The Supreme Court (“Court”), vide its judgment in National Projects Construction Corporation Limited v. Ishvakoo (India) Private Limited, Civil Appeal No. 5819 of 2025., held that an application under Section 9 of the Arbitration and Conciliation Act, 2019 (“Act”), filed during pendency of proceedings under Section 34 of the Act, is maintainable to prevent award holder from deriving unjust enrichment of bank guarantee. A bench comprising Justice K.V. Viswanathan and Justice Alok Aradhe, on August 11, 2026, observed that relief under Section 9 of the Act, during pendency of proceedings under Section 34, can be granted only under rare and compelling circumstances. Such a relief shall be aimed at preventing irreparable prejudice and preserving the efficacy of the challenge under Section 34.

Brief Facts:

The Appellant, National Projects Construction Corporation Limited (“NPCL”), and the Respondent, Ishvakoo (India) Private Limited (“IPL”), entered into a Memorandum of Understanding, wherein IPL furnished bank guarantees worth Rs. 3.5 crores (Rupees Three Crore Fifty Lac) as a mobilisation advance. Upon disputes arising between the parties, IPL invoked the arbitration clause to refer the matter to arbitration. IPL also filed an application under Section 9 of the Act to restrain NPCL from invoking the bank guarantees. The application was allowed, subject to an undertaking by IPL, to keep the guarantees alive during the pendency of the arbitral proceedings or of proceedings under Section 34 of the Act.

However, upon failure of IPL to keep the guarantees alive during arbitral proceedings, NPCL invoked bank guarantees before pronouncement of award. The award was passed in favour of NPCL, wherein, rejecting the claims of IPL, the sole Arbitrator opined that IPL was not entitled to any bank charges to keep guarantees alive since the same was being done by IPL on its own undertaking. It is pertinent to note that no counter claim was filed by NPCL before the arbitrator.

Subsequently, proceedings under Section 34 were instituted challenging the award. During pendency, IPL preferred a Section 9 application, praying for return of guarantee amount. The application was allowed by the Single Judge, Delhi High Court, recording that NPCL could not unjustly enrich itself in the absence of any counterclaims being filed or any finding that the bank guarantees were encashed on account of non-utilisation of mobilisation advance.

NPCL, aggrieved by the direction of Ld. Single Judge to deposit Rs. 3.5 crores with the registry of the High Court, filed an appeal before the Division Bench. The Division Bench dismissed the appeal, upholding the order of the Ld. Single Judge. Aggrieved by the order of the Division Bench, NPCL approached the Supreme Court.

Issues before the Court:

The primary issue raised before the Court was whether, while disposing of the Section 9 application during pendency of Section 34 proceedings, the courts below were justified in directing NPCL to deposit Rs. 3.5 crores in the registry of the High Court.

Contentions of the Parties:

The Appellant, NPCL, inter alia, contended that:

1. The relief granted to IPL was not encompassed within the framework of Section 9(1)(ii)(e);

2. Under Section 9 of the Act, a court cannot grant relief amounting to final adjudication of rights pending for consideration under Section 34 proceedings; and

3. Jurisdiction under Section 9 can be invoked only to protect fruits of the award which were absent for IPL.

The Respondent, IPL, contended that allowing NPCL to retain the amount would only result in NPCL unjustly enriching benefit of the bank guarantee. It was argued that Section 9 of the Act confers wide powers to pass orders of the nature passed by the Ld. Single Judge and the Division Bench.

Legal Position Governing Section 9 Applications Filed After the Award & During Pendency of Section 34 Proceedings:

The Court noted observations made on the issue of maintainability in its previous decisions. The issue of maintainability was settled in Home Care Retail Marts Private Limited v. Haresh N. Sanghavi, 2026 SCC Online SC 670., wherein it was held that the jurisdiction under Section 9 of the Act can be invoked by an unsuccessful award debtor, seeking continuation of the interim protection granted during pendency of arbitral proceedings. However, the threshold for grant of interim relief was observed to be higher in case of an unsuccessful party praying for such relief, and should be guided by principles well established, namely:

1. Existence of a prima facie case;

2. Balance of convenience in favour of the award debtor; and

3. Likelihood of irreparable harm or injury.

Reiterating the above holding in Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, (2022) 20 SCC 178., the Court in Essar House had observed that the discretion is to be exercised not arbitrarily, but judiciously, to promote efficacy of arbitration as a form of dispute resolution. The Court also noted its earlier observations in Adhunik Steels Limited v. Orissa Manganese and Minerals (Private) Limited, (2007) 7 SCC 125., where the Court held that the principles followed by courts while granting interim injunction were equally applicable while granting relief under Section 9 of the Act.

Decision of the Court:

Applying the law laid down to the present case, the Court opined that the present case is a rare and compelling case where even after applying a high threshold, the directions made by Ld. Single Judge and the Division Bench were required to prevent irreparable prejudice and to preserve the efficacy of challenge under Section 34 of the Act. The Court observed that in the absence of any counterclaim by NPCL and any recording of the arbitrator on encashment of bank guarantees by NPCL, permitting NPCL to retain the amount would unjustly enrich NPCL. Accordingly, the appeal was dismissed, and NPCL was directed to deposit Rs. 3.5 crores with the registry of the Delhi High Court.

Please find attached a copy of the Judgment, here.

This update has been contributed by R. Sudhinder (Senior Partner) and Anushka Sharma (Associate).

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