Kalpataru Projects International Limited vs Jsw Infrastructure Limited
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Reserved on: 20 May, 2026
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Pronounced on: 25 May, 2026
+ O.M.P.(I) (COMM.) 218/2026 & I.A. Nos. 14254/2026 &
14255/2026
KALPATARU PROJECTS INTERNATIONAL LIMITED
.....Petitioner
Through: Mr. Dayan Krishnan, Sr. Advocate
with Dr. Sunil Mittal, Mr. Malak
Bhatt, Mr. Anu Tiwari, Mr. Prithviraj
Dey and Mr. Sukrit Seth, Advocates
Mob: 9650592002
Email: [email protected]
versus
JSW INFRASTRUCTURE LIMITED .....Respondent
Through: Mr. Darpan Wadhwa, Sr. Advocate
with Mr. Nakul Mohta, Ms. Misha
Rohatgi Mohta, Mr. Amer Vaid and
Ms. Sneha Menon, Advocates
Mob: 9810896389
Email: [email protected]
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
JUDGMENT
MINI PUSHKARNA, J.
1. The present petition has been filed under Section 9 of the Arbitration
and Conciliation Act, 1996 (“Arbitration Act”), seeking inter alia relief for
staying, restraining and injuncting the respondent from acting upon, giving
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effect to or enforcing the Letter dated 07 May, 2026, issued by the
respondent, in so far as the said Letter seeks to levy liquidated damages
Signature Not Verified
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By:HARIOM SHARMA
Signing Date:25.05.2026
14:59:40
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against the petitioner for the period which was validly extended by the
respondent earlier, without levy of liquidated damages. There is a further
prayer to restrain the respondent from initiating any coercive steps against
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the petitioner, including, invoking the Bank Guarantee dated 18 July, 2025.
2. As per the case put forth by the petitioner, the present dispute arises
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out of a Contract Agreement dated 14 September, 2023 entered between
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the parties pursuant to the Letter of Intent dated 19 January, 2022 and
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Purchase Order dated 05 February, 2022, for execution of 131 Km Iron Ore
Slurry Pipeline Project in the State of Odisha, wherein, the petitioner was
required to complete the works within a stipulated period of 24 months, i.e.,
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by 18 January, 2024. However, the work could not be completed within the
original timeline on account of various circumstances. Thus, respondent
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issued Amendment no. 1 dated 27 December, 2023, whereby, the
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completion date was extended till 31 May, 2026, without levy of any
liquidated damages.
3. Subsequently, three other Amendment Letters were issued by the
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respondent, and on 07 May, 2026, the respondent issued the Amendment
No. 5 to the Purchase Order, whereby, substantial work was descoped from
the petitioner’s scope and the contract price was reduced from Rs. 240
crores to 123.20 crores, amounting to a reduction of nearly 50%. The said
unilateral amendment was accompanied by a covering letter directing the
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petitioner to complete the balance work by 31 May, 2026, and
simultaneously threatening risk purchase. In the same communication, the
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respondent also reserved rights to levy damages for alleged delay upto 31
May, 2026.
4. Thereafter, the respondent issued a Formal Notice of Risk Purchase
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dated 15 May, 2026 invoking Clause 21 of the Contract Agreement, by
way of which the respondent alleged that the petitioner has completed only
47% of the agreed contractual scope and further called upon the petitioner to
forthwith remedy and/or rectify the default.
5. As per the petitioner, since the respondent failed to fulfil its
obligations, the petitioner terminated the Contract Agreement vide its Letter
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dated 18 May, 2026.
6. Since the respondent is now seeking to invoke risk purchase, threaten
levy of liquidated damages against the petitioner, and invoke the Bank
Guarantee, the present petition has come to be filed.
7. On behalf of the petitioner, following submissions have been made:
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7.1 The Amendment No. 1 dated 27 December, 2023 made by the
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respondent to the Purchase Order dated 05 February, 2022, explicitly states
that liquidated damages charges would not be applicable for validity
extension of the Purchase Order.
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7.2 The said Amendment No. 1 dated 27 December, 2023 clearly
evinces that the respondent itself understood and accepted that the delay in
completion of the project was not attributable to the petitioner. Thus, the
respondent categorically excluded liquidated damages for the entire
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extended period till 31 May, 2026.
