M/S JINDAL STEEL AND POWER LTD. & ANR.versusM/S BANSAL INFRA PROJECTS PVT. LTD. & ORS.

                 [2025] 5 S.C.R. 1263 : 2025 INSC 640

               M/s Jindal Steel and Power Ltd. & Anr.
                                  v.
              M/s Bansal Infra Projects Pvt. Ltd. & Ors.
                       (Civil Appeal No. 6413 of 2025)
                                  07 May 2025
               [J.B. Pardiwala and R.Mahadevan,* JJ.]


                            Issue for Consideration
       Appellants issued work order to 1st respondent for construction of
       flats and paid advance. Bank guarantee equivalent to the advance
       money was furnished by 1st respondent to secure the amount. When
       the work got delayed and disputes arose between the parties,
       the appellants requested refund of debit balance, failing which
       the bank guarantee was to be encashed. The 1st respondent filed
       petition under Section 9 of the Arbitration and Conciliation Act,
       1996, before the Commercial Court, along with applications under
       Order XXXIX Rules 1 and 2 and Order XXXIX Rule 3 CPC, so as
       to restrain the appellants from proceeding with encashment of the
       bank guarantee. The applications for interim order were rejected
       by Commercial Court. The High Court allowed the writ petition
       filed against the same order and stayed encashment of the bank
       guarantee till disposal of the Arbitration Petition.
       The issues before the Supreme Court were:
       i.    Whether a Court of law can interfere with invocation of a
             bank guarantee when no exceptional circumstances of fraud
             or irretrievable injustice is proved to exist?
       ii.   Whether the High Court was right in granting interim protection
             against the invocation of the bank guarantee until the disposal
             of the Section 9 arbitration petition while exercising its
             jurisdiction under Article 227 of the Constitution?

                                   Headnotes†
       Bank guarantee – Injunction against its invocation – Settled
       legal principle:
       Held: The terms of the bank guarantee are, therefore, extremely
       material – The bank guarantee should be in unequivocal terms,

* Author
1264                                                           [2025] 5 S.C.R.

                         Supreme Court Reports


    unconditional and recite that the amount would be paid without demur
    or objection and irrespective of any dispute that might have cropped
    up or might have been pending between the beneficiary under the
    bank guarantee or the person on whose behalf the guarantee was
    furnished – In Hindustan Construction Co. Ltd v. State of Bihar and
    others,(1999) 8 SCC 436 the Supreme Court after placing reliance
    on various judgments held that courts are reluctant in granting an
    injunction against the invocation of bank guarantee, except in the
    case of fraud, which should be an established fraud, or where
    irretrievable injury was likely to be caused to the guarantor – Bank
    guarantees serve as the backbone of commercial transactions and
    must be honored in accordance with their terms.[Para 11]

    Impugned order – Whether legally sustainable in facts of the
    case:
    Held: If the appellants were permitted to invoke the bank guarantee,
    the prayer made in the Section 9 arbitration petition would become
    infructuous – The order was subject to Respondent No. 1 extending
    the validity of the bank guarantee – Therefore, the order of the
    High Court was merely an interim measure intended to protect
    the interests of both parties and correct – The arguments of both
    sides have already concluded in the arbitration petition – An Arbitral
    Tribunal was constituted to adjudicate the disputes between the
    parties; a hearing was held; and the parties have appeared – Thus,
    in view of the ongoing arbitration proceedings concerning the bank
    guarantee, it is imperative to maintain the existing position regarding
    the same until the final outcome of the Section 9 arbitration petition –
    Respondent No. 1 has given an undertaking to extend the validity
    of the bank guarantee till the disposal of the Section 9 arbitration
    petition – As of now, no prejudice to appellants – The Commercial
    Court shall pass appropriate orders within a period of eight weeks
    and until such time, the bank guarantee shall be kept alive subject
    to the outcome of the Section 9 arbitration petition. [Paras 12-15]

                              Case Law Cited
    Hindustan Construction Co. Ltd v. State of Bihar and Others [1999]
    Supp. 3 SCR 554 : (1999) 8 SCC 436 – relied on.

                                 List of Acts
    Contract Act, 1872; Constitution of India; Arbitration and Conciliation
    Act, 1996.
[2025] 5 S.C.R.                                                       1265

                        M/s Jindal Steel and Power Ltd. & Anr. v.
                        M/s Bansal Infra Projects Pvt. Ltd. & Ors.

