TMI Blog2020 (3) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant will sustain irreparable injury. The only grievance of the applicant that it has completed the contract work assigned to it. The question whether applicant failed to perform its part of the contract or not, is a question to be determined by way of evidence. Application dismissed. - I. A. No. 308 of 2018 in C. P. (IB) No. 111/7/HDB/2017 - - - Dated:- 5-3-2020 - Ratakonda Murali (Judicial Member) For the Applicant : A. Sanjay Kishore with H. Rajesh Kumar For the Liquidator : Ms. Rubaina S. Khatoon , Vaijayanth Paliwal and L. Aravind Reddy ORDER RATAKONDA MURALI (JUDICIAL MEMBER) .- 1. The applicant filed this application under section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking directions to liquidator to restrain from invoking or encashing the bank guarantee bearing No. GC 0608115000737 for USD 510, 000 dated August 7, 2018 issued by the Bank of China and further direction to the Bank of China not to pay any amount to the corporate debtor's bank guarantee issued by the Bank of China. 2. Brief averments in the application are : (1) The applicant and corporate debtor entered into a contract bearing No. 4200000943 on Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic pressure test, rotor dynamic balance test and performance test were ready for execution and requested the corporate debtor to update on the date of extension of LC. On March 28, 2017 the applicant was informed that an amount of USD 1, 832, 500 was opened by TANCEDO and expiry date of the LC is May 31, 2017. (9) It is averred that on April 1, 2017 the corporate debtor requested for some additional requirement which was not previously agreed upon by the parities and that the applicant would require some more time to rede sign the work and requested for additional time till August, 2017. The applicant also requested the corporate debtor to extend the LC date to October, 2017. It is averred that despite requests to open/extend LC, the corporate debtor failed to do so and in the meantime, CIRP against the corporate debtor was initiated. (10) It is the case of the applicant that on February 1, 2018 it submitted its proof of claim for ₹ 20, 96, 83, 439 to the resolution professional, which is towards manufacture of pumps and remained ready for delivery but corporate debtor failed to take delivery by opening a LC. (11) It is the case of applicant that in the list of oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntee on account of initiation of CIRP against corporate debtor. (4) The reasons given by the resolution professional that necessitated invocation of PBG was refusal of the applicant to renew the ABG as per the terms of the contract and secondly the termination of principal contract awarded by Tamil Nadu Generation and Distribution Corporation (TANGEDCO) on April 9, 2018 resulted in termination of the contract entered into with the applicant and that the advance lying with the applicant was required to be secured. (5) It is the case of resolution professional that the invocation of bank guarantee which is sought to be stayed is an unconditional bank guarantee and is a separate contract between the bank and the corporate debtor and that the law with respect to such bank guarantees is well-settled and courts must not interfere with the invocation of such bank guarantees. The resolution professional relied on the decision of the hon'ble Supreme Court in Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co. [2007] 139 Comp Cas 706 (SC) ; [2007] 8 SCC 110 and also in the matter of National Highway Authority of India v. Ganga Enterprises [2003] 117 Comp Cas 154 (SC). (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank guarantee extended, due to its own actions of failing to comply with the terms of the agreement. (5) It is averred that applicant was ready to comply with the terms of the agreement but for the unwillingness of the corporate debtor to open or/ and extend an LC, the applicant was unable to deliver the same. 5. I have heard counsel for applicant and counsel for resolution professional/liquidator. The applicant is seeking interim injunction restraining the resolution professional/corporate debtor from invoking the bank guarantee bearing No. GC 0608115000737 for USD 510, 000 dated August 7, 2018 and also to pass permanent injunction restraining resolution professional/corporate debtor from invoking the PBG as stated above. 6. The case of the applicant, on April 24, 2015 it entered into an agreement with the corporate debtor for design, engineering, manufacture, assembly, etc./inspection, painting, packing of the Boiler Feed Pump (BFP) package for 1 600 MW Super Critical Ennore Thermal Power Station expansion project including loading on vessel of main equipment and mandatory spares, supervision of erection and commissioning of the BFP. The contract was originally awarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hway Authority of India v. Ganga Enterprises [2003] 117 Comp Cas 154 (SC) that (page 159) : It is settled law that a contract of guarantee is a complete and separate contract by itself. The law regarding enforcement of an 'on demand bank guarantee' is very clear, if the enforcement is in terms of the guarantee, then courts must not interfere with the enforcement of bank guarantee. The court can only interfere if the invocation is against terms of the guarantee or if there is any fraud. Courts cannot restrain invocation of an 'on demand guarantee' in accordance with its terms by looking at terms of the underlying contract. The existence or non-existence of an underlying contract become irrelevant when the invocation is in terms of the bank guarantee. The bank guarantee stipulated that if the bid was withdrawn within 120 days or if the performance security was not given or if an agreement was not signed, the guarantee could be enforced. The bank guarantee was enforced because the bid was withdrawn within 120 days. Therefore, it could not be said that the invocation of the bank guarantee was against the terms of the bank guarantee, if it was in terms of the bank gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de a claim with regard to the amount allegedly due by the corporate debtor in respect of this contract work. The claim was not admitted by the resolution professional. Thus, it is clear, the applicant is agitating before the resolution professional that it is entitled to receive money from the corporate debtor in pursuant of this contract. When such is the case, the applicant cannot seek an injunction against the corporate debtor from invoking the CPBG. 13. The contention of learned counsel for liquidator that the court cannot go into the underlying contract before passing order restraining invocation of bank guarantee. The court has to see whether bank guarantee is being invoked in terms of guarantee, if it is in terms of bank guarantee then beneficiary cannot be restrained from invoking the bank guarantee. 14. The burden is on the applicant to establish fraud in invoking bank guarantee. Admittedly, the bank guarantee is being invoked which is in terms of bank guarantee. It is not the case of applicant that any fraud was played in obtaining bank guarantee. Similarly, there is also no material to come to a conclusion that any fraud was played on the applicant in invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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