Overview
In a landmark decision on arbitration law, the Supreme Court of India ruled that an unsuccessful party in an arbitration proceeding (an award debtor) can invoke Section 9 of the Arbitration and Conciliation Act, 1996 after an award has been passed. The Division Bench comprising Justice K.V. Viswanathan and Justice Alok Aradhe clarified that while the threshold for an award debtor to secure interim protection at the post-award stage is significantly higher, courts may grant relief in rare and compelling circumstances to prevent unjust enrichment and preserve the efficacy of challenge proceedings under Section 34.
The judgment comes in the case of National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd. (2026 INSC 828 / 2026 LiveLaw (SC) 791), where the apex court upheld a Delhi High Court order directing the appellant to deposit ₹3.5 crore with the court registry pending a Section 34 challenge.
Factual Background
The genesis of the dispute dates back to August 2002, when National Projects Construction Corporation Ltd. (NPCC) entered into a Memorandum of Understanding (MoU) with Ishvakoo (India) Pvt. Ltd. for infrastructure development projects in Uttar Pradesh, including works on the Taj Trapezium Zone Heritage Corridor in Agra.
Mobilisation Advance: Pursuant to the MoU, NPCC provided Ishvakoo with a Mobilisation Advance of ₹3.5 crore against bank guarantees furnished by Ishvakoo.
The 2005 Arrangement: Disputes arose, leading to arbitration. In 2005, the Delhi High Court disposed of an initial Section 9 petition, directing that NPCC would not encash the bank guarantees provided Ishvakoo kept them renewed and alive, and that encashment would depend on whether the arbitrator found NPCC entitled to recover any amount.
Encashment in 2017: In September 2017, Ishvakoo failed to renew the guarantees, prompting NPCC to invoke and encash them, realizing ₹3.5 crore.
Arbitral Award: In December 2017, the sole arbitrator rendered the final award. The tribunal dismissed Ishvakoo’s claims against NPCC. Notably, NPCC had not filed any counter-claim for damages or retention of the advance money before the tribunal. Furthermore, the tribunal delivered the award without factoring in the fact that NPCC had already encashed the guarantees shortly before the award was pronounced.
The Legal Controversy
Following the award, Ishvakoo challenged the tribunal's findings under Section 34 of the Arbitration Act. Simultaneously, Ishvakoo filed a post-award Section 9 application seeking interim protection—specifically, directing NPCC to deposit the ₹3.5 crore in court to prevent NPCC from retaining funds that had not been awarded to it by the tribunal.
A Single Judge of the Delhi High Court directed NPCC to deposit the ₹3.5 crore with the registry, an order subsequently affirmed by a Division Bench. NPCC appealed to the Supreme Court, raising a fundamental legal argument: Can an unsuccessful party, whose claims were entirely rejected by an arbitral tribunal, invoke Section 9 after the award is passed to recover or protect encashed funds?
Supreme Court’s Reasoning and Decision
1. High Threshold for Award Debtors
Reaffirming principles laid down in precedents such as Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi (2026), the Supreme Court held that the status of a party as a "losing party" does not automatically bar it from accessing Section 9. However, the bench emphasized a strict caution:
The threshold for grant of interim relief will be higher when the application is moved by an Award Debtor. Courts may, in rare and compelling cases, permit the unsuccessful party to invoke Section 9 to prevent irreparable prejudice and to preserve the efficacy of the challenge under Section 34.
2. Prevention of Unjust Enrichment
The Court observed that NPCC had not preferred any counter-claims in the arbitration, nor was there any affirmative finding by the arbitrator establishing that NPCC was entitled to retain the ₹3.5 crore mobilization advance. Therefore, allowing NPCC to retain the encashed sum throughout the pendency of the Section 34 petition would amount to unjust enrichment.
3. Preserving Balance of Convenience and Prima Facie Merit
The Supreme Court concluded that Ishvakoo satisfied the required criteria for interim relief—establishing a strong prima facie case and balance of convenience. Preserving the monetary sum in court custody ensured that the Section 34 proceedings would not be rendered redundant or illusory.
Final Directions
Dismissing NPCC’s appeal, the Supreme Court directed NPCC to deposit ₹3.5 crore with the Registry of the Delhi High Court within four weeks. The High Court Registry has been instructed to place the deposited funds into an auto-renewing Fixed Deposit (FD) in a nationalized bank until the main Section 34 challenge is finally adjudicated.
Discription: In National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd. (2026 INSC 828), the Supreme Court ruled that an unsuccessful party (award debtor) can invoke Section 9 of the Arbitration and Conciliation Act, 1996 post-award in exceptional cases.
Bench comprising Justice K.V. Viswanathan and Justice Alok Aradhe affirmed that while award debtors face a significantly higher legal threshold, courts may grant interim protection to prevent unjust enrichment and preserve the efficacy of Section 34 challenges.
The dispute involved NPCC encashing ₹3.5 crore in bank guarantees before the tribunal dismissed Ishvakoo's claims without awarding funds to NPCC. The Court ordered NPCC to deposit ₹3.5 crore with the Delhi High Court Registry pending Section 34 proceedings.