Xylem Water Solutions India Pvt Ltd vs Epc Construction India Ltd & Ors

National Company Law Appellate Tribunal Principal Bench, New Delhi COMPANY APPEAL (AT) (INSOLVENCY) No. 1474 of 2019 (Arising out of Order dated 30th August, 2019 passed by National Company Law Tribunal, Mumbai Bench, in MA 1011/2018 in C.P. No. 1832/IBC/NCLT/MB/MAH/2017). IN THE MATTER OF:

Xylem Water Solutions India Private Limited Through Mr. George Paulose, Legal Counsel, George.Paulose@xylemine.com, A Company incorporated under the provisions of Companies Act, 1956.

Registered Office: Plot No. 731, GIDC, Savli, Savli-Manjusar Road, Vadodara-391770, Gujarat, India. ...Appellant

Versus

1. EPC Constructions India Limited, through the Resolution Professional, Mr. Abhijit Guahathakurtha, abhijitg@deloitte.com, Company incorporated under the provisions of Companies Act, 1956.

Office at 1st Floor, Tower-II, Equinox Business Park (Peninsula Techno Park), Off Bandra Kurla Complex, LBS Marg, Kurla (W), Mumbai 400070, Maharashtra. ...Respondent No. 1

AND

2. Mr. Abhijit Guahathakurtha, abhijitg@deloitte.com, Resolution Professional of Respondent No. 1 Company having Registration No. IBBI/IP-003/IP- N000103/2017-18/11158 ...Respondent No. 2

AND

3. Kotak Mahindra Bank Limited, through Mr. Wajid A. Shaikh. Trade Finance, Wajid.Shaikh@kotak.com, a Banking Company incorporated under the provisions of -2-

Companies Act, 1956.

Office at 1st Floor, Manek Lodge, N S Patkar Marg, Hughes Road, Mumbai 400 007 ...Respondent No. 3

AND

4. Jamnagar Muncipal Corporation, through the Executive Engineer, xenugdjmc@gmail.com, Muncipal Corporation, located in Jamnagar District, Gujrat.

Office at Jubilee Garden, Lal Bungalow Circle, Jamnagar - 361001. ...Respondent No. 4

AND

5. Citi Bank Limited, through Mr. Bhavin Pagdhar, Assistant Manager, bhavin.paghdar@citi.com, a Banking Company incorporated under the provisions of Companies Act, 1956.

Office at 1st Floor, Pelican Building, Oppo Race Course Raod, Gotri Road, Vadodara 390 007. ...Respondent No. 5

Appellant: Mr. Saurabh Kirpal, Sr. Advocate along with Mr. Atul Shankar Mathur, Ms. Priya Singh, Mr. Umang Katariya & Ms. Tanima Gaur, Advocates. Respondents: Mr. Abhishek Swaroop, Mr. Swarnendu Chatterjee, Ms. Vatsala Bhatt & Mr. Shriraj Khembete, Advocates for Liquidator. Ms. Prerna Arora, Advocate for R-5.

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. Aggrieved by the Impugned Order dated 30.08.2019, passed by the

Learned Adjudicating Authority (National Company Law Tribunal, Mumbai

Bench, Mumbai) in MA 1011 of 2019 in C.P. No.

Company Appeal (AT) (Insolvency) No. 1474 of 2019 -3-

1832/IBC/NCLT/MB/MAH/2017. The Appellant/'M/s. Xylem Water

Solutions India Private Limited' preferred this Appeal under Section 61(1) of

the Insolvency and Bankruptcy Code (hereinafter referred to as the 'Code').

The Adjudicating Authority has dismissed the Miscellaneous Application No.

1011 of 2019 preferred by the Applicant/Appellant herein for discharge of

the Bank Guarantee bearing Nos. 5800687607, 5801687607, 5802687607

on the ground that the interest of the 'Corporate Debtor' ought to be

protected during the CIRP Proceedings.

2. Facts in brief are that the 'Corporate Debtor' entered into a sub-

contract with the Appellant herein for a total value of Rs.21,64,00,000/- for

Electro Mechanical and Instrumentation Works of 70 MLD capacity sewage

treatment plant for the City of Jamnagar. The Appellant furnished Bank

Guarantees to the 'Corporate Debtor' amounting to Rs.2 Crore each. On

19.11.2013, Bank Guarantee bearing No. 402LG085/13 for an amount of

Rs.6 Crore was issued by the 1st Respondent (hereinafter referred to as the

'Corporate Debtor') in favour of the 4th Respondent (hereinafter referred to as

'JMC' in short for 'Jamnagar Municipal Corporation'). On 14.09.2016, a

Completion Certificate was by JMC that the works under the sub-contract

were completed by the Appellant on July, 2016. For ready reference, the said

Completion Certificate is reproduced as hereunder:

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3. After the end of the Defect Liability Period, the Appellant addressed

the letter to the 'Corporate Debtor' seeking the final Completion Certificate.

