M/S Onycon Infrastructure vs Virtuaal Pareng Hydro Private Limited & Anr.
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgement reserved on: 08.10.2026
Judgement delivered on: 27.10.2026
+ O.M.P.(I) (COMM) 289/2026
M/S ONYCON INFRASTRUCTURE ……Petitioner
versus
VIRTUAAL PARENG HYDRO
PRIVATE LIMITED & ANR. ....Respondents
Advocates who appeared in this case:
For the Petitioner: Mr. Sujoy Datta, Mr. N.P.S. Chawla, Mr. Vibhor
Kapoor, Ms. Nishtha Khurana, Mr. Shubham
Raghuwanshi, and Ms. Kinjal Sharma, Advocates.
For the Respondents: Mr. Manish Sharma, Senior Advocates with Mr.
Vijay Kaundal, Mr. Nitish Kant Sharma, Ms. Sapna
Jha, Mr. Ninad Dogra and Ms. Adya Rao, Advocates
for R-1.
CORAM:
HON’BLE MR. JUSTICE TUSHAR RAO GEDELA
J U D G E M E N T
TUSHAR RAO GEDELA, J.
1. The petitioner has filed the present petition under Section 9 seeking ad-
interim ex-parte protection against invocation and encashment of two Bank
Guarantees (hereinafter referred to as ‘BGs’ ), being Bank Guarantee No.
075BG03243170001 dated 12.11.2024 for Rs.2,53,80,000/- (hereinafter referred to
as ‘BG-1’ ) and Bank Guarantee No. 075BG03250170001 dated 17.01.2025 for
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 1 of 35
Rs.1,78,20,000/- (hereinafter referred to as ‘BG-2’ ), both aggregating to
Rs.4,32,00,000/-, issued by respondent no.2/Yes Bank Limited, and currently valid
up to 15.11.2026.
2. This Court, on 22.07.2026, after having heard the learned counsel for the
petitioner at length and recording his submissions, passed the following order,
relevant portions of which are reproduced hereunder:
“6. The petitioner claims to be a firm engaged in execution of civil, infrastructure
and engineering projects. It claims that by a Letter of Acceptance dated
12.08.2024, the respondent no.1, developer of the Pareng Hydro Electric Project,
Arunachal Pradesh awarded to the petitioner, a Civil Works Contract dated
12.11.2024 for a contract price of Rs.86,38,57,744/-. The aforesaid two bank
guarantees, i.e., BG-1 and BG-2 were furnished by the petitioner exclusively as
security for mobilisation advance under the Civil Works Contract. It is also stated
that apart from the aforesaid Civil Works Contract, the parties also executed an
independent Framework Agreement on 06.01.2025 for supply of cement and steel
under which the respondent no.1 was the supplier and the petitioner was the
purchaser. It is claimed that the Framework Agreement did not contemplate any
bank guarantee as security, and that neither BG-1 nor BG-2 were referred
directly or indirectly in the said Framework Agreement.
7. In the meanwhile, it is stated by the petitioner that disputes have arisen between
the parties under the Civil Works Agreement allegedly, on account of respondent
no.1’s failure to hand over an encumbrance-free site, failure of timely release of
mobilization advances and certified bills etc. It is further stated that by a legal
notice dated 23.06.2026, the respondent no.1 demanded approximately a sum of
Rs.3,71,46,662/- from the petitioner, which is solely under the Framework
Agreement. It is claimed that the said notice is bereft of any reference to any
default or dispute in respect of the Civil Works Contract.
8. The petitioner also states that another Bank Guarantee for a sum of
Rs.3,24,00,000/- (BG-3) was furnished by the petitioner in connection with the
Civil Works Contact which was sought to be invoked by the respondent no.1,
however, the concerned bank declined to honour it. It is stated that since there
was no advance monies paid under the Framework Agreement, the said BG-3 was
permitted to lapse.
9. It is contended that the respondent no.1 having failed in its previous attempts to
encash BG-3, is now attempting to encash BG-1 and BG-2, which have no nexus
nor are incidental to the Framework Agreement, and are related only under the
Civil Works Contract, which is a separate contract.
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 2 of 35
10. It is also contended that the BG-1 and BG-2 are conditional in nature and
unless the conditions prescribed therein are completed, the respondent no.1 has
no right under the law to invoke the bank guarantees. It is further stated that the
Civil Works Contract contains an Arbitration Agreement at Clause 14 providing
for the arbitration under the Rules of the Indian Council of Arbitration, with seat
and venue at New Delhi.
11. The petitioner also prays that in case this Court is inclined, an Arbitrator may
be appointed so as to ensure that the disputes are decided by proper arbitration
procedure as prescribed under Clause 14 of the Contract Works Contract.
12. This Court has heard the learned counsel for the petitioner.
13. At the first instance, the learned counsel for the petitioner, on a query by this
Court contended that unlike cases where irrevocable and unconditional bank
guarantees are tendered, the present BG-1 and BG-2 both are conditional bank
guarantees. He submitted that having regard to the fact that both BGs are
conditional, the same cannot be invoked in the manner in which the respondent
no.1 is purporting to. The learned counsel has relied upon the judgement of the
Supreme Court in Hindustan Construction Company Limited vs. State of Bihar
& Ors., reported in 1999 (8) SCC 436, particularly paras 11, 13, 14 and 22 to
contend that in case of a conditional bank guarantee, the party cannot be
permitted to invoke such bank guarantee in the same way an unconditional or
irrevocable bank guarantee can. He had also contended that the special equities
which have arisen in this case in his favour, would also propel this Court to
restrain the encashment of BG-1 and BG-2. According to the learned counsel, the
special equities are that the bank guarantees i.e. BG-1 and BG-2 both have been
furnished to the respondent no.1 in respect of the Civil Works Contract alone and
has no relation to the Framework Agreement which was executed on 06.01.2025,
and thus could not be encashed on an alleged default/breach of the Framework
Agreement.
