Delhi High Court
Unity Infraprojects Limited vs Neptune Systems Private Limited on 4 August, 2016
25
IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 04.08.2016
RFA 536/2016
UNITY INFRAPROJECTS LIMITED ..... Appellant
Through: Mr Jawahar Raja, Mr Ashish Sharma
and Mr Minmay Kanojia, Advocates.
versus
NEPTUNE SYSTEMS PRIVATE LIMITED ..... Respondent
Through: Mr J.P.Sengh, Sr. Advocate with
Mr Ankur Singhal, Ms Sara Ansal and
Ms Manisha Mehta, Advocates.
CORAM:
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
SIDDHARTH MRIDUL, J (ORAL)
CM 27761/2016 (Stay)
1. The present application under Order 41 Rule 5 of the Code of Civil
Procedure, 1908 (in short 'the Code') essentially seeks stay of execution of
the judgment and decree dated 18.05.2016 impugned in the accompanying
appeal.
RFA536/2016 Page 1 of 15
2. By way of order of even date the trial court disposed of an application
under Order 37 Rule 3(5) of the Code filed on behalf of the appellant- Unity
Infraprojects Limited (hereinafter referred to as 'Unity'). The said
application was instituted on behalf of Unity in a suit being CS No.69/2016
instituted on behalf of the respondent- Neptune Systems Private Limited
(hereinafter referred to as 'Neptune'), against the former for recovery of
Rs.81,97,448/- along with pendente lite and future interest.
3. The facts as are necessary for the determination of the present
application are as follows:-
(i) Neptune is in the business of manufacturing of various electrical
technologies and is stated to be a well renowned company with
tremendous experience in the business.
(ii) Unity is a public limited company and principally operates as a
civil contractor in the area of buildings & housing,
transportation, water supply and irrigation.
(iii) Unity was awarded a contract for construction of a hospital
building, academic block and student's hostel with associated
services under Phase-I for comprehensive redevelopment plan
RFA536/2016 Page 2 of 15
for Lady Hardinge Medical College & Associated Hospital at
Connaught Place, New Delhi.
(iv) Unity in turn, admittedly, issued a Letter of Intent dated
08.02.2013 in favour of Neptune for supply of Meter Board and
Distribution Board.
(v) It is further an admitted position that Neptune supplied the
requisite goods through several tax/retail invoices containing
details of the goods during the financial year 2013-14 on credit
basis to Unity.
(vi) Admittedly, Unity furnished Form-C to Neptune against the
said invoices.
(vii) According to Neptune a sum of Rs.91,97,364/- was payable to
it, for goods sold and delivered to Unity, who kept deferring
payment thereof on one pretext or the other.
(viii) Eventually, post dated cheques were issued by Unity in favour
of Neptune duly signed by the Chairman. The details of the said
cheques are as follows:-
RFA536/2016 Page 3 of 15
S. No. Cheque No. Dated Amount
1. 156256 10.05.2014 Rs.49,00,000/-
2. 156257 25.05.2014 Rs.16,25,000/-
3. 156258 10.06.2014 Rs.15,00,000/-
4. 156259 25.06.2014 Rs.10,00,400/-
Total Rs.90,58,400/-
(ix) It is also an admitted position that upon presentation, Cheque
No.156256 dated 10.05.2014 was dishonoured by the payee
bank on account of "insufficient funds".
4. The dispute raised on behalf of Unity in the present appeal is in
relation to a letter dated 29.05.2014, whereby, Unity purportedly requested
Neptune not to deposit the cheques given to the latter towards payment for
goods till further instructions, on the assertion that the former, due to internal
reasons, could not prevent dishonour of the said Cheque No.156256 dated
10.05.2014 and also extending an apology in that behalf.
5. The entire defence of the appellant is predicated on the assertion that
the said letter dated 29.05.2014 is a forgery and has been fabricated by
RFA536/2016 Page 4 of 15
Neptune.
