In this article, Mohd Hashim Miyan discusses the appointment of the receiver in DRT matters.

Introduction

The Tribunal under The Recovery of Debts Due to Banks and Financial Institutions Act dealing with the matter of recovery may appoint a receiver to receive the rent, proceeds, and profit from any property of the defendant. The receiver is an officer of the tribunal, who is accountable for good faith and reasonable diligence. In the event that any misfortune occurs out at the property depended on the receiver, out of his/her carelessness or deceptive execution of trust he/she will be liable for harms. Appointment of the receiver by the tribunal is an interim relief before the final judgment of the matter. Its discretionary power of the tribunal to exercise while appointing a receiver.

There is no specific definition of the term “Receiver” in The Recovery of Debts Due to Banks And Financial Institutions Act, 1993 (RDDBFI-Act) or any other statutes or Code of Civil Procedure, 1908.  

Appointment of Receiver by the Tribunal

According to Sub-Section 18 of Section 19 of The Recovery of Debts Due to Banks And Financial Institutions Act, 1993 stated about the appointment of a receiver.

Basically, it is the discretionary power of the tribunal whether to appoint a receiver or not but this power is not against the natural justice it must be a sound and legal discretion and must be practised mindfully, judicially and after considering all the circumstances of the case for the purpose of achieving the ends of justice and the rights of all the parties are protecting who are interested in the controversy.

The motive of the legislature to introduce this provision is to protect, preserve and manage the property of the defendant up to the matter is pending.

In recovery dispute, the plaintiff wants to realize their debts from the property of the defendant in this situation the tribunal will appoint a receiver if it is satisfied on the condition that the property on which the recovery is proposed will be disposed of by the defendant.

A receiver ought to be appointed not just where it is essential for the realization, preservation or the management of any property or better care, movable or immovable, the subject of a suit or attachment, yet in addition where it appears to the tribunal to be just and convenient.

The Tribunal by the appointment of the receiver should not be distressed the bona fide possessor of the property unless there is some reasonable ground for such interference has arisen and there is a strong reason of the fear that the property will be dissolved unless the tribunal gives its protection.

A receiver only on the ground should not be appointed by the tribunal that no loss would occur on his appointment.

Limitation of the tribunal’s power

The power of the tribunal to appoint a receiver is limited to the case or matter it means that only for the period of the case is pending before the tribunal. There is no power of the tribunal to appoint a receiver if the proceeding of the case has been disposed off.

Powers of Receiver

A receiver is an officer of the court and he works under the discretion of the tribunal. As per the direction in case of Reddy v/s Reddy [1] the court or tribunal may give any of the following functions upon the receiver:

• To defend and institute a suit;
• To apply, dispose of and collect the profits and rents;
• To manage, preserve, protect, realize and improve the property;
• To execute a document; and
• Such other powers as it may deem fit.

In the case of S.B Industries v/s United Bank of India [2], the receiver has no power except the tribunal conferred by the interim order upon him for which he was appointed in the matter. It is for the tribunal not to confer all of the above powers to the receiver. They are duty bound as per terms of the appointment.

When full powers are conferred on the receiver then he should take certain directions of the tribunal in all relevant matters if he wants to defend himself. With the leave of the tribunal, a receiver can be sue or be sued. This has been adopted by the court in Everest Coal Co. v/s State of Bihar[3].

In the case of Jagat Tarini Dasi v/s Naba Gopal chaki expressed their view relating to the status of the receiver in the following words:

The receiver appointed by the court for the benefit of all the concerned parties and he is the representative of the court in the matter in which he is appointed. To exercise the jurisdiction of such cases relating to the administering of the property helped by the receiver to the court. The court can not administer the property without the receiver and he is also called the right arm of the court. Therefore, all suits to collect or acquire ownership of the property must be prosecuted by the receiver, and the proceeds received and control by only him.

Duties of the Receiver

Every receiver who is appointed shall-

• Supply every such security as the court or tribunal deems fit, appropriately to represent what he will get in regard to the property;
• Present all such records at such time periods and in such manner as the tribunal directs;
• The receiver has to pay the due amount according to the direction of the tribunal;
• If there is any loss occurred to the property by the wilful default or gross negligence of the receiver shall be responsible for it.

In Balaji v/s Ram Chandra, 1895 the court expressed that- the receiver shall furnish such security as the court deem fit on the account for what he shall collect in respect of the property. He has to present their account on such time and in such manner as the court directs. The receiver shall pay the amount due from him on the direction of the court. The receiver cannot delegate their duties which are assigned by the court to any other person for which he is bound personally to discharge them.

Liabilities of the Receiver

1. Where the receiver as the court directs fails to submit his accounts at such time and in such manner;
2. Where the receiver not to pay the amount due from him as the court directs;
3. Where the wilful default or gross negligence of the receiver occurrence loss to the property the tribunal may direct that his property should be attached and sell for the realization of the amount due from him for any harm occurred by him, and shall pay the remaining amount to the receiver if any.

A receiver is duty bound to protect the property for which he is appointed and shall work in the same manner as the reasonable person does for the protection of their property under similar conditions.

In Mohini v/s Sarkar[4], the court held that the receiver is responsible only for the amount which occurred by his default or negligence, not for the amount actually received by him.

In Thomas v/s Indian Bank 1890, the order of the court relating to the attachment and sale of the property of the receiver would be justified where the receiver fails to pay the amount as per the direction of the court. The appointed court also has the sole authority to remove the receiver when the receiver abuses his power and does not work as per the direction of the court.

The Position of the Receiver

A receiver is appointed by the tribunal which is the officer of the court and not the representative of the parties. He works for the benefit of all relevant parties in the suit. The court works for administering the property and hold the possession of the property by the receiver.

Remuneration of the Receiver

The tribunal is the authority to lay down the remuneration of the receiver. It represents the cost of the work done by him and must bear some connection to the labor included and time spent in the execution of the work endowed to him. If there is any contract made between the parties regards to the remuneration of the receiver is void and against the decision of the tribunal which is gross contempt of court.

The Term of appointment and discharge of a receiver

In the Halsbury’s laws of England describe the duration of appointment of the receiver by the court:

The time period of the receiver determines on the order of the court if the court passed interim order for the appointment of the receiver for the limited time period then he will discharge on the expiry of that period. If the receiver is appointed up to the final judgment or up to the further order of the court then they can not discharge from their office until the matter has been disposed off.

Removal of receiver

The tribunal or court does not only have the power of appointment but also to remove the receiver. Any party who has filed an application for removal of the receiver shall proof the conditions of his removal before the tribunal.

Conclusion

As the Civil Courts exercise the powers to appoint a receiver under CPC, the Debt Recovery Tribunal also have the same powers relating to the appointment of the receiver to recover the amount from the Non Performing Assets as per the RDDBFI Act and the SARFESI Act on behalf of the Banks and Financial Institutions.