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State Of Kerala v. T.K Kuruvilla And Others
Structured Summary of the Judicial Opinion (Sankarasubban, J.)
Factual and Procedural Background
The application (I.A.) was filed by the State seeking a stay of all further proceedings pursuant to an execution petition filed in O.S. No. 150 of 1997 before the Sub-Court, Kottayam. The State, represented by the District Collector, Kottayam, filed F.A.O. No. 384 of 2003 against the judgment and decree in O.S. No. 150 of 1997. The original suit was brought by the respondents for damages for breach of contract. A decree for Rs. 12,16,667.50 was entered in favour of the plaintiffs (respondents). The present appeal challenges that judgment and decree.
Legal Issues Presented
- Whether the State is entitled to an order of stay of execution without furnishing security under Order 27, Rule 8A of the Code of Civil Procedure (CPC).
- Whether Order 41, Rule 1(3) (requiring deposit of the amount in dispute or furnishing security by an appellant against a money decree) is mandatory or directory, and its effect when the State appeals.
- Whether the Appellate Court may direct the deposit of the decretal amount (in whole or in part) or require security from the State when granting a stay under Order 41, Rule 5 (specifically Rule 5(3) and Rule 5(5)), in light of Order 27, Rule 8A.
- How the provisions of Order 41 and the exemption in Order 27, Rule 8A are to be read harmoniously when the State is the appellant.
Arguments of the Parties
Appellant's (State) Arguments — as presented by the learned Government Pleader
- The State is entitled to an order of stay without providing security by virtue of Order 27, Rule 8A of the CPC.
- Order 41, Rule 5 enables the Appellate Court to grant a stay and the Government's exemption from furnishing security remains intact despite other amendments.
- Reliance was placed on the decision in Collector, Cuttack v. Padma Charan Mohanty (1980) 50 Cut LT 191 to support the proposition that Rule 8A preserves the Government's privilege of exemption from furnishing security.
Respondents' Arguments — as presented by Sri Bechu Kurian Thomas
- The Court has discretion and may direct the State to deposit a portion of the decretal amount as a condition for granting stay.
- Order 27, Rule 8A was enacted on the assumption that State Governments are solvent, but the Court may take judicial notice of the State's present financial difficulties (including admitted inability to discharge liabilities and long-unencashed government cheques).
- Reliance was placed on U.P. Avas Evam Vikas Parishad, Lucknow v. Satya Prakash (1997 AIHC 3266 (All)) for the proposition that while Rule 8A exempts the State from furnishing security under Rules 5 and 6 of Order XLI, it does not necessarily exempt the State from depositing the decretal amount; the court retains discretion to order deposit of whole or part of the decretal amount.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Collector, Cuttack v. Padma Charan Mohanty (1980) 50 Cut LT 191 | Established that Rule 8A (Order 27) preserves the Government's exemption from furnishing security despite subsequent amendments to Order 41; emphasized the assumption of government solvency and that Rule 8A was introduced/retained for that reason. | The court relied on this authority to support the proposition that Rule 8A exempts the Government from furnishing security and to justify reading Rule 8A as maintaining the Government's privilege despite amendments to Order 41. |
| U.P. Avas Evam Vikas Parishad, Lucknow v. Satya Prakash (1997 AIHC 3266 (All)) | Discussed that Order 27, Rule 8A exempts the Government from furnishing security under Rules 5 and 6 of Order XLI, but does not automatically exempt the Government from depositing the decretal amount; the Appellate Court has discretion to direct deposit (whole/part) or not. | The court considered this decision (specifically paragraph 20) as cited by respondents but ultimately interpreted Rule 8A and Order 41 so as to conclude that the State could not be compelled to give security or be directed to deposit the decretal amount in the circumstances of the present case. |
| State of Kerala v. Govindan Ponnamma (1987) 1 Ker LT 206 | Held that the privilege given to the Government under Order 27, Rule 8A is not taken away by inclusion of Order 41, Rule 1(3); treated Order 41, Rule 1(3) as directory rather than mandatory and read Orders 41 and 27 harmoniously. | The court treated this decision as an identical question previously decided by a learned single Judge, adopted the view that Order 41 Rule 1(3) is directory and that Rule 8A preserves the Government's exemption from furnishing security; used it to justify granting stay without security. |
Court's Reasoning and Analysis
The court undertook a statutory and precedential analysis, focusing primarily on the relationship between Order 27, Rule 8A and the provisions of Order 41 (in particular Rule 1(3) and Rule 5, including Rule 5(5)). The reasoning proceeded in the following steps, based on the material recited in the opinion:
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Identification of the relevant provisions:
- Order 27, Rule 8A — provides that the Government (or public officer defending in official capacity) shall not be required to furnish the security mentioned in Rules 5 and 6 of Order XLI.
