Customs Department Forfeits Security Interest Over EPCG Bank Guarantees Due to Failure to Elect Non-Relinquishment Within 30 Days: NCLAT Delhi

Overview of the Dispute

The Delhi Bench of the National Company Law Appellate Tribunal, in Assistant Commissioner (EPM) Vs Shruti Gupta, Company Appeal (AT) (Insolvency) No. 745 of 2025, delivered its judgment on 25 September 2026, dismissing the appeal filed by the Assistant Commissioner (EPM) — the Customs Department — against an order of the National Company Law Tribunal, New Delhi, dated 19 December 2024.

The central question before the Tribunal was whether the Adjudicating Authority could legitimately direct the return of original bonds pertaining to bank guarantees and simultaneously instruct Bank of Baroda to remit the underlying Fixed Deposit Receipt (FDR) proceeds into the liquidation account of the corporate debtor, thereby making them part of the liquidation estate.

The NCLAT answered this question in favour of the liquidator and against the Customs Department, holding that the failure to communicate a decision on non-relinquishment of security within the mandatory 30-day window under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, coupled with the expiry of the bank guarantees without renewal or invocation, conclusively settled the matter.

Background: The Corporate Debtor and the EPCG Bonds

The corporate debtor was a company incorporated on 09 December 2010 under the Companies Act 1956, engaged in research and development across natural sciences, medical sciences, agriculture, and engineering. During 2014 and 2015, the corporate debtor availed customs duty exemption benefits extended by the Government of India and, in accordance with the conditions of that scheme, executed eight EPCG Bonds in favour of the Customs Department, committing to fulfil specific export obligations within prescribed timelines.

To secure these bond obligations, Bank of Baroda — originally Vijaya Bank — executed eight bank guarantees in favour of the Customs Department, backed by fixed deposits of the corporate debtor held as underlying margin money. The aggregate value of these bank guarantees was ₹89,16,128.

The details of the eight bank guarantees were as follows:

The export obligation discharge periods under the relevant EPCG licences expired in 2020 and 2021. As the corporate debtor neither fulfilled its export obligations nor obtained any Export Obligation Discharge Certificate, customs duty liabilities crystallised against it.

Journey Into Insolvency and Liquidation

The corporate debtor itself approached the NCLT under Section 10 of the Insolvency and Bankruptcy Code, 2016, and the NCLT admitted the application, commencing the Corporate Insolvency Resolution Process (CIRP) vide order dated 14 March 2023, with Mr. Sunil Kumar Agarwal appointed as Interim Resolution Professional.

When no resolution plan was received following the issuance of Form G, the NCLT passed a liquidation order on 21 November 2023, appointing Respondent No. 1 (Shruti Gupta) as the liquidator. The liquidator's consent was filed on 06 December 2023, and a public announcement inviting claims was published on 07 December 2023 in Financial Express (English) and Jansatta (Hindi), with 03 January 2024 as the last date for submission of claims.

The Customs Department's Claim and the Critical Timeline

The Customs Department's conduct in filing its claim became the focal point of the legal proceedings. The following sequence of events was central to the Tribunal's analysis:

• 21 November 2023 — Liquidation commenced against the corporate debtor by the NCLT.
• 15 December 2023 — The Customs Department filed its claim in Form B, without communicating any decision regarding relinquishment or non-relinquishment of its security interest.
• 20 December 2023 — The 30-day period prescribed under Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016, expired. From this date, the security was deemed by operation of law to have been relinquished and absorbed into the liquidation estate.
• 01 February 2024 — The Customs Department filed a fresh claim in Form C, amounting to ₹1,81,27,632, expressly indicating non-relinquishment of security — but this was filed well beyond the 30-day window.

The liquidator admitted the Customs Department's claim of ₹1,81,27,632 in full. By letter dated 14 February 2024, the liquidator requested Bank of Baroda to release the expired bank guarantees and credit the maturity proceeds to the liquidation account. By letter dated 19 February 2024, the liquidator also requested the Customs Department to issue a lien release letter to Bank of Baroda.

Bank of Baroda, by letter dated 29 February 2024, declined to remit the amounts, contending that the bank guarantees had not expired due to the auto-renewal clause and requested the matter to be resolved with the Customs Department directly. This impasse led the liquidator to file IA No. 1357 of 2024 before the NCLT.

The NCLT Order and the Appeal

The NCLT, vide its order dated 19 December 2024, allowed IA No. 1357 of 2024 and directed as follows:

"i. In view of the reasons mentioned above, the IA-1357/2024 stands allowed.

2. Having regard to the facts and circumstances of the case, we direct the Respondent. 1/Shri Devindra Kumar, Assistant Commissioner, to immediately return the original bonds pertaining to the Bank Guarantees.
3. We further direct the Respondent no. 2/Manager, Bank of Baroda, to immediately remit the amount of the FDRs to the Liquidation Account so that the same could form part of the Liquidation Estate of the Corporate Debtor."

The Customs Department preferred Company Appeal (AT) (Insolvency) No. 745 of 2025 before the NCLAT Delhi, challenging this order.

Arguments Raised by the Customs Department

The Customs Department advanced several legal and factual contentions before the NCLAT:

Nature of the Bank Guarantees and FDRs

• The eight bank guarantees were Performance Bank Guarantees — not ordinary guarantees — executed against fixed deposits of the corporate debtor aggregating ₹89,16,128.
• Five of the eight bank guarantees contained auto-renewal clauses, and at least three contained auto-pay clauses triggered upon non-renewal, meaning that the bank was independently obligated to either renew the guarantee or pay the government.
• The FDRs were not simple fixed deposits of the corporate debtor. They were margin money — assets placed in trust for the specific purpose of securing the bank guarantee obligations. Under the law settled by various NCLAT precedents, margin money does not form part of the corporate debtor's assets and is accordingly excluded from the liquidation estate under Section 36(4) of the Insolvency and Bankruptcy Code, 2016.
• Being assets of the bank/surety in trust for the government (the beneficiary), the FDRs could not be treated as assets of the corporate debtor either under Section 18 or Section 36 of the IBC.

On the Relinquishment Question