2025 INSC 1190

REPORTABLE

IN THE SUPREME COURT OF INDIA

EXTRAORDINARY APPELLATE JURISDICTION

Petition for Special Leave to Appeal (C) No.19767 of 2025

LIFESTYLE EQUITIES C.V. & ANR. …PETITIONER(S)

VERSUS

AMAZON TECHNOLOGIES INC. …RESPONDENT

J U D G M E N T

Page 1 of 73

J.B. PARDIWALA J.,

For the convenience of exposition, this judgment is divided

into the following parts:-

INDEX

A. FACTUAL MATRIX ................................................................. 3

B. SUBMISSIONS ON BEHALF OF THE PLAINTIFFS .................. 11

C. SUBMISSIONS ON BEHALF OF THE DEFENDANT ................. 13

D. REJOINDER TO THE SUBMISSIONS CANVASSED ON BEHALF

OF THE DEFENDANTS ............................................................. 15

E. ANALYSIS............................................................................ 16

i. History of the Legislation in Question ................................................ 18

ii. Principles required to be followed while Interpreting a Provision of a

Statute ................................................................................................. 22

iii. Decisions of various High Courts on the Subject .............................. 33

iv. Meaning and Import of “sufficient cause” under Order XLI Rule 5 of the

CPC...................................................................................................... 38

v. Service of Summons and Irregularity in the Service of Summons ...... 39

vi. Reading of Section 36 of the Arbitration Act and Order XLI Rule 3 and

Rule 5 respectively of the CPC .............................................................. 41

vi. Relevant aspects which the High Court looked into for the purpose of

granting unconditional stay .................................................................. 53

F. CONCLUSION ...................................................................... 69

Page 2 of 73

1. Our Order dated 24.09.2025 passed in the instant petition reads thus:

“1. Exemption Application is allowed.

2. Heard Mr. Mukul Rohatgi and Mr. Gaurav

Pachnanda, the learned Senior counsel appearing

for the petitioners and Dr. Abhishek Manu

Singhvi, Mr. Neeraj Kishan Kaul and Mr. Arvind

Nigam, the learned Senior counsel appearing for

the respondent.

3. We are of the view that there is no good reason

for us to interfere with the impugned Judgment

and Order passed by the High Court.

4. The Special Leave Petition is, accordingly,

dismissed.

5. In view of the dismissal of the Special Leave

Petition, no orders are required to be passed on

the application for intervention/impleadment and

the same stands disposed of.

6. However, reasons to follow by a separate

Order.”

2. This petition arises from the judgment and order passed by the High

Court of Delhi, dated 01.07.2052 in the CM Application No. 26455 of

2025 filed in the RFA(O.S.)(COMM) No.11 of 2025 by which the

application filed by the respondent herein (judgment debtor-original

defendant) under Order XLI Rule 5(1) and Rule 5(3) of the Civil

Procedure Code, 1908, (for short, “the CPC”) respectively came to be

allowed, and thereby the Court stayed the operation of the judgment

and money decree dated 25.02.2025 passed by a learned Single Judge

in the suit instituted by the petitioner herein. In short, the Division

Bench of the High Court granted stay of the execution of the money

decree suffered by the respondent herein without insisting for the

deposit of the decretal amount.

3. For the sake of convenience, the petitioners herein shall be referred to

as the original plaintiffs and the respondent herein shall be referred to

as the original defendant.

Page 3 of 73

A. FACTUAL MATRIX

4. The plaintiffs along with its subsidiaries and licensees claim to be

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 (hereinafter referred to as, “BHPC”).

5. The plaintiff No. 1 is an Amsterdam based company and is the

proprietor of the BHPC trademark and claims to hold exclusive rights

for its use and commercialisation. The BHPC trademark consists of a

distinctive look featuring a charging Polo pony with a mounted rider

wielding a raised polo stick (mallet) symbolising the sport of Polo.

6. The plaintiff no. 2 is the licensee of the said trademark pursuant to the

Master License and Licensing Service Agreement dated 20.05.2008.

7. The plaintiffs instituted Civil Suit (COMM) No. 443 of 2020 in the Delhi

High Court, inter alia, seeking permanent injunction and damages

against the defendant for the alleged infringement of their registered

trademark BHPC.

8. It is the case of the plaintiffs that they are the rightful proprietors of

the BHPC Mark which enjoys extensive goodwill and recognition in the

domestic and international markets. The plaintiffs instituted the suit

contending that the defendant has been unlawfully using a mark

identically or deceptively similar to the plaintiffs’ trademark, thereby

violating their statutory and common law rights.

Page 4 of 73

9. In such circumstances referred to above, the plaintiffs prayed for the

following reliefs:

“a. Decree for permanent injunction restraining

die Defendants, its partners, directors,

shareholders or proprietor as the case may be, its

assigns in business, franchisees affiliates,

subsidiaries, licensees, and agents from selling,

offering for sale, advertising, directly or indirectly

dealing in any products or reproducing or using in

any manner whatsoever, the Infringing Logo

Mark or any other trade mark or logo/device,

which is identical to and/or deceptively similar to,

or is a deceptive variant of, and/or includes the

Plaintiffs' well known Logo Mark amounting to

infringement of the Plaintiffs' registered trade

marks as disclosed in the Plaint.

b. Decree for permanent injunction restraining the

Defendants, its partners, directors, shareholders

or proprietor as the case may be, its assigns in

business, franchisees, affiliates, subsidiaries,

licensees and agents from selling, offering for

sale, advertising, directly or indirectly dealing in

any products or reproducing or using in any

manner whatsoever, the infringing Logo Mark or

any other trade mark or logo/device, which is

identical to and/or deceptively similar to or

imitation of, or is a deceptive variant of, and/or

includes the Plaintiffs' artistic Logo Mark

amounting to infringement of the Plaintiffs'

copyright in the said logo.

c. Decree for permanent injunction restraining the

Defendants, its partners, directors, shareholders

or proprietor as the case may be, its assigns in

business, franchisees, affiliates, subsidiaries,

licensees and agents from selling, offering for

sale, advertising, directly or indirectly dealing in

any products or using in any manner whatever,

the infringing Logo Mark or any other mark or

logo/device, which is identical to, or is a deceptive

variant of and/or deceptively similar to and/or

includes the Plaintiff’s well known Logo Mark

amounting to passing off of the goods/services

Page 5 of 73

and/or business of the Defendants for those of

the Plaintiffs, dilution of goodwill and unfair

competition.

d. A decree for delivery up of all products and

material including stationery, visiting cards, hill

boards, brochures, promotional material, letter-

heads, cash memos, sign boards, sign posts,

leaflets, cartons, or any other items of

whatsoever, bearing the infringing Logo Mark

and/or any other mark, logo or device which may

be identical and/or deceptively similar, or is a

deceptive variant of and/or includes the Plaintiff's

well-known Logo Mark.

e. A decree for damages amounting to Rs.

2,00,05,000/- (Rupees Two Crores and Five

Thousand only) or any such amount as found due

in favour of the Plaintiffs. The Plaintiffs submit

that the valuation of damages is an approximate

figure only, and the Plaintiffs undertake to pay

further Court fees as may be determined by this

Hon'ble Court upon the damages that the

Plaintiffs are able to prove in the course of trial.

f. An order for rendition of accounts of profits in

favour of the Plaintiffs and against the

Defendants to ascertain the profits made by

Defendants through sale of its apparel products

or any other products which bear the infringing

Logo Mark. The Court fees as and when the

accounts of profit are determined precisely and

accurately in the course of trial, and upon

disclosure of profits made by the Defendants.

g. An order awarding costs of this suit to the

Plaintiffs;

h. Any other and further relief(s) as this Hon'ble

Court may deem fit and proper to meet the ends

of justice.”

10. It appears from the materials on record that in the suit filed by the

plaintiffs there were three defendants including the respondent herein

Page 6 of 73

as the original defendant No. 1. The plaint computed the damages

claimed from all the defendants to the tune of Rs. 2,00,05,000 /-

(Rupees Two Crore and Five Thousand Only), or such other amount as

the court would find it to be payable.

11. It further appears that the defendant No. 1 was proceeded ex parte vide

Order dated 20.04.2022. Of the remaining two defendants, the suit was

decreed against the defendant No. 2 for Rs. 4,78,484/- vide the Order

dated 02.03.2023. The very same order deleted the defendant No. 3

from the array of parties.

12. In such circumstances, the respondent before us is the only defendant

now contesting the litigation.

13. It appears that upon institution of the suit by the plaintiffs the following

Order dated 12.10.2020 came to be passed:

“1. Allowed, subject to all just exceptions.

2. Original documents, if any, be filed within two

weeks of the resumption of the normal functioning

of the Court.

3. Application is disposed of.

I.A. 9256/2020 (under Order XI Rule 1

(4) Commercial Courts Act)

1. Additional documents, if any, be filed within 30

days.

2. Application is disposed of.

Signing Date:13.10.2020 07:06:56 This file is

digitally signed by PS to HMJ Mukta Gupta

CS(COMM) 443/2020 I.A. 9254/2020 (under

Order XXXIX Rule 1 and 2 CPC)

1. Plaint be registered as a suit.

2. Issue summons in the suit and notice in the

application to the defendants.

Page 7 of 73

3. Learned counsel for the defendant No.2 and

defendant No.3 accept summons in the suit and

notice in the application.

4. Summons in the suit and notice in the

application be now issued to defendant No.1 on

the plaintiff taking steps through email and

whatsapp, returnable before this Court on 2nd

February, 2021.

5. Written statement and reply affidavit along

with affidavit of admission/denial be filed within

30 days of the receipt of summons in the suit and

notice in the application.

6. Replication and rejoinder affidavit, along with

affidavit of admission/denial, be filed within

three weeks thereafter.

7. Case of the plaintiff is that the plaintiff is a

brand-owner of "BEVERLY HILLS POLO CLUB"

which was established by its predecessors in the

year 1981. The first registration for the trademark

"BEVERLY HILLS POLO CLUB" was applied on

3rd December, 1992 and thereafter the plaintiff

has number of registrations for the said mark.

The mark of the plaintiff is a device mark, that is,

and the plaintiff is the owner of the registered

trademark and the copyright thereof.

8. Grievance in the present suit of the plaintiff is

limited to defendant No.1 which is a group

company of defendant No.3 but not working as an

intermediary but is selling its own brand, copying

the logo of the plaintiff as….. It is thus claimed

that by infringing the plaintiff's device mark as

also the copyright in the logo, the defendant No.1

is selling its goods representing them to be as the

plaintiff's brand. Learned counsel further states

that defendant No.2 is selling the products of the

defendant No.1 under the impugned logo mark by

listing the same on the platform of defendant

No.3.

9. None appears on behalf of defendant No.1

despite advance notice however, learned counsel

for defendant No.3, that is, Amazon Seller Service

Pvt. Ltd. enters appearance and states that in an

earlier suit filed by the plaintiff being CS(COMM)

1015/2018 Lifestyle Equities C.V. and Ors. vs.

Amazon Seller Services Pvt. Ltd., vide order dated

Page 8 of 73

16th July, 2018, this Court had already directed

the defendant No.3 to take down the URLs

wherein the brand/logo/device mark of the

plaintiff is copied including those mentioned in

the plaint and as and when the plaintiff gives any

further information in this regard. Learned

counsel for the defendant No.3 states that since

the defendant No.3 is covered by the said order

of this Court dated 16th July, 2018, no fresh suit

is maintainable and the plaintiff was only

required to intimate the same to the defendant

No.3 and hence the present suit is mala fide.

10. Learned counsel for the defendant No.2 states

that the defendant No.2 has already taken down

the listing and will further investigate into the

matter and take down any further listing which is

either on the defendant No.3's platform or any

other platform.

11. Case of the plaintiff is that in the earlier suit,

that is, CS (COMM) No.1015/2018, the plaintiff

had impleaded parties who were selling their

products on the defendant No.3's listing by

infringing the plaintiff's device mark and the

copyright and in the earlier suit the defendant

No.1 was not a party and in the present suit, not

only does the plaintiff seek delisting of the brand

of the defendant No.1 from the defendant No.3's

platform but also seeks the relief of injunction

against the defendant No.1 which is infringing

and diluting the plaintiff's mark by selling its

products on a much cheaper rates representing to

be that of the plaintiff.

12. Considering that the defendant No.1 is a

separate entity, this Court is prima facie of the

view that the present suit would be maintainable.

From the averments in the plaint as also the

documents filed therewith, this Court finds that

the plaintiff has made out a prima facie case in

its favour and in case no ex-parte ad-interim

injunction is granted, the plaintiff would suffer an

irreparable loss. Balance of convenience also lies

in favour of the plaintiff. Consequently, till the

next date of hearing, defendant No.1 and

defendant No.2, their Partners, Directors,

Proprietors, Shareholders, Affiliates, Licensees,

Page 9 of 73

Agents etc. are restrained from selling, offering for

sell, advertising, directly or indirectly dealing in

any products or reproducing or using in any

manner whatsoever the infringing logo mark

which is identically/deceptively similar to the

plaintiff's logo mark "BEVERLY HILLS POLO

CLUB". In the meantime, defendant No.3 is

directed to take down the products of the

defendant No.1 with the infringing logo within 72

hours of the URLs being provided by the plaintiff.

