This Article is written by Aakash M Nair, a 4th year Student of Delhi Metropolitan Education law School affiliated to GGSIP University. He broadly discusses the appointment, powers and duties of Receiver under the Civil Procedure Code.
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.
Who is a receiver under the civil procedure code?
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.
What is the purpose of the appointment of a receiver?
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.
What is the role of a receiver?
The Receiver is regarded as an officer of the court and is the extended arm and hand of the court. He is entrusted with the responsibility to receive disputed property or money given by the court and manage such property or money till the time a decree is passed or the parties have compromised or any other period as the court deems fit. The property or fund entrusted to the receiver is considered to be custodia legis i.e. in the custody of the law. The Receiver has no power other than those entrusted to him by the court while appointing him.
Who can appoint a receiver?
According to the civil procedure code, the court before which the proceedings are pending can appoint a receiver if it appears just and convenient to the court to appoint such receiver [section 51(d)]. It is within the discretionary power of the court to appoint the receiver. For example, in a suit, the trial court can appoint a receiver. Whereas, in appeal, the appellate court can appoint a receiver.
However, the discretion is not absolute, arbitrary or unregulated. The expression “just and convenient” does not mean the appointment is based on the whims and wishes of the judge on any grounds which stand against equity.
How does the court decide whether to appoint a receiver or not?
Court has to keep the following principles in mind before appointing a receiver:
- Appointment of a receiver is a discretionary power.
- It is a protective relief to the plaintiff. The object is to protect and preserve the disputed property till the time the suit is pending in the court.
- A receiver should not be appointed unless the plaintiff shows prima facie that he has a strong case against the defendant and it is more than likely that he will succeed in the suit.
- Appointment of a receiver is one of the hardest remedies as it deprives the defendant of his right to possession before the final decree. Therefore, the
- court should not resort to it merely on the ground that it will do no harm. There should be strong apprehension that there is a danger to the property or the plaintiff will be in worse of a situation if the appointment of a receiver is delayed.
- The court should appoint a receiver only when there is a possibility of wrong or injury. Also, if it is shown that the subject matter is not in the possession of any of the parties and it is in the common interest of both the parties to appoint a receiver for the protection and preservation of the property.
- The court should look at the conduct of the party who makes the application for appointment of a receiver. The party should come to the court with clean hands and their conduct should be such that they are not disentitled to this equitable relief.
The above principles were introduced by the Madras Court in the case of T. Krishnaswamy Chetty vs C. Thangavelu Chetty And Ors., AIR 1955 Mad 430. These principles are now well established in the Indian jurisprudence.
Who can apply for the appointment of the receiver?
Generally, a plaintiff files the application for appointment of a receiver but defendants can also file such application. A third party is not allowed to file the application but if he is interested in the protection and preservation of the property, he can also make an application after taking permission from the court.
Who can be appointed as a receiver?
A person who is independent, impartial and totally disinterested should be appointed as a receiver. Such a person should not have any stake in the disputed property. Generally, parties to the suit are not appointed as receiver by the court. But in extraordinary circumstances, a party to suit can be appointed as receiver.
When can a receiver be appointed?
The court can appoint receiver whenever the court is of the opinion that either party should not hold the property in dispute. The court can appoint a receiver before or after a decree and can remove any person from the possession or custody of the property and commit the same property in the custody or management of the receiver.
Under the code itself, the receiver can be appointed to prevent the ends of justice being defeated. [section 94(d)]. Similarly, for the execution of a decree, the court has the power to appoint a receiver. [section 51(d)].
There are provisions in special acts which provides for the appointment of a receiver by the court. For example, section 84 of the Companies Act, 2013 provides for the appointment of a receiver. Similarly, section 69A of the Transfer of Property Act, 1882 also provides for the appointment.
What is the process of appointment of a receiver?
The process of appointment of a receiver is provided by the courts in their respective court rules. The high court has the power to make rules for the superintendence and control of the subordinate courts.
In chapter XIX of the Delhi High Court (Original Side) rules, 1967, the following process is provided:
- Application for appointment shall be made in writing and shall be supported by affidavit.
- Receiver other than the official receiver has to give security.
