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TMI Blog2021 (1) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... ract as a guarantee against the failure of the other party to perform the obligations specified in the contract, it is usually provided by a Bank to make sure a contract completes designated project, in the case of financial guarantee, it reassures repayment of money in the event of non completion of repayment. We cannot attribute any logic to it, we only can say performance guarantee alone is exempted by the Code, therefore unless the guarantee has attributes of performance guarantee, it cannot be said that it is exempted by the Code. The case of the Respondent Bank is, it falls under the proviso to Section 3(31) of the Code, whereas the RP case is it will not fall under the exemption mentioned above. In the present case, it is nether P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Debtor have to come under the control and custody of the RP as per the Code. 2. The Applicant submits that there are two Fixed Deposits, under Account No. 7511874557; Outstanding ₹ 1,14,14,734.40 as on 31.03.2020 and another Account No. 7511872416 outstanding ₹ 50,60,312.99 as on 31.03.2020, which the Respondent Bank has refused to redeem on the ground that the fixed Deposits are part of the security, therefore it has priority over the redemption of such fixed deposits for adjustment of deposit money against the debt due and payable to the Respondent Bank in terms of the Facility agreements dated 02.07.2014 and 08.07.2014. 3. The reason given by the Respondent Bank for not redeeming the fixed deposits is that, since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be read as the monies of the Corporate Debtor until before it is appropriated. When section 14 rigors come into existence, nobody can take any action over the assets of the corporate debtor. 7. It is no doubt true that it is not that these fixed deposits have voluntarily been made to close them at the wish of the Corporate Debtor, they have in fact made to maintain debt security ratio with a rider clauses of lien and set-off, so in ordinary parlance, the corporate debtor cannot take out those deposits at the wish of the Corporate Debtor unless the loan facility is cleared, such being the case, the Respondent Bank is at liberty in the ordinary course to adjust the proceeds of the deposits against the loan dues, but the point for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailed, under this Code, the security interest covered by loan facility is also hit by section 14 of the Code, therefore the fixed deposit given as security against loan facility cannot be equated with the performance guarantee, and the right of lien or setoff ordinarily available to the Respondent Bank is not available during CIRP initiated under the Code. 11. The Respondent Bank relied upon two judgements Cofex Exports Ltd. Vs. Canara Bank (AIR 1997 Delhi 355) and Syndicate Bank vs. Vijay Kumar Others (1992) 2SCC 331, to say that lien/setting-off can be exercised and the deposits could be adjusted against the loan facility availed. Those two judgements are not in relation to the cases governed by insolvency proceedings under the Code ..... X X X X Extracts X X X X X X X X Extracts X X X X
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