NCLAT (2026.09.25) in Assistant Commissioner (EPM) Vs. Shruti Gupta (Liquidator) and Ors.. [(2026) ibclaw.in 1099 NCLAT, Company Appeal (AT) (Insolvency) No. 745 of 2025] held that;
Thus, even though the Appellant in its claim form, chose not to relinquish security, the law forced the Appellant to relinquish its security against the Corporate Debtor. As the creditor did not give its choice of non-relinquishment of security within 30 days, it is presumed that the creditor relinquished its security against the Corporate Debtor.
We also note that the bank guarantees were valid up to 30-06-2022 and were not renewed thereafter. Since the Bank Guarantees were never renewed by the Respondent No. 2 after expiry therefore the guarantee expired after the term.
However subsequently, the Appellant on 30.01.2024 filed its claim under Form ‘C’ amounting to ₹1,81,27,632/-, which was beyond 30 days. However, as noted by us herein earlier as per Section 21A of the Liquidation Regulation, relinquishment/non relinquishment of security interest must be informed within 30 days of Liquidation Commencement Date which the Appellant failed to do so.
In the above facts and circumstances, we don’t find any infirmity in the orders of the adjudicating authority by which it directed the Respondent No.1/ Assistant Commissioner to return the original bonds pertaining to the Bank Guarantees and also further direction to the Respondent No.2/Manager, Bank of Baroda, to immediately remit the amount of the FDRs to the Liquidation Account so that the same could form part of the Liquidation Estate of the Corporate Debtor.
Excerpts of the order;
The present appeal is filed against the Impugned Order dated 19.12.2024 passed by the Ld. National Company Law Tribunal, New Delhi Bench in IA No.1357 of 2024 in IB-809(ND)/2021, wherein the Hon’ble Adjudicating Authority has allowed the IA – 1357/2024, thereby directing the Appellant herein to return the original bonds pertaining to the Bank Guarantees and further directing the Manager, Bank of Baroda to immediately remit the amount of the FDR’s to the Liquidation Account so that the same could form a part of the Liquidation Estate of the Corporate Debtor.
Brief Facts
# 2. We note that the Corporate Debtor is a company incorporate on 09.12.2010 under the Companies Act 1956 registered with the Registrar of Companies, Delhi. The Corporate Debtor was involved in the business of research and development in natural sciences, medical sciences, agriculture and engineering & technology.
# 3. During the year 2014 and 2015, the Corporate Debtor imported some goods and availed benefit of scheme of custom duty exemption floated by Government of India. For availing the said scheme, the Corporate Debtor had executed eight EPCG Bonds with the Appellant for some export obligations to be fulfilled by the Corporate Debtor within prescribed timelines. Further as per the terms of the aforesaid bond, and on the request of the Corporate Debtor, Bank Guarantee was executed by the Respondent No. 2 in favour of the Appellant for each EPCG Bond. The details of each Bank Guarantees are as follows:
# 4. The Corporate Debtor moved an application under section 10 of Insolvency and Bankruptcy Code, 2016 (hereinafter referred as “IB Code”) before Hon’ble NCLT, New Delhi. The Ld. NCLT vide its order dated 14.03.2023 admitted the Corporate Debtor into insolvency and appointed Mr. Sunil Kumar Agarwal as IRP. Thereafter, the Ld. NCLT vide order dated 21.11.2023 passed liquidation order against the Corporate Debtor and appointed the Respondent No. 1 as liquidator.
# 5. The Respondent No. 1 issued public announcement on 07.12.2023, inviting all the stakeholders to file its claim with Respondent No. 1. As per the public announcement, last date of submission of claim was 03.01.2024. The Appellant filed its claim in Form ‘C’ with the liquidator on 01.02.2024 for an amount of ₹ 1,81,27,632/- and the same was admitted by the Liquidator in full.