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7.3 Having granted extension of time upto 31 May, 2026 without levy of
liquidated damages, the respondent is estopped from subsequently alleging
that the very same delay was attributable to the petitioner. The respondent
cannot resile from its earlier position on liquidated damages and now
subsequently seek to revive liquidated damages for the same period by
alleging contractor’s default.
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Signing Date:25.05.2026
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7.4 This Court in the case of Union of India Versus Chenab
Construction Joint Venture, 2010 SCC OnLine Del 996 , has held that
when an extension is granted to a contractor for completion of the contract
without levy of liquidated damages, it is quite clear that the extension is not
on account of any fault of the contractor.
7.5 Hindrances continued to persist at respondent’s part and remained
unresolved throughout the extended period even till the date of termination
by the petitioner, as a result of which the petitioner’s ability to execute the
project was severely hampered and completion within the stipulated
timelines was rendered impossible.
7.6 Once the respondent itself agreed not to levy any liquidated damages
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till 31 May, 2026, and descoped the balance work even before the end of
the tenure of the Contract Agreement, shows it is not entitled to levy of any
liquidated damages. Thus, respondent ought to be restrained from encashing
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the Bank Guarantee dated 18 July, 2025 in the garb of unquantified
liquidated damages.
7.7 The Supreme Court in the case of Jindal Steel and Power Limited
and Another Versus Bansal Infra Projects Private Limited and Others,
2025 SCC OnLine SC 1041 , has held that invocation of a bank guarantee
would render the prayers in a petition under Section 9 of the Arbitration Act
infructuous, and interim order restraining encashment must be maintained.
7.8 The respondent cannot rely upon the Minutes of the Meeting
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(“MoM”) dated 04 September, 2025, wherein, it was noted that the
petitioner was required to mobilise adequate manpower machinery and
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resources. The MoM dated 04 September, 2025 was never accepted and
signed by the petitioner.
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7.9 The submission of the respondent based on Clause 14.1.4 of the
contract to deny and negate the claims of the petitioner as cost overrun is
fundamentally misplaced and contrary to the contract.
8. Per contra , on behalf of the respondent, it has been submitted as
follows:
8.1 The petitioner is liable to pay liquidated damages for delay in
completion, and for incomplete and poor quality of work. Any extension
granted by the respondent for completion of work shall not affect the right of
the respondent to levy liquidated damages.
8.2 The petitioner cannot resist the levy of liquidated damages. In the
present case, the petitioner having not completed the work, having
terminated the contract before the due date and there being deficiency in the
quality of work, the respondent is entitled to levy liquidated damages.
8.3 No injunction can be granted restraining the injunction of
unconditional and irrevocable Bank Guarantee, which has been invoked by
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the respondent on 19 May, 2026, on account of the non-completion of
work by the petitioner.
8.4 Injunction against the invocation of an unconditional Bank Guarantee
cannot be granted except in a situation of egregious fraud or irretrievable
injury, and in the present case fraud is not even pleaded.
9. Having heard learned counsels appearing for the parties, it is to be
noted that while considering a petition under Section 9 of the Arbitration
Act, this Court does not adjudicate upon the inter se disputes between the
parties. The Court is only required to consider whether the petitioner has
made out a prima facie case for securing interim orders.
10. It is to be noted that the contractual relationship between the parties
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Signing Date:25.05.2026
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arises out of Letter of Intent dated 19 January, 2022, Purchase Order dated
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05 February, 2022, and the Contract Agreement dated 14 September,
2023, whereby, the respondent appointed the petitioner for laying 131 Kms.
length of Iron Ore Slurry Pipeline in the State of Odisha. The total contract
value was Rs. 240 crores and the completion schedule was 24 months from
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19 January, 2022.
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11. In the present case, on 27 December, 2023, the respondent extended
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the completion date of work upto 31 May, 2026. The said extension was
accepted and acted upon by the petitioner. However, subsequently vide
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Letter dated 04 February, 2025, the petitioner submitted a claim for
extended stay cost and submitted a claim of Rs. 50.47 Crores. The same was
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rejected by the respondent on 20 February, 2025. Subsequently, from 07
July, 2025, the petitioner stopped the work.
