venkateswarlu. The Russian Government’s representative subsequently rejected the shipment because it was of inferior quality, stating that it did not meet the required standards. After a re‑inspection at Kakinada, Agmark authorities rejected five of the ninety‑seven bales that had arrived, finding them unsuitable for sale. Those five bales were sent back to Guntur together with other rejected bales belonging to the appellant firm, and they were destroyed in an accidental fire in the appellant‑firm’s godown. The remaining ninety‑two bales are reported to be still stored with the shipping agent at Kakinada, and no purchaser has yet been found because the tobacco is of very poor quality. Fifteen of the original one‑hundred‑twelve bales that were never sent to Kakinada became damaged and had to be rebaled. The rebaling process reduced those fifteen bales to ten bales, which remain in the possession of the appellant firm, which has offered to return them to the respondent firm upon payment of the godown charges. The appellant firm maintained that the tobacco remained unsold because its quality was far below market standards and therefore it could not be transferred to any buyer. Consequently, the shipping agent retained the remaining bales at the port pending further instructions from either party concerning their disposition.

The appellant firm therefore contended that it never purchased the one‑hundred‑twelve bales from the respondent firm and consequently the respondent could not sue for the price of those bales. Prior to the filing of the suit, a receiver had been appointed in a separate suit for the purpose of realizing debts owed to the respondent firm. On 22 June 1949 the court overseeing that suit ordered the receiver to collect the debts due to the respondent firm. Acting on that order, the receiver Suryanarayana instituted the present suit, describing himself in the plaint as “I, Suryanarayana Garu, Receiver appointed in O.S. 275 of 1948 on the file of the District Munsif’s Court, Guntur”. The appellant firm argued that the suit was untenable because a receiver does not have the right to institute a suit in his own name. It further contended that the receiver had not been expressly authorised by the court to institute the suit. The appellant also maintained that the suit was barred by limitation, arguing that the period for filing such a claim had already expired. Moreover, the appellant firm asserted that the respondent was not entitled to the alleged price or to any interest thereon. The appellant further claimed that Mittapalli Abbayya had ceased to be a partner of the firm since 1942 because, following a partition between Abbayya and his son, Abbayya’s share had passed to his son Kotilingam. In response to the defence that the suit was not tenable, the respondent obtained leave of the court on 27 December 1949 to amend the plaint. The amended plaint described the plaintiff as “Messrs. Thondepu Ramaswami & Co., represented by Suryanarayana Garu, receiver appointed in O.S. 275 of 1948 on the file of the District Munsif’s Court, Guntur”, replacing the description.

The appellant firm responded to the amendment of the plaint by filing an amended written statement. In that statement it argued that the amendment had been made well after the statutory period of limitation had expired and that such amendment could not cure the original defect of the suit having been instituted by a person who was not entitled to bring the action. Consequently, the appellant contended that the suit was barred by limitation. The trial court, after hearing the parties, held that the respondent firm had succeeded in proving the existence of the contract it alleged. However, the trial court found that the respondent had not demonstrated that the appellant had agreed to pay the price of eight annas per pound for the tobacco. The trial court did accept that the price of the tobacco was Rs 5,639‑3‑0, but it dismissed the suit on three grounds: first, that I Suryanarayana, acting in his capacity as Receiver appointed in O.S. 275 of 1948, was not authorised to institute the suit; second, that the amendment of the plaint was filed beyond the prescribed period of limitation; and third, that, as a result of these defects, the suit was barred by limitation.

