Irb Mp Expressway Private Limited vs Mumbai Pune Expressway Limited
- Court
- Bombay High Court
2026:BHC-OS:12525
7-ia-288-2026-coms-138-2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION NO. 288 OF 2026
IN
COMMERCIAL SUIT NO. 138 OF 2025
IRB MP Expressway Private Limited ]
a company incorporated under ]
Companies Act, 1956, having its ]
registered office at 1101, Hiranandani ]
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Knowledge Park, 11 Floor, ]
Technology Street, Hill Side Avenue, ]
Opp. Hirandani Hospital, Powai, ]
Mumbai – 400 076. ]…Applicant
IN THE MATTER BETWEEN
IRB MP Expressway Private Limited ]
a company incorporated under ]
Digitally
signed by
VARSHA
VIJAY
RAJGURU
Date:
2026.06.08
17:50:34
+0530
VARSHA
VIJAY
RAJGURU
Companies Act, 1956, having its ]
registered office at 1101, Hiranandani ]
th
Knowledge Park, 11 Floor, ]
Technology Street, Hill Side Avenue, ]
Opp. Hirandani Hospital, Powai, ]
Mumbai – 400 076. ] … Plaintiff
V/s.
Mumbai Pune Expressway Limited ]
Having its registered office at, ]
Near Lilavati Hospital, Opp. Bandra ]
Reclamation Bus Depot, K.C. Marg., ]
Bandra(West), Mumbai – 400 050. ] … Defendant
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Mr. Vikram Nankani, Senior Advocate, Mr. Sumeet Nankani a/w. Mr.
Durgaprasad Poojari i/b. PDS Legal for Applicant/Plaintiff.
Ms. Vinodini Srinivasan a/w. Mr. Arun Siwach, Ms. Priyanka Mitra,
Ms. Nupur Shah, Ms. Vidhi Saxena i/b. Cyril Amarchand Mangaldas
for Respondent/Defendant.
CORAM : GAURI GODSE, J.
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RESERVED ON : 23 FEBRUARY 2026
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PRONOUNCED ON : 8 JUNE 2026
JUDGMENT:-
1) This application is filed by the plaintiff for an order of
injunction restraining the defendant from, in any manner, recovering
from the plaintiff an amount of Rs. 1,09,96,23,389/- either by
encashing bank guarantees or otherwise. The applicant has filed the
suit for a declaration that the agreement between the plaintiff and the
defendant is valid, subsisting, and enforceable, under which the
defendant granted an adjustment of Rs. 71,06,98,942/-. The plaintiff
seeks the said declaration by relying upon the written agreement
between the parties.
2) The plaintiff and defendant entered into an agreement for the
purpose of tolling, operation, maintenance, and transfer of the
Yashvantrao Chavan Expressway National Highway in the State of
Maharashtra. In view of the apprehension of encashment of bank
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guarantees, the plaintiff has filed the present suit for a declaration of
subsisting agreement and for an injunction that the defendant should
not recover the amount remitted pursuant to the subsequent
agreement by encashing bank guarantees or otherwise.
SUBMISSIONS ON BEHALF OF THE PLAINTIFF:
3) Learned senior counsel appearing for the plaintiff relied upon
the relevant pleadings in the plaint to support the prayers for
injunction. A sub-concessionaire agreement was executed between
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the plaintiff and the defendant on 28 February 2020 (“said
agreement”). Under the said agreement, the plaintiff was granted the
sole and exclusive right to demand, collect and appropriate the fee
subject to and in accordance with the said agreement and the fee
notification issued by the Government of Maharashtra and/or the
Ministry of Road, Transport and Highways (“MoRTH”) from the users
of the project comprising Yeshwantrao Chavan Expressway along the
Mumbai-Pune corridor. The contract is awarded to the plaintiff on a
toll-operate-and-transfer model, a form of public-private partnership
that enables the monetisation of public-funded highways by granting
the plaintiff the right to collect tolls and maintain the road during the
term of the agreement in exchange for an upfront payment to the
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defendant. Under the said agreement, the plaintiff deposited the sub-
concessionaire fees of Rs. 8,262 Crores as upfront sub-
concessionaire fees of Rs. 6,500 Crores and a deferred sub-
concessionaire fees of Rs.1762 Crores. In consideration thereof, the
plaintiff was permitted to commence tolling on the Highways project
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from 1 March 2020, i.e., the commencement date, till the expiry of
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the sub-concessionaire period, i.e., 30 April 2030.
