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TMI Blog2024 (10) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... Show Cause notice, decision was taken by Scrutiny Committee, recommending for invocation. The Nominated Authority after considering the recommendation, facts and circumstances, took the decision to invoke the Bank Guarantee as per the terms of the Agreement. Default on the part of the Corporate Debtor was established, hence, present was not a case where Court ought to have exercised its discretion, restraining the Bank from enforcing the Bank Guarantee. The Adjudicating Authority rightly took the decision to not grant the relief as prayed by the Appellant. There are no error in the order of the Adjudicating Authority, refusing the prayer to set aside the letter sent by Respondent No.1 to the Bank for invocation of Bank Guarantee. It is further to be noticed that letters, which were sent to the Bank were all in consequence to the earlier decision taken on 27.10.2023 by the Nominated Authority to invoke the Bank Guarantee, which was Appropriation Order. Subsequent letters were only follow-up and in consequence to the earlier order and by letter dated 28.03.2024, notice of dispute given by the Corporate Debtor was disposed of, upholding the earlier decision. There are no ground to int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a letter dated 28.03.2024 was issued by Additional Secretary Nominated Authority, communicating that a Meeting was held on 18.12.2023 for deliberation on the Dispute Notice dated 02.09.2023, wherein the request of the Corporate Debtor was declined and the decision earlier taken was reiterated. On 05.04.2024 and 10.04.2024, Respondent No.1 called upon the Bank to appropriate an amount of Rs.7,38,37,440/-. (vi)After the receipt of the above letter, the Appellant filed an IA No.1710 of 2024 before the Adjudicating Authority seeking a direction against Indian Bank from acting on the invocation letters dated 05.04.2024 and 10.04.2024. The Application came for consideration before the Adjudicating Authority and Adjudicating Authority took the view that Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC ) does not create a bar on encashment of PBG during moratorium. (vii)Aggrieved by which order, refusing to put restrain on invocation of PBG, this Appeal has been filed. 3.We have heard Shri Arvind Nayar, learned Senior Counsel appearing for the Appellant and Ms. Shiva Lakshmi, Central Government Standing Counsel for the Respondent. 4.Learned Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said order, the Nominated Authority disposed of the Dispute Notice dated 02.09.2023, which was given by the Corporate Debtor. The order dated 28.03.2024, upheld the earlier decision of Nominated Authority. It is submitted that enforcement of moratorium has no effect on encashment of PBG, which is well settled by several judgments of this Tribunal. 6.Learned Counsel for both the parties have relied on various judgments of the Hon ble Supreme Court and this Tribunal, which we shall refer to while considering the respective submissions. 7.The order of Adjudicating Authority, which is sought to be challenged, notes the prayers made in IA No.1710 of 2024 in paragraph-2 of the order, which are as follows: 2. IA 1710(MB)2024 : This is an application filed for seeking following reliefs: a. This Hon'ble Tribunal be pleased to pass an order and direction restraining Respondent No.2 from encashing the Performance Bank Guarantee dated December 18, 2020; b. This Hon'ble Tribunal be pleased to pass an order and direction restraining Respondent No.2 from acting on the invocation letters dated April 05, 2024, and April 10, 2024, issued by Respondent No. 1; c. This Hon'ble Tribunal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The said recommendations have been further deliberated upon by the Nominated Authority and the Central Government. The Nominated Authority and the Central Government have accepted the recommendations of the Scrutiny Committee. Further, in terms of Clause 6.2.1 (d), the Nominated Authority has determined that the failure of the Successful Bidder to comply with the Efficiency Parameters mentioned in Table-1 above are Appropriation Events . The Central Government has also accepted the said decision. 6.Therefore, in view of the clauses referred to in paragraph 1 and 2 above, the Nominated Authority is hereby directing for the following appropriations from the Performance Bank Guarantee (as it stood on the prescribed due date of completion of milestone):- S.No. Milestone No. Activity Percentage to be appropriated/ Weightage assigned to the Milestone 1. 17 Scheduled Production 8 2. 17 Scheduled Production 8 3. 17 Scheduled Production 8 Total 24 7.The Performance Security in form of Bank Guarantee as on the due date of completion of the aforementioned Efficiency Parameter amounts to Rs.30,76,56,000. Hon ble High Court of Delhi in LPA No.145/2020 vide its order dated 08.12.2020 directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been allotted to the Petitioner. 