2026 INSC 1017

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2026

(@ S.L.P. (C) NO. 5710 OF 2025)

NATIONAL SEEDS

CORPORATION LTD. … APPELLANT

VERSUS

NATIONAL AGRO SEED

CORPORATION ( INDIA) … RESPONDENT

J U D G M E N T

1. Leave granted.

2. A deposit is not synonymous with payment. A sum put beyond

the debtor's own reach neither extinguishes his liability nor

places it in the creditor's hands. Between the deposit of a sum

in court and the final discharge of liability lies a spectrum of

possibilities, attended by a corresponding degree of

uncertainty. Resolving that uncertainty, in the specific context

of enforcement of an arbitral award, is at the heart of this

appeal. Disputes of this nature arise with unsettling regularity,

yet the Arbitration and Conciliation Act, 1996 (the ‘1996 Act’),

as it stands, provides no clear guidance on the interplay

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between conditional deposits and the accrual of interest. This

lacuna cannot be ignored. We have therefore, in the later part

of the judgment, also noticed the asymmetry that exists in our

country with regard to the method and manner by which

deposits are directed to be made before the Courts/Tribunals

when appeals are being considered. We have requested the Law

Commission of India to examine the issues which we have

highlighted in this judgment and in the process, the Law

Commission has also been requested to consider the laws

which other countries have enacted and to consult the Reserve

Bank of India, Ministry of Finance and also the Nodal Ministry

of Law and Justice.

3. This appeal, at the instance of the Award-Debtor (‘appellant’),

calls into question the correctness of the judgment and order

dated 05.08.2024 passed by the High Court

1

. By the impugned

order, the High Court held the appellant liable to pay interest

at the rate of 12% per annum on the awarded sum for the

period commencing on 13.06.2019, being the date of the

Arbitral Award, and ending on 08.09.2022, being the date on

which the deposited amount was ordered to be released in

1

The High Court of Delhi

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favour of the Award-Holder (‘respondent’) within eight weeks

and disposed of the execution petition.

FACTUAL BACKDROP

4. The facts lie within a narrow compass. On 13.06.2019, an

Arbitral Award came to be passed against the appellant for a

sum of Rs.1,46,40,005.02/- (Rupees One Crore Forty-Six Lakh

Forty Thousand Five and Two Paise only), together with

interest at the rate of 12% per annum from 26.08.2017 till the

date of the Award, aggregating to Rs.1,77,97,434/- (Rupees

One Crore Seventy-Seven Lakh Ninety-Seven Thousand Four

Hundred and Thirty-Four only). Aggrieved thereby, the

appellant assailed the Award in a petition under Section 34 of

the 1996 Act before the High Court. By an ex parte interim

order dated 16.10.2019, the High Court stayed enforcement of

the Award, subject to the condition that the appellant deposit

50% of the principal sum awarded by the Arbitrator, namely

that is Rs.1,46,40,005.02, within six weeks.

5. In purported compliance with the aforesaid interim order, the

appellant deposited a sum of Rs.73,20,003/- (Rupees Seventy-

Three Lakh Twenty Thousand and Three only) with the

Registry of the High Court by demand draft dated 25.11.2019.

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On 05.01.2022, the High Court dismissed the appellant’s

petition under Section 34 of the 1996 Act. The respondent filed

an execution petition on 24.01.2022. Thereafter, the

respondent filed I.A. No. 2677 of 2022 on 14.02.2022, seeking

the release of the amount deposited in compliance with the

order dated 16.10.2019. While deciding the I.A., the High

Court took note of the execution petition filed and directed that

the amount be considered as deposited in the execution

proceedings.

PROCEEDING UNDER SECTION 37 OF THE 1996 ACT

6. Being aggrieved by the judgment dated 05.01.2022, the

appellant carried the matter in appeal under Section 37(1)(c)

of the 1996 Act. That appeal came to be dismissed by a Division

Bench of the High Court on 31.05.2022. The appellant

thereupon approached this Court way of a Special Leave

Petition, which was dismissed on 26.08.2022.

PROCEEDING IN THE EXECUTION PETIT ION

7. In the meantime, the respondent had instituted execution

proceedings on 24.01.2022 seeking enforcement of the Award

dated 13.06.2019. By an application dated 05.03.2022, the

respondent sought withdrawal of the sum of Rs. 73,20,003/-

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(Rupees Seventy-Three Lakh Twenty Thousand and Three only)

already deposited by the appellant along with the interest

accrued thereon. The appellant resisted the prayer, contending

that its appeal under Section 37 of the 1996 Act stood reserved

for orders, and filed a reply objecting to such withdrawal.

8. By an order dated 23.03.2022, the executing court directed the

appellant to deposit the balance sum with the Registry within

four weeks. The appellant having failed to comply, the Court

on 27.04.2022 recorded the appellant’s statement that it would

deposit the demand draft in its possession by the following day.

In compliance therewith, the appellant deposited the balance

sum of Rs.1,53,17,792/- (Rupees One Crore Fifty-Three Lakh

Seventeen Thousand Seven Hundred and Ninety-Two only) by

two demand drafts dated 26.04.2022.

9. Upon dismissal of the Section 37 appeal, the executing court,

by an order dated 07.07.2022 , on respondent’s request,

permitted the release of Rs. One Crore in favour of the

respondent, but subjected such release to the respondent

furnishing security in the form of title deeds of immovable

property. The appellant opposed this conditional release on the

ground that it was in the process of filing a Special Leave

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Petition. Although, the respondent tendered five title deeds by

way of security, it soon found itself unable to part with them.

By an order dated 19.07.2022, the High Court recorded that

the respondent, being in serious financial difficulty and

needing to raise funds to save its properties from auction, was

no longer pressing for release of the Rs. One Crore, and

accordingly directed return of the title deeds.

10. By an order dated 27.07.2022, the executing Court took note

of the respondent’s submission that, the Award having been

upheld and there being no subsisting stay, it ought to be

permitted to withdraw the amount without furnishing security.

Even so, the court deferred the matter to afford the appellant

a final opportunity to approach this Court.

