TMI Blog2023 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... -ordination Meetings, it was categorically observed that there was an Adverse Progress, as regards the Construction of Generating Station, by the Corporate Debtor, who was aware of the same. The Transmission Agreement, dated 31.03.2016, entered into between the 1st Respondent / Power Grid Corporation of India Limited and M/s. Lanco Vidarbha Thermal Power Limited (vide Clause 1), unerringly points out that the Bank Guarantee, shall be encashed, by Powergrid, in case of Adverse Progress of Work, under the scope of LVTPL assessed, during the Joint Co-ordination Meeting, etc. As such, it is clear that in the event of Adverse Progress, encashment of Bank Guarantee, is a compulsory one, as per the Transmission Agreement, entered into between the Parties. Thus, bearing in mind of the well settled legal principle that the Bank Guarantee, is neither an Asset nor a Liability of a Company, considering the surrounding facts and circumstances of the case in an integral manner, this Tribunal, especially, keeping in mind, of a primordial fact, that the Invocation of Eleven Performance Bank Guarantees, furnished by the Corporate Debtor to the 1st Respondent / Power Grid Corporation of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to encash the said Bank Guarantees. In case adverse progress on the part of the Corporate Debtor in construction of generating station as assessed during the Joint Coordination Meeting, the covenant of the said agreement also generally found that the covenant mandate of the said agreement in the event of adverse progress, the respondent has option to encash Bank Guarantee. During various Joint Coordination Meetings it was clearly held which is very much in the knowledge of the Corporate Debtor that there was an adverse progress in construction of generating station by the Corporate Debtor, which is very much in the knowledge of the Corporate Debtor itself. In light of the above agreement as well as various provisions of the I B Code, 2016 as amended in 2018, we are of the view that the applicant herein could not provide a valid ground for invoking the letters issued by respondent no.1. 10. We are further of the view that respondent no.1, in the event of adverse progress encashment of Bank Guarantee is mandatory. We are also satisfied that the Bank Guarantees furnished by the Corporate Debtor are in the nature of Performance Bank Guarantees under the Transmission Agreement. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation of the Inter State Transmission System , strengthening in Chhatarpur area in Madhya Pradesh which was taken as a part of the Transmission Scheme Connectivity System for Corporate Debtor , was put on hold, since the date of execution of the Transmission Agreement as LITL , who was the EPC Contractor of the Corporate Debtor , was facing Financial issues. 7. According to the Appellant, the Adjudicating Authority / Tribunal , should have appreciated the fact that the Project of the Corporate Debtor was stalled due to the Financial issues of LITL (Developer of Corporate Debtor , which later, went to Corporate Insolvency Resolution Process and currently under Liquidation ). Since the 1st Respondent, had not commenced its part of obligation of Construction of Transmission Lines , nor made any Capital Investment , it has no right , to take benefit and enrich itself, at the cost of the Corporate Debtor , on the ground of adverse progress. 8. The Learned Counsel for the Appellant, takes a stand that the 1st Respondent, had encashed Part of the Bank Guarantees , to the tune of Rs.29 Crores and enriched itself, at the cost of the Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor be taken up for implementation only after resolution of financial issues and after ascertaining the progress of the project, and this was not appreciated by the Adjudicating Authority / Tribunal , in a proper perspective. Evaluation: 14. Before the Adjudicating Authority / Tribunal, the Appellant / Petitioner , had preferred the IA No. 1219 / 2020 in CP (IB) No. 529 / 7 / HDB / 2018, against the 1st Respondent / Power Grid Corporation of India Limited and Ors., wherein he had sought the Relief of Declaration , that the following letters issued by the 1st Respondent, seeking to recover a Sum of Rs.36,32,00,000/-, towards the following Bank Guarantees , issued by the Respondent Nos. 2 to 7, as an Arbitrary , Illegal , one and to quash the same. Impugned Letters Ref and Date BG No. Amount Rs. In Cr. C/CTU/CBG ENCASH/ IDBI / LVTPL Dt. 17.12.2020 1601331BGP00255 dated 26.05.2016 8.76 C/CTU/CBG ENCASH/ PNB / LVTPL Dt. 17.12.2020 46151LG000217 dated 28.02.2017 2.25 C/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Bank / LVTPL Dt. 17.12.2020 46151LG000217 dated 28.02.2017 2.25 UCO Bank C/CTU/CBG ENCASH/ UCO Bank / LVTPL Dt. 17.12.2020 1945IGFIN002116 dated 08.08.2016 6.94 UCO Bank C/CTU/CBG ENCASH/ UCO Bank / LVTPL Dt. 17.12.2020 1945IGFIN00717 dated 07.04.2017 1.06 Bank of Baroda (e-Dena Bank) C/CTU/CBG ENCASH/ BANK OF BARODA / LVTPL Dt. 17.12.2020 116216IGPER0032 dated 24.05.2016 3.44 Bank of Baroda (e-Dena Bank) C/CTU/CBG ENCASH/ BANK OF BARODA / LVTPL Dt. 17.12.2020 116217IGPER0011 dated 10.02.2017 0.53 Union Bank of India (e-Corporation Bank) C/CTU/CBG ENCASH/ Corpn Bank / LVTPL Dt. 17.12.2020 2016/67 dated 25.06.2016 5.13 Union Bank of India (e-Corporation Bank) C/CTU/CBG ENCASH/ Corpn Bank / LVTPL Dt. 17.12.2020 2017 / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (@ Rs.5 Lakhs MW). 