TMI Blog2019 (3) TMI 1747X X X X Extracts X X X X X X X X Extracts X X X X ..... A. No. 145/HDB/2018 in C. P. (IB) No. 111/7/HDB/2017 - - - Dated:- 5-3-2019 - Ratakonda Murali (Judicial Member) For the Applicant : B. Chandrasen Reddy with Ms. M. Manjusha For the liquidator : Ms. Rubaina S. Khatoon, Vaijayanth Paliwal and L. Aravind Reddy ORDER RATAKONDA MURALI (JUDICIAL MEMBER) .- 1. This is an application filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking among other reliefs, a direction to the resolution professional not to invoke bank guarantee No. 09370003915 for ₹ 81,38,200, dated December 31, 2015 and bank guarantee No. 03690009814 for ₹ 30,50,000 dated August 14, 2014 issued by the Oriental Bank of Commerce in favour of the corporate debtor. 2. Brief averments made in the application are : (1) That the applicant herein is a private limited company registered under the Companies Act, 1956. The applicant is a sub-contractor of respondent No. 2 and had bank guarantees worth ₹ 1,86,00,000 (rupees one crore eighty six lakhs) issued in favour of respondent No. 2. (2) That the company petition bearing C. P. (IB) No. 111/7/HDB/2017 was admitted by this Tribunal vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, Union Bank of India ( UBI ) issued 3 (three) bank guarantees in favour of respondent No. 2 : (a) Bank Guarantee No. 30780IGL0014813, amount-₹ 35,89,246 (b) Bank Guarantee No. 30780IGL0015113, amount-₹ 35,89,245 (c) Bank Guarantee No. 30780IGL0014913, amount-₹ 3,60,754 (5) It is averred, Maharashtra State Power Generation Co. ( Mahagenco ) entered into a contract with respondent No. 2 and another, for setting up the thermal power project at Koradi, Maharashtra and that respondent No. 2, in turn entered into various contracts with several sub-contractors including applicant for the purposes of setting up the entire Koradi Project. On December 24, 2011, respondent No. 2 issued a letter of intent ( LoI ) in favour of the applicant for designing, engineering, manufacture, inspection, testing, commission and handing over of complete ETP and Ultra Filtration under the WTP for the 3 660 MW Koradi Project. The total order value of supplying and erecting ETP at the Koradi Project was ₹ 8,80,00,000 (rupees eight crores eighty lakhs only). It is also averred pursuant to the said contract for design, engineering, manufacture, inspection, testing, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract and that respondent No. 2 could have encashed the bank guarantees only if there is any breach of contract by the applicant and further states that even if there was any breach of contract, respondent No. 2 should have first issued a demand notice/letter prior to invoking the bank guarantees as a fundamental principle of natural justice. (10) The applicant further avers that on December 30, 2017 UBI allowed the encashment of the 3 (three) Moser Baer Thermal Projects, and UBI is now claiming a sum of ₹ 75,39,245 from the applicant vide letter dated December 30, 2017. (11) That because of the fraudulent acts of respondent No. 2, through IRP, the applicant was constrained to file a criminal complaint with the Connaught Place Police Station on December 30, 2017 against respondent No. 2 and its directors and further alleges that the act of invoking the Moser Baer Thermal Project bank guarantee by respondent No. 2 is in complete violation of section 18 of the Insolvency and Bankruptcy Code, 2016. (12) The applicant further alleges that respondent No. 2 has even approached OBC for encashment/invocation of the 2 (two) Koradi Project bank guarantees issued by OBC in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch applications and proceedings which can be disposed of in a summary manner can be entertained by the Adjudicating Authority and not the ones which require determination of questions of fact by way of evidence. (5) It is further averred by the liquidator that the relief sought in the form of injunction does not fall within the definition of claim as provided under section 3(6) of the Code and as such it does not fall within the purview of section 60(5)(b). (6) It is the case of liquidator that the application is filed seeking an order of injunction on the invocation/encashment of bank guarantees, furnished by the bank on behalf of the applicant to the corporate debtor, it is further stated that the bank guarantee itself is a separate contract between the bank issuing the bank guarantee and the beneficiary of the bank guarantee and not a contract where the promisor/applicant herein is even a party and relied on the judgment of the hon'ble Supreme Court in the matter of Gujarat Maritime Board v. Larsen and Toubro Infrastructure Development Projects Ltd. [2016] 10 SCC 46. (7) It is the contention of the liquidator that the application does not deal with any question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate authority in case there is any fraud in invoking the bank guarantees or applicant sustained any irreparable injury. The Tribunal/Adjudicating Authority has to see whether the proposed action of the corporate debtor in invoking the bank guarantees is nothing but a fraudulent action and that applicant would sustain irreparable injury if injunction is not granted. After invoking the bank guarantee, it is not open to the applicant to contend that fraud is involved in invoking the bank guarantee, etc. The applicant has to work out its remedies according to law. 5. The next case of the applicant, the corporate debtor entered into further contract with the applicant for setting up a thermal project at Koradi, Maharashtra State. The case of applicant, the corporate debtor issued a letter of intent in favour of applicant for design, engineering, manufacture, inspection, testing, commissioning and handing over of effluent treatment plant (ETP) and ultra-filtration under water treatment plant (WTP). The contention of applicant that it furnished two performance bank guarantees issued by Oriental Bank of Commerce. The contention of applicant that it had completed the project wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court should not interfere with the enforcement of the contract of guarantee unless there is spe cific plea of fraud or special equities in favour of the plaintiff. He must necessarily plead and produce all necessary evidence in proof of the fraud in execution of the contract of the guarantee, but not the con tract either of the original contract or any of the subsequent events that may happen as a ground for fraud. 8. Counsel for liquidator further contended there is no prayer for permanent injunction and therefore the interim injunction cannot be granted since there is no main relief. In this connection, learned counsel for the liquidator has relied on the decision of the hon'ble apex court reported in AIR 1952 SC 12 in the matter of (State of Orissa v. Madan Gopal Rungta), which is reproduced below : An interim relief can only be given in aid of and as ancillary to the main relief which may be available to the party on final determination of rights and in a suit or proceeding . . . But when the court declined to decide on the rights of the parties and expressly held that they should be investigated more properly in a civil suit, it could not, for the purpose of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained from invoking the bank guarantee. 13. Learned counsel for the liquidator further relied on the decision of hon'ble apex court reported in [1997] 89 Comp Cas 179 (SC) ; [1997] 1 SCC 568 in the matter of (U. P. State Sugar Corporation v. Sumac International Ltd.), wherein the hon'ble apex court held as follows (page 186 of 89 Comp Cas) : The bank must pay according to the tenor of its guarantee on demand without proof or condition. There are only two exceptions to this rule. The first exception is a case when there is a clear fraud of which the bank has notice. The fraud must be of an egregious nature such as to vitiate the entire underlying transaction. Explaining the kind of fraud that may absolve a bank from honouring its guarantee, this court (. . .) quoted with approval the observations (. . .) in Bolivinter Oil SA v. Chase Manhattan Bank NA [1984] 1 All ER 351(CA) at page 352) : 'the wholly exceptional case where an injunction can be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear both as to the fact of fraud and as to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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