Appointment of Receivers
Chapter Forty-Five
Syllabus topic 4.1, "Appointment of Receivers (Order XV)"
Pages 262 to 267 of 365
Note on the Order number
The syllabus prints this topic as "Appointment of Receivers (Order XV)". Order XV of the Code is headed Disposal of the Suit at the First Hearing and has nothing to do with receivers. The provisions on receivers are Order XL.
That is worth knowing for two reasons. If you look up Order XV you will find the wrong thing. And an examiner asking about receivers is asking about Order XL, whatever the syllabus prints, because that is where the law is.
In one line
A receiver is a person appointed by the court to take charge of property during a dispute, so that the property is preserved and its income collected while the parties fight about who owns it.
He is an officer of the court, not the agent of either party. That single fact explains all his duties.
Why the Code allows it
Litigation about property takes years, and someone must hold it meanwhile. Ordinarily that is whoever is already in possession, which is usually the defendant. But that is not always safe: he may have no interest in preserving what he expects to lose, he may pocket the rents, or the property may be a business that needs running rather than merely holding.
An injunction can stop a party doing something. It cannot make anyone collect rent, repair a building or run a factory. That is what a receiver is for, and it is why he is the most intrusive of the interim remedies: he does not restrain the parties, he displaces them.
The Code accordingly makes it a matter of the court's judgment rather than a party's right, and hedges it with security, accounts and personal liability.
The power: Rule 1
Rule 1(1): where it appears to the Court to be just and convenient, the Court may by order:
(a) appoint a receiver of any property, whether before or after decree (b) remove any person from the possession or custody of the property (c) commit the same to the possession, custody or management of the receiver (d) confer upon the receiver all such powers, as to bringing and defending suits and for the realisation, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents, as the owner himself has, or such of those powers as the Court thinks fit
Three things to take from Rule 1(1).
The test is "just and convenient". The Code lays down no list of grounds. That is deliberate, and it means an answer should state the test in those words and then say what courts look for in practice: a strong prima facie case, a real danger to the property or its income, and the absence of any less drastic remedy that would do.
Appointment of Receivers
It is available before or after decree. A receiver is not only an interim measure; section 51(d) makes appointing a receiver one of the five modes of executing a decree. See [Mode of Execution and Stay of Execution].
The powers are the owner's powers, or such of them as the Court thinks fit. The receiver may sue and be sued, collect rents, manage, preserve, improve and execute documents. What he actually gets is what the order gives him, and a receiver has no powers beyond his order.
Rule 1(2) is the limit: nothing in the rule authorises the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove.
That sub-rule is the answer to a common exam problem. A receiver cannot be used to evict somebody the plaintiff could not himself have evicted. If a tenant is in lawful possession under a subsisting lease, appointing a receiver does not defeat his rights, because no party had a present right to remove him.
Remuneration: Rule 2
Rule 2: the Court may by general or special order fix the amount to be paid as remuneration for the services of the receiver.
Short, but it makes the point that a receiver is paid out of the estate under the court's control, not by whichever party appointed him, because no party appoints him.
The four duties: Rule 3
This is the provision MU has asked twice, and the question is usually phrased "mention any two duties of Court Receivers". The rule gives four, so learn all four and give two.
Rule 3: every receiver so appointed shall:
(a) furnish such security, if any, as the Court thinks fit, duly to account for what he shall receive in respect of the property (b) submit his accounts at such periods and in such form as the Court directs (c) pay the amount due from him as the Court directs (d) be responsible for any loss occasioned to the property by his wilful default or gross negligence
Notice the standard in clause (d). A receiver is not an insurer and is not liable for every loss. He is liable for loss caused by wilful default or gross negligence, which is a deliberately high threshold, because otherwise nobody sensible would accept the appointment.
Enforcement: Rule 4
Rule 4: where a receiver (a) fails to submit his accounts as directed, or (b) fails to pay the amount due from him as directed, or (c) occasions loss to the property by his wilful default or gross negligence, the Court may direct his property to be attached and may sell such property, and may apply the proceeds to make good any amount found due from him or any loss occasioned by him, and shall pay the balance, if any, to the receiver.
Appointment of Receivers
Rule 4 maps onto Rule 3 exactly: clauses (a), (b) and (c) of Rule 4 are the breaches of duties (b), (c) and (d) of Rule 3. A tidy way to remember both is that the duties and their enforcement are the same list read twice.
The sanction is severe and personal. The receiver's own property is attached and sold, which is what makes the office one of real responsibility rather than a formality.
The Collector as receiver: Rule 5
Rule 5: 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 that property.
Two conditions are worth noting: the property must be revenue-paying or revenue-assigned land, and the Collector's consent is required. The court cannot conscript a revenue officer.
A receiver compared with an injunction
Both are interim protections, and the difference is one of degree that becomes a difference in kind.
| Temporary injunction, Order XXXIX | Receiver, Order XL | |
|---|---|---|
| What it does | Restrains a party from acting | Displaces the party in possession |
| Possession | Stays where it is | Goes to an officer of the court |
| Suitable where | An act threatens the property | The property needs managing, or the income collecting |
| Test | Prima facie case, balance of convenience, irreparable injury | Just and convenient, Rule 1(1) |
| Enforcement | Attachment and up to three months' detention, Rule 2A | The receiver's own property attached and sold, Rule 4 |
Because a receiver is the more drastic of the two, a court will not appoint one where an injunction would meet the case. That is part of what "just and convenient" means in practice. See [Temporary Injunctions and Interim Orders].
