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2026 Supreme(Online)(NCLT) 122
NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
UCO Bank – Appellant
Versus
Rajendra Prasad Tak – Respondent
IA(IBC)/448/2024|IA(IBC)/2464/2024|CP(IB) No. 328/7/HDB/2018
For the Appellants/Petitioners: Mr. Manav Gecil Thomas, Mr. Abhishek Anand, Mr. Karan Kohli, Mr. Rajat Gupta, Mr. Kunal Kocchar, Mr. Vanshika Dhoot
For the Respondents: Ms. Santhi Chandra
Bank guarantees are independent contracts; valid pre-expiry invocation obligates payment unaffected by insolvency. Uninvoked guarantees expire, allowing margin money release as liquidation estate asset.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 14(3)(b), 35(1)(b), 35(1)(m), 36, 36(3), 46, 53, 60(5), 238 - Bank guarantees issued in favour of customs authorities - Moratorium - Liquidation estate - Margin money - Bank guarantees are independent contracts between issuing bank and beneficiary - Valid invocation during subsistence obligates bank to honour and remit proceeds unaffected by insolvency proceedings - Uninvoked or post-expiry guarantees discharged upon expiry - Margin money of uninvoked guarantees forms part of liquidation estate - Directions issued for return of original uninvoked guarantees to bank and release of margin money to liquidator. (Paras 7.xii to 7.xxii)
(B) Customs Act, 1962 - Project Import Regulations - Bank guarantees furnished for provisional assessments - Invocation rights - Guarantees securing potential customs duties not assets of corporate debtor - Beneficiary entitled to proceeds upon valid pre-expiry invocation - Retention of expired uninvoked guarantees unjustified post-insolvency finality. (Paras 7.vi, 7.viii, 7.xxi)
(C) Contract Act, 1872 - Section 128 - Independent and autonomous nature of guarantees - Irrevocable unconditional guarantees payable on demand without demur - Bank bound to honour irrespective of disputes in underlying transaction or insolvency status. (Paras 7.xii, 7.xix)
Facts of the case:
Corporate debtor under liquidation with goods lying at ports under customs custody backed by bank guarantees issued by applicant bank. Liquidator sought return of guarantees and margin money claiming them as liquidation assets. Customs authorities invoked certain guarantees pre-expiry for unpaid duties but bank refused payment citing insolvency orders. Both parties filed cross-applications for directions on guarantee treatment and margin money release.
Findings of Court:
Customs authorities directed to return original bank guarantees not invoked or invoked post-expiry to issuing bank after retaining photocopies. Issuing bank directed to release margin money of uninvoked guarantees to liquidator upon receipt of originals. Invoked guarantees upheld with bank liable for proceeds.
Issues: Whether bank guarantees form part of liquidation estate; validity of pre-expiry invocations during moratorium/liquidation; entitlement to margin money release; directions for return of originals post-insolvency sale finality.
Ratio Decidendi: Bank guarantees constitute independent obligations enforceable per their terms irrespective of insolvency moratorium under Section 14(3)(b). Validly invoked guarantees during subsistence require honouring by bank; uninvoked guarantees expire discharging liability, enabling margin money release as liquidation asset. Supreme Court/NCLAT orders confirming Section 53 waterfall for dues do not override pre-invocation rights.
Result: Cross-applications partly allowed and disposed of.
| Table of Content |
|---|
| 1. case details and procedural history (Para 1 , 2 , 3) |
| 2. uco bank seeks return of bgs (Para 4) |
| 3. liquidator claims margin money (Para 5) |
| 4. customs retains bgs for duties (Para 6) |
| 5. bgs invoked timely payable; others returnable (Para 7) |
ORDER
1. I.A (IBC) No. 448 of 2024 is filed by M/s. UCO Bank against the all the Respondents seeking the following reliefs:
i) To direct the Respondent Nos. 2 (Principal Commissioner of Customs, Visakhapatnam) & 4 (Paradip Port Authority) to return the original Bank Guarantees mentioned hereunder to the Applicant.
ii) Pass an appropriate order as and with regard to the margin money of the aforementioned Bank Guarantees lying with the Applicant.
2. I.A (IBC) No. 2464 of 2024 is filed by Mr. Rajendra Prasad Tak, Liquidator of M/s. KVK Nilachal Power Private Ltd. against the all the Respondents seeking the following reliefs:
i) Direct the Respondent Nos. 2 (Principal Commissioner of Customs, Visakhapatnam) to 4 (Paradip Port Authority) to provide the Original Bank Guarantees issued on behalf of the Corporate Debtor by the Respondent No. 1 to the Respondent No. 2
ii) Direct the Respondent No. 1 (Principal Commissioner of Customs, Visakhapatnam) to return the Margin Money in the liquidation account of the Corporate Debtor;
3. Both I.A (IBC) No. 448 of 2024 and I.A (IBC) No. 2464 of 2024 are being heard and disposed of together, as they arise out of the same set of facts and involve the same parties.
4. Case of the UCO Bank
i) M/s. Power Finance Corporation Limited initiate proceedings against the M/s. KVK Nilachal Power Private Limited (Corporate Debtor/CD) under Section 7 of the Insolvency and Bankruptcy Code, 2016 and it was admitted by this Authority vide order dated 17.09.2019 in CP (IB) No. 329/7/HDB/2018. In the 8th CoC meeting held on 16.03.2020 and 17.03.2020, the CoC voted in favour of liquidating the CD with 100% majority. Consequently, the Resolution Professional, Mr. Rajendra Prasad Tak, filed an I.A (IBC) No. 1027 of 2020 seeking initiation of Liquidation Proceedings. This Authority, vide order dated 17.12.2020 allowed I.A (IBC) No. 1027 of 2020 and commenced liquidation.
ii) Thereafter, the Liquidator filed I.A (IBC) No. 475 of 2022 seeking the following reliefs:
“a. Allow the present application;
b. Issue appropriate directions to Respondent Nos. 1 to 3to return the goods/material/cargo of the Corporate Debtor lying in Paradip Port, Orissa and Gangavaram Port, Vizag forthwith being the assets as property of the Corporate Debtor so that the same can form part of the Liquidation estate under Section 36 of the Code; and c. Direct the Respondent Nos. 1-3 to return the original Bank Guarantee is lying with them on The Corporate Debtor; d. During the pendency of the present application to grant an ex parte ad interim direction upon the Respondents to maintain status quo and not to invoke any Bank Guarantees lying with on behalf of the Corporate Debtor during the pendency of this Application.”
iii) Further, the Liquidator issued e-auction process information document dated 11.07.2022 inviting bids from prospective buyers for the sale of CD’s business, as a going concern. In the said auction M/s. Padmaprabhu Commodity Trading Pvt. Ltd. was declared as successful bidder (PCTPL). PCTPL filed an I.A No. 960 of 2022 before this Authority seeking confirmation of the sale of CD as a going concern and it was allowed by this Authority vide order dated 01.12.2022.
iv) By virtue of the order dated 01.12.2022, I.A (IBC) No. 475 of 2022 was dismissed by this Authority as infructuous v) The Principal Commissioner of Customs, Visakhapatnam (Customs Department/Customs Authorities) challenging the order of this Authority in I.A (IBC) 960 OF 2022, filed a Company Appeal (AT) (CH) (Ins) No. 218 of 2023 (I.A Nos. 718, 719, 720 & 721 of 2023) before Hon’ble NCLAT, Chennai which was dismissed on the ground of limitation vide order dated 26.07.2023. Thereafter, Customs Authorities filed a Civil Appeal Nos. 6432-6
