TaxTMI 
TaxTMI 
2018 (3) TMI 231
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. The facts, that are necessary for disposal of this Application, are as follows: 2.1 M/s. Diamond Power Transformers Limited [hereinafter referred to as the "Corporate Debtor"], through its Director, triggered Corporate Insolvency Resolution Process under Section 10 of the Insolvency and Bankruptcy Code, 2016 ["Code" for short]. This Adjudicating Authority by order dated 6th June, 2017 made in CP (IB) No. 28 of 2017 admitted the Petition filed by the Corporate Applicant and imposed moratorium under Section 14 of the Code. This Adjudicating Authority had appointed Mr. Arvind Gaudana as Interim Insolvency Resolution Professional. Thereafter, Mr. Nitin H. Parikh was appointed as 'Resolution Professional' for the purpose of conducting Corporate Insolvency Resolution Process in respect of the Corporate Debtor Company. 2.2 It is stated in this Application that Madhya Gujarat Vij Company Limited [hereinafter referred to as "MGVCL"] is the customer of the Corporate Debtor since last 8 to 10 years. MGVCL used to purchase various types of transformers from the Corporate Debtor. 2.3 The transaction in this Application relates to Eight Acceptance of Tenders (ATs) issued between ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rest could not be despatched because the final testing was yet to be performed. 3.4 In the month of June 2017, MGVCL has taken a drastic decision for discontinuing power supply to the Company and on account of the same Corporate Debtor could not repair the remaining transformers even though they are willing to repair the transformers. The Company also wrote a letter on 27th July, 2017 indicating its willingness to repair the transformers by 27th August, 2017. The Company could not honour the commitment because of discontinuation of power supply from 28th July, 2017. Out of 6 ATs, in case of 4 ATs not a single transformer is given by MGVCL to the Corporate Debtor for repair and therefore all the 4 Performance Guarantees are required to be kept alive and cannot be encashed or invoked. In case of remaining 2 ATs, 33 transformers were given for repairs which the Company could not repair because of the reasons stated above. The Applicant denied the allegation that Company failed to supply 799 transformers. It is the case of Applicant that Company supplied 4298 transformers. On 5.8.2017 MGVCL informed the Corporate Debtor stating that against the outstanding dues of the Corporate Deb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be withheld but the Banks have not encashed the Bank Guarantees. The Legislature excluded the Performance Guarantees from the purview of the Code but the Banks refuse to invoke the Performance Guarantees also. It is stated that the Corporate Debtor failed to supply the quantity of transformers as per the order. The MGVCL issued a show-cause notice on the Corporate Debtor on 23.1.2017. There was a personal hearing for the Director of the Corporate Debtor on 20th March, 2017 with the Managing Director of MGVCL. Having noticed the failures of the Corporate Debtor the Company resolved to issue a show-cause notice dated 23.1.2017 to Stop Dealing with the Corporate Debtor. It is stated that "Stop Dealing Letter" due to non-performance of contract does not fall within the purview of moratorium under Section 14 of the Code. It is stated that the 1st Respondent filed Special Civil Application before the Hon'ble High Court of Gujarat and therefore the Applicant cannot now invoke the remedy of filing this Application. 5. Respondent No.2 filed Reply stating that in view of the moratorium order passed by this Tribunal in CP (IB) No. 28 of 2017 under Section 14 of the Code the Respondent cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bank is in a confused state where there are two conflicting applications one claiming restraint order, another invoking the Bank Guarantee pending NCLT moratorium period. It is said that claim against the Company on performance guarantee is a unsecured claim by any operational creditor during the pendency of insolvency proceedings before NCLT. The Respondent No.2 Bank undertakes to abide by any orders passed by this Tribunal in respect of the subject matter. Respondent No.3 Bank also filed Reply on the same lines on which the Respondent No.2 Bank has filed. 6. The points, that emerge for determination in this Application, are as follows: (i) Whether 1st Respondent is entitled to invoke Bank Guarantees during moratorium period; (ii) Whether Performance Guarantee is a 'Security Interest' or not; (iii) Whether supply of power to Corporate Debtor can be restated 7. Section 3, sub-section (31) defines "Security Interest" as under; "(31) "security interest" means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and inclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. In the case on hand, the moratorium period was extended for further period of 90 days beyond 180 days as per order dated 1st December, 2017. The 180 days' period had expired on 2.12.2017. Now, it is extended for another period of 90 days. 9. Section 3 (31) clearly says that Performance Guarantees are not included in the Security Interest. What is covered by the order of this Authority under Section 14(l)(c) is the Security Interest. Therefore, the moratorium order passed by this Tribunal is not applicable to the Performance Guarantees given by the Corporate Debtor. Therefore, the Bankers are at liberty to allow the 1st Respondent to encash the Bank Guarantees that are given in respect of Performance Guarantees subject to other objections, if any. If the Applicant has got any other dispute with regard to the invocation of the Performance Guarantees, it is not within the right of the Banker not to allow encashment of Performance Guarantees unless it is shown that fraud has been played in obtaining the Bank Guarantee or in invocation of Bank Guarantee or irrevocable injustice has been caused to company as laid down decision of UP State Sugar Corpn. v. Sumac International Ltd.[19....