National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd., 2026

The dispute arose from a Memorandum of Understanding (MoU) executed in 2002 between National Projects Construction Corporation Ltd. and Ishvakoo (India) Pvt. Ltd.

Pursuant to the contractual arrangement, Ishvakoo received approximately ₹3.5 crore as mobilisation advance.

Bank guarantees were furnished in connection with the mobilisation advance.

In an earlier proceeding under Section 9 of the Arbitration and Conciliation Act, 1996, the Delhi High Court disposed of the application on the understanding that the appellant would not invoke the bank guarantees so long as the guarantees remained alive.

It was understood that if the arbitrator ultimately found the appellant entitled to recover the relevant amount, the guarantees could be invoked.

The respondent failed to keep the bank guarantees alive.

Consequently, the appellant invoked and encashed the bank guarantees in September 2017.

The arbitral tribunal subsequently delivered its award on 5 December 2017.

The arbitrator dismissed the respondent's claims.

The award was passed without accounting for the fact that the bank guarantees had already been encashed.

The respondent challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.

While the Section 34 proceedings were pending, the respondent filed a fresh Section 9 application seeking interim protection in relation to the ₹3.5 crore already obtained through encashment of the bank guarantees.

The respondent contended that allowing the appellant to retain the money while the Section 34 challenge remained pending would result in unjust enrichment and cause irreparable prejudice.

The Delhi High Court's Single Judge allowed the Section 9 application and directed the appellant to deposit approximately ₹3.5 crore with the Court Registry.

The Division Bench of the Delhi High Court upheld that direction.

The appellant therefore approached the Supreme Court challenging the interim relief granted to the respondent.

The Supreme Court considered whether a post-award Section 9 application by an award debtor could be maintained in exceptional circumstances while a Section 34 challenge was pending.

The Supreme Court also considered whether retention of the encashed amount by the award holder during the pendency of the Section 34 proceedings would result in unjust enrichment.

The earlier Delhi High Court proceedings confirm that the dispute concerned a Section 9 application arising during the pendency of the Section 34 challenge and that the High Court had directed the ₹3.5 crore to be deposited pending the outcome of the Section 34 proceedings.

The Supreme Court dismissed the appeal filed by National Projects Construction Corporation Ltd.

The Court upheld the approach of the Delhi High Court in granting interim protection to the respondent.

The Supreme Court recognised that a post-award Section 9 application by an award debtor can be maintainable in exceptional circumstances.

The Court, however, emphasised that the threshold for granting such relief to an award debtor is higher than in an ordinary application for interim protection.

Such relief should be granted only in rare and compelling cases where failure to grant protection may cause irreparable prejudice or undermine the efficacy of the Section 34 challenge.

The Court found that the respondent had satisfied the necessary requirements for interim relief.

The Court noted that allowing the appellant to retain the ₹3.5 crore during the pendency of the Section 34 proceedings would result in unjust enrichment.

The Supreme Court therefore found the Delhi High Court justified in directing the appellant to deposit the amount.

The appellant was granted four weeks to deposit ₹3.5 crore with the Registry of the Delhi High Court.

The amount deposited was directed to be kept in a Fixed Deposit in a nationalised bank on auto-renewal basis until disposal of the Section 34 application.

The Supreme Court made clear that the interim arrangement was intended to preserve the subject matter and effectiveness of the Section 34 challenge.

The order did not amount to a final determination of the parties' substantive rights under the arbitral award.

The appeal was accordingly dismissed.

Court's reasoning: The Supreme Court approached Section 9 as a protective mechanism designed to preserve the effectiveness of arbitral proceedings and the remedies connected with them. The Court recognised that the existence of an arbitral award does not automatically extinguish every possibility of interim protection.

Post-award Section 9 relief: The significant legal principle is that Section 9 relief is not automatically unavailable after an award. However, the Court stressed that such applications by an award debtor must be treated cautiously and should succeed only in exceptional circumstances.

Higher threshold: The judgment reinforces that an award debtor cannot routinely use Section 9 to neutralise the effect of an arbitral award. There must be something more—such as a serious risk of irreparable prejudice, an unusual factual situation or a circumstance demonstrating that interim protection is necessary to preserve the effectiveness of the Section 34 proceedings.

Relationship between Sections 9 and 34: Section 34 provides the mechanism for challenging an arbitral award, whereas Section 9 provides interim judicial protection. The judgment demonstrates that these provisions can operate together where interim protection is necessary to ensure that the Section 34 challenge is not rendered practically ineffective.

Preserving the challenge: If an award holder is permitted to retain disputed money during the entire period of a Section 34 challenge, the eventual success of the challenge may become difficult to translate into meaningful relief. Interim protection can therefore preserve the practical value of the statutory challenge.

Unjust enrichment: The Supreme Court considered the possibility that retaining the ₹3.5 crore would unjustly enrich the appellant while the award remained under challenge. The Court's approach was therefore aimed at maintaining a neutral position rather than allowing either party to obtain an irreversible advantage during the litigation.

Prima facie case: The respondent had to establish a sufficient prima facie basis for interim protection. The Court found that the surrounding circumstances justified the protection granted by the High Court.

Balance of convenience: The balance of convenience favoured preservation of the disputed money rather than allowing one party to retain it outright while the Section 34 challenge remained pending. Depositing the money in court protected the interests of both sides.

Neutral custody of money: The direction to deposit the ₹3.5 crore with the Court Registry was particularly significant. Instead of ordering immediate payment to the award debtor or permitting continued retention by the award holder, the Court placed the amount in neutral custody until the Section 34 proceedings were determined.

Fixed deposit direction: The direction to maintain the deposited amount in an interest-bearing fixed deposit ensures that the money remains preserved and identifiable while the underlying challenge is adjudicated.

Exceptional nature of the remedy: The judgment should not be read as creating a routine mechanism for award debtors to obtain return of amounts merely because a Section 34 petition has been filed. The Court expressly emphasised the rare and compelling nature of such relief.

Arbitral finality versus judicial supervision: The judgment balances two competing considerations. Arbitration seeks finality and efficiency, but the Arbitration Act itself provides a statutory challenge under Section 34. Interim protection may therefore be justified where necessary to ensure that the statutory challenge remains meaningful.

Impact on award holders: Award holders cannot assume that an amount received or encashed in connection with an award will invariably remain with them during the entire period of a Section 34 challenge. In exceptional cases, courts may require preservation of the amount pending judicial determination.

Impact on award debtors: The decision provides a limited but important remedy to award debtors who can demonstrate that continued retention of money would cause serious prejudice and that the circumstances satisfy the stringent requirements for Section 9 protection.

Commercial significance: Bank guarantees are frequently used to secure commercial obligations in infrastructure and construction contracts. The judgment demonstrates that even after invocation or encashment, the surrounding contractual and arbitral circumstances can become relevant when determining whether interim protection is required.

Procedural significance: The case illustrates that the court's interim jurisdiction is not merely concerned with maintaining physical possession of property. It can also be used to preserve money and commercial interests where necessary to prevent an irreversible or unjust outcome.

Earlier Delhi High Court reasoning: The Delhi High Court had observed in the earlier proceedings that the entitlement to the ₹3.5 crore could not be treated as conclusively settled merely because the bank guarantee had been encashed, particularly in the circumstances then before the court.

Overall impact on arbitration law: The judgment strengthens the principle that Section 9 can, in exceptional circumstances, operate as a safeguard for the effectiveness of a Section 34 challenge. At the same time, the Court's insistence upon a higher threshold protects the finality and enforceability of arbitral awards from routine interference.