An interim order of stay, staying the proceedings before the lower court between the parties, is passed by applying the following three tests, the onus of which is on the Petitioner to satisfy as to their its existence in his case viz.
- A Prima Facie case, which necessitates that as per the material placed on record, the Petitioner is likely to succeed in the final determination of the case.
- Balance of convenience, such that the prejudice likely to be caused to the Petitioner due to rejection of the interim relief will be higher than the inconvenience that the Respondent may face if the relief is so granted; and
- Irreparable injury, which means that if the relief is not granted, the Petitioner will face irreversible injury that cannot be compensated in monetary terms.
Such a discretionary relief is not granted by the court as a matter of course without application of judicial mind and only granted subject to application of the aforesaid three tests in the facts and circumstances of the case before it. Therefore, as a corollary, can such orders of stay granted by the court by applying the aforesaid three tests, be automatically vacated after a certain period of time without even hearing the beneficiary of the Stay Order?
Background
In Asian Resurfacing of Road Agency Private Ltd. & Anr. vs Central Bureau of Investigation11(2018) 16 SCC 299[/mfn] [“Asia Resurfacing”] the Supreme Court invoked its plenary powers under Article 142 and held that a stay order granted by the court will automatically come to an end on expiry of 6 months from the date of the said stay order. Such an order was passed by the Supreme Court after observing delay in disposal of cases accruing on account of operation of the stay orders indefinitely. The Court further directed that in cases where stay order is granted, such matters must be decided on day-to-day basis so that the stay does not operate for an unduly long period. The ratio laid down in the said judgment was called into question by a three-judge bench of the Supreme Court which referred the issue to a larger bench of Supreme Court for reconsideration. Thus, a constitution bench was formed in the matter of High Court Bar Association vs State of U.P. & Ors.2Criminal Appeal No. 3589 of 2023 for reconsidering the ratio laid down in Asia Resurfacing (supra). The observations of the Constitution Bench of Supreme Court are hereinbelow.
Automatic Vacation of Stay Orders amounts to violation of principles of natural justice
The Supreme Court observed that the automatic vacation of stay order would amount to passing of the order behind the back of the beneficiary of the order without hearing his case which is against the basic tenets of natural justice. A stay order cannot be vacated solely on the account that much time has elapsed or due to inability of the High Court to take up the case. The court observed that if such an approach is adopted then the maxim actus curiae neminem gravabit” will apply i.e. no litigant should be allowed to suffer due to the fault of the court. All interim orders of stay passed by all High Courts cannot be set at naught by a stroke of pen on the ground of lapse of time. A similar legislation was introduced by the Legislature by inserting third proviso to Section 254(2A) of the Income Tax Act 1961 which provided automatic vacation of stay that has been granted on the completion of 365 days and the same was adjudged as arbitrary by the Supreme Court in the matter of Deputy Commissioner of Income Tax & Anr. v. Pepsi Foods Limited AIR 2021 SC 2692. Therefore, the Supreme Court observed that even if the legislature were to come out with such a provision for automatic vacation of stay, the same may not stand judicial scrutiny as it may suffer from manifest arbitrariness.
Directions in the exercise of power Under Article 142 cannot be used to defeat justice.
The Supreme Court observed that the issue regarding duration of the interim orders passed by various other High Courts did not even arise before the court in Asia Resurfacing (supra). In view thereof, the court observed that powers under Article 142 cannot be used to pass blanket orders setting at naught a large number of interim orders lawfully passed by all the High Courts and that too without hearing the contesting parties. The Court laid down the following parameters, which are not exhaustive, for exercise of powers under Article 142 of the Constitution of India-
- The jurisdiction can be exercised to do complete justice between the parties before the Court. It cannot be exercised to nullify the benefits derived by a large number of litigants based on judicial orders validly passed in their favour who are not parties to the proceedings before the Supreme Court.
- Article 142 does not empower Supreme Cour to ignore the substantive rights of the litigants.