13. Compliance under Order XXXIX Rule 3

CPC be made within one week.”

14. Thus, the Court while registering the plaint as a suit noted that the

defendant No. 1, i.e., the respondent before us despite an advance

notice failed to enter appearance, and accordingly granted an ex parte

ad interim injunction restraining the defendants, their partners,

directors, proprietors, shareholders, etc., from selling, offering for sale,

advertising, directly or indirectly dealing in any products which is

identically/deceptively similar to the plaintiffs’ logo mark “BHPC”.

15. The suit ultimately came to be adjudicated ex parte, and came to be

decreed in favour of the plaintiffs and against the defendant No. 1, i.e.,

the respondent before us in the following terms:

“121. The suit is accordingly decreed as under in

favour of Plaintiffs and against Defendant No. 1

in the following terms:

(i) A decree of permanent injunction is granted in

terms of paragraphs 64(a), (b) and (c) of the plaint,

(ii) A decree of damages to the tune of $38.78

million as on date Rs. 336,02,87,000.00/- is

granted in favour of the Plaintiffs against

Defendant No. 1. If the said amount is paid within

three months, no interest would be liable to be

paid. However, if the same is not paid by the

Defendant No.1, interest @ 5% per annum would

he payable from the date of this judgment until

the full realization of the said amount.

Page 10 of 73

(iii) A decree of costs to the tune of Rs.

3,23,10,966.60/- along with the Court Fee.

122. The details of the relief granted are

summarized below:

S.NO. DECREE

DETAILS

AMOUNT/TERMS

1 Compensatory

Damages

1A Lost Royalties USD 33.78 million

(Rs.292,70,37,000,00/)

1B Increased

Advertising &

Promotional

Expenses

USD 5 million

(Rs.43,32,50,000.00/-)

1C Total

Compensatory

Damages

USD 38.78 million

(Rs.336,02,87,000.00/)

2 Costs Rs.3,23,10,966.60/-

along with the Court

Fee.

3 Grand Total

(Damages +

Costs)

Rs.339,25,97,966.60/-

+ Court Fee

123. Decree sheet be drawn up in the above

terms.

124. The suit along with all pending applications,

if any are disposed of.”

16. The defendant being dissatisfied with the judgment and money decree

passed by the learned Single Judge of the High Court challenged the

same by filing RFA (O.S.) (COMM) No. 11 of 2025.

17. In the appeal filed by the defendant, an application was filed under

Order XLI Rule 5(1) and Rule 5(3) of the CPC respectively, seeking stay

of the operation of judgment and money decree passed by the learned

Single Judge referred to above.

Page 11 of 73

18. The Division Bench of the High Court after hearing the decree-holders

and the judgment-debtor allowed the stay application in the following

terms:

“181. We, therefore, dispose of the present

application by staying the operation of the

impugned judgment dated 25 February 2025,

passed by the learned Single Judge, insofar as it

awards damages of Rs. 336,02,87,000/-, and

costs of Rs. 3,23,10,966.60/-.

182. This shall, however, be subject to an

undertaking being furnished by the appellant

Amazon Tech to comply with the impugned

judgment, in the event of its failing in the present

appeal, to be furnished with the Registry of this

Court within a period of two weeks from

pronouncement of the present judgment.

183. CM Appl 26455/2025 stands flowed to the

aforesaid extent.

184. Observations and findings contained in the

present judgment, we clarify, are only intended to

be prima facie and for the purposes of disposing

of the present application. They shall not be

binding on Court while deciding the present

appeal.”

19. In such circumstance referred to above, the original plaintiffs/decree-

holders are here before us with the present petition.

B. SUBMISSIONS ON BEHALF OF THE PLAINTIFFS

20. Mr. Mukul Rohatgi and Mr. Gaurav Pachnanda, the learned Senior

Counsel appearing for the plaintiffs submitted that the Division Bench

of the High Court committed an egregious error in granting the benefit

of unconditional stay of the execution of money decree. It was

vehemently submitted that the impugned judgment and order passed

by the Division Bench of the High Court is in gross violation and

flagrant disregard of the mandatory provisions of Order XLI Rule 5(1)

and Rule 5(3) of the CPC respectively.

Page 12 of 73

21. Mr. Rohatgi vehemently submitted that impugned judgment and order

is erroneous on all counts. According to the learned Senior Counsel,

the High Court is not correct in saying that there was no valid service

of summons to the defendant.

22. The learned Senior Counsel vehemently submitted that Order XLI Rule

1(3) of the CPC makes it abundantly clear that in an appeal against a

decree for payment of amount, the appellant is obliged in law, within

the time permitted by the Appellate Court, to deposit the amount

awarded or furnish such security in respect thereof as the Court may

think fit. He laid much stress on the fact that under Order XLI Rule

5(5) of the CPC a deposit or security, is a condition precedent for an

order by the Appellate Court staying the execution of the decree.

23. In other words, according to the learned Senior Counsel the provision

is mandatory in character. With a view to fortify the submissions noted

aforesaid, the learned Senior Counsel placed strong reliance on the

decision of this Court in the case of Sihor Nagar Palika Bureau v.

Bhabhlubhai Virabhai & Co., reported in (2005) 4 SCC 1.

24. It was vehemently argued that, if according to the defendant it is a case

of an ex parte decree, i.e., decree passed without service of valid

summons, then why the defendant did not prefer any application under

Order IX Rule 13 of the CPC? Why defendant thought fit to prefer an

appeal against such so called ex parte decree?

25. The learned Senior Counsel invited our attention to the second Proviso

to Order IX Rule 13 of the CPC. Relying on the same, it was argued that

the defendant had the requisite knowledge of the date of hearing and

had sufficient time to appear, file its written statement, and to contest

Page 13 of 73

the suit. It was argued that the delivery of the suit papers and the order

passed by the High Court dated 12.10.2020 granting ex parte

injunction subject to compliance of Order XXXIX Rule 3 of the CPC

would amount to adequate service of summons in accordance with law.

To fortify this submission reliance was placed on the decision of this

Court in the case of Sunil Poddar and Others v. Union Bank of

India, reported in (2008) 2 SCC 326, and the decision of the Delhi

High Court in the case of LT Foods Ltd. v. Saraswati Trading

Company, reported in 2022 SCC OnLine Del 3694.

26. It was also submitted by the learned Counsel that the Division Bench

of the High Court committed an egregious error in staying the money

decree on mere asking the defendant to furnish an undertaking on

oath, that in the event, if the appeal is dismissed the defendant shall

deposit the decretal amount. This according to the learned Senior

Counsel cannot be termed as adequate security.

27. In such circumstances referred to above, the learned Senior Counsel

prayed that there being merit in his petition the same may be allowed

and the impugned judgment and order be set aside , and further the

defendant may be directed to deposit the decretal amount with interest

in the court below.

C. SUBMISSIONS ON BEHALF OF THE DEFENDANT

28. On the other hand, Dr. Abhishek Manu Singhvi, Mr. Neeraj Kishan

Kaul and Mr. Arvind Nigam, the learned Senior Counsel appearing for

the defendant, while vehemently opposing this petition submitted that

no error not to speak of any error of law could be said to have been

committed by the High Court in passing the impugned judgment and

order.

Page 14 of 73

29. The learned Senior Counsel submitted that all the relevant aspects of

the matter could be said to have been looked into by the Division Bench

painstakingly, and upon being fully convinced on all aspects, the

Division Bench in its discretion thought fit to grant the benefit of stay

of the execution of the money decree without insisting for the deposit

of the decretal amount with interest or any other tangible security.

30. It was argued that the decision of this Court in Sihor Nagar Palika

(supra) upon which strong reliance has been placed on behalf of the

petitioner is of no avail in view of the decision of this Court in Malwa

Strips Pvt. Limited v. Jyoti Limited, reported in (2009) 2 SCC 426.

31. It was pointed that in Malwa Strips (supra), this Court considered

Sihor Nagar Palika (supra) and took the view that the word “shall” in

Order XLI Rule 5 of the CPC is not mandatory, and if an exceptional

case is made out then it is always open for the Appellate Court to grant

the benefit of stay of the execution of a money decree without insisting

for deposit of the entire decretal amount with interest.

32. It was argued that the Division Bench of the High Court was fully

convinced that not only any valid summons was not served upon the

defendants and the suit proceeded ex parte, but even on other counts,

the judgment and decree passed by the Court, prima facie, suffers from

various legal infirmities.

33. The learned Senior Counsel submitted that the Division Bench of the

High Court in its impugned judgment and order has recorded few

shocking facts like the plaintiffs enhancing the claim of damages

consequently from Rs. 2 crore in the plaint to Rs. 3,780 crore at the

stage of written submissions post-trial, and that too without any

Page 15 of 73

amendment and without putting the defendant to notice of such

enhanced claim without any basis in the pleadings. It was argued that

having regard to the gross perversities and illegalities writ large in the

decree and conduct of the suit proceedings, asking the defendant to

furnish security or deposit of any particular amount as a pre-condition

for stay would be wholly disproportionate and excessive.

34. In such circumstances referred to above, the learned Senior Counsel

prayed that there being no merit in the present petition the same may

be dismissed.

D. REJOINDER TO THE SUBMISSIONS CANVASSED ON

BEHALF OF THE DEFENDANT S

35. Mr. Gaurav Pachnanda, the learned Senior Counsel appearing for the

plaintiffs in rejoinder put forward an important submission, which we

must take record and deal with the same.

36. The learned Senior Counsel invited our attention to Section 36(3) of the

Arbitration and Conciliation Act, 1996 (for short, “the Arbitration

Act”). He would submit that the second Proviso attached to Section

36(3) of the Arbitration Act is an indication that ordinarily by applying

the principles of Order XLI Rule 5 of the CPC, as mentioned in Section

36(3) of the Arbitration Act, the Court would not be empowered to

unconditionally stay an arbitration award or a judgment.

37. In the alternative, the learned Senior Counsel sought to argue that,

even if it was to be understood that the second Proviso attached to

Section 36(3) of the Arbitration Act provides that instead of exercising

discretion, the Court must grant unconditional stay in cases of fraud

and corruption, the same would lead to a logical inference that the

Page 16 of 73

discretion to grant an unconditional stay under Order XLI Rule 5 of the

CPC would be restricted to only cases of fraud or corruption, or grounds

that take colour from those two grounds and not cases of an extreme

or egregious view on the merits of the adjudication.

E. ANALYSIS

38. Having heard the learned Senior Counsel appearing for the parties and

having gone through materials on record, the only question that falls

for our consideration is whether the Division Bench of the High Court

committed any error in passing the impugned judgment and order?

39. Before adverting to the rival submissions canvassed on either side, we

must look into few relevant provisions of law and also look into few

decisions of this Court and various High Courts.

40. Order XLI Rule 1(3) of the CPC reads thus:-

“1. Form of appeal – What to accompany

memorandum.-

xxx

(3) Where the appeal is against a decree for

payment of money, the appellant shall, within

such time as the Appellate Court may allow,

deposit the amount disputed in the appeal or

furnish such security in respect thereof as the

Court may think fit.”

41. Order XLI Rule 5 of the CPC reads as under:-

“Order XLI Rule 5. Stay by Appellate Court.

(1) An appeal shall not operate as a stay of

proceedings under a decree or order appealed

from except so far as the Appellate Court may

order, nor shall execution of a decree be stayed

by reason only of an appeal having been

preferred from the decree; but the Appellate Court

may for sufficient cause order stay of execution of

such decree.

Page 17 of 73

Explanation-

An order by the Appellate Court for the stay of

execution of the decree shall be effective from

the date of the communication of such order to

the Court of first instance but an affidavit

sworn by the appellant, based on his personal

knowledge, stating that an order for the stay

of execution of the decree has been made by

the Appellate Court shall, pending the receipt

from the Appellate Court of the order for the

stay of execution or any order to the contrary,

be acted upon by the Court of first instance.

(2) Stay by Court which passed the decree. -

Where an application is made for stay of

execution of an appealable decree before the

expiration of the time allowed for appealing

therefrom, the Court which passed the decree

may on sufficient cause being shown order the

execution to be stayed.

(3) No order for stay of execution shall be made

under sub-rule (1) or sub-rule (2) unless the Court

making it is satisfied-

(a) that substantial loss may result to the party

applying for stay of execution unless the order

is made;

(b) that the application has been made without

unreasonable delay; and

(c) that security has been given by the

applicant for the due performance of such

decree or order as may ultimately be binding

upon him.

(4) [Subject to the provisions of sub-rule (3)], the

Court may make an ex parte order for stay of

execution pending the hearing of the application.

(5) Notwithstanding anything contained in the

foregoing sub-rules, where the appellant fails to

make the deposit or furnish the security specified

in sub-rule (3) of rule 1, the Court shall not make

an order staying the execution of the decree.”

Page 18 of 73

i. History of the Legislation in Question

42. The Bill No. 27 of 1974, being a Bill to amend the CPC and the

Limitation Act, 1963, was introduced in the Lok Sabha on April 8,

1974. The text of the Bill is found published in the Gazette of

India, Extraordinary dated April 8, 1974, in Part-II, Section 2 at pages

203 to 293.