14. In the aforesaid context, it would be relevant to extract the aforesaid
paragraphs of the judgment in Hindustan Construction (supra), which are as
under:
“11. We will first consider the bank guarantee relating to "mobilisation
advance". This guarantee was furnished in terms of clause 9 of the principal
contract between HCCL and the defendants which provides as under:
"9. Advance mobilisation loan.—The employer will make an advance loan
to the contractor at 13 per cent simple interest per annum for the costs of
mobilisation in respect of the works in a lump sum amount equivalent up to
15 per cent of the contract price named in the letter of acceptance, payable
in the proportioned amounts of foreign and local currencies as provided for
in the contract. Payment of the loan will be due under separate certification
by the Engineer after (i) execution of the form of agreement by the parties
thereto, (ii) provision by the contract of the performance security in
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 3 of 35
accordance with clause 5, and (iii) provision by the contractor of a bank
guarantee, by a bank acceptable to the employer in an amount equal to the
advance loan, such bank guarantee to remain effective until the advance
loan has been completely repaid by the contractor out of current earnings
under the contract and certified accordingly by the Engineer. A form of
bank guarantee acceptable to the employer is indicated in Section 9
Annexure B. The advance loan shall be used by the contractor exclusively
for mobilisation expenditures, including the acquisition of constructional
plant, in connection with the works. Should the contractor misappropriate
any portion of the advance loan, it shall become due and payable
immediately, and no further loan will be made to the contractor thereafter.
The advance mobilisation loan shall be paid within 15 days of the date of
certification."
xx xx xx
13. The Bank, in the above guarantee, no doubt, has used the expression
“agree unconditionally and irrevocably” to guarantee payment to the
Executive Engineer on his first demand without any right of objection, but
these expressions are immediately qualified by following:
“… in the event that the obligations expressed in the said clause of the
above-mentioned contract have not been fulfilled by the contractor giving
the right of claim to the employer for recovery of the whole or part of the
advance mobilisation loan from the contractor under the contract.”
14. This condition clearly refers to the original contract between HCCL and
the defendants and postulates that if the obligations, expressed in the
contract, are not fulfilled by HCCL giving to the defendants the right to
claim recovery of the whole or part of the “advance mobilisation loan”,
then the Bank would pay the amount due under the guarantee to the
Executive Engineer. By referring specifically to clause 9, the Bank has
qualified its liability to pay the amount covered by the guarantee relating to
“advance mobilisation loan” to the Executive Engineer only if the
obligations under the contract were not fulfilled by HCCL or HCCL has
misappropriated any portion of the “advance mobilisation loan”. It is in
these circumstances that the aforesaid clause would operate and the whole
of the amount covered by the “mobilisation advance” would become
payable on demand. The bank guarantee thus could be invoked only in the
circumstances referred to in clause 9 whereunder the amount would become
payable only if the obligations are not fulfilled or there is misappropriation.
That being so, the bank guarantee could not be said to be unconditional or
unequivocal in terms so that the defendants could be said to have had an
unfettered right to invoke that guarantee and demand immediate payment
thereof from the Bank. This aspect of the matter was wholly ignored by the
High Court and it unnecessarily interfered with the order of injunction,
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 4 of 35
granted by the Single Judge, by which the defendants were restrained from
invoking the bank guarantee.
xx xx xx
22. We have scrutinised the facts pleaded by the parties in respect of both
the bank guarantees as also the documents filed before us and we are,
prima facie, of the opinion that the lapse was on the part of the defendants
who were not possessed of sufficient funds for completion of the work. The
allegation of the defendants that HCCL itself had abandoned the work does
not, prima facie, appear to be correct and it is for this reason that we are of
the positive view that the “special equities” are wholly in favour of HCCL.”
15. It would be relevant to extract the Bank Guarantee furnished under the Civil
Works Contract:
“BANK GUARANTEE FOR MOBILIZATION ADVANCE
Letter of Acceptance/Contract Reference No VPHPL/PRG-LOA-Civil Works-
01/24-25/01 dated 12/08/2024 for the Contract for Civil Works for Pareng HEP
(3x 4850KW) in Pareng Village, District Papumpare, Arunachal Pradesh.
To:
M/s Virtuaal Pareng Hydro Private Limited,
Pvt Res, Near Directorate of Eco and stats,
P.O.RKM, Itanagar, Arunachal Pradesh- 791111, India
Dear Ladies and/or Gentlemen,
We refer to the Contract for Civil Works for Pareng HEP (3x 4850KW) in Pareng
Village vide reference no VPHPL/PRG-LOA-Civil Works-01/24-25/01 dated
12/08/2024.
