Introduction:

The Supreme Court has reaffirmed that an award debtor can, in exceptional and compelling circumstances, seek interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, even after an arbitral award has been rendered, particularly where such relief is necessary to preserve the effectiveness of a challenge to the award under Section 34. The Court held that the extraordinary nature of such relief does not make a post-award Section 9 application impermissible, although the threshold for granting relief to an award debtor remains considerably higher.

A Bench comprising Justice K.V. Viswanathan and Justice Alok Aradhe was considering an appeal arising from proceedings between National Projects Construction Corporation Ltd. and Ishvakoo (India) Pvt. Ltd. The dispute concerned approximately ₹3.5 crore paid as mobilisation advance pursuant to a Memorandum of Understanding executed in 2002. The amount had been secured by bank guarantees furnished by the respondent. The central question before the Supreme Court was whether the respondent, after the arbitral award had been passed and while its challenge under Section 34 remained pending, could seek interim protection under Section 9 to prevent the award holder from retaining the amount represented by the encashed bank guarantees.

The dispute had a long procedural history. Pursuant to the 2002 Memorandum of Understanding, National Projects Construction Corporation Ltd. provided Ishvakoo (India) Pvt. Ltd. with a mobilisation advance of approximately ₹3.5 crore. The advance was secured by bank guarantees. The parties subsequently approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996.

In 2005, the High Court disposed of the Section 9 proceedings on the basis of an understanding that the appellant would not invoke the bank guarantees so long as the guarantees remained alive. The arrangement further contemplated that, if the arbitrator ultimately found the appellant entitled to recover the relevant amount, the bank guarantees could thereafter be invoked.

The respondent, however, failed to keep the bank guarantees alive. As a result, the appellant invoked and encashed the guarantees in September 2017. Subsequently, on December 5, 2017, the arbitral tribunal rendered its award. The tribunal dismissed the respondent’s claims but, according to the material placed before the Supreme Court, remained unaware that the bank guarantees had already been encashed.

The respondent thereafter challenged the arbitral award under Section 34 of the 1996 Act. While that challenge was pending, it instituted a fresh application under Section 9 before the Delhi High Court, seeking interim protection and return or securing of the amount of approximately ₹3.5 crore which had been realised through the bank guarantees.

The Single Judge of the Delhi High Court allowed the application and directed the appellant to deposit the amount with the Registry. The Division Bench subsequently affirmed that order. Aggrieved by the direction requiring it to part with the amount during the pendency of the Section 34 proceedings, the appellant approached the Supreme Court.

The Supreme Court dismissed the appeal and upheld the interim protection granted by the Delhi High Court. The judgment, authored by Justice K.V. Viswanathan, relied upon the principle that although post-award Section 9 relief at the instance of an award debtor is not ordinarily granted, exceptional cases may justify such intervention where refusal of protection would cause irreparable prejudice or render the Section 34 challenge substantially ineffective.

The Court also found that the respondent had established the necessary requirements for interim relief, including a prima facie case and balance of convenience. Most significantly, the Court accepted the High Court’s conclusion that allowing the appellant to retain the entire amount during the pendency of the Section 34 challenge would result in unjust enrichment.

Arguments of the Parties:

The appellant, National Projects Construction Corporation Ltd., challenged the Delhi High Court’s direction requiring it to deposit approximately ₹3.5 crore with the Registry. Its position was essentially that the amount had already been realised pursuant to valid invocation of the bank guarantees and that the respondent’s Section 34 challenge to the arbitral award could not, merely by being filed, create a right to recover or secure the amount through a fresh Section 9 application.

The appellant relied upon the fact that the arbitral tribunal had already rendered its award on December 5, 2017. The award had gone against the respondent’s claims, and the appellant therefore maintained that it was the successful party in the arbitration. From this perspective, permitting the respondent to obtain interim relief after the award could undermine the consequences of the arbitral adjudication and effectively provide the unsuccessful party with protection that was not ordinarily available under Section 9.

The appellant also had the benefit of the earlier arrangement before the Delhi High Court concerning the bank guarantees. Under the 2005 order, the guarantees could be invoked if the arbitrator ultimately found the appellant entitled to recover the amount. Since the bank guarantees were not kept alive by the respondent and were consequently invoked in September 2017, the appellant’s case was that the amount had already become available to it in accordance with the contractual and procedural framework governing the dispute.

The appellant therefore questioned the necessity and legal basis of requiring it to deposit the amount during the pendency of the Section 34 proceedings. A Section 34 proceeding is concerned with setting aside an arbitral award on the limited statutory grounds provided by the Act. Merely because an award debtor challenges an award, the appellant argued, the award holder should not automatically be deprived of the benefit of amounts already realised.

The appellant’s case also had to be considered against the exceptional character of post-award Section 9 proceedings. Section 9 gives courts the power to grant interim measures before, during or after arbitral proceedings, but the exercise of that jurisdiction is discretionary. The appellant effectively contended that this jurisdiction should not be transformed into a mechanism for routinely granting substantive monetary relief to a party that had already suffered an adverse arbitral award.

