05 July 2021, Monday

3 months ago

1. Draft of affidavit of assets formulated by JR Midha J in the Bhandari Engineers line of cases set aside (Delhi High Court)

05 July 2021 | Delhi Chemical and Pharmaceutical Works Pvt. Ltd. & another v. Himgiri Realtors Pvt. Ltd. & another | EFA (OS) Comm) No. 4/2021 | Rajiv Sahai Endlaw & Amit Bansal JJ | 2021 SCC OnLine 3603

Order XXI of the Code of Civil Procedure, 1908 (“CPC”) deals with the execution of decrees and orders. Rule 41 (2) says that if a decree for the payment of money has remained unsatisfied for 30 days, the court may, on an application of the decree-holder, require the judgment-debtor to make an affidavit stating the particulars of the assets. The format of this affidavit is Form 16-A of Appendix E, CPC.

In the Bhandari Engineers line of cases, JR Midha J passed many judgments from time to time, drafting and re-drafting the form in which in execution petitions, the judgment-debtors were required to disclose their assets. But, in effect, these orders were set aside by the 2-judge bench in Delhi Chemicals ruling that the court does not have the power to make draft affidavits and direct adoption of that format in all execution petitions.

It appears that the chronicle started in a matrimonial case, Kusum Sharma v. Mahinder Kumar Sharma, 2015 SCC OnLine Del 6793. Midha J noted the practice in matrimonial courts requiring parties to file the affidavit of assets in Form 16-A. But for several elaborate reasons that he gave he believed that the format is not comprehensive, so he drafted a new one.

Then, in an execution petition, in Bhandari Engineers (I), 2016 SCC OnLine Del 182, decided on 11 January 2016, he noted that if the judgment-debtor does not make proper disclosure in Form 16-A, the court can exercise its inherent power under Section 151 CPC and direct filing of further affidavits. For this proposition, he relied on Kusum. He further opined that in all execution cases for recovery of money, the judgment debtor should file, at the initial stage itself, an affidavit of assets in Form 16A as on the date of the institution of the suit, and as of the current date and also bank accounts for the last three years.

After that, in Bhandari (II), 2019 SCC OnLine Del 11879, decided on 05 February 2019, Midha J formulated the draft(s) of affidavits to be mandatorily filed by the judgment-debtors in all execution proceedings. He located his source of power in Section 151 CPC, Order XXI Rule 41, CPC, Sections 106 and 165 of the Evidence Act (“EA”), and Article 227 of the Constitution of India.

In Bhandari (III) of 05 December 2021, available here, Midha J modified the format. He again referred to the same sources of his power and gave detailed reasons.

In Bhandari (IV) of 05 August 2020, available here, the format was modified some more. Finally, more modifications were done in Bhandari (V) 2021 SCC OnLine Del 3595 on 24 June 2021.

Delhi Chemical involved a dispute between the landowner and Himgiri Realtors, the real estate developer. A money award was made in Himgiri’s favour. Delhi Chemical was asked to pay, but the decree-holder Himgiri was required to deliver back the possession of the land owned by Delhi Chemical.

Himgiri applied for execution and set out in the petition the schedule of properties of the judgment-debtor Delhi Chemical (including the land already in possession of Himgiri). Further, Himgiri did not apply for a direction to Delhi Chemical (the judgment debtor) to make an affidavit stating the particulars of its assets.

In one of the hearings on 23 December 2019, JR Midha J directed Delhi Chemical (judgment-debtor) to file affidavits in the form that had been formulated in Bhandari (III). Delhi Chemical applied for a review but it was dismissed.

Delhi Chemical challenged these two orders in an appeal under Section 13 (1A) of the Commercial Courts Act, 2015 (“CCA”).

The appellate court examined the correctness of Bhandari III to the extent relevant. Rajiv Sahai Endlaw, writing for the appellate court, held that the source of the court’s power that Midha J relied on could not be invoked because:

  1. The court cannot invoke its inherent jurisdiction under Section 151 CPC if a party has a remedy under the CPC itself.
  2. Once specific provisions have been made in the CPC, the court cannot contravene them exercising powers under Sections 106 and 165 of the EA. Also, powers under these provisions do not extend to issuing general directions.
  3. The rule-making powers under Article 227 of the Constitution vests with the “Full Court.” It does not enable individual judges to issue general rules. The rule making procedure is set out in Part X CPC (Sections 121 to 130). It includes amending or varying Order XXXI Rule 41 but only by following the prescribed procedure.

The court also held:

  1. In breach of the right of privacy, the judgment-debtor in a money decree cannot be directed routinely to disclose far-reaching information formulated in Bhandari III affecting substantive rights of the judgment-debtors.
  2. The particulars of the assets were known to the executing court (from the execution petition). Therefore, it was required to immediately attach any of the properties from which the decretal amount could be recovered.
  3. There was no reason for issuing directions to file an affidavit in a form other than prescribed, and that too without an application by the decree-holder.

Several preliminary questions also had been raised in the matter on the court’s jurisdiction. On these, the court said as follows:-

  1. An appeal, even though not specifically enumerated under Order XLIII CPC ( like the one here filed against an order in an execution petition directing to file affidavits), is maintainable under Section 13 CCA. The proviso to Section 13 (1A) is enabling, not disabling. This is what was held by a 2-judge bench in D & H India Ltd. v. Superon Schweisstechnik India Ltd. 2020 SCC OnLine Del 477. “Though we … entertain doubts as to the correctness of the view taken in D&H …it is deemed expedient to settle the law” on the issue of the affidavit.
  2. The jurisdiction of the Commercial Court/Commercial Division under Section 10 CCA also extends to an execution petition.

The direction to the judgment-debtor to file an affidavit of assets in any form was set aside.

Access the court's decision here.


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