11. That opportunity too came to nought. On 26.08.2022, this

Court dismissed the appellant’s Special Leave Petition filed

against the judgment dated 31.05.2022. The respondent

renewed its prayer for release by filing an application on

22.08.2022 seeking a direction to release the amount. The

executing court by its order dated 08.09.2022, took note of the

dismissal of the Special Leave Petition, and held that the Award

had attained finality. The Court directed the release of the

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amount, and the appellant, for the first time, did not object to

such release. The compliance of the aforesaid direction was

recorded in the order dated 14.09.2022. The controversy thus

narrowed to a single surviving question: whether the appellant

is liable to pay interest for the period between 13.06.2019 and

08.09.2022.

IMPUGNED ORDER

12. By the impugned order dated 05.08.2024, the executing court

held that although the awarded sum had been deposited by

the appellant in two tranches, it was, in truth, never available

to the decree-holder for its use and enjoyment, precisely

because the appellant had resisted its release at every stage.

The court noted that the decretal amount became available to

the respondent only on 08.09.2022. The Court further noted

that in view of Order XXI Rules 1 and 4 of the Code of Civil

Procedure, 1908 (‘Code’), conditional deposits are never to be

construed as payments by the judgment-debtor in satisfaction

of the decretal amount. The executing court, therefore, directed

the appellant to pay interest at the rate of 12% per annum from

13.06.2019 till 08.09.2022, and disposed of the execution

petition accordingly.

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13. It is in this factual setting that the appeal arises. During its

pendency, this Court by an order dated 25.03.2026 permitted

release of the interest that had accrued on the monies lying

deposited in the High Court, and the High Court, by order

dated 30.04.2026, allowed the respondent’s application in that

regard.

SUBMISSIONS

14. Mr. Yashvardhan, learned counsel for the appellant, has made

the following submissions: (i) the deposit of the awarded

amount signifies satisfaction of the award. In support of

aforesaid submission reliance was placed on the decisions of

this Court

2

, (ii) in case of partial deposit of the awarded

amount, interest will cease to run on the amount deposited in

the Court. In this connection, reference has been made to a

decision of this Court

3

, (iii) the award holder shall be entitled

only to interest accrued on the deposited amount in terms of

the fixed deposit. In support of aforesaid proposition, reliance

is placed on a decision of this Court

4

, (iv) reliance on Order XXI

2

Himachal Pradesh Housing and Urban Development Authority & Anr. v. Ranjit Singh Rana,

(2012) 4 SCC 505; Union of India & Anr. v. M.P. Trading and Investment RAC. Corporation Limited,

(2016) 16 SCC 699; Union of India v. Concrete Products and Construction Company & Ors.,

(2014) 4 SCC 416.

3

Concrete Products and Construction Company & Ors. (supra)

4

Concrete Products and Construction Company & Ors. (supra)

9

Rules 1 (1) and (4) of the Code is misplaced as the 1996 Act is

a self-contained code and the applicability of the general law is

impliedly excluded. A reference was made to the decisions of

this Court

5

, (v) it was pointed out that even though the

appellant had deposited a sum of Rs. 73,20,003/ - on

25.11.2019, yet no application was made seeking withdrawal

till 14.02.2022.

15. It was accordingly urged that the appellant is not liable to pay

interest on the deposited sum, at any rate for the period

between 25.11.2019 till 14.02.2022. He also submitted that to

obviate any loss or difficulty faced by the respondent,

directions contained in Paragraph No. 40 of a decision of this

Court

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must be given effect to forthwith.

16. Mr. Ashutosh Kumar, learned counsel for the respondent,

submitted that in compliance with the order dated 16.10.2019

passed by the High Court, the appellant deposited a sum of Rs.

73,20,003/-. It was contended that the aforesaid amount was

neither deposited to satisfy the award nor was the same made

available to the respondent. It was urged that the benefit of the

5

Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333; Sundaram Finance Limited &

Anr. v. T. Thankam, (2015) 14 SCC 444; Sundaram Finance Ltd. v. Abdul Samad & Anr., (2018) 3

SCC 622; and Pam Developments Private Ltd. v. State of West Bengal, (2019) 8 SCC 112.

6

K.L. Suneja & Anr. v. Dr. Manjeet Kaur Monga (Dead) Through her LR & Anr., (2023) 6 SCC 722.

10

cessation of interest liability under Order XXI Rule 1 of the

Code would not be available to the appellant as he opposed the

release of amount to the respondent. It was pointed out that

only on 07.07.2022, the High Court permitted the partial

release of an amount of Rs. 1 crore against furnishing security

in the form of title deeds of immovable properties which does

not amount to satisfaction of the award and therefore the

benefit of Order XXI Rule 1 of the Code is not available to the

appellant.

17. In the alternative, it was contended that, in any case, the

benefit of interest would accrue on principal amount of the

award till 08.09.2022, that is, the date on which the amount

deposited by the appellant was permitted to be withdrawn

unconditionally. Reference has also been made to the report of

Expert Committee headed by Dr. T.K. Viswanathan. In support

of the aforesaid submissions, reliance has been placed on the

decisions of this Court

7

.

RELEVANT STATUTORY PROVISIONS

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P.S.L. Ramanathan Chettiar & Ors. v. O.R.M.P.R.M. Ramanathan Chettiar, 1968 SCC OnLine SC

28; K.L. Suneja & Anr. (supra); Nepa Ltd. through its Senior Manager (Legal) v. Manoj Kumar

Agrawal, 2022 SCC OnLine SC 1736; Delhi Development Authority v. Bhai Sardar Singh & Sons,

2020 SCC OnLine SC 1450; and DLF Limited & Anr. v. Koncar Generators & Motors Limited (2025)

1 SCC 343.

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18. Undoubtedly, the 1996 Act which consolidates, amends and

develops the law relating to arbitration, to bring it as much as

possible, in harmony with UNCITRAL model , is a self-

contained code. However, the 1996 Act itself incorporates the

principles of the provisions of the Code. Section 36 of the 1996

Act deals with the enforcement of Arbitral Awards. Section

36(1) of the 1996 Act creates a legal fiction by providing that

an award shall be enforced in accordance with the Code in the

same manner as if it were a decree of the court. For the limited

purpose of enforcement of the Award, an arbitration Award is

treated as if it were a decree. It is well-settled in law that the

court while construing the legal fiction should not extend the

fiction beyond the purpose for which it was created. Therefore,

an Award remains an Award and does not become a decree

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.

