Award Debtor Can Seek Section 9 Relief in Rare Cases, Supreme Court Holds; Orders Rs 3.5 Crore Deposit
A Supreme Court bench of Justices K. V. Viswanathan and Alok Aradhe upheld a direction requiring an award debtor to deposit Rs 3.5 crores pending a Section 34 challenge, preventing unjust enrichment.
The Supreme Court on 11 August 2026 dismissed a civil appeal by National Projects Construction Corporation Ltd. (NPCC) challenging an order that required it to deposit Rs 3.5 crores with the Registry of the High Court of Delhi, pending the disposal of a Section 34 application under the Arbitration and Conciliation Act, 1996. The dispute arose from a 2002 MoU for bus terminus development in Agra, Uttar Pradesh, where bank guarantees furnished against a mobilisation advance were eventually encashed by NPCC in September 2017 — before the arbitral award was even pronounced. The Court held that an award debtor may invoke Section 9 in rare and compelling cases, and that the facts here met that elevated threshold, given the absence of any counterclaim by NPCC and the arbitrator's apparent unawareness of the encashment.
The Dispute and Its Path to the Supreme Court
On 16 August 2002, NPCC and Ishvakoo (India) Pvt. Ltd. entered into a Memorandum of Understanding for development work at bus stands in Agra and the Taj Trapezium Zone Heritage Corridor. In December 2002, Ishvakoo received Rs 3.5 crores as mobilisation advance, secured by bank guarantees issued by Canara Bank.
Disputes arose, the arbitration clause was invoked by Ishvakoo, and an arbitrator was appointed. At that stage, Ishvakoo filed OMP No. 363/2003 under Section 9 before the Delhi High Court seeking to restrain NPCC from invoking the bank guarantees. The High Court disposed of that petition on 15 December 2005, recording a mutual undertaking: Ishvakoo would keep the bank guarantees alive through arbitration and any Section 34 proceedings, while NPCC would not encash them unless the arbitrator found an amount recoverable in NPCC's favour.
Ishvakoo, however, could not keep the bank guarantees alive after September 2017. NPCC encashed them before the award was pronounced. The arbitrator rendered the award on 5 December 2017, dismissing all of Ishvakoo's claims. Critically, the arbitrator dealt with Issue Nos. 3 and 4 — concerning discharge of bank guarantees and bank charges — apparently without knowing that NPCC had already encashed the guarantees. No counterclaim had been filed by NPCC.
After the award, Ishvakoo filed a Section 34 application challenging it. During those proceedings, the Single Judge made orders on 20 September 2018 and 30 October 2018 directing NPCC to return the encashed amount. Those orders were set aside by consent before the Division Bench, with liberty to Ishvakoo to file a fresh Section 9 petition. Ishvakoo accordingly filed OMP (I)(COMM.) No. 57/2019, seeking a direction that NPCC refund Rs 3.5 crores along with interest at 18% per annum.
The Single Judge allowed the Section 9 application on 5 April 2019, directing NPCC to deposit Rs 3.5 crores with the Registry to be kept in an interest-bearing fixed deposit. The Division Bench dismissed NPCC's appeal in FAO(OS)(COMM) No. 113/2019 on 21 May 2019. NPCC then approached the Supreme Court.
Whether an Award Debtor Can Invoke Section 9
NPCC's primary submission was that Section 9, in the post-award context, exists only to protect the fruits of an award in aid of its enforcement. A party whose claims have been entirely dismissed by the arbitrator holds no award, has no adjudicated amount surviving in its favour, and has nothing to protect. On that basis, NPCC argued the Section 9 application was not maintainable.
The Court found this issue settled by its recent decision in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, 2026 SCC Online SC 670, where it had held that a party that lost in arbitration may nonetheless invoke Section 9 for interim relief. The Court in that case had reasoned that denying such access would leave an unsuccessful party entirely remediless, particularly where the award under challenge is stayed and the ultimate outcome may alter the rights of parties.
The Court in Home Care Retail Marts had, however, set a higher threshold: relief will be granted in only “rare and compelling cases” to prevent irreparable prejudice and preserve the efficacy of Section 34 challenge proceedings. The present bench accepted that framing and applied it to the facts before it.
Why the Section 9 Relief Was Justified on These Facts
The Court identified nine reasons why Ishvakoo satisfied the required parameters.
First, the order of 15 December 2005 in OMP No. 363/2003 had expressly conditioned NPCC's right to encash the bank guarantees on a finding by the arbitrator that NPCC was entitled to recover the amount from Ishvakoo. Second, NPCC filed no counterclaim before the arbitrator. Third, the arbitrator dealt with Issue Nos. 3 and 4 only in the context of bank charges, appearing entirely unaware that the guarantees had already been encashed before the award was pronounced.
Fourth, the Section 34 court was still examining whether the arbitrator had recorded any finding that Ishvakoo failed to utilise the mobilisation advance — and prima facie no such finding existed in the award. Fifth, the order of 1 November 2017, which had found no fault with NPCC's encashment at that pre-award stage, did not operate as a bar in the present round of Section 9 proceedings which arose in the post-award context.
Sixth, because there was no counterclaim and no finding of non-utilisation of the mobilisation advance, permitting NPCC to retain Rs 3.5 crores pending Section 34 proceedings would amount to unjust enrichment and would be contrary to the spirit of the 2005 order. Seventh, applying the standards from Home Care Retail Marts and Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178, this was a rare and compelling case where, even at the higher threshold applicable to an award debtor, interim relief was needed to prevent irreparable prejudice and preserve the Section 34 challenge.
Eighth, the High Court had exercised its jurisdiction judiciously rather than arbitrarily, keeping in view prima facie case, balance of convenience and irreparable prejudice, and Ishvakoo had approached the court with reasonable expedition. Ninth, the relief fashioned — deposit into court rather than direct refund — advanced the efficacy of arbitration as a mode of dispute resolution and was within the purpose of interim measures under Section 9.
The Section 9 Framework the Court Applied
The Court reiterated the principles governing Section 9 from Essar House: the court must assess whether the applicant has a good prima facie case, whether the balance of convenience favours the interim relief sought, and whether the applicant approached the court with reasonable expedition. It also recalled that under Section 9(1)(ii)(e), the court may pass such other interim measure of protection “as may appear to the Court to be just and convenient,” a residuary power to be exercised judiciously and not arbitrarily.
The Court drew on Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125, for the proposition that the well-known principles governing interim injunctions — prima facie case, balance of convenience, irreparable injury, and the concept of just and convenient — are not alien to Section 9 and cannot be excluded from its operation.
The Single Judge below had identified the key facts with care. The arbitrator, when dealing with Issue No. 3 on discharge of bank guarantees, had simply quoted the 2005 court order and observed that Ishvakoo was bound by its own undertaking to keep the guarantees alive. The Single Judge found that the arbitrator had not actually decided Issue No. 3 at all, and had made the observation in the context of Issue No. 4 on bank charges, without knowing that encashment had already occurred. The Single Judge had also noted that NPCC could point to no finding in the award that the mobilisation advance had gone unutilised, and that without such a finding, there was no basis for NPCC to retain the money pending Section 34 proceedings.
Outcome
The Supreme Court dismissed the appeal. It granted NPCC four weeks to deposit Rs 3.5 crores with the Registry of the High Court of Delhi. On deposit, the Registry was directed to keep the amount in a fixed deposit with any nationalised bank, on auto-renewal basis, until disposal of the Section 34 application.
The Court made clear that all observations in these proceedings — including those of the courts below — were confined to the Section 9 petition. The Section 34 application is to be decided on its own merits, without being influenced by any of those observations. No order as to costs was made.