Civil claim dismissed; insolvency forum is appropriate, bank guarantees may be encashed; plaintiff liable for Rs.25 lakh costs.

The HC held the civil court lacked jurisdiction and rejected the plaints, refusing relief to restrain encashment of the bank guarantees; the NCLT is the appropriate forum and encashment may proceed. The court found the plaintiff's conduct caused over three months' delay and substantial prejudice to creditors and the resolution process, so the bank guarantees constituted a genuine pre-estimate of loss. No order for reimbursement of BG amounts with interest was made, but the plaintiff was ordered to pay costs of Rs. 25,00,000 to the respondent bank within four weeks.

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Issues Involved:
1. Jurisdiction of the Civil Court to entertain the suits.
2. Entitlement of the plaintiff to interim injunction restraining encashment of Bank Guarantees (BGs).
3. Validity of the invocation of the BGs by the defendants.
4. Applicability of the Insolvency and Bankruptcy Code, 2016 (Code) to the disputes.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Civil Court to entertain the suits:
The primary contention was whether the Civil Court has jurisdiction to entertain disputes arising under the Insolvency and Bankruptcy Code, 2016. The defendants argued that the Code provides exclusive jurisdiction to the National Company Law Tribunal (NCLT) for matters related to insolvency resolution, as per Sections 60(5)(c), 63, and 231 of the Code. The plaintiff countered that the BGs were not part of the insolvency proceedings and thus fell under the jurisdiction of the Civil Court.

The Court concluded that it lacked jurisdiction over the subject matter, as the disputes arose out of or in relation to insolvency resolution. The Code expressly bars the jurisdiction of Civil Courts in such matters. The Court emphasized that the entire transaction, including the BGs, was within the ambit of the Code, and allowing Civil Courts to entertain such disputes would undermine the objectives of the Code.

2. Entitlement of the plaintiff to interim injunction restraining encashment of BGs:
The plaintiff sought an interim injunction to restrain the encashment of BGs, arguing that the invocation was not in terms of the BGs and that there was no fraud or irretrievable harm. The defendants argued that the BGs were unconditional and that the plaintiff had failed to submit the required Performance Bank Guarantees (PBGs), justifying the invocation.

The Court found that the BGs were unequivocally, irrevocably, and unconditionally payable on demand. The invocation by the State Bank of India (SBI) was in the prescribed format and terms of the BGs. The Court held that the plaintiff failed to demonstrate any fraud of an egregious nature or irretrievable harm, which are the only grounds for restraining payment under unconditional BGs.

3. Validity of the invocation of the BGs by the defendants:
The plaintiff argued that the conditions for the event of forfeiture had not been met, and thus the invocation was invalid. The defendants maintained that the plaintiff's failure to furnish the PBGs constituted a valid ground for invocation.

The Court determined that the invocation was valid and in accordance with the terms of the BGs. The BGs' format required no additional proof beyond the demand letter, which was duly provided by SBI. The Court rejected the plaintiff's contention that the invocation was not justified, as the BGs were unconditional and the plaintiff had agreed to the terms.

4. Applicability of the Insolvency and Bankruptcy Code, 2016 (Code) to the disputes:
The defendants argued that the disputes were intrinsically linked to the insolvency resolution process under the Code, which provides a comprehensive framework for such matters. The plaintiff contended that the BGs were independent contracts not governed by the Code.

The Court held that the disputes were indeed related to the insolvency resolution process and fell under the exclusive jurisdiction of the NCLT. The Code's objective is to provide a unified and expedited insolvency resolution process, and allowing Civil Courts to adjudicate such disputes would contravene this purpose.

Conclusion:
The Court concluded that it did not have jurisdiction to entertain the suits, as the disputes arose out of the insolvency resolution process governed by the Code. The invocation of the BGs by SBI was found to be valid and in accordance with the terms of the BGs. The plaintiff was not entitled to an interim injunction, and the plaints were rejected. The plaintiff was directed to pay costs to SBI for delaying the receipt of payment under the BGs.

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