Turning a decree or award into money: execution, attachment and sale

Section 2(2) of the Code defines a decree as the formal expression of an adjudication that conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit. It may be preliminary, where further proceedings have to be taken before the suit can be completely disposed of, or final, where it completely disposes of the suit. It includes the rejection of a plaint and excludes an adjudication appealable as an order and a dismissal for default. Section 2(3) makes a decree holder any person in whose favour a decree has been passed or an order capable of execution has been made.

Section 38 lets the court that passed the decree execute it, or send it to another court. Section 39(1) allows transfer on the decree holder's application where the judgment debtor resides, carries on business or personally works for gain within another court's limits, where he has insufficient property within the original court's limits and has property within the other court's, where the decree directs the sale or delivery of immovable property outside the original court's limits, or for any other reason recorded in writing. Section 39(4) stops the court that passed the decree from executing it against a person or property outside its own local limits.

Section 51 lets the court, on the decree holder's application, order execution by delivery of specifically decreed property, by attachment and sale or sale without attachment, by arrest and detention, by appointing a receiver, or in any other manner the relief requires. For a money decree the proviso restricts detention: the court must give the judgment debtor an opportunity to show cause and record, in writing, that he is likely to abscond or leave the jurisdiction, has dishonestly transferred, concealed or removed property since the suit was filed, has had the means to pay a substantial part and refused or neglected to pay, or owed the sum in a fiduciary capacity.

Order XXI Rule 37 requires the court, before issuing a warrant of arrest on a money decree, to issue a notice calling on the judgment debtor to appear and show cause, unless it is satisfied by affidavit that he is likely to abscond to delay execution. Section 58 caps detention at three months where the decree exceeds five thousand rupees and six weeks where it is between two thousand and five thousand rupees, and bars detention where the decree does not exceed two thousand rupees. Release from detention does not discharge the debt, though the judgment debtor cannot be re-arrested under the same decree.

Order XXI Rule 41 is the tool for finding assets before a mode is chosen. Rule 41(1) allows the decree holder to have the judgment debtor, an officer of a corporate judgment debtor, or any other person orally examined about debts owed to the judgment debtor and its other property, with production of books. Where a money decree has remained unsatisfied for thirty days, Rule 41(2) lets the court order an affidavit of assets, and Rule 41(3) allows detention for up to three months for disobeying that order.

Article 136 of the Schedule to the Limitation Act, 1963 allows twelve years for the execution of any decree or order of a civil court, other than a decree granting a mandatory injunction. Time runs from when the decree or order becomes enforceable or, where it directs payment of money or delivery of property at a certain date or at recurring periods, from the default in respect of which execution is sought. The proviso exempts the execution of a decree granting a perpetual injunction from any period of limitation. Article 135 gives three years to enforce a decree granting a mandatory injunction, from the date of the decree or the date fixed for performance.

A decree of a court in a reciprocating territory is filed in a District Court under section 44A and executed as if passed by it. Bank of Baroda v. Kotak Mahindra Bank Ltd. [2020] 5 S.C.R. 492 held that the limitation for executing such a decree in India is the period prescribed in the reciprocating country, running from the date of the foreign decree, or three years from the end of execution proceedings in that country where they were begun there and the decree was not fully satisfied. The limitation guide in this hub covers acknowledgment and the other ways a period is extended.

Section 47(1) requires all questions between the parties to the suit, or their representatives, relating to the execution, discharge or satisfaction of the decree, to be decided by the executing court and not by a separate suit. Explanation II treats an auction purchaser as a party and questions about delivering possession to him as questions under the section. A judgment debtor who says the decree has been satisfied, adjusted or is otherwise not executable raises it here.

A third party who claims attached property is not liable to attachment proceeds under Order XXI Rule 58. The court adjudicates the claim, including questions of right, title and interest, and not by a separate suit, but a claim is not entertained once the property has been sold or where the court considers it designedly or unnecessarily delayed. Where the decree holder or an auction purchaser is resisted or obstructed in obtaining possession of immovable property, Order XXI Rule 97 lets him apply to the executing court, which adjudicates the application.

