We know that if a judgment debtor does not voluntarily satisfy a decree or award, the decree holder is compelled to initiate execution proceedings. In such a scenario, the typical problem that litigants face is the unreasonable delay in being able to enjoy the fruits of its success by getting the decree or award executed. More often than not, a judgment debtor is able to delay, and sometimes derail, the execution process either by raising frivolous disputes on merits of the underlying proceedings or by not making a full disclosure of its assets. This often leads to a dead end where a successful party has to take the difficult decision of whether to continue to expend on litigation expenses in its pursuit of success or drop the execution proceedings at some stage, given the lack of sufficient information on the assets of the judgment debtor.
In the recent past, the Delhi High Court has acknowledged this problem and has passed several directions to tighten the noose on judgment debtors. For context, in Bhandari Engineers & Builders Pvt Ltd v. Maharia Raj Joint Venture and Ors. [EX.P. 275/2012 and EX. APPL. (OS) 193/2020], Hon'ble Justice J. R. Midha passed an order on 1 January 2016 (Order 1) expressing that judgment debtors should be directed, at the initial stage itself, to file the affidavit of assets in the prescribed format1. The disclosure of assets of the judgment debtor is necessary for initiating sale proceedings to satisfy the decree or award.
On 5 December 2019, Justice Midha passed another order in this matter (Order 2) providing detailed directions and guidelines regarding comprehensive affidavits of assets and income, expenditure and liabilities, including the formats of such affidavits, to be filed by the judgment debtor. The affidavits must disclose the position of the judgment debtor's assets and income, expenditure and liabilities as on the date of cause of action, as on the date of the decree or award as well as well as on the date of swearing the affidavit. This was done after carefully considering and analysing the best international practices in similar proceedings outside India.
On 5 August 2020 (Order 3), another judgment was delivered by Justice Midha amending the earlier directions and guidelines passed in this matter. The present article briefly analyses these directions and guidelines which definitely appears to be a step forward to ensure that execution proceedings are not lingering at the mercy of the judgment debtor. While we will have to wait to see whether the above directions and guidelines are ultimately incorporated in the CPC, there is no doubt that the prescribed format is very comprehensive and will provide a complete overview of the assets, income, expenditure and liabilities, as well as the judgment debtor's standard of living, which will be useful to determine whether the judgment debtor has the means to satisfy the decree or award.
- Format of affidavits
- The Executing Court shall direct the judgment debtor to file an affidavit of his assets and income2. If the judgment debtor is a proprietor of a proprietorship firm, partner of a partnership firm, member of an Hindu Undivided Family (HUF), director or promoter of a company, or managing trustee of a Trust, the judgment debtor shall be directed to file an additional affidavit in respect of the assets and income of the firm, HUF, company or Trust, as the case may be3.
- After examining Annexure A1, the Executing Court may direct the judgment debtor to file an additional affidavit of his expenditure and liabilities4
- If the judgment debtor is a firm, company, HUF or Trust, the Executing Court shall direct the judgment debtor to disclose its assets and income5 within 30 days, which shall be sworn by all partners, directors, promoters, members or Karta, trustees, as the case may be.
- Retrospective application: In pending execution cases, if the judgment debtor has not already filed the affidavit of assets and income, the Executing Court should direct the judgment debtor to file the affidavit of assets, income, expenditure and liabilities.
- Investigation: Upon filing of affidavits, the decree holder shall verify the disclosures made in the affidavits, either itself or through an investigator. In appropriate cases, the Executing Court may order investigation by a Government Agency including a forensic audit, cost of which will have to be borne by the decree holder.
- Restraints on the Judgment Debtor: The Executing Court is empowered, at the initial stage itself, to restrain the judgment debtor from transferring, alienating or disposing of or otherwise parting with the possession of any assets commensurate to the decretal or awarded amount, except in the ordinary course of business such as payment of salary and statutory dues.
