TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 593
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....y the applicant had deposited a sum of Rs. 10,53,000/- with the respondent as and by way of security deposit. The said Term Sheet contemplated a final leave and license agreement to be executed between the parties within four months, failing which the Term Sheet shall stand cancelled and the security deposit would have to be refunded to the applicant. The time to execute the final leave and license agreement was extended by letter dated 9th July, 2014 where under a further additional payment of Rs. 28,00,000/was deposited by the applicant with the respondent aggregating to Rs. 38,53,000/- towards security deposit. No leave and license agreement was however, finalized even by the extended date. 3. The applicant filed a winding up petition (Company Petition No.489 of 2015) on 6th April, 2015 against the respondent in view of the respondent having failed to return the security deposit with interest to the applicant. On 5th April, 2017, this Court passed an order in the said company petition by consent of parties. The dispute between the parties was referred to arbitration of Ms.Sowmya Srikrishna, a counsel of this Court. The respondent through its counsel undertook to furnish a bank ....
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....a company petition under section 7 of the Insolvency & Bankruptcy Code, 2016 against the respondent before the National Company Law Tribunal, Mumbai Bench in respect of the alleged default in the sum of Rs. 93,86,52,393/- as on 25th September, 2017. By an order dated 29th January, 2019, National Company Law Tribunal, Mumbai Bench admitted the said company petition and passed an order under section 14 of the Insolvency & Bankruptcy Code, 2016 with effect from the date of the said order by prohibiting institution of any suit before any Court of law, transferring / encumbering any of the assets of the debtor etc. The National Company Law Tribunal also appointed Interim Resolution Professional. 8. It is the case of the applicant that the respondent however, did not disclose the said order dated 29th January, 2019 passed by the National Company Law Tribunal before the learned arbitrator. On 25th March, 2019, the applicant through its advocate's letter requested the learned Prothonotary & Senior Master of this Court to direct the Indian Bank to forthwith deposit the amount to the Prothonotary & Senior Master of this Court by demand draft under the said bank guarantee or by pay order in ....
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....ndian Bank did not permit encashment of the bank guarantee, the applicant moved this Court again for appropriate directions. On 8th November, 2019, Shri Justice S.J. Kathawalla recorded that the Indian Bank had committed gross breach of the order dated 6th September, 2019 and continued to breach the said order. This Court directed the Indian Bank to forthwith deposit the sum of Rs. 38,53,000/- along with interest, if any, with the Prothonotary & Senior Master of this Court before 3.00 p.m. on 11th November, 2019. On 11th November, 2019, the Indian Bank forwarded a demand draft of Rs. 38,80,208/- against the said bank guarantee of Rs. 38,53,000/- in favour of the Prothonotary & Senior Master of this Court. On 27th November, 2019, the respondent filed affidavit in reply opposing this application. The applicant filed affidavit in rejoinder. 12. Mr.Naushad Engineer, learned counsel appearing for the applicant invited my attention to various annexures to the company application, affidavit in reply and affidavit in rejoinder in this company application and would submit that pursuant to the order passed by this Court on 5th April, 2017, the issue was referred to arbitration of Ms.Sowmya ....
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....as envisaged under section 14 of the Insolvency & Bankruptcy Code, 2016 has attained finality. The respondent has not challenged the said order passed by this Court. 15. It is submitted that the reliefs sought in this company application by the applicant in respect of the bank guarantee is outside the purview of the order of moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016. He submits that the bank guarantee furnished by the Indian Bank on behalf of the respondent was an independent contract and thus bar under section 14(3) of the Insolvency & Bankruptcy Code, 2016 would not apply to the said bank guarantee and even to the amount lying with the Prothonotary & Senior Master of this Court pursuant to the encashment of the said bank guarantee encashed as per order passed by this Court. 16. Learned counsel placed reliance on section 14(3)(b) of the Insolvency & Bankruptcy Code, 2016 and would submit that a surety is outside the purview of section 14(1) of the Insolvency & Bankruptcy Code, 2016. He relied upon section 126 of the Indian Contract Act, 1872 and would submit that the person who gives the guarantee is called "surety" and the person in respect of whose ....