On the other side, Ishvakoo (India) Pvt. Ltd. sought protection on the ground that the circumstances of the case were unusual and warranted intervention under Section 9. The respondent’s principal concern was that the bank guarantees had already been encashed before the arbitral award was rendered, yet the tribunal was unaware of that development while deciding the dispute.

The respondent had challenged the award under Section 34. Its application before the High Court was therefore not presented as an attempt to obtain a final determination of its rights outside the arbitral process. Rather, it sought interim protection of the disputed amount while its statutory challenge to the award remained pending.

The respondent contended that allowing the appellant to retain approximately ₹3.5 crore throughout the pendency of the Section 34 proceedings would cause serious prejudice. If the award were eventually set aside and the respondent succeeded in the Section 34 proceedings, recovery of the amount could become a separate difficulty. The respondent therefore sought preservation of the subject matter in a manner that would protect both sides until the challenge to the award was decided.

The respondent also relied upon the fact that the bank guarantees had been encashed before the arbitral award was made and that the arbitral tribunal was unaware of the encashment when it passed its decision. This circumstance, according to the respondent, created an unusual situation in which retention of the money by the appellant during the Section 34 proceedings could result in an unfair advantage.

The respondent therefore maintained that the principles governing interim relief had to be applied to the actual circumstances rather than mechanically denied merely because the award had already been delivered. Section 9 was invoked to preserve the efficacy of the Section 34 challenge, not to substitute interim proceedings for the final adjudication of the arbitration dispute.

The respondent further relied upon the established principle that the court possesses jurisdiction to grant post-award interim measures in exceptional circumstances. It was argued that the statutory framework does not completely shut the door on an award debtor seeking protection after the award, particularly where the facts demonstrate the possibility of irreparable prejudice.

The Delhi High Court accepted this approach. The Single Judge found sufficient justification for directing the appellant to deposit the disputed amount with the Registry. The Division Bench subsequently declined to interfere with that decision. Before the Supreme Court, therefore, the appellant was required to demonstrate that the High Court had exercised its Section 9 jurisdiction in a manner so legally erroneous or unjustified as to warrant appellate interference.

The Supreme Court ultimately found no reason to disturb the High Court’s assessment. The Court accepted that the respondent’s case was not an ordinary application by an award debtor seeking to neutralise the effect of an adverse award. Rather, it was a case involving circumstances sufficiently unusual to satisfy the higher threshold applicable to such applications.

Court’s Judgment:

The Supreme Court dismissed the appeal and upheld the interim protection granted by the Delhi High Court. The Court’s reasoning centred on the nature and scope of Section 9 of the Arbitration and Conciliation Act, 1996, and the exceptional circumstances in which an award debtor may invoke that provision after an arbitral award has been made.

The Court began from the established legal position that a post-award Section 9 application is maintainable in appropriate cases. However, it emphasised that the power cannot be exercised routinely in favour of an unsuccessful party. Once an arbitral award has been rendered, the award debtor cannot ordinarily use Section 9 as a substitute for the statutory challenge mechanism under Section 34.

The Court therefore reaffirmed a heightened threshold. An award debtor seeking post-award interim protection must demonstrate circumstances that go beyond an ordinary disagreement with the arbitral award. The case must be sufficiently exceptional and compelling to justify intervention. The purpose of the relief must also be to prevent irreparable prejudice or preserve the efficacy of the pending Section 34 challenge.

In this context, the Court referred to the principle recognised in earlier decisions and specifically relied upon the recent decision in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sangavi, reported as 2026 LiveLaw (SC) 425. The principle emerging from that line of authority is that although Section 9 remains available after an award, the court must exercise particular caution where the applicant is the award debtor.

The Court observed that in rare and compelling cases, an unsuccessful party may invoke Section 9 where interim protection is necessary to prevent irreparable prejudice and preserve the effectiveness of the challenge under Section 34. Thus, the mere fact that the applicant is an award debtor does not completely extinguish the court’s jurisdiction.

The Supreme Court then applied this principle to the facts before it. A critical circumstance was that the bank guarantees had been encashed in September 2017, whereas the arbitral award was delivered on December 5, 2017. The tribunal, while deciding the arbitration, was unaware that the guarantees had already been encashed.

This factual circumstance assumed importance because the appellant was not merely seeking to rely upon the existence of an arbitral award. It was already holding approximately ₹3.5 crore obtained through the encashment of the guarantees while the respondent’s challenge to the award remained pending.

The Supreme Court agreed with the Delhi High Court that permitting the appellant to retain the money during the pendency of the Section 34 proceedings would, in the circumstances of the case, result in unjust enrichment. The expression “unjust enrichment” was central to the Court’s reasoning. The concern was not simply that the award holder had possession of money, but that allowing it to retain the amount while the award remained under challenge could confer an advantage disproportionate to the circumstances surrounding the dispute.

