Karta is personally liable when HUF property is insufficient to meet arbitral award dues: Bombay High Court

The Bombay High Court has held that the karta of a Hindu Undivided Family (HUF) can be personally proceeded against to satisfy an arbitral award where the HUF’s own assets are insufficient [Manjeet Singh T Anand v. Nishant Enterprises HUF through its Karta & Anr]..Justice RI Chagla held that the Mumbai “seat court” retains jurisdiction to entertain execution and interim enforcement even if the judgment‑debtor’s assets lie outside Mumbai in such cases..The Court passed the order in an interim application in a commercial execution arising from a November 30, 2023 arbitral award in favour of decree‑holder Manjeet Singh T Anand against Nishant Enterprises HUF and its karta.The award directed payment of around ₹12.52 crore with 10% interest along with costs of ₹22.25 lakh, with about ₹14.79 crore remaining unsatisfied and no stay operating on recovery of this decretal amount.The HUF objected to execution in Mumbai on the ground that all disclosed assets and bank accounts were in Bhiwandi, Thane district and that under the Code of Civil Procedure (CPC), only a court where the assets are located can execute the award..Justice Chagla rejected this, holding that the court at the seat of arbitration (Mumbai in this case) within the meaning of Section 2(1)(e)(i) of the Arbitration and Conciliation Act, 1996, cannot be divested of jurisdiction merely because the assets are located elsewhere.The Court reiterated that an award under Part I of the Arbitration Act can be executed both by the court under Section 2(1)(e) and by a court where the judgment‑debtor’s assets are situated, giving the award‑creditor an additional forum rather than restricting it..The karta raised a second preliminary objection that his personal assets could not be attached for a decree against the HUF, particularly since the operative money direction in the award was only against the HUF and the karta was made jointly liable only for costs.Justice Chagla held that Hindu law treats the karta’s liability for HUF debts as personal and unlimited, especially when the HUF is carrying on business, and that this principle operates at the stage of execution and need not be expressly recorded in the arbitral award..The Court rejected the argument that the HUF’s juristic personality insulates the karta, clarifying that such recognition is confined to certain statutory contexts such as taxation, and does not displace the traditional rule that the karta’s own assets can be reached where the HUF estate is insufficient to satisfy the decree.The Court held that the award’s silence on personal liability did not preclude the executing court from determining what assets can be reached to satisfy the award and found both preliminary objections without merit.It allowed the decree‑holder’s interim application, appointed the court receiver over immovable properties whose title deeds had earlier been deposited as security with power to take physical possession, and restrained the HUF and the karta from dealing with or encumbering any movable or immovable assets..Advocates Rashmin Khandekar, Jamsheed Master, Anand Mohan and Aniket Worlikar appeared for Anand.Advocates Prathamesh Kamat, SB Rao and Gauri Rao appeared for Nishant Enterprises HUF.Advocates Sanjay Jain, Nakul Jain, Sankalp Anantwar and Ronak Mistry, briefed by SMA Law Partners, appeared for the karta..[Read order].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.