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2023 Supreme(Bom) 1976
IN THE HIGH COURT OF BOMBAY
Bharat P.Deshpande, J.
Deepak Mathur - Appellant
Versus
St. Anthonys Timbers - Respondent
Writ Petition No. 503 of 2023
Decided On : 10-08-2023
Subodh Kantak, Advocate, Jitendra Supekar, Advocate, Yulette Coutinho, Advocate, Kher Simoes, Advocate, Neha Kholkar, Advocate, Dhaval Zaveri, Advocate, Nehal Govekar, Advocate, S.Kamulkar, Advocate
IMPORTANT POINT
An arrest warrant against a managing director in execution proceedings requires clear evidence of non-compliance with court orders and must respect the principles of natural justice, including providing an opportunity for the individual to defend against such actions.
Headnote:
EXECUTION - CHALLENGE TO ARREST WARRANT - Order 21 Rule 41 CPC - The court discussed the provisions of Order 21 Rule 41 of the Code of Civil Procedure (CPC), which governs the disclosure of assets by judgment debtors. The court emphasized that an arrest warrant can only be issued for non-compliance with the court's directions regarding asset disclosure. The court found that the executing court failed to establish any default by the judgment debtor or its managing director, thus violating principles of natural justice and the procedural requirements of the CPC.
Fact of the Case:
The petitioners challenged an order from the executing court that issued an arrest warrant against the Managing Director/CEO of a judgment debtor company for failing to satisfy a decree. The petitioners argued that they complied with the requirements of Order 21 Rule 41 CPC by submitting a list of assets, and that the warrant was issued without proper justification or adherence to legal procedures.
Finding of the Court:
The court found that the executing court did not provide sufficient reasons for issuing the arrest warrant and failed to establish any disobedience by the judgment debtor or its managing director. The court noted that the managing director was not given an opportunity to disclose personal assets or defend against the warrant, which constituted a violation of natural justice.
Issues: Whether the executing court had the authority to issue an arrest warrant against the Managing Director/CEO without establishing non-compliance with the court's orders and without providing an opportunity for the managing director to defend himself.
Ratio Decidendi: The court held that an arrest warrant under Order 21 Rule 41 CPC can only be issued after a clear finding of non-compliance with the court's orders regarding asset disclosure. The court emphasized the necessity of following due process and ensuring that the principles of natural justice are upheld in execution proceedings.
Final Decision: The court quashed and set aside the impugned orders, ruling that the executing court must adhere to the procedural requirements of the CPC. The court directed the executing court to expedite the execution proceedings and resolve the matter within one year.
JUDGMENT/ORDER
1. Rule. Rule made returnable forthwith. With the consent of the parties, matter is taken up for final disposal at the admission stage itself.
2. Though all office objections are removed, the matter is still on the filing number. The office is directed to register it immediately and issue regular number before showing it as disposed of.
3. Heard the learned Senior Advocate Mr Kantak appearing along with Mr Supekar Ms Coutinho, Mr Simoes and Ms Kholkar for the Petitioners and Mr Zaveri who appears along with Mr Govekar and Mr Kamulkar for Respondent No.1.
4. The petition is challenging the impugned order dtd. 5/3/2021 in Regular Execution No.7/2014 whereby the learned Executing Court issued arrest warrant against the Managing Director/CEO or the Judgment Debtors on the ground that the decree remained to be satisfied.
5. Mr Kantak, learned Senior Counsel for the Petitioners would submit that inspite of compliance of Order 21 Rule 41 by submitting the list of assets, warrant has been issued against the Managing Director/CEO without giving any reasons. Mr Kantak would submit that the only option with the Trial Court is when the Judgment Debtor fails to comply the directions issued under Order 21 Rule 41 for disclosing assets and not otherwise. He submits that the impugned order nowhere discloses about any default committed by the Judgment Debtors or its Directors in submitting/furnishing the assets.
6. Mr Kantak, learned Senior Counsel further submits that the Judgment Debtor is a company and warrant has been issued against the Managing Director without seeking the details of assets of the Managing Director personally and giving him opportunity to defend himself in the execution of decree. On this line, the learned Senior Counsel Mr Kantak submits that the impugned order which is against principles of natural justice, stands vitiated and also needs to be quashed and set aside for want of powers to issue such warrant in non-compliance of Order 21 Rule 41 CPC.
7. Per contra, Mr Zaveri appearing for Respondent No.1 forcefully submitted that principle of piercing corporate veil would apply in the present matter and in this respect, he placed reliance on the Judgment of the Division Bench of this Court in the case of Bhatia Industries & Infrastructure Limited vs. Asian Natural Resources (India) Limited & Anr.; 2016 SCC OnLine Bom 10695.
8. Mr Zaveri further pointed out that this Court directed the Judgment Debtor/Petitioners to deposit an amount of Rs.5, 00, 000.00 as per order dtd. 1/12/2021 and allowed Respondent No.1 to withdraw the said amount as per order dtd. 24/1/2022. He submits that in case the Court is not with him, such amount be protected till the disposal of execution proceedings or till order is passed by the Executing Court for the recovery of the remaining decretal amount. According to Mr Zaveri, the initial decretal amount was only Rs.10, 00, 000.00, however, with interest, the same is now equivated to around Rs.28, 00, 000.00.
9. Rival contentions fall for the determination of this Court as under.
10. The execution proceedings are pending from the year 2014 and that too on the basis of compromise decree. Mr Zaveri pointed out that Respondent No.1/Decree Holder is unable to recover the amount inspite of all efforts and therefore, application was filed for disclosing assets of the Judgment Debtor. He further submitted that though such application was allowed, Judgment Debtor failed to disclose the assets. According to him, the Managing Director played fraud on the Court and though the assets were available at the time of filing of the execution, the same have been siphoned off systematically in order to frustrate the entire decree.
11. Mr Zaveri candidly accepted that such aspect is not found recorded in the order of the Trial Court. However, he submits that all these aspects are already placed before the Executing Court.
12. Be that as it may, the present petition is challenging the impugned order dtd. 5/
