Unconditional Stay of Money Decrees Under Order XLI Rule 5 CPC: Supreme Court Clarifies Deposit Requirements

Introduction

The Supreme Court of India recently delivered a landmark judgment that has resolved a longstanding debate in civil litigation concerning the mandatory nature of deposits for staying money decrees. In the case of Lifestyle Equities C.V. & Anr. versus Amazon Technologies Inc., decided on October 7, 2025, the apex court clarified that depositing the decretal amount is not an absolute precondition for granting a stay of execution of money decrees under Order XLI Rule 5 CPC. This judgment marks a significant departure from the conventional understanding that has guided appellate practice for decades and provides much-needed clarity on the discretionary powers of appellate courts.

The bench comprising Justice JB Pardiwala and Justice KV Viswanathan examined the interplay between various provisions of Order XLI of the Code of Civil Procedure and established comprehensive guidelines for appellate courts when considering stay applications against money decrees. The court emphasized that while deposit requirements serve as prudent practice, they cannot be treated as mandatory conditions that completely bar the grant of stay in exceptional circumstances. This judgment has far-reaching implications for litigants seeking relief from money decrees and provides a balanced framework that protects both the rights of decree holders and the legitimate interests of appellants facing extraordinary circumstances.

Understanding Order XLI Rule 5 of the Code of Civil Procedure

Order XLI of the Code of Civil Procedure, 1908 governs appeals from original decrees and contains detailed provisions regarding the procedural aspects of appellate litigation. Rule 5 of Order XLI specifically deals with the stay of execution pending appeal and represents one of the most frequently invoked provisions in civil litigation. The provision empowers appellate courts to stay the execution of decrees during the pendency of appeals, but this power is not unfettered and must be exercised judiciously upon satisfaction of certain conditions.

The language of Order XLI Rule 5 has been subject to extensive judicial interpretation over the years. Rule 5(1) of Order XLI clarifies that an appeal does not automatically suspend the execution of a decree; a stay of execution of money decrees under Order XLI Rule 5 CPC can only be granted if specifically ordered by the appellate court. This procedural safeguard ensures that frivolous appeals cannot be used as instruments to indefinitely postpone the legitimate rights of successful litigants.

Rule 5(2) provides that no order for stay of execution shall be made unless the court is satisfied that substantial loss may result to the party applying for stay unless the order is made. Rule 5(3) mandates that the court shall not make an order of stay unless it is satisfied by the record of the lower court or other sufficient cause has been shown that there are substantial grounds for questioning the correctness of the decree or order. This provision introduces the concept of “sufficient cause” which has become the cornerstone of stay applications. The appellate court must record its satisfaction regarding the existence of sufficient cause before granting a stay of execution.

Rule 5(5) of Order XLI provides that where the court orders a stay of execution, it shall fix a date not exceeding sixty days from the date of such order for the appellant or defendant to deposit the amount of decree or a portion thereof as the court may direct. This provision has been the subject of considerable controversy, with divergent views emerging on whether the deposit requirement is mandatory or directory. The Supreme Court’s recent judgment in the Lifestyle Equities case has conclusively settled this controversy by holding that the provisions are directory rather than mandatory.[1]

The Lifestyle Equities Case: Factual Background and Proceedings

The dispute that led to this significant judgment originated from a trademark infringement suit filed in the Delhi High Court. Lifestyle Equities C.V. and its associate Lifestyle Licensing B.V., the proprietors of the registered trademark “BHPC / Beverly Hills Polo Club,” filed a suit against Amazon Technologies Inc., Cloudtail India Private Limited, and Amazon Seller Services Private Limited. The plaintiffs alleged that the defendants were selling apparel bearing marks that were deceptively similar to their registered trademarks, thereby infringing their intellectual property rights and causing substantial damage to their brand reputation.

During the trial proceedings, one of the defendants, Cloudtail India Private Limited, admitted liability for trademark infringement and was directed by the court to pay damages amounting to approximately Rs. 4.78 lakhs. However, Amazon Technologies Inc. faced a dramatically different outcome. The company was proceeded against ex parte due to alleged failures in proper service of summons, a procedural irregularity that would later become a focal point of the appellate challenge. In a development that stunned the legal and business communities, the Single Judge of the Delhi High Court enhanced the damages from the originally pleaded amount of Rs. 2 crore to an unprecedented Rs. 336 crore, along with costs totaling approximately Rs. 3.25 crore, bringing the total liability to Rs. 339.25 crore.[2]

What made this enhancement particularly controversial was that it occurred without any amendment to the pleadings that would have reflected such a substantially inflated claim. The principles of pleadings require that parties be given adequate notice of the case they must meet, and damages claimed must be specifically pleaded. The enhancement of damages by such a massive magnitude without corresponding amendments raised serious questions about procedural propriety and natural justice.

