National Projects Construction Corporation Ltdv.Ishvakoo (India) Pvt Ltd

Supreme Court Upholds Section 9 Relief for Award Debtor in Rare and Compelling Case, Directs Deposit of Encashed Bank Guarantee Amount

Case Snapshot

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

Citation: 2026 INSC 828

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

Date of Judgment: August 11, 2026

Area of Law: Arbitration Law, Interim Measures, Bank Guarantees

The Judgment in One Line

Award Debtor who lost in arbitration can invoke Section 9 post-award in rare and compelling cases to prevent unjust enrichment pending Section 34 challenge.

Why This Judgment Matters

This judgment is a significant application of the principles laid down in Home Care Retail Marts v. Haresh N. Sanghavi, which held that an unsuccessful party in arbitration (Award Debtor) can invoke Section 9 of the Arbitration Act post-award in rare and compelling cases. The Supreme Court upheld the High Court's direction to deposit the encashed bank guarantee amount pending Section 34 proceedings, finding that the case satisfied the higher threshold. The judgment reinforces that Section 9 powers are not confined to Award Holders and that courts can balance equities to prevent unjust enrichment while preserving the efficacy of challenge proceedings.

Background

The appellant and respondent entered into a Memorandum of Understanding for work at the Taj Mahal Bus Stand and Taj Trapezium Zone. The respondent was provided ₹3.5 crores as Mobilisation Advance against bank guarantees. Disputes arose, and arbitration commenced. On December 15, 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, but if the Award found the appellant entitled to recover, it could encash them.

The respondent failed to keep the bank guarantees alive, and the appellant encashed them in September 2017—before the Award was pronounced. The arbitrator dismissed all claims of the respondent and did not decide whether the mobilization advance was utilized. The respondent filed a Section 34 challenge. During the pendency of the Section 34 application, the respondent filed a fresh Section 9 application seeking return of the ₹3.5 crores. The Single Judge directed the appellant to deposit the amount in Court. The Division Bench affirmed. The appellant appealed to the Supreme Court.

Issues Before the Court

1. Whether an Award Debtor (unsuccessful party) can maintain a Section 9 application post-award.

2. Whether the High Court was justified in directing the appellant to deposit the encashed bank guarantee amount pending Section 34 proceedings.

3. Whether the respondent satisfied the higher threshold for grant of interim relief as an Award Debtor.

What Did the Supreme Court Hold?

The Supreme Court dismissed the appeal and upheld the High Court's direction. The Court's reasoning was anchored in the principles laid down in Home Care Retail Marts and Essar House:

Section 9 Maintainable by Award Debtor in Rare Cases: The Court applied the ratio of Home Care Retail Marts, which held that an unsuccessful party can invoke Section 9 post-award in rare and compelling cases where irreparable prejudice would otherwise occur. The threshold is higher, but the application is maintainable.

Higher Threshold Satisfied: The Court found that the respondent met the higher threshold for an Award Debtor seeking interim relief. The case presented "rare and compelling" circumstances: (i) no counter-claim was filed by the appellant; (ii) there was no finding by the arbitrator that the mobilization advance was not utilized; (iii) the arbitrator was oblivious to the fact that the bank guarantees had already been encashed; and (iv) permitting the appellant to retain the money would result in unjust enrichment.

No Counter-Claim and No Finding on Utilization: The Court emphasized that the arbitrator dismissed the respondent's claims but did not decide whether the mobilization advance was utilized. There was no counter-claim by the appellant. The absence of these findings meant the appellant had no legal basis to retain the amount.

Unjust Enrichment: The Court held that permitting the appellant to retain ₹3.5 crores pending Section 34 proceedings, without any finding of liability against the respondent, would amount to unjust enrichment. The High Court rightly balanced the equities by directing deposit of the amount in Court.

Order of November 1, 2017 Not a Bar: The Court noted that while the appellant had lawfully encashed the bank guarantees, the question in the present proceedings was whether retention was justified in light of the Award's contents. The earlier order did not preclude the respondent from seeking return of the amount post-Award.

Efficacy of Section 34 Challenge: The Court held that granting relief under Section 9 preserved the efficacy of the Section 34 challenge. If the respondent succeeded in setting aside the Award, the amount would be available for restitution.

Balance of Convenience: The Court found that the balance of convenience favoured the respondent—the appellant was a government undertaking and the amount could be deposited without hardship, while the respondent faced irreparable prejudice if the money was dissipated.

Key Legal Principles

1. Section 9 maintainable by Award Debtor — in rare and compelling cases, an unsuccessful party can invoke Section 9 post-award to prevent irreparable prejudice.

2. Higher threshold for Award Debtor — the applicant must demonstrate a strong prima facie case, balance of convenience, and irreparable harm.

3. Unjust enrichment — permitting an Award Debtor to retain money without a finding of liability constitutes unjust enrichment.

4. Efficacy of Section 34 challenge — interim relief under Section 9 can preserve the efficacy of challenge proceedings.

5. Balance of equities — courts can direct deposit of disputed amounts in Court pending final adjudication.

6. Section 9 powers are broad — the "just and convenient" clause under Section 9(1)(ii)(e) confers wide discretion, guided by principles of procedural law but not bound by their rigours.

Important Precedents

Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, 2026 SCC OnLine SC 670

• Held that an unsuccessful party in arbitration can invoke Section 9 post-award in rare and compelling cases; the threshold for grant of interim relief is higher.

Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178

• Held that Section 9 confers wide power to secure the amount in dispute; the court must examine prima facie case, balance of convenience, and irreparable harm.

Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125

• Held that the well-known principles governing interim injunctions—prima facie case, balance of convenience, irreparable injury—apply to Section 9 of the Arbitration Act.

Practical Impact

For advocates: This judgment is crucial when representing an unsuccessful party in arbitration who seeks interim relief pending Section 34 proceedings. It establishes that such applications are maintainable in rare and compelling cases, but the threshold is high. Advocates must demonstrate a strong prima facie case, balance of convenience, and irreparable prejudice.

For future litigation: The judgment reinforces that Section 9 powers are not confined to Award Holders. Courts will now consider applications from Award Debtors where the Award itself creates an unjust situation—such as where there is no counter-claim or finding of liability, and retention of money would result in unjust enrichment.

May be cited: In any case where an unsuccessful party in arbitration seeks interim relief under Section 9 post-award, particularly where the Award is silent on key issues or where retention of money would result in unjust enrichment.

Lawcurb Quick Insight

The Court's finding that the arbitrator was "oblivious" to the fact of encashment is significant. The arbitrator dismissed the claim for bank charges as if the guarantees were still alive, when they had already been encashed. This procedural oversight justified the High Court's intervention.

Lawcurb Practice Note

When seeking Section 9 relief as an Award Debtor, emphasize the absence of any finding of liability against your client, the lack of a counter-claim, and the risk of unjust enrichment. Argue that the case falls within the "rare and compelling" category recognized in Home Care Retail Marts.

Remember This Ratio

An Award Debtor can invoke Section 9 post-award in rare and compelling cases where retention of money would result in unjust enrichment and prejudice the Section 34 challenge.

Exam Lens

Q: Can an unsuccessful party in arbitration invoke Section 9 of the Arbitration Act post-award? A: Yes, but only in rare and compelling cases. The threshold for grant of interim relief is higher. The applicant must demonstrate a strong prima facie case, balance of convenience, and irreparable prejudice. Home Care Retail Marts recognizes this exception.

Q: What factors did the Court consider in finding a "rare and compelling" case? A: The absence of a counter-claim, the absence of a finding on utilization of the mobilization advance, the arbitrator's obliviousness to the fact of encashment, and the risk of unjust enrichment to the appellant.

Q: What is the scope of the "just and convenient" clause under Section 9(1)(ii)(e)? A: It confers wide discretion on the court to pass interim measures of protection. While guided by principles of procedural law (like Order XXXVIII Rule 5), the court is not unduly bound by their texts. The power must be exercised judiciously to promote the efficacy of arbitration.

Final Outcome

• Appeal dismissed — the Supreme Court upheld the High Court's direction.

• Deposit directed — the appellant is to deposit ₹3.5 crores with the Registry of the High Court of Delhi within four weeks.

• Fixed Deposit — the amount shall be kept in a fixed deposit on auto-renewal basis till the disposal of the Section 34 application.

• Observations not binding — the observations in these proceedings are only for the purpose of the Section 9 petition and shall not influence the Section 34 application.

• No costs — pending applications disposed of.

Lawcurb Verdict

This judgment is a significant application of the Home Care Retail Marts principles. By upholding the High Court's direction to deposit the encashed bank guarantee amount, the Court has ensured that the Award Debtor is not left remediless while pursuing a Section 34 challenge. The judgment reinforces that Section 9 powers are broad enough to balance equities and prevent unjust enrichment, even when the applicant is the unsuccessful party. A pragmatic and equitable decision that protects the efficacy of arbitration and the interests of justice.

This report is prepared by Lawcurb for educational and informational purposes only. It is a concise summary of the judgment and should not be construed as legal advice. Readers are encouraged to refer to the original judgment before relying on any legal proposition.