Company Officer Conceals Operational Bank Account While Disclosing Assets in Execution; Delhi High Court Upholds Arrest Warrants, Says Corporate Veil Is No Shield
Undisclosed Bank Account Remained Operational With ₹12.51 Lakh Withdrawn Before Closure; Delhi High Court Upholds Arrest Warrants Against Company Officer
Facts
The dispute arose from execution of an arbitral award obtained by ABB India Limited against M/s Techno Aircon Industries Pvt. Ltd. The arbitration concerned a purchase order dated 11 September 2008 under which the judgment-debtor company was to manufacture goods using raw materials supplied by ABB.
The sole arbitrator, by award dated 28 February 2019, allowed ABB’s claims and awarded ₹92,29,230, interest at 9% from 1 November 2021 until payment, and ₹3,75,000 as costs. ABB initiated execution proceedings on 30 May 2019.
The judgment-debtor unsuccessfully challenged the award. Its Section 34 petition was dismissed by the Delhi High Court on 20 December 2023; its Section 37 appeal was dismissed on 18 August 2025; and its further challenge before the Supreme Court was dismissed on 19 December 2025.
During execution, Syed Farhan Ali, the company’s authorised representative, was directed to disclose the company’s assets.
He filed two asset affidavits—dated 1 February 2024 and 13 December 2024—disclosing only an HDFC Bank account.
The second affidavit stated that the company had assets worth approximately ₹29.13 crore and that its HDFC account had a balance of approximately ₹13.87 crore.
However, when the company was subsequently directed to produce its bank statements, another account with ICICI Bank emerged.
ABB alleged deliberate concealment and sought civil imprisonment of the authorised representative under Order XXI Rule 41(3) CPC.
The Executing Court ultimately issued arrest warrants against him, followed by fresh warrants on 23 July 2026 when the earlier warrants remained unserved.
He challenged those warrants before the Delhi High Court under Article 227.
Issues
The High Court identified three principal issues:
1. Can an authorised representative/officer of a judgment-debtor company, who was not personally a party to the arbitration or execution, face coercive consequences without first lifting the corporate veil?
2. Was invocation of Order XXI Rule 41(3) CPC justified when asset affidavits had technically been filed but allegedly contained incomplete information?
3. Did the Executing Court wrongly disregard the petitioner’s claim that the undisclosed ICICI account had already been closed?
Petitioner’s Arguments
The petitioner emphasised that he was merely the authorised representative of the judgment-debtor company.
He had neither been a party to the arbitration nor been personally impleaded as a judgment-debtor in execution.
Therefore, according to him, arrest warrants could not be issued against him personally without any adjudication fastening the company’s liability upon him.
He invoked the doctrine of separate corporate personality, arguing that without lifting the corporate veil, the company’s liability could not be converted into his personal liability.
He further argued that Order XXI Rule 41(3) is discretionary and could not be invoked because he had in fact filed the asset affidavits required by the Executing Court.
Lastly, he relied upon a purported November 2023 closure statement concerning the ICICI account and contended that the Executing Court wrongly proceeded on the assumption that the account remained operational.
Respondent’s Arguments
ABB argued that the execution had remained pending for approximately seven years without recovery of even a single paisa.
According to ABB, the judgment-debtor and its authorised representative had repeatedly adopted measures frustrating enforcement of the award.
ABB also pointed out that the petitioner was an erstwhile director of the company and remained closely connected with the existing directors, who were his family members.
Therefore, it argued that he was fully conversant with the company’s financial affairs and knowingly withheld material information.
ABB’s case was that both asset affidavits deliberately omitted relevant information and that the true position emerged only because the Executing Court independently required production of bank records.
Analysis of the Law
Order XXI Rule 41(2): Company Officers Can Be Required to Disclose Assets
The High Court rejected the petitioner’s attempt to characterise the proceedings as an effort to personally enforce the arbitral award against him.
That was not what the Executing Court had done.
Order XXI Rule 41(2) expressly permits the Court, where the judgment-debtor is a corporation, to require an officer of the corporation to furnish an affidavit disclosing the judgment-debtor’s assets.
Rule 41(3), in turn, provides consequences for disobedience of that direction.
Thus, two situations must be distinguished:
Making an officer personally liable for the company’s decree, and
Proceeding against the officer because he personally failed to comply with a court-directed disclosure obligation.
The present case concerned the second situation.
No Need to Lift Corporate Veil
This is the most significant legal proposition in the judgment.
The Court held that the Executing Court was not transferring the company’s debt to the petitioner.
The action under Rule 41(3) arose from his own conduct while furnishing asset affidavits on behalf of the company.
Accordingly:
“The separate legal personality of the JD Company cannot, therefore, be invoked to defeat an obligation personally undertaken by its officer pursuant to a judicial direction.”
Therefore, neither lifting the corporate veil nor making the officer personally liable for the arbitral award was a prerequisite for action under Rule 41(3).
