Directors Of Company Can’t Be Arrested And Detained In Civil Prison For Execution Of Money Decree Against Company: Allahabad High Court
The Allahabad High Court has observed that the Directors/Authorized Representatives of a Company cannot be arrested and detained in Civil Prison for the execution of a Money Decree against the Company.
The Bench of Justice Ashutosh Srivastava observed, “There is no provision in the CPC which provides for execution of a money decree against the Judgment Debtor Company by effecting arrest and detention of its Employee, Director or General Manager. Order 21 Rule 50 does provide for execution of a money decree against a firm from the assets of the partners of the said firm mentioned in the Rule but there is no provision with respect to the Employee/Representative/Director of a Company. The Executing Court cannot go behind the decree and can execute the same as per the form only. The decree admittedly is against the Company. The Executing Court cannot execute the decree against anyone including the Revisionist herein other than the judgment debtor or against from the assets/properties of anyone other than the judgment debtor.”
Advocate Pankaj Saksena appeared for the Revisionist whereas Advocates Rama Goel Bansal and Shalini Goel appeared for the Respondents.
The Revisionist is working as a Vice President of M/s Benett Coleman & Co. Ltd. while working as General Manager and Branch Head was duly authorized to enter into a lease agreement with one Ram Dev Bhaguna for rent for 9 years.
Though the tenancy was for a fixed period of 9 years but the lessee was entitled to terminate the lease by giving 3 months’ notice during the tenure of the lease. The tenancy was terminated by the Landlord/Lessor and a request was made to the Company to vacate the premises and handover the vacant possession on expiry of 30 days from the service of notice and claimed mesne profits at Rs.2500/- per day till delivery of actual physical possession. The Company did not vacate the tenanted premises and the Lessor/Landlord instituted a suit.
The suit was decreed and Company M/s Benett Coleman & Co. Ltd. was directed to pay the mesne profit. The Plaintiff/Decree Holder/Opposite Party No.1 filed an execution case. In the execution case filed by the Plaintiff/Opposite Party No.1, the Execution Court held that the case was not maintainable against the Managing Director but against the General Manager/ Manager who had signed the agreement. Accordingly, the Revisionist was impleaded in the proceedings. Thereafter, the plaintiff filed an application under Section 55 of the Code of Civil Procedure, 1908, praying for the arrest and detention of the revisionist which was allowed. The order of the Additional District Judge issuing a Warrant of Arrest against the revisionist was challenged before the High Court.
The main question in consideration was whether the Directors/Authorized Representatives of a Limited Company be arrested and detained in Civil Prison for the execution of a Money Decree against the Company or so to say whether the Directors/Authorized Representatives of the Company are bound in a representative capacity for the Judgment Debtor Company for the execution of the said Decree.
The Court relied on the judgments in the V. K. Uppal Vs. Akshay International Pvt. Ltd. (2010 Delhi), Anirban Roy and Others Vs. Ram Kishan Gupta and ors (2017 Delhi) and Liugong India Pvt. Ltd. Vs. Yograj Infrastructure Ltd. and Ors. (2018 Delhi).
The Court also said that it was not the case to invoke the principle of lifting the corporate veil as it postulates the existence of dualism between the Company on one hand and its members or shareholders on the other. It was held that the money decree cannot be executed against the Revisionist being the Vice President of the Judgment Debtor Company M/s Benett Coleman Co. Ltd. responsible for the conduct of the business of the Company. It was for the Respondent/Decree Holder to point out as to what are the assets of the Judgment Debtor Company against which the Decree can be executed.
Accordingly, the revision was allowed.
Cause Title: Dhanush Vir Singh v. Dr Ila Sharma and Ors. (Neutral Citation: 2024:AHC:113931)
Appearances:
Revisionist: Advocate Pankaj Saksena
Respondents: Advocates Rama Goel Bansal and Shalini Goel