- Order 41, Rule 1(3) — where appeal is against a money decree, the appellant shall deposit the amount disputed in the appeal or furnish such security as the court may think fit.
- Order 41, Rule 5 — Appellate Court's power to grant stay of execution for sufficient cause; Rule 5(5) provided that where appellant fails to make deposit or furnish security as specified in Rule 1(3), the Court shall not make an order staying execution of the decree.
-
Review of precedent and legislative history:
- The court cited Collector, Cuttack v. Padma Charan Mohanty for the principle that Rule 8A preserves the Government's exemption from furnishing security despite amendments to Order 41; that Rule 8A was introduced/retained because the solvency of Government cannot be in doubt.
- The court also considered U.P. Avas Evam Vikas Parishad v. Satya Prakash, which observed that Rule 8A exempts the Government from furnishing security but does not expressly exempt deposit of the decretal amount, leaving deposit to the court's discretion.
- The court relied on State of Kerala v. Govindan Ponnamma where a single judge held that Order 41, Rule 1(3) is not mandatory and must be read subject to Order 27 Rule 8A.
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Interpretative conclusions on mandatory vs. directory nature:
- The court agreed with the view that Order 41, Rule 1(3) is directory (not mandatory) because the Code does not spell out a consequence such as dismissal of an appeal for non-compliance; non-compliance only affects the power to stay execution (per Rule 5(5)).
- Accordingly, failure to deposit or furnish security does not affect maintainability of an appeal; the consequence is that the Appellate Court may refuse to stay execution, leaving the decree-holder free to execute.
-
Harmonious reading of Orders 41 and 27:
- The court held that Order 41, Rule 5(3) (and Rule 1(3)) and Order 27, Rule 8A must be read harmoniously. Where Rule 8A provides that no security as specified under Rules 5 and 6 of Order XLI shall be required from the Government, that benefit cannot be nullified by directing deposit of the decretal amount as a condition for stay.
- The court rejected the respondents' contention that the Government's admitted cash-flow difficulties should remove the presumption of solvency; the court was not persuaded that the Government is insolvent merely because it may obtain time to deposit amounts.
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Application to the facts:
- After reviewing the judgment and decree and the parties' pleadings, the court was satisfied that the case warranted a stay.
- On that basis, and consistent with the interpretation that Order 27 Rule 8A exempts the State from furnishing security or being compelled to deposit the decretal amount, the court granted an interim stay of execution of the decree.
Holding and Implications
Holding: The court granted an interim stay of execution of the decree.
Immediate consequences and practical implications (as stated in the opinion):
- The State was permitted a stay of execution without being required to furnish security under the provisions of Order 27, Rule 8A.
- The court concluded that Order 41, Rule 1(3) is directory and that the Appellate Court must read Order 41 and Order 27, Rule 8A harmoniously so as not to deprive the State of the exemption conferred by Rule 8A.
- On the specific litigation timeline, the appeal was posted for hearing in the third week of March 2004.
Broader implications:
The opinion applies and interprets existing statutory provisions and prior authorities to resolve whether the State can obtain stay without furnishing security. It states the direct legal effect on the parties in this appeal (interim stay granted; exemption under Order 27, Rule 8A applicable), and does not purport in the text to announce any novel rule beyond the interpretation and application of the cited provisions and precedents.
Note: This summary is strictly confined to the statements and materials contained in the provided judicial opinion and does not add facts or inferences not present in that text.
Sankarasubban, J.:— The above I.A is filed by the State to stay all further proceedings in pursuance to the execution petition filed in O.S No. 150 of 1997 of the Sub-Court, Kottayam. F.A.O No. 384 of 2003 is filed by the State represented by the District Collector, Kottayam against the judgment and decree in O.S No. 150 of 1997. The suit was filed by the respondents for damages for breach of contract. An amount of Rs. 12,16,667.50 has been decreed in favour of the plaintiffs, it is against the above judgment and decree that this appeal is filed.
