Bank guarantee proceeds in insolvency form part of the corporate debtor's assets, not a separate creditor security interest.

Amounts realised under a bank guarantee furnished at the request of the corporate debtor for securing its liability were treated as part of the corporate debtor's assets during insolvency, not as an independent security interest in favour of the financial creditor. The insolvency framework and moratorium required the amount to remain under the control of the resolution professional for administration in the resolution process or liquidation, because it was linked to the creditor's admitted claim and the debtor's underlying obligation. The contrary finding was set aside.

---

---

Issues: Whether the amount of Rs. 20 crores deposited pursuant to the bank guarantee furnished at the instance of the corporate debtor was to be treated as an asset of the corporate debtor or as a security interest in favour of the financial creditor during the corporate insolvency resolution process.

Analysis: The amount arose from a bank guarantee given on the request of the corporate debtor to secure the award debt and was linked to the creditor's admitted claim in insolvency. The moratorium and the insolvency framework required that the amount be dealt with as part of the corporate debtor's assets and be placed under the control of the resolution professional for distribution in the resolution process or liquidation, rather than being treated as a separate security interest in favour of the creditor.

Conclusion: The amount of Rs. 20 crores was held to be an asset of the corporate debtor and not a security interest of the financial creditor; the contrary finding was set aside.

Ratio Decidendi: Amounts secured through a bank guarantee furnished at the instance of the corporate debtor, when linked to the debtor's liability and subject to insolvency proceedings, form part of the corporate debtor's assets and are to be administered within the insolvency process, not treated as an independent security interest of the creditor.

---