Mr. Naresh Kumar Goel, Liquidator Vs. Indian Overseas Bank - We note the fact that the bank guarantee is being revoked for violation of an undertaking given under the Customs Act by the Corporate Debtor. We are of the view that the corporate debtor under the liquidation cannot escape the consequences of violation of contractual obligations.

NCLT Chandigarh (20.07.2023) In Mr. Naresh Kumar Goel, Liquidator Vs. Indian Overseas Bank [IA No. 924/2020 In CP (IB) No. 300/Chd/Hry/2019] held that; 

• 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..

• “When irrevocable and unconditional bank guarantee payable on demand without demur then, whenever such bank guarantee is sought to be encashed by the beneficiary, bank is bound to honour the bank guarantee irrespective of any dispute raised by the customer (at whose instance the guarantee was issued) against the beneficiary.

• The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of a third party like a surety. Bank guarantee can be invoked even during the moratorium period issued under section 14 of the IBC in view of the amended provision under section 14 (3)(b) of the IBC.

• We note the fact that the bank guarantee is being revoked for violation of an undertaking given under the Customs Act by the Corporate Debtor. We are of the view that the corporate debtor under the liquidation cannot escape the consequences of violation of contractual obligations.

Excerpts of the Order;  

The present application has been filed by Mr. Naresh Kumar Goel, the liquidator of the corporate debtor under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (herein referred to as IBC) for seeking directions, in respect of the release of the Fixed Depository Receipts (herein referred to as FDRs). 

# 2. The applicant has stated the following facts in its application:- 

a) This Adjudicating Authority passed an order dated 21.11.2019 admitting the CIRP against M/s BR Knitwears Private Limited (herein referred to as corporate debtor) and Mr. Naresh Kumar Goel was appointed as the Interim Resolution Professional of the corporate debtor. 

b) In the second meeting of the COC held on 24.12.2019, it was resolved to file an application before this Adjudicating Authority for the liquidation of the corporate debtor as there were no possibilities of revival of business of the corporate debtor. On an application, this Adjudicating Authority on 13.03.2020 passed an order for the initiation of liquidation of the corporate debtor, and the applicant was duly appointed as the liquidator of the corporate debtor. 

c) The liquidator made a public announcement in accordance with Regulation 12 of the IBBI (Liquidation Process) Regulations, 2016 on 15.03.2020. 

d) After going through the records of the corporate debtor, the applicant came to know that the FDRs total amounting to Rs.10,00,308/– were lying with respondent No. 1, and thereafter, the applicant wrote a letter dated 17.01.2020 requesting respondent No. 1 to maintain the status quo of the account of the corporate debtor. (Annexure-5 of the application) 

e) Further, the applicant vide letter dated 24.01.2020 requested respondent No. 1 to provide details of the bank guarantees issued by respondent No. 1 in favor of respondent no. 2 i.e., Assistant/Deputy Commissioner of Customs, ICD, Tughlakabad, New Delhi. (Annexure-6 of the application) 

f) In another letter dated 20.02.2020 sent by the applicant to respondent No. 1, respondent No. 1 was requested to premature the FDR and make a fresh FDR of Rs. 10,00,308/– as a 100% margin against the bank guarantee issued by respondent No. 1 in favor of respondent No. 2. (Letter dated 20.02.2020, has been annexed as Annexure-7 of the application) 

g) Respondent No. 1 vide email dated 26.02.2020, informed the applicant that a letter was received from respondent No. 2 wherein the custom department sought for invocation of bank of bank guarantees issued in its favor. (Annexure A-9 of the application). In its reply, the applicant stated that in pursuance to the moratorium imposed under Section 14 of the IBC, the bank guarantees cannot be invoked by respondent No. 2, for which a separate claim had to be filed by respondent No. 2 before the applicant. (Annexure A-10 of the application) 

h) Vide letter dated 19.03.2020 and email dated 08.05.2020 the applicant requested respondent No. 1 to liquidate the FDRs amounting to Rs.10,00,308/– in the name of the corporate debtor and transfer the funds so generated along with the interest occurred till date on the aforesaid FDR for the purpose of liquidation of the corporate debtor. (Annexure- 11 of the application). In response to the afore-mentioned email, respondent No. 1 in its letter dated 11.05.2020 (Annexure-12 of the application) stated that an amount of Rs.8,35,019/- had been released and a fresh FDR of Rs.10,00,308/– was kept as 100% margin against aforesaid bank guarantee, issued by them to respondent No. 2. 