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12. The respondent by its communications dated 18 November, 2025,
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20 April, 2026, 30 April, 2026 and Notice of Risk Purchase dated 15
May, 2026, informed the petitioner that since the petitioner had abandoned
the work site and had completely stopped the work, the project was severely
impacted and that the respondent was reserving its right to recover damages
and would, in accordance with the terms of the Contract, proceed to have the
remaining work completed through an alternate source at the cost and risk of
the petitioner.
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13. Accordingly, the respondent vide the impugned Letter dated 07 May,
2026, descoped the petitioner’s work and issued a revised purchase order.
14. The petitioner by various communications attributed the delay to the
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respondent and subsequently by Letter dated 18 May, 2026, the petitioner
issued a notice of termination to the respondent, thereby, terminating the
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Signing Date:25.05.2026
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Contract.
15. This Court notes that the petitioner has relied upon Amendment No. 1
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dated 27 December, 2023, whereby, the time for completion was extended
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to 31 May, 2026, to submit that the respondent had agreed not to levy any
Liquidated Damages (“LD”). However, it is to be noted that the said
document by which extension was granted itself clearly mentions, “LD
applicable: YES” . Further, the said document also clearly stipulates that the
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amendment is only for extending the validity period upto 31 May, 2026,
with stipulation that, “LD charges will not be applicable for validity
extension of this existing order” .
16. Thus, a prima facie reading of the aforesaid Amendment Letter shows
that the amendment is only for the purposes of extending the validity period
and that the LD charges will not be applicable for validity extension.
Moreover, the purpose of grant of extension to a contractor is that the work
under the contract is duly executed by the contractor under the extended
period. Thus, if the petitioner were to complete the work within the extended
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period upto 31 May, 2026, no liquidated damages were liable to be
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imposed upon the petitioner for the extended period upto 31 May, 2026.
17. However, in the present case, the petitioner did not complete the work
and terminated the Contract before the extended due date. Further, it has
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also come on record that the petitioner stopped the work on 07 July, 2025.
Thus, the work is substantially incomplete, and disputes have arisen between
the parties, wherein, both plead that the other party is responsible for the
delay in execution of the work. All disputes and claims regarding the cause
of delay in execution of the work and the respective liabilities and
responsibility of the parties, would be subject matter of trial and would be
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By:HARIOM SHARMA
Signing Date:25.05.2026
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adjudicated in the arbitration proceedings.
18. However, for the purposes of the present case, this Court has to assess
as to whether a prima facie case has been established by the petitioner for
grant of an interim relief in its favour.
19. This Court is of the prima facie view that the extension of time for
completion of the Contract without liquidated damages entailed execution of
the work by the petitioner. In the absence of completion of the work and in
view of the various disputes between the parties as regards execution of the
work and termination of the contract by the petitioner, it cannot prima facie
be said that the respondent would be barred from imposing liquidated
damages.
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20. Clause 18 of the Contract Agreement dated 14 September, 2023
between the parties itself stipulates imposition of liquidated damages in the
following manner:
“xxx xxx xxx
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Signing Date:25.05.2026
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xxx xxx xxx”
21. Perusal of the aforesaid clause and in particular Clause 18.3 clearly
shows that the contract stipulates in categorical terms that any extension
granted by the respondent for the completion of the works, for reasons not
attributable to the respondent, shall not affect the right of the respondent to
levy liquidated damages.
22. Besides, issue as regards levy of liquidated damages is a matter,
which involves evidence and construction of the terms and conditions of the
contract and the correspondence between the parties, which would have to
be essentially decided by the learned Arbitrator. However, on prima facie
consideration, it cannot be said that the respondent is not entitled to levy
liquidated damages.
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Signing Date:25.05.2026
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23. Even otherwise, the respondent would also remain entitled to claim
damages and to prove and recover actual loss and damage suffered by it on
account of termination of the contract by the petitioner. Whether or not the
respondent is entitled to any damages would again be subject matter of
adjudication before the learned Arbitrator. However, it cannot be said at this
prima facie stage that the respondent is not entitled to recover any damages
from the petitioner.
24. In this view of the matter, no injunction can be granted by this Court
against recovery of damages by the respondent. The issue whether the
respondent is entitled for recovery of damages or whether the recovery of
damages by the respondent is in accordance with law and terms and
conditions of the contract, shall be subject matter of the adjudication before
the Arbitral Tribunal.
