Interim Protection Against Termination and Liquidated Damages Subject to Exhausting Mandated Dispute Adjudication Board Mechanism

The Petitioner entered into an EPC Agreement dated 14.07.2023 with the Respondent for the "Major Upgradation of Jodhpur Railway Station"

On 13.05.2026, the Respondent issued a Notice of intention to terminate the Agreement and sought to impose liquidated damages of ₹47.75 Crores (10% of contract value) via communications dated 12.05.2026 and 13.05.2026

The Petitioner filed this petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an interim stay on the termination and the recovery of liquidated damages, citing fears of bank guarantee invocation and irreparable financial loss

The Respondent argued that the Petitioner failed to meet contractual timelines and that the petition was premature as the mandatory Dispute Resolution Mechanism (Conciliation and Dispute Adjudication Board) had not been exhausted

1. Whether the Petitioner is entitled to interim protection against the termination of the EPC Agreement and the imposition of liquidated damages pending the resolution of disputes

2. Whether the Section 9 petition is maintainable before exhausting the multi-tier contractual dispute resolution mechanism, including the Dispute Adjudication Board (DAB)

The Court's order was guided by Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the Court to grant interim measures of protection

The Court further emphasized the sanctity of the contractual Dispute Resolution Mechanism (Article 34 of the Agreement), which mandated a tiered process: first conciliation, then reference to a Dispute Adjudication Board (DAB) with a 90-day decision period, prior to the commencement of formal arbitral proceedings

The Respondent challenged the maintainability of the petition, asserting that the Petitioner bypassed the mandatory DAB process stipulated in Article 34

The Petitioner argued that extreme urgency and the threat of coercive financial measures justified judicial intervention

Ultimately, the court did not choose between these positions but recorded a consensus (ad idem) between the parties. The parties agreed to revert to the contractual mechanism, specifically the DAB, to resolve the underlying disputes

To balance the interests during this period, the court recognized the agreement that the Respondent would refrain from acting upon the liquidated damages notices until the DAB rendered its decision, thereby addressing the Petitioner's immediate concern regarding financial prejudice while upholding the contract's procedural requirements

The Court directed that the Respondent shall not act upon the communications dated 12.05.2026 and 13.05.2026 regarding the imposition of ₹47.75 Crores in liquidated damages until the DAB renders its decision

Parties were granted liberty to pursue further legal remedies following the DAB's decision