Dismissed

Indian Renewable Energy Development Agency Ltd. v. M/S Ind-Barath Energies (Thoothukkudi) Ltd.

DRT30 Apr 2026TA/109/2023

Case brief

AI extract

What is this about?

This appellate order dismissed the debtor's appeal against a recovery order. The court held that the appellant bank was entitled to recover the principal loan amount and the amount paid on behalf of the government to recall the interest subsidy, rejecting the argument that the debt had been discharged by such payment.

What the court decided

AI extract

Indian Renewable Energy Development Agency Ltd… — Contract and Commercial Disputes | DRT (2026)

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Beforc SUSHIL KUMAR RASTOGI, Prcsiding Officer Debts Recovery Tribunal-U, Delhi

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TAltogl2023

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INDIAN RENEWABLE ENERGY DEVELOP]IENT AGENCY rTD VS U/S rND-BARATH ENERGTES (THOOTHUKKUDI) LTD & ORS

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Reserued on z 24.03.2026 Pronounced on : 30.04.2O2G

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Indian Renewable Energy Development Agency Ltd

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Applicant

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M/s Ind-Barath Energies (|'HOOTHUKKUDI) Ltd

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Shri K. Raghu Rama Krishna Raju

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Smt. K. Rama Devi

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Mls.Ind- Barath Energies Ltd

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UCO Bank

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Andhra Bank

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-Defendants

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Present: Shri Noel Cherobin, Counset appears for applicant EI.

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Shri I.S. Chauhan, Counsel for defendants.

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FINAL ORDER

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This original application has been filed by the applicant bank, on 23.05.2016 through shri Manish chandra, Deputy Manager (Law), IREDA under section 19 of the RDB Act, 1993 against the defendant nos.1 to 4 for recovery of a sum of Rs.29,184,8g9/- with further interest additional interest as riquidated damages and other charges thereon at the rates on the footing of the compound interest with quafterly rests at contractual rates from the date of fiiling of this o.A till the date of -G' realization in full.

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The brief facts of the cttse are that at the request of defendant no.1, the applicant bank sanctioned a Financial Assistance of Rs.1694.00 lacs for setting up of 10 MW which later on enhanced to 20 MW Biomass Combustion Power Proiect at Eppodumvendran Village, Ottapidaram Taluk, Thoothukkudi District in the state of Tamil Nadu, vide dated 10.02.2004. The defendant no.l, thereafter, request for the enhancement of^project from 7.5 MW to 10 MW and to take^joint finance from the other lender/s. Accordingly, the same was accepted by the applicant and amended sanction was issued vide tetter dated 31.03.2004 and the extent that the loan amount the applicant was reduced from Rs.1694.00 Lacs to Rs.1142.50 Lacs. However, later o[, again on the defendant no,l requested for the enhancement of project from 10 MW to 20 MW and to take joint finance from the other lender/s. Accordingly, IREDA's issued modified and amended sanction letter sanction letter dated 01.06.2004 and the loan amount was again raised to its original amount i.e., Rs.1694.00 Lacs. In consideration of the applicant having agreed to lend and advance the said Loan to the defendant no.l, the defendant no.l executed the unattested deed of hypothecation dated December 03, 2004 at New Delhi thereby creating an first charge by way of hypothecation on the whole of the movable^propefties of the defendant no.1 wherever situate, including and peftaining to its 20 MW, Biomass Power Project at Village Eppodumvendran, Taluk Ottapidaram, District Thoothukkudi in the State of Tamil Nadu, including its movable^plant and machinery machinery spares, tools and accessories and other movables, both^present and future (save and excepl,trq debts) whether installed ()

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or not and whether then lying loose or in clses or which were then lying or stored in or about or shall thereafter from time to time during the currency of the said Loan brought into or upon or stored or in or about at the defendant no.l's factories,^premises and godowns wherever the same may be or be held by any party to the order or disposition of the defendant no.1 or in the course of transit or on high seas or on order or delivery, however and wheresoever in the^possession of the defendant no.1 and either by way of substitution or addition in favour of the applicant and on all receivables^generated from the above Biomass^project wherever lying or held in Trust and Retention Account openened including any other monies credited therein or held or due from any^purchase of Power including Tami! Nadu Electricity Board as security for the due repayment of the said Loan together with all interest, liquidated damages, premia on^prepayment or on redemption, costs, charges and expenses and all other moneys as stipulated under the said Loan Agreement. In consideration of applicant having agreed to grant and I or granted the said Loan and having agreed to make disbursements I Interim disbursement to the defendant no. 1, on November L7,20M, Shri K. Raghu Rama Krishna, Chairman of the defendant no. 1, and authorized by the defendant no.l to do so vide Resolutions^passed by the Board of Directors in their meeting held on October 30th, 20L4'All those^pieces and^parcels of land admeasuring 20 Acres 73 Guntas bearing suruey nos. 433lLA, 4331L8, 43312, 43313, 43314, 43614, 43615 and 43616 situated at Eppodumvendran Village, Ottapidaram Talu( Sub Registration District of Ettayapuram, Tuticorin District in the state of Tamil Nadg _tggether with al! buildings,

