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Informist, Friday, Jul. 10, 2026

 

NEW DELHI – The Bombay High Court Friday asked Afcons Gunanusa Joint Venture to keep bank guarantees for INR 3.57 billion alive till Oil and Natural Gas Corp.'s plea challenging the arbitral award on liquidated damages, which went in favour of the joint venture company, is decided. Afcons Gunanusa, a joint venture of Afcons Infrastructure Ltd. and Indonesia's PT Gunanusa Utama Fabricators, will renew, extend, and keep alive all the bank guarantees furnished under the contract, on the same terms and conditions and for the same amounts, the court said.

 

Afcons Gunanusa shall take all necessary steps for renewal and extension of the bank guarantees at least 15 days before their expiry and shall furnish copies of the renewed guarantees to ONGC immediately upon renewal, the court said. Till ONGC's appeal is decided, Afcons Gunanusa shall not take any steps to cancel, discharge, or release the bank guarantees, it directed.

 

Justice Amit Borkar also directed ONGC not to invoke the bank guarantees solely on the basis of this order. The rights and obligations of the parties in relation to invocation of the bank guarantees shall remain subject to the terms of the contract, the bank guarantees, and further orders, if any, passed by the competent court, Justice Borkar said.       

 

"I am, prima facie, of the view that the present matter satisfies the higher standard laid down by the Supreme Court for grant of post-award interim protection," Justice Borkar said. "The present view is reached because, when all the circumstances appearing from the record are considered together, they show an exceptional situation where refusal of interim protection may defeat the purpose of the pending challenge." The Supreme Court had, in an earlier ruling, observed that post-arbitral award interim protection should be granted only in rare and compelling cases. Prima facie, the Bombay High Court said, the present matter appears to satisfy that requirement.

 

In 2008, the joint venture and ONGC had entered into a contract for construction, installation, and commissioning of a project, wherein the completion date was fixed as Apr. 30, 2011. The contract gave ONGC the right to recover liquidated damages if there was delay in completion of the project. Later, the joint venture requested ONGC for an extension to complete the project. It also urged ONGC not to deduct liquidated damages and offered to furnish bank guarantees as security instead. Thereafter, the bank guarantees were extended from time to time.

 

The project was ultimately completed on Oct. 31, 2012. After a dispute between the parties as to who was responsible for the delay, the joint venture company invoked arbitration. In March, the arbitral tribunal dismissed ONGC's claim of liquidated damages against the joint venture and directed it to return the bank guarantees within 10 days. Challenging the arbitral award, ONGC moved the Bombay High Court. ONGC also filed a petition seeking continuation of the bank guarantees.

 

ONGC argued that it cannot be treated as an unsuccessful party because the arbitral tribunal had rejected 12 of the 15 claims made by the joint venture, involving claims of about $114.13 million and INR 1.01 billion, and only partly allowed three claims involving smaller amounts. According to ONGC, the only issue on which it was unsuccessful was its counterclaim relating to liquidated damages. ONGC said the continuation of the bank guarantees would not cause any prejudice to the joint venture, whereas permitting their expiry would seriously prejudice its case. If the bank guarantees are allowed to expire, ONGC may face serious difficulty in securing and enforcing its claim for liquidated damages against the foreign entity, the company said.

 

Friday, shares of ONGC Ltd. ended at INR 244.96 on the National Stock Exchange, up 0.5% from Thursday. Shares of Afcons Infrastructure ended at INR 300.90, slightly up from Thursday.  End  

 

US$1 = INR 95.32

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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