Arbitration and Conciliation Act, 1996 – Section 9 – Availability of alternative remedy – Writ jurisdiction –
When the contract between the parties contains a clause providing for resolution of disputes by arbitration, and the petitioner has already invoked the arbitration clause, the remedy for interim protection against invocation of Bank Guarantee lies under Section 9 of the Arbitration and Conciliation Act, 1996. The writ jurisdiction under Article 226 of the Constitution of India is therefore not to be ordinarily invoked in such contractual disputes.
Performance Bank Guarantee – Invocation – Challenge under Article 226 – Maintainability –
The action of respondent authority in invoking the Performance Bank Guarantee cannot be examined on merits by this Court when the contract provides for a specific dispute resolution mechanism through arbitration. Petitioner relegated to avail remedy under the Arbitration and Conciliation Act, 1996.
Contract – Short closure – Invocation of Bank Guarantee –
Respondent-authorities stated that the contract was short closed by notice dated 15.09.2025 and only thereafter the Performance Bank Guarantee was sought to be encashed for delay in completion of the project.
Interim protection – Exercise of equitable jurisdiction –
Considering the peculiar facts and circumstances of the case and the intervening Court vacations, the respondents were directed not to take any coercive steps for invocation of the Performance Bank Guarantee for one week from the date of order, to enable the petitioner to move the competent Court under Section 9 of the Arbitration and Conciliation Act, 1996.
Writ Petition – Disposal – Liberty –
Writ petition disposed of granting liberty to the petitioner to avail appropriate remedy under the Arbitration and Conciliation Act, 1996; miscellaneous petitions, if any, dismissed as infructuous; no costs.
Result:
Writ Petition disposed of – Liberty granted to avail arbitration remedy – Respondents restrained for one week from invoking Bank Guarantee – No costs.APHC010531232025
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI
(Special Original Jurisdiction)
[0]
FRIDAY,THE THIRD DAY OF OCTOBER
TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HONOURABLE SRI JUSTICE CHALLA GUNARANJAN
WRIT PETITION NO: 27157/2025
Between:
1. AIR CONTROL AND CHEMICAL ENGINEERING CO LTD, HAVING
ITS HEAD OFFICE AT 63, THE CHAMBERS, NR. GOYAL PALACE,
OPP-GURUDWARA, S.G. HIGHWAY, BODAKDEV, AHMEDABAD,
GUJARAT - 380054. REPRESENTED BY ITS MANAGING
DIRECTOR, SRI VISHAL DAGA.
...PETITIONER
AND
1. UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY
OF DEFENCE, SOUTH BLOCK NEW DELHI-110001
2. THE EASTERN NAVAL COMMAND, REPRESENTED BY THE FLAG
OFFICER COMMANDING IN CHIEF 2ND FLOOR NAVAL BASE,
VISAKHAPATNAM - 530014
3. FLEET MAINTENANCE UNIT, REP. BY THE OFFICER IN-CHARGE,
C/O. FLEET MAIL OFFICE, NAVAL DOCKYARD VISHAKAPATNAM -
530014
4. THE INDIAN OVERSEAS BANK, KALUPUR CIRCLE BRANCH,
GROUND FLOOR, BSNL BUILDING, OPPOSITE KALUPUR
RAILWAY STATION, KALUPUR, AHMEDABAD, GUJARAT - 380002
...RESPONDENT(S):
Petition under Article 226 of the Constitution of India praying that in the
circumstances stated in the affidavit filed therewith, the High Court may be
pleased topleased to issue a writ, order or direction more particularly one in
2025:APHC:41067
the nature of the Writ of Mandamus declaring the action of the Respondent
No.3 herein invoking the Performance Bank Guarantee vide PBG Number
000371124000026 dated 31.07.2024, as extended up to 15.10.2025,
amounting to Rs. 19,00, 894/- (Rupees Nineteen Lakh Eight Hundred and
Ninety Four only), vide Letter No. PC/303/H E/RAN A/24 dated 25.09.2025,
alleging breach of terms and conditions under Work Order bearing No.
