In 2002 the parties entered into an MoU for bus terminus and Taj Trapezium Zone heritage corridor works at Agra, and the respondent received Rs 3.5 crore as mobilisation advance against bank guarantees. In 2005, on the appellant’s undertaking, the High Court recorded that the guarantees would be kept alive till the arbitrator decided the matter, and that encashment would follow only if the award required the respondent to pay.
The appellant encashed the guarantees in about September 2017 when they were not kept alive. The award of 5 December 2017 dismissed all of the respondent’s claims, but no counterclaim had been filed. In the respondent’s post-award Section 9 petition, a Single Judge on 5 April 2019 directed the appellant to deposit Rs 3.5 crore in court, to be kept in a fixed deposit, and a Division Bench dismissed the appeal on 21 May 2019.
The Key Question Before the Court
Can a party that lost the arbitration obtain interim relief under Section 9, and if so, was the deposit direction justified here?
A Higher Threshold, Not a Closed Door
Following Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, the Court held that a losing party may seek Section 9 relief in ‘rare and compelling cases’, subject to a higher threshold. It applied the familiar tests of prima facie case, balance of convenience and irreparable prejudice, drawing on Essar House and Adhunik Steels, and treated Order XXXVIII Rule 5 and Order XXXIX CPC as guiding principles rather than rigid requirements.
On the facts, the Court noted that no counterclaim was filed, that the arbitrator did not address whether the 2005 condition on encashment still applied, and that the arbitrator appeared unaware that the guarantees had already been invoked. Allowing the appellant to keep the money risked unjust enrichment, so interim protection was warranted to keep the Section 34 challenge meaningful.
What the Court Actually Held
- The appeal was dismissed.
- The appellant must deposit Rs 3.5 crore in the Delhi High Court Registry within four weeks.
- The deposit will be kept in an auto-renewing fixed deposit in a nationalised bank until the Section 34 application is decided.
- The Section 34 application is to be decided on its own merits, uninfluenced by these observations.
Why This Judgment Matters
- It confirms that Section 9 relief is available even to an award debtor, though only exceptionally.
- It shows how encashed bank guarantees can be secured pending a Section 34 challenge.
- It reinforces the role of unjust enrichment in the balance of convenience.
What Should Advocates Take Away From the Judgment?
For Award Debtors
- Show a rare and compelling case: an unaddressed issue in the award and a real risk of unjust enrichment help.
- Seek preservation of the specific fund in dispute rather than a broad injunction.
For Award Holders
- Ensure that any money realised outside the award (such as encashed guarantees) is covered by a counterclaim or finding.
- Expect courts to look closely at undertakings given earlier in the proceedings.
Key Takeaways
- A losing party can seek Section 9 relief only in rare and compelling cases.
- The usual interim relief tests apply with a higher threshold.
- The appellant must deposit Rs 3.5 crore within four weeks.
- The Section 34 merits remain fully open.
Frequently Asked Questions
No. It expressly left the Section 34 application to be decided on its own merits.
No counterclaim had been filed, the award did not address the encashment condition, and retention risked unjust enrichment.
No. The Court stressed it is available only in rare and compelling cases.
Conclusion
The judgment keeps the door to Section 9 open for award debtors but narrows it to exceptional cases where the award leaves a fund unaccounted for.
Practical takeaway: If money was realised from a party outside the award, the losing party may be able to have it secured in court pending the Section 34 challenge.