Asset Affidavit Is Not a Mere Formality
The Court explained the object of Order XXI Rule 41(2).
The provision exists to secure complete and meaningful disclosure of the judgment-debtor’s assets so that the decree-holder and Executing Court can effectively pursue satisfaction of the decree.
Accordingly, merely filing a document titled “affidavit of assets” does not amount to compliance.
If material particulars within the officer’s knowledge are withheld, the affidavit cannot constitute substantive compliance with Rule 41(2).
Such non-compliance can attract consequences under Rule 41(3).
The Undisclosed ICICI Bank Account
The factual record became decisive.
Both asset affidavits disclosed only the HDFC account.
When specifically asked by the Executing Court whether the company maintained any bank account in Delhi, the petitioner answered in the negative.
Subsequently produced bank statements revealed an ICICI Bank account that had not been disclosed in either affidavit.
Critically, the account reflected a balance of:
₹65,27,798.37 as on 1 February 2025.
This was therefore not an irrelevant dormant account.
Bank Was Actually Closed Only in July 2025
The petitioner’s defence was that the ICICI account had already been closed.
However, subsequent verification directly from the bank showed that it was closed only on:
23 July 2025.
Further, the records showed 13 withdrawal transactions on 17 July 2025 aggregating ₹12,51,719.
This meant that when the petitioner filed his asset affidavits on:
1 February 2024, and
17 December 2024,
the ICICI account was still operational.
The Court therefore found the chronology particularly significant.
Concealment Could Be Viewed as Attempt to Frustrate Execution
The account:
- was not disclosed in either affidavit;
- was not disclosed even when the Court specifically questioned the petitioner;
- emerged only after production of bank records pursuant to judicial directions;
- remained operational; and
- witnessed substantial withdrawals shortly before closure.
The High Court therefore held that the Executing Court could reasonably regard this conduct as an attempt to frustrate or impede execution of the decree.
Article 227 Is Supervisory, Not Appellate
The petitioner also sought reconsideration of the factual material concerning the ICICI account.
The High Court declined.
It reiterated that under Article 227, it does not sit as a regular appellate court to correct every factual or discretionary error.
Interference is ordinarily justified only where there is:
perversity, patent illegality, manifest jurisdictional error, or patent lack of jurisdiction.
The petitioner’s case essentially required reappreciation of material already considered by the Executing Court, which was beyond the proper scope of supervisory jurisdiction.
Precedent / Statutory Analysis
Unlike many judgments turning on a series of precedents, this decision principally rests upon the text and purpose of Order XXI Rules 41(2) and 41(3) CPC and the limited scope of Article 227.
The underlying execution proceedings had earlier relied upon M/s Bhandari Engineers & Builders Pvt. Ltd. v. M/s Maharia Raj Joint Venture & Ors. for directing disclosure of the judgment-debtor’s income and assets.
The central statutory distinction drawn by the Court is particularly important:
Rule 41(3) liability is not liability for the underlying decree.
It is a consequence arising from the officer’s own failure to comply fully with a disclosure direction issued under Rule 41(2).
That is why the corporate personality argument did not succeed.
Court’s Reasoning
The Court’s reasoning can be reduced to a clear sequence:
Company owes arbitral award → Court orders disclosure of company assets → officer personally furnishes affidavits → affidavits omit material operational bank account → officer also fails to disclose it when specifically questioned → bank records reveal account and substantial transactions → disclosure obligation was not substantively complied with → Rule 41(3) consequences can therefore follow against the officer personally.
The Court was careful not to hold that the petitioner had become personally liable to pay ABB’s arbitral award.
Rather, the coercive consequence arose because of his own alleged non-compliance with the Executing Court’s disclosure direction.
Conclusion
The Delhi High Court upheld the Executing Court’s decision to proceed against the authorised representative under Order XXI Rule 41(3) CPC.
It held that:
- the petitioner could not rely upon the company’s separate legal personality to escape his own disclosure obligation;
- merely filing an asset affidavit did not amount to compliance where material particulars were withheld;
- the undisclosed ICICI account was operational when the affidavits were filed;
- subsequent bank records justified the Executing Court’s findings;
- invocation of Rule 41(3) was not an erroneous exercise of discretion; and
- Article 227 could not be used merely to seek reappreciation of the same evidence.
Accordingly, the petition and pending applications were dismissed.
Case Details
Case: Syed Farhan Ali v. M/s ABB India Limited
Court: Delhi High Court
Case No.: CM(M) 1689/2026 & CM APPL. 50213/2026
CNR: DLHC010348592026
Judge: Justice Ajay Digpaul
Reserved: 1 September 2026
Decided: 18 September 2026
Result: Petition dismissed; coercive proceedings/arrest warrants against the judgment-debtor company’s authorised representative under Order XXI Rule 41(3) CPC left undisturbed.
