M S Lakshmi Infrastructure And Developers India Private Limited vs National Highways Authority Of India

Mini Pushkarna, J

The present petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") seeking stay of the Notice of Intention to Terminate dated 10th March, 2026, issued by the respondent with respect to the Engineering, Procurement and Construction Contract ("EPC Contract") dated 27th October, 2022.

There is a further prayer for seeking stay on the invocation of two Bank Guarantees for performance security dated 14th October, 2022 for an amount of Rs. 16,00,03,841/- and Rs. 2,61,05,730/- respectively, as well as a Surety Bond issued on an amount of Rs. 29,33,40,375/-, submitted by the petitioner to the respondent.

The aforementioned EPC Contract had been executed between the parties with respect to "6 laning of the existing 4 lane stretch from Kalkallu at Km. 454.000 to Gundla Pochanpally at Km. 471.000 on Nagpur- Hyderabad Section of NH-44 in the State of Telangana under Bharatmala Pariyojana". As per the petition, the work under the said EPC Contract could not be completed in time due to defaults attributable to the respondent, such as, non-availability of vacant access to the Right of Way ("ROW"), non-handing over of balance lands, encumbrances in handed over lands, change of scope in the work, delay in permission for tree felling from the Forest Authorities, etc.

Pursuant to these disputes, the petitioner and the respondent entered into multiple settlement agreements. However, despite the settlement agreements, the respondent insisted the petitioner to open an Escrow Account with respect to the project in question, which resulted in delay of nearly two months in completion of the project.

Thereafter, as per the case of the petitioner, the respondent suddenly issued the aforesaid Notice of Intention to Terminate the EPC Contract between the parties, thereby, frustrating the efforts of the petitioner to expedite the project. Thus, disputes have arisen between the parties.

This Court further notes that during the pendency of the present petition, an application being I.A. 9167/2026 was moved on behalf of the petitioner, wherein, it sought stay on the invocation of the Bank Guarantees and the Surety Bond by the respondent vide letter dated 01st April, 2026.

This Court vide order dated 01st April, 2026, i.e., the first day on which the present matter was heard, had recorded the statement of the learned counsel appearing for the respondent that no steps had been taken by the respondent for invocation of the Bank Guarantees or the Surety Bond, as on date.

Subsequently, the petitioner received a letter dated 01st April, 2026 from the respondent, wherein, the respondent indicated its intention to invoke the Bank Guarantees.

This Court notes that vide order dated 06th April, 2026, this Court had recorded the statement made by learned counsel appearing for the respondent that only a letter had been written to the petitioner with respect to intention of the respondent to invoke the Bank Guarantees, however, no letter had been written to the bank to invoke the said Bank Guarantees.

Today, learned counsel appearing for the respondent confirms that no letter as such, has been written by the respondent to the bank for invocation of Bank Guarantees in question, till date. She submits that this course of action was taken by the respondent in view of the matter being sub judice before this Court.

At this stage, learned Senior Counsel appearing for the petitioner submits that after receipt of the letter from the respondent, the petitioner had already started removing the plant and machinery from the site in question.

He further submits that joint measurement of the work is being carried out by the parties, and in view of the same, the petitioner shall not remove any further plant and machinery from the site in question.

Learned Senior Counsel appearing for the petitioner further submits that the Bank Guarantees have been extended till 13th July, 2026, while the Surety Bond is valid till 25th June, 2026.

He further submits that in view of the Arbitration Clause between the parties, the petitioner as well as the respondent, have already nominated their nominee Arbitrators.

Learned counsel appearing for the respondent confirms the said fact. 16. This Court notes that in the present case, the Arbitration Clause, i.e., Clause 26.3 as contained in the EPC Contract, along with Clause 26.2 therein, read as under:

"xxx xxx xxx

xxx xxx xxx"

Perusal of the aforesaid Clause shows that there exists a valid Arbitration Agreement between the parties, which stipulates that the arbitration is to be conducted under the aegis of the Society for Affordable Resolution of Disputes ("SAROD"). Further, the venue of arbitration shall be Delhi or a place selected by the governing body of SAROD. The arbitration is to be conducted by an Arbitral Tribunal consisting of three Arbitrators.

In view of the aforesaid, this Court is satisfied that there are disputes between the parties and there is a valid Arbitration Clause, and accordingly, the disputes are to be adjudicated by way of referring parties to arbitral proceedings.

Accordingly, in view of the consent of the parties and submissions made before this Court, the following directions are issued:

i. Since the petitioner and the respondent have nominated their nominee Arbitrators, the said nominee Arbitrators are requested to nominate the third Arbitrator who shall act as a Presiding Arbitrator.

ii. The Arbitral Tribunal is requested to furnish a declaration in terms of Section 12 of the Arbitration Act prior to entering into the reference.

iii. The arbitration proceedings shall be conducted under the aegis and Rules of SAROD.

iv. It shall be open to the respondent to raise counter-claims, if any, in arbitration proceedings.

v. It is made clear that all the rights and contentions of the parties, including, as to the arbitrability of any of the claim, any other preliminary objection, as well as claims/counter-claims and merits of the dispute of either of the parties, are left open for adjudication by the learned Arbitral Tribunal.

vi. Considering the fact that the nominee Arbitrators have already been nominated by both the parties and the arbitration process has been set into motion, this Court is of the view that the present petition under Section 9 of the Arbitration Act can be converted into an application under Section 17 of the Arbitration Act, to be taken up and decided by the learned Arbitral Tribunal on merits.

vii. Further, considering the facts and circumstances of the present case, it is directed that the respondent shall not encash the Bank Guarantees as well as the Surety Bond for a period of six weeks, so that the application of the petitioner under Section 17 of the Arbitration Act, can be considered by the learned Arbitral Tribunal.

viii. The petitioner shall continue to keep Bank Guarantee/Surety Bond alive till the application under Section 17 of the Arbitration Act is finally decided by the learned Arbitral Tribunal.

ix. The petitioner shall not remove the plant and machinery from the site in question.

It is further clarified that this Court has not expressed any opinion on the merits of the case, which shall be decided by the learned Arbitral Tribunal.

With the aforesaid directions, the present petition, along with the pending applications, stand disposed of.

Dasti under signatures of Court Master.