BETWEEN
You, M/s Virtuaal Pareng Hydro Private Limited a company incorporated under
the laws of India under the Companies Act 1956 as amended from time to time
and having its principal place of business and Registered Office at Pvt Res, Near
Directorate of Eco and stats, P.O.RKM, Itanagar, Arunachal Pradesh- 791111,
India (hereinafter called "the Employer" which expression shall unless repugnant
to the context or meaning thereof include its successors and assigns)
AND
M/s Onycon Infrastructure, a corporation incorporated under the laws of India
under the Companies Act 1956 as amended from time to time and having its
principal place of business and Registered Office at 307 3rd Floor, Shri Krishna
Premises, New Link Road, Opp Laxmi Ind. Estate, Andheri West, Mumbai-
400053 (hereinafter called "the Contractor" which expression shall unless
repugnant to the context or meaning thereof include its successors and assigns)
for providing of all plant, materials and performing of all required services,
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 5 of 35
including design (to the extent applicable), procurement, quality assurance,
construction, installation, erection, Tests on Completion, delivery, Tests after
Completion, as applicable, and Completion of the Works and rectification of
defects, in accordance with the plans, procedures, specifications, drawings,
codes, and any other documents and provisions as specified, for All Civil Works
Comprising of River Diversion Works, Barrage, Intake, Feeder Tunnel, De-silting
Chamber, Head Race Tunnel & Adits, Surge Shaft, Pressure Shaft, Penstock Civil
Structural Works, Power House Complex, etc., under the Civil Works Package for
Pareng Hydropower Project (14.5 MW) in Arunachal Pradesh ("the Works") and
the Taking Over of the Works by the Employer subsequent to its Completion by
the Contractor.
Whereas, in accordance with the terms of the said Contract, the Employer has
agreed to pay or cause to be paid to the Contractor Advance Payment(s) against
furnishing of an irrevocable bank guarantee for amount of Rs 2,53,80,000/-
(Rupees Two Crore Fifty Three Lakh Eighty Thousand Only).
By this letter We, YES Bank Ltd., a company incorporated and registered under
the Companies Act 1956 and a banking company within the meaning of section
5(c) of the Banking Regulation Act, 1949 and having its registered office at YES
BANK LIMITED, YES BANK House, Off Western Express Highway, Santacruz
East, Mumbai 400055, India & Issuing branch office inter alia at YES BANK
LTD, Ground Floor, Hotel Fortune Galaxy, N.H.8, GIDC, Vapi - 396195, Gujarat
(Hereinafter called as "Bank") do hereby irrevocably guarantee repayment of Rs
2,53,80,000/- (Rupees Two Crore Fifty Three Lakh Eighty Thousand Only) upon
the first demand of the Employer without cavil or argument in the event that the
Contractor fails to commence or fulfill its obligations under the terms of the said
Contract for reasons whatsoever.
Provided always that the Bank's obligation shall be limited to the amount of this
bank guarantee or an amount equal to the outstanding balance of the Advance
Payment(s), taking into account such amounts, which have been repaid by the
Contractor from time to time in accordance with the terms of payment of the said
Contract, as certified by you.
This bank guarantee will be effective only on receipt of advance payment in the
account 000184600001594 maintain with YBL.
This Guarantee shall remain in full force from the date upon which the said
Advance Payment(s) are received by the Contractor up to ninety (90) days beyond
the date on which the entire Advance Payment(s) has been fully adjusted in terms
of the Contract i.e., up to ninety (90) days beyond the date of Completion of the
Facilities under the Contract. This Guarantee may be extended from time to time,
as may be desired by M/s Virtuaal Pareng Hydro Private Limited on whose behalf
this Guarantee has been issued.
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 6 of 35
Any claims to be made under this Guarantee must be received by the Bank during
its period of validity, i.e. upto ninety (90) days beyond the date of Completion of
the Facilities by the Employer i.e. upto and inclusive of 30-SEP-2025.
Notwithstanding anything contained hereinabove:
1) Our liability under this bank guarantee shall not exceed Rs.2,53,80,000/-
(Rupees Two Crore Fifty Three Lakh Eighty Thousand Only);
2) This bank guarantee shall be valid only up to 30-SEP-2025;
3) We are liable to pay the guaranteed amount or any part thereof under this bank
guarantee only and only if a written claim or demand, served by you in
accordance with the terms of this bank guarantee, is received by us on or before 5
P.M on or before 30-SEP-2025 at YES BANK LTD, Ground Floor, Hotel Fortune
Galaxy, N.H.8, GIDC, Vapi - 396195, Gujarat. Thereafter, your right to claim
under this bank guarantee shall be forfeited once and forever and we shall be
relieved from all our liabilities hereunder irrespective of whether the original
bank guarantee has been returned to us or not.”
[Emphasis Supplied]
16. It may also be relevant to consider Clause 43.1 of the Civil Works Contract
dated 12.11.2024 which is reproduced hereunder:
“43.1. Mobilization Advance: Interest bearing mobilisation advance shall be paid
to the Contractor in 2 (two) instalments as specified herein below.