# 6. On 14.02.2024, the Respondent No. 1 issued a letter to the Respondent No. 2 requesting to release the expired Bank Guarantees executed on instruction of the Corporate Debtor and to credit the maturity amount to the liquidation account of the Corporate Debtor. The Liquidator also issued a letter dated 19.02.2024 to the Appellant informing admission of entire claim of the Appellant to the tune of ₹ 1,81,27,632/- and requested the Appellant to issue a letter to Respondent No. 2 for removal of lien. The Respondent No. 2 vide letter dated 29.02.2024 refused to credit of the maturity amount for the reason that the Bank Guarantees are not expired and requested to raise such issue with the Appellant.
# 7. Thereafter, The Respondent No. 1 filed an application bearing IA No. 1357 of 2024 before Hon’ble NCLT seeking direction against the Appellant to return the original Bank Guarantee to Respondent No. 2 and direction against the Respondent No. 2 to release the amount into liquidation account of the Corporate Debtor.
# 8. That Hon’ble NCLT vide order dated 19.12.2024 allowed the aforesaid application and directed the Appellant to return the original Bank Guarantee to the Respondent No. 2 and directed Respondent No. 2, to release the maturity amount in the liquidation account of the Corporate Debtor and the relevant parts of the said Order are reproduced hereinbelow:
” 6. It is ordered as follows:
i. In view of the reasons mentioned above, the IA-1357/2024 stands allowed.
ii. Having regard to the facts and circumstances of the case, we direct the Respondent. 1/Shri Devindra Kumar, Assistant Commissioner, to immediately return the original bonds pertaining to the Bank Guarantees.
iii. We further direct the Respondent no. 2/Manager, Bank of Baroda, to immediately remit the amount of the FDRs to the Liquidation Account so that the same could form part of the Liquidation Estate of the Corporate Debtor.
……”
Analysis and findings
# 57. We have heard the submissions of both sides and also perused the material on record.
# 58. The issue which arise for our consideration is whether the Adjudicating Authority can direct for return of Original Bonds pertaining to Bank Guarantees and direct the Bank to remit the amount of FDRs to the Liquidation Account so that it can become part of Liquidation Estate.
# 59. To begin with we try to find out as to when the appellant filed the relinquishment of its security under the liquidation process regulations. The liquidation proceeding against the Corporate Debtor was initiated on 21.11.2023 and the Appellant filed its claim on 30.01.2024 - which is beyond 30 days of liquidation commencement date. We observe that Section 21A of IBBI (Liquidation Process) Regulation, 2016 (hereinafter referred as “Liquidation Regulation”) provides that if a creditor does not take a call on relinquishment/non-relinquishment of security, then after expiry of 30 days, the security shall be deemed to be relinquished by the creditor. The relevant provision of the Liquidation Regulation is as follows:
“Regulation 21A: Presumption of security interest.
(1) A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II: Provided that, where a secured creditor does not intimate its decision within thirty days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.
(2) Where a secured creditor proceeds to realise its security interest, it shall pay –
(a) as much towards the amount payable under clause (a) and sub-clause (i) of clause (b) of sub-section (1) of section 53, as it would have shared in case it had relinquished the security interest, to the liquidator within ninety days from the liquidation commencement date; and
(b) the excess of the realised value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within one hundred and eighty days from the liquidation commencement date:
Provided that where the amount payable under this sub-regulation is not certain by the date the amount is payable under this sub-regulation, the secured creditor shall pay the amount, as estimated by the liquidator:
Provided further that any difference between the amount payable under this sub-regulation and the amount paid under the first proviso shall be made good by the secured creditor or the liquidator, as the case may be, as soon as the amount payable under this sub-regulation is certain and so informed by the liquidator.
(3) Where a secured creditor fails to comply with sub-regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.
Explanation- It is hereby clarified that the requirements of this regulation shall apply to the liquidation processes commencing on or after the date of the commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019.
# 60. Thus, even though the Appellant in its claim form, chose not to relinquish security, the law forced the Appellant to relinquish its security against the Corporate Debtor. As the creditor did not give its choice of non-relinquishment of security within 30 days, it is presumed that the creditor relinquished its security against the Corporate Debtor.
