Debt due to the Crown has preference over unsecured debts, and the receiver is obligated to pay legitimate expenses for the protection of the land.

Wadsworth, J.

1. 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 under Section 151 for payment out of Court at the instance of the Government. The answer to this contention is that the Collectors 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.

2. 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 Maharaja of Pithapuram v. Gokuldoss Goverdhana Doss AIR1931Mad626 , on a passage in the judgment of Ramesam, J., in the Full Bench ruling in Paramasivan Pillai v. Ramasami Chettiar AIR1933Mad570 and on the observations of Madhavan Nair, J., in Khader Mohideen Sahib v. Nagu Bai (1939)1MLJ730 . 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 laws 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. Venka