i) The applicant again on 31.08.2020 wrote a letter to respondent No. 1 to liquidate the FDR and transfer the principal amount along with interest to the liquidation account of the corporate debtor (Annexure-13 of the application). In response to the above-mentioned letter, respondent No.1 gave its reply on 12.10.2020 stating that the amount lying with respondent No. 1 will be released only after obtaining NOC/permission from respondent No. 2. 

j) It has been stated by the applicant that the applicant has failed to liquidate the FDRs and hence seeks directions from this adjudicating authority to direct respondent No. 1 to transfer the aforementioned FDRs for the purpose of liquidation. 

# 3. Mr. Ranjith Kumar, the Principal Officer of Overseas Bank, i.e. respondent No.1 has filed its reply and has stated that: 

a) The corporate debtor was a borrower or having an account with the answering respondent along with a bank guarantee of Rs. 10, 00, 308/– in favor of respondent No. 2 w.e.f. 27.09.2011 up till 27.09.2021 with 100% deposit margin in the form of FDR. This deposit was also marked as a lien to respondent No. 1. 

b) The answering respondent provided the applicant with confirmation of the status of the FDR along with all the details and documents pertaining to the FDR and bank guarantee. Further, a request had been received from the applicant to release the interest accrued on the said FDR since there is a requirement of 100% margin only against the bank guarantee.

c) Respondent No. 2 also sent a letter dated 25.02.2020 to the answering respondent for enforcing a bank guarantee for a sum of Rs.10,00,308/– being the beneficiary of the bank guarantee. A detailed response was sent via email/letter dated 11.05.2020 to respondent No. 2, requesting respondent No. 2 to approach the applicant. The receipt of the said letter dated 25.02.2020 for invoking the bank guarantee was also informed to the applicant. 

d) Thereafter, the answering respondent was informed about the commencement of liquidation proceedings against the corporate debtor vide order dated 13.03.2020 of this adjudicating authority. Following this the answering respondent released the interest amount of Rs. 8,35,019/- vide Demand Draft bearing No. 862804724 dated 11.05.2020 in the liquidation account of the corporate debtor. 

e) Upon the request of the applicant to liquidate the FDR amounting to Rs.10,00,308/–, the answering respondent claims that the said amount has been held by it to safeguard its own interest in view of the fact that there are multiple claims for the amount held by the answering respondent. Further, the answering respondent points out that the applicant has filed the present application without finding an amicable solution to the issue with respondent No. 2 and hence, the application is liable to be dismissed. 

# 4. Respondent No. 2, i.e. Assistant Commissioner, Office of PR, Commissioner of Customs, (Import) Inland Container Depot, Tughlakabad, New Delhi has filed its reply and it has been stated that:- 

a) The corporate debtor had obtained 2 EPCG, licenses registered with the answering respondent and the corporate debtor had imported duty-free goods under this license. 

b) A notice dated 12.03.2021 and demand letter dated 24.02.2022, under Circular No. 16/2017–Customs dated 02.05.2017 were issued to the corporate debtor, but no response was received. Thereafter, letters dated 10.12.2021 and 28.04.2022 were issued to respondent No. 1 for enforcement of the bank guarantee. 

c) It has been stated that the FDRs of which the applicant seeks release are not merely fixed deposits but rather are bank guarantees along with 100% margin money in an independent contract between the beneficiary and the bank through FDR issued by respondent No. 1 in favor of beneficiary- respondent No. 2 and therefore, it is not refundable to the corporate debtor unless the bank is discharged. Respondent No. 1 is under an obligation to pay the amount of the invoked bank guarantee, to the answering respondent, i.e. Respondent No. 2. 

