Few interim applications fail as predictably as those seeking to stop a bank guarantee — and yet the attempts persist, because the stakes are immediate and the exceptions tantalising. On 27 October 2026, in M/s Onycon Infrastructure v. Virtuaal Pareng Hydro Private Limited & Anr., O.M.P.(I) (COMM) 289/2026, Justice Tushar Rao Gedela of the Delhi High Court dismissed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 to restrain the invocation of two YES Bank guarantees — of Rs. 2,53,80,000 and Rs. 1,78,20,000 — furnished against mobilisation advance for civil works on a hydroelectric project in Arunachal Pradesh. The judgment walks through the settled law and adds a pointed warning about candour in Section 9 pleadings.
The contracts and the collision
The petitioner held a civil works contract of November 2024, valued at over Rs. 86 crore, for the Pareng Hydro Electric Project. Two bank guarantees secured the mobilisation advance. A separate framework agreement of January 2025 governed the supply of cement and steel. When relations deteriorated, a legal notice of June 2026 demanded roughly Rs. 3.71 crore under the framework agreement — and the petitioner, anticipating encashment of the guarantees, moved the High Court under Section 9, contending that guarantees furnished under one contract were being weaponised for claims under another. It also invoked the arbitration clause in the alternative.
The respondent's answer was orthodox: the guarantees belonged to the civil works contract alone, were in substance unconditional given their non-obstante language, and the petitioner had suppressed correspondence recording its defaults.
How the court reasoned
The court closed with a disclosure warning: the petitioner had not placed material correspondence on record, and Section 9 petitioners must include all material documents. The petition was dismissed without costs and interim protection vacated.
The doctrine, compressed
Bank guarantee law balances two interests. Commerce requires that guarantees function as cash — a beneficiary who bargained for an on-demand instrument must not be forced to litigate before payment. Equity intervenes only where the invocation is itself vitiated: established fraud known to the bank, irretrievable injustice, or a conditional guarantee whose triggering conditions are unmet. The third exception is the only one that regularly rewards close drafting analysis, and this judgment shows its mechanics: the court reads the guarantee's conditions, checks them prima facie against the record, and stops there. What it will not do is convert the enquiry into an audit of the underlying contract.
The disclosure holding deserves equal attention. Interim relief moves fast and often ex parte; the jurisdiction survives on candour. A Section 9 petition that files the contract but omits the default notices invites exactly the response delivered here.
Practical pointers
Before furnishing a guarantee, negotiate its conditions consciously: every condition is a potential ground to resist invocation, and every non-obstante clause erodes one.
When resisting encashment, plead within the recognised exceptions and tie the argument to the guarantee's text; underlying-contract grievances belong in arbitration.
File the complete correspondence, favourable and otherwise; suppression converts a weak petition into a dismissed one.
Beneficiaries should invoke strictly in the guarantee's language and under the correct contract — a mismatched invocation is the one self-inflicted wound this field still sees.
Frequently Asked Questions
When will a court restrain the invocation of a bank guarantee?
Only in narrow, settled exceptions: egregious fraud of which the bank has notice, irretrievable injustice of the kind that cannot be compensated later, and — for conditional guarantees — non-fulfilment of the conditions on which the right to invoke depends. Commercial disputes under the underlying contract are not a ground, because the guarantee is an independent contract between the bank and the beneficiary.
What was the petitioner's main argument, and why did it fail?
That the invocation really sought dues under a separate framework agreement for supply of cement and steel, to which the guarantees had no connection. The court examined the notices and found the invocation was purely under the civil works contract that the guarantees secured; the separate demand notice did not convert the invocation into one under the other agreement.
Does it matter whether a guarantee is conditional or unconditional?
Yes. For a conditional guarantee, the beneficiary must show the conditions are met. Here the court found the first condition — commencement of works — satisfied, and on the second, prima facie material of contractual default in the correspondence. Once the conditions prima facie stood fulfilled, the bank was bound to honour its commitment.
What did the court say about disclosure in Section 9 petitions?
It criticised the petitioner for withholding material correspondence and cautioned that parties seeking interim relief must place all material documents before the court. Suppression is not a side issue: interim jurisdiction is equitable, and a party that edits the record risks dismissal on that ground alone.