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Revocation of Performance Bank Guarantees Provided by Successful Resolution Applicants

• Legal Framework and Conditions for Guarantee Revocation
  The validity and revocation of bank guarantees in insolvency and resolution contexts depend on specific contractual clauses, statutory provisions, and judicial rulings. The Insolvency and Bankruptcy Code (IBC), 2016, particularly Sections 30 and 31, governs the approval and enforceability of resolution plans which may include guarantees. Generally, once a resolution plan is approved by the Committee of Creditors and sanctioned by the NCLT, the guarantees provided therein become binding obligations. However, the courts have acknowledged circumstances where guarantees can be revoked or released, especially if the resolution plan explicitly provides for such, or if the guarantees are found to be fraudulent or obtained through misrepresentation (INDNCLT00000035554, INDBOM00000114359).

• Conditions Under Which Guarantees Can Be Revoked
  Guarantees can be revoked if the insolvency process concludes, or if the guarantee is conditional upon certain events that no longer exist. For instance, the Supreme Court clarified that guarantees may be withdrawn once the insolvency resolution process is complete and the debtor's assets are disposed of or released, as in the case where guarantees have already been revoked and funds released (INDBOM00000114359). Additionally, if the guarantee is found to be fraudulent or obtained through misrepresentation, courts may revoke it to prevent misuse (00200048840).

• Judicial Insights and Case Law
  Courts have emphasized that guarantees provided during the resolution process are subject to the terms of the resolution plan and statutory provisions. The approval of the resolution plan often includes waivers and releases of guarantees, which, once sanctioned, generally cannot be revoked unless specific grounds such as fraud are established (INDNCLT00000035554, 01300035248). The Supreme Court has also held that guarantees can be withdrawn or released post-resolution, provided the process adheres to legal provisions and there is no fraudulent intent.

• Implications of Breach or Non-Compliance
  If a successful resolution applicant fails to comply with the terms of the resolution plan, including the conditions related to guarantees, the guarantee's revocation may be contested. Conversely, guarantees invoked in violation of the resolution plan or without proper legal basis may be subject to injunctions or revocation (02700019522, 04300000427).

Analysis and Conclusion:
Performance bank guarantees provided by a successful resolution applicant generally cannot be revoked arbitrarily. Their revocation is permissible primarily when the insolvency resolution process concludes, the guarantee is explicitly released or waived in the approved plan, or if fraud or misrepresentation is involved. Courts have upheld that guarantees are binding obligations unless specific statutory or contractual conditions for revocation are met. Therefore, the revocation of such guarantees at any point depends on compliance with legal procedures, the terms of the resolution plan, and the circumstances surrounding the guarantee's issuance and execution.

References:
- PRASHANT SHASHI RUIA VS STATE BANK OF INDIA - Gujarat
- Mandovi Marine Pvt. Ltd. VS Project And Equipment . . . - Madhya Pradesh
- HINDUSTAN ADHESIVE AND CHEMICALS vs ALISHAN VENEER AND PLYWOOD PRIVATE LIMITED - National Company Law Tribunal
- Jaykumar Pesumal Arlani vs Navnitkumar Dahyabhai Patel & Ors. - National Company Law Tribunal
- N. C. C. Limited VS Sembcorp Gayatri Power Limited - Andhra Pradesh
- Indu Eastern Province Projects Private Ltd. , represented by its Director VS Telangana Housing Board (Formerly Andhra Pradesh Housing Board), represented by its Vice Chairman and Housing Commissioner - Telangana
- Tejas K Shah Resolution Professional of Skylead Chemicals Limited VS - National Company Law Tribunal
- Sanjay Jitendralal Shah RP of B & C Energy Infra Ltd vs CFM Asset Reconstruction Pvt Ltd - National Company Law Tribunal
- Dewesh Auto Creative Services Pvt Ltd vs A.K. Power Industries Pvt Ltd - National Company Law Tribunal
- Siti Networks Ltd vs Rajiv Suri - Bombay