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Supreme Court of India holds that conditional deposit does not stop running of interest on awarded amount
In the recent case of National Seeds Corporation Limited vs. National Agro Seed Corporation (India)[1], the Supreme Court of India[2] has provided a clear answer on the pivotal question of whether interest continues to accrue when an award debtor deposits the award amount. Various High Courts and even the Supreme Court of India (“Supreme Court”) have considered this question before, but their answers have been inconsistent and limited.
The decision of the Supreme Court notes the necessity of a clear and uniform approach regarding deposit of awarded amounts and adjustment of interest, and it clarifies that post-award interest continues to run despite a conditional deposit, because a deposit made with the court is not the same as final discharge of liability. A deposit made to ‘purchase peace’, that is, to obtain a stay on the execution of an award, does not pass title to the money to the award-holder so as to stop interest; interest stops accruing only where the deposit is made towards satisfaction of the award under Order XXI Rule 1[3] of the Code of Civil Procedure 1908 (“CPC”). For award debtors faced with making a deposit in challenge proceedings to secure a stay, as opposed to making a deposit in execution proceedings, this presents a material consideration to be assessed.
Brief facts
The dispute arose from an Arbitral Award dated June 13, 2019 (“Award”) against National Seeds Corporation Limited (“Appellant”) in favour of National Agro Seed Corporation (India) (“Respondent”). The Award directed the Appellant to pay INR 1,46,40,005.02 (Indian Rupees one crore forty-six lakh forty thousand five and paise two) with interest at 12% per annum from August 26, 2017 until the date of the Award, totalling INR 1,77,97,434 (Indian Rupees one crore seventy-seven lakh ninety-seven thousand four hundred thirty-four). The Appellant challenged the Award by way of a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) before the Delhi High Court (“Delhi HC”). By an ex parte interim order dated October 16, 2019, the Delhi HC stayed enforcement of the Award on the condition that the Appellant deposit 50% of the principal sum awarded. The Appellant made the deposit and complied with the condition.
The Delhi HC then dismissed the Appellant’s Section 34 petition, and the Respondent filed an execution petition. The Delhi HC directed that the amount the Appellant deposited in the Section 34 proceedings be treated as deposited in the execution proceedings and further directed the Appellant to deposit the remaining amount.
At the Respondent’s request, and despite the Appellant’s opposition, the executing court permitted release of the deposited amount to the Respondent, on the condition that the Respondent furnish security for it. The Respondent tendered five title deeds as security but then encountered financial difficulty and stopped pressing for release of the deposited amount.
In the meanwhile, the Appellant filed an appeal under Section 37 of the Arbitration Act and thereafter, a Special Leave Petition (“SLP”), challenging the dismissal of its petition under Section 34, both of which were dismissed. Upon the dismissal of the Special Leave Petition, the executing court held that the Award had attained finality and directed release of the deposited amount.
By an order dated August 5, 2024 (“Impugned Order”), the High Court directed the Appellant to pay interest at the rate of 12% per annum from the date of the Award until the date on which the High Court directed release of the deposited amount to the Respondent. It gave 2 (two) reasons: (a) although the Appellant deposited the awarded sum in 2 (two) tranches, the Respondent could never use or enjoy it, because the Appellant resisted its release at every stage until the dismissal of its SLP; and (b) under Order XXI Rules 1 and 4[4] of the CPC, conditional deposits are not payments by a judgment-debtor in satisfaction of the decretal amount.
Issue
Whether the Appellant is liable to pay interest on the amount deposited for the period between the date of the Award and the date that the Delhi HC directed release of such amount to the Respondent?
Findings and analysis
Referring to Section 36 of the Arbitration Act, the Supreme Court observed that although the Arbitration Act is a self-contained code, it incorporates certain principles of the CPC. Section 36 creates a legal fiction under which an award is enforced in accordance with the CPC as if it were a decree of the court. When a court considers an application to stay an arbitral award for payment of money, it must have due regard to the provisions under the CPC concerning grant of stay of a money decree.
After referring to various precedents, the Supreme Court summarised the principles on interest on deposits as follows:
- if a decree-debtor deposits the amount in court in accordance with Order XXI Rule 1 of the CPC, the liability to pay interest on that deposit ceases. However, to comply with Order XXI Rule 1 of the CPC, the deposit must be unconditional and available to the decree-holder for withdrawal;
- a decree-holder cannot claim interest on deposit if he fails to take any action seeking withdrawal of the amount. Courts will treat such inaction as a deemed refusal of the amount tendered;
- where a judgement-debtor’s deposit is converted into and held as a fixed deposit at the decree-holder’s request, the decree-holder is entitled only to the interest accrued on that fixed deposit; and
- where the judgment-debtor deposits only part of the outstanding sum and that part is unconditionally available for withdrawal, interest stops accruing only on that part, and the remaining amount continues to attract interest at the applicable rate.
In the present case, the Supreme Court observed that the Appellant made the deposit solely to obtain a stay of enforcement of the Award pending its Section 34 petition. Further, the Appellant also did not give any notice under Order XXI Rule 1(2) of the CPC and resisted the Respondent’s application to withdraw the amount. Accordingly, the Supreme Court held that the deposit did not comply with Order XXI Rule 1 of the CPC, and the Respondent was not free to withdraw it unconditionally. As a result, the Appellant’s liability to pay interest did not cease.
The Supreme Court noted that no statute, rule or regulation governs the handling of deposits, that courts and tribunals have passed inconsistent orders, and that the time value of money is at stake. It observed that this inconsistency raises concerns for decree-holders, judgment-debtors, and courts and tribunals alike. The Supreme Court therefore stressed the need to standardise how courts handle deposited money, and asked the Law Commission of India, in consultation with the Reserve Bank of India, Ministry of Finance and the Nodal Ministry of Law and Justice, to consider these issues and formulate suitable legislation.
Conclusion
This judgment is a significant clarification on deposit arrangements and post-award interest, with real practical consequences for all parties to arbitration-related court proceedings.
For award debtors, the message is clear: depositing the awarded amount in court, whether to obtain a stay or otherwise, will not stop post-award interest unless the deposit is truly unconditional and the award-holder is free to withdraw it without impediment. An award debtor that deposits money but then resists its release gains no benefit on its interest liability for the period in which the award-holder cannot access the funds. The award debtors who want to limit their interest exposure should therefore make deposits in line with Order XXI Rule 1 of the CPC and should not resist release of the deposited amount.
For award-holders, the decision clarifies how award interest applies to deposits that the award debtor makes in court. It underlines the importance of withdrawing the deposited amount promptly and confirms that an award-holder who fails to take timely steps to withdraw an amount genuinely available to it may be treated as having refused it, which may affect its interest claim.
Finally, the Supreme Court’s reference to the Law Commission of India signals potential legislative reform to standardise how all courts and tribunals in the country administer deposits, which would bring greater certainty and predictability. Until such legislation materialises, however, the existing asymmetry will persist, and parties must navigate forum-specific deposit rules with care.
This Prism has been prepared by:
Vinod Kumar | Divyam Agarwal | Aniket Aggarwal | Kavya Jha | Thiyagarajan B
For more details, please contact km@jsalaw.com.
[1] 2026 SCC OnLine SC 1924 (decided on September 18, 2026)
[2] S.L.P. (C) NO. 5710 OF 2025
[3] Rule 1 lists out mode of paying money under a decree, which includes depositing the money with the executing court.
[4] Under Rule 4, when money is deposited into court and the judgement debtor provides notice of such payment to the decree holder, interest ceases to run from the date of service of the notice.