On appeal, the High Court held that the Receiver was duly authorised by the court to collect the debts of T Ramaswami & Co. and therefore was entitled to institute the suit. The High Court observed that, at most, there was a misdescription of the plaintiff‑firm in the cause title of the suit, a defect that could be corrected at any time, and consequently the suit was within the limitation period. It further found that the price of the tobacco agreed between the parties was eight annas per pound and that the plaintiff was therefore entitled to a decree for Rs 14,098 together with interest at six per cent per annum from the date of delivery of the goods until realisation. The appellant’s counsel, Mr Ranganadham Chetty, raised the first point before the Supreme Court, asserting that both the High Court and the subordinate judge were in error in holding that the bales of tobacco had been purchased by the appellant from the respondent. The Court noted that this issue was a question of fact and, since the two lower courts had found against the appellant on that point, the Court would not ordinarily disturb such a finding. Nonetheless, Mr Ranganadham Chetty relied on the decision in Srimati Bibhabati Devi v Kumur Ramendra Narayan Roy (1946) L.R. 73 I.A. 246, 259, arguing that the practice of appellate courts in special leave appeals was not inflexible and that the Supreme Court could depart from it in appropriate cases. The Court referred to the earlier citation of this decision in Srinivas Ram Kumar v Mahabir Prasad (1951) S.C.R. 277, 281, observing that when lower courts have arrived at concurrent findings on pure questions of fact, the Supreme Court ordinarily does not interfere with those findings or re‑examine the evidence for a third time, except in exceptional circumstances that justify departing from the normal practice. Counsel submitted that the present case was unusual because the reasons given by the High Court for holding that a sale had taken place differed markedly from those given by the trial court, and that one of the High Court’s reasons was based on a critical piece of evidence that the trial court had rejected.

In this case the Court observed that the reasons offered by the High Court for concluding that the transaction was a sale differed markedly from those given by the trial court, and that one of the High Court’s reasons rested on a crucial piece of evidence that contradicted the trial court’s view. Counsel for the respondent‑firm pointed out that the firm had relied on two entries in its account books, identified as Exhibits A‑13 and A‑14, to support its claim. According to the counsel, the trial court had not given any weight to these entries, whereas the High Court had accepted them as genuine without providing any explanation for this departure. The trial court’s reasoning was set out in paragraph 14 of its judgment, which read as follows: “In order to establish the sale of 122 bales of flue‑cured Virginia tobacco strips, Ramaswami relies on certain entries in the account books of his firm. Exhibit A‑13 is the katha on page 27 of the day book of Thondepu Ramaswami & Co., containing an entry in respect of 112 bales weighing 28,196 pounds at Re 0‑8‑0 per pound and debiting a sum of Rs. 14,098/‑. The words ‘Re 0‑8‑0 per pound’ are contained in the third line of the entry. The words ‘112 bales weighing 28,196 pounds at Re 0‑8‑0 per pound’ appear to be written closely. The sum of Re 14,098 appears in different ink. Exhibit A‑14 is the katha of the first defendant firm found on page 111 of the corresponding ledger of Thondepu Ramaswami & Co. On 5‑6‑1964 a sum of Rs. 14,098 was debited in respect of 112 bales of barn tobacco weighing 28,196 pounds at Re 0‑8‑0 per pound. In the second line of the entry the price therefore (in Telugu) and the debit of the sum of Rs. 14,098 are found. On 21st August 1946 interest of Rs. 267‑1‑9 was added. Exhibit A‑17 is the interest katha of Messrs. Thondepu Ramaswami & Co., Exhibit A‑16 is the katha at page 41 of the day book of Thondepu Ramaswami & Co. The katha shows that on 21‑8‑1946 two balancing entries for interest of Rs. 267‑13‑6 were made in the day book. The entry on the right‑hand side has been scored out and Ramaswami has not been able to explain why and under what circumstances the entry happens to be scored out. The entry on the left‑hand side, however, was not scored out. The totals do not tally unless the sum of Rs. 267‑13‑6 is included in the aggregate sum mentioned on the right‑hand side on page 41. It has been commented on behalf of the defendants that Ramaswami himself has no personal knowledge of the entries, that the clerks who made the entries in the account books have not been examined and that Exhibits A‑13, A‑14 and A‑16 cannot be relied on in order to come to the conclusion that the transaction relating to 112 bales was a sale and only a sale.” This extensive excerpt illustrates that the trial court had highlighted several inconsistencies in the entries, noted the scoring out of one entry without explanation, and emphasized the lack of personal knowledge on the part of Ramaswami as well as the absence of examination of the clerks who prepared the records. Consequently, the trial court concluded that the cited entries could not be used to establish that the deal involving the 112 bales was a sale.