Aggrieved by this decision, Amazon Technologies Inc. filed an appeal before the Division Bench of the Delhi High Court and simultaneously sought a stay of execution of the money decree. The company contended that the Single Judge’s order suffered from glaring procedural and substantive infirmities, including the enhancement of damages beyond pleadings, procedural irregularities in service of summons, and errors in assessment of liability. After examining the facts and circumstances, the Division Bench granted a stay on the execution of the money decree in Amazon’s favor without requiring the deposit of the disputed sum of Rs. 339.25 crore.

The Division Bench concluded that the case presented exceptional circumstances warranting an unconditional stay. The court observed that requiring Amazon to deposit such an enormous sum would effectively render the appeal meaningless, as the financial burden would be disproportionate and potentially irreversible even if the appeal succeeded. Furthermore, the court noted serious procedural irregularities in the trial court proceedings that prima facie indicated a strong case for setting aside or substantially modifying the impugned judgment.

Challenging this decision, Lifestyle Equities moved to the Supreme Court, contending that the Division Bench erred in granting an unconditional stay of a money decree without requiring any deposit or security. The petitioners argued that the established practice and judicial precedents consistently required deposit of the decretal amount as a condition for staying execution of money decrees. They contended that allowing an unconditional stay would set a dangerous precedent and undermine the rights of decree holders who have succeeded in establishing their claims through a full-fledged trial.

Supreme Court’s Analysis and Legal Framework

The Supreme Court undertook a comprehensive examination of the statutory provisions, judicial precedents, and principles governing stay applications. The court began by emphasizing that Order XLI Rule 5 must be read harmoniously with other related provisions to understand the complete legislative intent. The court noted that while the provision uses the word “shall” in certain contexts, a combined reading of Rules 1(3) and 5(5) reveals that the appellate court possesses discretion in imposing conditions for deposit depending on the facts and circumstances of each case.[1]

The court rejected the absolutist interpretation that deposit of the decretal amount constitutes a mandatory precondition for stay of execution. Justice Pardiwala, writing for the bench, observed that treating the deposit requirement as mandatory would lead to situations where appellate courts would be powerless to grant relief even in the most egregious cases of judicial error or miscarriage of justice. Such an interpretation would convert a procedural provision designed to balance competing interests into a rigid straitjacket that could produce unjust outcomes.

The court emphasized that the only statutory mandate for granting a stay of execution of money decrees under Order XLI Rule 5 CPC is the existence of “sufficient cause” in favor of the appellant. The concept of sufficient cause is deliberately kept broad and flexible to enable appellate courts to consider the infinite variety of factual situations that may arise in litigation. The court must examine whether substantial loss would result to the party seeking stay, whether the application has been made without unreasonable delay, and whether adequate security has been or can be provided for due performance of the decree.

However, the Supreme Court was careful to clarify that this discretion cannot be exercised arbitrarily or mechanically. The court must record cogent and adequate reasons for its satisfaction regarding the existence of sufficient cause. These reasons should indicate the necessity for maintaining the status quo prevailing on the date of the decree or the date of the stay application, not merely general reasons why a stay should be granted. The appellate court must engage in a careful balancing exercise, weighing the prima facie case of the appellant, the potential for irreversible harm, the interests of the decree holder, and the overall interests of justice.

The Supreme Court also addressed the nature of security that can be provided under Order XLI Rule 5. The court clarified that there is no provision in the Code of Civil Procedure imposing a mandate that only cash deposits can constitute security for execution of the decree. Security for the purpose of staying execution can take various forms, including property, bonds, bank guarantees, or even appropriate undertakings from the appellant to abide by the decree.[1] This flexible approach recognizes that different cases may require different forms of security depending on the nature of the decree, the financial capacity of the parties, and other relevant circumstances.

Criteria for Granting Unconditional Stay of Money Decrees Under Order XLI Rule 5 CPC in Exceptional Cases

One of the most significant contributions of the Lifestyle Equities judgment is the establishment of concrete criteria for determining when an unconditional stay may be justified. The Supreme Court recognized that while deposit requirements generally serve important purposes in protecting decree holders, there exist exceptional situations where insisting on deposits would result in manifest injustice. The court formulated specific guidelines to identify such exceptional cases, thereby providing a predictable framework for future litigation.

