INTRODUCTION (Order XL)
In civil litigation, a receiver plays an important role in assisting the court. The Receiver is considered to be an officer of the court who helps the court to protect and preserve the subject matter of suit till the time the court decides the matter. Sometimes, the court thinks, it is in the best interest of both the parties to appoint a receiver who will be responsible for the management of the subject matter. The subject matter is generally a movable or immovable property. The Receiver is liable to take care of the property just as a prudent man will take care of his own personal property. He should follow the directions of the court or else his property can be attached by the court to recover the amount which is due to him. The term receiver has not been defined under the Code of Civil Procedure but the court held that A receiver is an indifferent person between the parties to a cause, appointed by the Court to receive and preserve the property or fund in litigation “pendente lite’, when it does not seem reasonable to the Court that either party should hold it. He is not the agent or representative of either party to the action, but is uniformly regarded as an officer of the Court, exercising his functions in the interest of neither plaintiff nor defendant, but for the common benefit of all parties in interest.
Being an officer of the Court, the fund or property entrusted to his care is regarded as being in ‘custodia legis’, for the benefit of who-ever may finally establish title thereto, the Court itself having the care of the property by its receiver, who is merely its creature or officer, having no powers other than these conferred upon him by the order of his appointment, or such as are derived from the established practice of Courts of equity. Therefore, a receiver is an impartial person appointed by the court to obtain and safeguard the property or funds pendente lite when it does not seem judicious to the court that either party should hold such property or funds. Under order 40 of CPC, The Receiver is an independent and impartial person who is appointed by the court to administer/manage, that is, to protect and preserve a disputed property involved in a suit.
For example, in a dispute between A and B for an immovable property, if the court thinks that it is in the best interest of both the parties that possession should be taken from B and given to an independent person, the court may appoint a receiver who can manage the property till the time the suit is being decided. Such a receiver appointed by the court would be responsible for the maintenance of the property. He can collect the income accruing like rent or any other profits and utilize it to maintain the property. After deducting the expenses incurred in maintenance from the income received from the property, the receiver will have to submit the remaining income, if any, in the court. He is not representative of either of the parties in the action, is uniformly regarded as an officer of the court working in the interest of neither plaintiff nor defendant but for the common benefit of all the parties.
OBJECTIVE OF APPOINTMENT OF RECEIVER:
The fundamental object of appointment of receiver is to protect and secure the property or funds during the pendency of the litigation. In the case of P. Lakshmi Reddy v. L. Lakshmi Reddy (AIR 1957 SC 314) the court held that the purpose of appointment of receiver is to preserve the suit property and safeguard interests of both the parties to the litigation. When a party in possession of the disputed property exhausts the property or causes irreparable damages to it, the whole object of the suit gets defeated because the subject matter ceases to exist or its value gets affected. Therefore, when the court is of the opinion that the property in dispute must not go to either of the parties, pendente lite, the court appoints a receiver who is entrusted with the protection and preservation of such property. It is a form of interim protection which the court provides to the parties who makes the application till the time the court adjudicates the matter.
APPOINTMENT OF RECEIVER: ORDER 40 RULE 1(a)
Rule 1 states that where it appears to the Court to be just and convenient, the Court may by order appoint a receiver of any property, whether before or after, decree. The term “may'' used under Rule 1 of Order 40 clearly reflects the discretionary power of the courts. In the case of S.B. Industries, Freegunj And Ors. v. United Bank Of India And Ors. (AIR 1978 All 189) the court held that the appointment of a receiver is, as a general rule, discretionary, and not a matter of right, a court will make an appointment of a receiver with great caution and circumspection. In a case where the remedy of the appointment of a receiver seems necessary to prevent fraud, to protect and preserve the property against an imminent danger of loss or diminution in value, destruction, squandering, wastage or removal from jurisdiction, the court may appoint a receiver, following principles were held the court in context of appointment of receiver:
i. The appointment of a receiver pending a suit is a matter resting in the discretion of the Court. The discretion is not arbitrary or absolute: it is a sound and judicial discretion, taking into account all the circumstances of the case, exercised-for the purpose of permitting the ends of justice, and protecting the rights of all parties interested in the controversy and the subject-matter and based upon the fact that there is no other adequate remedy or means of accomplishing the desired objects of the judicial proceeding.
