Case Note & Summary
The appeal arose from an order dated 5th September 2019 passed by a learned Single Judge (R.I. Chagla J.) on a motion filed by the original plaintiff (Edit II Productions) in Suit No. 461 of 2010. The suit alleged that Defendant No.2 (Shoeib Mohammed Taj) had embezzled large sums from the plaintiff and, in collusion with Defendant No.3 and Defendant No.4 (his brother-in-law), used the embezzled funds to acquire properties in the names of third parties, including the appellants (Mohammed Riyaz Shaikh, Noor Mohammed Shaikh, and Shaikh Hasiboon Noor). The appellants were not parties to the suit but were impleaded as respondents to the motion. The learned Single Judge appointed a Court Receiver over the properties claimed by the appellants. The appellants challenged this order, arguing that they were not parties to the suit and claimed independent title to the properties. The Division Bench of the Bombay High Court (G.S. Patel and Gauri Godse JJ.) allowed the appeal, holding that a receiver cannot be appointed against persons who are not parties to the suit and who assert independent title, without a trial on merits. The Court set aside the impugned order and directed that the receiver stand discharged. The Court also disposed of the connected notices of motion and leave petition.
Headnote
A) Civil Procedure - Appointment of Receiver - Third Party Rights - Order 40 Rule 1 CPC - The Court held that a receiver cannot be appointed against persons who are not parties to the suit and who claim independent title to the property, without a trial on merits. The impugned order appointing a receiver over properties claimed by the appellants (who were not parties to the suit) was set aside. (Paras 1-17)
B) Civil Procedure - Suit for Embezzlement - Fraudulent Transfer - Section 9 CPC - The suit alleged embezzlement by Defendant No.2 and collusive transfer of funds to acquire properties in the names of third parties. The Court noted that the appellants were not parties to the suit and claimed independent title, and thus the receiver could not be appointed against them without adjudication. (Paras 1-17)
Issue of Consideration
Whether a Court Receiver can be appointed in respect of properties claimed by third parties who are not parties to the suit and who assert independent title, without a trial on merits.
Final Decision
Appeal allowed. Impugned order dated 5th September 2019 set aside. Court Receiver stands discharged. Connected notices of motion and leave petition disposed of.
Law Points
- Receiver cannot be appointed against third parties not party to suit
- Receiver cannot be appointed without trial on merits when third party claims independent title
- Order 40 Rule 1 CPC
- Section 9 CPC
Case Details
2022 LawText (BOM) (09) 67
Appeal No. 88 of 2020 in Notice of Motion (L) No. 2304 of 2018 in Suit No. 461 of 2010 with Notice of Motion (L) No. 936 of 2019 in Appeal No. 88 of 2020 with Leave Petition (L) No. 88 of 2020 in Appeal No. 88 of 2020
Ms Neeta Karnik for Appellants, Mr Rohaan Cama for Respondent No.1, Mr SK Dhekale (Court Receiver) with Gazala Khan-SO present
Mohammed Riyaz Shaikh, Noor Mohammed Shaikh, Shaikh Hasiboon Noor
Edit II Productions, Shoeib Mohammed Taj, Mumtas Shoeib Shaikh, Asif Rafique Shaikh, Evershine Builders Pvt Ltd, Evershine Pine Building no. 1, 2, 3 & 4 Co-operative Housing Society Ltd
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Nature of Litigation
Appeal against order appointing Court Receiver over properties claimed by third parties not party to the suit.
Remedy Sought
Appellants sought setting aside of the order appointing receiver over their properties.
Filing Reason
The original plaintiff alleged embezzlement by Defendant No.2 and collusive transfer of funds to acquire properties in names of third parties, including appellants.
Previous Decisions
Learned Single Judge (R.I. Chagla J.) on 5th September 2019 appointed Court Receiver over properties claimed by appellants.
Issues
Whether a Court Receiver can be appointed against persons who are not parties to the suit and who claim independent title to the property, without a trial on merits.
Submissions/Arguments
Appellants argued they were not parties to the suit and claimed independent title to the properties, and thus receiver could not be appointed against them.
Respondent No.1 (plaintiff) argued that the properties were acquired with embezzled funds and thus receiver was necessary to protect the plaintiff's interests.
Ratio Decidendi
A receiver cannot be appointed against persons who are not parties to the suit and who claim independent title to the property, without a trial on merits. The power to appoint a receiver under Order 40 Rule 1 CPC is discretionary and must be exercised cautiously, especially when third party rights are involved.
Judgment Excerpts
The Appeal is directed against an order of 5th September 2019 made by the learned single Judge, RI Chagla J on a motion filed by the Original Plaintiff.
The Appellants before us were Respondents Nos. 5, 6 and 7 to the motion. They are not parties to the suit.
Procedural History
Suit No. 461 of 2010 filed by Edit II Productions alleging embezzlement by Defendant No.2. Plaintiff filed Notice of Motion (L) No. 2304 of 2018 seeking appointment of receiver over properties. Learned Single Judge allowed the motion on 5th September 2019. Appellants (not parties to suit) filed Appeal No. 88 of 2020 against that order. Connected Notice of Motion (L) No. 936 of 2019 and Leave Petition (L) No. 88 of 2020 were also filed.
Acts & Sections
- Code of Civil Procedure, 1908 (CPC): Order 40 Rule 1, Section 9
