23 August 2021
Matter: C & C Construction Ltd. v. Power Grid Corporation of India Ltd.
Order dated: 19 July 2021.
Summary: The resolution professional of C & C Construction Ltd. (Corporate Debtor) filed an appeal before the NCLAT being aggrieved by the order of the NCLT, Principal Bench, as it vacated an ad-interim injunction which it had previously granted against encashment of bank guarantee issued on behalf of Corporate Debtor to its various customers.
The NCLAT set aside the NCLT’s order and held that the bank guarantee issued by bankers are also the responsibility of the bankers and that the monies will go out of the fund of the banks and not directly from the fund of the Corporate Debtor. However, keeping in mind the provisions of the Insolvency & Bankruptcy Code, 2016 (Code) on moratorium, if any such bank guarantee is liquidated, it can be restricted to the full value of the guarantee minus margin money provided by the Corporate Debtor to the banker for taking that bank guarantee. Accordingly, NCLT held that banks can release the fund to the extent of full value of the bank guarantee minus margin money provided by the Corporate Debtor to the banker
