INTRODUCTION

ORDER 40 - APPOINTMENT OF RECEIVER

The Civil Court in India has the power to issue various interim orders according to the needs and
exigencies of each case. One such power is the power to appoint a receiver, i.e., an officer of the
court who looks after the subject matter of the suit during its pendency, under Order 40 of the
Code. He is impartial and independent, and acts as a reasonable prudent man in the discharge of
his duties.

The Code of Civil Procedure does not define the term “Receiver”. But it is generally understood
as “A court appointed person who is appointed because the court thinks that neither party should
be in possession of the property in dispute”.

Simply stated, wherever the Court is of the opinion that it would not be reasonable for either of
the parties to hold the estate which is the subject matter of the suit, then, till it is disposed, the
Court may appoint an independent and impartial third party who will take over such property. He
will manage this property as a reasonable man would and is responsible for the maintenance of
the property. It is to be noted, that the receiver acts neither on behalf of the plaintiff nor the
defendant but is an officer of the court who acts in general benefit of the property.

For example, in a dispute between A and B for an immovable property, if the court thinks that it
is in the best interest of both the parties that possession should be taken from B and given to an
independent person, the court may appoint a receiver who can manage the property till the time
the suit is being decided. Such a receiver appointed by the court would be responsible for the
maintenance of the property. He can collect the income accruing like rent or any other profits
and utilize it to maintain the property. After deducting the expenses incurred in maintenance
from the income received from the property, the receiver will have to submit the remaining
income, if any, in the court.

Object

The object behind appointment of a receiver is to protect, preserve, and manage the property
during the pendency of the litigation. It is a part of the Court machinery that seeks to safeguard
interests of both the parties to the suit. When a party in possession of the disputed property
exhausts the property or causes irreparable damages to it, the whole object of the suit gets
defeated because the subject matter ceases to exist or its value gets affected. Therefore, when the
court is of the opinion that the property in dispute must not go to either of the parties, pendente
lite, the court appoints a receiver who is entrusted with the protection and preservation of such
property. It is a form of interim protection which the court provides to the parties who makes the
application till the time the court adjudicates the matter.

Who can appoint a receiver?

According to the civil procedure code, the court before which the proceedings are pending can
appoint a receiver if it appears just and convenient to the court to appoint such receiver [section
51(d)]. It is within the discretionary power of the court to appoint the receiver. For example, in a
suit, the trial court can appoint a receiver. Whereas, in appeal, the appellate court can appoint a
receiver.

However, the discretion is not absolute, arbitrary or unregulated. The expression “just and
convenient” does not mean the appointment is based on the whims and wishes of the judge on
any grounds which stand against equity.

Generally, a plaintiff files the application for appointment of a receiver but defendants can also
file such application. A third party is not allowed to file the application but if he is interested in
the protection and preservation of the property, he can also make an application after taking
permission from the court.

A person who is independent, impartial and totally disinterested should be appointed as a

receiver. Such a person should not have any stake in the disputed property. Generally, parties to
the suit are not appointed as receiver by the court. But in extraordinary circumstances, a party to
suit can be appointed as receiver.

Under the code itself, the receiver can be appointed to prevent the ends of justice being defeated.
[section 94(d)]. Similarly, for the execution of a decree, the court has the power to appoint a
receiver. [section 51(d)].
Can a collector be appointed as a receiver?

Yes, according to (Order 40 rule 5), a collector can be appointed as a receiver if the revenue
generated from the property is received by the government, the court can appoint a collector as a
receiver with his consent if the court thinks that management of such property by collector will
promote the interests of those who are concerned.

RULE 1

Under order 40 rule 1(d) powers of the receiver are provided as following:

1. Collection of rents and profits arising out of the property.

2. Application and disposal of such rents and profits.

3. Execution of documents as the owner himself.

4. To institute and defend the suit.

5. Such powers as the court may deem fit.

Also, there are indirect powers which a receiver enjoys being the hand of the court. For example,
If a person obstructs or interferes with the receiver’s right to possession, it will amount to
obstruction in a court proceeding and such a person can be made liable for contempt of court.
Similarly, property in the hands of the receiver cannot be attached without the leave of the court.

The court has the discretionary power to not confer all the rights on the receiver. Even if the
court has given all the powers to him, he should take the advice of the court in all important
decisions related to the property to protect himself.

Without the permission of the court, the receiver cannot:

 Grant lease on the property.

 Bring suits except for suit for rent. A suit will be dismissed if not permitted by the court.
In ICICI Bank v. Karnataka Ball Bearing Corporation Ltd.1, it was held that under
residuary powers, the receiver also has, in extreme cases, the power to sell any property.