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structures, erections etc. constructed and/or to be constructed thereon both^present and future and the plant and machinery attached to the earth or permanently fastened to anything attached to the eafthffixtures and fittings erected/installed or to be erected/installed thereon and every^paft thereof. With an intent to create a security by way of mortgage by deposit of title deeds in favor of the UCO Bank and in favour of IREDA Ltd and Andhra Bank for their term loans of Rs.1363.00 Lacs its and Rs.1694.00 Lacs and Rs.1500.00 Lacs respectively and for the due repayment, discharge and redemption by the defendant no. 1 Company of, amongst others the said Loans together with interest, additional interest, further interest, liquidated damages, commitment charge, permia on prepayment or on redemption cost, charges, expenses and other monies payable under the said Loan Agreement. The defendant no.2 in their^personal and individual capacity executed at New Delhi uncondiUonal and irrevocable deed of^guarantee dated 03.L2.2004 and defendant no.3 in their^personal and individual capacity executed at Hyderabad uncondiUonal and irrevocable deed of^guarantee dated L0.L2.2004 respectively and the defendant no.4 in its corporate capacity executed unconditional and irrevocable deed of guarantee dated 03.L2.20M in favour of the applicant bank. The defendant nos.5 and 6 are^paripassu charge holders on the movable and immovable propefties of the defendant no.l and the defendant nos.5 and 6 are^proforma defendants as no relief has been prayed for against the defendant no.5 and 6 in the present^proceedings. Pursuant to the aforesaid documents executed and securities created/ to be created in respect of the said !oan, the applicant 9,\

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disbursed an aggregate amount

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Rs.169,400,193/- out of the said loan of Rs.1694 lacs to the defendant no.l from time to time under the said loan agreement. At the request of defendant no.1 that the Government of India through the Ministry of^New and Renewable Energy and conveyed the sanction of the President of India for grant of Interest Subsidy of Rs.1,83,39,000/- to IREDA on the eligible Term Loan of Rs.1694.00 l-akhs to the defendant no.1 vide letter No. L21812005^-CPG dated 19.01.2007 subject to the terms and condition contained therein. The aforesaid amount of Interest Subsidy of Rs.1,83,39,000/ was to be adjusted against the interest^payable towards the^Loan availed by the defendant no.l at 2.75o/o. AccordinglY, the same was adjusted towards the interest^payable on the loan availed by the defendant no.1. In consideration for the Ministry of New and Renewable Energy^granting the Interest Subsidy of Rs.183.39 Lakhs to the defendant No.l, the defendant no.1 executed a Letter of Undertaking dated March 03, 2007 in favour of the President of India, Ministry of New and Renewable Energy and IREDA thereby agreeing and undertaking that in case the project is not complete as^per time schedule/or during the currency of the loan, or^project is abandoned for any reason whatsoever and/or the borrower commits default of the terms and conditions of the loan of IREDA including^payment of the dues on due dates and IREDA, the subsidy amount already disbursed to the defendant no.1 shall be refunded by the borrower as if loan was sanctioned without interest subsidy. Moreover, the defendant no.l agreed and undertook to operate the^project on Biomass to the best of its capabilities for the minimum^period of 10^years after its completion or as q9r the^{parameters given} in er\ '.

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the application and DPR. It is submitted that the defendant no.l has violated the afore said letter of Undeftaking dated March 03,2007 since it has switched over its Prcject from Biomass i.e. Renewable source of energy to Fossil Fuel. In terms of the said Letter of Undertaking, the defendant no.l was required to repay the said Interest Subsidy to the applicant in accordance with the Repayment Program and also to^pay interest and other monies in respect of the said Interest Subsidy to the applicant at the rate and in the manner as stated. However, in total violation of the above undertaking, the defendant no. 1 switched over its project from Biomass i.e. renewable source of energy to fossil fuel. The defendant no. 1 vide letter No. J U BETffN ER/002/2009 dated 26.02.2009 i nformed the Chairman, Tamil Nadu Electricity Board, Chennai that they have made necessry modifications in the boiler to operate on coal and further declared that the biomass power plant funded by the applicant will be a fossil based power plant hence forth wherein the Power Purchase Agreement entered on 15.3.2004 for biomass power will be null and void as per the definition of the fuels to be used. Applicant received a letter No. 556/BE/[EDA/2009 dated 8.7.2009 from Tamil Nadu Energy Development Agency (TEDA) informing that the defendant no. t had decided to operate the plant with Llo/o coal as fuel instead of Biomass. In this connection a letter No. CE/NCES/EEAruCB/AEE/F/RRFL/09/ D1160/09 dated 03.03.2008 was issued by Chief Engineer, NCES, Tamil Nadu Electricity Board, which stated that the Defendant No. t had made necessary modifications in boiler to operate on coal and modifications are nearing completion. Fufther it was informed that the power planlytill be operated on fossil

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fuel-based power plant and PPA entered in L5.2.2004 for biomass power remains null and void. The Chairman of TNEB acted accordingly and approved the termination of PPA executed by the Petitioner Company with TNEB on 15.3.2004 subject to field verification.

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It is further submitted that the defendants enjoyed and utilized the Loan facility, but failed to maintain the financia! discipline and failed to repay the due amounts. The applicant bank requested the defendants to regularize the loan account by visits and letters, but there was no response from the defendants. Therefore, the applicant bank serued a recall notice dated 15.09.2010 to the defendants but failed to recover the same Thus, the^present O.A[A is^preferred by the applicant bank to recover its dues.

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On notice by this Tribunal, the defendants^put appearance through counsel. The defendant^{nos.l to 4} have filed written statement and evidence.

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In their written statement the defendant^{no.l to} 4 have denied the facts mentioned in the OA. It^is submitted that this written statement^{filed without} prejudice to the rights of the defendants who filed case CS (OS) No.3047 of 20L4 before the^{Hon'ble High Court} New Delhi against the applicant and Ministry of^New and Renewable Energy for declaration^{with reference to} the operation of the defendant no.l^{power project as} biomass and consequential reliefs. It^{is submittedthat} on the administrative^grounds the^{same was transferred} to District & Sessions Judge^(New Delhi Central)^Patiala House Coufts, Delhi. It is submitted that the above application filed for recovery of amounts arising out^of the subsidiary illegally recalled by the applicant along I.

