All Things Execution with special reference to M/s Bhandari Engineers & Builders Pvt Ltd v. M/s Mahira Raj Joint Venture

“Execution jurisdiction deserves special attention and expeditious disposal considering that the decree-holder has already succeeded in the litigation and holds a decree/award in his favour.”

– Delhi High Court

In the Indian context, all aspects of litigation have gotten faster and better, it may have been because of the introduction of the Commercial Courts Act both for the Trial Courts or the High Courts. It may have been because the High Courts have been revising their procedures and regulations such as the newly made Delhi High Court (Original Side) Rules, 2018 (“DHC Rules”) or it may have been because of introduction of the newer technologies to cut down red tapism of filing by e-filing and services and deliveries by email but what has not changed is the aspect of Order XXI – Executions.

Since, 1908 when the Code of Civil Procedure (“CPC”) was formulated there has been a handful judgments which talks about what happens when someone wins a case, the method of such recoveries and the fact what all remedies does a person have if the person who loses (“Judgment Debtor”) delays and makes the person who succeeds (“Decree Holder”) wait for a long period.

The Delhi High Court by way of Justice J. R Midha had taken note of this aspect and vide an order dated 11th January 2016 titled,  Bhandari Engineers & Builders Pvt. Ltd. v. Maharia Raj Joint Venture[i] (“First BE”) which was subsequently modified by another  order dated 5th December 2019 in Bhandari Engineers & Builders Pvt. Ltd. v. Maharia Raj Joint Venture[ii] (“Second BE”) and laid down a slew of guidelines for the recovery of money in cases of execution of decrees/ awards. Vide this judgment these directions were issued to District Courts to implement these guidelines with immediate effect for all execution cases. The following is a summary of these guidelines:-

1. Attachment of Assets

If the Judgment Debtor does not voluntarily satisfy the decree/award, the Decree Holder is compelled to initiate execution proceedings. If the Decree Holder is aware of the assets of the judgment debtor, the Court can attach such assets at the very threshold of the execution proceedings[iii]. The Executing Court shall, thereafter, initiate proceedings for sale of the attached assets of the judgment debtor, if the judgement debtor does not satisfy the decree/award. Interestingly, the DHC Rules under Chapter XXIII, Rule 10[iv] now allows the cost of prosecuting the Judgment Debtors to the Decree Holders. In a recent ruling[v], the DHC has allowed the Decree Holder to be reimbursed for all legal costs for execution of its decree against the Judgment Debtor.

2. Affidavit of Assets

If the Decree Holder is not aware of the complete assets and income of the Judgment Debtor, the Executing Court can direct the Judgment Debtor to disclose his assets in Form 16A, Appendix E under Order XXI Rule 41(2) of the CPC. For this action, it is sufficient for the Decree Holder to make an oral prayer/application for issuance of directions.

The Executing Court shall, in the first instance, direct the Judgement Debtor to file within 30 days an affidavit of assets on the:

(i) date of cause of action,
(ii) date of the decree/award,
(iii) date of the swearing of the affidavit;

in Form 16A, Appendix E under Order XXI Rule 41(2) of the CPC.

The Court is also empowered to make an order restraining the Judgement Debtor from transferring, alienating, or disposing of, or otherwise parting with the possession of, any assets, to the tune of the decretal/award amount with a limited exception of (a) in the ordinary course of business such as payment of salary and statutory dues, and (b) discharging liabilities of Banks/financial institutions.

3. Additional Affidavit

The Court is further empowered to seek:-

Additional Affidavit of Assets and Income:

The Executing Court shall also, in exercise of power under Section 151 and Order XXI Rule 41 of the CPC, read with Section 106 and Section 165 of the Indian Evidence Act, direct the Judgment Debtor to file within 30 days an additional affidavit of his assets and income in the format of Annexure-A[vi] along with documents mentioned therein.

When the Judgment Debtor is a proprietor of a proprietorship firm; partner of a partnership firm; member of an HUF and/or Director of a company: Additional affidavits be filed by the JD in respect of the assets of each firm/HUF/Company, as the case may be, in the format of Annexure-B[vii].

If any ground for lifting of the corporate veil is made out, then all the Directors (other than independent/ non-executive and nominee directors) of the Judgment Debtor Company be directed to disclose their personal assets and income in the format of Annexure-A.

Additional Affidavit of Expenditure

After examining Annexure-A, the Court may direct the Judgment Debtor to file an additional affidavit of his expenditure in the format of Annexure-C[viii].

If the affidavit of the Judgment Debtor is not in the prescribed format or is not accompanied with the relevant documents, the Court may grant reasonable time to the Judgment Debtor to remove the defects/ deficiencies.

If the Judgment Debtor has made any misrepresentation, concealment or false statement in the affidavits, the decree-holder is at liberty to invoke Section 340 Code of Criminal Procedure, 1973[ix] (“CrPC”).

Second BE also notes that both Courts/Arbitral Tribunals are empowered to direct a party to file the aforesaid affidavits in proceedings under Order XXXVIII of the CPC and proceedings under Sections 9, 17 and 36 of the Arbitration and Conciliation Act, 1996.

