Lifestyle Equities C.V. & Anr. v. Amazon Technologies Inc: Granting unconditional stay of execution of the money decree under Order XLI Rule 5 of the CPC?
Lifestyle Equities C.V. & Anr. v. Amazon Technologies Inc.
Note on Subject Matter: it is a highly significant civil procedure judgment that addresses the scope of unconditional stay of execution of money decrees under Order XLI Rule 5 of the Civil Procedure Code. The judgment extensively discusses Section 36 of the Arbitration and Conciliation Act, 1996 for comparative purposes, making it relevant for arbitration practitioners as well.
Background Facts
The plaintiffs (Lifestyle Equities C.V. and another), proprietors of the Beverly Hills Polo Club (BHPC) trademark, filed a trademark infringement suit against Amazon Technologies Inc. (the defendant) in the Delhi High Court. The plaintiffs claimed that the defendant had been unlawfully using a mark identically or deceptively similar to their trademark.
The suit was decreed ex parte on 25 February 2025 by the learned Single Judge in favour of the plaintiffs with the following reliefs:
- Permanent injunction restraining the defendant from selling or dealing in products deceptively similar to the plaintiffs' BHPC logo
- Compensatory damages of USD 38.78 million (approximately Rs. 336.03 crores), comprising:
- Lost royalties: USD 33.78 million (Rs. 292.70 crores)
- Increased advertising expenses: USD 5 million (Rs. 43.33 crores)
- Costs of Rs. 3.23 crores plus court fees
- Grand total decretal amount: Rs. 339.26 crores plus court fees and interest at 5% per annum from date of judgment if not paid within three months
The defendant filed an appeal (RFA (O.S.) (COMM) No. 11 of 2025) and simultaneously filed an application under Order XLI Rule 5(1) and 5(3) of the CPC seeking stay of the operation of the judgment and money decree without depositing the decretal amount.
The Division Bench of the Delhi High Court vide judgment dated 1 July 2025 granted unconditional stay of the execution of the money decree. The plaintiffs challenged this order by filing the present Special Leave Petition before the Supreme Court.
Preliminary Disposal
Remarkably, the Supreme Court had already disposed of the SLP on 24 September 2025 with a brief order stating:
"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. The Special Leave Petition is, accordingly, dismissed. However, reasons to follow by a separate Order."
The detailed reasoned judgment was then delivered on 7 October 2025 explaining the legal basis for the Court's dismissal of the SLP.
Key Issue for Determination
The sole question before the Supreme Court was: Whether the Division Bench of the High Court committed any error in granting unconditional stay of execution of the money decree under Order XLI Rule 5 of the CPC?
Contentions of the Parties
Plaintiffs' Submissions
The plaintiffs, represented by senior counsel Mr. Mukul Rohatgi and Mr. Gaurav Pachnanda, argued that:
- The second Proviso to Section 36(3) of the Arbitration Act indicates that ordinarily courts would not be empowered to unconditionally stay an arbitration award or judgment by applying principles of Order XLI Rule 5 of the CPC
- Even if unconditional stay could be granted, the discretion should be restricted to only cases of fraud or corruption, or grounds that take color from those two grounds - not cases of extreme or egregious views on the merits
- The learned Senior Counsel sought to extend the analogy of Section 36 of the Arbitration Act to provisions of Order XLI Rule 3 and 5 of the CPC
Defendant's Submissions
The defendant, represented by senior counsel Dr. Abhishek Manu Singhvi, Mr. Neeraj Kishan Kaul, and Mr. Arvind Nigam, contended that:
- The High Court correctly granted unconditional stay based on serious infirmities in the ex parte judgment
- The provisions of Order XLI Rule 5 of the CPC cannot be restricted or interpreted through the lens of Section 36 of the Arbitration Act
- Unconditional stay can be granted in appropriate exceptional circumstances beyond just fraud or corruption
Supreme Court's Detailed Legal Analysis
1. Clear Demarcation from Arbitration Law
At the outset, the Supreme Court clarified that this litigation has nothing to do with Section 36 of the Arbitration Act. The Court was only concerned with Order XLI Rule 3 and 5 of the CPC. The Court referred to Section 36 only for the limited purpose of answering the specific contention raised by the plaintiffs' counsel about whether the analogy of Section 36 could be extended to Order XLI Rule 5 of the CPC.
