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IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
A. RAMALINGESWARA RAO, J.
M/s Lanco Infratech Limited and another - Petitioners
Vs.
Power Finance Corporation, New Delhi and another - Respondents
Writ Petition No. 24437 of 2017
Decided On : 07-08-2017
Companies Act, 1956 - 1st Petitioner is a Company incorporated and is engaged in the business of infrastructure and construction. 2nd petitioner is a subsidiary of the first petitioner Company and it was incorporated as a Special Purpose Vehicle for setting up of a Thermal Power Project comprising four units namely Unit-I (300 MW), Unit-II (300 MW), Unit-III (660 MW) and Unit-IV (660 MW) in the State of Chhattisgarh. The 1st respondent is a financial institution, a Central Government Public Sector undertaking and is engaged in the business of financing power projects. It makes available loan facilities to the entities setting up independent power projects. According to the petitioners, it is a State. 2nd respondent is a Public Sector Bank and is a State within the meaning of Article 12 of the Constitution of India. 2nd respondent issued a bank guarantee in favour of the 1st respondent on behalf of the 2nd Petitioner, which is the subject matter of the present Writ Petition. 2nd petitioner availed loan facilities from a Consortium of banks and financial institutions with the 1st respondent as a lead member of the Consortium for setting up its 300 MW Thermal Power Station (Unit-I). The 2nd petitioner executed financing documents with the 1st respondent and other members of Consortium for availing such loan facility. The 2nd petitioner availed a loan of Rs.904.34 crores by signing the Common Senior Debt Agreement (Facility Agreement) for Rupee Term Loan with the 1st respondent and other members of the Consortium. The said amount is required to be repaid by the 2nd petitioner in 48 quarterly instalments which was subsequently revised to 55 quarterly instalments commencing from a date indicated in the facility agreement after commencement of commercial operation of the unit. The date fixed. The commercial operation was achieved.second petitioner also executed another agreement called as “Trust and Retention Account Agreement” (TRAA). Under the said agreement –Held instant case, there is no plea of fraud or irretrievable harm or injustice and this court, on the basis of record available, does not find any such exception. In view of the same, this Court is not inclined to go into the merits of the present controversy between the parties relating to the original contract between the petitioners and the first respondent and on the settled point of law, the second respondent is bound by the terms of the bank guarantee. In the Hindustan Construction Co. Ltd. Case (supra), the bank guarantees were invoked and when invocation was challenged in a suit, the courts went into the merits of the case. Similarly, the case in Basic Tele Services Ltd. (supra) is also after invocation of bank guarantee and the court examined the merits of the case. In Gangotri Enterprises Limited (supra), the dispute was in relation to the ‘monies due’ and invocation of bank guarantee in an unrelated contract between the purpose the same parties. Thus, the decisions cited by the learned Counsel for the Petitioners relate to the merits of respective cases and are not relevant for of present case. Writ Petition is not maintainable in this court in view of the nature of private contract without any element of public law and is liable to be dismissed. Accordingly the Writ Petition is dismissed at the admission stage. No costs –Petition is Dismissed.
1. This writ petition is filed challenging the communication dated 20.07.2017 issued by the 1st respondent, Power Finance Corporation to the 2nd respondent, IDBI Bank Limited.
2. The 1st petitioner is a Company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of infrastructure and construction. The 2nd petitioner is a subsidiary of the first petitioner Company and it was incorporated as a Special Purpose Vehicle for setting up of a Thermal Power Project comprising four units namely Unit-I (300 MW), Unit-II (300 MW), Unit-III (660 MW) and Unit-IV (660 MW) in the State of Chhattisgarh. The 1st respondent is a financial institution, a Central Government Public Sector undertaking and is engaged in the business of financing power projects. It makes available loan facilities to the entities setting up independent power projects. According to the petitioners, it is a State under Article 12 of the Constitution of India. The 2nd respondent is a Public Sector Bank and is a State within the meaning of Article 12 of the Constitution of India. The 2nd respondent issued a bank guarantee in favour of the 1st respondent on behalf of the 2nd Petitioner, which is the subject matter of the present Writ Petition.
3. The 2nd petitioner availed loan facilities from a Consortium of banks and financial institutions with the 1st respondent as a lead member of the Consortium for setting up its 300 MW Thermal Power Station (Unit-I). The 2nd petitioner executed financing documents with the 1st respondent and other members of Consortium for availing such loan facility. The 2nd petitioner availed a loan of Rs.904.34 crores by signing the Common Senior Debt Agreement (Facility Agreement) dated 04.08.2005 for Rupee Term Loan with the 1st respondent and other members of the Consortium. The said amount is required to be repaid by the 2nd petitioner in 48 quarterly instalments which was subsequently revised to 55 quarterly instalments commencing from a date indicated in the facility agreement after commencement of commercial operation of the unit. The date fixed was 15.07.2010. The commercial operation was achieved on 09.04.2010. The second petitioner also executed another agreement on 04.08.2005 called as “Trust and Retention Account Agreement” (TRAA). Under the said agreement, certain accounts were opened and operated by the Account Bank mentioned therein for the purpose of making available the requisite funds under the Facility Agreement to the 2nd petitioner and for repayment of instalments of the loan to the 1st respondent and other Consortium members. The TRAA provides for maintenance of Debt Service Reserve Account (DSRA) to secure the above payments. The account is required to be maintained with an amount stipulated under TRAA which is called as “Debt Service Reserve Amount”. In order to provide and maintain the DSRA under the Facility Agreement and TRAA, a bank guarantee for an amount of Rs.88,56,00,000/- was furnished by the 2nd respondent on 18.11.2011. The said bank guarantee is valid and subsisting till 16.11.2017. The bank guarantees to an extent of 193.51 crores for the purpose of covering the DSRA towards debt servicing for the entire debt of Units I and II by Lenders Consortium were furnished by the 1st petitioner, on behalf of the 2nd petitioner, by earmarking its non-fund based limits maintained and made available by the 2nd respondent to the 1st petitioner. The 1st respondent also provided finance to the 2nd petitioner for its Unit-II for which a separate agreement was executed. The total bank guarantees to an extent of 193.51 Crores includes the guarantee for Unit-II also. Unit-II also became operational with effect from 07.05.2011, but it was shut down from March 2013 to December 2015 due to reasons beyond the control of the 2nd petitioner because of non-availability of linkage coal and
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