NCLT Ahmedabad Rejects Gensol RP Plea Against Termination Of ₹48.29 Crore EPC Contract By HMEL

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has dismissed a plea challenging the termination of a Rs. 48.29 crore EPC contract awarded to Gensol Engineering Ltd.

The bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed that the termination was based on pre-existing contractual breaches and not solely on the company's insolvency.

“...the mere temporal proximity between initiation of CIRP and termination does not establish causation, particularly where contemporaneous material evidences preexisting and continuing contractual breaches. The material on record does not demonstrate a direct nexus between the termination and the insolvency of the Corporate Debtor,” the tribunal observed.

The application was filed by Keshav Khaneja, the resolution professional of Gensol Engineering Ltd, under Section 60(5) of the Insolvency and Bankruptcy Code, seeking to set aside the termination of the Engineering, Procurement and Construction (EPC) contract dated November 14, 2023, awarded by HMEL Green Energy Pvt. Ltd.

Gensol, which is engaged in solar EPC projects and electric vehicle leasing, had secured the contract for setting up a 13.78 MWp rooftop solar plant at the Guru Gobind Singh Refinery in Bathinda, Punjab. The Letter of Award was issued on October 25, 2023, followed by the work order on November 14, 2023. The contract value was Rs.48.29 crore (exclusive of GST) and included a 10-year operation and maintenance component. The company had furnished a performance bank guarantee of approximately Rs 4.82 crore.

Under the contract, the project was to be completed within five months.

HMEL, however, pointed to delays right from the early stages of the project. It flagged slow progress, gaps in execution, inflated invoices, and what it described as financial stress on Gensol's part. Even after granting extensions until May 2025, the project remained incomplete, with only about 70% of the capacity commissioned by June.

The situation took a turn on June 13, 2025, when the tribunal admitted Gensol into insolvency. Within days, on June 26, HMEL moved to terminate the contract, invoking Clause 12 of the work order.

The resolution professional pushed back, arguing that ending the contract during the insolvency process was not permissible. According to him, the termination was effectively triggered by the company's insolvency and would hurt value maximisation. He also maintained that the EPC contract was central to keeping the company running as a going concern, and said he was willing to see the project through.

HMEL, for its part, stood by its decision. It said the termination had nothing to do with insolvency and was instead driven by earlier breaches, delays in execution, missed timelines, alleged abandonment of work, and failure to pay vendors.

It further argued that the dispute involved detailed questions of fact requiring evidence and fell outside the tribunal's summary jurisdiction. HMEL also submitted that the contract was not central to Gensol's CIRP and that alternate contractors had been engaged to complete the project.

The tribunal framed four issues, including maintainability, the centrality of the contract to CIRP, the cause of termination, and the reliefs sought.

On maintainability, the bench held that while it cannot adjudicate detailed contractual disputes, it can examine whether termination impacts the CIRP, and the application was therefore maintainable to that limited extent.

On the issue of centrality, the tribunal found that the contract was not indispensable to the survival of the corporate debtor, noting persistent delays and deficiencies in execution as well as the fact that alternate contractors had been engaged to complete the project.

“In the present case, the Corporate Debtor had itself failed to perform substantial obligations under the contract, had sought deviation from the contractual payment mechanism by requesting direct payments to subcontractors, and had effectively ceased execution of the project. The fact that the project is being completed through alternate contractors further negates the contention that the contract is indispensable,” the bench held.

On whether the termination was linked to insolvency, the tribunal held that the material on record indicated pre-existing breaches well before initiation of CIRP, and therefore the termination could not be attributed solely to insolvency.

In view of these findings, the tribunal declined to interfere with the termination or grant any of the reliefs sought by the resolution professional.