TaxTMI 
TaxTMI 
2024 (10) TMI 573
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....ented by the Nominated Authority) and the Corporate Debtor - Indrajit Power Pvt. Ltd. In compliance with the obligation under the Agreement, the Corporate Debtor deposited Performance Bank Guarantee ("PBG") in favour of the President of India. (ii)On 01.06.2022 and 05.06.2022, the Nominated Authority issued Show Cause Notice to the Corporate Debtor stating that they did not achieve the Scheduled Production for Financial year 2018-19 to 2022-23. On 02.09.2023, the Corporate Debtor issued a Notice to the Nominated Authority under Clause 25.2 of the Agreement. (iii)Meeting of Scrutiny Committee was held on 27/28.07.2023, which recommended for invocation of PBG. Recommendation of Scrutiny Committee was brought before the Nominated Authority. The Nominated Authority of the Central Government after deliberating the matter has issued an order on 27.10.2023, referred to as an Appropriation Order against the Bank Guarantee issued on 18.12.2020. The Corporate Debtor filed Writ Petition No.1416 of 2023 before the Delhi High Court for quashing the decision of Scrutiny Committee taken in its Meeting held on 27/28.07.2023. The Writ Petition was permitted to be withdrawn, on the....
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....f the Delhi High Court, Respondent No.1 was precluded to invoke the PBG until a decision is taken on the objections of the Promoters. It is submitted that encashment of PBG is against the interest of the Corporate Debtor. It is further submitted that Respondent No.1 has filed its claim as Operational Creditor in CIRP of the Corporate Debtor. Encashment of PBG would result in preferential transaction to Respondent No.1. It is further submitted that Promoter of the Corporate Debtor has already challenged the order of admission by means of Company Appeal (AT) (Insolvency) No.395 of 2024, which Appeal is pending consideration, wherein interim order has already been passed. The learned Counsel for the Appellant submits that in appropriate case, the Court can always pass an order of injunction to restrain enforcement of PBG. In event such encashment is allowed, it would result in irreparable loss or injustice to the Corporate Debtor. 5.The learned Counsel for the Respondent refuting the submissions of the Appellant submits that in the present case, the Nominated Authority has already taken a decision on 27.10.2023 for Appropriation of PBG of an amount of Rs.7,38,37,440/-. The Writ Pet....
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....ing Authority dated 01.02.2024 could not have proceeded to take any decision for invocation of PBG. 10.We may first notice the decision taken by the Nominated Authority prior to initiation of CIRP against the Corporate Debtor. The Appellant itself has brought on record the decision dated 27.10.2023 issued by the Nominated Authority to the Appellant as well as to the Branch Manager of Indian Bank. Subject of the letter dated 27.10.2023 is as follows: "Subject: Appropriation of' an amount of Rs.7,38,37,440/- (Rupees Seven Crore Thirty Eight Lakh Thirty Seven Thousand Four Hundred and Forty Only) against Bank Guarantee No.00l8220IPG048198 having issue date 18/12/2020 against Show Cause Notice issued to M/s. Indrajit Power Private Limited for non-compliance of 'Efficiency Parameters' mentioned in Coal Mines Development and Production Agreement (CMDPA) executed on 16.03.2015 in reference to Nerad Malegaon located in Maharashtra." 11.The said decision was taken after the Minutes of Meeting dated 27/28.07.2023 of the Scrutiny Committee, which recommended for invocation of Bank Guarantee. The Scrutiny Committee by Minutes dated 15.08.2023 has placed the recommendation be....
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....220IPG048198 for Rs.25,53,54,480/- which is not subject matter of the aforementioned LPA. 8.Accordingly, the Nominated Authority, hereby directs for appropriation of an amount of Rs. Seven Crore Thirty-Eight Lakh Thirty-Seven Thousand Four Hundred and Forty Only from the Performance Bank Guarantee No.0018220IPG048198 dated 18.12.2020 issued by Indian Bank in reference to the CMDPA. 9.Upon appropriation as mentioned in paragraph 8 above, you rare also advised to top-up the Performance Bank Guarantee no. 0018220IPG048198 so as to restore it to its original amount i.e. Rs.25,53,54,480/- after appropriation within fifteen Business Days [15 Business Days] of receipt of this order in compliance of Clause 6.3.3 of the CMDPA. Failure to do so shall be a 'Termination Event' for the purpose of Clause 26 in accordance with which the Nominated Authority shall be at liberty to terminate the CMDPA. 10.Attention is invited to Section 27 of the Coal Mines (Special Provisions) Act, 2015 providing for adjudication by the Tribunal constituted under the Coal Bearing Areas (Acquisition and Development) Act, 1957." 12.Thus, the Appropriation Order by the Competent Authority....
