Section 9 Application by Unsuccessful Party Maintainable in Exceptional Cases

Source: Supreme Court 

Why in News? 

A Bench of Justice K.V. Viswanathan and Justice Alok Aradhe, in National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd. (2026), held that to prevent an award holder's unjust enrichment through a bank guarantee while the award is under challenge, interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 can be granted on an award debtor's application to preserve the efficacy of the challenge under Section 34. 

• The Court refused to interfere with the Delhi High Court's judgment, which had allowed the respondent-award debtor's Section 9 application seeking interim relief against alleged unjust enrichment of a bank guarantee of about Rs. 3.5 crores by the appellant-award holder during the pendency of a Section 34 application. 

What was the Background of National Projects Construction Corporation Ltd. v. Ishvakoo (India) Pvt. Ltd. (2026) Case? 

• A Memorandum of Understanding was executed in 2002 between National Projects Construction Corporation Ltd. and Ishvakoo (India) Pvt. Ltd., pursuant to which the respondent was provided Rs. 3.5 crores as Mobilisation Advance against bank guarantees. 
• In 2005, the High Court disposed of a Section 9 application on the understanding that the appellant would not invoke the bank guarantees provided they were kept alive, and that the guarantees could be invoked only if the arbitrator found the appellant entitled to recover the amount. 
• The respondent failed to keep the guarantees alive, leading to their invocation by the appellant in September 2017. 
• The arbitrator, while passing the Award on December 5, 2017, dismissed the respondent's claims and remained unaware that the bank guarantees had already been encashed. 
• The respondent challenged the Award under Section 34 and, during its pendency, filed a fresh Section 9 application seeking return of the amount. 
• The Single Judge allowed the application and directed the appellant to deposit Rs. 3.5 crores with the Registry, an order that was upheld by the Division Bench, prompting the award holder to approach the Supreme Court. 

What were the Court's Observations? 

• On Maintainability of Post-Award Section 9 Applications: The Court noted that precedent recognises the maintainability of a post-award Section 9 application, while cautioning that the threshold for grant of interim relief is higher where the application is moved by an award debtor. 
• On the Exceptional Nature of the Remedy: The Court held that a court may, in rare and compelling cases, permit the unsuccessful party to invoke Section 9 to prevent irreparable prejudice and to preserve the efficacy of the challenge under Section 34. 
• On Unjust Enrichment: The Court held that permitting the appellant to retain the money pending disposal of the Section 34 application would unjustly enrich the appellant, and that the High Court was justified in so observing. 
• On Fulfilment of the Parameters for Section 9 Relief: The Court held that the respondent had made out a rare and compelling case for relief, having fulfilled the necessary parameters for obtaining relief under Section 9 — namely, the existence of a prima facie case and balance of convenience — since retention of the money by the appellant during the pendency of the Section 34 application would unjustly enrich the appellant. 
• On Relief Granted: The Court dismissed the appeal and directed the appellant to hand over the bank guarantee amount to the High Court's registry, granting four weeks for the appellant to deposit Rs. 3.5 crores with the Registry of the Delhi High Court, to be kept in a Fixed Deposit on auto-renewal basis until disposal of the Section 34 application. 

What is Section 9 of the Arbitration and Conciliation Act, 1996? 

• Section 9 empowers courts to grant interim measures of protection before, during, or after arbitral proceedings but before enforcement of the arbitral award.  
• Any party to an arbitration agreement can approach the court seeking interim relief for various protective measures during the arbitration process.  
• The court can appoint guardians for minors or persons of unsound mind specifically for the purposes of arbitral proceedings under this provision.  
• Courts are authorized to preserve, provide interim custody, or order sale of goods that form the subject-matter of the arbitration agreement.  
• The provision allows courts to secure the amount in dispute in arbitration to ensure effective enforcement of the final award.  
• Courts can order detention, preservation, or inspection of any property related to the arbitration dispute and authorize entry into premises for necessary observations or experiments.  
• Interim injunctions and appointment of receivers can be granted by courts under this section to maintain the status quo during arbitration.  
• Once an arbitral tribunal is constituted, courts cannot entertain Section 9 applications unless circumstances exist that render Section 17 remedies (tribunal's interim measures) inefficacious.  
• If interim measures are granted before arbitration commences, the arbitral proceedings must begin within 90 days of the court order, or within such extended time as the court may determine.