4) In terms of the said agreement, all tolling fee collections
were to be deposited into the defendant's escrow account, and the
plaintiff was not permitted to use the same until financial disclosure
and the declaration of the appointed date were made in terms of
Article 4 read with Article 22 of the said Agreement. The financial
disclosure was satisfied by the plaintiff on payment of upfront sub-
concessionaire fees. Accordingly, the terms and conditions of the said
agreement were satisfied, and the appointed date was declared to be
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18 June 2020. Thus, toll revenue collection during the sub-
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concessionaire period began on 1 March 2020 and would have
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ended on 30 April 2030.
5) Due to COVID-19 pandemic restrictions, the plaintiff, vide its
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letter dated 18 March 2020, invoked Article 27.5 of the said
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agreement, notifying the occurrence of the ‘Non-Political Force
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Majeure Event’ effective from 12 March 2020. The Government of
st
Maharashtra imposed a complete statewide lockdown from 21
st
March 2020 to 31 March 2020. The government of India ordered a
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complete lockdown from 26 March 2020 to 19 April 2020.
Accordingly, the plaintiff was forced to suspend the toll collection for
25 days. In terms of clause 27.5 of the said agreement, the plaintiff
notified that the directive issued by the state government imposing a
complete lockdown constituted a ‘Political Force Majeure Event’
under the said agreement. The plaintiff, therefore, claimed benefit for
a period of 25 days on the ground of ‘Force Majeure Cost’. However,
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the defendant, by its letter dated 9 April 2020, informed the plaintiff
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that the plaintiff’s letter dated 24 March 2020 did not constitute a
valid notice for ‘Political Force Majeure Event’ in accordance with
Article 27.5 of the agreement. Hence, the plaintiff’s claim was
rejected.
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6) The plaintiff, by its letter dated 14 April 2020, reiterated the
facts regarding the extension of the lockdown and resubmitted the
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Force Majeure Notice. The defendant, vide letter dated 20 April
2020, agreed that the lockdown constituted a force majeure event
and offered to adjust the reduced toll income for the lockdown period
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during complete stoppage of toll collection for 25 days. The defendant
also offered compensation based on the calculations as set out in the
said letter. The plaintiff accepted the said offer and agreed to adjust
the reduced toll income from the interest part of the upfront sub-
concession fee as stipulated in the defendant’s offer letter and
accordingly informed the defendant of the acceptance by letter dated
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21 April 2020. Hence, according to the plaintiff, it is a mutual written
agreement between the parties that would entitle the plaintiff to adjust
the computation of the upfront sub-concession fee.
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7) The plaintiff, by letter dated 16 June 2020, submitted the
adjusted computation of the upfront sub-concession fee and
requested the defendant's concurrence prior to remitting the same.
The plaintiff also requested the extension of the sub-concession
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period beyond 19 April 2020 in view of NHAI’s circular dated 26
May 2020, until the average daily collection reaches 90% of the
average daily fees as defined in the said agreement. The defendant,
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by its letter dated 17 June 2020, informed the plaintiff that it would
consider extending the sub-concession period in light of the
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guidelines. The plaintiff, vide letter dated 18 June 2020, recorded the
mutual agreement and the computation of the loss amounting to Rs.
71.06 crores incurred due to the suspension of toll collection for 25
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days. The plaintiff thus requested the defendant to declare the
appointed date, as the plaintiff had complied with the second tranche
as per clause 4.1.5 of the said agreement. The defendant accordingly
certified and confirmed that all the second-tranche conditions had
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been complied with and declared 18 June 2020 as the appointed
date in terms of the said agreement.
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8) The plaintiff, by its letter dated 23 October 2020, informed
the defendant that it would compute the cumulative extensions of the
sub-concession period monthly until the daily toll collections stabilise
at more than 90% of the average daily fees as defined under the said
agreement. The plaintiff accordingly computed its claim for the
extension of the sub-concession period by 70.55 days for the period
st th th th
from 21 March 2022 to 25 March 2020 and 20 April 2020 to 30
September 2020, excluding the period of complete suspension of toll
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collection from 26 March 2020 to 19 April 2020.