43. The Statement of Objects and Reasons accompanying the Bill recites in

paragraph 5 at page 295 that after carefully considering the

recommendations made by the Law Commission in its Twenty -seventh,

Fortieth, Fifty-fourth and Fifty-fifth Reports, the Government had

decided to bring forward the said Bill for the amendment of the Code of

Civil Procedure, 1908, keeping in view, among others, the following

basic considerations, namely:

(i) that a litigant should get a fair trial in accordance with the

accepted principles of natural justice;

(ii) that every effort should be made to expedite the disposal of civil

suits and proceedings, so that justice may not be delayed;

(iii) that the procedure should not be complicated and should, to

the utmost extent possible, ensure fair deal to the poorer sections

of the community who do not have the means to engage a pleader

to defend their cases.

44. Clause 90 of the Bill provided for the amendment of Order XLI. In Rule

1 of Order XLI, after sub-rule (2), sub-rule (3) in the following terms

was sought to be introduced:

“(3) Where the appeal is against an order made in

execution of a decree for payment of money, the

appellant shall, within such time as the Appellate

Court may allow, deposit the amount disputed in

the appeal or furnish such security in respect

thereof as the Court may think fit.”

Page 19 of 73

(Emphasis supplied)

45. In addition, the following provision was sought to be introduced by way

of amendment as sub-rule (1A), after sub-rule (1), in Rule 3 of Order

XLI:

“(1A) Where the appellant fails to make the

deposit or furnish security specified in sub-rule (3)

of Rule 1, the Court shall reject the memorandum

of appeal.”

46. Sub-rule (5) of Rule 5 of Order XLI, as now enacted, did not find place

in the Bill, in the same or any other form.

47. The Notes on Clauses annexed to the Bill point out at page 336 that

Rule 1 of Order XLI was being amended by introduction of sub-rule (3)

to provide for the deposit, or the furnishing of security for decretal

amount by judgment-debtor when the appeal is against an order made

in execution of a money decree. As regards amendment of Rule 3 of

Order XLI by insertion of sub-rule (1A), it was mentioned that the

provision was meant to provide that where the appellant fails to make

the deposit of the decretal amount or to furnish security specified in

sub-rule (3) of Rule 1, the memorandum of appeal shall be rejected.

48. After the Bill was introduced in Lok Sabha on April 8, 1974, the motion

for reference of the Bill to a Joint Committee of the Houses was moved

in Lok Sabha on May 2, 1974, and it was adopted. The Rajya Sabha

concurred in the said motion on May 14, 1974. The Joint Committee

constituted accordingly submitted its Report to Lok Sabha on April 1,

1976. The Report is found published at pages 804/3 to 804/34 in

the Gazette of India, Extraordinary, Part-II, Section 2 dated April 1,

1976. At page 804/21, the Joint Committee offered its observations in

paragraph 65 of the Report with regard to Clause 87 (Original clause

Page 20 of 73

90) of the Bill. The relevant portion from paragraph 65 of the Report of

the Joint Committee is extracted hereinbelow:

“65. Clause 87 (Original clause 90),—

(i) The Committee note that under the proposed

new sub-rule (1A) of Rule 3 in Order 41, if the

appellant fails either to deposit the amount

disputed in the appeal or to furnish security for

such amount, the memorandum of appeal shall be

rejected. The Committee feel that such a provision

will deprive a judgment-debtor having a good

case, to pursue the appeal on account of his

inability to deposit the disputed amount or to

furnish security for such amount.”

49. The Committee is, therefore, of the opinion that in order to see that

justice is done to both the parties, the proposed sub-rule might be

amended in such a way that neither the judgment-debtor is deprived

of his right to pursue the appeal nor the decree-holder is deprived of

the remedy. Proposed sub-rule (1A) has been amended to provide that

stay of execution of the decree will not be granted unless the deposit is

made or security is furnished and has been transposed as sub-rule (5)

of Rule 5.

50. Be it stated that the Committee made no specific recommendation in

regard to sub-rule (3) of Rule 1 of Order XLI proposed to be inserted by

original Clause 90 of the Bill. In other words, the Committee

recommended no change in the form or content of sub-rule (3) which

was proposed to be inserted by way of amendment in Rule 1 of Order

XLI. However, the Bill reported by the Committee incorporated a

material change in the said sub-rule which will be presently noticed.

51. The Code of Civil Procedure (Amendment) Bill, 1974 (Bill No. 27B of

1974) as reported by the Joint Committee is found published in

the Gazette of India, Extraordinary, Part-II, Section 2, dated April 1,

Page 21 of 73

1976 at pages 804/35 to 804. At page 804/111, Clause 87 finds place

and the relevant portions of the said clause are reproduced

hereinbelow:

“87. In the First Schedule, in Order 41,—

(i) Rule 1,—

xxx

(b) after sub-rule (2), the following sub-rules shall

be inserted, namely:

“(3) Where the appeal is against a decree for

payment of money, the appellant shall, within

such time as the Appellate Court may allow,

deposit the amount disputed in the appeal or

furnish such security in respect thereof as the

Court may think fit.”

(ii)

xxx

(iii) in rule 5,—

(a)

xxx

(b)

xxx

“(5) Notwithstanding anything contained in the

foregoing sub-rules, where the appellant fails to

make the deposit or furnish the security specified

in sub-rule (3) of rule 1, the Court shall not make

an order staying the execution of the decree.”

(Emphasis supplied)

52. The Bill having been considered and passed by both the Houses of

Parliament was enacted into the Code of Civil Procedure (Amendment)

Act, 1976 (No. 104 of 1976). The Act received the assent of the President

of India on September 9, 1976, and it was published in the Gazette of

India, Extraordinary, Part-II, Section-1, dated September 10, 1976. The

material amendments, namely, the insertion of sub-rule (3) in Rule 1

and sub-rule (5) in Rule 5 of Order XLI were duly enacted and stood

inserted in the CPC by Section 87 of the Amendment Act, which is to

Page 22 of 73

be found at page 1337 of the Gazette, and they came into force on and

with effect from February 1, 1977.

53. The substance of the legislative history set out hereinabove is that

Clause 90 of Bill No. 27 of 1974 stood materially altered as per clause

87 of Bill No. 27B of 1974, as reported by the Joint Committee, in the

following respects:

“(1) In sub-rule (3) of Rule 1 of Order 41, the

provision relating to the requirement of the

appellant depositing the amount disputed in the

appeal or furnishing such security in respect

thereof as the Court may think fit in cases where

the appeal is against an order made in execution

of a decree for payment of money was substituted

by the provision requiring such deposit being

made or security being furnished where the

appeal is against a decree for payment of money.

(2) Sub-rule (1A) of rule 3 of Order XLI requiring

the Court to reject the memorandum of appeal

where the appellant fails to make the deposit or

furnish security specified in sub-rule (3) of Rule 1

of Order 41, was deleted.

(3) Sub-rule (5) was added in Rule 5 of Order 41

providing that where the appellant fails to make

the deposit or to furnish the security, the Court

shall not make an order staying the execution of

the decree.”

(Emphasis supplied)

54. These changes are also found reflected in the Code of Civil Procedure

(Amendment) Act, 1978, and they now find place in the parent Act,

namely, the CPC.

ii. Principles required to be followed while Interpreting a

Provision of a Statute

55. As the entire debate revolves around the interpretation of the provisions

of Order XLI Rule 5(1) and Rule 5(3) of the CPC respectively, we must

Page 23 of 73

discuss the well settled principles required to be followed while

interpreting a provision of a statute.

56. The well-settled principles required to be followed by a court while

interpreting a provision of a statute is that the intention of the

legislature is primarily to be gathered from the language used, and

consequently, a construction which results in rejection of words as

meaningless, has to be avoided. It is not a sound principle of

construction to brush aside words or phrase in a statute as being

inapposite surplusage if they can have appropriate application in

circumstances conceivably within the contemplation of the statute. In

interpretation of statutes, the courts always presume that the

legislature inserted every part thereof for a purpose and the legislative

intention is that every part of the statute should have effect. The

legislature is deemed not to waste its words, or to say anything in vain.

[See: Mithilesh Singh v. Union of India, reported in (2003) 3 SCC

309].

57. Similarly, in the case of Padma Sundara Rao v. State of Tamil

Nadu, reported in (2002) 3 SCC 533, it was held that two principles of

construction – one relating to casus omissus, and the other in regard

to reading the statute as a whole appear to be well-settled. Under the

first principle, the rule of casus omissus cannot be supplied by the

court except in the case of clear necessity . The rule of casus

omissus should not be readily inferred and for that purpose, all the

parts of a statute or section must be construed together and every

clause of a section should be construed with reference to the context of

the statute and other clauses thereof, so that the construction to be

put on a particular provision makes a consistent enactment of the

whole statute. This would be more so, if literal construction of a

Page 24 of 73

particular clause leads to manifestly absurd or anomalous results,

which could not have been intended by the legislature. Therefore, if the

language is plain, there is no necessity of taking aid of external aid for

gathering the real intention of the legislature.

58. Over and above, we should bear in mind the following well-known rule

of interpretation of the statute reiterated by this Court in the case

of Union of India v. Deoki Nandan Agarwal , reported in 1992 Supp

(1) SCC 323:

“It is not the duty of the Court either to enlarge the

scope of the legislation or the intention of the

Legislature when the language of the provision is

plain and unambiguous. The Court cannot

rewrite, recast or reframe the legislation for the

very good reason that it has no power to legislate.

The power to legislate has not been conferred on

the Courts. The Court cannot add words to a

statute or read words into it which are not there.

Assuming there is a defect or an omission in the

words used by the Legislature the Court could not

go to its aid to correct or make up the deficiency.

Courts shall decide what the law is and not what

it should be. The Court of course adopts a

construction which will carry out the obvious

intention of the Legislature but could not legislate

itself. But to invoke judicial activism to set at

naught legislative judgment is subversive of the

Constitutional harmony and comity of

instrumentalities.”

(Emphasis supplied)

59. Applying the aforesaid principles, if we read the plain language of Order

XLI Rule 1 sub-rule (3) of the CPC, we get the clear intention of the

legislature that deposit of the decretal amount, or giving security

thereof is not a condition precedent for maintaining a money appeal,

and the court is vested with the discretion to grant time for depositing

such amount and giving security before disposal of the appeal, and at

the same time, the Appellate Court has also the power to extend the

Page 25 of 73

time by taking aid of Section 148 of the CPC. On the other hand, a less

grave consequence for non -compliance of such condition, was

envisaged, namely, to disentitle the appellant to the benefit of stay of

execution of the decree as provided in Rule 5(5) of Order XLI.

60. The aforesaid view has been expressed by this Court in the case of

Kayamuddin Shamsuddin Khan v. State Bank of India, reported

in (1998) 8 SCC 676, wherein it has been held as follows:-

“6. The learned counsel for the respondent has

invited our attention to Sub‐rule (3) of Rule 1 of

Order XLI in the CPC, as amended in the State of

Maharashtra, which reads as under:

“(3) Where the appeal is against a decree for

payment of money, the appellant shall, within

such time as the Appellate Court may allow,

deposit the amount disputed in the appeal or

furnish such security in respect thereof as the

Court may think fit:

Provided that the Court may dispense with the

deposit or security where it deems fit to do so

for sufficient cause.”

7. The submission of the learned counsel for the

respondent is that the High Court was right in

giving the direction regarding the deposit of Rs

75,000 as per the aforesaid provision and since

the appellant has failed to comply with the same

the appeal has been rightly directed to be

dismissed. We, however, find that the only

consequence for non‐compliance with the

direction given under Sub‐rule (3) of Rule 1 of

Order XLI is as provided in Sub‐ rule (5) of Rule 5

of Order XLI which reads as under:

“(5) Notwithstanding anything contained in the

foregoing sub‐rules, where the appellant fails

to make the deposit or furnish the security

specified in Sub‐rule (3) of Rule 1, the Court

shall not make an order staying the execution

of the decree.”

61. It may be apposite to observe that this Court in the aforesaid decision

was dealing with the interpretation of Order XLI Rule 1(3) of the CPC,

Page 26 of 73

as amended in the State of Maharashtra, where the appellate Court

has power to dispense with making deposit or security in fit and proper

cases.

62. In Malwa Strips (supra) this Court interpreted Order XLI Rule 1(3) of

the Code as provided in the Central legislation, i.e., the CPC, and held

that the said provision although couched with the expression “shall”

yet must be read as directory and not mandatory. It quoted with

approval the ratio laid down in Kayamuddin (supra).

63. In view of the law declared by this Court in Kayamuddin (supra) and

Malwa Strips (supra), there is no escape from the conclusion that the

obligation under Order XLI Rule 1(3) is not mandatory but directory in

nature, and failure to comply with the same shall not result in rejection

of the appeal, but would disentitle the appellant the benefit of stay of

execution of the money decree.

64. The provisions of Order XLI Rule 5 of the CPC govern the question of

grant or refusal of stay of execution of the decree by the appellate

court. A mere reading of the provision makes it clear that it does not

make any distinction between a money decree and other decrees. The

powers of the Appellate Court to order stay of execution of the decree

are not fettered in any way if there is “sufficient cause” for passing

such an order. Even with regard to money decrees, the discretion of

the court is circumscribed by the same limitations imposed under

the provisions of Order XLI Rule 5. There is no reason why decrees

for payment of money should receive a consideration different from

the other decrees in the matter of stay pending appeals. In suitable

cases, where the court is satisfied that substantial loss may result to

the applicant, if no stay is granted or there are any exceptional

Page 27 of 73

circumstances, the court may grant stay as prayed for either with or

without any condition whatsoever. Otherwise, in the absence of any

exceptional circumstance, money decree ordinarily would not be

stayed unconditionally from its execution by the appellate court

pending the final disposal of appeal on its own merits.

