Interim protection against bank guarantee encashment granted pending adjudication of disputes before the Dispute Resolution Committee

The Petitioner, having entered into an agreement dated June 4, 2019, for the upgradation of Jabalpur Airport, moved the court under Section 9 of the Arbitration and Conciliation Act, 1996

The Petitioner challenged letters dated April 24, 2026, issued by the Respondent (AAI) to various banks for the encashment of six bank guarantees totaling Rs. 3,17,00,000/-

The Petitioner contended that the invocation was arbitrary as dispute resolution proceedings under Clause 25 of the Agreement were already pending before the Dispute Resolution Committee (DRC)

The Respondent countered that the bank guarantees were unconditional contracts, and four had already been encashed while two were processed for payment

1. Whether the Court should interdict the encashment of bank guarantees when dispute resolution proceedings under the contract are currently pending

2. Whether the Petitioner is entitled to interim protection against further coercive actions pending the decision of the DRC

Section 9 of the Arbitration and Conciliation Act, 1996, which provides for interim measures by the Court

A bank guarantee is a separate, unconditional contract, and courts generally do not interfere with its invocation except in cases of fraud, irreparable loss, or invocation not in terms of the guarantee

Contractual mechanism under Clause 25 of the parties’ agreement, which mandates a reference of disputes to a Dispute Resolution Committee (DRC) prior to arbitration

The Court acknowledged the Respondent's argument that bank guarantees are independent contracts requiring payment without demur

It was noted that a DRC had been constituted and was actively hearing the matter, with the last hearing occurring on April 23, 2026

Relying on a precedent between the same parties (O.M.P.(I)(COMM.) 118/2026), where protection was granted until the mediation panel considered the disputes, the Court reasoned that further coercive steps should be stayed to ensure the efficacy of the DRC process

The Court distinguished between the four guarantees already encashed and the remaining two that were already "processed" for payment, excluding the latter from the stay to respect the completed stages of banking transactions

The Court further ordered that no coercive action be taken for a period of 10 days following the DRC's decision. Crucially, this stay does not apply to the two bank guarantees that have already been processed for encashment