Petition U/S 7 Of IBC Not Maintainable For Non-Return Of Expired, Uninvoked Bank Guarantee Under Settlement Agreement: NCLT Mumbai

The NCLT (National Company Law Tribunal) Mumbai bench has ruled that a "petition under Section 7 of IBC is not maintainable for non-return of an expired, uninvoked bank guarantee under a settlement agreement." The tribunal found that if a financial creditor's original debt was settled through an agreement, and a bank guarantee provided as part of that settlement expired without being invoked, the failure to physically return the expired guarantee by the corporate debtor cannot be construed as a "default" for initiating fresh insolvency proceedings under Section 7 of the IBC. This prevents the misuse of the IBC for minor or technical non-compliances when the underlying debt has been extinguished.