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TMI Blog2019 (8) TMI 1596X X X X Extracts X X X X X X X X Extracts X X X X ..... pute regarding completion of work and arbitration proceedings are pending to that effect. The purpose of the Counter Bank Guarantee as per Clause 4.2 of the contract was to enable the Corporate Debtor to furnish a Bank Guarantee of the corresponding amount to the Jamnagar municipal Corporation. Parties have made efforts for an amicable settlement. The proceedings are stated to be stayed due to the moratorium. In a situation when the question is that whether it is matured that a Bank Guarantee is fit to be invoked or that the claim has become final having no scope of contingency, then only the question of dealing with a Bank Guarantee can be decided under the provisions of the Insolvency Code. Else, the issue of invocation of a Bank Guarantee is better left to be decided by the Arbitral Authorities. The Counter bank guarantee cannot be ordered to be released during the CIRP because of the suspension of amicable settlement - Application rejected. - MA 661/2018 & MA 1011/2018 in CP No.1832/IBC/NCLT/MB/MAH/2017 - - - Dated:- 30-8-2019 - M.K. Shrawat, Member (J) For the Applicant : Sr. Adv. Mustafa Doctor, Mr. Shahezad Kazi, Mr. Sudip Mahopatra, Ms. Lakshmi Pradeep, Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the treated effluent for commercial/non-commercial uses during the period of contract. The Applicant states that the bid document issued and the corrigendum thereto did not make the reuse of treated effluent as mandatory. 4. The Applicant submits that the Corporate Debtor (EPC) and its joint venture partner viz. M/s. Thermax Ltd. submitted their bid and chose option (b) as stated above and an executive summary was submitted for the same on 23.01.2013. A contract was executed on 08.10.2013 for the work that was bided between the Corporate Debtor and the Respondent No. 1. 5. The bid of the Corporate Debtor (EPC) was accepted by the Respondent No. 1 vide communication dated 01.06.2013 and pursuant to the same, the Corporate Debtor was required to submit the financial security by way of a Bank-Guarantee (BG) to the Respondent No. 1. Further, vide communication dated 19.09.2013, the Respondent No. 1 called upon the Corporate Debtor ( EPC ) to submit a Performance Security to the tune of ₹10 Crores prior to signing of the contract and an Additional Performance Security to the tune of ₹13 Crores. 6. It is further submitted that the Bank Guarantees worth ₹23 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ern of the Corporate Debtor is that the Respondent No. 1 is likely to encash all the BGs despite the fact that moratorium has been imposed on the Corporate Debtor, and thus invocation of bank guarantees will be bad in law in view of the decision of the Apex Court in the matter of Innoventive Industries Ltd. V. ICICI Bank [(2018) 1 SCC 407], it was held that: 9. Bankruptcy and insolvency 54. On reading its provisions, the moment initiation of the corporate insolvency resolution process takes place, a moratorium is announced by the adjudicating authority vide Sections 13 and 14 of the Code, by which institution of suits and pending proceedings etc. cannot be proceeded with. This continues until the approval of a resolution plan under Section 31 of the said Code. In the interim, an interim resolution professional is appointed under Section 16 to manage the affairs of corporate debtors under Section 17. 13. It is also worth to note that in this matter, previously one MA 417/2018 was decided wherein it was ordered vide order dated 08.05.2018 to maintain status quo with regard to BGs in question in view of the Moratorium. Upon commencement of moratorium, alienation of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess does not automatically entitle the Respondent to invoke the bank guarantees. 18. Having heard the Learned counsels for both the sides, I am of the conscientious view that the provisions of the I B Code are clear that the invocation of Performance Bank Guarantee cannot be stayed since as per the Proviso ( supra) the Moratorium does not apply on performance bank guarantees . But fact of the each case ought to have bearing for applying the provisions of a Statute. Therefore, in view of the facts of the present case, since there was an ongoing dispute between the parties regarding the issue of non-completion of contract, hence the entitlement of encashment of a Bank Guarantee got jeopardised. This is a contractual dispute and has to be adjudicated by the Commercial court in view of the arbitration clause in the contract. The correctness of invocation of performance bank guarantees shall be decided by the Arbitrator post moratorium in view of the fact that the arbitration proceedings are stayed during moratorium. 19. Meanwhile, the assets of the Corporate Debtor shall be protected and preserved by the RP. Ordered Accordingly. B) Miscellaneous Application No. 1011 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illing its obligation to complete the work as per the sub-contract. The Jamnagar Municipal Corporation, who is the ultimate owner of the project, issued a completion certificate to the Applicant on 14.09.2016. It is stated that the work was done to the satisfaction of the Corporate Debtor as well as Jamnagar Municipal Corporation. 24. The Applicant herein is praying for release of the above said Counter Bank Guarantee since the work has been completed and all the obligations have been discharged. 25. On going through the submissions made, it is understood that there is an ongoing dispute regarding completion of work and arbitration proceedings are pending to that effect. The purpose of the Counter Bank Guarantee as per Clause 4.2 of the contract was to enable the Corporate Debtor to furnish a Bank Guarantee of the corresponding amount to the Jamnagar municipal Corporation. Parties have made efforts for an amicable settlement. In this Application the issue is of controversy among the parties are listed as under:- 14. That on 14th September 2016, the Respondent No. 4 who is the ultimate owner of the Project issued a completion certificate to the Applicant stating as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving once performed its part is entitled for the discharge of the Counter Bank Guarantee. 20. That, it is respectfully submitted that Respondent No.4 or Respondent No. 1 cannot insist the Applicant to continue with the counter Bank Guarantee and/or extend the Counter Bank Guarantee despite performance and discharge of all obligations in terms of the Sub-contract and as per the Counter Bank Guarantee. 26. Those proceedings are stated to be stayed due to the moratorium. In a situation when the question is that whether it is matured that a Bank Guarantee is fit to be invoked or that the claim has become final having no scope of contingency, then only the question of dealing with a Bank Guarantee can be decided under the provisions of the Insolvency Code. Else, the issue of invocation of a Bank Guarantee is better left to be decided by the Arbitral Authorities. Before we part with, it is also to be recorded that the Insolvency proceedings are operative for a limited period. The scope and the ambit of the Insolvency proceedings are not unlimited and to some extent do not decide all the issues, such as issues of civil nature. During the Insolvency proceedings it is required to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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