Authorized Representative Liable for Concealing Assets | Arrest Warrants Upheld Under Order XXI Rule 41(3) CPC : Delhi HC

The Delhi High Court affirmed the issuance of arrest warrants against the authorized representative of a judgment debtor company for willful non-compliance with asset disclosure directions under Order XXI Rule 41(2) of the CPC, holding that an officer cannot shelter behind the corporate veil when he personally undertakes to disclose assets and then conceals material particulars.

Background & Facts

The Dispute

The petitioner, Syed Farhan Ali, is the Authorized Representative (AR) of M/s Techno Aircon Industries Pvt Ltd (the judgment debtor company). The respondent, M/s ABB India Limited, obtained an arbitral award against the judgment debtor for Rs. 92,29,230 with interest at 9% from 01.11.2021 and costs of Rs. 3,75,000, arising from a purchase order dated 11.09.2008 for manufacture of goods using respondent-supplied raw materials.

Key Facts

• The underlying purchase order was dated 11.09.2008.
• The learned sole arbitrator passed an award on 28.02.2019 directing the judgment debtor to pay Rs. 92,29,230/- with 9% interest from 01.11.2021 and costs of Rs. 3,75,000/-.
• The respondent filed the execution petition on 30.05.2019.
• The judgment debtor entered appearance in 2021 and filed objections, which were dismissed by the executing court on 25.03.2021.
• On 08.09.2021 the judgment debtor filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award.
• Fresh objections under Section 47 CPC were filed on 20.11.2021 and dismissed vide order dated 12.05.2023.
• The dismissal order was challenged in CRP 274/2023 and dismissed as withdrawn on 16.10.2023.
• The judgment debtor’s Section 34 petition was dismissed by this Court on 20.12.2023.
• Consequently, the executing court directed the judgment debtor to file an affidavit of assets on 12.01.2024; the petitioner (AR) filed the first affidavit on 01.02.2024 disclosing only an HDFC Bank account in Greater Noida.
• The first affidavit stated income of Rs. 24,97,000/- and assets worth Rs. 29,28,67,000/-.
• The petitioner filed a second affidavit of assets on 17.12.2024 (dated 13.12.2024) again disclosing only the HDFC Bank account, with a balance of Rs. 13,87,71,817/-.
• On the same date, upon the court’s query, the petitioner reiterated that the judgment debtor had no bank account in Delhi.
• Pursuant to court directions, the judgment debtor filed 3-year bank statements, ITR and mortgaged property details on 03.02.2025, revealing an additional ICICI Bank account in Udyog Vihar, Noida.
• The ICICI Bank account showed a balance of ₹65,27,798.37 as on 01.02.2025.
• Subsequent bank verification on 26.11.2025 established that the ICICI account was closed only on 23.07.2025 after 13 withdrawal transactions on 17.07.2025 aggregating ₹12,51,719/-.
• The respondent filed an application on 08.04.2025 under Order XXI Rule 30 read with Rule 41(3) CPC seeking civil imprisonment of the petitioner for three months.
• The petitioner replied on 28.04.2025 seeking dismissal.
• The judgment debtor’s Section 37 petition was dismissed by a Division Bench on 18.08.2025 and the dismissal was upheld by the Supreme Court on 19.12.2025.
• The executing court allowed the respondent’s application and issued warrants of arrest on 11.05.2026.
• The warrants returned unserved, prompting fresh warrants of arrest on 23.07.2026.
• The petitioner challenged the order dated 23.07.2026 before this Court.
• Judgment reserved on 01.09.2026; pronounced on 18.09.2026.

Procedural History

• 11.09.2008: Purchase order executed between the parties.
• 28.02.2019: Arbitral award passed in favour of respondent.
• 30.05.2019: Execution petition filed by respondent.
• 25.03.2021: Executing court dismissed judgment debtor’s objections.
• 08.09.2021: Judgment debtor filed Section 34 petition.
• 20.11.2021: Fresh Section 47 objections filed.
• 12.05.2023: Order dismissing Section 47 objections.
• 16.10.2023: Challenge to the above order dismissed as withdrawn.
• 20.12.2023: This Court dismissed judgment debtor’s Section 34 petition.
• 12.01.2024: Executing court directed affidavit of assets.
• 01.02.2024: First affidavit of assets filed by petitioner.
• 17.12.2024: Second affidavit of assets filed by petitioner.
• 03.02.2025: Judgment debtor filed 3-year bank statements and ITR.
• 08.04.2025: Respondent filed application for civil imprisonment.
• 28.04.2025: Petitioner filed reply.
• 18.08.2025: Division Bench dismissed judgment debtor’s Section 37 petition.
• 19.12.2025: Supreme Court dismissed the Section 37 challenge.
• 11.05.2026: Executing court allowed application and issued arrest warrants.
• 23.07.2026: Fresh warrants of arrest issued after earlier warrants returned unserved.
• 01.09.2026: Judgment reserved.
• 18.09.2026: Date of decision.

Parties' Positions

The petitioner contended that, as an AR, he was not a party to the arbitral or execution proceedings, no personal liability had been adjudicated, and the corporate veil could not be lifted to fasten liability on him. He asserted that he had complied with all disclosure directions and that the executing court erred in relying on the closure statement of the ICICI account.

