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TMI Blog2020 (12) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the Section 66 of the Code that it only empowers the IRP/RP to prefer an Application against the erstwhile management of the Corporate Debtor. Hence, this Adjudicating Authority finds that the Applicant herein is not vested with any authority to seek the prayer under Section 66 of the code. Application disposed off. - IA Nos. 77, 237 and 238 of 2020 in CP (IB) No. 184/7/HDB/2019 - - - Dated:- 11-12-2020 - K. Anantha Padmanabha Swamy, Member (J) For the Appellant: P. Mohit Reddy, Amir Bavani, T.G. Rajesh Kumar, Counsels and Deepak Bhattacharjee, Senior Counsel ORDER K. Anantha Padmanabha Swamy, Member (J) 1. The present Applications bearing IA No. 77, 237 238 of 2020 are filed on the same set of facts by the Applicant i.e., M/s. Siemens Limited in the matter of M/s. Meenakshi Energy Limited (in short MEL) under section 60(5) of the IB Code, 2016, against the above said Respondents, inter-alia seeking similar reliefs. Therefore, the same are adjudicated by way of this common order. 2. The following are the relief(s) sought in the respective Applications:-Prayers in IA No. 77/2020 Direct the Respondent to deposit the money with this Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and erection of a 700 MW thermal power plant in Nellore District in Andhra Pradesh ('Project') were entered between Corporate Debtor and Respondent No. 3 ('EDAC Engineering Limited/EDAC) being a supply contract and the other being an erection contract respectively. 2.3. That on 26.12.2014, a consortium of lenders including Rural Electrification Corporation Limited ('RECL') sanctioned a term loan facility to Corporate Debtor for financing the Project. The terms and conditions of these facilities are governed by a Common Loan Agreement ('CLA') whereby CORPORATE DEBTOR was to provide security for its contractual obligations. It is submitted that Clause 3.1 (f) (iii) of the CLA provided for security by way of assignment of performance guarantee. 2.4. That on 23.09.2016, corporate debtor and RECL entered into a Trust Retention Agreement ('TRA') whereby a Trust Account was set up in the name of corporate debtor and all proceeds upon invocation of PBGs were to be deposited in it. 2.5. That on 17.01.2017, corporate debtor, EDAC and Siemens Ltd. (Applicant herein) entered into two Tripartite Agreements, whereunder the Applicant was appointed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion immediately filed a complaint with the Economic Offences Wing (EOW).On 21.10.2019, A suit with a prayer for stay on invocation and encashment of PBGs, amongst others was filed by the Applicant Siemens. On 23.10.2019 EOW, wrote to the Bank directing it not to encash the PBGs. On 02.11.2019, since, the letter of invocation was already issued by corporate debtor, the Court passed an ad-interim injunction against corporate debtor from further demanding payment from R3 and also restrained R3 from making any payments against the PBGs. 2.11. That against the illegal and wrongful invocation of the PBGs, the Applicant, filed a suit before the City Civil Court, Hyderabad being COS No. 42-19 for seeking declaration of the invocation as fraudulent and an injunction restraining Respondent No. 3 from encashing the PBGs. In addition, the Applicant also preferred an application under Order 39 Rule 1 of the Civil Procedure Code. 2.12. That upon due adjudication and prima facie satisfaction, the City Civil Court, Hyderabad has restrained corporate debtor from continuing with the invocation process of the PBGs and granted an ad-interim injunction on the invocation of the PBGs. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or and passed its Final Common Order and Judgment on 06.01.2020. However, a copy of the said order was received by the Applicant on 08.01.2020 at around 6.45 p.m., by which time the Respondent No. 2 (RP) was also informed that the Applicant is preferring a SLP against the same. The Applicant requested Respondent No. 2 (RP) not to remit the amounts under the PBGs to Trust Account until the disposal of the SLP but the Respondent No. 1 (corporate debtor) with an intent of fraudulent trading encashed the PBGs amount. 2.15. The Applicant then filed the SLP on 09.01.2020 vide SLP No. 691-692/2020 against the order dated 06.01.2020 for fraudulent trading adopted by the Respondents and on mentioning, the SLP was listed for hearing on 10.01.2020. Counsel for R-2 informed the Hon'ble Supreme Court that the PBGs were already encashed and therefore the SLPs are infructuous. Despite the encashment, Supreme Court issued notice in respect to the other reliefs prayed by the Applicant in the SLP. 2.16. That accordingly, this Adjudicating Authority vide its order dated 30.01.2020 in IA No. 238/2020 has restrained the Respondent No. 1 (RP) from not utilizing the amounts of the PBGs. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order by any court of law, tribunal, arbitration panel or other authority come within the purview of 'moratorium. The said provision specifically do not exclude any Court, including the Hon'ble High Courts or Hon'ble Supreme Court of India. 7. There is no provision to file any money suit or suit for recovery before the Hon'ble Supreme Court except under Article 131 of the Constitution of India where dispute between Government of India and one or more States or between the Government of India and any State or States on one side and one or two or more States is filed. Some High Courts have original jurisdiction to entertain the suits, which may include money suit or suit for recovery of money. The Hon'ble Supreme Court has power under Article 32 of the Constitution of India and Hon'ble High Court under Article 226 of Constitution of India which power cannot be curtailed by any provision of an Act or a Court. In view of the aforesaid provision of law, we make it clear that 'moratorium.' wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that there are monies due and payable to the Applicant by the Corporate Debtor and on the other hand, in the current proceedings, contesting for INR 20 Crores of BG money. This position is legally untenable. 