Rajasthan High Court Orders Civil Imprisonment For Company Director Over Non-Compliance With Foreign Arbitral Award

Rajasthan High Court Orders Civil Imprisonment For Company Director Over Non-Compliance With Foreign Arbitral Award

Justice Nupur Bhati of the Rajasthan High Court has imposed a one-month civil imprisonment on Sanjay Rathi, the director of Mamta Hygiene Products Pvt. Ltd., for failing to comply with a court order regarding the enforcement of a foreign arbitral award.

Earlier, the High Court had ruled that the foreign arbitral award was enforceable and executable as a court decree. Mamta Hygiene Products Pvt. Ltd. (the respondent) was directed to disclose its assets by filing an affidavit within four weeks of the judgment. Additionally, Emeraldstone Management Sia (the applicant) was granted the right to seek further enforcement measures in accordance with the law.

Despite multiple extensions and additional court orders, the respondent failed to comply by not submitting the required affidavit, financial documents, or deposit of ₹50,00,000 as directed. The court noted persistent non-compliance with the judgment dated September 26, 2023, and subsequent orders, including the failure to submit income-tax returns, audited balance sheets, and required deposits.

The High Court observed:

“From perusal of the various order sheets, it is apparent that the respondent-company has failed to comply with the judgment dated September 26, 2023, as it has not disclosed its assets by way of filing an affidvit within a period of four weeks from the date of passing of the said judgment and further has not complied with the directions passed by this Court dated March 22, 2024, as it has not placed on record its income-tax return along with the audited balance sheet of the last five financial years by the next date as directed vide order dated March 22, 2024, and has also failed to deposit the amount of Rs. 50,00,000/- in the bank account of the applicant-company as directed in the order dated March 22, 2024.”

Given the blatant disregard for court orders, the Court decided to invoke Order 21 Rule 41 of the Civil Procedure Code. The Superintendent of Police, Bhilwara, was instructed to detain Sanjay Rathi in civil prison for one month.