6. It would be pertinent to observe at this stage, that the underlying
transaction between the parties resting with the delivery of the subject goods,
issuance of the subject cheques and Form-C, as aforesaid, has been
unequivocally admitted by Unity.
7. Mr Jawahar Raja, learned counsel appearing on behalf of the
appellant, strenuously urged that in view of their assertion that the disputed
letter dated 29.05.2014 was a forgery, Unity was entitled to grant of
unconditional leave to defend the said suit bearing CS No.69/2016
8. Mr Raja, learned counsel, invites my attention to paragraph 8 of the
judgment and decree impugned in the present appeal to urge that the finding
arrived at by the trial court exhibits complete non-application of mind and an
abject failure to consider their assertion that the said letter dated 29.05.2014
had never been issued by them and was a forgery.
9. On a specific query from the court and after perusal of the application
seeking leave to defend filed on behalf of Unity, it emerges that at no stage
earlier has it been asseverated on behalf of Unity as is being sought to be
RFA536/2016 Page 5 of 15
done now, that Mr Narender Pal Singh, who has authored the subject letter,
was never an employee of Unity, so as to substantiate their assertion that the
said letter dated 29.05.2014 is ex-facie a forgery.
10. Be that as it may, in the facts and circumstances aforesaid, prima
facie, I am of the view that the appellant was not entitled to the grant of
unconditional leave to defend the said suit bearing CS No.69/2016, instituted
by Neptune.
11. During the course of submissions made before this court, my attention
has been invited to the decisions in Malwa Strips Private Limited v. Jyoti
Limited: (2009) 2 SCC 426, Sihor Nagar Palika Bureau v. Bhabhlubhai
Virbhai & Co.: (2005) 4 SCC 1 and National Thermal Power Corporation
Ltd. v. Siemens Atiengesellschaft: 2012 SCC OnLine Del 5686, to urge that
this court possesses a discretionary power to stay execution of a money
decree in an appropriate case.
12. The Hon'ble Supreme Court in Sihor Nagar Palika Bureau (supra),
whilst considering the scope and ambit of Order 41 Rule 1(3) and Rule 5(5)
of the Code held as follows:-
RFA536/2016 Page 6 of 15
"6. Order 41 Rule 1(3) 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 41 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
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."
13. In Malwa Strips Private Limited (supra), heavily relied upon on
behalf of the appellant, Sihor Nagar Palika Bureau (supra) was cited with
approval by the Hon'ble Supreme Court of India. In Malwa Strips Private
RFA536/2016 Page 7 of 15
Limited (supra) the Hon'ble Supreme Court while approving the decision in
B.P.Agarwal v. Dhanalakshmi Bank Ltd. : (2008) 3 SCC 397, held as
under:-
"12. The High Court in this case failed to notice the
provisions of sub-rule (3) of Rule 1 of Order 41. The
appellate court, indisputably, has the discretion to
direct deposit of such amount, as it may think fit,
although the decretal 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."
14. In this regard, the Hon'ble Supreme Court in B.P.Agarwal (supra),
made the following observations:-
"4. In Kayamuddin Shamsuddin Khan v. SBI [(1998) 8
SCC 676] the dispute related to Order 41 Rule 1(3); it
was held that if the amount is not deposited, the appeal
could be directed to be dismissed. Obviously reference
was to Order 41 Rule 5(5). In paras 6 and 8 this Court
observed as follows: (SCC p. 677)
"6. The learned counsel for the respondent has
invited our attention to sub-rule (3) of Rule 1
of Order 41 in the Code of Civil Procedure, as
amended in the State of Maharashtra, which
reads as under:
RFA536/2016 Page 8 of 15
'1. (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:
Provided that the court may dispense with the
deposit or security where it deems fit to do so
for sufficient cause.'
***
8. This would mean that non-compliance with
the direction given regarding deposit under
sub-rule (3) of Rule 1 of Order 41 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.""
