By- Shivani Karmakar
Introduction
The Civil Court in India has the power to issue various interim orders according to the needs and exigencies of each case. One such power is the power to appoint a receiver, i.e., an officer of the court who looks after the subject matter of the suit during its pendency, under Order 40 of the Code. He is impartial and independent, and acts as a reasonable prudent man in the discharge of his duties.
Who is a Receiver?
The Code of Civil Procedure does not define the term “Receiver”. But it is generally understood as “A court appointed person who is appointed because the court thinks that neither party should be in possession of the property in dispute”.[1]
Kerr defines a receiver as “an impartial person appointed by the Court to collect and receive, pending the proceedings, the rents, issues and profits of land, or personal estate, which it does not seem reasonable to the Court that cither party should collect or receive, or for enabling the same to be distributed among the persons entitled.”[2]
Simply stated, wherever the Court is of the opinion that it would not be reasonable for either of the parties to hold the estate which is the subject matter of the suit, then, till it is disposed, the Court may appoint an independent and impartial third party who will take over such property. He will manage this property as a reasonable man would and is responsible for the maintenance of the property.
It is to be noted, that the receiver acts neither on behalf of the plaintiff nor the defendant but is an officer of the court who acts in general benefit of the property.
In Anthony C. Leo v. Nandlal Balakrishnan[3], the Apex Court described a receiver as an impartial/ neutral person. He is an agent of the Court. The property in the custody of the deceiver is custodio legis i.e., in the Custody of law or the court. The receiver has all powers as the real owner of the property, but he always acts under the supervision of the Court.
Object
The object behind appointment of a receiver is to protect, preserve, and manage the property during the pendency of the litigation. It is a part of the Court machinery that seeks to safeguard interests of both the parties to the suit.[4]
Appointment of a Receiver
The Court before whom the proceedings are pending, may appoint a receiver of the property, whether before or after decree, wherever it appears to be just and convenient.[5]
It may remove any person from the possession or custody of the property[6]; and commit the same to the possession, custody or management of the receiver[7].
Thus, the provision confers a discretionary power on the Court to remove any person and appoint a receiver so as to serve the ends of justice. However, where no party to the suit has the right to remove a person from the possession or custody of the property, the Court cannot dispossess such a person.[8]
The Landmark Case of T. Krishnaswany Chetty v. C. Thangavelu Chetty[9], the Madras High Court enumerated the five principles that must be kept in mind before appointing a receiver.
These “panch sadachar” are:
- The appointment of a receiver is a discretionary power of the Court. However, this discretion is neither arbitrary nor absolute, and must be exercised taking into account all the circumstances of the case, for protecting the rights of all parties interested in the controversy and the subject-matter. It is one of the harshest remedies under law as it deprives a party of the possession of property even before final judgement is pronounced, and so, must only resorted to where no other adequate remedy exists.
- A receiver can only be appointed if the plaintiff prima facie proves that he has an excellent chance of succeeding in the suit.
- The plaintiff must show some emergency or danger or loss demanding immediate action, and a court must not appoint a receiver merely on the ground that it will do no harm.
- An order appointing a receiver will not be. made where it has the effect of depriving a defendant of a ‘de facto’ possession since that might cause irreparable wrong.
- The party who makes the application must be free from blame and must not have resorted to laches, delay, acquiescence etc.
An application for the appointment of a receiver is generally made by a Plaintiff. However, nothing bars a defendant from applying for the appointment of a receiver if it is just and convenient.
Further, where a third party is interested in the realisation, management, protection, preservation, or improvement of property, he may also make such application. There is disagreement on whether or not the Court can appoint a receiver suo moto.[10]
Powers of a Receiver
Being a representative of the Court, the receiver functions its directions.[11] Order 40 R 1(1)d) enumerates that the Court may confer upon the receiver any or all of the following powers:
- To institute and defend suits;
- to realize, manage, protect, preserve, and improve property;
- collect, apply, and dispose of rents and profits;
- execute documents;
- such powers as the court thinks fit.
