Introduction
In National Seeds Corporation Ltd. v. National Agro Seed Corporation (India) [2026 INSC 1017], the Supreme Court considered whether an award-debtor continues to be liable for interest after depositing the awarded amount in court during proceedings challenging the award.
The Supreme Court held that a deposit is not synonymous with payment. For interest to cease on an amount deposited in court, the deposit must satisfy the requirements of Order XXI Rule 1 of the Code of Civil Procedure, 1908 ("CPC"), including that the amount is made available to the award-holder for withdrawal in the manner contemplated by the provision.
Where the amount is deposited merely as a condition for stay and is not unconditionally available to the award-holder, the deposit does not discharge the award-debtor's liability and interest continues to accrue. The Supreme Court accordingly upheld the direction requiring interest at 12% per annum until the date on which the deposited amount became available for unconditional release.
The Supreme Court also examined the absence of a uniform framework governing deposits made before courts and tribunals. It requested the Law Commission of India to examine the issue and consider the need for suitable legislation, including after consultation with the Reserve Bank of India and the concerned Ministries.
In this article, we navigate through the facts of the case and the findings rendered by the Supreme Court.
Brief Facts
An arbitral award dated 13 June 2019 was passed in favour of National Agro Seed Corporation (India) ("National Agro") and against National Seeds Corporation Ltd. ("National Seeds"). The award directed payment of INR 1,46,40,005.02 together with interest at 12% per annum from 26 August 2017 until the date of the award, aggregating to INR 1,77,97,434.
National Seeds challenged the award before the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). By an interim order dated 16 October 2019, the High Court stayed enforcement of the award subject to National Seeds depositing 50% of the principal sum awarded.
In compliance with the stay order, National Seeds deposited INR 73,20,003 with the Registry of the High Court on 25 November 2019.
The Section 34 petition was dismissed on 5 January 2022. National Agro thereafter instituted execution proceedings on 24 January 2022 and sought release of the amount already deposited. National Seeds opposed the release on the ground that its appeal under Section 37 of the Arbitration Act was pending.
By an order dated 23 March 2022, the High Court directed National Seeds to deposit the balance amount. National Seeds subsequently deposited INR 1,53,17,792 on 26 April 2022.
The appeal under Section 37 was dismissed on 31 May 2022. Thereafter, on 7 July 2022, the High Court permitted release of INR 1 crore to National Agro subject to furnishing security in the form of title deeds of immovable property.
National Agro initially tendered title deeds but subsequently informed the High Court that it could not part with them because it required the properties to raise funds and address its financial difficulties. It therefore did not press for release on those terms.
National Seeds approached the Supreme Court against the dismissal of its Section 37 appeal. The Special Leave Petition was dismissed on 26 August 2022.
On 8 September 2022, the High Court noted that the award had attained finality and directed release of the deposited amount to National Agro. National Seeds did not oppose the release at that stage.
The surviving controversy before the High Court was whether National Seeds remained liable for interest between 13 June 2019, being the date of the award, and 8 September 2022, when the deposited amount was directed to be released.
By order dated 5 August 2024, the High Court held that the amounts deposited by National Seeds had not been available to National Agro for its use because their release had been resisted and, at one stage, made conditional upon furnishing security. The High Court therefore directed National Seeds to pay interest at 12% per annum from 13 June 2019 until 8 September 2022.
National Seeds challenged this order before the Supreme Court.
Arguments from Both Sides
National Seeds contended that deposit of the awarded amount in court amounted to satisfaction of the award and that interest should cease, at least to the extent of the amount deposited. It relied on Himachal Pradesh Housing and Urban Development Authority v. Ranjit Singh Rana [(2012) 4 SCC 505], Union of India v. M.P. Trading and Investment RAC. Corporation Limited [(2016) 16 SCC 699] and Union of India v. Concrete Products and Construction Company [(2014) 4 SCC 416].
It was further submitted that National Agro would be entitled only to the interest actually earned on the amount while it remained deposited. National Seeds also argued that Order XXI Rule 1 of the CPC could not be relied upon because the Arbitration Act is a self-contained code.
National Seeds additionally relied on the fact that the first deposit had been made on 25 November 2019, whereas National Agro did not seek withdrawal until February 2022. On this basis, it argued that interest should not continue to accrue on the deposited amount.
National Agro contended that the initial deposit was made only to obtain a stay of enforcement and was neither intended nor made available as payment in satisfaction of the award. It emphasised that National Seeds had repeatedly opposed release of the amount.
National Agro further submitted that the conditional permission granted on 7 July 2022, requiring security in the form of title deeds, did not amount to payment under Order XXI Rule 1 of the CPC. According to National Agro, interest continued until 8 September 2022, when the amount was finally made available for unconditional withdrawal.
Findings of the Supreme Court
The Supreme Court dismissed the appeal and affirmed the order of the High Court.
The Supreme Court first considered the relationship between the Arbitration Act and the CPC. While reiterating that the Arbitration Act is a self-contained code, the Supreme Court noted that Section 36(1) expressly provides that an arbitral award is to be enforced in accordance with the CPC in the same manner as if it were a decree of the court.
The Supreme Court also noted that Section 36(3) requires a court considering stay of a money award to have due regard to the provisions governing stay of a money decree under the CPC. The principles governing payment and cessation of interest under Order XXI Rule 1 were therefore relevant to enforcement of the arbitral award.
