Harinder Bashista vs The Bank Of Baroda Limited

Comp. App. (AT) (Ins) No. 1136 of 2024 & I.A. No. 4078, 4079, 4080 of 2024 IN THE MATTER OF: Harinder Bashista ...Appellant

Versus

Bank of Baroda & Anr. ...Respondent

Present: For Appellant : Mr. Sambit Nanda, Adv. For Respondents : Mr. Sovgat Sinha, R. Gayathari Manasa, Adv. for R1

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by the suspended director of the CD, namely, M/s

Ultimate Infovision Pvt. Ltd. against the order dated 29.05.2024 passed by

the NCLT, New Delhi, Bench VI (in short 'The Tribunal') by which an

application filed by the Financial Creditor, namely, Bank of Baroda, under

Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code')

registered as IB-31/ND/2023, for the resolution of its debt of Rs.

11,17,38,792/- as on 30.09.2022, has been admitted and Bharat Bhushan

Sethi was appointed as the Interim Resolution Professional (IRP).

2. M/s Vardhaman Builtech Pvt. Ltd. (Principal Borrower) approached the

Financial Creditor (herein after referred to as the Bank) in the year 2014 for

availing credit facility in the form of performance bank guarantee for an

amount of Rs. 11,00,00,000/-. The principal borrower (in joint venture i.e.

Jai Krishan JV) undertook a work contract (construction project) for

development of a township with the Director of Town and Country Planning

Department, Govt. of Haryana. In order to execute the construction project, 2

bank guarantee of around 11 Cr. was to be submitted by M/s Vardhaman

Buildtech Pvt. Ltd. in favour of the Director of Town and Country Planning

Department, Haryana.

3. The principal borrower was not having any secured asset/property to

secure the bank guarantees but the CD was the original allottee of the

Industrial Plot No. 12A, Sector KP-03, Greater Noida, Industrial Development

Area, Gautam Budh Nagar, UP. The Principal borrower and the Corporate

Debtor had the same shareholders and directors. The CD agreed to become a

Corporate Guarantor for the principal borrower and agreed to mortgage its

property situated at Industrial Plot No. 12A, Sector KP-03, Greater Noida

Industrial Development Area, Gautam Budh Nagar, UP by executing a

contract of guarantee with the bank.

4. The Bank sanctioned a credit facility (non fund based bank guarantee)

of Rs. 11 Cr. on 23.04.2014. The Corporate Debtor executed the agreement

of corporate guarantee on 25.09.2014 after obtaining necessary permission

from GNOIDA.

5. The borrower requested the bank for two performance based bank

guarantees totalling Rs. 10,39,73,000/-. The guarantees were issued in

favour of the Director of Town and Country Planning Department, Haryana.

The detail of the two performance based bank guarantees is as under:-

"i) Bank Guarantee No. 0586IGPER000215, dated 08.01.2015, for Rs. 1,56,49,000/-, valid from 08.01.2015 to 07.07.2017 (First Bank Guarantee).

ii) Bank Guarantee No. 05861GPER000515, dated 13.01.2015, for Rs. 8,83,24,000/-, valid from 13.01.2015 to 12.07.2017 (Second Bank Guarantee).

6. The Director of Town and Country Planning, Haryana (Beneficiary), vide

their office letter no. DGTCP/AO (III)/2017/486 dated 22.05.2017 and office 3

letter no. DGTCP/AO(III)/2017/497 dated 24.05.2017 invoked the

guarantees. The letters dated 22.05.2017 and 24.05.2017 are reproduced as

under:-

4 5

7. The letter of invocation of two bank guarantees were sent by the

beneficiary much before the expiry of bank guarantees because the said

guarantees were to expire in July, 2017 and the borrower as well as the CD,

despite reminders by the bank, did not come forward to renew the aforesaid

BGs.

6

8. The Beneficiary asked the bank for encashment of the BGs vide their

letter dated 24.11.2017. The said letter is also reproduced as under:- 7

9. Based upon the request of the beneficiary, the Bank remitted the

amount of BGs to the beneficiary on 30.11.2017, thereafter, the Bank from

December, 2017 and February, 2018 called upon the borrower and the CD to

repay the amount which was remitted by it to the beneficiary but the same

was not paid, therefore, on 28.02.2018 the borrower account was classified

as NPA and a demand notice under Section 13(2) of SARFAESI Act, 2002 was 8

issued on 31.03.2018 for payment of Rs. 8,21,47,651/- alongwith interest

within a period of 60 days.

10. Since the aforesaid notice did not bring the desired result, the Bank

filed an OA for recovery of Debt before the DRT, Delhi vide I.A No. 1161 of

2018, under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993.

The CD contested the encashment of BGs before the DRT, principally on the

ground that there was no invocation of BGs in time, therefore, the same had

expired and in this regard, filed SA No. 232 of 2018. The CD filed the

application for stay with SA (Securitization Application) but the DRT, by way

of detailed order dated 24.10.2018, dismissed the application of stay holding

that the BGs were invoked vide letter dated 22.05.2017 and 24.05.2017 well

before the expiry dates of respective BGs. The order dated 24.10.2018 is also

reproduced as under:-

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11. The aforesaid order dated 24.10.2018 passed by the DRT was never

challenged by the CD in appeal before the DRAT and it attained finality. 11

12. After the above order, the CD started negotiating with the Bank for a

One time Settlement ( for short ''Settlement') and in this regard, wrote a letter

dated 21.08.2019 which is reproduced as under:-

13. The bank responded to the request of the settlement positively but out

of total outstanding amount of Rs. 9.89 Cr., the CD paid only Rs. 2.25 Cr.

and rest of the amount was not paid. As a result, this application under

Section 7 was filed.