In Krishna Kumar v. Grindlays Bank P.L.C.[12], it was held that the receiver cannot sue or be sued without the leave of the Court, and if the suit is filed without such leave, it is liable to be dismissed and its decree set aside. However, grant of leave in the rule and refusal is generally an exception.
In Prabodh Nath Shah v. SBI[13], it was held that the list of powers of the receiver under order 40 is not exhaustive and can be added to from time to time. The receiver could even get the rent increased.
In ICICI Bank v. Karnataka Ball Bearing Corporation Ltd.[14], it was held that under residuary powers, the receiver also has, in extreme cases, the power to sell any property.
Duties and Liabilities of a Receiver
Under Rule 3, the duties of the Receiver have been mentioned as follows:
- furnishing security accounting for the income that he will receive from the property;
- submission of accounts as directed by the Court;
- payment of amount due;
- responsibility for any loss to the property that lapped due to his wilful default or gross negligence.
It must be borne in mind that the, the receiver, being a representative of the Court must discharge all his rights and duties personally, and cannot delegate or assign such rights or duties entrusted to him by the Court.[15]
According to Rule 4, where a receiver fails to submit his accounts or pay such amount in the time and manner as prescribed by the court, or, where, by his wilful default or gross negligence, there has been a loss to the property, the Court may have the receivers own property attached and sold to recover the loss caused by him. The balance (if any) shall be paid to the receiver.
The receiver must act diligently, as a reasonably prudent man in the maintenance of the estate entrusted to him, as if it were his own property. Thus, he must endeavour to keep down expenses.[16]
Further, in K.T. Thomas v. Indian Bank[17], the receiver is responsible not only for sums actually received but also for all sums he might have received but for his own default or negligence.
Miscellaneous
Where revenue from a land accrues to the Government, the Court may, if it is in the interest of the parties concerned, and with the consent of Collector, appoint him as the receiver.[18]
The Code does not mandate the issue of notice before appointment of receiver by the Court, as it may, in some circumstances, defeat the very purpose of the appointment, considering the fact that the receiver is appointed in exigencies.
The order appointing or refusing to appoint a receiver is appealable[19], and, where no appeal lies, a revision is competent and maintainable.
Conclusion
A receiver, therefore, is an important part of the Court machinery that functions to safeguard the interests of the parties to the suit, by managing a property pendente lite. He is supposed to be impartial, neutral, and must act as a reasonably prudent man would with respect to his own property.
- Consise Oxford English Dictionary (2002), p 1195. ↑
- Kerr, Law and Practice as to Receivers appointed by the High Courts of Justice or order of Court, Twelfth Edition, Walton and Sarson, Special Edition for India (2001) p.3. ↑
- Anthony C. Leo v. Nandlal Balakrishnan, AIR 1996 SC 1323. ↑
- P. Lakshmi Reddy, AIR 1957 SC 314. ↑
- Order 40 Rule 1(1)(a). ↑
- Order 40 Rule 1(1)(b). ↑
- Order 40 Rule 1(1)(c). ↑
- Order 40 Rule 1 (2). ↑
- T. Krishnaswany Chetty v. C. Thangavelu Chetty, AIR 1930 Mad 430 ↑
- See Mahendra v. Ram Narayan, AIR 2000 SC 3569. ↑
- Hiralal Patni v. Loonkaran Sethiya, AIR 1962 SC 261. ↑
- Krishna Kumar v. Grindlays Bank P.L.C., AIR 1991 SC 899. ↑
- Prabodh Nath Shah v. SBI, Civil Appeal no. 3908/1999. ↑
- ICICI Bank v. Karnataka Ball Bearing Corporation Ltd., AIR 1999 SC 3438. ↑
- Balaji v. Ramchandra, ILR (1895) Bom 660. ↑
- Mohini v. Sarkar, AIR 1941 Cal 144. ↑
- K.T. Thomas v. Indian Bank, 1984 Supp SCC 703. ↑
- Order 40 Rule 5. ↑
- Order 43 Rule (1)(s). ↑