Bank guarantees are the working capital of infrastructure contracting — and renewing them cycle after cycle while an award challenge is pending is expensive. In Consolidated Construction Consortium Ltd v. ONGC, the award debtor tried an inventive route out: deposit the awarded liquidated damages in court under its Section 34 challenge, and ask the court, in the stay application under Section 36(3), to direct release of bank guarantees worth roughly Rs 85 crore. The Delhi High Court declined, drawing a firm boundary around what a stay application can carry.
The architecture of Section 36
Since the 2015 amendments, filing a Section 34 challenge no longer stays enforcement automatically. Section 36(2) requires a separate stay application; Section 36(3) empowers the court to grant stay “subject to such conditions as it may deem fit,” with money awards treated on the principles applicable to money decrees — ordinarily deposit or security. The provision moves in one direction: it conditions the award holder’s right to enforce. What it does not do, the Delhi High Court held, is confer a parallel jurisdiction to grant the award debtor affirmative, mandatory reliefs — such as directing a counterparty to release live bank guarantees.
Stays enforcement of the award, on conditions — deposit, security, undertakings — protecting the award holder.
Grant mandatory directions, such as release of bank guarantees, which belong to enforcement under Section 36(1) read with Order XXI CPC or other proceedings.
The re-agitation problem
A second strand proved equally fatal. The petitioner had already sought the same bank guarantee reliefs in a petition under Section 9 — O.M.P.(I) (COMM) 540/2025 — and had been declined. Justice Gedela held that issues so raised and decided could not be re-agitated under the cover of a Section 36(3) application. The judgment thus polices not only the vertical boundary between stay and enforcement jurisdictions, but the horizontal one against serial applications for the same relief under different labels.
What the Court actually ordered
The application was disallowed insofar as it sought release of the bank guarantees. The petitioner was granted one week to extend the validity of the guarantees — commercial continuity preserved — and the open question of who should ultimately bear the recurring renewal costs, put at about Rs 45 lakh per cycle, was reserved for a later day, with the matter listed on 17 November 2026.
Takeaways for award debtors
For contractors staring at large liquidated damages awards, the decision clarifies the menu. A deposit under Section 36(3) buys a stay of enforcement; it does not unwind the contractual security architecture. Relief against bank guarantees must be pursued where it jurisdictionally lives — in the enforcement proceedings themselves, in a properly framed Section 9 application before or during the challenge (and not a second one on the same facts), or by negotiation reflected in consent directions. Attempting it through the stay application costs time and, as here, invites findings of re-agitation that colour the rest of the litigation.
Practice pointer: when offering a deposit under Section 36(3), spell out in the application precisely what consequence is sought — stay on specified conditions — and keep any prayer touching securities severable. A composite prayer risks the whole application being read as an attempt to outflank Section 36(1).
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
What had the arbitral tribunal awarded?
The tribunal awarded ONGC liquidated damages of Rs 43,14,30,091 against the petitioner-contractor. Three bank guarantees totalling about Rs 85 crore, furnished to secure various contract obligations, remained alive, with renewal costs the petitioner put at roughly Rs 45 lakh per cycle.
What relief did the petitioner seek under Section 36(3)?
It offered to deposit the awarded amount in court and asked that the bank guarantees be released, contending the deposit would fully secure ONGC. The ASG opposed, arguing that Section 36(3) permits only orders staying enforcement — subject to conditions — and that release of securities is a matter for enforcement proceedings under Section 36(1) read with Order XXI of the CPC.
What did the Court hold?
That the scope of Section 36(3) cannot be expanded to include prayers and reliefs which can be sought and enforced under Section 36(1) read with Order XXI CPC. The Court also noted that identical reliefs had been sought and declined earlier in a Section 9 petition, and could not be re-agitated through the stay application. The petitioner was given one week to extend the guarantees.
Is the question of who bears renewal costs settled?
No. The Court expressly left open the question of cost allocation for the bank guarantee renewals, and listed the matter for 17 November 2026. The Section 34 challenge itself also remains pending on its own merits.