Debt-laden Lanco Infratech’s troubles deepened as Hindustan Power Projects encashed bank guarantees (BGs) worth Rs 500 crore due to unfulfilled contractual obligations related to engineering and construction work at the latter’s 2,520 MW Anuppur thermal power plant. In response, in a letter dated July 3 reviewed by FE, Lanco’s chairman urged nine banks to not permit the encashment and report the matter to the CBI as the encashments were allegedly an “attempt to defraud the bank”. While Hindustan Power said it “has multiple claims against Lanco Infrastructure, including large cash advances and unfinished work at the thermal site,” Lanco’s chairman L Madhusudhan Rao said the BGs were being encashed “with malafide intent of securing funds to mitigate its own financial difficulties”. Lanco is one of the 12 companies identified by the Reserve Bank of India (RBI) which are to be taken to the bankruptcy court to mitigate the country’s Rs 9.63-lakh-crore bad debts problem. RBI has directed the company’s lead lender, IDBI Bank, to initiate a corporate insolvency resolution process under the Insolvency and Bankruptcy Code 2016. The Delhi High Court, through an order dated June 30, rejected Lanco’s plea to stay the invocation and encashment of the bank guarantees by Hindustan Power.
In the letter to the banks, Lanco claimed that the chairmen of Hindustan Power and Lanco met at a hotel here on the same day and the former offered Rs 150 crore to the latter from the Rs 505 crore to be received from the BGs. Lanco also alleged that Hindustan Power extended majority of the BGs on June 15, “knowing fully well that the banks will not be able to recover this additional debt amount from Lanco which is getting to NCLT for insolvency resolution”.
Hindustan Power denied “the baseless allegations made by Lanco Infratech with an intention to thwart the legal recourse available to us (Hindustan Power)”. It said the BG encashments were directed towards safeguarding the interests of its stakeholders and the operations of the thermal asset. Sources told FE that in order to minimise cost overruns, Hindustan Power’s own EPC team was working with Lanco as backup. They also added that cash-strapped Lanco itself had encashed the BGs of its own sub-contractors, and payments to daily labourers and material suppliers at the plant site were severely irregular.