REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7410-7411 OF 2008
(Arising out of SLP (C) No. 18095-18096 of 2008)
M/S. MALWA STRIPS PVT. LTD. …
APPELLANT
Versus
M/S. JYOTI LTD. … RESPONDENT
JUDGMENT
S.B. Sinha, J.
1. Leave granted.
2. Appellant is a company incorporated and registered under the
Companies Act, 1956 (for short, “the said Act”). It is engaged in
manufacturing of copper strips and copper foils etc. It has its registered
office at 17-20, Industrial Area No.2, AB Road, Dewas, Madhya Pradesh.
Respondent is also a company registered and incorporated under the said
Act. It has its registered office at Nanubhai Amin Marg, Industrial Area,
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Vadodara. Respondent used to place orders for supply of copper rods strips
and foils from time to time with the appellant. Allegedly, the payments
used to be made towards the said supply from time to time. Appellant, inter
alia, on the premise that a sum of Rs. 49,03,908.29 was owed to it by the
respondent filed a Summary Suit under Order XXXVII of the Code of Civil
Procedure, 1908 (for short, “the Code”). An application for leave to defend
the suit was filed by the respondent. Appellant contended that as the
respondent raised a defence only as regards the rate of interest and not the
principal amount, its application should be dismissed. By an order dated
23.08.2007, the application for leave to defend the suit was allowed, subject
to the condition that the respondent shall make payment of undisputed and
admitted amount of Rs.22,64,789.52. Such deposit was to be made by
22.9.2007. Respondent obtained extension of time to deposit the amount.
However, as the said amount was not deposited, the trial court passed a
judgment on or about 14.11.2007 decreeing the suit in favour of the
appellant. Respondent preferred an appeal thereagainst. An application for
stay of the said judgment and decree passed by the trial Court was also filed.
By reason of the impugned judgment, the High Court stayed the operation
and execution of the decree in its entirety. While doing so, the High Court
opined:
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“ We are conscious of the fact that usually
money decrees are not stayed in appeal. At the
same time, it is not a universal principle of law
that the stay can never be granted in cases relating
to money decree. The Court has discretion to
grant a stay keeping in view all facts and
circumstances of the case, including the manner in
which the trial of the suit was conducted and the
impugned decree was passed.
We are prima facie of the view that a case
for stay of execution of the decree is made out by
the appellant on the facts on record. We do not,
however, wish to express any opinion on the
merits and demerits of the case at this stage,
which, in our opinion, will be gone into at the time
of hearing of the appeal. For the purpose of grant
of stay, we are of the view that a ground for stay,
as contemplated under O.41 R.5 CPC is made out.
We are, therefore, inclined to stay execution of the
decree pending appeal.”
Appellant is, thus, before us.
3. Mr. Shiv Sagar Tiwari, learned counsel appearing on behalf of the
appellant would submit that the High Court committed a serious error of law
in passing the impugned judgment insofar as it failed to take into
consideration that the defendant – respondent had raised no substantive and
bona fide defence and that in view of the matter it was not a case where the
execution of the decree should have been stayed.
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4. Ms. Kamini Jaiswal, learned counsel appearing on behalf of the
respondent, on the other hand, would urge that compound interest was not
payable and in any event a suit under Order XXXVII of the Code being not
maintainable, the manner in which the judgment and decree passed by the
learned trial judge being wholly unsustainable, the High Court could not be
said to have committed any error of law in passing the impugned judgment.
5. The decree passed by the learned trial judge is a money decree. A
conditional leave to defend was granted. The said condition has not been
fulfilled. Leave to defend, therefore, would be deemed to have been
refused. Correctness of the said order had not been questioned.
The Parliament, by reason of Section 87 of Act 104 of 1976 inserted
sub-rule (3) in Rule 1 of Order XLI of the Code, which is to be in the
following effect:
“(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.”
6. An explanation was also added to sub-rule (1) of Rule 5 of Order
XLI. In terms of sub-rule (1) of Rule 5 of Order XLI, an appeal shall not
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operate as a stay of proceedings. It is for the Appellate Court who may, for
sufficient cause, order stay of execution of such decree. The explanation
appended to the said sub-rule reads as under:
“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.”
7. In terms of sub-rule (5) of Rule 5 of Order XLI, 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.
8. We will proceed on the assumption that although the word ‘shall’ has
been used in Order XLI Rule 1 (3) of the Code, the same is not mandatory
in character, and, thus, may be read as directory.
9. In Rajasthan State Electricity Board and Anr. vs. Ram Deo & ors.
[AIR 1999 Rajasthan 264], after noticing some of the aforementioned
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decisions as also the legislative history of the said provision, a learned
Single Judge of the Rajasthan High Court held as under:
“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 without making compliance of 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 comply with the directions issued by the Court
under Sub-Rule (3) of Rule I of Order 41 CPC.”
10. We may, however, notice that although the provisions of sub-rule (3)
of Rule 1 of Order XLI have been held not to be mandatory, this Court in
Kayamuddin Shamsuddin Khan vs. State Bank of India [(1998) 8 SCC 676]
opined that non-compliance of a direction to deposit the decreetal amount or
part of it or furnish security therefor would result in the dismissal of the stay
application but not the entire appeal, stating:
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“8. This would mean that non-compliance with the
direction given regarding deposit under Sub-rule
(3) of Rule 1 of Order XLI 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.”
11. To the same effect is the decision of this Court in Sihor Nagar Palika
Bureau vs. Bhabhlubhai Virabhai & Co. [(2005) 4 SCC 1], wherein it was
held:
“6. Order XLI Rule 1(3) of the 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 XLI 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 decree is not stayed
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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 &
anr. vs. Dhanalakshmi Bank Ltd. & ors. [(2008) 3 SCC 397]
The High Court in this case failed to notice the provisions of sub-rule
(3) of Rule 1 of Order XLI.
The appellate court, indisputably, has the discretion to direct deposit
of such amount, as it may think fit, although the decreetal 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.
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The High Court, with respect, failed to notice that suit was one under
Order XXXVII 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 XII 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.
12. 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 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 decreetal amount or a part of it and/or
directly through the judgment debtor to secure the payment of the decreetal
amount is granted. A strong case should be made out for passing an order
of stay of execution of the decree in its entirety.
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13. We, therefore, having regard to the facts and circumstances of this
case direct the respondent to deposit a sum of Rs.35 lakhs within a period of
four weeks from date. Respondent shall furnish adequate security for the
rest of the decreetal amount within the same period. Appellant shall be
entitled to withdraw a sum of Rs.30 lakhs out of the said deposited amount
without furnishing any security and the rest amount on furnishing security.
In the event the respondent fails to comply with the order, the decree shall
be executable at once.
14. The appeals are allowed with the aforementioned directions. No
costs.
……………….…..………….J.
[S.B. Sinha]
..………………..……………J.
[Cyriac Joseph]
New Delhi;
December 18, 2008