- While exercising the jurisdiction under Article 142 of the Constitution of India, Supreme Court can always issue procedural directions to the Courts for streamlining procedural aspects and ironing out the creases in the procedural laws to ensure expeditious and timely disposal of cases. However, while doing so, the Court cannot affect the substantive rights of those litigants who are not parties to the case before it. The right to be heard before an adverse order is passed is not a matter of procedure but a substantive right.
- The powers under Article 142 cannot be exercised to defeat the principles of natural justice.
Court should not deal with an issue which has not arisen before it for consideration
In Asia Resurfacing (supra) the court was dealing a case under Prevention of Corruption Act, 1988. However, the court travelled beyond its remit and passed blanket orders affecting litigants which were not even a party before it. The Supreme Court relied upon a constitution bench judgment in the matter of Sanjeev Coke Manufacturing Company Bharat Coking Coal Ltd31983 AIR 239 wherein the court categorically observed that it is inexpedient for the Supreme Court to delve into problems which do not arise and express opinion thereon.
Clause 3 of Article 226 only applies to ex-parte ad interim orders
The Supreme Court observed that a plain reading of clause 3 of Article 226 posits that if a party against whom an interim order has been passed without it being served copy of the writ petition and without giving it an opportunity of being heard, such party may make an application before the court for vacating the interim order and High Court shall dispose of the same within 2 weeks from the date it received the application or from the date it was furnished to the Petitioner, whichever is later. If the application is not disposed of within the aforesaid period, the interim order shall stand vacated. Such a clause will only operate and enure to the advantage of the Respondent when an application for vacation has been moved as per the said clause and only in the circumstances the court is unable to dispose of the application within the stipulated timeline, the stay would be vacated but not otherwise, i.e. if no such application is moved, stay order would remain in force. Furthermore, clause 3 would not be operational if the High Court has passed interim order after hearing both the parties. It only applies to ex-parte ad interim orders.
Direction of court for automatic vacation of stay order and disposal of all cases in which a stay order has been granted on a day-to-day basis amounts to judicial legislation
The Court observed that the Court in Asian Resurfacing (supra) encroached upon the realm of the executive by issuing directions that cases in which stay order has been granted, such matters be heard expeditiously. Court observed that it is in the realm of legislature to decide whether a particular category of case should be decided in a specific time. The Court also took cognizance of the fact that Courts across the country, especially the District Judiciary is heavily burdened with cases and it would be unrealistic or rather discriminatory to direct the courts to give priority to particular category of cases over other cases which equally demand immediate intervention. Therefore, the Court held that constitutional Courts should not normally fix a time-bound schedule for disposal of cases pending in any Court.
Procedure to be adopted by High Court while passing interim orders of stay
The Court observed that while granting ex-parte ad-interim relief without hearing the affected parties, the High Courts should normally grant ad-interim relief for a limited duration. After hearing the contesting parties, the Court may or may not confirm the earlier ad-interim order. Ad-interim relief, once granted, can be vacated or affirmed only after application of mind by the concerned Court by hearing the case of both the parties. An interim order passed after hearing the contesting parties cannot be vacated without hearing the party in whose favour the stay order was passed. At the same time, the Respondent is not precluded from filing an application for vacating an interim stay and if an application is so filed, the court must give priority to such application and not let it be pending for an inordinately long time.
Observing in the aforementioned terms, the court emphatically concluded by categorically stating that that there cannot be automatic vacation of stay granted by the High Court. We do not approve the direction issued to decide all the cases in which an interim stay has been granted on a day-to-day basis within a time frame. We hold that such blanket directions cannot be issued in the exercise of the jurisdiction under Article 142 of the Constitution of India.
When does an Interim Order cease to operate?
Interim Stay orders are granted during the pendency of the proceedings between the parties and cease to operate in the following two circumstances-
- On an application of vacation of stay being allowed by court.
- By dismissal of the Petition/Suit.
However, in the case of the latter, the courts do not specifically record the vacation of interim order, if any, thus giving rise to the misconception that the stay order is still in operation despite the dismissal of the Petition/Suit.
