TMI Blog2018 (3) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... Guarantees given by the Corporate Debtor. Therefore, the Bankers are at liberty to allow the 1st Respondent to encash the Bank Guarantees that are given in respect of Performance Guarantees subject to other objections, if any. The moratorium order passed by this Tribunal applies in respect of Bank Guarantees other than Performance Guarantees furnished by the Corporate Debtor in respect of its property since it comes within the meaning of ‘security interest’. Respondent No. 1 is not entitled to invoke Bank Guarantees other than that comes within the meaning of performance Guarantees, during Moratorium period. Coming to the aspect of disconnection of power supply by the 1st Respondent to the Applicant, it appears that without issuing any notice the power supply was disconnected to the Corporate Debtor. In the case on hand, it appears that the power supply was disconnected to the Corporate Debtor after the declaration of moratorium. Section 14(2) of the Code says, ‘the supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended or interrupted during moratorium period. The supply of power is an essential goods and service with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited [hereinafter referred to as MGVCL ] is the customer of the Corporate Debtor since last 8 to 10 years. MGVCL used to purchase various types of transformers from the Corporate Debtor. 2.3 The transaction in this Application relates to Eight Acceptance of Tenders (ATs) issued between the years 2011 to 2014 for purchase of various types of Transformers. 2.4 As per the terms and conditions of the Acceptance of Tenders, Corporate Debtor was required to give Bank Guarantees towards Security Deposit and Performance Guarantee. The period allowed for supply is also stated in Acceptance of Tenders. MGVCL filed Special Civil Application No. 14185 of 2017 seeking prayer against UCO Bank for directions to permit to invoke Performance Guarantee. 2.5 It is stated in the Application, that UCO Bank and IOB have not paid the guarantee amount and sought clarification from the Resolution Professional regarding encashment of Bank Guarantee mainly on the ground of moratorium order passed by this Adjudicating Authority under Section 14 of the Code. 3. Section 3, sub-section (31) of the Code defines Security Interest as follows; (31) security interest means right, title or inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons stated above. The Applicant denied the allegation that Company failed to supply 799 transformers. It is the case of Applicant that Company supplied 4298 transformers. On 5.8.2017 MGVCL informed the Corporate Debtor stating that against the outstanding dues of the Corporate Debtor for ₹ 1,16,82,235/-, MGVCL has adjusted an amount of ₹ 71,40,434.40 ps. On 4.7.2017, MGVCL addressed letters to UCO Bank and IOB seeking encashment of Bank Guarantee towards Security Deposit/Performance Guarantees issued by Corporate Debtor. The UCO Bank addressed a letter dated 20th June, 2017 to Interim Resolution Professional regarding encashment of Bank Guarantee. MGVCL by letter dated 5.8.2017 informed the Corporate Debtor to Stop Deal all kinds of business with the Corporate Debtor, to recover from the Corporate Debtor the total amount due totalling ₹ 1,16,82,235/-, to encash and forfeit the Bank Guarantees against Security Deposit and Performance Guarantees. In view of the proposed action of the MGVCL the possibility of obtaining a Resolution Plan and placing it before the Committee of Creditors gets nullified. 4. MGVCL (1st Respondent) filed Reply stating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon ble High Court of Gujarat and therefore the Applicant cannot now invoke the remedy of filing this Application. 5. Respondent No.2 filed Reply stating that in view of the moratorium order passed by this Tribunal in CP (IB) No. 28 of 2017 under Section 14 of the Code the Respondent could not honour the letters of invocation of Bank Guarantees from MGVCL, PGVCL, UGVCL, and DGVCL. The following are the Guarantees invoked after the commencement of moratorium period: Sr. No. Beneficiary Nature Number Validity Period Amount (in Rs.) 1. Madhya Gujarat Vij Company Limited (MGVCL) Performance Guarantee 20311GPER001412 29.10.12-23.04.2018 50,57,321.00 20311GPER001614 04.06.14-30.09.2017 30,07,923.53 2 Paschim Gujarat Vij Company Limited (PGVCL) Performance Guarantee 20311GPER001814 19.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional creditor during the pendency of insolvency proceedings before NCLT. The Respondent No.2 Bank undertakes to abide by any orders passed by this Tribunal in respect of the subject matter. Respondent No.3 Bank also filed Reply on the same lines on which the Respondent No.2 Bank has filed. 6. The points, that emerge for determination in this Application, are as follows: (i) Whether 1st Respondent is entitled to invoke Bank Guarantees during moratorium period; (ii) Whether Performance Guarantee is a Security Interest or not; (iii) Whether supply of power to Corporate Debtor can be restated 7. Section 3, sub-section (31) defines Security Interest as under; (31) security interest means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee; This Adjudicating Authority imposed morator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Security Interest. What is covered by the order of this Authority under Section 14(l)(c) is the Security Interest. Therefore, the moratorium order passed by this Tribunal is not applicable to the Performance Guarantees given by the Corporate Debtor. Therefore, the Bankers are at liberty to allow the 1st Respondent to encash the Bank Guarantees that are given in respect of Performance Guarantees subject to other objections, if any. If the Applicant has got any other dispute with regard to the invocation of the Performance Guarantees, it is not within the right of the Banker not to allow encashment of Performance Guarantees unless it is shown that fraud has been played in obtaining the Bank Guarantee or in invocation of Bank Guarantee or irrevocable injustice has been caused to company as laid down decision of UP State Sugar Corpn. v. Sumac International Ltd.[1997] 14 SCL 165 (SC). 10. The moratorium order passed by this Tribunal applies in respect of Bank Guarantees other than Performance Guarantees furnished by the Corporate Debtor in respect of its property since it comes within the meaning of security interest . Therefore, Respondent No. 1 is not entitled to invoke Bank Gua ..... 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