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TA NO/r 0912023 8 with interest. It is submitted that the said illegal action of the applicant was challenged by the defendant before court of law and the same is^pending adjudication. It is submitted that the defendant no. 1 is a Company incorporated under the Companies Act, 1956 having its registered office at the address mentioned in the cause tiUe. The defendant no.l was duly incorporated on August 2L, 2003 with the^primary object to carry on and^{generate power} through renewable energy sources such as Biomass. It is submitted that vide a letter dated 2L.07.2003, Ministry of Non- Conventional Energy Sources, Government of India, conveyed sanction with regard to implementation of Biomass energy and Cogeneration^programmes during the^year 2003-04. The said letter was addressed to the respective State Governments and other agencies. The scheme provided for Central Financia! Assistance (CFA) in the form of Grants-in-Aid and Subsidies in respect of certain activities, which apart from others includes commercial pQects. It is submitted that the defendant no. 1 for setting up the Biomass power project applied to the applicant for grant of loan and also for the Central Financial Assistance in the form of grants in aid and subsidies in respect of its commercial^project. On 03.12.2004, a Loan Agreement was executed between the defendant no.t and applicant. It is fufther submitted that under the terms of the above Loan Agreement, and as per the^pre- disbursement conditions, a long term Power Purchase Agreement (PPA) was to be executed between the defendant no.1 and the Tamil Nadu Electricity Board (TNEB) for supply of excess power over a period of 15 years at the rates specified in the B.P. (FB) No. 59 dt.11.04.2000 as amended.fro$ time to time. It is

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relevant to mention herein that the^price at which the power was to be supplied to TNEB was linked to the HT tariff applicable in Tamil Nadu and the same was specified to be Rs.3.15/-^per l(,Vh. It is submitted that the above Scheme of 2003 was amended from time to time and by a letter dated 26.L2.2006, approva! of the Government of India, for implementation of the scheme for promotion of the Grid Interactive Power Generation Projects based on Renewable Energy Sources during 2006-07, was issued by the "MNES". It is submitted that Para 7 of the said letter stated that it modified the earlier schemes relating to grid interactive renewable power generation projects till the end of the 10s Plan period i.e., 31st March, 2007. As per clause IX of the Scheme for promotion of Grid Interactive Power Generation Projects based on Renewable Energy Technologies, it laid down the eligibility conditions and other details. The scheme further^provided that in the event the project developer setting up a Biomass Project intends to avai! the interest subsidy in the nature of capital subsidy as one time suppoft against the outstanding loan, the same be granted, since the project developer has achieved the object and purpose of the scheme. It is fufther submitted that for implementation of Biomass Power/ Co-generation Programme it was envisaged that commercial projects for power generation beyond 1 MWs capacity will be provided Central Financial Assistance (CFA) in the form of interest subsidy or capital subsidy, which would be routed through financial institutions, nationalized banks, investment corporations etc. and the power p@ects would be permitted to use fossil fuel to the extent of 25o/o in one year. The scheme was modified from time to time. The defenSnt no. 1 applied and

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thereafter availed the^grant of the loan from the applicant for development and running of a^powerplant at Eppudumvendran, Ottipidaram, Thoothukkudi (Dist.), Tamil Nadu with a capacity of 20 MWs. The defendant no. 1 also applied for^grant of interest subsidy in terms of the scheme. The defendant no.¹ commenced operation of lts Biomass^powerplant on 09.06.2006. Under the modified scheme of 2006-07 of MNES, the defendant no. 1 was^granted interest subsidy to the extent of 183.39 lacks of which Rs. 153.49 lacks were disbursed. It is submitted that vide a letter dated 19.01.2007, the MNES sanctioned interest subsidy, to be^given to the defendant no. 1, through the applicant. The said sanction letter, in Paragraph 5(iv), contained a condition that the Developer of a power^plant shall furnish an undeftaking that it will operate the^project on biomass for a minimum^period of ten^years to the best of its capabilities and as^per the^{parameters given} in Application and the DPR. In case of failure to do so, it will be liable to refund the entire amount of subsidy to the MNSE. Pursuant to the above condition, the defendant no. L, on 03.03.2007, furnished the said undertaking. It is submitted herein that the defendant no.1 was running its power plant on Biomass. The fuel used by the defendant no. 1 for running the^{power plant} also contained coal which was much below the 15olo permitted under the above scheme for the implementation of Biomass Energy and Co-generation programmes. The year wise data makes it amply cleat that the defendant no. 1 was running its^power throughout, and till date, within the parameters of the said stipulation. It is submitted that in the year 2008 the prices of the raw materials for running the power plant on Biomass stafted to rise appreciably. The