d) Respondent No. 2, i.e. Customs Department places reliance on the judgment of the Hon’ble Supreme Court in the case of “Ansar Engineering Projects Ltd. Vs. Tehri Hydro Development Corpn. Ltd.” [1996 (5) SCC 450] which states that: 

• " 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 coptract between the person at whose instance the bank guarantee was given and the beneficiary…. ‘ 

• " 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..” 

e) It has been stated that the bank guarantee issued by the bank in favor of respondent No. 2 is supported by the fixed deposit. It cannot be revoked as such revocation would result in frustrating the bank guarantee issued by respondent No. 1 in favor of respondent No. 2. Furthermore, it is added that the applicant is attempting to frustrate the right already created in favor of respondent No. 2 and is illegally provoking the corporate debtor to prematurely revoke the FDRs and to get fresh FDRs created. Respondent No. 1-bank is also under an obligation to pay the amount of invoked bank guarantee to the beneficiary respondent No. 2 without any reference to the corporate debtor. 

f) The invocation of bank guarantee is between respondent No. 1 bank and respondent No. 2, therefore, the order of moratorium does not affect the right of the department respondent No. 2 in any manner as the beneficiary respondent No. 2 is at the liberty to directly realize its dues from the bank guarantee, instead of initiating proceedings or making a claim against the corporate debtor. Hence, it is stated that the applicant-liquidator had no right to order or direct the corporate debtor to get the FDRs liquidated. 

# 5. The applicant has filed its written statement along with a rejoinder to the reply filed by respondent No. 1 and respondent No. 2 and has stated that:- 

a) As per the various provisions of the Code, the liquidator has the statutory obligation to take control of the assets over which the corporate debtor has ownership once the liquidation commences. Thus, in order to fulfill its obligation, the liquidator is duty-bound to get the said FDRs transferred to the liquidation account of the corporate debtor. 

b) That there are no funds available in the liquidation account of the corporate debtor due to which the liquidator is not able to perform statutory duties provided under the law and also the Liquidator is not able to pay fees to the professionals engaged by the liquidator. The liquidator is in dire need of funds failing which the entire liquidation process is being hampered and clogged. 

c) Rebuttal has been made on the ground that as per Section 14(1)(c), 17(1)(d), 17(2)(e), 18(1)(f)(iii), 25(2)(a), 36(3)(c), 43(2)(a) of Insolvency and Bankruptcy Code, 2016 and Regulation 41 of the IBBI (Liquidation Process) Regulations, the Respondent No. 1 has the statutory obligation to transfer the amount of said FDRs along with interest into the liquidation account of the corporate debtor. 

d) It has been submitted that as per Section 238 of the Insolvency and Bankruptcy Code, 2016, the provisions of the Code have an overriding effect over the other laws, and IBC shall prevail. 

e) Reliance has been placed upon the judgment of Hon’ble Supreme Court of India in Civil Appeal No. 7667 of 2021 in the matter of “Sundaresh Bhatt, Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs” dated 26.08.2022, in which vide para 53 of the judgment, it was held that 

• “The IBC would prevail over The Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be”, 

# 6. We have heard the counsel for the applicant and the respondent and have pursued the records carefully. 

# 7. From the facts of the case, it is clear that the Corporate Debtor has provided a bank guarantee to Respondent No. 2 i.e. Customs Department. Respondent No. 1 has asked the petitioner to obtain NOC from Respondent No 2- Customs Department before releasing the amount of bank guarantee to the Corporate Debtor. The said bank guarantee is kept as a security by the Indian Overseas Bank in relation to the bank guarantee issued by the bank to the Customs Department. The bank guarantee is in respect of the EPCG licenses obtained by the Corporate Debtor. The bank guarantee is in the nature of financial guarantee where respondent-bank has undertaken to assume the responsibility to meet the possible debt if the applicant-Corporate Debtor defaults. 

