Order XLI Rule 5 CPC | Deposit Not Mandatory For Stay Of Money Decree, Unconditional Stay Can Be Granted In Exceptional Cases : Supreme Court

The Supreme Court on Tuesday (October 7) resolved the long-standing debate on whether deposit or security is an absolute precondition for staying a money decree. It clarified that it is not mandatory for the Appellate Court to impose a condition for deposit of the amount in dispute for grant of stay of execution under Order XLI Rule 5 of the Code of Civil Procedure, 1908 (“CPC”). Affirming the Delhi High Court's division bench decision, the Court held that the provisions of Order XLI Rule 1(3) and Rule 5(5) of CPC, which require an appellant to deposit the decretal amount or furnish security, are directory, not mandatory. While non-compliance may normally lead to rejection of a stay application, appellate courts retain discretion to grant stay in “exceptional cases” even without such a deposit. Importantly, the Court stressed that failure to deposit cannot result in dismissal of the appeal itself. “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.”, the court said. The Court added that “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.” Further, the Court for the first time laid down the concrete criteria for when unconditional stay may be justified. Such a stay is permissible where the order: (i) is egregiously perverse; (ii) is riddled with patent illegalities; (iii) is facially untenable; and/or (iv) such other exceptional causes similar in nature. A bench of Justices JB Pardiwala and KV Viswanathan summarized the law regarding the grant of benefit of stay of execution of a decree by an appellate court in term of Order XLI as under: - (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 ...

Order XLI Rule 5 CPC | Deposit Not Mandatory For Stay Of Money Decree, Unconditional Stay Can Be Granted In Exceptional Cases : Supreme Court

Yash Mittal

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