9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (9) TMI 1454 - Tri - Insolvency and BankruptcyDirection against the respondent to release the funds of the corporate debtor - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The effect of the Exception to Section 28 is to limit the period provided under the Limitation Act from 3 years to 1 year in case of banks and financial institutions to issue a guarantee. If a claim is made and not honoured then the party is entitled to a period of 3 years to sue for enforcement of the rights. If a claim is not made within that time, the right to make a claim for breach of guarantee is lost - In the present case, claim itself was not made within the stipulated period of 1 year, hence, the right to make a claim is lost. Therefore, the objection of the respondent-bank is unsustainable and it cannot refuse to release the above referred fixed deposit of ₹ 10 Lacs, belonging to the corporate debtor. The respondent-bank are directed to release the fixed deposit of ₹ 10 Lacs of the corporate debtor within 2 weeks from today - application disposed off.
Issues:
Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking direction to release funds of corporate debtor from fixed deposit held by respondent bank. Analysis: The judgment involves an application filed by the Resolution Professional against Punjab National Bank under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking direction to release funds of the corporate debtor from a fixed deposit. The corporate debtor had filed for initiation of Corporate Insolvency Resolution Process under Section 10 of the Code, which was admitted, and a moratorium was declared. The fixed deposit of ?10 lacs with the respondent bank was pledged as security for a bank guarantee issued in favor of Honda Cars India Ltd., which had elapsed without invocation and renewal. The Resolution Professional requested the release of the fixed deposit since the business relationship with Honda Cars India Ltd. was terminated, and the fixed deposit was free from encumbrances. However, the respondent bank refused to release the fixed deposit citing Section 28 Exception 3 of the Indian Contract Act, 1872, stating that the time of invocation of the guarantee is 3 years. The respondent bank reiterated its stand in the reply filed during the proceedings. The Tribunal carefully considered the arguments presented by both parties. Section 28 of the Indian Contract Act, 1872 was analyzed, specifically Exception 3 which pertains to saving of a guarantee agreement of a bank or financial institution. The Tribunal examined the bank guarantee executed by the respondent bank in favor of Honda Cars India Ltd., noting that the guarantee was valid for a specific period and had specific clauses regarding the liability of the bank. Reference was made to a Supreme Court case which distinguished between 'assertion of right' and 'enforcement of right' in relation to Section 28 of the 1872 Act. The Court observed that limiting the period for making a claim against a guarantee is different from fixing a time period for lodging a claim. The effect of Exception 3 to Section 28 was discussed, emphasizing that it limits the period for issuing a guarantee to 1 year for banks and financial institutions. If a claim is not made within this period, the right to claim is lost. In this case, since the claim was not made within the stipulated period, the right to claim was lost, and the respondent bank's objection to releasing the fixed deposit was deemed unsustainable. Consequently, the Tribunal directed the respondent bank to release the fixed deposit of ?10 lacs belonging to the corporate debtor within two weeks from the date of the judgment. The case was disposed of, and the Registry was instructed to communicate the order to the parties.
|
