Companies have, generally, to disclose assets on their balance sheets, which are publicly accessible online from the website of the Ministry of Corporate Affairs upon payment of a fee. This is not the case with partnerships and sole proprietorships. However, there are various asset tracing agencies that may be engaged by a party to locate the assets of opposing parties. These agencies generally conduct a detailed search of all filings and publicly available information, such as land records.
Decree holders can request the court to direct the judgment debtor to disclose their assets in an affidavit. The court may direct the judgment debtor to disclose its assets in a particular format prescribed under the Code of Civil Procedure, 1908 (CPC).
Parties may also approach the court at any time, including before or after the judgment, or during its execution, to pass orders restraining the defendant from selling or creating any third party rights on its property if they feel there is a threat that the assets will be dissipated.
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Final judgments are statements given by a judge on the grounds of a decree or an order under the CPC, which conclusively determine the rights of the parties. They may be either preliminary, where judgment is passed on some issues and the rest are decided later, or final, where all issues are decided.
There are various kinds of decrees recognised under Indian law, such as:
There are various other decrees, which depend on the nature of the relief sought. These include:
Decrees
A decree against which no appeal has been filed, or if an appeal has been filed and dismissed, can be executed in the manner set out below:
The limitation to execute a decree is 12 years from when the decree becomes enforceable.
Judgments
A judgment may be executed in the following ways as provided under Section 51, read with Order 21, of the CPC:
Delivery of property specially decreed
If the decree concerns a specific property, the court may direct the judgment debtor to deliver the property to the decree holder. However, if the movable property is of such nature that it cannot be conveniently removed from the ground, then the property can be left in the custody of a custodian. If the immovable property that is to be delivered pursuant to a decree is in the occupancy of a tenant, a copy of the warrant must be affixed in some conspicuous place on the property, and a proclamation to the occupant must be made.
Attachment and sale
In cases where the decree is for payment of money, one of the most common methods to execute is attachment and sale of the property. Sections 60 to 64 and rules 41 to 57 of Order 21 of the CPC lay down a detailed procedure as to how the court can conduct an auction of the attached property.
Arrest and detention of the Judgment Debtor
The judgment debtor can be arrested or detained if there is sufficient cause. It has to be established that the judgment debtor is likely to obstruct delay, abscond or alienate the property to avoid execution. This is also a manner of execution for a decree of payment of money.
Appointing a receiver
The court, when it deems fit, can also appoint a receiver who is entrusted with the protection and preservation of the property that forms the subject matter of the decree.
Other
Judgments may be executed in any other manner that the nature of the relief may require – eg, a decree for restitution of conjugal rights, it may be executed by making a periodical payment as provided under Order 21, Rule 33 of the CPC.
Garnishee Order
If a third party (garnishee) owes a debt to the judgment debtor, the court may, on an application by a decree holder (garnisher), pass an order directing or ordering a garnishee not to pay money to the judgment debtor since the latter is indebted to the garnisher. It is an order of the court to attach money or goods belonging to the judgment debtor in the hands of a third person.
Insolvency Proceedings
These can be initiated by a party in the event that an undisputed debt of a specified amount becomes due and the judgment debtor fails to satisfy the debt. The decree holder would have to be either an “operational creditor” or “financial creditor” as defined under the Insolvency Bankruptcy Code.
COVID-19
At the time of drafting this article (July 2020), there was a lockdown in India due to the outbreak of COVID-19. Due to this lockdown, the functioning of Indian courts is restricted to hearing matters only by way of videoconference. Moreover, courts are only hearing matters where some urgency has been established by the parties. Even though the lockdown has been partially lifted, courts are still continuing to function in this limited manner. Therefore, hearings for execution of judgments/decrees is unlikely, unless an urgency has been established.
Due to the difficulties posed by the outbreak of COVID-19, the Indian Supreme Court, by its order dated 23 March 2020, suspended the limitation periods of all proceedings with effect from 15 March 2020 until further orders.
