The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Dr. Alok Srivastava and Barun Mitra, Technical Member was hearing an Appeal on Monday and held that the Successful Resolution Applicant cannot be subjected to surprise claims which are not part of Resolution Plan.
The present appeal has been filed by the Appellant- Bank of Maharashtra, under Section 61 of the Insolvency and Bankruptcy Code, 2016 assailing the order passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench.
The Corporate Insolvency Resolution Process was initiated on an application filed under Section 7 of the IBC filed by the Bank of Maharashtra acting for and on behalf of itself, State Bank of India and Vijaya Bank. Subsequently, a Resolution Plan for insolvency resolution of the Corporate Debtor Fabtech Projects and Engineers Ltd. was submitted jointly by the Successful Resolution Applicant which was approved by the Committee of Creditors by a voting share of 85.18% and the Resolution Plan was approved by the Adjudicating Authority vide its order dated 16.11.2021.
It was stated by the Appellant that the bank guarantee provided by the Bank of Maharashtra was invoked after the approval of the Resolution Plan by the CoC but before the Resolution Plan’s approval by the Adjudicating Authority took place. The request for paying the invocation amount of Rs. 29.30 crores was sent by the Bank of Maharashtra to the Successful Resolution Applicants vide letter dated 18.10.2021. Accordingly, other bank guarantees were also invoked by the consortium member banks through various letters, the BOM, SBI and BOB informed the SRA that the bank guarantees had been invoked by the beneficiaries who had asked for payment of the invoked bank guarantees as per the terms of the approved resolution plan. Responding to these letters, the SRA informed the respondent banks that the invocation of the bank guarantees took place before the management and control of the corporate debtor was handed over to the SRA and therefore, the SRA cannot be held responsible for events taking place prior to the ‘Transfer Date’ and further denied its liability to pay the invocation amount of the bank guarantees to the respective banks.
The Appellant stated that thereafter Bank of Maharashtra filed an IA No. 530 of 2022 in CP No. (IB) 1222/(MB) 2019 before the Adjudicating Authority seeking direction to the SRA for paying 52.50% of the invoked bank guarantees, and subsequently, the SRA also filed an I.A. No. 534 of 2022 in CP No. (IB) 1222/(MB) 2019 requesting for the direction that the financial creditors were not entitled to reimbursement of the invoked amount of the bank guarantees which were invoked prior to ‘Transfer Date’ i.e. 04.01.2022.
The Learned Senior Counsel for the Appellant submitted that the bank guarantees constitute independent contracts and did not come within the purview of Section 14 of the IBC and the interpretation of the SRA that only in the event of invocation post ‘Transfer Date’, liability would arise affects the right of the third party which has the right to invoke the bank guarantee at any point of time and claim money under the said bank guarantees from the banks.
The Learned Senior Counsel for Respondents No. 1 & 2 has argued that the Resolution Plan was approved by the CoC on 27.02.2021 and finally approved by the Adjudicating Authority on 16.11.2021. He has strongly argued that the ‘Closing Date’ of 31.12.2021 and ‘Transfer Date’ of 04.01.2021 which are defined in the Resolution Plan and not disputed by the Appellant very clearly establish that the management/ control of the corporate debtor would continue in the hands of Resolution Professional till the “Transfer Date” and will be handed over to the boards constituted by the Resolution Applicant on “Transfer Date” which would be within 15 days from the “Closing Date”. He has further submitted that the invocation of the bank guarantees took place vide letters dated 18.10.2021, sent by the beneficiaries Indian Oil Corporation and Oil India Limited to the respective banks and which was prior to the “Transfer Date” of 04.01.2022.
The Appellate Authority found that the issue for consideration in the present appeal was limited to whether the Appellant and other member banks of the consortium were entitled to payment towards live Bank Guarantees related to large projects under Resolution Plan invoked prior to the “Transfer Date” by the Successful Resolution Applicant.
The Appellate Authority observed that it became clear from the perusal of the definitions of “Closing Date” and “Transfer Date” that the management and control of the corporate debtor will devolve to the board constituted by the Resolution Applicant on the “Transfer Date” which will be within 15 days of the “Closing Date”.
The Appellate Tribunal noted that the payment of live bank guarantee for two large projects will be made in the event of and with respect to the invocation of such bank guarantee subsequent to the “Transfer Date”. We have earlier noted that the “Transfer Date” relates to the date when the management/ corporate debtor goes into the hands of the board of the Successful Resolution Applicant. It was not disputed that the said bank guarantees were invoked vide letters dated 18.10.2021 and the SRA replied to these invocation letters stating that it was not liable to pay any amount post such invocation, as the Bank Guarantees were invoked prior to “Transfer Date” i.e 04.01.2022.
The Appellate Authority also followed the judgment of the Hon’ble Supreme Court in the matter of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., REED 2021 SC 04534 and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors., REED 2019 SC 11505, wherein it is clearly held that Successful Resolution Applicant cannot be subjected to surprise claims which are not part of Resolution Plan.
The Appellate Authority were of the clear view that any purported liability falling on the Successful Resolution Applicant (SRA) prior to the “Transfer Date” in respect of the invocation of bank guarantees shall not be payable by the SRA.
The Appeal was accordingly dismissed.