The Delhi High Court’s decision to stay execution of a damages decree in M/s Pearl Engineering v. Koninklijke Philips N.V. raises uneasy questions about when money decrees can be put on hold. Aafreen Saraf argues that by relying on doubts in damages computation, the Court stretches the Supreme Court’s narrow “exceptional cases” standard reaffirmed in Lifestyle Equities v. Amazon Technologies. Aafreen is a third-year B.A. LL.B. (Hons.) student at the West Bengal National University of Juridical Sciences (WBNUJS), Kolkata. She is interested in intellectual property law, tech and AI regulation, and corporate and commercial law.
Staying the Numbers: Damages Quantification and the Limits of “Exceptionality” after Lifestyle
By Aafreen Saraf
Recently, a Division Bench of the Delhi High Court stayed the execution of a damages decree in M/s Pearl Engineering v. Koninklijke Philips N.V., arising from infringement of Philips’ DVD SEP. By the time the matter was decided, the patent had already expired. The dispute was no longer about injunctions, but only about how much money was payable for past infringement, making it into a money decree. (Read more about the Philips’ DVD SEP litigation here.)
This decision raises the question: can enforcement of a decree be stopped only because the calculation of damages is doubtful, even when the decree itself is otherwise valid? This question is of extreme significance when viewed in light of the Supreme Court’s (SC) recent decision in Lifestyle Equities v. Amazon Technologies (read more about the Amazon dispute here), which reaffirmed that money decrees are ordinarily not to be stayed and that such relief is confined to narrowly defined “exceptional cases”. This blog post examines the DHC’s decision to stay execution of a money decree in the Philips SEP case, and analyses how its reliance on defects in damages computation stretches the “exceptional case” threshold laid down by the SC.
The Philips SEP Appeals: What Was Stayed and Why
The appeals challenged a common judgment of the Single Judge bench holding the appellants liable for infringement of Philips’ SEP. As the suit patent had expired by the time of adjudication, the reliefs granted were confined to damages and costs, making it a pure money decree. These are decrees directing payment of a specified sum of money, enforceable through execution under Order XXI, Rule 30 of Code of Civil Procedure, 1908.
The Single Judge bench issues findings on five aspects that collectively formed the basis of the damages award. These included findings on: (i) infringement of the suit patent; (ii) validity of the patent; (iii) the appropriate FRAND royalty rate; (iv) the number of stampers supplied to the appellants; and (v) the number of DVDs replicated during the period of infringement (para 20.2 of Philips SEP). On appeal, the DB emphasised that its immediate task was not to revisit these findings on merits, but to assess whether execution of the money decree ought to be stayed pending adjudication of the Regular First Appeals.
The DB expressly acknowledged that money decrees are ordinarily not to be stayed, and that the governing principles were those laid down by the SC of India in Lifestyle Equities v. Amazon Technologies (para 8 of Philips SEP). Applying that framework, the Court held that the findings of the Single Judge on infringement, validity, FRAND royalty, and the number of stampers supplied did not suffer from any infirmity of the nature contemplated by the SC and, therefore, could not justify a stay of execution (para 20.4 of Philips SEP).
However, a different conclusion was reached in respect of the fifth finding. The DB noted that the Single Judge had proceeded on the assumption that 10,000 DVDs could be replicated from a single stamper, without any evidentiary basis on record to support this figure (paras 19.3 of Philips SEP). These presumptions were held to be prima facie without foundation, rendering the computation of damages vulnerable and attracting the limited exception recognised in Lifestyle Equities.
On this basis, the DB held that execution of the money decree could not be permitted to proceed in its existing form and accordingly stayed execution. Any requirement of immediate cash deposit was dispensed with, and the appellants were directed to furnish an unconditional and irrevocable bank guarantee securing the decretal amount within the stipulated period.
The SC Judgement in Lifestyle
Order XLI Rule 5 of the Code of Civil Procedure, 1908 governs appeals from original decrees and sets out the conditions under which execution of a decree may be stayed while an appeal is pending. The position of law was recently clarified by the SC in Lifestyle Equities C.V. & Anr. v. Amazon Technologies Inc. The judgment arose from a challenge to a Division Bench order of the Delhi High Court, which had stayed execution of a money decree against Amazon without directing the deposit of the decretal amount. The DB identified serious procedural infirmities, including the absence of valid service of summons and the fastening of liability on the basis of claims never pleaded.
