Wednesday, 4 December 2019

Five golden principles for appointment of court receiver

 Order XL
Rule 1 of CPC enables the Court to appoint a Receiver where it appears
to the Court to be just and convenient. In Parmanand Patel (supra), the
Apex Court has observed thus :-
" 23. A receiver, having regard to the provisions contained
in O.40 R.1 of the Code of Civil Procedure, is appointed only
when it is found to be just and convenient to do so. Appointment
of a receiver pending suit is a matter which is within the
discretionary jurisdiction of the Court. Ordinarily the Court
would not appoint a receiver save and except on a prima facie
finding that the plaintiff has an excellent chance of success in
the suit.
24. It is also for the plaintiff not only to show a case of
adverse and conflict claims of property but also emergency,

danger or loss demanding immediate action. Element of danger
is an important consideration. Ordinarily, a receiver would
not be appointed unless a case has been made out which may
deprive the defendant of a de facto possession. For the said
purpose, conduct of the parties would also be relevant. "
10. In T. Krishnaswamy Chetty (supra), the Madras High Court
has laid down the five principles described as 'panch sadachar' of our
Courts exercising equity jurisdiction in appointing receiver, which read
as follows:
" (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.
(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.
(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.

(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.
(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. "
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO.1189 OF 2014
WITH
NOTICE OF MOTION NO.1789 OF 2017
IN
SUIT NO.443 OF 2013

Rajdai Nandlal Shaw  Vs  Mahendra Mangruram Gupta 

CORAM : SMT. ANUJA PRABHUDESSAI, J.
ORDER PRONOUNCED ON :-26/11/2019


The Plaintiff has taken out notice of Motion No.1189 of
2014 for injunction to restrain the Defendant nos.1 and 2 from parting
possession and /or creating third party rights in respect of the suit shop
No.5 pending the final disposal of the suit. The plaintiff has also
sought appointment of court receiver to take charge of the suit
premises.

2. By order dated 1/8/2017 this Court had appointed the
court receiver, who was directed to take symbolic possession of the suit
premises, without disturbing possession of the Defendant. After taking
over formal possession, the court receiver was directed to apply for
directions concerning appointing Defendant Nos.1 and 2 or anyone
else as an agent of the receiver on such terms as to royalty and security
as may be deem fit. Liberty was granted to the Plaintiff to apply for
further ad-interim reliefs. Pursuant to this order, the Plaintiff took out
the second notice of motion No.1789 of 2017 to appoint her as the
agent of the court receiver, without security or royalty for the suit
premises as well as the business carried out in the suit premises.
3. The Defendant Nos.1 and 2 took out a Notice of Motion No.
235 of 2018 for recall of the order dated 1/8/2017 on the ground that
the same was passed in their absence. By order dated 27/3/2019 this
Court allowed the said Notice of Motion and thus recalled the said
order dated 1/8/2017 and restored the Notice of Motion No. 1189 of
2014 to file.
4. The dispute in the present case is in respect of shop no.5

situated on the ground floor of Bajrang Kripa, N.M. Joshi Marg, Parel,
Mumbai, hereinafter referred to as 'the suit shop'. It is the case of the
plaintiff that her father Deep Narayan Chatanki was a tenant of the suit
shop, wherein he was conducting chana kurmura business. As the
business flourished, he brought his younger brothers Magruram and
Baburam from Uttar Pradesh to Mumbai to help him in the business.
Later he allowed them to run the business in the suit shop. As per the
mutual arrangement, each one of them i.e., Deep Narayan, Magruram
and Baburam were to run the business for one year on rotation. The
said arrangement continued till July, 2012.
5. It is the case of the Plaintiff that the Defendant No.1, the
son of Magruram was to conduct the business in the suit shop for one
year ending on 31st July, 2012. Thereafter he was to handover the
business and the possession of the suit shop to the Defendant No.3.
The grievance of the plaintiff is that the Defendant Nos.1 and his son
i.e., the defendant no.2 refused to handover the business to the
defendant no.3 - Baburam. It is alleged that the defendant nos.1 and 2
locked the suit shop and refused to handover possession to the
Defendant Nos.3 and 4. The Defendant Nos.1 and 2 thereafter filed a
suit against the Plaintiff and also moved a Notice of Motion seeking to