Section 36(3) of the 1996 Act mandates that the Court, while

considering the application for grant of stay in case of an

Arbitral Award for payment of money, shall have due regard to

the provision of grant of stay of a money decree under the

8

Paramjeet Singh Patheja v. ICDS Ltd.; (2006) 13 SCC 322 and Sundaram Finance Ltd. v. Abdul

Samad (supra).

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provisions of the Code. The relevant extract of Section 36 of

the 1996 Act reads as under:

“36. Enforcement.—(1) Where the time for

making an application to set aside the arbitral

award under section 34 has expired, then,

subject to the provisions of sub-section (2), such

award shall be enforced in accordance with the

provisions of the Code of Civil Procedure, 1908

(5 of 1908), in the same manner as if it were a

decree of the court.

(2) Where an application to set aside the arbitral

award has been filed in the Court under section

34, the filing of such an application shall not by

itself render that award unenforceable, unless

the Court grants an order of stay of the

operation of the said arbitral award in

accordance with the provisions of sub-section

(3), on a separate application made for that

purpose.

(3) Upon filing of an application under sub-

section (2) for stay of the operation of the

arbitral award, the Court may, subject to such

conditions as it may deem fit, grant stay of the

operation of such award for reasons to be

recorded in writing:

Provided that the Court shall, while considering

the application for grant of stay in the case of an

arbitral award for payment of money, have due

regard to the provisions for grant of stay of a

money decree under the provisions of the Code

of Civil Procedure, 1908 (5 of 1908).

Provided further that where the Court is

satisfied that a Prima facie case is made out

that, —

(a) the arbitration agreement or contract which

is the basis of the award; or

(b) the making of the award,

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was induced or effected by fraud or corruption,

it shall stay the award unconditionally pending

disposal of the challenge under section 34 to the

award.”

18.1. Order XXI of the Code deals with execution of decrees and

orders. Order XXI Rule 1 of the Code recognizes following three

modes of payment of money under the decree:

“1. Modes of paying money under decree. —

(1) All money, payable under a decree shall be

paid as follows, namely:—

(a) by deposit into the court whose duty it is to

execute the decree, or sent to that Court by

postal money order or through a bank; or

(b) out of Court, to the decree-holder by postal

money order or through a bank or by any other

mode wherein payment is evidenced in writing;

or

(c) otherwise, as the Court which made the

decree, directs.”

18.2. Order XXI Rule 1 sub-Rules (4) and (5) of the Code which are

relevant for the purposes of controversy involved in this appeal

are extracted below for the facility of reference:

“(4) On any amount paid under clause (a) or

clause (c) of sub-rule (1), interest, if any, shall

cease to run from the date of service of the

notice referred to in sub-rule (2).

(5) On any amount paid under clause (b) of

sub-rule (1), interest, if any, shall cease to run

from the date of such payment:

Provided that, where the decree-holder refuses

to accept the postal money order or payment

through a bank, interest shall cease to run

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from the date on which the money was

tendered to him, or where he avoids acceptance

of the postal money order or payment through

bank, interest shall cease to run from the date

on which the money would have been tendered

to him in the ordinary course of business of the

postal authorities or the bank, as the case may

be.”

18.3 Order XXI Rule 1(5) of the Code provides for cessation of

interest in following cases; (i) where the decree-holder refuses

to accept postal money order or payment through a bank,

interest shall cease to run from the date on which money was

tendered to him, (ii) where he avoids acceptance of the postal

money order or payment through bank, interest shall cease to

run from the date on which money would have been tendered

to him in the ordinary course of business of the postal

authorities or the bank. If the deposit has been made available

to the Award-holder/Decree-holder, it must take timely action

for withdrawal of the amount.

18.4 Order XLI Rule 5 of the Code deals with stay of proceedings of

execution. Order XLI Rule 5(3) of the Code mandates that no

order for stay of execution shall be made unless conditions

mentioned in Clauses (a) to (c) are satisfied. Order XLI Rule

5(3) of the Code reads as under:

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“(3) No order for stay of execution shall be

made under sub-rule (1) or sub-rule (2) unless

the Court making it is satisfied— (a) that

substantial loss may result to the party

applying for stay of execution unless the order

is made; (b) that the application has been made

without unreasonable delay; and (c) that

security has been given by the applicant for the

due performance of such decree or order as

may ultimately be binding upon him.”

18.5 Order XLI Rule 6 of the Code deals with security in case of

order for execution of decree appealed from. Order XLI Rule

6(1) of the Code is reproduced below for the facility of the

reference:

“6. Security in case of order for execution of

decree appealed from.—(1) Where an order is

made for the execution of a decree from which

an appeal is pending, the Court which passed

the decree shall, on sufficient cause being

shown by the appellant, require security to be

taken for the restitution of any property which

may be or has been taken in execution of the

decree or for the payment of the value of such

property and for the due performance of the

decree or order of the Appellate Court, or the

Appellate Court may for like cause direct the

Court which passed the decree to take such

security.”

ISSUES

19. The issues which arise for consideration in this appeal are as

under: (i) whether an Award-Debtor is liable to pay interest on

the amount deposited by it in accordance with Order XXI Rule

16

1 of the Code before the Court? and (ii) whether the deposit

was made by the appellant in accordance with Order XXI Rule

1 of the Code and therefore, its liability to pay interest had

ceased?

ANALYSIS

20. The question as to how Order XXI Rule 1 ought to be

interpreted and the subsequent interest calculation when the

defendant/judgment-debtor/award-debtor deposits either

some or the entirety of the amount with a court , was

considered in extensive detail by a Constitution Bench of this

Court in Gurpreet Singh v. Union of India

9. The Constitution

Bench noted that interest with respect to any decretal deposit

made into a court ceases to run from the date when the

depositor serves a notice to the plaintiff/decree-holder/award-

holder or, if the payment is tendered outside court, such

payment is refused. The relevant portions of the Constitution

Bench’s judgment are extracted below for ready reference:

“15. Order 21 Rule 1 provides the modes of

paying money under a decree. It stipulates that

all monies payable under a decree shall be paid:

(a) by deposit into the court whose duty it is to

execute the decree, or (b) out of court, to the

9

(2006) 8 SCC 457.

