EVEREST COAL COMPANY (P) LTD. versus STATE OF BIHAR & ORS.

Citation: [1978] 1 S.C.R. 571 · Decided: 29-09-1977 · Supreme Court of India · Bench: V.R. KRISHNA IYER · Disposal: Appeal(s) allowed
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Judgment (excerpt)

' 
EVEREST COAL COMPANY (P) LTD. 
v. 
STATE OF BIHAR & ORS. 
September 29, 1977 
[V. R. KRISHNA IYER AND ]ASWANT SINGH, JJ.] 
Civil Procedure Code (Act V of 1908), Order XL-Leave to 
Receiver, whether a must-Principle behind obtaining prior leave of 
which appointed the.Receiver before suing tile Receiver, explained. 
571 
sue 
the 
the court 
The appellant-plaintiff entered into a contract' with the Receiver defendant 
State relating to a coal mine which had come within his 
Receivership in an 
earlier suit. 
While the appellant was working the mine under the contract, the 
Receiver-defendant after obtaining the permission of the court which appointed 
him but without notice to the appellant, cancelled the contract. The appellant 
sued the Receiver in damages after giving notice u/s. 80 C.P.C., but without 
taking the prior permission of the court which appointed the Receiver. Although 
he failed to apply for leave of the court before suing the Receiver, he made up 
for it by applying to the said court for permission to continue the 
litigation 
against the Receiver. 
The application was rejected on the view that since 
the 
petitioner had already filed a suit without leave of the cour_t, the question 
of 
grant of permission to continue it did not arise. 
A revision to the High Court 
was dismissed in limine. 
Allowing the appeal by special leave an~ granting leave to the appellant to 
prosecute his suit against Receiver-respondent, the court, 
HELD : ( 1) The principle that prior leave of the court which appointed the 
Receiver is necessary before suing the Receiver is based on 'contempt' of court. 
The rule is merely to prevent contempt. Leave obtained before the Lis termi-
nates is a solvent of contempt. The infirmity does not bear upon the jurisdic-
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B 
c 
D 
tion of the trying court or the cause of action. It is perepheral. The propelty 
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bt:ing in custodia legis, the court's leave, liberally granted is needed. It is the 
court appointing the' Receiver that can1 grant leave. 
If a suit prosecuted without 
such leave culminates in a decree, it is liable to be set nside. [575 B-E1 
(2) When a court puts a Receiver in possession of property. the 
property 
comes under court custody, the Receiver being merely an officer or agent of the 
court. Any obstruction or interference with the court's possession sounds 
in 
conten1pt of that court. 
~Any legal action in respect of that property is in 
a 
sense such an interference and invites the contempt penalty of likely invalidation 
F 
of the suit or other proceedings. 
But, if either before starting the 
action or 
during its continuance, the party takes the leave of the court, the sin: is absolved 
and the proceeding may continue to a conclusion on the merits. 
In the ordi-
nary course, no court is so prestige-conscious that it will stand in the v.-·ay of a 
legitimate legal proceeding for redressal 
or 
relief against its receiver unless 
the action is totally meritless, frivolous or vexatious or olher\vise vitiated by any 
sinister factor. 
Grant of leave is the rule, refusal the exception. 
After aU, the 
court is not, in the usual run of cases, affected by a litigation which settles the 
rights of parties and the Receiver represents neither party, being an officer of 
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the court. For this reason, ordinarily the court accords permission to sue. or to 
continue. The jurisdiction to grant leave is undoubted and inherent, but not 
based on black letter law in the sense of enacted la\v. 
Any litigative distur-
bance of the court's possession without its permission amounts to contempt of its 
authority; and the wages of contempt of court in this jurisdiction may well be 
voidability of the whole proceeding. 
Equally clearly, prior permission of the 
.:ourt appointing the Receiver is not a condition precedent to the enforcement 
of the cause of action. 
Nor is it so grave a vice that later leave sought and got 
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before the decree has been passed will not purge it. 
If, before the suit terrni-
nat~, the· televant court is moved and perm'ission to sue or to prosecute further 
is granted, the requirement of law is fulfilled. 
Of course failure to secure such 
leave till the end of the /is may prove fatal. [573 E-H, 574 A] 
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572 
SUPREME COURT REPORTS 
(1978] ! S.C.R. 
Pramatha Nath v. Keira Nath (1905) 32 Cal. 270; Jamshedji v. Husseinbhai 
(1920) 44 Born. 908, 58 J.C. 411, over-ruled. 
Banku Behari 15 Calcutta Weekly Notes 54, approved. 
OBSERVATION : 
Wh~n an
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