2. When the matter came up for hearing, we heard learned Government Pleader for the appellant and Sri Bechu Kurian Thomas learned counsel for the respondents. Learned Government Pleader submitted that the State is entitled to get an order of stay without providing security in view of Order 27, Rule 8A of C.P.C On the other hand, Sri Bechu Kurian Thomas submitted that the Court has a discretion in this matter and the court can direct the State to deposit a portion of the amount. He further submitted that Order 27, Rule 8A is enacted on the assumption that all the State Governments are solvent. He submitted that the court can take notice of the fact that the Government has itself admitted that it is not able to discharge the liabilities and many cheques issued by the Government were not encashed for a long time.
2A. Order 27, Rule 8A clearly states that no, such security as is mentioned in Rules 5 and 6 of Order XLI shall be required from the Government or, where the Government has undertaken the defence of the suit, from any public officer sued in respect of an act alleged to be done by him in his official capacity. Order 41, Rule 5 enables the Appellate Court to grant stay. Learned Government Pleader brought to our notice the decision in Collector, Cuttack v. Padma Charan Mohanty (1980) 50 Cut LT 191. In that decision, it has been stated as follows:
“Introduction of sub-rule (3) of Rule 1 and Sub-rule (5) of Rule 5 of Order 41 has not affected the privilege of exemption from furnishing security so far enjoyed by the Government. sub-rule (3) of Rule 1 for the first time, by the Amendment of 1976, imposed an obligation on the appellant is appealing from a decree for payment of money, either to deposit the amount in dispute in appeal or to furnish such security in respect thereof as the court may direct. By introducing Sub-rule (5) of Rule 5 of Order 41, the Legislature purported to reiterate the position that where the appeal is against a decree for payment of money the appellant must deposit the amount in dispute in appeal or furnish security notwithstanding anything contained in sub-rules (1), (3) and (4) of Rule 5. Rule 8A of Order 27, however, provides an exception. It states that no such security as is in Rules 5 and 6 of Order XLI shall be required from the Government. Sub-rule (5) of Rule 5 expressly mentions furnishing of security as specified in sub-rule (3) of Rule 1. So rule 5 mentions about security under sub-rule (3)(c) of Rule 5. Therefore, even though security is required under sub-rule (3) of Rule 1 from the appellant, whoever he may be, that security having been mentioned in Sub-rule (5) of Rule 5 cannot be required to be furnished by the Government by reason of Rule 8A of Order 27, Civil Procedure Code.” It is also stated thus: “Security is generally required to be furnished where the appellant's solvency is doubtful and to secure the fruits of litigation to the respondent in the event of his ultimate success. The solvency of the Government cannot ever be in doubt. It is in that view that Rule 8A of Order 27 was first introduced as a part of Order 41 and has been retained as a part of Order 27 irrespective of amendment of rules 1 and 5 by the 1976 amendment”. Learned counsel for the respondents cited U.P Avas Evam Vikas Parishad, Lucknow v. Satya Prakash 1997 AIHC 3266 (All). That was concerning with an award passed under the Land Acquisition Act. The Court discussed the present issue in paragraph 20 of the judgment. It is stated thus:
“Order 27, Rule 8-A exempts the Government from furnishing any security as mentioned in Rules 5 and 6 of Order 41. Even without Allahabad Amendment for the purposes of consideration of grant of stay, the State Government may not be required to furnish security. But the said provision does not provide that the State Government would not be required to deposit decretal amount. So far as the deposit of the decretal amount is concerned, there being no exemption the Government stands on the same footing as ordinary litigant while preferring appeal. In such event it is discretion of the Court. The Court may direct the deposit for whole or part of the decretal amount or the disputed amount in its discretion. Similarly, while exercising such discretion the Court is free even not to direct deposit of any of the amount or part thereof. But however, such discretion in judicious one, having regard to the facts and circumstances of the case. There cannot be any straight-jacket formula.”
