CERC Upholds Bank Guarantee Encashment In CPCL-CTUIL Long-Term Access Dispute

The Central Electricity Regulatory Commission (CERC) has issued a final order in a long-running dispute between Chettinad Power Corporation Limited (CPCL) and Central Transmission Utility of India Limited (CTUIL), bringing closure to a case related to the cancellation of Long-Term Access (LTA) and encashment of a ₹1.11 crore bank guarantee.

The dispute arose from CPCL’s proposed 1200 MW thermal power project in Tamil Nadu, which was initially planned for commissioning in 2015. However, the project faced major delays after its environmental clearance was challenged before the National Green Tribunal (NGT), leading to a temporary suspension. CPCL argued that these developments were beyond its control and created genuine hardship, preventing it from fulfilling the conditions required for signing the LTA agreement.

CPCL maintained that the bank guarantee submitted to CTUIL was meant only to demonstrate the seriousness of its application and not to serve as a penalty. The company further argued that CTUIL had not made any substantial investment or suffered financial losses due to the delay, and therefore, the encashed amount should be refunded.

On the other hand, CTUIL defended its action by stating that the bank guarantee is an essential regulatory mechanism. According to the utility, it ensures that transmission capacity is not blocked by developers who fail to move forward with their projects. CTUIL emphasized that CPCL had been given multiple extensions over several years but was still unable to meet key milestones. It also pointed out that CPCL had provided written undertakings agreeing that the bank guarantee could be invoked if the agreement was not signed within the stipulated timelines.

The case eventually reached CERC after being remanded by the Appellate Tribunal for Electricity (APTEL). APTEL had earlier clarified that under the 2009 Connectivity Regulations, encashment of a bank guarantee is not mandatory but discretionary. This required CERC to assess whether CTUIL had exercised its discretion in a fair and reasonable manner.

After reviewing the facts, CERC concluded that CTUIL’s decision was justified and not arbitrary. The Commission observed that while the environmental litigation created uncertainty, it did not completely stop the project’s progress. It noted that there were periods when the environmental clearance was valid, yet CPCL did not take sufficient steps to advance the project.

CERC highlighted what it described as prolonged inaction on the part of CPCL. The Commission found that the company failed to present a clear or credible timeline for completing the project. It also observed that the project appeared to have been effectively shelved due to a lack of progress rather than unavoidable external factors.

Based on these findings, CERC ruled that CTUIL had exercised its discretion in a reasoned and appropriate manner. The encashment of the bank guarantee was seen as necessary to maintain financial discipline and prevent misuse of transmission planning resources.

With this decision, CERC rejected CPCL’s request for a refund of the ₹1.11 crore, thereby bringing an end to the decade-long dispute. The order reinforces the importance of accountability among power project developers and underlines the role of regulatory mechanisms in ensuring efficient utilization of transmission infrastructure in India’s power sector.