25. As regards the issue raised by the petitioner regarding invocation of
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the Bank Guarantee, it is to be noted that the Bank Guarantee dated 18
July, 2025 is unconditional and irrevocable. The relevant Clause of the said
Bank Guarantee is reproduced as under:
“xxx xxx xxx
xxx xxx xxx”
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26. A plain reading of the said Bank Guarantee dated 18 July, 2025
shows that the same is unconditional and irrevocable in nature. The Bank
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Signing Date:25.05.2026
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Guarantee clearly stipulates that within 15 working days from the date of
receipt of written demand, without demur or protest, and not withstanding
any difference between the parties, i.e., the petitioner and respondent herein,
the bank shall make payment under the Bank Guarantee. Thus, if the
respondent invokes the Bank Guarantee on the ground that the petitioner
herein has failed to fulfil its obligation in terms of the contract, the bank has
irrevocably and unconditionally guaranteed payment of the amount under
the Bank Guarantee.
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27. Furthermore, it is evident that the Bank Guarantee dated 18 July,
2025 is an advance payment Bank Guarantee. In this regard reference may
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be made to Clause 15.1 of the Agreement dated 14 September, 2023
between the parties, which stipulates submission of advance payment
guarantee, in the following manner:
“xxx xxx xxx
xxx xxx xxx”
28. Thus, it is apparent that the Advance Bank Guarantee was furnished
by the petitioner to secure the advance payment made by the respondent to
the petitioner under the Contract. The advance so paid was liable to be
progressively recovered and adjusted against the value of the work executed
by the petitioner.
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By:HARIOM SHARMA
Signing Date:25.05.2026
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29. This Court takes note of the submission made by learned Senior
Counsel appearing for the respondent that the petitioner having stopped the
work and not completing the same, a substantial portion of the advance paid
by the respondent remains unadjusted and unrecovered. The very purpose of
an Advance Bank Guarantee is to protect the respondent in precisely such a
situation.
30. It is well established that a Bank Guarantee is not concerned with the
underlying dispute between the parties and that the beneficiary is entitled to
realise the guarantee irrespective of any pending dispute. A Bank Guarantee
is a separate contract, which obligates the bank to pay the guaranteed
amount on demand. The disputes between the parties under the main
contract, is no ground for issuing an order of injunction or to restrain the
enforcement of a Bank Guarantee. Further, an injunction against the
invocation of an unconditional Bank Guarantee cannot be granted except in
a situation of egregious fraud or irretrievable injury.
31. Thus, in the case of Gujarat Maritime Board Versus Larsen and
Toubro Infrastructure Development Projects Limited and Another, (2016)
10 SCC 46 , the Supreme Court held as follows:
“xxx xxx xxx
12. An injunction against the invocation of an absolute and an
unconditional bank guarantee cannot be granted except in
situations of egregious fraud or irretrievable injury to one of the
parties concerned . This position also is no more res integra. In
Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co. [Himadri
Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC
110], at para 14 : (SCC pp. 117-18)
“14. From the discussions made hereinabove relating to the
principles for grant or refusal to grant of injunction to restrain
enforcement of a bank guarantee or a letter of credit, we find that
the following principles should be noted in the matter of injunction
to restrain the encashment of a bank guarantee or a letter of credit:
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(i) While dealing with an application for injunction in the
course of commercial dealings, and when an unconditional
bank guarantee or letter of credit is given or accepted, the
beneficiary is entitled to realise such a bank guarantee or a
letter of credit in terms thereof irrespective of any pending
disputes relating to the terms of the contract.
(ii) The bank giving such guarantee is bound to honour it as
per its terms irrespective of any dispute raised by its customer.
(iii) The courts should be slow in granting an order of
injunction to restrain the realisation of a bank guarantee or a
letter of credit.
(iv) Since a bank guarantee or a letter of credit is an
independent and a separate contract and is absolute in nature,
the existence of any dispute between the parties to the contract
is not a ground for issuing an order of injunction to restrain
enforcement of bank guarantees or letters of credit .
(v) Fraud of an egregious nature which would vitiate the very
foundation of such a bank guarantee or letter of credit and the
beneficiary seeks to take advantage of the situation .
