Depositing an award amount under a conditional stay does not stop interest, holds Supreme Court
A Division Bench affirms that National Seeds Corporation stays liable for 12% interest because its deposit did not comply with Order XXI Rule 1, and asks the Law Commission to fix the gap.
An award-debtor who deposits money in court to buy a stay of an arbitral award does not thereby stop interest from running on the award. That is the ruling of the Supreme Court in National Seeds Corporation Ltd v. National Agro Seed Corporation (India), decided on 18 September 2026 by a Division Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe. The Court held that a deposit made only to secure a conditional stay, without complying with Order XXI Rule 1 of the Code of Civil Procedure, is not the same as payment — so National Seeds remains liable for 12% interest on the awarded sum for the period the money sat in the High Court’s registry. The appeal was disposed of and the Delhi High Court’s order affirmed.
A deposit that was not a payment
The Court opened with the distinction that decided the case: “A deposit is not synonymous with payment.” A sum put beyond the debtor’s own reach, the Bench reasoned, neither extinguishes the debtor’s liability nor places the money in the creditor’s hands. Between the deposit of a sum in court and the final discharge of liability lies a spectrum of possibilities, and resolving that uncertainty in the context of enforcing an arbitral award was, in the Court’s words, at the heart of the appeal.
The facts lay within a narrow compass. On 13 June 2019, an arbitral award was passed against National Seeds Corporation for Rs.1,46,40,005.02, together with interest at 12% per annum from 26 August 2017. The company challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court. By an ex parte interim order dated 16 October 2019, the High Court stayed enforcement on the condition that the company deposit a sum; National Seeds deposited Rs.73,20,003 by demand draft dated 25 November 2019.
The route through stay, dismissal and execution
On 5 January 2022 the High Court dismissed the Section 34 petition. The company’s appeal under Section 37(1)(c) of the 1996 Act was dismissed by a Division Bench on 31 May 2022, and its Special Leave Petition was dismissed on 26 August 2022, at which point the award attained finality. The executing court then dealt with release of the deposited amount and the interest that had accrued.
By the order under challenge, dated 5 August 2024, the Delhi High Court held National Seeds liable to pay interest at 12% 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 to the award-holder. The company carried that finding to the Supreme Court, arguing that once it had deposited the money in November 2019 in compliance with the stay condition, interest should have stopped running.
Why Order XXI Rule 1 controlled the result
The Court located the answer in Order XXI Rule 1 of the CPC, which governs the modes of paying money under a decree. Read with its post-1976 sub-rules, the provision requires a judgment-debtor who deposits money in court to give notice of the deposit to the decree-holder; interest ceases to run only from the date of that notice. The legislative object, the Bench noted, was that interest should cease on the deposit being made and notice given, or on the amount being tendered — not merely on money being parked in court.
Applied to National Seeds, the deposit of Rs.73,20,003 had been made to satisfy a condition for stay, not as a payment under Order XXI Rule 1 accompanied by the notice the Rule contemplates. The Court held that the deposit was therefore not made in consonance with Order XXI Rule 1, and that the company’s liability to pay interest did not cease when the money was deposited. It also examined Section 36 of the 1996 Act, which makes an award enforceable as a decree and allows a conditional stay, and found nothing in it that converted a security deposit into satisfaction of the award.
A wider problem, referred to the Law Commission
The Bench did not stop at the parties. It recorded that the 1996 Act, as it stands, provides no clear guidance on the interplay between conditional deposits and the accrual of interest, and that this gap could not be ignored. Surveying the position across Indian courts and tribunals, the Court described an “asymmetry” in the method and manner by which deposits are directed to be made and held when appeals are pending — some rules requiring fixed deposits in nationalised banks, others government securities, others nothing at all.
The judgment contrasted this with mechanisms abroad, including the pooled court-registry investment system operated under Title 28 of the United States Code and the deposit-into-the-Consolidated-Revenue-Fund model under the Canadian Supreme Court Act, 1985, where interest on security deposits is governed by statute. Concluding that it was necessary to evolve a consistent normative rule and, ultimately, suitable legislation, the Court requested the Law Commission of India to examine the issues and to consult the Reserve Bank of India, the Ministry of Finance and the Ministry of Law. The Registry was directed to send a copy of the judgment to the Chairman of the Law Commission, the Governor of the Reserve Bank of India, and the Secretaries to the Ministries of Finance and Law.
Order
On the facts, the Court found no ground to interfere with the High Court’s order dated 5 August 2024 and affirmed it. With the observations and directions on the deposit-and-interest question and the reference to the Law Commission, the appeal was disposed of.