#Performance Bank Guarantee

The Delhi High Court held that an arbitral award granting 9% interest on a Performance Bank Guarantee from the date of invocation violated public policy under Section 34(2)(b)(ii) where the contract expressly excluded interest under Clause 13(2). The court set aside this portion of the award while upholding the rejection of the delayed shipment claim. The ruling reinforces that arbitrators cannot rewrite contractual terms on interest, and such overreach renders an award contrary to fundamental policy of Indian law.

Bombay High Court upholds a ₹27.43 crore arbitral award, ruling that ONGC’s wrongful termination of an ETP contract entitles Newton Engineering to both loss of profit and refund of the performance bank guarantee. The judgment reaffirms the limited scope of judicial review under Section 34 of the Arbitration Act, reinforcing contractual sanctity in commercial disputes.

The Delhi High Court has ruled that when a Performance Bank Guarantee is encashed in breach of an interim stay, any interest accrued on the encashed amount must be returned alongside the principal as integral to the remedy for unlawful enrichment. This clarifies that interest is not a standalone claim but part of the restitution owed under Section 34, reinforcing the arbitrator’s power to restore parties to their pre-breach position.

MP High Court rules that invoking a performance bank guarantee without first exhausting contractual dispute resolution mechanisms violates agreement terms and natural justice. The ruling reinforces that parties must adhere to prescribed contractual remedies before resorting to bank guarantee encashment, impacting construction contracts and commercial agreements.