                                         List of Keywords
      Bank guarantee; Arbitration; Interim order; Injunction.

                                         Case Arising From
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6413 of 2025
      From the Judgment and Order dated 20.08.2024 of the High Court
      of Orissa at Cuttack in WP (C) No. 11848 of 2024

                                   Appearances for Parties
      Advs. for the Appellants:
      Ms. Charu Mathur.
      Advs. for the Respondents:
      Shubhranshu Padhi, O. P. Gaggar.

                        Judgment / Order of the Supreme Court

                                              Judgment

      R. Mahadevan, J.

      Leave granted.
2.    This appeal has been filed by the appellants challenging the order
      dated 20.08.2024 passed by the High Court of Orissa, Cuttack1 in
      W.P. (C) No. 11848 of 2024 which was filed under Article 227 of the
      Constitution of India, against the order dated 30.04.2024 passed by
      the Senior Civil Judge (Commercial Court), Cuttack2, in Arbitration
      Petition No. 14 of 2024 filed by Respondent No.1. The Commercial
      Court by the said order dated 30.04.2024 rejected the prayer for
      ex parte ad interim injunction made in an application under Order
      XXXIX Rule 3 and Section 151 of the Code of Civil Procedure,
      19083 filed in the application under Section 9 of the Arbitration
      and Conciliation Act, 1996, observing that no order of injunction
      could be passed without affording an opportunity of hearing to the
      opposite parties, and accordingly, it directed issuance of notice


1    Hereinafter referred to as “the High Court”
2    For short, “the Commercial Court”
3    For short, “CPC”
1266                                                      [2025] 5 S.C.R.

                       Supreme Court Reports


    to the opposite parties and fixed 25.06.2024 as the date for their
    appearance. Challenging the said order of the Commercial Court,
    Respondent No.1 (herein) filed the writ petition before the High
    Court, in which, the High Court as an interim measure, granted
    an order of status quo till the next date of hearing with regard to
    encashment of bank guarantee. Thereafter, the High Court by the
    order impugned herein, disposed of the writ petition in the following
    terms:
         “40. Hence, the parties are directed to appear before the
         Senior Civil Judge, Commercial Court, Cuttack in ARBP No.
         14 of 2024 on 27.08.2024. If so required, the Commercial
         Court shall prepone the date to the said date, if the said
         case stands posted to any date beyond the said date. The
         Opposite Parties shall file their Objection with all relevant
         documents, if any, to the application filed under section 9
         of the Act, 1996, within ten days from the said date.
         41. On filing of Objection, the Senior Civil Judge,
         Commercial Court, Cuttack shall proceed further in
         accordance with law and shall try to conclude the said
         proceeding at the earliest, preferably within a period of
         six weeks from the date of filing of the objection and
         documents by the Opposite Parties.
         42. Since the Bank Guarantee furnished by the Petitioner
         is going to expire on 05.09.2024, the petitioner is directed
         to extend the said BG until 31.12.2024 well before the
         expiry of the said period.
         43. As the Opposite Parties contested the present Writ
         Petition on technical grounds of maintainability so also
         scope regarding interference by the Court regarding
         invocation of Bank Guarantee and are yet to file their
         Objection in ARBP No.14 of 2024, it is made clear that after
         filing of Objection by the Opposite Parties, the Senior Civil
         Judge, Commercial Court, Cuttack shall proceed further
         in accordance with law and decide the prayer made in
         ARBP No.14 of 2024 on merit taking into consideration
         the pleadings and documents on record, without being
         influenced by the observations made above. However,
         the interim order dated 20.05.2024 passed in the present
[2025] 5 S.C.R.                                                            1267

                       M/s Jindal Steel and Power Ltd. & Anr. v.
                       M/s Bansal Infra Projects Pvt. Ltd. & Ors.

               case shall remain in force till disposal of the ARBP No.14
               of 2024, subject to extension of Bank Guarantee by 31st
               August, 2024.”
       Aggrieved by the aforesaid order of the High Court, the appellants
       are before us with the present appeal.