# 61. Thus, the security created by the Appellant in the form of BGs stands relinquished by virtue of law.
# 62. It is noted that all the EPCG Bonds were executed by the Corporate Debtor in favour of the Appellant between 2014 to 2015. The relevant terms of the EPCG Bonds are as follows:
“Whereas I/We the obligor(s), have imported goods listed in Annexure-I availing customs duty exemption in the terms of the notifications of the Government of India in the Ministry of Finance (Department of revenue) No.102/2009, dated 11/09/2009 (hereinafter referred to as the said notification) against the Advance License No. 0510394397 dated 2.6.2015 (Hereinafter referred to as the said notification) for the import of the goods mentioned therein on the terms and conditions specified in the said notification and license.
Whereas I/We the obligor(s) has / have undertaken to fulfill the export obligation as specified in the said notification and the license and to produce evidence of having so fulfilled the export obligation within 30 days from the expiry of the specified export Obligation period to the satisfaction of the Government.
4. In the event of failure to fulfil full or part of the export obligations as specified in the said notification and the license I/ We the obligor(s) hereby undertake to pay the customs duly but for the exemption and also interest as per applicable rate for per annum thereon forthwith and without any demur of the government.”
# 63. Liquidator brings to our notice that as per the terms of the Bond executed by the Corporate Debtor, if the Corporate Debtor failed to fulfil the export obligations, then the Corporate Debtor is liable to pay the custom duty along with penal interest. It was also brought to our notice by the liquidator that as per the notification no. 102/2009-CUSTOM, 96/2009 – CUSTOMS both dated 11.09.2009 and 22/2013 – CUSTOMS dated 18.04.2013 the EPCG Bond executed by the Corporate Debtor was valid only for a period of six years from the date of execution of the aforesaid Bond. Thus, the EPCG Bond had already expired in the year 2020 and 2021 that is before initiation of CIRP against the Corporate Debtor. We also note that after expiry of the EPCG Bond, the Appellant did not take any action against the Corporate Debtor in order to realise the amount outstanding against the Corporate Debtor. Also, the Appellant did not take any action for renewal of BGs or encash the BGs.
# 64. We also observe that the Bank Guarantees executed by the Respondent No. 2/BoB in favour of the Appellant were never renewed by the Bank. The Respondent No. 2/BoB executed eight different Bank Guarantees in favour of the Appellant alleged to be auto renewed by the Respondent No. 2 itself. The relevant clauses of one of the Bank Guarantees bearing no. 6017IBGIS140064 are as follows:
“We, Vijaya Bank, further agree that the guarantee herein contained shall remain in full force and effect during the period that would be taken for performance of the said bond and remain shall continue to be enforceable till all the dues of the Dy. Commissioner/Asst. Commissioner of custom, ICD TKD, New Delhi under or by virtue of the said executed bond have been fully paid or the terms and condition of the bond have been fulfilled to the satisfaction of the Dy. Commissioner/Asst. Commissioner of custom, ICD TKD, New Delhi till dt. 30.06.2022 whichever is earlier.
2. We, Vijaya Bank, further declare that this Bank Guarantee will be valid up to dt. 30.06.2022 and we undertake to renew this guarantee on its own till the matter is settled and fully discharged by the Dy. Commissioner/Asst. Commissioner of Customs, ICD TKD, New Delhi on receipt of this letter.
3. That if this Guarantee is not renewed for the reason whatsoever on or before the expiry of this Guarantee the entire amount become forthwith due and payable to Government and the bank of its own shall pay to the government without any demur.”
# 65. The perusal of the above terms of the bank guarantee indicates that that the Respondent No. 2/BoB shall, by its own motion, renew the Bank Guarantee and if it fails to do so then the Respondent No. 2 is liable to pay the whole by its own. We also note that the bank guarantees were valid up to 30-06-2022 and were not renewed thereafter. Since the Bank Guarantees were never renewed by the Respondent No. 2 after expiry therefore the guarantee expired after the term.
# 66. We further observe that as per the EPCG Bond, in event of failure in performing the export obligation till expiry of the period, the Corporate Debtor was liable to pay the custom duty along with interest. The export obligation discharge period expired in the year 2020 & 2021 and thus the import duty to the tune of ₹ 1,81,27,632/- became outstanding amount against the Corporate Debtor. We further find that the appellant never claimed the bank guarantee for non-performance of the export obligations of the Corporate Debtor.
