TaxTMI 
TaxTMI 
2020 (12) TMI 1349
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....and 692/2020 titled as Siemens Limited V. Meenakshi Energy Limited and Ors. Prayers in IA No. 237/2020 a) To extend the interim protection granted in IA No. 77/2020 in favour of the Applicant till the pendency of the Applications preferred by the Applicant pursuant to liberty granted by the Hon'ble Supreme Court vide order dated 19.02.2020 in SLP (C) No. 691-692/2020 and b) Direct the Respondents restraining them from utilising/dissipating the moneys deposited under the PBGs in any manner and deposit the same with this Adjudicating Authority till disposal of the applications filed by the Applicant. Prayers in IA No. 238/2020 a) To issue a direction against the Respondents for preservation and refund of the moneys realized under the PBGs and currently lying in control and custody of the Respondent No. 2; b) To take cognizance of fraud and wrongful trading under section 66 of the Code against the Respondents considering the fact and circumstances of the case; c) To take cognizance for misconduct during corporate insolvency resolution process under section 70 of the Code against the Respondents considering the fact and circumstances of the case; d) To take cog....
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....roject. While the first tripartite agreement was for supply of electrical balance of plant and the second tripartite agreement was for erection of electrical balance of plant package in accordance with the terms and conditions set out therein. 2.6. Pursuant to the said arrangement, the Applicant issued two Bank Guarantees for a value of Rs. 9,41,66,068/- (Rupees Nine Crore Forty-One Lakhs Sixty-Six Thousand and Sixty Eight only) being BG No. 003GT0217051009 and Rs. 10,90,00,000/- (Rupees Ten Crore Ninety Lakh only) being BG No. 003GT02172230034 on 20.02.2017 and 11.08.2017 respectively. 2.7. That upon receiving information of the above two PBGs, RECL issued a letter dated 02.05.2018, intimating RP of the assignment of corporate debtor's rights, benefits, claims and documents under the PBGs to RECL as stipulated under the CLA and TRA. Therefore, Respondent No. 3 (HDFC Bank) was expressly notified about the assignment of the PBGs to Respondent No. 4 (EDAC) and that corporate debtor had expressly relinquished its right to invoke the PBGs along with other rights or interests to RECL. 2.8. That on account of certain disputes, meetings were held between the Applicant, corpor....
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....pears that the respondent No. 1 is trying to take advantage of the Bank Guarantee and invoke it to satisfy the demands of respondent No. 4 and the other respondents. It is nothing to do with performance and in fact neither the respondent No. 2 nor the Court shall consider the performance as an issue regarding the invocation of the Bank Guarantee. But still it would be injustice if the respondent No. 1 is allowed to invoke the Bank Guarantee only to satisfy it's lenders, more particularly, when there was some kind of agreement under Ex. P9 to return the Bank Guarantee. Usually, the Court could not interfere in invocation of the Bank Guarantee, but, there may exist circumstances in which the parties may suffer irreparable loss and injury. It is not out of the place to mention here that in Hindustan Construction Company Ltd. Vs. State of Bihar (1999) 8 SCC 436 despite strongly worded judgment against injunction against invocation of the bank guarantee, the Hon'ble Supreme Court has held that injunction is to be maintained on the technical grounds if wrong invocation was made by a person who was not authorized to invoke. In the said judgment when there were lapses on execution ....
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....me. 2.17. That on 14.02.2020, the Claim of the Applicant as an operational creditor of corporate debtor was admitted to the tune of Rs. 2,08,79,030 out of the total amount of Rs. 11,27,32,647 by R2 (RP). 2.18. That on 19.02.2020, In view of the pendency of the instant applications, the Applicant withdrew the SLPs filed in view of the following order passed by the Hon'ble Supreme Court: "We are informed that the petitioner is under the Corporate Insolvency Resolution Process ('CIRP'). There is no dispute that the petitioner has approached the National Company Law Tribunal (NCLT) for reliefs that are the subject matter of these Special Leave Petitions. Mr. Nakul Diwan, learned senior counsel submits that the NCLT by an Order dated 30.1.2020 directed the 1st respondent not to utilize the amount of bank guarantee till the next date of hearing. We are further informed that the said order was extended periodically and is in operation. As the NCLT is seized of the matter, we permit the petitioner to withdraw these Special Leave Petitions and approach the NCLT for any further orders. 2.19. That the Applicant herein relied upon the judgment of Supreme Court ....
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....re the Hon'ble Supreme Court under Article 32 of the Constitution of India or where an order is passed under Article 136 of Constitution of India. 'Moratorium' will also not affect the power of the High Court under Article 226 of Constitution of India. However, so far as suit, if filed before any High Court under original jurisdiction which is a money suit or suit for recovery, against the 'corporate debtor' such suit cannot proceed after declaration of 'moratorium, under Section 14 of the I&B Code. 2.21. That the R-1's contended that once the BGs are encashed for whatever reason, the same have now become the estate of the Corporate Debtor and consequently the Applicant is left with no remedy to recover the said money in the current proceedings or otherwise. 2.22. That what will be included in the estate of the CD will be determined by IBC, 2016. The said provision is contained under Section 18 of the IBC, which covers Duties of the IRP, as under: "Section 18: The interim resolution professional shall perform the following duties, namely: (f) take control and custody of any asset over which the corporate debtor has ownership rights as r....
