National Seeds Corporation Ltd. v. National Agro Seed Corporation (India) | 2026 INSC 1017 | 18 September 2026
What the case was about
This case tackled a stubborn question that frequently arises after an arbitral award: if the losing party deposits the awarded money in court while challenging the award, does that deposit automatically halt the interest running on the debt? The Arbitration and Conciliation Act, 1996 treats an arbitral award as a decree for enforcement purposes, yet it does not clearly spell out how conditional court deposits interact with the continuing accrual of interest (para 2; para 18). The Supreme Court used the dispute to settle when interest liability actually ends—not when the money enters the court’s accounts, but when the award-holder can truly access it without strings attached.
The key facts
In June 2019, an arbitral tribunal passed an award ordering National Seeds Corporation Ltd. to pay approximately Rs. 1.78 crores, covering principal and interest (para 4). National Seeds challenged the award before the Delhi High Court under Section 34 of the 1996 Act and, on 16 October 2019, secured an ex parte interim stay on enforcement. The stay was conditional: the company had to deposit 50 per cent of the principal awarded, i.e., Rs. 73,20,003, which it lodged with the High Court on 25 November 2019 (para 5).
The High Court dismissed the Section 34 petition on 5 January 2022. National Seeds carried the matter in a Section 37 appeal, which a Division Bench dismissed on 31 May 2022; its subsequent Special Leave Petition was dismissed by the Supreme Court on 26 August 2022 (para 6). By then, the respondent had already begun execution proceedings. National Seeds deposited the balance sum on 26 April 2022 (para 8), yet it consistently opposed the respondent’s attempts to withdraw the funds. On 7 July 2022, the executing court did permit a partial release, but only if the respondent furnished title deeds as security; the respondent, facing financial distress, could not part with the deeds and therefore did not withdraw the amount (para 9). The money was not released unconditionally until 8 September 2022 (para 11).
By its order dated 5 August 2024, the executing court held that because the sums were never freely available to the respondent for its use and enjoyment, National Seeds remained liable for interest at 12 per cent per annum from the date of the award (13 June 2019) until the date of unconditional release (8 September 2022) (para 12).
The questions before the Court
The Supreme Court framed two crisp issues (para 19):
- Whether an award-debtor is liable to pay interest on the amount deposited in court in accordance with Order XXI Rule 1 of the Code of Civil Procedure, 1908.
- Whether National Seeds had made the deposit in accordance with Order XXI Rule 1, so that its liability to pay interest had ceased.
What the Court decided and why
A two-judge bench of Justices P.S. Narasimha and Alok Aradhe dismissed the appeal and upheld the High Court’s direction.
The Court began with the foundational principle that “a deposit is not synonymous with payment.” Merely putting a sum beyond the debtor’s own reach does not by itself extinguish liability or place the money in the creditor’s hands (para 2). It explained that under Section 36 of the 1996 Act, an award is enforceable as if it were a decree, and a court dealing with a stay application in a money-award case must have due regard to the Code of Civil Procedure (para 18).
Turning to Order XXI Rule 1, the bench relied on the Constitution Bench decision in Gurpreet Singh v. Union of India to note that interest on a decretal deposit ceases to run from the date the depositor serves notice on the decree-holder, or from the date an out-of-court tender is refused (para 20). It also drew upon a three-judge bench in P.S.L. Ramanathan Chettiar to emphasise that the real effect of a court deposit is to place the money beyond the reach of both parties pending an appeal. If a decree-holder is allowed to withdraw only after furnishing security, payment is not made in satisfaction of the decree. For a deposit to qualify as payment under Order XXI Rule 1, it must be unconditional and the decree-holder must be free to withdraw it whenever they please (para 21). The Court further distilled the principle that where the deposit is not made in terms of Order XXI Rule 1, interest continues to run even after the money is lodged in court (para 25).
The judgment also clarified, citing DLF Limited v. Koncar Generators & Motors Limited, that if an award-holder is permitted to withdraw a deposit—even conditionally, subject to the final decision in the matter—the court must treat the amount as accessible to the creditor. In such a situation, the burden shifts to the award-holder to furnish the required security in order to utilise the funds, or to seek modification of the condition if unable to comply (para 24).
Applying these tests, the Court found that National Seeds’ initial deposit was made solely to obtain a stay of the Section 34 proceedings and was not accompanied by the notice required under Order XXI Rule 1(2) (para 26). More importantly, the company repeatedly resisted the respondent’s withdrawal applications at every stage, and the respondent was not free to take the money unconditionally until 8 September 2022 (para 27). Consequently, the deposit never acquired the character of a payment in satisfaction of the award.
The Court answered the first issue in the affirmative: if a deposit is made in accordance with Order XXI Rule 1 and is unconditionally available, interest liability does cease (para 28). However, because National Seeds’ deposit was conditional and obstructed at every stage, its liability to pay interest continued until the date of unconditional release. The second issue was answered against the appellant, and the direction to pay interest at 12 per cent per annum from 13 June 2019 to 8 September 2022 was upheld.
Why it matters
For businesses and litigants, the ruling is an important caution: lodging a demand draft with the court registry does not, by itself, pause the interest clock. An award-debtor cannot simultaneously deposit money and block the creditor’s access to it, only to later claim that interest stopped accruing on the date of deposit. By tying the end of interest liability to the creditor’s actual, unconditional ability to withdraw the funds, the Court has ensured that procedural tactics do not dilute the value of an arbitral award.
Beyond the immediate parties, the judgment highlights a deeper systemic concern about the time value of money and the opportunity cost suffered by creditors when funds are locked in court under inconsistent procedures (para 40). The bench noted that there is no uniform statutory or regulatory framework governing how court deposits are handled, invested, or adjusted during the pendency of appeals, and it has requested the Law Commission of India to examine these issues in consultation with the Reserve Bank of India and the Ministries of Finance and Law (paras 30–32). Until such reform arrives, the message from the Court is clear: if the money is not truly and freely available to the award-holder, the interest meter keeps running.