Delhi High Court Partially Sets Aside Arbitral Award, Orders Refund of Performance Bank Guarantee Proceeds

Case Snapshot

Case Name: ISGEC Heavy Engineering Limited v. Prakash Industries Limited

Citation / Neutral Citation: CNR No. DLHC010518952023

High Court: High Court of Delhi

Bench: Hon'ble Mr. Justice Avneesh Jhingan

Date of Judgment: 8th September, 2026

Area of Law: Arbitration Law, Section 34 of Arbitration and Conciliation Act, 1996, Performance Bank Guarantee

Judgment Headline

Court sets aside award rejecting PBG refund claim; arbitrator ignored contractual exclusion clause.

The Judgment in One Line

Delhi High Court partially sets aside arbitral award, directing refund of PBG proceeds as the respondent failed to prove corresponding loss.

Why This Judgment Matters

This judgment reinforces that an arbitral tribunal cannot travel beyond the terms of the contract. It establishes that while invocation of a Performance Bank Guarantee may be valid, appropriation of its proceeds requires proof of corresponding loss or damage. The ruling clarifies the interplay between PBG clauses and contractual exclusion clauses—a party cannot retain PBG proceeds for losses that are excluded under the contract (e.g., loss of production, profit, or conseque

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