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2021 (1) TMI 1209 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHIApplication for closure of its Fixed Deposit on the ground that since Corporate Insolvency and Resolution Process has been initiated against the Corporate Debtor - redemption of fixed deposits to the Account of the Corporate Debtor - whatever the assets belonging to the Corporate Debtor have to come under the control and custody of the RP as per I&B Code - whether or not the fixed deposits lying with the Respondent Bank are to be construed on par with Performance Bank Guarantee covered by the proviso to Section 3(31) of the Code? - HELD THAT:- A performance guarantee is issued to one party of a contract as a guarantee against the failure of the other party to perform the obligations specified in the contract, it is usually provided by a Bank to make sure a contract completes designated project, in the case of financial guarantee, it reassures repayment of money in the event of non completion of repayment. We cannot attribute any logic to it, we only can say performance guarantee alone is exempted by the Code, therefore unless the guarantee has attributes of performance guarantee, it cannot be said that it is exempted by the Code. The case of the Respondent Bank is, it falls under the proviso to Section 3(31) of the Code, whereas the RP case is it will not fall under the exemption mentioned above. In the present case, it is nether Performance Guarantee, nor a fixed deposit linked to performance guarantee, it is like any other security given against loan facility availed, under this Code, the security interest covered by loan facility is also hit by section 14 of the Code, therefore the fixed deposit given as security against loan facility cannot be equated with the performance guarantee, and the right of lien or set off ordinarily available to the Respondent Bank is not available during CIRP initiated under the Code. The Respondent Bank is directed to transfer the amount payable (including interest accrued thereon) on closure of Fixed Deposits held by the Corporate Debtor - Application allowed.
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