2020 (10) TMI 590 - Tri - Insolvency and Bankruptcy

CIRP / Liquidation Proceedings - applicant has contended that the Liquidator committed serious error in not admitting the claim filed by the applicant and further the Liquidator committed error in not returning the Advance Bank Guarantees - HELD THAT - It is true the applicant to produce necessary documents in support of the claim filed before the Liquidator. The liability of the Corporate Debtor will be decided only when supporting documents or invoices are filed. It is the case of the Liquidator that proforma invoices are not in the records of the Corporate Debtor. Then how the Liquidator can admit the claim of the applicant when there are no documents with the Corporate Debtor with reference to the alleged proforma invoice. There must be some proof before the Liquidator that such invoices were raised and filed with the Corporate Debtor. It is an admitted case of the applicant that goods were not dispatched to the Corporate Debtor. The goods were allegedly made ready and were lying with the units of the applicant. The specific case of the applicant is that the Corporate Debtor failed to lift the goods prepared according to the specification which was also inspected by the Inspecting Agency. There must be some evidence before the Liquidator. All necessary documents are to be filed with the Liquidator by the applicant by which the Liquidator would be able to decide the liability of the Corporate Debtor towards the applicant. The Liquidator cannot decide a dispute which is within the jurisdiction of a competent authority. The Liquidator is not an adjudicating authority on any dispute between the applicant and the Corporate Debtor. The Liquidator cannot assess the damages which are within the realm of a civil court against breach of contract. The applicant has not approached any civil court as of now for assessment of damages. When the Liquidator is expressing difficulty to admit the claim of the applicant on the ground of non-production of documents, etc. then the Tribunal cannot direct the Liquidator to admit the claim. The claim of the applicant is in the nature of damages for breach of contract. Therefore, we feel that the Liquidator has not committed any error in not admitting the claim. Invocation of Bank Guarantee - HELD THAT - There is no fraud alleged in obtaining Bank Guarantee. An injunction cannot be given against invoking Bank Guarantee unless it is shown that a fraud of egregious nature is involved. In the present case there is no material to show that any fraud was played by the Corporate Debtor in obtaining Bank Guarantee from the applicant - the relief prayed for by the applicant to restrain the Corporate Debtor from invoking Bank Guarantee or to give a direction to the Liquidator to return the Bank Guarantee or to direct the Liquidator to Inform Bank of America that there are no claims against Bank Guarantee, cannot be granted. Application dismissed.

Summary

Issues Involved:
1. Admission of Claims by the Liquidator
2. Return of Advance Bank Guarantees (ABGs)
3. Alleged Breach of Contract and Damages
4. Invocation of Bank Guarantees

Issue-wise Detailed Analysis:

1. Admission of Claims by the Liquidator
The Applicant, M/s. Bray Controls India Private Limited, filed claims under Section 42 of the Insolvency and Bankruptcy Code, 2016, seeking directions for the Liquidator to honor obligations under the Amended Purchase Order and admit the Applicant's claims in full. The Liquidator rejected these claims, stating that the Applicant did not provide necessary documentation, such as invoices, to establish the Corporate Debtor's liability. The Tribunal upheld the Liquidator's decision, emphasizing that the Liquidator's role is to verify claims based on available documentation and not to adjudicate disputes.

2. Return of Advance Bank Guarantees (ABGs)
The Applicant sought a direction for the Liquidator to return the ABGs and issue a No Objection Certificate to the Bank of America. The Liquidator argued that the Corporate Debtor's books showed an advance payment to the Applicant, and thus, the ABGs were justified. The Tribunal concurred, noting that the Corporate Debtor had given an advance, and the Applicant had provided ABGs in return. The Tribunal found no grounds to direct the Liquidator to return the ABGs, as there was no evidence of fraud in obtaining them.

3. Alleged Breach of Contract and Damages
The Applicant contended that the Corporate Debtor breached the contract by not taking delivery of the manufactured valves, which were inspected and cleared by a third-party agency. The Liquidator argued that claims for damages due to breach of contract must be adjudicated by a competent authority, not by the Liquidator. The Tribunal agreed, referencing the Supreme Court's decision in Union of India vs. Raman Iron Foundry, which states that a claim for unliquidated damages does not constitute a debt until adjudicated by a court or arbitrator. The Tribunal concluded that the Liquidator rightly rejected the claims since they were in the nature of damages for breach of contract.

4. Invocation of Bank Guarantees
The Applicant sought to restrain the Corporate Debtor from invoking the ABGs, alleging that the Corporate Debtor's actions were unethical. The Liquidator maintained that there was no fraud involved in obtaining the ABGs, and thus, there were no grounds for an injunction. The Tribunal cited the Supreme Court's decision in Himadri Chemicals Industries Limited vs. Coal Tar Refining Co., which held that an injunction against invoking a bank guarantee can only be granted if there is evidence of fraud of an egregious nature. The Tribunal found no such evidence and refused to grant the relief sought by the Applicant.

Conclusion:
The Tribunal dismissed the application, upholding the Liquidator's decision to reject the claims due to lack of supporting documentation and the necessity for claims of damages to be adjudicated by a competent authority. The Tribunal also denied the request to restrain the invocation of ABGs, finding no evidence of fraud.