2.25. In the instant case a 'trust' arose between Corporate Debtor and the Applicant herein, when the BG money was credited in corporate debtor's account. The reason why the BG money is in trust is because ownership on the fund remains that of the Applicant and corporate debtor is holding it on behalf of the Applicant. There is no occasion under law which has arisen to determine the ownership of the funds. In fact the order in appeal dated 06.01.2020 itself states that the money can be recovered in case it is determined that the ownership of the funds remains that of the Applicant. 2.26. Therefore, in view of the forgoing it is clear that the BG money is held by R-1 in constructive trust in view of the same having been received in consequence of a non-est order. Said BG money must be ordered to be refunded in view of the authoritative judgments of the Supreme Court stating that it is the duty of the court of competent jurisdiction to reverse the effects of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimation. On this ground alone, this Tribunal must hold that the BGs so invoked were done so wrongly and therefore, the money needs to be returned. 2.31. That the Applicant herein inter alia seeking preservation and refund of the ill-gotten proceeds of wrongful and illegal invocation of the performance bank guarantees provided by the Applicant in favour of Respondent No. 1 and currently in custody and control of the Respondent No. 2. 2.32. Reiterating the above, the counsel for the Applicant inter alia prayed to allow the Applications as sought for. 3. Counsel for the RP/R2 filed counter and written arguments inter-alia seeking to dismiss these applications on the following grounds as under: 3.1. That the Applicant cannot be allowed to re-agitate the issues that have already been decided by the Hon'ble High Court of Telangana. The performance bank guarantees have been legally invoked and encashed. Pertinently, Hon'ble High Court of Telangana has refused to, interfere with the invocation of Bank Guarantees by Corporate Debtor vide order dated 06.01.2020. This Adjudicating Authority does not have jurisdiction to sit in appeal over issues conclusively decided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.7. That since the Bank Guarantees have not only been invoked but also en-cashed, the Suit has become infructuous. In such circumstances, since the main relief in the Suit has become infructuous, any ancillary relief sought by the Applicant before this Adjudicating Authority is clearly not maintainable. 3.8. That the principles of Bank Guarantee are more stringent as compared to a regular contract of guarantee. In the case of Himadri Chemical Industries Limited v. Coal Tar Refining Co. (2007) 8 SCC 110 the Hon'ble Supreme Court has summarized the principles - existence of (i) egregious fraud; and (ii) irreparable harm for grant of an injunction restraining the enforcement of a bank guarantee. This decision has also been reiterated by the Hon'ble Supreme Court of India in the recent case of Adani Agri Fresh Limited v. Mehaboob Sharif and others [(2016) 14 SCC 5171. 3.9. That the Applicant to seek deposit of the proceeds of encashment of the Bank Guarantees let alone establishing the parameters set out by the aforementioned judicial precedents. It is submitted that the Applicant has failed to establish any of the ingredients necessary for the grant of injunction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered between the Applicant, R1 and R4 for erection of electrical balance of plant package. It is pertinent to mention herein that the R5 is not a party to either of the Tripartite Agreements. 4.2. That the Hon'ble High Court has erroneously recorded findings that if the amount covered under Bank Guarantee is paid to the R5, which is one of the creditors of the R1, if the Applicant were to succeed in the suit or in the arbitration proceedings it can still recover the amount from the R5 which is a public sector financial institution. That since, the Account No. 00000036049000407 is being maintained by Respondent No. 1 with State Bank of India, the remittance of amount of Bank Guarantee upon invocation in the said Account will not come to R5 and therefore, R5 cannot be made liable for recovery of Bank Guarantees. 4.3. That the dispute exists primarily between the Applicant, R1 and R4. It is evident from the record that the dispute between the parties arose on 18.10.2019, when the R1 sent a letter to R3 to invoke the Bank Guarantees issued by the Applicant. That being aggrieved by the invocation, the Applicant approached the Civil Court and vide order dated 02.11.2019 granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 2; 7. This Adjudicating Authority observes that the subject BG's were invoked on 18.10.2019, by MEL for alleged default committed by Applicant herein, which is much prior to the admission of CIRP in respect of MEL, which was on 07.11.2019 only. 8. It is also observed that the BG invoked are irrevocable in nature. This Adjudicating Authority also observes that the Civil Court has categorically observed that there is no element of fraud involved in the issue of invoking BGs. It is also seen that the reliefs granted in IA No's 723 724 of 2019 in COS No. 42 of 2019 namely Continuing the process of invocation of BGs till further orders is misplaced for the fact that such interim direction issued by the Civil Court was not operable due to the fact that by the time, such orders were passed, the BGs were already invoked. This fact has also been highlighted by the Hon'ble High Court of Telangana in its order dated 06.01.2020 whereby, the orders passed by the Civil Court was set-aside. 9. Clause 2 of the BGs states as under:- 2. The bank shall effect the payments to MEL under this guarantee, without further proof or conditions and without any delay, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if- (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and (b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor. Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub-section (2), in respect of such default against which initiation of corporate insolvency resolution proces ..... 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