Supreme Court Confines a Forensic Audit of Seventeen Banks to Their Dealings With the Judgment Debtors
Background and Facts
A court executing a decree has wide powers over the judgment debtor and much narrower ones over everybody else. The Supreme Court has held that a forensic audit directed in aid of execution must stay confined to the transactions that connect the banks to the judgment debtors, and cannot become a general inquiry into the affairs of the banks themselves. The order was reported on September 29, 2026 and was made by a Bench of Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana.
The proceedings arise from the execution of an arbitral award of Rs 2,562 crore in favour of Daiichi Sankyo against the former promoters of Fortis Healthcare. In aid of that execution the Delhi High Court had directed a forensic examination of the role of banks and financial institutions in loans secured against shares of Fortis Healthcare Limited. Seventeen banks and financial institutions were within the sweep of that direction.
Several of the banks appealed, among them Yes Bank. Their objection was not to the execution but to their own position in it: they are not judgment debtors, and an audit of their affairs at large is a different thing from an audit of what they did with the judgment debtors' shares.
Key Legal Issue
How far a court may direct investigation into the records of a third party in aid of execution, where that third party is not a judgment debtor but has dealt in the security over which the decree holder hopes to realise its money.
What the Court Held
The audit was not set aside. It was confined. The Court held that the examination must remain restricted to transactions between Fortis Healthcare Limited, Fortis Healthcare Holdings Private Limited, the judgment debtors and the banks concerned, and that it could not become a general probe into the affairs of seventeen banks.
The Court went further and described the subject matter that the audit may properly cover: the creation and modification of security, the maintenance of security margins, top-up arrangements, the invocation and sale of pledged shares, the release of securities and the outstanding liabilities. That list is the useful part of the order, because it draws the line by reference to the life cycle of the security rather than by reference to a period or a document class.
Why the Distinction Holds
An execution court's inquisitorial powers are directed at the judgment debtor. Order XXI Rule 41 of the Code of Civil Procedure, 1908, headed the examination of a judgment debtor as to his property, allows a decree holder to have the judgment debtor orally examined as to what debts are owing to him, and where a money decree has remained unsatisfied for thirty days allows the court to require an affidavit of the particulars of his assets, with detention in civil prison for disobedience.
Nothing in that scheme is addressed to a stranger to the decree. Where a third party holds something that belongs to the judgment debtor, the Code deals with it by attachment rather than examination: Order XXI Rule 46 provides for the attachment of a debt, share or other property not in the possession of the judgment debtor by a written prohibitory order, and Rule 46A provides for notice to a garnishee requiring payment into court. Those are targeted at an identified asset, not at the third party's books.
Read against that structure, the Court's confinement of the audit is not a concession to the banks. It keeps the inquiry pointed at the asset the decree holder is pursuing, which is where the Code points it.
What This Leaves the Decree Holder
Quite a lot, and it is worth being clear about that. An audit of the creation, modification, margining, top-up, invocation, sale and release of the pledged shares is precisely the material from which a decree holder can work out whether the security was dealt with in a way that defeated its recovery. What it cannot do is range across the lending practices of seventeen institutions in the hope that something emerges.
The practical effect is to shift the burden of specificity onto the decree holder. An application for third party examination now has to identify the transaction and the asset, not the institution.
Practice Notes
In practice, the order changes how an application of this kind should be framed and resisted:
Frame the application around an asset, not an institution: A direction sought against a bank because it is one of the lenders will be read down. A direction sought in respect of identified pledged shares, and what was done with them, sits inside the line the Court has drawn.
Use the life cycle of the security as the schedule: Creation, modification, margin maintenance, top-up, invocation, sale, release and outstanding liability are the stages the Court itself named. An application scheduled that way is difficult to characterise as roving.
For a third party, object on standing rather than on burden: The winning objection was that the bank is not a judgment debtor. Objections built on the volume of documents or the cost of compliance are weaker and invite a narrowed direction rather than a refusal.
Remember that attachment and examination are different tools: Where the asset is identified and in a third party's hands, the prohibitory order under Order XXI Rule 46 and the garnishee notice under Rule 46A do the work directly. Reaching for an audit where attachment would serve is what makes an application look exploratory.
Expect confinement rather than refusal: The audit survived. A respondent planning for an all or nothing outcome should plan instead for a narrowed direction, and should come to the hearing with the narrowing it can live with.
Key Provisions Discussed
Order XXI Rule 41 of the Code of Civil Procedure, 1908: Examination of a judgment debtor as to his property. Where the decree is for the payment of money the decree holder may apply for the judgment debtor to be orally examined as to what debts are owing to him; where the decree has remained unsatisfied for thirty days the court may require an affidavit of the particulars of his assets; and disobedience may be met with detention in civil prison for up to three months.
Order XXI Rule 46 of the Code of Civil Procedure, 1908: Attachment of a debt, share or other property not in the possession of the judgment debtor, effected by a written order prohibiting transfer or payment without the permission of the court.
Order XXI Rule 46A of the Code of Civil Procedure, 1908: Notice to a garnishee, permitting the court on a verified application to require a person owing money to the judgment debtor to pay it into court.
Case Details
Court: Supreme Court of India
Bench: Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana
Reported: September 29, 2026
Appellants: Banks including Yes Bank
Decree Holder: Daiichi Sankyo, holding an arbitral award of Rs 2,562 crore against the former promoters of Fortis Healthcare
Order Below: A direction of the Delhi High Court for a forensic examination of the role of seventeen banks and financial institutions in loans secured against shares of Fortis Healthcare Limited
Outcome: The audit confined to transactions between Fortis Healthcare Limited, Fortis Healthcare Holdings Private Limited, the judgment debtors and the banks concerned, covering the creation and modification of security, maintenance of margins, top-up arrangements, invocation and sale of pledged shares, release of securities and outstanding liabilities, and not a general probe into the affairs of the banks.
Sources and References
SC limits Fortis forensic audit, bars fishing and roving bank inquiry
Order XXI Rules 41 to 47 of the Code of Civil Procedure, 1908
Code of Civil Procedure, 1908, Order XXI Rules 41, 46 and 46A
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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