ii. The Court should not appoint a receiver except upon proof by the plaintiff that prima facie he has a very excellent chance of succeeding in the suit.
iii. Not only must the plaintiff show a case of adverse and conflicting claims to property, but, he must show some emergency or danger or loss demanding immediate action and of his own right, he must be reasonably clear and free from doubt. The element of danger is an important consideration. A Court will not act on possible danger only; the danger must be great and imminent, demanding immediate relief. It has been truly said that a Court will never appoint a receiver merely on the ground that it will do no harm.
iv. 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. If the dispute is as to title only, the Court very reluctantly disturbs possession by receiver, but if the property is exposed to danger and loss and the person in possession has obtained it through fraud or force the Court will interpose by receiver for the security of the property. It would be different where the property is shown to be ‘in medio’, that is to say, in the enjoyment of no one, as the Court can hardly do wrong in taking possession: it will then be the common interest of all the parties that the Court should prevent a scramble as no one seems to be in actual lawful enjoyment of the property and no harm can be done to anyone by taking it and preserving it for the benefit of the legitimate who may prove successful. Therefore, even if there is no allegation of waste and mismanagement the fact that the property is more or less ‘in medio’ is sufficient to vest a Court with jurisdiction to appoint a receiver.
v. The Court, on the application of a receiver, looks to the conduct of the party who makes the application and will usually refuse to interfere unless his conduct has been free from blame. He must come to Court with clean hands and should not have disentitled himself to the equitable relief by laches, delay, acquiescence etc.
POWERS OF RECEIVER: ORDER 40 RULE 1(d)
A receiver is an officer of the court and is conferred with following powers-
● To institute and defend suits;
● Realization, management, protection, preservation and improvement of the property;
● Collection of the rents and profits;
● Execution of documents as the owner himself has;
● Such powers as the Court thinks fit.
DUTIES OF A RECEIVER: ORDER 40 RULE
Under order 40 rule (3), duties of a receiver are provided as follows:
● Furnish security to account for what he will receive from the property as income.
● Submit accounts (half yearly) for such period or form as directed by the court. The account basically includes the income received and expenses incurred for the protection and preservation of the property.
● Pay the amount due to the court.
● Take responsibility for any reduction in the value of the property because of the receiver’s willful negligence.
● Discharge the duties personally and should not delegate or assign any of the rights entrusted to him by the court.
● The receiver has to fulfill all the duties and responsibilities entrusted to him by the court. Otherwise, the court can take action against him and make him personally liable for any loss which might occur due to his negligence or willful failure to protect and preserve the property.
ENFORCEMENT OF DUTIES OF RECEIVER: ORDER 40 RULE 4
According to Order 40 rule (4), When a receiver fails:
● To submit the reports as specified by the court or,
● To pay the amount due from him as directed by the court or,
● Causes loss to the property due to gross negligence.
● Any other duty which court directed him to do,
● The court may order the attachment of property of the receiver to recover the loss caused due to his willful default or negligence.
● The court, after recovering all the losses from the proceeds received after selling the receiver's property, will pay the balance (if any) to the receiver.
● The receiver is bound in keeping down the expenses and taking care of the property in his possession as a prudent man would observe in connection with his own property under similar circumstances.
REMUNERATION TO THE RECEIVER:
Receivers are entitled to remuneration as fixed by the court for the services rendered by them. Also, a receiver has to be provided for the loss or expenses incurred by him for maintaining the property. Under order 40 rule (2), the court can fix the remuneration to be paid to the receiver for the services provided by him. The court can pass a general or specific order regarding the same.
DURATION FOR APPOINTMENT OF RECEIVER
The code does not specify any fixed period for the appointment of receiver; however, when a receiver is appointed for a specified time limit his appointment shall expire on expiry of such duration. In other cases, his appointment shall expire after the judgment or decree is passed by the court.
0 Comments