receiver Order 40 under civil procedure code

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Introduction: In the context of the Civil Procedure Code (CPC), a Receiver is an impartial individual appointed by the court under Order 40. This person is tasked with overseeing and safeguarding a disputed property involved in a legal case. For instance, in a property dispute between parties A and B, if the court deems it beneficial to entrust an independent entity with managing the property until the case is resolved, a Receiver may be appointed.

The court grants the Receiver the responsibility of maintaining the property, including tasks such as collecting rent or other profits. The Receiver is obliged to utilize the income to cover maintenance expenses. After deducting these costs, any remaining income must be submitted to the court. Importantly, the Receiver does not represent either party in the legal action but is considered an officer of the court, operating in the best interest of neither the plaintiff nor the defendant. Instead, the Receiver works for the common benefit of all parties involved.

The Receiver does not serve as a representative for either party involved in the legal proceedings. Instead, the Receiver is universally recognized as an officer of the court, functioning impartially and not advocating for the interests of either the plaintiff or the defendant. Rather, their role is dedicated to promoting the mutual benefit of all parties involved.

purpose of the appointment of a receiver

The appointment of a receiver serves the purpose of preventing the depletion or irreparable damage to the disputed property when a party in possession jeopardizes its integrity. In situations where the continued possession by either party could result in the destruction of the subject matter or diminish its value, the court intervenes. In such instances, the court, recognizing the need to preserve the property during the litigation, appoints a receiver. The receiver is tasked with safeguarding and maintaining the property until the court reaches a final decision. This appointment functions as a temporary measure, offering interim protection to the parties involved until the court resolves the matter.

role of a receiver

The Receiver is recognized as a court officer, acting as the extended arm and hand of the court. Assigned with the duty of receiving disputed property or money as directed by the court, the Receiver is responsible for managing such assets until a decree is issued, parties reach a compromise, or for a duration determined by the court. The property or funds placed under the Receiver’s care are deemed to be in custodia legis, meaning they are under the custody of the law. The Receiver possesses only the powers specifically granted by the court during their appointment.

Authority to Appoint a Receiver

In accordance with the Civil Procedure Code, the court handling the ongoing proceedings has the authority to appoint a receiver if it deems such an appointment just and convenient (Section 51(d)). The discretion to appoint a receiver lies within the court’s purview. For instance, in a primary lawsuit, the trial court possesses the ability to appoint a receiver. Conversely, in the case of an appeal, the appellate court holds the authority to make such an appointment.

However, it is crucial to note that this discretion is not absolute, arbitrary, or unregulated. The term “just and convenient” implies that the appointment is not based on the whims of the judge but is determined by equitable considerations and legal principles. 

Determining the Appointment of a Receiver in Court

In deciding whether to appoint a receiver, the court must adhere to the following guiding principles:

Discretionary Authority: The court’s power to appoint a receiver is discretionary.

Protective Relief: The primary aim is to provide protective relief to the plaintiff, safeguarding and preserving the disputed property throughout the pending legal proceedings.

Prima Facie Showing: A receiver should only be appointed when the plaintiff presents a prima facie strong case, indicating a likelihood of success in the ongoing lawsuit.

Caution in Remedies: The appointment of a receiver, being a stringent remedy that deprives the defendant of possession pre-decree, should not be employed solely on the basis that it causes no harm.

Imminent Peril: There must be a substantial apprehension of harm to the property or a worsened situation for the plaintiff if the appointment of a receiver is delayed.

Potential Wrong or Injury: A receiver should be appointed only when there is a credible risk of wrongdoing or injury. Additionally, if the subject matter is not in the possession of any party and it is in the mutual interest of both parties, a receiver may be considered for the protection and preservation of the property.

Examination of Party Conduct: The court should scrutinize the conduct of the party seeking the receiver’s appointment. The applicant must approach the court with integrity, ensuring their actions do not disqualify them from receiving this equitable relief.

