Delhi High Court Restrains NTPC From Encashing Bank Guarantees In Multi-Crore Arbitration Dispute

In a significant judicial intervention, the Delhi High Court has issued an interim order restraining NTPC Vidyut Vyapar Nigam Limited (NVVN) from proceeding with the encashment of performance bank guarantees (PBGs) held by Precision Technik Private Limited (PTPL). The order, passed by Justice Sachin Datta, underscores the sanctity and finality of arbitral awards in ongoing commercial contractual disputes.

A History of Legal Contention

The dispute stems from a long-standing contractual disagreement between NTPC Vidyut Vyapar Nigam (Respondent) and Precision Technik Private Limited (Petitioner). As early as May 8, 2015, an arbitral tribunal ruled in favor of PTPL, ordering the discharge and return of two performance bank guarantees of Rs. 3.64 crores each.

Despite this, the conflict persisted, leading to prolonged litigation under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. A pivotal moment occurred on July 18, 2025, when a Division Bench, while exercising powers under Section 37, upheld the earlier findings, explicitly stating that NTPC’s claims for further encashment lacked justification and would impose an "excessive and inequitable burden" on the petitioner.

The Conflict at Hand

Despite the finality attained through the July 2025 judgment, the petitioner approached the High Court alleging that the respondent was attempting to fraudulently encash the very bank guarantees (bearing No. 12711IGPER0002 and 124711IGPER0003) which the tribunal had long ordered to be returned.

The petitioner argued that such an attempt was a direct violation of established arbitral findings, prompting the urgent filing of the current writ petition.

Key Observations

The Court highlighted the need to respect the conclusive findings of previous arbitral and judicial proceedings:

• Regarding the initial tribunal findings: "The two other 2nd and 3rd Performance Bank Guarantees of Rs.3,64,26,000/- each be discharged and paid back to the claimant."
• Reflecting on the findings of the Division Bench: "The learned Single Judge further held, and we concur, that any additional claim towards further encashment of the PBG would not only lack justification but would also amount to imposing an excessive and inequitable burden on PTPL."
• On the current situation: "It is submitted that the same is fraudulent and, is in the teeth of the findings rendered in the arbitral award which has acquired finality."

Judicial Directive

In view of the circumstances, Justice Sachin Datta restrained the respondents from encashing the bank guarantees, with a condition that they remain valid until January 31, 2026. The matter is now listed for further hearing on January 15, 2026, where the respondent will be expected to file a formal reply to the allegations.

This order serves as a stern reminder that parties to an arbitration dispute cannot unilaterally disregard findings that have attained finality, particularly when those findings explicitly protect financial instruments like bank guarantees from arbitrary liquidation. As the case proceeds, the legal community will be watching to see how the court addresses the allegations of attempted fraudulent encashment against a major public sector undertaking.