Against this backdrop, the Supreme Court examined the scope of Order XLI Rule 5 CPC. While reaffirming that money decrees are ordinarily not to be stayed, the Court clarified that the requirement for such a deposit under the CPC is directory rather than mandatory. Non-compliance with Order XLI Rule 1(3) does not render an appeal non-maintainable, but ordinarily disentitles the appellant from seeking a stay of execution (Para 62 and 63 of Lifestyle Equities).
The Court held that an unconditional stay may nevertheless be granted in exceptional cases, where the decree is egregiously perverse, riddled with patent illegality, facially untenable, or suffers from similar exceptional causes. (Para 82 of Lifestyle Equities).
Identifying the Fault Line: Where Philips SEP Parts Ways with Lifestyle
The reasoning adopted by the DB in Philips SEP reveals a tension in the application of the framework laid down by the SC in Lifestyle. In Lifestyle, the SC emphasised that an “exceptional case” justifying stay of a money decree arises only where the decree itself is egregiously perverse, riddled with patent illegality, or facially untenable. It is important to recognise that Lifestyle Equities held that the grant of a stay on a money decree is a matter of judicial discretion (Para 70 of Lifestyle Equities). However, the “exceptional cause” must exist in the decree as a whole, not on isolated parts of the judgement.
The concern is not with the existence of discretion, but the basis on which it is exercised. In Lifestyle, the SC laid down the “exceptional cases” to help streamline the discretion. When the discretion is exercised on the basis of prima facie findings about quantification, in an otherwise valid decree, it risks treating an appellate case as an exceptional case justifying an injunction.
Against this benchmark, the reasoning in Philips SEP reveals a subtle shift. The DB expressly accepted that the findings on infringement, patent validity, the FRAND royalty rate, and the number of stampers supplied did not suffer from any infirmity that would attract the application of the “exceptional case” benchmark laid down in Lifestyle. The infirmity identified by the Court was confined to a single step in the damages computation. The DB’s conclusion on this aspect was prima facie. This gives rise to a mismatch. Lifestyle contemplates perversity at the level of the decree, while Philips SEP locates it at the level of a component of quantification.
At first glance, reliance on Lifestyle appears intuitive. The unconditional stay was granted due to the extraordinary escalation of damages, without amendment of pleadings or notice to the defendant. In that sense, both Lifestyle and Philips SEP involve judicial concern with the basis on which damages were quantified.
However, upon a closer look, we can see in Lifestyle that the inflated damages were not merely a matter of erroneous estimation. It was due to an absence of valid service of summons, ex parte proceedings, and a decree founded on claims never pleaded or contested. The damages escalation was inseparable from a broader collapse of procedural fairness, calling into question the legitimacy of the decree as a whole.
In Philips SEP, by contrast, the DB expressly accepted the integrity of the liability findings. The Court held that the conclusions on infringement, patent validity, the FRAND royalty rate, and the number of stampers supplied did not suffer from any infirmity. The vulnerability identified was in the damages computation, and the assumption regarding the number of DVDs replicable from a stamper. This defect, while serious, does not stem from denial of hearing, absence of pleadings, or procedural unfairness.
Treating such defects as sufficient to attract the “exceptional case” doctrine risks collapsing the high threshold articulated in Lifestyle into a merits-based standard, thereby blurring the separation between appeal and execution.
This is not to suggest that the DB was incorrect to intervene or that interim protection was impermissible. In fact, the requirement of an unconditional bank guarantee reflects a conscious attempt to balance equities and mitigate prejudice to the decree-holder. The concern arises in the characterisation of a quantification-centric irregularity as an “exceptional cause” under Lifestyle. The judgment leaves doubts on whether the stay rests on the balancing of convenience or on an expanded reading of “exceptionality” under Lifestyle, a distinction that warrants greater clarity.
Conclusion
The DB order staying execution of the damages decree in Philips SEP is noteworthy, given the settled principle that money decrees are ordinarily not to be stayed. While the Court’s intervention reflects a careful attempt to balance equities through security-based safeguards, its reasoning raises questions about the scope of the “exceptional case” doctrine articulated in Lifestyle. As the observations are expressly prima facie and confined to interim stay applications, the treatment of damages quantification remains to be settled in the pending appeals.
