Siemens Limited vs Meenakshi Energy Ltd Through Its ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI COMPANY APPEAL (AT) (INSOLVENCY) NO. 1089 of 2020 (Arising out of the Order dated 11th December, 2020 passed by National Company Law Tribunal, Hyderabad Bench, in IA No. 77, 237 & 238/2020, in C.P. (IB) No. - 184/7/HDB//2019

IN THE MATTER OF:

Siemens Limited A Company incorporated under the provisions of the Companies Act, 1956. Having its registered office at: Birla Arora, Level 21, Plot No. 1080, Annie Besant Road, Worli, Mumbai, Maharashtra - 400030 Rep. by its Authorised Representative Sapna Malhortra. ...Appellant

Versus

1. M/s. Meenakshi Energy Limited (through its Resolution Professional) A Company registered under the provisions of the Companies Act, 1956. Having its registered office at: 405, Saptagiri Towers, 1-1075/1/1 to 6, Begumpet, Secundarabad, Hyderabad - 500016. ...Respondent No. 1

2. Mr. Ravi Shankar Devarakonda Resolution Professional D 602, Prestige St. Johnswood Apartments No. 80, Tavarakere Main Road, Chikka Adugodi, Bangalore, Karnataka, 560029.

Also at:

405, Saptagiri Towers, 1-1075/1/1 to 6, Begumpet, Secundarabad, Hyderabad - 500016. ...Respondent No. 2

3. HDFC Bank Limited Through its Manager HDFC Bank House Vatika Atrium, A Block Sector 53 Golf Course Road, Gurgaon (HR) - 122011. ...Respondent No. 3

4. M/s. EDAC Engineering Limited Through its Authorised Signatory SPIC House, 88 Mount Road Chennai (TN) - 600032. ...Respondent No. 4

5. Rural Electrification Corporation Limited Though its Authorised Signatory Core-4, Scope Complex, No. 7 Lodhi Road, New Delhi (DL) - 110003. ...Respondent No. 5

Present

For Appellant: Mr. Sameer Jain, Ms. Suvigya Awasthy, Mr. Himesh Thakur, Advocates.

For Respondent: Mr. Sumant Batra, Advocate.

For Respondent No. 3: Mr. Harshal Arora, Advocate for R-3/HDFC Bank.

For Respondent No. 5: Mr. Anand Varma & Ms. Apoorva Pandey, Advocates for R-5 (REC).

(JUDGEMENT)

[Per; Shreesha Merla, Member (T)]

1. The present Appeal has been filed against the common Impugned Order

dated 11.12.2020 passed by the Learned Adjudicating Authority (National

Company Law Tribunal, Hyderabad Bench), in I.A. Nos. 77, 237, 238/2020 in

CP (IB) No. 184/7/HDB/2019 whereby, the Adjudicating Authority has

dismissed the I.A. of the Appellant and allowed the Respondents to continue with

the process of invocation and encashment of 'Performance Bank Guarantee(s)'

('PBG') granted by the Appellant in favour of the first Respondent/'Corporate

Debtor' undergoing CIRP.

-2-

Comp. App. (AT) (Ins.) No. 1089 of 2020

2. Facts in brief are that State Bank of India/the Financial Creditor filed an

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016

(herein after referred to as 'The Code') for initiation of the CIRP against the

'Corporate Debtor'/M/s. Meenakshi Energy Ltd. It is averred that just before the

initiation of CIRP against the 'Corporate Debtor', on 28.06.2010, two

Agreements in relation to supply and erection of a 700 MW thermal plant was

entered into between the 'Corporate Debtor' and (EDAC) Engineering Ltd./the

fourth Respondent herein. On 26.12.2014, a consortium of lenders including

Rural Electrification Corporation Ltd. (RECL)/ the fifth Respondent herein

sanctioned the term loan facility to the 'Corporate Debtor' for financing the

project. The terms and conditions of these facilities are governed by a Common

Loan Agreement (CLA) whereby the 'Corporate Debtor' was to provide security

for its contractual obligation.

3. It is averred that Clause 3.1(f)(iii) of the CLA provided for Security by way

of assignment of Performance Guarantee. On 23.09.2016, the 'Corporate Debtor'

and RECL entered into a Trust Retention Agreement (TRA) whereby a 'Trust

Account' was setup in the name of the 'Corporate Debtor' and all proceeds upon

invocation of the Performance Bank Guarantee(s)(PBG) were to be deposited in

it.

