Very Important Point
In Order 40 of the C.P.C. there is existing a power which is totally unfettered in terms of the provisions of the Statute. The language of Order 40 thus being of widest possible import, any restriction as regards the power of the Court to direct a Receiver to effect a sale of immovable property prior to the decree does not and cannot arise.

Headnote:Code of Civil Procedure, 1908-Order 40, Rule 1 - Receiver -Court’s power to direct sale of immovable property prior to passing of decree-Language of Order 40 has widest possible import-Court has unfettered powers in the event Court feels that sale of property would be just and convenient having due regard to the situation of the matter-Question of there being any embargo in the matter of sale of immovable property by receiver before passing decree does not and cannot arise.
       Held : Order 40 Rule 1 of the Code of Civil Procedure expressly provides for the appointment of a Receiver over a property whether before or after the decree and the Court may by an order confer on to the Receiver all powers of realisation, management, protection, preservation and improvement of the property. Order 40 Sub-rule (1)(d) specifically provides for realisation and the words ‘or such of those powers as the Courts thinks fit’ appearing in Order 40 Rule 1(d) ought to be interpreted in a manner so as to give full effect to the legislative intent in the matter of conferment of powers by the Court to preserve and maintain the property through the appointment of a Receiver. Needless to record here that there is existing a power which is totally unfettered in terms of the provisions of the Statute. Law courts, however, in the matter of appointment of a Receiver through a long catena of cases, imposed a self imposed restriction to the use of discretion in a manner which is in consonance with the concept of justice and to meet the need of the situation - ‘unfettered’ does not and cannot mean unbriddeled or unrestrictive powers and though exercise of discretion is of widest possible amplitude, but the same has to be exercised in a manner with care, caution and restraint so as to subserve the ends of justice. The law courts are entrusted with this power under Order 40 Rule 1 so as to bring about a feeling of securedness and to do complete justice between the parties. (Para 6)
       The language of Order 40 thus being of widest possible import, any restriction as regards the power of the Court to direct a Receiver to effect a sale of immovable property prior to the decree does not and cannot arise. Order 40 Rule 1 and various sub-rules thereunder unmistakably depict that the Court has unfettered powers in the event the Court feels, that the sale of property would be just and convenient having due regard to the situation of the matter. The Court must consider whether special interference with the possession of the defendant is required or not and in the event the Court comes to such a conclusion that there is likelihood of the immovable property, in question be, dissipated or some such occurrences as is detailed more fully hereinafter or party initiating the action suffering irreparable loss, unless the Court gives appropriate protection, there should not be any hesitation in directing the sale of immovable property. (Para 7)
       Question of having restriction imposed on the court’s power to direct sale of immovable property prior to the passing of a decree does not and cannot arise. The words ‘Just and convenient’ have to be attributed a proper meaning and the intent of the legislature as regards the extent of the empowerment by the Code, is rather categorical in nature. The discretion empowered cannot thus be said to be non-existing, having due regard to the language of Order 40 Rule 1 though, however, the courts shall have to be rather cautious in its approach and use proper circumspection as stated herein before and it is only in the case, where the court feels it expedient that in the event property is not sold, the initiator of the action would be subject to perpetration of a great fraud : the diminution in value of the assets, wastage and wrongful entrants or trespassers’ attempt to make an in-road for their permanent settlement, (the factum of which is not very uncommon in the country presently) - are some such instances which may be taken into consideration. We, however, hasten to add that the instances noted above are only illustrative in nature and no hard and fast rule can be laid down in regard to the exercise of Court’s powers under Order 40 Rule 1, the same being dependent on the facts and circumstances of each case as is available before the Court. A court may appoint a receiver not as a matter of course but as a matter of prudence having regard to the justice of the situation. (Para 11)
       Therefore the question of there being any embargo in the matter of sale of immovable property by the Receiver before passing of decree does not and cannot arise and we do feel it expedient to record that the observations of the Full Bench in State Bank of India v. Trade Aid Paper & Allied Products (India) Ltd. & Ors., (1995(2) Mh.L.J. 81) is too wide a preposition and as a matter of fact runs counter to the true intent of the legislature as appears from Order 40 Rule 1 of the Code of Civil Procedure. The observations of the Full Bench pertaining to the above is to be treated as merely stated for the purposes of the facts of the particular case of the State Bank (supra) and cannot be treated as a precedent. (Para 12)

Judgement Key Points

The provided judgment primarily addresses the scope of the court's powers under Order 40 of the Civil Procedure Code, specifically the court's authority to appoint a receiver and to direct the sale of immovable property prior to the passing of a decree. It emphasizes that the language of Order 40 Rule 1 is of the widest possible import and that the court's powers to appoint a receiver and to order sale are unfettered, provided the court considers it just and convenient in the circumstances of the case (!) (!) .

