Know The Law| Can There Be A Blanket Stay On Money Decree?

One such case happened recently where though the Court had decreed the suit in favour of the plaintiff; however, its execution was stayed by the High Court in an appeal. The Court, while asking the High Court to reconsider its order of stay, also emphasised the need to consider the aforementioned question.

During the hearing, primarily two judgments were brought to the Court's notice. Those were: Sihor Nagar Palika Bureau Vs. Bhabhlubhai (2005) 4 SCC 1 and Kanpur Jal Sansthan and Anr Vs. Bapu Constructions (2015) 5 SCC 267. This piece will discuss these judgments to help our readers understand the point of law surrounding the aforesaid issue.

Appellate Court Has The Discretion To Direct Either Deposit Of The Amount Or To Furnish Security

The factual matrix of Bhabhlubhai's case was such that the Sihor Nagar Palika Bureau/ present appellant had given a contract for collection of octroi to the respondent. However, the appellant terminated the same. Aggrieved by this, the respondent filed a civil suit claiming wrongful termination and sought recovery of damages. The suit ended in a money decree being passed in favour of the respondent and against the appellant.

The latter appealed to the Gujarat high court which asked it to deposit a certain amount of money before hearing the appeal. However, the appellant filed an application seeking modification of this order. He requested the Court to dispense with the requirement of depositing the money as he was facing financial difficulty and was in dire need of money to carry out public utility services. As an alternative, he instead offered to furnish security. Since the Court declined this prayer, the present appeal was filed before the Supreme Court.

To understand the statutory provisions around this issue, Order 41 Rule 1(3) CPC provides that in an appeal against a decree (for payment of amount), the appellant shall deposit the amount disputed by the appeal or furnish such security as the court may think fit. Further, Order 41 Rule 5(5) states that a deposit or security, is a condition precedent for an order by the appellate court staying the execution of the decree.

The Top Court, while allowing an appeal, had asked the appellate to furnish security to the trial court instead of making a cash deposit. To reason this, the Court had perused Order 41 Rule 1(3) and Order 41 Rule 5(5) of the CPC. After examining these provisions, the Court observed that the appellate court has a discretion to direct either deposit of the amount disputed in the appeal or to permit furnishing of an appropriate security.

Apart from the above observations, the Court also opined that an execution of a money decree does not amount to irreparable injury. This was supported by the reasoning that if an appeal is allowed then the remedy of restitution can always be availed. Still the power is there, of course a discretionary power, and is meant to be exercised in appropriate cases., the Court said.

Allowing the appeal, the Court said that it would be in public interest to allow the appellant to retain the amount during the pendency of the appeal.

“ It is not the case of the respondent that in the event of the appeal being dismissed the decretal amount may not be recovered from the appellant. On the other hand, the appellant has made out a prima facie strong case for the hearing of the appeal on its merits and further a case that public interest would be better served by the amount being retained by the appellant during the pendency of the appeal,” the Court reasoned.

Direction Passed For Furnishing Security For The Entire Amount

Moving on to the next case, in Kanpur Jal Sansthan's case, the Supreme Court had directed the appellant (against whom an arbitral award was passed), to furnish the security for the entire amount as a prerequisite for granting a stay.

In this case also Kanpur Jal Sansthan/ present appellant, had entered into a contract for "supply of sand for slow sand filter". The dispute arose between both the parties and the same led to the appointment of an arbitrator. Eventually, the award was passed in favor of the respondent and the appellant was required to pay a significant amount of money.

Challenging this, an appeal was filed before the High Court coupled with an application for stay of the award. The Allahabad High Court, while dealing with this application, directed the appellant to deposit the entire amount in the court as security. Not only this but it also permitted the respondent to withdraw 50% of amount without furnishing security. As far as the other half is concerned, the same was allowed to be withdrawn only after furnishing security.

This order was challenged by the appellant contending, inter-alia, that it is a wing of the government, and thus, it could not be asked to furnish security. To rest its claim, defence of Section XXVII Rule 8A (No security to be required from Government or a public officer in certain cases) of the Civil Procedure Code, 1908, was taken.

However, the Court rejected this argument saying the provision is applicable only to the Government and not to instrumentality or agency of the State. Notably, at the same time, it was also noted that the High Court has not provided any justifiable reason for permitting the withdrawal of deposited amount. Thus, without commenting on the merits of the grounds sought before it, the Top Court modified the order that the appellant shall furnish the security for the entire amount.

“Coming to the legal validity of the impugned order we find that the High Court has directed for deposit of the money and withdrawal of the 50% of the same without furnishing security and remaining half after furnishing security. The High Court has not given any justifiable reason for permitting such withdrawal. Without commenting on the merits of the grounds sought to be urged before us (to which we have not referred to in detail not being necessary) we only modify the order that the appellant shall furnish the security for the entire amount to the satisfaction of the concerned District Judge within a period of six weeks.,” the Court concluded.

Conclusion

As can be seen, the case of Sihor Nagar Palika Bureau Vs. Bhabhlubhai highlights the discretionary power of appellate courts in deciding whether, when the money decree is challenged, deposition of a disputed amount is required or security has to be furnished. It is up to the Courts to allow either of the two options. However, it can be inferred that the underlying principles guiding these decisions involve balancing the public interest and the particular circumstances of each case.

Further, in Kanpur Jal Sansthan's case, while directing the appellant to furnish the security for the entire amount and not permitting the withdrawal by the opposite party, the Court balanced the interests of both parties. Moreover, the Court rejected the appellant's contention of exemption from giving security based on it being an agency of the State Government. Pertinently, the judgment also tells us about the need to outline the justifiable reasons in such cases by the appellate court.

It is also important to note that the ratio of these two judgments implies that there cannot be a blanket stay unless either a certain dispute amount or a security is furnished. That being said, a remedy of restitution will always be available in case the appeal gets allowed.

Case Title : SHEKHAWATI ART AND EXPORTS v. UNITED INDIA INSURANCE COMPANY LTD & ORS

Citation : 2024 LiveLaw (SC) 408