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variable cost of the production of^power, thus, started to increase. The defendant no.1 was, therefore, finding it increasingly difficult to run its^{power plant} on Biomass, as stipulated by the applicant for availing the loan and interest subsidy, and for supply of the^power to TNEB at Rs.3.15^per kwh. Even after the said rise in the variable cost, the defendant no. 1 continued to run its power plant on Biomass. It is fufther submitted that thereafter, the feasibility of running the^powerplant was under question as a direct result, firstly of the steep rise of raw materials and secondly, due to unavailability of the said raw materials at times. The defendant no. 1 was, thus, compelled by extraneous circumstances, which were clearly out of the said defendant's control, to contemplate termination of the PPA with the TNEB so that the power can be sold in the open market to power traders. This w?y, it was envisaged, that the defendant no. I would be able to recover the increased costs of^generation of^power. Since, the TNEB did not revise the tariff under the PP& of Rs.3.15 per kWh, the defendant no. 1, with no other option and to safeguard the huge investments already incurred in setting up and running of the power plant, first sought the termination of the PPA with the TNEB vide a letter/ notice dated 26.04.2008, and thereafter sought to run the plant on fossil fuel. However, notwithstanding the same, the defendant no. I has, throughout the term of its functioning til! date, been well within the 25o/o cap placed on the use of fossil fuels, under the scheme for implementation of Biomass Energy and Co-generation programmes. It is submitted that in the above said notice of termination of the Power Purchase Agreement (PPA) the defendant no. t highlighted that due to abrupt increase in the pricgl of materials used of (,\

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generation of power through Biomass, the defendant no. 1 was unable to sell^power at the PPA rates of Rs.3.15 per unit. It is submitted that the tariff under the said PPA was linked to the HT tariff^prevalent in the State of Tamil Nadu, and the same has not been revised over a long time. The defendant no. 1 further stated that it will suffer huge monetary losses which could result in the winding up of the said company if it is forced to supply power at the PPA rates which were clearly inadequate to meet the steep rise in the cost of power generation. The defendant no. 1 also pointed out that it wants to sell power to the licensed traders in the open market so that it is able to recover the costs involved in the generation of Biomass power. It is submitted that the defendant no. 1 sent a few more letters to the TNEB for terminating the PPA dated 15.03.2004. However, there was no response from the TNEB. Thereafter, the defendant no. 1 filed a petition, numbered as M.P. No. 19 of 2008, before the Hon'ble Tamil Nadu Electricity Regulatory Commission (TNERC) seeking termination of the said PPA. On 07.082008, the TNEB wrote a letter to the defendant no. 1 stating that the request for termination of the PPA was not feasible. It is submitted that thereafter, the defendant no.l requested the Hon'ble TNERC for withdrawing the said petition for termination of the PP& so that the same could be terminated by the TNEB. After several letters were written to the TNEB for termination of the PPA, on 03.03.2009, the defendant no. 1 received a letter from the Chief Engineer, NCES, TNEB stating that an approval has been granted to terminate the said PPA. On 06.03.2009, the defendant No. 1 received a letter from the Superintendent Engineer, TNEB, stating that the PPA has been termina[ed with effect from t7 00

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Hrs. on 05.03.2009. It is fufther submitted that in the meanwhile, a letter was sent by the defendant no. 1 to the TNEB on 05.11.2008 to inform that the defendant no. t has made necessary modifications in the boiler of the power plant to operate on coal. The said modifications were made since running the^plant on biomass was not feasible, at that^point of time, due to very high prices of raw materials required for running the plant on biomass. Since the defendant no. 1 was incurring huge losses due to sudden increase in the price of raw materials and at times the unavailability of the said raw materials, there were only two options left, for the defendant no. 1 to run the power plant in order to safeguard huge investments incurred in developing the said plant, one was the termination of the PPA dated 15.03.2004 so that the defendant no. 1 is able to sell its power in the open market to recover the costs, and second to start running the power plant on fossil fuel. It is fufther submitted that the decision to run the power plant on fossil fuel was taken as a last resoft, upon compulsion on account of the extraneous circumstances, and the same cannot be taken as though the power plant is a fossil fuel based one. It is submitted that the defendant no.l soon resumed running its power plant on Biomass, and the said fact is corroborated by the year wise data, and the same shows that the defendant no.1 has always been within the 25olo cap on the use of fossil fuels on a yearly basis. The defendant no. 1 never intended to run its power plant entirely on fossil fuels and was thus, always committed to run the same on biomass. Thus, the defendant no.1 was running the power plant on biomass to the best of its abilities, as mentioned in the undeftaking dated 03.03.2007.)t is submitted that the

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defendant No. I had thereafter, again, sent a letter to the TNEB, on 26.02.2009, wherein it was mentioned that due to unaffordable fuel price hike, the operation of the power plant on biomass was not feasible, and hence necessary modifications have been made in the boiler to operate it on fossil fuels. The defendant no. 1 fufther offered to sell 15 MW of firm power and 3 MW of infirm power to the board at the rate of 6.70 per kwh. It is submitted that on 04.08.2009, a letter by applicant / IREDA^{was issued} to the defendant no. 1 stating that due to the approval accorded by Tamil Nadu Electricity^{Board (TNEB) for} termination of the Power Purchase^{Agreement (PPA)} subject to field verification, and the^{fact that since the} project of the defendant no. 1 shall no more be operated on renewable sources of^{energy, the loan} facility^granted by the applicant^{no. 1 cannotbe} continued. The said letter^{further demandedthe} defendant no. 1 to initiate^{action for pre - closing the} toan immediately. It was also^{mentioned that pre-} closure of loan shall, however,^{be subjectto terms and} conditions of loan agreement^{with IREDA/ applicant. It} is submitted that the aforesaid^{letter was sent without} giving any opportunity to the defendant no.1 for^giving clarifications as to the reasons^{behind seeking} termination of the PPA with the^{TNEB. The said action,} on the^part of the defendant^{no. 1, was thus, arbitrary} and against the^principles of^{natural justice. It is} submitted that the termination of^{the said PPA was on} account of frustration as the^{events were in the nature} of Force Majeure. The defendant^{no. 1 was left with no} other option but to seek termination. It^{is further} submitted that the defendant no.l, after^{briefly running} the power^plant on fossi! fu_el,lesumed^{running of the}