2.Material on record discloses that the Minutes of Meeting dated 27/28.07.2023 would be placed before the Nominated Authority/Ministry of Coal for its approval. It is stated that the Petitioner had been called for a meeting on 12.10.2022 and because of the fact that the authorized representative of the Petitioner was suffering from liver abscess and was in hospital, the meeting was re-scheduled to 16.11.2023. 3.The Petitioner herein apprehends that the Bank Guarantee given by the Petitioner would be invoked even before the Nominated Authority takes its decision. 4.When this Court suggested to the learned Senior Counsel for the Petitioner that the instant writ petition is premature inasmuch as the matter is still pending before the Nominated Authority, learned Senior Counsel for the Petitioner has graciously accepted the suggestion made by this Court and has sought liberty to withdraw the instant writ petition with liberty to approach this Court in case, the Nominated Authority takes a decision upholding the Minutes of Meeting dated 27/28.07.2023. 5.Permission and liberty, as prayed for, are granted. 6.The writ petition is disposed of as withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcement of Bank Guarantees. The first judgment relied on, is the judgment of this Tribunal in Bharat Aluminium Co. Ltd. vs. J.P. Engineers Pvt. Ltd. through Mr. Sumit Bansal IRP Anr. (2021) SCC Online NCLAT 57, wherein in paragraphs 37 and 38, this Tribunal laid down following: 37. With the aforesaid, we hold that the Corporate Debtor has issued bank guarantee for ensuring the price of goods. The bank guarantee is irrevocable and unconditional and payable on demand without demur. The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of third party like surety. Bank guarantee can be invoked even during moratorium period issued under section 14 of the IBC in view of the amended provision under section 14(3)(b) of the IBC. 38. Ld. Adjudicating Authority has not considered the aforesaid amended provision. Therefore, the impugned order is not sustainable in law. Hence, the impugned order is hereby set aside. Resultantly the Respondent No. 2's Application I.A. No. 2572/ND/2020 is dismissed whereas the Appellant's Application I.A. No. 2085/ND/2020 is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. *** 5.7. The Allahabad High Court subsequently took a differing view in Sanjeev Shriya v. SBI [Sanjeev Shriya v. SBI, 2017 SCC Online All 2717 : (2018) 2 All LJ 769 : (2017) 9 ADJ 723] , by applying moratorium to enforcement of guarantee against personal guarantor to the debt. The rationale being that if a CIRP is going on against the corporate debtor, then the debt owed by the corporate debtor is not final till the resolution plan is approved, and thus the liability of the surety would also be unclear. The Court took the view that until debt of the corporate debtor is crystallised, the guarantor's liability may not be triggered. The Committee deliberated and noted that this would mean that surety's liabilities are put on hold if a CIRP is going on against the corporate debtor, and such an interpretation may lead to the contracts of guarantee being infructuous, and not serving the purpose for which they have been entered into. 5.8.In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, 2018 SCC Online Nclat 384] , Nclat took a broad interpretation of Section 14 and held that it would bar proceedings or actions against sureties. While doing so, it did not refer to any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.11. Further, since many guarantees for loans of corporates are given by its promoters in the form of personal guarantees, if there is a stay on actions against their assets during a CIRP, such promoters (who are also corporate applicants) may file frivolous applications to merely take advantage of the stay and guard their assets. In the judgments analysed in this relation, many have been filed by the corporate applicant under Section 10 of the Code and this may corroborate the above apprehension of abuse of the moratorium provision. The Committee concluded that Section 14 does not intend to bar actions against assets of guarantors to the debts of the corporate debtor and recommended that an explanation to clarify this may be inserted in Section 14 of the Code. The scope of the moratorium may be restricted to the assets of the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence. There are, however, exceptions to this rule when there is a clear case of fraud, irretrievable injustice or special equities. The Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee. 22.The learned Counsel for the Appellant has placed reliance on judgment of the Hon ble Supreme Court in (2007) 8 SCC 110 Himadri Chemicals Industries Ltd. vs. Coal Tar Refining Co. on the proposition that Court may pass injunction order to restrain enforcement of Bank Guarantee in cases where encashment would result in irretrievable harm or injustice to the party concern. The above was a case dealing with law of the Bank Guarantees. We have already noticed the judgment of the Hon ble Supreme Court in Standard Chartered Bank vs. Heavy Engineering Corporation Limited and Anr. (supra), where the Hon ble Supreme Court has laid down that Bank Guarantee is an independent contract between Bank and the beneficiary and the Bank is always obl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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