The Bombay High Court has affirmed that an unsuccessful party in arbitration may seek post-award interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, to preserve security for an awarded claim - even when a larger sum is awarded against it. This landmark ruling, grounded in the Supreme Court’s recent decision in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, clarifies that statutory access to interim protection is not contingent on being the prevailing party in arbitration.
Background & Facts
The Dispute
The dispute arose under a Lump Sum Turn Key (LSTK) contract dated 3 July 2010 between Oil and Natural Gas Corporation Limited (ONGC), the Petitioner, and Larsen & Toubro Limited (L&T), the Respondent, for the engineering, procurement, fabrication, and installation of four offshore well-head platforms in the Mumbai High North Redevelopment Project. The Contract Price was USD 97,104,900 plus EUR 5,293,700 plus INR 524,25,01,000. The scheduled completion date was 15 May 2011.
Under Clause 6.3.2 and 6.3.4 of the General Conditions of Contract, L&T was required to furnish a bank guarantee for 10% of the Contract Price (approximately INR 150.34 crores) to secure the release of liquidated damages (LD) withheld by ONGC for delays. The project was completed on 28 February 2012, resulting in a delay of 289 days. ONGC withheld LD amounting to INR 122.73 crores, and L&T secured its release by submitting the bank guarantee.
Key Facts
- Contract signed: 03.07.2010
- Scheduled completion: 15.05.2011
- Actual completion: 28.02.2012 (delay of 289 days)
- LD imposed by ONGC: INR 122.73 crores
- Bank guarantee furnished by L&T: INR 150.34 crores (10% of Contract Price)
- Bank Guarantee No. 00040100008747 issued by Axis Bank Limited: dated 21.08.2015
- Expiry date of guarantee: 30.04.2026
- Claim expiry date of guarantee: 30.04.2027
- L&T notified ONGC on 05.02.2026 that it would not extend the guarantee beyond 30.04.2026
- Petitioner filed Section 34 petition challenging the arbitral award on 12.03.2026
- Section 36(3) application for interim stay filed on 17.04.2026
- Supreme Court delivered judgment in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi on 24.04.2026
- Petitioner filed present Section 9 petition on 29.04.2026, one day before the guarantee’s expiry
Procedural History
- 03.07.2010: Contract executed between ONGC and L&T
- 28.02.2012: Project completed; 289-day delay incurred
- 21.08.2015: Bank Guarantee issued by Axis Bank Limited
- 30.12.2024: Arbitral Tribunal issues original award
- 12.12.2025: Arbitral Tribunal issues Additional Award under Section 33
- 05.02.2026: L&T notifies ONGC of non-renewal of bank guarantee
- 12.03.2026: ONGC files Commercial Arbitration Petition (L) No. 9373 of 2026 under Section 34
- 17.04.2026: ONGC files Interim Application under Section 36(3) seeking stay and bank guarantee extension
- 23.04.2026: L&T files Section 9 petition (CARBP(L) 14555 of 2026); ONGC states it will seek relief under Section 36(3); petition disposed of
- 28.04.2026: Section 36(3) application heard; ONGC withdraws prayer and seeks liberty to file Section 9 petition
- 29.04.2026: Present Section 9 petition filed
- 30.04.2026: Court records L&T’s undertaking to renew guarantee if Petitioner succeeds
- 06.05.2026: Judgment delivered
The Parties' Positions
ONGC (Petitioner): Argued that despite being the net loser in the award, it is a partially successful party entitled to interim protection under Section 9 to preserve the bank guarantee securing its awarded claim of INR 42.95 crores (35% of LD). It contended that the Additional Award’s deletion of the condition requiring payment of 35% LD before return of the guarantee was ultra vires Section 33 and that the bank guarantee was never intended as performance security but as a financial assurance for LD refund.
L&T (Respondent): Opposed maintainability, asserting that ONGC, as the net loser (liable to pay INR 271.12 crores), had no right to invoke Section 9. It argued that Section 36(3) was the exclusive remedy for post-award interim relief and that Section 9 was being misused to avoid the deposit requirement under Section 36(3). It also claimed suppression of facts regarding the claim expiry date (30.04.2027) and delay in filing.
Relief Sought
ONGC sought:
- Direction to L&T to extend and keep alive Bank Guarantee No. 00040100008747 dated 21.08.2015 for the amount of USD 9,710,490 plus EUR 529,370 plus INR 52,42,50,100 (10% of Contract Price) until final disposal of the Section 34 petition
- Alternative direction to furnish a fresh bank guarantee of equivalent amount if the existing one lapses
- Ad-interim relief
- Costs of the petition
The Legal Issue
Can an unsuccessful party in arbitration, which has been awarded a claim but is liable to pay a higher net amount to the opposing party, maintain a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking extension of a bank guarantee to secure the awarded amount?