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same on Biomass as soon as it became feasible. Clearly, the defendant no.1 cannot be^penalized by the applicant for events which were in the nature of a Force Majeure. The^ground of termination of the^{PPA with the} TNEB cannot be one for recalling of the^{interest subsidy} already availed by the defendant^{no.1, as} the^{same is} within the rights of the defendant^{no.1 in the nature of} a party to a contract on^{accountof frustration. The} defendant no.1, even today^{is runningits power plant} on Biomass and thus acting^{in the true spirit of the} scheme under which it availed^{loan and interest} subsidy. Even though the^{defendant no.1 used} increased^quantities of^{coal (fossil fuel) for a small} period of time, in the years 2008-09,^{the year wise data} submitted by the^{defendant no.1 clearly demonstrates} that the fuel consumption^{of the power plant,during} the said^{period,was being overwhelmingly biomass,} The defendant no.t,^{even during such extraneous} circumstances,^{managedto run its power plant on} biomass and^{kept the percentage of coal well within the} 25o/o cap of the scheme^{under whichit availed loan and} interest subsidy. Thus,^{the defendant no.1 did} evefihing to^{run its power plant on Biomasscompletely} in terms of the undertaking^{dated 03.03.2007, tendered} by the defendant^{no.1 to the applicant, and the interest} subsidy sanction^{letter dated 19.01.2007, addressed by} the MNES to the^{Ministry of Non-conventiona!Energy} Sources. In the^{said undertakingand the interest} subsidy sanction^{letter, it was specificallymentioned} that the defendant no.l^{shall operate its power plant on} Biomass to the best of^{its abilities.The defendant no.l} was, and is still^{running the power plant on Biomass to} the best of its abitities.^{In the light of the said} undertaking and the^{intere{ sglsidy letter, whichwas}

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accepted and acted upon by the applicant for^grant of loan and interest subsidy, the said applicant could not have acted against what it had already accepted. It is submitted that on 11.01.2010, the defendant no.l received a facsimile from the applicant wherein it was stated that as per their books of account an amount of Rs.11,64,60,L931- towards loan amount is outstanding on the defendant. Thereafter, as^per the asseftions of the applicant in a letter dated 22.03.20L0, it was intimated that on 27.0L.2010, the MNES had directed the applicant to initiate action against the defendant No.1 for recalling the interest subsidy already released, along with interest accrued as per Government of India (GOI) Financial Rules. The letter further directed the applicant to return to the MNES the interest subsidy amount which remained unutilized. It is submitted that such unilateral action on the^paft of the applicant and MNES, without^giving an oppottunity to the defendant No.l for addressing the concerns, over the termination of the PPA and towards seeking modification of its boiler to run on fossil fuels, is uncalled for. arbitrary and unjust. It is submitted that on 22.03.2010, a letter was sent by the applicant to the defendant no. 1 calling upon to take action on^pre- closing the loan immediately. The applicant sent another letter to the defendant no.1, dated 30.04.2010, stating that it has refunded the unutilized interest subsidy and interest accrued thereon to the MNES. The said letter also stated that no further interest subsidy shall be available in future to the defendant no. 1. It is submitted that a notice for recall of interest subsidy was sent from the applicant to the defendant no.l on 03.06.2010 to^pay an amount of Rs.1,90,61,3341- along with fufther interest, additignt interest by way of

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liquidated damages and other monies. The issuance of the said recall notice is arbitrary, illogical and capricious as no oppoftunity was given to the defendant no. 1 to address the reasons behind the said notice. It is pertinent to mention herein that even the said recall notice, in paragraph no. 4. states that the applicant was to run its^powerplant on Biomass to the best of its abilities. It is submitted that the defendant no. f. in order to pre-close the loan granted by the applicant, started negotiations with M/s Kotak Mahindra Bank for availing another loan for Rs.10,59,00,000/-, so that the same may be used to preclose the applicant's loan. On 31.08.2010, the defendant no. 1 received a letter from the applicant stating that there are no dues except the interest subsidy, which was granted in terms of the aforementioned scheme for power generators using Biomass as fuel. Clearly, through the said letter the applicant acknowledged that the loan availed by the defendant no. t had been preclosed except the interest subsidy. It is submitted that after receiving the entire amount as per their demand, the applicant issued a letter to the defendant No. 1 claiming that inadveftently only the amount of interest up to 31.08.2010 i.e. Rs.44,05,8481- on the subsidy recalled amount of Rs.1,53,49,202/- was mentioned in the letter and the amount of subsidy recalled was not mentioned. It is submitted that the applicant to their own understanding of the scheme, whose objective was to provide incentive to renewable power projects, believed and understood that the same was to be granted to rationalize incentives given by the Ministry as one time support and therefore, had themselves kept the interest subsidy amount already disbursed, out of their claim for outstanding. It is submittedlqit is relevant to point

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out that in the letter dated 31.08.2010 the amount of Rs.44,05 ,8481- is under the head of subsidy recalled, however, in the subsequent letter dated 06.09.2010, the said amount is mentioned as interest on subsidy recalled. As such, there is a clear depafture from the origina! understanding with regard to the entitlement of the defendant no. 1 for grant of incentive and to treat the disbursed interest subsidy as capital subsidy, which was to be adjusted against the outstanding loan as a onetime support. It is submitted that on 15.09.2010, a letter was sent by the applicant to the defendant No.1 asking for^payment of Rs.L,77,48,7361-. The said letter acknowledged pre-payment of loan amount of Rs.10,16,55,4881- by the defendant no.1. It is submitted that although the defendant No. 1 made payment of the entire principal amount, the applicant adjusted the said principal amount with the interest recalled by it, thereby creating an impression that the defendant no.l is in default of the principal amount. The said letter is contradictory to the stand taken by the applicant in the letter dated 31.08.2010, in which it was mentioned in unequivocal terms that there were no dues except the interest subsidy. It is submitted that on 2L.09.2010, the defendant no.l sent a letter to the applicant for issuance of a No Dues Ceftificate so that the securities towards fixed assets, which were created in favour of the said applicant by the defendant no. 1 at the time of availing the loan, can be released and the same can then be created for M/s KoAk Mahindra Bank who financed the pre-closure of the loan given by the applicant. The defendant no.1 was duty bound to create the said securities in favour of Kotak Mahindra Bank and was enUtled to get the No Dues Ceftificate. It is fufther submitted that the defendant 2o.1 sent a letter to the

