HSA | Dispute Resolution & Arbitration Monthly Update | June 2025

In The Supreme Court of India M/S Jindal Steel and Power Ltd. & Anr. (Appellant) V/S. M/S Bansal Infra Projects Pvt. Ltd. & Others (Respondent)

2025 SCC OnLine SC 1041

Background facts 

• M/s Jindal Steel and Power Ltd. ("Appellant") issued a work order on 24.01.2022 to M/s Bansal Infra Projects Pvt. Ltd. ("Respondent No. 1") for constructing 400 flats at Jindal Nagar, valued at Rs. 43,99,46,924.13, with an advance of Rs. 3,73,95,490/- secured by a bank guarantee dated 08.03.2022.
• The project, initially due by September 30, 2022, was extended to 30.06.2023 and later to 30.09.2023 with a condition that retention money would be forfeited if not completed.
• The Appellant terminated the work order on July 7, 2023, citing Respondent No. 1's poor performance, quality issues, and non-compliance with contract terms. Subsequently, on March 25, 2024, the Appellant demanded Rs. 4,12,54,904/- by 30.04.2024 for unadjusted advances to and encash the bank guarantee if unpaid.
• Respondent No. 1 filed Arbitration Petition No. 14 of 2024 under Section 9 of the Arbitration and Conciliation Act, 1996, before the Commercial Court, Cuttack, to restrain termination and encashment, along with an ex parte injunction application.
• The Commercial Court, on April 30, 2024, rejected the ex parte injunction, requiring a hearing of the parties, and set a date for appearance on 25.06.2024.
• Respondent No. 1 challenged this order via a writ petition under Article 227 before the Hon'ble Orissa High Court, which issued a status quo order on May 20, 2024 and, on August 20, 2024, directed the bank guarantee's extension to December 31, 2024 and conclusion of proceedings within six weeks.
• Respondent No. 1 invoked arbitration on May 13, 2024; an Arbitral Tribunal was formed on November 6, 2024, with a hearing held on 03.01.2025.
• The Appellant appealed to the Hon'ble Supreme Court, arguing the Hon'ble High Court's order was appealable under Section 37 and its Article 227 intervention was improper.
• Respondent No. 1 maintained the Commercial Court's order was an interlocutory one, and thus not appealable, and extended the bank guarantee to June 30, 2025 to show good faith.

Issue(s) at hand?

• Whether the Hon'ble High Court could decide the matter on merits under Article 227 or interfere with an unconditional bank guarantee's encashment.
• Whether the Commercial Court's rejection of the ex parte injunction was an order under Section 9 of the Arbitration and Concilliation Act 1996 ("Act"), appealable under Section 37(1)(b) of the Act, making the Article 227 petition inappropriate.
• Whether Respondent No.1's simultaneous pursuit of court remedies and arbitration violated the Act's principle of minimal judicial intervention.
• Whether the Commercial Court's order under Order XXXIX Rule 3 CPC was an interlocutory order, not appealable under Section 37 or CPC, thus justifying recourse to Article 227.

Findings of the Court

• The Court noted the Appellant's claim that an interim order under Order XXXIX Rule 3 CPC in a Section 9 petition is an order under Section 9, appealable under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996, but reserved this issue for future adjudication.
• The Court acknowledged the Appellant's argument that the Hon'ble High Court's use of Article 227 jurisdiction was improper due to an available appeal under Section 37(1)(b) against the Commercial Court's 30.04.2024 order, but did not rule on the remedy's applicability.
• The Court observed Respondent No. 1's simultaneous arbitration initiation on 13.05.2024 and Article 227 writ petition, which Appellant claimed delayed arbitration, but refrained from ruling on the permissibility of such parallel proceedings.
• The Court examined whether an interlocutory order rejecting an ex parte stay under Order XXXIX Rule 3 CPC in a Section 9 petition is appealable under Section 37, barring Article 227 recourse, or non-appealable under Order XLIII Rule 1(r) and Section 104 CPC, allowing Article 227 challenge, but left this unresolved.
• The Court found the High Court's August 20, 2024 order, restraining bank guarantee encashment, to be an interim measure to protect both parties, without addressing the validity of Article 227 jurisdiction.
• The Court held that maintaining the status quo on the bank guarantee was necessary until the Section 9 petition's disposal, given Respondent No. 1's extension to June 30, 2025.
• The Court directed the Commercial Court, Cuttack, to conclude Arbitration Petition No. 14 of 2024 within eight weeks, keeping the bank guarantee operative, subject to the petition's outcome, without prejudicing Appellant' contentions.
• The Court noted the Section 9 petition was partly heard, with Respondent No. 1 and No. 2's arguments concluded, and arbitration was progressing, with a Tribunal formed on November 6, 2024 and a hearing on January 3, 2025, causing no immediate prejudice to Appellant.

