Supreme Court Summarizes Principles On Grant Of Benefit Of Stay Of Execution Of Decree By Appellate Court Under Order XLI CPC
The Supreme Court said that for the grant of stay of execution of a decree in terms of Order XLI, a prayer to such effect has to be specifically made to the Appellate Court and the Appellate Court has the discretion to grant an Order of stay or to refuse the same.
Justice J.B. Pardiwala, Justice K.V. Viswanathan, Supreme Court
The Supreme Court has summarized certain principles on the grant of benefit of stay of execution of a Decree by an Appellate Court under Order XLI of the Civil Procedure Code, 1908 (CPC).
The Court was hearing a Petition preferred by Lifestyle Equities C.V. against Amazon Technologies INC, challenging the Judgment of the Delhi High Court.
The two-Judge Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan summarized the following points –
(I) Order XLI Rule 5 contains the provision for the grant or refusal of stay of execution of the decree by the appellate court under the CPC. It categorically stipulates that mere filing of an appeal against an order of execution, shall not ipso facto operate as stay of proceedings. Any execution proceeding or an order therein, shall be stayed only if a specific, reasoned order granting such stay is passed by the appellate court, after proper application of mind.
(II) For the grant of stay of execution of a decree in terms of Order XLI, a prayer to such effect has to be specifically made to the appellate court and the appellate court has the discretion to grant an order of stay or to refuse the same.
(III) Order XLI Rule 5(3) of the CPC provides for satisfaction regarding sufficient cause as a pre-condition for granting benefit of stay of execution of decree, and it casts an obligation upon the appellate court to record its satisfaction for stay of execution such decree.
(IV) The power of the Appellate Court to order stay of execution of the decree is circumscribed and made subject to the existence of a “sufficient cause” in favour of the appellant being shown. In order to ascertain whether a “sufficient cause” exists for the grant of stay of execution of a decree under Order XLI of the CPC, the appellate court as per sub-rule (3) of Rule 5 is required to examine:-
(i) Whether there will be substantial loss to the party applying for stay;
(ii) Whether the application has been made without unreasonable delay; and
(iii) Whether security has been given by the applicant for due performance of the decree.
(V) For the grant of stay of execution of the decree, the appellate court is required, after perusing the materials on record, to assign reasons for its satisfaction regarding the existence of a “sufficient cause”. Such reasons should be cogent and adequate. The reasons assigned must indicate the necessity for the status quo prevailing on the date of the decree and/or the date of making of the application for stay, to continue by granting stay, and not merely the reasons why stay should be granted.
(VI) Although, Order XLI Rule 5 of the CPC, uses the word “shall”, yet a combined reading of the sum and substance of Rule(s) 1(3) and 5(5) would reveal, that for the grant of stay of execution, it is not mandatory for the appellate court to impose a condition for deposit of the amount in dispute. The aforesaid provisions make it abundantly clear that the appellate court, for the grant of stay of execution, has a discretion to impose a condition of deposit of the amount depending on the facts and circumstances of each case.
(VII) A deposit is not a condition precedent for an order of stay of execution of the decree by the appellate court. The only guiding factor and statutory mandate, for the grant of such stay of execution as indicated in Rule 5, is the existence of “sufficient cause” in favour of the appellant, on the availability of which the appellate court would be inclined to pass an order of stay.
(VIII) For the grant of benefit of an unconditional stay of execution of a decree, an exceptional case has to be made out before the appellate court. This discretion of the appellate court to grant an unconditional stay of execution of decree must not be exercised arbitrarily. It must be exercised sparingly and only if an exceptional case is made out for such stay in view of the peculiar facts and attending circumstances of the case before it.
(IX) A lodestar for bringing a case within the purview of “exceptional case” for the purpose of granting benefit of unconditional stay of the execution of money decree by the appellate court would be, if the money decree in question: -
(i) is egregiously perverse;
(ii) is riddled with patent illegalities;
(iii) is facially untenable; and/or
(iv) such other exceptional causes similar in nature.
(X) For the purpose of the grant or refusal of stay of execution of the decree under Rule 5 of Order XLI, it is immaterial whether the decree is a money decree or any other decree. The language couched in the said provision is very clear. Order XLI, Rule 5 of the makes no distinction between a money decree and other decrees, and the said provision applies with full rigour in both instances. Yet as a rule of prudence and established practice evolved over a period of time, no stay of execution of a money decree should be granted, except on the condition that the decretal amount be deposited in the court. However, such condition for deposit cannot be said to be mandatory and non prescription thereof does not operate as a bar to staying the execution of a money decree.
(XI) There is no provision under Order XLI Rule 5 of the CPC imposing a mandate to deposit cash security as the only mode of security for execution of the decree. Security, for the purpose of the said provision, can be in the shape of property, bond and or in the form of an appropriate undertaking from the appellant to abide by the decree, seeking stay of execution.
