Arbitration | Post-Award Section 9 Application By Unsuccessful Party Maintainable In Exceptional Cases : Supreme Court

The Supreme Court on Tuesday (August 11) held that to prevent an award holder's enrichment of a bank guarantee while an award was under challenge, an interim relief under Section 9 of the Arbitration & Conciliation Act, 1996 can be extended on an award debtor's application to preserve the efficacy of the challenge in Section 34.

A bench of Justice KV Viswanathan and Justice Alok Aradhe refused to interfere with the Delhi High Court's judgment, which had allowed the Respondent-award debtor's Section 9 application which sought an interim relief against alleged unjust enrichment of a bank guarantee of about Rs. 3.5 crores by an Appellant-award holder during the pendency of a Section 34 application.

The bench noted that there are precedents holdig that a post-award Section 9 application is maintainable in exceptional cases.

“This Court, while holding the application to be maintainable, has sounded a note of caution that the threshold for grant of interim relief will be higher in case the application is moved by an Award Debtor and that a court 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…the High Court was justified in observing that permitting the appellant to hold on the money pending Section 34 application, would be unjustly enriching the appellant…”, the Court observed.

The dispute arose from a Memorandum of Understanding executed in 2002 between National Projects Construction Corporation Ltd. and Ishvakoo India Pvt. Ltd., pursuant to which the respondent was provided Rs. 3.5 crores as Mobilisation Advance against bank guarantees.

In 2005, the High Court disposed of a Section 9 application with the understanding that the appellant would not invoke the bank guarantees provided they were kept alive, and that if the arbitrator found the appellant entitled to recover the amount, the guarantees could be invoked. The respondent failed to keep the guarantees alive, leading to their invocation by the appellant in September 2017.

The arbitrator, while passing the Award on December 5, 2017, dismissed the respondent's claims and remained oblivious to the fact that the bank guarantees had already been encashed.

The respondent challenged the Award under Section 34 and, pending its disposal, filed a fresh Section 9 application seeking return of the amount.

The Single Judge allowed the application and directed the appellant to deposit Rs. 3.5 crores with the Registry, which order was upheld by the Division Bench, prompting the award holder to move to the Supreme Court.

Dismissing the appeal, the judgment authored by Justice Viswanathan held that the respondent had made out a rare and compelling case for Section 9 relief to prevent irreparable prejudice and unjust enrichment to an Appellant. [See Home Care Retail Marts Pvt Ltd v. Haresh N Sangavi, 2026 LiveLaw (SC) 425]

The Court stated that the Respondent-award debtor did fulfil in ample measure the necessary parameters for obtaining relief under Section 9, i.e., the existence of a prima facie case and balance of convenience, as holding of the money by the Appellant during the pendency of the Section 34 application would unjustly enrich the Appellant.

As a result, the appeal was dismissed, with a direction to the Appellant to hand over the bank guarantee amount to the High Court's registry.

“We grant 4 (four) weeks' time to the appellant to deposit the amount of Rs. 3.5 crores with the Registry of the High Court of Delhi. On deposit, the Registry of the High Court shall keep the same in a Fixed Deposit (FD), in any Nationalized Bank, on auto-renewal basis, till the disposal of the Section 34 application.”, the Court ordered.

Headnote

Arbitration and Conciliation Act, 1996 – Section 9, Section 9(1)(ii)(e), Section 34 and Section 36 – Maintainability of Section 9 Petition at Post-Award Stage by an Unsuccessful Party / Award Debtor – Threshold and Guiding Principles for Grant of Interim Relief – Securing Amount in Dispute / Deposit of Monies – Rare and Compelling Cases - A petition under Section 9 of the Arbitration and Conciliation Act, 1996 at the post-award stage by an unsuccessful party (award debtor) is maintainable in law - the threshold for granting interim relief to an unsuccessful party is significantly higher - The Supreme Court may grant interim measures in rare and compelling cases to balance equities, prevent irreparable prejudice, and preserve the efficacy of the challenge proceedings under Section 34 - The exercise of power under the "just and convenient" residuary clause under Section 9(1)(ii)(e) must be guided by settled principles namely, existence of a strong prima facie case, balance of convenience, irreparable injury, and reasonable expedition and must promote the efficacy of arbitration without being rigidly bound by the strict procedural technicalities of Order XXXVIII Rule 5 or Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 - In the present case, bank guarantees furnished against mobilisation advance were encashed by the appellant prior to the pronouncement of the arbitral award - The Arbitrator dismissed the respondent's claims in toto without the appellant having filed any counter-claim or the Arbitrator recording any finding regarding non-utilisation of the mobilisation advance - Sustaining the High Court's direction directing the appellant to deposit Rs. 3.5 crores in the Registry to be placed in an interest-bearing Fixed Deposit pending adjudication of the Section 34 petition, the Supreme Court held that permitting the appellant to retain the encashed funds in the absence of an executable award or counter-claim in its favour would result in unjust enrichment and defeat earlier interim undertakings - The case presented rare and compelling circumstances warranting interim deposit to prevent irreparable prejudice and preserve the subject matter of the dispute. [Relied on Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, 2026 SCC OnLine SC 670; Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178; Paras 18–27].

Cause Title: National Projects Construction Corporation Ltd. Versus Ishvakoo (India) Pvt. Ltd.

Citation : 2026 LiveLaw (SC) 791

Click here to download judgment

Appearance:

For Appellant(s) : Mr. Rajat Arora, AOR Ms. Mariya Shahab, Adv.

For Respondent(s) :Mr. Ajay Bansal, Adv. Ms. Veena Bansal, Adv Mr. Gaurav Yadav, Adv. Mr. Sourav Jindal, Adv. Mr. Aditya Gupta, Adv. Ms. Pooja, Adv. Mr. Kuldip Singh, AOR