While so on 20.04.2018, CIRP Proceedings were initiated against the

'Corporate Debtor'. On 09.07.2018, the 'Corporate Debtor' filed MA 661 of

2018 against JMC and Union Bank of India seeking directions for staying

the invocation of Bank Guarantees including Bank Guarantee bearing No.

402LG085/13. The Adjudicating Authority on 11.07.2018 stayed the

invocation of the Bank Guarantees. JMC addressed a letter on 13.11.2018 to

the 'Corporate Debtor' seeking extension of the Bank Guarantee. M/s. Kotak

Mahindra Bank/3rd Respondent addressed a letter to the Appellant herein

requesting for extension of the Counter Bank Guarantee, on the request of

JMC. On 06.12.2018, the Appellant herein filed an Application seeking

injunction on the invocation of Bank Guarantee furnished by the Appellant

which was disposed of by terms of settlement, as per which, the Bank

Guarantee was not to be invoked. The Appellant extended the Bank

Guarantee on 11.12.2018, which was furnished to the Corporate Debtor.

While so on 31.03.2019, JMC addressed a letter of invocation marking a

copy to M/s. Kotak Mahindra Bank/3rd Respondent seeking to invoke the

Bank Guarantee unless it is extended by 15.03.2019.

4. On 08.03.2019, MA 1011 of 2019 was preferred by the Appellant

herein before the Adjudicating Authority praying for directions to JMC and

the 'Corporate Debtor' for release of Bank Guarantee issued on behalf of the

Appellant by the 5th Respondent/M/s. Citi Bank in favour of M/s. Kotak

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Mahindra Bank pursuant to the sub-contract entered into between the

'Corporate Debtor' and the Appellant herein.

5. Learned Sr. Counsel appearing for the Appellant contended that the

'Corporate Debtor' has gone into Liquidation on 07.05.2021, and a

Liquidator has also been appointed and vide Order dated 23.11.2021, this

Tribunal has sought for the Status Report by way of an Affidavit from the

Liquidator. On 14.12.2021, this Tribunal has recorded the submissions of

the Learned Sr. Counsel for the Appellant with respect to the Completion

Certificate issued by JMC in favour of the Applicant having completed the

works assigned to them. Learned Sr. Counsel also placed reliance on the

'Final Acceptance Certificate' dated 17.09.2018, which is detailed as

hereunder:

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6. The Counsel appearing for the Liquidator submitted that in view of the

fact that the 'Corporate Debtor Company' has already handed over the

Project to JMC; the main Bank Guarantee bearing No. 0004FBG130041 of

Rs.10 Crores issued by the 'Corporate Debtor Company' has been invoked

and encashed by JMC; the pending Arbitration Proceedings before the

Commercial Court are sought to be withdrawn; a memo of withdrawal dated

07.10.2021 is pending for Orders; the Liquidator/the 2nd Respondent has no

objection to the discharge of the said Bank Guarantees.

7. The Liquidator deposed in the Additional Affidavit there is no objection

if the discharge of the Bank Guarantee bearing Nos. 5800687607,

5801687607 & 5802687607 sought for by the Appellant, is granted by this

Tribunal and original Counter Bank Guarantees are returned. Having regard

to the Affidavit filed by the Liquidator and the submissions made, coupled

with the fact that the 'Corporate Debtor Company' has already invoked the

main Bank Guarantee; the Project has been handed over to JMC and the

pending Arbitration Proceedings were instructed to be withdrawn vide email

dated 29.09.2021, and the Defect Liability Period under the Sub-Contract

Act has also expired as evidenced in the aforenoted Completion Certificate

and the Final Acceptance Certificate, this Appeal is allowed and the

Impugned Order is set aside. No Order as to costs.

8. The Registry is directed to upload the Judgement on the website of

this Tribunal and send the copy of this Judgement to the Learned

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Adjudicating Authority (National Company Law Tribunal, Mumbai Bench,

Mumbai) forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

NEW DELHI 10th January, 2022

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Company Appeal (AT) (Insolvency) No. 1474 of 2019