GUJARAT URJA VIKAS NIGAM LIMITED v. MR. AMIT GUPTA & ORS.

The Judgment of the Court was delivered by A DR. DHANANJAYA Y CHANDRACHUD, J. This judgment has been divided into sections to facilitate analysis. They are: A The appeal B B The genesis of the PPA C Initiation of CIRP D Termination of the PPA E Proceedings before NCLT and NCLAT C F Proceedings by the Successful Resolution Applicant G Submissions of counsel G.1 Submissions on behalf of the appellant G.2 Submissions on behalf of the respondents H Issues arising from the dispute D I Jurisdiction of the NCLT/NCLAT over contractual disputes I.1 Section 60(5)(c): “arising out of” and “in relation to” I.2 Jurisdiction of NCLT and GERC I.3 Residuary jurisdiction of the NCLT under Section E 60(5)(c) J Validity of ipso facto clauses J.1 Position of international and multilateral organisations J.2 National jurisdictions F J.3 Position in India K Appellant’s right to terminate the PPA in the present case K.1 Analysis of the PPA K.2 Validity of the termination of PPA K.3 Dialogical Remedies G

L NCLAT’s decision on the issue of liquidation M Appellant’s liability to pay for the electricity interjected by the Corporate Debtor N Conclusion H

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A A The appeal

1Copy pinpoint1. By its judgment dated 29 August 2019, the National Company Law Tribunal1 stayed the termination by the appellant of its Power Purchase Agreement2 with Astonfield Solar (Gujarat) Private Limited3. The order of the NCLT was passed in applications4 moved by the B Resolution Professional of the Corporate Debtor5 and Exim Bank6 under Section 60(5) of the Insolvency and Bankruptcy Code, 20167. On 15 October 2019, the NCLAT dismissed the appeal by the appellant 8 under Section 61 of the IBC. The decision by the NCLAT is called into question.

2Copy pinpoint2. The appellant assails the order dated 15 October 2019 of the C NCLAT on, inter alia, two broad grounds: first, that the NCLT and NCLAT do not possess jurisdiction under the IBC to adjudicate on a contractual dispute between the appellant and the Corporate Debtor; and second, in any event, the termination of the PPA was validly made under Article 9.2.1(e) and Article 9.3.1 of the PPA.

D B The genesis of the PPA

3Copy pinpoint3. The narrative of this case begins with the Government of Gujarat notifying the Solar Power Policy, 20099 on 6 January 2009, for development of Solar Power projects in the state. The appellant, a Government of Gujarat undertaking, is a successor to the Gujarat Electricity Board, and E is also the holding company of all the State Power Utilities in Gujarat.

4Copy pinpoint4. On 1 August 2009, the Government of Gujarat allocated a 25- megawatt capacity to the Corporate Debtor for developing and setting up a solar photovoltaic based power project in the State of Gujarat. The Corporate Debtor expressed its desire to setup a ‘Solar Photovoltaic F Grid Interactive Power Plant’10 of 10-megawatt capacity and exercised its option for sale of the entire electrical energy produced from the plant to the appellant for commercial purposes. 1 “NCLT” or “Adjudicating Authority” 2 “PPA” 3 “third respondent” or “Corporate Debtor” G 4 CA No. 701/2019 (first respondent); CA No. 700/2019 (second respondent) 5 “first respondent” or “RP” 6 “second respondent” 7 “IBC” 8 “appellant” or “GUVNL” 9 “Policy” 10 H “Plant”

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5Copy pinpoint5. In exercise of its powers under Sections 61(h), 62 and 86 of the A Electricity Act, 200311, the Gujarat Electricity Regulatory Commission12 published a draft tariff order for purchase of solar energy, inviting comments and suggestions from members of the public and stakeholders. Public hearings were held by the State Commission on the price at which power could be procured. B

6Copy pinpoint6. After the process of public hearings and consultations, a Tariff Order dated 29 January 201013 was issued by the State Commission for procurement of power by the appellant from power producers, under Section 86(1)(a) of Electricity Act. The tariff was determined on the basis of the then prevailing capital and financing costs, and debt equity ratio. It was envisaged that the PPA will be for 25 years, with higher C tariffs in the first 12-15 years, and a scaled-down tariff for the remaining years. The tariff was to be applicable to solar projects commissioned within the control period of the First Tariff Order, i.e., from 29 January 2010 to 28 January 2012.

