# In the matter of The National Small Industries Corporation Limited vs. Prabhakar Kumar & Ors.

> NCLAT judgment dated 2023-10-16. Citation: TCN-2023-NCLAT-00120. The National Small Industries Corporation Limited (NSIC) filed an appeal under Section 61 of…

- **Court:** NCLAT
- **Order date:** 16 Oct 2023
- **Citation:** TCN-2023-NCLAT-00120
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/the-national-small-industries-corporation-limited-vs-prabhakar-kumar-ors-b02f959d

## Summary

### Background

The National Small Industries Corporation Limited (NSIC) filed an appeal under Section 61 of the Insolvency and Bankruptcy Code (IBC), 2016, against an order dated 25.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Court – IV) in I.A. No.3139/ND/2020 in C.P. (IB) No. – 364(ND)/2019. The dispute arose from the invocation of bank guarantees by NSIC, which provided raw material financial assistance to M/s. Ganesh Fire Equipments Private Limited (Corporate Debtor). The Resolution Professional filed an application contending that the invocation of bank guarantees violated the moratorium provisions under Section 14(1)(c) of the IBC. The Adjudicating Authority quashed the notices issued by NSIC regarding the invocation of bank

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## Facts

The National Small Industries Corporation Limited (NSIC) provided raw material financial assistance to M/s. Ganesh Fire Equipments Private Limited (Corporate Debtor) under a scheme where the Corporate Debtor furnished bank guarantees. Initially, the financial assistance was Rs. 1 Crore, later increased to Rs. 2.99 Crores through a supplementary agreement dated 05.10.2018. Seven bank guarantees were submitted to NSIC. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) following an application by an Operational Creditor. NSIC invoked the bank guarantees on 14.02.2020. The Resolution Professional filed I.A. No.3139/ND/2020, arguing that the invocation violated Section 14(1)(c) of the IBC, which imposes a moratorium. The Adjudicating

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## Issues and analysis

### Issue 1: Whether the bank guarantees invoked by the Appellant (NSIC) fall under the category of 'Performance …

**Ratio:** The categorization of bank guarantees as per RBI guidelines distinguishes between

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**Reasoning:** The Adjudicating Authority determined that the bank guarantees were for financial

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**Interpretation:** The term 'Performance Bank Guarantee' implies a guarantee against

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**Application:** In this case, the bank guarantees were provided to secure the raw material

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## Parties

- **Judges:** M. Venu…; Ajai Das Me…
- **Appellants:** The National…
- **Respondents:** M/s. Ganesh Fire…; Sh. Prabhakar…

## Timeline

- **2012-05-11 — Agreement…**: M/s. Ganesh Fire Equipments Private Limited entered into an agreement with NSIC for raw…
- **2018-10-05 — Supplementary…**: A supplementary agreement was executed, increasing the raw material financial assistance…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 61 — Appeals and Appellate Authority](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-61)

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