Paid Into Court, Still Paying Interest: Supreme Court Says a Deposit Is Not a Payment (National Seeds vs National Agro Seed, 2026 INSC 1017)

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Two Finance Managers, One Demand Draft

Picture two finance managers in two different companies. Both have just lost an arbitration. Both have been told by their lawyers to park the money in court so that the award cannot be enforced against them. Both do exactly that, walk out of the Registry with a receipt, and relax, believing that the interest meter has stopped ticking.

On 18 September 2026, the Supreme Court told them, in one blunt line, that they may be wrong: “A deposit is not synonymous with payment.” In National Seeds Corporation Ltd. v. National Agro Seed Corporation (India), 2026 INSC 1017, a Bench of Justice P.S. Narasimha and Justice Alok Aradhe held that an award-debtor who had put crores into court was still liable to pay 12% per annum interest for nearly three years and three months, because the money had never been placed where the award-holder could freely take it.

The ruling matters far beyond seed companies. Every lawyer who files a Section 34 challenge, every in-house counsel who approves a stay deposit, and every award-holder waiting for money now has to read Order XXI Rule 1 of the Code of Civil Procedure more carefully. The judgment also ends with a rare request to the Law Commission of India to fix the way courts across the country handle deposited money.

The Case at a Glance

Parties: National Seeds Corporation Ltd. (award-debtor and appellant) versus National Agro Seed Corporation (India) (award-holder and respondent).
Citation and Bench: 2026 INSC 1017, Civil Appeal arising out of S.L.P. (C) No. 5710 of 2025, decided on 18 September 2026 by Justice P.S. Narasimha and Justice Alok Aradhe. Marked reportable.
The award: Dated 13.06.2019, for Rs.1,46,40,005.02 with 12% per annum interest from 26.08.2017 till the date of the award, totalling Rs.1,77,97,434.
Order under challenge: Delhi High Court, 05.08.2024, holding the debtor liable to pay 12% per annum interest from 13.06.2019 to 08.09.2022.
The question: Does depositing money in court stop interest from running against the award-debtor?
The result: Appeal dismissed, High Court order affirmed, and the Law Commission of India requested to examine a uniform framework for court deposits.

The Money Trail: Two Deposits and a Wall Around Them

The Court says the facts lie within a narrow compass. After the 2019 award, the debtor challenged it under Section 34 of the Arbitration and Conciliation Act, 1996. On 16.10.2019 the Delhi High Court stayed enforcement of the award on the condition that the debtor deposit 50% of the principal sum within six weeks.

Deposit one. The debtor lodged Rs.73,20,003 with the Registry by demand draft dated 25.11.2019. The Section 34 petition was dismissed on 05.01.2022, and the award-holder moved promptly: an execution petition on 24.01.2022 and an application for release of the deposited amount on 14.02.2022. The debtor resisted release, saying its appeal under Section 37 stood reserved for orders.

Deposit two. On 23.03.2022 the executing court directed the debtor to deposit the balance within four weeks. The debtor did not comply in time. After a statement recorded on 27.04.2022, the balance of Rs.1,53,17,792 was deposited through two demand drafts dated 26.04.2022.

The wall. The Section 37 appeal was dismissed on 31.05.2022. On 07.07.2022 the executing court allowed the award-holder to withdraw Rs.1 crore, but only against security in the form of title deeds of immovable property, and the debtor opposed even that, saying it was about to file a Special Leave Petition. The award-holder tendered five title deeds, but by 19.07.2022 it told the Court that it was in serious financial difficulty and needed to raise funds to save its properties from auction. It stopped pressing for the Rs.1 crore and the title deeds were returned.

The Supreme Court dismissed the debtor’s SLP on 26.08.2022. Only on 08.09.2022 did the executing court direct release of the amount, and this time, for the first time, the debtor did not object. The whole dispute was then reduced to one question: was interest payable for the period from 13.06.2019 to 08.09.2022?

The Four-Question Deposit Test

The judgment does not use this label. But if you read paragraphs 20 to 28 closely, the Court’s reasoning can be turned into four practical questions that any court, lawyer or client can ask about a deposit. Interest stops only when the answers line up.

Question 1: Was the money paid the way Order XXI Rule 1 CPC contemplates?

