This article is written by APURVA, a student of the Fairfield Institute of Management and Technology, GGSIPU.
In civil litigations, a ‘Receiver’ is considered to be an officer of the court who is appointed by the court to protect and preserve the subject matter of suit till the time the court decides the matter. According to the court it is sometimes 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 generally be a movable or immovable property.
The Receiver is liable to take care of the property akin to a prudent man who will take care of his own personal property. He is supposed to 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.
A Receiver under the Civil Procedure Code
According to the order 40 of the Civil Procedure Code (CPC):
A Receiver is an independent and impartial person who is appointed by the court to administer or manage, i.e., to protect and preserve a disputed property involved in a suit. He is not a representative of any of the parties, and he is regarded as an officer of the court working in the interest of neither plaintiff nor defendant but for the benefit of all the parties.
For example, if there is a dispute between A and B regarding an immovable property. The court thinks that the possession should be taken from B and given to an independent person if it is in the best interest of both the parties, a receiver may be appointed by the court who can manage the property till the time that the suit is being decided. Such a receiver appointed by the court is responsible for the maintenance of the property and he can also collect the income like rent or any other profits and utilize it for the maintenance of the property. Apart from the expenses incurred in maintenance of the property, the remaining amount from the income received, the receiver will have to submit, in the court.
The court provides to the parties a form of interim protection who makes the application till the time that matter gets adjudicated by the court.
The Receiver is considered as an officer of the court as an extended hand of the court. He is entrusted with the responsibility of the disputed property or money by the court, and he manages such property or money till the time a decree is passed, or the parties have compromised, or any other period as the court decides. The property entrusted to the receiver is considered to be the custody of the law and the receiver has no other power than those entrusted to him by the court while being appointed.
How is a Receiver Appointed
According to the section 51(d) of 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. It is the discretionary power of the court. In a suit, the trial court can appoint a receiver, whereas, in an appeal, the appellate court can appoint a receiver. However, the discretion is not arbitrary, absolute, or unregulated. The expression “just and convenient” does not mean that the appointment is based on the whims and wishes of the judge on any grounds which stand against equity and the Court has to keep the various principles in mind before appointing a receiver.
Case law: T. Krishnaswamy Chetty vs C. Thangavelu Chetty And Ors., AIR 1955 Mad 430
In this case, the Madras Court introduced the following principles which are well established in Indian jurisprudence as well:
- It is a discretionary power.
- 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, a receiver should not be appointed.
- It is one of the hardest remedies as it deprives the defendant of his right to possession before the final decree. Therefore, the court shall not resort to it merely on the ground that it will do no harm and there should be a strong apprehension that the property is in danger, or the plaintiff will be in a worse situation if the appointment of a receiver is delayed.
- A receiver is appointed only when there is a possibility of wrong and 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 maintenance of the property.
- The court is supposed to look at the conduct of the party who makes the application for appointment of a receiver.
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 an affidavit.
- A Receiver other than an official receiver has to give security.
- The security is to be given should be satisfactory to the registrar.
- The receiver has to provide personal bonds with a number of sureties required by the registrar where 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.
- The receiver will have to submit a report providing the details regarding the property such as inventory of property or books of account etc., within a week of appointment,
- The directions on where to invest the money received by the receiver from the property will be given by the Registrar.
Who can Apply for the Appointment as a Receiver
A plaintiff as well as the defendants can file such an application for the appointment as a Receiver, but a third party is not allowed to file the application. Although, if he is interested in the protection and preservation of the property, he can make an application after taking permission from the court. A person needs to be independent, impartial, and totally disinterested to be appointed as a receiver and that person should not have any stake in the disputed property.
If the court is of the opinion that either party should not hold the property in dispute, he can appoint a receiver before or after a decree and can remove from the possession of the property and commit the same property in the custody or management of the receiver.
Under section 94(d), the receiver can be appointed to prevent the ends of justice being defeated and under section 51(d) the court has the power to appoint a receiver for the execution of a decree.
There are provisions in other acts as well 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, section 69A of the Transfer of Property Act, 1882 also provides for the appointment.
Powers of a 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.
Duties of a 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.
Liabilities as 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.
Receiver 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, 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:
- On Rs. 10,000 : 5 %
- Above Rs. 10,000 up to Rs. 20,000 : 3 %
- Above Rs. 20,000 up to Rs. 50,000 : 2 %
- Above Rs. 50,000 up to Rs. 1,00,000 : 1 %
- 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.
A Collector as a Receiver
According to Order 40 rule 5, if the revenue generated from the property is received by the government, the court can appoint a collector as a receiver if the court thinks that management of such property by collector will promote the interests of those who are concerned.
It can be concluded that the receiver plays a vital role whenever the court requires. A receiver is appointed by the courts as an officer of the court and subject matter is managed by him which is considered to be in custody of the law. A receiver should be impartial who has no stake in the subject matter and can manage the property just as a prudent man will do with his own property. The receiver should take complete care while making an important decision related to the subject matter appointed to him as he is personally liable for any damage to it. For safety, he can consult the court before making such decisions.
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