7Copy pinpoint7. The appellant filed a petition before the State Commission on D 28 May 2013, seeking initiation of proceedings for re-determination of the capital cost and tariff fixed under the First Tariff Order. This petition was filed on the basis that subsequent incentives given to power producers on 27 February 2010 had brought down their cost of capital and, as a consequence, the tariff fixed under the First Tariff Order should be E revised. This petition was dismissed by the State Commission on 8 August

8Copy pinpoint8. The appellant and the Corporate Debtor entered into a PPA on 30 April 2010, in accordance with which the appellant has to purchase all the power generated by the Corporate Debtor. The PPA was amended by two Supplementary Agreements dated 7 August 2010 and 13 April 2011, due to an increase in the capacity of the Plant and a change in its location. G

11 “Electricity Act” 12 “State Commission” or “GERC” 13 “First Tariff Order” 14 “APTEL” 15 Civil Appeal No. 10301 of 2014 H

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9Copy pinpoint9. Article 9.1 of the PPA provides that it would remain in force for 25 years, from the ‘Commercial Operation Date’ which, in accordance with Article 1.1 is “the date on which the Solar Photovoltaic Grid Interactive power plant is available for commercial operation (certified by GEDA) and such date as specified in a written notice given at least ten days in advance by the [Corporate Debtor] to GUVNL”. B

10Copy pinpoint10. Article 5.2 of the PPA stipulates that in case the commissioning of the Plant is delayed beyond 31 December 2011, the appellant shall pay the tariff as determined by the State Commission for Solar Projects effective on the date of commissioning of the Plant or the tariff provided under the clause, whichever is lower. Article 5.2 provides that Rs 15 per C unit is payable for the first 12 years and Rs 5 per unit is payable from the 13th to the 25th year.

11Copy pinpoint11. While the Corporate Debtor was in the process of commissioning the Plant, the State Commission, in exercise of its powers under Sections 62 and 86 of the Electricity Act, issued the Tariff Order D dated 27 January 201216 for procurement of power from solar energy developers by distribution licensees in the State of Gujarat. The tariff was to be applicable to solar projects commissioned within the control period of the Tariff Order, i.e., from 29 January 2012 to 31 March 2015.

12Copy pinpoint12. Having signed the financing documents and attained financial E closure with the second respondent and Power Finance Corporation in terms of the PPA, and established the Plant as defined in it, the Corporate Debtor commissioned 1.296MW on 11 December 2012 and 10.212 MW on 20 December 2012. Accordingly, the PPA was to remain in force until December 2037.

13Copy pinpoint13. Since it was commissioned within the applicable period of the Second Tariff Order, the tariff applicable was Rs 9.98 per unit for first 12 years and Rs 7 per unit for next 13 years. C Initiation of CIRP

14Copy pinpoint14. The initial years of the operationalization of the PPA appear G to have been relatively calm. The first major issue arose between July to December 2015. During this period, there was heavy rainfall and floods in the State of Gujarat, due to which the Plant was shut down for two months. The Plant was severely damaged due to the floods, and the generation of electricity was temporarily paused. By December 2015, 16 H “Second Tariff Order”

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normalcy was restored in the generation of electricity and the Plant was A generating electricity at 70% of its total generating capacity.

15Copy pinpoint15. During June and July 2017, Gujarat was again affected by floods due to heavy rainfall. The Plant was severely damaged due to the floods. Resultantly, it was only able to operate at 10-15% of its original capacity. B

16Copy pinpoint16. Due to the financial stress caused by the disruptions and damage, for which insurance claims remained pending, the Corporate Debtor was unable to fully service its debt to the Financing Parties (the second respondent and Power Finance Corporation), who proposed to declare the Corporate Debtor a non-performing asset (“NPA”). C

17Copy pinpoint17. On 15 February 2018, in accordance with Article 8.1 of the PPA, the Corporate Debtor intimated the appellant regarding the impact of the rainfall and floods on the Plant, and the measures adopted by it in this regard. The Corporate Debtor requested the appellant to treat the letter as a formal communication regarding cause for failure in the D performance of the Corporate Debtor’s obligations under the PPA, and to confirm that this event may be treated as a ‘Force Majeure Event’ in accordance with Article 8.1.

