Receiver-held funds and Crown priority: revenue claims may be satisfied from receiver collections absent court appropriation or charge.

Receiver-held collections in mortgage or charge proceedings remain in custodia legis and are not automatically impressed with the character of the mortgaged corpus; the court must expressly appropriate or create a charge for the mortgagee to obtain priority. The Crown's preferential right to satisfy revenue claims applies against unsecured creditors and, therefore, an Income Tax claim may be paid from receiver realisations unless the fund has been expressly charged, earmarked or appropriated in favour of a secured mortgagee. Outcome: Revenue priority upheld absent a court-created charge in favour of the mortgagee.

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Issues: Whether an Income Tax Officer (Collector) is entitled to payment out of sums realised and deposited by a court-appointed receiver in a mortgage/charge suit, or whether such receiver collections are to be appropriated to the mortgagee/decree-holder in priority to the Crown debt.

Analysis: The Court examined the legal character of funds collected by a receiver appointed in proceedings to enforce a mortgage or charge and reviewed authorities on (i) the Crown's preferential right in respect of debts due to the State, (ii) the effect of appointing a receiver in mortgage or charge actions, and (iii) whether appointment of a receiver creates a charge, lien or security in favour of the mortgagee over rents and profits realised. The Court held that a receiver is an officer of the court holding property in custodia legis and that monies realised by him are not automatically impressed with the character of the mortgaged corpus unless the court by order has appropriated or earmarked them in favour of the mortgagee. The priority of the Crown over other unsecured creditors remains applicable; however, that priority does not extend to defeat a true secured debt or a fund already charged by express order. The Court concluded that absent an order creating a charge or appropriation in favour of the mortgagee, the Income Tax claim (a Crown debt) can be satisfied from receiver collections subject to the rule that properly secured claims or funds expressly charged by court order prevail.

Conclusion: The Collector (Revenue) is entitled to payment out of the receiver's collections unless the fund is already charged, earmarked or appropriated in favour of the mortgagee by a court order; accordingly, the Collector's appeals are allowed in the first matter and the Income Tax Officer's claim is upheld in the second matter as confirmed by the Court below - overall decision is in favour of the Revenue.

Ratio Decidendi: Appointment of a receiver in a mortgage or charge action does not by itself create a charge or lien in favour of the mortgagee over rents and profits collected by the receiver; monies held by the receiver remain in medio until the court makes an appropriation or creates a charge, and in the absence of such appropriation a Crown debt has priority over other unsecured creditors.

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