Court Rules That Authorized Representative of Judgment-Debtor Company Cannot Escape Liability Under Order XXI Rule 41(3) CPC for Deliberate Non-Disclosure of Material Information
In a significant judgment delivered on September 18, 2026, the Delhi High Court, presided over by Justice Ajay Digpaul, dismissed the petition filed by Syed Farhan Ali, the Authorized Representative (AR) of M/s Techno Aircon Industries Pvt. Ltd., challenging the issuance of arrest warrants against him for non-compliance with court directions during the execution of an arbitral award.
The dispute originated from an arbitration award dated February 28, 2019, in favor of M/s ABB India Limited, ordering recovery of Rs. 92,29,230/- along with interest and costs from the judgment debtor (JD) company. Following protracted litigation and unsuccessful challenges to the award, the executing court directed the JD company to disclose its assets through affidavits pursuant to Order XXI Rule 41(2) of the Code of Civil Procedure (CPC).
Syed Farhan Ali, acting as AR of the JD company, submitted affidavits in February and December 2024, declaring the company's assets and bank accounts. However, the affidavits failed to disclose an operational ICICI Bank account in Noida, which was revealed only after the court ordered production of bank statements in February 2025. The bank records disclosed that the account was active until July 23, 2025, with significant withdrawals occurring shortly before closure.
The respondent contended that the petitioner, despite his position as AR and erstwhile director, deliberately withheld material information to frustrate execution proceedings spanning over seven years. The executing court found the petitioner's conduct to be evasive and non-compliant with the disclosure directions, issuing arrest warrants under Order XXI Rule 41(3) CPC for civil imprisonment.
Challenging the warrants, the petitioner argued that he was not personally liable as he acted only in his capacity as AR and that the corporate veil of the company could not be pierced without due process. He further contended that the ICICI account was closed in 2023, relying on a closure letter, and that the arrest warrants were disproportionate.
Justice Digpaul rejected these contentions, emphasizing that Order XXI Rule 41(3) CPC empowers courts to hold officers of judgment-debtor companies personally accountable for deliberate non-compliance with asset disclosure directions, even if they are not personally liable under the decree. The Court noted that the petitioner had knowingly withheld information about the ICICI bank account, which was crucial for satisfying the decree.
The Court clarified that this proceeding is distinct from holding the officer liable for the debt itself; rather, it arises from his own conduct in failing to comply with court orders. The Court further stated that supervisory jurisdiction under Article 227 of the Constitution would not permit reappraisal of evidence unless there was perversity or jurisdictional error, which was absent.
The Court also rejected the petitioner's reliance on the earlier closure letter, holding that the bank's own records were the authoritative source, proving the account was active until mid-2025 with substantial withdrawals. Consequently, the Court upheld the discretion of the executing court in issuing arrest warrants under Rule 41(3) CPC.
This judgment reinforces the principle that officers of corporate judgment-debtors must fully and honestly comply with asset disclosure directions in execution proceedings. It sends a clear message that attempts to frustrate execution by withholding material information will attract personal coercive consequences, including arrest, notwithstanding the separate legal personality of the company.
Bottom Line:
Under Order XXI Rule 41(3) of CPC, an officer of a judgment-debtor company can be subjected to arrest for non-compliance with disclosure directions under Rule 41(2), even if not personally liable under the decree, provided the officer has knowingly withheld material information.
Statutory provision(s):
Civil Procedure Code, 1908 - Order XXI Rule 41(2), Order XXI Rule 41(3); Arbitration and Conciliation Act, 1996 - Section 34, Section 37; Constitution of India - Article 227
Syed Farhan Ali v. M/s ABB India Limited, (Delhi) : Law Finder Doc Id # 2981472