18Copy pinpoint18. On 4 May 2018, the second respondent declared the Corporate Debtor to be an NPA. On 20 November 2018, the NCLT admitted a petition17 filed by the Corporate Debtor under Section 10 of the IBC. E NCLT commenced the Corporate Insolvency Resolution Process 18 in respect of the Corporate Debtor, issued an order of moratorium and the first respondent was appointed as the Interim Resolution Professional19.

19Copy pinpoint19. The second respondent and Power Finance Corporation Limited, filed an appeal20 challenging the order dated 20 November 2018. F The appeal was dismissed by the NCLAT on 4 December 2018, holding that the right of the Corporate Debtor’s shareholders to vote on the initiation of the CIRP under Section 10 of the IBC was not curtailed by the Deed of Pledge of Securities dated 28 March 2013 entered into between the Corporate Debtor, the second respondent and Power Finance G Corporation Limited. The first respondent was confirmed as the RP by the NCLT on 1 February 2019. 17 CIRP petition, C.P. (I.B.) No. 940(ND)/2018 18 “CIRP” 19 “IRP” 20 Company Appeal (Insolvency) No. 754 of 2018 H

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A D Termination of the PPA

20Copy pinpoint20. The appellant issued two notices of default to the Corporate Debtor on 1 May 2019, which were received by the first respondent on 8 May 2019: (i) The basis of the First Notice is that under Article 9.2.1(e) B of the PPA, the Corporate Debtor undergoing CIRP under the IBC amounts to an ‘event of default’. The appellant called upon the Corporate Debtor to remedy this default within 30 days from the date of receipt of the said notice, failing which the appellant stated that it shall terminate the C PPA by issuing a termination notice; and (ii) The basis of the Second Notice is that under Article 9.2.1(a) of the PPA, there was a default in the operation and maintenance of the Plant. Once again, the appellant called upon the Corporate Debtor to remedy the O&M default D within 90 days from the receipt of the notice, failing which the appellant stated that it shall terminate the PPA by issuing a termination notice.

21Copy pinpoint21. The first respondent issued his replies to both the notices on 10 May 2019. The replies are summarized below: E (i) The reply to the First Notice states that the Corporate Debtor’s PPA with the appellant is its only PPA, and hence they are heavily dependent on it for reaching a resolution under the IBC. In case the appellant terminates the PPA, prospective resolution applicants21 who had submitted their F expression of interest for the Corporate Debtor might not submit a resolution plan, which would eventually lead to liquidation of the Corporate Debtor, defeating the main object of the IBC; and (ii) The reply to the Second Notice states that since the G Corporate Debtor is undergoing CIRP under the IBC, the operations at the Plant were severely affected due to force majeure events in terms of the PPA. Thus, the conditions of the PPA could not be said to have been breached.

21 H “PRAs”

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22Copy pinpoint22. On 21 May 2019, a meeting was scheduled between the first A respondent and the General Manager (IPP) of the appellant. During this meeting, the first respondent emphasized that if the PPA was to be terminated, revival of the Corporate Debtor will be at stake, since prospective resolution applicants may not submit resolution plans or may withdraw the resolution plans, if submitted, citing termination of the PPA. B Declining to accede to this position, the appellant made it clear that in accordance with a legal opinion obtained by them, they will be terminating the PPA under Articles 9.2.1(e) and 9.3.1 under the First Notice, since the Corporate Debtor is under CIRP. However, the appellant confirmed that the O&M default stood cured, and hence it would not act upon the Second Notice. It may also be noted at this stage that the appellant has C not pressed the issue of the O&M default either before this Court or before the NCLAT/NCLT. E Proceedings before NCLT and NCLAT

23Copy pinpoint23. In May 2019, the first and second respondents filed applications under Section 60(5) of the IBC before the NCLT in regard to the Notices D issued by the appellant to the Corporate Debtor, and sought an injunction restraining the appellant from terminating the PPA. By an interim order dated 31 May 2019, NCLT restrained the appellant from terminating the PPA till the next date of hearing.

24Copy pinpoint24. While the interim order was in operation, the appellant wrote to the first respondent on 7 June 2019, stating that the notice period for curing the default had expired. The appellant claimed that Corporate Debtor had failed to cure the default, as a result of which the appellant was entitled to issue the final termination notice under Article 9.3.1 of the PPA. However, since the NCLT had provided an interim protection to the Corporate Debtor till the next date of hearing (12 June 2019), the appellant stated that it was not issuing the final termination notice at the present.