17

decree-holder in the manner provided, or (c)

otherwise, as the court which made the decree

directs. Sub-rule (2) provides that where a

payment is made by deposit into the court or as

directed in the decree, the judgment-debtor

shall give notice thereof to the decree-holder

either through the court or directly to him by

registered post acknowledgment due. On any

amount paid by way of deposit into the court or

as directed under the decree, interest, if any,

shall cease to run from the date of the service of

the notice referred to in sub-rule (2). Thus,

Order 21 Rule 1 after its amendment in the year

1976 also contemplates the deposit of the decree

amount into court and the giving of notice

thereof to the decree-holder and provides

further for cessation of interest from the date of

notice to the decree-holder of such deposit.”

25. In the Objects and Reasons for amendment

of Order 21 Rule 1, it was set out as follows:

“The Committee notes that there is no provision

in the Code in relation to cessation of interest

on the money paid under a decree, out of court,

to a decree-holder, by postal money order or

through a bank or by any other mode wherein

payment is evidenced in writing. The Committee

is of the view that, in such a case, the interest

should cease to run from the date of such

payment. In case the decree-holder refuses to

accept the postal money order or payment

through a bank, interest should cease to run

from the date on which the money was tendered

to him in ordinary course of business of the

postal authorities or the bank. Sub-rule (5) in

Rule 1 Order 21 has been inserted accordingly.”

The legislative intent in enacting sub-rules (4)

and (5) is therefore clear and it is that interest

should cease on the deposit being made and

notice given or on the amount being tendered

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outside the court in the manner provided.

Mulla in his Commentary on the Code of Civil

Procedure, 15th Edn., Vol. II at p. 1583 has set

out the effect of the rules as follows:

“Normal rule with respect to money decree is (i)

the appropriation of payments towards

satisfaction of interest in the first instance, and

(ii) then towards principal amount. But this

became inoperative, after the amendment of

Rule 1 Order 21 CPC. Section 60 of the

Contract Act cannot be invoked for the

application of the aforesaid normal rule.”

26. Thus, in cases of execution of money

decrees or award- decrees, or rather, decrees

other than mortgage decrees, interest ceases to

run on the amount deposited, to the extent of

the deposit. It is true that if the amount falls

short, the decree-holder may be entitled to

apply the rule of appropriation by

appropriating the amount first towards the

interest, then towards the costs and then

towards the principal amount due under the

decree. But the fact remains that to the extent

of the deposit, no further interest is payable

thereon to the decree-holder and there is no

question of the decree-holder claiming a

reappropriation when it is found that more

amounts are due to him and the same is also

deposited by the judgment-debtor. In other

words, the scheme does not contemplate a

reopening of the satisfaction to the extent it has

occurred by the deposit. No further interest

would run on the sum appropriated towards

the principal.”

21. The issue whether a deposit has been made in consonance

with Order XXI Rule 1 of the Code was considered by a three-

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Judge Bench of this Court

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wherein it was held that the real

effect of deposit of money in the court is to put the money

beyond the reach of parties pending disposal of an appeal. It

was further held that if the decree-holder was permitted to

withdraw the amount only on furnishing security, means that

payment was not made in satisfaction of the decree. In order

to make a deposit in consonance with Order XXI Rule 1 of the

Code, the same has to be unconditional and decree -holder

must be free to withdraw the same whenever he pleases. It was

also held that if a deposit is not made in terms of Order XXI

Rule 1 of the Code, the interest continues to run on the amount

after the deposit.

22. A two-Judge Bench of this Court

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without noticing the

aforesaid decision rendered by a three-Judge Bench of this

Court in P.S.L. Ramanathan Chettiar & Others (supra),

held that expression “payment” in the context of Section

37(1)(b) of the 1996 Act means extinguishment of liability

arising under the award and signifies satisfaction of the award.

It was further held that the deposit of the award amount is

10

P.S.L. Ramanathan Chettiar & Ors. (supra)

11

Himachal Pradesh Housing and Urban Development Authority and Another (supra).

20

nothing but a payment to the credit of decree-holder. The

aforesaid view was reiterated by another two-Judge Bench of

this Court

12

. While another three-Judge Bench of this Court

13

and a two-Judge Bench of this Court

14

reiterated the principle

laid down in P.S.L. Ramanathan Chettiar & Others (supra).

23. A two-Judge Bench of this Court

15

, has held that provisions of

Order XXI of the Code embody a sound policy principle that if

the amount is deposited or paid to the decree-holder or person

entitled to it, the person entitled to amount cannot later seek

interest on it. The said principle requires the debtor to ensure

that amount payable is placed at the disposal of the person

entitled to receive it. This Court also emphasised that all courts

and judicial forums should frame guidelines providing that

where the amounts are deposited with the office/registry of the

court/tribunal, such amounts should mandatorily be

deposited in a bank or some financial institution to ensure that

no loss is caused in the future. It was further held that the

guidelines should be embodied in the form of appropriate

12

M.P. Trading and Investment RAC. Corporation Limited (supra).

13

Delhi Development Authority v. Bhai Sardar Singh and Sons (supra)

14

Nepa Limited (supra).

15

K.L. Suneja (supra).

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rules, or regulations of each court, tribunal, commission,

authority, agency etc., exercising adjudicatory power.

24. Finally, in a recent judgment in DLF Ltd. & Anr. v. Koncar

Generators and Motors Ltd. (supra), one of us (P.S.

Narasimha, J) had the opportunity to trace the evolution of

judicial interpretation with respect to Order XXI Rule 1. The

two-Judge Bench of this Court concluded that the key

question, with respect to the calculation of interest vis-à-vis a

decretal deposit in a court, is whether the decree -

holder/award-holder could freely withdraw the same. The

relevant portion of this Court’s holding on that point is

extracted below:

“44. These cases demonstrate that once there is

a deposit by the award debtor and the award-

holder is permitted to withdraw the same, even

if such withdrawal is conditional and subject to

the final decision in the matter, the court must

consider that the award-holder could access

and benefit from such deposit. It is then the

burden of the award-holder to furnish security,

as required by the court’s orders, to utilise the

amount or to make an application for

modification of the condition if it is unable to

fulfil the same.”