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applicant on 13.11.2010 wherein the applicant stated that it all along operated its power plant on biomass, as clearly demonstrated in the^year-wise data, except for a brief period of time in 2009 due to nonavailability of food stock on account of the aforementioned ceftain extraneous reasons. It is submitted, at the cost of repetition, that even during the said period, the defendant no.1 kept the percentage of coal used to levels which were much below than the 25o/o allowed under the scheme for availing the loan agreement and interest subsidy. In the said letter, the defendant no.1 further stated that it utilized 0.4 million Tones of biomass till Financial Year 20L0, and that the recalling of interest subsidy is uncalled for. The defendant no.1 again requested the applicant to furnish a No Dues Certificate. It is submitted that on 08.12.20!.0 the applicant sent a letter to M/s Kotak Mahindra Bank with a copy of the same to the defendant no.1. The applicant in the said letter, stated that it cannot issue a No Dues Certificate since the defendant no.l has not paid the outstanding amount as per the schedule annexed in the letter. The defendant no. I exploited its position since the securities were still in their possession, thereby causing undue hardship to the defendant no.1, who has been unfairly treated, and who required a No Dues Ceftificate and the release of securities. The defendant no.l addressed another letter dated 03.01.2011 to the applicant asking for a No Dues Ceftificate, however there was no response to the said letter. It is further submitted that the defendant no.1 on or around 28.04.2011 were indicated over telephone by the Officials of the applicant that unless the demanded payments were settled, the applicant will not issue any No Dues Certificate and in that event the l^{{-^t} 9). ',,

¶75

TA NO/10912023 20

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defendants would have to^pay a higher^{interest rate} to the^present Bankers^(ti!! the securities are^perfected) and in addition to the same, the applicant^{would initiate} coercive action against the defendants to^{recover the} amount of interest subsidy recalled^{along with accrued} interest thereon. Further, the applicant^{refused to} consider the enUUement of the defendant no.l's^proiect to the incentives under the Scheme, as the^{loan granted} to the defendant no.1 has been^pre-closed. When^{it was} informed to the applicant and MNES that the^pre- closure of the loan was at their instance, and^the defendant no.1 should not be made to suffer for their insistence and then also take away the benefits of the scheme is unreasonable and unjustified, the applicant and MNES refused to consider any such request.^The actions of the applicant were arbitrary and unreasonable. The action/ inaction of the applicant refusing to consider and veriff that the status of the project of the defendant no.1 is still that of a Biomass project and as such, entiUed to the benefits of the scheme was also a colourable exercise of^power. It is furthers submitted that aggrieved by the manner in which the applicant and MNES^proceeded to recall the interest subsidy without veriffing the fact that the defendant no.l continued to operate on biomass, and had used fossil fuel within the^permissible limits, the defendant no.1^preferred a writ^petition, numbered as Writ Petition (Civil) No. 3586 of 20LL, before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court disposed of the said petition by^passing a final order dated L6.07.20L3 wherein the defendant no.1 was granted a liberty to avail such other remedy which is available as per law. Thereafter, the defendant no.1 filed the said case CS (OS)Ng,3V7 of 20t4 before the

¶77

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Hontle High Couft Delhi for declaration with^regard to the status of the^powerplant of the^{defendant no.l,} which is necessary in the wake of the^{unilatera! actions} of the applicant in recalling^{the interest subsidy when} the defendant no.l continues^{to operatethe power} plant on biomass thereby fulfilling the^condition precedent of the scheme floated by the^{Ministryof Non} - Conventiona! Energy Sources, Government^{of India. It} is submitted that the^{defendants have failed and} neglected to independently^{veriff the status of the} power plant of the defendant^{no. 1 before subjecting} the defendant no.^{1 to severeprejudice and hardship} by recalling the^{interest subsidy. The defendant no. 1} runs its biomass-based^{powerplant whichis of 20 MW} capacity and^{the loan granted by the defendantswas} material for the^{developmentand running of the power} plant. Even after the defendant^{no.l has cleared the} outstanding^{loan amount, the defendantsare} continuing with^{their illegal demands by raising an} alleged amount^{towardsrecall of interestsubsidy. The} defendants^{failed to consider that despiteuse of fossil} fuel for a very^{short durationand time for generationof} power, the same was^{within and much below the} permitted limits under the^{scheme. It is submitted that} the defendant^{no.l vide its letter dated: 18.07.2011} requesting the^{Tamil Nadu Energy Development Agency} (TEDA) intimating the^{intentionof the defendant no.l} to establish^{biomasspower plant and operatethe same} on biomass. It^{was furtherintimated due to water} problem faced in Eppodumvendran^{District the} company installed^{Air Cooled Condensers instead of} conventional^{water-cooled Condensers. It is submitted} that the defendant^{no.1 fufther informedTEDA that the} defendant^{no.1 as able to} :glYgrt^{plant for partialusage} e'\

