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TMI Blog2020 (10) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... s already indicated and authoritatively decided, bank guarantees would not come within the scope of section 14 of the Code. No order of restraint is thus contemplated. Therefore, the prayer made in the Application does not merit consideration - Application cannot be allowed. - IA No. 1031 of 2020 in [CP (IB) No. 01/MB/2018] - - - Dated:- 7-10-2020 - Hon ble Janab Mohammed Ajmal, Member Judicial And Hon ble Ravikumar Duraisamy, Member Technical For the Applicant : Senior Counsel Mr. Gaurav Joshi with Ms. Meghna Rajadhyaksha. For the Respondents : None ORDER Per : Janab Mohammed Ajmal ( Member Judicial ) This is an Application by the Resolution Professional of the Corporate Debtor seeking necessary direction against the Respondent(s). 2. Facts leading to the Application may briefly be stated as follows. The Videocon Telecommunications Limited (hereinafter referred to as the Corporate Debtor) had availed various credit facilities from the State Bank of India and other Banks including Bank of Baroda (Respondent No. 2). The Department of Telecommunications, Government of India (Respondent No. 1) has provided certain services including 2G Spectrum Licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIRP of the Corporate Debtor. As the consequence of such orders the Respondent No. 1 issued notices to the Corporate Debtor demanding payment of outstanding dues. Communications by the Corporate Debtor to the Respondent no. 1 that payments pertaining to the period prior to the commencement of CIRP could not be made by the Applicant, went unheeded. Despite such communication, the Respondent no. 1 issued notices to the Corporate Debtor as well as to the Respondent no. 2 for encashment of the bank guarantees or for their renewal scheduled between 4th July, 2020 and 6th September, 2020. During the process of CIRP the Respondent no. 1 filed claims amounting to ₹ 262.15 Crores before the RP. On 5th December, 2019 it filed a revised claim which is under verification/evaluation by the Applicant. The revised claim submitted included the amount corresponding to the outstanding SUC which have been secured by way of bank guarantees. 7. Moreover, the Respondent. No. 2 has also included the amount corresponding to the uninvoked bank guarantees as part of its claim against the Corporate Debtor. In case the bank guarantees are renewed the Corporate Debtor would be doubly liable for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. [Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come within the embargo under section 14 (1)(c)of the Code. There is no quarrel that the Respondent no. 1 is an Operational Creditor of the Corporate Debtor. It has already submitted its claim to the RP (Applicant) and the same is under consideration. But would that have any bearing on the invocation or otherwise of the bank guarantees, is required to looked into. 11. Security interest is defined under section 3(31) of the Code as: (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; 12. The bank guarantees furnished for availing certain services are performance guarantees which could be invoked on the failure of the corporate debtor to perform certain acts. Thus, would fall squarely under the above definition and would be beyond the purview of section 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was the principle laid down by this Court in various decisions. In UP Cooperative Federation Ltd. v. Singh Consultants Engineers Pvt. Ltd., [1988] 1 SCC 174, the law laid down in Bolivinter Oil SA v. Chase Manhattan Bank, [1984] 1 All E.R. 351 was approved and it was held that an unconditional Bank Guarantee could be invoked in terms thereof by the person in whose favour the Bank Guarantee was given and the Courts would not grant any injunction restraining the invocation except in the case of fraud or irretrievable injury. 14. This Authority need not however concern itself with the propriety of the bank guarantees. Nor can the matter of fraud or irretrievable injury can be gone into. The same is not canvassed either. What needs consideration is if a restraint order can be passed within the parameters of the Code, now that the CIRP has commenced. As already indicated and authoritatively decided, bank guarantees would not come within the scope of section 14 of the Code. No order of restraint is thus contemplated. Therefore, the prayer made in the Application does not merit consideration. The Application deserves to be disallowed. Hence ordered. ORDER The Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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