The invocation of bank guarantees must adhere strictly to the contractual terms; courts may intervene to prevent encashment if it risks undermining arbitration.

JUDGMENT :

HARISH VAIDYANATHAN SHANKAR, J.

1. The present Petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 [A&C Act] seeking the following reliefs:

“a. Pass an ex-parte ad-interim order, thereby restraining the Respondents from invoking/ encashing the bank guarantees issued by the State Bank of India i.e., herein Respondent No.2; namely:

i. Performance Bank Guarantee No. 0151824BG0000014 for Rs.3,24,00,324/- dated 20.01.2024;

ii. Mobilization Bank Guarantee No. 0151824BG0000057 for Rs.3,50,46,351/- dated 04.03.2024;

iii. Performance Bank Guarantee No. 0151824BG0000016 for INR. 1,89,00,019/- dated 20.01.2024

b. Pass an order restraining Respondent No.1, its servants, employees and agents from terminating the contracts for Pkg-I and Pkg-IV, in as much as the EPC Contract is also “the subject matter of the arbitration agreement”;

c. Confirm the orders passed in terms of aforesaid Prayers "a" and "b" after notice to the Respondents;

d. Award costs of the present proceedings in favour of the Petitioner and against the Respondents;

e. Pass such other order or further orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case.”

BRIEF FACTS:

2. M/s Sadguru Engineers and Allied Services Pvt. Ltd. [Petitioner] the Engineering, Procurement and Construction [EPC] Contractor herein, is a construction company incorporated under the Companies Act, 1956, having its registered office at 406, 4th Floor, Hanuman Tower, Athgaon, Guwahati, Assam-781001.

3. National Highways & Infrastructure Development Corporation Ltd. [NHIDCL/Respondent No.1] is a Central Public Sector Undertaking under the Ministry of Road Transport and Highways, Government of India, which, on 25.09.2023, issued certain tenders for execution of balance works of four-laning of National Highway No.37 (Old) [NH-37], Jorhat- Jhanji stretch, under the EPC mode for Package-I (consisting the Road Works) [Pkg-I] and Package-IV (consisting the Structures & Toll Plaza) [Pkg-IV]

4. The Petitioner emerged as the lowest bidder for the said tenders and was issued Letters of Acceptance dated 15.01.2024 for both packages. Pursuant thereto, Contract Agreements dated 07.02.2024 [Agreements] in respect of both said packages came to be executed with NHIDCL.

5. In compliance with the contractual stipulations, the Petitioner furnished two Performance Bank Guarantees and a Mobilisation Bank Guarantee [BGs] issued by State Bank of India [Respondent No. 2] (through the Branch Manager), SME AT Road Branch, Guwahati-794106, aggregating to INR 8,63,46,694/-.

6. It is stated that the appointed date for commencement of works for both packages was fixed as 14.02.2024, and in the course of execution thereafter, the Petitioner achieved substantial progress, namely approximately 97% physical progress and 93.18% financial progress in Pkg-I, and 94.73% physical progress and 92.35% financial progress in Pkg-IV, as reflected in the Stage Payment Statements.

7. It is further stated that in pursuance thereof, certain applications seeking Extension of Time [EOT] including formal applications, were submitted by the Petitioner for completion of the balance of works. The Petitioner, however, asserted that delays in said completion of the project occurred due to Authority Defaults and Force Majeure events, including non-availability of encumbrance-free right of