Arguments Presented
For the Petitioner
The Petitioner relied on the Supreme Court’s judgment in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi to argue that Section 9 does not distinguish between successful and unsuccessful parties. It emphasized that the bank guarantee was not performance security but a mechanism to release withheld LD, and that the awarded amount of INR 42.95 crores was crystallized and owed to ONGC. It contended that the Additional Award’s deletion of the payment precondition for return of the guarantee was a material alteration beyond Section 33’s scope. It further argued that the balance of convenience and irreparable harm favored preservation of the guarantee, as ONGC would lose its only security for a claim that may be upheld in the Section 34 proceeding.
For the Respondent
The Respondent contended that Section 9 is not a parallel remedy to Section 36(3) and that the Petitioner’s filing was an abuse of process to circumvent the deposit requirement under Section 36(3). It argued that the net award of INR 228.16 crores in its favor rendered ONGC’s claim insignificant and that the guarantee’s claim expiry date of 30.04.2027 negated any urgency. It relied on pre-Home Care Retail judgments from this Court and others, now overruled, to assert that only successful parties may invoke Section 9. It further claimed that granting the relief would interfere with enforcement of the Award.
The Court's Analysis
The Court undertook a detailed analysis of the Supreme Court’s judgment in Home Care Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi, which overruled the Bombay High Court’s earlier decision in Dirk India Pvt. Ltd. v. Maharashtra State Electricity Generation Company Limited. The Court held that Section 9’s language - "a party" - is unqualified and does not exclude unsuccessful parties. The Apex Court explicitly rejected the notion that interim relief under Section 9 is confined to award holders, emphasizing that the statutory purpose is to preserve the subject matter or amount in dispute until final adjudication.
"An unsuccessful party cannot secure protection of its claim under Section 34 or Section 36. To deny interim relief under Section 9 would leave such a party remediless."
The Court noted that the Arbitral Tribunal’s original award had conditioned the return of the bank guarantee on payment of 35% LD (INR 42.95 crores). The Additional Award, issued under Section 33, deleted this condition and substituted it with a direction for mutual adjustment of amounts - a change the Petitioner challenged as beyond the Tribunal’s limited powers. The Court observed that the Additional Award’s modification, if upheld, would deprive ONGC of its only security for a crystallized claim.
The Court further held that the bank guarantee was not intended to secure performance but to facilitate release of withheld LD. ONGC had been deprived of its contractual right to deduct LD from L&T’s bills, and the guarantee was the sole mechanism to secure that amount. The awarded sum of INR 42.95 crores was not merely a claim but an enforceable entitlement, and its security could not be withdrawn pending challenge to the larger award.
The Court rejected the Respondent’s reliance on pre-Home Care Retail judgments, noting they were expressly overruled. It also dismissed the argument that Section 36(3) was the exclusive remedy, holding that Section 9 serves a distinct purpose: preserving ancillary rights, not staying enforcement. The Court emphasized that the relief sought was non-prejudicial: ONGC had assured it would not invoke the guarantee, and L&T’s ability to enforce its award remained unaffected.
The Court found that the Petitioner met the higher threshold for interim relief to an unsuccessful party, as laid down in Home Care Retail Marts. It established a strong prima facie case that the Tribunal erred in restricting LD to 35%, and that the Additional Award’s alteration of the guarantee’s terms was questionable. The Court concluded that failure to preserve the guarantee would cause irreparable harm to ONGC, a public sector entity managing public funds, while imposing only a minimal burden on L&T to maintain an existing instrument.
The Verdict
The Petitioner succeeded. The Court directed L&T to extend and keep alive Bank Guarantee No. 00040100008747 dated 21 August 2015 for the amount of USD 9,710,490 plus EUR 529,370 plus INR 52,42,50,100 until final disposal of the Section 34 petition. In the event of lapse, L&T was directed to furnish a fresh bank guarantee of equivalent amount. There shall be no order as to costs.
What This Means For Similar Cases
Interim Relief Under Section 9 Is Not Limited to Award Holders
- Practitioners may now file Section 9 petitions on behalf of unsuccessful parties seeking preservation of security for awarded amounts, even when a larger net liability exists
- The focus must shift from net outcome to the nature of the claim secured - e.g., withheld amounts, bank guarantees, or escrowed funds
- A party need not be "successful" to qualify; partial success suffices if the claim is crystallized and secured by collateral
Bank Guarantees as Ancillary Security Are Protected Post-Award
- A bank guarantee furnished to release withheld amounts is not merely performance security but a financial assurance tied to a specific claim
- If the guarantee’s release is conditioned on payment of an awarded sum, and that condition is removed by an Additional Award, Section 9 may be invoked to restore the condition pending challenge
- Courts will examine whether the guarantee’s removal prejudices the claimant’s ability to recover an awarded amount
Section 36(3) and Section 9 Are Complementary, Not Mutually Exclusive
- Section 36(3) stays enforcement of the award; Section 9 preserves ancillary rights
- An unsuccessful party may simultaneously seek stay under Section 36(3) and interim protection under Section 9
- Filing under Section 9 does not constitute an abuse of process if the remedy sought is distinct from the stay mechanism
- Courts must avoid conflating the two remedies; Section 9 is available even if Section 36(3) is pending