Section 36(1) of the 1996 Act makes an award enforceable under the CPC as if it were a decree, but only for the limited purpose of enforcement. An award remains an award. Order XXI Rule 1 then lists three ways of paying a decretal sum: deposit into the executing court, payment out of court to the decree-holder in a manner evidenced in writing, or payment as the court otherwise directs. Sub-rules (4) and (5) say interest ceases from the date of service of notice of the deposit, or from the date of payment or tender. The Court relied on the Constitution Bench in Gurpreet Singh v. Union of India, (2006) 8 SCC 457, which read the scheme as stopping interest on the amount deposited, to the extent of the deposit.

Here, the Court found that the first deposit was made solely to obtain a stay of enforcement pending the Section 34 petition and was not accompanied by a notice under Order XXI Rule 1(2). It was a condition of a stay, not a payment towards the award.

Question 2: Could the award-holder take the money out freely?

This is where the case was really decided. Relying on the three-Judge Bench in P.S.L. Ramanathan Chettiar (1968), the Court repeated that the real effect of a court deposit is to put the money beyond the reach of both parties. To count as payment under Order XXI Rule 1, the deposit must be unconditional and the decree-holder must be free to withdraw it whenever it pleases. If withdrawal is allowed only on furnishing security, it is not payment in satisfaction of the decree, and interest keeps running.

On the facts, the Court noted that the debtor resisted release even after the Section 34 petition was dismissed and even while the Section 37 appeal was pending, and that the only release order before 08.09.2022 was tied to title deeds. It concluded that the respondent had never been free to withdraw the amount unconditionally.

Question 3: Was the whole sum deposited?

Principle (ix) in the Court’s summary says that where only part of the outstanding sum is deposited or tendered, and it is available for unconditional withdrawal, interest ceases only on that part. The balance continues to attract interest at the applicable rate. The Court also distinguished Himachal Pradesh Housing and Urban Development Authority v. Ranjit Singh Rana, (2012) 4 SCC 505, where the entire amount due under the award had been deposited and was therefore treated as payment to the credit of the decree-holder. In the present case, the Court observed, the debtor never deposited the whole amount.

Question 4: Did the award-holder sit on its rights?

The law also puts a duty on the other side. The Court noted that a decree-holder who takes no step to withdraw an amount that is genuinely available cannot claim interest on it, because that inaction is treated as a deemed refusal of the tender. The debtor tried to use this, pointing out that no withdrawal application was made between 25.11.2019 and 14.02.2022. But the Court’s account of the facts shows that the respondent applied for release on 14.02.2022, roughly six weeks after the Section 34 dismissal, and that the debtor then resisted it.

How the Court answered the two issues. On the first issue, the Court held that if an award-debtor pays in accordance with Order XXI Rule 1, its liability to pay interest on that amount ceases. On the second, it held that this debtor did not make the deposit in consonance with Order XXI Rule 1, so its liability for interest did not cease. Finding no ground to interfere with the High Court order, the Bench affirmed it and disposed of the appeal.

Nine Rules From Paragraph 25, in Plain Language

The 1996 Act is a self-contained code, but Section 36(1) treats an award as a decree only for the purpose of enforcement.
When deciding a stay application against a money award, Section 36(3) requires the court to have due regard to the CPC provisions on stay of money decrees.
The real effect of depositing money in court is to put it beyond the reach of the parties.
To fit Order XXI Rule 1, a deposit must be unconditional and available to the decree-holder for withdrawal.
If the decree-holder can withdraw only on furnishing security, the deposit is not payment in satisfaction of the decree.
If the deposit is not made in terms of Order XXI Rule 1, interest continues to run on the amount after the deposit.
A decree-holder who takes no action to withdraw cannot claim interest on the deposit, as the inaction is treated as deemed refusal of the tender.
If the deposit is converted into a fixed deposit at the decree-holder’s own request, the holder is entitled only to the interest accrued on that fixed deposit.
For a part deposit that the holder can withdraw unconditionally, interest ceases only on that part, and the remainder keeps attracting interest.

Why the Debtor’s Precedents Did Not Rescue It

The debtor relied on several decisions, and the Court dealt with each briefly. Ranjit Singh Rana involved a deposit of the entire award amount. Union of India v. Concrete Products and Construction Company, (2014) 4 SCC 416, was decided on contractual terms that barred interest on withheld amounts. In M.P. Trading and Investment Corporation, (2016) 16 SCC 699, the debtor had deposited the principal and the decree-holder had asked that the deposit be retained as a fixed deposit. None of those situations matched a part deposit, linked to a stay, that the holder could not freely draw.

The judgment also quietly exposes a fault line inside the Supreme Court’s own case law. A two-Judge Bench in Ranjit Singh Rana had treated deposit of the award amount as payment without noticing the earlier three-Judge Bench in P.S.L. Ramanathan Chettiar, which looked at whether the money was actually available to the decree-holder. Later three-Judge and two-Judge Benches followed Ramanathan Chettiar. This decision lines up with that larger-Bench view.