4. On 17.01.2017, the 'Corporate Debtor'/the fourth Respondent (EDAC) and

M/s Siemens Ltd. the Appellant herein entered into two Tripartite Agreements

-3- Comp. App. (AT) (Ins.) No. 1089 of 2020 whereby M/s. Siemens Ltd. was appointed as the Sub-Contractor for the

completion of the Project. Pursuant to this arrangement, M/s Siemens Ltd. issued

two Bank Guarantees for a value of Rs. 9,41,66,068/- being BG No.

003GT0217051009 and Rs. 10,90,00,000/- being BG No. 003GT02172230034

on 20.02.2017 and 11.08.2017 respectively. Upon receiving information of the

two PBGs, RECL issued a letter dated 02.05.2018, intimating the RP of the

assignment of the Corporate Debtor's rights, claims under the PBGs to RECL as

stipulated under the Agreements.

5. HDFC Bank/the third Respondent herein was expressly notified about the

assignment of the PBGs to the fourth Respondent M/s EDAC Engineering Ltd.

The parties agreed that 15.06.2018 would be considered as the deemed date of

completion of the Applicant's Performance obligations.

6. It was also agreed that the 'Corporate Debtor' would return the Balance

Retention amount of Rs. Two Crores and would return the PBGs of Ten Crores

Ninety Lakhs and Nine Crores Forty Lakhs. Despite the above Agreement and

satisfactory performance, almost 17 months after the said Agreement, the

'Corporate Debtor' addressed a letter to the third Respondent/HDFC and invoked

the PBGs and requested HDFC to credit the monies in the trust account held by

the 'Corporate Debtor'.

7. While so, on 19.10.2019 M/s Siemens Ltd. in view of the wrongful

invocation immediately filed a complaint with the Economic Offences Wing

-4- Comp. App. (AT) (Ins.) No. 1089 of 2020 (EOW). On 23.10.2019 the EOW wrote to HDFC Bank directing it not to encash

the PBGs. M/s Siemens Ltd. filed a suit before the City Civil Court for seeking

declaration of the invocation as fraudulent and an injunction restraining HDFC

from encashing the PBGs. The City Civil Court Hyderabad has restrained the

'Corporate Debtor' from continuing with the invocation process of the PBGs and

granted an ad interim injunction. This Order was carried in an Appeal before the

Hon'ble High Court Telangana during the pendency of which, CIRP was initiated

by SBI against the 'Corporate Debtor'. Despite the moratorium, it is averred that

the Hon'ble High Court of Telangana passed an Order on 06.01.2020 which was

received by M/s Siemens Ltd. on 08.01.2020, and an SLP was preferred against

the said Order. The Appellant requested the RP not to remit the amounts under

the PBGs to the Trust Account until the disposal of the SLP. The SLP was filed

on 09.01.2020 against the Order dated 06.01.2020 and the matter was listed 'For

Hearing' on 10.01.2020. But the Counsel for the RP informed the Hon'ble

Supreme Court that the PBGs were already encashed and therefore the SLP stands

infructuous. Despite the encashment, Hon'ble Supreme Court issued 'Notice' in

respect of the other reliefs prayed for by the Applicant in the SLP.

8. The Adjudicating Authority vide Order dated 30.01.2020 in I.A. No. 238

of 2020 has restrained the RP from the utilizing 'amounts of PBGs.

9. On 14.02.2020 the claims of M/s Siemens Ltd. as an Operational Creditor

of the 'Corporate Debtor' was admitted to a tune of Rs. 2,08,79,030/- out of the

-5- Comp. App. (AT) (Ins.) No. 1089 of 2020 total amount of Rs. 11,27,32,647/-. On 19.02.2020 in view of the pendency of

instant Applications, the Appellant withdrew the SLPs 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 Ist 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."

(Emphasis Supplied)

10. The Adjudicating Authority disposed of I.A. No. 238 of 2020 filed by the

Appellant herein seeking a direction against the Respondents for preservation and

refund of the monies under the PBGs currently lying in control and custody of

the Second Respondent.

"7. This Adjudicating Authority observes that the subject BG's were invoked on 18.10.2019, by MEL for alleged default committed by Applicant herein, which is much prior to the admission of CIRP in respect of MEL, which was on 07.11.2019 only.

