2018 (6) TMI 1719 - Tri - Insolvency and Bankruptcy

Stay on invocation of Performance Bank Guarantee - HELD THAT - The Corporate Debtor had completed the Work Order as assigned by 15.09.2016 to the satisfaction of GAIL India Limited who, in turn, had issued Completion Certificate and the Defect Liability Period has also MA 521 OF 2018 Rajeev Mannadiar, Resolution Professional Kohinoor Crane Services Vs. Petron Engineering Construction Limited elapsed on 15.09.2017, GAIL India Limited should not be allowed to demand State Bank of India for revocation of the Bank Guarantee. Further, the admitted factual position is that Moratorium has already been commenced vide an Order (supra), therefore, alienation of any asset or recovery from any property of the Corporate Debtor is prohibited, hence action of revocation of the Bank Guarantee is against the provisions of the Insolvency Code - The State Bank is hereby estopped from revocation of Bank Guarantee or discharge in favour of any party including GAIL so that the rights of the stakeholders of the Corporate Debtor should not be prejudiced. Application allowed.

Summary

Issues:
1. Invocation of Performance Bank Guarantee during the moratorium period.
2. Estoppel against State Bank of India for releasing payment of Bank Guarantee.
3. Compliance with the Insolvency Code provisions regarding asset alienation during moratorium.

Analysis:
1. The judgment pertains to a Miscellaneous Application filed by the Resolution Professional seeking to prevent the invocation of a Performance Bank Guarantee by the State Bank of India during the moratorium period declared under the Insolvency Code for the Corporate Debtor, M/S. Petron Engineering Construction Limited. The Resolution Professional argued that the completion of work by the Corporate Debtor and the issuance of a Completion Certificate by GAIL India Limited should prevent the revocation of the Bank Guarantee.

2. The Resolution Professional drew attention to a previous interim order involving Axis Bank, where the bank was estopped from revoking a Performance Bank Guarantee. The Resolution Professional requested a similar injunction against the State Bank of India to protect the interests of the stakeholders of the Corporate Debtor. The Tribunal, considering the facts of the case and the ongoing moratorium, found that the revocation of the Bank Guarantee by the State Bank of India would be against the provisions of the Insolvency Code.

3. The Tribunal held that since the moratorium was already in effect, any alienation of assets or recovery from the Corporate Debtor's property was prohibited. Therefore, the State Bank of India was estopped from revoking the Bank Guarantee or discharging it in favor of any party, including GAIL India Limited. The judgment allowed the Miscellaneous Application, directing the Registry to issue a Certified Copy urgently to enforce the decision and protect the rights of the stakeholders of the Corporate Debtor.