restrain the Plaintiff herein from dispossessing them from the suit
shop. The said Notice of Motion has been dismissed by the City Civil
Court by order dated 21/12/2012. The Plaintiff has averred that the
possession of the defendant nos.1 and 2 was permissive. The mutual
arrangement having been terminated, the defendants have no legal
right to occupy the suit shop or to conduct the business in the suit
shop.
6. The Defendant Nos.3 to 9 i.e, Late Baburam and his
successors have supported the case of the Plaintiff. The defendant
nos.1 and 2 have contested the suit mainly on the ground that Deep
Narayan and his two brothers i.e., Magruram and Baburam were cotenants
in respect of the suit shop. They have averred that the rent
receipts were issued in the name of Deep Narayan, he being the eldest
among the three brothers. These Defendants have further claimed
that Deep Narayan has executed a joint declaration acknowledging the
rights of the other brothers. It is further alleged that by an affidavit
dated 22nd February, 1990 Deep Narayan had transferred his rights in
the suit shop in favour of his brother - Magruram. Upon the death of
Deep Narayan, his widow - Antadevi also executed a declaration
relinquishing her right, title and interest in shop no.5 in favour of the

defendant no.1 - Mahendra, the son of Magruram. The defendant nos.1
and 2 therefore contend that they have exclusive right over the suit
shop. They claim that the Plaintiff in connivance with the Defendant
Nos.3 to 7 is trying to dispossess them from the suit shop and hence he
was constrained to file a suit against them. The said suit has been
dismissed by this Court (Coram : R. Dalvi, J.) by order dated
14/08/2013. It is stated that the Defendant Nos.1 and 2 have filed
SLP before the Hon'ble Supreme Court challenging the said dismissal
order.
7. Heard Mr. Sanglikar, the learned counsel for the Plaintiff.
He contends that the father of the Plaintiff was a tenant of the suit
shop. He had permitted his brothers to carry on the business in the
suit shop by rotation. As per the mutual arrangement, the term of the
Defendant No.1 to conduct the business by rotation, was to end on
31/7/2012 and then the Defendant No.4 was to continue the business
for the following year. However, the Defendant No.1 refused to hand
over the business and possession of the suit shop to the Defendant
No.4 and filed a suit claiming title to the suit shop. The learned
counsel submits that the possession of the Defendant Nos.1 and 2 was
purely permissive. The Plaintiff having terminated the mutual

arrangement, the Defendant Nos.1 and 2 have no right to conduct the
business and occupy the suit shop. The Learned counsel for the
Plaintiff states that the suit filed by the Defendant Nos. 1 and 2 to
restrain the Plaintiff from dispossessing them otherwise by due process
of law has been dismissed. Relying upon the decision of the Apex
Court in Maria Margarida Sequira Fernandes vs Erasmo Jack De
Sequeira, (2012) 5 SCC 370, he submits that due process of law
means an opportunity to the Defendant to file pleadings including
written statement and documents before the court of law. It does not
mean the whole trial. He urges that the plaintiff has been put to undue
hardship and immense loss due to unauthorized conduct of business
and occupation of the suit shop.
8. Mr. Railkar, the learned counsel for the Defendant Nos.1
and 2 contends that the Plaintiff as well as the Defendant Nos.1 and 2
have raised conflicting claims over the suit shop. He submits that the
Defendants Nos. 1 and 2 are in possession of the suit shop and
appointment of receiver will result in depriving them of de facto
possession. He submits that the Plaintiff has prima facie failed to show
that there is imminent danger to the suit shop, which warrants
immediate relief. He submits that in the absence of any material to

show that the property is likely to be dissipated or wasted, the court
would not be justified in appointing the court receiver. To substantiate
this contention, he has relied upon the decision of the Apex Court in
Premanand Patel (dead) by Lrs. vs. Sudha A. Chowgule and Ors.,
(2009) 11 SCC 127, decision of the Madras High Court in T.
Krishnaswamy Chetty vs. C. Thangavelu Chetty and ORs., AIR 1955
Madras 430 and Hasenbhoy Jetha vs. New India Corporation Ltd., AIR
1955 Madras 435 and decision of the Bombay High Court in B.D.A.
Ltd. Vs Central Bank of India and Anr. in AIR 1995 BOMBAY 14.
9. I have perused the records and considered the submissions
advanced by the learned counsel for the respective parties. Order XL
Rule 1 of CPC enables the Court to appoint a Receiver where it appears
to the Court to be just and convenient. In Parmanand Patel (supra), the
Apex Court has observed thus :-
" 23. A receiver, having regard to the provisions contained
in O.40 R.1 of the Code of Civil Procedure, is appointed only
when it is found to be just and convenient to do so. Appointment
of a receiver pending suit is a matter which is within the
discretionary jurisdiction of the Court. Ordinarily the Court
would not appoint a receiver save and except on a prima facie
finding that the plaintiff has an excellent chance of success in
the suit.
24. It is also for the plaintiff not only to show a case of
adverse and conflict claims of property but also emergency,