25. From the foregoing authorities, the following principles may be

distilled:

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(i) The 1996 Act is a self-contained code. Section 36(1)

contains a legal fiction by which Award passed under the

1996 Act is made executable as if it were a decree of the

court.

(ii) Section 36(3) of the 1996 Act provides that the court while

dealing with an application of stay of an Arbitral Award for

payment of money shall have due regard to provisions for

grant of stay of money decree under the Code.

(iii) The real effect of deposit of money in the court is to put the

money beyond the reach of the parties.

(iv) A deposit of the amount in the court has to be made

unconditionally and the same must be available to the

decree-holder for withdrawal, in order to make the deposit

in consonance with Order XXI Rule 1 of the Code.

(v) If the Decree-Holder is permitted to withdraw the amount

only on furnishing security, it amounts to payment not

made in the satisfaction of the decree and not in

accordance with Order XXI Rule 1 of the Code.

(vi) If the deposit is not made in terms of Order XXI Rule 1 of

the Code, the interest continues to run on the amount after

the deposit.

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(vii) A decree-holder cannot claim interest on deposit if he fails

to take any action seeking withdrawal of the amount. Such

inaction shall be treated as deemed refusal of the tender of

the amount.

(viii) Where the sum deposited by the Judgment-debtor is

converted and is held as fixed deposit at Decree-holder’s

own request, he shall only be entitled to interest accrued

on such fixed deposit.

(ix) Where only a part of outstanding sum is deposited or

tendered which is available for withdrawal by the Award-

holder/Decree-holder unconditionally, accrual of interest

shall cease only on such deposit, and the remaining part

will continue to attract interest at the applicable rate.

26. In the backdrop of aforesaid legal principles, we may advert to

the facts of the case in hand. An award was passed on

13.06.2019 in favour of the respondent. In compliance with the

interim order dated 16.10.2019 passed in a petition under

Section 34 of 1996 Act, the appellant on 25.11.2019 deposited

a sum of Rs.73,20,003/-. The said deposit was made solely to

obtain stay of enforcement of the Award pending Section 34

petition and was not accompanied by a notice under Order XXI

24

Rule 1(2) of the Code. Pursuant to dismissal of appellant’s 34

objection petition on 05.01.2022, the respondent filed an I.A.

on 14.02.2022. The appellant resisted the application for

withdrawal of the amount even after dismissal of the petition

under Section 34 of the 1996 Act and even during the

pendency of the appeal under Section 37 of the 1996 Act.

27. The High Court by an interim order dated 17.02.2022 took up

the I.A. and directed that such deposit shall be considered as

deposit in execution proceeding. On 26.04.2022, the appellant

deposited the balance sum of Rs. 1,53,17,792/- (Rupees One

Crore Fifty-Three Lakh Seventeen Thousand Seven Hundred

Ninety-Two only). The appellant resisted the aforesaid

application. The executing court, by an order 07.07.2022

permitted withdrawal of a sum of Rs. One Crore subject to

deposit of title deeds. The respondent did not withdraw the

amount and sought release of the title deeds as it was facing

severe financial crisis and had to raise funds to save its

properties from getting auctioned. Thus, from the aforesaid

narration of facts, it is evident that the deposit made by the

appellant was not in accordance with Order XXI Rule 1 of the

25

Code and the respondent was not free to withdraw the same

unconditionally.

28. For the aforementioned reasons, the first issue is answered in

the affirmative by stating that if payment is made by an Award-

Debtor in accordance with Order XXI Rule 1 of the Code, the

liability to pay interest on such deposit ceases. The appellant

in the instant case did not make the deposit in consonance

with Order XXI Rule 1 of the Code, and therefore, liability to

pay interest did not cease. The second issue is answered

accordingly.

29. In so far as reliance placed by the appellant on the decision of

this Court

16

, is concerned, suffice it to say that same is of no

assistance to the appellant in the facts of this case, as

judgment-debtor in the said case had deposited the entire

amount in the court due under the Award. Therefore, a two-

Judge Bench of this Court held that deposit of entire amount

in the court is nothing but payment to the credit of decree-

holder. In the instant case, the appellant never deposited the

whole amount. Similarly, the decision of this Court

17

has no

application to the instant factual matrix as the said case was

16

Himachal Pradesh Housing and Urban Development Authority & Another (supra)

17

Concrete Products and Construction Company & Ors. (supra)

26

decided on the basis of contractual terms barring claims for

interest in respect of withheld amounts. In another decision

relied upon by the appellant

18

, the judgment-debtor had

deposited the principal amount in court, and the decree-holder

had requested that the deposit be retained as fixed deposit.

Therefore, the aforesaid decision also has no application to the

case in hand.

30. Disputes of the nature arising in the present case arise with

sufficient frequency to necessitate a clearer and more uniform

approach to the deposit, investment and adjustment of interest

accruing on such deposits during the pendency of appeals.

31. Therefore, it is necessary to evolve a consistent normative

principle by which: (a) decretal amounts are to be deposited in

courts/tribunals pending disposal of an appeal and the

method by which interest accrued thereon is to be accounted

when the cases are finally decided, (b) the deposited amount

secures interest of the decree-holder and also the judgment-

debtor in terms of the mounting interest liability on the decreed

amount, and (c) a standard principle by which such deposits

18

M.P. Trading and Investment RAC Corp. Ltd., (supra).

27

and interest accrued thereon get adjusted in the final

settlement.

32. There is neither a statutory prescription nor a rule/regulation

to be followed. At the same time, instead of evolving consistent

principles, courts/tribunals have passed orders on a case-to-

case basis leading to a great amount of disparity and

inconsistency.

THE PROBLEM OF ASYMMETRY IN HANDLING OF

DEPOSITS BY COURTS/TRIBUNALS

33. The consequences of the absence of a normative rule, coupled

with inconsistency in the orders passed by courts/ tribunals,

have led to asymmetry in: (a) the manner in which the financial

interests of the parties involved in litigation are secured,

including the nature of the protection afforded to the party

seeking enforcement and the corresponding burden imposed

upon the party challenging the decree or award, (b) the amount

of the decretal sum which the court/tribunal requires a

Judgment/Award-Debtor to deposit as a condition for stay of

the decree, (c) the financial institutions or the banks in which

the monies are to be deposited, (d) the criteria governing the

selection of that institution and also the financial instrument

28

in which the deposit is to be made and held, (e) the method by

which the courts/tribunals administer, transfer and supervise

the deposits into banks or other financial institution s,

including the time taken between receipt of the deposit and its

investment, tenure of the deposit, terms of withdrawal, renewal

and reinvestment, (f) the rate of interest that the deposited

money earns, the terms on which the rate of interest is

finalized and (g) the adjustment of the interest earned on the

deposit with the terms of decree or award.

