Explained: The Supreme Court ruling against automatic vacation of stay granted by a high court

The Leaflet explains the rationale and the significance of the five-judge Constitution Bench judgment that a stay granted by a high court cannot be vacated automatically.

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IN a significant ruling, a five-judge Constitution Bench of the Supreme Court has overruled a 2018 ruling of a three-judge Bench that held that an interim stay granted by the courts would stand vacated automatically after the expiry of six months.

Writing the judgment for the Constitution Bench, Justice Abhay S. Oka held that there cannot be automatic vacation of a stay granted by a high court.

The Bench which also comprised the Chief Justice of India Dr D.Y. Chandrachud and Justices J.B. Pardiwala, Manoj Misra and Pankaj Mithal opined that an Order of vacating interim relief passed without hearing the beneficiary of the Order is against the basic tenets of justice.

"Application of mind is an essential part of any decision-making process. Therefore, without application of mind, an Order of interim stay cannot be vacated only on the ground of lapse of time when the litigant is not responsible for the delay.

"An interim Order lawfully passed by a court after hearing all contesting parties is not rendered illegal only due to the long passage of time," the Constitution Bench ruled.

The controversy

In 2018, a three-judge Bench comprising Justices A.K. Goel, Rohinton Fali Nariman and Navin Sinha in Asian Resurfacing of Road Agency (P) Ltd versus CBI, had directed that in all pending cases where a stay against proceedings of a civil or criminal trial was operating, the same would come to an end on expiry of six months from the day of judgment unless in an exceptional case by a speaking Order such stay was extended.

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"Remedy is required not only for corruption cases but for all civil and criminal cases where on account of stay, civil and criminal proceedings are held up. At times, proceedings are adjourned sine die on account of stay. Even after stay is vacated, intimation is not received and proceedings are not taken up," a three-judge Bench had observed.

In December last year, a coordinate Bench headed by the CJI Dr Chandrachud raised doubts about the correctness of the judgment in Asian Resurfacing and referred the matter to a larger Bench.

It is against this backdrop that the larger Bench of five-judge handed down the ruling today, overruling the three-judge Bench decision in Asian Resurfacing.

Reasons assigned by larger Bench to overrule Asian Resurfacing

At the outset, the Constitution Bench noted that the directions were issued in the Asian Resurfacing case in the exercise of powers under Article 142 of the Constitution of India. This article confers plenary powers on the Supreme Court to pass any order or decree to do complete justice.

Since much of the issue pertained to the exercise of power under Article 142 of the Constitution, the Bench framed the following questions:

(a) Whether the Supreme Court, in the exercise of its jurisdiction under Article 142 of the Constitution of India, can order automatic vacation of all interim Orders of high courts of staying proceedings of civil and criminal cases on the expiry of a certain period?

(b) Whether the Supreme Court, in the exercise of its jurisdiction under Article 142 of the Constitution of India, can direct the high courts to decide pending cases in which interim Orders of stay of proceedings have been granted on a day-to-day basis and within a fixed period?

The judgment authored by Justice Oka, and signed by the CJI Dr Chandrachud and Justices Pardiwala and Misra, and concurred by Justice Mithal in his separate opinion, answers both questions in the negative.

The Bench said that an interim Order lawfully passed by a Court after hearing all contesting parties is not rendered illegal only due to the long passage of time.

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"The directions issued in Asian Resurfacing regarding automatic vacation of interim Orders of stay passed by all high courts are applicable irrespective of the merits of individual cases.

"If a high court concludes after hearing all the concerned parties that a case was made out for the grant of stay of proceedings of a civil or criminal case, the Order of stay cannot stand automatically set aside on expiry of the period of six months only on the ground that the high court could not hear the main case.

"If such an approach is adopted, it will be completely contrary to the concept of fairness," the Constitution Bench opined.

It added that if an interim Order is automatically vacated without any fault on the part of the litigant only because the high court cannot hear the main case, the maxim "actus curiae neminem gravabit" will apply, i.e., no litigant should be allowed to suffer due to the fault of the court. If that happens, it is the bounden duty of the court to rectify its mistake.

The Constitution Bench also noted that in Asian Resurfacing, a direction had been issued to the trial courts to immediately fix a date for a hearing after the expiry of the period of six months without waiting for any formal Order of vacating stay passed by the high court.

To this, the Constitution Bench observed that such a direction gave an unfair advantage to the respondent in the case before the high court. Moreover, it adversely affects a litigant's right to the remedies under Articles 226 and 227 of the Constitution of India.

"Such Orders virtually defeat the right of a litigant to seek and avail of statutory remedies such as revisions, appeals, and applications under Section 482 of the Code of Criminal Procedure, 1973 (for short, CrPC) as well as the remedies under the Code of Civil Procedure, 1908 (for short, CPC).

"All interim Orders of stay passed by all high courts cannot be set at naught by a stroke of the pen only on the ground of lapse of time," the Constitution Bench held.