# 8. The reason for the revocation of the Bank guarantee as mentioned in the letter dated 25.02.2020 from the office of Customs, Inland Container Deport, New Delhi is reproduced below :- 

• “In relation to the aforesaid license EODC passed by the DGFT has not yet been received in this office nor any information has been received from the party. Hence, the party did not complete the Export obligation which is contrary to the Regulations/ conditions of customs. 

• Therefore, you are requested to enforce the above bank guarantee immediately and a Demand Draft/ Banker Cheque may send to the PNB ICD, Tikdi, Commissioner of Custom (Import).” 

# 9. In this connection, a reference is made to the decision of the Hon’ble NCLAT in the matter of Bharat Aluminium Co. Ltd. vs M/s. J.P. Engineers Private Limited; Company Appeal (AT) (Insolvency) No. 759/2020 dated 26.02.2021, which deals with the dual issue of invocation of bank guarantee and also whether the same can be invoked even during moratorium under Section 14 of the IBC. On the issue, whether the Bank guarantee is an asset of the Corporate Debtor, the Hon’ble NCLAT has considered the decision of Hon’ble AP Court in the case of Haryana Telecom Ltd. Vs. Aluminium industries Ltd. (1995) SCC Online AP 721 in which it has been held that:- 

• “The bank guarantee cannot be said to be the property of the first respondent (buyer) simply because it is indirectly going to be affected by enforcement of the said bank guarantee by the writ Appellant” 

# 10. Further, reference is made to the judgment of the Hon’ble Supreme Court in the case of UP State Sugar Corporations Vs. Sumac International Ltd. in Civil Appeal No. 15357 of 1996 dated 04.12.1996 in which it is held that:- 

• “When irrevocable and unconditional bank guarantee payable on demand without demur then, whenever such bank guarantee is sought to be encashed by the beneficiary, bank is bound to honour the bank guarantee irrespective of any dispute raised by the customer (at whose instance the guarantee was issued) against the beneficiary.” 

# 11. The order also refers to the Sub-section 3 of Section 14 of IBC substituted by the Insolvency and Bankruptcy Code (Second Amendment) Act 26 of 2018 with retrospective effect from 06.06.2018, which reads as under:- 

• “In Section 14 of the principal Act, for sub-Section (3), the following sub-section shall be substituted namely:- 

• (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 regulator; (b) a surety in a contract of guarantee o a corporate debtor.” 

# 12. After considering all the facts and the related judicial decisions, the Hon’ble NCLAT in case of Bharat Aluminium Co. Ltd. vs M/s. J.P. Engineers Private Limited (Supra) has observed that 

• “we hold that the Corporate Debtor has issued bank guarantee for ensuring the price of goods. The bank guarantee is irrevocable and unconditional and payable on demand without demur. The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of a third party like a surety. Bank guarantee can be invoked even during the moratorium period issued under section 14 of the IBC in view of the amended provision under section 14 (3)(b) of the IBC.” 

(Emphasis supplied) 

# 13. We note the fact that the bank guarantee is being revoked for violation of an undertaking given under the Customs Act by the Corporate Debtor. We are of the view that the corporate debtor under the liquidation cannot escape the consequences of violation of contractual obligations. 

# 14. In view of the above discussion and the decision in the case of Bharat Aluminium Co. Ltd. vs M/s. J.P. Engineers Private Limited (Supra), the prayers of the applicant cannot be accede to. In these circumstances, IA No. 924/2020 is dismissed and disposed of accordingly. 