These principles, initially established by the Madras Court in the case of T. Krishnaswamy Chetty vs C. Thangavelu Chetty And Ors., AIR 1955 Mad 430, now form well-established guidelines within the framework of Indian jurisprudence. They assist the court in making informed decisions regarding the appointment of a receiver.

Eligibility to Seek Receiver Appointment

In the process of appointing a receiver, the following guidelines dictate who can file an application:

Plaintiff’s Initiative

Typically, the plaintiff initiates the application for the appointment of a receiver.

Defendant’s Option

Contrarily, defendants also retain the right to file such an application.

Third-Party Involvement

Third parties are generally restricted from filing applications.

However, if a third party holds a genuine interest in the protection and preservation of the property, they may submit an application with prior court permission.

Qualifications for Receiver Appointment

In selecting a receiver, the court considers the following criteria:

Independence and Impartiality

The appointed person must be independent and impartial, demonstrating a lack of bias or personal interest.

Disinterestedness

The receiver should be entirely disinterested, with no stake or personal involvement in the disputed property.

Exclusion of Parties

Typically, individuals involved in the lawsuit are not chosen as receivers by the court.

However, in exceptional circumstances, a party to the suit may be appointed as a receiver.

Instances of Receiver Appointment

The court has the authority to appoint a receiver under various circumstances:

Dispute Resolution

The court can appoint a receiver if it believes that neither party should have possession of the disputed property. This action can be taken before or after a decree is issued.

Preventing Injustice

In line with Section 94(d) of the code, a receiver may be appointed to prevent the miscarriage of justice.

Decree Execution

For the execution of a decree, the court is empowered to appoint a receiver under Section 51(d).

Special Acts Provision

Special acts, such as Section 84 of the Companies Act, 2013, and Section 69A of the Transfer of Property Act, 1882, may also provide provisions for the court to appoint a receiver.

In each of these scenarios, the court has the discretion to appoint a receiver, either to manage the property, prevent injustice, or facilitate the execution of a decree, as outlined by relevant legal provisions.

Receiver Appointment Procedure

The procedure for appointing a receiver is stipulated by the courts through their respective court rules. High courts, in particular, possess the authority to establish rules governing the supervision and oversight of subordinate courts.

Receiver Appointment Procedure Example

For illustration, in Chapter XIX of the Delhi High Court (Original Side) Rules, 1967, the process unfolds as follows:

Written Application and Affidavit

An application for receiver appointment must be in writing and supported by an affidavit.

Security Requirement

Except for the official receiver, any appointed receiver must furnish security.

Registrar’s Satisfaction

The security provided should meet the satisfaction of the registrar.

Personal Bonds with Surety

Personal bonds, with a number of sureties as determined by the registrar, must be submitted. The bond amount is double the annual rental value or the total property value under the receiver’s administration.

Prompt Reporting

Within a week of appointment, the receiver is obligated to submit a detailed report, including an inventory of the property or books of account.

Investment Directions

The registrar issues directives on the investment of funds received by the receiver from the property. Typically, such funds are deposited in scheduled banks or government bonds.

Receiver’s Authority and Responsibilities

According to Order 40, Rule 1(d), the receiver is endowed with the following powers:

Collection and Disposal

The receiver has the authority to collect rents and profits emanating from the property and can manage their application and disposal.

Acting as Owner

The receiver is empowered to execute documents on behalf of the owner, effectively representing the owner’s interests.

Litigation Actions

The receiver is authorized to institute and defend legal proceedings on behalf of the property.

Court-Delegated Powers

The court may grant additional powers to the receiver as deemed appropriate.

Additionally, the receiver possesses indirect powers as an extension of the court:

Contempt Proceedings

Interfering with the receiver’s right to possession can lead to contempt of court charges against the obstructing party.

Protection from Attachment

Property under the receiver’s control cannot be attached without court permission.

While the court may grant extensive powers to the receiver, the receiver is advised to seek the court’s guidance in significant property-related decisions to ensure self-protection.

Receiver’s Limitations Without Court Permission

The receiver is restricted from undertaking the following actions without prior court approval:

Lease Granting

Without court permission, the receiver is not authorized to grant a lease on the property.

