THE RATIO. One judgment, decoded twice: once for anyone, once for the profession.

Case Details

  • Citation: 2026 INSC 828 (Civil Appeal No. 5819 of 2025)
  • Court and Bench: Supreme Court of India, Civil Appellate Jurisdiction, before K.V. Viswanathan and Alok Aradhe, JJ.
  • Decided: 11 August 2026
  • On appeal from: Division Bench, High Court of Delhi, order dated 21 May 2019 in FAO(OS)(COMM) 113/2019, confirming a Single Judge order dated 5 April 2019 in OMP(I)(COMM) 57/2019
  • Parties: National Projects Construction Corporation Ltd (Appellant, the employer and bank guarantee beneficiary) and Ishvakoo (India) Pvt Ltd (Respondent, the contractor, bank guarantee furnisher, and arbitral claimant)
  • Governing provisions: Arbitration and Conciliation Act 1996, sections 9, 34, and 36; Code of Civil Procedure 1908, Order XXXVIII Rule 5, referenced by analogy rather than as binding law
  • Counsel: Rajat Arora for the Appellant; Ajay Bansal for the Respondent
  • Key precedents applied: 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; Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125
  • Key paragraphs: [17] (the question for consideration); [18]-[19] (maintainability of a Section 9 application by an unsuccessful arbitral party, per Home Care Retail Marts); [20]-[24] (general Section 9 principles, per Essar House and Adhunik Steels); [26] (application of the principles to the facts)

Headnote

A construction company won its arbitration in the narrow sense that its opponent’s claims were thrown out, but that did not settle who should hold onto Rs. 3.5 crores realised from bank guarantees the opponent had furnished years earlier. The Supreme Court held that even a party that lost its arbitration case can, in rare cases, ask a court for interim protection while it challenges the award, and found this was one of those cases. Because the company had never actually established a right to keep the money and its opponent’s challenge to the award was still pending, the Court ordered the money deposited with the High Court registry, earning interest, until that challenge is decided. The ruling leaves both sides’ ultimate entitlement untouched and simply preserves the fund in the meantime.

Factual Background

In 2002, National Projects Construction Corporation Ltd (NPCC) engaged Ishvakoo (India) Pvt Ltd for bus terminus and heritage corridor works in Agra. NPCC advanced Rs. 3.5 crores as a mobilisation advance, secured by bank guarantees Ishvakoo furnished through Canara Bank. When disputes arose, Ishvakoo invoked arbitration, and in 2003 also sought an order under Section 9 of the Arbitration and Conciliation Act 1996 restraining NPCC from invoking the guarantees. That petition was resolved in 2005 by a recorded undertaking: Ishvakoo would keep the guarantees alive through the arbitration and any court challenge that followed, while NPCC would not invoke them unless the eventual award required Ishvakoo to pay NPCC.

Ishvakoo was later unable to keep the guarantees alive, and NPCC encashed them in September 2017, before the Arbitrator delivered an award. A fresh Section 9 petition Ishvakoo filed at that stage was dismissed in November 2017 on the footing that Ishvakoo bore the fault for the lapse. The Arbitrator’s award followed in December 2017, dismissing Ishvakoo’s claims for discharge of the guarantees and for the bank charges it had incurred keeping them alive, partly on the basis that Ishvakoo’s own undertaking bound it and partly citing the Arbitrator’s own characterisation of “fraudulent and collusive conduct” on Ishvakoo’s part, a finding Ishvakoo disputes and has separately challenged. NPCC had filed no counterclaim of its own.

Ishvakoo challenged the award under Section 34. While that challenge was pending, orders made in 2018 that had directed NPCC to hand the money back to Ishvakoo were set aside by consent on appeal, with the underlying questions left open. Ishvakoo then filed a fresh Section 9 petition, which a Single Judge allowed in April 2019, finding that the Arbitrator appeared unaware the guarantees had already been encashed, had not in fact decided the issue of their discharge, and had recorded no finding that Ishvakoo failed to use the mobilisation advance for its intended purpose. Rather than order the money paid to Ishvakoo directly, the Single Judge directed NPCC to deposit an equivalent sum with the High Court registry in an interest-bearing account, to await the outcome of the Section 34 challenge. A Division Bench affirmed that order, and NPCC appealed to the Supreme Court.

The Question for Determination

In plain terms: when one side loses its arbitration case outright, can it still go to court afterward and ask for temporary protection, such as having disputed money safely held, while it appeals that loss, or does losing the case mean it has no further claim on the money at all?

Framed precisely, the immediate question was whether the courts below were justified in directing NPCC to deposit Rs. 3.5 crores with the Registry pending disposal of Ishvakoo’s Section 34 challenge to the arbitral award. That turned on a threshold question the Supreme Court had only recently settled: whether a party under Section 9 of the Arbitration and Conciliation Act 1996, at the post-award stage, whose claims were dismissed and who holds no enforceable award in its favour, may nonetheless invoke Section 9 for interim protection.

The Court’s Reasoning

The Court began with the threshold question, noting it had recently been settled in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi. That decision reasoned that sections 34 and 36 protect a party that holds an award, while Section 9 exists to protect the subject matter of the dispute regardless of which side eventually prevails, since the outcome of a pending challenge can still change the parties’ rights. Denying an unsuccessful party any access to interim relief would leave it without recourse in situations such as an award obtained without proper notice, or one tainted by fraud, or one where a party had earlier secured protection during the arbitration, for instance against invocation of a bank guarantee, that would otherwise lapse automatically once the award issued. On this reasoning, the word party in Section 9 was read purposively to include any party to the arbitration agreement, win or lose, though the threshold for relief sits higher for an unsuccessful party than for one holding an award in its favour, confined to rare and compelling cases where refusing relief would cause irreparable prejudice and undermine the value of a pending Section 34 challenge.

