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GRIDCO Limited Versus Surya Kanta Satapathy and Others
Court / Forum : National Company Law Appellate Tribunal Citation : Company Appeal (AT) (Insolvency) No. 1271 of 2019 Coram : Justice Bansi Lal Bhat, Member(Judicial), Mr. V.P. Singh, Member (Technical), Mr. Alok Srivastava, Member (Technical) Subject : Section 61 of the Insolvency and Bankruptcy Code, 2016 Date of Decision : July 24, 2020
The GRIDCO Limited (“GRIDCO”) entered into a Power Purchase Agreement (“PPA”) with ‘Alex Green Energy Private Limited’ (the “Corporate Debtor”) for purchase of Solar Power. PPA was for a period of 25 years and power was to be supplied to GRIDCO at a fixed tariff at the rate of Rs.7 per KWH in terms of Clause 7 of the PPA. Admittedly, PPA did not provide for the alteration of said rate.
However, the Corporate Debtor stopped supply of power to GRIDCO in June 2018. On July 31, 2018, the Corporate Debtor sent a letter informing GRIDCO that it was envisaging to transfer the plant to some other company.
In the meanwhile, Corporate Insolvency Resolution Process was initiated against the Corporate Debtor by the Adjudicating Authority in the matter titled, “Hemant Khaitan v. Alex Green Energy Pvt. Ltd.”, C.P. (IB) 1439 (KB)/2018 in terms of the order dated February 18, 2019 with consequential orders. Fortis Chemicals Private Limited (“Respondent No. 4”) emerged as the successful Resolution Applicant in the Corporate Insolvency Resolution Process (“CIRP”).
GRIDCO however terminated the PPA vide Notice dated July 8, 2019, which was during the period of moratorium imposed by the Ld. Adjudicating Authority under Section 14 of the Insolvency and Bankruptcy Code, 2016 (the “Code”).
It was observed by the Ld. Adjudicating Authority in CA (IB) No. 1184/KB/2019 in CP (IB) No. 1439/KB/2018, filed by the Resolution Professional, that the termination of the PPA by GRIDCO was in violation of Section 14 of the Code and directed the restoration of the PPA as if there was no termination of the same.
Whether the termination of PPA is in violation of Section 14(1) of the Code justifying the same being set aside in terms of the impugned order and if not, whether the Appellant could have validly terminated the same unilaterally?
What is the effect of approval of the Resolution Plan on such termination of the PPA?
Issue 1: It was held that the termination of the PPA purportedly for failure on the part of Corporate Debtor to restore the plant and power supply almost one year after power supply had ceased and about five months after commencement of Moratorium as a sequel to the initiation of the Corporate Insolvency Resolution Process of the Corporate Debtor communicated by the Resolution Professional to Appellant in terms of letter dated February 25, 2019, being in violation of Section 14(1) of the ‘Code’ would not sustain. That apart, such termination of PPA not being in conformity with procedure set out in the contractual provision cannot be supported.
Issue 2: It was held that the effect of approval of the Resolution Plan of Respondent No.4 and such approval having been upheld by this Appellate Tribunal which stands un-assailed is that the Resolution Plan of Respondent No.4 is binding on the Corporate Debtor and all other stakeholders involved in the Resolution Plan which encompasses the Appellant within its fold who had the notice of pendency of Corporate Insolvency Resolution Process culminating in approval of the Resolution Plan of Respondent No.4. Reference was made to the judgement of the Supreme Court in “Swiss Ribbons Pvt. Ltd. v. Union of India”, Writ Petition (Civil) No. 99 of 2018 (Paragraph 43) and “Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta & Ors., 2019 SCC OnLine SC 1479 (Paragraph 86).