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State Of Kerala v. Govindan Ponnamma
Factual and Procedural Background
Two appeals were filed by the State of Kerala against two money decrees obtained by the same set of persons. The underlying suits were for declaration and a mandatory injunction directing the defendant State to refund amounts deposited as bid amounts and duty in Abkari auctions. The two Civil Miscellaneous Petitions (C.M.Ps) before the Court sought stays of execution of those money decrees. A learned Judge of this Court initially ordered an interim stay and issued notice in both petitions. The respondents (decree-holders) sought directions that, under Order XLI, Rule 1(3) of the Code of Civil Procedure, the State (as appellant) should deposit the entire decree amount or furnish security.
Legal Issues Presented
- Whether, under Order XLI, Rule 1(3) of the Civil Procedure Code, deposit of the amount disputed in the appeal or furnishing security is mandatory for the maintainability of an appeal against a money decree.
- What is the legal consequence of failure to deposit the disputed amount or furnish security under Order XLI, Rule 1(3) (i.e., whether such failure affects maintainability or only affects the court's power to grant a stay of execution).
- Whether the exemption in Order XXVII, Rule 8 (and Order XXVII, Rule 8-A as discussed) that exempts the Government from providing security in Rules 5 and 6 of Order XLI also applies to the deposit/security requirement in Order XLI, Rule 1(3).
- Whether, in the facts of these appeals (where the appellant is the State of Kerala), the court could properly grant interim stay without directing the State to deposit the disputed amounts or furnish security.
Arguments of the Parties
Respondents' Arguments (as presented in the opinion)
- Counsel for the respondents (Mr. K.P. Dandapani) contended that under Order XLI, Rule 1(3) deposit of the amount disputed in the appeal or furnishing security is mandatory for the maintainability of an appeal when it is against a decree for payment of money.
- He relied on two reported decisions in support of that contention (referenced later in the opinion).
- The respondents asked the court to direct the State to deposit the entire decree amount under Order XLI, Rule 1(3).
Appellant's Position (as reflected in the opinion)
- The appellant is the State of Kerala, which challenged the basis of the decrees and the maintainability of the suits themselves (the suits being framed as mandatory injunctions with court-fee paid for lesser amounts than the monetary claims).
- The State did not, in the interim orders described, have conditions imposed that required deposit of the disputed amounts or furnishing security.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Syndicate Bank v. Rallies India Ltd. (AIR 1979 Delhi 40) | Cited by respondents' counsel in support of the contention that deposit/security under Order XLI, Rule 1(3) is mandatory. | The Court observed that this decision "has not held anything better in favour of" the respondents' position and treated it as not decisive in making the deposit/security requirement mandatory for maintainability. |
| (Reported decision) AIR 1986 Himachal Pradesh 78 | Cited by respondents' counsel as authority supporting mandatory deposit/security. | The Court noted this decision had also "not held anything better in favour of" the respondents' contention and therefore was not decisive to require deposit/security as a condition of maintainability. |
Court's Reasoning and Analysis
The Court undertook a textual and contextual analysis of Order XLI, Rule 1(3) together with the provisions of Order XLI, Rule 5 and Order XXVII, Rule 8 (and Rule 8-A as discussed). Key points of the analysis are:
- Origin and scope of Order XLI, Rule 1(3): The sub-rule was added by Amending Act 104 of 1976. It empowers the Appellate Court in money decrees to direct appellants to deposit the amount disputed in the appeal or furnish security as the Court thinks fit. Its object, as described by the Court, is to safeguard the decree-holder's interest and lessen hardships caused by frivolous appeals delaying realisation of money decrees.
- Non-mandatory character: The Court held that Rule 1(3) is not mandatory for maintainability of an appeal because nowhere in the Code is it provided that failure to deposit or furnish security results in dismissal or rejection of the memorandum of appeal. Thus the sub-rule does not affect the appeal's maintainability.
- Consequence of non-compliance: The only consequence of non-compliance with an Appellate Court's direction under Rule 1(3) is the consequence spelled out in Order XLI, Rule 5(5): the Court shall not make an order staying execution of the decree. In other words, failure to deposit or furnish security fetters the Appellate Court's jurisdiction to grant a stay of execution; it does not vitiate the appeal itself.