34. This asymmetry, coupled with the varied orders passed by the

courts, on a case-by-case basis in accordance with the facts

and circumstances of each case, leaves several concerns

unaddressed such as:

(i) The decree-holder, despite having obtained a

favourable decree, is unable to use the decretal

money, as the terms of withdrawal are entirely

based on the discretion of the Court/Tribunal that

ordered the deposit. A lack of standardization does

not allow the decree-holder to plan his financial

outlays in a clear manner, as the money which he is

entitled to, is put into a deposit, out of his control.

29

This is also a loss of the opportunity cost of the

alternative economic use of that money;

(ii) The Judgment-Debtor, upon making the deposit,

parts with the use and control of the money. While

it proves beneficial for securing a stay, the liability

of maintaining this deposit will not enure to its

benefit in the long run. A Judgment/Award-Debtor

gets benefit of the deposit only when the amount is

generally released to the Decree/Award-Holder, and

not otherwise;

(iii) Differences in the administration of deposits by

Courts/Tribunals result in similarly situated parties

receiving materially different treatment depending

on the forum in which their proceedings are

pending;

(iv) Absence of a common and comprehensive legal

framework, uncertainty concerning the

administration of the deposit and its interest

earnings, generate further litigation even after the

underlying dispute has been finally decided; and

30

(v) The lack of common standards and consistent

principles are resulting in repeated determinations

of routine questions concerning investment,

renewal, quantum, accounting and interest on

deposits, thereby increasing the burden on

Courts/Tribunals.

PREVIOUS INSTANCES OF ATTEMPTS MADE TO

STANDARDIZE THRESHOLDS FOR DEPOSITS TO BE MADE:

35. In this very context, taking note of this situation, this Court in

K.L. Suneja and Anr. v. Dr. (Mrs.) Manjeet Kaur Monga (D)

Through Her LR and Anr.

19 had made an important

observation regarding having a uniform process of investing the

money deposits made by litigants into the Registry of different

Courts/Tribunals. Advocating that the money amounts

deposited in the courts/tribunals be held in a financial

institution or a bank, this Court observed that:

“35. ….this Court is of the opinion that all

courts and judicial forums should frame

guidelines in cases where amounts are

deposited with the office/registry of the

court/tribunal. Such amounts should

mandatorily be deposited in a bank or some

19

2023 INSC 89, para. 35.

31

financial institution to ensure that no loss is

caused in the future. Such guidelines should

also cover situations where the concerned

litigant merely files the instrument (Pay Order,

Demand Draft, Banker’s Cheque, etc.) without

seeking any order, so as to avoid situations like

the present case. These guidelines should be

embodied in the form of appropriate rules, or

regulations of each court, tribunal, commission,

authority, agency, etc. exercising adjudicatory

power.”

(emphasis supplied)

36. The need for standardisation with respect to the amount to be

deposited in the context of Section 36 of the 1996 Act was also

recommended by the Dr. T. K. Vishwanathan Committee. An

amendment to Section 36(3) was suggested by way of adding

two new provisos in order to bring uniformity in the amount of

money that the courts require a litigant to deposit while

challenging an award and in the time when interest accrues on

such deposits being made:

“It is proposed to amend sub section (3) of section

36 to insert two provisos before the second proviso

to provide: -

(i) that the Court may grant stay of the arbitral

award upon deposit of 50% of the principal amount

awarded and the furnishing of security for the

remaining sum awarded, with interest accrued up

to the date of furnishing security.

(ii) that in the event of deposit being made of

such amount as directed by the Court, or in the

event of such higher amount at the option of the

party making the deposit, further interest on the

amount so deposited shall cease only in the event of

32

unconditional withdrawal of the deposited amount

by the other party.”

(emphasis supplied)

CURRENT POSITION IN DIFFERENT HIGH COURTS

37. Despite these directions and recommendations, little effort has

been made towards the standardization and uniformization of

the approach by which the payments made into

courts/tribunals are to be dealt with. For instance, the Delhi

High Court (Original Side Rules), 2018 provides that the money

deposited is to be held by the Registry in a fixed deposit

20

.

While the Allahabad High Court Rules, 1952 provide for a

similar method, wherein the deposit made by a litigant into the

Court is to be held by the State Bank of India, no further

method or manner of how the money is to be deposited or is to

be put to use is codified

21

.

20

Chapter XXII - Court Deposit and Payments

Rule 1 - Payment of Money - (a) The Registrar, and subject to his directions, any other officer of

the Court shall receive all monies paid into the Court and shall pay out all monies duly ordered

to be paid out of Court. All money received in Court shall be kept in fixed deposit for a

reasonable period, subject to the orders which may be passed by the Court.

21

Part VIII, Chapter XXXVI - Deposit and Repayment of Money, Allahabad High Court Rules, 1952

Rule 7 - Deposit to be sent to State Bank of India :- Sums deposited under heads (1) (3) and (4) of

Rule 1 shall be entered at once in their respective receipt registers and sent to the State Bank

of India daily along with the pass book and a duplicate copy of the entries made therein. The

copy shall after comparison with the passbook be retained by the Bank and forwarded to the

Treasury in due course, the passbook being returned to the Court.

33

38. In the case of the Bombay High Court, while any payment made

into the Court is to be held by the Prothonotary and the Senior

Master or the Sheriff, as the case may be, with no mention of

any further investment of such monies

22

, subsequent judicial

pronouncements have made it a practice to direct the concerned

Court Official to deposit such monies in a fixed deposit of a

Nationalized Bank

23

. Similar judicial interventions were made

by the Punjab and Haryana High Court, by which all the

executing courts were directed to deposit the monies paid by

litigants into fixed deposits of Nationalized Banks

24

. Even this

Court uses the mechanism of investing monies deposited with

it by litigants into government deposits of Nationalized Banks,

22

Chapter XXII - Execution of Decrees and Orders, Bombay High Court (Original Side) Rules,

1980

Rule 335 - Payment into Court when to be made:- Payment of money into Court in satisfaction

of a decree or order shall be made to the Prothonotary and Senior Master, if warrants in

execution have not been issued or if they have been issued but have not been lodged with the

Sheriff, and the Prothonotary and Senior Master shall enter satisfaction protanto upon the

decree or order. The Prothonotary and Senior Master shall then, at the request of the judgment-

creditor, pay the money to him.

