New Delhi: The Supreme Court has dismissed an appeal filed by National Projects Construction Corporation Ltd. and upheld a Delhi High Court direction requiring it to deposit Rs. 3.5 crore with the High Court Registry, pending the outcome of a challenge to an arbitral award that had otherwise gone in the corporation's favour.
The dispute traces back to a 2002 Memorandum of Understanding between National Projects Construction Corporation and Ishvakoo (India) Pvt. Ltd. for bus terminus and heritage corridor works in Agra. Ishvakoo was given Rs. 3.5 crore as mobilisation advance against bank guarantees. When disputes arose and arbitration was invoked, the Delhi High Court in 2005 permitted the guarantees to remain alive, on the condition that the corporation could encash them only if the arbitrator ultimately found in its favour.
Ishvakoo was unable to keep the guarantees alive, and the corporation invoked them in September 2017, months before the arbitrator ruled. When the award was finally delivered in December 2017, it dismissed all of Ishvakoo's claims, including its plea for discharge of the guarantees, after finding that Ishvakoo itself was bound to keep them alive and had engaged in “fraudulent and collusive conduct.”
Ishvakoo challenged the award under Section 34 of the Arbitration and Conciliation Act, and separately sought the return of the Rs. 3.5 crore through a fresh application under Section 9, arguing that the corporation had never filed a counter-claim and that the award contained no finding that it had misused the original mobilisation advance. Retaining the money without any adjudicated claim, it argued, would unjustly enrich the corporation. Both the Single Judge and the Division Bench of the Delhi High Court agreed and directed the amount to be deposited in court.
Before the Supreme Court, the corporation argued that Section 9 could not be used, after an award, to claw back money already lawfully realised under bank guarantees once a claimant's case had been dismissed in its entirety. It contended that the High Court had effectively reviewed the merits of the award at an interim stage, and that a party with no surviving claim had no fruits of an award left to protect.
The Bench of Justices K. V. Viswanathan and Alok Aradhe rejected this position, relying on the Court's recent ruling in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, which held that even a party that has lost before the arbitrator may invoke Section 9 after an award, in rare and compelling cases, to preserve the efficacy of a pending challenge. The threshold for such relief, the Court noted, is higher for an unsuccessful party, but not unavailable.
Applying that standard, the Court found the case before it met the higher bar. It noted that the arbitrator had ruled only on the narrow question of bank charges, without addressing the corporation's obligation, recorded in the 2005 order, to keep the guarantees alive only until an award actually favoured it. No counter-claim had been filed, and no finding existed that Ishvakoo had failed to utilise the mobilisation advance. In those circumstances, the Court held, permitting the corporation to retain the money pending the Section 34 challenge “would not only result in the respondent unjustly enriching itself.”
The Court clarified that its observations were confined to the Section 9 proceedings and would not influence the outcome of the pending Section 34 challenge to the award, which remains to be decided on its own merits.
The appeal was accordingly dismissed. The corporation has been given four weeks to deposit Rs. 3.5 crore with the Registry of the Delhi High Court, to be held in an interest-bearing fixed deposit with a nationalised bank, on auto-renewal, until the Section 34 application is decided. No costs were awarded.
Appearances:
For the Appellant: Mr. Rajat Arora, Advocate.
For the Respondent: Mr. Ajay Bansal, Advocate.
Case Title: National Projects Construction Corporation Ltd. vs. Ishvakoo (India) Pvt. Ltd., Civil Appeal No. 5819 of 2025.
