Unconditional Stay and Jurisdictional Fairness: A Reaffirmation of Judicial Discretion under Order XLI Rule 5 CPC
Facts: Lifestyle Equities C.V., headquartered in Amsterdam, along with its Indian licensee, owned the registered trademark “Beverly Hills Polo Club (BHPC)” used for apparel, shoes, accessories, furniture, and personal care products. Amazon Technologies Inc. was accused of facilitating sales of counterfeit goods bearing a mark identical or deceptively similar to the BHPC logo.
The Suit: In 2020, Lifestyle filed a commercial suit (CS(COMM) 443/2020) in the Delhi High Court, alleging trademark infringement and passing off, seeking permanent injunction, delivery-up of infringing goods, and damages of Rs. 2.00 crore. The suit named three defendants—Amazon Technologies Inc. (Defendant 1), Cloudtail Pvt. Ltd. (Defendant 2), and Amazon Seller Services Pvt. Ltd. (Defendant 3).
Summons were issued to all defendants. Defendant No. 1 did not appear and was proceeded ex parte. An interim order dated 12 October 2020 restrained all defendants from using the BHPC mark. The suit was ultimately decreed ex parte against Amazon Technologies Inc. by order dated 25 February 2025, granting damages of Rs. 336 crores, costs of Rs. 3.23 crores, and a permanent injunction, based on an alleged computation of damages worth USD 38.78 million.
The Appeal: Amazon’s appeal before the Division Bench of the Delhi High Court (RFA(O.S.)(COMM) 11/2025) resulted in the High Court staying execution of the money decree without requiring deposit of the decretal amount, subject only to an undertaking by the appellant to comply if the appeal were dismissed. Lifestyle Equities filed a Special Leave Petition (SLP) before the Supreme Court challenging this “unconditional stay.”
Procedural Details: The matter reached the Supreme Court through Special Leave Petition (C) No. 19767 of 2025 under Article 136 of the Constitution.
The SLP questioned whether the Delhi High Court erred in not insisting upon deposit/security as mandated under Order XLI Rule 1(3), Rule 5(3), and Rule 5(5) of the CPC while granting a stay on execution of a money decree and whether an unconditional stay was legally sustainable?
The Dispute: The crux lay in reconciling two competing legal principles: The CPC’s general rule that mere appeal does not automatically stay execution, and that stay may be granted only upon sufficient cause with adequate security, and The High Court’s discretion to conditionally or unconditionally stay execution in exceptional cases.
Lifestyle argued that the stay was unlawful for lack of mandatory deposit. Conversely, Amazon contended that valid service of summons was never effected, the decree suffered from gross procedural and substantive irregularities, and the ex parte decree was inflated far beyond the original Rs. 2 crore claim without any amendment or notice.
Reasoning of the Court: Court's detailed reasoning traversed historical, statutory, and judicial contexts of Order XLI — balancing procedural discipline with judicial discretion.
Purpose of Order XLI Rules 1 & 5 CPC: The Court traced the legislative amendments of 1976 that introduced sub-rule (3) in Rule 1 (obliging appellants to deposit decretal amounts or furnish security) and sub-rule (5) in Rule 5 (barring stay if deposit/security is not furnished). The Court emphasized that the Parliament intended to prevent abuse of appellate process while permitting equitable discretion in exceptional cases.
Whether deposit/security is mandatory: The Court reaffirmed that the requirement of deposit is directory, not mandatory. Non-deposit disentitles stay but does not invalidate the appeal. Appellate courts may grant unconditional stay if exceptional circumstances make enforcement unjust or impossible.
Scope of judicial discretion: An unconditional stay of a money decree can only be justified if the decree is: egregiously perverse, riddled with patent illegalities, facially untenable, or affected by exceptional causes akin to fraud or manifest injustice.
Service of summons: The Supreme Court concurred with the High Court that Amazon Technologies was never served valid summons. The record revealed no affidavit of service post the order dated 7 July 2021, nor proof of notice via email/WhatsApp as directed earlier. Proceeding ex parte without proper service thus constituted a foundational illegality, vitiating jurisdiction. Reliance by Lifestyle on Order IX Rule 13 proviso and Sunil Poddar v. Union Bank (2008) 2 SCC 326 was found misplaced.
On damages and maintainability: The Supreme Court noted that the single judge’s decree inflated damages from Rs. 2 crore (as in plaint) to Rs. 336 crore without any amendment, notice, or proof. This violated Order VII Rule 2 and 7 of the CPC, which require precise quantification in money suits. The absence of pleadings or evidence supporting enhancement rendered the decree prima facie perverse.
License and liability findings: The High Court correctly observed that Amazon Technologies merely licensed its “SYMBOL” brand to Cloudtail and had no role in manufacturing or affixing the alleged infringing logo. No legal or contractual link established complicity. The single judge’s inference that all Amazon entities were one “cohesive commercial entity” lacked any pleading or evidence. These findings were perverse and speculative.
Analogy with Arbitration Act: Rejecting the petitioner’s reliance on Section 36(3) of the Arbitration Act, the Court clarified that unconditional stay power is not limited solely to cases of fraud or corruption. Discretion to grant such stay under Order XLI Rule 5 subsists independently but should be ~rarely~ exercised in extreme circumstances.
Protection of due process: The bench reaffirmed that valid service of summons is the basis of jurisdiction. Absence of due service entitles the defendant to avoid liability regardless of procedural lapses by counsel or co-defendants. The right to defend cannot be presumed to have been waived.
Judgment and Decision
Decision: The Supreme Court upheld the Delhi High Court’s judgment dated 1 July 2025, dismissing the Special Leave Petition. It held there was no valid reason to interfere, as the Division Bench rightly found the single judge’s decree tainted by serious procedural irregularities and lack of jurisdiction. The stay of execution, therefore, was justified even without deposit.
Court emphasized that unconditional stay is not the rule but an exception, permissible where enforcement of decree would cause grave miscarriage of justice. In this case, the court found multiple irregularities, including: absence of valid summons to Amazon, massive jump in damages without amendment, lack of specific findings of infringement against Amazon, and misreading of a license agreement unconnected to the infringing mark.
Consequently, the Supreme Court affirmed that the High Court’s exercise of discretion under Order XLI Rule 5 CPC did not suffer from any legal infirmity.
Final Holding: The Special Leave Petition was dismissed on 7 October 2025, confirming the High Court’s order of unconditional stay. The Court reiterated that unconditional stay of a money decree remains permissible in exceptional circumstances and highlighted due process and fairness over procedural rigidity.
Case Title: Lifestyle Equities C.V. & Another Vs. Amazon Technologies Inc.
Order Date: 7th October 2025
Case Number: Civil Appeal No. 19767 of 2025
Neutral Citation: 2025 INSC 1190
Name of Court: Supreme Court of India
Hon’ble Judges: J.B. Pardiwala J. and K.V. Viswanathan J.
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Written By: Advocate Ajay Amitabh Suman, IP Adjutor [Patent and Trademark Attorney], High Court of Delhi