RULE 2

Receivers are entitled to remuneration as fixed by the court for the services rendered by them.
Also, a receiver has to be provided for the loss or expenses incurred by him for maintaining the
property.

Under order 40 rule (2), the court can fix the remuneration to be paid to the receiver for the
services provided by him. The court can pass a general or specific order regarding the same.

Rents recovered, outstanding recovered, the value realised on the sale of movable and
immovable properties calculated on anyone estate:

(i) On First Rs. 10,000 : 5 %

(ii) Above Rs. 10,000 up to Rs. 20,000 : 3 %

(iii) Above Rs. 20,000 up to Rs. 50,000 : 2 %

(iv) Above Rs. 50,000 up to Rs. 1,00,000 : 1 %

(v) Above Rs. 1,00,000 : ½ %

Similarly, for taking custody of money, 1 %, for taking custody of Government securities of
stocks, shares, 1 % of the estimated value.

1
AIR 1999 SC 3438
If no remuneration is specified for any work, such remuneration can be granted, as the court may
think reasonable, on the application of the receiver.

RULE 3

Under order 40 rule (3), duties of a receiver are provided as follows:

1. Furnish security to account for what he will receive from the property as income.

2. Submit accounts (half yearly) for such period or form as directed by the court. The
account basically includes the income received and expenses incurred for the
protection and preservation of the property.

3. Pay the amount due to the court.

4. Take responsibility for any reduction in the value of the property because of the
receiver’s willful negligence.

5. Discharge the duties personally and should not delegate or assign any of the rights
entrusted to him by the court.
The receiver has to fulfil all the duties and responsibilities entrusted to him by the court.
Otherwise, the court can take action against him and make him personally liable for any loss
which might occur due to his negligence or wilful failure to protect and preserve the property.

RULE 4

According to Order 40 rule (4), When a receiver fails:

1. To submit the reports as specified by the court or,

2. To pay the amount due from him as directed by the court or,

3. Causes loss to the property due to gross negligence.

4. Any other duty which court directed him to do,

The court may order the attachment of property of the receiver to recover the loss caused due to
his willful default or negligence.

The court, after recovering all the losses from the proceeds received after selling receiver’s
property, will pay the balance (if any) to the receiver.

The receiver is bound in keeping down the expenses and taking care of the property in his
possession as a prudent man would observe in connection with his own property under similar
circumstances.

RULE 5

Yes, according to (Order 40 rule 5), a collector can be appointed as a receiver if the revenue
generated from the property is received by the government, the court can appoint a collector as a
receiver with his consent if the court thinks that management of such property by collector will
promote the interests of those who are concerned.

Further, in K.T. Thomas v. Indian Bank2, the receiver is responsible not only for sums
actually received but also for all sums he might have received but for his own default or
negligence.

ORDER 39

Order 39 of the CPC prvides for Temporary Injunction. The Court may impose a
temporary restraining order to prevent the Defendant from
causing any damage to the Plaintiff’s property or threatening
to sell it. This is an interim relief provided to ensure that
Plaintiff’s rights are not violated. The Court can issue this
Injunction at any point throughout the trial, even before the
2
1984 Supp SCC 703
case is resolved. The Civil Procedure Code of 1908 governs
temporary injunctions. The following are the provisions that
govern it.

Order 39, Rule 1 lists the circumstances in which the Court

may grant a temporary injunction as a statutory relief, and
they include:-

i. If the property in question is in danger of being

squandered, damaged, alienated, or unlawfully sold by
one of the parties to the litigation, the Court may order
that it be maintained.
ii. If Plaintiff is threatened with eviction or property damage
by Defendant during the property dispute.
iii. Assume Defendant has broken the law or breached a
contract. The ground described before is also
emphasized in Order 39, Rule 2 of the CPC, 1908.
iv. Finally, if the Court believes it would be in the best
interests of justice, it may issue an injunction.

2. Order 39, Rule 2-A talks about the non-compliance of an

individual with regards to an injunction, they are:
 It mandates the detainment of that individual in civil prison for not
more than three months.
 Furthermore, it warrants the attachment of property of that guilty
individual for not more than a year. However, if the delinquency were
to continue, the property may be sold.
 In the case of Ram Prasad Singh v. Subodh Prasad Singh (1983) 3, it was
highlighted that it is not necessary for an individual to be a party to the
concerned suit, to be liable under Order 39, Rule 2-A of the CPC, 1908,
provided it is known that he was an agent of the defendant and
violated the injunction despite being aware of the same.

3
AIR 1983 Pat 278
CONCLUSION

A receiver, therefore, is an important part of the Court machinery that functions to safeguard the
interests of the parties to the suit, by managing a property pendente lite. He is supposed to be
impartial, neutral, and must act as a reasonably prudent man would with respect to his own
property.
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ORDER 39

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