The time taken to execute a judgment in India is dependant on multiple factors (ie, where the asset of the judgment debtor is located or the ease with which it is identified). For instance, the attachment of a bank account in a metro city in India will be easier and quicker than the attachment or sale of immovable property of the judgment debtor located in the interior of India, where the decree will have to be transferred to the local court for execution. Identifying assets becomes difficult in the case of subsidiary companies, where parties are unable to trace assets and have to pierce the corporate veil in order to execute judgments against the assets of directors or the parent company. In such cases execution takes longer. Typically, the enforcement of a domestic judgment would take two to five years depending on the complexity of the matter.
It is difficult to provide an estimate of the costs involved as these depend on a lot on variables, including which court has to be approached, the jurisdiction in which the assets are located, the actual time taken by the court, and the fees of lawyers or law firm engaged.
The effects of COVID-19 on the functioning of the Indian courts, as discussed in 2.2 Enforcement of Domestic Judgments, should also be borne in mind.
Please refer to 1.1 Options to Identify Another Party’s Asset Position.
Order 21, Rule 41 of the CPC empowers the courts to call upon the judgment debtor to disclose, in an affidavit, all assets owned by it. If any ground for lifting of the corporate veil is made out, then all the directors of the judgment debtor company can be directed to disclose their assets and income in the prescribed format. The disclosure of assets by the judgment debtor is a preliminary step in aid of execution. Upon filing of the affidavits, the court may also allow the decree holder to verify the disclosures made in the affidavits, either him or herself or through an investigator. The court may also ask the judgment debtor to be physically present before the court and/or to file an additional affidavit of income.
A party seeking to resist the enforcement of a domestic judgment can challenge it by filing an appeal against it. For challenging a judgment, a party will have to prove specific grounds, such as questions of law raised by the judgment, questions of fact, or any new evidence that has been discovered after the judgment was passed. An ex parte decree may be challenged on the ground that the summons were not duly served, or that the party was prevented by any sufficient cause from appearing when the suit was called on for hearing.
If the decree is passed by a District Court, the first appeal is filed to a Superior Court, and subsequently a second appeal is filed to the High Court. If the decree is passed by a single bench of the High Court exercising its original jurisdiction, then appeal may be filed to the division bench of the appellate division of the same High Court.
In both the cases above, parties may thereafter approach the Supreme Court, in accordance with the Constitution of India, only if there is a substantial question of law.
The CPC further provides that an appeal against a judgment does not automatically operate as a stay on enforcement of the proceedings. A party seeking such a stay will have to make a separate application seeking a stay on the enforcement of the domestic judgment till such time as the appeal is decided. The court, at the time of staying the execution, may require the judgment debtor to furnish security or make a deposit with the court. The direction to make a security deposit can either be as per the direction of the court or mandated by a statute.
After all the stages of appeal, as described in 2.5 Challenging Enforcement of Domestic Judgments, are exhausted, and if the judgment is upheld by the courts, then it shall be enforced.
There is no central register of judgments in India. However, the Supreme Court – as well as certain High Courts, subordinate courts and tribunals – maintain websites where largely all judgments are available and can be downloaded.
For a foreign judgment to be enforced in India it must satisfy the conditions laid down by Section 13 of the CPC and must have been rendered by a reciprocating territory gazetted under Section 44A of the CPC.
Conditions for Enforcement of a Foreign Judgment
Section 13 of the CPC lays down the criteria that have to be met for a foreign judgment to be enforced, a foreign judgment:
Judgments by Reciprocating Territories
Section 44A of the CPC provides that a judgment rendered by a superior court of a reciprocating country shall be enforced and executed as decree as if it had been passed by Indian courts (ie, by filing an execution application along with a certified copy of the decree/judgment). Reciprocating territories gazetted by the Indian Government are:
Judgments from Non-reciprocating Territories
In contrast, a judgment pronounced by a court from a non-reciprocating territory is not entitled to automatic recognition and enforcement. The judgment creditor has to recommence proceedings in India by filing a civil suit on the foreign judgment, which will be relied upon as evidence of the debt due to the petitioner. The judgment creditor may use the foreign decree to support its suit. Even in this circumstance, the foreign judgment must satisfy the tests of Section 13 of the CPC, as listed above, in order for it to be reliable as evidence. Such a suit must be filed within three years from the date of the foreign judgment/decree.
