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2026 Supreme(Online)(NCLT) 2525

NATIONAL COMPANY LAW TRIBUNAL
Union Bank Of India – Appellant
Versus
Shailesh Balchandra Desai Liquidator – Respondent
IA(I.B.C) - 43/2022

Advocates:
For the Petitioner:NOOR ilyas BAKALI
For the Respondent:AKR ADVISORS LLP

A refund from a wrongly invoked bank guarantee during CIRP is an asset of the corporate debtor, not the issuing bank's secured asset, and becomes part of the liquidation estate if the secured creditor fails to exercise its right under Section 52 within 30 days.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 36, Section 52, Section 60(5) - IBBI (Liquidation Process) Regulations, 2016 - Regulation 21A - Wrongful invocation of bank guarantee during moratorium - Refund received by liquidator from beneficiary - Whether refund forms part of liquidation estate - A secured creditor must exercise its right to realise security interest under Section 52 within 30 days of liquidation commencement date, failing which the asset is presumed to be part of the liquidation estate under Regulation 21A. (Paras 44-48)

(B) Insolvency and Bankruptcy Code, 2016 - Section 3(31) - Security interest - Refunded amount from wrongly invoked bank guarantee cannot be considered as 'stock' or 'book debt' or 'plant and machinery' covered under the primary or collateral security of the creditor/claimant; hence no security interest exists over such refund. (Paras 35-39)

Facts of the case:
The Corporate Debtor was admitted into CIRP on 11.04.2019 and later ordered into liquidation on 14.08.2020. During the CIRP period, a beneficiary wrongly invoked a bank guarantee issued by the Applicant (a bank) on behalf of the Corporate Debtor, and the Applicant released the guarantee amount of Rs.2 crores to the beneficiary. The liquidator filed an application, and the beneficiary agreed to refund Rs.1,83,90,060/- to the liquidator. The liquidator treated this refund as part of the liquidation estate and distributed it among secured creditors under Section 53 of the Code. The Applicant bank claimed that the refund should be returned to it exclusively, not distributed to other creditors.

Findings of Court:
(i) The amount receivable from the beneficiary was an asset of the Corporate Debtor and not a secured asset of the Applicant. (ii) The Applicant had failed to intimate its decision to realise security interest within 30 days from the liquidation commencement date as required under Section 52 read with Regulation 21A, thereby the amount became part of the liquidation estate. (iii) The liquidator was justified in distributing the refund amount among the secured creditors as per Section 53 of the Code. (Paras 40-52)

Issues: (I) Whether the refund of wrongly invoked bank guarantee amount received from the beneficiary exclusively belongs to the Applicant and should be kept outside the liquidation estate? (II) Whether the liquidator was justified in distributing the refund amount to all creditors as per Section 53 of the Code? (Para 29)

Ratio Decidendi: (i) A refund received from a wrongly invoked bank guarantee is an asset of the corporate debtor and not a secured asset of the issuing bank. (ii) A secured creditor must exercise its right to realise security interest within 30 days of liquidation commencement date; otherwise, the asset becomes part of the liquidation estate. (iii) Since the applicant failed to exercise such right and did not intimate its decision, the liquidator rightly treated the refund as part of the liquidation estate and distributed it under Section 53.

Result: The application (I.A. 43/2022) was dismissed. (Para 53)

Legal Category Hierarchy

IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH COURT III I.A.43/2022 IN CP No.2660/2018 Under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016, Union Bank of India Stressed Assets Management Branch, 104, Ground floor, Bharat House, MS Marg, Fort, Mumbai.

…Applicant Vs.

Mr. Shailesh Desai (Liquidator)

Headway Resolution and Insolvency Services Private Limited, 1006, Raheja Centre, 10th Floor, Nariman Point, Mumbai - 400 021. … Respondent No.1 Bank of Baroda Backbay Reclamation Branch, Backbay Reclamation, Appejay House, 3, Dinshaw Vaccha Road, Mumbai-400020.

… Respondent No.2 Standard Chartered Bank

4th Floor, Crescenzo, BKC, Mumbai-

400051.

… Respondent No. 3 In the matter of Under Section 7 of the Insolvency and Bankruptcy Code,2016.

Dena Bank Dena Corporate Centre, C-10, G- Block, Bandra- Kurla Complex, Bandra (East), Mumbai- 400 051.

