| Headnote |
Insolvency and Bankruptcy Code, 2016 – ss. 10, 31, 60(5), 61, 238 – Power Purchase Agreement – Corporate Insolvency Resolution Process – Jurisdiction of NCLT over contractual dispute – The appellant allocated a 25-megawatt capacity to the Corporate Debtor for developing and setting up a solar photovoltaic based power project – The appellant and the corporate debtor entered into a PPA on 30.04.2010, according to which the appellant was to purchase all the power generated by the corporate debtor – Due to floods and heavy rainfall in 2015 then again in 2017, Plant was severely damaged – Resultantly, it was only able to operate at 10- 15% of its original capacity – Corporate debtor intimated the appellant regarding cause for failure in its performance under the PPA, and to confirm that this event may be treated as a Force Majeure Event – The second respondent (Bank) declared the Corporate Debtor to be an NPA – Corporate Debtor filed a petition in the NCLT u/s 10 of IBC, pursuant to which NCLT commence the CIRP and issued an order of moratorium – First respondent was appointed as the Interim Resolution Professional – Appeal was filed against the said order in the NCLAT, same was dismissed – The appellant issued two notices of default to the corporate debtor expressing their intention to terminate the PPA – Thereafter, the first and second respondents approached NCLT by filing applications u/s. 60(5) of the IBC in regard to the notices issued by the appellant to the corporate debtor, and sought an injunction restraining the appellant from terminating the PPA – NCLT restrained the appellant from terminating the PPA and sets aside the First Notice – NCLAT dismissed the appeal filed against the order of NCLT – Issue arose for determination before the Supreme Court – Whether the NCLT/NCLAT can exercise jurisdiction under IBC over disputes arising from contracts such as the PPA – Held: Neither NCLT nor NCLAT in its decision specifically examine the issue of its jurisdiction u/s. 60(5)(c) of the IBC – The institutional framework under the IBC contemplates the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora – The corporate debtor would have to file and/or defend multiple proceedings in different fora and these proceedings may cause undue delay in the insolvency resolution process – Therefore, considering s. 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor – The nexus with the insolvency of the corporate debtor must exist – In the present case, the PPA was terminated solely on the ground of insolvency, therefore, in the absence of the insolvency of the corporate debtor, there would be no ground to terminate the PPA – The RP can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process – However, for adjudication of disputes that arise dehors the insolvency of the corporate debtor, the RP must approach the relevant competent authority – Since, the dispute in the instant case has arisen solely on the ground of the insolvency of the corporate debtor, NCLT is empowered to adjudicate this dispute u/s. 60(5)(c) of the IBC. Insolvency and Bankruptcy Code, 2016 – Right of Appellant to terminate Power Purchase Agreement – Whether the appellant‘s right to terminate the PPA in terms of Article 9.2.1(e) read with 9.3.1 is regulated by the IBC – Held: In accordance with Article 9.3.1 of PPA, the appellant, on the occurrence of an Event of Default u/Article 9.2.1, can issue a default notice which shall specify in reasonable detail the Event of Default giving rise to the default notice, and call upon the Corporate Debtor to remedy it – At the expiry of 30 days from such notice, unless otherwise agreed, if the default has not been remedied, the appellant can terminate the PPA – In the instant case, it is the sole contract for the sale of electricity which was entered into by the corporate debtor – The PPA was terminated solely on the ground of insolvency, which gives the NCLT jurisdiction u/s. 60(5)(c) to adjudicate this matter and invalidate the termination of the PPA – NCLT is the forum vested with the responsibility of ensuring the continuation of the insolvency resolution process, which requires preservation of the Corporate Debtor as a going concern – The NCLT/NCLAT correctly stayed the termination of the PPA by the appellant, since allowing it to terminate the PPA would certainly result in the corporate death of the Corporate Debtor due to the PPA being its sole contract. Interpretation of Statutes – Textually similar language in different enactments has to be construed in the context and scheme of the statute in which the words appear – The meaning and content attributed to statutory language in one enactment cannot in all circumstances be transplanted into a distinct, if not, alien soil – It is trite law that the words of a statute have to be construed in a manner which would give them a sensible meaning which accords with the overall scheme of the statute, the context in which the words are used and the purpose of the underlying provision – Insolvency and Bankruptcy Code – sec. 60(5) – Companies Act, 1956 – 446(2). Ipso Facto Clause – Validity of – Discussed |
