Section 9 petition converted to Section 17 application with interim protection against bank guarantee invocation.

The Petitioner entered into an Engineering, Procurement, and Construction (EPC) Contract with the Respondent on 27th October 2022 for the 6-laning of a section of NH-44 in Telangana

Delays occurred in the project, which the Petitioner attributed to the Respondent’s failure to provide Right of Way (ROW), land encumbrances, and delayed forest clearances

Following disputes and settlement attempts, the Respondent issued a Notice of Intention to Terminate on 10th March 2026

The Petitioner filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a stay on the termination notice and the invocation of two Bank Guarantees (totaling approx. Rs. 18.6 crore) and a Surety Bond (approx. Rs. 29.3 crore)

During proceedings, both parties nominated their respective arbitrators, and a joint measurement of work was initiated

1. Whether interim protection against the invocation of Bank Guarantees and termination of contract should be granted under Section 9 of the Arbitration Act when the arbitral process has already been set in motion

2. Whether a Section 9 petition can be converted into an application under Section 17 to be adjudicated by the Arbitral Tribunal once the tribunal is being constituted

Section 9 of the Arbitration and Conciliation Act, 1996, which empowers the court to grant interim measures before or during arbitral proceedings

Section 17 of the Act, which allows the Arbitral Tribunal to grant interim measures, and Section 12 regarding the mandatory disclosure by arbitrators

Contractual arbitration clause (Clauses 26.2 and 26.3), which mandates arbitration under the rules of the Society for Affordable Resolution of Disputes (SAROD)

The Court observed that a valid arbitration agreement exists and that both parties have already taken steps to nominate their nominee arbitrators, signaling the commencement of the arbitral process

Given that the tribunal's formation was imminent, the Court determined that the merits of the interim protection should be evaluated by the Arbitral Tribunal rather than the Court

To balance the equities, the Court noted that the Bank Guarantees and Surety Bonds were still valid for several weeks

Consequently, the Court found it appropriate to provide a limited "pro-tem" protection to the Petitioner to prevent the immediate encashment of securities, thereby preserving the subject matter until the Tribunal could hear the matter under Section 17

The Court also recorded the Petitioner's undertaking not to remove plant and machinery from the site to ensure the status quo during joint measurement

The Court directed: (i) the nominee arbitrators to appoint a presiding arbitrator; (ii) the arbitration to proceed under SAROD rules

(iii) the Respondent not to encash the Bank Guarantees or Surety Bond for a period of six weeks

(iv) the Petitioner to keep the Bank Guarantees alive and refrain from removing machinery from the site

The Court clarified it expressed no opinion on the merits of the underlying dispute