R.L. Moore vs Asharfi Singh

Adami, J.—The husband of the petitioner was receiver of Schedule 3 properties of the Mulukrani Kuer's estate and was manager under the Court of Wards, of Schedule 1 and Schedule 2 properties. As manager of the Court of Wards he had an establishment of clerks, and, for his purposes as receiver of the Schedule 3 properties, it is alleged that he employed the Court of Wards establishment which was under his direction.

On 8th March 1927, Mr. Moore, the petitioner's husband had a serious heart attack. At that time he had in his hands Rs. 815 belonging to Schedule 3 properties of which he was the receiver. Being so ill, he handed over the Rs. 815 to one Phuleshar, who was the cashier of his office as manager under the Court of Wards of Schedule 1 and 2 properties and who presumably acted also generally as cashier of the Schedule 3 properties as well and obtained a receipt for that sum from him. He at the same time wrote to the Collector asking that somebody else should be sent to take over charge from him, since he was too ill to carry on as manager. No one was sent by the Collector and on 18th March Mr. Moore died.

After Mr. Moore's death, an officer was sent down to take overcharge. Phuleshar never paid the money to the Court or to the present respondent who was appointed as receiver of Schedule 3 properties after Mr. Moore's death, but embezzled it. The respondent then applied to the learned Subordinate Judge, asking that action should be taken by him under Rule 4, Order 40, Civil P.C. In the application under Rule 4, the Subordinate Judge was asked to attach and soil the property of the present petitioner on the ground that she was liable as widow and legal representative of Mr. Moore. She objected that she was not liable; but the learned Subordinate Judge has overruled the objection and directed that an order of attachment should issue against the property of the petitioner. The petitioner now moves this Court against that order. Now Rule 4, Order 40 runs:

Where a receiver-(a) fails to submit his accounts at such periods and in such form as the Court directs, or (b) fails to pay the amount due from him as the; Court directs, or (c) occasions loss to the property by his wilful default or gross negligence the Court may direct his property to be attached and may sell .such property, etc.

It is clear that the learned Subordinate Judge could net have acted on the grounds (a) and (b) in the rule, for there was no direction by the Court to Mr. Moore either to submit accounts or to pay in any amount due from the receiver. The only ground on which he could have acted was ground (c), and in the first place we must determine whether there was any wilful default or gross negligence on the part of the receiver.

On 8th March 1927, it is clear, Mr. Moore was altogether incapable of conducting any business, and he knew this, and it was for that reason that he asked that he should be allowed to give over charge and at the same time made over the money in his hands to the clerk, who in the ordinary course of business would generally take over the money and keep it until it was sent to the Court. This man Phuleshar, as I have said, was the cashier under the Court of Wards. Mr. Moore took the precaution of getting a receipt from him and he had, so far as I can see, no reason in any way to distrust the clerk.

It is urged before us that the receiver as such neglected his duty in entrusting this sum to the clerk who was not actually a clerk in the estate under the receiver, and he had given no security as such clerk, and that it was the duty of Mr. Moore to have sent the money direct to the Court. No doubt, if Mr. Moore had been in good health he would have taken steps to send the money direct to the Court but on that day he was incapable of so acting. In my mind there was no negligence or default much less wilful default or gross negligence on the part of the receiver in handing over the money to Phuleshar and taking a receipt.

Our attention has been directed to certain cases, namely the case of Balaji Narayan v. Ramchandra Govind [1895] 19 Bom. 660 and the case of Salway v. Salway. 2 Russ & M. 216.

Now in both those cases there was wilful neglect. In the former case the receiver for a period of four years made over the absolute control of the properties entrusted to him for management to successive karkuns who embezzled the money; he took absolutely no steps to carry out his duties. In the case of Salway v. Salway 2 Russ & M. 216, the receiver, having, monies in his hand belonging to the estate, instead of depositing them in the Bank in a separate account made some arrangement with other persons as sureties that the moneys should be doposited in the Bank in the names of those sureties and those sureties should have the power of withdrawing the moneys.

Now it is quite clear that in both those cases there was a wilful neglect of duty. In my mind in. the present case the action taken by the receiver was the action which an ordinary prudent man would take. He had in his hands money of the estate and, feeling that he might die at any moment owing to his heart attack, he at once took steps to ensure that the Rs. 815 would not be mixed up with his own private money, which would go to his wife, but should be kept separate and would be handed to the Court by a man whom he apparently had every reason to trust.

10 On p. 399, para. 758, 24th Vol. of Halsbury's Laws of England, it is laid down that:

If money paid to someone else by a receiver does not reach its proper destination, the receiver will be compelled to make good the loss unless he can show that he has acted with perfect regularity and has used such a degree of prudence as would be expected from a private individual in relation to his own affairs.

I am certainly of opinion that the receiver in this case did act with a degree of prudence which would be expected from a private individual in relation to his own affairs. That he secured a receipt from Phuleshar is admitted and in fact Phnleshar after absconding was arrested and put on trial and confessed that he had received the money from the receiver and had embezzled it.

The learned Subordinate Judge has stated in his order that it is not the case of the present petitioner that Phuleshar in the capacity either of a clerk or cashier used to remain in charge of any cash of the estate in the ordinary course of business. But in fact that seems to be the case of the petitioner. It has been urged that even in a case where a receiver places money properly in a Bank and the Bank fails, the receiver will be personally liable for the loss; but this is clearly not the law as shown in the paragraph I have mentioned above in Vol. 24 of Halsbury's Laws of England. I may say that it is true that, having been moved, the Subordinate Judge posted a letter to Mr. Moore on 15th March 1927, directing him to submit accounts but that letter never reached Mr. Moore before he died.

Taking all the circumstances together, I am satisfied that this is not a case in which the Subordinate Judge should have passed an order under Rule 4, Order 40, and therefore that order must be set aside and the money deposited by the petitioner under the order of the Court will be returned to her.

The respondent will pay the costs of the lower Court and also the costs of this hearing. We assess the hearing fee at three gold mohurs.

Scroope, J.

I agree.