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TMI Blog2020 (9) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Adjudicating Authority/National Company Law Tribunal, Chandigarh Bench, Chandigarh in CA No. 95 of 2019 in CP (IB) No.80/CHD/HRY/2018 in the matter of M/s Arvind Kumar, Resolution Professional Vs Indian Overseas Bank by which the Application filed by the Resolution Professional was partly accepted and a payment of Rs. 51,27,591/- was ordered to be released to the Resolution Professional of the Corporate Debtor M/s Richa Industries Limited. The said amount was retained by the Appellant Bank, being the margin money of the irrevocable Bank Guarantee, which was already invoked during the Moratorium period, issued U/S 14 of the Code. The Parties are represented by their original status in the Company Petition for the sake of convenience ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rantee. 4. Since the bank guarantee was invoked during the moratorium period and FDR relating to margin money was broken, and margin money was adjusted in making payment of Bank Guarantee amount; thus the Interim Resolution Professional objected to this. Given the demand raised by the IRP, the margin money amount was kept by Appellant Bank in fresh FDR issued on 14th January 2019. 5. After that an Application by the Resolution Professional of M/s Richa Industries Limited, bearing CA No. 95 of 2019 in CP (IB) No. 80/CHD/HRY/2018, filed under Section 60 (5) read with Section 74(2) of the Code, seeking direction against the Appellant, i.e. Indian Overseas Bank to release all the funds of the Corporate Debtor, which were retained by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said margin money was created by the Appellant in its favour. Therefore, any adjustment made by the Appellant violates Section 77 of the Companies Act, 2013 and Section 14(1)(c) of the Code. It is also argued that Section 77 of the Companies Act, 2013 categorically states that no charge created by the Company shall be taken into account by the Liquidator unless the same has been duly registered under sub-section (1) of Section 77 of the Companies Act, 2013, with the Registrar of Companies. Thus, it is contended that the adjustment of margin money, against payments made on the invocation of Bank Guarantee, was blatantly illegal and against the explicit provisions of the Code. 8. We have heard the arguments of the Learned Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-section (31) of Section 3 of the "I&B Code", which reads as follows: "3. Definitions.─ xxx xxx xxx (31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee" 6. From sub-section (31) of Section 3, it is clear that the "security interest" do not include the "Performance Bank Guarantee", therefore, we hold that the "security i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, and the margin money amount was used towards the payment of the Bank Guarantee. Once this margin money was used to honour the bank guarantee, nothing remained with the Bank, and as such, the Respondent Resolution Professional cannot demand that amount. 15. The Resolution Professional/IRP is only entitled to those payments to which the Corporate Debtor is entitled if no orders of Moratorium would have been passed under Section 14 of the Code. The Corporate Debtor had no right to claim the margin money after the invocation of Bank Guarantee. 16. In the circumstances, as stated above, we are the considered opinion that Appeal deserves to be partly allowed and the direction of the Adjudicating Authority 'to release the margin money, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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