Won the Decree, Now What? Executing a Money Decree Against a Company

Winning a money decree against a company is an important milestone, but it is not the end of the case. A decree is a judicial finding that money is owed, not a payment. To collect, the decree-holder must file execution proceedings under Order XXI of the Code of Civil Procedure. Execution cases have a reputation for being slow, and the Supreme Court has repeatedly said that the real fruit of litigation is in the execution. Knowing the tools available helps a decree-holder move quickly.

What Does Execution Involve?

Section 51 of the CPC lists the powers of the court in execution of a decree for money. They include attachment and sale of the judgment-debtor's property, arrest and detention in civil prison, appointment of a receiver, and any other manner that the nature of the relief requires. For a company, the realistic tools are attachment of bank accounts and receivables, attachment and sale of immovable and movable property, and appointment of a receiver over assets or the business.

How and Where Do You File?

The decree-holder files an execution petition before the court that passed the decree, or applies for the decree to be transferred to the court where the assets are located under Section 39. The petition must give details of the decree, the amount due with interest, the mode of execution sought, and the property to be proceeded against. A decree for money is generally enforceable within 12 years from the date of the decree, but a decree-holder should not wait, because assets can disappear and the company's financial position can deteriorate.

How Do You Find Assets?

This is often the hardest part. Useful sources include:

• Company filings with the Registrar of Companies, including balance sheets and registered charges
• Property records, such as sub-registrar and revenue records
• Bank details found in contracts, invoices and cheques used in dealings
• Debts owed to the company by its customers, which can be attached
• A court-ordered examination of the judgment-debtor on its assets

Order XXI Rule 41 allows the court to examine the judgment-debtor, and in the case of a company an officer, about the property and the means of satisfying the decree. In Rahul S. Shah v. Jinendra Kumar Gandhi (2021), the Supreme Court gave directions to make execution faster, including that execution proceedings should be completed within six months, that judgment-debtors should be required to file affidavits disclosing their assets, and that courts should avoid unnecessary adjournments. Those directions can be cited to resist delay.

What Are the Main Methods of Recovery?

The usual modes are:

• Attachment of bank accounts, by directing the bank to hold and pay over the funds
• Attachment of debts owed to the company by third parties, through a garnishee order
• Attachment and sale of immovable property, by auction under court supervision
• Attachment and sale of movable property, such as machinery or stock
• Appointment of a receiver to collect rents or manage the business

A bank account attachment is often the quickest, but the decree-holder needs the bank and account number, so identifying the account comes first. The court cannot attach exempt property listed in Section 60, but the exemptions are largely about individuals and agriculture, and rarely help a company. A third party who claims an interest in the attached property can raise an objection, and these claim petitions are a common cause of delay.

What About Directors and Civil Detention?

Civil detention is available against individual judgment-debtors, but it is rarely effective against a company, and it does not make the directors liable for the company's debt. A decree against a company binds the company, and directors are not personally liable unless there is a separate basis, such as a personal guarantee, or the rare case of lifting the corporate veil, which we explain in our note on directors' personal liability for company debts.

What If the Company Is Insolvent or Has No Assets?

If the company has no attachable assets, execution may yield little, and the decree-holder should consider other routes, such as whether the claim meets the threshold for an insolvency application. If an insolvency process has already begun, the moratorium bars execution against the company, and the creditor must file a claim before the resolution professional; see our note on the moratorium under Section 14 of the IBC. An arbitral award is enforced in the same way as a decree, as we explain in our guide to setting aside and enforcing arbitral awards.

How Can You Speed Up Execution?

Begin tracing assets before the decree is passed. Apply for attachment early. Respond quickly to objections. Ask for periodic reports. And keep the interest calculation up to date, because post-decree interest continues under Section 34 of the CPC. If the debtor is disposing of assets while the suit is pending, consider attachment before judgment at an earlier stage.

Execution rewards preparation, and an unprepared petition invites delay. Our Commercial Disputes practice acts for decree-holders in execution proceedings, and you can request a consultation to plan yours.