65. 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. As per the provisions of sub-

rule (3) of Rule 5 of Order XLI, the Court has to see;

(1) whether there will be substantial loss to the party applying for

stay;

(2) whether the application has been made without unreasonable

delay; and

(3) whether security has been given by the applicant for due

performance of the decree.

66. Thus, the provisions of the Rule are very clear and they do not make

any distinction between money decrees and other types of decrees.

67. This Court in Sihor Nagar Palika (supra), observed the following as

regards the power of the Appellate Court to stay the decree in first

appeal:-

“Order 41 Rule 1(3) CPC provides that in an

appeal against a decree for payment of amount

the appellant shall, within the time permitted by

the appellate court, deposit the amount disputed

in the appeal or furnish such security in respect

thereof as the court may think fit. Under Order 41

Rule 5(5), a deposit or security, as abovesaid, is

a condition precedent for an order by the

appellate court staying the execution of the

Page 28 of 73

decree. A bare reading of the two provisions

referred to hereinabove, shows a discretion

having been conferred on the appellate court to

direct either deposit of the amount disputed in the

appeal or to permit such security in respect

thereof being furnished as the appellate court

may think fit. Needless to say that the discretion

is to be exercised judicially and not arbitrarily

depending on the facts and circumstances of a

given case. Ordinarily, execution of a money

decree is not stayed inasmuch as satisfaction of

money decree does not amount to irreparable

injury and in the event of the appeal being

allowed, the remedy of restitution is always

available to the successful party. Still the power

is there, of course a discretionary power, and is

meant to be exercised in appropriate cases.”

(Emphasis supplied)

68. In Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd.,

reported in (2005) 1 SCC 705, this Court while deciding a litigation

arising from the Delhi Rent Control Act, 1958 observed as under:-

“6. The order of eviction passed by the Rent

Controller is appealable to the Rent Control

Tribunal under Section 38 of the Act. There is no

specific provision in the Act conferring power on

the Tribunal to grant stay on the execution of the

order of eviction passed by the Controller, but

sub-section (3) of Section 38 confers the Tribunal

with all the powers vested in a court under the

Code of Civil Procedure, 1908 while hearing an

appeal. The provision empowers the Tribunal to

pass an order of stay by reference to Rule 5 of

Order 41 of the Code of Civil Procedure, 1908

(hereinafter “the Code” for short). This position

was not disputed by the learned Senior Counsel

appearing for either of the parties.

xxx

8. It is well settled that mere preferring of an

appeal does not operate as stay on the decree or

order appealed against nor on the proceedings in

the court below. A prayer for the grant of stay of

proceedings or on the execution of decree or order

appealed against has to be specifically made to

Page 29 of 73

the appellate court and the appellate court has

discretion to grant an order of stay or to refuse the

same. The only guiding factor, indicated in Rule 5

aforesaid, 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. Experience shows that the principal

consideration which prevails with the appellate

court is that in spite of the appeal having been

entertained for hearing by the appellate court, the

appellant may not be deprived of the fruits of his

success in the event of the appeal being allowed.

This consideration is pitted and weighed against

the other paramount consideration: why should a

party having succeeded from the court below be

deprived of the fruits of the decree or order in his

hands merely because the defeated party has

chosen to invoke the jurisdiction of a superior

forum. Still the question which the court dealing

with a prayer for the grant of stay asks itself is:

why the status quo prevailing on the date of the

decree and/or the date of making of the

application for stay be not allowed to continue by

granting stay, and not the question why the stay

should be granted.

9. […]In our opinion, while granting an order of

stay under Order 41 Rule 5 CPC, the appellate

court does have jurisdiction to put the party

seeking stay order on such terms as would

reasonably compensate the party successful at

the end of the appeal insofar as those

proceedings are concerned. Thus, for example,

though a decree for payment of money is not

ordinarily stayed by the appellate court, yet, if it

exercises its jurisdiction to grant stay in an

exceptional case it may direct the appellant to

make payment of the decretal amount with

interest as a condition precedent to the grant of

stay, though the decree under appeal does not

make provision for payment of interest by the

judgment-debtor to the decree-holder. Robust

common sense, common knowledge of human

affairs and events gained by judicial experience

and judicially noticeable facts, over and above

the material available on record — all these

Page 30 of 73

provide useful inputs as relevant facts for

exercise of discretion while passing an order and

formulating the terms to put the parties on. […]”

(Emphasis supplied)

69. In Malwa Strips (supra), this Court after looking into the decision

in Sihor Nagar Palika (supra) observed as under :-

“9. In terms of sub-rule (5) of Rule 5 of Order 41,

the court shall not make an order staying the

execution of the decree notwithstanding anything

contained in the foregoing sub-rules, where the

appellant fails to make the deposit or furnish the

security specified in sub-rule (3) of Rule 1. We will

proceed on the assumption that although the

word “shall” has been used in Order 41 Rule 1(3)

of the Code, the same is not mandatory in

character, and, thus, may be read as directory.

10. In Rajasthan SEB v. Ram Deo [AIR 1999 Raj

264] after noticing some of the aforementioned

decisions as also the legislative history of the said

provision, a learned Single Judge of the

Rajasthan High Court held as under: (AIR pp.

267-68, para 19)

“19. After close scrutiny of the aforesaid

observations, I am of the opinion that in view

of the provisions of sub-rule (5) of Rule 5 of

Order 41 CPC it cannot be held that appeal

against the decree for payment of money is not

maintainable, if filed withou t making

compliance with the provisions contained in

sub-rule (3) of Rule 1 of Order 41 CPC and it is

the duty of the Registry to see that on

application under Order 41 Rule 5 CPC seeking

stay of money decree the appellant has to

incorporate a note in regard to his readiness

and willingness to comply with the directions

under sub-rule (3) of Rule 1 of Order 41 CPC. If

the appeal is preferred against the decree for

payment of money without any stay

application under Order 41 Rule 5 CPC then in

that event, it is the duty of the appellant to

incorporate a note in the memo of appeal in

respect of his readiness and willingness to

Page 31 of 73

comply with the directions issued by the court

under sub-rule (3) of Rule 1 of Order 41 CPC.”

11. We may, however, notice that although the

provisions of sub-rule (3) of Rule 1 of Order 41

have been held not to be mandatory, this Court in

Kayamuddin Shamsuddin Khan v. SBI [(1998) 8

SCC 676] opined that non-compliance with a

direction to deposit the decretal amount or part of

it or furnish security therefor would result in the

dismissal of the stay application but not the entire

appeal, stating: (SCC p. 677, para 8)

“8. This would mean that non-compliance with

the direction given regarding deposit under

sub-rule (3) of Rule 1 of Order 41 would result

in the Court refusing to stay the execution of

the decree. In other words, the application for

stay of the execution of the decree could be

dismissed for such non-compliance but the

Court could not give a direction for the

dismissal of the appeal itself for such non-

compliance.”

To the same effect is the decision of this Court

in Sihor Nagar Palika Bureau v. Bhabhlubhai

Virabhai & Co. [(2005) 4 SCC 1], wherein it

was held: (SCC pp. 2-3, para 6)

“6. Order 41 Rule 1(3) CPC provides that in an

appeal against a decree for payment of

amount the appellant shall, within the time

permitted by the appellate court, deposit the

amount disputed in the appeal or furnish such

security in respect thereof as the court may

think fit. Under Order 41 Rule 5(5), a deposit or

security, as abovesaid, is a condition

precedent for an order by the appellate court

staying the execution of the decree. A bare

reading of the two provisions referred to

hereinabove, shows a discretion having been

conferred on the appellate court to direct either

deposit of the amount disputed in the appeal

or to permit such security in respect thereof

being furnished as the appellate court may

think fit. Needless to say that the discretion is

to be exercised judicially and not arbitrarily

depending on the facts and circumstances of a

given case. Ordinarily, execution of a money

Page 32 of 73

decree is not stayed inasmuch as satisfaction

of money decree does not amount to

irreparable injury and in the event of the

appeal being allowed, the remedy of restitution

is always available to the successful party.

Still the power is there, of course a

discretionary power, and is meant to be

exercised in appropriate cases.”

To the same effect is the decision of this Court

in B.P. Agarwal v. Dhanalakshmi Bank Ltd.

[(2008) 3 SCC 397]

12. The High Court in this case failed to notice the

provisions of sub-rule (3) of Rule 1 of Order 41.

The appellate court, indisputably, has the

discretion to direct deposit of such amount, as it

may think fit, although the decretal amount has

not been deposited in its entirety by the judgment-

debtor at the time of filing of the appeal. But while

granting stay of the execution of the decree, it

must take into consideration the facts and

circumstances of the case before it. It is not to act

arbitrarily either way. If a stay is granted,

sufficient cause must be shown, which means

that the materials on record were required to be

perused and reasons are to be assigned. Such

reasons should be cogent and adequate.

13. The High Court, with respect, failed to notice

that suit was one under Order 37 of the Code.

Whether it was maintainable or not may fall for

consideration in the appeal. Even assuming that

the same was not maintainable, the question

which should have been posed by the High Court

was as to whether sufficient cause had been

made out to reverse the decree passed in favour

of the appellant. Even a decree could have been

passed having regard to the defence raised by the

respondent under Order 12 Rule 6 of the Code.

We, therefore, see no justification at all as to why

an order of stay of the nature was passed by the

High Court.

14. Even if the said provision is not mandatory,

the purpose for which such a provision has been

inserted should be taken into consideration. An

exceptional case has to be made out for stay of

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execution of a money decree. The parliamentary

intent should have been given effect to. The High

Court has not said that any exceptional case has

been made out. It did not arrive at the conclusion

that it would cause undue hardship to the

respondent if the ordinary rule to direct payment

of the decretal amount or a part of it and/or

directly through the judgment-debtor to secure the

payment of the decretal amount is granted. A

strong case should be made out for passing an

order of stay of execution of the decree in its

entirety.”

(Emphasis supplied)

70. Thus, in Malwa Strips (supra), this Court unequivocally observed

that although the word “shall” has been used in Order XLI Rule 5

CPC, yet the same is not mandatory in character. The Court further

observed that the purpose for which such a provision has been

inserted, should be taken into consideration. An exceptional case

has to be made out for unconditional stay of execution of a money

decree. Thus, it is necessary to imply that if an exceptional case is

made out, the Appellate court has the discretion to stay the

execution of the money decree without imposing any condition.

iii. Decisions of various High Courts on the Subject

71. We may now look into few old decisions of various High Courts on

the subject. In the case of A.A. Khan v. Ameer Khan, reported in

1949 SCC OnLine Kar 11 , the High Court of Mysore has observed

as follows (headnote):-

“The court can stay execution of money decrees

pending appeal on such security as it deems fit in

proper cases in which sufficient cause for a stay

has been made out, without requiring in all cases

that the decree amount should be deposited in

court.”

(Emphasis supplied)

Page 34 of 73

72. Similarly, the Division Bench of the Saurashtra High Court in the

case of Borough Municipality v. Firm Ramji Vashram , reported

in AIR 1955 Guj 113, has in terms held that the judgment of the

Bombay High Court in the case of Dhunjibhoy Cowasji Umrigar v.

Lisboa, reported in ILR 1889 13 Bom 252, cannot serve as a useful

guide for cases under Order XLI Rule 5 of the CPC. It is further

observed therein that when the Bombay High Court decided the case

of Dhunjibhoy (supra), the provisions of the Civil Procedure Code,

1882, were applicable and therein, there was no provision similar to

that of Order XLI Rule 5 of the CPC. The relevant observations read

thus:-

“6. We are not concerned with sub-rule (4) which

deals with ex parte orders for stay of execution

pending the hearing of the application. The power

of the Court to stay execution of a decree has to

be exercised within the four corners of the above

Rule. The intention of the Legislature which

appears from the language of this rule seems to

be that an appeal should not automatically

operate as a stay of execution of the decree and

no order for stay of execution should be made

merely by reason only that an appeal has been

preferred from the decree.

7. The reason of the rule appears to be that the

rights of the decree -holder having been

determined by a competent Court, it is not fair

that he should be deprived of the fruits of his

decree merely because the judgment -debtor

prefers an appeal against the decree. At the same

time if execution of the decree is likely to result in

substantial loss to the decree-holder, discretion is

given to the Court to stay execution provided the

other two conditions of sub-r. (3) are satisfied. It

is, therefore, impossible to formulate any uniform

rule of practice and each case must be decided on

its own facts.

8. In the case of money decrees, a Bench of the

Bombay High Court decided in Dhunjibhoy

Cowasji Umrigar v. Lisboa, 13 Bom 241 (A) that

where a decree orders payment of money and an

Page 35 of 73

appeal is lodged against that decree by the party

directed to pay, then on his application execution

of the decree should be stayed, so far as it directs

payment, on the judgment-debtor lodging the

amount in Court, unless the other party gives

security for the repayment of money in the event

of the decree being reversed.

