Finding that the delay was attributable to the contractor (Afcons) and the contract required the guarantees to continue till final settlement of the liquidated damages dispute, the Bombay High Court has granted interim relief to Oil and Natural Gas Corporation Ltd. (ONGC). The Court held that an unsuccessful party in arbitration can seek post-award interim protection under Section 9, but only on a much higher standard requiring rare and compelling circumstances. In this case, where the arbitral tribunal had itself found delay attributable to the contractor and applicability of the liquidated damages clause, and where the challenge under Section 34 raised substantial legal issues on Section 74 and liquidated damages jurisprudence rather than merely factual re-appreciation, continuation of the existing bank guarantees was justified to preserve the subject matter of the dispute and prevent irreversible prejudice.
The Court treated Clause 6.3.4 as prima facie supporting continuation of the guarantees till final settlement of the liquidated damages dispute, and directed Afcons to renew, extend and keep alive all bank guarantees furnished under Clause 6.3.4 of the GCC, on the same terms and for the same amounts, pending final disposal of ONGC’s Section 34 petition challenging the award dated 10 March 2026.
A Single Judge Bench of Justice Amit Borkar found that ONGC had raised a substantial and not illusory challenge. It noted that the tribunal had accepted that delay of more than 220 days was attributable to Afcons and that Clause 6.3.2 was applicable, but had still rejected ONGC’s counterclaim on the ground that actual loss was not pleaded and proved. The High Court observed that this raised an important legal issue about the interplay between Section 74 of the Contract Act and the challenge was not one requiring mere re-appreciation of facts, but involved significant legal questions that would have to be examined in Section 34.
The Court then analysed the contract structure and found prima facie support for ONGC’s stand. Clause 6.3.4 had been inserted after delay occurred, at Afcons’ request, to replace deduction of liquidated damages from running bills with bank guarantee security. The clause expressly stated that the bank guarantees would continue till the issue of ONGC’s right to recover liquidated damages was settled. The Court said that, prima facie, this showed that both parties had consciously agreed to secure the dispute through guarantees while allowing the project to continue.
On balance of convenience and irreparable injury, the Court accepted that continuation of the bank guarantees would merely preserve an existing arrangement that had remained in place for nearly fifteen years. ONGC was not seeking immediate invocation or enforcement, only continuation of security pending Section 34. The Court found that Clause 6.3.4 prima facie supported continuation till final settlement, and that the claim-period clause in the bank guarantee did not fully answer ONGC’s concern that once the guarantees expired, the security itself might disappear.
The High Court further observed that the bank guarantees were the only security for ONGC’s liquidated damages claim. If they lapsed and ONGC later succeeded in Section 34, the challenge could become ineffective. The Court also noted that one constituent of the joint venture was a foreign Indonesian company, and after completion of the project the joint venture had already served its purpose. In that backdrop, recovery difficulties could not be brushed aside. The Court held that a corporate guarantee was not commercially equivalent to an unconditional bank guarantee, and therefore Afcons’ offer was not an adequate substitute.
The Court finally recorded a cumulative list of circumstances showing “rare and compelling circumstances” within the meaning of Home Care. These included the tribunal’s findings on delay and applicability of Clause 6.3.2, the legal nature of ONGC’s Section 34 challenge, the public utility character of the project, the introduction of Clause 6.3.4 at Afcons’ request, the long-standing existence of the guarantees, the fact that ONGC only sought preservation of existing security, the lack of equivalence between a corporate guarantee and a bank guarantee, ONGC’s prompt approach to court, and the risk of irreversible prejudice if the guarantees were allowed to lapse.
Briefly, ONGC filed a Section 9 petition before the Bombay High Court seeking a direction that Afcons Gunanusa Joint Venture must renew and continue the bank guarantees furnished under the contract until ONGC’s Section 34 challenge to the arbitral award is finally decided. ONGC’s case was that the arbitral award dated 10 March 2026 had rejected its counterclaim for liquidated damages and had also directed return of the bank guarantees, but those guarantees were the only security available to protect its claim. ONGC relied on the contract to argue that the guarantees had to remain alive till the dispute over liquidated damages was finally settled.
The dispute arose from a project contract executed between ONGC and Afcons for construction, installation and commissioning works. The completion date under the GCC was fixed as 30 April 2011, time was expressly made the essence of the contract under Clause 6.3.1.2, and ONGC had a contractual right under Clause 6.3.2 to recover liquidated damages for delay in completion.
After the project was not completed within time, Afcons sought extension of time and requested that liquidated damages should not be deducted immediately. Instead, Afcons offered bank guarantees as security. ONGC then extended the completion date up to 31 December 2011 while making it clear that it was not waiving its right to recover liquidated damages. Thereafter, by amendment dated 22 July 2011, Clause 6.3.4 was inserted, under which Afcons agreed to furnish unconditional and irrevocable bank guarantees securing 110% of ONGC’s maximum liquidated damages claim, and those guarantees were to remain valid till ONGC’s entitlement to liquidated damages was finally settled.
The project was ultimately completed on 31 October 2012 and 2 January 2013, after an effective delay of more than 220 days. Disputes then arose on who was responsible for the delay and whether ONGC was entitled to liquidated damages. Afcons invoked arbitration in July 2015. During arbitration, the tribunal directed that the bank guarantees be restricted to specified amounts representing 110% of the maximum liquidated damages claim and remain alive till the final award. In the final award dated 10 March 2026, the tribunal dismissed ONGC’s counterclaims including its claim for liquidated damages and directed ONGC to return the bank guarantees within ten days. ONGC then filed a Section 34 petition challenging the award, especially the rejection of its liquidated damages counterclaim.
