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M/S Jindal Steel and Power Ltd. v. M/S Bansal Infra Projects Pvt. Ltd.

Civil Appeal · 2025 INSC 640Decided 7 May 2025
Civil Appeal No. 6413 of 2025 (arising out of SLP (Civil) No. 21916 of 2024)
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

Jindal Steel and Power had engaged Bansal Infra Projects to build 400 flats at its Jindal Nagar project, giving an advance secured by a bank guarantee. After repeated deadline extensions and alleged quality/performance failures, Jindal terminated the work and moved to encash the bank guarantee for unadjusted advances. Bansal filed a Section 9 arbitration petition seeking to stop the encashment; the Commercial Court refused to grant an immediate ex parte injunction and instead ordered notice to the other side. Bansal then went to the Orissa High Court under Article 227 of the Constitution (rather than appealing under the Arbitration Act), and the High Court granted interim protection against encashment, which Jindal challenged before the Supreme Court, raising several technical questions about which route of challenge was proper.

Decision Breakdown

The Supreme Court noted that the parties disputed whether an order rejecting an ex parte ad interim injunction under Order XXXIX Rule 3 CPC (issued alongside a Section 9 arbitration petition) is itself appealable under Section 37 of the Arbitration Act, or whether Article 227 was the only available route. Rather than deciding these disputed legal questions, the Court found that practical developments had overtaken the dispute: the underlying Section 9 petition was already substantially argued before the Commercial Court, an Arbitral Tribunal had since been constituted, and Bansal had repeatedly extended the bank guarantee's validity (through to 30 June 2025) so Jindal suffered no real prejudice from keeping the guarantee alive pending the Section 9 outcome. The Court therefore left the larger legal questions open, directed the Commercial Court to decide the Section 9 petition within eight weeks, and ordered the bank guarantee kept alive until then.

Lesson Learnt

Courts are generally reluctant to interfere with an unconditional bank guarantee except in cases of clear fraud or irretrievable injury, but where the guarantee has been kept extended and renewed without real harm to either side, the Supreme Court may simply let the underlying dispute proceed to a prompt decision rather than resolving every procedural or jurisdictional technicality along the way.

Official source (sci.gov.in)View Judgment (PDF)

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