Enforcement of Judgments 2020

Last Updated August 04, 2020

India

Law and Practice

Authors



Shardul Amarchand Mangaldas & Co has, in the course of its 100-year legacy, established one of the most robust and recommended corporate commercial dispute resolution practices in India with over 100 dispute lawyers, including 20 partners. The team is led by senior litigators who are acknowledged leaders in their field, many of whom have more than twenty years of experience at the bar. The firm has a wealth of experience in representing Indian domestic clients before the Supreme Court of India as well as various High Courts and Tribunals in India. Its lawyers have acted in numerous landmark cases that have resulted in the development of jurisprudence in India. In addition, it also has significant experience in representing clients in both domestic and international arbitrations, having seats in India and abroad. Shardul Amarchand Mangaldas provides litigation services in the following areas: dispute avoidance, strategic advice, pre-litigation/litigation advice and enforcement.

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. 

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:

  • decrees on admission – in cases where an admission of fact has been made by either party, either orally or in pleadings, the court may, either on its own motion or on the application of a party, pass a judgment to the extent of that admission;
  • ex parte decrees – courts are empowered to proceed without the presence of the defendant (ie, ex parte) if the defendant does not appear despite the fact that summons were duly served;
  • decrees granting permanent injunction or mandatory injunction – courts can grant injunctions either prohibiting a party from taking a particular action (prohibitory injunction) or requiring a party to perform a particular action (mandatory injunction); and 
  • decrees granting specific performance – courts can pass judgments requiring the performance of the terms of a contract by a party.

There are various other decrees, which depend on the nature of the relief sought. These include:

  • money decrees;
  • decrees for recovery of immovable or moveable property;
  • decrees for dissolution of a partnership; and
  • decrees for partition of property.

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 decree holder, or its legal representatives, must file an application for execution of the decree before the court that passed the decree.
  • In the event that the appropriate court to execute the decree is not the court that passed the decree, the judgment creditor can make an application seeking transfer of the execution to the competent court (ie, where the assets of the judgment debtor lie or where the judgment debtor resides).
  • The court may then issue notice to the person against whom execution is sought, requiring that person to show cause as to why the decree should not be executed.
  • If the person against whom the decree is to be executed does not appear or show cause as to why the decree should not be executed, the court will recognise and enforce the decree.
  • In aid of execution, the decree holder can apply to the court to provide directions to the judgment debtor, instructing it to disclose any assets and liabilities; if these assets are disclosed, the court will proceed with the attachment and sale of such assets.

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:

  • shall be conclusive as to any matters contained – that is to say that interim orders such as injunctions, or any pro-tem order or measure that is not a final judgment or decree, will not be enforceable in India;
  • has to be pronounced by a court of competent jurisdiction;
  • has to be given on the merits of the case – an ex parte judgment that is not on the merits of the case (ie, which does not independently assess the material and make findings on the issues at hand) will not be enforceable in India;
  • must appear, on the face of the proceedings, to be founded on a correct view of international law;
  • must not fail to recognise the law of India in cases in which such law is applicable;
  • must not have been obtained in proceedings which were opposed to natural justice;
  • must not have been obtained by fraud; and
  • must not sustain a claim founded on a breach of any law in force in India.

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:

  • the United Kingdom;
  • Aden;
  • Fiji;
  • the Republic of Singapore;
  • the Federation of Malaya;
  • Trinidad and Tobago;
  • New Zealand;
  • the Cook Islands and the Trust Territory of Western Samoa;
  • Hong Kong;
  • Papua and New Guinea;
  • the UAE; and
  • Bangladesh.

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:

  • if a decree holder does not take any steps to execute the foreign decree in the cause country, he or she may file an execution petition in India as per the law of limitation of the cause country; and
  • if a decree holder takes steps-in-aid to execute a foreign decree in the cause country, and the decree is not fully satisfied, he or she may file an execution petition in India within three years from the finalisation of the execution proceedings in such cause country.

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:

  • an application for execution must be filed before the executing court (ie, the court where the assets of the judgment debtor lie);
  • a certified copy of the award must be filed along with this application for execution;
  • the execution of the award can only be stayed if the award debtor files an application to this effect; and
  • execution can only be initiated after the 90-day period to challenge the award has lapsed.

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:

  • the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;
  • the original agreement for arbitration or a duly certified copy thereof;
  • such evidence as may be necessary to prove that the award is a foreign award; and
  • an official translation into English if the award is in a foreign language.

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:

  • jurisdictional grounds – ie, the non-existence of a valid and binding arbitration clause;
  • procedural grounds, such as failure to give proper notice of the appointment of an arbitrator or the composition of the arbitral tribunal not being in accordance with the agreement;
  • substantive grounds – ie, that the arbitral tribunal made a mistake of law or a mistake of fact, the award is in conflict with public policy of India, the award suffers from a patent illegality, or the subject matter is incapable of being settled by arbitration under Indian law.

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:

  • the award must be passed pursuant to a valid arbitration agreement and by an arbitral tribunal that was constituted in terms of the agreement or in the manner agreed by the parties;
  • the parties must not be under some incapacity, were given notice of the arbitration proceedings, and had opportunity to present their case;
  • the award is final and binding and has not been annulled in the country in which it was made;
  • the award does not deal with differences which were outside the terms of submission to arbitration;
  • the subject matter is capable of being determined by arbitration under Indian law; and
  • the award is not in contravention of public policy of India.

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.

Shardul Amarchand Mangaldas & Co

Amarchand Towers
216, Okhla Phase III
Okhla Industrial Estate Phase III
New Delhi
Delhi 110020

+91 11 4159 0700 / 4060 6060

Pallavi.Shroff@AMSShardul.com www.amsshardul.com
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Law and Practice

Authors



Shardul Amarchand Mangaldas & Co has, in the course of its 100-year legacy, established one of the most robust and recommended corporate commercial dispute resolution practices in India with over 100 dispute lawyers, including 20 partners. The team is led by senior litigators who are acknowledged leaders in their field, many of whom have more than twenty years of experience at the bar. The firm has a wealth of experience in representing Indian domestic clients before the Supreme Court of India as well as various High Courts and Tribunals in India. Its lawyers have acted in numerous landmark cases that have resulted in the development of jurisprudence in India. In addition, it also has significant experience in representing clients in both domestic and international arbitrations, having seats in India and abroad. Shardul Amarchand Mangaldas provides litigation services in the following areas: dispute avoidance, strategic advice, pre-litigation/litigation advice and enforcement.

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