       FACTUAL MATRIX
3.     The relevant facts necessary to understand the background of the
       litigation are as follows:
       3.1. The appellants issued a work order dated 24.01.2022 to
            Respondent No.1 viz., M/s. Bansal Infra Projects Private
            Limited, for construction of 400 flats at Jindal Nagar, South Block
            (Sharmik Vihar)4 for a total value of Rs. 43,99,46,924.13/-. To
            execute the said work, the appellants had given an advance of
            Rs. 3,73,95,490/- and to secure the same, Respondent No.1
            furnished a bank guarantee bearing No. 32700IGL0001122
            dated 08.03.2022 for the said amount, to the appellants.
       3.2. As per clause 62 of the work order, the project was required to
            be completed within a period of 8 months i.e., by 30.09.2022.
            Subsequently, the work order was amended on 02.02.2022,
            by which, the project completion date was extended up to
            30.06.2023. Thereafter, at the request of Respondent No.1,
            the project completion deadline was further extended for a
            period of 60 days.
       3.3. However, due to the respondent’s continuous failure and poor
            performance – particularly in relation to quality deficiencies,
            missed deadlines, and non-compliance with contractual
            obligations - the appellants were constrained to terminate the
            work order in accordance with clauses 11, 32, 33, 34, 45 and 57
            of the work order.
       3.4. In the meanwhile, the project completion timeline was extended
            upto 30.09.2023, with the express condition that if the handover
            schedule extended beyond this date, the retention money would
            be forfeited. Accordingly, an amended work order was issued.



4    Hereinafter referred to as “the Project”
1268                                                     [2025] 5 S.C.R.

                       Supreme Court Reports


    3.5. Even thereafter, time limit was extended subject to the condition
         already agreed upon regarding the forfeiture of the retention
         money. Meanwhile, several issues arose at the project site,
         and relevant correspondence pertaining to the same was duly
         exchanged.
    3.6. Consequently, the appellants sent a letter dated 21.02.2024 to
         Respondent No. 1 highlighting the disregard for construction
         norms which resulted in a compromise of standards and posed
         a serious risk to the integrity and safety of the project. They
         directed Respondent No. 1 to take appropriate corrective actions.
         Since no compliance was made, by letter dated 25.03.2024,
         the appellants requested Respondent No. 1 to refund the debit
         balance of Rs. 4,12,54,904/- attributed to unadjusted advances
         and other deductions on or before 30.04.2024, failing which,
         the bank guarantee would be encashed.
    3.7. In these circumstances, Respondent No. 1 filed a petition
         bearing Arbitration Petition No. 14 of 2024 under Section 9 of
         the Arbitration and Conciliation Act, 1996, before the Commercial
         Court, along with applications under Order XXXIX Rules 1 and
         2 and Order XXXIX Rule 3 CPC, seeking to pass an order
         of interim measure restraining the appellants not to proceed
         further as per the termination notice and not to encash the bank
         guarantee in pursuance of the letter dated 25.03.2024 till the
         constitution of the Arbitral Tribunal.
    3.8. The Commercial Court rejected the application seeking to grant
         ex parte injunction, against which, Respondent No. 1 filed a
         writ petition bearing W.P.(C) No. 11848 of 2024, in which,
         the High Court granted an order of status quo with regard
         to the encashment of the bank guarantee. Simultaneously,
         Respondent No. 1 also invoked the arbitration proceedings,
         in terms of Clause 58.3 of the Work Order / Contract dated
         24.01.2022.
    3.9. Ultimately, the High Court, after hearing both sides, passed the
         order dated 20.08.2024 inter alia that the interim order staying
         encashment of the bank guarantee shall continue until disposal of
         the Arbitration Petition No. 14 of 2024, which is under challenge
         at the instance of the appellants herein.
[2025] 5 S.C.R.                                                            1269

                M/s Jindal Steel and Power Ltd. & Anr. v.
                M/s Bansal Infra Projects Pvt. Ltd. & Ors.