Vijaya Bank & Anr. Vs. Prashant B Narnaware

2025 SCC OnLine SC 1107

Background facts

• The Respondent was appointed as a Senior Manager in the Appellant (Bank) pursuant to a recruitment process that expressly required selected candidates to serve a minimum of three years or, in the alternative, pay INR 2 lakhs as liquidated damages. This stipulation was incorporated into both the recruitment notification and Clause 11(k) of the appointment letter. The respondent accepted these terms, joined the post, and executed an indemnity bond accordingly. However, he resigned before the three-year period elapsed and, though he paid the stipulated amount under protest, challenged the clause before the High Court. The High Court ruled the clause void under Articles 14 and 19(1)(g) of the Constitution and Sections 23 and 27 of the Contract Act. The Bank appealed to the Supreme Court.

Issue(s) at hand?

• Whether Clause 11(k) amounted to a restraint of trade under Section 27 of the Indian Contract Act, 1872.
• Whether the Clause was opposed to public policy under Section 23 of the Contract Act and thereby violative of Articles 14 and 19 of the Constitution.

Findings of the Court

• The Supreme Court upheld the validity of Clause 11(k), reiterating the established position that negative covenants operating during the subsistence of an employment contract do not amount to restraint of trade under Section 27. Drawing on authoritative precedents such as Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co 1967 SCC OnLine SC 72 and Superintendence Company (P) Ltd. v. Krishan Murgai (1981) 2 SCC 246, the Court distinguished between covenants operative during employment, which does not put a clog on the freedom of a contracting party to trade or employment, and those extending beyond termination, which may be struck down.
• Clause 11(k) did not restrict the respondent's ability to seek future employment; it merely imposed a financial consequence for failing to complete the agreed term of service. The Court clarified that such covenants, which aim to preserve institutional continuity and mitigate attrition-related costs, are in furtherance of contractual employment and not a bar to trade or profession.
• Apropos public policy, the Court rejected the contention that the clause was unconscionable merely because it was part of a standard-form contract. It noted that public sector banks operate under constitutional obligations to ensure transparent and merit-based recruitment. The Apex Court observed that an untimely resignation would require the Bank to undertake a prolix and expensive recruitment process involving open advertisement, fair competitive procedure lest the appointment falls foul of the constitutional mandate under Articles 14 and 16. Acknowledging the administrative and financial strain caused by untimely resignations, especially in institutions that cannot resort to private hiring mechanisms, the imposition of liquidated damages for premature resignation was found to be neither arbitrary nor excessive by the Court. The clause was therefore held to be a legitimate safeguard, not an instrument of unjust enrichment.
• The Court also clarified that the decision of the Karnataka High Court in W.A. No. 2736/2009 K.Y Venkatesh Kumar v. BEML Ltd. was inapplicable, as that case involved restrictions impeding future employability, an element absent in the present matter. It cautioned against applying precedents without a careful appreciation of the factual matrix.
• Accordingly, the Supreme Court, setting aside the order of the High Court, allowed the instant Appeal and held that the restrictive covenant in Clause 11(k) of the appointment letter does not amount to restraint of trade nor is it opposed to public policy.

M/s J Fibre Corporation V. Maruti Harishchandra Amrute and Ors.