43.1.1. 1ˢᵗ Instalment: A lump sum mobilization advance (Initial Mobilisation
Advance) not exceeding Rs.4.00 crores (Indian Rupees Four Crores only) shall be
paid to the Contractor at a simple interest rate of 8% (eight percent) per annum,
subject to fulfilment of the following conditions: -
a) On unconditional confirmation of Letter of Acceptance by the Contractor.
b) Acceptance and finalization of the Contractor's Detailed Construction Schedule
for the Works and finalization of the Contractor's Equipment mobilization
schedule.
c) Signing of the Contract.
d) Submission of Contractors invoice for the advance amount
e) Submission of advance payment security in the form of Advance Bank
Guarantee (as per format enclosed at Appendix 2) for 108% (one hundred eight
percent) of the amount of Initial Mobilisation Advance Plus GST thereon, with
initial validity of up to ninety (90) days beyond the Time for Completion of the
Works reckoned from the Commencement Date. The same shall be extended by the
Contractor time to time till ninety (90) days beyond the date of Completion
Certificate.
43.1.2. 2ⁿᵈ Instalment: A further lump sum mobilization advance (Additional
Mobilisation Advance) not exceeding Rs.4.50 crores (Indian Rupees Four Crores
and Fifty Lakhs only) shall be paid to the Contractor at a simple interest rate of
8% (eight percent) per annum on certification by the Employer that the
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 7 of 35
Contractor has opened his office at Site and mobilized the Contractor's
Equipment specifically agreed with the Employer for releasing this advance
payment subject to fulfilment of the following conditions: -
a) Confirmation that the Contractor's Equipment as per schedule have been
deployed at site.
b) Submission of Contractors invoice for the advance amount
c) Submission of Advance payment security in the form of Advance Bank
Guarantee (as per format enclosed at Appendix 2) for 108% (one hundred eight
percent) of the amount of Additional Mobilisation Advance plus GST thereon,
with initial validity of up to ninety (90) days beyond the Time for Completion of
the Works reckoned from the Commencement Date. The same shall be extended by
the Contractor time to time till ninety (90) days beyond the date of Completion
Certificate.
Notwithstanding the above, the Contractor may choose to submit the Advance
payment security with an initial validity of not less than one (1) year reckoned
from the Commencement Date. In such a case, the Contractor shall, however, be
required to extend the validity of the Advance payment security by at least one (1)
year at a time, and finally till ninety (90) days beyond the Time for Completion of
the Works reckoned from the Commencement Date, as may be required under the
Contract. Such extension may be arranged by the Contractor at any time, but the
Contractor must ensure the submission of the extended Advance payment security
to the Employer no later than 45 days before the expiry of the Advance payment
security, failing which the said Advance payment security shall be invoked by the
Employer for recovery of the unadjusted advance.”
17. From the aforesaid conditions employed in the Bank Guarantee, it is apparent
that the same is not unconditional, and there are certain conditions which have
been prescribed which may fall within the purview of the ratio of the judgement
laid down by the Supreme Court in Hindustan Construction (supra).
18. That apart, two legal notices dated 23.06.2026 and 11.07.2026 issued by the
respondent no.1 appear to be primarily and solely based on the alleged violations
of the Framework Agreement, and have not remotely referred to any issue arising
out of the Civil Works Contract. This is particularly relevant for the reason that
though by the said notices, the respondent no.1 is attempting to threaten the
petitioner of invocation of the Bank Guarantee in an indirect manner, however,
are premised only on issues pertaining to the Framework Agreement dated
06.01.2025.
19. At this prima facie stage, the action of respondent no.1 appears to be contrary
to the ratio laid down by the Supreme Court in Hindustan Construction (supra).
20. At this stage, Ms. Palak Rohmetra, learned counsel for the respondent no.1
enters appearance and states that she has been apprised of the present petition
just now. She states, on instructions, that the invocation of BG-1 and BG-2 shall
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 8 of 35
not be processed further for the next two days, and requests that the matter may
be taken up for consideration thereafter.
21. Having regard to the aforesaid and binding the respondent no.1 to the
statement tendered by Ms. Rohmetra, learned counsel, list the matter on
27.07.2026 for consideration.”
CONTENTIONS OF THE RESPONDENT:-
3. Appearing for the respondent no.1, Mr. Sharma, learned senior counsel
would submit that the law in respect of minimal interference in invocation of BGs
by the Courts is well settled. He would contend as under:
3.1. Learned senior counsel, at the outset, stated that the premise on which the
petitioner had pitched its case that the subject BGs were being wrongly invoked on
the basis of violation of the Framework Agreement dated 06.01.2025 (hereinafter
referred to as “FA” ) between the parties, is absolutely incorrect and false. He
would contend that the BGs were furnished only in respect of and under the Civil
Works Contract dated 12.11.2024 (hereinafter referred to as “CWC” ), and not the
FA. Alluding to Appendix 2 of the CWC, learned senior counsel elaborately
demonstrated the scope of work. He further referred to Clause 43.1 of the CWC
regarding Mobilization Advance and the requirement of the Contractor to furnish
Advance Payment Security in the form of Advance BG. In order to explain the
manner in which the Advance BG was to be furnished, learned senior counsel drew
attention to the format provided of the Advance BG specified in Appendix 2.
Explaining the format, he would contend that the BG is unconditional inasmuch as
the so-called condition relied upon by the respondent prescribed two aspects. One,
that the contractor fails to commence the work, and two, it fails to fulfil the
obligations under the terms of the CWC. He contended that in the present case, the
works had already commenced, and thus, the only aspect remaining was of
fulfilment of the obligations. He would emphasize that it is on account of non-
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 9 of 35
fulfilment of obligations that the BGs are sought to be invoked, which is not a
condition precedent for this Court to pass any interim orders.
