TaxTMI 
TaxTMI 
2022 (9) TMI 1129
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..../2020 in CP (IB) No. 184/7/HDB/2019 whereby, the Adjudicating Authority has dismissed the I.A. of the Appellant and allowed the Respondents to continue with the process of invocation and encashment of 'Performance Bank Guarantee(s)' ('PBG') granted by the Appellant in favour of the first Respondent/'Corporate Debtor' undergoing CIRP. 2. Facts in brief are that State Bank of India/the Financial Creditor filed an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (herein after referred to as 'The Code') for initiation of the CIRP against the 'Corporate Debtor'/M/s. Meenakshi Energy Ltd. It is averred that just before the initiation of CIRP against the 'Corporate Debtor', on 28.06.2010, two Agreements in relation to supply and erection of a 700 MW thermal plant was entered into between the 'Corporate Debtor' and (EDAC) Engineering Ltd./the fourth Respondent herein. On 26.12.2014, a consortium of lenders including Rural Electrification Corporation Ltd. (RECL)/ the fifth Respondent herein sanctioned the term loan facility to the 'Corporate Debtor' for financing the project. The terms and conditions of these facilities are governed by a Common Loan Agreement (CLA)....
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....e 'Corporate Debtor' from continuing with the invocation process of the PBGs and granted an ad interim injunction. This Order was carried in an Appeal before the Hon'ble High Court Telangana during the pendency of which, CIRP was initiated by SBI against the 'Corporate Debtor'. Despite the moratorium, it is averred that the Hon'ble High Court of Telangana passed an Order on 06.01.2020 which was received by M/s Siemens Ltd. on 08.01.2020, and an SLP was preferred against the said Order. The Appellant requested the RP not to remit the amounts under the PBGs to the Trust Account until the disposal of the SLP. The SLP was filed on 09.01.2020 against the Order dated 06.01.2020 and the matter was listed 'For Hearing' on 10.01.2020. But the Counsel for the RP informed the Hon'ble Supreme Court that the PBGs were already encashed and therefore the SLP stands infructuous. Despite the encashment, Hon'ble Supreme Court issued 'Notice' in respect of the other reliefs prayed for by the Applicant in the SLP. 8. The Adjudicating Authority vide Order dated 30.01.2020 in I.A. No. 238 of 2020 has restrained the RP from the utilizing 'amounts of PBGs. 9. On 14.02.2020 the claims of M/s Siemens ....
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.... "2. The bank shall effect the payments to MEL under further proof or conditions and without any delay, reservation, contest, recourse protest or demur and without any enquiry into EDAC or the sub-contractor, without reference to sub-contractor, immediately upon MEL's written request indicating the amount demanded by MEL stating therein that the sub-contractor has failed to perform its obligations as per the above mentioned Agreement. Any such demand made by MEL on the bank shall be conclusive and binding not withstanding any differences between MEL, EDAC, the sub-contractor or any other person or any dispute pending before any court, tribunal or any other authority." 10. From the above clause, it is crystal clear that the invocation of BGs by MEL vide its letter dated 18.10.2019, stating that the Applicant herein failed to perform its obligations in terms of the Agreements, is completely in terms of the above referred clause which was duly agreed to by the parties to the contract. 11. Since the irrevocable BGs were invoked much prior to initiation of CIRP, this Adjudicating Authority cannot sit over the BGs already invoked at this juncture, more so in ....
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....rate of Enforcement vs. Manoj Kumar Agarwal, 2021 SCC Online NCLAT 121 Edelweiss Asset Reconstruction Company Ltd. vs. Tecpro Systems Ltd, 2017 SCC Online NCLT 6012 * It is strenuously contended that the Ld. Counsel for the Appellant that the Bank Guarantees have been wrongfully invoked by MEL and that Clause 17 of the Bank Guarantees stipulated that MEL may assign or transfer the Bank Guarantees to its lender agent or Security Trustee with prior written notice to the Bank. The Ld. Counsel placed reliance on Clause 17 of the Bank Guarantee which is reproduced as hereunder: "MEL may assign or transfer all of its rights or interest in this Guarantee to its Lender, their Agent or Security Trustee along with the Agreement, with prior written notice to the Bank. Upon such assignment, MEL's lenders, their agent or security trustee shall assume all of the rights of MEL under this Guarantee all references in this Guarantee to MEL shall be constructed as a reference to MEL's lenders, their agent or security trustee." * REC in terms of Clause 17 of the Bank Guarantee intimated the HDFC Bank vide a letter dated 02.05.2018 that the Bank Guarantee stood assigned to REC. ....
