Section 9 Interim Relief for Continuation of Bank Guarantee Pending Section 34 Petition

The contract provides for bank guarantees to remain alive till the dispute of levy of liquidated damages is finally decided. On that basis, section 9 petition for interim directions for renewal and continuation of bank guarantees pending section 34 petition is claimed.

It is true that a successful party becomes entitled to enjoy the benefit arising from the decision in its favour. The same principle applies to an arbitral award. However the petitioner is not asking for enforcement of its claim or immediate invocation of the Bank Guarantees. The petitioner is asking for continuation of the existing security till the proceedings under Section 34 are decided. Therefore, whether such continuation would really cause prejudice to the respondent has to be considered in the light of the arrangement voluntarily entered into between the parties. In this background, Clause 6.3.4 becomes important. Prima facie, this clause appears to have been inserted at the request of the respondent. The object was to replace deduction of liquidated damages by furnishing Bank Guarantees. The clause provides that the Bank Guarantees shall continue till settlement of the dispute relating to liquidated damages. It is true that the words “final settlement” may require interpretation in the proceedings under Section 34. However, at this stage, the language of the clause supports the submission of the petitioner that the parties intended the Bank Guarantees to continue till the dispute reaches finality.

Judgment dated 10.7.2026 of the High Court of Bombay (OS) in Commercial Arbitration Petition (L No.20173 of 2026 of Oil and Natural Gas Corporation Vs.  Afcons Gunanusa Joint Venture