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RECEIVER: ORDER 40

1. Who is Receiver? Who may appoint receiver? Who may be appointed as receiver? What is the object of appointing a Receiver?

2. Discuss the principles governing the appointment of Receivers. What are their powers and duties? Can a collector be appointed as a Receiver?

MEANING--- Receiver is an independent person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation pendente lite, when it does not seem reasonable to the court that either party should hold it. A receiver is an officer, an extended arm and hand of the court, a part of court machinery by which the rights of the parties are protected.

OBJECT-- The primary object of appointment of receiver is to protect, preserve and manage the suit property during the pendency of the litigation and safeguard interests of both the parties to the suit.

APPOINTMENT: RULE 1(A)

Appointment of receiver is in the discretion of the court. According to Or. 40 R. 1(1)(a) read with S. 94(d) where it appears to the court to be just and convenient, it may appoint a receiver. [Or. 40 R. 1(1)(a); S. 94(d).]

Courts in India have very wide jurisdiction to appoint as well as to remove a receiver in the exercise of their discretion. In this regard Indian courts are following the principles followed by the Chancery Courts in England for the appointment of receivers. The discretion, however, is not absolute, arbitrary and unregulated. It is a sound and judicial discretion and must be exercised cautiously, judicially and after taking into account all the circumstances of the case for the purpose of serving the ends of justice and protecting the rights of all the parties interested in the controversy.

The following principles must be borne in mind before a receiver is appointed by a court:

1. The appointment of a receiver is a DISCRETIONARY POWER of the court.

2. It is a PROTECTIVE RELIEF. The object is preservation of the property in dispute pending a judicial determination of the rights of the parties to it

3. A receiver should not be appointed unless the plaintiff PRIMA FACI Eproves that he has very excellent chance of succeeding in the suit.

4. It is one of the harshest remedies which the law provides for the enforcement of rights, and therefore, should not be lightly resorted to. Since it deprives the opposite party possession of property before a final judgment is pronounced, it should only be granted for the prevention of a manifest wrong or injury. A court will never appoint a receiver merely on the ground that it will do no harm.

5. Generally, an order appointing a receiver will not be made where it has the effect of depriving the defendant of a de facto possession, since that might cause irreparable loss to him. But if the property is shown to be IN MEDIO, that is to say, IN ENJOYMENT OF NO ONE, it will be in the common interest of all the parties to appoint a receiver.

6. The court should look at the CONDUCT of the party who makes an application for appointment of a receiver. He must come with CLEAN HANDS and should not have disentitled himself to this equitable relief by laches, delay or acquiescence.

WHO MAY APPOINT RECEIVER?

A receiver may be appointed by the court before which the proceedings are pending. Thus, in case of a suit, receiver can be appointed by the TRIAL COURT. Where an appeal is preferred against the decree passed by the trial court, it is the APPELLATE COURT which has power to appoint receiver.A court, however, cannot appoint a receiver suomotu.[Mahendra H. Patel v. Ram Naraycm, (2000) 9 SCC 190: AIR 2000 SC 3569 (1): 2000 AIR SCW 3688;

WHO MAY BE APPOINTED AS RECEIVER?

A person who is independent, impartial and totally disinterested should normally be appointed as receiver.Generally, a party to the suit (plaintiff or defendant) should not be appointed as receiver by the court. But the rule is not rigid or inflexible. In exceptional circumstances or for special reasons, a party to a suit or proceeding can also be appointed as receiver.

[Kasturi Bai v. Anguri Chaudhary, (2001) 3 SCC 176: AIR 2001 SC 1361;

POWERS: RULE 1(D)

A receiver is an officer or representative of the court and he functions under its directions.

The court may confer upon the receiver any of the following powers:

I. to institute and defend suits;

II. to realize, manage, protect, preserve and improve the property;

III. to collect, apply and dispose of the rents and profits;

IV. to execute documents; and

V. such other powers as it thinks fit. [R.1l(1)(d).

But he has no power except such as are conferred upon him by the order by which he was appointed. It is open to a court not to confer all of the above powers. They are conditioned by the terms of his appointment. But even when full powers are conferred on him, he should take the advice of the court in all important matters if he wants to protect himself.

A RECEIVER CANNOT SUE OR BE SUED WITHOUT THE LEAVE OF THE COURT.

However, grant of leave is the rule and refusal an exception. But if the suit is filed without such leave, it is liable to be dismissed. If the decree is passed in such suit, it can be set aside. No such sanction is, however, necessary to prosecute the Receiver for a criminal offence alleged to have been committed by him by abusing his authority as receiver.

Since he is custodialegis, any obstruction or interference by anyone with his possession without the leave of the court is interference with the court's proceedings and is liable for contempt of court.

Property in the hands of a receiver cannot be attached without the leave of the court.

A receiver is entitled to the remuneration fixed by the court for the services rendered by him. [R. 2.]

A receiver is entitled to be indemnified for the debts incurred or contracts entered into by him in the course of management of the estate.

The status of a receiver has been appropriately explained in the leading case of JagatTariniDasiv. Naba Go-pal ChakiLR (1907) 34 Cal 305.]in the following words:

"The receiver is appointed for the benefit of all concerned; he is the representative of the court, and of all parties interested in the litigation, wherein he is appointed. He is the right arm of the court in exercising the jurisdiction invoked in such cases for administering the property; the court can only administer through a receiver.

Duties: Rule 3

A receiver has to furnish such security, as the court thinks fit, duly to account for what he shall receive in respect of the property. He has to submit accounts for such period and in such forms as the court directs. He has to pay the amount due from him as per the direction of the court.

Being a representative of the court, he is bound to discharge his duties personally and cannot delegate or assign any of his rights or duties entrusted to him by the court.

LIABILITIES: RULE 4

If the receiver fails to submit accounts, or fails to pay the amount due, or occasions loss to the property by his wilful default or negligence, the court may direct his property to be attached and sold and make good any amount found to be due from him. [R. 4.]

A receiver is bound to exercise the same diligence in keeping down expenses and in caring for the estate in his possession as a prudent man would observe in connection with his own property under similar circumstances.

Thus, he is not responsible for sums actually received by him but also for all sums which he might have received but for his default of negligence. Where he fails to pay the amount ordered by the court, the court would be justified in directing the attachment and sale of his property.

The court has also an inherent power to remove the receiver appointed by it, when he does not comply

with the orders of the court or abuses his powers or authority.

APPEAL---An order appointing or refusing to appoint a receiver is appealable. [Or. 43 R. l(s).]

REVISION--- An order passed on an application for appointment of receiver by allowing the application or rejecting such application is a "case decided" within the meaning of Section 115 of the Code. Hence, where no appeal lies, a revision is competent and maintainable. 5 . When Collector may be appointed receiver—

Where the property is land paying revenue to the Government, or land of which the revenue has been assigned or redeemed, and the Court considers that the interests of those concerned will be promoted by the management of the Collector, the Court may, with the consent of the Collector appoint him to be receiver of such property.

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