… Financial Creditor Vs.

EMI Transmission Limited (in liquidation).

101, 1st Floor, Centre Point, Dr. Babasaheb Ambedkar Road, Parel, Mumbai – 400012 …Corporate Debtor Order pronounced on: 28.04.2026 Coram:

Hon’ble Ms. Lakshmi Gurung, Member (Judicial)

Hon’ble Sh. Hariharan Neelakanta Iyer, Member (Technical).

Appearances:

For the Applicant: Adv. Deepak Saxena, Adv. Shivanjali Mane, Adv. Bhardwaj, Adv. Malhar Zatakia, Adv.

Kaushal Ameta i/b Legal Prism.

For the Respondent No.1: Adv. Ayush Rajani, Adv. Mitali Bhatt, Adv.

Priyank Jadhav i/b ARK Legal.

For the Respondent No.2 None appeared For the Respondent No.3 Adv. Virgil Braganza, Adv. Shaan Bhatt i/b J.

Sagar Associates.

PER: MS. LAKSHMI GURUNG, MEMBER (JUDICIAL)

ORDER

1. This application has been filed by the Union Bank of India (‘the Applicant’) under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (‘the Code’), read with Rule 11 of the National Company Law Tribunal Rules, 2016, (‘NCLT Rules’) seeking following reliefs: -

a) That this Tribunal be pleased to direct the Respondent No. 1 to release entire refund amount of Rs.1,83,90,060/- (Rupees One Crore Eighty-Three Lakhs Ninety Thousand Sixty less the amount paid to the Applicant), refunded by KEC International Limited, to the Applicant;

b) In the alternate this Tribunal, be pleased to direct the Respondent No. 2 & 3 to release amount of Rs.1,16,87,810/- (Rupees One Crore Sixteen Lakhs Eighty-Seven Thousand Eight Hundred Ten only) and Rs.4,74,578/- (Rupees Four Lakhs Seventy-Four Thousand Five Hundred Seventy-Eight only) respectively received from Respondent No.1, under section 53 of the IB Code to the Applicant;

c) Any other reliefs as this Tribunal may deem fit in the circumstances of the matter.

2. The Applicant is inter alia assailing the action of the Respondent No. 1 for inclusion of the amount of Bank Guarantee wrongfully invoked and encashed by KEC International Limited (KEC), into liquidation estate and its distribution under section 53 of Insolvency and Bankruptcy Code, 2016 (‘the Code’).

Brief Facts:

3. Upon an application filed by Dena Bank under Section 7 of the Code, M/s EMI Transmission Ltd. (the Corporate Debtor) was admitted into Corporate Insolvency Resolution Process (‘CIRP’) on 11.04.2019 and Respondent No. 1 was appointed as the Interim Resolution Professional (‘IRP’) and was later confirmed as Resolution Professional (‘RP’) of the Corporate Debtor.

4. In the tenth meeting of Committee of Creditors (‘COC’) held on

02.01.2020, the COC noted that no resolution plan was received and hence passed a resolution to liquidate the Corporate Debtor.

5. In the meantime, during the CIRP period, KEC, being a beneficiary, invoked Bank Guarantees issued by the Applicant, on behalf of the Corporate Debtor, and the Applicant complying with the same released the amount of Bank Guarantees aggregating to Rs.2,00,00,000/-

(Rupees Two Crores Only) to KEC on 28.01.2020.

6. Upon an application filed by the Respondent No.1, this Tribunal ordered for liquidation of the Corporate Debtor on 14.08.2020 in M.A No.

307/2020 and Respondent No.1 wa

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2026 Supreme(Online)(NCLT) 2525

NATIONAL COMPANY LAW TRIBUNALUnion Bank Of India – AppellantVersusShailesh Balchandra Desai Liquidator – RespondentIA(I.B.C) - 43/2022

A refund from a wrongly invoked bank guarantee during CIRP is an asset of the corporate debtor, not the issuing bank's secured asset, and becomes part of the liquidation estate if the secured creditor fails to exercise its right under Section 52 within 30 days.

Legal Category Hierarchy

NATIONAL COMPANY LAW TRIBUNAL
Union Bank Of India – Appellant
Versus
Shailesh Balchandra Desai Liquidator – Respondent
IA(I.B.C) - 43/2022