9911796707
TMI Blog2021 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1956. It is engaged in the business of infrastructure, such as, telecommunications, power transmission and distribution. The applicant is presently undergoing CIRP. Shri Naren Sheth has been appointed as IRP by this Tribunal vide order dated 19.11.2019 and he has been confirmed as RP by the CoC, and such appointment is approved by the Tribunal. 3. Respondent No. 1/Jaguar Overseas Ltd. is incorporated under the provisions of the Companies Act, 1956 and is engaged in infrastructure work. Respondent No. 2 is the Bank which has issued Bank Guarantee on the request of the applicant in favour of respondent No. 1. 4. National (sic, Nepal) Electricity Authority (employer), a corporation incorporated under the law of Nepal has its principal place of business at Kathmandu, Nepal. The employer has awarded contract on 09.09.2011 to design, manufacture, test, deliver, install, complete and commission certain facilities, viz. Damak-Kabel 132 kV transmission to Joint Venture Parties of respondent No. 1/Jaguar Overseas Ltd. and applicant/Aster Pvt. Ltd. Both respondent No. 1 and the applicant have entered into a Joint Venture Cooperation Agreement on 21.09.2010 (ANNEXURE-1), under the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and the applicant, partners to Joint Venture hold 65% and 35% shareholding respectively. Value of the contract in question was USD 7,632,388 for supply and Rs. 3,754,701 for testing of towers and Rs. 181,980,787 for services. The contract awarded by Nepal Electricity Authority was funded by the World Bank. 10.2. Respondent No. 1 has submitted PBG to Nepal Electricity Authority for value of USD 4.42 lacs, which is valid till completion of defect liability period of 540 days plus a further period of 60 days. 10.3. It is averred that the Corporate Debtor has not performed its obligations as per the Agreement due to which respondent No. 1 suffered losses. Therefore, respondent No. 1 has invoked BG of Rs. 1,40,42,898/- issued by IDBI vide its letter dated 27.08.2020 (Page 12 of the Counter) on the following grounds: (a) The BG is an independent contract. Respondent No. 2 cannot be stopped from honouring invocation of BG by respondent No. 1. (b) The contention of the applicant that moratorium declared in respect of the Corporate Debtor under section 14(1)(c) of the I&B Code prevents invocation of BG has no substance. In this regard it is contended that 'security interest' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of the project. 11.2. It is averred in para 6 that the applicant had never defaulted in performing its obligations under the contract as is evident from Completion Certificate dated 11.09.2019. 11.3. It is averred in para 10 that though PBG is excluded from the 'security interest', and PBG does not come within the meaning of security interest, respondent No. 1 cannot invoke BG contrary to the terms of contract inasmuch as there was no breach of contract. 11.4. It is averred in para 12 of the Rejoinder that there is no case that the applicant owes any dues either to respondent No. 1 or to employer. There is no case against the applicant that it had ever committed breach of contract. 11.5. It is averred in para 13 (page 8) of the Rejoinder that the Tribunal, vide order dated 04.06.2020 passed in IA No. 337 of 2020 in CP(IB) No. 199/7/HDB/2019, has restrained respondent No. 1 from invoking BG till 12.06.2020. The above order was passed after taking into consideration the peculiar facts involved in the present case. 11.6. As regards section 14 of the I&B Code, it is submitted by the applicant/Corporate Debtor that the aim of section 14 of the Code is to protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further submitted that the proviso to section 3(31) of the Code, viz. "Provided that security interest shall not include a performance guarantee" makes it clear that respondent No. 1 is not covered by section 14 of the Code. 12.2. Respondent No. 1 relied on the following decisions: (i) Judgment dated 28.09.2020 of the NCLT, New Delhi in Company Appeal (AT) (Insolvency) No. 558 of 2020 in the case of INDIAN OVERSEAS BANK VS. ARVIND KUMAR, wherein it is held that a PBG is not covered under section 14 of IBC. (ii) Order of the Hon'ble NCLAT, New Delhi in Company Appeal (AT) (Insolvency) No. 319 of 2018 in the case of GAIL (India) Ltd. Vs. Rajeev Manaadiar & Ors. The said case deals with invocation of Performance Bank Guarantee in part and not whole of it. The Hon'ble NCLAT observed that the concerned persons will allow the appellant to extend the period of 'Bank Guarantee' for another six months to ensure completion of the period of 'moratorium'. (iii) Order dated 09.02.2018 of NCLT, Ahmedabad in Nitin Hasmukhlal Parikh (Diamond Power Transformers Ltd.) Vs. Madhya Gujarat Vij Company Limited, in IA No. 340 of 2017 in CP IB No. 28/100/NCLT/AHM/2017, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to section 3(31) of the Code. Thus, it does not attract section 14(3) of the Code. Hence there is prohibition for enforcing security created by the applicant/Corporate Debtor in terms of section 14(1)(c) of the Code. 13.4. It is averred in para 13 of the Written Submissions that respondent No. 1 must show breach of obligation on the part of the applicant under the Contract and the Joint Venture Contract Agreement and narrate those breaches by way of a separate document attached to formal notice of invocation and send it to respondent No. 2/Bank for invocation. In the present case respondent No. 1 has not done so. Relevant BG is reproduced below: "At the request of Aster Private Limited, we, IDBI Bank Limited, Specialised Corporate Branch, .... hereby irrevocably undertake to pay you any sum or sums not exceeding in total an amount of Rs. 1,40,42,898/- upon receipt by us of your fist demand in writing accompanied by written statement stating that Aster is in breach of its obligation under the Contract and Joint Venture Cooperation Agreement." Hence formal notice of invocation dated 27.08.2020 is against the terms of said BG as respondent No. 1 could not demonstrate breac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case NEA has given Completion Certificate to the applicant even though there are minor pending works as claimed by the applicant and it is also the fact that the project is in commercial operation by NEA. 18. The Hon'ble Supreme Court in its order dated 05.05.2016 in Civil Appeal No. 4814 of 2016, in the case of M/s. Gangotri Enterprises Ltd. Vs. Union of India and others, observed that every case has to be decided with reference to the facts of the case involved therein. 19. NCLT, Mumbai in its order dated 30.08.2019, in the case of EPC Constructions India Limited Vs. Jamnagar Municipal Corporation and others in MA 661/2018 & MA 1011/2019 in CP No. 1832/IBCNCLT/MB/MAH/2017, has held that, "... ... ... ...invocation of PBG cannot be stayed since as per the proviso (supra) the moratorium does not apply on 'PBG'. But the fact of each case ought to have bearing for applying the provisions of a Statute....." In view of the above decisions it becomes clear that PBG or regular BG involves only compensation payable to the party, which suffered losses. In the present case it is the contention of the applicant that in absence of invocation of BG by NEA in terms of contract ..... X X X X Extracts X X X X X X X X Extracts X X X X
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