9) During the COVID-19 second wave in April 2021, toll
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collection on the project was severely disrupted from 1 April 2021 to
th nd
30 June 2021. Hence, the plaintiff, by its letter dated 22 July 2021,
after referring to the force majeure notice and the circulars issued by
NHAI and MoRTH, submitted its claim for an extension of the sub-
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concession period by 22.24 days. The defendant, by its letter dated
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31 October 2022, informed the plaintiff that the Accountant General
(Audit-II), Maharashtra, Nagpur, had raised an audit query regarding
the compensation granted to the plaintiff. The defendant stated that
the Accountant General did not accept the defendant’s explanation
and rejected the compensation granted to the plaintiff. Hence, the
defendant called upon the plaintiff to remit Rs. 71.06 crores.
th
10) The plaintiff, by its letter dated 8 November 2022, disputed
the defendant’s demand for Rs. 71.06 crores and submitted that the
compensation was granted by a mutual written agreement between
the parties and was therefore valid and effective. The plaintiff, by its
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letter dated 5 December 2022, requested that the defendant
approve a 137.24 days extension of the sub-concession period. The
plaintiff stated that upon written approval and execution of the
supplementary agreement for extension, the plaintiff would initiate
negotiations with its senior lenders for disbursement of the amount.
11) Since the dispute regarding the concession and extension
claimed by the plaintiff was not resolved, the defendant, vide letter
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dated 6 January 2023, informed the plaintiff that, as per clause 37 of
the said agreement, the plaintiff may call upon an independent
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engineer to mediate and assist in arriving at an amicable settlement.
Accordingly, the plaintiff appointed Bloom Companies LLC as an
independent engineer and requested the defendant to initiate
mediation.
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12) Pending mediation, the defendant, by letter dated 17
February 2023, alleged that the plaintiff should take necessary action
to remit Rs. 71,06,98,942/- to the defendant. The plaintiff, however,
informed the defendant that the mediation process was initiated. By
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letter dated 7 July 2023, the defendant advised the plaintiff that the
amount of Rs. 71,06,98,942/- should be remitted to the defendant,
and the plaintiff may independently apply for extension of sub-
concessionaire period as per clause 27.6.2 of the said agreement.
The plaintiff again requested the defendant to complete the mediation
process. Thereafter, the defendant also scheduled a joint mediation
meeting. The meetings were rescheduled, and the mediation meeting
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was conducted on 24 August 2023.
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13) The independent engineer, by letter dated 13 October 2023,
stated that the amicable settlement was not agreed to, and the
defendant advised the plaintiff to remit the amount to the defendant,
and also informed that it was open for the plaintiff to make a
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representation before the director in charge, as per clause 37.2.1 of
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the said agreement. The plaintiff again, by letter dated 30 October
2023, requested the defendant to approve the extension of the sub-
concession period and also stated that, upon receipt of written
approval for such extension and execution of a supplementary
agreement, the plaintiff would negotiate with its lenders and, subject
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to approval, disburse the amount. The defendant, by letter dated 16
November 2023, informed the plaintiff that the prescribed time for
resolving the dispute amicably had elapsed and therefore advised the
plaintiff to take recourse as per clause 37.2.1 of the said agreement.
14) The defendant, after about two years, by citing the purported
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CAG observations, issued a letter dated 4 September 2025 and
called upon the plaintiff to remit Rs. 71.06 crores with interest within 7
days and threatened action in terms of the said agreement, including
encashment of performance security submitted by the plaintiff in
terms of Article 9 of the said agreement. The plaintiff, by letter dated
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11 September 2025, again requested the defendant to honour its
written agreement, which recorded the mutual terms for
compensation in lieu of actual loss for a period of 25 days. The
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plaintiff also issued a communication without prejudice dated 5
December 2022 for the plaintiff’s claim for a total extension of 137.24
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days to the sub-concession period on account of the force majeure
event in light of the circular issued by the Government of India read
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with the defendant's letter dated 17 June 2020. By the said letter
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dated 17 June 2020, the defendant had assured that it would
consider extending the sub-concession period in line with the
guidelines issued by MoRTH, NHAI, and the Government of
Maharashtra.
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15) By a letter dated 25 November 2025, the defendant stated
that the defendant had purportedly considered the issue and the
documents on record and, with reference to the CAG’s explanation,
the independent engineer is unable to accept the plaintiff’s request.