3.2. Apart from the above, learned senior counsel drew attention to the Advance
BG dated 12.11.2024 (BG-1) furnished by the petitioner. He would contend that
apart from the conditions specified, BG-1 also had a non obstante clause whereby
the bank had given an unconditional guarantee of payment, if a written claim or a
demand is served upon it. He would contend that having regard to the non obstante
clause, arguendo , even if the BGs are claimed to be conditional, the same would be
overridden by the non obstante clause. Thus, according to him, read any which
way, the BGs are unconditional.
3.3. In the same context, learned senior counsel also contended that BG-2 was
also furnished only in respect of the Advance BG, and as such, in view of the
aforesaid submissions, ought to be read as unconditional BG, which can be
invoked by the respondent without a demur. He would contend that even in BG-2,
the same non obstante clause is available, thus there cannot be a distinction on
invocation between BG-1 and BG-2.
3.4. Handing over the Bench a list of documents containing the FA, learned
senior counsel would forcefully contend that the said FA did not contemplate any
security in the nature of a BG. He would emphatically contend that no BG of
whatsoever nature was furnished or required from the petitioner. He emphasised
that the petitioner has raised a completely false bogey of the respondent invoking
the BGs by relying upon or predicating some alleged breach of the FA. In fact,
according to him, the invocation of BGs is clearly contemplated only under the
CWC, and not the FA. Thus, according to him, the main stay of the petitioner on
which the entire petition is predicated falls flat, and is dissipated.
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 10 of 35
3.5. In order to buttress the aforesaid, learned senior counsel read the legal notice
dated 23.06.2026 to clarify that the invocation of BGs were not at all linked to the
said notice as has been falsely contended by the petitioner. In fact, learned senior
counsel would emphasise that in the penultimate paragraph of the said legal notice,
there was no reference to any invocation of BG, rather it was a notice of initiation
of proceedings before the Micro, Medium and Small Enterprises Facilitation
Centre (MSMEFC) under Section 18 of the Micro Small and Medium Enterprises
Development Act, 2006 (hereinafter referred to as ‘ MSME Act, 2006’ ). Thus,
according to him, the entire case of the petitioner is premised on a false and
vexatious ground.
3.6. Further to the above, learned senior counsel also invited attention of this
Court to the grounds in the petition, particularly, Ground A to D, G, H, I, K and L,
M and N, which relate only and only to the FA, and have no nexus or relation to
the CWC. By reference to these grounds, the learned senior counsel would have
the Court believe that the petitioner’s premise is completely false and unavailable.
3.7. Learned senior counsel seriously contended that the petitioner is guilty of
suppression of material documents which would disentitle it from praying for any
interim relief. Referring to the documents filed alongwith the reply, learned senior
counsel would contend that by way of a number of correspondence and legal
notices, the petitioner was put to notice of serious infirmities and grave failure in
fulfilment of material obligations of the Contract. He would also refer to notices
dated 24.02.2025, 01.07.2025, and 10.11.2025 alongwith the snapshots of the
instruction book and photographs annexed to the legal notices to demonstrate the
abject failure of the petitioner in fulfilling its contractual obligations. So much so,
that not only were notices for default issued, but even penalties for unauthorized
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 11 of 35
open excavation were sought to be levied. Learned senior counsel would contend
that things came to such a pass that the respondent had no choice but to withdraw
certain works from the petitioner vide notice dated 04.04.2026. Although, vide the
letter dated 21.04.2026, the said withdrawal was kept in abeyance, however, the
petitioner was cautioned that its performance will be monitored closely, and
appropriate and strict action as deemed necessary under the terms and conditions
of the Contract would be initiated without any further notice. It is in this context,
learned senior counsel contended that the BGs were sought to be invoked.
3.8. Additionally, he would also contend that even if it is assumed, though
without admitting, that the BGs were conditional, the letters, correspondences,
even of default notices, the withdrawal of work, etc., would clearly demonstrate
non-fulfilment of obligations in terms of the CWC entitling the respondent to
invoke the BGs. He would submit that looking at it any which way, the action of
invocation of BGs whether premised on unconditional nature or assumingly
conditional nature, is clearly not only justifiable, but also well within the
conditions specified in the CWC. Learned senior counsel relied on the judgement
of the Supreme Court in National Highways Authority of India vs. Ganga
Enterprises & Anr., (2003) 7 SCC 410 , and that of this Court in Kalpataru
Projects International Limited vs. JSW Infrastructure Limited, 2026 SCC
OnLine Del 3936 . He thus prays that the present petition may be dismissed with
costs.
REJOINDER OF THE PETITIONER:-
4. Mr. Sujoy Datta, learned counsel for the petitioner refutes the submissions of
the respondent. Referring to Clause 43.1 of the CWC, the learned counsel would
contend that though the said Contract contemplated furnishing of BGs for Advance
Signature Not Verified
Digitally Signed
By:YASHRAJ
Signing Date:28.10.2026
14:42:57
O.M.P.(I)(COMM) 289/2026 Page 12 of 35
Security, however, did not provide any mechanism for encashment of the same. He
would contend that unlike Performance BG, the BGs for Advance Security had a
mechanism for recovery as spelt out in Clause 43.3. Alongwith Clause 43.1 of the
CWC, he would also invite attention to Clause 38.2, which clearly specifies that
the contractor was required to issue the Bill of Quantities, which were measured
till the 15th and 30th of every month. Referring further to sub-clause (f) and (g) of
Clause 38.2, he would contend that the deduction, if at all, can be acted upon only
under the said provisions. Apart from the said provisions, according to him, there
is no provision which provides or empowers the respondent to encash the BGs. He
would contend that the BG-1 and BG-2 in question, are furnished only against the
Advance Mobilization Security, and not the Performance Security, thus, would
remain bound by the aforesaid terms. To demonstrate the distinction between
Advance BG and Performance BG, he referred to Clause 5 of the CWC regarding
furnishing of Performance Security.
