# In the matter of Bharat Aluminium Co. Ltd. Vs. J. P. Engineers Pvt. Ltd. and Anr. CA (AT) (Ins) No. 759 of 2020

> NCLAT judgment dated 2021-02-26. Citation: TCN-2021-NCLAT-00349. Bharat Aluminium Company Limited filed an appeal against the order dated 31.07.2020 passed by…

- **Court:** NCLAT
- **Order date:** 26 Feb 2021
- **Citation:** TCN-2021-NCLAT-00349
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/bharat-aluminium-co-ltd-vs-j-p-engineers-pvt-ltd-and-anr-ca-bb42403f

## Summary

### Background

Bharat Aluminium Company Limited filed an appeal against the order dated 31.07.2020 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi, Bench No. II. The Adjudicating Authority dismissed the Appellant's Application I.A. No. 2085/ND/2020 and allowed the Respondent No. 2’s Application I.A. No. 2572/ND/2020. The appeal concerns the invocation of a bank guarantee issued by Andhra Bank (Respondent No. 2) on behalf of J.P. Engineers Pvt Ltd (Corporate Debtor/Respondent No. 1) in favor of Bharat Aluminium Company Limited (Appellant). The Appellant sought to encash the bank guarantee, but the Respondent No. 2 refused due to the moratorium imposed under Section 14 of the Insolvency and Bankruptcy Code (IBC) following the initiation of CIRP against

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## Facts

The Appellant, Bharat Aluminium Company Limited, entered into an agreement with the Corporate Debtor, J.P. Engineers Pvt Ltd, for the sale and purchase of aluminium products between 01.04.2019 and 31.03.2020. To ensure payments, the Corporate Debtor provided a bank guarantee dated 22.04.2019 for Rs. 1,60,000,00/- executed by Andhra Bank (Respondent No. 2). The bank guarantee's validity was extended until 21.04.2020. The Corporate Debtor defaulted on payments, leading the Appellant to send a letter dated 03.03.2020 to Andhra Bank to invoke the bank guarantee, depositing the original guarantee at the branch. Andhra Bank replied on 27.03.2020, refusing invocation due to the moratorium under Section 14 of the IBC, initiated following the admission of a Section 9

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## Issues and analysis

### Issue 1: Whether a financial bank guarantee can be invoked after the issuance of a moratorium under Section …

**Ratio:** The amended Section 14(3)(b) of the IBC, effective retrospectively from 06.06.2018,

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**Reasoning:** The NCLAT reasoned that the legislative intent behind Section 14 of the IBC is to protect

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**Interpretation:** The amendment to Section 14(3)(b) is interpreted as a clarificatory amendment

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**Application:** In this case, the bank guarantee was issued by Andhra Bank (Respondent No. 2)

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## Parties

- **Judges:** Jarat Kuma…; KanthiNar…
- **Appellants:** Bharat Aluminium…
- **Respondents:** J.P. Engineers…; M/S J.P. ENGINEERS…
- **Advocates:** Ranjana Roy…; Ananya…; +5 more

## Timeline

- **2019-04-01 — Agreement for Sale and…**: Appellant and Corporate Debtor entered into an agreement for sale and purchase of…
- **2019-04-22 — Bank Guarante…**: Corporate Debtor issued a bank guarantee dated 22.04.2019 amounting to Rs. 1,60,000,00/-…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 14 — Moratorium](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-14)

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