Bombay HC: a partner can be appointed Court Receiver of the firm's own redevelopment project

The Bombay High Court dismissed a commercial appeal challenging a trial court's order appointing one partner of a two-partner construction firm as Court Receiver over a housing society redevelopment project, during the pendency of a suit for dissolution and accounts between the partners. The appellant, who held a 33% share against the respondent's 67%, argued that appointing his co-partner as Receiver, rather than an independent third party, exposed him to continuing conduct he had already alleged was a breach of fiduciary duty, including sale of flats below market rate. The respondents pointed to Section 47 of the Indian Partnership Act, 1932, which obliges partners to complete unfinished transactions on dissolution, and to the respondent partner having funded and managed the project's construction, including obtaining approvals and paying displaced society members' rent, while the appellant had contributed little capital and drawn a loan from the firm.

The Division Bench of Justices G.S. Kulkarni and Neela Gokhale held that appointment of a receiver under Order XL Rule 1 of the Code of Civil Procedure, 1908 is discretionary and aimed at protecting the suit property pending trial, that a party to litigation may be appointed Receiver in special circumstances, and that introducing a stranger unfamiliar with an ongoing, complex redevelopment would itself prejudice the parties and the third-party flat purchasers and society members awaiting possession. Since the trial court had safeguarded the appellant by requiring a Rs. 2 crore deposit and prior court approval for further sales, the appeal was dismissed.