4. Warrants

If upon the service of the notice, the Judgment Debtor fails to appear before the Court, the Executing Court shall ensure his presence initially by issuing bailable warrants and thereafter, by issuing non-bailable warrants.

5. Civil Detention

In case the JD does not file the aforesaid affidavit within the stipulated time:

The Executing Court shall consider detention of the Judgment Debtor in civil prison for a term not exceeding three months under Order XXI Rule 41(3) of the CPC by directing the decree-holder to deposit the subsistence allowance @ Rs.40 per day per person with the Executing Court for detention of the Judgment Debtor. Upon deposit of the subsistence allowance, the Executing Court shall issue non-bailable warrants against the Judgment Debtor for his detention.

It is pertinent to note in terms of Section 56[x] of the CPC, a woman cannot be arrested and/or detained in relation to the execution proceedings. However, it is interesting to note that if a woman does an act of Perjury[xi] then the offence as laid under Section 199[xii] read with Section 191[xiii], 193[xiv] and 209[xv] Indian Penal Code will still be applicable.

The Executing Court finds that the Judgment Debtor is not satisfying the decree/award despite having means/capacity to pay:

In such a scenario, the decree-holder is at liberty to file an application for detention of the Judgment Debtor whereupon the Executing Court shall issue a show cause notice to the Judgment Debtor to show cause as to why he should not be committed to civil prison.

The Court shall, upon being satisfied that the Judgment Debtor has means to pay the decretal amount or substantial part thereof and has refused or neglected to pay the same, pass an order for detention of the Judgment Debtor in civil prison for a period not exceeding three months in terms of Section 58[xvi] (1) (a) of the CPC.

Even after release from detention, the Judgment Debtor shall remain liable to satisfy the decree/award in terms of Section 58 (2) of the CPC.

However, the Judgment Debtor who has no means to satisfy the decree/award, cannot be detained in civil prison. The Court in that case shall follow the procedure laid down in Sections 51(c), 55 to 59 and Order XXI Rules 37 to 40 of the CPC for detention of the Judgment Debtor.

6.  Investigation

Upon filing of affidavits in Form 16A, Appendix E under Order XXI Rule 41(2) of the CPC, as well as the additional affidavits namely Annexure-A, B and C, the Executing Court shall give liberty to the decree-holder to verify the disclosures made in the affidavits, either himself or through an Investigator.

The decree-holder is at liberty to serve the interrogatories and seek production of relevant documents from the Judgment Debtor. The Executing Court shall, thereafter, consider whether the oral examination of the Judgment Debtor is necessary under Section 165[xvii] of the Evidence Act. If so, the Executing Court shall proceed to examine the Judgement Debtor. In a recent ruling[xviii], the DHC has allowed the application of the applicant without any additional notice or reply directing the defendants to file additional affidavits as the supporting documents filed by the applicant with their Form 16A, as shown by the applicant, showed transactions to its other subsidiaries and the DHC considering the said judgment directed the Defendants to file their additional affidavits in the manner as laid down by Second BE.

In appropriate cases, the Executing Court may:

(i) issue notice and direct the Garnishee(s) to deposit in Court the amount due to the Judgment Debtor as per law[xix];
(ii) permit the decree-holder to inspect all the assets and the records of the Judgment Debtor in the presence of the Local Commissioner to be appointed by the Court;
(iii) direct the auditor of the Judgment Debtor company to submit a report with respect to the affairs of the Judgment Debtor;
(iv) permit the decree-holder to serve interrogatories on the auditors of the Judgment Debtor;
(v) permit the decree-holder to inspect the records of the Judgment Debtor with the Income Tax and the other authorities to verify the disclosures made by the Judgment Debtor;
(vi) in extreme cases, appoint a Chartered Accountant as a Local Commissioner to inspect all the records of the Judgment Debtor and submit a report to the Court with respect to the affairs of the Judgment Debtor;
(vii) restrain the Judgment Debtor from leaving the country without the permission of the Court; and,
(viii) impound the passport of the Judgment Debtor.

Author:
Abhimanyu Chopra, Counsel

Footnotes:

[i] (2016) 227 DLT 302
[ii] EX.P. 275/2012 & EX.APPL.(OS) 221/2018.
[iii] id.
[iv] Costs after taxation. — The Court may allow, after preparation and signing of decree, only such costs as it deems fit and appropriate incurred by a party for effecting transmission of the decree to another court. In addition, the Court executing the decree/ the executing court may also award costs of execution as it considers fit and appropriate, in accordance with these Rules/ rules applicable to the executing court.
[v] Skechers U.S.A Inc. v. Pure Play Sports; Delhi High Court vide order dated 14.10.2019 in Ex P. 81 of 2018
[vi] ibid @Pg. 33-50 of the Second BE
[vii] id @Pg. 51-62 of the Second BE
[viii] id @Pg. 63-67 of the Second BE
[ix] 340. Procedure in cases mentioned in section 195. (1) When, upon an application made to it in this behalf or otherwise, any Court is of opinion that it is expedient in the interests of justice that an inquiry should be made into any offence referred to in clause (b) of sub- section (1) of section 195, which appears to have been committed in or in relation to a proceeding in that Court or, as the case may be, in respect of a document produced or given in evidence in a proceeding in that Court, such Court may, after such preliminary inquiry, if any, as it thinks necessary,-

(a) record a finding to that effect;
(b) make a complaint thereof in writing;
(c) send it to a Magistrate of the first class having jurisdiction;
(d) take sufficient security for the appearance of the accused before such Magistrate, or if the alleged offence is non- bailable and the Court thinks it necessary so to do, send the accused in custody to such Magistrate; and
(e) bind over any person to appear and give evidence before such Magistrate.