5. Apart from the above, learned counsel would contend that the respondent
has failed to demonstrate as to under which clause of the CWC, has the respondent
sought invocation of the BGs furnished on account of Advance Mobilization.
Additionally, he would contend that the reply itself is bereft of reference to any
clause of the CWC for such invocation.
RESPONSE OF THE RESPONDENT:-
6. Mr. Sharma, learned senior counsel would submit that the submissions of the
petitioner are bereft of the pleadings and as such cannot be taken note of. He
reiterated that the petitioner has not furnished any BG in the nature of PBG as
stipulated under Clause 5 of the CWC. He would further contend that it is only the
Performance Security which is subject to the final accounting. Thus, according to
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him, the invocation of BG-1 and BG-2 is in consonance with the conditions of the
CWC.
ANALYSIS AND CONCLUSION:-
7. At the outset, this Court would refer to its order dated 22.07.2026. It may be
recalled that the petitioner had pitched its case for restraint of invocation of BGs on
two fundamental issues. In that, (i) that the BG-1 and BG-2 are conditional and
cannot be invoked predicated on the judgement of the Supreme Court in
Hindustan Construction Company Limited ( supra ), and (ii) that the invocation is
arbitrary and malafide being based on the FA and have no nexus nor an incidental
to the said FA having been furnished under the CWC, which is a separate Contract.
8. So far as the issue no (ii) noted above is concerned, it is beyond cavil that
the invocation of BG is purely under the CWC and not under the FA. This is clear
from the fact that no contrary assertion has been made by the petitioner to the
submission that BG-1 and BG-2 are furnished only under the CWC and not the FA.
In fact, in rejoinder, learned counsel for the petitioner did not at all dispute this
submission. Thus, it is apparent and manifest that the BGs have been furnished by
the petitioner under the conditions of CWC and not the FA.
9. Further to issue no. (ii), it would be relevant to consider the submission that
was made on the admission hearing that the respondent is seeking to invoke BG-1
and BG-2 predicated on some violation of conditions of the FA, this Court has,
with the assistance of learned senior counsel perused the abovesaid notices. On
such examination, it is profoundly clear that the notices do not refer to invocation
or any threat of invocation of BG-1 and BG-2, and in the penultimate paragraph
only refer to initiation of proceedings under the MSME Act, 2006. Other than that,
it has no nexus with the invocation of the BGs. To ensure that there is no doubt
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about the aforesaid analysis and conclusion, the penultimate paragraph of the
notice dated 23.06.2026 is extracted hereunder:
“19. In view of the foregoing, you are hereby called upon to pay to our client the
following amounts within SEVEN (7) days from the date of receipt of this Notice:
(a) Rs.3,16,33,233.46/- (Rupees Three Crore Sixteen Lakh Thirty Three Thousand
Two Hundred Thirty Three and Forty Six paise Only) being the principal
outstanding amount towards materials supplied;
(b) Rs.54,38,428/- (Rupees Fifty Four Lakh Thirty Eight Thousand Four Hundred
Twenty Eight Only) being compound interest on the principal outstanding amount
under Section 16 of the MSMED Act, 2006, computed at three (3) times the RBI
Bank Rate i.e., at 19.50% per annum compounded annually, from the respective
due dates of each invoice until 22.06.2026, as per the MSME Interest Calculation
Statement annexed hereto as AnnexureB, and further interest continuing to accrue
at the said rate until actual payment; and
(c) Rs.75,000/- (Rupees Seventy Five Thousand Only) towards the costs of
drafting and sending this Legal Notice. The aggregate amount demanded
hereunder as at 31.05.2026 is Rs.3,71,46,662/- (Rupees Three Crore Seventy One
Lakh Forty Six Thousand Six Hundred Sixty two Only), exclusive of further
interest accruing after 31.05.2026 until actual payment.
Take notice that in the event you fail to comply with the aforesaid demand within
the time stipulated, our client shall, without any further notice to you, initiate
proceedings before the Micro and Small Enterprises Facilitation Council
(MSMEFC) under Section 18 of the MSMED Act, 2006, file a complaint on the
MSME Samadhaan Portal, and take such other steps as may be advised, including
reporting your non-compliance to the GST and Income Tax authorities, all at your
risk as to costs and consequences.
Our client remains open to an amicable resolution of this dispute and is willing to
meet at a mutually convenient time and place to explore an early settlement,
failing which it shall be constrained to initiate the legal proceedings referred to
herein.
This Notice is issued without prejudice to all other rights and remedies of our
client in law and in equity, all of which are expressly reserved.”
[Emphasis Supplied]
Thus, it is abundantly manifest that the submission of the petitioner itself is
without any factual or legal foundation and is outrightly rejected.