# 67. We observe that the liquidation proceedings were initiated against the CD (Corporate Debtor) vide order dated 21.11.2023; the Appellant filed its claim on 15.12.2023 in form ‘B’ (₹ 1,81,27,632/- became outstanding amount against the Corporate Debtor) for non-fulfilment of export obligation and in a way chose to relinquish its security interest by filing of claim in Form ‘B’. The Appellant’s claim against import duty and non-fulfilment of export obligation was admitted also by the Respondent No. I in full.
# 68. However subsequently, the Appellant on 30.01.2024 filed its claim under Form ‘C’ amounting to ₹1,81,27,632/-, which was beyond 30 days. However, as noted by us herein earlier as per Section 21A of the Liquidation Regulation, relinquishment/non relinquishment of security interest must be informed within 30 days of Liquidation Commencement Date which the Appellant failed to do so. While submitting the aforesaid claim against the import duty, the Appellant chose not to relinquish the security interest (Bank Guarantee) given by the Corporate Debtor. Thus, relinquishment of the charge happens as per law, as Appellant did not intimate regarding non-relinquishment of security interest in terms of Regulation 21A of the Liquidation Regulations within 30 days. Thus the Appellant has to be treated as per waterfall mechanism under Section 53 of the IB Code. Thus, BGs became part of liquidation estate. Thus, in such circumstances wherein the Appellant has not availed of the opportunity of non-relinquishment of its charge and also when such bank guarantee has not been renewed and is lying with respondent No. 2, it has to be released to the Corporate Debtor.
# 69. It is the stand of Respondent No. 2/Bank of Baroda that “in case the Bank Guarantees have expired, the margin money becomes free and is liable to be refunded. However, in case Bank Guarantees have not expired, margin money remains as margin money and continues to remain outside the liquidation estate.” Respondent No. 2/Bank of Baroda further states that “the moot question before this Hon’ble Tribunal is whether the Bank Guarantees have expired or not.” It further contends that the wording of Bank Guarantees coupled with the fact that that the Appellant has not invoked them ought to be considered for deciding whether they have expired or not. However, in the facts and circumstances of this case we find that this is not the relevant question which we need to answer. Rather the relevant question before us is whether the Appellant had given the option of non-relinquishment, which in this case it had not – irrespective of the fact whether the guarantees are still subsisting or not. We also note that in the facts and circumstances of the case, the bank guarantees have not been invoked either by the Appellant or auto renewed by the bank itself. Therefore, they have to be released to the account of the company prior to the initiation of the CIRP. The terms and conditions of the guarantee as noted herein earlier indicates that the bank should have auto-renewed it but due to the fact that the Appellant has not opted for non-relinquishment, even if it was auto-renewed by the bank, it would still be part of the liquidation estate under these conditions. Thus, the amount underlying in the form of BGs with the Respondent No. 2 Bank is an asset of the Corporate Debtor and part of the liquidation estate and Respondent No. 2 could not have refused to release the expired BGs.
# 70. The Appellant has relied on various judgments which are not directly relevant to the present facts and circumstances. The case of Punjab National Bank versus Supriyo Kumar Chaudhuri & Ors. [(2022) ibclaw.in 731 NCLAT] and Monitoring Agency of Anush Finlease & Construction Pvt. Ltd. Vs State Bank of India [(2021) ibclaw.in 471 NCLAT] (supra) is related to Bank Guarantee against the margin money and not related to the performance of obligations. The case of Ansal Engineering Projects Ltd. (supra) is pertaining to Arbitration Act and not under this IB Code.
# 71. In the above facts and circumstances, we don’t find any infirmity in the orders of the adjudicating authority by which it directed the Respondent No.1/ Assistant Commissioner to return the original bonds pertaining to the Bank Guarantees and also further direction to the Respondent No.2/Manager, Bank of Baroda, to immediately remit the amount of the FDRs to the Liquidation Account so that the same could form part of the Liquidation Estate of the Corporate Debtor.
# 72. Thus, we dismiss the appeal and all related IAs are also disposed of. No orders as to cost.
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