14. The CD has admitted the execution of BGs and mortgage of immovable

property. It is alleged that the letters dated 22.05.2017 and 24.05.2017

cannot be said to be valid invocation of BGs because the said letters were a

formal request for renewal of BGs and since the BGs had already expired 12

having not been invoked, cannot be made the basis for the purpose of

recovery.

15. The Tribunal, while admitting the application, held that there was no

dispute about the sanctioning of credit facility to the principal borrower and

execution of the BGs by the CD. It has observed that legality of invocation of

BG has already been tested by another statutory legal authority, namely, DRT

in its order dated 24.10.2018 in which it has been held that the Bank

guarantees were rightly invoked and the said order remained unchallenged

at the instance of the CD. It has also been held that the CD offered a one time

settlement to the Bank in August, 2019 which was accepted and OTS was

executed on 03.09.2019 but the CD failed to fulfil the terms and conditions

of the settlement. It was also held that the OTS is a formal acknowledgement

of the outstanding debt which implies an admission of debt and subsequent

non-payment in accordance with the agreed settlement terms constitutes

default. The Tribunal relied upon a decision of this Court rendered in the case

of Hrushikesh Balakrishna Paranjape Vs. Canara Bank and Anr. (2022) SCC

OnLine NCLAT 4995.

16. Aggrieved against the order of admission, the present appeal has been

preferred.

17. Counsel for the Appellant has submitted that the BGs were conditional

and could have only been invoked if the condition was satisfied. It is

submitted that irrevocable guarantee can be invoked if the owner/borrower

commit any default in complying with any of the terms of the conditions of

the guarantees. It is further submitted that the letters dated 22.05.2017 and

24.05.2017 were not valid invocation of the BG. It is alleged that the letters

were pertaining to renewal of BG. In this regard, reliance has been placed 13

upon a decision in the case of EMCO Ltd. Vs. Malvika Steel, CS (OS) No. 258/

2000, 2012 DHC: 6870.

18. It is further submitted that the BGs were invoked on 29.11.2017 after

the expiry of the BG. It is submitted that the Bank received letters dated

29.11.2017 for encashment of the first BG and the second BG. It is also

submitted that the Bank may recover the amount which has been given to

DTCP by any other mode, which is allegedly wrongfully released under the

expired bank guarantees. Counsel for the Appellant has also submitted that

the application under Section 7 can be invoked if there is debt and default. It

is also submitted that one time settlement by the CD on 03.09.2019 cannot

be made the basis for the present proceedings as the same had been executed

by the CD under duress. Lastly, it is submitted that interim order dated

24.10.2018 cannot operate as res-judicata because it was only an interim

order.

19. On the other hand, Counsel for the Respondent (Bank) has vehemently

argued that in the face of admission of the fact that the borrower had availed

non-fund based loan facility from the bank and that the CD had mortgaged

its immovable property and also executed two bank guarantees and that the

BGs were not being extended by the CD despite reminders, the beneficiary

had rightly invoked the BG alleging that if the said BGs were not renewed/

extended before the date of expiry then letter dated 22.05.2017 and

24.05.2017 shall be considered for the purpose of encashment of the said

BGs. Apropos, the Bank also remitted the amount due to the beneficiary.

When the CD did not come forward to repay the amount remitted to the

beneficiary, the bank gave notice under Section 13(2) of the Act both to the

CD and the borrower and when it did not make the payment within the given 14

time, OA was filed before the DRT. At this stage, the CD also filed a SA No.

232 of 2018 before the DRT for the purpose of seeking an order of stay,

categorially taking the plea that BGs were not invoked in time before its

expiry. The DRT has referred to the letters dated 22.05.2017 and 24.05.2017

but did not find any error in the said letters which is sought to be highlighted

by the Appellant in the present appeal and dismissed the application. This

order of the DRT dated 24.10.2018 has remained unchallenged. Meaning

thereby, the finding / observation made by the DRT was accepted by the CD

who had started negotiating with the Bank for settlement which too was

accepted by the bank but even in this process also, the CD did not make the

payment even of the amount of settlement. Since, the CD did not get stay in

SA No. 232 of 2018 when its application was dismissed on 24.10.2018 and

had started negotiating with the bank for settlement, approached the DRT

and submitted that it is ready to deposit sum of Rs. 1 Cr. within 10 days but

the bank may be directed not to take physical possession of the mortgaged

property. An order in this regard had also been passed on 28.09.2021 which

is also reproduced as under:-

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20. It is really strange that on the one hand the CD had tried its luck on

the basis of the argument which has been advanced in the present appeal

before the DRT and remained unsuccessful and thereafter agreed to pay the

amount in question acknowledging it to be a debt and the default as well and

was trying to protect its property which was likely to be taken over by the

Bank by way of taking possession and on the other hand it is playing hide

and seek with the Respondent and also with the Courts by taking hyper 16

technical pleas though it has already, in so many words acknowledged its

debt, after executing the settlement and non-payment has resulted into a

default.

21. Thus, in view of the aforesaid facts and circumstances, we do not find

any merit in the present appeal and the same is hereby dismissed. No costs.

I.A.s, if any, pending are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical)

New Delhi 29th August, 2025.

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