Whether an Award-Debtor is liable to pay interest on the amount deposited by it in accordance with Order XXI Rule 1 of the Code of Civil Procedure, 1908 (CPC) before the Court?

Cause Title:

National Seeds Corporation Ltd. v. National Agro Seed Corporation (India)

Citation: 2026 INSC 1017

Court: Supreme Court of India (Civil Appellate Jurisdiction)

Bench: Pamidighantam Sri Narasimha and Alok Aradhe, JJ.

Date of Judgment: September 18, 2026

Issues Raised and Answered by the Apex Court (with Paragraph Numbers)

1. Issue 1 (Paras 19, 28): Whether an Award-Debtor is liable to pay interest on the amount deposited by it in accordance with Order XXI Rule 1 of the Code of Civil Procedure, 1908 (CPC) before the Court?
   
   
   • Answer by the Apex Court: Yes, in the affirmative. If payment or deposit is made by an Award-Debtor strictly in accordance with Order XXI Rule 1 of the CPC (meaning it is unconditional, notified to the decree-holder, and completely free for withdrawal), the liability to pay interest on such deposited amount ceases from the date of service of notice/deposit.
     
     
2. Issue 2 (Paras 19, 26–28): Whether the deposit made by the appellant in the present case was in accordance with Order XXI Rule 1 of the CPC and whether its liability to pay interest had consequently ceased?
   
   
   • Answer by the Apex Court: No, in the negative. The deposit made by the appellant was a conditional deposit intended solely to secure a stay of execution under Section 34 of the Arbitration and Conciliation Act, 1996, and was unaccompanied by a notice under Order XXI Rule 1(2) CPC. Furthermore, the appellant actively resisted the respondent’s withdrawal applications throughout the Section 34 and Section 37 proceedings. Therefore, the deposit did not satisfy Order XXI Rule 1 CPC, and interest continued to run until the money was unconditionally released.
     
     

Analysis of Facts and Law

• Analysis of Facts:
  An arbitral award was passed against the appellant (National Seeds Corporation Ltd.) on June 13, 2019, directing payment of ₹1,46,40,005.02 plus interest at 12% per annum. While challenging the award under Section 34 of the Arbitration and Conciliation Act, 1996, the appellant obtained an ex parte stay on October 16, 2019, subject to depositing 50% of the principal sum. The appellant deposited ₹73,20,003/- on November 25, 2019. When the Section 34 challenge and subsequent Section 37 appeal were dismissed, the respondent sought to withdraw the deposited money. However, the appellant consistently contested the withdrawal. After the Supreme Court dismissed the appellant’s Special Leave Petition on August 26, 2022, the executing court ordered the release of the money on September 8, 2022, and held the appellant liable to pay interest for the entire period (June 13, 2019, to September 8, 2022).
  
  
• Application of Law:
  The Supreme Court examined the intersection between Section 36 of the Arbitration and Conciliation Act, 1996 (which makes arbitral awards executable as decrees via a legal fiction) and Order XXI Rule 1 of the CPC. Reviewing landmark precedents such as Gurpreet Singh v. Union of India, P.S.L. Ramanathan Chettiar, K.L. Suneja, and DLF Ltd. v. Koncar Generators, the Court reiterated that a deposit put beyond a debtor's reach does not extinguish liability unless it is unconditional and freely accessible for withdrawal by the decree-holder at will. Because the appellant's deposit was strictly for securing a stay and its release was vigorously opposed by the appellant at every judicial turn, the mandatory thresholds of Order XXI Rule 1 CPC were not met, keeping the interest liability alive.
  
  

Conclusion (What the Supreme Court Finally Held)

1. Dismissal of Appeal: The Supreme Court affirmed the impugned order of the High Court, holding that the appellant-award debtor was legally liable to pay interest at 12% per annum on the awarded sum up to September 8, 2022 (the date of unconditional release), because the initial deposit was conditional and restricted from the respondent's use. The appeal was dismissed.
   
   
2. Systemic Reform and Law Commission Reference: Recognizing a significant legislative lacuna in the 1996 Act and widespread judicial asymmetry across High Courts regarding how court deposits and interest accruals are handled, the Supreme Court formally requested the Law Commission of India—in consultation with the RBI, Ministry of Finance, and Ministry of Law and Justice—to study international frameworks (such as the United States Court Registry Investment System - CRIS) and formulate normative legislative guidelines to standardise court deposit administration.