     CONTENTIONS OF THE PARTIES
4.   The primary contention of the learned counsel for the appellants is
     that an order passed in an application under Order XXXIX Rule 3
     CPC for an ex parte ad interim injunction is, in essence, an order
     passed in a Section 9 arbitration petition. Therefore, Respondent No.
     1 had an equally efficacious alternative remedy available by way of
     an appeal under Section 37(1)(b) of the Arbitration and Conciliation
     Act, 1996. In such circumstances, the High Court ought not to have
     exercised its supervisory power under Article 227 of the Constitution
     of India, particularly, in the absence of clear reasoning pointing to
     any specific perversity or infirmity in the order dated 30.04.2024
     passed by the Commercial Court. It is also submitted that once
     parties have opted for the statutory remedies provided under the
     Arbitration and Conciliation Act, 1996, it is necessary that the arbitral
     process be allowed to proceed without any judicial interference that
     could prejudice the rights of the parties.
     4.1. Elaborating further, the learned counsel submitted that it is
          settled law that the High Court may exercise its power under
          Article 227 of the Constitution of India in cases involving grave
          injustice or failure of justice, such as when: (i) the court or tribunal
          has assumed a jurisdiction which it does not possess, (ii) it has
          failed to exercise a jurisdiction which it does possess, and such
          failure has resulted in a failure of justice; or (iii)the jurisdiction,
          though available, is being exercised in a manner that amounts
          to overstepping the limits of jurisdiction. In the present case, the
          High Court in utter disregard of settled principles, entertained
          a writ petition under Article 227 of the Constitution of India on
          an incorrect premise that the non-grant of exemption under
          Order XXXIX Rule 3 CPC is not appealable either under CPC
          or under the Commercial Courts Act, 2015. Proceeding on this
          erroneous understanding, the High Court held that since no
          appeal was provided for, Respondent No.1 had rightly invoked
          its supervisory jurisdiction.
     4.2. Adding further, it is submitted that the court should not
          interfere with the invocation of a bank guarantee so long as
          the invocation is in accordance with the terms of the bank
          guarantee. Accordingly, the High Court ought not to have
          interdicted the encashment of an unconditional bank guarantee,
1270                                                       [2025] 5 S.C.R.

                        Supreme Court Reports


         in the absence of any element of fraud or special equities in
         favour of Respondent No.1.
    4.3. It is also contended that the impugned order is ex facie erroneous
         as it equates an order issuing notice in a petition under Section 9
         of the Arbitration and Conciliation Act, 1996 with an order under
         Order XXXIX Rule 3 CPC ultimately concluding that such an
         order is not appealable under Order XLIII CPC. In doing so, it
         overlooks that the expression ‘granting or refusing to grant any
         measure under Section 9’ appearing in Section 37(1)(b) of the
         Arbitration and Conciliation Act, 1996 includes within its ambit
         an order refusing to grant any ex parte interim relief. Such an
         order is, therefore, appealable under section 37 of the Arbitration
         and Conciliation Act, 1996. The use of the word ‘any’ in Section
         37(1)(b) is clearly all-inclusive and extends to a refusal to grant
         ex parte interim measures under Section 9. Furthermore, there
         is nothing in Section 13 of the Commercial Courts Act, 2015,
         to suggest that only a final order under Section 9 is appealable
         under Section 37 of the Arbitration and Conciliation Act, 1996.
         Extrapolating this reasoning to the present case, it is evident
         that any order passed under Section 9 of the Arbitration and
         Conciliation Act, 1996 is appealable only under Section 37 of the
         Arbitration and Conciliation Act, 1996, which constitutes a self-
         contained code governing the appellate remedies. Consequently,
         the applicability of Order XLIII Rule 1 CPC stands excluded.
         Therefore, the High Court erred in entertaining a writ petition
         under Article 227 of the Constitution.
    4.4. The learned counsel further submitted that it is an established
         principle of law that parties must be prevented from initiating
         parallel proceedings before courts so as to avoid delaying the
         arbitral process. However, in the present case, the respondent
         invoked arbitration through its letter dated 13.05.2024, while
         simultaneously engaging in court proceedings to obtain a stay
         on the encashment of the bank guarantee – first from the
         commercial court and subsequently from the High Court. Such
         a course of action is untenable and contrary to the spirit of the
         Arbitration and Conciliation Act, 1996, which mandates minimal
         judicial intervention and prioritizes the expeditious resolution of
         disputes through arbitration.
[2025] 5 S.C.R.                                                       1271

                M/s Jindal Steel and Power Ltd. & Anr. v.
                M/s Bansal Infra Projects Pvt. Ltd. & Ors.

