Supreme Court of India· 18 September 2026

Does interest on a sum deposited pending appeal cease unless the deposit is unconditional and freely available for withdrawal under Order XXI Rule 1?

NATIONAL SEEDS v. NATIONAL AGRO SEED

2026 INSC 1017
Coram: Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

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Answer

Interest on a sum deposited pending appeal does not cease unless the deposit is unconditional and freely available for withdrawal under Order XXI Rule 1.

No. Interest on a sum deposited pending appeal does not cease unless the deposit is unconditional and freely available for withdrawal under Order XXI Rule 1. Where the decree-holder or award-holder is permitted to withdraw only on furnishing security, the deposit is not payment in satisfaction of the decree or award, and interest continues to run on the amount after the deposit. In this case, the appellant's deposit was not made in accordance with Order XXI Rule 1, so the liability to pay interest on it did not cease.

Headnote

Arbitration and Conciliation Act, 1996 — s.36 — s.37(1)(b) — Code of Civil Procedure, 1908 — Order XXI Rule 1 — Deposit and payment — Interest cessation — Code of Civil Procedure, 1908 — Order XXI Rule 1 — Interest on court deposits — Held: Interest on a sum deposited pending appeal does not cease unless the deposit is unconditional and freely available for withdrawal. Where withdrawal is permitted only on furnishing security, the deposit is not payment in satisfaction of the decree or award. (¶21, 28) Code of Civil Procedure, 1908 — Deposit and payment — Held further: A deposit is not synonymous with payment and neither extinguishes the debtor's liability nor places the money in the creditor's hands. A decree-holder permitted to withdraw only on furnishing security is not treated as having received payment in satisfaction of the decree. (¶2, 21) Arbitration and Conciliation Act, 1996 — Order XXI Rule 1 — Application to facts — Held further: In this case, the appellant's deposit was conditional and not freely available to the respondent for withdrawal, so it did not conform to Order XXI Rule 1 and the liability to pay interest did not cease. Appeal disposed of; impugned order affirmed. (¶27, 28, 47)

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In the Court's own words

Paragraph 21The issue whether a deposit has been made in consonance with Order XXI Rule 1 of the Code was considered by a three- Judge Bench of this Court[^10] 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.

Paragraph 27The 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 Code and the respondent was not free to withdraw the same unconditionally.

Paragraph 28For 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.

Acts & Sections

s.36 Arbitration and Conciliation Act, 1996s.37(1)(b) Arbitration and Conciliation Act, 1996Order XXI Rule 1 Code of Civil Procedure, 1908

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Also decided in this judgment

Is a deposit synonymous with payment, extinguishing the debtor's liability or placing the money in the creditor's hands?Is a decree-holder permitted to withdraw a deposit only on furnishing security treated as having received payment in satisfaction of the decree?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections