NCLAT (04.10.2021) In Monitoring Agency of Anush Finlease & Construction Pvt. Ltd. Vs. State Bank of India & Ors. [Company Appeal (AT) (Insolvency) No. 902 of 2020] held that;
Ld. Adjudicating Authority has rightly observed that as per RBI Guidelines and various judgments in this regard, margin money is construed as substratum of a trust created to pay to the beneficiary to whom the bank guarantee is given and cannot be treated as an asset of the Corporate Debtor.
“ It is settled law that bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary….”
The court exercising its power cannot interfere with enforcement of bank guarantee/letters of credit except only in cases where fraud or special equity prima facie made out in the case as triable issued by strong evidence so as to prevent irretrievable injustice to the parties
Admittedly, in terms of the Section 36(4) of the IBC, it is a clear indication that assets held under Trust cannot be considered as the asset of the Corporate Debtor. The Ld. Adjudicating Authority has considered all these facts in correct prospective.
Excerpts of the order;
This Appeal has been preferred by the Appellant aggrieved and dissatisfied by the order dated 04.08.2020 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Principal Bench in IA-2057(PB)/2020 in (IB)-1705 (PB)/2018 whereby and where under the I.A. No. 2057(PB)/2020 filed by one Mr. Aashish Gupta, Chairman of the Monitoring Committee (formed pursuant to approval of Resolution Plan) seeking directions against State Bank of India (Respondent No. 2 herein) and Director General of Foreign Trade (Respondent No. 4 herein) for release of Fixed Deposits Receipts of Anush Finlease and Construction Pvt. Ltd. (Corporate Debtor) wherein the Ld. Adjudicating Authority passed the following order:
“ 39. For this reason alone, it has been said in Section 30(2)(e) that, the Resolution Plan shall not contravene any of the provisions of the laws for time being in force, the same is again reiterated in Section 238 of the Code saying that this Code will have overriding effect over other laws which are inconsistent with the provisions of this Code. Harmonisation of statutes is the hall mark of justice, not invalidating the rights conferred under one enactment by another enactment save and except to the extent mentioned.
40. Since it has been mentioned that Security Interest shall not include the Performance Guarantee, the incidental actions to the performance guarantee cannot be called as falling within the ambit of the Code. On the day the Bank is discharged, the applicant can get back this money from the Bank.
41. Accordingly, this application is hereby dismissed as misconceived.”
FINDINGS
# 34. After hearing the parties and gone through the records of the case as also Written Submissions, we are of the considered view that the following facts are admitted in the instant Appeal.
- The Respondent No. 1 – State Bank of India issued 23 Bank Guarantees on 100% margin on behalf of M/s Anush Finlease and Construction Pvt. Ltd. (“AFCPL” Corporate Debtor) involving a total amount of Rs. 1,12,72,191.00 which are due to mature on different dates in years 2021 and 2022.
- The aforesaid bank guarantees were issued in favour of the Government Departments / Deputy Commissioner of Customs and Director General of Foreign Trade, New Delhi (“the beneficiaries”) i.e. Respondent No. 3 and Respondent No. 4.
- It is also admitted fact that the Appellant filed an application being I.A. No. 2057 of 2020 before the Ld. Adjudicating Authority seeking directions against Respondent Nos. 1 to 3 for release of Fixed Deposits Receipts of AFCPL.
- It is also admitted fact that the said application was erroneously based on the resolution plan approved in the CIRP of AFCPL vide order dated 01.04.2020 passed by Ld. Adjudicating Authority.
- It is also admitted fact that the State Bank of India and Director General of Foreign Trade submitted before the Ld. Adjudicating Authority that this is not simple fixed deposit rather it is bank guarantee along with margin money is an independent contract between the beneficiary and the Bank, though these are shown as FDRs, issued by SBI in favour of the beneficiary, it is not refundable to the Corporate Debtor unless the Bank is discharged.
- It is also admitted fact that the Ld. Adjudicating Authority has rightly observed that as per RBI Guidelines and various judgments in this regard, margin money is construed as substratum of a trust created to pay to the beneficiary to whom the bank guarantee is given and cannot be treated as an asset of the Corporate Debtor.
- The State Bank of India has relied upon Hon’ble Supreme Court judgment in Ansal Engineering Projects Ltd. Vs. Tehri Hydro Development Corpn. Ltd. [1996 (5) SCC 450] wherein the Hon’ble Supreme Court observed as follows:
“ It is settled law that bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary….”
“5. It is equally settled law that in terms of the bank guarantee the beneficiary is entitled to invoke the bank guarantee and seek encashment of the amount specified in the bank guarantee. It does not depend upon the result of the decision in the dispute between the parties, in case of the breach. The underlying object is that an irrevocable commitment either in the form of bank guarantee or letters of credit solemnly given by the bank must be honoured. The court exercising its power cannot interfere with enforcement of bank guarantee/letters of credit except only in cases where fraud or special equity prima facie made out in the case as triable issued by strong evidence so as to prevent irretrievable injustice to the parties…”.”
- Admittedly, in terms of the Section 36(4) of the IBC, it is a clear indication that assets held under Trust cannot be considered as the asset of the Corporate Debtor. The Ld. Adjudicating Authority has considered all these facts in correct prospective.
ORDER
# 35. We are of the considered view that there is no illegality in the impugned order and we hereby affirm the order dated 04.08.2020 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), New Delhi, Principal Bench and Ld. Adjudicating Authority has rightly dismissed the IA-2057(PB)/2020 in (IB)-1705 (PB)/2018. There is no merit in the instant Appeal, the Appeal is hereby dismissed. No order as to costs.
# 36. Registry to upload the Judgment on the website of this Appellate Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority (National Company Law Tribunal), New Delhi, Principal Bench, forthwith.
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