Rs 40 crore construction guarantee must go back in two weeks, but APTEL refuses Rs 5.74 crore in bank charges
Clause 6 of a bulk power transmission agreement secures construction and nothing else, so a guarantee kept alive for more than a decade after a 1,400 MW Odisha plant was built cannot be held hostage to the letter of credit under Clause 2, the Tribunal held. The generator that never sought a stay, though, bears its own renewal costs.
The Appellate Tribunal for Electricity has directed Central Transmission Utility of India Limited (CTUIL) to return, within two weeks, the ₹40 crore construction bank guarantees that GMR Kamalanga Energy Limited furnished in 2010 for its thermal plant in Dhenkanal, Odisha. A Central Electricity Regulatory Commission direction tying the return to a separate letter of credit was set aside.
The judgment of 26 October 2026, written by Judicial Member Virender Bhat for himself and Officiating Chairperson Seema Gupta, rejects the generator's claim for ₹5,74,25,547.50 spent on keeping the guarantees alive. The appellant filed no stay application with its 2018 appeal and sought interim relief only in 2025, so it must bear those costs itself.
A 1,400 MW plant and its grid access
GMR Kamalanga set up a 1,050 MW thermal station at village Kamalanga, later expanded to 1,400 MW with a fourth 350 MW unit. Under a 2006 memorandum with the Odisha government and a PPA of 28 September 2006 with GRIDCO, 25 per cent of the output goes to the State.
A PPA of 12 March 2009 with PTC India covers 300 MW for Haryana discoms over 25 years.
To evacuate the power, the generator signed a bulk power transmission agreement (BPTA) with the Central Transmission Utility on 24 February 2010 for long-term access (LTA) of 800 MW. Of this, 200 MW was for the Southern Region and 600 MW for the Northern Region.
The access was later revised to 647 MW: 387 MW to the Northern Region and 260 MW to the Eastern Region.
The BPTA made the generator responsible for building the station and the dedicated line to the Angul pooling station. As security for those two obligations it had to furnish bank guarantees at ₹5 lakh per MW.
GMR Kamalanga gave two guarantees to Power Grid Corporation of India Limited, then the CTU: ₹22.5 crore on 18 February 2010 and ₹17.5 crore on 10 March 2010.
The three units were commissioned in April 2013, November 2013 and March 2014, as the BPTA required. The dedicated line to Angul was commissioned on 21 December 2014.
Two petitions, one direction under appeal
The generator took the position that, with both obligations met, the guarantees had served their purpose and should have come back on their own. Instead, Power Grid asked for extensions by letters of 17 February, 19 May and 5 August 2015.
GMR Kamalanga filed Petition No. 203/MP/2015 before CERC seeking a declaration that the demand letters were illegal and outside the BPTA, return of the ₹40 crore guarantees, and ₹22.67 lakh in bank charges.
A second petition, No. 41/MP/2016, sought a declaration that its LTA stood modified to 647 MW and a corresponding reduction in the letter of credit it had to open as payment security.
By a common order of 8 December 2017 the Commission held that the construction guarantee under Clause 6 could not be withheld because the LC under Clause 2 had not been opened. But in direction (b) of its operative paragraph it said the guarantee would be returned subject to Power Grid being satisfied about the LC for 647 MW.
The Commission also held the generator liable for relinquishment charges on the capacity it gave up, to be fixed in Petition No. 92/MP/2015.
The appeal targeted direction (b) alone. Vishrov Mukherjee argued for the generator; Nikhil Nayyar, senior counsel, appeared for CTUIL, which now stands in Power Grid's shoes. Suparna Srivastava appeared for Power Grid.
Two clauses, two periods, two purposes
Mukherjee took the bench to paragraph 27 of the impugned order. There CERC itself had held that the Clause 6 guarantee covers only the construction period and can be encashed only if the developer fails to build, exits or abandons the project. It cannot secure the Clause 2 LC.
Having said so, he argued, the Commission contradicted itself in direction (b).