25Copy pinpoint25. On 29 August 2019, the NCLT issued its final order through which it allowed the applications filed by the first and second respondents, thereby restraining the appellant from terminating the PPA and setting aside the First Notice. The NCLT’s reasoning is premised on the following: (i) The clauses of the PPA cannot be placed on a higher pedestal than the provisions of the IBC, in the context of drawing a timeline for completion of the CIRP. The fact H

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A that the CIRP has not concluded within 30 days from the receipt of the notice of default cannot be construed as an event of default since the time limit for the CIRP under the IBC is 330 days; and (ii) The PPA is an ‘instrument’ within the meaning of Section B 238 of the IBC. The clauses of the PPA are inconsistent with the provisions of the IBC, and stand overridden. However, in paragraph 35 of its order, the NCLT held that the appellant could terminate the PPA, in the event that liquidation proceedings are initiated against the Corporate Debtor. Paragraph 35 C reads thus: “35. It is however, made clear that if due to any reason, the Corporate Debtor goes into liquidation, the Respondent Company will be at liberty to terminate the Power Purchase Agreement.”

26Copy pinpoint26. The NCLAT by its judgment dated 15 October 2019 dismissed the appeal against the NCLT’s order. The NCLAT noted that the appellant attempted to terminate the PPA on the sole ground that the CIRP has been initiated for the Corporate Debtor. It observed that during the CIRP, the first respondent has to maintain the Corporate Debtor as a ‘going concern’ and the termination of its sole PPA, under which it supplied electricity only to the appellant, would render the Corporate Debtor defunct. Hence, the NCLAT held that the appellant could not terminate the PPA solely on the ground of the initiation of CIRP of the Corporate Debtor, which was supplying power to the appellant during the period of the CIRP. Further, it restrained the appellant from terminating the PPA even in the event that the Corporate Debtor underwent liquidation, by setting aside theobservations made by the NCLT in paragraph 35 of the order dated 29 August 2019.

27Copy pinpoint27. The NCLAT thereafter directed the appellant to pay the dues for power supplied by the Corporate Debtor during the CIRP period. On 12 June 2020, the appellant, as an interim measure but without prejudice to its rights, agreed to release an ad-hoc payment of Rs 50 lakhs to the Corporate Debtor. However, the appellant informed the first respondent that this payment to the Corporate Debtor is conditional, and the Corporate Debtor must submit an undertaking on stamp paper stating that the amount released by the appellant will be refunded to them with interest, in case this Court allows the present appeal. The first respondent H

GUJARAT URJA VIKAS NIGAM LTD. v. MR. AMIT GUPTA & ORS. 635 [DR. DHANANJAYA Y CHANDRACHUD, J.]

furnished the undertaking sought on 18 June 2020, following which the A appellant released an ad-hoc payment of Rs 50 lakhs to the Corporate Debtor on 1 July 2020. Since then, the appellant has paid a further amount of Rs 1.07 crores to the Corporate Debtor, against a similar written undertaking given by first respondent dated 27 January 2021. F Proceedings by the Successful Resolution Applicant B

28Copy pinpoint28. During the course of these hearings, the court has been informed of parallel proceedings initiated against the respondents by M/ s Kundan Care Products Limited22, whose Resolution Plan in relation to the Corporate Debtor was approved by 99.28% of voting shares of the Committee of Creditors23. C 24

29Copy pinpoint29. An application under Section 31 of the IBC was filed by the first respondent on 15 November 2019 before the NCLT seeking approval of the Resolution Plan approved by the CoC. This application is currently pending adjudication before the NCLT, due to the present appeal filed by the appellant before this Court. D

30Copy pinpoint30. However, on 20 December 2019, the Successful Resolution Applicant filed an application25 under Section 60(5) of the IBC before the NCLT, seeking withdrawal of their Resolution Plan submitted for the Corporate Debtor. Further, on 16 January 2020, the Successful Resolution Applicant filed an interlocutory application26 before this Court E in the present appeal, seeking certain reliefs from this Court or, in the alternative, seeking permission of this Court to allow them to withdraw their Resolution Plan dated 12 November 2019. This Court allowed the Successful Resolution Applicant to withdraw the interlocutory application filed in the present appeal on 20 July 2020. F

