Validity of automatic vacation of stay orders | Judgement Summary

The decision to vacate stay orders must apply a “judicial mind”

The judgement held that the application of a “judicial mind” was necessary to set aside a stay order against proceedings of a civil or criminal trial. High Courts could modify or vacate such orders under non-exhaustive grounds such as:

1. when the litigant tries to prolong the case based on unreasonable grounds; 
2. when the litigant remains absent from the Court specifically during the hearing of the main case;
3. when a stay order is passed on misinformation or hidden facts;
4. when there are any material changes due to prolonged time. 

However, when stay orders are automatically vacated there is no application of “judicial mind”.  The decision must be based on evaluated results to ensure fairness in rendering justice.

Further, the Court noted that automatic vacation gives an unfair advantage to the respondent. “This gives 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.” 

Automatic vacation is subject to judicial scrutiny even when legislation provides for it

In Pepsi Foods Ltd. v. ACIT (2015), the Court was dealing with the third proviso to Section 254(2A) of the Income Tax Act 1961, which provided that if an appeal preferred before the Appellate Tribunal was not disposed of within 365 days, the stay shall stand vacated even if the delay in disposing of the appeal is not attributable to the assessee.  

While striking down the proviso, the Court observed that “a provision automatically vacating a stay was manifestly arbitrary and, therefore, violative of Article 14 of the Constitution of India.” “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,” the Court had noted. 

In the present case, the judgement agreed with this view taken in Pepsi Foods and noted that a provision provided for automatic vacation may not withstand judicial scrutiny.  

Can the Court use discretionary powers to automatically vacate stay orders?

A key question before the Court was to decide if it could use its discretionary powers under Article 142 to automatically vacate stay orders. In Asian Resurfacing, the Court had relied on Article 142 to justify automatic vacation of stay. 

In the present case, however, the Bench clarified that the provision was not intended to be used to pass blanket orders that set aside valid orders of the High Court.

The judgement noted the Court can exercise jurisdiction to ensure “complete justice” under Article 142 but cannot nullify any benefits arising from a valid order. The judgement also held that while the Court could provide directions on procedural aspects under Article 142, it cannot ignore any major substantive rights of litigants. 

HCs “constitutionally independent” of the Supreme Court 

The Supreme Court observed that High Courts are not subordinate to them by stating that “a High Court is constitutionally independent of the Supreme Court of India and is not subordinate to this Court.” 

“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,” they said. The Supreme Court could not use Article 142 to limit the High Courts’ power and declare that their stay orders will be valid only for six months at a time. The Bench said that “putting this constraint on the power of the High Court” would amount to “making a dent” in jurisdiction under Article 226, which formed part of the basic structure of the Constitution. 

Decisions of the Court cannot be time-bound 

In Asian Resurfacing, the Court had held that “if the case is not decided within six months, the interim stay will be vacated automatically, virtually making the pending case infructuous.” 

In the present case, the Court overruled the view in Asian Resurfacing. The judgement observed that “automatic vacation of the order of stay and the disposal of all cases in which a stay has been granted on a day-to-day basis virtually amount to judicial legislation.”

Further, in Asian Resurfacing the Court had directed the trial courts to proceed with cases having stay order after the expiry of six months and that the High Courts are to continue cases with stay orders on a day-to-day basis. 

Here, the Bench observed that stipulating a time-frame for deciding cases is a legislative function.  The Court also has observed that no court could direct the other courts to decide cases on a priority basis. The reason is that every litigant cannot afford to file cases at the constitutional courts. 

Justice Mithal’s concurring opinion

In his concurring opinion, Justice Mithal added that the vacation or extension of a stay order has to be accompanied by a speaking order from a judge. 

He held that Article 142 and Article 226(3) are analogous. This means that while Article 142 ensures absolute justice, Article 226(3) provides that an application is to be made for the vacation of stay order where there is a time period within which the application is filed. 

Therefore, when the time-bound application is not filed for a vacation of a stay order, automatically vacating it would amount to obstructing justice.