Introduction

The appointment of a Receiver is one of the reliefs which can be sought by a plaintiff in a civil suit. It involves the Court taking suit property out of the hands of one or more litigating parties and placing it under the custody of an independent officer of the Court. The officer then manages the property and collects all revenue generated by it. The court appoints a receiver in a suit only when mismanagement or waste of property is proven. It can be said as an exceptional remedy granted only in extraordinary circumstances and not in a regular manner. In this article, we will discuss the procedure of appointment of a receiver in a Civil Suit.

What is a receiver?

The term ‘receiver’ is not defined in the CPC. According to Black’s Law Dictionary, a receiver is an indifferent person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation, and receive its rents, issues, and profits, and apply or dispose of them at the direction of the court when it does not seem reasonable that either party should hold them.

Appointment of Receiver under the CPC

Order XL of the CPC provides for the appointment of a receiver. Apart from that, the remedy of the receiver can be taken by a decree holder during execution proceedings under Section 51 of the CPC. Further, it can be granted by the Court as Supplemental Proceedings under Section 94 of the CPC to prevent the ends of justice from being defeated.

Order XL contains 5 rules: it provides for appointment, remuneration, duties, enforcement of the receiver’s duty, and when a collector may be appointed as a receiver.

A receiver is appointed during the pendency of a suit when it does not seem reasonable to the Court that either party should hold it. He is not the agent or representative of either party to the action, but is uniformly regarded as an officer of the Court, exercising his functions in the interest of neither plaintiff nor defendant, but for the common benefit of all parties in interest.[1]

When may a receiver be appointed?

A receiver may be appointed when the court considers it just and convenient. It is the discretionary power of the court which must be exercised judicially and not arbitrarily. In the case of Krishna Kumar v. Grindlays Bank, AIR 1991 SC 889, it was observed that, following principles must be borne in mind before a receiver is appointed by the Court:

(a) that the appointment is at the discretion of the Court;

(b) The basic object of this appointment is the preservation of property in dispute pending judicial determination of the rights of the parties to it;

(c) a receiver should not be appointed unless the plaintiff prima facie proves that he has a very excellent chance of succeeding in the suit; and

(d) Since the appointment of a receiver deprives the opposite party of the possession of property before the final judgment is pronounced, it should only be granted for the preservation of manifest injury or wrong.

In Parmanand Patel v. Sudha A. Chowgule, AIR 2009 SC 1593, it was observed that a receiver, having regard to the provisions contained in Order XL, rule 1 of the Code of Civil Procedure, is appointed only when it is found to be just and convenient to do so.

In Hitesh Bhuralal Jain v. Rajpal Amarnath Yadav & Ors., the Hon’ble Supreme Court observed that expressions like “prima facie case” or “conduct” alone are insufficient to justify the appointment of a Court Receiver. The Court emphasized that a compelling reason must be provided, demonstrating how the property would deteriorate without the Receiver’s intervention.

Application for Appointment of Receiver

A Plaintiff can make an application under Order XL Rule 1 for the appointment of a receiver. However, a Court can appoint a receiver where there is no application from the party concerned, but is satisfied that it is just and convenient to do so. It is not necessary to make the appointment only when there is an application for it.

Position of a Receiver

In Hiralal Patni v. Loonkaran Sethiya, AIR 1962 SC 21 on the issue of “position of a receiver” the Court held that “a receiver is an officer of the Court. He is also a public servant within the meaning of section 2, clause (17) of the Code of Civil Procedure, 1908.”

Duration of Receiver

In cases of Hiralal Patni v. Loonkaran Sethiya, AIR 1962 SC 21 (27): (1962) 1 SCR 868 and Hindustan Petroleum Corp. Ltd. v. Ram Chandra, AIR 1994 SC 478, the Supreme Court has summarised the law regarding the terms of the office of receivership. The Court held that:

(a) If a receiver is appointed in a suit until judgment, the appointment is brought to an end by the judgment, in the action;

(b) If the receiver is appointed in a suit without his tenure being expressly defined, he will continue to be receiver till he is discharged;

(c) Although after the final disposal of the suit as between the parties to the litigation, the receiver’s functions are terminated, he would still be answerable to the Court as its officer till he is finally discharged;

(d) The Court has ample power to continue the receiver even after the final decree if the exigencies of the case so require.

Appointment of Receiver in Partition Suits

In partition suits, a receiver cannot be appointed to dispossess the co-sharer currently having possession. Until and unless there is clear waste or mismanagement of property, a prima facie case in favour of the plaintiff, the case calls for urgent measures to appoint a receiver, and it is just and convenient.

In Saleema Bi v. Pyari Begum, AIR 2000 SC 3413: (2000) 9 SCC 560, the Hon’ble Supreme Court held that a receiver can 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 the taking of urgent measures like the appointment of a receiver.

Appeal when the application for the appointment of a Receiver is granted/rejected

When the application under Order XL Rule 1 for the appointment of a receiver is granted/rejected. The aggrieved person can appeal under Order XLIII Rule 1(s) of the CPC as it is an appealable order. Section 106 of the CPC provides in which court the appeal lies. Section 106 read as:

“Where an appeal from any order is allowed, it shall lie to the Court to which an appeal would lie from the decree in the suit in which such order was made, or where such order is made by a Court (not being a High Court) in the exercise of appellate jurisdiction, then to the High Court.”

Conclusion

The appointment of a receiver in a civil suit is an exceptional remedy. The appointment of a receiver helps parties maintain equitable grounds during the pendency of a suit. It should be passed with great care and caution, and we have seen judgments in this article which show that courts act with great care and caution before granting the remedy of a receiver. Further, we have seen that it cannot be used to dispossess a party which is in settled possession.

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[1] AIR 1955 Mad 430.