Performance bank guarantee restraint falls when unsupported contractual reconciliation directions are set aside.

A direction requiring reconciliation of work done by the corporate debtor and payment within a fixed time was found to exceed the Adjudicating Authority's scope, since contractual disputes could not be adjudicated in that forum and the order conflicted with the earlier position on invocation of the performance bank guarantee. The consequent status quo restraint on invoking the bank guarantee also failed because it depended entirely on the unsustainable reconciliation direction and had no independent basis. Both impugned orders were therefore set aside, and the appellant obtained relief in both appeals.

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Issues: (i) whether the direction requiring reconciliation of work done by the corporate debtor and payment within a fixed time could be sustained; (ii) whether the consequential status quo order restraining invocation of the performance bank guarantee could survive.

Issue (i): whether the direction requiring reconciliation of work done by the corporate debtor and payment within a fixed time could be sustained.

Analysis: The Appellate Tribunal held that the Adjudicating Authority had gone beyond the scope of the applications by issuing a direction on reconciliation and payment. It found that the forum was not the proper one for adjudicating the contractual disputes between the parties and that the direction was inconsistent with the earlier finding that the appellant could not be prevented from invoking the performance bank guarantee. The impugned direction was therefore treated as unwarranted.

Conclusion: The direction requiring reconciliation and payment was set aside in favour of the appellant.

Issue (ii): whether the consequential status quo order restraining invocation of the performance bank guarantee could survive.

Analysis: The status quo order was founded entirely on the reconciliation direction passed earlier. Once that foundational direction was held unsustainable and set aside, the consequential restraint on invocation of the bank guarantee had no independent basis to continue.

Conclusion: The status quo order was set aside in favour of the appellant.

Final Conclusion: Both impugned orders were annulled, and the appellant obtained complete relief in both appeals.

Ratio Decidendi: A direction affecting invocation of a performance bank guarantee cannot be sustained where it rests on an unwarranted order for contractual reconciliation, and any consequential restraint founded on that order must also fall.

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