(2) The power conferred on a Court by sub- section (1) in respect of an offence may, in any case where that Court has neither made a complaint under sub- section (1) in respect of that offence nor rejected an application for the making of such complaint, be exercised by the Court to which such former Court is subordinate within the meaning of sub- section (4) of section 195.

(3) A complaint made under this section shall be signed,-

(a) where the Court making the complaint is a High Court, by such officer of the Court as the Court may appoint;
(b) in any other case, by the presiding officer of the Court.

(4) In this section,” Court” has the same meaning as in section 195.
[x] Prohibition of arrest or detention of women in execution of decree for money. – Notwithstanding anything in this part, the court shall not order the arrest or detention in the civil prison of a woman in execution of a decree for the payment of money.
[xi] Supra Pt. 3
[xii] 199. False statement made in declaration which is by law receiva­ble as evidence. – Whoever, in any declaration made or subscribed by him, which declaration any Court of Justice, or any public servant or other person, is bound or authorised by law to receive as evidence of any fact, makes any statement which is false, and which he either knows or believes to be false or does not believe to be true, touching any point material to the object for which the declaration is made or used, shall be punished in the same manner as if he gave false evidence.
[xiii] 191. Giving false evidence. – Whoever, being legally bound by an oath or by an express provision of law to state the truth, or being bound by law to make a declaration upon any subject, makes any statement which is false, and which he either knows or be­lieves to be false or does not believe to be true, is said to give false evidence.
[xiv] 193. Punishment for false evidence. – Whoever intentionally gives false evidence in any stage of a judicial proceeding, or fabri­cates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine, and whoever intentionally gives or fabricates false evidence in any other case, shall be punished with imprisonment of either de­scription for a term which may extend to three years, and shall also be liable to fine.
[xv] 209. Dishonestly making false claim in Court. – Whoever fraudu­lently or dishonestly, or with intent to injure or annoy any person, makes in a Court of Justice any claim which he knows to be false, shall be punished with imprisonment of either descrip­tion for a term which may extend to two years, and shall also be liable to fine.

[xvi] 58. Detention and release – (1) Every person detained in the civil prison in execution of a decree shall be so detained,-(a) where the decree is for the payment of a sum of money exceeding [five thousand rupees], for a period not exceeding three months, and][(b) where the decree is for the payment of a sum of money exceeding two thousand rupees, but not exceeding five thousand rupees, for a period not exceeding six weeks :]

Provided that he shall be released from such detention before the expiration of the [said period of detention]-

(i) on the amount mentioned in the warrant for his detention being paid to the officer in charge of the civil prison,
(ii) on the decree against him being otherwise fully satisfied, or
(iii) on the request of the person on whose application he has been so detained, or
(iv) on the omission by the person, on whose application he has been so detained, to pay subsistence allowance :

Provided, also, that he shall not be released from such detention under clause (ii) or clause (iii), without the order of the Court. [(1A) For the removal of doubts, it is hereby declared that no order for detention of the judgment-debtor in civil prison in execution of a decree for the payment of money shall be made, where the total amount of the decree does not exceed [two thousand rupees.]]

(2) A judgment-debtor released from detention under this section shall not merely by reason of his release be discharged from his debt, but he shall not be liable to be re-arrested under the decree in execution of which he was detained in the civil prison.

[xvii] 165. Judge’s power to put questions or order production. – The Judge may, in order to discover or to obtain proper proof of relevant facts, ask any question he pleases, in any form, at any time, of any witness, or of the parties, about any fact relevant or irrelevant; and may order the production of any document or thing; and neither the parties nor their agents shall be entitled to make any objection to any such question or order, nor, without the leave of the Court, to cross-examine any witness upon any answer given in reply to any such question: Provided that the Judgment must be based upon facts declared by this Act to be relevant, and duly proved: Provided also that this section shall not authorize any Judge to compel any witness to answer any question, or to produce any document which such witness would be entitled to refuse to answer or produce under sections 121 to 131, both inclusive, if the questions were asked or the documents were called for by the adverse party; nor shall the Judge ask any question which it would be improper for any other person to ask under section 148 or 149; nor shall he dispense with primary evidence of any document, except in the cases hereinbefore excepted.

[xviii] Vistra ITCL (India) Ltd. v. Lalit Kumar Jain; Delhi High Court vide order dated 24.02.2020 in CS (Comm) 288 of 2019
[xix] Daiichi Sankyo Company Ltd. v. Malvinder Mohan Singh; Delhi High Court vide order dated 11.10.2019 in O.M.P (EFA) (Comm) 6 of 2016;

Date: April 9, 2020