A deposit is not a payment: the award-debtor pays interest until the money actually reaches the creditor
Justices Pamidighantam Sri Narasimha and Alok Aradhe upheld interest running until release of a conditional deposit, and asked the Law Commission to examine how courts hold such money.
An award-debtor who deposits half the awarded sum in a High Court registry to buy a stay has not paid the creditor anything. That is the proposition the Supreme Court worked out on 18 September 2026, upholding an order that made the debtor pay 12 per cent interest for the whole period between the arbitral award and the day the deposited money was released. The judgment opens with the distinction it turns on: a sum put beyond the debtor's own reach neither extinguishes his liability nor places it in the creditor's hands. Having decided the appeal, the Bench went on to describe a wider problem the 1996 Act does not address, and sent the judgment to the Law Commission.
Three years in a registry
The facts are narrow. An arbitral award was passed on 13 June 2019 against the appellant for Rs 1,46,40,005.02, together with interest at 12 per cent per annum from 26 August 2017 to the date of the award, which took the total to Rs 1,77,97,434. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court.
By an ex parte interim order of 16 October 2019 the High Court stayed enforcement, on condition that the appellant deposit 50 per cent of the principal sum within six weeks. The appellant deposited Rs 73,20,003 with the Registry by demand draft dated 25 November 2019. The Section 34 petition was dismissed on 5 January 2022. The award-holder filed an execution petition on 24 January 2022 and then an application on 14 February 2022 seeking release of the deposited amount; the High Court, noting the execution petition, directed that the amount be treated as deposited in the execution proceedings. The appellant carried the dismissal further under Section 37(1)(c).
By the order under appeal, dated 5 August 2024, the High Court held the appellant liable to pay interest at 12 per cent per annum on the awarded sum for the period from 13 June 2019, the date of the award, to 8 September 2022, the date on which the deposited amount was ordered to be released, and disposed of the execution petition.
The spectrum between deposit and discharge
The Court's starting point is that a deposit and a payment are different events. Between the deposit of a sum in court and the final discharge of liability lies a spectrum of possibilities, and with it a corresponding degree of uncertainty. The money sits where neither side can use it. The debtor cannot deploy it; the creditor cannot receive it. Resolving that uncertainty in the context of enforcement of an arbitral award was, as the judgment puts it, the heart of the appeal.
The Court recorded that disputes of this nature arise with unsettling regularity, and that the 1996 Act as it stands provides no clear guidance on the interplay between conditional deposits and the accrual of interest. It declined to treat that gap as something to be worked around case by case without comment.
What other systems do with the money
Having identified the lacuna, the Bench looked at how deposits are handled elsewhere. In the United States, a unified portal administered by legal and financial personnel operates across courts of different levels, through which deposits are invested in commercially proportionate, interest-bearing instruments. In Canada, under Section 65(1) of the Supreme Court Act, 1985 read with the Rules of the Supreme Court of Canada, 2002, a deposit made as security for a stay goes into the Consolidated Revenue Fund through the Office of the Registrar, and Rule 87 provides that interest is to be paid on money deposited as security, at a rate determined under the financial administration legislation.
Against that, the Court described an asymmetry in India in the methods and manners by which deposits are directed to be made before courts and tribunals when appeals are considered. It set the aspects of that asymmetry out across several paragraphs of the judgment, together with the consequences that follow from it, and concluded that a normative principle is needed to apply as a standard, and that suitable legislation on the subject is necessary.
The reference
The Court requested the Law Commission of India to examine the issues the judgment highlights and, in doing so, to consider the laws other countries have enacted. It observed that the Law Commission may need to consult the Reserve Bank of India, the Ministry of Finance and the nodal Ministry of Law and Justice. The Registry was directed to send a copy of the judgment to the Chairman of the Law Commission of India, the Governor of the Reserve Bank of India, and the Secretaries to the Ministries of Finance and of Law and Justice.
Order
On the facts and in the circumstances of the case, the Court found no ground to interfere with the order under appeal and affirmed it. The appeal was disposed of with the observations and directions set out in the judgment, including the reference to the Law Commission and the direction to the Registry to circulate copies.