NCLAT Overturns NCLT Ruling on Mitsubishi's Bank Guarantee Encashment

The Insolvency Appellate Tribunal NCLAT has overturned a NCLT order that restricted Mitsubishi Heavy Industries from encashing a Rs 47.72 crore Performance Bank Guarantee from Punj Lloyd. Mitsubishi's right to invoke the Bank Guarantee was upheld, despite Punj Lloyd's insolvency proceedings and disputes over LNG tank construction defects.

In a significant ruling, the Insolvency Appellate Tribunal NCLAT has overturned an order by the National Company Law Tribunal (NCLT) that had barred Mitsubishi Heavy Industries from encashing a Performance Bank Guarantee submitted by contractor Punj Lloyd.

NCLAT ruled that the NCLT had 'committed an error' in allowing the plea filed by Punj Lloyd's Resolution Professional to restrain Mitsubishi and associated banks from invoking the Bank Guarantee.

The tribunal asserted that according to established laws, Section 14 of the Insolvency & Bankruptcy Code does not affect the appellant's right to invoke a Bank Guarantee during a moratorium. It also cited previous Supreme Court judgments, emphasizing that the Bank Guarantee is an independent contract that must be honored if it is unconditional and irrevocable.

(With inputs from agencies.)