23

Daman Hospitality (P) Ltd. v. R & S Investment A.G. Wollerau, 2021 SCC OnLine Bom 7781,

para. 1; Sunita Jain v. J.V. Construction & Developers, 2019 SCC OnLine Bom 6621, para. 4 and

Rekha Jayant Khandait v. State of Maharashtra, 2025 SCC OnLine Bom 2002, para 3.

24

Pradeep Kumar Kuldeep Kumar v. Shiv Lal Raj Kumar & Commission Agent, 2026 SCC OnLine

P&H 200035, para 29. Relevant Observations are as follows:

“In addition to the aforesaid directions, this Court deems it necessary to direct the executing courts

in the States of Punjab, Haryana and U.T., Chandigarh that the amounts received in execution

proceedings be immediately deposited with nationalized bank instead of keeping the same idle. This

will ensure that the parties are not at loss due to act of court. Money deposited in execution shall be

deposited in interest bearing Fixed Deposits with a nationalized bank. Fixed Deposit should be

transferred to the party entitled. Party concerned may withdraw the interest or continue with the fixed

deposit.

34

as approved by the Chief Justice of India, which is decided

through an open tender, with preference being given to the bank

providing the highest rate of interest

25

.

39. On the other hand, the Calcutta High Court follows a different

method, whereby it is mandated that any sum of money

deposited by a litigant in the Accountant General’s Office shall

be held with the Reserve Bank of India. A similar approach is

taken by the Madras High Court, whereby any person paying

money into the Court must obtain a challan from the Section

Officer, enabling the person to deposit the money in the Suitors

Funds Accounts of the Reserve Bank of India

26

, which in turn

is to be held in the form of a government security as mentioned

in Appendix IV of the Rules

27

. The types of securities mentioned

25

Order XIV, Supreme Court Rules, 2013

Rule 1 - Unless otherwise ordered, all moneys directed to be paid into this Court to the credit of

any suit, appeal or other proceeding, shall be paid into the UCO Bank, Supreme Court

Compound, New Delhi (or any other Nationalised Bank(s), as may be directed by the Chief

Justice from time to time) (hereinafter referred to as ‘the Bank’), into an account entitled

‘Government A/c-P-Deposits and Advances-II Deposits Not Bearing Int.-(C) other Deposits

A/cs.-Deptl. and Judicial Deposits-Civil Deposits-Civil Court Deposits’.

26

Chapter XVI - Rules of The High Court At Calcutta (Original Side), 1914

Rule 12 - Unless the Court or a Judge shall otherwise direct, every decree or order for payment

of money or delivery of securities into Court shall direct such money to be paid, into the Reserve

Bank of India at Calcutta, and securities to be endorsed and delivered over to the Financial

Secretary to the Government of West Bengal and the Secretary and Treasurer for the time being

of the State Bank of India (or such other officer or officers as shall, for the time being, have the

custody of the funds of suitors), with the privity of the Accountant-General of the Court.

27

Order XXXI, Rules of the High Court, Madras, Original Side, Rules, 1994

Rule 2 - Any person desirous of paying money into Court under a decree or order of Court shall

present a lodgment schedule to the Section Officer of the Accounts Department of the High

35

in the appendix range from shares and debentures of State or

Central Public Sector companies, securities issued for money by

Central, State or Municipal Governments, fixed deposits in

schedule, cooperative and nationalized banks, first mortgages

of immovable property situated in India and financial

institutions of Tamil Nadu such as the Transport Development

Finance Corporation and the Housing Development Finance

Corporation. As discussed above, a survey of these rules

indicates that there exists a problem of asymmetry in the way

in which any money, once deposited into the Court, is to be

handled.

STANDARDIZATION OF COURT DEPOSIT ADMINISTRATION

AS A FACET OF THE PRINCIPLE OF TIME VALUE OF MONEY

40. To understand why there is a requirement to standardise the

manner in which money deposited in courts is to be handled, it

is important to examine the concept of the time value of money.

Court for the issue of a challan to enable the party to make payment into the Reserve Bank of

India, with a copy of the decree or order directing the payment of money into Court.

Rule 8 - The Registrar, Original Side shall make in a register to be kept by him causewise,

hereinafter referred to as the money order book, an entry of every decree or order for transfer

of money or effects from civil courts deposits to the Suitors' Fund Account in the Reserve Bank

of India for investment in securities referred to in Appendix IV of these rules, or for delivery into

or out of the Reserve Bank of India of any securities, or for sale of such securities, and shall

before delivery of the copy of the decree or order to the person or persons entitled to the same

or his or their advocate, mark “entered” at the foot of such copy and subscribe his name

thereto.

36

Simply put, the time value of money is a proposition that a sum

of money deposited today would be worth more than the same

amount receivable at a future date, leading to an opportunity

cost.

28

This opportunity cost faced by the depositor, along with

the pressure of inflation and economic uncertainties, is

remedied by the provision of a clear rate of interest on that

amount of money deposited.

29

In order to preserve the economic

integrity of any deposit and to provide interest, there must be

clarity and uniformity in the method and manner in which the

deposit itself is handled. Lack of standardisation in the process

by which sums deposited into the court are to be handled

undermines this essential underlying principle of the time value

of money as well as the accrual of interest in a certain and clear

manner.

41. This practice of standardisation must take place through a

common platform wherein monies deposited in different

Courts/Tribunals are pooled into one unified scheme and then

accordingly put into the most beneficial financial instrument for

28

Frank Fabozzi, The Handbook on Fixed Income Securities (McGraw Hill, 2005), Appendix A-

Time Value of Money, p. 1443

29

Ashwath Damodaran, “Time Value of Money”, (Stern School of Business, New York University,

2000), https://pages.stern.nyu.edu/~adamodar/pdfiles/papers/pv.pdf

37

the litigating parties. This common platform will not only create

certainty in the interest rates and increase the ease of

accessibility for litigants but will also ease the burden on

Courts/Tribunals regarding how this money deposited is to be

invested and dealt with.