31Copy pinpoint31. The NCLT by an order dated 3 July 2020, dismissed the application filed by the Successful Resolution Applicant, thereby refusing to grant them permission to withdraw the Resolution Plan. Thereafter, the NCLAT by a judgment dated 30 September 2020, dismissed the appeal filed by the Successful Resolution Applicant against NCLT’s order dated 3 July 2020. G

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32Copy pinpoint32. The Successful Resolution Applicant has since filed an appeal27 before this Court challenging NCLAT’s judgment dated 30 September

33Copy pinpoint33. The case of the appellant has been presented initially in the articulate and carefully reasoned submissions made by Ms Ranjitha Ramachandran, learned counsel. Mr Shyam Diwan, learned senior C counsel has then urged his submissions. The following submissions were urged in relation to the jurisdiction of the NCLT/NCLAT under section 60(5) of the IBC: (i) Section 60(5) must be interpreted in the context of Section 25(2)(b) of the IBC, which provides that the RP has to D “exercise the rights for the benefit of the corporate debtor in judicial, quasi judicial or arbitration proceedings.” Hence, if NCLT is conferred with the exclusive jurisdiction in relation to the Corporate Debtor, this section would be rendered redundant. This Court in Embassy Property Developments (Private) Limited vs State of E Karnataka28 has held that the RP cannot sidestep the jurisdiction of other authorities and approach the NCLT for the enforcement of the Corporate Debtor’s rights. Although this judgment was in the context of a renewal of a mining lease by a statutory authority, the interpretation of Section F 60(5) would not be limited to statutory authorities particularly in the backdrop of Sections 18 (duties of interim resolution professional) and 25(2)(b). In the present case, Article 10.4 of the PPA has granted jurisdiction to the State Commission, the regulatory authority under the Electricity Act, to entertain disputes relating to the PPA. Article 10.4 provides: G “In the event that such differences or disputes between the Parties are not settled through mutual negotiations within sixty (60) days, after such dispute arises, then it

27 Civil Appeal No. 3560 of 2020 28 H (2020) 13 SCC 308; hereinafter referred to as “Embassy Property”

GUJARAT URJA VIKAS NIGAM LTD. v. MR. AMIT GUPTA & ORS. 637 [DR. DHANANJAYA Y CHANDRACHUD, J.]

shall be adjudicated by the Commission in accordance with Law.” (ii) Section 86(1)(f) of the Electricity Act provides that the State Commission shall discharge the function of adjudicating “the disputes between the licensees, and generating companies and to refer any dispute for arbitration”. Therefore, any issue in relation to the PPA must be raised before the State Commission, and not the NCLT. Further, the second respondent has no locus to file a petition before the NCLT in relation to the PPA; (iii) The NCLT cannot preclude the appellant from exercising its contractual rights under the PPA read with the Electricity Act; (iv) If Section 60(5) is given a broad interpretation to include contractual disputes, it would disrupt the streamlined and timebound process under the IBC. Although the NCLT, D being conscious of its limitations, has not proceeded to adjudicate on whether the termination of the PPA was valid, or dwelt on the interpretation of the PPA, it has still erroneously set aside the termination of the PPA by the appellant without any basis under the IBC; E (v) Even if it is assumed that NCLT has jurisdiction over disputes relating to the PPA, the adjudication of such disputes should be in accordance with the PPA. The sanctity of the contracts must be upheld unless there is a statutory provision interdicting such contracts. There can be no exercise of F any inherent or residual power by the NCLT to set aside the termination of a contract absent a statutory interdict. The Resolution Applicant or NCLT have no powers to modify the PPA through a resolution plan. The formation, novation or alteration of the contract must be in accordance with Section 30(2)(e) of the IBC, which provides that the G Resolution Plan cannot contravene any provision of law which is in force. The provisions of the Indian Contract Act, 1872 (“Contract Act”), require mutual agreement of the parties for such a modification; H

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A (vi) The submission of the respondents that ‘property’ under Section 3(27) of the IBC includes an actionable claim and hence the dispute falls under the jurisdiction of the NCLT is erroneous in view of the judgement in Embassy Property (supra); B (vii) The contention of the respondents that there is a direct connection between the termination of the PPA by the appellant and the insolvency resolution process should be rejected because the issue in the present case is not of interpretation of the insolvency resolution process but of the PPA, and only the State Commission has the jurisdiction to interpret the PPA; and (viii) The respondents have relied on judgments under other statutes like the Companies Act, 195629, Banking Regulation Act, 194930 and Provincial Insolvency Act, 192031 with provisions corresponding to Section 60(5). However, these statutes do not contain any provisions equivalent to Sections 18 and 25 (2) (b) of IBC. The interplay between these provisions and Section 60(5) must be considered for the purpose of determining NCLT’s jurisdiction. Further, the facts of these judgements are also distinguishable from the present case.

