Madras High Court Halts Foxconn Subsidiary Project Amid Arbitration Dispute
- Kaustav Chowdhury
- Jun 26
- 3 min read
The Madras High Court has halted certain project works of Yuzhan Technology India, a subsidiary of Foxconn, amid a contract dispute with BNR Infrastructure Projects. The Court directed that the respondent cannot claim to continue work either by itself or through any third parties until June 29, 2026. The order was passed under the Arbitration and Conciliation Act, 1996, following BNR's application seeking interim injunctive relief.
Background of the Dispute
BNR Infrastructure Projects and Yuzhan Technology entered into a contract on October 29, 2025, following which a letter of award was issued by Yuzhan in favour of BNR. The agreement concerned infrastructure work at Yuzhan's Tamil Nadu facility. However, disputes arose over delays in execution of the contracted works. On May 30, 2026, Yuzhan issued a notice partially terminating the contract, citing performance issues.
BNR challenged the partial termination and moved the Madras High Court under the Arbitration and Conciliation Act, 1996, seeking two forms of interim relief: first, an injunction restraining Yuzhan from invoking bank guarantees aggregating to Rs 310 crore; and second, a stay on the May 30 partial termination notice. The matter is currently pending before an arbitral tribunal. (Related: Arbitration in India: Key Supreme Court Rulings)
Legal Framework: Interim Relief Under Section 9
Section 9 of the Arbitration and Conciliation Act, 1996 empowers courts to grant interim measures of protection before or during arbitral proceedings. This includes orders for the preservation of goods, securing the amount in dispute, or preventing a party from altering the status quo. The court's jurisdiction under Section 9 is broad, but it requires the applicant to demonstrate a prima facie case, balance of convenience, and irreparable harm if relief is not granted.
The 2015 Amendment to the Arbitration Act introduced Section 9(3), which provides that once an arbitral tribunal is constituted, the court shall not entertain an application under Section 9 unless the circumstances warrant that the remedy under Section 17 (interim measures by the tribunal) would not be efficacious. This provision was introduced to reduce court intervention in arbitration. However, in the Foxconn dispute, the urgency of the matter and the scale of the bank guarantees at stake appear to have justified the High Court's exercise of Section 9 jurisdiction. (See: Foreign Arbitral Awards in India: Public Policy Grounds)
Bank Guarantee Invocation: The Legal Standard
The restraint on invocation of Rs 310 crore in bank guarantees raises an important area of contract law. Indian courts have consistently held, following the Supreme Court's ruling in U.P. Co-operative Federation v. Singh Consultants (1988), that bank guarantees are autonomous instruments and courts should generally not restrain their invocation unless there is fraud or irretrievable injustice. The Madras High Court's interim order suggests that BNR may have demonstrated special equities that warranted departure from this general principle. (See also: Contract Damages and Breach: Supreme Court Framework)
Broader Implications for Infrastructure Contracts
This dispute highlights the risks inherent in large infrastructure contracts, particularly where a foreign-owned entity and an Indian contractor are involved. Partial termination of contracts, invocation of performance guarantees, and disputes over delay attribution are common in India's infrastructure sector. The case underscores the importance of clear termination clauses, dispute resolution mechanisms, and bank guarantee terms in construction and infrastructure agreements. (Related: Commercial Courts in India: What Qualifies as a Commercial Dispute)
The involvement of Foxconn, one of the world's largest electronics manufacturers, adds a dimension of foreign direct investment (FDI) policy to the dispute. India has been actively courting electronics manufacturing investments through the Production-Linked Incentive (PLI) scheme, and disputes of this nature could affect investor sentiment. (See: India Semiconductor Mission: Legal Framework for PLI)
The matter is next listed for June 29, 2026, when the Court is expected to hear detailed arguments on both the bank guarantee restraint and the stay on partial termination. The outcome could have implications for how infrastructure disputes involving multinational corporations are resolved in Indian courts.
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