Meenakshi Energy Ltd, HDFC lock horns as bank refuses to honour guarantee
Kolkata: Hyderabad-headquartered Meenakshi Energy Ltd (MEL) locked horns with HDFC Bank after the latte refused to honour bank guarantees (BGs) of Rs 20.31 crore issued by the bank on behalf of Siemens Ltd in favour of Meenakshi Energy Ltd (MEL) even after the beneficiary decided to invoke the BGs on ground that the sub-contractor had failed to perform its obligations as per the agreement.
Meenakshi Energy’s repeated invocation claims have been to no avail. This is notwithstanding the fact that the Hyderabad Commercial Court, after protracted hearing, refused to grant any stay or any injunction in the matter as prayed for by Siemens, holding that no ground has been made out for the same. Interestingly, RBI circular clearly says that 'BG is a contract between the beneficiary and the bank and when the beneficiary invokes the bank guarantee and a letter invoking the same is sent in terms of the bank guarantee, it is obligatory on the bank to make payment to the beneficiary'.
A detailed query sent to HDFC Bank and subsequent phone calls did not elicit any response.
Significantly, India Power Corporation, a Kanoria Foundation company, had acquired Meenakshi Energy from French major Engie for an undisclosed sum, as it looked to expand thermal power capacity. Engie had been holding 89.11 per cent of Meenakshi Energy. Rest of its stake belonged to the Meenakshi Group.
On October 18, in two separate communications, Mrityunjoy Poddar, authorised signatory of MEL, wrote to the HDFC Bank manager at its Golf Course Road branch, requesting for invocation of BGs issued by the bank on behalf of Siemens.
MEL alleged that ‘as per instructions of the bank, Siemens prayed for an ad interim injunction/stay of the invocation of the BG’. The court however after protracted hearing, refused to grant any stay or any injunction in the matter.
RBI Master Circular dated July 1, 2015, says: “In fact some strictures were passed by Courts in the past against banks for not honouring the guarantee commitments promptly....: ‘We are therefore, of the opinion that the correct position of law is that commitment of banks must be honoured free from interference by the courts.”
MEL is now taking up the issue with the RBI, PMO and other concerned authorities.