Nayyar answered that GMR Kamalanga had relinquished part of its LTA, which amounted to abandoning that part of the project, so the guarantee was encashable. CTUIL, he said, could recover transmission charges of ₹194.65 crore from it.
He also relied on equitable set-off as recognised in Tata Power Trading Company Ltd v. KERC (Appeal No. 45 of 2018, decided 15 July 2026), and on the fact that the generator had renewed the guarantees for years without protest.
The Tribunal read Clauses 2.0 and 6.0 side by side. Clause 2 requires a long-term customer to open an LC for 105 per cent of estimated monthly billing and a further guarantee of two months billing, three months before the scheduled commissioning of the units, to secure payment of transmission charges once the plant runs.
Clause 6 requires a construction guarantee of ₹5 lakh per MW, valid until six months after the expected commissioning date, encashable if the developer fails to construct, exits or abandons the project, or on adverse progress assessed at coordination meetings.
The two mechanisms, the bench held, relate to different time periods and serve distinct objectives. Nothing in the BPTA makes them interchangeable. Had the parties intended the Clause 6 guarantee to stay alive until the Clause 2 LC was opened, the agreement would have said so.
Relinquishing capacity is not abandoning a project
The bench rejected CTUIL's central argument in blunt terms. The suggestion that relinquishing part of the LTA amounted to exiting or abandoning the project “appears to be preposterous on the face of it”. The words of Clause 6 point to a developer who does not complete the project and walks away midway.
Relinquishment of LTA, the Tribunal noted, was concededly before the Central Commission in Petition No. 92/MP/2015, and the order in that petition is itself under challenge before the Tribunal in a batch of appeals by generators. The construction guarantee could in no circumstance be linked to it.
The phrase recovery of transmission charges in Clause 6, the bench agreed with CERC, covers the case where the transmission system is built but the generating units never are. In that event the developer will never use the line and has no occasion to open an LC.
That is why the BPTA lets the charges or lump-sum damages be recovered from the construction guarantee in that one situation. That was not this case.
A guarantee is a contract of its own
Having correctly explained both clauses, the Tribunal said, the Commission patently erred when it linked the return of the construction guarantee to the opening of the LC. It then stated the principle at paragraph 19:
A Bank Guarantee is a separate and independent contract. (para 19)
A guarantee can be invoked only in strict compliance with its own terms, and any invocation beyond them is contrary to settled law. Under Section 126 of the Indian Contract Act a contract of guarantee is a promise to discharge the liability of a third person on his default. These guarantees secured timely completion of the power and transmission projects.
Once both were completed and commissioned in time, the guarantees had accomplished their purpose and lost their contractual value. They could not be used for anything else. The respondents were bound to return them as soon as six months had passed from commissioning, as Clause 6 itself provides.
No stay sought, so no reimbursement
The generator also asked to be reimbursed ₹5,74,25,547.50 spent on keeping the guarantees alive. The Tribunal accepted that the impugned order had required GMR Kamalanga to keep them alive until the LC was opened. But the appellant had filed no application for stay along with its appeal, and simply kept extending the guarantees without seeking interim relief.
Only in 2025 did it file IA No. 1710 of 2025 asking that CTUIL be restrained from demanding further extensions. The bench said the appellant “woke up from slumber” that year. On that application the Tribunal passed an order on 22 December 2025 restraining further extensions until further orders.
Given this conduct, the claim for renewal costs was not justified and was rejected.
Order
Direction (b) in paragraph 43 of the CERC order of 8 December 2017, which linked the return of the Clause 6 construction bank guarantee to CTUIL's satisfaction about the Clause 2 letter of credit, was set aside. CTUIL was directed to return the construction bank guarantee to GMR Kamalanga Energy forthwith, and not later than two weeks from the judgment.
The prayer for reimbursement of ₹5,74,25,547.50 in bank charges was rejected. The appeal was partly allowed to that extent, and all pending interlocutory applications were disposed of. The judgment was pronounced in open court on 26 October 2026.