34Copy pinpoint34. However, assuming but not conceding that the NCLT could have had jurisdiction over the dispute, the appellants argue that there is no embargo under the IBC on exercise of contractual rights by the appellant, which does not include this termination: F (i) Except for the moratorium stipulated under Section 14 of IBC, there is no other bar in the scheme of the IBC to intervene in contractual arrangements that the Corporate Debtor has entered with a third party. In the present case, the NCLT/NCLAT did not hold that the termination of the G PPA was prohibited under Sections 14(1) and (2) of IBC. Sections 14(2) and (2A) deal with supply of essential/critical goods and services to the Corporate Debtor, and do not

29 “CA 1956” 30 “BRA” 31 H “PIA”

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mandate the third party to purchase any goods and services from the Corporate Debtor. Section 14(2) provides for continued supply of essential goods and services to the Corporate Debtor. However, there is no bar on termination of other agreements. Section 14(2A) was introduced after the issuance of the default notice by the appellant and, in any event, it does not prohibit the termination of the PPA. Parliament has chosen not to include any provision to this effect despite the multiple amendments that have been made to the IBC; (ii) The Explanation to Section 14(1) of the IBC, which was introduced by an amendment in December 2019, covers licenses or approvals granted by a government authority. However, no reference has been made there to contracts such as PPAs; (iii) The respondents are attempting to resurrect the regime under Section 22(3) of the Sick Industrial Companies D (Special Provisions) Act, 198532, which empowered the Board to suspend the operation of all or any of the contracts to which the sick industrial company was a party. In Swiss Ribbons Private Limited vs Union of India33, this Court held that the IBC was introduced because the regime under E SICA and Board for Industrial and Financial Reconstruction34 had failed. Under the IBC, there is no such power to suspend contracts. Hence, when the legislature has wilfully omitted something or in a situation of a casus omissus, this Court cannot introduce what has been omitted by way of interpretation, analogy or implication; F

(iv) The termination of the PPA cannot be set aside based on the objective of the IBC to ensure that the Corporate Debtor remains a ‘going concern’, in the absence of a specific provision under the IBC. The objective of the IBC cannot be understood to mean that the vested rights of parties can G be interfered with or extinguished except to the extent contemplated under Section 14 of the IBC. While in the 32 “SICA” 33 (2019) 4 SCC 17; hereinafter referred to as “Swiss Ribbons” 34 “BIFR” H

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A United States there are specific provisions providing for non-enforcement of ipso facto clauses such as Article 9.2.1(e) of the PPA, no such provisions exist under the IBC. Hence, such a bar cannot be read into the legislation by reference to the object of the IBC or duties of the RP. The parties cannot wish away a contractual right because it is B not suitable to them by way of a narrow understanding of “public interest”. The public interest lies in preserving the sanctity of contracts and for the contractual bargains to play out; (v) The duty of the RP to preserve the Corporate Debtor as a C going concern and the definition of resolution plan do not bind third parties to act in favour of the Corporate Debtor. The NCLAT has stressed that the Corporate Debtor would become defunct if the PPA is terminated because it supplies power exclusively to the appellant. However, the Corporate D Debtor chose to supply power solely to the appellant. The Corporate Debtor was empowered under Sections 7 and 10 of the Electricity Act to sell electricity to any licensee or consumer. The power producing company can convey electricity to any part of the country using the transmission network under Sections 2(4), 38(2)(d), 39(2)(d), 40(c) and E 42(2) of the Electricity Act. Hence, the Corporate Debtor is free to supply power to any other licensee or consumer after the termination of the PPA. The only difference would be that the Resolution Applicant would have to supply electricity at a lower cost; F (vi) The second respondent and Power Finance Corporation Limited were aware that the appellant can terminate the PPA under Article 9.2.1(e). They are vested with the right to assign the rights and obligations under the PPA to a third party, in the event of a default committed by the Corporate G Debtor, under the financing documents under Article 12.9 of the PPA. Hence, the second respondent could have exercised its power to assign prior to the initiation of the CIRP on 20 November 2018. Instead, it declared the account of Corporate Debtor as an NPA. Then, when the Corporate Debtor applied for the initiation of the CIRP under H