8. It is also observed that the BG invoked are irrevocable in nature. This Adjudicating Authority also observes that the Civil Court has categorically observed that there is no element of fraud involved in the issue of invoking BGs. It is also seen that the reliefs granted in

-6- Comp. App. (AT) (Ins.) No. 1089 of 2020 IA No's 723 & 724 of 2019 in COS No. 42 of 2019 namely "Continuing the process of invocation of BGs till further orders" is misplaced for the fact that such interim direction issued by the Civil Court was not operable due to the fact that by the time, such orders were passed, the BGs were already invoked. This fact has also been highlighted by the Hon'ble High Court of Telangana in its order dated 06.01.2020 whereby, the orders passed by the Civil Court was set-aside.

9. Clause 2 of the BGs states as under:-

"2. The bank shall effect the payments to MEL under further proof or conditions and without any delay, reservation, contest, recourse protest 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 sub-contractor 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 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

-7- Comp. App. (AT) (Ins.) No. 1089 of 2020 continuation of civil suit and therefore cannot be agitated in any other court of Law other than NCLT, since, Moratorium under Section 14 is under operation as against MEL, this Adjudicating Authority observes, that contrary to the stand taken by the Applicant, the Applicant itself went on to prefer SLP before Hon'ble Supreme Court assailing the orders passed by Hon'ble High Court of Telangana.

13. The prayer A is accordingly answered in the negative, holding that the invocation of BGs by MEL vide its letter dated 18.10.2019 is proper."

11. Submissions of the Ld. Counsel for the Appellant:

• Ld. Counsel for the Appellant submitted that the suit with a prayer for

injunction on invocation and encashment of PBGs, amongst others was

filed by the Appellant in Hyderabad City Civil Court on 21.10.2019. The

Court passed an interim injunction on 02.11.2019 against MEL from

further demanding payment from the Bank and also restrained the Bank for

making any payments against the PBGs.

• MEL filed an Appeal against the Order dated 02.11.2019, but within three

days of filing of the Appeal, i.e., on 07.11.2019, MEL was sent to CIRP

and moratorium under Section 14 of the Code was declared. On 06.01.2020

during the subsistence of the moratorium, the High Court passed an Order

vacating the ad interim relief granted by the Trial Court. It is argued that

when the moratorium, was in place, the Hon'ble High Court ought not to

have passed an Order allowing the Appeal as it is in violation of Section

14 of the Code.

-8-

Comp. App. (AT) (Ins.) No. 1089 of 2020 • The Ld. Counsel for the Appellant relies on the following Judgments in

support of this argument:

o SREI Infrastructure Finance Ltd. vs. Deputy Director, Directorate of

Enforcement, NCLT Mumbai, [CP 405/2018]

o J.M. Financial Asset Reconstruction Company vs. Indus Finance Ltd.

CP 405/2018.

o Bhavarlal M Jain & Anr. vs. Metal Link Alloys Ltd. & Ors., IA 361 of

2018 in CP (IB) 67 of 2017

o In Deputy Director Directorate of Enforcement Delhi vs. Axis Bank &

Ors., 2019 SCC Online Del 7854

o Raj Shipping Agencies v. Barge Madhwa & Anr., 2020 SCC Online

Bom. 651

o P. Mohanraj vs M/s. Shah Brothers Ispat Pvt. Ltd., 2021 SCC Online

SC 152

o Directorate of Enforcement vs. Manoj Kumar Agarwal, 2021 SCC

Online NCLAT 121

o Edelweiss Asset Reconstruction Company Ltd. vs. Tecpro Systems Ltd,

2017 SCC Online NCLT 6012

• It is strenuously contended that the Ld. Counsel for the Appellant that the

Bank Guarantees have been wrongfully invoked by MEL and that Clause

17 of the Bank Guarantees stipulated that MEL may assign or transfer the

-9- Comp. App. (AT) (Ins.) No. 1089 of 2020 Bank Guarantees to its lender agent or Security Trustee with prior written

notice to the Bank. The Ld. Counsel placed reliance on Clause 17 of the

Bank Guarantee which is reproduced as hereunder:

"MEL may assign or transfer all of its rights or interest in this Guarantee to its Lender, their Agent or Security Trustee along with the Agreement, with prior written notice to the Bank. Upon such assignment, MEL's lenders, their agent or security trustee shall assume all of the rights of MEL under this Guarantee all references in this Guarantee to MEL shall be constructed as a reference to MEL's lenders, their agent or security trustee."

