APPOINTMENT OF RECEIVER

Introductory:-

The court may appoint a receiver in a variety of circumstances. A Court will never appoint a receiver merely on the ground that it will do no harm. A Court will not act on possible danger only; the danger must be great and imminent demanding immediate relief. 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. The Court has to appoint a Receiver only when it is found that such an appointment is just and convenient to do so. The receiver is an officer of the court in all cases. The receiver must act fairly and impartially. It is not possible to give a detailed description of what a court appointed receiver does because of the many different circumstances for which they may be appointed. A receiver may be instructed by the court to manage a business, to collect rents, to sell assets or just ensure that property is preserved pending resolution of a dispute. The receiver may apply to the court for directions at any time for his/her duties. The court will generally grant remuneration to the receiver that is reasonable and proportionate after taking into account. The court may order the receiver to prepare and serve accounts.

Definition of ‘Receiver‘:-

The word ‘Receiver’ has been defined by Kerr as follows:- “A receiver in an action is an impartial person appointed by the Court to collect and receive, pending the proceedings, the rents, issues and profits of land, or personal estate, which it does not seem reasonable to the Court that cither party should collect or receive, or for enabling the same to be distributed among the persons entitled.” (Kerr on the Law and Practice as to Receivers appointed by the High Courts of Justice or order of Court, Twelfth Edition, Walton and Sarson, Special Edition for India, N. M. Tripathi & Co. (1932) P. L). See. Krishnaswamy Chetty v. C. Thangavelu Chetty, AIR 1955 Mad 430.

Two classes of receivers can be appointed by Courts:-

Two classes of receivers can be appointed by Courts, viz., (a) under the statutes and (b) under the Civil Procedure Code, the Specific Relief Act and the Original Side Rules of the High Court. See. Krishnaswamy Chetty’s case (supra).

Appointment of receiver by Court under statutes:-

Several statutes in India like the Provincial Insolvency Act (5 of 1920) (Sections 20, 57, 59 and 68), the Presidency Towns Insolvency Act (3 of 1909) (Section 16) the Transfer of Property Act (4 of 1882) (Section 69-A), the Trustees’ and Mortgagees’ Powers Act (28 of 1866) (Sections 12 to 19) and the Indian Companies Act (7 of 1913) (Sections 118, 119, 129 and 277E) authorise Courts for appointing receivers under the particular circumstances set out therein. …”

Appointment of receiver by Court under the Civil Procedure Code, the Specific Relief Act and the Original Side Rules of the High Court:-

The second class of Receivers arc included in these in which appointment is made to preserve the property pending litigation to decide the rights of parties. The powers to appoint a Receiver in such cases are comprised in the Civil Procedure Code of 1908 (Sections 51, 94 and Order 40), the Specific Relief Act of 1877 (Section 44), and the Original Side Rules of High Courts relating to Receivers.”

Panch sadachar:-

In Krishnaswamy Chetty v. C. Thangavelu Chetty, AIR 1955 Mad 430, five principles which were described as the “panch sadachar’ of our Courts exercising equity jurisdiction in appointing receivers.

(1) 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 : — ‘Mathusri v. Mathusri, 19 Mad 120 (PC) (Z5); — ‘Sivagnanathammal v. Arunachallam Pillai’, 21 Mad LJ 821 (Z6); –‘Habibullah v. Abtiakallah’, AIR 1918 Cal 882 (27); — ‘Tirath Singh v. Shromani Gurudwara Prabandhak Committee’, AIR 1931 Lah 688 (28); –‘Ghanasham v. Moraba’, 18 Bom 474 (7.9); –‘Jagat Tarini Dasi v. Nabagopal Chaki’, 34 Cal 305 (Z10); — ‘Sivaji Raja Sahib v. Aiswariyanandaji’, AIR 1915 Mad 926 (Z11); — ‘Prasanno Moyi Devi v. Beni Madbab Rai’, 5 All 556 (Z12); — ‘Sidheswari Dabi v. Abhayeswari Dahi’, 15 Cal 818 (213); — ‘Shromani Gurudwara Prabandhak Committee, Amritsar v. Dharam Das’, AIR 1925 Lah 349 (Z14); — ‘Bhupendra Nath v. Manohar Mukerjee’, AIR 1024 Cal 456 (Z15).

