Decretal amounts deposited as appellate security cannot be released without an unconditional bank guarantee.

The Appellant challenged the judgment and decree dated 31 July 2024 passed by the District Judge (Commercial Court-04), South-East District, Saket Courts, in favour of Respondent No. 1.

On 11 November 2024, the High Court stayed operation of the decree subject to the Appellant depositing the decretal amount together with interest. The Appellant consequently deposited ₹55,86,102 with the Registry.

Respondent No. 1 thereafter sought release of the deposited amount. By order dated 22 April 2025, the High Court permitted withdrawal subject to Respondent No. 1 furnishing an unconditional bank guarantee for an equivalent amount and undertaking to refund the amount with interest at 12% per annum if the Appellant succeeded in the appeal.

Respondent No. 1 sought modification of these conditions, contending that the bank guarantee would require collateral security or a fixed deposit and would involve substantial charges, causing financial hardship. It also sought reduction of the agreed interest rate of 12% per annum.

Whether Respondent No. 1 could withdraw the decretal amount deposited in Court during the pendency of the appeal without furnishing an unconditional bank guarantee of an equivalent amount?

Whether the agreed rate of 12% per annum payable upon refund of the deposited amount could be reduced or modified?

Order XLI Rule 5(3)(c) of the Code of Civil Procedure, 1908 requires that a stay of execution should not be granted unless security is furnished for the due performance of the decree or order that may ultimately bind the applicant.

Where the decretal amount has been deposited as security for the decree during the pendency of an appeal, its withdrawal is permissible only upon provision of adequate substitute security; otherwise, withdrawal would effectively amount to execution of the decree during the appeal.

A condition expressly agreed to and recorded in a judicial order cannot ordinarily be modified in the absence of a justifiable ground warranting such modification.

The Court held that the Appellant’s deposit was made pursuant to the stay order as security for due execution of the decree.

Permitting Respondent No. 1 to withdraw the amount without an equivalent unconditional bank guarantee would leave the decretal amount unsecured and would effectively permit execution while the appeal remained pending.

The alleged requirement of collateral security or a fixed deposit, as well as the bank-guarantee charges, was held insufficient to dispense with the security condition.

As to interest, the Court noted that Respondent No. 1 had expressly agreed, when the earlier release order was passed, to refund the amount with interest at 12% per annum if the Appellant succeeded. Since no ground justifying modification of that agreed condition was disclosed, the Court declined to reduce the rate.

It held that release of the deposited amount could not be permitted without an unconditional bank guarantee for the equivalent amount, and that the agreed refund interest rate of 12% per annum could not be reduced.

The application seeking modification of the order dated 22 April 2025 was accordingly dismissed.