9. If such security is given by the successful

party, then stay of execution should not be

granted. This order was made in 1888 under the

Code of Civil Procedure of 1882. That Code did

not have any provision similar to O. 41 R. 5 of the

CPC and the order must be taken to have been

passed in the exercise of the inherent power of the

Court.

10. But after the enactment of O. 41 R. 5 in the

Code of 1908 the discretion of the Court is very

much limited and has to be exercised within the

limits prescribed by the rule, and in a proper case

where substantial loss is likely to result to the

judgment-debtor if a decree for payment of money

is executed, the Court can stay execution of the

decree even before the judgment-debtor deposits

the amount in Court. The above decision therefore

cannot serve as an useful guide for the cases

under O. 41 R. 5.”

(Emphasis supplied)

73. In the case, Movie Enterprises v. M.S. Periasamy Mudaliar ,

reported in 1952 SCC OnLine Kar 14, the High Court of Mysore has

observed as under (headnote):

“Order 41, rule 5, cannot be read as imposing any

limitation that the decrees for payment of money

should receive a consideration different from the

other decrees in the matter of stay pending

appeal. Therefore, there could be no restriction on

the discretion of the court for staying a decree for

payment of money in suitable cases where the

court is satisfied that substantial loss will result

to the applicant if no stay is made. In this view, it

cannot be contended that a decree directing

payment of money should not be stayed unless

the decree amount is lodged into court.”

(Emphasis supplied)

Page 36 of 73

74. In Borough Municipality (supra), the Saurashtra High Court

referred to the Bombay High Court decision in the case of

Dhunjibhoy (supra). We must look into this decision of Dhunjibhoy

(supra).

75. In the case of Dhunjibhoy (supra), the Bombay High Court had

observed that no stay of execution of money decree should be granted

without asking the judgment debtor to deposit the decretal amount.

In Dhunjibhoy (supra) the Bombay High Court held that:

“A party appealing against a decree, which

directs him to pay money, may obtain stay of

execution of-decree, so far as it directs payment,

on his lodging the amount in court, unless the

other party gives security for the repayment of the

money in the event of the decree being reversed.

If such security be given by the successful party,

then stay of execution should not be granted.”

76. The case of Dhunjibhoy (supra) was decided by the Bombay High

Court on August 31, 1888, under the provisions of the Civil

Procedure Code, 1882. In that Code, there was no provision similar

to Order 41 Rule 5 of the CPC. Therefore, the order must be taken

to have been passed by the court in exercise of its inherent powers.

On the other hand, the facts and circumstances of the present case

are governed by the provisions of the CPC, wherein there is an

express provision regarding grant or refusal of stay of execution of

decree. Hence, it is not permissible to the court to have recourse to

the inherent powers of the court. This distinction makes a world of

difference between the two situations.

77. It may also be noted that in Dhunjibhoy (supra), the suit was for

injunction restraining the defendant from erecting a building which

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will interfere with the free access of light and air through certain

windows in the plaintiff's house. The plaintiff had obtained a decree

in respect of the windows and had also obtained a decree for

compensation by way of damages for the injury done to the

windows. The decree also directed the defendant to pay the

plaintiff's costs of the suit. The defendant had filed an appeal and

a question arose regarding the execution of the decree so far as it

related to costs. It is in this context, i.e., where the prayer was for

recovery of the amount of costs awarded by the trial court, the

aforesaid observations were made by the Bombay High Court.

78. Thus, it cannot be said as a principle of universal rule that in all

cases of money decree, the defendant should be directed to deposit

the amount in court and then only the question of stay be

considered.

79. The decisions of the High Court of Mysore in A.A. Khan (supra) and

Movie Enterprises (supra) have been followed by the Rajasthan

High Court in the case of Bansidhar v. Pribhu Dayal, reported in

1952 SCC OnLine Raj.

80. Then the question is: Is there an established practice that the

execution of money decree should not be stayed unless the

judgment debtor deposits the decretal amount in court, and on

such deposit, the successful party be permitted to withdraw the

money on furnishing security to the satisfaction of the court. We do

observe that in a large number of cases where a money decree is

passed, this Court generally does not grant stay unless the

defendant deposits the amount in court. But this appears to be a

rule of prudence and not a principle of law of universal application.

Page 38 of 73

We also believe and hold that this practice based on the rule of

prudence should ordinarily be followed by appellate courts. The

practice of not granting stay in money decrees except on condition

that the decretal amount be deposited in the court , and the

successful party be permitted to withdraw the same on furnishing

security to the satisfaction of the trial court appears to have been

well entrenched, and for good reasons. [See: Central Bank of India

v. State of Gujarat, reported in (1987) 4 SCC 407]

81. Hence, the term “sufficient cause” occurring in Order XLI Rule 5 of

the CPC has got to be interpreted and understood in the light of the

aforesaid discussion. After all, what is “sufficient”? One may again

turn to Black’s Law Dictionary. “Sufficient” means “adequate-

enough” as much as may be necessary -equal or fit for end

proposed-and that which may be necessary to accomplish an

object.

iv. Meaning and Import of “sufficient cause” under Order XLI

Rule 5 of the CPC

82. Having regard to the case law discussed above and for reasons to be

recorded, we are inclined or rather persuaded to take the view 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.

83. 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.

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84. We are at one with the submission canvassed on behalf of the

defendant that in contradistinction to Order XLI, the word “deposit”

does not figure in Rule 1(3), Rule 5(5) and Rule 5(3) respectively.

85. Under Rule 5(3) sub-clause (c) – security has to be furnished for “due

performance” of the decree. We find it difficult to read any mandate for

direction to deposit the decretal amount.

86. As noted above, the provision under 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. It casts an obligation

upon the court to record its satisfaction for stay of execution such

decree. Therefore, security can be in the shape of property, bond, or by

undertaking from the appellant to abide by the decree, seeking stay of

execution.

87. However, 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.

v. Service of Summons and Irregularity in the Service of

Summons

88. At this stage, we must deal with one submission canvassed on behalf

of the petitioners that in view of the second Proviso to Order IX Rule 13

of the CPC, the defendant could be said to have had the requisite

“knowledge” of the date of hearing and sufficient time to appear. It was

sought to be argued vehemently that the delivery of suit papers and the

order granting ex parte injunction dated 12.10.2020 could be said to

be valid service of summons. In this regard, strong reliance was sought

to be placed on the decision of this Court in the case of Sunil Poddar

Page 40 of 73

(supra) and the Delhi High Court judgment in the case of LT Foods

(supra) respectively referred to above.

89. We do not find any merit in the aforesaid submission, for the simple

reason that the second Proviso to Order IX Rule 13 of the CPC would

come into play only when there is “irregularity” in the service of

summons (for instance, the publication in wrong newspaper, no

acknowledgment on duplicate summons being received etc).

90. This has been well explained by this Court in its decision in Basant

Singh v. Roman Catholic Mission, reported in (2002) 7 SCC 531. In

the case in hand, the High Court has noted that prima facie there was

nothing on record to establish valid service of “summons”. If that be so,

the second Proviso would not come into play. This proposition is again

well explained by this Court in its decision Sushil Kumar Sabharwal

v. Gurpreet Singh & Ors., reported in (2002) 5 SCC 377.

91. In the aforesaid context, the reliance placed on behalf the petitioners,

on the decision in Sunil Poddar (supra) is of no avail. The undisputed

facts in the said case were that the parties had already filed their

pleadings before the civil court much prior to the case being transferred

to the DRT. The parties were also aware of the transfer of the suit to

the DRT. Despite such knowledge the party concerned consciously

avoided service of summons in those proceedings. The decision in

Sunil Poddar (supra) is distinguishable on the facts.

92. In the case on hand, the Division Bench in its impugned judgment has

prima facie noted that there was nothing to indicate whether:

(a) the plaintiffs had actually served all the documents with their

notices under Order XXXIX Rule 3 and;

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(b) the defendant was actually made aware with sufficient time of

the claim as regards the next date of hearing in the proceedings.

93. In the same manner the decision of the Delhi High Court in LT Food

(supra) is also of no avail as the same is distinguishable on the facts.

94. We now proceed to deal with the submission canvassed by Mr. Gaurav

Pachnanda, the learned Senior Counsel in rejoinder as noted by us in

paras 35 and 36 respectively of our judgment.

vi. Reading of Section 36 of the Arbitration Act and Order

XLI Rule 3 and Rule 5 respectively of the CPC

95. At this stage, we need to clarify something important. At the outset, we

must state that this litigation has nothing to do with Section 36 of the

Arbitration Act. In the present litigation, we are only concerned with

Order XLI Rule 3 and 5 respectively, of the CPC. We are referring to

Section 36 of the Arbitration Act only for the limited purpose of

answering the specific contention raised by Mr. Gaurav Pachnanda. In

other words, whether the learned counsel is right in extending the

analogy of Section 36 of the Arbitration Act to the present case or rather

to the provisions of Order XLI Rule 3 and 5 of the CPC, is inappropriate.

For this limited purpose only, we have thought fit to look into the two

decisions of this Court one in the case of Sepco Electric Power

Construction v. Power Mech Projects Limited, reported in 2022 SCC

OnLine SC 1243, and the other, in the case of Pam Developments

Private Limited v. State of West Bengal, reported in (2019) 8 SCC

112.

96. Section 36 reads thus:

“36. Enforcement.—(1) Where the time for making

an application to set aside the arbitral award

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under section 34 has expired, then, subject to the

provisions of sub-section (2), such award shall be

enforced in accordance with the provisions of the

Code of Civil Procedure, 1908 (5 of 1908), in the

same manner as if it were a decree of the court.

(2) Where an application to set aside the arbitral

award has been filed in the Court under section

34, the filing of such an application shall not by

itself render that award unenforceable, unless

the Court grants an order of stay of the operation

of the said arbitral award in accordance with the

provisions of sub-section (3), on a separate

application made for that purpose.

(3) Upon filing of an application under sub-section

(2) for stay of the operation of the arbitral award,

the Court may, subject to such conditions as it

may deem fit, grant stay of the operation of such

award for reasons to be recorded in writing:

Provided that the Court shall, while

considering the application for grant of stay in

the case of an arbitral award for payment of

money, have due regard to the provisions for

grant of stay of a money decree under the

provisions of the Code of Civil Procedure, 1908

(5 of 1908).]

Provided further that where the Court is

satisfied that a Prima facie case is made out

that,—

(a) the arbitration agreement or contract

which is the basis of the award; or

(b) the making of the award,

was induced or effected by fraud or corruption,

it shall stay the award unconditionally

pending disposal of the challenge under

section 34 to the award.

Explanation.—For the removal of doubts, it is

hereby clarified that the above proviso shall apply

to all court cases arising out of or in relation to

arbitral proceedings, irrespective of whether the

arbitral or court proceedings were commenced

prior to or after the commencement of the

Arbitration and Conciliation (Amendment) Act,

2015 (3 of 2016)”

(Emphasis supplied)

Page 43 of 73

97. Section 36 of the Arbitration Act was substituted vide the Arbitration

and Conciliation (Amendment) Act 2015 (for short, “the Amendment

Act, 2015”). Prior to the 2015 Amendment, the mere filing of an

application challenging arbitral award under Section 34 of the

Arbitration Act was understood in many quarters as a stay of the award

in terms of the unamended Section 36 of the Arbitration Act.

98. This “automatic stay” became a subject matter of legal debate as being

a great obstacle to the ease of enforcement of arbitral awards. In such

circumstances, and with a view to address this lacuna, the Amendment

Act, 2015, was introduced in the Arbitration Act. Under the

Amendment Act, 2015, the existing provision in Section 36 was wholly

substituted. Sub-section (2) of the amended provision provided that the

filing of an application to set aside the arbitral award did not by itself

render the award unenforceable unless an order was passed by

“granting a stay on the operation of the award pursuant to a separate

application filed to that effect”. Therefore, Section 36(2) of the

Arbitration Act contemplated a separate application seeking stay.

99. In Hindustan Construction Company & Anr. v. Union of India &

Ors., reported in (2020) 17 SCC 324, this Court held that there would

be no automatic stay on the enforcement of an arbitral award under

Section 36 of the Arbitration Act due to th e mere fact that an

application to set aside the award under Section 34 had been field

before a court. In the said case, the constitutional validity of Section

87 of the Arbitration Act as inserted by Section 13 of the Arbitration

and Conciliation (Amendment) Act, 2019 (for short, “the Amendment

Act, 2019”) was challenged along with repeal of Section 26 of the

Amendment Act, 2015 by Section 15 of the Amendment Act, 2019. This

Court in the final analysis held as under:

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i. The language of Section 36 of the Arbitration Act does not warrant

an automatic stay on the enforcement of an arbitral award due to

the mere filing of a Section 34 petition.

ii. The legislature, by inserting Section 87 and deleting Section 26

through the Amendment Act, 2019, had subverted the purpose of

the Arbitration Act, 1996 and the Amendment Act, 2015, and was

contrary to public interest because it sought to revive the pre-2015

Amendment automatic stay regime that was a major cause of

delay to the disposal of arbitral proceedings, and thus, the Court

declared Section 13 and 15 of the Amendment Act, 2019 as

manifestly arbitrary and unconstitutional as being violative of

Article 14 of the Constitution.

iii. The ratio in the BCCI v. Kochi Cricket Pvt. Ltd., reported in

(2018) 6 SCC 287, was the position of law, prevailing at that time

and would be used to interpret the applicability of the Amendment

Act, 2015, to the arbitral proceedings and proceedings in relation

to them.

