NCLAT permits encashment of unconditional financial bank guarantees during IBC moratorium.
The National Company Law Appellate Tribunal (NCLAT), Delhi, upheld the encashment of unconditional financial bank guarantees during the moratorium period under Section 14(3)(b) of the Insolvency and Bankruptcy Code, 2016.
The tribunal distinguished between operational dues and independent bank obligations, emphasizing that unconditional guarantees are not 'claims' against the corporate debtor but independent obligations of the bank. Therefore, encashment does not contravene the automatic stay.
The nature of the guarantee—unconditional and independent—falls outside the scope of prohibited recovery actions during CIRP.
This clarification provides certainty to banks and beneficiaries of guarantees in insolvency proceedings. Practitioners must evaluate the terms of the guarantee carefully: conditional guarantees may still be restrained.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 14(3)(b)
