Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 23.12.2025
Judgment pronounced on: 09.01.2026
Judgment uploaded on: 09.01.2026
+ FAO(OS) (COMM) 211/2025, CM APPL. 81218/2025, CM
APPL. 81219/2025, CM APPL. 81220/2025, CM APPL.
81221/2025 and CM APPL. 81222/2025
BLACK GOLD RESOURCES PRIVATE LIMITADA
.....Appellant
Through: Mr. Parag Tripathi, Sr. Adv.
with Mr. Saurav Agrawal, Mr.
Mayank Jain, Mr. Madhur Jain,
Ms. Aakriti Dhawan, Mr. Arpit
Goel, Mr. Deepak Jain and Ms.
Samayra Adlakha, Advs.
versus
INTERNATIONAL COAL VENTURES PVT. LTD & ANR.
.....Respondents
Through: Mr. Rajshekhar Rao, Sr. Adv.
with Mr. Shaiwal Srivastava
and Ms. Aashna Chawa, Advs.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
J U D G M E N T
ANIL KSHETARPAL, J.
I. INTRODUCTION
1. The present Appeal, preferred under Section 37(1) of the
Arbitration and Conciliation Act, 1996 (“the Act”) read with Section
13 of the Commercial Courts Act, 2015, assails the judgment and
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PASRICHA
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order dated 17.12.2025 passed by the learned Single Judge in
OMP(I)(COMM.) 78/2025 captioned as Black Gold Resources
Private Limitada vs. International Coal Ventures Pvt. Ltd. & Anr. ,
2. By the impugned order, the learned Single Judge dismissed the
Appellant’s petition under Section 9 of the Act, which sought to
restrain the Respondents from encashing an Unconditional
Performance Bank Guarantee (“PBG”) of USD 10,535,000 issued by
First Capital Bank. The Appellant also sought protection against what
it describes as the "illegal termination" of the Mining Services
Contract dated 02.11.2017.
3. The present Appeal was listed for hearing on 23.12.2025 before
this bench for the first time, and arguments of the learned counsel
representing the parties have been heard at length and with their able
assistance, the paper book and the Impugned Order have been
perused.
II. FACTUAL BACKGROUND
4. The Appellant, a Special Purpose Vehicle registered in
Mozambique, entered into a Mining Services Contract with
Respondent No. 2, Minas De Benga Limitada (“MBL”), on
02.11.2017. Respondent No. 2 is a subsidiary of Respondent No. 1,
International Coal Ventures Pvt. Ltd. (“ICVL”), a joint venture of
Indian Public Sector Undertakings including SAIL, NMDC, CIL, and
NTPC. The contract involved the extraction of Run-of-Mine (“ROM”)
coal and the removal of overburden (“OB”) at the Benga Coal Mine in
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FAO(OS)(COMM) 211/2025 Page 2 of 8
Mozambique. (Overburden means extracted sand, rocks, stones and
waste material.)
5. On 18.08.2023, the parties executed “Addendum No. 2,”
extending the contract duration until 22.08.2025. This addendum
mandated the excavation of target quantities and the clearance of
“Backlog OB” from previous periods. Under Clause 12 of the General
Conditions of Contract read with the Addendum, a 90-day cure notice
was required for defaults in quarterly targets.
6. Performance issues emerged in late 2024. The Respondents
alleged substantial shortfalls in OB removal and raised concerns over
the accuracy of prior computations. A survey report by M/s Bureau
Veritas suggested that excess quantities of approximately 17.69 BCM
of OB had been incorrectly recorded between August 2023 and July
2024. On 08.11.2024, the Respondents issued a default notice. While
the Respondents urged continued performance via a letter dated
13.12.2024, the Appellant, citing a financial crisis caused by the
Respondents withholding payments for August to October 2024,
communicated its inability to perform on 19.12.2024.
7. Negotiations and dispute resolution attempts under Clause 13
failed to yield a consensus. Consequently, on 03.03.2025, Respondent
No. 2 terminated the contract at the Appellant’s “risk and cost” and
simultaneously moved to invoke the PBG. The Appellant filed a
Section 9 petition on 05.03.2025, securing an ad-interim stay on
encashment the following day. During the pendency of these
proceedings, a three-member Arbitral Tribunal was constituted under
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the International Chamber of Commerce (“ICC”) on 01.09.2025,
comprising Mr. D. K. Singh, Mr. Justice L. Nageswara Rao (Retd),
and Datuk Professor Sundra Rajoo Nadarajah.
III. APPELLANT’S CONTENTIONS
8. Learned Senior Counsel for the Appellant argued that the
termination was arbitrary, non-transparent, and procedurally defective.
It was submitted that the Appellant had successfully achieved 96% of
the coal production target, and since OB removal is merely an
ancillary obligation, termination on that ground was disproportionate.
The Appellant contended that the Respondents violated Clause 12.1(b)
and Clause 9 of the Addendum by failing to provide the mandatory
90-day cure period, instead granting only 14 days in the notice dated
08.11.2024. Furthermore, it was argued that Clause 13.2 prohibited
termination while the dispute resolution process was underway, yet
the Respondents terminated the contract just one day before a
scheduled conciliation meeting.
