The Delhi High Court has held KRR Infra Projects Pvt. Ltd., its Director (Projects) B. Vasu, and Director Kunam Raghava Reddy guilty of civil contempt for permitting bank guarantees to expire despite obtaining interim protection against their invocation on the express condition that the guarantees would be kept alive. The Court held that a party which secures equitable relief from the Court on the strength of an undertaking cannot subsequently disregard the very condition upon which such relief was granted. Mere assertions of financial hardship, unsupported by evidence of genuine efforts to comply with the Court’s directions, cannot absolve a party from contempt liability.
Background
The dispute arose out of two construction contracts awarded by the Union of India through the Directorate General Married Accommodation Project to KRR Infra Projects Pvt. Ltd. for construction of residential accommodation projects in Kolkata. Pursuant to the contracts, KRR furnished various performance and mobilisation advance bank guarantees amounting to several crores of rupees. Subsequently, disputes arose regarding performance of the contracts and the Union of India initiated steps for invocation and encashment of the guarantees.
Aggrieved by the proposed invocation of the guarantees, KRR approached the Delhi High Court by filing petitions under Section 9 of the Arbitration and Conciliation Act, 1996 seeking restraint against encashment of the guarantees. During the pendency of those proceedings, it was brought to the notice of the Court that certain guarantees were nearing expiry. On 15.02.2013, the Court continued the interim protection against invocation of the guarantees conditional upon the guarantees being kept alive till disposal of the petitions. The order recorded the statement on behalf of KRR that steps would be taken to ensure that they remained alive.
Despite the aforesaid undertaking, the guarantees were not renewed and eventually expired. According to the Union of India, it refrained from invoking the guarantees solely because of the protection granted by the Court and the assurance recorded from KRR. It was therefore contended that allowing the guarantees to lapse amounted to deliberate and ‘wilful disobedience’ of the Court’s order and hence sought punishment for civil contempt.
Defence Raised by KRR
KRR sought to justify the lapse of the guarantees by contending that the company was undergoing severe financial distress. It was argued that its accounts had been classified as Non-Performing Assets and that several projects had been terminated during the relevant period. KRR further contended that immediately after the Court’s order, a request had been made to the State Bank of India seeking renewal of the guarantees. However, the bank declined the request in view of the company’s deteriorating financial condition. According to KRR, the inability to renew the guarantees was therefore beyond its control and did not amount to wilful disobedience.
Principles Governing Civil Contempt
Before examining the facts, the Court reiterated that every breach of a court order does not automatically amount to civil contempt. Referring to Section 2(b) of the Contempt of Courts Act, the Court observed that the essence of civil contempt lies in “wilful disobedience”. Therefore, the Court was required to determine not merely whether the guarantees had expired, but whether their expiry resulted from a deliberate and conscious disregard of the Court’s directions. While the existence of the order and non-compliance were undisputed, the central question was whether the conduct of the respondents disclosed wilful disregard of the Court’s directions.
Financial Hardship Not Accepted as a Defence
The Court was not persuaded by KRR’s reliance on financial difficulties. It observed that apart from producing a single letter requesting renewal of the guarantees, KRR had failed to place any material demonstrating meaningful efforts to comply with the Court’s order. There was no evidence of follow-up communications with the bank, attempts to provide alternative security, efforts to arrange substitute guarantees, or attempts to obtain financial assistance from other sources.
The Court held that where interim protection had been granted solely because the guarantees were to remain alive, a corresponding obligation arose on the part of KRR to take all necessary steps to ensure compliance. Mere forwarding of one request letter could not be treated as sufficient compliance with an undertaking recorded before the Court.
The Court further noted that the plea of financial incapacity was not supported by convincing evidence. The record indicated that KRR continued to be engaged in multiple infrastructure projects and was raising finances from various sources. The Court also noted that State Bank of India was not the only financial institution with which KRR maintained banking relations. These circumstances weakened the contention that the company was completely incapable of arranging renewal of the guarantees.
Key Takeaway
The judgment reinforces that a party obtaining interim relief on the basis of an undertaking to the Court assumes a continuing obligation to honour that undertaking. Where the benefit of judicial protection is enjoyed but the corresponding obligation is ignored without genuine efforts at compliance, the resulting breach may amount to wilful disobedience.
Case details
Case Name: KRR Infra Project Pvt Ltd vs Union of India & Ors.
Court: Delhi High Court
Case No.: OMP 1150/2012 & OMP 1151/2012
Neutral Citation: 2026:DHC:4842
Date of Judgement: 29 May 2026
Coram: Justice Harish Vaidhyanathan Shankar