While India is not a party to the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, it has entered into bilateral treaties with various states regarding co-operation and reciprocity in terms of enforcement of foreign judgments and decrees; however, these countries are not yet notified as reciprocating territories. They include Afghanistan, Azerbaijan, Bahrain, Bulgaria, France, Kazakhstan, Mongolia, Turkey and Ukraine. Pending notification as reciprocating territories, the enforcement of judgments and decrees from courts in these jurisdictions follow the same process as non-reciprocating territories.
Please refer to 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
Please refer to 3.1 Legal Issues Concerning Enforcement of Foreign Judgments, specifically to Section 13 of the CPC referred therein. Foreign judgments that do not satisfy the criteria laid down by Section 13 and Section 44A of the CPC cannot be enforced in India.
Enforcing Judgment Passed by a Reciprocating Territory
A foreign judgment that passes the test set out in Section 13 of the CPC, and which is passed by a reciprocating territory as under Section 44A of the CPC, will be enforced by court as if it were a decree passed by that court. Please refer to 3.1 Legal Issues Concerning Enforcement of Foreign Judgments for requirements under Section 13 of the CPC and 2.2 Enforcement of Domestic Judgments for the procedure for execution of a domestic judgment. Needless to say, a certified copy of the decree issued by the superior court of the foreign country must be submitted.
Enforcing Judgment Passed by a Non-reciprocating Territory
The judgment holder must file a suit where the assets of the judgment debtor lie on the foreign judgment or decree. Only once the suit is allowed can it be executed as a domestic decree in terms of Order 21 of the CPC. See 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
Limitation
The Supreme Court in Bank of Baroda v Kotak Mahindra Bank 2020 SCC OnLine SC 324, has held that the limitation laws of the country where the decree was rendered (cause country), would be applied, even when the decree is sought to be executed in India. It has been held that:
COVID-19
Please refer to 2.2 Enforcement of Domestic Judgments for information on the effects of COVID-19 on the functioning of the courts and limitation periods.
It is difficult to estimate the time and cost that it would take to enforce a foreign judgment. It depends on the complexity of the matter and whether the enforcement is challenged or not
The cost estimate depends on a lot of variables including the court which has to be approached, the actual time taken by court, and the fees of lawyers or law firm engaged. A nominal court fee is payable as well, and depends on the court which has been approached.
COVID-19
Please refer to 2.2 Enforcement of Domestic Judgments for information on the effects of COVID-19 on the functioning of the courts and limitation periods.
Please refer to 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
A party can challenge the enforcement of a foreign judgment on the grounds laid down under Section 13 of the CPC, which specify the criteria that must be met by a foreign judgment for it to be enforced in India.
Parties can enforce a domestic award after a period of 90 days has elapsed from the award being received, unless that award is challenged by the other party. Even if the other side has challenged the award, it can be enforced if there is no stay on its enforcement. Grounds of challenge are contained in Section 34 of the Arbitration & Conciliation Act, 1996 (the Act) and are discussed in 4.6 Challenging Enforcement of Arbitral Awards.
As regards foreign awards, once they are final according to the law of the seat of arbitration, they can be enforced in India. In order to be enforced in India, the foreign award must satisfy the conditions imposed by the Act – ie, it must be passed in furtherance of a written arbitration agreement to which the New York Convention or the Geneva Convention applies and in a territory that has been recognised by the Indian government by a notification in the Official Gazette. The grounds to challenge the enforcement of a foreign award are provided in Section 48 of the Act and are discussed further in 4.6 Challenging Enforcement of Arbitral Awards.
Please refer to 4.1 Legal Issues Concerning Enforcement of Arbitral Awards.