The respondent argued that the petitioner, being closely associated with the judgment debtor’s management, deliberately concealed the ICICI Bank account and made withdrawals to frustrate execution, thereby warranting civil imprisonment under Rule 41(3) for non-compliance with the asset disclosure direction.

Relief Sought

The petitioner sought quashing of the order dated 23.07.2026 issuing fresh warrants of arrest, dismissal of the respondent’s application under Order XXI Rule 30 read with Rule 41(3) CPC, and costs.

The Legal Issue

The central question was whether an authorized representative of a judgment debtor company can be subjected to civil imprisonment under Order XXI Rule 41(3) CPC for non-compliance with asset disclosure directions under Rule 41(2) without first lifting the corporate veil, and whether the executing court’s discretion was vitiated by failure to appreciate the bank closure statement.

Arguments Presented

For the Petitioner

The petitioner relied on the principle of separate legal personality, asserting that a company’s officer cannot be made personally liable for the company’s debts absent personal liability adjudication or lifting of the corporate veil. He cited the Court’s own judgment in M/s Bhandari Engineers & Builders Pvt. Ltd. v M/s. Maharia Raj Joint Venture & Ors. to argue that appearance as an AR does not confer personal liability. He emphasized that he had filed the affidavits of assets as directed and that the omission of the ICICI account was not willful, especially given the closure letter of November 2023. He further contended that issuing arrest warrants in a civil execution proceeding was disproportionate and bad in law, and that the executing court had wrongly exercised its discretion under Rule 41(3) when he had substantially complied with the disclosure direction.

For the Respondent

The respondent countered that the petitioner, as erstwhile director and close relative of the current directors, was fully conversant with the judgment debtor’s affairs and had deliberately withheld material particulars about the ICICI Bank account. It pointed to the 13 withdrawals totalling ₹12,51,719/- on 17.07.2025, shortly before the account’s closure on 23.07.2025, as evidence of an attempt to frustrate execution. The respondent argued that the petitioner’s conduct amounted to non-compliance in substance with the direction under Rule 41(2), rendering him liable under Rule 41(3). It stressed that the executing court had correctly appreciated the scope of Rule 41(2) and (3) and had appropriately exercised its discretion, and that supervisory jurisdiction under Article 227 did not permit re-appreciation of evidence merely to reach a different factual conclusion.

The Court's Analysis

The Court first distinguished between proceeding against a judgment debtor and proceeding against an officer under Order XXI Rule 41(3). It held that Rule 41(2) contemplates that where the judgment-debtor is a corporation, an officer may be directed to furnish an affidavit disclosing the assets of the judgment-debtor, and Rule 41(3) provides a consequence for disobedience of such an order. The Court observed: > "The separate legal personality of the JD Company cannot, therefore, be invoked to defeat an obligation personally undertaken by its officer pursuant to a judicial direction."

It further held that an affidavit filed by an officer which withholds material particulars, particularly information within the officer’s knowledge, cannot constitute compliance in substance with a direction under Rule 41(2) and is therefore punishable under Rule 41(3). The Court found that the petitioner, as AR, had knowledge of the ICICI Bank account (given his past directorship and familial ties) yet failed to disclose it in either affidavit, even after a specific query by the court. The subsequent bank verification showing the account’s operation and substantial withdrawals prior to closure demonstrated willful concealment.

Regarding supervisory jurisdiction under Article 227, the Court clarified that interference is warranted only where the subordinate court’s exercise of jurisdiction or discretion is vitiated by perversity, patent illegality or manifest jurisdictional error, not for mere errors of appreciation. Since the executing court’s reliance on the bank’s own records regarding the account’s status and withdrawals was not perverse, the Court declined to reappraise the evidence.

The Court concluded that the petitioner’s non-disclosure was a deliberate attempt to impede execution, that the executing court had correctly appreciated the facts, and that its discretion under Rule 41(3) was not erroneous.

The Verdict

The petition was dismissed; the order dated 23.07.2026 issuing fresh warrants of arrest against the petitioner was upheld. The Court affirmed the executing court’s direction for civil imprisonment of the petitioner for three months under Order XXI Rule 30 read with Rule 41(3) CPC, and held that the petitioner remained liable to comply with the asset disclosure direction. No additional monetary award or costs were specified in the operative portion of the judgment.

What This Means For Similar Cases

Officer Liability Under Rule 41(3)

An officer of a corporate judgment debtor who undertakes to disclose assets pursuant to a court direction must make a full and meaningful disclosure; concealment of material particulars known to the officer attracts personal liability under Rule 41(3) without the need to lift the corporate veil.

Full Disclosure Is Mandatory

Mere formal filing of an affidavit that omits known assets, bank accounts or financial transactions does not constitute compliance. The executing court may treat such omission as willful non-compliance and initiate coercive proceedings.

Limits of Supervisory Jurisdiction

Under Article 227, the High Court will not interfere with a subordinate court’s appreciation of evidence unless the exercise is shown to be perverse, illegal or jurisdictionally erroneous. A party seeking to challenge factual findings must demonstrate such infirmity.

Practical Takeaways

• Advise corporate clients’ representatives to disclose all known assets, including dormant or recently closed accounts, when filing affidavits under Order XXI Rule 41(2).
• Maintain clear records of asset positions to resist allegations of concealment.
• Recognize that arrest warrants in execution proceedings are permissible for officers who fail to comply with disclosure directions, even if they are not formal parties to the underlying decree.