A worked example
Eknath and Farida are in litigation over a commercial building let to several tenants. Eknath is in possession, collecting the rents, and Farida says he is spending them and letting the building fall into disrepair.
Would an injunction do? An order restraining Eknath from collecting rents would leave nobody collecting them, and an order restraining waste does not repair a roof. This is exactly the case a receiver exists for.
Appointment of Receivers
On what test is one appointed? Rule 1(1): where it appears to the Court to be just and convenient. In practice Farida must show a strong prima facie case, real danger to the property or its income, and that no lesser remedy suffices.
What can the receiver do? Whatever the order gives him out of the powers in Rule 1(1)(d): bringing and defending suits, realising, managing, protecting, preserving and improving the property, collecting and applying the rents and profits, and executing documents, being such of the owner's powers as the Court thinks fit.
Can he evict the tenants? Rule 1(2): not unless a party to the suit had a present right to remove them. Tenants in lawful possession under subsisting leases are not removed merely because a receiver has been appointed.
What must he do? Rule 3: furnish security if the Court so directs, submit accounts as directed, pay over what is due as directed, and he is responsible for loss caused by his wilful default or gross negligence.
He fails to file accounts for a year. Rule 4: the Court may attach and sell his own property, apply the proceeds to make good what is due or the loss caused, and pay him any balance.
The building is destroyed by an earthquake. He is not liable. Rule 3(d) fastens liability only on loss occasioned by wilful default or gross negligence.
Change the property. Suppose it is revenue-paying agricultural land and the Court thinks the Collector would manage it best. Rule 5 allows the Collector to be appointed receiver, but only with his consent.
Change the stage. Suppose there is now a decree and Farida is executing it. A receiver is still available: section 51(d) makes appointing a receiver one of the modes of execution, and Rule 1(1)(a) allows appointment before or after decree.
What it does not mean
A receiver is not an agent of the party who applied for him. He is an officer of the court and owes his duties to the court.
"Just and convenient" is not a formality. A receiver displaces possession and will not be appointed where a lesser remedy would do.
A receiver cannot remove anyone the parties could not remove. Rule 1(2) says so expressly.
A receiver's powers are not inherent. He has what the order gives him out of Rule 1(1)(d).
He is not liable for every loss. Only for loss occasioned by his wilful default or gross negligence.
A receiver is not confined to the period before decree. Rule 1(1)(a) and section 51(d).
Quick revision
Order XL, not Order XV. The syllabus misprints the number.
Rule 1(1): where just and convenient, the Court may appoint a receiver of any property before or after decree, remove any person from possession or custody, commit the property to the receiver, and confer on him the owner's powers as to suits, realisation, management, protection, preservation, improvement, collection and application of rents and profits, and execution of documents, or such of them as it thinks fit. Rule 1(2): the Court may not remove a person whom no party had a present right to remove.
Appointment of Receivers
Rule 2: the Court fixes his remuneration.
Rule 3, the four duties: furnish security as directed; submit accounts as directed; pay what is due as directed; and be responsible for loss caused by wilful default or gross negligence.
Rule 4: on failure to account, failure to pay, or loss by wilful default or gross negligence, the Court may attach and sell the receiver's own property, apply the proceeds, and pay him the balance.
Rule 5: the Collector may be appointed receiver of revenue-paying or revenue-assigned land, with his consent, where the interests of those concerned will be promoted by his management.
Section 51(d): appointing a receiver is also a mode of execution.
Test yourself
1. Under which Order are receivers appointed? Order XL. The syllabus prints Order XV against this topic, but Order XV of the Code deals with the disposal of a suit at the first hearing.
2. When may a receiver be appointed? Where it appears to the Court to be just and convenient, under Order XL Rule 1(1), and the appointment may be made whether before or after decree.
3. Mention any two duties of a court receiver. He must furnish such security as the Court thinks fit, duly to account for what he receives in respect of the property; and he must submit his accounts at such periods and in such form as the Court directs. He must also pay the amount due from him as the Court directs, and he is responsible for any loss occasioned to the property by his wilful default or gross negligence.
4. What happens if a receiver fails in those duties? Under Order XL Rule 4, where he fails to submit accounts or to pay the amount due as directed, or occasions loss to the property by wilful default or gross negligence, the Court may direct his property to be attached and sold, apply the proceeds to make good the amount due or the loss occasioned, and pay any balance to the receiver.
5. Can a receiver be used to remove a person in possession? Only a person whom a party to the suit has a present right to remove. Order XL Rule 1(2) provides that nothing in the rule authorises the Court to remove from possession or custody any person whom no party has a present right so to remove.
Appointment of Receivers
6. When may the Collector 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. His consent is required: Order XL Rule 5.
7. Is a receiver liable for any loss to the property? No. Under Order XL Rule 3(d) he is responsible only for loss occasioned to the property by his wilful default or gross negligence.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.