Synopsis

The petitioner (contractor) furnished a performance bank guarantee (PBG) of ₹9.30 crores to the DDA for a hotel project. DDA attempted to invoke the PBG for alleged delay. The contractor obtained interim protection, and during arbitration, the DDA was allowed to encash the PBG but with the condition that the amount be kept in a fixed deposit (FDR), with the entire amount (principal + interest) to abide by the outcome. The arbitrator held that DDA was not entitled to invoke the PBG at all, and directed release of the principal amount to the contractor, but denied the interest accrued on the FDR. The Delhi High Court, in a Section 34 petition, set aside that part of the award, holding that once it was determined that the PBG could not have been invoked, the interest accrued on the FDR partakes of the character of the principal and must also be released to the contractor. The court found the arbitrator’s view patently illegal and perverse, and modified the award accordingly.

Court: High Court of Delhi at New Delhi

Coram: Hon’ble Mr. Justice Avneesh Jhingan (Single Judge)

Date of Judgment: 5th May 2026

Citation: O.M.P. (COMM) 349/2023 (2026:DHC:3777)

Core Law: Arbitration and Conciliation Act, 1996 – Sections 34 (setting aside award), 31(7) (interest), 17 (interim measures)

1. Heading of the judgment

High court of delhi at new delhi

O.m.p. (comm) 349 of 2023

Jaksons developers (p) ltd (petitioner) vs. Delhi development authority (respondent)

Coram: hon’ble mr. justice avneesh jhingan

Judgment reserved on: 30th april, 2026; pronounced on: 5th may, 2026

2. Legal framework

Major laws and provisions involved:

• Arbitration and conciliation ac

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