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 currently in insolvency proceedings, was installing a 700 MW thermal power plant, in which Siemens was a project subcontractor.
The Appeal Tribunal upheld the earlier order of the Hyderabad Bench of the National Company Law Tribunal (NCLT) in this regard and noted that the bank guarantees had been invoked by MEL on the grounds that Siemens had failed to perform its obligations under the agreements.
”…Also bearing in mind that we find no evidence on record of fraud, we find no illegality or invalidity in the order of the contested order (of NCLT),” said one two – member of the NCLAT bench.
MEL’s resolution professional had requested permission to release Rs 2.50 crore and authorized its use against the total outstanding amount of Rs 13.06 crore to ensure the continued operation of MEL’s plant.
In this regard, the NCLAT said: “In view of all the above reasons, we believe that the amount can be used for the operation of the ‘Company Debtor’ (MEL) as a going concern. Earlier on December 11, 2020, the NCLT had rejected Siemens’ plea and authorized the Resolution Professional to continue the process of invoking and encashing the ‘Bank Performance Guarantees granted in favor of MEL.
This was challenged by Siemens in the NCLAT Appeals Tribunal, claiming that the warranties were wrongly invoked by MEL.
The Corporate Insolvency Resolution Process (CIRP) was initiated against MEL on November 7, 2019, after NCLT admitted the plea filed by State Bank of India.
Prior to the opening of the CIRP against MEL, the company had entered into two agreements relating to the supply and construction of a 700 MW thermal power plant with EDAC Engineering Ltd.
On December 26, 2014, a consortium of lenders, including Rural Electrification Corporation, approved the term loan facility to finance the project.
The terms of these facilities were governed by a Common Loan Agreement (CLA), which provided security by assignment of a performance bond.
EDAC Engineering has appointed Siemens as the sub-contractor for the completion of the 700MW project, which has issued two bank guarantees of Rs 9.41 crore and Rs 10.90 crore.
Later, MEL issued two notices of summons to HDFC Bank on October 18, 2019 and on January 9, 2020, both were credited to the trust holding account.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)