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.....01.2020. The BG money is also required to be refunded in view of the exception carved out under Section 18 of IBC, 2016 and the judgments of various NCLT stating that the property held is trust can be returned. If at all R-1 would be legally entitled to the moneys, it can very well do so by initiating appropriate proceedings under law and obtaining a decree against the applicant. 2.27. That in view of the above, the Applicant herein relied upon the judgment of the Hon'ble NCLAT in the matter of NUI Pulp and Paper Industries Pvt. Ltd. Vs. M/s. Roxcel Trading GMBH Company Appeal (AT) (Insolvency) No. 664 of 2019, while holding that NCLT has inherent powers under Rule 11 of the NCLT Rules, held as under: 9. From the aforesaid Rule 11, it is clear that the Tribunal (Adjudicating Authority herein) can make any such order as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. 2.28. That, Clause 17 of the BGs allowed corporate debtor to assign all of its rights and interest in the BGs to its lenders i.e. RECL. Clause 17 of the BGs stated as under: MEL may assign or transfer all of its rights or interest in this Guarantee to....
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....gana. The issue with regard to the invocation and subsequent encashment of Bank Guarantees is no longer res integra; 3.2. That judgment dated 06.01.2020 passed by High Court of Telangana has attained finality. It is pertinent to mention that on 19.02.2020, the Applicant has withdrawn the SLP. The liberty for pursuing further reliefs before NCLT cannot vest powers in NCLT which it does not possess. The directions contained in the Order of the Hon'ble Supreme Court of India cannot be construed as conferring jurisdiction, which it does not possess, as it is trite law that if a court/tribunal inherently lacks jurisdiction, nothing can confer jurisdiction upon such court/tribunal. 3.3. That the Civil Suit No. 42/2019 filed by Siemens against Corporate Debtor seeking permanent injunction against Corporate Debtor from invoking/enforcing the performance bank guarantees apart from being hit by moratorium has also become infructuous. If the claim of the Applicant is entertained, then it would mean that this Adjudicating Authority would be dealing with issues which the Trial Court, High Court and Supreme Court ought to have, and have dealt with, Entertaining the claims of the Applic....
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....rantees except for a bald assertion that the invocation of the Bank Guarantees was fraudulent and malicious and allegedly in contravention of the understanding between the Applicant and Corporate Debtor in the MoM. It is submitted that the Applicant has failed to make any prima facie case of fraud let alone egregious fraud. It is submitted that the case of Applicant is merely that of a breach of contract and therefore does not warrant an injunction on the encashment of the Bank Guarantees. 3.10. That Respondent No. 5 (RECL) filed its Reply to the application filed by the Applicant and has primarily stated that the Trial Court and the High Court has erred in stating that the Applicant would be entitled to claim the amounts from Respondent No. 5 if the amounts under the Bank Guarantee encashment are paid to Respondent No. 5 (RECL). Factually, the amounts under the Bank Guarantee encashment are currently lying in the TRA of the Corporate Debtor, which cannot be utilized by Respondent No. 1 (Corporate Debtor), in view of the interim orders passed by this Adjudicating Authority. Therefore, any grievance with regard to the Trial Court's Order and/or the High court's Order can ....
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....unction on the invocation of the Bank 'Guarantee by the R1, on the ground that the invocation of bank guarantee would cause serious prejudice and irreparable loss to the Applicant and the same cannot be allowed without the conclusion of the trial ascertaining the rights of the parties. However, the trial court erroneously held that the monies from the invocation of the Bank Guarantees would be payable to a Lender of the R1 i.e. the R5. Whereas, the amount of the Bank Guarantee has been paid in the bank account of R1 and presently R2 is in the control of the funds. That the R5 has not received any amount. 4.4. That, pursuant to the admission of the insolvency petition against R1, the R2 (RP) has taken over the management of R1. Subsequent to the judgment by the Hon'ble High court on 06.01.2020, the proceeds from the encashment have been deposited in the above mentioned SBI TRA account, which is under the exclusive control and management of the R2. Thus, the R5 will not have any access to the amount of Bank Guarantees and hence cannot be made liable for the same. 4.5. That the present petition is concerned, it is reiterated that there exists no lis or privity of contrac....
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....test 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 subcontractor 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 has 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 view of clause 2 of the BGs quoted above. 12. Though the Applicant herein is of the view that any appeal arising out of civil suit is nothing but conti....
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.... as per section 10A.] Explanation. - For the purposes of this section a director or partner of the corporate debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence was reasonably expected of a person carrying out the same functions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor. 15. It is clear from a bare reading of the Section 66 of the Code supra that it only empowers the IRP/RP to prefer an Application against the erstwhile management of the Corporate Debtor. Hence, this Adjudicating Authority finds that the Applicant herein is not vested with any authority to seek the prayer under Section 66 of the code. Prayer C D & E c. To take cognizance for misconduct during corporate insolvency resolution process under section 70 of the Code against the Respondents considering the fact and circumstances of the case; d. To take cognizance against the erstwhile management of Meenakshi Energy Ltd. and the Respondents for false representation to creditors under section 73 of the Code considering the fact and circumstances of the case; e. To take cognizance against the erstwhile manag....