Back
2025 Supreme(Online)(NCLT) 1577
NATIONAL COMPANY LAW TRIBUNAL
Shri Rajeev Bhardwaj, J, Shri Sanjay Puri, T
M/s. Edelweiss Asset Reconstruction Company Limited – Appellant
Versus
M/s. Viceroy Bangalore Hotels Pvt. Ltd. – Respondent
I.A.(IBC)1806 of 2023 in C.P. (IB) No.88/07/HDB/2022
For the Applicant : Mr. G.Bhupesh
For the Respondents: Mr.Raja Shekar Rao Salvaji, Ms.KVS Madhumita
Bank Guarantees are independently enforceable despite insolvency; moratorium does not apply to such guarantees under the Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5) - Bank Guarantees - Invocations during moratorium - The Court ruled that Bank Guarantees constitute autonomous contracts independently enforceable, even when a Corporate Debtor is under insolvency proceedings, as per the moratorium exclusion under Section 14(3). The claims of the Corporate Debtor's creditors were extinguished upon the approval of a Resolution Plan. (Paras 3, 6, 7, 9, 10)
(B) Performance Guarantees - Legal status - Performance Guarantees are excluded from the definition of 'security interest' and thus, the moratorium does not apply to them. The margin money was deemed held in trust for the beneficiary. (Para 6)
(C) Invocation Validity - The Court upheld the validity of the invocation of Performance Bank Guarantees post-CIRP initiation, affirming the right of beneficiaries to invoke guarantees regardless of underlying contract disputes. (Paras 2, 5, 8, 9)
Facts of the case:
The application arose from a Corporate Insolvency Resolution Process initiated against Viceroy Bangalore Hotels Pvt. Ltd. The Applicant sought to restrain respondents from encashing Bank Guarantees, citing a Resolution Plan that had extinguished the Corporate Debtor's pre-CIRP liabilities.
Findings of Court:
The Court concluded that the invocation of Bank Guarantees was valid and did not breach the moratorium provisions as these guarantees are treated independently of the underlying contracts.
Issues: Whether Bank Guarantees issued prior to CIRP can be invoked later and if appropriations by beneficiaries are valid despite ongoing insolvency proceedings.
Ratio Decidendi: The designated authority deemed that the right to invoke Bank Guarantees remains intact regardless of a Corporate Debtor's insolvency status, affirming established legal precedents.
Result: Application dismissed.
| Table of Content |
|---|
| 1. validity of bank guarantees invoked even with corporate debtor in cirp. (Para 10 , 11 , 12) |
| 2. final determination of the application based on the presented arguments. (Para 13 , 14 , 15) |
ORDER
I. The present application has been filed by M/s. Edelweiss Asset Reconstruction Company Limited (Applicant/Financial Creditor/FC) under Section 60 (5) of the Insolvency & Bankruptcy Code, 2016 (“IBC”, 2016) seeking the following reliefs.
a. Direct the Respondents not to encash Bank Guarantees/Bonds submitted while obtaining License Nos. 930011086, 930011170 and 930011229;
b. Direct the Respondent Department not to cause any inconvenience or interference with the revival process of the Corporate Debtor;
c. Direct Respondent No. 3 not to release any amounts to Respondent No. 1 & Respondent No. 2; and
d. Direct Respondent No. 3 to release the margin money and other amounts to the Applicant herein to deal with them in accordance with the Resolution Plan.
II. Application
1. M/s.Viceroy Bangalore Hotels Private Limited (CD) was admitted into CIRP vide order dated 05.08.2022, on a petition under Section 7 of IBC filed by the FC, in C.P.(IB) No. 88/7/HDB/2022. Mr.Kuresh Khambati has been appointed as the Resolution Professional ("erstwhile RP").
2. The CoC has approved the Resolution Plan of M/s.Dharampal Satyapal Limited (Successful Resolution Applicant/SRA). This Adjudicating Authority has confirmed the said Plan vide Order dated 22.05.2023.
3. On 12.10.2022, R1 filed a claim pertaining to 7 licenses and the said claim was considered by the erstwhile RP. Subsequently, a demand draft has been prepared as per the approved Resolution Plan to settle the claim of R1. Further, the concerned Department of R1 has been notified to collect it from the office of the erstwhile RP.
4. The erstwhile RP vide letter dated 05.07.2023, [At pages 27- 31 of the application] has informed the Central Board of Excise and Customs regarding the implementation of the Resolution Plan and also asked the R1 and R2, to dismiss the proceedings against the CD. R1 and R2 have replied vide email dated 19.07.2023, [At pages 32-34 of the application] stating that the proceedings could not be dropped, as they were considered untenable.
5. Later, the erstwhile RP vide letter dated 04.08.2023, [At pages 35-37 of the application] has informed R1 and R2 about the approval of the Resolution Plan and the extinguishment of the CD’s liabilities. However, no response was received from R1 and R2 to the said letter. On 14.09.2023, [E-mails at page 44 -45 of the application] the erstwhile RP was directed by the Respondents to send the Demand Draft directly to their office and subsequently the Demand Draft was delivered on 03.10.20235
6. On 15.09.2023, R1 through R2 has issued a letter to the CD asking to fulfill the obligations to obtain the licenses, whereas the licenses and certain exceptions under Export Promotion Capital Goods Scheme (EPCG) have already been granted. Further, it was informed to the CD that in the event of CD's failure to meet these obligations, the Respondents will invoke the Bank Guarantees (BGs) submitted for the said purpose to which the CD replied on 27.09.2023, [At pages 38-41 of the application]
7. The CD registered under the EPCG had obtained the following licenses against which the exemptions were availed as per the letter as follows:
8. In the meanwhile, on 03.11.2023, [At page 22 of the application], the CD had merged with the SRA, in accordance with the Resolution Plan.
9. In these circumstances, the Applicant has strongly submitted that in view of the approval of the Resolution Plan, R1 and R2 are required to release the BGs without invocation, and Kotak Bank is obligated to return the margin money to the Applicant. The Resolution Plan stipulates that, upon approval of the Resolution Plan, all liabilities of the Corporate Debtor prior to the Corporate Insolvency Resolution Process (CIRP)