Although Ramaswamy was absent at the time the entries were recorded in the various registers of his firm, it was not contested that the accounts were kept in the ordinary course of business. The trial court, while addressing the issue of price, observed that “Much reliance cannot be placed on the rate mentioned in Exhibits A‑13 and A‑14 and the price has to be determined independently having regard to the fact that the price of tobacco depreciates gradually with its age.” Accordingly, the trial court did not discard these entries entirely; it only disallowed them to the extent that they were used to prove the price that had supposedly been agreed for the respondent‑firm. The High Court then examined the matter and noted that “Exhibit A‑13 is the entry in the day book of Thondepu Ramaswami & Co. under date 5‑6‑1946 wherein a sum of Rs. 14,098 is debited to the defendant firm in respect of 112 bales of tobacco weighing 286,196 pounds at 8 annas per pound. Though the figures ‘Rs. 14,098’ were written in a different ink from the rest of the entry this is not a suspicious circumstance because the rest of the entry which is in the same ink and which is written in a normal manner contains reference to the sale of 28,196 pounds at 8 annas per pound. The resultant total is entered in the column on the right hand side as Rs. 14,098. It may be that the figure of Rs. 14,098 was entered a little later before the accounts for the day were closed. Exhibit A‑14 is the corresponding ledger of Thondepu Ramaswami & Co. and the entries in the day book are duly incorporated in the ledger.” Later the High Court added that “At the same time the entries in the regularly kept books of the plaintiff firm cannot be thrown overboard particularly when no challenge was made of their genuineness.” It further observed that “It is apparent from Exhibit A‑23 that the defendant firm was shown to be a debtor not merely with respect to Rs. 14,098 the price of 28,196 pounds but also in respect of the interest due upon the sum, and the plaintiff firm has paid income‑tax thereon.” Although the Court expressed that it might not share every reasoning of the High Court, it concluded that there was no extraordinary circumstance that would justify a fresh review of the evidence concerning whether the transaction was a sale. Subsequently, counsel for the petitioner argued that the lower courts had failed to appreciate the true meaning of the words “no price” appearing in the entry relating to the 112 bales in the verification register Exhibit A‑28. The entry read: “5‑6‑46 For 112 bales of Baru tobacco no price at Re. 0‑8‑0 per pound.” The entry was in Telugu, and according to the counsel, the phrase signified that no sale had occurred. The courts below, familiar with the language, interpreted the entry as “no price,” and that interpretation was reflected in the paper book; consequently, the counsel could not claim a different meaning. The counsel further submitted that even accepting the meaning “no price,” the proper inference should be that there was no sale transaction and that the rate of 8 annas per pound was provided merely for valuation of the 112 bales. While that argument was noted, it did not negate the effect of other entries that clearly indicated a sale. Additionally, the counsel pointed to the absence of a copy of the transport permit required for the movement of excisable articles between bonded warehouses, seeking to use that omission to support the contention that a sale had not taken place.

The court observed that the expression recorded in the verification register was “no price”, and that, according to the interpretation of the learned counsel for the petitioner, Mr. Ranganadham Chetty, this phrase signified the absence of any sale. The lower courts, however, which were familiar with the Telugu terminology, understood the entry to convey simply that the price was “no price” and they rendered this meaning in the official paper book. The court therefore held that it was not permissible for Mr. Chetty to assert an alternative meaning for the expression. Subsequently, Mr. Chetty argued that even if the entry were taken to mean merely “no price”, the logical conclusion should be that no sale had taken place and that the rate of eight annas per pound mentioned in the entry served only as a basis for valuing the 112 bales of Baroo tobacco. The court acknowledged that such an interpretation might be possible, but it emphasized that this view does not defeat the effect of the other entries in the register, which clearly indicate that a sale transaction occurred. In addition, Mr. Chetty attempted to draw an inference from the fact that the record did not contain a copy of the transport permit that is required for moving excisable articles from one bonded warehouse to another. The court found no significance in this omission because the appellant‑firm itself admitted that it had actually received the 112 bales of tobacco from the respondent‑firm. Consequently, the court concluded that there were no exceptional or unusual circumstances that would compel a fresh examination of the entire evidentiary material, and accordingly, it declined to reopen the issue.