danger or loss demanding immediate action. Element of danger
is an important consideration. Ordinarily, a receiver would
not be appointed unless a case has been made out which may
deprive the defendant of a de facto possession. For the said
purpose, conduct of the parties would also be relevant. "
10. In T. Krishnaswamy Chetty (supra), the Madras High Court
has laid down the five principles described as 'panch sadachar' of our
Courts exercising equity jurisdiction in appointing receiver, which read
as follows:
" (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.
(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.
(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.

(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.
(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. "
11. It would also be advantageous to refer to the decision of
this Court in Mulji Umershi Shah and Etc. Vs. Paradisia Builders Pvt.
Ltd AIR 1998 Bom 87. The question before the Court was whether the
Trial Court was justified in appointing a receiver while refusing to
grant temporary injunction in favour of the Plaintiff and in absence of
any application for appointment of receiver. The observations of the
learned Single Judge of this Court, (as his lordship then was) are as
under:-
" 19. In my view, in suitable cases, the Court is not
powerless to pass appropriate order for appointment of
receiver without any application by any of the parties while
rejecting the application for temporary injunction. Such
power of course has to be exercised sparingly and in
exceptional cases where dismissal of an application for grant
of temporary injunction may lead the parties to take law in
their own hands and use their own devices either for
protection of unlawful possession of recent origin or for
gaining possession or such like circumstances. There is no
impediment put by the Code of Civil Procedure in passing
such order to prevent the ends of justice being defeated. Such
order may be imminently required to be passed also so that
possession may be made over to that party who is prima facie
entitled to possession but is deprived by unlawful conduct or
illegal act of the other party. An appointment of receiver can
be made on the application of either parties to the litigation
as well as suo motu and therefore, absence of application
shall not preclude the Court from passing such order if it is
just and convenient The cases may be varied and many. A
party may not have any right to the property and still comes
in possession of the property unlawfully and illegally which
may be of recent origin and on that basis may seek to protect
his possession by filing suit for injunction and by making an
application for temporary injunction. The Court may find that
such person has no title, right or interest in the property and
is not in lawful possession and, therefore, is not entitled to
grant of any temporary injunction. To avoid grave situation
where the parties may take law in their own hands even while
temporary injunction has been refused, in the absence of any
application, the Court may make an order of appointment of
receiver. Such exceptional order is permissible under law to
prevent larger mischief if it is just and convenient in the facts
and circumstances of the case. There is nothing wrong if by

taking such recourse the plaintiff who has unlawfully come in
possession recently is dispossessed during pendency of suit. In
suitable and appropriate case, if the trial Court appoints the
receiver while rejecting the application for temporary
injunction, it cannot be said that such power is without
jurisdiction…"
12. In the instant case, undisputedly, the license as well as the
rent receipts of the suit shop were in the name of Deep Narayan
Chatanki, the father of the Plaintiff. It is also not in dispute that the
chawl wherein the suit shop was existing was in dilapidated condition
and the same was acquired by MHADA and Mumbai Housing Repair
Board. In the year 1989, the father of the Plaintiff was given notice to
vacate the premises and was provided temporary alternative
accommodation. The father of the Plaintiff died in U.P. on
09/05/1993.
13. The records prima facie indicate that dispute over allotment
of suit shop led to Anta Devi, the mother of the Plaintiff filing a Writ
Petition No.1196 of 1996 for allotment of permanent alternative
accommodation in the newly constructed building. The records
indicate that by interim order dated 09/07/1996; this Court had
directed MHADA to put Antadevi in possession of the suit shop. She
was permitted to use the suit shop for commercial purpose or for

