Supreme Court re-emphasises “Status-Quo Protection” of Bank Guarantees Pending Section 9 Proceedings – M/S Jindal Steel & Power Ltd. v. M/S Bansal Infra Projects Pvt. Ltd. (2025 INSC 640)

1. Introduction

The decision of the Supreme Court of India in M/S Jindal Steel and Power Ltd. & Anr. v. M/S Bansal Infra Projects Pvt. Ltd. & Ors., Civil Appeal No. 6413 of 2025 (arising out of SLP (C) No. 21916 of 2024), addresses the delicate intersection between:

Interim reliefs under Section 9 of the Arbitration & Conciliation Act, 1996 (A&C Act);
Appeals under Section 37 of that Act;
Supervisory jurisdiction of High Courts under Article 227 of the Constitution; and
The long-standing judicial reluctance to interfere with the invocation of unconditional bank guarantees.

Although the Supreme Court ultimately refrained from answering all the substantial questions of law framed by the appellants, the judgment is important because it

keeps in place a protective “status-quo” mechanism for bank guarantees until Section 9 petitions are decided,
signals scepticism toward parallel Article 227 proceedings where Section 37 appeals may exist, and
reiterates the limited grounds on which encashment of an unconditional bank guarantee can be restrained.

2. Summary of the Judgment

The Court, speaking through Mahadevan J. (with Pardiwala J. concurring):

Granted leave but dismissed the appeal on merits, keeping the High Court’s interim order of status quo alive.
Directed that:
- The Section 9 petition pending before the Senior Civil Judge (Commercial Court), Cuttack, be decided within eight weeks of the appellants’ arguments.
- The bank guarantee be kept alive (the respondent undertook to extend it further) until that decision.
Left open – expressly and deliberately – the eight substantial questions of law raised (concerning the scope of Section 37, the bar of Order XLIII, use of Article 227, etc.).

Essentially, the Supreme Court preserved the interim protection granted by the High Court, prioritising expedition of the Section 9 proceedings and the parallel arbitration, while postponing any conclusive pronouncement on jurisdictional conflicts.

3. Analysis

3.1 Precedents Cited and Their Influence

Hindustan Construction Co. Ltd. v. State Of Bihar, (1999) 8 SCC 436 – quoted to re-affirm the principle that courts do not interdict invocation of unconditional bank guarantees except on (i) fraud of an egregious nature, or (ii) irretrievable injustice.
A line of cases beginning with U.P. Coop. Federation Ltd. v. Singh Consultants (1988) 1 SCC 174 through Sumac International (1997) 1 SCC 568 – referred to enunciate the same twin‐test doctrine.
No precedent was finally “applied” to decide the Section 37 vs. Article 227 debate because the Court chose to keep that issue open, but the appeal implicitly relies on the legislative scheme in SBP & Co. v. Patel Engg. and Deep Industries v. ONGC which caution against indiscriminate Article 227 interference in arbitral matters.

3.2 Legal Reasoning Adopted

Nature of High Court’s order – The Supreme Court characterised the High Court order as a “mere interim measure intended to protect the interests of both parties”. Because the respondent had voluntarily extended the bank guarantee, no material prejudice was caused to the appellants.
Equity over technicality – Although substantial technical objections (availability of Section 37 appeal, bar of Order XLIII Rule 1, etc.) were raised, the Court preferred to advance the arbitral process rather than become entangled in procedural wrangles. Accordingly, all legal issues were left sub judice.
Emphasis on expedition – The Commercial Court was ordered to dispose of the Section 9 application within eight weeks, reflecting the 2015 amendments’ ethos of speed in commercial litigation.

3.3 Impact on Future Cases

Even though the Court avoided a doctrinal ruling, the judgment is likely to influence practice in three respects:

Practical template for status-quo orders – High Courts may rely on this case as authority to maintain a neutral status-quo of bank guarantees where (a) Section 9 petitions are already on foot and (b) the beneficiary suffers no immediate prejudice because the guarantee is extended. This balances commercial urgency with due process.
Re-ignition of Section 37 debate – By expressly leaving the questions open, the Court has signalled that a definitive ruling will come in a larger bench or more appropriate matter. Until then, litigants will continue to argue both ways on the appealability of interim orders refusing ex parte relief in Section 9 matters.
Encouragement to arbitral forums – The decision aligns with the legislative policy of minimal court intervention. Parties are nudged to argue Section 9 fully and then proceed in arbitration rather than proliferate writs.

4. Complex Concepts Simplified

Bank Guarantee – A contract independent of the underlying construction contract. The issuing bank undertakes to pay the beneficiary on demand, without demur, provided the invocation is as per guarantee terms.
Section 9 (A&C Act) – Allows courts to grant interim protective measures before, during, or after arbitral proceedings. Typical measures include injunctions, asset freezing, security deposits, etc.
Order XXXIX Rule 3 CPC – Permits a court to grant an ex parte interim injunction in urgent cases, but the applicant must (a) explain reasons for non-issuance of notice, and (b) serve pleadings & documents on the other side immediately after the order.
Section 37(1)(b) (A&C Act) – Provides a statutory appeal against “an order granting or refusing to grant any measure under Section 9”. Whether refusal of ex parte relief constitutes such an order is the contested issue here.
Article 227 (Constitution) – Confers “supervisory” jurisdiction on High Courts over all courts and tribunals within their territorial limits, meant to correct grave jurisdictional errors, not to act as a routine appellate forum.

5. Conclusion

The Supreme Court’s ruling in Jindal Steel v. Bansal Infra abstains from creating an authoritative precedent on the contested overlap between Section 37 appeals and Article 227 writs. Yet, it meaningfully contributes to commercial jurisprudence by:

Prioritising the swift determination of Section 9 applications and arbitral claims over procedural manoeuvres;
Affirming the minimal-interference doctrine concerning unconditional bank guarantees while simultaneously acknowledging rare circumstances that justify interim restraint;
Leaving the path open for a future definitive pronouncement on whether refusal of ex parte injunctions in Section 9 petitions is appealable under Section 37.

For practitioners, the immediate takeaway is strategic: where a bank guarantee is at stake and arbitration is contemplated or commenced, seek a consensual extension of the guarantee and press for an expedited Section 9 hearing rather than proliferating writ or revision petitions. Conversely, beneficiaries should be prepared for such status-quo orders but can insist on strict timelines for disposal to safeguard commercial interests.