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2022 Supreme(Gau) 414
IN THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
DEVASHIS BARUAH, J.
Union Of India Rep. By The Secretary and 5 Ors. – Appellants
Versus
Nayak Infrastructure Pvt. Ltd., Director Sri Alok Kumar Nayak – Respondent
Arb.A. 5 of 2020
Decided on : 14-06-2022
Advocate Appeared:
For the Appellants :Mr. G. Goswami, Advocate.
For the Respondent:Mr. U. K. Nair, Senior Advocate Mr. R. Singha, Advocate
Point of Law: The earnest money and the security deposit are assets of corporate debtor and taking into consideration that object behind the enactment of Section 14 (1) of the Code which is that assets of the corporate debtor is preserved during the Insolvency Proceedings.
Headnote:
Arbitration and Conciliation Act, 1996- Section 37 (1) (b) - Sick Industrial Company (Special Provisions) Act, 1985- Section 22 (1) - Insolvency Law Committee - Bank guarantee – Tender Process - Scope and ambit of Section 22 (1) of Act, 1985 - Instant case is that pursuant to a tender process the respondent was entrusted with work, namely, “Earthwork in cutting to form formation and in filling to form embankment including mechanical compaction for making proposed Tupul Terminal Yard (KM) and from KM 97.800 to KM 98.000 in between Noney to Tupul including construction of minor Bridges and other ancillary works in connection with construction of New Railway Line from Jiribam-Tupul (Two Packet System)” - Letter of acceptance was issued to respondent and contract value was Rs.44,68,97,432.35 - Court opinion that said earnest money and security deposit cannot be forfeited by appellants till resolution process stands concluded in manner as envisaged under law. (Para 22)
Finding of the court :
This Court sets aside order, passed in Misc. (Arb) Case in so far as the restraint upon appellants to invoke bank guarantee is concerned - Taking into consideration that matter is still pending before Court of Additional District Judge, No. 1, parties are directed to appear before said court and thereupon court shall proceed with adjudication of matter as expeditiously as possible and preferably within a period of 30 (thirty) days from date of appearance of parties before it - This Court has only gone into legality and validity of impugned order which relates to curtailment of right to invoke Bank Guarantee by Appellants by way of an injunction and no observations have been made as regards rights of appellants to invoke bank guarantee via-a-vis State Bank of India in question.
Result: Appeal disposed of
JUDGMENT :
Heard Mr. G. Goswami, the learned counsel for the appellants and Mr. U.K. Nair, the learned senior counsel assisted by Mr. R. Singha, the learned counsel appearing on behalf of the Interim Resolution Professional, appointed for the respondent by the National Company Law Tribunal in CP(IB) No.10/2021.
2. This is an application under Section 37 (1) (b) of the Arbitration and Conciliation Act, 1996 (for short, the Act of 1996) challenging the order dated 04.011.2019, passed in Misc. (Arb) Case No. 56/2019 whereby the Court of the Additional District Judge, No. 1, (Kamrup (M) at Guwahati vide the said order had restrained the appellants herein from invoking or encashing the performance bank guarantee amounting to Rs.2,23,44,827/-furnished by the respondent and also from forfeiting the security deposit and earnest money deposited by it for the work allotted to it.
3. At this stage, it may be relevant herein to mention that the said order was passed ex-parte. It is also pertinent to mention that the appellants had also filed the written objection in the said Misc (Arb.) Case No. 56/2019 and the same is presently pending before the said Court of the Additional District Judge, No. 1, (Kamrup (M) at Guwahati
4. Mr. G. Goswami, the learned counsel for the appellants submits that till date, the said Misc. (Arb) Case No. 56/2019 is still pending before the court below and the order impugned and the delay in disposal of the said Misc. (Arb) Case has seriously affected the rights of the appellants.
5. As the said Misc. (Arb) Case No. 56/2019 is still pending adjudication before the Court of the Additional District Judge, No. 1, (Kamrup (M) at Guwahati, this Court would confine its adjudication to the legality and validity of the impugned order keeping the said aspect of the matter in mind.
6. The brief fact of the instant case is that pursuant to a tender process the respondent was entrusted with the work, namely, “Earthwork in cutting to form formation and in filling to form embankment including mechanical compaction for making proposed Tupul Terminal Yard (KM 96.700 to 97.800) and from KM 97.800 to KM 98.000 in between Noney to Tupul including construction of minor Bridges and other ancillary works in connection with construction of New Railway Line from Jiribam-Tupul (Two Packet System)”. The letter of acceptance was issued to the respondent on 07.07.2015 and the contract value was Rs.44,68,97,432.35. The performance guarantee in the form of a bank guarantee issued by the State Bank of India was submitted on 19.08.2015 for a value of Rs.2,23,44,872/-and the contract agreement was signed on 07.12.2015. The completion period was 9 months from the letter of acceptance. It may be relevant to mention that the said bank guarantee was extended from time to time and the last of such extension was given on 15.04.2019 whereby the validity was upto 10.04.2020.
7. It is the case of the appellants that the respondent failed to perform its part of the contract as per the terms of the contract and as such a termination notice was issued vide Letter No.W/60/CON/J-T/EMB/2014/12/2097 dated 01.11.2019 as per Clause 62 of the General Conditions of the Contract.
8. The respondent herein after receiving the termination notice dated 01.11.2019, filed an application under Section 9 of the Act of 1996 before the Court of the Additional District Judge, No. 1, (Kamrup (M) at Guwahati which was registered and numbered as Misc. (Arb) Case No. 56/2019 praying for grant of interim measure by way of injunction restraining the appellants from invoking the relevant clauses of the contract invoking the bank guarantee dated 15.04.2019 for an amount of Rs.2,23,44,872/- issued by the State Bank of India, Khanapara Branch and also from forfeiting the security deposit and earnest money deposited by the respondent till disposal of the petition.
9. The Court of the Additional District Judge, No. 1, (Kamrup (M) at Guwahati vide the impugned order dated 04.11.2019 issued notice