TA NO/l09/2023

of coal onty since the^{travellinggrate design of} the boiler could not be^{convefted for full usge of coal.} The usage of coal limited^{due to frequentbreakdownof} Boiler. Hence the defendant^{no.1 has limitedthe} conversion of coal^{for utilization of fossil fuel only as per} MNRE^{guidelines and statted using Biomassas fuel. It} is submitted that^{the defendant no.1 fuftherintimated} the TEDA that^{TNEB staftedpurchasing powerthrough} PTC at affordable^{price and this gave comfort to operate} the^plant on biomass.^{Hencethe defendant no.l stafted} the^plaint by^{using the biomassfor sustained operafion} of the^{powerplant. It is submitted that the defendant} no.l by explaining^{all the facts requestedthe TEDA to} inspect the^{plant if necessaryto ensure that the} generation is optimal^{with usage of biomass for} generation and a certificate^{issue to that effect for} applying for^{Renewable Energy ceftificate.It is further} submitted that^{the Tamil Nadu Energy Development} Agency vide^{its letter No. TEDA/CMD/BElInd-Bharath} dated:^{L2.04.20L3 addressedto the chairmanand} ManagingDirector/Biomass/F.No.2035120L2 TANGEDCO^{Chennai while recommending for issue of} consent and^{signing of EPA statedthat 'the company} has^{justified the usage of biomass and coal as per the} norms stipulated^{by MNRE, TEDA recommendsthe} proposal of M/s. Ind-Bharath^{Energies(Thoothukudi)} LtdChennaitoTANGEDCoforissueof consenvexecution^{of EnergyPurchaseAgreement} (EPA). It is submitted^{that it clearly showsthat the} defendant no.l^{is operating its plant by usingbiomass.} It is submitted^{that as alreadystated above the} defendants^{already paid the principal amount and the} amount for^{which the above applicationwas filed} represents the^{illegal recallingthesubsidiary by MNES} 6\

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and applicant. It is submitted that^till adjudication of the issues and reliefs in CS^(OS) No.3047 of 20t4 with reference to the illegal^recalling subsidiary by the applicant the above application be kept pending. It is submitted that the defendants reserve their right to file additional written^{statement in} the above application on adjudication of^{the relief in CS} (OS) No.3047 of 20L4 filed by the defendant^no.l against the applicaUon. In^{view of the abovefacts the} apptication be dismissed^{by consideringthe plea of the} defendants that the defendant^{no.1 operatingthe} pQect by using biomass and entitled^{for the subsidiary.} It is^prayed that this^{Honble Tribunalmay dismiss the} present O.A.

¶86

The applicant^{bank and defendantnos.1 to 4 have} filed their resPective^evidence.

¶87

Heard the^{Ld. counsels of both the pafties and} perused the record.

¶88

The main contenuon^{of the Ld. counsel of the} defendants is^{that the applicant has filed the present} OA for the recovery^{of the amount which does not fal!} within the category^{of the debt and therefore, the same} cannot be recovered^{under Section 19 of the RDB Act.} It is submitted that^{the defendant companyhas} installed a^{plant for generation of power through} renewabte energy^{sources specificallythe biomass. The} project was conceived, designed^{and financed in} accordance^{with the MNES Scheme of the Govt. of India} for implementation^{of biomass energy. The scheme was} issued vide letter^{dated 2L.07,2003clearly} contemplated that^{financialassistances will be routed} through financial^{institutions such as IREDAand the} fossil fuel used upto^{25% of.the total fuel would be}

S.JU .

TA NO/r 0912023

permissible in biomass power proiect. After sanction of the scheme, the company^{applied for a} grant of term loan from the applicant and also sought CFA in form of interest subsidy. The^{loan was granted} to the defendant for^purpose of^{setting up and} operating biomass^{power plant.} In the^pre disbursement conditions it has been^{incorporated that} the long term^{powerpurchase} agreement^{will be} executed with the Tamil Nadu Electricity^{Board for} supply of excess^power over a^{period of 15 years at the} rate specified in board notification^{dated 11.04.2000.} The tariff of the electricity was^{fixed at Rs.3.15per} l$/H. It is submitted that^{the defendant has stafted} production of the electricity using biomass^{as per} conditions but during the^{subsistenceof the project the} prices of the biomass has raised substantially^and therefore, it was not^{possible to run the proiect with} profit and therefore, the applicant^{has applied to the} Tamil Nadu Etectricity^{Board for terminationof the PPA} and rise in the^{price of the electricity or permit the} defendant to sell the^{electricityto privatevendors. It is} submitted that the^{prayer of the applicant has not been} heard by the Tamil^{Nadu Electricity Board and} therefore, the defendant^{couldnot run the project with} profit. It is submitted that the Tamil^{Nadu Electricity} Board has indicated that^{the termination of the PPA was} not feasible as^{per letter dated07.08.2008.} Subsequently the Tami!^{Nadu ElectricityBoard} terminated the PPA w.e.f.^{05.03.2009.The termination} of the PPA was an arbitrary^{act and unilateralact and} therefore, the same^{could not be upheld by the} Tribunal. It is submitted^{that the defendant is still using} biomass within^{the permissiblelimit. It is submitted that} the pQect was to^{be operatedon biomassto the best} t\