15. A Division Bench of this court in National Thermal Power
Corporation Ltd.(supra), in particular, paragraphs 9 and 10 thereof observed
as under:-
"9. We may notice that learned senior counsel
for the appellant has relied upon the
observations of the Supreme Court in Sihor
Nagar Palika Bureau v. Bhabhlubhai Virabhai
& Co.; (2005) 4 SCC 1 to contend that court
while considering the issue of grant of interim
stay under Order 41 Rule 1(3) and Rule 5(5),
CPC, is within its rights to direct furnishing of
security instead of deposit of the decretal
amount. The relevant observations made in para
6 are as under:-
"6. Order 41 Rule 1(3) 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 41
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
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."
10. Learned senior counsel for the respondent
while referring to the same judgment has
emphasized that such discretion is to be
exercised judicially and not arbitrarily and the
Supreme Court itself has opined that ordinarily
execution of money decree is not stayed
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."
16. The relevant provisions of the Order 41 of the Code are extracted
hereinbelow:-
Rule 1(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."
Rule 5
"5. Stay by Appellate Court.- (1) An appeal
shall not operate as a stay of proceedings under a
decree or order appealed from except so far as the
Appellate Court may order, nor shall execution of
a decree be stayed by reason only of an appeal
having been preferred from the decree; but the
Appellate Court may for sufficient cause order
stay of execution of such decree.
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 to 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 country, be acted
upon by the court of first instance.
(2) Stay by court which passed the decree :--
Where an application is made for stay of
execution of an appealable decree before the
expiration of the time allowed for appealing there
from, the court which passed the decree may on
sufficient cause being shown order the execution
to be stayed.
(3) No order for stay of execution shall be made
under sub-rule (1) or sub-rule (2) unless the court
making it is satisfied--
(a) that substantial loss may result to the party
applying for stay of execution unless the order is
made;
(b) that the application has been made without
unreasonable delay; and
(C) that security has been given by the applicant
for the due performance of such decree of or as
may ultimately be binding upon him.
(4) Subject to the provisions of sub-rule (3), the
court may make an ex parte order for stay of
execution pending the hearing of the application.
(5) 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, the court shall not make
an order staying the execution of the decree."
17. A bare reading of the provisions referred to hereinabove, insofar as
they are relevant to the facts of the present case, shows that a discretion has
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. Further the Appellate Court
cannot order stay of execution unless it is satisfied that substantial loss may
result to the party applying for stay. Where the appellant fails to deposit the
decretal amount or furnish the specified security, the court ought not to stay
the execution of the impugned decree.
18. The legal position that inter alia emerges from a conspectus of the
aforementioned judicial decisions can be summarized as follows:-
(i) Ordinarily, execution of a money decree is not stayed, inasmuch
as, satisfaction of money decree does not amount to substantial
loss or irreparable injury and in the event of appeal being
allowed, the remedy of restitution is always available to the
successful party.
(ii) The power to stay execution of a money decree is a
discretionary power, and is meant to be exercised in appropriate
cases by the appellate court.
(iii) The discretion has to be exercised judicially and not arbitrarily
depending on the facts and circumstances of a given case.
(iv) Even if the provisions of Order 41 Rule 1(3) and Rule 5(5) are
considered not to be mandatory, the purpose for which they
have been enacted has to be accorded due consideration. An
exceptional case has to be made out for stay of execution of a
money decree. The Parliamentary intent has to be given effect
to.
19. The appellant in the present case refuses to either deposit the decretal
amount or furnish security for the due performance of the impugned decree.
Further, as has been observed hereinabove, the present is not a case where
the appellant has a good prima facie case so as to warrant the exercise of the
discretionary power of this court of absolute stay of execution of the money
decree. Even otherwise, the satisfaction of the impugned decree would not
amount to irreparable injury on account of the circumstance that the remedy
of restitution would always be available to the appellant in the event of his
succeeding in the appeal.
20. In view of the foregoing discussion and in the facts and circumstances
of the case, in my view, the appellant has been unable to make out a case
leave alone an exceptional case, for grant of order of stay of execution of the
impugned decree.
21. The application is devoid of merit and is accordingly dismissed.
SIDDHARTH MRIDUL, J
AUGUST 04, 2016
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