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10. So far as issue no. (i) aforenoted is concerned, it would require this Court to
examine the language employed in the subject BGs. Since the language is almost
identical, BG-1 is extracted hereunder:
“BANK GUARANTEE FOR MOBILIZATION ADVANCE
Letter of Acceptance/Contract Reference No VPHPL/PRG-LOA-Civil Works-
01/24-25/01 dated 12/08/2024 for the Contract for Civil Works for Pareng HEP
(3x 4850KW) in Pareng Village, District Papumpare, Arunachal Pradesh.
To:
M/s Virtuaal Pareng Hydro Private Limited,
Pvt Res, Near Directorate of Eco and stats,
P.O.RKM, Itanagar, Arunachal Pradesh- 791111, India
Dear Ladies and/or Gentlemen,
We refer to the Contract for Civil Works for Pareng HEP (3x 4850KW) in Pareng
Village vide reference no VPHPL/PRG-LOA-Civil Works-01/24-25/01 dated
12/08/2024.
BETWEEN
You, M/s Virtuaal Pareng Hydro Private Limited a company incorporated under
the laws of India under the Companies Act 1956 as amended from time to time
and having its principal place of business and Registered Office at Pvt Res, Near
Directorate of Eco and stats, P.O.RKM, Itanagar, Arunachal Pradesh- 791111,
India (hereinafter called "the Employer" which expression shall unless repugnant
to the context or meaning thereof include its successors and assigns)
AND
M/s Onycon Infrastructure, a corporation incorporated under the laws of India
under the Companies Act 1956 as amended from time to time and having its
principal place of business and Registered Office at 307 3rd Floor, Shri Krishna
Premises, New Link Road, Opp Laxmi Ind. Estate, Andheri West, Mumbai-
400053 (hereinafter called "the Contractor" which expression shall unless
repugnant to the context or meaning thereof include its successors and assigns)
for providing of all plant, materials and performing of all required services,
including design (to the extent applicable), procurement, quality assurance,
construction, installation, erection, Tests on Completion, delivery, Tests after
Completion, as applicable, and Completion of the Works and rectification of
defects, in accordance with the plans, procedures, specifications, drawings,
codes, and any other documents and provisions as specified, for All Civil Works
Comprising of River Diversion Works, Barrage, Intake, Feeder Tunnel, De-silting
Chamber, Head Race Tunnel & Adits, Surge Shaft, Pressure Shaft, Penstock Civil
Structural Works, Power House Complex, etc., under the Civil Works Package for
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Pareng Hydropower Project (14.5 MW) in Arunachal Pradesh ("the Works") and
the Taking Over of the Works by the Employer subsequent to its Completion by
the Contractor.
Whereas, in accordance with the terms of the said Contract, the Employer has
agreed to pay or cause to be paid to the Contractor Advance Payment(s) against
furnishing of an irrevocable bank guarantee for amount of Rs.2,53,80,000/-
(Rupees Two Crore Fifty Three Lakh Eighty Thousand Only).
By this letter We, YES Bank Ltd., a company incorporated and registered under
the Companies Act 1956 and a banking company within the meaning of section
5(c) of the Banking Regulation Act, 1949 and having its registered office at YES
BANK LIMITED, YES BANK House, Off Western Express Highway, Santacruz
East, Mumbai 400055, India & Issuing branch office inter alia at YES BANK
LTD, Ground Floor, Hotel Fortune Galaxy, N.H.8, GIDC, Vapi - 396195,
Gujarat (Hereinafter called as "Bank") do hereby irrevocably guarantee
repayment of Rs.2,53,80,000/- (Rupees Two Crore Fifty Three Lakh Eighty
Thousand Only) upon the first demand of the Employer without cavil or argument
in the event that the Contractor fails to commence or fulfill its obligations under
the terms of the said Contract for reasons whatsoever.
Provided always that the Bank's obligation shall be limited to the amount of this
bank guarantee or an amount equal to the outstanding balance of the Advance
Payment(s), taking into account such amounts, which have been repaid by the
Contractor from time to time in accordance with the terms of payment of the said
Contract, as certified by you.
This bank guarantee will be effective only on receipt of advance payment in the
account 000184600001594 maintain with YBL.
This Guarantee shall remain in full force from the date upon which the said
Advance Payment(s) are received by the Contractor up to ninety (90) days beyond
the date on which the entire Advance Payment(s) has been fully adjusted in terms
of the Contract i.e., up to ninety (90) days beyond the date of Completion of the
Facilities under the Contract. This Guarantee may be extended from time to time,
as may be desired by M/s Virtuaal Pareng Hydro Private Limited on whose behalf
this Guarantee has been issued.
Any claims to be made under this Guarantee must be received by the Bank during
its period of validity, i.e. upto ninety (90) days beyond the date of Completion of
the Facilities by the Employer i.e. upto and inclusive of 30-SEP-2025.
Notwithstanding anything contained hereinabove:
1) Our liability under this bank guarantee shall not exceed Rs.2,53,80,000/-
(Rupees Two Crore Fifty Three Lakh Eighty Thousand Only);
2) This bank guarantee shall be valid only up to 30-SEP-2025;
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3) We are liable to pay the guaranteed amount or any part thereof under this
bank guarantee only and only if a written claim or demand, served by you in
accordance with the terms of this bank guarantee, is received by us on or before 5
P.M on or before 30-SEP-2025 at YES BANK LTD, Ground Floor, Hotel Fortune
Galaxy, N.H.8, GIDC, Vapi - 396195, Gujarat. Thereafter, your right to claim
under this bank guarantee shall be forfeited once and forever and we shall be
relieved from all our liabilities hereunder irrespective of whether the original
bank guarantee has been returned to us or not.”