Since the action of the defendant in seeking to recover the said
amount with interest at 9.5% and threatening to encash the
performance of the security bank guarantee, the plaintiff was
constrained to file this suit.
16) According to the plaintiff, the 25-day concession granted to
the plaintiff constitutes the parties’ contract for compensation in lieu of
the loss of toll collection for 25 days. Hence, in view of the valid and
subsisting agreement between the parties, the performance of bank
guarantees cannot be invoked by the defendant. In view of the
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defendant’s letter dated 25 November 2025 and threat to encash the
bank guarantees, the plaintiff was constrained to file this application
seeking an injunction restraining the defendant from recovering the
said amount by encashing the performance guarantee or otherwise.
17) The Maharashtra State Road Development Corporation Ltd.
(“MSRDC”) has delegated its responsibilities for the project highways
to the defendant. The Ministry of Road Transport and Highways
(“MoRTH”), the government of India, entered into a concession
agreement with MSRDC, granting the right to collect tolls.
Subsequently, pursuant to an agreement among the Government of
Maharashtra, MSRDC, and the defendant, MSRDC delegated its
responsibilities for the Yashwantrao Chavan Expressway to the
defendant on a build, operate, and transfer basis. Accordingly, the
said sub-concession agreement was executed by the defendant in
favour of the plaintiff.
18) The Force Majeure Event contemplated under clause 27.6.2
is not restricted to political or non-political Force Majeure
classification, and thus the plaintiff is entitled to an extension of the
contract period for any kind of Force Majeure Event when the plaintiff
is unable to collect the toll fee. The respective circulars issued by
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MoRTH and NHAI provided for a minimum extension of 90 days
concession along with a proportionate reduction in payment of the
concession fee for the corresponding period. Therefore, the plaintiff is
entitled to the benefit granted by MoRTH and NHAI as acknowledged
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by the defendant in its letter dated 17 June 2020.
19) The observations of the Accountant General would not have
any binding effect in view of the terms and conditions agreed between
the plaintiff and the defendant. Once the plaintiff has agreed in writing
to grant compensation in lieu of the loss of toll collection resulting
from the forced lockdown, the defendant cannot invoke the
performance guarantee to recover the amount for which the plaintiff
has already granted compensation. Similarly, the plaintiff is also
entitled to an extension of the sub-concession period. Hence, for no
fault on the part of the plaintiff, the defendant cannot recover the
amount for which benefit is already granted, and thus, the
performance guarantee cannot be invoked. To support his
submissions, learned senior counsel for the plaintiff relied upon the
decision of the Hon’ble Apex Court in the case of Hindustan
1
Construction Co. Ltd Vs. State of Bihar and Ors and the decision of
2
the Delhi High Court in Kkspun India Ltd. Vs OFB Tech Pvt. Ltd .
1 (1999) 8 SCC 436
2 2022 SCC Online Del 3176
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SUBMISSIONS ON BEHALF OF DEFENDANT:
20) Learned counsel for the defendant opposed the reliefs
claimed in the application on the ground that the performance bank
guarantee was unconditional. Hence, no injunction can be granted
restraining its enforcement. The defendant has relied upon the
relevant contents of the unconditional bank guarantees. According to
the defendant, the bank guarantees constituted an independent and
distinct contract between the issuing bank and the beneficiary. Hence,
despite the contractual dispute between the plaintiff and the
defendant, the defendant would be entitled to encash the bank
guarantees. With reference to the concessional period or ‘Political
Force Majeure Event’, it is disputed by the defendant that it is a
‘Political Force Majeure Event’. Under Article 27 of the sub-
concessionaire agreement, the occurrence of the ‘Non-Political Force
Majeure Event’ requires each party to bear its own costs and neither
party to claim any compensation.
21) The CAG recorded, inter alia, several findings, which even
independently raise serious questions on whether such
‘compensation’ could have been granted to the plaintiff under the
terms of the sub-concession agreement. The CAG noted that the
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COVID-19 lockdown was a Non-Political Force Majeure Event, as it
was an epidemic. Therefore, no waiver of revenue or compensation
can be granted. The defendant had no contractual or legal obligation
to compensate the plaintiff for loss of toll revenue arising from
suspension of operations. The defendant is entitled to reverse the
compensation granted to the plaintiff. The unconditional performance
guarantees need not be enforced by any intimation to the plaintiff.