(vi) Allowing encashment of an unconditional bank guarantee
or a letter of credit would result in irretrievable harm or
injustice to one of the parties concerned .”
xxx xxx xxx”
(Emphasis Supplied)
32. Likewise, in the case of U.P. State Sugar Corporation Versus
Sumac International Limited, (1997) 1 SCC 568 , the Supreme Court held
as follows:
“xxx xxx xxx
12. The law relating to invocation of such bank guarantees is by
now well settled. When in the course of commercial dealings an
unconditional bank guarantee is given or accepted, the beneficiary
is entitled to realize such a bank guarantee in terms thereof
irrespective of any pending disputes. The bank giving such a
guarantee is bound to honour it as per its terms irrespective of any
dispute raised by its customer. The very purpose of giving such a
bank guarantee would otherwise be defeated. The courts should,
therefore, be slow in granting an injunction to restrain the
realization of such a bank guarantee. The courts have carved out
only two exceptions. A fraud in connection with such a bank
guarantee would vitiate the very foundation of such a bank
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guarantee. Hence if there is such a fraud of which the beneficiary
seeks to take advantage, he can be restrained from doing so. The
second exception relates to cases where allowing the encashment of
an unconditional bank guarantee would result in irretrievable harm
or injustice to one of the parties concerned. Since in most cases
payment of money under such a bank guarantee would adversely
affect the bank and its customer at whose instance the guarantee is
given, the harm or injustice contemplated under this head must be of
such an exceptional and irretrievable nature as would override the
terms of the guarantee and the adverse effect of such an injunction
on commercial dealings in the country . The two grounds are not
necessarily connected, though both may coexist in some cases. In the
case of U.P. Coop. Federation Ltd. v. Singh Consultants and
Engineers (P) Ltd. [(1988) 1 SCC 174] which was the case of a works
contract where the performance guarantee given under the contract
was sought to be invoked, this Court, after referring extensively to
English and Indian cases on the subject, said that the guarantee must
be honoured in accordance with its terms. The bank which gives the
guarantee is not concerned in the least with the relations between the
supplier and the customer; nor with the question whether the supplier
has performed his contractual obligation or not, nor with the question
whether the supplier is in default or not. The bank must pay according
to the tenor of its guarantee on demand without proof or condition.
There are only two exceptions to this rule. The first exception is a case
when there is a clear fraud of which the bank has notice. The fraud
must be of an egregious nature such as to vitiate the entire underlying
transaction. Explaining the kind of fraud that may absolve a bank
from honouring its guarantee, this Court in the above case quoted
with approval the observations of Sir John Donaldson, M.R. in
Bolivinter Oil SA v. Chase Manhattan Bank [(1984) 1 All ER 351]
(All ER at p. 352): (at SCC p. 197)
“The wholly exceptional case where an injunction may be
granted is where it is proved that the bank knows that any
demand for payment already made or which may thereafter be
made will clearly be fraudulent. But the evidence must be clear
both as to the fact of fraud and as to the bank's knowledge. It
would certainly not normally be sufficient that this rests on the
uncorroborated statement of the customer, for irreparable
damage can be done to a bank's credit in the relatively brief
time which must elapse between the granting of such an
injunction and an application by the bank to have it charged.”
This Court set aside an injunction granted by the High Court to
restrain the realisation of the bank guarantee.
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Signing Date:25.05.2026
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xxx xxx xxx
15. Our attention was invited to a number of decisions on this issue —
among them, to Larsen & Toubro Ltd. v. Maharashtra SEB [(1995) 6
SCC 68] and Hindustan Steel Workers Construction Ltd. v. G.S. Atwal
& Co. (Engineers) (P) Ltd. [(1995) 6 SCC 76] as also to National
Thermal Power Corpn. Ltd. v. Flowmore (P) Ltd. [(1995) 4 SCC 515]
The latest decision is in the case of State of Maharashtra v. National
Construction Co. [(1996) 1 SCC 735 : JT (1996) 1 SC 156] where this
Court has summed up the position by stating: (SCC p. 741, para 13)
“ The rule is well established that a bank issuing a guarantee is
not concerned with the underlying contract between the parties
to the contract. The duty of the bank under a performance
guarantee is created by the document itself. Once the
documents are in order the bank giving the guarantee must
honour the same and make payment ordinarily unless there is
an allegation of fraud or the like. The courts will not interfere
directly or indirectly to withhold payment, otherwise trust in
commerce internal and international would be irreparably
damaged. But that does not mean that the parties to the
underlying contract cannot settle the disputes with respect to
allegations of breach by resorting to litigation or arbitration as
stipulated in the contract. The remedy arising ex contractu is not
barred and the cause of action for the same is independent of
enforcement of the guarantee.”