100.Section 36(3) of the Arbitration Act provides that upon such an

application being filed, the court may grant a stay “subject to such

conditions as it may deem fit” for reasons to be recorded in writing. In

terms of Section 36(3) of the Arbitration Act, the Court is conferred with

the discretionary power to grant a stay of an arbitral award. Such

discretionary power flows from the usage of the words “may” for grant

of stay and the employment of the phrase “such conditions as it may

deem fit” for the conditions that may be imposed if a stay was granted.

Therefore, in terms of Section 36(3), the court retains its discretionary

power to grant a stay of an arbitral award.

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101. Further, the first Proviso to Section 36(3) provides that if the arbitral

award was for payment of money, the court shall have “due regard” to

the provisions for grant of stay of money decree under the CPC.

102. The aforesaid was, the legal position for a period of six years from 2016

to 2021. In 2021, Section 36 of the Arbitration Act was once again

amended with retrospective effect from 23.10.2015, vide the

Arbitration and Conciliation Amendment Act, 2021 (for short, “the

2021 Amendment ”). The 2021 Amendment, inter alia, introduced a

second Proviso to Section 36(3) which provided that if a prima facie

case is made out that either the arbitration agreement/contract which

is the basis of the award, or the making of the award was induced or

effect by fraud or corruption, the Court “shall” stay the award

“unconditionally” pending the disposal of the challenge.

103. As is clear from a plain reading of the second Proviso referred to above,

it was provided that if, inter alia, the making of the award was induced

or effected by fraud or corruption then the court was mandated to stay

the award and such a stay was to be unconditional.

104. Mr. Gaurav Pachnanda, the learned Senior Counsel would argue that

the courts cannot grant the benefit of unconditional stay of an award

in cases other than those covered by the second Proviso to Section 36(3)

of the Arbitration Act. In the same manner, according to the learned

Senior Counsel, when it comes to staying a money decree

unconditionally, the judgment-debtor needs to make out more than a

prima facie case of fraud or corruption, or something analogous to the

same, and it is just not sufficient to point out our serious infirmities in

the judgment granting money decree.

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105. In the aforesaid context, we must look into the decision of this Court

in the Sepco Electric (supra). In the said decision, this Court was

dealing with an appeal against a judgment of the Delhi High Court

where the learned Single Judge had granted a stay of the arbitral award

subject to deposit of 100% of the award amount. This order was passed

in an application filed under Section 9 of the Arbitration Act which was

heard together with an application under Section 36(3) of the Act in a

connected petition. This decision was affirmed in appeal by this Court

which held that there were no grounds made out for interfering with

the judgment below.

106.This Court, while considering the contention of the appellant therein

observed that a court may grant an unconditional stay if it is

appropriate to do so. While so observing, this Court stated that

unconditional stays were covered by the second Proviso to Section

36(3). The relevant portions of the judgement are extracted below:

“The power under subsection (3) of Section 36 to

grant stay of an award is coupled with the duty

to impose conditions which could include the

condition of securing the award by deposit in

Court, of the amount of the Award. It may be true

as argued by Mr. Vishwanathan that the Court

may not impose condition for stay, if it deems

appropriate not to do so. The power of Court to

grant unconditional stay of an Award is not

unfettered. The power of unconditional stay is

subject to the condition in the second proviso that

is:

The Court is satisfied that a prima facie case (sic)

is made out that

(i) the arbitration agreement or contract which is

the basis of the award; or

(ii) the making of the award, was induced or

effected by fraud or corruption”

(Emphasis supplied)

Page 47 of 73

107.While this Court acknowledged that an unconditional stay could be

granted in appropriate cases, it quickly followed up saying that the

power to grant an unconditional stay is governed by the second Proviso

to Section 36(3). This may indicate that the Court acknowledged the

grant of an unconditional stay to the existence of the grounds

mentioned in the second Proviso. This would indicate that the benefit

of unconditional stay could be granted only in cases of fraud or

corruption.

108.Notwithstanding the above, this Court in order to fortify its conclusion

in the case, subsequently also noted that the appellant therein was not

able to show any cogent and glaring error that went to the root of the

award. This observation was repeated later where the Court stated that

no cogent ground had been made out even, prima facie, for interference

with the impugned award. The relevant observations are extracted

below:

“26. It is settled law that grounds for interference

with an award is restricted. Even before this

court, the Appellant has not been able to advert to

any cogent and glaring error which goes to the

root of the award. The contention of the award

being opposed to the public policy of India, is

devoid of any particulars whatsoever…

xxx xxx xxx

35. It is not in dispute that there is an award of

Rs. 142 Crores in favour of the Respondent. No

cogent ground has been made out even prima

facie, for interference with the impugned award.

xxx xxx xxx

37. We find no ground at all to interfere. The

Appeals are dismissed. ……”

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109.After arriving at such a finding, this Court proceeded to dismiss the

appeal. Therefore, the observations referred to above formed part of this

Court’s reasoning in arriving at its decision.

110.The aforesaid observations of this Court would suggest that the Court

thought it fit to consider the merits of the award at a prima facie level

in order to decide whether the conditional stay of the award was

justified or not. In the facts of the present case, the Court felt that it

was justified.

111.In light of the abovementioned observations, it is possible to

legitimately argue that if the second Proviso to Section 36(3) was the

sole source for granting an unconditional stay, there would have been

no occasion for the Court to examine whether any prima facie cogent

ground that went to the root of the award is forthcoming or not.

Therefore, by relying upon this Court’s observations, it could be

plausibly argued that in exceptional cases an unconditional stay can

be granted even in cases not arising under the second proviso to

Section 36(3). Such unconditional stay would instead be relatable to

the main part of Section 36(3).

112.The above reading of Sepco Electric (supra) would also be in tune with

the discretionary power of the court under the main part of Section

36(3) both with respect to the power to grant stay and the power to

impose conditions if a stay is granted. After all, it is not inconceivable

to contend that a power to impose conditions would also include the

power not to impose conditions.

113.Be that as it may, Sepco Electric (supra) does not clearly answer the

question whether an unconditional stay can be granted in cases not

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covered by the second Proviso to Section 36(3). This confusion remains

because while the Court states an unconditional stay can be granted

in cases covered by the second Proviso, it does not categorically exclude

the possibility of an unconditional stay in cases not covered by the

second proviso.

114.This Court in Pam Developments (supra) had occasion to consider the

nature of applicability of provisions of the CPC vis-à-vis the proceedings

under the Arbitration Act, and specifically, the interpretation of the

phrase “due regard” appearing in the first Proviso. The respondent

therein had preferred an application seeking an unconditional stay of

the arbitral award on the strength of Order XXVII Rule 8A, CPC which

inter alia exempted Government from furnishing a security while

seeking stay of a decree. Aggrieved by the application being allowed by

the Calcutta High Court, the appellant-award holder approached this

Court.

115.This Court allowed the appeal and directed deposit of the award

amount as a condition for continuing the stay. The Court reasoned that

the exemption from furnishing security under Order XXVII Rule 8A that

would otherwise be applicable to the ordinary civil proceedings could

not be strictly applied to the arbitration proceedings. Therefore, the

respondent-government could not have relied upon that provision to

avoid furnishing security for staying the award. The Court further held

that even if the exemption from furnishing security was made

applicable to the arbitration proceedings, such exemption would not

extend to making deposit of the award amounts. This was based on the

Court’s interpretation of the difference between Order XXVII Rule 8A

which was introduced in 1937 and exempted furnishing of ‘security’

and sub-rule (5) of Rule 5 of Order XLI that was introduced in 1976

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and which differentiated between ‘security’ and ‘deposit’. The Court

also referred to the implications of a provision introduced during the

colonial period and its continuance in the present constitutional set-

up.

116.This Court in Pam Developments (supra) held that the phrase “due

regard” would only mean that the provisions of CPC are to be taken

into consideration and not that they are mandatory. The relevant

observations are extracted below:

“20. In our view, in the present context, the

phrase used is “having regard to” the provisions

of CPC and not “in accordance with” the

provisions of CPC. In the latter case, it would have

been mandatory, but in the form as mentioned in

Rule 36(3) of the Arbitration Act, it would only be

directory or as a guiding factor. Mere reference to

CPC in the said Section 36 cannot be construed in

such manner that it takes away the power

conferred in the main statute (i.e. the Arbitration

Act) itself. It is to be taken as a general guideline,

which will not make the main provision of the

Arbitration Act inapplicable. The provisions of

CPC are to be followed as guidance, whereas the

provisions of the Arbitration Act are essentially to

be first applied. Since, the Arbitration Act is a self-

contained Act, the provisions of CPC will apply

only insofar as the same are not inconsistent with

the spirit and provisions of the Arbitration Act.”

(Emphasis supplied)

117.On the strength of the above reasoning, this Court held that the

exemption from furnishing security could not be applied to the

arbitration proceedings. The Court clarified that while courts must

have due regard to the CPC, they are not rigidly bound by it s

provisions. The CPC serves as a guiding framework rather than a strict

mandate because the Arbitration Act being a self-contained Act is to be

first applied by the court.

Page 51 of 73

118.Although not explicitly stated by the Court as a reason for its decision,

yet this Court did note the consequence of accepting the contention

that Order XXVII Rule 8A was applicable. The result would be that

wherever the government was the judgment-debtor in the arbitration

proceedings, it would be entitled to an unconditional stay on the mere

filing of an application under Section 36(2).

119.While Pam Developments (supra) relied on the phrase “due regard”

appearing in the first Proviso to decline the rigid application of an

exemption from furnishing security provided under the CPC it could

also be argued that insisting on a conditional stay in all cases of a

money award would be a rigid application of Order XLI Rule 5. This is

because Rule 5 mandates the furnishing of security or deposit as a

condition for granting stay. Relying on Pam Developments (supra), it

could possibly be argued that “due regard” to the provisions of CPC,

especially Order XLI Rule 5, would not mean a mandatory grant of

conditional stay in all cases. This is because the provisions of the Act,

especially Section 36, would have to be first applied wherein a

discretionary power is vested in the court.

120. If the first Proviso has to be interpreted as done in Pam Developments

(supra) and merits of the award have to be considered on a prima facie

level as done in Sepco Electric (supra), it is difficult to rule out the

existence of an unconditional stay in cases outside the second Proviso.

A closer analysis of the decision in Sepco Electric (supra) and this

Court’s interpretation of the first proviso in Pam Developments (supra)

suggests that unconditional stays can be granted even in cases outside

the second Proviso.

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121.At this stage, we must look into one decision of the Bombay High Court

in the case of ITD Cementation India Ltd. v. Urmi Trenchless

Technology Pvt. Ltd., reported in 2020 SCC OnLine Bom 10611 ,

wherein the High Court after referring to and relying upon Pam

Developers (supra) observed as under:

“11. The provision of Section 36(3) are clear, that

one must have regard to the provisions of the

Code of Civil Procedure 1908 (“ CPC”) and

specifically the provisions of Order 41 Rule 5

while addressing the question of stay. The words

‘have due regard’ have received judicial

interpretation. Certainly there is no blanket

prohibition barring a Court from unconditionally

staying either a money award or a money decree.

The three-fold requirement of Order 41 Rule 5(3)

will have to be kept in mind. But, as the Supreme

Court held in Pam Developers Private

Limited v. State of West Bengal (2019) 8 SCC 112

the provisions of Order 41 Rule 5 are f or

guidance. They do not indicate that a Section 36

Court lacks all discretion to grant an

unconditional stay. That said, it is equally well

settled that a strong and exceptional case must

be made for unconditional stay of a money decree

or a money award. The three matters to consider

under Order 41 Rule 5(3) are (a) whether the

Applicant will be put to a substantial loss if stay

is refused; (b) whether there is a delay in making

the application and (c) whether the Applicant has

furnish sufficient security to satisfy any ultimate

decree. There is a delay, though slight. I do not

see how the question of substantial loss arises.

The fact that it has suffered an Award is neither

here or there. The third requirement is that the

party applying for stay must show sufficient

security. There is no such attempt made.”

(Emphasis supplied)

122.In such circumstances referred to above, we find it difficult to subscribe

to the submission of Mr. Gaurav Pachnanda, that even for the purpose

of grant of benefit of unconditional stay of money decree under Order

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XLI Rule 5 of the CPC, the judgment-debtor has to make out more than

a prima facie case of fraud or corruption and not solely on the basis of

an extreme or egregious view on the merits of the adjudication.

123.We once again clarify that the analogy of Section 36 of the Arbitration

Act sought to be applied is inappropriate. The decision of this Court in

Pam Developments (supra) should also be understood and confined

only to matters relating to arbitration, more particularly, Section 36 of

the Arbitration Act.

124. We are 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. This would lead to

nothing but serious miscarriage of justice.

vi. Relevant aspects which the High Court looked into for the

purpose of granting unconditional stay

125.The first thing that the Division Bench of the High Court looked into

was that the suit had proceeded in the absence of the respondent

herein. In the aforesaid context, the findings recorded by the Division

Bench may be looked into:

“168. We also find prima facie substance in the

contentions of Mr. Nigam and Mr. Kaul that the

manner in which, after excluding all defendants

from the proceedings, the entire trial of the suit,

arguments and rendition of judgment took place

solely in the presence of the plaintiff Lifestyle,

may not sustain legal scrutiny.