The court then turned to the question of whether the suit was properly framed and filed within the prescribed limitation period. Although the cause of action arose on 5 June 1945, the court noted that it was admitted that the courts were closed on 5 June 1949 and that the suit was instituted on the first day the courts reopened. Accordingly, the filing was considered timely provided that the suit was correctly constituted on that date. In addressing the procedural aspect, the court referred to the leading authority of Jagat Parini Dasi v. Naba Gopal Chaki, wherein the Calcutta High Court held that a court must empower a receiver to sue in his own name, and that a receiver, even if not expressly named as a litigant, may sue by virtue of the powers vested in him under section 503 of the Code of Civil Procedure (Act XIV of 1882). The learned judges explained that, although the primary purpose of appointing a receiver is to preserve the subject‑matter of the litigation pending a judicial determination of the parties’ rights, this does not inevitably mean that a receiver who is authorized to sue cannot do so in his own name. They further observed that, while the receiver may in one respect act as a custodian of the property and may be required to supplant the original owner in certain respects, there is no reason to limit his authority and that his powers should be regarded as co‑extensive with those necessary to protect and administer the property.

In this case, the Court observed that a receiver cannot effectively carry out his functions unless it is presumed that, by virtue of his office, he possesses a sufficient interest in the subject‑matter committed to him, which enables him to sue in his own name. Although a receiver is not the assignee or beneficial owner of the property placed under his care, it is inaccurate to describe his relationship to the property merely as that of a custodian. When a court assumes charge and custody of property for the purpose of administering it in accordance with the ultimate rights of the parties to the litigation, the property is said to be in custodia legis. For the period of administration, the title to the property may, in a sense, be regarded as belonging to the court. The receiver is appointed for the benefit of all concerned; he acts as the representative of the court and of every party having an interest in the suit. He functions as the right‑hand of the court in exercising the jurisdiction required to manage the property, because the court can only administer the property through a receiver. Consequently, any suit that seeks to collect or obtain possession of the property must be prosecuted by the receiver, and any proceeds must be received and controlled solely by him. If the suit were to be brought nominally in the name of the true owners, such a procedure would be both inconvenient and useless – inconvenient because, in many cases, the owners’ title is itself the subject of the litigation, and useless because the owners have no discretion to commence the suit, no control over its conduct, and no right to the proceeds. The learned judges later emphasized that, for the purposes of administering the assets, the real party interested in the litigation is the receiver; therefore there is no reason why the suit could not be instituted in his own name. They cited a series of authorities supporting this conclusion. Accordingly, the view expressed by the Calcutta High Court is that a receiver who is appointed with full powers to administer property that is in custodia legis, or who is expressly authorised by the court to institute a suit for the collection of assets, is entitled to institute such a suit in his own name, acting in his capacity as receiver. When property is in custodia legis, the contesting parties cannot deal with it directly; consequently some competent authority must act on their behalf. A receiver placed in charge of the property on behalf of the court is the appropriate person to do so.

In this case the Court observed that a receiver appointed by a court is the only person properly authorised to act on the property that is in custodia legis. The receiver’s role is not limited merely to preserving the assets; the court may, when necessary, grant him additional powers, including the authority to commence legal proceedings in the interests of the parties involved. The Court noted that, although the receiver in the present matter did not possess full powers, the order dated 26 June 1949 expressly authorised the receiver to collect debts, particularly because some of those debts were at risk of becoming time‑barred. Consequently, the receiver possessed the legal right to institute the suit that is the subject of this appeal.

The appellant argued that the 1949 order did not specifically direct the receiver to file a suit. The Court rejected this contention, holding that the language of the order—granting the receiver the power “to collect the debts”—is sufficiently broad to enable the receiver to take any legal steps he deemed necessary for debt recovery, including filing a suit. Accordingly, the original suit was properly instituted and was competent on its face.

The High Court, prior to this appeal, had remarked that it might have been more appropriate for the cause title to indicate that the firm, rather than the receiver, was the real plaintiff and that the firm was suing through the receiver. The High Court characterised this as a simple misdescription of parties and noted that the plaint could be amended at any stage to reflect the correct description. The Supreme Court agreed with that view, stating that when a misdescription occurs the court may allow amendment of the plaint at any time and that no limitation issue arises from such an amendment.

After addressing the matter of the rate of interest, the Court set aside the decree of the High Court, allowed the appeal in part, and entered a decree in favour of the respondent firm for the sum of Rs 5,639/3/‑ together with interest at six per cent per annum calculated from the date of the transaction until actual realization. The Court ordered that the respondent firm shall receive proportionate costs from the appellant firm, while each party shall bear its own legal costs. The appeal was therefore allowed in part.