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TMI Blog2023 (10) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfaction of the Appellant. It further prescribes that the Appellant shall be entitled to invoke and encash the said Bank Guarantee on the terms and conditions as stipulated in the said Bank Guarantee. From the perusal of the Bank Guarantee bond dated 30.05.2012, this Tribunal finds that the Bank had undertaken to pay the amounts due and payable under the said Guarantee without any demur, merely on a demand from the Appellant and the Bank had undertaken to pay the Appellant any amount so demanded notwithstanding any dispute raised by the Corporate Debtor and that the Bank s liability under the said Bank Guarantee is absolute and unequivocal - it is apparent that the Bank had absolute, unequivocal and irrevocable liability to pay to the Appellant the amount guaranteed to the Appellant on demand without any demur and irrespective of any objection or dispute or any legal proceeding initiated by the Corporate Debtor. The Moratorium was envisaged to ensure that the Corporate Debtor s Assets are not liquidated or reduced till the CIRP is completed. The idea behind Moratorium was that no additional stress is brought on the business which is being rescued. In the instant case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi (hereinafter called the `Appellant ) being aggrieved by the Order dated 25.08.2021 in I.A. No.3139/ND/2020 in C.P. (IB) No. 364(ND)/2019, passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi, Court IV). 2. I.A. No. 2256/2021 filed in the present Appeal was allowed vide Order dated 29.11.2021, condoning the delay of two days in filing the present Appeal. Amendment in cause title and pleadings, as requested by the Appellant were allowed in I.A.2555/2021, I.A.3344/2022 and I.A.3345/2022. 3. Brief facts of the case are that `M/s. Ganesh Fire Equipments Private Limited (hereinafter called `Corporate Debtor ) had entered in an Agreement dated 11.05.2012 with the Appellant for the raw material financial assistance against Bank Guarantee under the Raw Material Assistance Scheme of the Appellant. The Appellant is a Government Company which facilitates MSME and also provides integrated support services under Marketing, Technology, Finance and other Support Services. It is submitted that as per Clause 4 of the Agreement, the Corporate Debtor had agreed and undertaken to repay the amount with interest. As per Clause 6 of the Agreement, raw m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he raw material financial assistance against Bank Guarantee was sought for Rs.1 Crore which was later increased to Rs. 2.99Crores by executing a supplementary Agreement dated 05.10.2018. In compliance of the two Agreements, 7 Bank Guarantees were submitted to the Appellant. 5. On an Application by the Operational Creditor M/s. Jasmeet Associates, the Corporate Debtor was admitted in Corporate Insolvency Resolution Process (`CIRP ) in C.P. (IB) No. 364(ND)/2019. The announcement regarding initiation of CIRP was made in the newspapers on 12.02.2020. The Appellant invoked the Bank Guarantees vide letter dated 14.02.2020. 6. I.A. No.3139/ND/2020 in C.P. (IB) No. 364(ND)/2019 was filed by the Resolution Professional praying that the actions of the Appellant in invoking Bank Guarantee were in violation of the provisions of Section 14(1)(c) of IBC, 2016, which provides Moratorium prohibiting 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 SARFAESI Act, 2002. 7. The Adjudicating Authority vide Order dated 28.08.2021 quashed the Notices issued by the Appellant regarding inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. National Company Law Tribunal, New Delhi Bench at New Delhi and not to quash the notices issued for invocation of Bank Guarantees by the Appellant; (c) This Hon'ble Tribunal may be pleased to declare that the Bank Guarantees in question can be invocated/encashed even during the moratorium period under section 14 of the IBC against the Corporate Debtor. (d) Direct the Respondent No.2 to release the payment of Bank Guarantees invoked by the Appellant. (e) Direct the Respondent No. 2 to release amount of interest @ 16.05% per annum on amount of Bank Guarantees for date of invocation of such Bank Guarantees till date of realization of Bank Guarantees invoked. (f) Pass any other order as this Hon ble Tribunal may deem fit. 9. Learned Counsel for the Appellant submitted that in the Impugned Order the Adjudicating Authority has held that since the Bank Guarantee in question does not fall under the category of Performance Bank Guarantee to qualify for exclusion as per provision of Section 3 sub-Section (31) of the IBC, 2016, invocation of such Guarantee is not permissible under Section 14 of the IBC, 2016. The Adjudicating Authority has erred in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Counsels for the Appellant and the Respondents and have perused their submissions. 13. The Adjudicating Authority while allowing the Application of the Resolution Professional has stated that invocation of Bank Guarantee by the Appellant (NSIC) is not in consonance with the provisions of the IBC, 2016, as the Bank Guarantees do not fall under the category of Performance Bank Guarantee to qualify for exclusion as per the provisions of Section 3(31) of the IBC, 2016. The Adjudicating Authority held that since the Guarantee is not Performance Bank Guarantee , the Moratorium under Section 14 shall apply. In arriving at this conclusion, the Adjudicating Authority noted that the Appellant (NSIC) had financed purchase of raw materials to enhance manufacturing capacity of the Corporate Debtor and was secured by the said Bank Guarantees, which tantamounts to financial assistance and there are no ingredients of linkage to performance to call it Performance Bank Guarantee . We have gone through the provisions of the said Bank Guarantees and the Agreement between the Appellant and the Corporate Debtor wherein it is apparent that the Appellant was extending raw material assistance to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Borrower of the first surety and second surety or the guarantor Bank, as the case may be hereby expressly walve/relinquish the defense/plea. ( Emphasis Supplied ) 16. From the perusal of the Bank Guarantee bond dated 30.05.2012, this Tribunal finds that the Bank had undertaken to pay the amounts due and payable under the said Guarantee without any demur, merely on a demand from the Appellant and the Bank had undertaken to pay the Appellant any amount so demanded notwithstanding any dispute raised by the Corporate Debtor and that the Bank s liability under the said Bank Guarantee is absolute and unequivocal. As per para 8 of the said Guarantee dated 30.05.2012, the Bank had undertaken not to revoke this Guarantee during its currency except by previous consent of the Appellant. From the plain reading of the said document given at Page No. 88 to 91 of the Appeal Paper Book, it is apparent that the Bank had absolute, unequivocal and irrevocable liability to pay to the Appellant the amount guaranteed to the Appellant on demand without any demur and irrespective of any objection or dispute or any legal proceeding initiated by the Corporate Debtor. 17. Before deciding wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off 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 (54 of 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. Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a licence, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 21. Since the assets of the surety (Respondent No. 2) are separate from those of the `Corporate Debtor , encashment of `Bank Guarantee would not impact the Assets of the `Corporate Debtor . Only difference will be that instead of the Appellant, the claim against the said amount from the `Corporate Debtor will be shifted and will have to be raised by the Respondent No. 2 (Canara Bank). It has been submitted that the Appellant had not filed any claim before Resolution Professional and it is Respondent No. 2 who has filed the claim before the Resolution Professional. 22. As per the provisions of Clause (b) of sub-Section (3) of Section 14, the provisions of sub-Section (1) relating to Moratorium shall not apply to a surety in a contract of Guarantee to a Corporate Debtor. These terms are defined in Section 126 of the Indian Contract Act, 1872, which is given below for ready reference: 126. Contract of guarantee , surety ..... X X X X Extracts X X X X X X X X Extracts X X X X
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