3. Order 41 rule 1(3) states that where the appeal is against a decree for payment of money, the appellant shall, within such time as the Appellate Court may allow, to deposit the amount disputed in the appeal or furnish such security in respect thereof as the court may think fit. Order 41, Rule 5 deals with stay by Appellate Court. It states that 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. Order 41, Rule 5(5) stated that 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. We don't agree with the contention of the learned counsel for the respondents that in spite of the enactment of Order 21, Rule 8A doing away with security, when the Government is the party. Order 27, Rule 8A has been enacted for the purpose of enabling the State to get stay of decree without furnishing security. This is on the ground that the State is solvent. Learned counsel for the respondents then submitted that it can be taken notice by this court that the Government is not able to meet even the essential expenditures in the face of the tightness of financial position. We are not able to accept this argument that the Government is not solvent. Probably, the Government may be getting time to deposit the amount. That does not mean that the Government is not solvent. Of course before ordering stay, the court has to look into the facts and circumstances of the case. It is only when the Appellate Court is satisfied that circumstances exist enabling the appellant to get an order of stay. In that circumstances, the court can direct the appellant to deposit the decree amount or part of it or to furnish security. We don't agree.
4. In State Of Kerala v. Govindan Ponnamma (1987) 1 Ker LT 206, an identical question arose before this court. A learned single Judge held that in spite of the inclusion of Order 41, rule 1(3) the privilege given to the government under Order 27, Rule 8A is not taken away. Learned Judge took the view that the provisions of Order 41, rule 1(3) and Rule 5(5) had to be read subject to Order 27 Rule 8A. Order 41 rule 1(3) states that 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. Order 41 Rule 5 deals with granting of stay by the Appellate Court. Order 41 Rule 5(5) states thus: “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”. Learned counsel for the respondents argued that Order 41 rule 1(3) is mandatory. Learned counsel contended that Order 41 rule 1(3) read along with sub-rules (3) and (5) of Order 41 makes it obligatory on the part of the appellant to deposit the amount decreed. According to us. Order 41, rule 1(3) cannot be said to be mandatory. Nothing is stated in Order 41 as to what will happen to the appeal, if rule 1(3) is not compiled with. It does not state that if the amount is not deposited or security is not given, appeal can be dismissed. In so far as nothing is stated as to what will happen in violation of Order 41 rule 1(3), according to us, Order 41 rule 1(3) is only directory.
5. Next question is regarding the question whether the Court can order deposit of amount for granting stay under Order 41 Rule 5(3). According to us, the Court cannot order deposit of the amount when the State is the appellant in so far as Order 27 Rule 8A provides that the Government cannot be compelled to give security. According to us, Order 41 Rule 5(3) and Order 27, Rule 8A have to be read harmoniously. If such a reading is taken, it will be sure that the benefit of Order 27 Rule 8A given to the State cannot be deprived of by directing deposit of decretal amount. Hence according to us, Order 27 Rule 8A demands that no security can be required to be given by the State. As we already stated earlier in the decision reported in 1987 (1) KLT 206 when the matter came up for consideration before the learned single Judge of this Court, the learned Judge stated as follows:
“The sub-rule is not mandatory because it is not provided anywhere in the Code that if the amount is not deposited or security is not offered the appeal is liable to be dismissed. The only consequence of non-compliance of the direction of the Court under Order XLI, rule 1(3) to deposit the amount or furnish security is that provided under Order XLI, Rule 5(5) that in such cases the Court shall not make an-order staying execution of the decree. Non-compliance of sub-rule (3) of Rule 1 by the appellant thus only fetters the jurisdiction of the appellate court in granting stay of execution and thereby enabling the decree-holder to execute the decree in spite of the pendency of the appeal because as provided in Order XLI, Rule 5 an appeal shall not operate as an automatic stay of execution. An express provision requiring the Court to reject the memorandum of appeal in cases where the appellant against a money decree fails to make the deposit or furnish security as ordered by the court, was sought to be introduced by way of amendment as sub-rule (1a) of Order XLI, Rule 3. That rule was subsequently deleted on the recommendation of the Joint Committee. This fact when taken along with Sub-rule (5) of Rule 5 already referred to clearly indicates that even failure to make a deposit or furnish security will not affect maintainability of the appeal. The only result in such cases is that the decree-holder will be free to execute the decree and enjoy the fruits of his litigation in spite of the appeal filed by the judgment-debtor and its pendency so that the delay caused by the appeal will not in any way prejudice the decree-holder whose interest is sought to be safeguarded.”
Thus, according to us, Order 27 Rule 8A is applicable in the case and after going through the judgment and decree and the pleadings furnished by both the parties, we are satisfied that it is a case where stay has to be granted, hence, we grant an interim stay of execution of the decree. Learned counsel for the respondents then submitted that an early posting may be given, since it arises out of the suit for damages.
Post the appeal for hearing in the third week of March, 2004.
Order accordingly.
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