Hence, no injunction can be granted restraining the defendant from
enforcing unconditional bank guarantees.
22) Learned counsel for the defendant submitted that, in view of
clause 27.7.2, no liability can be fastened on the defendant. The
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upfront payment was not made by the plaintiff till 18 June 2020.
Hence, the defendant is also entitled to claim damages for the
delayed upfront payment. Hence, the unconditional bank guarantee
provided under clause 9.1 of the agreement cannot be prevented
from realisation. To support her submissions, learned counsel for the
defendant relied upon the decision of the Hon’ble Apex Court in the
3
case of U.P. State Sugar Corporation Vs. Sumac International Ltd .
23) Learned counsel for the defendant submitted that, upon the
defendant's mere demand, the bank is required to pay the guarantee
3 (1997) 1 SCC 568
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amount. The defendant is therefore not required to show any breach.
To support her submissions, learned counsel for the defendant relied
upon the decision of the Hon’ble Apex Court in the case of Mahatma
Gandhi Sahakra Sakkare Karkhane Vs. National Heavy Engg Coop.
4
Ltd and Another . The plaintiff cannot seek an explanation from the
defendant for invoking the bank guarantee unless fraud is alleged or
irretrievable prejudice is shown. Even if the bank guarantee refers to
the clauses of the said agreement, it will not make the bank
guarantee conditional. To support her submissions, learned counsel
for the defendant relied upon Vinitec Electronomics Private Ltd Vs.
5
HCL Infosystems Ltd .
24) According to the learned counsel for the defendant, in view
of clause 25.1 of the agreement, it was obligatory on the part of the
plaintiff to obtain an insurance policy for the ‘Non-Political Force
Majeure Event’. This clause, therefore, shows that the plaintiff was
not entitled to claim any benefit based on the ‘Force Majeure Event’.
Learned counsel for the defendant submitted that the decision of the
learned single judge of the Delhi High Court relied upon by the
learned senior counsel for the plaintiff has been overruled by the
learned Division Bench. She relied upon the decision of the Division
4 (2007)6 SCC 470
5 (2008) 1 SCC 544
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Bench of the Delhi High Court in the case of OFB Tech Private
6
Limited and Ors Vs Kkspun India Ltd. vs.
SUBMISSIONS IN REJOINDER ON BEHALF OF THE PLAINTIFF:
25) Learned senior counsel for the plaintiff submitted that the
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letters dated 14 April 2020, 20 April 2020, and 21 April 2020,
exchanged between the parties, show the written contract permitting
the plaintiff to claim concession for 25 days when the toll collection
was completely stopped in view of the Covid-19 pandemic
restrictions. Learned senior counsel for the plaintiff relied upon the
relevant terms and conditions of the original contract and the letter
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dated 18 June 2020 for declaring the appointed date as 18 June
st
2020. Hence, the right to collect the toll was during the period from 1
th st th
March 2020 to 30 April 2030. However, from 1 March 2020 to 18
th
June 2020, the plaintiff was to operate only as a contractor. From 18
June 2020 onwards, the title of the plaintiff was sub-concessionaire.
th
Learned senior counsel for the plaintiff relied upon the letter dated 9
April 2020, issued by the defendant to the plaintiff, and the letter
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dated 24 March 2020 by the plaintiff to the defendant informing of
the ‘Political Force Majeure Event’. Since there was no dispute
regarding the ‘Political Force Majeure Event’, the plaintiff accepted
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6 FAO(OS)(COMM)296/2022 dated 1 February 2024
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the defendant's offer to extend the concessional period by issuing a
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letter dated 20 April 2020. Hence, according to the plaintiff, in view of
this agreement, the calculation of Rs. 71 Crores is based on the
defendant's offer letter.
26) Hence, according to the learned senior counsel for the
plaintiff, the defendant's offer was accepted by the plaintiff and acted
upon. Hence, in view of the agreement between the parties, the
defendant is not entitled to recover the amount and/or enforce the
bank guarantee on the ground that it was an unconditional bank
guarantee. Learned counsel for the plaintiff therefore submits that
despite the concession given to the plaintiff, the defendant threatened
to invoke the bank guarantee. Hence, the plaintiff is entitled to the
injunction to prevent the defendant from recovering the amount.
