ONGC Cannot Demand Security From Award Holder After Giving ‘No Objection’ To Withdrawal Of Deposited Amount: Andhra Pradesh High Court

"Plea taken appears to us to be a well-thought-out afterthought to get over the ‘no objection’ made before the learned Special Judge... Inaction on the part of ONGC for more than 3 years shows that it had no objection to withdrawal of the amount by the respondent without furnishing any security." High Court of Andhra Pradesh, in a significant ruling, held that a party cannot demand security or re-deposit of funds from an award holder if it had previously expressed "No Objection" to the unconditional withdrawal of those funds during the lower court proceedings.

A bench comprising Justice Ravi Nath Tilhari and Justice Balaji Medamalli observed that once a party consents to the withdrawal of a deposited arbitral amount without conditions, it cannot later seek to impose security requirements during the appeal stage by claiming its officers were unauthorized to give such consent.

The dispute arose from an arbitral award passed in 2022 in favor of Deep Industries Ltd (DIL) against Oil and Natural Gas Corporation Ltd (ONGC). During proceedings to set aside the award under Section 34 of the Arbitration and Conciliation Act, the Special Court stayed the execution on the condition that ONGC deposit 75% of the awarded amount. DIL subsequently applied to withdraw this amount, to which ONGC filed a counter-affidavit stating it had "no objection" to the withdrawal without security, citing DIL’s ongoing contracts and an undertaking to re-deposit if required. After the Section 34 petition was dismissed, ONGC filed an appeal under Section 37 and moved an interlocutory application (I.A. No. 2 of 2025) seeking a direction for DIL to re-deposit the amount or furnish a bank guarantee.

The primary question before the court was whether ONGC could compel the award holder to furnish security for an amount already withdrawn with consent, especially after the challenge to the award was dismissed by the lower court. The court was also called upon to determine whether an undertaking given to a lower court remains binding during the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act.

ONGC Bound By Previous ‘No Objection’ Statement

The Court noted that ONGC had clearly stated in its counter-affidavit before the Special Judge that it had no objection to DIL withdrawing the 75% deposited amount. The bench observed that the Special Judge’s order permitting the withdrawal was based on this specific concession and the fact that DIL was still a contractor for ONGC.

The Court emphasized that this order was passed nearly three years prior and was never challenged by ONGC. The bench found that the corporation’s attempt to distance itself from its previous legal stand was untenable at the appellate stage.

"Inaction on the part of ONGC for more than 3 years also shows that it had ‘no objection’ to withdrawal of the amount by DIL without furnishing any security."

Arguments Regarding Unauthorized Consent Rejected As Afterthought

The Solicitor General, appearing for ONGC, argued that the officer who filed the "No Objection" counter-affidavit was not authorized to concede the withdrawal without security. However, the Court rejected this plea, noting that no such ground was raised in the memo of appeal or the initial affidavits filed in the High Court.

The bench held that such a claim, raised for the first time in a rejoinder affidavit, appeared to be a strategic afterthought to bypass the finality of the Special Court’s order.

"The plea taken appears to us to be well afterthought to get over the ‘no objection’ made before the learned Special Judge by way of writing in the counter to permit withdrawal to DIL."

Financial Distress Claims Not Sufficient To Overrule Consent

ONGC further contended that DIL was facing "severe financial stress," citing a loss in the 2024-25 financial year, and therefore security was necessary to safeguard the public exchequer’s money. DIL countered this by clarifying that the "loss" was a non-cash accounting entry following acquisitions and that it held active contracts worth over Rs. 1,000 crores with ONGC.

The Court declined to adjudicate on these disputed questions of fact regarding financial solvency. It held that since the Section 34 petition had already been dismissed on merits, there was no justifiable reason to reverse the status quo regarding the withdrawn funds.

"For an order directing to re-deposit the entire amount or to furnish the bank guarantee it will have to be shown a very strong case by ONGC against the DIL... especially when the Section 34 petition has been dismissed."

Undertaking To Re-Deposit Remains Binding In Appeal

While rejecting ONGC’s prayer for security, the Court clarified a vital point of law regarding the nature of undertakings. DIL had argued that its undertaking to re-deposit the money "as and when directed" expired once the Section 34 proceedings concluded. The High Court disagreed, holding that an appeal is a continuation of original proceedings.

The bench ruled that DIL remains bound by its undertaking. If the High Court eventually sets aside the award in the main appeal, DIL will be legally obligated to return the funds pursuant to its original commitment to the court.

"The DIL shall still be bound by its undertaking to deposit the amount withdrawn by it if so directed by the Court. Appeal is well settled continuation of the original proceedings."

The Court concluded that no case was made out to interfere with the arrangement already in place for the last three years. It held that the sanctity of court proceedings must be maintained, and orders based on the mutual consent of parties cannot be reopened without compelling reasons or evidence of fraud. Consequently, the High Court dismissed ONGC's application for security.

Date of Decision: May 07, 2026