The Court also drew on its earlier decision in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, which described Section 9 as conferring wide power to secure the amount in dispute at any stage of arbitration, tested by whether the applicant shows a good prima facie case, a balance of convenience favouring relief, and reasonable expedition in approaching the court, with a strong possibility of asset diminution sufficing without proof of an actual attempt to dispose of assets. Weighing the balance of convenience meant comparing the harm to the applicant if relief were refused and it later succeeded against the harm to the opponent if relief were granted and the applicant later failed. Citing Adhunik Steels Ltd. v. Orissa Manganese and Minerals, the Court reiterated that the familiar principles governing interim injunctions, prima facie case, balance of convenience, and irreparable injury, sit comfortably within Section 9’s residuary just and convenient clause, guiding the court without binding it as rigidly as Order XXXVIII Rule 5 of the Civil Procedure Code would in an ordinary suit.

Turning to the facts, the Court found several strands pointing the same way. The 2005 order had only ever entitled NPCC to encash the guarantees if the award required Ishvakoo to pay NPCC, and no such finding existed since NPCC had filed no counterclaim. The Arbitrator’s dismissal of Issues 3 and 4 rested on the premise that the guarantees remained alive, and in substance addressed only Ishvakoo’s claim for bank charges rather than deciding the separate question of discharge. Whether the Arbitrator had nonetheless found that Ishvakoo failed to utilise the mobilisation advance remained a live question for the Section 34 court, though the Supreme Court agreed with the High Court’s provisional view that no such finding existed on the record. The earlier order of November 2017, which had found no fault in NPCC’s encashment, addressed a different question, whether the encashment itself was proper, not whether NPCC could keep the proceeds once the Award’s actual contents were examined.

On that basis, the Court held that permitting NPCC to retain the funds pending the Section 34 challenge risked unjustly enriching it and sat awkwardly with the purpose of the original 2005 arrangement. This qualified as one of the rare and compelling cases Home Care Retail Marts contemplated, justifying interim relief even though Ishvakoo had lost its arbitral claims outright. The Court emphasised that the relief actually granted, deposit with the Registry in an interest-bearing account rather than direct payment to Ishvakoo, kept the ultimate question of entitlement open and simply preserved the fund’s value for whichever side prevailed in the Section 34 proceedings, a form of order it considered consistent with promoting the efficacy of arbitration as a means of dispute resolution.

Critical Assessment

The reasoning leans heavily on a decision, Home Care Retail Marts, that the Court itself notes is barely off the press, decided the same year as this appeal. Building a fact-specific outcome so quickly on a freshly minted exception limited to rare and compelling cases means the boundary of that exception is still being drawn case by case rather than through settled doctrine. The judgment does real work to show why this case qualifies, the conditional nature of the 2005 undertaking, the absence of a counterclaim, the Arbitrator’s apparent unawareness of the encashment, but a party relying on this precedent in a materially different fact pattern, say one where a counterclaim had actually been filed and dismissed on the merits, would find comparatively little guidance on where the line sits.

The relief the Court ultimately upheld deserves credit for its restraint. Instead of treating the question as binary, pay Ishvakoo or leave the money with NPCC, the High Court’s order of deposit with the Registry, later affirmed here, sidesteps the risk of prejudging the Section 34 challenge while still protecting the fund from being spent or dissipated in the interim. That structure lets interest accrue for whichever party ultimately succeeds and lowers the practical stakes of getting the interim question wrong, a sensible use of the just and convenient discretion Section 9 confers.

NPCC held the money because it had already encashed the guarantees before the award was even rendered, a self-help remedy available to it as the guarantee beneficiary that Ishvakoo, as the guarantee furnisher, had no equivalent access to. The entire Section 9 dispute in this round exists because that self-help step occurred outside the arbitration’s timeline and outside the Arbitrator’s knowledge. Nothing in the judgment suggests either party acted improperly in that sequence of events, but it illustrates how the timing of a bank guarantee encashment relative to an award can shape which party ends up needing to invoke Section 9 at all, a feature of how such guarantees function generally rather than anything particular to this dispute.

Implications

If you’re not a lawyer: If you gave or received a bank guarantee tied to a contract dispute that later went to arbitration, this case is a reminder that losing the arbitration does not automatically end the question of who gets to keep money already collected under that guarantee. Courts can step in temporarily, even for a losing party, to make sure money is not simply kept by whoever happens to be holding it while a further legal challenge is still being decided. In this case, that meant placing the disputed amount into a safe, interest-earning account with the court rather than letting either side use it, until the underlying dispute is finally resolved.

For the profession: Home Care Retail Marts has quickly become load-bearing precedent, and this judgment is an early application worth tracking as the rare and compelling standard gets tested against further fact patterns. Practitioners advising a client that has lost an arbitration but still holds a live Section 34 challenge should examine whether any interim protection secured during the arbitration lapsed automatically on the award, since that lapse, combined with a risk of irreversible prejudice, appears central to satisfying the higher threshold. Framing Section 9 relief as deposit with the court registry rather than direct payment, as the High Court did here, may also be a useful template for securing interim protection without inviting the objection that the application seeks final adjudication of rights still pending in the Section 34 proceedings.