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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 ..... of the Code and Section 3 (31) specifically excludes Performance Bank Guarantees (PBGs). The Hon ble Supreme Court in M/S. DYNEPRO PRIVATE LIMITED VERSUS V. NAGARAJAN [ 2019 (3) TMI 2013 - SC ORDER] , upholding the decision of this tribunal has held that NCLT has no jurisdiction to decide the question of disputes and claims/counter claims. Thus, an irrevocable and unconditional Bank Guarantee can be invoked even during moratorium period in view of the amended provision under Section 14 (3) (b) of the Code - appeal dismissed. - Company Appeal (AT) (Ins) No. 543 of 2021 - - - Dated:- 10-1-2023 - [Justice Anant Bijay Singh] Member (Judicial) And [Ms. Shreesha Merla] Member (Technical) For the Appellant : Mr. Ankur Mittal, Ms. Yashika Sharma, Ms. Muskan Jain, Advocates For the Respondents : Mr. Gaurav Mitra, Mr. Abhinash Agarwal, Mr. Amit Mehario, Advocates for R-1 Mr. Sunil F., Mr. Raghav Chadha, Advocates for R-2 JUDGEMENT [ Per : Ms. Shreesha Merla, Member (T) ] 1. Aggrieved by the Impugned order dated 31.05.2021, passed by National Company Law Tribunal, New Delhi, Principal Bench in I.A. No. 2184 of 2020 in C.P. (I.B) No. 731/PB/2018, the present ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat balance amount from Rs. 60 Crore can be infused by PLL and IOCL may encash the BGs available for recovery of outstanding dues. It is vehemently contended that the Advance Bank Guarantees were fraudulently misused by IOCL and PLL in contravention of the Bank Guarantee terms as well as their inter-se contract. It is submitted that there is a categorical admission on the part of the IOCL regarding recovery of advances and no denial whatsoever of the factual aspects raised by the Banks regarding fraud . IOCL has already recovered the entire mobilisation advance and has gone ahead and recovered an amount much higher than that and a backdoor arrangement has been entered into between the Corporate Debtor and IOCL. It is not the case of IOCL that having granted the mobilisation advance of 10% of total contract value i.e., Rs. 107 Crore, IOCL and Corporate Debtor modified the terms of the contract governing the grant of said mobilisation advance. The legal arrangement entered into between IOCL and the Corporate Debtor amounts to fraud played upon the Appellant Banks and such an arrangement would vitiate the very foundation of such BGs. It is argued that Advance Bank Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the parties before it and not the Appellant Bank. 3. Submissions of the Ld. Counsel appearing on behalf of the First Respondent: Ld. Counsel for the first Respondent/IOCL submitted that disputes between IOCL and Corporate Debtor are pending adjudication before the Hon ble Arbitral Tribunal and the same BGs are before the Arbitral Tribunal , wherein the Corporate Debtor has filed an application under Section 17 of the Arbitration and Conciliation Act, 1996 praying for stay on the encashment of the same BGs. The Application was dismissed by the Hon ble Arbitral Tribunal on 21.10.2021 and the BGs were encashed by the Bank on 22.10.2021. No appeal has been preferred by the Corporate Debtor against the dismissal of the application under Section 17 of the Arbitration and Conciliation Act, 1996 and hence the same has attained finality. The Arbitral Tribunal allowed encashment of the BGs only after appreciating the merits of the disputes between IOCL and the Corporate Debtor and the same cannot be allowed to be re-agitated by the Appellant Bank in the instant appeal. Independent Bank Guarantees created by third parties are beyond the scope of moratorium under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement entered into between IOCL and the Corporate Debtor for seeking additional advances without any intimation to the Bank. Two Bank Guarantees of the Appellant involved in this matter are No. 160127IBGA00005 of Rs. 49,44,58,134/- and another BG being No.160127IBGA00014 for Rs. 29,47,64,102/- both of which are unconditional and irrevocable and payable on demand. Both these Bank Guarantees have been encashed on 22.10.2021 subsequent to the Arbitral Award dated 21.10.2021. It is the main case of the Appellant Bank that the entire mobilisation advance for which Advance Bank Guarantees were furnished by the Appellant Bank, was admittedly repaid to the IOCL much prior to the invocation of Bank Guarantees and that IOCL and Corporate Debtor entered into a new arrangement vide fresh sanction letters, for which the Appellant Bank did not grant any Bank Guarantee nor was its concurrence taken. 5. Ld. Counsel for the Appellant had vehemently contended that fraud was committed on the Appellant Bank by IOCL acting in concert with the Corporate Debtor. In the matter of Arbitration before the Hon ble Arbitral Tribunal the Corporate Debtor was the Claimant and IOCL the Respondent wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimant qua the Bank in the amount of the ABGS. 69. The contentions of both parties with respect to Claimant's CIRP warrant a closer analysis of the Statutory scheme of the IBC so as to determine if pendency of CIRP would amount to irretrievable injustice to the Claimant. 70. The IBC upon initiation of CIRP imposes a statutory moratorium on the assets of a Corporate Debtor, which essentially prohibits and overrides all pending and potential recovery actions, during CIRP. The IBC was amended in 2018, and Section 14(3)(b) was introduced, which makes it clear that this moratorium does not apply to BGs. Section 14(3)(b) IBC reads as follows: 14. Moratorium. (3) The provisions of sub-section (1) shall not apply to- .. (b) a surety in a contract of guarantee to a corporate debtor. 71. It is also pertinent to refer to the Report of the Insolvency Law Committee that preceded 2018 amendment. The Committee while disagreeing with the view that the proceedings against sureties would affect the CIRP observed that: 5.10 The Committee further noted that a literal interpretation of Section 14 is prudent, and a broader interpretation m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue has already been decided against Claimant. 76. In light of the foregoing discussion, the Tribunal sees no reason to interfere with the encashment of ABGS by the Respondent. Claimant has failed to establish that any irretrievable injustice or harm will be caused to it by the encashment of the two ABGS. The prayer of Claimant for restoration of already encashed BGs is also dismissed, since such a prayer involves a determination into the merits of the dispute. This issue will be dealt with by the Tribunal at the time of passing of the arbitral award. Therefore, the Application of Claimant is dismissed. (Emphasis Supplied) 7. Having regard to the aforenoted findings in the Arbitration Award referring to the same BGs and encashment thereof and the observation of the Hon ble Arbitral Tribunal that there was no reason to interfere with the encashment of ABGs by IOCL and that there was no injustice or harm caused to it by the encashment, we do not see any substantial ground to delve into the issue of any breach of terms of the contract or any alleged fraud between IOCL and the Corporate Debtor. 8. It is also pertinent to note that the Appellant Bank had not taken any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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