Order XLI Rule 5 CPC | Appellate Court Must Balance Equities While Imposing Conditions For Stay Of Eviction Decree: Bombay High Court

"The appellate court, while granting an order of stay, may impose such terms and conditions as would ensure that the ends of justice are met and that the interests of the party ultimately found to be successful in the appeal are adequately protected." Bombay High Court, in a ruling dated 21 September 2026, held that while an Appellate Court has the discretion to impose conditions, including the payment of interim compensation, while staying an eviction decree under Order XLI Rule 5 of the CPC, such conditions must be balanced and not rendered excessively onerous, particularly when a parallel suit regarding title is pending.

A bench of Justice Arun R. Pedneker observed that while the "at-market-rate" compensation principle from Atma Ram Properties serves as a guiding light, the court must calibrate the burden to ensure it does not become punitive, especially in complex family disputes involving claims of ownership.

The dispute pertains to a family property in Cuffe Parade, Mumbai, where the Petitioner (the elder brother) has been residing since 1982. The Respondent (the younger brother) filed an eviction suit, claiming the Petitioner was a gratuitous licensee. The Trial Court decreed eviction in favour of the Respondent and directed the payment of mesne profits. The Petitioner challenged this decree before the Appellate Bench of the Small Causes Court, which stayed the eviction subject to the condition of depositing monthly compensation of Rs. 3,00,000 retrospectively from 2011, the date of the suit.

The primary question before the court was whether the Appellate Court's direction to deposit monthly compensation from the date of the suit, as a condition for staying an eviction decree, was legally sustainable or overly onerous. The court also examined the applicability of the principles laid down in Atma Ram Properties v. Federal Motors to a gratuitous licensee embroiled in a simultaneous title dispute.

Court Explains Scope Of Order XLI Rule 5 CPC

The High Court underscored that the power to grant a stay of execution under Order XLI Rule 5 is equitable and discretionary. The court noted that a party seeking a stay must "do equity while seeking equity," and therefore, the appellate court is justified in ensuring that the successful landlord is not deprived of the fruits of the decree or reasonable compensation during the pendency of the appeal. However, the court warned against transforming this equitable power into an instrument of hardship.

Applying Atma Ram Principles With Caution

Justice Pedneker noted that while Atma Ram Properties (P) Ltd. v. Federal Motors Pvt. Ltd. and State of Maharashtra v. Super Max establish the landlord’s right to market-rate compensation upon the termination of a tenancy or license, these principles must be applied with sensitivity. In the present case, where the Petitioner has a substantive suit for declaration of title pending, a retrospective deposit from the date of the suit was found to be overly burdensome and unjustified at this interim stage.

"The Appellate Court, while granting an order of stay, may impose such terms and conditions as would ensure that the ends of justice are met and that the interests of the party ultimately found to be successful in the appeal are adequately protected."

Balancing The Equities

To balance the competing interests, the High Court modified the Appellate Court’s order. It directed that the monthly compensation of Rs. 3,00,000 be paid effective only from the date of the eviction decree (26 November 2024), rather than from the date of the suit. To protect the Respondent’s interest, the court mandated that the Petitioner file an undertaking to pay the compensation for the period from the date of the suit until the decree date, contingent upon the final outcome of the appeal.

Conditions For Protection Of Title

The court further held that if the Respondent seeks to withdraw the deposited amounts, he must furnish an undertaking to the court, and the Petitioner is strictly restrained from creating any third-party interests in the suit premises. This measure ensures that the property remains protected while the title dispute remains sub-judice. The court emphasized that these directions are prima facie and shall not influence the final adjudication of the pending title suits.

The High Court disposed of the Writ Petition by modifying the impugned order of the Small Causes Court. The Petitioner is required to deposit the arrears from the date of the decree within two months and continue monthly payments thereafter. By shifting the retrospective burden into a future undertaking, the court successfully navigated the need for immediate relief for the decree-holder while preserving the Petitioner’s statutory right to appeal without suffering undue financial prejudice.

Date of Decision: 21 September 2026