     4.5. In support of these submissions, the learned counsel placed
          reliance on a plethora of decisions of this Court.
     4.6. Stating so, the learned counsel sought to allow this appeal and
          set aside the order passed by the High Court.
5.   Per contra, the learned counsel for Respondent No.1 submitted that
     the challenge pertains solely to the grant of interim relief staying
     the invocation of the bank guarantee during the pendency of the
     proceedings under Section 9 of the Arbitration and Conciliation
     Act, 1996. The said Arbitration Petition bearing No. 14 of 2024 has
     already been partly heard; the arguments on behalf of Respondent
     No. 1 and Respondent No. 2 have been concluded on 10.12.2024,
     and the matter is now pending for final arguments of the appellants,
     who have sought an adjournment citing the pendency of the present
     appeal. Therefore, no prejudice is caused to the appellants, and
     it remains open to them to raise all their contentions before the
     Commercial Court. To demonstrate its bonafides, Respondent No. 1
     has extended the bank guarantee until 30.06.2025.
     5.1. Continuing further, it is submitted that the appellants vide letter
          dated 25.03.2024 claimed a debit balance of Rs. 4,12,54,904/-
          against Respondent No.1 due to unadjusted advances and
          alleged non-compliance with work order terms. Further, the
          appellants would proceed to encash the bank guarantee of
          Rs.3,73,95,490/- executed by Respondent No. 1, if payment
          was not made by 30.04.2024. According to the learned counsel,
          the alleged non-compliance was only due to the delays caused
          by the appellants and hence, invocation and encashment of the
          bank guarantee without proper adjudication would be unjust.
     5.2. It is also submitted that the appellants have acted contrary to the
          terms of the bank guarantee which was furnished to secure the
          advance given by the appellants to Respondent No. 1. Further,
          during the meeting held on 30.04.2024, the parties had agreed
          to certain remedial course of action and the appellants had also
          granted 30 days’ time for alleged rectifications and completion
          of the job to Respondent No. 1. However, before the expiry
          of the said period, the appellants sought to invoke the bank
          guarantee. The High Court has examined the pleadings of the
          parties, the communications and the clauses of the contract
1272                                                     [2025] 5 S.C.R.

                       Supreme Court Reports


         and bank guarantee, and has arrived at a prima facie view that
         “special equities” are in favour of Respondent No. 1, and held
         that permitting the appellants to invoke and encash the bank
         guarantee would result in irretrievable injustice to Respondent
         No. 1. Hence, the order of the High Court does not warrant
         any interference by this Court.
    5.3. It is further submitted that an appeal under Section 37(1)(b) of
         the Arbitration and Conciliation Act, 1996, is maintainable only
         against an order granting or refusing to grant any measure
         under Section 9 of the Act. However, a careful reading of
         Section 37 indicates that such an appeal lies solely against a
         final order passed under Section 9, and not against an interim
         order passed under Order XXXIX Rule 3 CPC, even if such an
         order is passed in proceedings under Section 9 of the Act. In the
         present case, the order passed by the Commercial Court was
         at an interim stage and not a final adjudication under Section 9.
         Accordingly, the said order was not appealable under Section
         37(1)(b) of the Arbitration and Conciliation Act, 1996. Moreover,
         under Section 8 of the Commercial Courts Act, 2015, there is
         an express bar against filing a revision application or petition
         against an interlocutory order passed by a commercial court.
         In the present case, since the order dated 30.04.2024 passed
         by the Commercial Court is an interim order, Respondent No.1
         could not have filed a revision application or petition under
         the Commercial Courts Act. That apart, no appeal could have
         been filed under Section 13 of the Commercial Courts Act,
         as that provision applies only to appeals against decrees of
         Commercial Courts and Commercial Divisions, and not against
         interlocutory orders. Since the order dated 30.04.2024 passed
         by the Commercial Court is neither a decree nor a final order,
         it is not subject to appeal under Section 13 of the Commercial
         Courts Act, 2015. Further, there is no provision under the CPC
         permitting an appeal against an order passed under Order
         XXXIX Rule 3 CPC. In these circumstances, Respondent No. 1
         was constrained to approach the High Court under Article 227
         of the Constitution of India, in order to safeguard its interests
         as the invocation of the bank guarantee would have resulted in
         a significant financial burden and caused irreparable prejudice
         to Respondent No. 1.
[2025] 5 S.C.R.                                                        1273

                M/s Jindal Steel and Power Ltd. & Anr. v.
                M/s Bansal Infra Projects Pvt. Ltd. & Ors.