Page 54 of 73

169. The learned Single Judge has repeatedly

observed, in the impugned judgment, that

Amazon Tech was deliberately staying away

from the proceedings despite being aware of their

pendency, and has relied, for the said purpose,

on the order dated 5 September 2022 passed in

the suit. A reading of the order discloses that the

appearance of Counsels are noted only for

Defendant 2 Cloudtail and Defendant 3 ASSPL.

The mere fact that learned Senior Counsel

appearing for Cloudtail advanced a submission,

on behalf of his client as well as on behalf of

Amazon Tech, that they were willing to suffer

reasonable damages, cannot be seen as proof of

Amazon Tech being aware of the proceedings or

deliberately refraining from participating therein.

Even prior to this date, Amazon Tech had been

proceeded ex parte on 20 April 2022. As a matter

of fact, therefore, Amazon Tech was never present

before the learned Single Judge on any date of

hearing.

170. When one peruses the orders passed in the

suit, vis-à-vis the notings of the Registry, it

becomes apparent that, in fact, no summons in

the suit were ever served on Amazon Tech. This,

to our mind, is a serious infirmity, which may

plague all other proceedings. Amazon Tech was

proceeded ex parte, by the learned Single Judge,

on 20 April 2022. In the order passed by the

learned Joint Registrar on 7 July 2021, which

was the immediately preceding effective date, it

was specifically noted that there was no report

regarding service of the suit on Amazon Tech. In

the circumstances, Lifestyle was directed to file

an affidavit of service. No affidavit of service was

filed by Lifestyle, between 7 July 2021 and 20

April 2022. The only affidavit of service which

was filed by Lifestyle was of 25 March 2021. That

affidavit enclosed, by it, an email dated 8 March

2021. No email, after 8 March 2021, was sent by

Lifestyle to Amazon Tech. There is no question of

the summons having been served by the email

dated 8 March 2021, as the delay in filing process

fee was condoned only on 16 April 2021. After 16

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April 2021, the summons have never been sent to

Amazon Tech, by any means of communication

including email. It was for this reason that the

order dated 7 July 2021 of the learned Joint

Registrar required Lifestyle to file an affidavit of

service. This was never done. As such, it is

apparent that the learned Single Judge was in

error in proceeding ex parte against Amazon Tech

by order dated 20 April 2022.

171. In fact, even before us, Mr. Pachnanda, with

characteristic candour and forthrightness, did not

seek to contend that formal service of summons

on Amazon Tech, as directed by the Court while

issuing summons on 12 October 2020, ever took

place. His submission is, however, that, prior to

issuance of summons by the Court on 12 October

2020, as well as by way of attachment to the

email dated 8 March 2021, all the documents

relating to the suit, as well as applications filed

therewith, were forwarded to Amazon Tech.

Besides, due compliance with the requirements of

the proviso to Order XXXIX Rule 13 of the CPC

was also ensured. In these circumstances, Mr.

Pachnanda’s submission is that the learned

Single Judge was correct in holding that Amazon

Tech deliberately absented itself from the

proceedings and cannot, now, therefore, seek to

raise a grievance that it was proceeded ex parte.

172. We cannot, in law, accept the submission.

173. The law does not require a defendant to

enter appearance in a suit, unless summons in

the suit are served on it. The Commercial Courts

Act, 2015 contains strict provisions in that regard.

No amount of service, on the defendant, of the

papers relating to the suit, by the plaintiff, absent

actual summons issued by the suit, can compel a

defendant, in law, to enter appearance. The law

does not permit a defendant to be proceeded ex

parte, even before summons in the suit are served

on it. This is plain, and elementary. The learned

Single Judge could not, therefore, have proceeded

against Amazon Tech ex parte on 20 April 2022,

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even before formal summons in the suit had been

served on it. In doing so, it appears that the

learned Single Judge was not made aware of the

order passed by the learned Joint Registrar on

the immediately preceding date, i.e. 7 July 2021,

in which it was specifically noted that there was

no report regarding service of the suit on Amazon

Tech. In holding that Amazon Tech had not

appeared despite service and, therefore,

proceeding against Amazon Tech ex parte,

therefore, we are of the opinion that the learned

Single Judge materially erred in law and on facts.

174. This, by itself, is a lapse serious enough to

vitiate all proceedings in the suit after 20 April

2022, at least insofar as the appellant Amazon

Tech is concerned. It also, therefore, suffices,

even by itself and independent of all other

considerations, as enough to justify

entertainment of the present appeal without

requiring any deposit of the decretal amount to be

made by Amazon Tech.

175. We also find considerable substance in the

submission of learned Senior Counsel for the

appellant Amazon Tech that, in any event, all

these developments took place at a time when the

damage claimed by Lifestyle were only to the

tune of ₹ 2,00,05,000/-. Enhancement of these

damages are necessarily to be proceeded by an

amendment of the plaint, of which Amazon Tech

had to be put on due notice. This was never done.

In fact, the written submissions filed by Lifestyle,

which enhanced the damages, earlier computed

at ₹ 20,005,000/– to ₹ 3780 crores, were also not

served on the Appellant Amazon Tech. In

accepting the enhancement of the claim for

damages, therefore, we agree with learned Senior

Counsel for the appellant Amazon Tech that the

learned Single Judge has not acted strictly in

accordance with the law.

176. In some circumstances, we are also of the

opinion that lifestyle cannot seek sanctuary

behind Order VII Rule 2 or Order VII rule 7 of the

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CPC, or even Rule 120 of the IPD Rules. Order VII

Rule 2, in fact requires a plaint, seeking recovery

of money, to state the precise claimed amount.

The proviso to Order VII Rule 2 applies only in

cases of suits for mesne profits, or for an amount

which would be found on rendition of accounts

between the Plaintiff and the Defendant, or for

movables in the possession of the defendant or

debts of which the value cannot be reasonably

estimated at that stage. The present suit does not

fall within any of these categories. The suit does

not claim mesne profits, or value of movables in

the possession of the defendants, or any debt of

which the value was not ascertainable. Moreover,

para 86 of the impugned judgment records the

submission of Lifestyle that it was not pressing

for its prayer for rendition of accounts. In that

view of the matter, the proviso to Order VII Rule 2

of the CPC would not apply, and the main

provision, which requires the precise claim to be

quantified in the suit, would apply with all force.

The precise amount quantified in the suit was

only ₹ 2,00,05,000/–. There is, therefore,

substance in the contention of learned Senior

Counsel for Amazon Tech that, without an

amendment of the plaint, the damages could not

have been enhanced, much less to ₹ 3780 crores.

177. Order VII Rule 7, plainly, does not apply, as

it exempts a plaintiff from requiring to claim

“general or other relief”, apart from the specific

relief sought in the plaint.

178. In any event, what lies at stake, here, is

something far more empirical. The question that

is required to be addressed is whether (i) a claim

for damages, assessed in the plaint at ₹

2,00,05,000/–, could be inflated to ₹ 3780 crores

merely in written submissions filed by the

plaintiff after conclusion of arguments, without

amending the plaint and without even serving a

copy of the written submissions on a defendant

against whom the enhanced damages were

claimed and (ii) the Court would, in such

circumstances, have awarded damages in excess

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of ₹ 336 crores, without any prior opportunity to

the concerned defendant to contest the proposed

judgment.”

126.The second relevant aspect that the Division Bench looked into was

the fact that there were no pleadings of infringement against the

respondent herein worth the name. In this regard, the following

observations are relevant:

“156. Mr. Sai Deepak, appearing on behalf of

Lifestyle and supplementing the submissions

advanced by Mr. Pachnanda, sought earnestly to

convince us that the requisite factual basis or

alleging involvement of Amazon Tech in the

infringement of Lifestyle’s registered trademark,

is forthcoming in the plaint. We are unable to

agree.

157. We have already set out, from para 29 of the

present judgment on words, the relevant

averments contained in the plaint. We do not find,

therein, any prima facie sustainable allegation of

involvement, by Amazon Tech, in any

infringement of Lifestyle’s registered trademark.

158. Para 41 of the plaint alleges that Amazon

Tech is, under its brand ‘SYMBOL’,

“manufacturing, offering for sale and/or selling

products which bear the infringing logo mark.

These allegations are completely defeated by the

assertions in the replication filed by Lifestyle, to

the written statement of Cloudtail – also

reproduced supra – that it was Cloudtail

manufacturing and selling the apparel bearing

the mark, and, thereby, infringing Lifestyle’s

registered trademark.

159. Para 41 goes on to state that ASSPL was

selling products of Amazon Tech on its platform

under the trademark ‘SYMBOL’, bearing the

infringing mark. This allegation, again, is

incorrect. The products sold by ASSPL were not of

Amazon Tech, but of Cloudta il. The only

connection of Amazon Tech, with the said

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products, was the ‘SYMBOL’ mark, which

Cloudtail affixed on the said apparel under

license from Amazon Tech. This does not, in any

way, connect Amazon Tech with the infringing

mark.

160. In fact, after making such bald and

unsubstantiated allegations, Lifestyle, in the

same para 41 of the plaint, acknowledges that it

was not certain about the actual relation between

Amazon Tech, Cloudtail and ASSPL. Obviously,

the allegations against Amazon Tech, regarding

its complicity in the affixation of the mark on the

apparel sold by Cloudtail on the ASSPL platform,

were merely shots in the dark, without any

knowledge of the actual state of affairs. In fact,

para 46 of the plaint acknowledges the fact that

the invoice, raised by ASSPL, with respect to the

apparel purchased by Lifestyle, only contained

the name and details of Cloudtail. Despite this,

para 48 of the plaint alleges that it was an

“admitted case of Defendant No 3 (ASSPL) that

orders for the infringing product of the Defendant

No 1 (Amazon Tech) are being fulfilled by

Defendant No 2 (Cloudtail)”, without any such

“admitted case” being available on record. The

plaint does not disclose where this “admission” is

to be found.

161. At this juncture, we may also refer to the

affidavits dated 21 July 2022 and 1 September

2022 of ASSPL, on which Mr. Pachnanda sought

to place reliance as supporting the finding of the

learned Single Judge, in the impugned judgment,

that Amazon Tech, Cloudtail and ASSPL

constitute a “cohesive commercial entity”. We find

no such inference being forthcoming from the

affidavits. In any case, we are not concerned,

here, with the interlink, as commercial entities,

between Amazon Tech, Cloudtail and ASSPL.

They are, admittedly, independent commercial

entities, as was, in fact, noted by the learned

Single Judge in the order dated 12 October 2020,

reproduced in para 19 of the impugned

judgement. What is to be seen is whether there

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was any material to indicate involvement of

Amazon Tech in the allegedly infringing activities

of Cloudtail. There is, in fact, none.

162. Apart from this, the plaint only refers,

repeatedly, to the infringing mark as belonging to

Amazon Tech and has having been adopted by it.

No factual basis for these allegations is

forthcoming.

163. We have already explained, in para 18 to 26

supra, why it cannot be said that any substantial

allegation of involvement, by Amazon Tech, in the

allegedly infringing activities of Cloudtail, by

affixation of the mark on the apparel sold by it,

can be said to exist.

164. This, therefore, is not merely a case in which

damages have been awarded against Amazon

Tech without any finding, by the learned Single

Judge, of involvement, in the alleged infringing

activities, but is, in fact, a case where no such

pleadings exist.”

127.The third aspect which the Division Bench looked into was one

relating to no pleadings for the purpose of claiming Rs.

3,36,02,87,000/- towards damages. In this regard, the findings

recorded are:

“136. Leave alone the fact that there were no

pleadings, claiming ₹ 336,02,87,000/-, there

were also no pleadings on the basis of which is

claim could be supported or sustained. The

learned Single Judge has herself ventured into an

exercise of computing the awardable damages as

₹ 336,02,87,000/-, without the said exercise

being supported by any pleadings of Lifestyle.

The position that has resulted is, therefore, that

(i) the pleadings of Lifestyle only justified

damages of ₹ 2,00,05,000/–,

(ii) without amending its pleadings, Lifestyle, in

its written submissions before the learned Single

Judge, worked out the damages to which it was

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allegedly entitled as approximately ₹ 3780 crores,

and

(iii) the impugned judgment decrees in favour of

Lifestyle and against Amazon Tech, ₹

336,02,87,000/-, again on the basis of a

computation solely devised by the learned Single

Judge, not pleaded by the parties and

unsupported by any pleading on record.

137. Mr. Pachnanda sought to submit that the

damages to which the Plaintiff is entitled need not

be specifically computed and claimed in the

pleadings. The submission, in our view, begs the

issue. This is not merely a case where there are

no pleadings, supporting the damages of ₹ 3780

crores, claimed by Lifestyle in its written

submissions, or the damages of ₹

336,02,87,000/-which ultimately came to be

awarded by the learned Single Judge. Even the

basis for the claim of ₹ 3780 crores, all for the

amount of ₹ 336,02,87,000/-which was

ultimately awarded, is not to be found anywhere

in the pleadings of Lifestyle.

138. The basis for the claim for damages are, at

all costs, to be contained in the pleadings of the

Plaintiff. It cannot be reserved for evidence. It is a

legal truism that evidence cannot traverse the

pleadings.”