The court held that an unconditional stay of execution of a money decrees under Order XLI Rule 5 CPC can be granted where the impugned decree or order is egregiously perverse. Perversity in judicial decision-making occurs when a court arrives at conclusions that are so unreasonable that no reasonable person could have reached them on the available evidence. A finding becomes perverse when it is based on no evidence or when relevant evidence is completely ignored. In such situations, requiring an appellant to deposit substantial sums to challenge a fundamentally flawed decision would amount to compounding the injustice.

The second criterion identified by the Supreme Court relates to decrees riddled with patent illegalities. Patent illegality refers to errors of law that are apparent on the face of the record and do not require elaborate examination of evidence or intricate legal arguments to establish. These may include jurisdictional errors, violations of mandatory statutory provisions, breach of principles of natural justice, or decisions rendered without following prescribed procedures. When such illegalities are glaring and obvious, appellate courts should not insist on deposits as a condition for staying execution.

The third ground for unconditional stay exists where the decree or order is facially untenable. A decision becomes facially untenable when it is self-contradictory, contains conclusions that are contrary to its own reasoning, or is based on findings that are logically inconsistent with each other. Similarly, decisions that completely ignore binding precedents or misapply settled legal principles may be considered facially untenable. In the Lifestyle Equities case itself, the enhancement of damages from Rs. 2 crore to Rs. 336 crore without any amendment to pleadings represented such facial untenability.

The court also recognized that the categories of exceptional circumstances cannot be exhaustively enumerated and left room for “such other exceptional causes similar in nature” to the three specific grounds mentioned. This open-ended formulation provides flexibility for appellate courts to respond to novel situations that may arise in future cases. However, the court emphasized that this discretion must be exercised sparingly and only when truly exceptional circumstances exist. The exceptionality requirement ensures that unconditional stays do not become routine, thereby defeating the legitimate purpose of deposit requirements.

The Supreme Court was careful to emphasize that these exceptional circumstances must be established through proper application of judicial mind. The appellate court cannot grant unconditional stay based on mere assertions or vague allegations. The appellant must demonstrate through specific pleadings and supporting material that the case falls within one or more of the exceptional categories. The court must examine the record, consider the contentions of both parties, and arrive at a considered conclusion that exceptional circumstances indeed exist before dispensing with deposit requirements.

Distinction Between Money Decrees and Other Decrees

The Supreme Court explicitly addressed the question of whether different standards should apply to stay applications concerning money decrees as opposed to other types of decrees. The court noted that Order XLI Rule 5 makes no textual distinction between money decrees and other decrees, and the provision applies with equal force to both categories. The language of the provision is general and comprehensive, encompassing all types of decrees without creating separate regimes based on the nature of relief granted.

However, the court recognized that as a matter of judicial practice and prudence evolved over decades, courts have generally been more cautious in granting stays of money decrees without deposits. This approach stems from the recognition that money decrees involve quantified obligations, and the risk of non-recovery increases substantially if execution is stayed without adequate security. Unlike injunctive relief or specific performance decrees where maintaining status quo may be appropriate, money decrees represent ascertained liabilities that decree holders are entitled to recover.

The established practice has been that stays of execution of money decrees should ordinarily be granted only on the condition that the decretal amount or a substantial portion thereof is deposited in court. This practice serves multiple purposes: it provides security to the decree holder, discourages frivolous appeals designed solely to delay payment of legitimate dues, and ensures that appellants have genuine intention to pursue their appeals rather than merely postponing inevitable payment. The Supreme Court acknowledged the wisdom underlying this practice and indicated that it should continue to guide appellate courts in ordinary circumstances.

Nevertheless, the court clarified that this rule of prudence and established practice cannot override the statutory provisions or convert a directory requirement into a mandatory one. Even in cases involving money decrees, if exceptional circumstances exist that bring the case within the parameters established by the court, unconditional stays can be granted. The court emphasized that such stays must be exceptional rather than routine, and appellate courts should carefully scrutinize whether the case truly warrants departure from normal practice.[1]

Impact on Appellate Practice and Litigants

The Lifestyle Equities judgment has profound implications for appellate practice in Indian civil courts. By clarifying that deposit requirements under Order XLI Rule 5 are directory rather than mandatory, the Supreme Court has expanded the discretionary power of appellate courts to fashion appropriate interim relief based on the specific circumstances of each case. This enhanced discretion enables courts to prevent situations where procedurally or substantively flawed decisions cause irreparable harm while appeals remain pending.

