Tribunal Upholds Encashment of Bank Guarantees by Hindustan Copper Limited, Rules Out Jurisdiction to Enforce Executive Policy Schemes
In a significant decision, the National Company Law Tribunal (NCLT) Chennai bench, comprising Shri. Jyoti Kumar Tripathi, Member (Judicial), and Shri. Ravichandran Ramasamy, Member (Technical), dismissed an application filed by R. Venkatakrishnan, Liquidator of M/s. Star Trace Private Limited, seeking a refund of Rs.16.95 crore from Hindustan Copper Limited. The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, with the petitioner requesting the Tribunal to direct Hindustan Copper Limited to refund 95% of the performance security encashed during the COVID-19 pandemic under the Vivad Se Vishwas-I Scheme.
The Tribunal ruled that its jurisdiction under Section 60(5) does not extend to adjudicating issues related to executive policy schemes such as the Vivad Se Vishwas-I Scheme, which provides relief to MSMEs affected by the pandemic. The Tribunal observed that determining eligibility under the scheme involves factual verification and administrative scrutiny, which are beyond its purview.
The case's genesis lies in an EPC contract awarded to the Corporate Debtor, M/s. Star Trace Private Limited, for setting up a Copper Ore Tailing Beneficiation Plant in Madhya Pradesh. The Corporate Debtor failed to complete the project within the stipulated timeline, prompting Hindustan Copper Limited to encash the performance bank guarantees in March and September 2020, citing contractual breaches.
The Liquidator argued that the encashment during the COVID-19 period warranted a refund under the Vivad Se Vishwas-I Scheme, aimed at providing financial relief to MSMEs. However, Hindustan Copper Limited contended that the scheme did not apply to the contract in question, an EPC contract, and highlighted ongoing investigations and allegations of fraud against the Corporate Debtor.
The Tribunal noted that the encashment of the unconditional bank guarantees was in accordance with the contractual terms and that there was no legal basis to deem the encashment unlawful. It further stated that the Vivad Se Vishwas-I Scheme is a policy-driven administrative measure, and any claims under it should be processed by the appropriate authorities.
The Tribunal concluded that it could not adjudicate disputed contractual claims or enforce policy entitlements unrelated to insolvency proceedings, thereby dismissing the application. The Liquidator retains the option to seek remedies through appropriate legal channels.
Bottom Line:
Insolvency and Bankruptcy Code - Tribunal under Section 60(5) cannot adjudicate disputed eligibility conditions or enforce relief under executive policy schemes like Vivad Se Vishwas-I Scheme. Contractual rights and encashment of bank guarantees upheld.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 60(5)
R. Venkatakrishnan v. Hindustan Copper Limited, (NCLT)(Chennai) : Law Finder Doc Id # 2832409
