Extension of Time Without Liquidated Damages Does Not Bar Their Levy if the Contract Is Abandoned.

The Petitioner was contracted by the Respondent to execute a 131 Km Iron Ore Slurry Pipeline Project in Odisha via an Agreement dated September 14, 2023

The original completion date was January 18, 2024; however, the Respondent granted an extension until May 31, 2026, via "Amendment No. 1," which stated that liquidated damages ("LD") charges would not apply for the validity extension

Subsequently, disputes arose regarding delays and site stoppages. On May 7, 2026, the Respondent descoped 50% of the work and reserved the right to levy LD

The Petitioner terminated the contract on May 18, 2026, citing the Respondent's failures

The Respondent then sought to invoke an unconditional Advance Bank Guarantee dated July 18, 2025, leading the Petitioner to seek interim protection under Section 9 of the Arbitration and Conciliation Act, 1996

1. Whether a prima facie case exists to restrain the Respondent from levying liquidated damages for a period previously covered by an extension granted without such levy?

2. Whether the Petitioner is entitled to an injunction restraining the invocation of an unconditional and irrevocable Bank Guarantee?

The court applied Section 9 of the Arbitration and Conciliation Act, 1996, regarding interim measures

It relied on the settled principle that a bank guarantee is an independent contract, and courts should only interfere in cases of "egregious fraud" or "irretrievable injury," as established in Gujarat Maritime Board v. Larsen and Toubro Infrastructure Development Projects Ltd. and U.P. State Sugar Corporation v. Sumac International Limited

Regarding LD, the court examined Clause 18.3 of the contract, which allows the levy of liquidated damages notwithstanding extensions if the delay is not attributable to the employer

The "irretrievable injury" exception requires proof that restitution would be impossible in law, as per Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Work (P) Ltd.

The court found that while "Amendment No. 1" initially waived LD for the extension, the Petitioner failed to complete the work and terminated the contract before the extended deadline

Consequently, Clause 18.3 of the contract preserved the Respondent's right to levy LD for delays not caused by the Respondent, a matter requiring factual adjudication by an Arbitral Tribunal

Regarding the Bank Guarantee, the court determined it was unconditional, irrevocable, and specifically intended to secure advance payments

Since the Petitioner stopped work on July 7, 2025, leaving advances unadjusted, the Respondent was entitled to invoke the guarantee

The court noted that the Petitioner failed to plead "egregious fraud" and that "financial hardship" does not constitute "irretrievable injury" as restitution remains possible through future arbitration

On Issue 2, it held that the unconditional Bank Guarantee must be honored irrespective of the underlying contract dispute

The court dismissed the petition and all pending applications, refusing to grant an injunction against the invocation of the Bank Guarantee or the levy of liquidated damages