Case Note & Summary
The proceedings arose from a contract between Oil and Natural Gas Corporation Limited (ONGC) and Afcons Gunanusa Joint Venture for construction, installation, and commissioning of a process platform for hydrocarbon extraction. The contract, executed on 29 May 2008, fixed a completion date of 30 April 2011 and provided for liquidated damages in case of delay. Following delays, the completion date was extended to 31 December 2011, and Afcons agreed to furnish bank guarantees for 110% of ONGC's maximum liquidated damages claim, to remain valid until the dispute over liquidated damages was finally settled. The project was completed in late 2012 and early 2013 with a delay of over 220 days. Disputes arose regarding liability for liquidated damages, and Afcons invoked arbitration in 2015. During arbitration, the Arbitral Tribunal passed an interim order on 22 April 2022 restricting the bank guarantees to specified amounts and directing that they remain alive until the final award. On 10 March 2026, the Tribunal passed the final award, dismissing ONGC's counterclaim for liquidated damages (Counterclaim No. 8) and directing ONGC to return the bank guarantees. The Tribunal held that ONGC was required to prove actual loss despite the liquidated damages clause, relying on Kailash Nath Associates v. DDA. ONGC filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 on 8 June 2026 challenging the award, along with an application for stay. On 13 June 2026, ONGC filed the present petition under Section 9 seeking a direction for the respondent to renew and continue the bank guarantees until the Section 34 petition is decided. ONGC contended that the award was prima facie erroneous as it ignored Supreme Court precedents holding that in public utility projects, proof of actual loss is not required for liquidated damages, and the burden shifts to the defaulting party. ONGC argued that the bank guarantees were the only security for its claim and that their return would cause irreparable harm. The respondent opposed the petition. The court reserved judgment on 8 July 2026 and pronounced its order on 10 July 2026. The provided text does not include the final operative direction.
Issue of Consideration
Whether the petitioner is entitled to an order directing the respondent to renew and continue the bank guarantees pending the decision in the Section 34 petition challenging the arbitral award which rejected the liquidated damages counterclaim and directed return of guarantees.
Law Points
- Section 9
- Arbitration and Conciliation Act
- 1996 - interim measures
- prima facie case
- balance of convenience
- irreparable injury
- liquidated damages - proof of actual loss
- public utility projects - presumed loss
- binding nature of contract terms
- Kailash Nath Associates v. DDA
- Saw Pipes v. ONGC
- Construction & Design Services v. DDA
- GAIL v. Punj Lloyd
- Saisudhir Energy v. NTPC
- BPL v. Morgan Securities
Case Details
2026 LawText (BOM) (07) 34
Commercial Arbitration Petition (L) No. 20173 of 2026
Mr. Sharan Jagtiani, Senior Advocate with Ms. Chitra Rentala, Mr. Atul Jain, Mr. Ritwik Kulkarni, Mr. Sohan Kinkhabwala, Mr. Alabh Lal, Mr. Abhimanyu Chaturvedi i/b Trilegal for Petitioner; Mr. Rajeev Sharma, Senior Counsel with Mr. Mayur Khandeparkar, Mr. Abhishek Birthray, Mr. Kunal Kanungo, Ms. Shreya Sharwa, Mr. Tanmany Nandi, Mr. Kartikeya Tripathi, Ms. Rupa Shaw for Respondent
Oil and Natural Gas Corporation Limited
Afcons Gunanusa Joint Venture
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Nature of Litigation
Petition under Section 9 of the Arbitration and Conciliation Act, 1996 for interim measures
Remedy Sought
The petitioner seeks a direction to the respondent to renew and continue the bank guarantees furnished under the Contract until the Section 34 petition challenging the arbitral award is decided.
Filing Reason
The arbitral award dated 10th March, 2026 dismissed the petitioner's counterclaim for liquidated damages and directed return of the bank guarantees. The petitioner, having filed a challenge under Section 34, apprehends that if the bank guarantees are not kept alive, it will lose the only security for its claim.
Previous Decisions
Arbitral Tribunal passed an interim order dated 22nd April, 2022 directing restriction of bank guarantees to 110% of maximum claim and continuation thereof till award; final award dated 10th March, 2026 rejecting counterclaim and directing return of guarantees; petition under Section 34 filed on 8th June, 2026 with interim stay application.
Issues
Whether the petitioner is entitled to an interim order under Section 9 of the Arbitration and Conciliation Act, 1996 directing the respondent to renew and continue the bank guarantees pending disposal of the petition under Section 34 challenging the arbitral award.
Submissions/Arguments
The arbitral award is prima facie erroneous as it rejected the liquidated damages claim despite findings that delay was solely attributable to the respondent and that ONGC was entitled to liquidated damages under the contract.
The award wrongly relied on Kailash Nath Associates v. DDA, ignoring established Supreme Court precedents holding that in public utility projects, proof of actual loss is not required for liquidated damages; the burden shifts to the defaulting party to prove no loss.
In contracts where time is of the essence and liquidated damages are a genuine pre-estimate of loss, as held in Saw Pipes and Construction & Design Services, loss can be presumed and contractual terms must be enforced.
The bank guarantees were contractually required to remain alive until final settlement of the dispute, and they constitute the only security for ONGC's claim; hence, their return would cause irreparable harm pending the Section 34 challenge.
Judgment Excerpts
the Arbitral Tribunal rejected the petitioner's counterclaim for liquidated damages and also directed return of the Bank Guarantees.
according to the petitioner, these Bank Guarantees are the only security available for protecting its claim.
Clause 6.3.4 further provided that the Bank Guarantees would remain valid till the issue relating to ONGC's entitlement to recover liquidated damages under the Contract was finally settled.
the Tribunal dismissed ONGC's counterclaim by relying upon the decision of the Supreme Court in Kailash Nath Associates v. DDA (2015) 4 SCC 136.
in public utility projects, loss to the affected party can be presumed even if there is no specific evidence of actual loss.
Procedural History
The contract was executed on 29 May 2008. The completion date was extended to 31 December 2011, and Clause 6.3.4 was inserted on 22 July 2011. The project was completed in late 2012/early 2013. Disputes arose, and Afcons invoked arbitration on 20 July 2015. The Arbitral Tribunal passed an interim order on 22 April 2022 restricting the bank guarantees. The final award was made on 10 March 2026. ONGC filed a Section 34 petition on 8 June 2026. The present Section 9 petition was filed on 13 June 2026 and heard on 25 June 2026. The respondent filed its reply on 6 July 2026, and the petitioner filed a rejoinder on 7 July 2026. The matter was reserved for judgment on 8 July 2026 and pronounced on 10 July 2026.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 9, 17, 34
