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Key considerations – Enforcement of UAE judgments in India

  • UAE

    23-04-2020

    Whilst each case will ultimately need to be assessed on its merits, we have set out below what we consider to be the key factors for all UAE creditors to take into account when deciding whether to start the enforcement process in India. These factors are all likely to have a significant impact on the cost, speed and efficiency of the overall process.

    Location of assets

    Knowledge of the debtor’s assets, including their whereabouts, is arguably the most important consideration for any creditor tasked with deciding whether to start the enforcement process. Not only is this factor relevant to the ‘cost benefit analysis’ test that most creditors seek to satisfy, but it is also key information needed to help ensure that proceedings are initiated in the relevant District or State where the assets exist. By providing the Court with details of the debtor’s potential assets in the initial application process, the Court will be able to establish jurisdiction in the early stages. Asset tracing reports should therefore be considered at the early stages, unless creditors already have the information needed to evidence the location of assets.

    Once proceedings are started, applications can then be made requiring the judgment debtor to provide details of all their assets by affidavit. Depending on the extent of information provided, such affidavits may prove helpful with valuations and even identify potential barriers to enforcement, such as third party interests, which all need factoring into the decision making process sooner rather than later.

    Impact of where proceedings are brought

    Once assets are identified, the appropriate location for enforcement action should then be considered. This is because courts are considered to adopt different approaches depending on their level and location. For example, the outcome of an application to the High Court in Delhi, is likely to differ to the outcome of an application to the District Court in Hyderabad, with the more commercially populated States being potentially more likely to see the creditor’s perspective. Whilst the decision over where to start proceedings will not always be a question of choice (depending instead on the pecuniary jurisdiction of the courts and the location of the assets), it is a factor that needs taking into account when assessing the route ahead as it can have an impact on cost, speed and ultimately the final outcome.

    Conduct of the Judgment Debtor

    The likely approach of the judgment debtor also needs considering. Whilst the answers will not always be known, it is worth asking the following questions to try and assess the anticipated route ahead: Are they likely to adopt an adversarial stance? Will they be motivated to settle? Will they fail to appear or will they avoid service? When assets are available, it is not uncommon for applications to become opposed, with judgment debtors being more motivated to frustrate recovery attempts to protect their wealth, resulting in multiple applications and increased time and cost. In such circumstances, it is not uncommon for such individuals to instruct their own lawyers and for proceedings to become protracted. Conducting an assessment of the judgment debtor and the likely “legal response” is therefore an important part of the decision making process to be made at the outset based on the information available.

    Interference by third party creditors or family members in dispute

    The process can be significantly delayed in the event that other creditors assert competing rights over the debtor’s assets. For example, it is not uncommon in India for residential property to be owned by various family members, which if the target of enforcement proceedings, is likely to complicate matters as the family members seek to protect their share or defend the property. They may even already be in dispute over the property between themselves. Consequently, if the debtor is believed to own a residential property, enquiries should be made to establish the likelihood of any such dispute. This can be done through asset tracing reports or enquiries of the local land records, to the extent they are available.

    Barrister fees

    Whilst most local Indian law firms may be able to conduct the advocacy themselves, it may be more appropriate to instruct barristers for cases involving complex applications and high value assets. This will obviously increase the costs involved and need factoring into the overall costs benefit analysis assessment.

    Financial scenarios

    Given the anticipated time and cost involved, we would advise against pursuing debts worth less than USD 100,000 unless there is some wider and non-monetary benefit in doing so. We would also advise against starting the process without any evidence of available assets.

    It is difficult to accurately estimate the costs involved in a process that is relatively untried and tested, the outcome of which will largely depend on the specific facts of the case. However, we can review cases to identify anticipated legal spend and suitable fee arrangements.

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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