(2) The Court should not appoint a receiver except upon proof by the plaintiff that prima facie he has very excellent chance of succeeding in the suit. — ‘Dhumi v. Nawab Sajjad All Khan’, AIR 192.3 Uh 623 (Z16); — ‘Firm of Raghubir Singh’ Jaswant v. Narinjan Singh’, AIR 1923 Lah 48 (217); — ‘Siaram Das v. Mohabir Das’, 27 Cal 279 (Z18); — ‘Mahammad Kasim v. Nagaraja Moopanar’, AIR 1928-Mad 813 (Z19); — ‘Banwarilal Chowdhury v. Motilal’, AIR 1922 Pat 493 (220).

(3) 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. — “Manghanmal Tarachand v. .Mikanbai’, AIR 1933 Sind 231 (221); — ‘Bidurramji v. Keshoramji’, AIR 1939 Oudh 31 (Z22); — ‘Sheoambar Ban v. Mohan Ban’, AIR 1941 Oudh 328 (223).

(4) 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. — ‘Nilambar Das v. Mabal Behari’, AIR 1927 Pat 220 (Z24); — ‘Alkama Bibi v. Syed Istak Hussain’, AIR 1925 Cal 970 (Z25~.); — ‘Mathuria Debya v. Shibdayal Singh’, 14 Cal WN 252 (Z26); — ‘Bhubaneswar Prasad v. Rajeshwar Prasad’, AIR 1948 Pat 195 (Z27). Otherwise a receiver should not be appointed in supersession of a bone fide possessor of property in controversy and bona fides have to be presumed until the contrary is established or can be indubitably inferred.

(5) 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.”

I have discussed till now the meaning of ‘Receiver’, two classes of receivers can be appointed by Courts, five principles which can be described as ‘Panch Sadachar‘ for appointment of a receiver. A word about latest legal position on the subject matter is not out of place.

As was pointed out by the Hon’ble Division Bench in S. Saleema Bi Vs. S. Pyari Begum and another, 2000 (3) ALT(SC) 1 ( D.B.), the Receiver can only be appointed when it is just and convenient and also when there is a prima facie case in favour of the plaintiff and the case calls for taking of urgent measure like appointment of a Receiver.

In M/s. Sherali Khan Mohamed Manekia Vs. State of Maharashtra and others, 2015 (3) SCJ 722 ( D.B.). KURIAN JOSEPH and M.Y. EQBAL,jj., it was held that ordinarily, functions of receiver come to an end with final decision of the case Even thereafter, the Court has discretion to take further assistance of the Receiver.

In Ajmeera Raghavulu Vs. Guguloth Rupla (died) by his L.R., Guguloth Rangamma and another, 2012 (4) ALT 382. C.V. NAGARJUNA REDDY,j, it was held that power of Agent to Government under Rule 42 of A.P. Agency Rules, 1924 to appoint a Receiver in a suit suo motu even without an application by a party for that purpose be exercised in a very discreet and judicious manner and for the reasons to be recorded.(Para 6).

Appointment of Receiver in partition suit:- When there is no allegation of acts of waste of property in possession of defendant and when no relief is sought by plaintiff for mesne profits, appointment of receiver in partition suit is erroneous.(Paras 4 and 6). See. Meda Baby Reddy v. Smt. Akula Jyothi and another – 2010 (1) ALT 629 ( D.B.). V.V.S. RAO and B.N. RAO NALLA,jj. In Karumanchi Padmapriya and others v. Chirasani Ratnakumari and others, 2008 (2) ALT 188, it was held that in a partition action, normally appointment of receiver shall not be resorted to without considering the entire facts and circumstances.

Appointment of Receiver to manage the property:- Appointment of Receiver to manage certain property in the absence of any allegation that party in possession is indulging in acts of waste or damage being caused to the property is not legal.(Para 18). See. Mohd. Tajuddin v. Smt. Muneerunnisa Begum and other, 2010 (1) ALT 197. B.S. REDDY,j.