• REC in terms of Clause 17 of the Bank Guarantee intimated the HDFC

Bank vide a letter dated 02.05.2018 that the Bank Guarantee stood assigned

to REC. Ld. Counsel also drew our attention to Clause 3 of the CLA which

is reproduced as hereunder:

"This Obligations including the Facilities together with all interests, liquidated damages, fees, premia on pre- payment remuneration payable to the security agent, costs, charges, expenses and other monies, including any amount for which letter of credit are issued from time to time pursuant to the Facilities, and all other amounts whatsoever stipulated in, or payable by the Borrower in terms of, the Financing Documents shall be secured by:

(a)....

(b)....

(c)....

(d)....

-10- Comp. App. (AT) (Ins.) No. 1089 of 2020

(e) A first charge overall letters of credit, bank accounts, including without limitation, escrow account, Trust and Retention Account, Debt Service Reserve Account, the Coal Price Volatalily Reserve Account and other reserves and any other book accounts of the Borrower wherever maintained in relation to the Phase-II Project;

(f) A first assignment by way of security of:

"(i) All the right, title, interest, benefits, claims and demands whatsoever of the Borrower in the Project Documents, duly acknowledged and consented to by the relevant counter parties to the Documents as provided under such Project Documents, or as amended, varied or supplemented from time to time;

(ii) The right, title and interest benefits, claims and demands whatsoever of the Borrower in, to and under all the Clearances;

(iii) All the right, title, interest, benefits, claims and demands whatsoever of the Borrower in any letter of credit, guarantee, performance bond provided by any party of the Project Documents; and

(iv) All the rights, title, interest, benefits, claims and demands whatsoever of the Borrower under all Insurance Contracts and Insurance Proceeds;

(g)...."

• MEL had no right to invoke the Bank Guarantees as REC stepped into the

shoes of MEL and every reference to the MEL under the Bank Guarantees

was to be construed as a reference to REC.

• As the Bank Guarantees have been wrongfully invoked what needs to be

examined is whether fraud or irretrievable injustice has been done. In the

-11- Comp. App. (AT) (Ins.) No. 1089 of 2020 I.A. filed by M/s Siemens Ltd. it was pleased that there was fraud and

irretrievable injustice done to them. The Hon'ble Adjudicating Authority

may come address to this issue more over the Hon'ble Supreme Court in

its Order dated 30.01.2020 has directed that the applications filed by the

Petitioner before the NCLT shall be disposed of in accordance with law.

12. Submissions of the Learned Senior Counsel appearing for the 1 st and

2nd Respondent:

• It is submitted that the Appellant was appointed as a Sub-Contractor for

the Supply and Erection Contract and Tripartite Agreements were entered

into between the 'Corporate Debtor', the Appellant and EDAC, in terms of

which, the Appellant furnished the subject two Bank Guarantees dated

22.02.2017 and 11.08.2017 respectively. Thereafter, a Supplemental

Tripartite Agreement dated 10.08.2017 was executed between the

'Corporate Debtor', Appellant and EDAC in terms of which the work

under the supply Order was to be completed by 31.09.2017 and work under

the Erection Order was to be completed by 31.12.2017, but the Appellant

was unable to comply with these dates. Owing to continuous defaults by

the Appellant, the 'Corporate Debtor' was constrained to invoke the Bank

Guarantees on 18.10.2019.

• It is submitted that despite the Bank Guarantees being already invoked, the

Appellant filed a suit before the Additional Chief Judge, Commercial

-12- Comp. App. (AT) (Ins.) No. 1089 of 2020 Court, Hyderabad on 21.10.2019 seeking injunction against the said

invocation. On 02.11.2019, the Trial Court granted an ad interim

injunction. On an Appeal, the High Court of Telangana, vide an Order

dated 06.01.2020 set aside the Order of the Trial Court. During the

pendency of the Appeal on 07.11.2019, the CIRP of the 'Corporate Debtor'

commenced. Accordingly, the 'Corporate Debtor' issued a letter dated

07.01.2020 to HDFC seeking encashment of the Bank Guarantee.

