MODALITIES OF EXECUTION POWERS OF THE NCLT

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.

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.