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....dated 30.01.2020 has directed that the applications filed by the Petitioner before the NCLT shall be disposed of in accordance with law. 12. Submissions of the Learned Senior Counsel appearing for the 1st and 2nd Respondent: * It is submitted that the Appellant was appointed as a Sub-Contractor for the Supply and Erection Contract and Tripartite Agreements were entered into between the 'Corporate Debtor', the Appellant and EDAC, in terms of which, the Appellant furnished the subject two Bank Guarantees dated 22.02.2017 and 11.08.2017 respectively. Thereafter, a Supplemental Tripartite Agreement dated 10.08.2017 was executed between the 'Corporate Debtor', Appellant and EDAC in terms of which the work under the supply Order was to be completed by 31.09.2017 and work under the Erection Order was to be completed by 31.12.2017, but the Appellant was unable to comply with these dates. Owing to continuous defaults by the Appellant, the 'Corporate Debtor' was constrained to invoke the Bank Guarantees on 18.10.2019. * It is submitted that despite the Bank Guarantees being already invoked, the Appellant filed a suit before the Additional Chief Judge, Commercial Court, Hyderabad on ....
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....It is submitted that Respondent No. 3 has a very limited role to play and has transferred the amounts pertaining to the Bank Guarantees to the Bank Account in compliance of the Order of NCLT and the e-mail dated 08.01.2020 issued by the IRP. Upon the request of the RP, the bank processed the invocation of the Bank Guarantees vide letter dated 09.01.2020 and discharged their liability to the beneficiary. Learned Counsel drew our attention to the e-mail sent by the RP which reads as under: Assessment: 14. The admitted facts regarding the Agreements entered into between the parties is not being reiterated for the sake of brevity. The main point which falls for consideration in this Appeal is whether the invocation of the Performance Bank Guarantees was justified keeping in view the sequence of events and also whether the Adjudicating Authority was justified in passing the Impugned Order and holding that the Orders of the Hon'ble High Court of Telangana has attained finality. 15. Section 14 of the Code reads as under: "Moratorium. - (1) Subject to provisions of sub-Sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by Order dec....
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....ion with any financial sector regulator or any other authority;] (b) a surety in a contract of guarantee to a 'Corporate Debtor'.] (4) The Order of moratorium shall have effect from the date of such Order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-Section (1) of Section 31 or passes an Order for liquidation of 'Corporate Debtor' under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation Order, as the case may be." Section 14(3)(b) states that a surety in a contract of guarantee to a 'Corporate Debtor' is not covered under Section 14. 16. Section 3(31) Describe Security Interest and states that Security Interest shall not include a Performance Bank Guarantees. 17. At the outset we address to whether the Performance Bank Guarantees were invoked prior to the Initiation of CIRP or during the Moratorium period. A brief chronology of the events is essential to be detailed at this juncture. 31.09.2017 Supplemental Tripa....
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....at the SLPs has since stood withdrawn and the Notices of invocation were sent prior to the initiation of the CIRP. We are also conscious of the fact that the case in the Hon'ble High Court has been filed by the 'Corporate Debtor'. 20. It is the case of the Resolution Professional that the amount of Rs.2,50,16,972/- be released and permitted to be utilised against the overall outstanding amount of Rs.13,06,30,410/- to ensure that the plant of the 'Corporate Debtor' is kept running as a 'Going Concern'. I.A. No.954 of 2021 was filed seeking this direction. Learned Senior Counsel Mr. Nakul Dewan strenuously objected on the ground that if this amount is allowed to be utilised, it would have the effect of the Appeal being rendered infructuous. Having regard to all the aforenoted reasons, we hold that the amount may be utilised for the functioning of the 'Corporate Debtor' as a Going Concern. 21. For all the foregoing reasons, the Appeal is dismissed. No Order as to costs. ============= Document 1ANNEXURE- R3B From: To: "CIRP for Meenakshi Energy" , "[email protected] , "Kamal Kant" [email protected]>, "Mrityunjay Poddar Smrityunjay.podger@meenakshienergy.....