Pleases refer to 4.6 Challenging Enforcement of Arbitral Awards.
Domestic Awards
Section 36 of the Act provides that a domestic award is akin to a decree of the Civil Court and therefore can be directly executed in the manner specified in 2.2 Enforcement of Domestic Judgments. The process for executing a domestic arbitral award is provided below:
Foreign Awards
An award, which satisfies the criteria of Section 44 of the Act (as referred to in 4.1 Legal Issues Concerning Enforcement of Arbitral Awards), may be enforced under the Act. The award holder would have to file an application for recognition and enforcement of the foreign award under Sections 44 and 47 of the Act. While making this application the award holder must produce the following before the court:
When the award debtor receives notice, he or she may object to the recognition and enforcement of the foreign award based on grounds in Section 48 of the Act, which are discussed in 4.6 Challenging Enforcement of Arbitral Awards. If the court does not find existence of any such ground, then it will recognise the award and proceed to execute it as a domestic decree. Please refer to 2.2 Enforcement of Domestic Judgments for discussion of the execution of a domestic decree.
It is difficult to estimate the time and costs that it would take to enforce an arbitral award. It depends on the complexity of the matter and whether the enforcement is challenged or not.
The Act provides that challenges to the award under Section 34 of the Act must be disposed of within one year, however, this timeline is only directory and not mandatory.
Please refer to 2.2 Enforcement of Domestic Judgments for information on the effects of COVID-19 on the functioning of the courts and limitation periods.
Domestic Awards
As stated, parties can challenge a domestic award on the grounds mentioned in Section 34 of the Act. These are:
The Act clarifies that an award is in conflict with the public policy of India only if the making of the award was induced by fraud or corruption, or was offensive to basic notions of morality or justice, or if the award is in contravention of the fundamental policy of Indian law. The Act expressly provides that the public policy exception cannot entail a review on the merits of the dispute.
Limitation
An application for setting aside a domestic award must be made within three months of the date of the award, as specified under Section 34 (3) of the Act. An extension of 30 days can be granted by the court if it is of the opinion that the applicant had sufficient cause for delay.
It is important to note that the mere filing of an application to challenge an award in India does not operate as a stay of the award, nor suspend its execution. As a condition to the grant of a stay order, the court may direct the challenging party to deposit the money awarded with the court.
Foreign Awards
Under the Act, foreign awards are categorised as those governed by the New York Convention or the Geneva Convention. Section 48 of the Act regulates the enforcement of New York Convention awards and mirrors Article V of the New York Convention. Part III of the Act regulates enforcement of Geneva Convention awards and Section 57 of the Act sets out conditions for the enforcement of a Geneva Convention award. Conditions specified under Sections 48 and Section 57 of the Act, are similar to the grounds contained in Section 34 of the Act. They include that:
Furthermore, as regards Geneva Convention awards, Section 57(3) of the Act provides an additional ground for setting aside the enforcement of an award. The said provision states that a Geneva Convention award may not be enforced in India if, under the lex arbitri, an additional ground is available to challenge the award, which is satisfied.
Limitation
Under Section 43 of the Act, the law of limitation is made applicable to proceedings under the Act. There have been varying judgments as to the computation of the period of limitation for foreign awards and until recently the period of limitation for the execution of a foreign award was as was applicable to a domestic decree (ie, 12 years).
However subsequently, the Supreme Court has held, in the case of Bank of Baroda v Kotak Mahindra Bank Ltd 2020 SCC OnLine SC 324, that the period of limitation for the execution of a foreign decree will be determined by the limitation periods prescribed in the country wherein the decree was made. At present, it remains to be seen if the Supreme Court’s judgment will have an implication on the execution of foreign arbitral awards in India. (See 3.6 Challenging Enforcement of Foreign Judgments)
Please refer to 2.2 Enforcement of Domestic Judgments for discussion of the effects of COVID-19 on the functioning of the courts as well as limitation periods.
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Contributed by: Ila Kapoor, Partner; Ananya Aggarwal, Senior Associate
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