The Court also considered the traditional requirements for grant of interim relief. The respondent had to establish a prima facie case and demonstrate that the balance of convenience favoured protection. It was not enough merely to point to the pendency of a Section 34 application.

The Supreme Court found that the respondent had satisfied these requirements “in ample measure.” The balance of convenience favoured preservation of the disputed amount because retaining the money with the appellant could create prejudice if the Section 34 challenge ultimately succeeded. Conversely, directing the amount to be deposited with the High Court Registry did not finally decide the parties’ substantive rights.

This distinction was particularly important. The Court did not order that the money be immediately paid to the respondent for unrestricted use. Instead, it directed the appellant to deposit the amount with the Registry of the Delhi High Court. The money was thereafter to be placed in a fixed deposit in a nationalised bank with automatic renewal until the Section 34 proceedings were disposed of.

The arrangement therefore preserved the disputed amount rather than awarding it finally to either party. In practical terms, the order created a neutral mechanism under which the money would remain protected until the court dealing with the Section 34 challenge determined the legal consequences of the arbitral award.

The Court granted the appellant four weeks to deposit ₹3.5 crore with the Registry of the Delhi High Court. Once deposited, the Registry was directed to keep the amount in a fixed deposit with a nationalised bank on an auto-renewal basis until disposal of the Section 34 application.

The Supreme Court’s approach demonstrates that Section 9 relief is fundamentally protective rather than adjudicatory. The provision allows courts to preserve the subject matter of arbitration and prevent the arbitral process or subsequent challenge from being rendered ineffective by intervening circumstances.

The judgment also reinforces the relationship between Sections 9 and 34 of the Arbitration and Conciliation Act. Section 34 provides the statutory mechanism for challenging an arbitral award, while Section 9 permits interim protection in appropriate circumstances. The two provisions therefore operate differently, but they can interact where interim protection is required to ensure that a Section 34 challenge remains meaningful.

At the same time, the Court carefully preserved the exceptional character of the remedy. It did not hold that every award debtor challenging an arbitral award can seek return or deposit of money under Section 9. Such an interpretation would potentially undermine the finality and enforceability associated with arbitral awards and encourage unsuccessful parties to seek a second layer of interim adjudication.

Instead, the judgment establishes a narrower proposition: where exceptional circumstances demonstrate a genuine risk of irreparable prejudice, and where refusal of interim protection could undermine the efficacy of a pending Section 34 challenge, a court may exercise its Section 9 jurisdiction even at the instance of an award debtor.

The Court’s reliance on the concepts of prima facie case and balance of convenience is also significant. Interim measures are inherently discretionary, and courts must examine the circumstances of each case. The applicant must establish a credible basis for intervention, while the court must ensure that the relief does not effectively determine the final dispute.

In the present case, the deposit order struck that balance. The appellant did not lose the money permanently, because the amount was only required to be deposited and preserved. At the same time, the respondent was protected against the possibility that the appellant would retain the disputed amount throughout the Section 34 proceedings and thereby obtain an advantage that might later prove difficult to reverse.

The Court’s approach also reflects the broader objective of arbitration law: speedy and effective dispute resolution accompanied by judicial intervention only where necessary. Arbitration is intended to provide finality, but statutory remedies such as Section 34 remain available to challenge an award on specified grounds. Interim protection may therefore be justified where it ensures that the statutory remedy is not rendered practically meaningless.

The Supreme Court consequently found that the Delhi High Court had correctly exercised its discretion. The High Court was justified in concluding that retaining the ₹3.5 crore during the pendency of the Section 34 proceedings could amount to unjust enrichment. The respondent had established a rare and compelling case warranting Section 9 relief, and no ground was made out for appellate interference.

The appeal was accordingly dismissed.

The final direction was that National Projects Construction Corporation Ltd. must deposit ₹3.5 crore with the Registry of the Delhi High Court within four weeks. The Registry was directed to place the amount in a fixed deposit with a nationalised bank on an auto-renewal basis until the Section 34 application was finally disposed of.

The judgment is significant for arbitration practice because it clarifies that the availability of Section 9 after an arbitral award is not entirely extinguished. More importantly, it establishes that an award debtor may, in exceptional circumstances, obtain interim protection where such intervention is necessary to prevent irreparable prejudice and preserve the practical efficacy of a Section 34 challenge.

The decision does not dilute the principle of finality attached to arbitral awards. Instead, it recognises that finality cannot be invoked mechanically where the peculiar circumstances of a case create a risk of unjust enrichment or make the statutory challenge practically ineffective. The emphasis remains on exceptional circumstances, judicial restraint and preservation of the disputed subject matter.

Ultimately, the Supreme Court’s ruling strikes a balance between two competing principles: respecting the outcome of arbitration and ensuring that the statutory remedy of challenging an award remains meaningful. By directing the disputed amount to be secured in a fixed deposit rather than releasing it to either side, the Court preserved the interests of both parties until the Section 34 proceedings reach their conclusion.