Insolvency moratorium does not stop release of an encashed bank guarantee where the guarantee is independent and final orders exist.

An independent bank guarantee furnished under consent orders and later encashed was held outside the insolvency moratorium because it was not treated as execution against the corporate debtor's assets and the statutory exclusion for sureties applied. The prior order directing encashment had attained finality, and the pending challenge to the arbitral award did not make the company application non est. The release of the realized amount to the applicant was therefore maintainable under section 14(1), subject to an undertaking to repay with interest if required in the pending section 34 proceedings.

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Issues: Whether the encashment and release of the bank guarantee amount were barred by the moratorium under the Insolvency and Bankruptcy Code, 2016, and whether the company application seeking such release was maintainable.

Analysis: The dispute had already been referred to arbitration pursuant to consent orders, and the bank guarantee was furnished in compliance with that arrangement. The prior order directing encashment of the bank guarantee had attained finality. A guarantee is an independent contract, and the provision excluding sureties from the moratorium applied. The application for release of the amount already realized on encashment was not treated as an execution proceeding against the assets of the corporate debtor. The moratorium under section 14(1) did not, therefore, prevent release of the encashed amount to the applicant. The Court also noted that the pending challenge to the arbitral award did not render the application non est.

Conclusion: The moratorium did not bar encashment or release of the bank guarantee amount, and the application was maintainable. Relief was granted in favour of the applicant, subject to an undertaking to repay with interest if required in the pending section 34 proceedings.

Ratio Decidendi: Encashment of an independent bank guarantee furnished pursuant to a court order is outside the moratorium where the guarantee is not treated as execution against the corporate debtor's assets and the statutory exclusion for sureties applies.

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