The Supreme Court referred to the Constitution Bench decision in Gurpreet Singh v. Union of India [(2006) 8 SCC 457], where it was held that interest on an amount deposited in court ceases from the date on which notice of the deposit is served upon the decree-holder in accordance with Order XXI Rule 1. To the extent of a valid deposit, further interest does not run on the sum appropriated towards principal.
The Supreme Court then referred to P.S.L. Ramanathan Chettiar v. O.R.M.P.R.M. Ramanathan Chettiar [1968 SCC OnLine SC 28], where it was held that the real effect of a deposit in court may merely be to place the money beyond the reach of the parties pending the appeal. Where withdrawal is permitted only upon furnishing security, the deposit is not payment in satisfaction of the decree. For a deposit to conform to Order XXI Rule 1, the amount must be available to the decree-holder for withdrawal in the manner contemplated by the provision.
The Supreme Court also considered K.L. Suneja v. Dr. Manjeet Kaur Monga [(2023) 6 SCC 722] and DLF Limited v. Koncar Generators & Motors Limited [(2025) 1 SCC 343] while examining the effect of court deposits and the availability of the deposited amount to the decree-holder or award-holder.
After considering the authorities, the Supreme Court distilled the governing principles. A deposit made in accordance with Order XXI Rule 1 can stop further accrual of interest on the amount deposited. However, the deposit must be made in accordance with the statutory requirements and be available to the decree-holder or award-holder for withdrawal.
The Supreme Court clarified that where withdrawal is dependent upon furnishing security, the deposit does not amount to payment in satisfaction of the decree for the purposes identified by the Court. If a deposit is not made in accordance with Order XXI Rule 1, interest continues to run notwithstanding that the money has been deposited with the court.
At the same time, the Supreme Court recognised an important qualification. An award-holder cannot continue to claim interest on an amount which has been made available for withdrawal but in respect of which no action is taken to seek withdrawal. Such inaction may be treated as a deemed refusal of the tender.
The Supreme Court further held that where only part of the outstanding amount is deposited and is available for unconditional withdrawal, interest ceases only on that part. The balance continues to attract interest at the applicable rate.
Applying these principles, the Supreme Court noted that the first deposit of INR 73,20,003 was made solely to secure a stay of enforcement during the Section 34 proceedings. The deposit was not accompanied by notice under Order XXI Rule 1(2), and National Seeds subsequently resisted National Agro's request for withdrawal.
The balance amount deposited in April 2022 also did not alter the position. National Seeds continued to resist release, and the permission subsequently granted to withdraw INR 1 crore was subject to National Agro furnishing title deeds as security.
The Supreme Court therefore held that the deposits made by National Seeds were not deposits in accordance with Order XXI Rule 1 and were not freely available to National Agro for unconditional withdrawal. Consequently, National Seeds' liability to pay interest did not cease upon making those deposits.
The Supreme Court accordingly found no ground to interfere with the High Court's direction requiring payment of interest until 8 September 2022 and affirmed the impugned order.
The Supreme Court thereafter addressed the broader manner in which courts and tribunals deal with monetary deposits. It observed that there is no common statutory prescription governing the amount to be deposited, the financial institution or instrument in which deposits should be held, the terms of withdrawal, renewal and reinvestment, or the adjustment of interest ultimately earned.
The Supreme Court noted that different High Courts follow different practices and that this lack of uniformity can prejudice both sides. An award-holder may be deprived of the use of money despite having succeeded, while an award-debtor may lose control over the deposited funds and yet continue to face mounting interest liability.
The Supreme Court also emphasised the time value of money and considered comparative mechanisms in the United States and Canada for administering monies deposited with courts.
In view of these concerns, the Supreme Court requested the Law Commission of India to examine the issues highlighted in the judgment and consider the need for suitable legislation. The Law Commission was also requested to consider foreign legal frameworks and consult the Reserve Bank of India, the Ministry of Finance and the Ministry of Law and Justice.
Comment
The judgment in National Seeds Corporation (supra) provides an important clarification on the distinction between depositing money in court and making payment in satisfaction of an arbitral award.
The decision makes clear that an award-debtor does not necessarily stop the running of interest merely by placing money with the court as a condition for stay. The legal effect of the deposit depends upon whether it satisfies Order XXI Rule 1 and whether the amount is actually made available to the award-holder for withdrawal in the manner contemplated by that provision.
This is particularly relevant during challenges under Sections 34 and 37 of the Arbitration Act, where courts frequently direct deposits as a condition for stay. Unless the terms of the deposit and release have the effect contemplated by Order XXI Rule 1, the award-debtor may remain exposed to continuing interest even though the money has left its own control.
The judgment equally protects against the opposite result. Once an amount is validly made available for withdrawal, an award-holder cannot allow it to remain untouched and continue claiming contractual or award interest indefinitely. The Supreme Court has therefore linked cessation of interest to genuine availability of the money rather than the mere physical act of deposit.
The decision also confirms that the self-contained nature of the Arbitration Act does not exclude the CPC where the Arbitration Act itself expressly incorporates its principles for enforcement. Section 36 places enforcement of awards within the CPC framework for the limited purpose identified by the statute.
The broader observations on administration of court deposits are also significant. The Supreme Court has identified substantial variations in existing practices and has expressly invited institutional reform. Any legislative response following consideration by the Law Commission could have a direct bearing on the conditions imposed for stay of money awards, investment of deposited sums and allocation of interest during appellate proceedings.
The judgment therefore provides immediate guidance on interest liability while also highlighting a systemic issue in award enforcement. For parties challenging or enforcing money awards, the precise terms governing deposit, notice and withdrawal will remain critical in determining when interest stops running.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