CONSIDERATION OF THE SUBMISSIONS:
27) From the facts of the case as narrated in the above
paragraphs and the rival submissions made on behalf of the parties,
three points arise for consideration at this stage. Firstly, whether the
defendant granted compensation to the plaintiff as recorded and
agreed in writing between the parties in lieu of the loss of toll
collection for 25 days during forced lockdown. Secondly, whether the
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defendant is entitled to reverse or revoke, grant of the said
compensation on the ground of the recommendation and opinion of
the Accountant General and thirdly, whether the defendant can
recover the amount with interest on the ground of such revocation, by
either invoking the performance bank guarantee or otherwise.
28) The offer made by the defendant and accepted by the
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plaintiff is clearly evidenced by the defendant’s letter dated 20 April
st
2020 and the plaintiff’s response dated 21 April 2020. The
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defendant’s offer is clearly recorded in the letter dated 20 April 2020,
in paragraphs 4, 5 and 6, which reads as under;
“ 4. In view of the above, given the Pandemic event and
considering GOM’s past decision on Force Majeure event, we
realise an early resolution/settlement would be in the interest of
both parties. However, such a consensus on
resolution/settlement should have a balance of commercial
aspects and provisions in sub-concession.
5. As per the terms of SCA, during a FM event, the sub-
concessionaire is entitled to extension of concession period. In
lieu of the same, MPEL is offering a compensation based on the
following calculation and subject to your concurrence to the
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same:
(a) (I) Average toll collection per day for the affected days in
March 2020 (i.e. from March 26 to March 31, 2020, both days
inclusive):
This toll shall be worked out based on the actual toll collection
done by the Sub-Concessionaire in the month of March prior to
the impact of lockdown (i.e. from Mar 1, 2020 till March 25,
2020) and deposited in the lender escrow account);
OR
the toll collection per day shown in the cash flow statement
submitted by the Sub-Concessionaire for the corresponding
period in the bidding document, whichever is lower. (A1) and
(II) Average toll collection per day for the affected days
st
beyond 31 March 2020 (i.e. from April 1, 2020 till April 19,
2020):
This toll shall be worked out based on actual toll collection of the
March month (i.e. from March 1, 2020 till March 25, 2020) and
deposited in the lender escrow account); adjusted to toll fee
revision as per Toll Fee Notification.
OR
the toll collection per day shown in the cash flow statement
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submitted by the Sub-Concessionaire for the corresponding
period in the bidding document, whichever is lower.(A2)
(b) The above numbers shall be multiplied by the number of
days during which toll collection remained suspended in March-
st
2020(B1) and from 1 April 2020 till end of toll stoppage (B2)
(c) The above product shall be deducted from the interest
payable on the Upfront Sub-Concession fee.(C)
(d) So, upon the Financial Close, the Sub-Concessionaire will
be obliged to pay Rs. 6500 Cr +C – (A1B1 + A2B2)
6. The above compensation/settlement may be treated as final
settlement in lieu of any increase in the Sub Concession Period.
There will not be any other compensation on account of this
lockdown beyond that described in Para 5 above. Further, this
settlement is one time and should not be treated as precedence
for future, as this compensation is provided to ease the burden of
financial closure of the sub-concessionaire. No further claims,
damages or representation will be considered in this regards.
This offer of MPEL is in full and final response to your request. A
copy of this may be returned, duly signed as token of your
acceptance.”
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st
29) By letter dated 21 April 2020, the plaintiff accepted the
defendant’s offer and agreed to adjust the reduced toll income during
the lockdown period against the interest portion of the upfront sub-
concession fee, as expressly stipulated under para 5 of the
defendant’s letter. Thus, the parties agreed on compensation in view
of the loss of toll collection during the 25-day lockdown period.
30) Admittedly, due to the forced lockdown in March 2020, there
was a loss of toll collection for 25 days. The plaintiff’s request to seek
the benefit of a force majeure event, in view of the lockdown, was
addressed by the defendant, and after deliberation between the
parties, the defendant accepted that the plaintiff had suffered a loss of
toll collection. Accordingly, the defendant unconditionally agreed to
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grant compensation in terms of the offer set out in the letter dated 20
April 2020. The plaintiff accepted the defendant’s offer of
compensation in writing. Hence, it was a concluded contract between
the parties to offer and accept compensation in lieu of the loss of toll
collection. The defendant’s offer letter was not subject to any
approval.
