Summary
Giving reasons for its earlier dismissal of the decree-holders' SLP, the Supreme Court upheld the Delhi High Court's stay, without deposit and on an undertaking, of an ex parte money decree of about Rs 339 crore against Amazon Technologies. It held that deposit is not a condition precedent to a stay under Order XLI Rule 5 CPC; money decrees are ordinarily stayed only on deposit as a rule of prudence, but an unconditional stay may be granted in an exceptional case, such as a decree that is egregiously perverse, riddled with patent illegalities or facially untenable. Security may include an undertaking.
Issues
- Whether an appellate court may stay execution of a money decree under Order XLI Rule 5 CPC without requiring deposit of the decretal amount or tangible security.
- Whether Order XLI Rules 1(3) and 5(5) CPC make deposit or security mandatory before a money decree can be stayed.
- Whether the second proviso to Section 36(3) of the Arbitration and Conciliation Act, 1996 limits unconditional stays of money decrees to cases of fraud or corruption.
- Whether delivery of suit papers and notice of an ex parte injunction amounted to service of summons, attracting the second proviso to Order IX Rule 13 CPC.
- Whether the High Court erred in granting an unconditional stay on the facts.
Provisions considered
- Order XLI Rule 5(1), (3) and (5), Code of Civil Procedure, 1908Stay may be granted for sufficient cause upon satisfaction of substantial loss, absence of unreasonable delay and security for due performance; the rule draws no distinction between money and other decrees, does not make cash deposit the only form of security, and allows an unconditional stay in an exceptional case. (¶¶ 41, 64, 65, 66, 82, 85, 86, 87, 134)
- Order XLI Rule 1(3), Code of Civil Procedure, 1908Following Kayamuddin Shamsuddin Khan and Malwa Strips, and the legislative history of the 1976 amendment, the obligation to deposit or furnish security in a money-decree appeal is directory; non-compliance does not defeat the appeal but disentitles the appellant to a stay under Rule 5(5). (¶¶ 40, 49, 53, 59, 62, 63)
- Order IX Rule 13, second proviso, Code of Civil Procedure, 1908The proviso covers only irregularity in service of summons; where, prima facie, no summons was validly served at all, it does not apply, so delivery of suit papers and notice of an injunction under Order XXXIX Rule 3 did not amount to service. (¶¶ 88, 89, 90, 91, 92)
- Section 36(3) and its provisos, Arbitration and Conciliation Act, 1996The analogy was held inappropriate: Section 36 does not govern stays under Order XLI Rule 5, and Sepco Electric and Pam Developments in any case suggest unconditional stays are not confined to the fraud or corruption proviso; Pam Developments is confined to arbitration. (¶¶ 95, 96, 111, 120, 122, 123, 124)
Held
- Deposit of the decretal amount is not a condition precedent to stay of a money decree; the only statutory guide is sufficient cause under Order XLI Rule 5, and the appellate court has discretion whether to impose a deposit condition. (¶¶ 63, 134)
- By a rule of prudence and established practice, execution of a money decree should ordinarily be stayed only on deposit of the decretal amount, but this is not a mandatory rule of law. (¶¶ 80, 134)
- An unconditional stay of a money decree requires an exceptional case and must be granted sparingly; a decree that is egregiously perverse, riddled with patent illegalities, facially untenable, or affected by similar exceptional causes falls within that category. (¶¶ 70, 82, 83, 134)
- An order granting stay must record cogent and adequate reasons, based on the record, for the satisfaction that sufficient cause exists, addressing why the status quo should continue. (¶¶ 69, 134)
- Security under Order XLI Rule 5 need not be a cash deposit; it may take the form of property, a bond or an appropriate undertaking by the appellant to abide by the decree. (¶¶ 86, 87, 134)
- The fraud-or-corruption proviso to Section 36(3) of the Arbitration Act does not restrict unconditional stays under Order XLI Rule 5 to such cases; confining them so would cause injustice where, for instance, a decree was passed without valid service. (¶¶ 122, 123, 124)
- A court acquires jurisdiction over a defendant only through valid service of summons or voluntary submission; substituted service is exceptional. (¶¶ 131, 132, 133)
- The Division Bench, having prima facie found no service of summons, enhancement of damages without amendment of the plaint, no pleading or finding of the respondent's involvement in infringement, and a damages computation unsupported by pleadings, committed no error in granting an unconditional stay; its observations and this judgment are not to influence the appeal on merits. (¶¶ 125, 126, 127, 128, 129, 130, 136)
Result
Special leave petition dismissed (reasons for the order dated 24.09.2025); the High Court's unconditional stay upheld; the regular first appeal to be decided on its own merits with all contentions open; Registry directed to send the judgment to all High Courts.