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TMI Blog2020 (1) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... nt out of the Performance Bank Guarantees, in such case we are of the view that the appellants can file their respective claim before Liquidator who may decide the claim in terms of Section 40 of I B Code - Thereafter if any person be aggrieved, such person is entitled to file appeal under Section 42 of Insolvency Bankruptcy Code, 2016 before the Adjudicating Authority. Appeal disposed off. - Company Appeal (AT)(Insolvency) No.230 of 2019, 234 of 2019, 235 of 2019 - - - Dated:- 25-9-2019 - Justice S.J. Mukhopadhaya Chairperson And Justice Bansi Lal Bhat Member (Judicial) For the Appellant : Mr. Abhijeet Sinha, Mr. SulabhRewari, Ms Neha Maathen and Mr Aditya Shukla, Advocates For the Respondents : Mr. Ramji Srinivasan, Sr. Advocate with Mr. VaijayantPaliwal and Ms Charu Bansal, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J In Corporate Insolvency Resolution Process against M/s Lanco Infratech Ltd (Corporate Debtor), the applicant/appellant, M/s KSB Shanghai Pump Co Ltd, filed application under Section 60(5) of Insolvency Bankruptcy Code, 2016 ( I B Code in short) se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator that Applicant committed breach of the terms of contract. So dispute of this nature cannot be decided in a summary fashion. Therefore, injunction cannot be granted in favour of the Applicant from invoking the Bank Guarantee by Corporate Debtor in the circumstances of the case. 15. Thus, it is clear, no material before the Adjudicating Authority that invocation of Bank Guarantee by Corporate Debtor in the present case is a fraudulent action and that Applicant will sustain irreparable injury. The only grievance of the Applicant that it has completed the contract work assigned to it. The question whether Applicant failed to perform its part of the contract or not, is a question to be determined by way of evidence. The said dispute cannot be resolved by summary procedure. If Bank Guarantee in terms of guarantee, then Corporate Debtor is entitled to invoke it. So injunction as prayed cannot be granted in respect of Bank Guarantee covered by this Application. 16. In the result, Application is dismissed. Interim order, if any stands vacated. M/s KSB Shanghai Pump Co Ltd. 5. The case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranteed value, this would amount to non-performance of the Contract and M/s Lanco Industries Ltd will be entitled to invoke the PBG. 8. It was further submitted that in between 4th January, 2016 to 12th June, 2016, M/s Lanco Industries Ltd failed to inspect the materials/supplies which were stored in China alongwith approved Manufacturing Quality Plan. M/s Lanco Industries Ltd was obliged to inspect the materials/supplied and issue MDCCs which were pre-requisite for appellant-TLT to claim payment and deliver goods. It was also contended that Monthly Progress Report was issued by appellant-TLT to M/s Lanco Industries Ltd on 1st February, 2016. In between January to May, 2017 correspondence exchanged between appellant-TLT and M/s Lanco Industries Ltd regarding further extension of Advance Bank Guarantee and communication by appellant-TLT that post amendment was necessary for further extension of the Advance Bank Guarantee beyond 27th April, 2017. It was submitted that on 7th August, 2017 the Corporate Insolvency Resolution Process was initiated against M/s Lanco Industries Ltd. As on the said date, the Advance Bank Guarantee had laps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd and M/s Tamil Nadu Generation and Distribution Corp Ltd for setting up of a Thermal Power Project at Ennore, Tamil Nadu in the year 2014. On 22nd April, 2015 the contract was executed between appellant-M/s Beijing Power Equipment Group Co Ltd and M/s Lanco Industries Ltd for supply, manufacture, delivery of a coal mill and seal air fans package for the Ennore Project and the total contract value was US$ 4.98 million. The Advance Bank Guarantee was issued on 11thJune, 2015 in terms of payment terms by Banks on behalf of appellant-M/s Beijing Power in favour of M/s Lanco Industries Ltd for US$ 498,000/- valid upto 21st August, 2016. The Performance Bank Guarantee (PBG) was also furnished by Banks on 11th June, 2015 in terms of Payment Terms in favour of M/s Lanco Industries Ltd for US$ 498,000/- valid upto 1st April, 2020. Correspondence dated 10th October, 2015 showed M/s Lanco Industries Ltd s failure to open the LC on time as was required under the Contract leading to delay in performance. In between 5th November, 2015 to 14th January, 2016, correspondence were made which shows failure on the part of M/s Lanco Industries Ltd to inspect the materials/supplies that were stored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be conclusive and binding notwithstanding any dispute pending before any court, tribunal, arbitrator or any other authority. Accordingly the Corporate Debtor is well within its right to invoke the Performance Bank Guarantee without any reference to the terms of the underlying contract. 18. It was further contended that it is a settled position of law that courts must not interfere with the invocation of bank guarantees, unless the invocation amounts to fraud of egregious nature and the fraudulent invocation causes irretrievable damage to the rights of the persons against whom such bank guarantees are invoked. The onus of proof is on the Appellants to establish fraud of an egregious nature and or to establish irretrievable harm. The Appellants have failed to establish both in the present facts and circumstances. 19. According to learned counsel for the Resolution Professional/Liquidator the issues raised in these Appeals cannot be determined. The decision of this Appellate Tribunal has been relied upon in M/s Dynepro Private Limited Vs Mr. V. Nagarajan CA(AT)(Insolvency) No.229 of 2018 to suggest that the Adjudicating Authority cannot decide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific request from the Corporate Debtor having been made on 10th July, 2017. 24. It was further stated that the only reason given by the appellants for refusing extension of Advance Bank Guarantee was that in view of public announcement of bankruptcy against the Corporate Debtor, they were not extended. However, it is pertinent to note that at the time of refusal of extension by the appellants, the Corporate Debtor was undergoing Corporate Insolvency Resolution Process which does not amount to company going through bankruptcy. 25. Similar objection has been raised by Resolution Professional/Liquidator in Company Appeal (AT) (Insolvency) No.234 of 2019. In this case also it was stated that the case of the appellant was found inadmissible since the goods were never supplied by the Appellant. It was informed that in accordance with the terms and procedures of the payment as laid down in Appendix 2 to the Contract, the Corporate Debtor had duly made an advance payment of 10% of the contract price to the Appellant. The terms of payment stipulate was as follows: a.50% of the contract price through Letter of Credit upon shipment on p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant. It was stated that in accordance with the terms and procedures of the payment as laid down in Appendix 2 to the Contract, the Corporate Debtor had duly made an advance payment of 10% of the contract price to the Appellant. The terms of payment stipulate was as follows: a.50% of the total contract price shall be paid upon shipment on pro rata basis as per the approved billing break-up on submission of invoices and shipping documents alongwith material dispatch clearance certificate issue by the Purchaser or its authorized representative. b. 25% of the total contract price shall be paid on pro-rata basis as per the approved billing break-up on receipt of equipment at site and physical verification and certification by the Purchaser or its authorised representative. c. 5% of total contract price shall be paid on successful commissioning of synchronization of the unit or within 27 months from the scheduled FOB date at China Port, whichever is earlier. d. Balance 10% of total contact price shall be paid on successful completion of performance guarantee test of the plant and taking over of the plant by E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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