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31) Accordingly, the defendant issued a letter dated 18 June
2020, declaring the appointed date in terms of the said agreement,
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recording satisfaction of the payment obligation for the upfront sub-
concession fee, along with the applicable interest, after adjustment of
compensation for toll suspension. In view of the written agreement
between the parties to grant compensation, the rival submissions on
whether the benefit was in view of a political force majeure event or a
non-political force majeure event need not be discussed at this
preliminary stage.
32) Therefore, after acting upon the written agreement between
the parties for the grant of compensation and recording satisfaction of
receipt of the upfront sub-concession fee along with applicable
interest after adjustment of compensation, the defendant is not
entitled to reverse or revoke the grant of compensation after a period
of two years on the ground of an internal communication received
from the Accountant General.
33) The intimation to encash the performance bank guarantee is
based on non-payment of the amount of the compensation, for which
adjustment is already granted to the plaintiff. The copy of the bank
guarantee is produced on record. The bank guarantee is issued in
terms of Article 9.1 of the said agreement as a performance security
on the terms and conditions recorded in the deed of bank guarantee.
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The terms and conditions record that it is an unconditional and
irrevocable guarantee for the due and faithful performance of the
plaintiff’s obligations under the said agreement. Further, it records
that a letter from the defendant under the hands of an officer, not
below the rank of general manager of the defendant, stating that the
sub-concessionaire, that is, the plaintiff, has committed default in due
and faithful performance of all or any of its obligations in accordance
with the said agreement, shall be conclusive and binding on the bank.
34) Therefore, it is the defendant’s argument that the bank
guarantee is an unconditional performance guarantee and the
defendant is entitled to encash the same without offering any
explanation. The letter issued by the defendant clearly states that the
defendant shall consider invoking the bank guarantee for non-
payment of the amount for which compensation has already been
granted to the plaintiff. Hence, according to the plaintiff, an attempt to
invoke the performance bank guarantee would cause irretrievable
prejudice.
35) In U.P. State Sugar Corpn., the Apex Court held that courts
should be slow to grant an injunction restraining the realisation of an
unconditional bank guarantee, except in two situations: when a fraud
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of an egregious nature is alleged in connection with such a bank
guarantee vitiating the very foundation of such a bank guarantee
and/or where allowing the encashment of an unconditional bank
guarantee would result in irretrievable harm or injustice to the party
concerned.
36) In Mahatma Gandhi Sahakra Sakkare Karkhane, the Apex
Court held that a dispute of any kind cannot be raised to prevent
enforcement of an unconditional bank guarantee except on the
grounds of fraud and irretrievable injury. It is further held that the
mere fact that the bank guarantee refers to the principal agreement
without referring to any specific clause in the preamble of the deed of
guarantee does not make the guarantee furnished by the bank a
conditional one. The aforesaid decisions are followed by the Apex
Court in Vinitec Electronics and held that the plea taken as regards
“irretrievable injustice” if vague and not supported by any evidence
cannot be accepted.
37) In Hindustan Construction Co. Ltd. , the Apex Court held that
a bank guarantee is the common mode of securing payment of
money in commercial dealings as the beneficiary, under the
guarantee, is entitled to realise the whole of the amount under that
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guarantee in terms thereof irrespective of any pending dispute
between the person on whose behalf the guarantee was given and
the beneficiary. It is observed that in contracts awarded to private
individuals by the Government, which involve huge expenditure, for
example, construction contracts, bank guarantees are usually
required to be furnished in favour of the Government to secure
payments made to the contractor as “advance” and secure
performance of the work; therefore the courts are reluctant in granting
an injunction against the invocation of bank guarantee, except in the
case of an established fraud, or where irretrievable injury is likely to
be caused to the guarantor. It is further held that the invocation,
therefore, will have to be in accordance with the terms of the bank
guarantee, or else, the invocation itself would be bad.
CONCLUSIONS:
38) As discussed in the paragraphs above, the legal principles
governing the invocation of a bank guarantee are well settled. The
courts should be slow to grant an injunction restraining the realisation
of an unconditional bank guarantee. However, there is no absolute
bar in protecting the guarantor in the event of a fraud of an egregious
nature vitiating the very foundation of such a bank guarantee and/or if
allowing the encashment of an unconditional bank guarantee would
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result in irretrievable harm or injustice to the party concerned.