Meanwhile, the Appellant filed two SLPs before the Hon'ble Supreme

Court of India on 09.01.2020, in which matters 'Notice' was issued.

• It is submitted that the Appellant filed I.A. No. 77 of 2020 seeking direction

against the RP to deposit the money and not encash the amount under the

Bank Guarantee. Thereafter, on 19.02.2020 the Hon'ble Supreme Court

permitted the Appellant to withdraw the SLPs, in view of the pending I.A.

No. 77 of 2020 before the Adjudicating Authority.

• It is argued that once the Appellant had withdrawn the SLPs, the High

Court has Order attained finality. The High Court Order noted that the

Bank Guarantees furnished by the 'Corporate Debtor' to the Appellant are

irrevocable and that they were rightly invoked. It is submitted that allowing

the present Appeal would permit the Appellant, a back door entry for

adjudication of its alleged claim. The Bank Guarantees were invoked prior

to the commencement of the CIRP.

-13-

Comp. App. (AT) (Ins.) No. 1089 of 2020 • It is a settled Principle of Law that the Contract of Guarantee is a separate

and distinct contract executed between the Creditor and the Guarantor and

that the Creditor has an independent right to recover from the Guarantor

irrespective of claims being made against the Borrower. Learned Counsel

placed reliance on the following Judgements in support of his case:

o Himadri Chemical Industries Limited Vs. Coal Tar Refining Co.

(2007) 8 SCC 110, para 14

o Adani Agri Fresh Limited Vs. Mehaboob Sharif and Others (2016)

14 SCC 517

o Mahatma Gandhi Sahakra Sakkare Karkhane Vs. National Heany

Engg. Coop. Ltd. (2007) 6 SCC 470

o Gujarat Maritime Board Vs. Larsen and Toubro Infrastructure

Development Projects Limited and Anr. (2016) 10 SCC 46

o Hindustan Construction Co. Ltd. Vs. State of Bihar and Ors. (1999)

8 SCC 436

o United Commercial Bank Vs. Bank of India and Ors. AIR 1981 SC

1426

13. Submissions of the Learned Counsel for RP

• It is submitted that Respondent No. 3 has a very limited role to play and

has transferred the amounts pertaining to the Bank Guarantees to the Bank

Account in compliance of the Order of NCLT and the e-mail dated

-14- Comp. App. (AT) (Ins.) No. 1089 of 2020 08.01.2020 issued by the IRP. Upon the request of the RP, the bank

processed the invocation of the Bank Guarantees vide letter dated

09.01.2020 and discharged their liability to the beneficiary. Learned

Counsel drew our attention to the e-mail sent by the RP which reads as

under:

Assessment:

14. The admitted facts regarding the Agreements entered into between the

parties is not being reiterated for the sake of brevity. The main point which falls

-15- Comp. App. (AT) (Ins.) No. 1089 of 2020 for consideration in this Appeal is whether the invocation of the Performance

Bank Guarantees was justified keeping in view the sequence of events and also

whether the Adjudicating Authority was justified in passing the Impugned Order

and holding that the Orders of the Hon'ble High Court of Telangana has attained

finality.

15. Section 14 of the Code reads as under:

"Moratorium. - (1) Subject to provisions of sub- Sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by Order declare moratorium for prohibiting all of the following, namely:-

(a) the institution of suits or continuation of pending suits or proceedings against the 'Corporate Debtor' including execution of any Judgement, decree or Order in any Court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of by the 'Corporate Debtor' any of its assets or any legal right or beneficial interest therein;

(c) any action to foreclose, recover or enforce any security interest created by the 'Corporate Debtor' in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the 'Corporate Debtor'.

-16- Comp. App. (AT) (Ins.) No. 1089 of 2020 [Explanation. - For the purposes of this sub-Section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearances or a similar grant or right given by the Central Government, State Government, local authority, sectoral regular or any other authority constituted under any other law for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period.]

[(2-A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the 'Corporate Debtor' and manage the operations of such 'Corporate Debtor' as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such 'Corporate Debtor' has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified.]