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Interestingly, the Constitution Bench also 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.

To buttress its reasoning, the Bench referred to a decision of the Supreme Court in Pepsi Foods Limited, wherein it held that a provision automatically vacating a stay was manifestly arbitrary and, therefore, violative of Article 14 of the Constitution of India.

This case pertained to the legislature's attempt to provide for an automatic vacation of stay granted by the Income Tax Appellate Tribunal by introducing the third proviso to Section 254 (2A) of the Income Tax Act, 1961.

It provided that if an appeal in which the stay was granted was not heard within 365 days, it would amount to the automatic vacation of stay.

After disapproving the Asian Resurfacing judgment on the principles of fairness and natural justice, the Constitution Bench also examined the scope of Article 142.

It noted that it is very difficult to exhaustively lay down the parameters for the exercise of powers under Article 142 of the Constitution of India due to the very nature of such powers. However, the Bench provided a few important parameters:

• 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 this court.
• Article 142 does not empower this court to ignore the substantive rights of the litigants.
• While exercising the jurisdiction under Article 142 of the Constitution of India, this 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.

This is because, while exercising the jurisdiction under Article 142, this court may not be bound by procedural requirements of law.

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However, while doing so, this 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 power of this court under Article 142 cannot be exercised to defeat the principles of natural justice, which are an integral part of our jurisprudence.

On this basis, the Bench observed that the power of the high court under Article 227 of the Constitution to have judicial superintendence over all the courts within its jurisdiction will include the power to stay the proceedings before such courts.

By a blanket direction, the Constitution Bench held, in the exercise of power under Article 142 of the Constitution of India, the Supreme Court cannot interfere with the jurisdiction conferred on the high court of granting interim relief by limiting its jurisdiction to pass interim Orders valid only for six months at a time.

"Putting such constraints on the power of the high court will also amount to making a dent on the jurisdiction of the high courts under Article 226 of the Constitution, which is an essential feature that forms part of the basic structure of the Constitution," the Constitution Bench held.

The Bench also observed that ideally the cases in which the stay of proceedings of the civil or criminal trials is granted should be disposed of expeditiously by the high courts. But the Bench also said we do not live in an ideal world.

"A judicial notice will have to be taken of the fact that except high courts of smaller strength having jurisdiction over smaller states, each high court is flooded with petitions under Article 227 of the Constitution of India for challenging the interim Orders passed in civil and criminal proceedings, the petitions under Section 482 of the CrPC for challenging the Orders passed in the criminal proceedings and petitions filed in the exercise of revisional jurisdiction under the CPC and the CrPC.

"A judicial notice will have to be taken of the fact that in all the high courts of larger strength having jurisdiction over larger states, the daily cause lists of individual Benches of the cases of the aforesaid categories are of more than a hundred matters. Therefore, once a case is entertained by the high court and the stay is granted, the case has a long life," the Constitution Bench observed.

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On the issue of constitutional courts fixing time-bound schedules for disposal of cases, the Bench observed that the pattern of pendency of various categories of cases pending in every court, including high courts, is different. The situation at the grassroots level is better known to the judges of the concerned courts.

"Therefore, the issue of giving out-of-turn priority to certain cases should be best left to the concerned courts. The Orders fixing the outer limit for the disposal of cases should be passed only in exceptional circumstances to meet extraordinary situations," the Bench held.

Procedure to be adopted by high courts while passing interim Orders of stay of proceedings

The Bench also took note of the fact that once the high court stays a trial, it takes a very long time for it to decide the main case. To avoid any prejudice to the opposite parties, while granting ex parte ad interim relief without hearing the affected parties, 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. Hence, courts must give necessary priority to the hearing of the prayer for interim relief where ad interim relief has been granted.

"Though the high court is not expected to record detailed reasons while dealing with the prayer for the grant of stay or interim relief, the Order must give sufficient indication of the application of mind to the relevant factors," the Bench held.

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The Bench also held that an interim Order passed after hearing the contesting parties cannot be vacated by the high court without giving sufficient opportunity to be heard to the party whose prayer for interim relief has been granted.

Justice Mithal's concurring opinion

Justice Mithal, in his concurring opinion, noted that sometimes, in the quest of justice, we end up doing injustice.

"Asian Resurfacing is a clear example of the same. Such a situation created, ought to be avoided in the normal course or if at all it arises be remedied at the earliest.

"In doing so, we have to adopt a practical and a more pragmatic approach rather than a technical one which may create more problems burdening the courts with superfluous or useless work," Justice Mithal said.

Justice Mithal added that it is expedient in the interest of justice to provide that a reasoned stay Order once granted in any civil or criminal proceedings, if not specified to be time-bound, would remain in operation till the decision of the main matter or until and unless an application is moved for its vacation and a speaking Order is passed adhering to the principles of natural justice either extending, modifying, varying or vacating the same.

Click here to read the order.