However, the judgment does not explicitly discuss or provide a definitive ruling on the specific scenario where the maintainability of a suit is challenged through a stay application, and the court remains undecided on that issue. The focus remains on the general principles governing the exercise of the court's powers under Order 40, without addressing procedural or jurisdictional questions that arise when the maintainability of the suit itself is in question and remains unresolved.

In essence, the judgment does not directly answer whether a civil court can appoint a receiver when the maintainability of the suit is challenged and the matter is kept undecided. It underscores the broad discretion of courts to appoint receivers and to order sales based on the circumstances, but it does not extend this discretion to procedural issues about the maintainability of the suit itself or the impact of stay applications on such powers.

Therefore, based on the content of this judgment, it does not explicitly resolve the question of whether a receiver can be appointed in a situation where the suit's maintainability is under challenge and remains undecided.

Judgment

Banerjee, J.-Leave granted.

2. Authority of Receivers to effect sale of immovable properties prior to the passing of the decree is the focal point for consideration in this appeal, by the grant of special leave being directed against the Bench decision of the Bombay High Court. The Bench in deciding the issue however did rely upon the decision of an earlier. Full Bench judgment in the case of State Bank of India v. Trade Aid Paper & Allied Products (India) Ltd. & Ors.1 .

3. Mr. R.F. Nariman, Senior Advocate, appearing in support of the appeal very strongly contended that the Full Bench decision in State Bank of India’s case (supra) cannot be said to have laid down the law in a correct perspective and as such it would be convenient at this juncture to note the observations of the Full Bench pertaining thereto. The Full Bench observed :

“10. As mentioned hereinabove, the decisions referred to in the judgment as regards the ambit of power of the court to appoint Receiver under Order 40 Rule 1 of the Code of Civil Procedure were recorded in suit filed by the individuals to recover the loans or to enforce the mortgages. The economic policy of the Government and the Nationalised Banks has opened new vistas and required the Banks and the financial institutions to advance loans in many areas which were earlier unknown. The benefit available to the citizens of securing loans from Banks and financial institutions cannot be misused by refusal to pay the amount and then indulge in time consuming litigation. Indeed, it is the duty and function of the Court entertaining the suits institutions to ensure that efforts are made to dispose of the suits as early as possible and even during the pendency of the suits, ensure that not only the properties are protected but the defendant is made to repay the amount, if desirous of enjoying the benefits secured by obtaining the loan. The powers of the Court under Order 40 Rule 1 of the Code of Civil Procedure are to be exercised to advance cause of justice and what is `just and convenient’ depends upon the nature of the claim and the surrounding circumstances. The court should not close eyes of the realities and blindly follow the principles laid down 50 years before when the suits by Banks and financial institutions were a novelty. The economic liberalisation and the policy of the Government to grant loans for various activities have increased the number of suits by Banks and financial institutions and in this Court every year more than 2,000 suits are instituted. It would not be difficult to imagine how much public money is involved in these suits and how long the Nationalised Banks and Financial Institutions are deprived of their dues. The Court should be conscious of these facts and should be more pragmatic in exercising powers under Order 40 Rule 1 of the Code of Civil Procedure.

11. The Parliament is also conscious of the importance of the claims of the Banks and financial institutions and Section 29 of the State financial Corporation Act, 1951 entitles the Financial Corporation to take up possession of the concern when a default is committed and without resort to the suit. The Parliament had realised that taking advantage of the liberal economic policies and healthy approach of the Banks and the financial institutions to advance loan, there is a growing tendency to misuse the facility by taking advantage of delay in disposal of the cases in Court. The delay in disposal of the cases in the court is not due to the fault of the litigant and the Banks and financial institutions should not be hampered from recovering the amounts by denial of just relief admissible under Order 40 Rule 1 of the Code of Civil Procedure.

12. The Courts while appointing Receiver under Order 40 Rule 1 of the Code of Civil Procedure may not deprive the defendant of possession, in case of immovable properties provided that the defendant is ready and willing to continue in possession as agent of the Receiver on the t

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1999 Supreme(SC) 955

Cases Referred (2)