128.The fourth aspect that the Division Bench looked into was the fact

that the learned Single Judge had recorded no findings as regards the

role of the respondent herein in the alleged infringement. The relevant

observations are as under:

“142. With greatest respect, it appears to us that

the impugned judgement is more concerned with

the fact that e -infringement is a new

phenomenon, and that it is very difficult to

identify the actual players in the act. Paras 42 to

44 of the impugned judgm ent deal with the

menace of e-infringement, and the difficulty in

localising liability in such cases. Para 44, in fact,

refers to intermediary liability, which is of no

particular relevance, as Amazon Tech does not

claim itself to be an intermediary. We may note,

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even at this juncture, that the learned Single

Judge has, in para 99 of the impugned judgment,

observed that Amazon Tech was identifying itself

as an intermediary. This is a prima facie

erroneous finding. At no point of time has Amazon

Tech claimed to be an intermediary. In fact, in

earlier orders passed in the suit, particularly in

the orders dated 2 March 2023 and 7 August

2023 – which the latter was passed by the

learned Single Judge herself – it has been

correctly noted that Defendant 3 ASSPL was

claiming to be an intermediary and was, in fact,

one. In the impugned judgment, therefore, the

learned Single Judge has proceeded on an

apparently mistaken assumption that Amazon

Tech was also claiming to be an intermediary.

143. Returning to the findings in the impugned

judgment, following the adverse observations

regarding the menace of e-infringement is a new

species of trademark infringement, which poses

significant challenges in localising of liability, the

learned Single Judge proceeds, in para 45, to

characterise the present case as a case of e-

infringement – with which there can be no serious

cavil. Following this, however, the learned Single

Judge was on to note that the brand ‘Symbol’,

being used by Cloudtail, was owned by Amazon

Tech. This is also; however, is difficult to

understand how the ownership, by Amazon Tech,

of the brand ‘Symbol’ is of any relevance. The

mark ‘Symbol’ is, quite clearly, not infringing in

nature.

144. In fact, even the plaint in the suit does not so

assert. The case that Lifestyle has sought to build

up, in the plaint, is that, as the infringing mark

figured on the same apparel, which bore the

‘SYMBOL’ mark of Amazon Tech, Amazon Tech

could not escape liability from the tort of

infringement by use of the mark. In our

considered view, the said plea, which has

apparently found favour with the learned Single

Judge in the impugned judgment, has no basis in

law.

145. The learned Single Judge proceeds to lay

considerable stress on order dated 5 September

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2022, passed in the suit, particularly on the

opening sentence of the order, which reads:

“The learned senior counsel for the defendant

no. 2/applicant herein submits that the said

defendant, including for and on behalf of the

defendant no. 1 is willing to suffer a decree of

injunction and also for paying reasonable

damages to the plaintiff.”

The learned Single Judge has treated this

sentence, from the order dated 5 September

2022, as recording some kind of a concession, on

behalf of Amazon Tech, admitting its liability for

infringement and agreeing to pay damages.

Significantly, prior to the passing of this order,

Amazon Tech had already been proceeded ex

parte on 20 April 2022. Even if it were to be

assumed that Amazon Tech had agreed, through

learned Counsel who appeared on behalf of

Cloudtail, to suffer reasonable damages, that

statement, if at all, was made at the stage when

the damages claimed by Lifestyle were of ₹

2,00,05,000/–. In the face of this claim, it would

be preposterous to hold that the order dated 5

September 2022 amounts to an admission, by

Amazon Tech, to suffer damages of ₹

336,02,87,000/-. Before awarding such

damages, therefore, it was incumbent on the

learned Single Judge to render specific findings of

infringement, or at least of complicity in the

infringing activities, by Amazon Tech. With

greatest respect, we do not find this to have been

done.

146. Para 47 of the impugned judgment observed

that Amazon Tech, Cloudtail and ASSPL were

“closely related to or interlinked with each other”.

Para 48 records that “it is a matter of public

knowledge that the www.amazon.in platform is

closely linked with Defendant No. 1”, i.e. the

present appellant Amazon Tech. To a large extent,

it is clear that the impugned judgement proceeds

on the premise that Amazon Tech, Cloudtail and

ASSPL, i.e., all the defendants, were acting in

concert and were one commercial entity.

147. We also find, prima facie, that the learned

Single Judge has, in para 52 of the impugned

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judgment, completely misread the Licensing

Agreement dated 23 December 2015 as fastening

liability on Amazon Tech for infringement

whereas, in fact, it does nothing of the kind. The

learned Single Judge observes that the License

Agreement dated 23 December 2015, between

Amazon Tech and Cloudtail i ndicated “that

Amazon retains significant control over

Cloudtail’s branding and distribution activities”.

Following this, the learned Single Judge returns

an opinion that “the clauses in the Agreement

clearly diminish Amazon’s liability to distance

itself from the alleged infringement committed by

Cloudtail”, that “the contractual restrictions on

unauthorised trademark use, coupled with

indemnification obligations, provide strong legal

grounds for (Lifestyle) to argue Amazon’s direct

involvement in trademark infringement”, “the

agreement being a license agreement, Defendant

No. 1 being a licensor an Defendant No. 2 being a

licensee, any infringement or unlawful use by the

licensee would also affix liability about the

licensor”, “while licensing the word mark

SYMBOL” Amazon would be unable to distance

itself from the use of the accompanying horse logo

device mark” and that “thus, the consequences of

infringement squarely fall upon Defendant No. 1”.

148. We are, prima facie, unaware of any law

which supports these observations and findings.

The Licensing Agreement dated 23 December

2015 was restricted to the ‘SYMBOL’ mark,

owned by Amazon Tech. Amazon Tech had, by

the agreement, licensed, to Cloudtail, the right to

use the mark ‘SYMBOL’. The agreement does

nothing beyond this. By no stretch of imagination

could be Licensing Agreement be read as

authorising Cloudtail to affix, on the apparel sold

by it, the allegedly infringing mark. In fact, the

Licensing Agreement makes no reference to the

said mark at all, obviously because Amazon Tech

had no concern with the said mark. If, therefore,

Cloudtail did affix the mark on the apparel sold

by it, it certainly did not do so by virtue of any

authorisation or permission granted by the

Licensing Agreement dated 23 December 2015. In

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fact, the Licensing Agreement contained a specific

clause proscribing any infringement, by Cloudtail,

of the trademark of any third party, and

indemnified Amazon Tech in that regard.

149. The observations contained in para 52 of the

impugned judgment, extracted by us earlier in

paragraph 139, are unsupported by law. In a

Licensing Agreement, whereby and whereunder

Amazon Tech had only licensed, to Cloudtail, the

right to use the ‘SYMBOL’ mark, we are unable to

understand how Amazon Tech could be fastened

with liability for use, by Cloudtail, of the mark,

with which the Licensing Agreement – and,

indeed, Amazon Tech itself – had no concern.

150. Needless to say, a licence by one party to

another, to do a particular act, cannot render the

first party liable for every infringing or illegal act

committed by the second, in the absence of any

material to indicate that the commission of the

illegal infringing act was also authorised by the

license. The findings in para 52 of the impugned

judgment, in our prima facie view, are contrary to

this principle which, according to us, is practically

fossilized in the law. They, therefore, suffer from

patent illegality.

151. In para 98, the learned Single Judge

observes that the judgment would proceed to

examine, inter alia, “the degree of culpability of

the Defendants”. Paras 98 to 99 proceed,

apparently, to record certain observations

regarding Amazon Tech which, in our view, are

not incriminating in any manner. Before,

however, adverting thereto, the learned Single

Judge observes, in para 98 and in the opening

part of para 99 of the impugned judgment, that

the mark ‘SYMBOL’, of which the right to use had

been licensed by Amazon Tech to Cloudtail, was

used “along with” the infringing mark, on the

apparel sold by Cloudtail. Even if it was, we are

unable to understand how any liability or

responsibility for infringement, on the ground, be

fastened on Amazon Tech. Amazon Tech was not

the manufacturer of the apparel on which the

infringing mark was used. It had never licensed,

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to Cloudtail, the right to use the infringing mark,

with which, in fact, it had no concern. In fact,

Cloudtail itself conceded, before this Court on 2

March 2023, that the decision to use the

infringing mark on the apparel sold by was not of

Amazon, but of Cloudtail itself. Unfortunately, the

learned Single Judge has entirely overlooked this

concession, regarding which no objection or

reservation was ever expressed by Lifestyle,

either before this Court on 2 March 2023 or at any

point thereafter. In view thereof, it is plainly

obvious that the affixation, on the apparel sold by

Cloudtail, of the infringing logo, could not

incriminate Amazon Tech in any manner, merely

because the same apparel also happened to carry

the ‘SYMBOL’ mark, the use of which had been

licensed by Amazon Tech to Cloudtail.

152. Para 99 of the impugned judgment proceeds

to observe that Amazon Tech was “one of the most

dominant players in the ecommerce space”, that

it “possesses ways and means to utilise its

dominant presence in the e-commerce space to

promote its own products as also products which

it might otherwise wish to promote”, and that it

had “the leverage through its own platforms to

dilute Plaintiff’s brand/logo by indulging in deep-

discounting of its own products which compete

with the Plaintiff by using a similar mark/logo”.

These findings are, prima facie, entirely in the

realm of presumption and conjecture. They reflect

an impression, by the learned Single Judge, that

Amazon Tech was in a position to indulge in

infringing activities by means such as deep

discounting – with respect to which there is not

even a whisper of an allegation against Amazon

Tech in the entire plaint of Lifestyle – and that,

therefore, it must have done so. On the face of it,

we are of the view that these findings suffer from

perversity in law, and cannot, therefore, sustain.

153. Para 99 goes on further to observe that “it is

well known reality that all 3 Defendants belong

to the Amazon Group of Companies and operate

as a cohesive commercial entity”. This finding has

nothing forthcoming, available on the record, to

support it. There is certainly no pleading to that

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effect. The plaint, filed by Lifestyle, does not

allege, even indirectly, that Amazon Tech,

Cloudtail and ASSPL constituted a “cohesive

commercial entity”. A finding that 3 companies,

which are independent corporate ventures,

constitute a cohesive commercial entity, cannot be

returned without any pleading to that effect. We

are constrained to observe that the learned Single

Judge has, in so holding, made out a case in

favour of Lifestyle which it itself did not plead.

154. There are no other findings, in the impugned

judgment, against Amazon Tech. Of course, the

learned Single Judge has adversely commented

on what she perceives as Amazon Tech’s

deliberate absence from the proceedings in the

suit. Even if it were to be presumed, merely for

the sake of argument, that Amazon Tech took a

conscious decision not to participate in the suit

proceedings, that cannot justify mulcting it with

damages of ₹ 336,02,87,000/-.

155. The case, therefore, is one of awarding,

against Amazon Tech and in favour of Lifestyle,

of damages of ₹ 336,02,87,000/-, without any

sustainable finding of infringement, or of

complicity in infringement, against Amazon

Tech.”

129. If the Division Bench after looking into all the relevant aspects referred

to above thought fit to grant benefit of unconditional stay of execution

of money decree then, applying the principles of law discussed by us,

it cannot be said that the Division Bench committed any error much

less an error of law in passing the impugned judgment and order.

130.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.

Page 68 of 73

131.It is necessary for us to observe that the Court’s jurisdiction over a

respondent is founded on a valid service of summons. Without a valid

service, the Court cannot acquire jurisdiction over the respondent,

unless the defendant voluntarily submits to it. 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.

Proper service of summons is used to protect one’s right to due process.

132. 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."

133.In the case in hand, what is important for us to note is the Order passed

by the Joint Registrar (Judicial) of the High Court of Delhi dated

01.03.2021 which reads thus:

“CS(COMM)443/2020

“1. Written statement filed by the defendant No.

2 & 3 with affidavit of admission/denial.

2. Replication to the written statement of the

defendant no.3 with affidavit of

admission/denial of the documents has been

filed by the plaintiff.

3. It is submitted by counsel for the plaintiff that

replication and affidavit of admission/denial of

the documents qua the defendant no.2 has also

been filed but the same is lying under scrutiny.

Let necessary steps be taken to ensure that

replication and affidavit of admission/denial of

the documents are placed on record.

4. Affidavit of service filed by the plaintiff reflects

that entire paper book was delivered to the

defendant no.1 through speed post and courier.

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However, from the report of the Registry it

appears that PF was not filed for service of the

defendant no.1 and summons of the suit through

e-mail and Whatsapp were not issued to the

defendant no.1 as per orders of the Hon’ble Court

which is dated 12/10/2020. Let the order be

complied with, and process be Issued, returnable

for the next date.

5. Re-notify the matter for completion of service,

completion of pleadings and admission/denial of

the documents on 22"'' April, 2021.”

(Emphasis supplied)

F. CONCLUSION

134. We summarize our final conclusion on 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

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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

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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

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(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.

135.In view of the aforesaid, we have reached the conclusion that we

should not disturb the impugned judgment and order passed by the

Division Bench of the High Court.

136.It is needless to clarify 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 impugned judgment and order passed by

the High Court including our judgment.

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137.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.

138.Registry shall forward one copy each of this judgment to all the High

Courts.

……………...................J.

[J.B. PARDIWALA]

...................................J.

[K.V. VISWANATHAN]

New Delhi;

7

th October, 2025.