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TMI Blog2023 (1) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 filed by the 'Resolution Professional' (RP) of Punj Lloyd Ltd. (Corporate Debtor) seeking encashment of the Bank Guarantees issued by the Appellant and Central Bank of India. The Bank Guarantees were issued on behalf of the Corporate Debtor, as required under the terms of IOCL's EPCC-2 package of 'Aishwarya Project' at its Haldia Refinery in West Bengal. 2. Submissions of the Ld. Counsel appearing on behalf of the Appellant: * Ld. Counsel for the Appellant contended that the 'Advance Bank Guarantees' (ABG) issued by the Appellant Bank have been wrongfully utilised by the IOCL, contrary to the terms of the Bank Guarantee. It is submitted that the Advance Bank Guarantee was provided to secure part of the mobilisation advance of Rs. 107 Crore and against 10% supply payment which has been wrongfully utilised by the Corporate Debtor to secure some other additional advances from IOCL, contrary to the contract and without concurrence from the Appellant bank, which is the issuer of the Advance Bank Guarantee and a party to the Bank Guarantee (BG) Agreement. The Letter dated 05.12.2017 from the Corporate Debtor to IOCL clearly reveals that the Corporate Debtor has sought additional adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e strictly construed in terms thereof and no unilateral changes can be made to the Bank Guarantee terms without intimation to and concurrence of the Bank as the same would amount to novation of the contract. * The Ld. Counsel placed reliance on the following Judgments in support of this submission: Delhi Development Authority vs. Joint Action Committee[(2008) 2 SCC 672]- para 62, M.S. Anirudhan vs. Thomco's Bank Ltd., 1963 Supp (1) SCR 63: AIR 1963 SC 746- which relies on Blest v. Brown [1862 (45) ER 1225] and Holme v. Brunskill [1878 (3) QBD, 495]- para 27, 28. * Additionally, Ld. Counsel for the Appellant also submitted that the entire mobilisation advances for which Advance Bank Guarantees were furnished by the Appellant was repaid to IOCL much prior to the invocation of the Bank Guarantees. IOCL in its affidavit dated 13.06.2020 filed before the Tribunal admitted that it had recovered an advance of Rs. 104.55 Crore + Rs. 73.69 Crore totalling to Rs. 178.24 Crore and has also recovered another amount of Rs. 14.74 Crore towards advance from invoking the guarantee furnished by Central Bank of India, thus totalling to Rs. 192.98 Crore. Hence, no amount is due and payable wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ Para 26, 29, 45 & 53] in which the Hon'ble Apex Court has held as follows: "26. In our considered view, once the demand was made in due compliance of bank guarantees, it was not open for the appellant Bank to determine as to whether the invocation of the bank guarantee was justified so long as the invocation was in terms of the bank guarantee....." * Ld. Counsel also submitted that in Bank of Baroda & Another vs. Indian Oil Corporation & Others [MAT No. 916 of 2019; dated 10.02.2020] [Para 6 to 9] the Hon'ble Division Bench of Hon'ble High Court of Kolkata has even directed Reserve Bank of India to consider cancelling the Banking license of the Bank of Baroda on account of refusal of encashment of the independent Bank Guarantees as per the RBI Master Circulars. The same was upheld and affirmed by the Hon'ble Supreme Court in 'Bank of Baroda vs. Indian Oil Corporation Ltd.' [Special Leave to Appeal (Civil) No. 5148-5148 of 2020; dated 22.06.2020]. * As regarding fraud, the Ld. Counsel for the Respondent No.1 submitted that no case of fraud whatsoever was made out and that Banks are not allowed to contest the decision of the first Respondent as to any breach and the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Arbitral Tribunal which had dismissed the application filed by the Corporate Debtor under Section 17 of the Arbitration and Conciliation Act, 1996, seeking stay on the encashment. This order has not been challenged and therefore the findings had attained finality. 6. The Hon'ble Arbitral Tribunal in paras 66 to 76 have given their findings which are relevant to the contentions raised by the Ld. Counsel for the Appellant Bank regarding fraud and other disputes inter se between the parties, regarding Breach of terms of the contract. 66. Moreover, as already observed in the preceding paras, the existence any dispute between the parties to the contract including the pendency of claims or counterclaims is not a ground for interdicting the enforcement/encashment of BGs. Furthermore, it is also a well-settled principle of law that the principle of unjust enrichment cannot be considered, while determining the question of interdicting of BGS. 67. Therefore, the only submission that deserves attention of the Tribunal as this stage is interdicting the BGs would jeopardise Claimant's CIRP pending before NCLT 68. In this regard, Ld. Senior Counsel for the Respondent, has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t impact on the debt of the corporate debtor as the right of the creditor against the principal debtor is merely shifted to the surety, to the extent of payment by the surety. Thus, contractual principles of guarantee require being respected even during a moratorium and an alternate interpretation may not have been the intention of the Code, as is clear from a plain reading of Section 14". 72. This Tribunal is of the considered view, that from the aforesaid, the legislative intent behind the statute is very clear, that mere pendency of CIRP by itself is not a ground for interdicting BGS, which is a contract of guarantee. 73. Therefore, the Tribunal finds merit in the argument of Ld. Counsel for Respondent and is of the firm view that Claimant by merely stating that invocation of BG shall jeopardise the CIRP process, has failed to make out a case of irretrievable injustice. Claimant has merely argued that interdiction of the two ABGs would severely prejudice the CIRP or consequent liquidation proceedings, without assigning any reasons thereof. Claimant failed to prove as to how the encashment of BGs shall cause such an irreparable harm for which no restitution is possible. 74. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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; (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. xxx xxx xxx (3) The provisions of sub-section (1) shall not apply to- (a) such transactions, agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority; (b) a surety in a contract of guarantee to a corporate debtor." 10. Bank Guarantees are outside the scope of the moratorium under Section 14 of the Code a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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