Consortium of GSEC Limited Vs Indian Overseas Bank & Anr. (Supreme Court of India)
Summary: The Supreme Court dismissed the appeal filed in the dispute concerning ₹1,58,59,294 in margin money maintained by Diamond Power and Infrastructure Ltd. for bank guarantees issued by Indian Overseas Bank. The supplied Supreme Court order records dismissal of the appeal in terms of a signed order and disposal of pending applications, without setting out substantive reasons. The underlying NCLAT proceedings concerned whether the bank could appropriate earmarked term deposits after commencement of the corporate insolvency resolution process (CIRP), where the guarantees had already been invoked before the moratorium commenced.
Read NCLAT Delhi Order: NCLAT Holds Pre-CIRP Bank Guarantee Invocation Valid Despite Post-Moratorium Margin Money Adjustment
The guarantees were invoked between 21 April and 23 May 2018, before CIRP commenced on 24 August 2018. The bank recorded appropriation on 27 September 2018 and submitted a revised claim of ₹51,54,93,366 after adjusting the margin money. The successful resolution applicant, Consortium of GSEC Limited and Rakesh Shah, subsequently challenged the adjustment. On 24 April 2024, NCLT Ahmedabad directed the bank to reverse ₹1,58,59,294. The bank appealed under Section 61 of the Insolvency and Bankruptcy Code, 2016.
The bank contended that the deposits were earmarked for beneficiaries and acquired the character of trust property upon invocation of the guarantees. The successful resolution applicant argued that appropriation after commencement of CIRP violated the Section 14 moratorium and the approved resolution plan. NCLAT examined Sections 3(31), 14 and 18 of the IBC, Section 126 of the Indian Contract Act and precedents addressing margin money and bank guarantees. It held that the guarantees had been invoked before CIRP, the corresponding margin money was no longer an asset of the corporate debtor, and the subsequent accounting adjustment did not constitute enforcement of security interest prohibited by the moratorium. It distinguished cases involving deposits remaining with banks after CIRP and found that the revised claim had been disclosed to the resolution professional and reflected in the information memorandum. NCLAT further held that ordering reversal after approval of the resolution plan would impermissibly disturb its settled terms. It allowed the bank’s appeal and set aside the reversal direction. The Supreme Court’s supplied order dismisses the subsequent appeal; it does not independently articulate or reproduce these reasons.
Cases Discussed
- Bharti Airtel Ltd. Vs Vijaykumar V. Iyer and Ors., (2024) 4 SCC 668 (Supreme Court) — Distinguished because the present dispute was not a set-off of unrelated mutual claims.
- Punjab National Bank Vs Supriyo Kumar Chaudhuri, Resolution Professional, Company Appeal (AT) (Insolvency) No. 657 of 2020, decided 16 September 2022 (NCLAT) — Relied upon regarding trust character of margin money.
- Monitoring Agency of Anush Finlease & Construction Pvt. Ltd. Vs SBI, Company Appeal (AT) (Insolvency) No. 902 of 2020, decided 4 October 2021 (NCLAT) — Relied upon concerning independent bank guarantees.
- UCO Bank Vs Sudip Bhattacharya, Resolution Professional, Company Appeal (AT) (Insolvency) No. 335 of 2021, decided 21 July 2021 (NCLAT) — Cited on exclusion of trust margin money from debtor assets.
- Bank of India Vs Bhuban Madan, Company Appeal (AT) (Insolvency) No. 590 of 2020, decided 28 May 2021 (NCLAT) — Distinguished on the facts of post-CIRP withdrawal.
- Ghanashyam Mishra and Sons Private Limited Vs Edelweiss Asset Reconstruction Company Limited, (2021) 9 SCC 657 (Supreme Court) — Applied concerning finality and binding effect of approved resolution plans.
- Indian Overseas Bank Vs Arvind Kumar, Resolution Professional/Liquidator, Company Appeal (AT) (Insolvency) No. 558 of 2020, decided 28 September 2020 (NCLAT) — Relied upon on appropriation of margin deposits for invoked guarantees.
- Bank of Baroda Corporate Financial Services Vs Sundaresh Bhatt, Company Appeal (AT) (Insolvency) No. 635 of 2019, decided 20 February 2020 (NCLAT) — Distinguished as fixed deposits were closed after CIRP began.
- GAIL India Ltd. Vs Rajeev Manaadiar, Company Appeal (AT) (Insolvency) No. 319 of 2018, decided 24 July 2018 (NCLAT) — Cited on the exclusion of performance bank guarantees from security interest.
- Ansal Engineering Projects Ltd. Vs Tehri Hydro Development Corporation Ltd., (1996) 5 SCC 450 (Supreme Court) — Cited regarding the independent character of bank guarantees.
FULL TEXT OF THE ORDER OF SUPREME COURT
For Respondent(s): UPON hearing the counsel the Court made the following
1. The appeal is dismissed in terms of the signed order.
2. Pending application(s), if any, stands disposed of.
1. The appeal is dismissed in terms of the signed order.
2. Pending application(s), if any, stands disposed of.