- Consequences for Default: If the judgment debtor does not appear upon service of notice, the Executing Court shall ensure its presence initially by issuing bailable warrants and thereafter, by issuing non-bailable warrants as per law. If the judgment debtor does not file the aforesaid affidavits within the stipulated time, the Executing Court may consider directing detention of the judgment debtor in civil prison as per Order XXI Rule 41(3) of the CPC. If the judgment debtor does not truly disclose all its assets and income, expenditure and liabilities, the decree holder or the Executing Court is at liberty to order interrogatories, discovery, inspection, production of any document and/or order any fact to be proved by the judgment debtor.
- Restitution, Costs and/or Prosecution: Even though it is not uncommon for an Executing Court to order restitution or costs, courts ought to (a) direct reimbursement of the loss suffered by the decree holder on account of delay and obstruction in the execution proceedings caused by the judgment debtor; or (b) impose actual, realistic or proper costs equivalent to the deprivation suffered by the decree holder; or (c) prosecute the judgment debtor for the false claims introduced by it, under the Indian Penal Code and Code of Criminal Procedure.
- In appropriate cases, the Executing Court may also issue any of the following directions: (a) direct the judgment debtor to file its affidavit of assets on the basis of an oral prayer of the decree holder which can be considered to be sufficient compliance of Order XXI Rule 41(2) of the CPC; (b) issue notice and direct the garnishee(s) to deposit in court the amount due to the judgment debtor as per law; (c) permit the decree holder to inspect all the assets and records of the judgment debtor in the presence of the Local Commissioner; (d) direct the auditor of the judgment debtor to submit a report with respect to the affairs of the judgment debtor; (e) permit the decree holder to serve interrogatories on the auditors of the judgment debtor; (f) permit the decree holder to inspect the records of the judgment debtor with the Income Tax and other authorities to verify its disclosures; (g) appoint a receiver in respect of the attached properties of the judgment debtor; and (h) 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.
The above directions and guidelines shall apply to all execution proceedings, and have been circulated to all the District Judges, SDM's dealing with execution cases as arrears of land revenue, as well as the Delhi Judicial Academy to sensitize the judges on this subject. The Delhi High Court has also suggested to the Ministry of Law and Justice that the mandatory filing of the affidavit of assets, income, expenditure and liabilities by judgment debtor in a detailed prescribed form at the very threshold of execution litigation should be incorporated in the statutes, as in the developed countries. If that happens, it will significantly improve the jurisprudence on this subject.
The efforts of the Delhi High Court for continually setting out guidelines to protect the interests of the decree holders and make certain that execution cases for recovery of money are not unreasonably delayed are commendable. Given that delays and difficulties in execution of decrees and awards erode public confidence and trust in the justice delivery system, it was time to revisit this law to restore faith in the judicial process and to prevent the efforts of a successful litigant from going in vain. If these directions and guidelines are followed in letter and spirit, the observation of the Privy Council that the difficulties of a litigant in India begin when he has obtained a decree will hopefully be reduced to paper.
1 Form 16A, Appendix E under Order 21 Rule 41(2) of the CPC
2 The format is prescribed in Annexure A1 appended to the judgment, which requires the judgment debtor to disclose details such as occupation and income from all sources in the last five years; particulars of immovable properties, financial assets, investments, movable assets, intangible assets, charge on assets; income details depending on whether the judgment debtor is salaried or self- employed etc. and other personal information in the affidavit.
3 The format is prescribed in Annexure B1 appended to the judgment, which requires the judgment debtor to disclose details such as registration and incorporation details; particulars of shareholding; particulars of directors, partners, promoters, key managerial staff; net worth; particulars of drawings, immovable properties, financial assets, investments, movable assets, intangible assets, charge on assets; income from business/profession and other sources etc. in the affidavit.
4 The format is prescribed in Annexure C1 appended to the judgment, which requires the judgment debtor to disclose details such as expenditure on housing; household expenditure; maintenance of dependents; transport; medical expenditure; insurance; entertainment; holiday and vacations; litigation expenses; discharge of liabilities etc. in the affidavit.
5 The affidavit has to be filed in the format of Annexure B1 appended to the judgment.
Siddhant Kumar, an intern at Phoenix Legal, contributed to his in-depth analysis and research.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.