Delhi High Court Appoints Former SC Judge Arun Mishra Arbitrator In NHIDCL Contract Dispute
The Delhi High Court on May 19 dismissed an appeal filed by National Highways Infrastructure Development Corporation Ltd. (NHIDCL) against an order restraining the encashment of bank guarantees furnished by a contractor.
With the consent of both sides, the court also appointed former Supreme Court judge Justice Arun Mishra as the sole arbitrator to adjudicate disputes arising from a highway project in Assam.
A division bench of Justices Dinesh Mehta and Vinod Kumar upheld a February 24 order passed by a single judge in favour of Sadhguru Engineers and Allied Services Pvt. Ltd., which had been awarded the balance work for four-laning of National Highway-37 on the Jorhat-Jhanji stretch.
The bench observed:
“The opening part of the bank guarantees in question may give an impression that the same are unconditional but if we peruse the complete guarantees, it clearly suggests that such unconditional bank guarantees can be invoked only in existence of certain situations or contingencies. According to us, unless the pre-defined contingencies in the bank guarantees are in existence, the appellant cannot justifiably invoke the bank guarantees.”
Sadhguru Engineers and Allied Services Pvt. Ltd. (Sadhguru) was awarded a contract of four-laning of NH-37 by NHIDCL. Sadhguru furnished two performance bank guarantees and one mobilization BGs drawn upon SBI Guwhati aggregating Rs.8,63,46,694. NHIDCL alleged that Sadhguru was lax in performance and failed to complete work on time.
By notice dated 14 January 2026, NHIDCL threatened to encash the BGs to recover Rs. 8.496 crores comprising – Rs. 2.28 crores towards undisputed vendor dues and Rs. 6.216 crore toward recovery of funds released on assurances not honoured (Notice).
NHIDCL also issued the termination notice dated January 31 2026. Sadhguru filed an application under Section 9, ACA seeking injunction against encashment. The Single Judge granted the stay on 24 February 2026 holding the BGs to be conditional (Impugned Order). Aggrieved, NHIDCL preferred the present appeal under Section 37, ACA.
NHIDCL contended that the BGs were unconditional and irrevocable on their face. The relevant clause of the BG read that they were payable on “mere first written demand, without any demur, reservation, contest or protest.” It was argued that the Single Judge erred in treating unconditional BGs as conditional so the very premise of the Impugned Order was faulty and liable to be set aside.
On the other hand, Sadhguru argued that since the injunction had already continued for 3 months, the better course would be to appoint an arbitrator and let interim relief be decided by him. It was submitted that the Notice invoked BGs for reasons unconnected to contractual performance. Rs. 2.28 crore were sought against undisputed vendor dues and Rs. 6.216 were towards recovery of funds released on assurance which were not honoured by the contractor. Sadhguru contended neither the contract terms nor the PBGs permitted encashment in furtherance of such claims.
The court analyzed the text of the BG and observed that NHIDCL could have sought invocation of bank guarantees in case the contractor committed a default in the performance of all or any of its obligations under the contract.
The court held that while the initial paragraphs suggested that the BGs were unconditional, a complete reading of the text of BG made it certain conditions were a precursor to its encashment.
The Court also read the Notice and concluded that both the purported claims did not relate to failure to perform contractual obligations or default. Thus, the contingencies provided in the bank guarantees did not exist. Further, the obligations or purported dues did not directly relate to obligations under and in accordance with the contract which was a precursor for invocation of the BGs.
The Court held that the invocation of BGs was not justified and there was no error in the Impugned Order. The Court dismissed the appeal and appointed Justice Arun Mishra as the Sole Arbitrator to adjudicate the disputes between the parties.
For Petitioner - Rajshekhar Rao, Sr. Adv with Gopal Singh, Subham Janghu, Yoshit Jain & Ananya Diya
For Respondent – Amarjit Singh Chandhiok, Sr. Adv. Mr. Srisatya Mohanty & Ms. Purva Kohli, Advs. for R-1, Mr. Jatin Sehgal, Mr. Ashish Garg & Mr. Shubham Aggarwal, Advs. For R-4.