20. That apart, the Corporate Debtor , had furnished Bank Guarantees , for a Sum of Rs.66 Crores, to and in favour of the 1st Respondent / Power Grid Corporation of India Ltd. Ors., from different Banks , including from the Respondent Nos. 2 to 7 . As a matter of fact, the Bank Guarantee Details , issued by the Respondent Nos. 2 to 7, as required in terms of the Transmission Agreement , are run as under: Bank Guarantees Date of Open Rs. in Crores Bank 160133IBGP00255 26-05-2016 8,76,00,000 IDBI 4615ILG000217 28-02-2017 2,25,00,000 PNB 1945IGFIN002116 08-08-2016 6,94,00,000 UCO Bank 1945IGPER000717 07-04-2017 1,06,00,000 UCO Bank 116216IGPER0032 24-05-2016 3,44,00,000 Bank of Baroda (e-Dena Bank) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken up and it was kept in abeyance, from October 2017. 24. In effect, the stand of the Appellant / Petitioner is that, the Invocation of Bank Guarantees , by the 1st Respondent / Power Grid Corporation of India Limited , is an invalid and an illegal one, and as such, the IA No. 1219 of 2020 in CP (IB) No. 529 / 7 / HDB / 2018, on the File of the NCLT, Bench I, Hyderabad, is to be allowed , in furtherance of Substantial Cause of Justice . 25. Per contra, the 1st Respondent / Power Grid Corporation of India Limited, in its Reply (to IA No. 1219 of 2020 in main CP (IB) No. 529 / 7 / HDB / 2018), had averred that the IA No. 1219 of 2020 in CP (IB) No. 529 / 7 / HDB / 2018 (on the File of the NCLT, Bench-I, Hyderabad), is devoid of merits and that the 1st Respondent, had issued the impugned letters , seeking Invocation of the Bank Guarantees , in the background of the Commercial and Statutory relationship between the 1st Respondent / Power Grid Corporation of India Limited , and the Corporate Debtor . 26. Furthermore, as per ingredients of Section 10 (3) of the Electricity Act, 2003, a Generating Company (like the Corporate Debtor), is required to co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply to IA No. 1219 of 2020 in CP (IB) No. 529 / 7 / HDB / 2018 of the Appellant s Appeal Paper Book Vol. III at Page 520 Diary No. 01639 dated 28.07.2023) that . the invocation of the bank guarantee is also not to be in contravention of any other explicit or implicit protection available to a generating station including those under Office Memorandum (OM) dated 8.3.2019, issued by the Government of India, Ministry of Power, which has an advisory of directory nature to all authorities, including Respondent No. 1 not to cancel the transmission connectivity of thermal power projects referred to CIRP under the Code 32. The clear cut stand of the 1st Respondent / Power Grid Corporation of India Limited is that the Bank Guarantees , given by the Corporate Debtor , were in the character of Performance Bank Guarantees , to secure the Performance of Transmission Agreement , by the Corporate Debtor , which is latently and patently evident from Clause 1.0 (d) of the Transmission Agreement , which required the encashment of BTs , in case of adverse progress of work, under the ambit of the Corporate Debtor . 33. The version of the 1st Respondent, before the Adjudicating A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Paragraph 21 (iv) of IA No. 1219 / 2020 vide Page 90 of the Appellant s Appeal Paper Book in Diary No. 01639 dated 28.07.2023), and hence, come within the ambit of Security Interest in terms of Section 3 (31) of the Code , and is covered in terms of Section 14 (1) of the Code , this Tribunal , points out that Section 14 of the I B Code, 2016, does not prohibit actions , against the Corporate Debtor s Guarantors , and the purview of Moratorium , is limited to the Assets of the Corporate Debtor only and it is aptly pointed out that Section 14 (3) of the I B Code, 2016, reads as under: 1[(3) The provisions of sub-section (1) shall not apply to 2[(a) such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority;] (b) a surety in a contract of guarantee to a corporate debtor.] and it is candidly crystalline clear that the Contract of Guarantee , is excluded from the ambit of Moratorium , in the considered opinion of this Tribunal . 39. Undoubtedly, Performance of Bank Guarantee , is excluded from the definition Section of 3 (31) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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