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Bank of Maharashtra Vs. Manjeet Cotton Pvt. Ltd. & Anr. - “When a statute is carefully punctuated and there is doubt about its meaning, weight should undoubtedly be given to the punctuation”

NCLAT (14.11.2022) in Bank of Maharashtra Vs. Manjeet Cotton Pvt. Ltd. & Anr. [Company Appeal (AT)(Insolvency) No. 581 of 2022] held that;

• “When a statute is carefully punctuated and there is doubt about its meaning, weight should undoubtedly be given to the punctuation”

Excerpts of the Order;

This appeal has been filed by the Appellant- Bank of Maharashtra, under Section 61 of the Insolvency & Bankruptcy Code, 2016 (hereinafter called as ‘IBC’) assailing the order dated 20.04.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) in I.A. No. 534 of 2022 in I.A. No. 607 of 2021 in CP No. (IB) 1222/(MB) 2019 (hereinafter called the ‘Impugned Order’).

 

# 2. In brief, the facts of the case are that the Corporate Insolvency Resolution Process (in short ‘CIRP’) was initiated on an application filed under Section 7 of the IBC filed by the Bank of Maharashtra (in short ‘BOM’), acting for and behalf of itself, State Bank of India and Vijaya Bank (which is now Bank of Baroda). Subsequently a Resolution Plan for insolvency resolution of the Corporate Debtor Fabtech Projects and Engineers Ltd. was submitted jointly by Manjeet Cotton Pvt. Ltd. and Parason Machinery (India) Pvt. Ltd. (in short ‘Successful Resolution Applicant’) which was approved by the Committee of Creditors (in short ‘CoC’) by a voting share of 85.18% and the Resolution Plan was approved by the Adjudicating Authority vide its order dated 16.11.2021.

 

# 3. It is the Appellant’s case that under the terms of the Resolution Plan, the Successful Resolution Applicant- SRA undertook to pay 52.50% i.e. Rs. 29.30 crores to BOM/ SBI/ BOB in case the live bank guarantees are invoked by the beneficiaries.

 

# 4. It is further stated by the Appellant that the bank guarantee provided by the Bank of Maharashtra was invoked after the approval of the Resolution Plan by CoC but before the Resolution Plan’s approval by the Adjudicating Authority took place. The request for paying the invocation amount of Rs. 29.30 crores were sent by Bank of Maharashtra to the Successful Resolution Applicants vide letter dated 18.10.2021. Accordingly, other bank guarantees were also invoked by the consortium member banks through various letters, the BOM, SBI and BOB informed the SRA that the bank guarantees had been invoked by the beneficiaries who had asked for payment of the invoked bank guarantees as per the terms of the approved resolution plan. Responding to these letters, the SRA informed the respondent banks that the invocation of the bank guarantees took place before the management and control of the corporate debtor was handed over to the SRA and therefore, the SRA cannot be held responsible for events taking place prior to the ‘Transfer Date’ and further denied its liability to pay the invocation amount of the bank guarantees to the respective banks.

 

# 5. The Appellant has stated that thereafter Bank of Maharashtra filed an IA No. 530 of 2022 in CP No. (IB) 1222/(MB) 2019 before the Adjudicating Authority seeking direction to the SRA for paying 52.50% of the invoked bank guarantees, and subsequently the SRA also filed an I.A. No. 534 of 2022 in CP No. (IB) 1222/(MB) 2019 requesting for direction that the financial creditors are not entitled to reimbursement of the invoked amount of the bank guarantees which were invoked prior to ‘Transfer Date’ i.e. 04.01.2022.

 

# 6. We heard the arguments of the Learned Senior Counsels for the Appellant and Respondent No. 1 & 2 and perused the record.

 