     5.4. It is ultimately submitted that there is no prejudice caused to
          the appellants, given that the bank guarantee has been duly
          extended and remains in force till date. On the other hand,
          irreparable harm and injury would be caused to Respondent
          No. 1 if the impugned order is set aside, as the appellants may
          proceed to invoke and encash the bank guarantee resulting in
          significant financial loss and hardship to Respondent No. 1.
          Therefore, the learned counsel prayed for dismissal of this
          appeal.
6.   We have heard the submissions of the learned counsel for both
     parties and perused the materials available on record.
7.   The challenge raised in the present appeal is solely to the interim order
     passed by the High Court restraining the appellants from invocation
     of the bank guarantee during the pendency of the proceedings under
     section 9 of the Arbitration and Conciliation Act, 1996. The appellants
     formulated the following substantial questions of law, against the
     impugned order passed by the High Court:
     (a)   Whether the High Court while exercising its supervisory
           jurisdiction under Article 227 of the Constitution of India, can
           decide a matter on merits?
     (b)   Whether the High Court ought to exercise its extraordinary
           jurisdiction under Article 227 in a matter pertaining to the
           encashment of an unconditional bank guarantee?
     (c)   Whether any interim order passed under Order XXXIX Rule 3
           CPC accompanying a Section 9 Petition under the Arbitration and
           Conciliation Act, 1996, ought to be treated as an order passed
           under Section 9 proceedings and can be challenged under
           Section 37(l)(b) of the Arbitration and Conciliation Act, 1996?
     (d)   Whether the writ jurisdiction under Article 227 of the Constitution
           can be invoked when an equally efficacious alternative remedy
           is available by way of an appeal under Section 37(1)(b) of the
           Arbitration and Conciliation Act, 1996, against the order dated
           30.04.2024 passed by the Commercial Court?
     (e)   Whether an interim application under the Code of Civil Procedure
           can be filed in a Section 9 Petition under the Arbitration and
           Conciliation Act, 1996, given that the Arbitration Act is a self-
           contained and exhaustive code?
1274                                                       [2025] 5 S.C.R.

                         Supreme Court Reports


     (f)   Whether a party can be permitted to initiate parallel proceedings
           by approaching the High Court under Article 227 of the
           Constitution, while simultaneously invoking arbitration, thereby
           causing delay in the arbitral process?
     (g)   Whether an interlocutory order arising out of the rejection of ex
           parte interim stay under Order XXXIX Rule 3 CPC accompanying
           a Section 9 Petition under the Arbitration Act, is appealable
           under Section 37 of the Arbitration and Conciliation Act, and
           hence, whether the aggrieved party is barred from approaching
           the High Court under Article 227 of the Constitution?
     (h)   Whether an interlocutory order passed on an Order XXXIX Rule 3
           application by the Commercial Court, in a Section 9 arbitration
           petition is barred from challenge by virtue of the specific bar
           under Order XLIII Rule l(r) read with Section 104 CPC, and is
           not appealable under Section 37 of the Arbitration Act thereby
           permitting recourse only under Article 227 of the Constitution?
8.   According to the appellants, they made an advance payment of Rs.
     3,73,95,490/- in respect of the work order dated 24.01.2022 issued
     to Respondent No. 1, and the Respondent No. 1 furnished an
     irrevocable and unconditional bank guarantee dated 08.03.2022 for
     the said amount as security. The original project completion period
     was fixed at eight months, but the timeline was extended on several
     occasions. At one point, i.e., on 07.07.2023, the appellants terminated
     the work order issued to Respondent No. 1 citing alleged poor
     performance by Respondent No. 1 with respect to quality standards,
     non-compliance with contractual obligations, delays in timeliness, and
     missed deadlines. Subsequently, pursuant to a consensus reached
     between the parties, the appellants issued an amended work order
     on 13.07.2023, incorporating a condition that the retention money
     would be forfeited if the building was not handed over by 30.09.2023.
     Consequently, the appellants sought a refund of the debit balance
     of Rs. 4,12,54,904/- attributed to unadjusted advances and other
     deductions on or before 30.04.2024, failing which, the bank guarantee
     would be encashed. While so, Respondent No. 1 approached the
     Commercial Court and sought an ex parte interim protection against
     the encashment of the bank guarantee.
9.   On the other hand, it is the categorical stand of Respondent No. 1
     that due to delays in the supply of materials, delays in releasing
[2025] 5 S.C.R.                                                           1275