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....sions of section 14(3) of the Insolvency & Bankruptcy Code, 2016 has to be read with section 14(1) of the Insolvency & Bankruptcy Code, 2016. He submits that the proceedings were filed before the National Company Law Tribunal against the respondent in which an order under section 14(1) of the Insolvency & Bankruptcy Code, 2016 came to be passed against the respondent. He submits that as a result of the said order of moratorium passed by the National Company Law Tribunal which was in force when the arbitral proceedings were going on and when the arbitral award was rendered, the arbitral proceedings itself would not have been proceeded with. No arbitral award could have been rendered by the learned arbitrator. 20. Learned counsel invited my attention to the prayers in the company application and would submit that the reliefs sought in the company application are in execution of the arbitral award against the respondent. He submits that since this company application was filed on the date on which the said order of moratorium passed under section 14 of the Insolvency & Bankruptcy Code, 2016 was in force, this company application itself being non-est in law, even though those proceedi....
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.... of this company application is concerned, it is submitted by the learned counsel that by the said order, this Court has only granted an injunction and thus insofar as prayer clause (b) which is also in the nature of relief in execution is concerned, the relief granted in terms of prayer clause (a) would not assist the applicant. 24. Mr.Naushad Engineer, learned counsel for the applicant in rejoinder submits that the applicant under section 22 of SICA, there was stay not only against the properties only but also against the parties and the proceedings. The provisions of section 22 of SICA are in pari-materia with section 14 of the Insolvency & Bankruptcy Code, 2016. The bank guarantee furnished by the respondent being an independent contract would fall outside the purview of moratorium under section 14(1) of the Insolvency & Bankruptcy Code, 2016. 25. Without prejudice to the rights and contentions of the applicant referred to aforesaid, learned counsel for the applicant on instructions states that there is no stay granted by this Court in the said arbitration petition filed by the respondent under section 34 of the Arbitration & Conciliation Act, 1996 impugning the arbitral awar....
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....he Insolvency & Bankruptcy Code, 2016 and after adverting to the judgment of the Supreme Court in case of State Bank of India vs. V. Ramakrishnan & Ors. (Civil Appeal No.3595 of 2018 decided on 14th August, 2018 has held that the bank guarantee furnished by the Indian Bank in favour of the learned Prothonotary & Senior Master of this Court would not enjoy the benefit of moratorium as envisaged under section 14 of the Insolvency & Bankruptcy Code, 2016. This Court accordingly held that the learned Prothonotary & Senior Master of this Court was right in invoking the bank guarantee. The said order passed by this Court in this company application allowing encashment of the bank guarantee has not been impugned by the respondent till date. 29. By the said order dated 6th September, 2019, this Court also directed that insofar as prayer clause (b) is concerned, Resolution Professional to file affidavit in reply with a copy to be served upon the applicant's advocate. In my view, the view already taken by this Court that the bank guarantee furnished by the Indian Bank in favour of the learned Prothonotary & Senior of this Court would not enjoy the benefit of the moratorium as envisaged unde....
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....award is pending before this Court. 33. Insofar as the judgment of the Andhra Pradesh High Court in case of Haryana Telecom Limited (supra) relied upon by Mr.Engineer, learned counsel for the applicant is concerned, in my view the provisions of section 22(1) of SICA, 1985 are in pari-materia with section 14(1) of the Insolvency & Bankruptcy Code, 2016. It is held by the Andhra Pradesh High Court in the said judgment that the bank guarantee cannot be said to be the property of the respondent therein simply because it is indirectly going to be affected by enforcement of the said bank guarantee by the appellant. It is held that the proceedings to encash the bank guarantee cannot be said to be covered by the phrase "execution, distress or the like", contemplated under section section 22(1) of SICA. In my view, the principles laid down by the Andhra Pradesh High Court in the said judgment can be extended to the facts of this case. I am in respectful agreement with the views expressed by the Andhra Pradesh High Court in the said judgment in case of Haryana Telecom Limited (supra). 34. In my view, this company application filed by the applicant for seeking an order of release of the amo....
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....the respondent in view of the fact that the facts before the Supreme Court were different. In this case the view already taken by this Court by an order dated 6th September, 2019 has attained finality. Be that as it may, this Court has not followed the said judgment of the Delhi High Court in case of SSMP Industries Limited (supra) and has kept the said issue open. This Court thus need not decide the issue whether under section 3(6) of the Insolvency & Bankruptcy Code, 2016, the claim would include the disputed claim also and could not have been proceeded with before the learned arbitrator. 38. In my view, the bank guarantee being an independent contract, this application is maintainable for seeking appropriate directions for the release of the amount encashed by the learned Prothonotary & Senior Master of this Court pursuant to an order passed by this Court. The respondent does not dispute that the order passed by this Court permitting encashment of the bank guarantee has not been impugned by the respondent and has attained finality. 39. I am inclined to permit the applicant to render an undertaking before this Court that if the respondent succeeds in the arbitration petition fi....