- Interplay with Rule 5: Sub-rule (3) of Rule 5 lists conditions for granting a stay of execution (including security having been given). Sub-rule (4) allows ex parte stays subject to sub-rule (3). Sub-rule (5) expressly states that 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 execution of the decree. The Court emphasized that Rules 1(3) and 5 are interconnected and intended to ensure prospects of eventual enforcement of the decree.
- Government exemption (Order XXVII, Rule 8 / Rule 8-A): Order XXVII, Rule 8 states that no security as mentioned in Rules 5 and 6 of Order XLI shall be required from the Government (or, when the Government has undertaken the defence, from public officers sued in official capacity). The Court rejected counsel's contention that this exemption applies only to Rules 5 and 6 and not to Rule 1(3). The Court reasoned that the exemption applies in substance to the deposit/security purpose and that in cases involving the Government (or where the Government defends), requiring deposit or security would serve no purpose because any delay in disposal of appeal would not prejudice the decree-holder's ability to realise the amount due.
- Legislative history reinforcing non-mandatory view: An express provision (sub-rule 1A of Rule 3 of Order XLI) that would have required rejection of a memorandum of appeal for failure to deposit or furnish security was proposed but subsequently deleted on the Joint Committee's recommendation. This, together with Rule 5(5), indicates that failure to deposit or furnish security was intended to affect only the power to stay execution and not the maintainability of the appeal.
- Application to these appeals: Given that the appellant in these appeals is the State of Kerala, and in view of the Government exemption and the purposes of the provisions discussed, the Court found it appropriate that interim stays previously granted be left without any direction to deposit the disputed amounts or furnish security. The Court observed that the interim orders were in accordance with Order XXVII, Rule 8-A and that it was not in a position to say those orders were passed without sufficient cause under Rule 5 of Order XLI.
Holding and Implications
Holding:
Both petitions are allowed and the interim stays ordered in both appeals are made absolute until the disposal of the two appeals.
Implications (as explained in the opinion):
- The Court held that Order XLI, Rule 1(3) does not make deposit of the disputed amount or furnishing of security a mandatory condition for the maintainability of an appeal against a money decree. Non-compliance with a direction under Rule 1(3) does not invalidate the appeal; instead, it restricts the Appellate Court's power to order a stay of execution (per Order XLI, Rule 5(5)).
- Where the Government is the appellant (or has undertaken the defence), the exemption in Order XXVII, Rule 8 (and as discussed, Rule 8-A) means that no such security or deposit need be required; requiring it would generally serve no purpose because delay in appeal disposal will not prejudice the decree-holder's ability to realise the amount.
- In practical terms for the parties before this Court: the State of Kerala was not directed to deposit the disputed amounts or furnish security, and the interim stays of execution were confirmed and made absolute until final disposal of the appeals.
- The opinion confines the legal consequence of non-deposit to the inability to obtain a stay of execution; it does not treat non-deposit as a ground to dismiss or strike down an appeal.
1. Both the appeals are filed by the State of Kerala against two money decrees obtained by the same set of persons in two suits for declaration and mandatory injunction directing the defendant State to refund money deposited as bid amount and duty in Abkari auctions. The two C.M.Ps are for stay of execution. A learned Judge of this Court ordered interim stay and notice in both the petitions. The petitions came up for hearing at the instance of the respondents. They wanted the State in both appeals to be directed under Order XLI, Rule 1(3) of the Civil Procedure Code to deposit the entire decree amount. Order XLI, Rule 1(3) reads —
“(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”
2. Mr. K.P Dandapani on behalf of the respondents said that under Order XLI, Rule 1(3) deposit of the amount disputed in the appeal or furni shing security in respect thereof is mandatory for the maintainability of an appeal when it is against a decree for payment of money. He cited two decisions in support of his contention. I do not think that the argument is sound. Before dealing with that argument I think it is necessary to refer to two other provisions. Order XLI, rule 5 says:
“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 Appellaie 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 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
(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 therefrom, 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 appellant for the due performance of such decree or order as may ultimately be binding upon him.
