Overview
In this matter, the Supreme Court considered whether a party which has lost in arbitration can still approach the Court under Section 9 of the Arbitration and Conciliation Act for interim protection after the Arbitral Tribunal has passed the award.

The dispute concerned bank guarantees of around ?3.5 crore which had been encashed by National Projects Construction Corporation Ltd. (NPCC). 

The issue before the Supreme Court was not simply whether Section 9 could be used after an arbitral award had been passed but it was also whether interim protection could be granted to a party whose claims had already been rejected by the Arbitrator.

Facts of the Case

The appellant, National Project Construction Corp. Ltd. (NPCC) and Ishvakoo Pvt. Ltd., the respondent, entered into a Memorandum of Understanding in 2002 for development work in Agra. The respondent received an advance of ?3.5 crore and furnished bank guarantees in favour of the appellant. 

Disputes arose between the parties and were further referred to arbitration. During the same, the respondent approached the Delhi High Court under Section 9 for protection against the invocation of bank guarantees by NPCC. 

On 15 December 2005, the respondent committed to keep the guarantees alive until the dispute was finally decided, including the proceedings challenging the arbitral award. The Court also stated that if the Arbitrator found out that any amount was recoverable by the appellant, it could recover that amount by invoking the bank guarantees.

The respondent later failed to keep the guarantees alive. In September 2017, the appellant therefore invoked and encashed the guarantees for ?3.5 crore. 

On 5 December 2017, the claims of the respondent were dismissed by the Arbitrator. The appellant did not file any counterclaim in the arbitration proceedings. 

The respondent then challenged the award under Section 34 and filed another Section 9 petition seeking protection for the 3.5 crore. The Single Judge directed the appellant to deposit the amount. The Division Bench upheld that direction, following which the appellant approached the Supreme Court.

Legal Issues

1. Whether a losing party in arbitration can still approach the Court under Section 9 after the arbitral award has been passed.
2. Whether a higher threshold is applicable when an unsuccessful party seeks interim protection.
3. Whether the Court can direct a party to deposit the money under Section 9 to protect the other party’s interests during Section 34 proceedings.
4. Whether retaining the encashed amount, in the absence of a counterclaim or finding that the mobilisation advance remained unused, could result in unjust enrichment.

Decision

The Supreme Court dismissed the appeal and upheld the direction which required the appellant to deposit ?3.5 crore with the Registry of the Delhi High Court.

It was clarified by the Court that a party does not lose its right to maintain an application under Section 9 merely because it lost in arbitration.

While referring to the case of Home Retail Marts Pvt. Ltd. v Haresh N. Sanghavi, the Court held that the difference between a successful and an unsuccessful party cannot determine the accessibility to Section 9. 

However, the threshold for granting relief to an unsuccessful party is higher. Such relief would be considered only where there are rare and compelling circumstances. 

The Court reiterated that relief under Section 9 is based on the principles such as the existence of a prima facie case, balance of convenience, and likelihood of irreparable harm. The Court must also consider whether the party approached it without any further delay.

In this case, the Court found that the circumstances were sufficient enough to justify the protection given.

Allowing the appellant to retain the money while the Section 34 proceedings were already pending could result in unjust enrichment and prejudice the respondent.

The Supreme Court therefore gave the appellant four weeks time to deposit ?3.5 crore with the Registry of the Delhi High Court. The amount was to be kept in a fixed deposit with a nationalised bank until the Section 34 proceedings were decided.

It was also clarified by the Court that its observations under Section 9 proceedings would not affect the independent adjudication of the challenge under Section 34.  

Case Reference:- National Project Construction Corp. Ltd. Vs. Ishvakoo (India) Pvt. Ltd. Civil Appeal No. 5819 of 2025 (DB, Before K.V. Viswanathan and Alok Aradhe, JJ, Delivered by K.V. Viswanathan, J.)