The Supreme Court of India, in a significant judgment, has held that an appellate court has the discretion to grant an unconditional stay on the execution of a money decree in “exceptional cases,” such as when the decree is egregiously perverse, riddled with patent illegalities, or facially untenable. A bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan dismissed a Special Leave Petition filed by Lifestyle Equities C.V., upholding a Delhi High Court order that had granted an unconditional stay on a money decree of over ₹336 crores against Amazon Technologies Inc. The Court clarified that while the norm is to require a deposit of the decretal amount, this is a rule of prudence and not a mandatory legal requirement under the Civil Procedure Code, 1908.
Background of the Case
The dispute originated from a civil suit, CS(COMM) No. 443 of 2020, filed in the Delhi High Court by Lifestyle Equities C.V. and its licensee (the plaintiffs). They alleged that Amazon Technologies Inc. (defendant No. 1) and other defendants were infringing on their registered trademark, “Beverly Hills Polo Club” (BHPC), by using an identically or deceptively similar logo. The plaintiffs, proprietors of the well-known BHPC mark featuring a charging polo pony and rider, sought a permanent injunction and damages initially quantified at ₹2,00,05,000.
The suit proceeded ex parte against Amazon Technologies Inc., which was noted to have failed to enter an appearance despite advance notice. On February 25, 2025, a learned Single Judge of the Delhi High Court passed an ex parte judgment, decreeing the suit in favor of the plaintiffs. The decree included a permanent injunction and awarded damages amounting to USD 38.78 million (approximately ₹336,02,87,000) along with costs of over ₹3.23 crores against Amazon.
Aggrieved by this judgment, Amazon filed a regular first appeal, RFA (O.S.) (COMM) No. 11 of 2025, before a Division Bench of the Delhi High Court. Along with the appeal, Amazon moved an application under Order XLI Rule 5 of the Civil Procedure Code (CPC), seeking a stay on the operation of the money decree. On July 1, 2025, the Division Bench allowed the application and granted an unconditional stay on the execution of the decree, subject only to an undertaking from Amazon to comply with the judgment if its appeal ultimately failed. It was this unconditional stay that Lifestyle Equities challenged before the Supreme Court.
Arguments of the Parties
For the Petitioners (Lifestyle Equities): Senior Counsel Mr. Mukul Rohatgi and Mr. Gaurav Pachnanda argued that the High Court’s order was an “egregious error” and in “flagrant disregard” of the mandatory provisions of Order XLI Rule 5 of the CPC. They contended that under Order XLI Rule 1(3) and Rule 5(5), a deposit or security is a condition precedent for staying the execution of a money decree. It was argued that since Amazon had knowledge of the proceedings, the delivery of suit papers constituted adequate service of summons. The petitioners insisted that directing Amazon to merely furnish an undertaking could not be considered “adequate security.”
For the Respondent (Amazon Technologies Inc.): Senior Counsel Dr. Abhishek Manu Singhvi, Mr. Neeraj Kishan Kaul, and Mr. Arvind Nigam defended the High Court’s order. They argued that the Division Bench had painstakingly considered all relevant aspects and, in its discretion, granted the stay. They contended that the word “shall” in Order XLI Rule 5 is not mandatory and an appellate court can grant an unconditional stay in exceptional cases. The respondent highlighted several “shocking facts” and “gross perversities” in the Single Judge’s decree, including the enhancement of the damages claim from ₹2 crores to ₹3,780 crores at the stage of written submissions without any amendment to the plaint or notice to the defendant. They also argued that no valid summons were ever served on Amazon.
The Supreme Court’s Analysis
The Supreme Court, in a detailed judgment authored by Justice Pardiwala, embarked on a thorough analysis of the legislative history and judicial interpretation of Order XLI Rule 1 and Rule 5 of the CPC.
The Court observed that the legislative intent behind the 1976 amendment to the CPC was not to make the deposit of the decretal amount a mandatory prerequisite for maintaining an appeal. Citing its previous decisions in Kayamuddin Shamsuddin Khan v. State Bank of India and Malwa Strips Pvt. Limited v. Jyoti Limited, the bench reiterated that the obligation under Order XLI Rule 1(3) is “directory and not mandatory.” Non-compliance would only disentitle the appellant to a stay of execution, not lead to the rejection of the appeal itself.
The Court held that the power to grant a stay under Order XLI Rule 5 is discretionary and hinges on the existence of “sufficient cause.” The bench laid down what could constitute an “exceptional case” warranting an unconditional stay. The Court stated, “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.”
The judgment noted that the High Court had found prima facie substance in several of Amazon’s contentions. These included:
- No Valid Service of Summons: The High Court found it was a “serious infirmity” that no summons in the suit were ever served on Amazon, making the ex parte order against it erroneous.
- Unjustified Enhancement of Damages: The claim for damages was inflated from ₹2 crores to ₹3780 crores in written submissions, without amending the plaint or putting Amazon on notice. The Court observed, “without an amendment of the plaint, the damages could not have been enhanced, much less to ₹3780 crores.”
- Lack of Pleadings and Findings: The Division Bench noted there were no pleadings to support the massive damages awarded and no specific findings of infringement or complicity against Amazon Technologies Inc. The liability appeared to have been fastened based on conjectures about its relationship with other defendants.
The Supreme Court found that these prima facie findings by the Division Bench justified the grant of an unconditional stay. The Court underscored the importance of valid service of summons, stating, “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.”
The Final Decision
Concluding its analysis, the Supreme Court summarized the principles for granting a stay of execution. It affirmed that while the ordinary practice for money decrees is to require a deposit, it is not an inflexible rule. An unconditional stay can be granted in exceptional circumstances. The Court held that security under Order XLI Rule 5(3) “can be in the shape of property, bond, or by undertaking from the appellant to abide by the decree.”
Finding no legal error in the High Court’s discretionary order, the Supreme Court dismissed the Special Leave Petition. It clarified that the observations made by the High Court and by itself were prima facie for the purpose of the stay application and would not influence the final decision of the appeal on merits.