Pendency of any proceedings in Court in relation to arbitration proceedings would be a pre-condition for the exercise of power by Civil Court under the Second Schedule of the Act.:- The Hon’ble Apex Court in M/s. Sant Ram & Company vs. State of Rajasthan and others, 1997 (1) ALT(SC) 1, it was held that in view of clause (b) of Section 41 the Court has been given power of passing orders in respect of any of the matters set out in Second Schedule for the purpose of and in relation to any proceedings before the Court. The Second Schedule of the Arbitration Act inter alia includes ‘interim injunction’ and the ‘appointment of receiver’. (Para 3) To avail the remedy under the provisions of the Code of Civil Procedure, when an application for injunction under Section 41(b) read with Schedule is filed, the Court shall have, pending proceedings for the purpose of and in relation to the arbitration proceedings availed through the process of the Court, the same power of making orders in respect of any matters set out in the Second Schedule as it has for the purpose of and in relation to any proceedings before the Court. (Para 4)

It is obvious from sub-section (1) of Section 146,Cr.P.C that the Magistrate is give power to attach the subject of dispute “until the competent Court has determined the rights of the parties thereto with regard to the person entitled to the possession thereof”. See. Dharam Pal & others. Vs. Smt. Ramshri & others, 1993 (1) ALT(CRI.)(SC) 299 ( D.B. ). R.M. SAHAI and P.B. SAWANT,jj.

In P. Perraju and Others Vs. Central Bank of India, 1979 (2) ALT(NRC) 87 ( D.B.).  K. MADHAVA REDDY and MADHAVA RAO,jj, it was held that Receiver can be appointed of the properties directed to be sold under a simple mortgage decree. Sub-rule 2 of rule 1 of Order 40 does not prevent a Receiver from dispossessing a party to a proceeding. It only restricts his power to dispossess a person other than a party to the suit whom a party to the suit himself could not have dispossessed. While the Court may in exercise of the powers conferred on it under Or. 40 Rule 1 (a), (b), (c), (d) confer on the Receiver the authority to take possession and manage the properties and realise the rents etc., that power of the Court does extend so as to enable it to direct the removal of any person from the possession or custody of the property “whom any party to the suit has not a present right so to remove.”

In C. Venkataswami Vs. C. Kotayya, 1959 (1) ALT 725 ( D.B.), A. SRINIVASACHARI and P. CHANDRA REDDY,jj, the words of Order 40 Ruler C. P. C. make it abundantly clear that the court would be justified in appointing a Receiver where it is satisfied that it would be ‘just and convenient’. The provisions of the English Law corresponding to this rule were to be found in Section 25 of the Judicature Act of 1873 and now Section 45 of the Judicature Act of 1915. The words therein were ‘just or convenient’. But even in England these words were interpreted to mean ‘just and convenient’. What is required is that the Court should not merely exercise the power vested in it under this rule in an arbitrary or unregulated manner but according to legal principles after a consideration of the whole of the circumstances of the case and the court has a complete discretion in this matter. Where, therefore, the words used are ‘just and convenient’ it cannot be said that it is only in the case where there is an application by the plaintiff for the relief that a Receiver could be appointed. The words ‘appoint a Receiver of any property’ are also significant.

Conclusion:-

As was held by the Hon’ble Supreme Court in Parmanand Patel (Dead) by LR. and another Vs. Sudha A. Chowgule and others, 2009 (5) SCJ 550 (D.B.), Court has to appoint a Receiver only when it is found that such an appointment is just and convenient to do so. It is well-settled law that a Receiver cannot be appointed in respect of agricultural lands especially in a dispute between family members. (Ref. Bollareddy Brahmananda Reddy and another v. Bollareddy Seethayamma @ Seethamma, 2006 (6) ALT 207). , But, in Chundru Srinivasa Rao Vs. Chundru Venkata Rao, 1992 (2) ALT 733, it was observed that appointment of receiver in partition suit-Not barred in all types of cases-Suit filed by sons against father for partition alleging that their father is no providing anything to them for their livelihood-In such circumstances of the case, normal rule that no receiver can be appointed in cases of partition may be deviated. In Kallam Mangamma Vs. K. Brahma Reddy, 1989 (1) ALT 331, the HOn’ble Single Judge pointed out that Or. 40 Rule 1 CPC, application by plaintiff co-owner for appointment of receiver to schedule property on ground that defendant co-sharer in possession is not taking proper care-Can be ordered. The Court should not appoint a receiver except upon proof by the plaintiff that prima facie he has very excellent chance of succeeding in the suit.

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