Tribunal Upholds IRP's Application, Invalidates Termination & Bank Guarantee, Protects Corporate Debtor Rights

The Tribunal held that the application filed by the IRP was maintainable as it did not require prior concurrence of the CoC. The termination of work orders during the moratorium period was deemed to contravene IBC provisions and principles of natural justice, being against the spirit of the law. The invocation of bank guarantees by Respondent No. 1 was declared invalid, with the bank directed to place a lien on their accounts. The Tribunal prohibited any prejudicial actions against the Corporate Debtor without authority approval and deemed any fresh tender awarded as void. The Corporate Debtor was permitted to claim its dues lawfully.

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Issues Involved:
1. Maintainability of IA 214/JPR/2020 filed by the IRP without prior concurrence of CoC.
2. Whether the termination of work orders is in contravention of the letter and spirit of IBC, 2016.
3. Whether Respondent No. 1 can invoke bank guarantees in the factual matrix of the case.

Issue-wise Detailed Analysis:

1. Maintainability of IA 214/JPR/2020:
The Tribunal examined Section 28 of IBC, 2016, and concluded that the filing of IA 214/JPR/2020 by the IRP does not fall under the purview of Section 28, which requires prior approval of the CoC for certain actions. Therefore, the application filed by the IRP is maintainable.

2. Termination of Work Orders:
The Tribunal considered the relevant provisions of IBC, 2016, including the moratorium under Section 14, the overriding effect of Section 238, and the management of the corporate debtor as a going concern under Section 20. It was determined that the termination of the work orders by Respondent No. 1 during the moratorium period contravened these provisions. The Tribunal noted that the termination of Work Order No. 1 was done without proper notice and was inconsistent with the principles of natural justice. Additionally, the Tribunal highlighted that the termination proceedings were in violation of the Government of Rajasthan's circular granting an extension of six months to all contractual obligations due to the COVID-19 pandemic. Thus, the termination actions were held to be against the letter and spirit of IBC, 2016, and were declared inoperative and null.

3. Invocation of Bank Guarantees:
The Tribunal stated that any action taken as a consequence of an invalid root action, such as the termination of work orders, is per se illegal and invalid. Citing the Hon'ble Supreme Court's observation in State of Punjab vs. Davinder Pal Singh Bhullar & Ors., it was concluded that since the termination provisions/proceedings were void ab-initio, the consequent invocation of bank guarantees by Respondent No. 1 was non-est in law and liable to be set aside. The Tribunal directed Respondent No. 3 (Punjab National Bank) to place a lien on the bank accounts of Respondent No. 1 for the amount equivalent to the bank guarantees invoked and to hold this sum as custodia legis until further directions.

Judgment:
The Tribunal held and ordered that:
a. Provisions for termination included in or connected with the instruments of Work Orders No. 1 and 2 are invalid and prohibited under Section 238 of IBC, 2016.
b. Termination of Work Orders 1 and 2 and all related communications are inoperative and null.
c. The invocation of bank guarantees by Respondent No. 1 is untenable, and Respondent No. 3 is directed to place a lien on Respondent No. 1’s bank accounts for the amount of the bank guarantees invoked.
d. Respondent No. 1 and 3 are directed not to take any prejudicial action against the Corporate Debtor during the CIRP period without prior approval of the Adjudicating Authority.
e. Any fresh tender awarded in this regard is invalid and void.
f. The Corporate Debtor is at liberty to raise claims for its dues in accordance with the law.

The applications IA No. 214/JPR/2020 and IA No. 167/JPR/2020 were disposed of with these directions.

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