Reading This Alongside DLF v. Koncar (2025)

In DLF Ltd. v. Koncar Generators and Motors Ltd., (2025) 1 SCC 343, where Justice Narasimha traced the evolution of the law, the key question was framed as whether the award-holder could freely withdraw the deposit. The Court held that once the award-holder is permitted to withdraw, even conditionally and subject to the final outcome, it must be taken to have access to the money. The burden then shifts to the award-holder to furnish the security or to seek modification of the condition.

At first glance this sits uneasily with the present case, where the executing court had allowed release of Rs.1 crore against title deeds and the award-holder still won on interest. The judgment does not spell out how the two fit together. A reasonable reading, and this is our commentary rather than the Court’s own words, is that the debtor’s conduct made the difference: it opposed release at every stage, gave no Order XXI Rule 1(2) notice, and even resisted the one conditional order. Expect future disputes to test where the line lies between a conditional deposit that is genuinely available and one that the debtor has obstructed.

Beyond the Dispute: India’s Court Deposit Mess

The second half of the judgment reads more like a policy paper. The Court says there is neither a statutory prescription nor any rule or regulation to follow, so courts and tribunals have passed orders case by case, producing disparity and inconsistency. It identifies asymmetry in seven areas:

how the financial interests of the party seeking enforcement and the party challenging the decree are secured;
how much of the decretal sum must be deposited as a condition for a stay;
which banks or institutions hold the money;
the criteria for choosing that institution and the financial instrument;
how deposits are administered, transferred and supervised, including delay in investing, tenure, withdrawal, renewal and reinvestment;
the rate of interest the deposit earns and how that rate is fixed; and
how the interest earned is adjusted against the decree or award.

The Court lists the human cost of this. The award-holder cannot plan its finances because withdrawal depends on the discretion of the forum, and it loses the opportunity cost of money it is entitled to. The award-debtor parts with the use of the funds and benefits only if the amount is eventually released to the holder. Similarly placed parties get different treatment depending on the forum, and routine questions about investment, renewal and interest are litigated again and again, even after the main dispute has ended.

A country-wide snapshot. The Bench surveyed the position across courts. The Delhi High Court (Original Side) Rules, 2018 keep deposits in fixed deposit. The Allahabad High Court Rules, 1952 send deposits to the State Bank of India but say little more. In Bombay, the rules mention no investment, though judicial practice now directs fixed deposits in a Nationalised Bank, and the Punjab and Haryana High Court has directed executing courts to place deposits in fixed deposits with nationalised banks. The Supreme Court itself invests litigants’ deposits with nationalised banks chosen through an open tender, with preference to the bank offering the highest interest. Calcutta and Madras route deposits through the Reserve Bank of India, and Madras holds them in the securities listed in an appendix to its rules.

Time value of money. The Court grounds the need for standardisation in a simple idea: money deposited today is worth more than the same sum received later, and that opportunity cost must be compensated by a clear rate of interest. Without a uniform method of handling deposits, that certainty is lost.

Lessons from abroad. The United States runs the Court Registry Investment System (CRIS) for federal courts under 28 U.S.C. sections 2041 and 2045. Deposits are pooled into one platform, invested in Treasury-issued securities, held in a separate account for each depositor, and reported back to the originating court with principal and interest. In Canada, a deposit made as security for a stay goes into the Consolidated Revenue Fund under Section 65 of the Supreme Court Act and Rule 87 of the Rules of the Supreme Court of Canada, with interest determined under the Financial Administration Act.

What the Court directed. The Court recalled that the Dr. T.K. Viswanathan Committee had proposed amending Section 36(3): a stay could be granted on deposit of 50% of the principal amount awarded, with security for the remainder, and further interest on the deposit would cease only on unconditional withdrawal by the other side. Concluding that suitable legislation is necessary, the Bench requested the Law Commission of India to examine the issues, consider the laws of other countries, and consult the Reserve Bank of India, the Ministry of Finance and the Ministry of Law and Justice. The Registry was directed to send copies of the judgment to the Chairman of the Law Commission, the Governor of the Reserve Bank of India, and the Secretaries of the Ministries of Finance and Law and Justice.

What Award-Debtors Should Do Differently

The following are practical takeaways drawn from the ruling, not directions issued by the Court.