(4) Subject to the provision of sub-rule (3), the Court may make an exparte 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”.
3. According to sub-rule (3) three conditions are to be satisfied before ordering stay of execution. Third condition of which alone we are concerned here is that security has been given by the applicant for the due performance of decree or order as may ultimately be binding upon him Rule 6 also deals with security but we are not concerned with it because it relates to an order for execution of decree from which an appeal is pending. Under sub-rule (4) of rule 5 the Court can make even an ex parte order provided the conditions of sub-rule (3) are satisfied. If these conditions are satisfied and if there is sufficient cause, it is within the jurisdiction of the Appellate Court to grant stay of execution. Sub-rule (5) provides that 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. That is the only consequence of non-compliance of the provisions of Order XLI, rule I (3). Order XXVII, rule 8 says that no such security as is mentioned in rules 5 and 6 of Order XLI shall be required from the Government or, when 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. Mr. Dandapani is of the view that this provision applies only to Order XLI, rules 5 and 6 and not to Order XLI, rule I (3) which, according to him, is independent of rules 5 and 6. I do not think that I will be able to agree with that view also.
4. sub-rule (3) of rule 1 of Order XLI was added by the amending Act 104 of 1976. It empowers the Appellate Court in money decrees to direct the appellants to furnish security or deposit the disputed amount in an appeal as it thinks fit. Prior to this the Appellate Court had no suo motu power to order the judgment-debtor to deposit the amount or furnish security in appeal. Money decrees used to be delayed by frivolous appeals and stay orders therefrom. Decree-holders had thereby to face great difficulties in execution of their decrees. It was to benefit the decree-holders and to lessen their hardships that this sub-rule was introduced. 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. It is true that even without an application for stay filed by the appellant the Appellate Court is suo motu entitled to direct the appellant to furnish security or deposit the amount disouted in appeal. The object is only to safeguard the interest of the decree-bolder in realising the amount due under the decree. 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 I 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 inspite 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. Normally, in the absence of other provisions or directions the amount deposited by the appellant as per direction of the Appellate Court under sub-rule (3) of rule 1 of Order XLI also operates only as security. Unless remitted by way of compromise formula with liberty to the decree-holder to draw the same or allowed by the Appellate Court, the amount cannot be drawn by the decree-holder otherwise than by execution of the decree.
5. When along with the appeal against a money decree the appellant applies for stay of execution and the court orders stay on condition of depositing the amount or furnishing security the stay normally becomes operative only when the deposit is made or security furnished. In such cases there is no question of any fresh or independent direction for the same purpose suo motu under Order XLI, Rule 1(3). Both the provisions are interconnected and intended for the same purpose and object namely ensuring the prospects of the ultimate decree being enforced.
6. 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 by me 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 inspite 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-bolder whose interest is sought to be safeguarded.
7. Unless some safeguards are made ensuring realisation of the decree amount by the time the appeal is disposed of, the decree-holder may have sometimes to incur the risk of being unable to realise anything by lapse of time. If this contingency is not there, there may not be any purpose in insisting on the deposit or making the security. That may be the reason why Order XXVII rule 8-A provided 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. In such cases what ever be the delay in the disposal of the appeal that is not going to affect in any way the right of the decree-holder to realise the amount due under the decree. In such cases no ourpose will be served by asking the State to deposit the amount or furnish security. The decisions reported in Syndicate Bank v. Rallies India Ltd. (AIR. 1979 Delhi 40) or AIR. 1986 Himachal Pradesh 78 cited by Mr Dandapani have not held anything better in favour of his clients.
8. In these two appeals the appellant is the State of Kerala which challenged the basis of the decree and the maintainability of the suits themselves as those for mandatory injunctions on payment of court-fee for much lesser amounts than covered by the monetary claims in the two suits. Interim stay was granted in both the appeals without any direction to deposit the disputed amount or furnish security.
9. This is quite in accordance with Order XXVII. rule 8A and I am not in a position to say that the orders were passed without sufficient cause as provided in rule 5 of Order XLT of the Code of Civil Procedure.
10. Both the petitions are therefore allowed and the interim stay ordered in both the appeals are made absolute till the disposal of the two appeals.
11. Allowed.
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