For appellants, particularly those challenging money decrees involving substantial amounts, this judgment provides hope that appellate courts can grant meaningful relief even when deposit of the entire decretal amount would be financially crippling or impossible. The judgment recognizes that in certain situations, insisting on deposits would effectively deny the right of appeal, as parties would be unable to pursue their legitimate grievances due to financial constraints. This is particularly important in cases involving corporate entities where substantial damages have been awarded, as mandatory deposits could potentially drive businesses into insolvency before appeals are decided.

However, the judgment should not be misunderstood as opening floodgates for unconditional stays in ordinary cases. The Supreme Court has been careful to emphasize that unconditional stays represent exceptions rather than the rule, and can only be granted when truly exceptional circumstances exist. Appellants cannot expect to obtain stays without deposits merely by making general allegations about errors in the impugned judgment. They must specifically demonstrate through cogent material that the case falls within one of the exceptional categories identified by the court.

For decree holders, the judgment provides assurance that their rights will not be lightly compromised. The requirement of establishing exceptional circumstances acts as a safeguard against routine grant of unconditional stays. Furthermore, the judgment clarifies that even when unconditional stays are granted, appellate courts should consider alternative forms of security such as bank guarantees, bonds, or undertakings. This ensures that decree holders’ interests are protected even when cash deposits are not mandated.

The judgment also has implications for the conduct of trial courts. By identifying categories of exceptional cases where unconditional stays may be warranted, the Supreme Court has indirectly emphasized the importance of procedural regularity and adherence to established legal principles at the trial stage. Trial courts must ensure that their decisions are based on proper pleadings, that parties receive adequate opportunity to present their cases, and that damages or other relief are assessed in accordance with law. Decisions that suffer from procedural irregularities or substantive errors invite appellate interference and may result in stays being granted without deposits.

Comparative Analysis with Arbitration Awards

The judgment also touches upon important distinctions between stays of execution of court decrees and stays of arbitration awards. While Order XLI Rule 5 of the Code of Civil Procedure governs appeals from court decrees, different provisions apply to challenges against arbitration awards under the Arbitration and Conciliation Act, 1996. Section 36 of the Arbitration Act deals with enforcement of arbitral awards and has been subject to extensive judicial interpretation regarding stay requirements.

The Arbitration and Conciliation Act originally provided that arbitral awards could be stayed pending challenge, but the 2015 amendments significantly altered this position. The amended Section 36 introduced a more stringent regime requiring deposit of the awarded amount as a precondition for stay in most cases. This legislative choice reflected the policy objective of minimizing judicial interference with arbitration awards and ensuring speedy enforcement of arbitral decisions. The Supreme Court has consistently held that Section 36 represents a statutory departure from the general provisions of the Code of Civil Procedure and must be applied accordingly.

However, even in the context of arbitration awards, courts have recognized that unconditional stays may be granted in truly exceptional circumstances. The Supreme Court has held that where arbitral awards suffer from patent illegality, fundamental procedural violations, or are contrary to substantive provisions of law or public policy, courts may grant stays without insisting on deposits. The principles articulated in the Lifestyle Equities judgment regarding exceptional circumstances are equally applicable to challenges against arbitration awards, though the threshold for establishing exceptionality may be higher given the strong legislative policy favoring enforcement of arbitral awards.

The distinction between court decrees and arbitration awards stems from different policy considerations. Court decrees result from judicial adjudication under established procedural rules with built-in safeguards, while arbitration awards represent consensual dispute resolution with limited grounds for judicial intervention. The legislature and judiciary have recognized that greater deference should be accorded to arbitration awards, and correspondingly, stricter requirements should apply for staying their enforcement. Nevertheless, the fundamental principle remains that in exceptional cases involving manifest injustice, courts possess inherent power to grant appropriate relief.

Procedural Requirements for Stay Applications

The Supreme Court’s judgment clarifies several procedural aspects that appellants must observe when seeking stay of execution of money decrees under Order XLI Rule 5 CPC. First, a specific application for stay must be filed before the appellate court. The mere filing of an appeal does not automatically operate as a stay of proceedings, and appellants cannot assume that execution will be suspended simply because they have challenged the money decree. The application for stay must be made promptly and without unreasonable delay, as delay in seeking stay may itself indicate lack of genuine grievance or create adverse inferences.

The stay application must contain specific averments demonstrating the existence of sufficient cause for staying execution. Vague or general allegations are insufficient. The applicant must clearly set out the grounds on which stay is sought, explain why substantial loss would result if stay is not granted, and demonstrate that there are substantial grounds for questioning the correctness of the decree. Where unconditional stay is sought on grounds of exceptional circumstances, the application must specifically plead and substantiate that the case falls within one or more of the exceptional categories identified by the Supreme Court.