                   M/s Jindal Steel and Power Ltd. & Anr. v.
                   M/s Bansal Infra Projects Pvt. Ltd. & Ors.

     the running bills, and the failure to provide sufficient hutments and
     facilities for the workers as required under the terms of the contract,
     Respondent No. 1 was unable to complete the project within the
     stipulated time. Without considering their own lapses, the appellants
     attempted to encash the bank guarantee furnished by Respondent
     No. 1. This compelled Respondent No. 1 to file a Section 9 arbitration
     petition and also an application to seek an ex parte interim injunction
     against the enforcement of bank guarantee.
10. The Commercial Court rejected the application filed under Order
    XXXIX Rule 3 CPC and ordered issuance of notice in the Section
    9 arbitration petition filed by Respondent No. 1. However, the Writ
    Court, exercising its jurisdiction under Article 227 of the Constitution,
    granted interim protection in favour of Respondent No. 1 against the
    invocation of the bank guarantee until the disposal of the Section 9
    arbitration petition, which is questioned by the appellants by filing
    the present appeal.
11. We are aware of the established legal principle that the Courts
    should refrain from interfering with the invocation of a bank guarantee
    except in cases of fraud of an egregious nature or in cases where
    allowing encashment would result in irretrievable injustice. This
    Court in Hindustan Construction Co. Ltd v. State of Bihar and
    others5, emphasized that bank guarantees serve as the backbone of
    commercial transactions and must be honoured in accordance with
    their terms. The following paragraphs are pertinent in this regard:
            “8. Now, a bank guarantee is the common mode of
            securing payment of money in commercial dealings as
            the beneficiary, under the guarantee, is entitled to realise
            the whole of the amount under that guarantee in terms
            thereof irrespective of any pending dispute between the
            person on whose behalf the guarantee was given and the
            beneficiary. In contracts awarded to private individuals by
            the Government, which involve huge expenditure, as, for
            example, construction contracts, bank guarantees are
            usually required to be furnished in favour of the Government
            to secure payments made to the contractor as “advance”
            from time to time during the course of the contract as also


5   (1999) 8 SCC 436
1276                                                           [2025] 5 S.C.R.

                                Supreme Court Reports


              to secure performance of the work entrusted under the
              contract. Such guarantees are encashable in terms thereof
              on the lapse of the contractor either in the performance of
              the work or in paying back to the Government “advance”,
              the guarantee is invoked and the amount is recovered from
              the bank. It is for this reason that the courts are reluctant
              in granting an injunction against the invocation of bank
              guarantee, except in the case of fraud, which should be
              an established fraud, or where irretrievable injury was
              likely to be caused to the guarantor. This was the principle
              laid down by this Court in various decisions. In U.P.
              Coop. Federation Ltd v. Singh Consultants & Engineers
              (P) Ltd.6, the law laid down in Bolivinter Oil SA v. Chase
              Manhattan Bank7 was approved and it was held that an
              unconditional bank guarantee could be invoked in terms
              thereof by the person in whose favour the bank guarantee
              was given and the courts would not grant any injunction
              restraining the invocation except in the case of fraud or
              irretrievable injury. In Svenska Handelsbanken v. Indian
              Charge Chrome8, Larsen & Toubro Ltd v. Maharashtra
              SEB9, Hindustan Steel Works Construction Ltd v. G.S.
              Atwal & Co. (Engineers) (P) Ltd 10, National Thermal
              Power Corporation Ltd v. Flowmore (P) Ltd11, State of
              Maharashtra v. National Construction Co.12, Hindustan
              Steel Works Construction Ltd v. Tarapore & Co.13 as also
              in U.P. State Sugar Corporation v. Sumac International
              Ltd14, the same principle has been laid down and reiterated.
              9. What is important, therefore, is that the bank guarantee
              should be in unequivocal terms, unconditional and recite
              that the amount would be paid without demur or objection