composite purpose of residential cum commercial. Accordingly,
Antadevi was put in possession of the suit shop.
14. The records further indicate that Antadevi had died during
the pendency of the writ petition and the Plaintiff herein had been
brought on record as the legal representative. The writ petition came
to be disposed of by order dated 11/01/2011 in terms of the interim
order dated 09/07/1996. The records further indicate that by order
dated 09/01/2012, MHADA had transferred the suit shop in the name
of the Plaintiff. The electric connection in respect of the suit shop has
also been transferred in the name of the Plaintiff.
15. The material on record prima facie indicate that the father
of the Plaintiff was a tenant of the suit shop. After demolition of the
original shop, his widow - Antadevi was put in possession of the suit
shop and upon her death the suit shop has been transferred in the
name of the Plaintiff.
16. It is pertinent to note that the Defendant Nos.1 and 2 claim
to be the owners of the suit shop, mainly on the basis of the affidavit
and declaration executed by Deep Narayan and his wife Antadevi. It is

to be noted that based on the same documents, these Defendants had
filed a suit and sought interim relief against the Plaintiff and the other
Defendants. The City Civil Court dismissed the Notice of Motion
holding that the Defendant Nos.1 and 2 had failed to prove that they
had exclusive right or that they were in exclusive possession of the suit
shop. The learned Judge has further observed that taking undue
advantage of ad-interim relief, the Defendant Nos.1 and 2 have
deprived the Plaintiff and other Defendants from conducting business
in the suit shop. The Appeal filed against the said order has been
dismissed by this Court (Coram : R. Dalvi, J.) by order dated
14/08/2013, wherein it has been observed that the documents on the
basis of which the Defendants are claiming rights over the suit shop are
unregistered and fall within the mischief of Section 49 of the
Registration Act.
17. It is pertinent to note that the Writ Petition No. 1196 of
1996, which was filed subsequent to execution of these documents,
was not filed by the Defendant No.1 in his individual capacity but was
filed as an attorney of Antadevi, the mother of the Plaintiff.
Furthermore, pursuant to the order passed in the said Writ Petition,
MHADA had put Antadevi in possession of the suit shop and

subsequently transferred the suit shop in her name without there being
any challenge by and/or behalf of the Defendant Nos.1 and 2. The
documents on which the Defendant Nos. 1 and 2 have based their
claim are unstamped and unregistered. These documents, which are
hit by Section 49 of the Registration Act would not create any legal
interest in the property.
18. The Defendant Nos.1 and 2 have not been able to prima
facie -establish their title or exclusive/settled possession in respect of
the suit shop. The material on record indicates that the Defendant
Nos.1 and 2 were permitted to conduct business in the suit shop on
gratuitous basis. Such permissive possession does not create any right
or interest to the property. As per the mutual arrangement, the
Defendant Nos.1 and 2 were to carry business in the suit premises till
31/7/2012 and thereafter hand over premises to the Defendant Nos.3
to 7, who were to conduct business for the following year. The records
indicate that the Defendant Nos.1 and 2 declined to hand over
possession of the suit shop and the business to the Defendant No.3.
They locked the suit shop and prevented the Defendant Nos.3 to 7 as
well as the Plaintiff from entering the suit shop. These Defendants
have continued to remain in possession beyond the agreed term. Prima facie, they are in unauthorized and unlawful possession of the suit
shop. Though the Plaintiff has legal right to be in possession, they
have kept her out of possession for over 7 years and thus deprived her
from occupying the suit shop and or conducting the business in the suit
shop. Under these facts and circumstances, rejecting the application
will prima facie result in protecting unauthorized possession of the
Defendants Nos. 1 and 2. Hence, in my considered view, it is
imminently just and convenient to appoint a receiver
19. Hence, the following order:
a) Pending the hearing and final disposal of the suit, the Court
receiver, High Court, Bombay is appointed as a receiver in
respect of the suit shop.
b) The Receiver shall take possession of the suit shop from the
Defendant Nos. 1 and 2 within a period of one week from the
date of the order.
c) The Receiver shall appoint the Plaintiff as his agent in respect
of the suit shop, without any security. The receiver shall fix
the monthly royalty, which shall be deposited in the court
and invested in any nationalized bank until further orders.
20. The Notice of Motion Nos.1189 of 2014 and Notice of

Motion No.1789 of 2017 are disposed of accordingly.
21. Parties to act on an authenticated copy of this order.
(ANUJA PRABHUDESSAI, J.)

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