[(3) The provisions of sub-Section (1) shall not apply to -

[(a) such transactions, Agreements or other arrangements as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;]

(b) a surety in a contract of guarantee to a 'Corporate Debtor'.] (4) The Order of moratorium shall have effect from the date of such Order till the completion of the corporate insolvency resolution process:

-17-

Comp. App. (AT) (Ins.) No. 1089 of 2020 Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub- Section (1) of Section 31 or passes an Order for liquidation of 'Corporate Debtor' under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation Order, as the case may be."

Section 14(3)(b) states that a surety in a contract of guarantee to a

'Corporate Debtor' is not covered under Section 14.

16. Section 3(31) Describe Security Interest and states that Security Interest

shall not include a Performance Bank Guarantees.

17. At the outset we address to whether the Performance Bank Guarantees

were invoked prior to the Initiation of CIRP or during the Moratorium period.

A brief chronology of the events is essential to be detailed at this juncture.

31.09.2017 Supplemental Tripartite Agreements entered into between the parties for the supply and erection work.

31.12.2017 -Do-

18.10.2019 The 'Corporate Debtor' issued two notices for invocation to Respondent No. 3.

02.11.2019 The Trial Court, Hyderabad declared injunction against the invocation.

07.11.2019 CIRP commenced against the 'Corporate Debtor'. 06.01.2020 Hon'ble High Court of Telangana set aside the Order of the Trial Court on the ground that Bank Guarantees were invoked prior to the filing of the suit.

09.01.2020 The proceeds of the Bank Guarantees were credited to the Trust Retention Account. On the same day two SLPs were preferred by the Appellant before the Hon'ble Supreme Court of India.

-18- Comp. App. (AT) (Ins.) No. 1089 of 2020 11.01.2020 The Appellant filed I.A. No. 77 of 2020 seeking direction to deposit the amounts with the Tribunal. 30.01.2020 The Adjudicating Authority restrained the 'Corporate Debtor' from utilising the amounts under the Bank Guarantees.

19.02.2020 The Hon'ble Supreme Court permitted the Appellant to withdraw the SLPs in view of the pending I.A. No. 77 of 2020.

18. A Performance Bank Guarantee does not enjoy the benefits of a

moratorium under Section 14 of the Code. It is pertinent to mention that the CIRP

commenced on 07.11.2019 and notices for invocation were sent prior to the

commencement on 18.10.2019. The actual disbursement took place pursuant to

the Order of the Hon'ble High Court of Telangana. At this juncture, it is relevant

to peruse the Order of the Hon'ble Supreme Court which is reproduced as

hereunder:

-19-

Comp. App. (AT) (Ins.) No. 1089 of 2020

19. Having regard to the fact that the Bank Guarantees stood invoked vide

letter dated 18.10.2019 by the 'Corporate Debtor' on the ground that the

Appellant has failed to perform its obligations in terms of the Agreements, read

with Clause 2 of the Bank Guarantees and also keeping in view that we do not

find any material on record with respect to any fraud, we do not find any illegality

or infirmity in the Order of the Impugned Order. The question of fraud has been

dealt with by the City Civil Court, which held that there was 'no element of fraud'

involved. The Judgements relied upon by the Learned Counsel for the Appellant

in support of its contention that the Hon'ble High Court of Telangana ought not

to have proceeded with the Appeal as moratorium has already been imposed, are

not applicable here keeping in view that the SLPs has since stood withdrawn and

the Notices of invocation were sent prior to the initiation of the CIRP. We are

also conscious of the fact that the case in the Hon'ble High Court has been filed

by the 'Corporate Debtor'.

20. It is the case of the Resolution Professional that the amount of

Rs.2,50,16,972/- be released and permitted to be utilised against the overall

outstanding amount of Rs.13,06,30,410/- to ensure that the plant of the 'Corporate

Debtor' is kept running as a 'Going Concern'. I.A. No.954 of 2021 was filed

seeking this direction. Learned Senior Counsel Mr. Nakul Dewan strenuously

objected on the ground that if this amount is allowed to be utilised, it would have

the effect of the Appeal being rendered infructuous. Having regard to all the

-20- Comp. App. (AT) (Ins.) No. 1089 of 2020 aforenoted reasons, we hold that the amount may be utilised for the functioning

of the 'Corporate Debtor' as a Going Concern.

21. For all the foregoing reasons, the Appeal is dismissed. No Order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

Principal Bench, New Delhi 23rd September, 2022

ha/sr/pks

-21- Comp. App. (AT) (Ins.) No. 1089 of 2020