APTEL Refuses To Prevent SECI Encashing Bank Guarantee for Inox Green Power Projects

APTEL (The Appellate Tribunal For Electricity) has rejected the petition filed by Inox Green Energy Services Ltd, Haroda Wind Energy Pvt. Ltd., Khatiyu Wind Energy Pvt. Ltd.,,Ravapar Wind Energy Pvt. Ltd., , Vigodi Wind Energy Pvt. Ltd., seeking a restrain on Solar Energy Corporation of India Limited (SECI) from encashing the bank guarantee that had been furnished by them. The APTEL order pertains to a 2022 interim ruling by the CERC which had allowed SECI to encash such bank guarantee of over Rs 37 cr provided by Inox Wind and its subsidiaries.

SECI had invited proposals in 2017 for setting up grid-connected wind power projects, on “build own operate” basis, for an aggregate capacity of 1000 MW. Later, INOX Wind and its subsidiary firms were issued a letter of award for setting up a 250 MW wind power project. A PPA was signed for the project while the Haryana Electricity Regulatory Commission (HERC) adopted the tariff.

Haryana Power Purchase Centre had signed a PSA with HPPC and UPPCL. In 2019, the HERC adopted the tariff acting in the capacity of the firm while disposing of the petition filed by SECI.

In the current petition, the firm was looking for the PPA to be terminated as it cited several factors such as non-availability of the requisite infrastructure etc. that prevented the execution of the project in time, despite extensions totaling 787 days from SECI. CERC had permitted SECI to encash the Performance Bank Guarantee that had been furnished by the appellant, it being subject to invocation in the event of delay in commissioning of the project by six months from the SCOD.

The APTEL bench held that a bank guarantee is an instrument that stands independent of any other related or associated reason, and it has been clearly made out by other judgements that SECI has every right to encash it if the terms of the PPA are not met. Especially since Inox Wind has not made out a case of fraud or special equities, justifying the Respondent-SECI being restrained from encashing the
Bank Guarantees, the relief sought by them in this Appeal cannot be granted.

This was notwithstanding SECI’s obligation to make good any such encashment should the final decision on the case go against it or in favour of the petitioner, Inox Energy . the order specifically isolated the issue of bank guaranty from the issue of liquidated damages for the same non-performance and non-supply of power. To quote, While the PPA (ie the underlying contract) no doubt provides for the conditions under which the Performance Bank Guarantee can be encashed, it must also be borne in mind that a bank guarantee is an independent and distinct contract, between the bank and the beneficiary, and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. Subject to limited exceptions, the beneficiary cannot be restrained from encashing the bank guarantee even if the dispute, between the beneficiary and the person at whose instance the bank guarantee was  given by the bank, had arisen in the performance of the contract.

Full order can be viewed here.