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Judgment
Wadsworth, J.—This appeal arises out of an order giving directions to the receiver appointed at the instance of the plaintiff in a suit on a
simple mortgage to pay to the Collector a sum of money due by the mortgagor by way of the value of labour known as kudimaramath for which
the mortgagor was obliged to pay under the Madras Compulsory Labour Act. The amount due from the mortgagor in respect of kudimaramath
had accrued due before the appointment of the receiver. The Collector was, of course, not a party to the suit on the mortgage and he filed an
application under Order 40, Rule 1, Civil Procedure Code, praying the Court to pay the money due to the Government out c f the amount in
deposit or to direct the receiver to pay it. A preliminary objection was taken that no appeal lies. It is contended that this is not in fact an order to
the receiver under Order 40, Rule 1 but a mere order u/s 151 for payment out of Court at the instance of the Government. The answer to this
contention is that the Collector''s application was framed under Order 40, Rule 1 and that in fact the payment was directed by means of an order
to the receiver which clearly falls under Order 40, Rule 1 and is therefore appealable.
The question therefore is whether the debt due to the Crown is entitled to priority over the debt due to the mortgagee in respect of the amount
recoverable from the income of the mortgaged property. The appellant contends that the appointment of a receiver in a suit on a simple mortgage
creates what is practically a charge in favour of the mortgagee for the rents and profits of the land. He relies on certain observations in Sri Rajah
Rao Venkatakumara Mahipathi Surya Rao Bahadur Garu, the Maharaja of Pittapuram Vs. Gokuldoss Goverdhanadoss and Others, , on a
passage in the judgment of Ramesam, J., in the Full Bench ruling in M. Paramasivan Pillai Vs. A.V.R.M.S.P.S. Ramasami Chettiar, and on the
observations of Madhavan Nair, J., in Khadar Mohideen Sahib Vs. C. Nagu Bai alias Seetha Bai and Others, . It is true that there are in these
judgments phrases which give some colour to the theory that when a receiver has been appointed the right of the mortgagee to a preferential lien
over the rents in respect of his mortgage-debt to the extent to which it is not covered by the hypotheca, is based on the theory that the rents are
regarded as being added to the security for the mortgage-debt. But it seems to me that this view is clearly erroneous and that it was not in fact the
basis of the decisions in the three cases above referred to. In India at any rate a simple mortgage does not bind the rents and profits of the
hypotheca. The appointment of a receiver in a suit on a simple mortgage does not really enlarge the scope of the mortgage. The true nature of the
proceeding is that the Court creates a machinery whereby the mortgagor is prevented from dissipating the funds which would normally be used to
defray the interest on the mortgage, the object of the machinery being simply to prevent the mortgagor from profiting by the law''s delays. The
receiver collects the rents in the first instance for the benefit of the mortgagee against the contingency of the hypotheca being insufficient. If the
hypotheca satisfies the mortgage-debt then the receiver holds the rents for the mortgagor. The theory that these rents are charged in favour of the
mortgagee seems to have arisen out of the difficulty of finding a legal basis for the rule that the mortgagee at whose instance a receiver has been
appointed is entitled to priority as against the. simple creditors of the mortgagor in claiming the funds in the hands of the receiver, should the
hypotheca fail to satisfy his debt. The true basis of this rule is not, I think, that there is any charge in favour of the mortgagee but that the Court
gives preference to the mortgagee over the simple creditors in respect of those moneys merely by way of justice and equity in order to ensure that
the mortgagee shall not be damnified by the protraction of the suit. The decision in S.C. Venkanna v. Mangammal I.L.R.(1936) 14 Rang. 308 lays
it down that the preferential claim of the mortgagee to the profits in the hands of the receiver is not based on any substantive rights to those profits
which the terms of the mortgage do not warrant, but is merely granted by way of an equitable relief to the mortgagee against the consequences of
the delay in enforcing his legal remedy. If it is conceded that a mortgagee has no charge over the rents in the hands of the receiver, it is difficult to
see how he can have a preferential claim as against the Crown. His preferential claim as against the simple creditors has been recognized, but not,
so far as I am aware, on any other grounds than as an equity which is recognised in his favour as a diligent creditor trying to enforce his legal
remedy. As against all the unsecured creditors the claim of the Crown is paramount. Manickam Chettiar Vs. The Income Tax Officer and Another,
. The lower Court has relied on a decision in Soniram Rameshur v. Mary Pinto I.L.R.(1933) 11 Rang. 467 which at page 474 quotes with
approval an unreported decision of the Rangoon High Court to the effect that a receiver appointed in a mortgage suit can be directed at the
instance of the Crown to pay out of the rents and profits collected from the mortgaged land Income Tax due by the mortgagor. One might be chary
of treating a brief summary of an unreported decision as an authority in the absence of the full text of the judgment, but I am of opinion that the
decision which appears to have been given in that case is based on correct principles. If there is no charge in favour of the mortgagee and if the
mortgagee is merely in the position of a simple creditor in whose favour the Court recognises an equity over other simple creditors, there is no
reason why the ordinary rule that a debt due to the Crown has preference over all other unsecured debts should not be enforced in this case. The
circumstances of the present case give an additional weight to the claim of the Crown. It is true that money due from a ryot who has defaulted in his
duty to perform the customary labour for the protection of the irrigation source of his land is not charged on the land, though it may be recovered
as an arrear of land revenue. At the same time the payment of these dues is a legitimate expense which the holder of the land ought to incur for the
protection of the land. And although in the present case the amount became payable before the receiver was appointed it is in my opinion a
legitimate expense which the receiver should pay as an incident of his management of the property, quite apart from the fact that it is also a debt
due to the Crown and so entitled to priority. Whichever way therefore one regards this claim, it is one which must be preferred to the claim of the
mortgagee. I therefore dismiss the appeal with costs.