Contributed by: Khaitan & Co
After years of toil and waiting for a verdict, there is a decree in your favour and against the opposite party. There is a sigh of relief but alas! the relief is short-lived. Because now, another set of proceedings will have to be initiated to realize the decree. These proceedings are known as the execution proceedings in which the party in whose favour the decree is awarded is known as the ‘decree-holder’ and the opposite party is termed as ‘judgement debtor’. The problems which are faced by the decree-holder range from false claims and defences raised by the judgement debtor to obsolete format of affidavits of income and assets as provided under the Code of Civil Procedure 1908 (‘CPC’) filed by the judgement debtor which does not give their true financial standing, etc. All these problems cause a huge strain on the judicial system, and therefore, the search of truth becomes the paramount inquisition of execution proceedings as well. The solution for the above menace is also provided under the law which includes restitution, imposition of costs, mesne profits, etc. which serve the purpose but at the cost of delay in the administration of justice.
The High Court of Delhi (‘Court’) has taken cognizance of the problems faced by the decree holders in realizing the decree as per its true terms. The Court in the matters of M/s Bhandari Engineers and Builders Pvt. Ltd. v Maharia Raj Joint Venture (EX.P. 275/2012) and M/s Bhandari Engineers and Builders Pvt. Ltd. v M/s You One Maharia (JV) Delhi & Ors. (EX.P. 276/2012), being heard together, is trying to tackle the aforementioned problems faced by the decree-holder. The Court deriving its power from Sections 30 and 151 and Order XXI of CPC read with Sections 106 and 165 of the Indian Evidence Act 1872 and Article 227 of the Constitution of India has modified/ amended the formats of an affidavit of assets, income, expenditure, and liabilities to be mandatorily filed by the judgment-debtor in execution cases including that of an individual and a proprietorship firm/ partnership firm/ HUF/ Company/ Trust. The Court has also streamlined the process of the execution proceedings, which if implemented and followed in its true manner, will go a long way in sorting the mess.
Primarily, the Court in its order dated 5 December 2019 in the aforementioned matters had modified the formats of affidavits to be filed by the judgment debtor and also streamlined the procedure to be adopted by courts while entertaining an execution petition based on best international practices. Vide the same order, this Court had also sought suggestions and responses from other courts as well as Delhi High Court Bar Association on the working of the aforesaid guidelines.
Thereafter, the Court, taking note of the recommendations and suggestions received, in its order dated 5 August 2020 has further modified that the process of execution proceedings and also prescribed amended the format of the affidavit of assets, income, expenditure, and liabilities to be filed by the judgment-debtor, making it more comprehensive.
The Court while discussing various precedents laid by down different courts of India in search for truth and how it is the guiding star of the entire judicial process including Jasraj Inder Singh v Hemraj Multanchand, (1977) 2 SCC 155; Union Carbide Corporation v Union of India, (1989) 3 SCC 38; Mohanlal Shamji Soni v Union of India, 1991 Supp (1) SCC 271; Zahira Habibullah Sheikh v State of Gujarat, (2006) 3 SCC 374, Maria Margarida Sequeria Fernandes v Erasmo Jack de Sequeria, (2012) 5 SCC 370; etc. and considering the formats of the affidavit which are prescribed under different jurisdictions and the relevant laws relating to execution proceedings, has prescribed a comprehensive format of such affidavits which should reveal the actual financial standing of the judgement debtor.
The format of the affidavits as prescribed under latter order will also be useful to determine whether the judgment debtor has the means to satisfy the decree/award. The facets covered in the prescribed format include disclosing his occupation and income from all sources in the last five years; particulars of immovable properties in his name as well as joint names; financial assets including all bank accounts, DEMAT accounts, safety deposit lockers; investments including FDRs, stocks, shares, insurance policies, loans, foreign investments; movable assets including motor vehicles, mobiles, computer, laptop, electronic gadgets, gold, silver and diamond jewellery; etc.
The format has been prepared based on the suggestions and recommendations of the bench (court) and the bar (bar associations, advocates, etc.). Therefore, it encompasses a solution to a lot of practical problems that are faced by the parties.
In regard to streamlining the process, the Court duly directed that the executing court should direct the judgement debtor to file the affidavit of assets and income in the format as prescribed in the latter order at the first instance. If the judgement debtor fails to file the same, the executing court should consider detention of the judgment-debtor in civil prison for the term not exceeding three months. Even in the pending execution cases, if the judgement debtor has not filed the aforesaid affidavits, the executing court should direct the judgement debtor to file the affidavit in the format as prescribed in the order. The Court further directed that if any ground for lifting the corporate veil of a judgment-debtor company is made out as per law, then all the Directors/Promoters (other than independent/non-executive and nominee directors) of the judgment debtor Company should be directed to disclose their assets and income.
Further, if the executing court deems it necessary, it has the power to restrain the judgment debtor from transferring, alienating or disposing of or otherwise parting with the possession of any assets to the tune of the decretal/ award amount except in the ordinary course of business such as payment of salary and statutory dues at the initial stage itself. Further, if the judgement debtor fails to appear before the Court upon service of notice, the executing court should ensure its presence initially by issuing bailable warrants and thereafter, by issuing non-bailable warrants as per law. The Court further noted that in appropriate cases, the executing court may order an investigation by a Government Agency including a forensic audit, cost of which shall be borne by the decree-holder.
Execution proceedings are generally the final and last step of dispute resolution. The complications faced by the decree-holder in getting a decree/ award executed often makes it the most cumbersome proceeding. Also, the procedure followed differs from court to court. Therefore, the Court has clarified that the procedure and format of the affidavits as prescribed under the latter order shall apply to the Court and the courts subordinate to it including Debt Recovery Tribunals, Motor Accident Claims Tribunal, District Courts, etc. Pertinently, it shall also apply to execution proceedings under Section 36 of the Arbitration and Conciliation Act 1996 or at any stage where the Court of the Arbitral Tribunal deems it necessary. The Court has also suggested that the prescribed format and procedure be shared with the Central Government so that the same can be incorporated under different statutes, and the aforesaid procedure and format becomes the common procedure to be followed across the country. This shall go a long way in giving the decree-holder a semblance of a common procedure to be followed in an execution proceeding if such recommendations by this Court are accepted by the Central Government.
The Court has further listed the matter again in November of this year to consider any further recommendations submitted to it by either an advocate or the litigant. Therefore, we can expect the Court to further streamline the process and maybe provide an even more comprehensive format of the affidavits.
Contributed by Khaitan & Co
The above article is authored by Mr. Ajay Bhargava (Partner), Mr. Aseem Chaturvedi (Partner), and Mr. Milind Sharma (Associate).