# In the matter of SKS Power Generation (Chattisgarh) Ltd Vs. Canara Bank, Commercial Summary Suit No. 234 of 2020

> HC judgment dated 2021-08-11. Citation: TCN-2021-HC-00018. SKS Power Generation (Chhattisgarh) Ltd filed a Commercial Summary Suit against Canara Bank based…

- **Court:** HC
- **Order date:** 11 Aug 2021
- **Citation:** TCN-2021-HC-00018
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-chandigarh-bench/sks-power-generation-chattisgarh-ltd-vs-canara-bank-commercial-summary-suit-no-2-0e898ff6

## Summary

### Background

SKS Power Generation (Chhattisgarh) Ltd filed a Commercial Summary Suit against Canara Bank based on unconditional Bank Guarantees. Cethar Ltd, the principal debtor at whose instance the Bank Guarantees were issued, filed an Interim Application for impleadment. The bank guarantees were issued by Canara Bank at Cethar's request in favor of SKS Power for a power project in Chhattisgarh. Canara Bank sought an injunction against the invocation of the bank guarantees in District Court Trichy, despite a jurisdiction clause in the guarantees that conferred exclusive jurisdiction to courts in Mumbai. SKS Power challenged this order in the Madras High Court, which allowed Canara Bank to withdraw the Trichy suit and file a suit in Mumbai.

## Facts

SKS Power Generation (Chhattisgarh) Ltd ('SKS Power') filed a Commercial Summary Suit against Canara Bank based on unconditional Bank Guarantees. Cethar Ltd ('Cethar'), the principal debtor, sought impleadment. In 2011, SKS Power and Cethar entered agreements for a 1200 MW power project in Raigarh, Chhattisgarh, requiring Cethar to furnish bank guarantees. In 2012, Canara Bank issued five bank guarantees totaling Rs. 121.65 crores in favor of SKS Power. These guarantees were payable on demand and unconditional. The initial validity was until January 31, 2014, and were extended periodically. In March 2017, Cethar requested an extension of the bank guarantees. In June 2017, NCLT Chennai admitted an application against Cethar, commencing CIRP. Canara Bank extended the

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## Issues and analysis

### Issue 1: Whether Cethar Ltd, as the principal debtor, should be impleaded in the suit concerning the bank …

**Ratio:** A bank guarantee is an independent contract, and the principal debtor is not a necessary

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**Reasoning:** The court reasoned that enforcing a guarantee does not require the principal debtor to be

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**Interpretation:** The court interpreted the law on bank guarantees to mean that the obligation of

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**Application:** The court applied this principle to the facts, finding that Cethar's presence

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## Parties

- **Judges:** G.S.P…
- **Appellants:** SKS Power…
- **Respondents:** Cethar…; Canara…

## Timeline

- **2011-01-01 — Agreements for Power…**: SKS Power and Cethar entered into agreements for a 1200 MW power project in Raigarh,…
- **2012-02-16 — Issuance of Bank…**: Canara Bank issued five bank guarantees totaling Rs. 121.65 crores in favor of SKS Power…

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