2024 (12) TMI 225 - AT - IBC

Invocation of bank guarantee and its impact on the claim of the Financial Creditor under Section 53 of the IBC - waterfall mechanism under Section 53 of the IBC - effect of moratorium under Section 14 - HELD THAT - There is no dispute that irrevocable bank guarantee was issued by the Bank which was independent and separate contract between the parties - It is well settled that the moratorium under Section 14 shall not come in the way of invocation of bank guarantee which is independent and separate contract. In event, the bank guarantee is invoked and any amount is received by Respondent No.1, the claim of Respondent No.1 has to be revised as intimated by the IRP by his email dated 22.12.2022. Recording the aforesaid, we are of the view that there is no error committed by the Adjudicating Authority in allowing the application filed by the Respondent herein. It will be open for the parties to point out order dated 24.07.2024 passed by the Adjudicating Authority in IA No.699/KB/2023. Appeal is dismissed.

Summary

Issues:
- Invocation of bank guarantee and its impact on the claim of the Financial Creditor under Section 53 of the IBC.
- Right of the Respondent to invoke the bank guarantee despite filing a claim in the CIRP.
- Applicability of moratorium under Section 14 of the IBC on the invocation of bank guarantee.
- Interpretation of the irrevocable and unconditional nature of bank guarantees.
- Revision of claim amount in case of bank guarantee invocation.

Analysis:

The judgment pertains to an appeal against an order passed by the Adjudicating Authority regarding the invocation of a bank guarantee amounting to Rs. 3 Crores. The Adjudicating Authority held that the Applicant had the right to invoke the bank guarantee, and the Respondent should not obstruct the same. The Adjudicating Authority relied on the independence and irrevocable nature of the bank guarantee, citing relevant legal precedents to support its decision.

The Appellant challenged the order, arguing that the invocation would adversely affect the claim of the Financial Creditor under Section 53 of the IBC and impose additional financial burden. The Respondent contended that the IRP had been informed about the bank guarantee and the need to revise the claim if any amount was recovered through its invocation.

The Tribunal considered the submissions and records, emphasizing the independence of the bank guarantee as a separate contract between the parties. It referenced legal judgments to establish that the moratorium under Section 14 of the IBC does not prevent the invocation of an irrevocable and unconditional bank guarantee. The email communication from the IRP further supported the need to revise the claim amount upon bank guarantee invocation.

Ultimately, the Tribunal upheld the Adjudicating Authority's decision, stating that if the bank guarantee is invoked and funds are received by the Respondent, the claim amount must be revised accordingly. The Tribunal dismissed the appeal, noting that the Resolution Plan was pending approval and allowing parties to refer to the previous order for details.