Instituting Suits

Except for suits related to rent, the receiver cannot bring legal proceedings without the explicit permission of the court. Failure to obtain such permission may result in the dismissal of the suit.

Receiver’s Responsibilities and Obligations

As outlined in Order 40, Rule 3, the duties of a receiver encompass the following:

Furnishing Security

The receiver is required to provide security, ensuring accountability for the income derived from the property.

Periodic Accounting

Submission of accounts on a half-yearly basis, as directed by the court, detailing the income received and expenses incurred for property protection and preservation.

Court Payments

Settling the amount due to the court in a timely manner.

Liability for Property Value Reduction

Assuming responsibility for any decline in the property’s value resulting from willful negligence on the part of the receiver.

Personal Execution of Duties

Personally discharging the assigned duties, without delegating or assigning any rights granted by the court.

It is imperative for the receiver to diligently fulfill all responsibilities delegated by the court. Failure to do so may lead to legal consequences, and the receiver could be held personally liable for any losses resulting from negligence or willful failure to safeguard and preserve the property.

Receiver’s Liabilities as per Order 40, Rule 4

As per Order 40, Rule 4, a receiver is subject to liabilities if:

Failure to Comply

If the receiver neglects to submit specified reports or pay the directed amount, or fails in any duty as mandated by the court.

Gross Negligence

When the receiver’s gross negligence results in a loss to the property.

Non-fulfillment of Court Directives

Any other duty directed by the court that the receiver fails to perform.

In such instances, the court has the authority to order the attachment of the receiver’s property to recover losses arising from willful default or negligence. After recouping all losses from the proceeds of the sold property, any remaining balance is returned to the receiver.

The receiver is obligated to manage expenses prudently and care for the property in their possession with the diligence expected of a prudent individual handling their own property under similar circumstances.

Receiver’s Right to Compensation

Receivers have a right to compensation determined by the court for the services they have provided. Additionally, the court may grant reimbursement to the receiver for any losses or expenses incurred in the maintenance of the property.

According to Order 40, Rule 2, the court possesses the authority to establish the remuneration payable to the receiver for their services. The court may issue a general or specific order regarding the determination of compensation.

Certainly, as per (Order 40, Rule 5), the court has the authority to appoint a collector as a receiver under certain circumstances. If the revenue derived from the property is received by the government, the court, with the collector’s consent, can appoint the collector as a receiver. This appointment is made when the court deems that the management of the property by the collector would advance the interests of the parties involved.

Frequently asked questions

What is a Receiver under the Civil Procedure Code (CPC)?

A Receiver, as per Order 40 of the CPC, is an impartial individual appointed by the court to manage and safeguard a disputed property involved in legal proceedings. The Receiver acts independently, serving the common benefit of all parties without representing the interests of either the plaintiff or the defendant.

What is the primary purpose of appointing a Receiver?

The primary purpose of appointing a Receiver is to prevent the depletion or irreparable damage to a disputed property during legal proceedings. This measure is taken when the court believes that continued possession by either party may lead to the destruction or devaluation of the property.

Who has the authority to appoint a Receiver, and under what circumstances?

The court handling ongoing proceedings has the authority to appoint a Receiver under Section 51(d) of the CPC. The appointment is at the discretion of the court and can occur in various scenarios, such as dispute resolution, preventing injustice, executing a decree, or as provided by special acts.

Can anyone apply for the appointment of a Receiver?

Generally, both plaintiffs and defendants can initiate the application for the appointment of a Receiver. However, third parties are restricted from filing applications unless they can demonstrate a genuine interest in the protection and preservation of the property, obtaining prior court permission.

What is the process for the appointment of a Receiver according to court rules?

The process for appointing a Receiver is provided by court rules. For example, in Chapter XIX of the Delhi High Court (Original Side) Rules, 1967, the applicant must submit a written application supported by an affidavit. The Receiver, except the official receiver, must furnish security, and personal bonds are required.

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