- The security is to be given to the satisfaction of the registrar.
- He has to provide personal bonds with the number of surety required by the registrar. The personal bond will be double the amount of annual rental value of the property or the total value of the property which the receiver is going to administer.
- Within a week of appointment, the receiver will have to submit a report providing the details regarding the property such as inventory of property or books of account etc.
- The registrar will give directions on where to invest the money received by the receiver from the property. Generally, such money is submitted in scheduled banks or government bonds.
What are the powers of the receiver?
Under order 40 rule 1(d) powers of the receiver are provided as following:
- Collection of rents and profits arising out of the property.
- Application and disposal of such rents and profits.
- Execution of documents as the owner himself.
- To institute and defend the suit.
- Such powers as the court may deem fit.
Also, there are indirect powers which a receiver enjoys being the hand of the court. For example, If a person obstructs or interferes with the receiver’s right to possession, it will amount to obstruction in a court proceeding and such a person can be made liable for contempt of court. Similarly, property in the hands of the receiver cannot be attached without the leave of the court.
The court has the discretionary power to not confer all the rights on the receiver. Even if the court has given all the powers to him, he should take the advice of the court in all important decisions related to the property to protect himself.
Without the permission of the court, the receiver cannot:
- Grant lease on the property.
- Bring suits except for suit for rent. A suit will be dismissed if not permitted by the court.
What are the duties of the receiver?
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 fulfil 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 wilful failure to protect and preserve the property.
What are the liabilities of a receiver?
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 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.
Will a receiver be entitled to remuneration?
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.
For example, The Delhi high court has provided in Delhi High Court (original side) rules,1967, the for remuneration of the receiver as follows:
Rents recovered, outstanding recovered, the value realised on the sale of movable and immovable properties calculated on anyone estate:
(i) On First Rs. 10,000 : 5 %
(ii) Above Rs. 10,000 up to Rs. 20,000 : 3 %
(iii) Above Rs. 20,000 up to Rs. 50,000 : 2 %
(iv) Above Rs. 50,000 up to Rs. 1,00,000 : 1 %
(v) Above Rs. 1,00,000 : ½ %
Similarly, for taking custody of money, 1 %, for taking custody of Government securities of stocks, shares, 1 % of the estimated value.
If no remuneration is specified for any work, such remuneration can be granted, as the court may think reasonable, on the application of the receiver.
Can a collector be appointed as a receiver?
Yes, according to (Order 40 rule 5), a collector can be appointed as a receiver if the revenue generated from the property is received by the government, the court can appoint a collector as a receiver with his consent if the court thinks that management of such property by collector will promote the interests of those who are concerned.
Clearly, the receiver plays an important role whenever the court requires the receiver to manage the subject matter in a suit to protect and preserve it till the time, the court decrees the suit.
The receiver is an officer of the courts and the subject matter managed by him is considered to be in custody of the law. The court appoints a receiver when the court is of the opinion that neither of the party should manage the property till the time the matter is decided. Any person can become a receiver provided they fulfil the requirements set by the court.
A receiver should be of impartial, independent and indifferent character who has no stake in the subject matter and can manage the property just as a prudent man will do with his own property. Court have vested certain powers and responsibilities on the receiver which he should use to manage the property in the best way possible.
The receiver should be careful while making an important decision related to the subject matter as he is personally liable for any damage to it. He can seek the permission of the court before making such decisions to be safe.
- “Harihar Mukherjee And Anr. vs Harnendra Nath … – Indian Kanoon.” https://indiankanoon.org/doc/1094113/.
- “Sri.D.Arumugam vs Sri.A.Balamurugan on 10 January … – Indian Kanoon.” 10 Jan. 2014, https://indiankanoon.org/doc/27350771/.
- “Mr. Anthony C. Leo vs Nandial Bal Krishnan & Ors on … – Indian Kanoon.” https://indiankanoon.org/doc/98916/.
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- “Delhi High Court Original Side Rules.” http://www.delhihighcourt.nic.in/library/acts_bills_rules_regulations/DELHI%20HIGH%20COURT%20(original%20side)%20rules,%201967.pdf.
- [Mohini v. Sarkar, AIR 1941 Cal. 144]