¶93

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of its abilities. It is fufther submitted that^{the Govt.} of India has recalled the subsidy and directed^the applicant to recover the subsidiary^{granted to the} defendant.The defendant has^paid an amount^of Rs.L,77,48,7361- towards the^{principaloutstanding} amount and the applicant was under duty^{to issue the} No Objection Certificate in favour of the defendant.^It is submitted that instead of making the^account satisfied, the applicant has^paid the above^amount towards the subsidy withdrawn by the Govt.,^which cannot be done by the applicant. It^{is submitted that} when the defendant has already^paid the^{entire dues} of the applicant, the same cannot be^{recovered from} the defendant. It is submitted that^{the applicant has no} authority to recover the amount of^{subsidywhich has} been recalled by the Government of^India. I^have considered the contention of the Ld.^{counsel for the} defendant. What was the cause of^{failure of the project} cannot be a^ground to exonerate the^{defendant from} making the^payment of the debt. If the^{proiect of the} defendant has failed due to the^{rise in the price of the} biomass and due to the failure of^{the termination of the} PPA by the Tamil Nadu Electricity^{Board, the applicant} cannot be blamed and the defendant^{cannot be} exonerated from making^{payments of the dues. It is for} the businessman to dea! with the business^{and in case} of failure of the business the secured^{creditors cannot} be held liable. If the business has^{failed due to the} circumstances beyond the control of the^businessman, the businessman cannot be exonerated^{from making} payment to the creditors. Therefore, the cause of the failure of the business cannot exonerate the^defendant from making^payment to the applicant.

TA NO/10912023 26

The next contention of the defendant^{is that} the defendant has made a^{payment of Rs.L,77,48,7361-} towards the^principal debt and^{therefore, the entire} debt has atready been^{paid. It is submitted that the} applicant has wrongly^{held that the payment has been} made towards the^{subsidy whichhas been returned to} the Govt. of India.^{From perusalof the recordit is clear} that in^gEtse of the^{failure of the project the defendant} was directed to^{return the subsidy to the Govt. of India} through applicant.^{The Govt. of India has directed the} applicant to^{recoverthe subsidy given to the defendant'} In compliance^{of the directions issued by the Govt. of} India the applicant^{has transferred the amount paid by} the defendant^{towardsthe recovery of the subsidy paid} to the defendant.^{Therefore, it cannot be said that the} amount was^{paid towardsthe principaldebt that has} been availed^{by the defendant from the applicant. The} amount which^{has been deposited by the defendant has} already been^{refunded to the Govt. of India as the} recovery of the^{subsidy,therefore, it is clear that the} dues of the^{applicanthas not been paid by the} defendants.^{It cannot be said that the amount paid by} the defendant^{should be adjusted towards the debt and} the Govt. of^{India should be directed to recoverthe} subsidy directly^{from the defendants.It is clear from} the loan documents^{and the agreemententeredinto} between the^{parties that all subsidyshall be routed} through the^{IREDA. In such case the payment made by} the defendant^{has been routed through IREDAand paid} to the Govt.^{of India as recovery of the subsidy.} Therefore, the^{contention of the defendant has no force} and it is^{clear that the debt sanctioned by the applicant} has still not^{been paid and therefore,the contention of} the defendant^{that only recorrry of the subsidy is due}

TA NO/r 09t2023

and it does not fall within the meaning of debt cannot be accepted.

¶103

From perusal of the entire evidence, it is clear that the defendant has failed to prove his case as claimed in the written statement. On the other hand, the applicant bank has proved his case against the defendants and therefore, the defendants are liable to^pay the amount claimed by the applicant bank and the OAffA of the applicant bank is liable to be allowed.

¶104

In the light of the above discussions, the^{present TA} deserues to be allowed.

¶105

ORDER

¶106

I hereby allow this T.A. of the applicant bank^and direct the defendant nos. 1 to 4 to^pay to^{the applicant} bank within 30 days from today, a sum^of Rs.2,91,84,888/- along with cost, expenses and^interest @11.50o/o^{from the date of filing of this O.A. whichhas} become T.A till the date of realization

¶107

In case of failure to deposit the above^amount within the stipulated^period, the same shall^be recovered from the sale of hypothecated assets^{and the} sale of mortgaged^property being All those^{pieces and} parcels of land admeasuring 20 Acres 73 Guntas bearing survey nos. 433lLA, 433lLB, 43312, 43313,^43314, 43614, 43615 and 43616 situated at^{Eppodumvendran} Village, Ottapidaram Taluk, Sub Registration District of Ettayapuram, Tuticorin District in the state of^Tami! Nadu. In case of short fall, the same shall be^recovered from the sale of persona! movable and immovable assets of the defendant nos.1 !' 4.

¶108

9^\

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TA NO/10912023 28

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Recovery Certificate be^{issued forthwithand be} sent to Recovery Officer, Debts^{Recovery Tribunal-Il,} Delhi.

¶111

The registry of this^{Tribunal is herebydirected to} issue free copy of the order^{and send the same to both} the^parties.

¶112

Parties are direct to^{appear before the Ld.} Recovery Officer, DRT-II,^{Delhi on 30.06.2026. Pending} IAs, if dry, stand disposed of.

¶113

File be consigned to records.

¶114

Date: 30.04.2026

¶115

5.)

¶116

(susHr L KU MAR^-nnsilOCt) PRESIDING OFFICER DRT-II, Delhi

¶117

This^judgement has been signed,^dated and pronounced in open coutt.

¶118

s;--^</sup>

¶119

Date :30.04.2026^{(SUSHILKUMARRASfOGI)} PRESIDING OFFICER DRT-II, Delhi

¶120

Indian Renewable Energy Development Agency Ltd. v. M/S Ind-Barath Energies (Thoothukkudi) Ltd.

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Indian Renewable Energy Development Agency Ltd. v. M/S Ind-Barath Energies (Thoothukkudi) Ltd.

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