Rahul S. Shah v. Jinendra Kumar Gandhi (2021) 6 SCC 418 records the Supreme Court's concern with judgment debtors who use these provisions to delay. The Court upheld a High Court direction to appoint a Court Commissioner to identify and measure the decretal property, upheld exemplary costs, upheld a direction to complete execution within six months, issued mandatory directions to all courts on adjudication and execution, and asked the High Courts to update their execution rules within one year.

Section 60(1) makes all saleable property of the judgment debtor liable to attachment and sale, including land, buildings, goods, money, negotiable instruments, debts and shares, whether held in his own name or by another in trust for him. The proviso exempts items such as necessary wearing apparel and bedding, tools of artisans, books of account, a mere right to sue for damages, a right of personal service, and certain pensions and wages. Immovable property is attached under Order XXI Rule 54 by an order prohibiting the judgment debtor from transferring or charging it, proclaimed on or near the property and affixed on the property and at the court house, and requiring him to attend to take notice of the date for settling the proclamation of sale.

Order XXI Rule 64 allows the court to sell so much of the attached property as is necessary to satisfy the decree. Rule 66 requires a proclamation, drawn up after notice to both sides, stating the time and place of sale and, as fairly and accurately as possible, the property, any encumbrance, the amount for which the sale is ordered, and anything else a purchaser should know to judge its nature and value. Where the notice under Rule 54 has been given, a fresh notice to the judgment debtor under Rule 66 is not needed unless the court directs it.

Order XXI Rule 89 lets a person claiming an interest in the property sold apply to set the sale aside by depositing five per cent of the purchase money for the purchaser and the amount stated in the proclamation for the decree holder, less anything already received. Rule 90 allows the decree holder, the purchaser or any person whose interests are affected to apply to set aside a sale of immovable property for material irregularity or fraud in publishing or conducting it, but only where the applicant shows substantial injury caused by it. A ground that could have been raised on or before the date the proclamation was drawn up is not entertained, and a mere absence of or defect in attachment is not by itself a ground.

Article 127 of the Limitation Act gives sixty days from the date of the sale for an application to set aside a sale in execution of a decree, including one by the judgment debtor. An objection to the valuation in the proclamation has to be raised when its terms are settled, because Rule 90(3) shuts it out once the proclamation has been drawn up.

Order XLI Rule 5(1) says an appeal does not operate as a stay of proceedings under the decree, and execution is not stayed merely because an appeal has been filed; the appellate court may order a stay for sufficient cause. Rule 5(2) lets the court that passed the decree stay execution on an application made before the time for appeal expires. Under Rule 5(3), no stay is granted unless the court is satisfied that substantial loss may result to the applicant without it, that the application was made without unreasonable delay, and that the applicant has given security for the due performance of the decree.

The appellant who wants time therefore has to file the stay application with the appeal and offer security. A decree holder facing a stay application should ask that the security cover the decretal amount with interest, because that is what Rule 5(3)(c) secures.

Section 36(1) of the Arbitration and Conciliation Act enforces an award under the Code as if it were a decree once the time for a section 34 application has expired. Under section 36(2), filing a section 34 application does not make the award unenforceable unless the court grants a stay on a separate application. Sundaram Finance Ltd. v. Abdul Samad (2018) 3 SCC 622 held that the award holder need not first file the award in the court with jurisdiction over the arbitration and obtain a transfer; the award can be filed for execution straight away in the court where the assets are located.

A foreign award made in a Convention country is enforced under Chapter I of Part II. Section 47 requires the applicant to produce the original award or an authenticated copy, the original arbitration agreement or a certified copy, and evidence that it is a foreign award, with a certified English translation where needed; the Explanation sends the application to the High Court. Section 48 lists the only grounds on which enforcement may be refused, including incapacity, lack of notice or inability to present the case, an award beyond the submission, irregular composition or procedure, an award not yet binding or set aside at the seat, non-arbitrability, and conflict with the public policy of India in the same narrow sense as section 34. Once the court is satisfied, section 49 deems the award a decree of that court. Shriram EPC Ltd. v. Rioglass Solar SA [2018] 10 S.C.R. 749, on appeal from the Madras High Court, held that a foreign award is not unenforceable merely because it has not been stamped under the Indian Stamp Act, 1899.