6    (1988) 1 SCC 174
7    (1984) 1 All ER 351 (CA)
8    (1994) 1 SCC 502
9    (1995) 6 SCC 68
10   (1995) 6 SCC 76
11   (1995) 4 SCC 515
12   (1996) 1 SCC 735
13   (1996) 5 SCC 34
14   (1997) 1 SCC 568
[2025] 5 S.C.R.                                                        1277

                M/s Jindal Steel and Power Ltd. & Anr. v.
                M/s Bansal Infra Projects Pvt. Ltd. & Ors.

           and irrespective of any dispute that might have cropped
           up or might have been pending between the beneficiary
           under the bank guarantee or the person on whose behalf
           the guarantee was furnished. The terms of the bank
           guarantee are, therefore, extremely material. Since the
           bank guarantee represents an independent contract
           between the bank and the beneficiary, both the parties
           would be bound by the terms thereof. The invocation,
           therefore, will have to be in accordance with the terms of
           the bank guarantee; or else, the invocation itself would
           be bad.”
12. However, it cannot be disputed that after hearing both sides and
    with the consent of the parties, the High Court disposed of the writ
    petition by the order impugned herein, inter alia stating that if the
    appellants were permitted to invoke the bank guarantee, the prayer
    made in the Section 9 arbitration petition would likely become
    infructuous. Furthermore, the High Court clearly observed that
    the Commercial Court shall proceed in accordance with law and
    adjudicate upon the prayers made in the arbitration petition on its
    own merits, considering the pleadings and documents placed on
    record, without being influenced by any of the observations made
    therein. Ultimately, it was directed that the interim order restraining
    the appellants from encashing the bank guarantee shall remain in
    force until the disposal of the arbitration petition pending before
    the Commercial Court, subject to Respondent No. 1 extending the
    validity of the bank guarantee. Thus, we are of the view that the order
    passed by the High Court is merely an interim measure intended to
    protect the interests of both parties.
13. Admittedly, Respondent No. 1 initiated arbitration proceedings to
    resolve the disputes with the appellants. In the Section 9 arbitration
    petition filed by them, the arguments on behalf of Respondent No.
    1 and Respondent No. 2 have already been concluded, and the
    matter stands partly heard, pending further arguments on behalf of
    the appellants. Furthermore, pursuant to the order dated 06.11.2024
    passed by the High Court, an Arbitral Tribunal was constituted to
    adjudicate the disputes between the parties and a hearing was held
    on 03.01.2025, during which, the parties involved herein appeared
    and the Arbitral Tribunal directed them to file statement of claim,
    statement of defence and counter claim, if any, and reply to the same.
1278                                                             [2025] 5 S.C.R.

                             Supreme Court Reports


     Thus, in view of the ongoing arbitration proceedings concerning the
     bank guarantee, it is imperative to maintain the existing position
     regarding the bank guarantee until the final outcome of the Section
     9 arbitration petition.
14. It is also to be pointed out that as directed by the High Court,
    Respondent No. 1 renewed the bank guarantee till 31.12.2024, which
    was subsequently, extended till 30.06.2025 pursuant to the directions
    of this Court. Furthermore, the learned counsel for Respondent
    No. 1 has given an undertaking to extend the validity of the bank
    guarantee till the disposal of the Section 9 arbitration petition. As
    such, no prejudice whatsoever is occasioned to the appellants, for
    the present. Therefore, we will not decide the legal issues raised
    herein and the same are left open.
15. Since the Section 9 arbitration petition is now ripe for arguments
    before the Commercial Court on behalf of the appellants, the parties
    are directed to advance all their contentions along with necessary
    documents, and the Commercial Court shall pass appropriate orders
    within a period of eight weeks thereafter. Until such time, the bank
    guarantee shall be kept alive and shall be subject to the outcome
    of the Section 9 arbitration petition.
16. Accordingly, this appeal stands disposed of. No costs. Consequently,
    connected Miscellaneous Application(s), if any, shall stand closed.

     Result of the case: Appeal disposed of.




     †
         Headnotes prepared by: Swathi H. Prasad, Hony. Associate Editor
                                 (Verified by: Kanu Agrawal, Adv.)