The appellate court must apply its mind to the stay application and record detailed reasons for granting or refusing stay. Perfunctory orders passed without adequate reasons do not satisfy the requirements of Order XLI Rule 5(3). The court’s reasoning should address the specific contentions raised by both parties, explain why sufficient cause exists or does not exist, and justify any conditions imposed for granting stay. Where unconditional stay is granted, the court must specifically explain why exceptional circumstances exist that warrant departure from the normal requirement of deposit.

The Supreme Court has also emphasized that appellate courts should fix time limits for disposal of stay applications and ensure that they are decided expeditiously. Prolonged pendency of stay applications defeats the purpose of both the appeal and the execution proceedings. Decree holders are entitled to know within a reasonable time whether they can proceed with execution or must await disposal of the appeal. Similarly, appellants need timely clarity on whether interim protection will be available to them during the pendency of appeals.

Constitutional Perspectives on Access to Justice

The Lifestyle Equities judgment also implicates important constitutional considerations relating to access to justice and the right to appeal. While the Constitution of India does not guarantee an absolute right to appeal in all matters, once statutory rights of appeal are created, they must be meaningful and effective. Courts have recognized that the right of appeal is a substantive right that cannot be rendered illusory through procedural requirements that make it practically impossible for parties to pursue appeals.

The Supreme Court’s interpretation of Order XLI Rule 5 reflects this constitutional perspective. By holding that deposit requirements are not mandatory and can be dispensed with in exceptional circumstances, the court has ensured that financially constrained litigants are not denied access to appellate justice solely due to their inability to deposit substantial amounts. This approach aligns with the constitutional mandate of ensuring equal justice under law and preventing discrimination based on economic status.

However, the judgment also recognizes competing constitutional and policy considerations. Decree holders have vested rights arising from judicial adjudication, and these rights deserve protection. Allowing routine stays without deposits would undermine the sanctity of judgments and encourage frivolous litigation designed merely to delay enforcement of legitimate dues. The balance struck by the Supreme Court through its exceptional circumstances doctrine attempts to harmonize these competing interests while ensuring that neither party suffers manifest injustice.

Conclusion

The Supreme Court’s judgment in Lifestyle Equities C.V. & Anr. versus Amazon Technologies Inc. represents a watershed moment in Indian civil procedure. By comprehensively examining Order XLI Rule 5 of the Cpc and establishing clear guidelines for applications for stay of money decrees, the court has provided much-needed clarity on a contentious issue that has generated divergent views among High Courts. The judgment strikes a careful balance between protecting the rights of decree holders and ensuring that appellants have meaningful access to appellate remedies in exceptional circumstances.

The court’s articulation of specific criteria for identifying exceptional cases provides predictability and consistency in appellate practice. By identifying egregious perversity, patent illegality, facial untenability, and similar exceptional causes as grounds for unconditional stay, the Supreme Court has given concrete content to what would otherwise remain a vague and subjective standard. This framework enables appellate courts to exercise their discretion in principled manner while preventing arbitrary outcomes.

The practical impact of this judgment will unfold over time as appellate courts apply the principles laid down by the Supreme Court to diverse factual situations. What remains clear is that deposit requirements, while generally prudent and desirable, cannot be treated as insurmountable barriers to appellate relief in cases involving fundamental errors or manifest injustice. The judgment reaffirms the importance of judicial discretion in civil procedure while providing guardrails to ensure that such discretion is exercised responsibly and in accordance with established legal principles. For litigants and legal practitioners, this judgment provides a comprehensive roadmap for navigating stay applications and understanding the nuanced balance between competing interests that appellate courts must maintain.

References

[1] LiveLaw. (2025). Order XLI Rule 5 CPC | Deposit Not Mandatory For Stay Of Money Decree, Unconditional Stay Can Be Granted In Exceptional Cases: Supreme Court. Available at: https://www.livelaw.in/supreme-court/order-xli-rule-5-cpc-deposit-not-mandatory-for-stay-of-money-decree-unconditional-stay-can-be-granted-in-exceptional-cases-supreme-court-306156 

[2] LiveLaw. (2025). ‘Deliberate And Wilful Infringement’ Of Trademark: Delhi HC Directs Amazon To Pay ₹339.25 Crore To Luxury Brand Beverly Hills Polo Club. Available at: https://www.livelaw.in/high-court/delhi-high-court/amazon-trademark-infringement-luxury-brand-beverly-hills-polo-club-damages-costs-285085