Arbitration | Post-Award Section 9 Application By Unsuccessful Party Maintainable In Exceptional Cases : Supreme Court

The Supreme Court on Tuesday (August 11) held that to prevent an award holder's enrichment of a bank guarantee while an award was under challenge, an interim relief under Section 9 of the Arbitration & Conciliation Act, 1996 can be extended on an award debtor's application to preserve the efficacy of the challenge in Section 34. A bench of Justice KV Viswanathan and Justice Alok Aradhe refused to interfere with the Delhi High Court's judgment, which had allowed the Respondent-award debtor's Section 9 application which sought an interim relief against alleged unjust enrichment of a bank guarantee of about Rs. 3.5 crores by an Appellant-award holder during the pendency of a Section 34 application.The bench noted that there are precedents holdig that a post-award Section 9 application is maintainable in exceptional cases.“This Court, while holding the application to be maintainable, has sounded a note of caution that the threshold for grant of interim relief will be higher in case the application is moved by an Award Debtor and that a court may, in rare and compelling cases, permit the unsuccessful party to invoke Section 9 to prevent irreparable prejudice and to preserve the efficacy of the challenge under Section 34…the High Court was justified in observing that permitting the appellant to hold on the money pending Section 34 application, would be unjustly enriching the appellant…”, the Court observed. The dispute arose from a Memorandum of Understanding executed in 2002 between National Projects Construction Corporation Ltd. and Ishvakoo India Pvt. Ltd., pursuant to which the respondent was provided Rs. 3.5 crores as Mobilisation Advance against bank guarantees. In 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, and that if the arbitrator found the appellant entitled to recover the amount, the guarantees could be invoked. The respondent failed to keep the guarantees alive, leading to their invocation by the appellant in September 2017. The arbitrator, while passing the Award on December 5, 2017, dismissed the respondent's claims and remained oblivious to the fact that the bank guarantees had already been encashed. The respondent challenged the Award under Section 34 and, pending its disposal, filed a fresh Section 9 application seeking return of the amount. The Single Judge allowed the application and directed the appellant to deposit Rs. 3.5 crores with the Registry, which order was upheld by the Division Bench, prompting the award holder to move to the Supreme Court. Dismissing the appeal, the judgment authored by Justice Viswanathan held that the respondent had made out a rare and compelling case for Section 9 relief to prevent irreparable prejudice and unjust enrichment to an Appellant. [See Home Care Retail Marts Pvt Ltd v. Haresh N Sangavi, 2026 LiveLaw (SC) 425] The Court stated that the Respondent-award debtor did fulfil in ample measure the necessary parameters for obtaining relief under Section 9, i.e., the existence of a prima facie case and balance of convenience, as holding of the money by the Appellant during the pendency of the Section 34 application would unjustly enrich the Appellant. As a result, the appeal was dismissed, with a direction to the Appellant to hand over the bank guarantee amount to the High Court's registry. “We grant 4 (four) weeks' time to the appellant to deposit the amount of Rs. 3.5 crores with the Registry of the High Court of Delhi. On deposit, the Registry of the High Court shall keep the same in a Fixed Deposit (FD), in any Nationalized Bank, on auto-renewal basis, till the disposal of the Section 34 application.”, the Court ordered. Cause Title: National Projects Construction Corporation Ltd. Versus Ishvakoo (India) Pvt. Ltd.Citation : 2026 LiveLaw (SC) 791Click here to download judgmentAppearance: For Appellant(s) : Mr. Rajat Arora, AOR Ms. Mariya Shahab, Adv. For Respondent(s) :Mr. Ajay Bansal, Adv. Ms. Veena Bansal, Adv Mr. Gaurav Yadav, Adv. Mr. Sourav Jindal, Adv. Mr. Aditya Gupta, Adv. Ms. Pooja, Adv. Mr. Kuldip Singh, AOR

Arbitration | Post-Award Section 9 Application By Unsuccessful Party Maintainable In Exceptional Cases : Supreme Court

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Arbitration | Post-Award Section 9 Application By Unsuccessful Party Maintainable In Exceptional Cases : Supreme Court

Yash Mittal

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