SC Clarifies Interest Liability on Conditional Court Deposits of Arbitral Award
Judgment dated 18.9.2026 of the Supreme Court in SLP (Civil) No.5710 of 2025 of National Seeds Corporation Ltd Vs. National Agro Seed Corporation (India)
Conditional Deposits & Accrual of Interest
On 13.6.2019, the Arbitral Award for Rs.1.46 crores with interest at 12% from 26.8.2017 was passed.
By the impugned order, the High Court held the appellant liable to pay interest at the rate of 12% per annum on the awarded sum for the period commencing on 13.06.2019, being the date of the Arbitral Award, and ending on 08.09.2022, being the date on which the deposited amount was ordered to be released in favour of the Award-Holder (‘respondent’) within eight weeks and disposed of the execution petition.
By an ex parte interim order dated 16.10.2019 in section 34 petition, the High Court stayed the Award subject to the condition of 50% deposit.
On 25.11.2019, the appellant deposited Rs.73.20 lakhs in the High Court.
On 5.1.2022, the High Court dismissed section 34 petition.
On 24.1.2022, the respondent filed execution petition and also interim application for withdrawal of the deposited amount
Section 37 appeal was dismissed on 31.5.2022. The Supreme Court dismissed the SLP on 26.8.2022.
By the impugned order dated 05.08.2024, the executing court held that although the awarded sum had been deposited by the appellant in two tranches, it was, in truth, never available to the decree-holder for its use and enjoyment, precisely because the appellant had resisted its release at every stage. The court noted that the decretal amount became available to the respondent only on 08.09.2022. The Court further noted that in view of Order XXI Rules 1 and 4 of the Code of Civil Procedure, 1908 (‘Code’), conditional deposits are never to be construed as payments by the judgment-debtor in satisfaction of the decretal amount. The executing court, therefore, directed the appellant to pay interest at the rate of 12% per annum from 13.06.2019 till 08.09.2022, and disposed of the execution petition accordingly.
The issues which arise for consideration in this appeal are as under: (i) whether an Award-Debtor is liable to pay interest on the amount deposited by it in accordance with Order XXI Rule 15 1 of the Code before the Court? and (ii) whether the deposit was made by the appellant in accordance with Order XXI Rule 1 of the Code and therefore, its liability to pay interest had ceased?
the first issue is answered in the affirmative by stating that if payment is made by an Award- Debtor in accordance with Order XXI Rule 1 of the Code, the liability to pay interest on such deposit ceases. The appellant in the instant case did not make the deposit in consonance with Order XXI Rule 1 of the Code, and therefore, liability to pay interest did not cease. The second issue is answered accordingly.
We have referred to the asymmetry that exists in our Country in the methods and manners by which deposits are directed to be made before Courts and Tribunals in appeals which are considered. The asymmetry is reflected in many aspects, and we have referred to some of them in paragraphs 30 to 39 of our judgment. We have also indicated the consequences flowing from such asymmetry and the compelling need to evolve a normative principle that would apply as a standard. We are of the opinion that it is necessary to evolve and formulate a suitable legislation on the subject.