PC/303/HE/RANA/24 dated 17.07.2024 as illegal, arbitrary, unjust, contrary to
the terms and conditions under Work Order bearing No. PC/303/H E/RAN
A/24 dated 17.07.2024 and principles of natural justice, besides being
violative of Articles 14, 19(1)g and 300A of the Constitution of India and/or
pass
IA NO: 1 OF 2025
Petition under Section 151 CPC praying that in the circumstances stated
in the affidavit filed in support of the petition, the High Court may be pleased
pleased direct the Respondents No. 4 herein not to honor the Performance
Bank Guarantee vide PBG Number 000371124000026 dated 31.07.2024, as
extended up to 15.10.2025, amounting to Rs. 19,00,894/- (Rupees Nineteen
Lakh Eight Hundred and Ninety Four only), pursuant to the Letter No.
PC/303/H E/RAN A/24 dated 25.09.2025 issued by the Respondent No.3
herein and pass
Counsel for the Petitioner:
1.K KOUTILYA
Counsel for the Respondent(S):
1.
The Court made the following:
2025:APHC:41067
THE HONOURABLE SRI JUSTICE CHALLA GUNARANJAN
WRIT PETITION NO: 27157/2025
ORDER:
The present writ petition is filed assailing the action of respondent No.3
invoking the Performance Bank Guarantee vide PBG number
000371124000026 dated 31.07.2024, which is extended upto 15.10.2025 to
be arbitrary, illegal and violation of principles of natural justice.
2. The petitioner has entered into the contract with respondent No.3 on
17.07.2024. The same was awarded in pursuance to tender process initiated
by respondent No.3. The total value of work awarded was for Rs.6,33,63,140/-
as per the work order. The petitioner was supposed to complete the same
within the period of six months. The petitioner was also required to furnish the
performance bank guarantee for a value of Rs.19,00,894/- as condition
precedent. The same has been complied by the petitioner on 31.07.2024
which is in force till 15.10.2025. In the process of execution of contract,
respondent No.3 had issued impugned proceeding dated 25.09.2025 for
encashment of Performance Bank Guarantee.
3. Learned counsel for the petitioner tried to advance the arguments on
merits of the matter. The contract provided for a specific dispute resolution
mechanism of invoking arbitration, the petitioner had already issued notice
dated 01.10.2025 invoking the arbitration clause under the contract. In as
much as the disputes are agreed to be resolved through arbitration, under the
provisions of Arbitration and conciliation Act, 1996, there is a specific remedy
2025:APHC:41067
for securing interim measure by way of Section 9 application. The petitioner is
therefore required to avail such remedy.
4. Learned counsel for respondent Nos.1 to 3 on instructions submitted
that by notice dated 15.09.2025, the contract has been short closed and only
thereafter, the Performance Bank Guarantee was sought to be encashed for
delay in completion of the project.
5. Since, this Court is inclined to relegate the petitioner to prefer remedy of
filing application under Arbitration and Conciliation Act, it is not proposing to
examine the merits or otherwise of the respective contentions. In peculiar
facts and circumstances of the case, considering that due to intervening
vacations, the jurisdictional Court is not functioning, the writ petition is
disposed of by granting petitioner liberty to avail appropriate remedy. The
respondents are directed not to take any coercive steps in pursuance to the
said proceedings for invocation of Bank Guarantee for a period of one week
from today. In case the petitioner prefers appropriate application before
competent Court, the same shall be considered and disposed of inaccordance
with law without being influence by any of observations made herein. No costs.
As a sequel, Miscellaneous Petitions pending, if any, shall stand
dismissed as infructuous.
_______________________
CHALLA GUNARANJAN,J
Dated: 03.10.2025
AG
2025:APHC:41067
THE HONOURABLE SRI JUSTICE CHALLA GUNARANJAN
WRIT PETITION NO: 27157/2025
Dated: 03.10.2025
AG
2025:APHC:41067
