Bhandari Engineers & Builders Pvt Ltd v Maharia Raj Joint Venture & Ors Judgment dated 5 August 2020 in EX.P.275 & 276/2012 and EX. APPL. (OS) 193/2020: Directions and formats of affidavits in execution proceedings.
The Delhi High Court has recently passed detailed directions to be followed by courts in execution proceedings under the Arbitration & Conciliation Act 1996 (A&C Act), while also making these guidelines applicable to proceedings under various other statutes. These measures have been laid down to ensure that a Judgment Debtor (JD) does not frustrate the decree by stating that he does not have the funds.
The Court has framed formats of comprehensive affidavits that have to be filed by individuals or firms/companies in order to determine, inter alia, their assets, income, expenditure and liabilities over the last 5 - 10 years to assess whether the JD has disposed of any properties to avoid satisfying the decree.
Directions for Courts hearing execution proceedings:
Courts hearing execution petitions have been directed to take the following steps:
1) The Courts have to expedite execution cases and try to decide them within one year. [¶83]
2) On the first date of hearing, the JD's assets known to the Decree Holder should be attached and the court should thereafter initiate proceedings for their sale. [¶8]
3) The Court, at the initial stage itself, can restrain a JD from transferring or parting with any assets estimated to be equivalent to the decretal/award amount. Similarly, the JD can be restricted from discharging any financial liability (other than to banks/financial institutions) without the Court's permission. [¶56]
4) At the initial stage itself, the JDs have to file detailed affidavits (Annexure A1/B1) to reveal inter alia, particulars of the last 5 - 10 years regarding income, properties, bank accounts, FD's, foreign investments and standard of living. [¶61]
5) Additionally, after inspecting the Annexure A1 affidavit, the Court may direct the individual JD to file an affidavit (Annexure C1) disclosing his expenditure on housing, transport, medical expenses, insurance, entertainment, vacations, etc. [¶62]
6) If circumstances exist to lift the corporate veil, then all the Directors/Promoters of the JD (except independent/non-executive/nominee directors) will have to disclose their personal assets and income through these detailed affidavits. [¶66]
7) These affidavits have to be filed in pending cases as well. [¶64]
8) In case these affidavits are not filed in time, the JD can be detained in civil prison for up to 3 months. [¶58]
9) After the JD has filed these detailed affidavits, the Decree Holder will verify the disclosures made in the affidavits, either himself or through an investigator. In appropriate cases, the Court may order investigation by a Government Agency including a forensic audit, the cost of which shall be borne by the Decree Holder. If the JD does not truly disclose all his assets and income, the Decree Holder is at liberty to serve interrogatories and/or seek production of relevant documents from the JD. [¶69 & 70]
10) In case a JD makes a false claim in his affidavit, the Decree Holder can initiate proceedings under the Indian Penal Code 1860 and the Code of Criminal Procedure 1973 for perjury, which carries imprisonment of up to 2 years. [¶78]
11) The Court can ensure the presence of a JD by issuing bailable/non-bailable warrants in case he fails to appear after notice has been served. [¶57]
12) In appropriate cases, the Court may, (i) direct the Garnishee(s) to deposit the amount owed to the JD in court, (ii) allow the Decree Holder to inspect all assets and records of the JD in the presence of a Local Commissioner appointed by the Court, (iii) direct the auditor of the JD to submit a report regarding the affairs of the JD, (iv) permit the Decree Holder to serve interrogatories on the JD's auditors, (v) permit the Decree Holder to inspect the records of the JD with the Tax and the other authorities to verify the disclosures, (vi) appoint a receiver in respect of the attached properties, and/or (vii) in extreme circumstances, appoint a C.A. as Local Commissioner to inspect the JD's records and submit a report. [¶75]
13) If the JD does not satisfy the decree/award despite having the means, the Decree Holder will file an application for his detention whereupon the Court will issue a show cause notice to the JD. The Court, on being satisfied that the JD has refused/neglected to pay the decretal amount or a substantial part thereof, despite having the means to do so, will pass an order for his detention in civil prison for a period not exceeding 3 months. Even after release from detention, the JD shall remain liable to satisfy the decree/award. [¶74]
14) In case the Decree Holder suffers a loss on account of delay & obstruction caused by the JD, the Court can pass appropriate orders of restitution by disgorgement. [¶45 & 76]
The Court has held that the aforesaid directions will apply inter alia to proceedings under §9, 17 & 36 of the A&C Act, execution proceedings before the Motor Accident Claims Tribunal & Debt Recovery Tribunal, the Sub Divisional Magistrate, and under the Consumer Protection Act. [¶80 & 81]
The directions would hopefully play a role in expediting execution proceedings, and in pressurising the JDs so that they do not delay or avoid execution of decrees. Given the time often taken for execution in the Indian legal system, these directions are being viewed as a welcome change.
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