Senior Advocates Mukul Rohatgi and Gaurav Pachnanda appeared for the Petitioners/Plaintiffs, while Senior Advocates Abhishek Manu Singhvi, Neeraj Kishan Kaul, and Arvind Nigam appeared for the Respondent/Defendant.
Facts of the Case
The Petitioners-Plaintiffs along with subsidiaries and licensees were engaged in the business of manufacturing, distribution and sale of a wide range of products including garments, apparels, footwear for men, women and children, furniture, textiles, watches and other lifestyle/personal care products under the trademark Beverly Hills Polo Club (BHPC). Lifestyle Equities, an Amsterdam based company was the proprietor of the BHPC trademark and claimed to have held exclusive rights for its use and commercialisation.
The Plaintiffs instituted a Civil Suit in the Delhi High Court, seeking permanent injunction and damages against the Defendant for the alleged infringement of their registered trademark BHPC. The Respondent-Defendant proceeded ex-parte and the suit was decreed in favour of the Plaintiffs. This was challenged before the High Court and the Division Bench after hearing the decree-holders and the judgment-debtor allowed the stay application filed by the Defendant. In such circumstances, the Plaintiffs were before the Apex Court.
Court’s Observations
The Supreme Court after hearing the contentions of the counsel, observed, “Mere filing of an appeal would not operate as stay of execution of decree, but the Appellate Court may, for “sufficient cause”, order stay of execution of decree. The other relevant part of the rule is contained in sub-rule (3) of Rule 5 of Order XLI.”
The Court said that the provisions of the Rule are very clear and they do not make any distinction between money decrees and other types of decrees.
The Court noted that the benefit of stay of execution of a money decree may be granted by the Appellate Court unconditionally, if it:
i. is egregiously perverse;
ii. is riddled with patent illegalities;
iii. is facially untenable; and/or
iv. such other exceptional causes similar in nature.
“The aforesaid factors would bring the case within the purview of “exceptional case” for the purpose of granting benefit of unconditional stay of the execution of money decree. … there is no provision under Order XLI Rule 5 of the CPC imposing a mandate to deposit cash security as the only mode of security for execution of the decree”, it added.
The Court was of the view that if fraud or corruption or something analogous to the same is only to be seen for the purpose of granting benefit of unconditional stay of execution of money decree then in such circumstances, the decree holder may argue that although there may not be a valid service of summons to the defendant/judgment-debtor yet, the same by itself would not be sufficient to grant the benefit of unconditional stay of execution of money decree and this would lead to nothing but serious miscarriage of justice.
“… it cannot be said that the Division Bench committed any error much less an error of law in passing the impugned judgment and order. … It goes without saying that whatever has been observed by the Division Bench in its impugned judgment and order is not an expression of any final opinion but are prima face observations for the purpose of granting the relief as prayed for by the respondents”, it remarked.
The Court further said that without a valid service, the Court cannot acquire jurisdiction over the Respondent, unless the Defendant voluntarily submits to it and the original Defendant Respondent must be properly be apprised of a pending action against him and assured of the opportunity to present his defenses to the suit and roper service of summons is used to protect one’s right to due process.
“In an action strictly in personam, personal service on the defendant is the preferred mode of service, i.e., by handing a copy of the summons to the defendant in person. If defendant, for excusable reasons, cannot be served with the summons within a reasonable period, then substituted service can be resorted to. While substituted service of summons is permitted, "it is extraordinary in character and in derogation of the usual method of service", it added.
Conclusion
The Court, therefore, concluded that it should not disturb the impugned Judgment and Order passed by the Division Bench of the High Court. It clarified that the main Appeal shall be decided on its own merits and without being influenced in any manner by any of the observations made in the Judgment.
“It shall be open for the parties to put forward all contentions available to them in law at the time of the final hearing of the Regular First Appeal”, it said.
Accordingly, the Apex Court directed the Registry to forward one copy each of the Judgment to all the High Courts.
Cause Title- Lifestyle Equities C.V. & Anr. v. Amazon Technologies INC (Neutral Citation: 2025 INSC 1190)
Appearance:
Petitioners: Senior Advocates Mukul Rohatgi, Gaurav Pachnanda, AOR Garima Bajaj, Advocates Sidhant Goel, Mohit Goel, Dipankar Mishra, Karmanya Dev Sharma, and Udbhav Gady.
Respondent: Senior Advocates Abhishek Manu Singhvi, Neeraj Kishan Kaul, Arvind Nigam, AOR Swikriti Singhania, Advocates Saikrishna Rajagopal, Sidharth Chopra, Sneha Jain, Devvrat Joshi, and Angad Makkar.
