LexM/S JINDAL STEEL AND POWER LTD. & ANR. versus M/S BANSAL INFRA PROJECTS PVT. LTD. & ORS.
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[2025] 5 S.C.R. 1263 : 2025 INSC 640 M/s Jindal Steel and Power Ltd. & Anr. v. M/s Bansal Infra Projects Pvt. Ltd. & Ors. (Civil Appeal No. 6413 of 2025) 07 May 2025 [J.B. Pardiwala and R.Mahadevan,* JJ.] Issue for Consideration Appellants issued work order to 1st respondent for construction of flats and paid advance. Bank guarantee equivalent to the advance money was furnished by 1st respondent to secure the amount. When the work got delayed and disputes arose between the parties, the appellants requested refund of debit balance, failing which the bank guarantee was to be encashed. The 1st respondent filed petition under Section 9 of the Arbitration and Conciliation Act, 1996, before the Commercial Court, along with applications under Order XXXIX Rules 1 and 2 and Order XXXIX Rule 3 CPC, so as to restrain the appellants from proceeding with encashment of the bank guarantee. The applications for interim order were rejected by Commercial Court. The High Court allowed the writ petition filed against the same order and stayed encashment of the bank guarantee till disposal of the Arbitration Petition. The issues before the Supreme Court were: i. Whether a Court of law can interfere with invocation of a bank guarantee when no exceptional circumstances of fraud or irretrievable injustice is proved to exist? ii. Whether the High Court was right in granting interim protection against the invocation of the bank guarantee until the disposal of the Section 9 arbitration petition while exercising its jurisdiction under Article 227 of the Constitution? Headnotes† Bank guarantee – Injunction against its invocation – Settled legal principle: Held: The terms of the bank guarantee are, therefore, extremely material – The bank guarantee should be in unequivocal terms, * Author 1264 [2025] 5 S.C.R. Supreme Court Reports unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished – In Hindustan Construction Co. Ltd v. State of Bihar and others,(1999) 8 SCC 436 the Supreme Court after placing reliance on various judgments held that courts are reluctant in granting an injunction against the invocation of bank guarantee, except in the case of fraud, which should be an established fraud, or where irretrievable injury was likely to be caused to the guarantor – Bank guarantees serve as the backbone of commercial transactions and must be honored in accordance with their terms.[Para 11] Impugned order – Whether legally sustainable in facts of the case: Held: If the appellants were permitted to invoke the bank guarantee, the prayer made in the Section 9 arbitration petition would become infructuous – The order was subject to Respondent No. 1 extending the validity of the bank guarantee – Therefore, the order of the High Court was merely an interim measure intended to protect the interests of both parties and correct – The arguments of both sides have already concluded in the arbitration petition – An Arbitral Tribunal was constituted to adjudicate the disputes between the parties; a hearing was held; and the parties have appeared – Thus, in view of the ongoing arbitration proceedings concerning the bank guarantee, it is imperative to maintain the existing position regarding the same until the final outcome of the Section 9 arbitration petition – Respondent No. 1 has given an undertaking to extend the validity of the bank guarantee till the disposal of the Section 9 arbitration petition – As of now, no prejudice to appellants – The Commercial Court shall pass appropriate orders within a period of eight weeks and until such time, the bank guarantee shall be kept alive subject to the outcome of the Section 9 arbitration petition. [Paras 12-15] Case Law Cited Hindustan Construction Co. Ltd v. State of Bihar and Others [1999] Supp. 3 SCR 554 : (1999) 8 SCC 436 – relied on. List of Acts Contract Act, 1872; Constitution of India; Arbitration and Conciliation Act, 1996. [2025] 5 S.C.R. 1265 M/s Jindal Steel and Power Ltd. & Anr. v. M/s Bansal Infra Projects Pvt. Ltd. & Ors. List of Keywords Bank guarantee; Arbitration; Interim order; Injunction. Case Arising From CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6413 of 2025 From the Judgment and Order dated 20.08.2024 of the High Cou
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