Case Note & Summary
The appeal was filed against an order of the National Company Law Tribunal (NCLT) allowing the liquidator to direct the return of original bonds related to Bank Guarantees and to remit amounts to the liquidation account. The Corporate Debtor, incorporated on 09.12.2010, was involved in research and development and had executed eight EPCG Bonds with the Customs Department for export obligations. The Corporate Debtor was admitted into insolvency on 14.03.2023, and a liquidation order was passed on 21.11.2023. The Appellant filed a claim for ₹ 1,81,27,632/- which was admitted in full. The liquidator sought to release expired Bank Guarantees and credit amounts to the liquidation account, but the Appellant contended that the Bank Guarantees had not expired and were secured by Fixed Deposits. The NCLT ruled in favor of the liquidator, leading to the appeal. The Appellant argued that the Bank Guarantees were performance guarantees and not part of the liquidation estate as per Sections 14, 18, and 36(4) of the IBC. The Respondent Bank contended that the guarantees were performance guarantees and sought their return. The Tribunal analyzed the claims and the legal framework, ultimately determining that the Bank Guarantees and Fixed Deposits were not assets of the Corporate Debtor and thus not part of the liquidation estate. The appeal was allowed, and the NCLT's order was set aside.
Headnote
A) Insolvency Law - Liquidation Proceedings - Authority to Direct Return of Bank Guarantees - Insolvency and Bankruptcy Code, 2016, Section 36(4) - The court held that Bank Guarantees and underlying Fixed Deposits do not form part of the liquidation estate as they are assets owned by a third party. The direction to return the original bonds and remit amounts to the liquidation account was deemed erroneous as these assets are excluded under the IBC (Paras 58-59).
Issue of Consideration
Whether the Adjudicating Authority can direct the return of original bonds pertaining to Bank Guarantees and direct the Bank to remit the amount of FDRs to the Liquidation Account.
Final Decision
The Tribunal allowed the appeal, set aside the NCLT's order, and held that the Bank Guarantees and Fixed Deposits do not form part of the liquidation estate under Section 36(4) of the IBC.
Law Points
- Insolvency and Bankruptcy Code
- 2016
- Liquidation Process Regulations
- Bank Guarantees
- Performance Bonds
- Margin Money
- Security Interest
