“Deposit Is Not Payment”: Supreme Court Holds Conditional Deposit of Arbitral Award Does Not Stop Interest Unless Award-Holder Can Withdraw It Freely

Case Name: National Seeds Corporation Ltd. v. National Agro Seed Corporation (India)

Date of Judgment: 18 September 2026

Citation: 2026 INSC 1017

Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe

Held: The Supreme Court held that the mere deposit of an awarded or decretal amount in court does not constitute payment or satisfaction of the liability. Interest stops running only when the deposit complies with Order XXI Rule 1 CPC—that is, when it is unconditional, notice of the deposit is given to the award-holder and the amount is freely available for withdrawal.

Where withdrawal is opposed by the award-debtor or made conditional upon furnishing security, the deposit does not satisfy the award and interest continues to accrue. A sum placed beyond the award-debtor’s control but simultaneously kept beyond the award-holder’s reach cannot be treated as payment.

The Court clarified that where only part of the awarded amount is deposited and made unconditionally available, interest ceases only on that portion. The balance continues to attract interest. However, if the award-holder fails to seek withdrawal despite the amount being freely available, such inaction may be treated as deemed refusal of the tender, and the award-holder cannot continue claiming interest on that amount.

Applying these principles, the Court held that the deposits made by National Seeds Corporation were not in conformity with Order XXI Rule 1 CPC. The Corporation repeatedly resisted their release, and even the proposed partial withdrawal of ₹1 crore was made conditional upon the award-holder furnishing title deeds as security. Its liability to pay interest at 12% per annum therefore continued until 8 September 2022, when unconditional release was finally permitted.

Summary: An arbitral award dated 13 June 2019 directed National Seeds Corporation Ltd. to pay ₹1,46,40,005.02 along with interest at 12% per annum from 26 August 2017 until the date of the award. The total amount calculated at the award stage was ₹1,77,97,434.

National Seeds Corporation challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. On 16 October 2019, the Delhi High Court stayed enforcement subject to the Corporation depositing 50% of the principal amount. It consequently deposited ₹73,20,003 on 25 November 2019. This deposit was made solely as a condition for obtaining a stay and was not accompanied by notice under Order XXI Rule 1(2) CPC.

The Section 34 petition was dismissed on 5 January 2022. During the ensuing execution proceedings, the Corporation deposited a further ₹1,53,17,792 on 26 April 2022. It nevertheless continued opposing release of the deposited sums while pursuing its appeal under Section 37 and, subsequently, a special leave petition before the Supreme Court.

On 7 July 2022, the High Court allowed the award-holder to withdraw ₹1 crore, but only upon furnishing title deeds of immovable properties as security. The award-holder, which was facing serious financial distress and needed the title deeds to raise funds, did not withdraw the amount. After the Supreme Court dismissed the Corporation’s special leave petition, the High Court ordered unconditional release of the deposited amount on 8 September 2022.

The Delhi High Court held that the award-holder had no unrestricted access to the money before that date and directed the Corporation to pay interest at 12% per annum from the date of the award until 8 September 2022.

Affirming that decision, the Supreme Court explained that Section 36 of the Arbitration Act permits enforcement of an arbitral award in the same manner as a civil court decree. Consequently, the principles contained in Order XXI Rule 1 CPC apply when determining whether a court deposit amounts to payment and whether post-award interest has ceased.

The Court distilled the governing rule that the decisive consideration is not merely whether money has been deposited but whether it has been placed at the award-holder’s unrestricted disposal. A conditional deposit made to secure a stay preserves the money during litigation but does not extinguish the underlying liability.

The Court also expressed concern over the absence of uniform standards governing court deposits, including the amount required for stay, the institution in which deposits are invested, applicable interest rates, withdrawal conditions and adjustment of accrued interest.

Decision: The Supreme Court dismissed the appeal in substance and affirmed the Delhi High Court’s direction requiring National Seeds Corporation to pay interest at 12% per annum from 13 June 2019 until 8 September 2022.