39) In the present case, there is no allegation of fraud. However,
the issue is of irretrievable harm and injustice to the plaintiff. The plea
of irretrievable injustice and harm is not vague in the present case
and is supported by substantial evidence of the parties’ written
agreement to compensate the plaintiff for the loss of revenue during
the first lockdown. The defendant not only granted compensation but
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also acted on the decision. The defendant issued a letter dated 18
June 2020, declaring the appointed date, recording satisfaction of the
payment obligation for the upfront sub-concession fee, along with the
applicable interest, after adjustment for compensation for toll
suspension.
40) The letter issued by the defendant, revoking the grant of
compensation, relies on an internal communication to which the
plaintiff is not a party. Whether the internal communication issued by
the Accountant General to the defendant is valid and binding on the
plaintiff would be a question of trial. At this stage, nothing has been
shown on behalf of the defendant that the said internal
communication would be binding on the plaintiff. However, at this
preliminary stage, based on an internal communication, the plaintiff
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cannot be deprived of the benefit of the adjustment already granted in
lieu of the loss of toll collection.
41) The grant of compensation in lieu of loss of toll collection
was never subject to any approval. Hence, the plaintiff has prayed for
a declaration that there is a valid, subsisting, binding, and
enforceable agreement regarding the compensation and adjustment
of Rs. 71.06 crores. In the alternative prayer is for a declaration that if
the plaintiff is held not entitled to compensation, it be declared that
the plaintiff is entitled to extension of the sub concession period by 25
days being the period of loss of toll collection due to lockdown and for
a direction to the defendant to execute supplementary agreement in
terms of clause 40.9 of the agreement by granting extension to the
sub-concession period.
42) The issue regarding the plaintiff’s entitlement to an extension
of the sub-concession period and to what extent or for how many
days is a matter of trial. However, there is no dispute that there was a
loss of toll collection for at least 25 days due to the Covid pandemic
lockdown. Admittedly, the defendant agreed to grant compensation in
lieu of loss of toll collection for 25 days and accordingly acted upon it,
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adjusting the payments while issuing the letter dated 18 June 2020.
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By the said letter, the defendant declared the appointed date, thereby
recording satisfaction of the payment obligations for the upfront sub-
concession fee, along with the applicable interest, after adjustment
for compensation for toll suspension.
43) Therefore, a serious prejudice, injustice and an irretrievable
loss to the plaintiff are evident due to the defendant’s attempt to issue
an intimation that the defendant would take steps in accordance with
the terms and conditions of the agreement to recover the amount of
compensation already granted, including taking steps to invoke the
performance bank guarantee. Therefore, the apprehension expressed
by the plaintiff regarding the threat to recover the amount and the
invocation of the bank guarantee is genuine. There is substance in
the arguments made on behalf of the plaintiff that serious prejudice,
injustice and irretrievable loss are likely to be caused to the plaintiff if
the defendant recovers the amount for which benefit is already
granted to the plaintiff by way of compensation in lieu of loss of toll
collection. The plaintiff has therefore made out a prima facie case,
showing irreparable loss and injustice, and the balance of
convenience also lies in favour of the plaintiff for seeking an interim
injunction. Hence, the plaintiff would be entitled to interim relief to the
extent of the benefit of compensation already granted to the plaintiff
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as recorded in the letter dated 18 June 2025.
44) The plaintiff has prayed for an injunction restraining the
defendant from recovering from the plaintiff the amount of Rs.
1,09,96,23,389/- by encashing bank guarantees or otherwise. This
prayer is based on an intimation by the defendant to the plaintiff vide
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letter dated 25 November 2025. This intimation is for recovering the
amount along with interest on the ground of revocation of the
compensation already granted in view of the revocation
recommendation by the Accountant General.
45) The interim application is therefore allowed in terms of
prayer clause (a), which reads as under:
“a) That pending hearing and disposal of the Suit, this
Hon’ble Court be pleased to pass an interim order and
injunction restraining the Defendant by itself, its servants and
agent from in any manner to recover from the Plaintiff ₹
1,09,96,23,389/- either by encashment of Bank Guarantee,
details of which are set out in Exhibit “GG” to the Plaint or
otherwise;”
(GAURI GODSE, J.)
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