Company Officer May Face Civil Imprisonment For Concealing Assets During Execution Of Arbitral Award: Delhi HC

Justice Ajay Digpaul dismissed a petition filed by Syed Farhan Ali, the authorised representative of Techno Aircon Industries Pvt Ltd, challenging the warrants issued by an executing court. The Court clarified that Ali was not being made personally liable under the arbitral award; the coercive proceedings arose from his own failure to comply with the asset-disclosure directions.

The Court held that filing an affidavit under Order XXI Rule 41(2) is not a formality. An officer who withholds material particulars within his knowledge cannot claim compliance merely because an affidavit was filed.

It observed, “The true import of Rule 41(2) is to secure a complete and meaningful disclosure of all material particulars of the assets of the judgment-debtor, so that the decree-holder and the executing court are placed in a position to effectively pursue satisfaction of the decree. The filing of an affidavit cannot, therefore, be treated as a mere formality. An affidavit filed by an officer of a company, which withholds material particulars, particularly information within the knowledge of the officer furnishing it, cannot constitute compliance in substance with a direction under Rule 41(2), and would therefore be punishable under Rule 41(3).”

The dispute arose from an arbitral award directing Techno Aircon to pay ABB India Ltd ₹92.29 lakh, along with interest and costs. During execution, the company was directed to disclose its income and assets. Ali filed two affidavits mentioning only an HDFC Bank account.

Bank statements subsequently revealed an undisclosed ICICI Bank account. The bank's records showed that the account remained operational until July 2025 and that 13 withdrawals totalling ₹12.51 lakh were made shortly before its closure. The executing court consequently issued arrest warrants against Ali under Order XXI Rule 41(3).

Ali argued that he was neither a party to the arbitration nor the execution proceedings and could not be subjected to personal liability without lifting the company's corporate veil. He also maintained that he had complied with the disclosure directions and that the ICICI account had already been closed.

ABB contended that Ali, an erstwhile director who remained closely associated with the company's management, had deliberately withheld information to frustrate execution of the award.

Rejecting Ali's challenge, the High Court held that the company's separate legal personality could not defeat an obligation personally undertaken by its officer pursuant to a judicial direction. It found that the ICICI account was operational when the affidavits were filed and had remained undisclosed even after a specific query from the executing court.

“The consequence followed from the petitioner's own non-compliance with the disclosure direction issued under Rule 41(2), and not from any attempt to treat him as the judgment-debtor under the decree,” the Court said.

Finding no perversity or jurisdictional error warranting interference under Article 227, the Court dismissed the petition and affirmed the executing court's exercise of discretion.

For Petitioner: Asim Naeem

For Respondent: Nikhilesh Krishnan, Siddharth Singh, Ritika Priya and Karna Mehra