[Emphasis Supplied]
11. To the mind of this Court, the language employed appears to be partly
conditional, which is predicated on non-commencement of the works or failure to
fulfil the obligations under the terms of the CWC. It is not disputed that the works
under the CWC have already commenced, and thus, the first portion of the BG is
already fulfilled. So far as the second portion of the condition regarding failure of
fulfilment of obligations under the CWC is concerned, the respondent alongwith its
reply has furnished crucial correspondences which would demonstrate, prima
facie , that the petitioner has failed in fulfilment of its obligations. As to how this
Court is forming the said opinion would be demonstrable from the critical
paragraphs of such notices whereby events of default have been notified, certain
works were withdrawn, and though the withdrawal was kept in abeyance, however,
a warning of immediate strict action under the CWC without further notice would
be undertaken by the respondent, was clearly mentioned and intimated to the
petitioner, and are extracted hereunder:
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12. A cumulative reading of the aforenoted crucial paragraphs of the notices and
other communications would leave no doubt or any ambiguity as to the issue raised
by the respondent regarding non-fulfilment of the contractual terms of the CWC by
the petitioner, which may be serious in nature. This Court is not called upon to
consider or examine the merits or demerits of such disputes. Rather, at this stage,
this Court is only required to see as to whether the part condition in the BG has
been necessarily fulfilled by the respondent. The fact that the respondent has raised
essential and crucial issues in respect of non-fulfilment or breach of obligations
under the CWC, has not been disputed. While the petitioner may question or object
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to the correspondences and their contents regarding the alleged non fulfilment of
conditions of the CWC, this Court consciously is not dealing with any of such
allegations, lest it prejudices any of the parties. Liberty is available with the parties
to take up those issues in appropriate proceedings.
13. From the above, it is clear that in the present case, conditions as required
under the BGs, are met with.
14. So far as the bank maintaining the BGs is concerned, the disputes inter se
parties is not relevant to it. The bank, per se , is bound to honour its commitment to
the respondent. In those circumstances where BGs are wholly or partly conditional,
it is only for the Courts to examine and ascertain such necessary facts as would be
crucial to the Court to form an opinion as to the fulfilment of such conditions. In
the present case, this Court is, prima facie , satisfied that the conditions are fully
met with, and thus, the action of seeking invocation of the BGs is fully within the
right of the respondent.
15. To the argument of the petitioner predicated on Clause 43 and its sub-
clauses, in the opinion of this Court, the invocation or otherwise, or the
justification thereof would be a subject matter of a dispute which might be referred
to arbitration. At this stage, where the petitioner is seeking discretionary relief
under Section 9 of the Act, this Court is only required to assess as to whether such
invocation is within the confines of the conditions prescribed in the BGs itself. If
this Court were to embark upon such aspects, it would amount to examining the
issue on merits which would be the sole domain of arbitration proceedings. In case
the petitioner is inclined to initiate arbitration, the learned Tribunal would have the
jurisdiction to pass any appropriate orders or award compensating the petitioner for
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any wrongful acts of the respondent. Thus, this Court does not find such
submissions persuasive and are held to be unmerited.
16. It may be significant to note that the petitioner had predicated its case only
on the BGs being ‘conditional’ and the challenge was neither on egregious fraud or
irretrievable injury or special equities. Thus, the above analysis is predicated on the
limited ground.
17. The Supreme Court in National Highways Authority of India vs. Ganga
Enterprises ( supra ) and relied upon by the respondent, held that the underlying
contract executed between the parties would not be a relevant consideration while
examining a case of invocation of a BG premised on the settled aspect that a
contract of guarantee is a complete and separate contract by itself. Thus, this Court
is enjoined only to consider the terms and conditions of the BGs alone. The other
judgement relied upon by the respondent in Kalpataru Projects International
Limited ( supra ) may not be strictly applicable inasmuch as, in that case the learned
Coordinate Bench was considering a case of an unconditional BG and after
considering other aspects had refused grant of injunction. However, in the present
case, the petitioner has pleaded that the BGs are conditional.
18. It is noted that while the petitioner is seeking discretionary relief from this
Court, yet, crucial documents, in the nature of correspondences, notices of events
of default etc., for this Court to ascertain as to whether the petitioner has
approached this Court with clean hands, have been concealed from the Court by
the petitioner.
19. A note of caution is required to be placed observing that petitions which are
filed under Section 9 of the Act are clearly required to place on record, all material
documents and correspondences, which may be in their favour, and more
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importantly, those which may be prejudicial. It is for the Court alone to ascertain,
assess, and conclude whether, even in adverse circumstances, a petitioner is
entitled to discretionary relief by the Court. Even otherwise, filing of all essential
documents is a statutory requirement in view of the provisions of the Commercial
Courts Act, 2015. [See: Order XI Rule 1(5) of the Commercial Courts Act,
2015 ]
20. Therefore, finding no merits in the arguments of the petitioner, the petition is
dismissed, however, without any order as to costs. Any interim order or
arrangement stands vacated.
TUSHAR RAO GEDELA
(JUDGE)
OCTOBER 27, 2026
yrj/anj/rl
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