# 7. The Learned Senior Counsel for the Appellant has argued that the bank guarantees for large projects given by the members of the banking consortium, namely, BOM, SBI and BOB on behalf of the corporate debtor Fabtech Projects and Engineers Ltd. were live bank guarantees at the time of submission of the proposed Resolution Plan by the SRA, and this plan was eventually approved by the CoC and later by the Adjudicating Authority with the provision that the SRA would pay 52.50% (totalling to Rs. 29.38 crores) in relation to the bank guarantees provided by the banks once they are invoked by the respective banks. She has further argued that the Resolution Plan was approved by the CoC with a majority of 85.18% voting share, and thereafter approved by the Adjudicating Authority on 16.11.2021. She has further claimed that the said bank guarantees were invoked by the beneficiaries Indian Oil Corporation and Oil India Ltd. vide letters dated 18.10.2021 addressed to the Bank of Baroda and Bank of Maharashtra asking for payment of proceeds of the bank guarantee of Rs. 7 crores and Rs. 6.86 crores to the BOB and BOM. Another bank guarantee was invoked through another letter dated 18.10.2021 addressed to the Bank of Maharashtra which was for an amount of Rs. 5.65 crores. She has claimed that these invocations of the bank guarantees took place before the Resolution Plan was approved by the Adjudicating Authority on 16.11.2021 but after the Resolution Plan had been approved by the Committee of Creditors. And hence the SRA which has committed itself to pay the invocation amounts to the extent of 52.20% in the resolution plan should honour its commitment.

 

# 8. The Learned Senior Counsel for the Appellant has taken us through the terms of the approved resolution plan, specifically clause 3.5 relating to ‘Source of Funds’ and its ‘Utilisation’ which shows the maximum payment guarantees towards invocation of live bank guarantees. She has further submitted that in the Section “Summary of Utilisation of Fund’s”, specifically at Serial No. 2 which reads “Payment to Secured Financial Creditors” totalling to Rs. 192.24 crores the double asterisk (**) appearing in the footnote of the table quite categorically states that the amount of Rs. 192.24 crores is included in which equivalent to 52.50% of invoked bank guarantees issued by secured financial creditors pertaining to large projects.

 

# 9. In connection with the terms of payment to Secured Financial Creditors after invocation, the Learned Senior Counsel for the Appellant has adverted to Para 3.7 (2) (c) in the Resolution Plan to claim that the SRA/ corporate debtor is obliged to make payment to the secured financial creditors under the Resolution Plan which is in accordance with the treatment provided in the Resolution Plan upon invocation.

 

# 10. The Learned Senior Counsel for Appellant has relied on the following judgments in support of her contentions:-

• Andhra Bank v. F.M. Hammerle Textile Ltd. (2018) SCC OnLine NCLAT 883.

• Export Import Bank of India v. Resolution Professional JEKPL Private Ltd. (2018) SCC OnLine NCLAT 465.

• Canara Bank v. IVRCL Limited (2019) SCC OnLine NCLT 5327.

 

# 11. The Learned Senior Counsel for the Appellant has also argued that a purposive interpretation of contractual terms should be made to support the commercial wisdom of the parties when the payment to the beneficiaries is to be made after invocation of the bank guarantees. In this connection she has referred to the judgments of the Hon’ble Supreme Court in the matter of Enercon (India) Ltd. and Ors. V. Enercon GMBH and Anr. (2014) 5 SCC 1 and in the matter of Union of India v. D.N. Revri and Co. and Ors. (1976) 4 SCC 147.

 

# 12. The Learned Senior Counsel for the Appellant has submitted that the bank guarantees constitute independent contracts and don’t come within the purview of Section 14 of the IBC and the interpretation of the SRA that only in the event of invocation post ‘Transfer Date’, liability would arise affects the right of the third party which has the right to invoke the bank guarantee at any point of time and claim money under the said bank guarantees from the banks. She has referred to the judgment of Hon’ble Supreme Court in the matter of Phoenix ARC Pvt. Ltd. v. Anush Finleash & Construction Pvt. Ltd. (IB) 1705 (PB)/ 2018 and Pragdas Mathuradas v. Jeewanlal (1929), Limited (1948) SCC OnLine PC 46 in this regard to claim that these judgments are support of her contention.

 

# 13. She has further claimed that the Adjudicating Authority while disallowing the claim of the appellant bank has relied on two Supreme Court’s Judgements, namely, Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021 SCC OnLine SC 313) and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2020 (8) SCC 531). In this connection she has claimed that in both these judgements, the Hon’ble Supreme Court was considering the issue of new and surprise claim post the approval of the Resolution Plan whereas in the present case it is clear that the claim against the invoked bank guarantees were not surprise claims but the CoC and the financial creditors as well as the SRA were quite aware of these claims that could arise in the future and therefore took case to include payment towards secured financial debt including bank guarantees. She has also claimed that on the one hand, the SRA wishes to distance itself from making any payment towards invoked bank guarantee, but on the other hand has sought return of margin money from Bank of Baroda used in issue of bank guarantees.