9. Regarding the PBG, the Appellant alleged “egregious fraud” on
the basis that the Respondents were seeking to recover amounts
already settled or refunded. It was further contended that "special
equities" exist because the illegal termination and withholding of over
USD 25 million in pending bills had wiped out the Appellant’s net
worth. Relying on the ratio in BGR Energy Systems Ltd. , the
Appellant argued that such financial incapacitation constitutes
irretrievable injury, as it prevents the Appellant from effectively
pursuing its claims before the Arbitral Tribunal. Finally, the Appellant
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maintained that once the Tribunal was formed, the learned Single
Judge was duty-bound under Section 9(3) to refer the matter to the
Tribunal rather than dismissing the petition on its merits.
IV. RESPONDENTS’ CONTENTIONS
10. Learned Senior Counsel for the Respondents submitted that the
PBG is an independent and unconditional contract, and the law
restricts judicial interference to very narrow exceptions. They argued
that the Appellant’s communication dated 19.12.2024, stating its
inability to perform, amounted to a clear abandonment of the contract.
It was contended that the shortfalls in OB removal were not trivial but
constituted a material breach of the performance targets stipulated in
the Addendum. The Respondents denied any fraud, asserting that the
discovery of misreported OB volumes by Bureau Veritas justified
both the termination and the invocation of the guarantee.
11. The Respondents further argued that the Appellant’s financial
distress does not meet the threshold of “special equities” or
“irretrievable harm”. They pointed out that as the Respondents are
government-backed entities with substantial assets, the Appellant’s
interests remain protected, as any amount encashed could be refunded
with interest should the Appellant prevail in arbitration. It was also
highlighted that the dispute over the exact quantum of liability-
whether it is USD 30 Million or less is a matter of evidence to be
adjudicated by the Arbitral Tribunal. Given that the Tribunal is
already seized of the matter and a Section 17 application has been
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filed by the Respondents, they urged that the Court should not
interfere at this stage.
V. ANALYSIS
12. The legal framework governing the stay of encashment of an
unconditional bank guarantee is remarkably strict. It is well-settled
through a catena of judgments, including U.P. State Sugar
Corporation vs. M/S. Sumac International Ltd. [1997 (1) SCC 568]
and Dwarikesh Sugar Industries Ltd vs Prem Heavy Engineeing
1
Work , Vinitec Electronics Private Limited v. HCL Infosystems
2
Limited and Gujarat Maritime Board v. L&T Infrastructure
Development Projects Ltd. and Anr, that a bank guarantee must be
honoured regardless of any pending dispute between the parties to the
underlying contract. The two recognized exceptions are: (i) fraud of
an egregious nature which the bank has notice of and which vitiates
the very foundation of the guarantee; and (ii) special equities where
encashment would result in irretrievable harm or injustice.
13. On the first exception, the Appellant’s allegations of fraud
pertain to the computation of overburden volumes and the validity of
the termination. These are essentially contractual disputes. Even if the
Appellant is correct that the termination was procedurally flawed or
based on inaccurate surveys, such claims do not constitute the kind of
"egregious fraud" that would allow a Court to stay an unconditional
guarantee. The dispute over whether the liability is USD 30 Million or
a lower figure is a matter for the Arbitral Tribunal to determine
1
[1997 (6) SCC 450],
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through evidence. Though the dispute is to be finally decided by the
Arbitral Tribunal, however, prima facie, removal of OB is not an
ancillary but integral and important component of the contract.
14. Regarding "special equities" and "irretrievable harm," the
Appellant’s reliance on its "wiped out" net worth and the BGR Energy
case is misplaced in the present context. Financial hardship or a
liquidity crisis resulting from a commercial dispute does not equate to
"irretrievable harm". Irretrievable harm implies a situation where the
party, even if successful in arbitration, would find it impossible to
recover the money from the beneficiary. Since the Respondents are
backed by Indian Public Sector Undertakings like SAIL and NTPC,
there is no risk that they would be unable to satisfy an eventual
arbitral award.
15. The observation in the impugned judgment regarding the
Appellant's conduct are significant. The Appellant’s refusal to perform
on 19.12.2024, following the Respondents’ demand for performance
on 13.12.2024, prima facie indicates a cessation of work. While the
Appellant justifies this on financial grounds, such an abandonment
strengthens the Respondents' right to invoke the PBG, which is
intended to protect the beneficiary against performance failures.
16. Lastly, the procedural reality of this case cannot be ignored. A
high-level three-member Arbitral Tribunal has already been
constituted and is actively managing the dispute. Under Section 9(3)
of the Act, once the Tribunal is constituted, the Court shall not
entertain a Section 9 petition unless the remedy under Section 17 is
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found to be inefficacious. The Respondents have already moved an
application under Section 17. It is therefore appropriate that all interim
measures, including the status of the PBG, be addressed by the
Tribunal, which has the power to pass comprehensive orders based on
a full review of the record.
VI. CONCLUSION
17. In light of the foregoing, the Appellant has failed to meet the
high threshold required to restrain the encashment of an unconditional
bank guarantee. The issues raised regarding the legality of the
termination and the quantum of overburden removal are matters for
arbitration. The learned Single Judge correctly applied the settled law
on bank guarantees and properly considered the constitution of the
Arbitral Tribunal.
18. The present Appeal and all pending applications are hereby
dismissed.
ANIL KSHETARPAL, J.
HARISH VAIDYANATHAN SHANKAR, J.
JANUARY 09, 2026
s.godara/KB
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