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....d be free to proceed with the matter in accordance with the law without being influenced by the fact that the instant writ petition has been withdrawn by the Petitioner. 8.In case the Nominated Authority accepts the recommendation made by the Scrutiny Committee in its Minutes of Meeting dated 27/28.07.2023 then four (4) working days' time are granted to the Petitioner to approach this Court by filing an appropriate writ petition. The Respondent No.5/Allahabad Bank (Now India Bank) would abide by the Bank Guarantee from the 5th day after the rejection by the Nominated Authority. It is stated by the learned Senior Counsel for the Petitioner, on instructions, that the Bank Guarantee is alive till April, 2024. 9.This Order is not an indicator on the applicability of otherwise of Clause 25.4 which provides that existence of dispute does not affect right of Nominated Authority to appropriate Performance Security or terminate the agreement." 14.The above order indicate that the Writ Petition was filed against the decision taken by the Scrutiny Committee in its Meeting held on 27/28.07.2023 and not against the Appropriation Order dated 27.10.2023 issued by the Nominate....
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....has noticed the Insolvency Law Committee Report dated 26.03.2018, where amendments made in 2018 came for consideration. The Hon'ble Supreme Court in paragraph 30, 31, 32 and 33 laid down following: "30. We now come to the argument that the amendment of 2018, which makes it clear that Section 14(3), is now substituted to read that the provisions of sub-section (1) of Section 14 shall not apply to a surety in a contract of guarantee for corporate debtor. The amended section reads as follows: "14. Moratorium.-(1)-(2)*** (3) The provisions of sub-section (1) shall not apply to- (a)such transactions as may be notified by the Central Government in consultation with any financial sector regulator; (b)a surety in a contract of guarantee to a corporate debtor." 31.The Insolvency Law Committee, appointed by the Ministry of Corporate Affairs, by its Report dated 26-3-2018, made certain key recommendations, one of which was: "(iv) to clear the confusion regarding treatment of assets of guarantors of the corporate debtor vis-à-vis the moratorium on the assets of the corporate debtor, it has been recommended to clarify by way ....
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....ich are intrinsic to a contract of guarantee. 5.9.A contract of guarantee is between the creditor, the principal debtor and the surety, whereunder the creditor has a remedy in relation to his debt against both the principal debtor and the surety (National Project Construction Corpn. Ltd. v. Sadhu and Co. [National Project Construction Corpn. Ltd. v. Sadhu and Co., 1989 SCC Online P&H 1069 : AIR 1990 P&H 300] ). The surety here may be a corporate or a natural person and the liability of such person goes as far the liability of the principal debtor. As per Section 128 of the Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor and the creditor may go against either the principal debtor, or the surety, or both, in no particular sequence (Chokalinga Chettiar v. DandayuthapaniChettiar [Chokalinga Chettiar v. Dandayuthapani Chettiar, 1928 SCC Online Mad 236 : AIR 1928 Mad 1262] ). Though this may be limited by the terms of the contract of guarantee, the general principle of such contracts is that the liability of the principal debtor and the surety is co-extensive and is joint and several (Bank of Bihar Ltd. v. Damodar Prasad [Bank of....
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....such clarificatory amendment is retrospective in nature, would be clear from the following judgments:" 17.We may also notice the definition of 'security interest' as contained in Section 3(31) of the IBC, which clearly means that performance guarantee is not inclusive in the security interest. Section 3(31) is as follows: "(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 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;" 18.Section 14, sub-section (3) was amended by Act 26 of 2018, w.e.f.06.06.2018. Amendment made in sub-section (3) of Section 14 is as follows: "14(3) The provisions of sub-section (1) shall not apply to - (a)such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other auth....