Whether the Corporate Debtor has any right with respect to money received from reversal of invocation of a Performance Bank Guarantee (which had been invoked prior to the initiation of CIRP), specifically when the margin money was also not deposited by the Corporate Debtor? – UCO Bank Vs. Sudip Bhattacharya RP of Reliance Naval & Engineering Ltd. – NCLAT New Delhi
In the instant case, the issue pertains to amounts refunded by reversal of invocation of Performance Bank Guarantee where even the margin money was paid by the Bank and not by the Corporate Debtor.
NCLAT held that it is a well settled proposition that a Bank Guarantee is an independent and a distinct contract between the Bank and the beneficiary and in the event of any default, the beneficiary would realise the amount under the Bank Guarantee from the Bank and not from the Corporate Debtor. Bank Guarantees are issued for some purpose and for a tenure which automatically gets revoked in fulfilment of such purpose or completion of such specified time. We are of the view that liabilities under a Performance Bank Guarantee cannot be terminated by action of a third party. A Bank which gives a Performance Guarantee must honour the guarantee according to its terms.