Writ Petition No. 10454 of 2024

Background facts

• M/s J Fibre Corporation (Employer/Petitioner) is a partnership firm and engaged in manufacturing of nonwoven fabric, nylon, monofilament yarn and drinking straw. Mr. Maruti Harishchandra Amrute (Employee/Respondent No.1) was employed as Shift Supervisor with the Employer since April 01, 2011.
• On May 17, 2018, the Employer terminated the services of Employee on the grounds of costcutting measures. Further, the Employer stated that the Employee was the most junior out of the 3 employees performing similar functions and was therefore considered for termination.
• A termination letter and a cheque for 1 months' notice pay were also issued on the same day. While the Employee initially declined to accept the termination letter, he acknowledged the letter 2 days later but returned the cheque.
• Subsequently, the Employee raised a demand for reinstatement and initiated conciliation proceedings. Upon failure of conciliation, the matter was referred to the 3rd Labour Court, Thane (Labour Court). Vide an award dated November 2, 2022, the Labour Court directed reinstatement with full back wages and continuity of service (Award).
• Aggrieved by the Award, the Employer filed a Writ Petition before the Bombay High Court (HC) on the grounds that the direction for reinstatement was not sustainable as the Employee had already reached the age of retirement by the time of Award, and that termination had been carried out in accordance with due process.

Issue(s) at hand?

• Whether the Labour Court was justified in directing reinstatement when the Employee had reached the age of retirement by the time Award was passed?
• Whether the termination was legally valid? If not, what would be the appropriate relief?

Findings of the Court

• At the outset, the HC observed that the Employee's permanent account number (PAN) card reflected his date of birth as June 24, 1961. Based on this, the HC noted that the Employee had attained 60 years of age by June 24, 2021. Since the Labour Court's Award was passed in November 2022 i.e. after the Employee had reached the retirement age, the HC held that reinstatement was not a legally tenable remedy in such circumstances.
• Further, the HC delved in the issue of the status of Employee as 'workman' within the meaning of Section 2(s) of the Industrial Disputes Act (ID Act). The HC concurred with the decision of Labour Court which conducted factual inquiry into the duties and responsibilities performed by the Employee. The HC held that predominant work of the Employee was of technical nature and the entries made in the reports written by him could at best be treated as clerical work and not supervisory work.
• With regards to the legality of termination, the HC noted that the Employer had failed to comply with the conditions under Section 25F of the Industrial Disputes Act, 1957 (ID Act). The HC specifically observed that the retrenchment compensation was not paid at the time of termination but was deposited into the Employee's bank account nearly 6 months later. The HC further noted that the Employer failed to produce any seniority list to substantiate its claim that the Employee was the most junior among the 3 employees in same category.
• In view of the above, while upholding the Labour Court's finding that the termination was procedurally defective, the HC modified the relief granted and directed payment of monetary compensation in lieu of reinstatement. The amount was quantified at INR 3,58,073.

In The High Court of Delhi Vedanta Limited (Appellant) Vs. Shreeji Shipping (Respondent)

2025 SCC OnLine SC 1041

Background facts 

• Vedanta Limited ("Appellant") entered into a contract with Shreeji Shipping ("Respondent") for the transportation of coal. The coal was to be transported from Kandla Port to Vedanta's Bhachau Plant and from Bedi Port to its Khambhalia Plant, both located in Gujarat. The contractual terms were set out in two work orders dated March 22, 2022, and March 29, 2022.
• Each work order contained an arbitration clause (Clause 21), which provided for dispute resolution through arbitration under the Arbitration and Conciliation Act, 1996 ("Act"). The clause stated that arbitration could be held either in Bhuj or in New Delhi. Disputes later arose between the parties regarding alleged deficiencies in performance and pending payments, and accordingly the Appellant invoked Clause 21 and initiated arbitration proceedings by nominating a sole arbitrator.
• However, the Respondent did not agree to the nomination, resulting in a deadlock in the appointment process. The Appellant then filed a petition before the Hon'ble Delhi High Court under Section 11(6) of the Act, seeking the Hon'ble Court's intervention for appointment of an arbitrator.
• The Respondent opposed the petition on two grounds: firstly, that no arbitrable dispute existed, and secondly, that the Hon'ble Delhi High Court lacked territorial jurisdiction since the arbitration clause permitted arbitration in either Bhuj or New Delhi.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.