The Starting Point: No Automatic Stay
The filing of an appeal does not operate as a stay of the NCLT order. The appellant must file a separate stay application, supported by an affidavit and the grounds of appeal. The NCLAT may grant a stay pending the appeal, but the grant is discretionary.
The Grounds for Stay
The NCLAT applies the familiar triad: a prima facie case in the appellant’s favour; the balance of convenience; and the irreparable injury that the appellant would suffer if the stay is refused. The appellant should also address the prejudice to the respondent and to third parties if the stay is granted.
The Stay of a Scheme Order
A stay of an NCLT order sanctioning a scheme is granted sparingly, particularly where the scheme has been implemented and the rights of third parties have crystallised. The NCLAT may grant a conditional stay, requiring the appellant to deposit the amount or to furnish security. The appellant should demonstrate that the scheme is illegal or that the NCLT’s order is patently unsustainable.
The Stay of a Winding-Up Order
A stay of a winding-up order is similarly discretionary. The NCLAT may stay the order to allow the appellant to pay the debt or to pursue an alternative remedy. The appellant should show that the winding-up order will cause irreparable harm and that the appeal has a reasonable prospect of success.
The Procedure
The stay application should be filed along with the appeal, or as soon as possible thereafter. The NCLAT may hear the application ex parte and grant an interim stay, pending the hearing of the respondent. The appellant should serve the stay application on the respondent and be prepared for a contested hearing.
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