Case Note & Summary
The dispute arises from a Memorandum of Understanding dated 16.08.2002 between the appellant, National Projects Construction Corporation Ltd., and the respondent, Ishvakoo (India) Pvt. Ltd., for construction work at Bus Terminuses and development of the Taj Trapezium Zone Heritage Corridor in Agra. In December 2002, a mobilisation advance of Rs. 3.5 crores was provided to the respondent against bank guarantees. Disputes led to arbitration, and the respondent initially filed a Section 9 application in 2003 (OMP No. 363/2003) to restrain invocation of the bank guarantees. On 15.12.2005, the High Court disposed of that application, recording the respondent's undertaking to keep the bank guarantees alive till the award and any further proceedings, with the condition that if the appellant was entitled to recover under the award, it could encash the guarantees. The respondent failed to keep the guarantees alive, and the appellant encashed them in September 2017. Before the award was pronounced on 05.12.2017, the respondent moved another Section 9 petition, which was disposed of on 01.11.2017, noting no fault on the appellant's part due to the failure to keep the guarantees alive. The arbitral award dismissed all claims of the respondent. The arbitrator, in dealing with Issue No. 3 (discharge of bank guarantees) and Issue No. 4 (bank charges), held that the respondent was bound by the undertaking and was not entitled to relief, without expressly deciding on the discharge issue and believing the guarantees were still alive. The respondent filed a Section 34 application, and the Single Judge passed orders on 20.09.2018 and 30.10.2018 directing the appellant to return the encashed amount. These orders were challenged in appeal, and a Division Bench by consent order dated 29.11.2018 set aside the directions, leaving legal objections open and allowing the respondent to file a fresh Section 9 petition. Pursuant to this, the respondent filed OMP(I)(COMM) No. 57/2019 seeking refund of Rs. 3,50,00,000/-. The Single Judge allowed the petition on 05.04.2019, finding that the arbitrator had not decided the issue of discharge of bank guarantees and that without a claim, the appellant could not retain the money. The Division Bench dismissed the appeal on 21.05.2019, leading to the present Civil Appeal before the Supreme Court. The legal issues raised include whether an order under Section 9 could direct refund of an encashed bank guarantee when the arbitral award gave no positive finding on entitlement and no counter-claim was filed. The Supreme Court's judgment in this matter remains unreported in the provided text.
Issue of Consideration
Whether the High Court could direct refund of the encashed bank guarantee amount under Section 9 of the Arbitration and Conciliation Act, 1996, in the absence of any adjudicated claim or counter-claim in the arbitral award?
Law Points
- Section 9 interim measures
- bank guarantee encashment
- discharge of bank guarantee
- arbitral award adjudication
- consent orders
- Section 34 proceedings
Case Details
2026 LawText (SC) (08) 35
Civil Appeal No. 5819 of 2025
National Projects Construction Corporation Ltd.
Ishvakoo (India) Pvt. Ltd.
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Nature of Litigation
Commercial arbitration dispute arising from a Memorandum of Understanding for construction work, involving invocation of bank guarantees and subsequent proceedings under Sections 9 and 34 of the Arbitration and Conciliation Act, 1996.
Remedy Sought
The respondent sought refund of Rs.3,50,00,000/- encashed by the appellant from bank guarantees, along with interest, in a petition under Section 9 of the Act.
Filing Reason
The appellant encashed the bank guarantees after the respondent failed to keep them alive, and the arbitral award did not adjudicate on the entitlement to the amount, prompting the respondent to seek interim relief for refund.
Previous Decisions
The High Court had earlier passed orders on 20.09.2018 and 30.10.2018 directing return of the amount, which were set aside by consent; later, a fresh Section 9 petition was allowed by Single Judge on 05.04.2019, and the Division Bench dismissed the appeal on 21.05.2019.
Issues
Whether the High Court could direct refund of the encashed bank guarantee amount under Section 9 of the Arbitration and Conciliation Act, 1996, in the absence of any adjudicated claim or counter-claim in the arbitral award?
Whether the arbitrator had decided the issue of discharge of bank guarantees, and if not, what is the effect on the subsequent proceedings?
Submissions/Arguments
Appellant argued that the arbitrator decided Issue No.3 against the respondent, and that the bank guarantees were encashed due to the respondent's failure to keep them alive.
Respondent contended that the arbitrator did not decide Issue No.3, that the encashment was wrongful, and that without a claim, the appellant cannot retain the money.
Judgment Excerpts
on the award becoming executable if under the said award the respondent has to recover the amount, the respondent shall be entitled to encash the bank guarantees.
A careful perusal ... would show that the learned Arbitrator did not decide Issue No. 3 which pertained to discharge of bank guarantees.
without a claim, can the respondent, by any stretch of imagination, hope to keep the money with it.
Procedural History
16.08.2002: MoU entered into between parties. December 2002: Mobilisation advance of Rs.3.5 crores provided to respondent against bank guarantees. 2003: Section 9 application (OMP No. 363/2003) filed by respondent seeking restraint on invocation of bank guarantees. 15.12.2005: High Court disposed of OMP No. 363/2003 with undertaking that bank guarantees be kept alive till award and enforcement. September 2017: Appellant invoked bank guarantees as respondent failed to keep them alive. 01.11.2017: Section 9 petition disposed of holding no fault in appellant's conduct as bank guarantees not kept alive. 05.12.2017: Arbitral award passed dismissing respondent's claims; issue of discharge of bank guarantees not decided. 20.09.2018: Single Judge in Section 34 proceedings directed appellant to return the encashed amount. 30.10.2018: Further order reiterating return of money. 29.11.2018: Division Bench by consent set aside orders of 20.09.2018 and 30.10.2018, left legal objections open. 05.04.2019: Single Judge allowed fresh Section 9 petition (OMP(I)(COMM) No. 57/2019) directing refund. 21.05.2019: Division Bench dismissed appeal (FAO(OS)(COMM) No. 113/2019) confirming the Single Judge's order. [Date not mentioned]: Civil Appeal filed before Supreme Court.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9, Section 34, Section 36
