Moratorium and performance bank guarantees: invocation remains permissible absent fraud, irretrievable injustice, or special equity.

Section 14 moratorium under the Insolvency and Bankruptcy Code does not prevent invocation or encashment of a performance bank guarantee, because such a guarantee is an independent contractual obligation and not a security interest of the corporate debtor. The moratorium operates against the corporate debtor and its assets, not against the surety bank's liability to the beneficiary. Where no fraud, irretrievable injustice, or other exceptional equity is shown, enforcement may proceed. If the appropriation decision was taken before commencement of CIRP, later invocation letters are consequential and do not invalidate the earlier decision.

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Issues: (i) Whether the moratorium under the Insolvency and Bankruptcy Code bars appropriation or invocation of a performance bank guarantee issued for the corporate debtor. (ii) Whether the subsequent invocation letters and the authority's decision to appropriate the guarantee amount were invalid for breach of moratorium or for any equitable ground warranting injunction.

Issue (i): Whether the moratorium under the Insolvency and Bankruptcy Code bars appropriation or invocation of a performance bank guarantee issued for the corporate debtor.

Analysis: The moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 operates against the corporate debtor and its assets, but does not extend to a surety in a contract of guarantee. A performance bank guarantee is not treated as a security interest of the corporate debtor. The guarantee is an independent contract between the bank and the beneficiary, and settled law recognises that such a guarantee may be invoked even during CIRP, absent fraud, irretrievable injustice, or other exceptional equities.

Conclusion: The moratorium did not bar invocation or encashment of the performance bank guarantee, and the challenge on that ground failed.

Issue (ii): Whether the subsequent invocation letters and the authority's decision to appropriate the guarantee amount were invalid for breach of moratorium or for any equitable ground warranting injunction.

Analysis: The appropriation decision had already been taken before commencement of CIRP, and the later communications were only consequential steps. The writ proceedings relied upon by the appellant had been withdrawn and did not invalidate the earlier appropriation order. No exceptional case of fraud, irretrievable harm, or special equity was established to restrain enforcement of the guarantee.

Conclusion: The subsequent invocation letters and the appropriation process were valid, and no injunction could be granted.

Final Conclusion: The appeal failed on all substantive grounds, and the order refusing restraint on enforcement of the bank guarantee was sustained.

Ratio Decidendi: The moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 does not prohibit invocation of a performance bank guarantee, since such guarantee is an independent contractual obligation and is outside the corporate debtor's moratorium-protected assets.

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