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October 07, 2017

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MODALITIES OF EXECUTION POWERS OF THE NCLT


- Lalltaksh Joshi, Lawyer [ ]

Lalltaksh Joshi

Lalltaksh Joshi graduated from the Symbiosis Law School, Pune and now practices law in Delhi. Previously, he has worked at Mumbai in one of India’s largest conglomerates.


lalltaksh.joshi@gmail.com
+91 9730630681
India New Delhi

Sweeping powers are conferred upon the NCLT to enforce the execution of its order…

In June 2016, the Central Government in exercise of its powers under the Companies Act, 2013 (“the Act”) constituted the National Company Law Tribunal (“NCLT”) replacing the Company Law Board (“CLB”). One of the key objects for constitution of the NCLT was to enhance the powers for effective execution of orders, a problem which was often faced by the CLB. Post commencement of operations, the NCLT passed orders in company petitions instituted before it. At that juncture and similar to the situations that arise before civil courts, two kinds of judgment debtors emerged. Those that belong to the first category comply with the orders passed by the NCLT without the courts’ intervention. The second category comprises companies which do not comply with orders passed by NCLT. In such cases, the decree holder is compelled to institute execution proceedings. While dealing with the cases falling under the second category, the NCLT discovered its infrastructural inability to effectively enforce execution of its orders. The present article makes an attempt to address the said issue. Another issue that has been addressed in this article relates to execution of an order by the NCLT without sending for its execution to the court of local jurisdiction.

Section 424(3) of the Act empowers the NCLT to enforce its own order in the same manner as if it were a decree made by a civil court. Implying that in order to enforce its order, the NCLT would be guided by the principles laid down under Order 21 of the Code of Civil Procedure, 1908 (“CPC”) which comprehensively lays down the procedure for execution of decrees and orders.

Further, Rules 56 and 57 of the NCLT Rules, 2016 (“the Rules”) give teeth to the executory powers of the NCLT laid down under Section 424(3) of the Act. Rule 56 lays down the format for execution application. Rule 57(2) states that while enforcing its order, the NCLT can issue attachment or recovery warrants. Human resource infrastructure is needed to carry out attachment and subsequently, sale of attached property, or issuance of recovery warrants. Neither the Act nor the Rules provides the NCLT with such human resources. Hence, absence of human resources to carry out attachment and thereafter public auction of the attached property lead to an infrastructural inability of the NCLT to execute its orders.

Rule 57(2) states that while enforcing its order, the NCLT can issue attachment or recovery warrants. Human resource infrastructure is needed to carry out attachment and subsequently, sale of attached property, or issuance of recovery warrants. Neither the Act nor the Rules provides the NCLT with such human resources

Attachment and Sale of Property of Judgment Debtor


The NCLT is guided by principles enshrined under the CPC for enforcement of its orders. The NCLT has executory powers akin to those of civil courts. Section 51 of the CPC lays down the powers of the court to enforce execution of orders passed by it. Section 51(b) states that the court may on an application of the decree holder, order execution of the decree “by attachment and sale or by the sale without attachment of any property.” Drawing a parallel, the NCLT may enforce its order either by: attaching the property of the judgment debtor and subsequently proceeding towards its sale, or proceeding towards the sale of property of the judgment debtor without any attachment. Let us examine the applicability of each procedure:

(1) By sale of property of the judgment debtor without any attachment

Order 21 Rule 65 of the CPC states that in furtherance of execution of a decree, every sale shall happen as public auction and it shall be conducted by an officer of the court or such other person as the court may appoint in this behalf.

Upon the institution of an application, the NCLT may appoint an officer of the court or such other person as it may appoint in this behalf to conduct public auction of the property of the judgment debtor. In such case, proclamation of the property intended to be sold is made by the officer of the court or such other person through publication in English and regional language newspapers. Subsequently, bids are invited towards the property put on public auction. Post receipt of bids, the property is sold to the highest bidder and the order is satisfied through the proceeds of sale. Outstanding amount, if any, is returned to the judgment debtor. In this regard, some other relevant rules which have not been detailed in this article are Order 21 Rules 65, 66, 67, 68, 77, 79, 94, and 95 of the CPC which pertain to modalities for sale of property of judgment debtor, issuance of certificate to the purchaser, and delivery of property in occupancy of judgment debtor.

(2) By attachment and sale of property of the judgment debtor

The NCLT is empowered to issue attachment of property of judgment debtor to satisfy the order passed by it. While exercising executory powers akin to those of civil courts, the NCLT may issue precepts (i.e., order / direction) under Section 46 of the CPC to the court within whose local jurisdiction the property of the judgment debtor, intended to be attached, is situated. In such case, the court receiving precepts proceeds with attachment of the property of the judgment debtor. It is important to highlight that issuance of precept does not have the effect of transfer of a decree for execution to the court to which the precept is issued.1

The object of Section 46 is to enable attachment of property of the judgment debtor situated within the jurisdiction of another court in order to prevent the judgment debtor from alienating it to the detriment of the decree holder.

After attachment of the property through precept, the NCLT may proceed for sale of the property to fulfill the decree / order. In case of sale of property of the judgment debtor, the procedure stated above would be followed.

Recovery Warrant


Under Rule 57(2) of the Rules, the NCLT is also empowered to issue recovery warrants. Under Indian laws, a recovery warrant is often issued by courts to the District Collector, in which case, the District Collector recovers the amount due from the judgment debtor as arrears of land revenue.

In order to understand the exercise of power of issuing a recovery warrant, a parallel may be drawn from other statutes:

1. The Code of Criminal Procedure empowers the Court to issue a recovery warrant to the District Collector, authorizing him to realize the fine imposed on a defaulter as arrears of land revenue from his/ her movable or immovable property.

2. The Consumer Protection Act empowers the Consumer Forum to issue a certificate in the form of a recovery warrant to the District Collector, directing him to recover the amount due from any person. The District Collector proceeds to recover the amount as arrears of land revenue.

3. The Motor Vehicles Act, 1988 empowers the Claims Tribunal to issue recovery warrants to the District Collector, directing him to recover the amount due from any person under an order, as arrear of land revenue.

4. The Haryana General Sales Tax Act, 1973 states that the amount of any tax, interest and penalty which remains unpaid after the due date shall be recovered as arrears of land revenue.

The reason behind issuing a recovery warrant to the District Collector lies in the human resources infrastructure available at his disposal for the attachment and sale of movable or immovable property of a person against whom the order has to be enforced. Often, Indian courts, including the Supreme Court of India, have issued recovery warrants for effecting the recovery of subject matter amount as land revenue.

Conclusion


The NCLT exercises the power to enforce its own order basis the circumstances of each case. Different routes can be adopted to fulfill the same end. The NCLT may order sale of property of the judgment debtor without attachment. Or, it may order attachment of property of the judgment debtor. In case of attachment and if the judgment debtor continues to default, the NCLT may proceed with public auction of the attached property. The NCLT has been empowered to issue recovery warrants to the District Collector, and in such case, the money due to the decree holder is recovered from the judgment debtor as arrears of land revenue. Sweeping powers are conferred upon the NCLT to enforce the execution of its order. In each strategy discussed here, the NCLT supervises the execution proceedings which would remain pending till the decree is absolutely fulfilled.

Footnote:
1 The MLJ Civil Court Manual. Fourteenth Edition, 2011, Lexis NexisButterworthsWadhwa Nagpur. Volume 4, page 685.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.

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