2. Evolution of Section 36 of the Arbitration Act
The Court undertook an exhaustive analysis of the legislative history of Section 36:
Pre-2015 Amendment: The mere filing of an application challenging an arbitral award under Section 34 was understood in many quarters as an automatic stay of the award, which became a great obstacle to ease of enforcement.
2015 Amendment: Section 36 was wholly substituted. Sub-section (2) provided that filing an application to set aside the arbitral award did not by itself render the award unenforceable unless a separate stay application was filed and granted.
2019 Amendment (Struck Down): The legislature attempted to revive the pre-2015 automatic stay regime through Sections 13 and 15 of the Amendment Act, 2019. However, in Hindustan Construction Company v. Union of India(2020) 17 SCC 324, the Supreme Court declared these provisions as manifestly arbitrary and unconstitutional as being violative of Article 14 of the Constitution.
2021 Amendment: The Arbitration and Conciliation Amendment Act, 2021 introduced a second Proviso to Section 36(3) with retrospective effect from 23 October 2015. This Proviso provides 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
3. Analysis of Section 36(3) and Its Provisos
The Court noted that Section 36(3) confers discretionary power on courts to grant stay of an arbitral award, flowing from the usage of the word "may" and the phrase "such conditions as it may deem fit."
The first Proviso to Section 36(3) provides that in case of arbitral awards for payment of money, the court shall have "due regard" to the provisions for grant of stay of money decree under the CPC.
The second Proviso mandates unconditional stay in cases of fraud or corruption.
4. Judicial Precedents on Section 36
A. Sepco Electric Power Construction v. Power Mech Projects Limited (2022 SCC OnLine SC 1243)
The Supreme Court observed that a court may grant an unconditional stay if appropriate to do so. While acknowledging this, the Court stated that unconditional stays were covered by the second Proviso to Section 36(3), indicating that the power to grant unconditional stay is governed by the second Proviso. This may indicate that the benefit of unconditional stay could be granted only in cases of fraud or corruption.
However, the Court also noted that the appellant was not able to show any cogent and glaring error going to the root of the award, and no cogent ground had been made out even prima facie for interference with the award. These observations formed part of the reasoning in dismissing the appeal.
B. Pam Developments Private Limited v. State of West Bengal (2019) 8 SCC 112
This decision was also analysed by the Court to understand the circumstances under which unconditional stay could be granted in arbitration matters.
5. Distinguishing Arbitration Law from Civil Procedure
The Supreme Court held that the provisions of the Arbitration Act cannot be mechanically imported into the interpretation of Order XLI Rule 5 of the CPC. The two regimes are distinct:
- Arbitration Act: Enacted with specific legislative intent to ensure speedy enforcement of arbitral awards and minimize court intervention. The restrictive approach in Section 36 serves this specific policy objective.
- Civil Procedure Code: Governs ordinary civil litigation where different considerations apply. Order XLI Rule 5 provides courts with discretionary power to stay execution "for sufficient cause."
6. Principles Governing Order XLI Rule 5 of the CPC
The Supreme Court laid down comprehensive principles governing stay of execution under Order XLI Rule 5:
(I) General Rule for Money Decrees: As a rule of prudence and established practice evolved over time, no stay of execution of a money decree should be granted except on the condition that the decretal amount be deposited in court.
(II) Not a Mandatory Rule: However, such condition for deposit cannot be said to be mandatory and non-prescription thereof does not operate as a bar to staying execution of a money decree.
(III) "Exceptional Cases" Doctrine: A lodestar for bringing a case within the purview of "exceptional case" for the purpose of granting benefit of unconditional stay of execution of money decree would be if the money decree in question:
- Is egregiously perverse
- Is riddled with patent illegalities
- Is facially untenable
- Such other exceptional causes similar in nature
(IV) No Distinction Between Money and Other Decrees: For purposes of grant or refusal of stay under Rule 5 of Order XLI, it is immaterial whether the decree is a money decree or any other decree. The language of the provision is very clear - Order XLI Rule 5 makes no distinction between money decrees and other decrees, and applies with full rigour in both instances.
