The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by Siemens Ltd against the invocation of its bank guarantees by Meenakshi Energy. Meenakshi Energy Ltd (MEL) which is presently facing insolvency proceedings, was setting up a 700 MW thermal plant, in which Siemens was a sub-contractor for the project.
The appellate tribunal has upheld the earlier order of the Hyderabad bench of the National Company Law Tribunal (NCLT) in this regard and noted the bank guarantees were invoked by MEL on the ground that Siemens failed to perform its obligations in terms of the agreements.
“… Also keeping in view that we do not find any material on record with respect to any fraud, we do not find any illegality or infirmity in the order of the Impugned Order (of NCLT),” said a two-member NCLAT bench.
The Resolution Professional of MEL had sought permission for the release of Rs 2.50 crore and permitted it to be utilised against the overall outstanding amount of Rs 13.06 crore to ensure MEL’s plant is kept running.
On this NCLAT said, “Having regard to all the aforenoted reasons, we hold that the amount may be utilised for the functioning of the ‘Corporate Debtor’ (MEL) as a Going Concern.”
Earlier on December 11, 2020, NCLT had dismissed the plea of Siemens and allowed the Resolution Professional to continue with the process of invocation and encashment of ‘Performance Bank Guarantees granted in favour of MEL.
This was challenged by Siemens before the appellate tribunal NCLAT contending that guarantees were wrongfully invoked by MEL.
The corporate insolvency resolution process (CIRP) was commenced against MEL on November 7, 2019, after NCLT admitted the plea filed by the State Bank of India.
Before the initiation of CIRP against MEL, the company had entered into two agreements in relation to the supply and erection of a 700 MW thermal plant with EDAC Engineering Ltd.
On December 26, 2014, a consortium of lenders including Rural Electrification Corporation sanctioned the term-loan facility for financing the project.
The terms and conditions of these facilities were governed by a Common Loan Agreement (CLA), which provided for security by way of assignment of a performance guarantee.
EDAC Engineering appointed Siemens as the sub-contractor for the completion of the 700 MW project, which issued two bank guarantees of Rs 9.41 crore and Rs 10.90 crore.
Later, MEL issued two notices for the invocation to HDFC Bank on October 18, 2019 and on January 9, 2020 both were credited to the Trust Retention Account.
