TaxTMI 
TaxTMI 
2019 (8) TMI 1596
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.... Section 7 application (CP 1832/I&BP/NCLT/MB/2017) filed by a 'Financial Creditor' IDBI Bank Ltd. Vide the said order dated 20.04.2018. One Mr. Abhijit Guhathakurta was appointed as the Interim Resolution professional (IRP) to the Corporate Debtor. Pursuant to the First Committee of Creditors (CoC) meeting dated 25.05.2018, the IRP Mr. Abhijit Guhathakurta was appointed as the Resolution professional (RP). A) Miscellaneous Application No. 661/2018 2. The present Miscellaneous Application in hand is filed by the RP seeking injunction against the invocation of four Bank Guarantees (BG) by Respondent No. 1 i.e. Jamnagar Municipal Corporation ( in short JMC) issued by the Respondents No. 2, 3 & 4, to the tune of Rs.23 Crores to which the Respondent No. 1 is the beneficiary. The Prayer argued is as under:- "a) That the Hon'ble Tribunal be pleased to pass an order / directions to Respondent No. 1 staying the invocation of the Bank Guarantees i.e. BG No. Bank Name INR (Cr) 0004FBG130041 Axis Bank Ltd. 10.00 402LG0858/13 Kotak Mahindra Bank 6.00 49580 IGL 0050814 Union Bank of India 4.00 49580 IGL 0037715 Union Bank of India 3....
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....tilization of treated water from the STP, which the RP states was not an obligation of the Corporate Debtor under the contract and would cost an additional INR 60 Crores approximately. 9. The Respondent No. 1 issued a show cause notice dated 21.12.2017 to the Corporate Debtor seeking an explanation as to why the contract be not terminated and the BG's aggregating to INR 23 Crores be not invoked. The RP states that despite the fact that the Corporate Debtor was under no obligation to carry out the laying of pipelines, it was under negotiations with one M/s. Saurashtra Enviro Projects Pvt. Ltd. (SEPL) to carry out the said work. 10. The Respondent No. 1 issued a Press Note dated 06.04.2018 stating that Operation & maintenance (O&M) of the Plant was handed over to 'Gujarat Water Supplies and Sewerage Board' (GWSSB). The note further stated that the JMC would take legal action against the Corporate Debtor and also blacklist the company apart from encashing the BGs. 11. The Corporate Debtor sought the return of BGs if the plan was being handed over to GWSSB. The Corporate Debtor initiated arbitration proceedings under Arbitration & Conciliation act, 1996 before the Rajkot Comme....
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....itisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002)". 15. The definition of 'security interest' as given in Section 3(31) of the I&B Code carves out an exception by excluding performance guarantees from its ambit. It provides: "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 includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee" 16. Further, the counsel for the Respondent relies upon the decision of Hon'ble NCLAT in GAIL (India) Ltd. v. Rajeev Manaadiar, order dated 24.07.2018, wherein it was reiterated that Section 14 does not apply to a performance bank guarantee. Also, it is submitted that no claim was lodged before the IRP/RP for these bank guarantees. 17. The Ld. counsel for the Applicant in its rejoinder submitted that the correctness of reason for....
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....s at the back of this application are that the Corporate Debtor entered into a sub-contract with the Applicant for a total value of Rs. 21,64,00,000/- for the electromechanical and instrumentation works of 70 MLD Capacity sewage treatment plant for the city of Jamnagar in the state of Gujarat. The Applicant furnished a bank Guarantee of Rs. 6 Crores in order to cover the performance obligations under clause 4.2 of the sub-contract. It was also provided that the Corporate Debtor could invoke the Counter Bank Guarantee in the event Jamnagar Municipal Corporation invoked the bank guarantee furnished by the Corporate Debtor. 22. Further, it is submitted that Bank Guarantee was to remain valid till the end of defect liability period i.e. 24 months from the date of completion of works and thereafter the value of the bank guarantee was to be reduced to Rs.2 Crores as per clause 4.2 read with Clause 12 of the sub-contract for the Operation and Management of the equipment to be agreed by a separate contract. 23. The Applicant submits that the entire work as per the sub-contract was completed in July, 2016 and the Corporate Debtor paid a sum of Rs.19.55 crore out of Rs. 20.69 crore to ....
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.... to the Applicant stating that the Subcontract has been successfully completed in all respects including the Defect Liability Period and the Applicant has provided all extended services after commissioning and requested for the issuance of the Final Acceptance Certificate. A copy of the Letter dated 127th September 2018 is annexed herewith and marked as EXHIBIT - 'J". 17. That it is respectfully submitted that as per clause 12 of the4 Sub-contract, the Applicant has duly completed the Defect Liability Period of 24 Months on 30th September 2018 and further as per Cause 12.6 of the Sub-contract, the Final completion certificate is deemed to have been granted as several months (post the contractual requirement of 14 days) have lapsed post the completion of the Defect Liability Period and there are no further performance obligations which is pending against the Applicant. 18. That on 20th February 2019, Respondent No. 4 addressed a letter of invocation to Respondent No. 1 marking a copy to Respondent No. 3 Bank threatening to invoke the Bank Guarantee expiring on 31.03.2019. A copy of the letter of invocation dated 20 February 2019 is annexed herewith and marked as EX....