Wrongful termination for lack of contractually mandated notice period renders bank guarantee encashment illegal.

The dispute arose from a contract for the supply and maintenance of a Statewide Area Network. Telecommunications Consultants India Ltd (TCIL) issued a Purchase Order to Frans Global Infotech Ltd (Frans)

TCIL terminated the contract on 09.06.2023, citing delays and non-performance, and subsequently blacklisted Frans for two years and encashed its Performance Bank Guarantee (PBG)

Both parties challenged the Arbitral Award dated 24.09.2025 under Section 34 of the Arbitration and Conciliation Act, 1996

TCIL challenged the finding that termination was wrongful, while Frans challenged the rejection of its claims for damages, unpaid invoices, and loss of reputation

1. Whether the termination of the Purchase Order by TCIL was wrongful due to lack of contractually mandated notice

2. Whether Frans was entitled to damages for wrongful termination and loss of reputation

3. Whether the "back-to-back" payment clause in the contract barred Frans's claim for unpaid invoices

4. Whether the encashment of the PBG was wrongful

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, emphasizing the restricted scope of judicial interference, which is limited to "patent illegality," "perversity," or "fundamental policy of Indian law"

Reliance was placed on OPG Power Generation Pvt. Ltd. v. Enexio Power Cooling Solutions regarding the finality of an arbitrator's interpretation of facts and contracts

The Court also invoked Section 39 of the Indian Contract Act, 1872, defining the requirements for anticipatory breach

the principle of quod approbo non reprobo (approbate and reprobate) regarding contractual consistency

the enforceability of "pay-when-paid" or "back-to-back" clauses was upheld based on Kingston Enterprises

the requirement of proof of actual loss for damages was reinforced via M/s Unibros v. All India Radio

The Court upheld the Arbitral Tribunal's (AT) finding that the termination was wrongful because TCIL failed to provide the mandatory 45-day notice required under Clause 3.9 of the Special Conditions of Contract (SCC), which overrode the general termination clause

The Court rejected TCIL’s argument of anticipatory breach, noting that Frans had displayed a continued willingness to perform

Regarding Frans’s cross-claims, the Court affirmed the AT’s denial of damages because Frans failed to provide evidentiary proof of actual financial loss or lost profitability

The claim for unpaid invoices was rejected because the contract contained a clear "back-to-back" payment term, and Frans failed to prove that TCIL had received payment from the end-client

the Court found the direction to refund the PBG with 12% interest to be a logical and reasonable consequence of the wrongful termination

the termination was wrongful due to procedural non-compliance

the refund of the PBG was justified

the denial of damages to Frans was correct due to lack of proof

the rejection of invoice claims was valid under the "back-to-back" payment framework

No order as to costs was made