 

# 14. The Learned Senior Counsel for Respondents No. 1 & 2 has argued that the Resolution Plan was approved by the CoC on 27.02.2021 and finally approved by the Adjudicating Authority on 16.11.2021. He has strongly argued that the ‘Closing Date’ of 31.12.2021 and ‘Transfer Date’ of 04.01.2021 which are defined in the Resolution Plan and not disputed by the Appellant very clearly establish that the management/ control of the corporate debtor would continue in the hands of Resolution Professional till the “Transfer Date” and will be handed over to the boards constituted by the Resolution Applicant on “Transfer Date” which would be within 15 days from the “Closing Date”. He has further submitted that the invocation of the bank guarantees took place vide letters dated 18.10.2021, sent by the beneficiaries Indian Oil Corporation and Oil India Limited to the respective banks and which was prior to the “Transfer Date” of 04.01.2022.

 

# 15. The Learned Senior Counsel for Respondent No. 1 & 2 has adverted to Para 3.7 which is regarding “Treatment under the Resolution Plan for the Financial Creditors” wherein in Para 3.7(2)(c) payment to be made to the Secured Financial Creditors of the EPC Division is mandated within 60 days for invocation of bank guarantees is included, and in the operative part under the head “Non-Fund Based Facility i.e. EPC – Live Bank Guarantee- 2 Large Projects” it is very clearly stated that the Resolution Applicants shall make payments to respective financial creditors to the extend of 52.50% of the invocation amount within 60 days of invocation of such Bank Guarantees, that are currently live, in the event of and with respect to invocation of such bank guarantees subsequent to the “Transfer Date”. He has emphasised that the actual payment after invocation of bank guarantee post the transfer date would be as per clause 3.7(2)(c) and any other mention in the resolution plan in Para 3.5 regarding the bank guarantees appears only to state the source of funds and how these funds may be utilised, which is to only show that the Successful Resolution Applicants possesses sufficient funds for an effective resolution of the corporate debtor.

 

# 16. The Learned Senior Counsel for the Respondents No. 1 & 2 has referred to Hon’ble Supreme Court’s Judgment in the matter of Kanataru Rajeevaru v. Indian Young Lawyers Association (through its General Secretary Bhakti Pasrua and Ors.) [2020 9 SCC 121] wherein it is held that “when a statute is carefully punctuated and there is doubt about its meaning, weight should undoubtedly be given to the punctuation” to emphasise that the specific condition regarding “Transfer Date” in clause 3.7(2)(c) of the Resolution Plan was carefully inserted based on discussions in the Committee of Creditors and thus the argument of Appellant is not acceptable in view of the actual Para 3.7(2)(c) and its formulation. He has clarified that the Respondents never intended to make payments towards Bank Guarantees invoked prior to the “Transfer Date”. He has also submitted that the SRA have made due payments to State Bank of India for a Bank Guarantee that was invoked subsequent to the “Transfer Date”.

 

# 17. In support of his contention that any claim that is explicitly not covered in the payment schedule in the approved resolution plan for Successful Resolution Applicant, would be extinguished as is held by Hon’ble Supreme Court in the matters of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021 SCC OnLine SC 313) and also in the matter of Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2020 (8) SCC 531).