(V) Modes of Security: There is no provision under Order XLI Rule 5 imposing a mandate to deposit cash security as the only mode of security for execution of the decree. Security can be in the shape of:
- Property
- Bond
- Appropriate undertaking from the appellant to abide by the decree
Application to the Present Case
Having laid down the legal principles, the Supreme Court examined the High Court's reasons for granting unconditional stay. The High Court had noted several serious infirmities in the ex parte judgment:
- Irregularities in service of summons on the defendant
- Defendant's non-appearance despite advance notice may not have been deliberate given service irregularities
- The decretal amount of Rs. 339.26 crores was extraordinarily high
- Serious questions about the merits of the case that required appellate examination
The Supreme Court found that the High Court had correctly exercised its discretion in granting unconditional stay after considering all relevant factors. The judgment and decree were found to be facially untenable and contained patent illegalities, bringing the case within the "exceptional cases" doctrine.
Supreme Court's Ultimate Holding
The Supreme Court dismissed the Special Leave Petition and upheld the High Court's order granting unconditional stay. The Court held that:
"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."
The Court clarified that the main appeal shall be decided on its own merits without being influenced by any observations made in the impugned judgment or the Supreme Court's judgment. Parties shall be free to put forward all contentions available to them at the time of final hearing.
Significantly, the Court directed that one copy of this judgment be forwarded to all High Courts, indicating its precedential value and importance for uniform application across the country.
Key Takeaways and Practical Implications
1. Unconditional Stay Not Limited to Fraud or Corruption
While the Arbitration Act restricts unconditional stay primarily to cases of fraud or corruption (second Proviso to Section 36(3)), the same restriction does not apply to ordinary civil proceedings under Order XLI Rule 5 of the CPC. Courts can grant unconditional stay in exceptional cases where the decree is egregiously perverse, riddled with patent illegalities, or facially untenable.
2. Arbitration Principles Cannot Be Mechanically Imported
The restrictive approach under Section 36 of the Arbitration Act flows from the specific legislative policy of minimal judicial intervention in arbitration. These principles cannot be mechanically imported into interpretation of the CPC, which governs ordinary civil litigation with different policy considerations.
3. "Exceptional Cases" Doctrine Clarified
The Supreme Court has provided clear markers for what constitutes an "exceptional case" warranting unconditional stay:
- Egregious perversity in findings
- Patent illegalities riddling the decree
- Facial untenability of the judgment
- Similar exceptional causes
4. Cash Deposit Not the Only Mode of Security
The judgment clarifies that cash deposit is not mandatory - courts can accept alternative forms of security such as property, bonds, or undertakings. This provides flexibility and prevents execution being stalled merely due to liquidity constraints.
5. Ex Parte Decrees Warrant Careful Scrutiny
Where a decree has been passed ex parte, particularly involving large sums, courts should carefully examine whether there were irregularities in service or other procedural improprieties before executing the decree. This protects the right to be heard.
6. Discretion Must Be Exercised Judiciously
While unconditional stay is permissible in exceptional cases, it remains an exception rather than the rule. Courts must exercise this discretion judiciously after examining all relevant factors. The general rule remains that money decrees should ordinarily be stayed only upon deposit of the decretal amount or furnishing adequate security.
7. Relevance for Arbitration Practitioners
While this is not an arbitration case, the detailed discussion of Section 36 of the Arbitration Act and its provisos provides valuable insights for arbitration practitioners, particularly regarding:
- The legislative history and rationale behind the restrictive approach to staying arbitral awards.
- The limited circumstances under which unconditional stay of arbitral awards can be granted.
- The distinction between the arbitration regime and ordinary civil litigation.
Conclusion
The Judgment is a significant civil procedure decision that comprehensively addresses the scope and limits of unconditional stay of execution of money decrees. By clarifying that the restrictive approach under the Arbitration Act cannot be mechanically imported into the CPC, and by providing clear guidelines on when "exceptional cases" warrant unconditional stay, the judgment strikes a balance between protecting decree-holders' rights to speedy execution and safeguarding appellants from irreversible harm where serious questions exist about the correctness of the decree.
The judgment's direction to forward copies to all High Courts underscores its importance as binding precedent that will guide stay applications across the country in civil appeals involving money decrees.
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