Section 9 Relief Available Even to a Losing Party in “Rare and Compelling” Cases: Supreme Court Orders Deposit of ₹3.5 Crore to Prevent Unjust Enrichment

Case Name: National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd.

Date of Judgment: 11 August 2026

Citation: 2026 INSC 828

Bench: Justice K.V. Viswanathan and Justice Alok Aradhe

Held:  The Supreme Court held that an unsuccessful party in arbitration, despite having no enforceable award in its favour, is not barred from seeking post-award interim protection under Section 9 of the Arbitration and Conciliation Act, 1996. However, such relief can be granted only in rare and compelling cases, and the award-debtor must satisfy a higher threshold by establishing a strong prima facie case, balance of convenience, likelihood of irreparable prejudice and reasonable expedition in approaching the court.

The powers conferred upon courts under Section 9 are wide and include the residuary power under Section 9(1)(ii)(e) to grant any interim measure that appears just and convenient. Nevertheless, this discretion must be exercised judiciously and in furtherance of the efficacy of arbitration. Although courts are guided by the principles underlying Orders XXXVIII and XXXIX CPC, they are not rigidly bound by the text of those provisions while granting relief under Section 9.

In the present case, the Court held that directing National Projects Construction Corporation Ltd. to deposit ₹3.5 crore, representing the amount realised through encashment of bank guarantees, was justified. NPCC had not filed any counterclaim before the arbitrator, and the award contained no finding that Ishvakoo had failed to utilise the mobilisation advance against which the bank guarantees were furnished. Allowing NPCC to retain the amount during the pendency of the Section 34 challenge could result in unjust enrichment and render the challenge proceedings ineffective.

The Court clarified that the direction to deposit the amount did not constitute a final determination of ownership or entitlement. The deposit was merely a protective measure intended to preserve the subject matter until the Section 34 petition was decided on its own merits.

Summary: National Projects Construction Corporation Ltd. and Ishvakoo (India) Pvt. Ltd. entered into a Memorandum of Understanding on 16 August 2002 for construction and development works relating to bus termini and the Taj Trapezium Zone Heritage Corridor in Agra, Uttar Pradesh. In December 2002, Ishvakoo received a mobilisation advance of ₹3.5 crore against bank guarantees furnished in favour of NPCC.

When disputes arose, Ishvakoo invoked arbitration and simultaneously approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, seeking restraint against encashment of the bank guarantees. By an order dated 15 December 2005, the High Court recorded Ishvakoo’s undertaking to keep the guarantees alive until the arbitral proceedings and any ensuing Section 34 proceedings were concluded. NPCC agreed not to invoke them during that period. The order specifically provided that NPCC could encash the guarantees if the arbitral adjudication resulted in an executable award permitting it to recover money from Ishvakoo.

Ishvakoo subsequently became unable to keep the guarantees alive. NPCC consequently invoked and encashed the guarantees in September 2017, shortly before the arbitral award was pronounced. A Section 9 petition filed by Ishvakoo against the encashment was disposed of on 1 November 2017, with the High Court observing that NPCC could not be faulted because Ishvakoo had failed to renew the guarantees.

The arbitrator delivered the award on 5 December 2017 and dismissed Ishvakoo’s claims. NPCC, however, had not filed any counterclaim seeking recovery of the mobilisation advance or any other amount. Two issues before the tribunal concerned Ishvakoo’s entitlement to discharge of the bank guarantees and reimbursement of approximately ₹77.27 lakh as charges incurred in keeping them alive.

The tribunal declined relief after noting Ishvakoo’s undertaking to maintain the guarantees and making adverse observations concerning its alleged fraudulent and collusive conduct. Significantly, however, the tribunal appeared unaware that the bank guarantees had already been encashed before the award was pronounced. It also did not record any finding that the mobilisation advance had remained unutilised.

Ishvakoo challenged the award under Section 34 of the Arbitration Act. During those proceedings, the Delhi High Court initially directed NPCC to return the amount received through encashment of the guarantees. Those directions were subsequently set aside through a consent order of the Division Bench, leaving the questions open for adjudication and permitting Ishvakoo to institute a fresh Section 9 petition.

Ishvakoo accordingly filed a post-award petition under Section 9 seeking return or protection of the ₹3.5 crore. The Single Judge found that NPCC had filed no counterclaim in the arbitration and that the tribunal had not determined that Ishvakoo failed to utilise the mobilisation advance. The Court held that allowing NPCC to retain the amount pending adjudication of the Section 34 petition could unjustly enrich it. To balance the equities, NPCC was directed to deposit ₹3.5 crore with the Delhi High Court Registry, where it would be invested in an interest-bearing fixed deposit. The Division Bench affirmed that direction.

Before the Supreme Court, NPCC argued that Section 9 could not be used to grant relief amounting to final adjudication, particularly to a party whose claims had been dismissed entirely. It maintained that a losing party had no “fruits of the award” to protect and that the High Court had impermissibly reviewed the merits of the award at the interlocutory stage. NPCC also contended that encashment of the bank guarantees had already been upheld by the order dated 1 November 2017.

Ishvakoo responded that NPCC had never filed a counterclaim and that the tribunal had not found that the mobilisation advance was unutilised. It contended that the issue concerning discharge of the guarantees had not been properly adjudicated because the tribunal was unaware of their prior encashment. Permitting NPCC to retain the amount would therefore constitute unjust enrichment while Ishvakoo’s challenge to the award remained pending.

The Supreme Court relied upon Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, which recognised that Section 9 is available to any party to an arbitration agreement, including an unsuccessful party. Access to Section 9 cannot be determined solely by classifying parties as winners or losers because the final outcome may change during Section 34 proceedings. Denying relief in every case to an unsuccessful party could leave it without any forum to preserve the subject matter of the dispute.

At the same time, the Court reiterated that the threshold for granting interim protection to a losing party is considerably higher. Such relief must remain confined to rare and compelling cases where intervention is necessary to prevent irreversible prejudice and preserve the effectiveness of the award-challenge proceedings.

Applying these standards, the Supreme Court found that Ishvakoo had satisfied even the enhanced threshold applicable to an unsuccessful party. The original order permitted NPCC to encash the guarantees only if arbitral adjudication established that it was entitled to recover money. NPCC had filed no counterclaim; the tribunal had recorded no finding that the mobilisation advance was unutilised; and the arbitrator appeared unaware that the guarantees had already been encashed. The respondent had also approached the courts with reasonable expedition.

The Court concluded that the direction to deposit the amount was a judicious interim arrangement. It prevented possible unjust enrichment, protected both parties’ interests, allowed the money to earn interest and preserved the efficacy of the pending Section 34 proceedings without finally deciding entitlement to the amount.

Decision: The Supreme Court dismissed NPCC’s appeal and upheld the Delhi High Court’s direction requiring it to deposit ₹3.5 crore with the High Court Registry. NPCC was granted four weeks to make the deposit.

The Delhi High Court Registry was directed to invest the amount in a fixed deposit with a nationalised bank on an auto-renewal basis until disposal of the Section 34 petition. The Supreme Court clarified that its observations were confined to the Section 9 proceedings and would not influence the independent adjudication of the Section 34 challenge. No order as to costs was passed.