COMPARITIVE PERSPECTIVES: POSITION OF THE UNITED

STATES AND CANADA

42. A common pooling system has been developed by the United

States for the Federal Courts called the Court Registry

Investment System (CRIS). As per Title 28 USC Section 2041

read with Rule 67 of the Federal Rules of Civil Procedure

30

, any

deposit of money made in pending or adjudicated cases in any

court of the United States shall be deposited with the Treasurer

of the United States or a designated depository. Under the same

statute, as per Section 2045, this designated authority is the

Director of the Administrative Office of the United States Courts

who has been entrusted with the power to request the Treasury

30

Title 28 U.S.C. § 2041 Deposit of moneys in pending or adjudicated cases: All moneys paid into

any court of the United States, or received by the officers thereof, in any case pending or

adjudicated in such court, shall be forthwith deposited with the Treasurer of the United States

or a designated depositary, in the name and to the credit of such court. This section shall not

prevent the delivery of any such money to the rightful owners upon security, according to

agreement of parties, under the direction of the court.

38

Department to invest funds of litigants in public debt securities

at a market-rate of interest suitable to the needs of these

funds.

31

Pursuant to this statutory mandate, federal courts

across the United States have been linked through the CRIS

Platform, wherein any money deposited through the CRIS is

automatically pooled into a single unified portal, which is used

to purchase Government Account Series Securities through the

Bureau of Public Debt, Department of the Treasury.

32

Further,

an account is opened in the name of each litigant/depositor in

the CRIS Liquidity Fund to ensure sufficient liquidity whenever

a deposit is to be withdrawn or paid, and the Director of the

Administrative Office also prepares a statement showing the

principal amount deposited along with the interest earned,

which is communicated to the concerned Court from where the

31

Title 28 U.S.C. § 2045 Investment of Court Registry Funds

(a)The Director of the Administrative Office of the United States Courts, or the Director’s

designee under subsection (b), may request the Secretary of the Treasury to invest funds

received under section 2041 in public debt securities with maturities suitable to the needs of

the funds, as determined by the Director or the Director’s designee, and bearing interest at a

rate determined by the Secretary of the Treasury, taking into consideration current market

yields on outstanding marketable obligations of the United States of comparable maturity.

(b)The Director may designate the clerk of a court described in section 610 to exercise the

authority conferred by subsection (a).

32

Director of Administrative Office of US Courts, Court Management, Financial Systems, and

Statistical Reporting - Annual Report 2013, <https://www.uscourts.gov/data -

news/reports/annual-reports/directors-annual-report/annual-report-2013/court-

management-financial-systems-and-statistical-reporting-annual-report-2013>

39

deposit originated.

33

Thus, a compact mechanism has been

evolved across Courts of different levels creating a unified portal

administered by both legal and financial personnel for the ease

of investing these deposits in commercially proportionate,

interest-bearing instruments.

43. A similar mechanism is found in Canada , wherein, as per

Section 65(1) of the Canadian Supreme Court Act, 1985 read

with Rules of the Supreme Court of Canada, 2002

34

, any

deposit made as security for obtaining a stay by an appellant

shall be made into the Consolidated Revenue Fund by the

Office of the Registrar, on which the interest rate is determined

in accordance with the provisions of the Finance

Administration Act, 1985.

35

33

Ibid.

34

Section 65 - Stay of Execution, Supreme Court Act, 1985

65 (1) On filing and serving the notice of appeal and depositing security as required by section

60, execution shall be stayed in the original cause, except that

(d) where the judgment appealed from directs the payment of money, either as a debt or for

damages or costs, the execution of the judgment shall not be stayed until the appellant has

given security to the satisfaction of the court appealed from, or of a judge thereof, that, if the

judgment or any part thereof is affirmed, the appellant will pay the amount thereby directed to

be paid, or the part thereof with respect to which the judgment is affirmed, if it is affirmed only

with respect to part, and all damages awarded against the appellant on the appeal.

Rule 87, Rules of the Supreme Court of Canada SOR/2002-156

Rule 87 - Interest in accordance with the Financial Administration Act shall be paid on money

deposited as security.

35

Office of Registrar of the Supreme Court of Canada - 2024-2025 Financial Statements,

<https://www.scc-csc.ca/resources-ressources/reports-rapports/performance-

rendement/2024-2025-statements-etats/>

40

CONCLUSION AND DIRECTIONS

44. We have referred to the asymmetry that exists in our Country

in the methods and manners by which deposits are directed to

be made before Courts and Tribunals in appeals which are

considered. The asymmetry is reflected in many aspects, and

we have referred to some of them in paragraphs 30 to 39 of our

judgment. We have also indicated the consequences flowing

from such asymmetry and the compelling need to evolve a

normative principle that would apply as a standard. We are of

the opinion that it is necessary to evolve and formulate a

suitable legislation on the subject.

45. We request the Law Commission of India to examine the issues

which we have highlighted and, in the process, also consider

the laws which other countries have enacted. It may be

necessary for the Law Commission to consult the Reserve Bank

of India, Ministry of Finance and also the Nodal Ministry of Law

and Justice.

Relevant Extracts: “The ORSCC operates within the Consolidated Revenue Fund (CRF), which is

administered by the Receiver General for Canada. All cash received by the ORSCC is deposited to

the CRF, and all cash disbursements made by the ORSCC are paid from the CRF. The net cash

provided by Government is the difference between all cash receipts and all cash disbursements,

including transactions between departments of the Government.”

41

46. The Registry is directed to send a copy of our judgment to the

Chairman, Law Commission of India, Governor, Reserve Bank

of India, and the Secretaries to the Ministries of Finance and

Law and Justice.

47. However, in the facts and circumstances of the case, we do not

find any ground to interfere with the impugned order. The

same is hereby affirmed. With the aforesaid

observations/directions, the appeal is disposed of.

……………..……………………………….J.

[PAMIDIGHANTAM SRI NARASIMHA]

………………………………………………J.

[ALOK ARADHE]

NEW DELHI;

SEPTEMBER 18, 2026.