2026 Supreme(Online)(Bom) 3757

HIGH COURT OF BOMBAY
Sandeep V. Marne, J
Oil and Natural Gas Corporation Limited – Appellant
Versus
Larsen & Toubro Limited – Respondent
COMMERCIAL ARBITRATION PETITION (L) NO. 15345 OF 2026

Unsuccessful party may invoke post-award Section 9 for interim measures like bank guarantee extension in rare compelling cases meeting higher threshold, preserving disputed amounts pending Section 34 without prejudicing award enforcement.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 9, 33, 34, 36(3) - Post-award interim measures - Unsuccessful party can maintain Section 9 petition despite higher award to successful party - Supreme Court judgment holds Dirk India line of cases not good law - Section 9 available to preserve subject matter or disputed amount until Section 34 culmination - Threshold higher for unsuccessful party; rare and compelling circumstances required - Non-prejudicial relief like bank guarantee extension permissible if does not affect award enforceability - Prima facie case of erroneous liquidated damages restriction to 35% despite contractual 10% cap; guarantee secures awarded claim preventing deductions - Direction to extend guarantee until Section 34 disposal as rare compelling case made out. (Paras 2, 25-34, 36-49)

(B) Arbitration - Additional award under Section 33 - Alters original condition linking bank guarantee return to payment of awarded liquidated damages (35%) to mutual adjustment/set-off - Challenged as exceeding jurisdiction; supports need for interim security pending Section 34. (Paras 8-9, 40-42)

(C) Contracts - Liquidated damages - Apportionment methodology contrary to clause; extension of time exceeding actual delay without critical path analysis - Findings prima facie perverse justifying interim protection. (Paras 14, 37)

Facts of the case:
Petitioner engaged respondent for survey, design, fabrication, installation of well-head platforms on lump sum turnkey basis; scheduled completion 15 May 2011; delayed to 28 Feb 2012 (289 days); liquidated damages of approx. INR 122.73 crores withheld, released against bank guarantee of approx. INR 150.34 crores (10% contract price); arbitral award grants respondent approx. INR 271.12 crores claims, limits petitioner to 35% liquidated damages (INR 42.95 crores), directs mutual adjustment and bank guarantee return; additional award substitutes payment condition with set-off; respondent refuses extension beyond 30 Apr 2026; petitioner files Section 34 challenge and Section 9 petition for guarantee renewal.

Findings of Court:
Petition allowed; respondent directed to extend/keep alive or furnish equivalent bank guarantee until final disposal of Section 34 petition.

Issues: Whether unsuccessful party (net liability INR 228.16 crores) can maintain post-award Section 9 petition for bank guarantee extension securing awarded/unawarded liquidated damages; whether rare/compelling case made out despite pendency of Section 36(3) application.

Ratio Decidendi: Unsuccessful/partially successful party entitled to Section 9 relief in rare compelling cases crossing higher threshold; here, prima facie illegality in liquidated damages cap violation, guarantee as assurance against prevented deductions, non-prejudicial to award enforcement, irreparable injury absent security, balance of convenience favors preservation pending Section 34 where modification possible.

Result: Petition allowed.

Table of Content
1. unsuccessful party may seek section 9 relief post-award. (Para 1 , 2 , 3 , 4)
2. contract delay led to ld and bank guarantee disputes. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13)
3. petitioner challenges award errors and seeks bg extension. (Para 14 , 15 , 16)
4. respondent contests maintainability due to delay and estoppel. (Para 17 , 18 , 19 , 20)
5. net award favors respondent over petitioner. (Para 21 , 22 , 23 , 24)
6. home care allows unsuccessful parties section 9 relief in rare cases. (Para 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33)
7. petition maintainable; higher threshold for interim relief. (Para 34 , 35 , 36 , 37)
8. bg secures petitioner's ld claim against set-off. (Para 38 , 39 , 40 , 41 , 42)
9. rare compelling case justifies non-prejudicial bg renewal. (Para 43 , 44 , 45 , 46 , 47 , 48 , 49)
10. order directs bg extension pending section 34. (Para 50 , 51)

JUDGMENT:

PREFACE

1) This is a post Award Petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) seeking a direction to the Respondent to extend and to keep alive the Bank Guarantee provided by Respondent to the Petitioner towards liquidated damages as per clauses 6.3.2 and 6.3.4 of the General Conditions of Contract. The Arbitral Tribunal has awarded in favour of Respondent an aggregate sum of approximately INR 271,12,57,704.81 whereas the sum awarded in favour of Petitioner is approximately INR 42,95,65,545.28. Petitioner is aggrieved by the Award, which is challenged by it under Section 34 of the Arbitration Act. In that sense, the Respondent is a ‘successful party’ in the arbitration whereas Petitioner is a ‘unsuccessful party’. Though Petitioner is an unsuccessful party in the arbitral proceedings, it has filed the present Petition under Section 9 of the Arbitration Act seeking a direction for renewal of the bank guarantee on the ground that it is entitled to recover from the Petitioner the entire or at least the awarded amount of liquidated damages.

2) Though the issue of impermissibility for a losing party to maintain application under Section 9 of the Arbitration Act was fairly well settled by judgment of Division Bench of this Court in Dirk India Pvt. Ltd. vs. Maharashtra State Electricity Generation Company Limited 1, 2013 SCC OnLine Bom 481the law has undergone a change on account of Hon’ble Supreme Court’s recent judgment dated 24 April 2026 in Home Care Retail Marts Pvt. Ltd vs. Haresh N. Sanghavi 2, 2026 SCC OnLine SC 670in which it is held that the judgment of this Court in Dirk India Pvt. Ltd. (supra) does not lay down a good law and that even an unsuccessful party to arbitration can maintain application under Section 9 of the Arbitration Act.

3) The Petitioner has in fact applied for very same interim relief under Section 36(3) of the Arbitration Act while challenging the arbitral award under Section 34. However, after filing of Section 34 petition, since the legal position has undergone a change on account of judgment in Home Care Retail Marts Pvt. Ltd. (supra) on 24 April 2026, the Petitioner has chosen to file the present Petition under Section 9 of the Arbitration Act rather than pressing for interim relief under Section 36(3). The Respondent questions (i) maintainability of the present Petition, (ii) the propriety in filing of the present Petition despite seeking similar relief in Section 36(3) Application and (iii) Petitioner’s entitlement for interim measures on merits.

THE ISSUE INVOLVED

4) In the light of the above position, the issue that arises for consideration is whether the Petitioner, who has been awarded claim in the sum of Rs.42.95 crores as against award of claim of Rs.271.12 crores in favour of the Respondent, can maintain a Petition under Section 9 of the Arbitration Act for seeking interim measures for securing the awarded and unawarded sum of liquidated damages by extension/renewal of the bank guarantee by the Respondent. Also involved is the issue whether Petitioner can main

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