Originally if an Appeal is filed under Section 34 of the Act1 there was an automatic stay of the arbitration award, and the award holder had to wait for years to execute the award. Such a situation frustrated the award holders since the disposal of Section.34 applications took many years, and the appellants dragged the S.34 proceedings for many years. Hence in the year 2015, an amendment was brought in by Government of India by introducing a new S.36 which mandated the Court to take into consideration the principles of CPC2 (Order XLI Rule 5) while granting a stay. The Courts interpreted the above Amendment as a requirement of deposit of full award amount including interest, as the pre-condition for the grating of stay of the arbitration award. Hence the award holders had an opportunity to furnish the Bank guarantee to the Court and withdraw the award amount. This situation gave a kind of satisfaction to the award holders but in a recent Judgment in the case of Lifestyle case3

Supreme Court of India has held that deposit of award amount is not a precondition for granting of stay of the Money Decree (applicable to Arbitration awards as well) and the Court can decide the conditions including pre-deposit option on case to case basis, looking into the nature of the award

The disputes between the Plaintiff and respondent ended up in a Civil Suit in the Delhi Court, resulted in an ex parte money decree. The impugned judgment had certain shocking facts like the plaintiffs enhancing their claim from Rs. Two Crores to Rs.3,780 crores at the stage of written statement post-trail and that too without any amendment and without putting the defendant to notice of such enhanced claim without any basis in the pleadings. Moreover, no summons was ever served to the 1st Defendant who is a Foreign company, which was a shocking and serious infirmity, which may plague all other proceedings. Moreover, even after a specific direction to the plaintiff to file proof affidavit of service by the Registrar, it was never filed. Hence the single Judge was in error in proceeding ex party in this matter. The defendant being dissatisfied with the judgment and money decree passed by the learned Single Judge of the High Court appealed to the Division Bench. The Division Bench of the High Court allowed the stay application filed by the Defendant without directing any deposit of the decretal amount. Hence, the Plaintiff who is the holder of the money decree was aggrieved by the stay order of the Division Bench, approached the Supreme Court.

The Petitioner, Lifestyle Equities CV, contended that order XLI Rule 1(3) of the CPC makes it abundantly clear that in an Appeal against a Decree for payment of amount, the appellant is obliged in law, within the time permitted by the Appellate Court, to deposit the amount awarded or furnish such security in respect thereof as the Court may think fit. It was also argued that under Order XLI Rule 5(5) of the Code of Civil Procedure a deposit or security, is a condition precedent for an order by the Appellate Court staying the execution of the decree. It was also argued inviting the attention of the Court to Section. 36(3) of the Arbitration and Conciliation Act,1996 that the 2nd proviso attached to Section 36(3) of the Arbitration Act is an indication That ordinarily by applying the principles of order XLI Rule 5 of CPC, as mentioned in section 36(3) of the arbitration Act, the Court is not empowered to unconditionally stay and  arbitration award or a judgement.

Even though the Judgment discussed the factual details that lead to justifying the decision of the Division Bench in granting the stay without any pre-deposit or security amount, the Court also interpreted Order XLI Rule 5(3) applying the established legal principles to come to the final conclusion. Moreover, even though it is not a case arising out of an Arbitration award, the court also carefully took into consideration the analogy that can be derived from Section.36 of the Arbitration and Conciliation Act, various important judgments that interpreted the said Section36 and hence this Judgment will be taken into consideration by the Courts while granting the stay order against Arbitration awards.

The conclusion in the Judgment can be summarised as follows: The appeal Court cannot casually grant a stay of a decree and any execution proceeding or an order therein shall be stayed only if a specific, reasoned order granting such stay is passed by the appellate Court, after proper application of Mind. Although Order XLI Rule 5 of the CPC, uses the word “shall” yet a combined reading of the sum and substance of Rules 1(3) and 5(5) would reveal that the grant of stay of execution, it is not mandatory for the appellate Court to impose a condition for deposit of the amount of dispute. A deposit is not a condition precedent for an order of stay of execution of the decree by the appellate court. The only guiding factor is the existence of “sufficient cause” in favour of the Appellant. Even though this judgment may shock the award holders, it protects the parties from extreme situations.