The other recent decision is in Hindustan Steelworks Construction
Ltd. v. Tarapore & Co. [(1996) 5 SCC 34 : JT (1996) 6 SC 295]
xxx xxx xxx”
(Emphasis Supplied)
33. In the present case, fraud is not even pleaded by the petitioner.
Further, with respect to irretrievable injury, the petitioner has pleaded
financial and commercial hardship. However, mere pleading of financial or
commercial hardship or distress, does not meet the threshold for irretrievable
injury or injustice, which is attracted only when restitution is impossible in
law. However, no such case has been made out by the petitioner in the
present case.
34. In this regard, reference may be made to the judgment of this Court in
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the case of Black Gold Resources Private Limited Versus International
Coal Ventures Pvt. Ltd. and Another, 2025 SCC OnLine Del 9231 ,
wherein, while relying upon the judgment of the Supreme Court in the case
of Dwarikesh Sugar Industries Limited Versus Prem Heavy Engineering
Work (P) Ltd. and Another, (1997) 6 SCC 450 , it has been held as follows:
“xxx xxx xxx
88. Irretrievable injustice, as an exception to the rule of non-
interference with invocation/encashment of unconditional bank
guarantee, is not fulfilled by mere pleading of loss or financial
hardship. Any party who furnishes a PBG is at the risk of suffering
its encashment, however, such a party also always has the legal
remedy to sue for recovery due to wrongful encashment. Therefore,
what the petitioner needed to prove was that it would be impossible
for it to recover the PBG amount, if later the Arbitral Tribunal
found the issue in its favour , as also observed by the Hon'ble
Supreme Court in Dwarikesh Sugar Industries Ltd. v. Prem Heavy
Engineering Works (P) Ltd ., especially in paragraph No. 22, which
reads as under:—
“22. The second exception to the rule of granting injunction,
i.e., the resulting of irretrievable injury, has to be such a
circumstance which would make it impossible for the
guarantor to reimburse himself, if he ultimately succeeds. This
will have to be decisively established and it must be proved to
the satisfaction of the court that there would be no possibility
whatsoever of the recovery of the amount from the beneficiary,
by way of restitution .”
xxx xxx xxx”
(Emphasis Supplied)
35. The judgment relied upon by the petitioner in the case of Jindal Steel
and Power Limited (Supra) is distinguishable and not applicable in the
present case. In the said case, the Supreme Court accepted the established
legal position that Courts should refrain from interference with invocation of
Bank Guarantees. However, since the ad interim order was in force for a
long period and Arbitral Tribunal was constituted, and petition under
Section 9 of the Arbitration Act was part-heard at the stage of final
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arguments, the Supreme Court did not interfere with the ad interim stay
granted. Thus, the said judgment cannot be read as a precedent for
proposition that in a petition under Section 9 of the Arbitration Act,
invocation of Bank Guarantee ought to be stayed.
36. Reliance by the petitioner on the judgment of Chenab Construction
Joint Venture (supra) is also misplaced. The observation made therein with
regard to extension of time granted for completion of work without levy of
liquidated damages, was in a petition under Section 34 of the Arbitration
Act, wherein, evidence in that regard had been led before the learned
Arbitrator. However, in the present case the stage for leading evidence on
the said issue, is yet to come.
37. In view of the foregoing discussion, no case is made out for exercise
of jurisdiction by this Court in the present proceedings.
38. Needless to state, nothing contained herein shall be construed as an
expression of any opinion on the merits of the dispute that may be referred
to the Arbitral Tribunal. The observations made herein are solely for the
purpose of deciding the present petition.
39. The present petition is accordingly dismissed, along with the pending
applications.
MINI PUSHKARNA
(JUDGE)
MAY 25, 2026/ au/ak
Signature Not Verified
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By:HARIOM SHARMA
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