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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 ..... ency & Bankruptcy Code, 2016 ('I&B Code' in short) seeking directions to Liquidator to restrain from invoking or encashing the Bank Guarantee bearing No.GC 0608115000737 for US$ 510,000 dated 07th August, 2018 issued by Bank of China and for further direction to Bank of China not to pay any amount to the Corporate Debtor's Bank. 2. Similar application was filed by the applicant/appellant, M/s TLT-Tourbo (Sichuan) Co Ltd, under Section 60(5) of I&B Code with similar prayer to restrain from invoking and encashing the Contract Performance Bank Guarantee (PBG) No.LG61205B500032 dated 30th October, 2015 and not to pay any amount to the Corporate Debtor's Bank. 3. The other applicant/appellant, M/s Beijing Power Equipment Group Co Ltd, also moved an application under Section 60(5) of the I&B Code for seeking direction to Resolution Professional to restrain from invoking/encashing Performance Bank Guarantee (PBG) No.11100020003190 dated 11th June, 2015and to return to the applicant any amounts paid out upon encashment of the PBG. 4. The Adjudicating Authority by similar order all dated 5th March, 2019 taking into consideration the fact that the applicants/appellants have filed their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant on 24th April, 2015 for design, engineering, manufacture, assembly etc for 1x660 MW Supercritical Ennore Thermal Power Station Expansion Project alongwith insurance, forwarding on FOB Shanghai Seaport on delivery basis including loading the vessel of main equipment and mandatory spares, apart from supervision, erection and commissioning of BFP. The above project was awarded to the Corporate Debtor by way of an Engineering Procurement and Construction Contract by TANGEDCO. 6. Learned counsel for the appellant has submitted that the appellant cannot be made to suffer irretrievable loss owing to Respondent, Corporate Debtor. It was also submitted that the Corporate Debtor through the Resolution Professional had fraudulently invoked the 'Performance Bank Guarantee' with a view to deprive the appellant of its monies and to make wrongful gain. M/s TLT-Turbo (Sichuan) Co Ltd 7. Learned counsel for the appellant, M/s TLT-Turbo (Sichuan) Co Ltd submitted that main contract was executed between Lanco Industries Ltd (Corporate Debtor) and the Tamil Nadu Generation and Distribution Corp Ltd in the year 2014 for setting up of a 'Thermal Power Project' at Ennore. On 27th August, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between M/s Lanco Industires Ltd and TANGEDCO was terminated by TANGEDCO owing to M/s Lanco' Industries Ltd breaches. The Performance Bank Guarantee was purportedly invoked by the Resolution Professional of M/s Lanco Industries Ltd on 30th July, 2018 on the ground of alleged non-performance and failure to extend the Advance Bank Guarantee. No notice was given by the Resolution Professional of M/s Lanco Industries Ltd nor the Contract was terminated by M/s Lanco Industries Ltd . 9. According to counsel for the appellant a guarantee can only be invoked in accordance with its terms. The Bank Guarantee was issued towards timely completion and the faithful performance of the Contract in accordance with the terms and conditions specified in the Contract. Therefore the Professional/Liquidator does not have the power under IBC to invoke the Performance Bank Guarantee. 10. It was also submitted that in exercising functions under the I&B Code, the Resolution Professional was required to act in terms of the contract executed by the corporate debtor and Appellant. There being no case of breach of the contract by appellant-TLT made out by the Resolution Professional/Liquidator, and M/s Lanco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod upto 17th January, 2018. In the meantime Corporate Insolvency Resolution Process was initiated against M/s Lanco Industries Ltd on 7th August, 2017 due to which the contract between M/s Lanco Industries Ltd and TANGEDCO was terminated by TANGEDCO owing to M/s Lanco Industries Ltd's breaches on 9th April, 2018. Only thereafter the Performance Bank Guarantee was invoked by the Resolution Professional on 31st July, 2018. 14. It was submitted that the guarantee can be invoked only in accordance with its terms and conditions. The Bank Guarantee was issued towards timely completion and the faithful performance of the Contract as per terms and conditions specified in the Contract. According to appellant in no case for failure of performance of M/s Lanco Industries Ltd it can be invoked. 15. It was submitted that in exercising functions under the I&B Code, the Resolution Professional was required to act in terms of the contract executed by the corporate debtor and Appellant. There being no case of breach of the contract by M/s Beijing Power made out by Resolution Professional/Liquidator, and M/s Lanco Industries Ltd having not raised any dispute as to about performance of M/s Beij ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d inadmissible since the goods were never supplied by the appellants. According to learned counsel as per terms and procedures of payment as laid down in Appendix 2 to the Contract, the Corporate Debtor made an advance payment of 10% of the contract price to each of the Appellants. Which stipulates:- "a. 60% 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 issued by the Purchaser or its authorized representative; b. 20% 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. Balance 10% of total contract price shall be paid on successful completion of performance guarantee test of the plant and taking over of the plant by Employer/Owner or 1st October 2018 whichever is earlier. 22. It was further submitted that none of the above three conditions have been met by any of the appellant and till date i.e. the goods have not been shipped nor supplied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract price shall be paid on successful erection, testing and commissioning of the system, upon submission of an additional performance bank guarantee for 10% contract price valid until PG test (scheduled on 1st October, 2018). 26. It was also submitted that admittedly none of the above mentioned three conditions have been met till date i.e. the goods have not been shipped nor supplied on site and the following question of satisfying the guarantee test automatically does not arise. 27. It was submitted that the appellant was in breach of the contract by not extending the Advance Bank Guarantee. As per Clause 19.1 of the Special Purchase Conditions of the Contract, the Corporate Debtor has right to get the Advance Bank Guarantee extended till the completion of supplies for the unit is achieved. However, admittedly the appellant has refused to extend the Advance Bank Guarantee despite a specific request made by the Corporate Debtor. 28. It was further stated that the Performance Bank Guarantee was rightly invoked. According to learned counsel while managing the operations of the Corporate Debtor under its obligation to preserve and protect the assets of the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. 33. In all the cases the appellants have sought direction to Liquidator to restrain from invoking or encashing the Bank Guarantee. However, the Bank Guarantees were invoked. Though it is not clear as to whether the amount have been realised by the Corporate Debtor on invocation of aforesaid Performance Bank Guarantees or not, which was to be released by the Bank of China. 34. Therefore, the direction as sought for by appellants to direct not to pay any amount to the Corporate Debtor, cannot be ordered. 35. In case the Performance Bank Guarantees have been invoked, and the Corporate Debtor has received the amount 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. 36. For the above said reasons this Appellate Tribunal is not inclined to decide the claim and counter claim as made by the parties, but give liberty to the appellants to move before the Appropriate F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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