Separate a stay deposit from a payment. If the goal is to stop interest, plan a payment that fits Order XXI Rule 1 instead of assuming that a Section 34 stay deposit will do it.
Give notice. The Court specifically noted that the first deposit was not accompanied by a notice under Order XXI Rule 1(2).
Make the money genuinely available. Do not oppose release once the challenge has failed, and avoid conditions the holder cannot practically meet.
Watch part payments. Interest ceases only on the part that the holder can withdraw unconditionally.
Budget for interest. Nearly three years and three months at 12% per annum on the awarded sum was the price of getting this wrong.

What Award-Holders Should Do Differently

Apply for release early and on record. Inaction on an available deposit can be treated as deemed refusal and can cost you interest.
Deal with conditions. If release is allowed only on security, either furnish it or apply to modify the condition, as the DLF line of cases puts that burden on the award-holder.
Think before asking for a fixed deposit. If the sum is held in a fixed deposit at your own request, you get only the interest accrued on that fixed deposit.
Keep a dated trail. Every application, objection and order counts, because interest is decided on those dates.

Frequently Asked Questions (FAQs)

Is a deposit in court the same as payment of an arbitral award?

No, not automatically. In National Seeds Corporation Ltd. v. National Agro Seed Corporation (India), 2026 INSC 1017, the Supreme Court held that a deposit counts as payment under Order XXI Rule 1 CPC only if it is made in accordance with that rule. That means it must be unconditional and the award-holder must be free to withdraw it. A deposit made only to obtain a stay of the award does not stop interest.

Does interest stop running once the award-debtor deposits money in court to get a stay?

Not necessarily. If the deposit is not made in terms of Order XXI Rule 1, interest continues to run on the amount after the deposit. In this case the stay deposit was not accompanied by a notice under Order XXI Rule 1(2) and the award-holder could not withdraw it unconditionally, so interest at 12% per annum ran from 13.06.2019 to 08.09.2022.

What happens to interest if only part of the award amount is deposited?

Where only a part of the outstanding sum is deposited or tendered and is available to the award-holder unconditionally, interest ceases only on that deposited part. The remaining part continues to attract interest at the applicable rate.

What should an award-holder do to protect its interest claim on a deposited sum?

Apply for withdrawal promptly and keep a record of every application, objection and order. The Supreme Court noted that a decree-holder who takes no action to withdraw an available amount cannot claim interest on it, since the inaction is treated as deemed refusal of the tender. If release is allowed only against security, the award-holder must furnish it or seek modification of the condition. If the sum is converted into a fixed deposit at the award-holder’s own request, only the interest accrued on that fixed deposit is payable.

What did the Supreme Court ask the Law Commission of India to do in this judgment?

The Court asked the Law Commission of India to examine the asymmetry in how courts and tribunals across India direct, hold, invest and adjust deposits made while appeals are considered. The Commission was also asked to study the laws of other countries and to consult the Reserve Bank of India, the Ministry of Finance and the Ministry of Law and Justice. The Court said suitable legislation is necessary and directed its Registry to send copies of the judgment to these authorities.

Turn This Knowledge Into a Career in Arbitration and Dispute Resolution

Judgments like this show where the real money moves in arbitration: not only in winning the award, but in surviving the Section 34 challenge, the Section 37 appeal and the execution stage. Lawyers who can draft a notice under Order XXI Rule 1(2), frame a stay application, oppose or seek release of a deposit, and compute interest correctly are the ones clients and law firms trust with high-value enforcement work. Fresh advocates and law students who build this skill early stand out quickly, whether they aim for arbitration practice, litigation chambers, in-house legal teams or dispute resolution desks at law firms.

If you want to build a career in this space, Into Legal World offers the Advanced Certificate Course in Arbitration & Dispute Resolution, designed for law students, fresh advocates and practising lawyers who want to build a practice in arbitration and dispute resolution.

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Since 2018, Into Legal World has trained 1,05,000+ legal professionals and placed 1,400+ lawyers. Explore the Arbitration & Dispute Resolution course or enrol in Advanced Legal Drafting 6.0 today and start building the skills that this judgment shows are in demand.

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Read the Full Judgment

Download the judgment (PDF) here: National Seeds Corporation Ltd. vs National Agro Seed Corporation (India), 2026 INSC 1017

Google Drive copy of the judgment: https://drive.google.com/file/d/1jrP1BPjH4FbcjaC715xdOZgk9R8xh9uk/view?usp=sharing

Disclaimer: This article is for educational purposes only and is not legal advice. Please read the official judgment before relying on any proposition discussed here.

Keywords

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