In State of U.P. & Ors. vs Prem Chopra42022 INSC 347 the Supreme Court was called on to answer a similar issue. The Appellant directed the Respondent to pay outstanding license fee of Rs 9,16,788/- in the year 2003, under the U.P. Excise (Settlement of License for Retail Sale of Country Liquor) Rules, 2002. The Respondent challenged the same by way of Writ Petition before the High Court which directed stay on the recovery proceedings vide order dated 01.08.2003 subject to deposit of Rs 2,75,000/-. The said Writ Petition came to be dismissed for non-prosecution on 21.12.2015. Later in the year 2017, the Respondent deposited the balance amount due. Thus, an amount which was due in 2003, was paid in the year 2017, however, the Respondent did not pay any interest on the amount. In the meanwhile, the High Court recalled the order of dismissal for non-prosecution and resumed the proceedings. The Respondent demanded interest on the payment, however, the High Court held that payment of interest on payment was not justified as the Respondent was under the protection of an interim order.
Difference between stay of operation of an order and quashing of an order
The Court explicated the difference between stay of an operation of an order and quashing of an order by relying upon a decision of the Supreme Court in Shree Chamundi Mopeds Ltd v. Church of South India Trust (1992) 3 SCC 1, wherein the Supreme Court has held as follows-
“While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence.”
The Court also observed the ratio laid down in Kanoria Chemicals and Industries Ltd. and Ors. v. U.P. State Electricity Board and Ors. (1997) 5 SCC 772 wherein the Supreme Court held that an order of stay which is granted during the pendency of a writ petition/suit or other proceeding comes to an end with the dismissal of the substantive proceedings and it is the duty of the court in such cases to put the parties in the same position that they would have been in but for the interim order of the court.
Interim Order merges with the final order of dismissal. It is duty of court to restore the parties in the same position they would have been in but for the interim order of the court.
The Court therefore held that merely because an order has been stayed, that does not mean that the stayed order has been wiped from existence. It only means that that order that has been stayed would not be operative from the date of passing of the stay order. Once the proceedings, wherein a stay was granted, are dismissed, any interim order granted earlier merges with the final order. In other words, the interim order comes to an end with the dismissal of the proceedings. In such a situation, it is the duty of the Court to put the parties in the same position they would have been but for the interim order of the court, unless the order granting interim stay or final order dismissing the proceedings specifies otherwise. On the dismissal of the proceedings or vacation of the interim order, the beneficiary of the interim order shall have to pay interest on the amount withheld or not paid by virtue of the interim order.
By observing in the aforesaid terms the Supreme Court set aside the order of High Court.
Does a judgment cease to operate as a precedent when it gets stayed by High Court/Supreme Court?
The Supreme Court in Shree Chamundi Mopeds (supra) has categorically culled out the difference between stay of operation of an order and quashing of an order. The Court has categorically stated that the stayed order does not get wiped from existence and it only means that the order which has been stayed would not be operative from the date of passing of the stay order. In a judgment rendered by the Madras High Court in the matter of Vsiwapariya (India) Ltd. v. Government of Tamil Nadu5(2015) 4 LW 33, the Court interpreted the ratio laid down in Shree Chamundi Mopeds (supra) with respect to the effect of interim stay and held that the order of stay operates as between the parties to the lis and it does not constitute a declaration of law under Article 141 of the Constitution of India. A similar view was taken by the Calcutta High Court in Niranjan Chatterjee and Ors. Vs. State of West Bengal and Ors6MANU/WB/0141/2007. Recently, the Bombay High Court in the matter of Shyamalendu Kumar Das vs Union of India7MANU/MH/5666/2024 was relying upon a judgment rendered by the Division Bench of the Court which was stayed by the Supreme Court in Appeal, however, the Court relied upon Shree Chamundi Mopeds (supra) and held that mere grant of stay to the operation of the judgement rendered by the Division Bench is not a ground to altogether ignore the ratio of that judgment.