 

# 18. We find that the issue for consideration in the present appeal is limited to whether the Appellant and other member banks of consortium were entitled to payment towards live Bank Guarantees related to large projects under Resolution Plan invoked prior to the “Transfer Date” by the Successful Resolution Applicant. In this regard reference is made to Para 3.7(2)(c) of the Resolution Plan which states as herein:-

• “Non-Fund based Facility i.e. EPC- Live Bank Guarantee- 2 Large Projects

• The Resolution Applicants shall make payment to the respective Financial Creditors to the extent of 52.50% of the invocation amount within 60 days of invocation of such Bank Guarantee, that are currently live, as mentioned below, in the event of and with respect to, the invocation of such Bank Guarantees subsequent to the Transfer Date.”                          (emphasis supplied)

 

# 19. We note that Para 3.5 of the Resolution Plan (at Page 91 of the Appeal Paper Book Volume-I) shows the following :-

“3.5 Source of Funds and its Utilization

a. Source of Funds

Sr. No	Particulars	Rs. Crore
6.	Maximum payment guarantee towards invocation of the live Bank Guarantee provided by respective Financial Creditors.	62.09

b. Summary of Utilisation of Funds

Sr. No	Application of Funds	Rs. Crore
2.	Payment of Secured Financial Creditors**$	192.24

 

# 20. The ‘Closing Date’ and the ‘Transfer Date’ are defined in the Resolution Plan (at Page 66 and 67 of the Appeal Paper Book, Volume-I):-

“C. DEFINITIONS

“Adjudicating Authority”/”NCLT”	The National Company Law Tribunal (Mumbai bench)
“Closing Date”	The date on which the entire Upfront Payments to the Financial Creditors are affected in terms of this Resolution Plan and payments as envisaged under this Resolution Plan are affected to Operational Creditors and CIRP Costs.
“Transfer Date”	The date on which Resolution Professional hand over the management/ control of the Corporate Debtor to the Board constituted by Resolution Applicants within 15 days from Closing Date

 

# 21. A perusal of Para 3.5(a) and (b) makes it clear that these paras only show the “Source of Funds” and “Summary of Utilisation of Funds” by the SRA. It is noteworthy that the two asterisks (**) that appear below the table of “Summary of Utilisation of Funds” states that the utilisation of funds will be in the manner as provided under this Resolution Plan. Further in the note that in the footnote with $ sign it is stated that this amount also includes the amount equivalent to 52.50% of the invoked bank guarantees issued by the secured financial creditors pertaining to large projects, to be paid to such respective Secured Financial Creditors whose bank guarantees are invoked.

 

# 22. It becomes clear from perusal of the definitions of “Closing Date” and “Transfer Date” that the management and control of the corporate debtor will devolve to the board constituted by the Resolution Applicant on the “Transfer Date” which will be within 15 days of the “Closing Date”.

 

# 23. It becomes lucidly clear on a close reading of Paras 3.5 and 3.7 of the resolution plan that payment of live bank guarantee for two large projects will be made in the event of and with respect to the invocation of such bank guarantee subsequent to the “Transfer Date”. We have earlier noted that the “Transfer Date” relates to the date when the management/ corporate debtor goes in the hands of the board of the Successful Resolution Applicant. It is not disputed that the said bank guarantees were invoked vide letters dated 18.10.2021 (attached at Page- 169- 173 of the Appeal Paper Book) and the SRA replied to these invocation letters stating that it was not liable to pay any amount post such invocation, as the Bank Guarantees were invoked prior to “Transfer Date” i.e 04.01.2022. We follow the judgment of the Hon’ble Supreme Court in the matter of Kanataru Rajeevaru v. Indian Young Lawyers Association (Supra) wherein it is held that in case a certain provision is carefully punctuated, weightage should be given to punctuation.

 

# 24. We also follow the judgment of Hon’ble Supreme Court in the matter of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (Supra) wherein it is clearly held that Successful Resolution Applicant cannot be subjected to surprise claims which are not part of Resolution Plan.

 

# 25. In view of detailed discussion in the aforementioned paragraphs and the terms included in the approved Resolution Plan, we are of the clear view that any purported liability falling on the Successful Resolution Applicant prior to “Transfer Date” in respect of invocation of bank guarantees shall not be payable by the SRA. We, therefore find that the appeal is devoid of merit and it is accordingly dismissed.

 

# 26. No order as to costs.

 

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