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Section 10 of the IBC, which was admitted by the NCLT A through its order dated 20 November 2018, it challenged the order before in an appeal, which was dismissed by the NCLAT on 4 December 2019. Therefore, the appellant has the right to terminate the PPA under Article 9.2.1(e), irrespective of whether any assignment has taken place under Article 12.9; (vii) The first respondent cannot rely on the resolution plan to prevent termination of the PPA since the resolution plan or process does not modify the terms of the contract of the Corporate Debtor with third parties. Each party took a calculated risk to enter into the contract with the knowledge that the appellant is entitled to terminate the PPA; (viii) The PPA is not an instrument under Section 238 of IBC, since the phrase used in the section - “instrument having effect by virtue of any such law” - does not cover commercial bilateral agreements between a corporate debtor and a third party laying down the terms of an executory contract entered between them. It only applies to a statutory contract or an instrument entered into by operation of law that is inconsistent with the IBC; (ix) No provision of the PPA is inconsistent with the IBC. Article E 9.3.1 which specifies a period of 30 days for the Corporate Debtor to remedy a default, and gives the appellant the right to terminate the contract in case of a failure to do so, is not inconsistent with the time limit provided in section 12 of the IBC to complete the insolvency resolution process. F Article 9.3.1 obliges the Corporate Debtor to ensure that the proceedings initiated against it come to an end within 30 days by an act of the Corporate Debtor and does not govern the resolution process undertaken under the IBC; (x) The right to terminate the PPA in accordance with Article G 9.3.1 has accrued to the appellant, since an event of default has occurred within the meaning of Article 9.2.1(e): (a) Article 9.2.1(e) of the PPA provides that if the Corporate Debtor “becomes voluntarily or involuntarily, the subject of a proceeding in any H

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A bankruptcy or insolvency laws”, it would be considered as an event of default. Article 9.2.1(e) also lists other events of default like dissolution, liquidation and the appointment of a receiver. Each of these eventualities is independent. The clause may have referred to the legislation which preceded the B IBC since the PPA was entered into in 2010. However, each of these laws related to companies that were bankrupt/insolvent. The exception under Article 9.2.1(e) covers voluntary reconstruction and merger undertaken under the Companies Act, 201335, C leading to a dissolution of the company without liquidation or winding up. The exception is limited to dissolution undertaken for the above purposes and does not contemplate a dissolution in relation to an insolvency or bankruptcy proceeding. There is no dissolution in the present case. Respondents have contended that the third “or” under the Article 9.2.1(e) should be changed into “and” or other situations should be read into the exception which is only for dissolution. The interpretation of “or” as “and” would mean that initiation of proceedings under any bankruptcy or insolvency laws would constitute an event of default only if the company goes into liquidation. The usage of words “or” and “and” are deliberate. The interpretation proposed by the respondents would exclude liquidation taking place for reasons other than insolvency/bankruptcy, which could not have been the intent of the parties. In absence of any ambiguity or uncertainty in the clause, the court cannot imply any term or interpret the clause contrary to its plain meaning; (b) Clauses such as Article 9.2.1(e) are standard clauses in agreements of this nature. Even after the notification of the IBC, similar provisions continue in PPA formats notified by the Government of India as part of the Standard Bid Documents for Tariff Based

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Competitive Bid Process under Section 63 of the A Electricity Act for conventional power. Similar provisions are found in the PPAs being drafted as per Guidelines for Tariff Based Competitive Bidding Process for renewable energy sources; and (c) The bargain between the parties was fair and not B one sided. The same default clause has been provided under the appellant’s defaults in Article 9.2.2(c), and a corresponding right to terminate has been provided under Article 9.3.2. Similar clauses are provided under the standard PPAs issued by the Government of India for competitive bidding under Section 63 of the C Electricity Act. Therefore, the clauses cannot be said to be unreasonable or unconscionable.

35Copy pinpoint35. In summing up their submissions, the appellants have raised two more arguments: D (i) The NCLAT’s observations in relation to the termination of the PPA if the Corporate Debtor goes into liquidation were incorrect: (a) In the appeal filed by the appellant against the order of the NCLT dated 29 August 2019, the appellant E had not challenged the determination of the NCLT that the PPA can be terminated in the event of the initiation of a liquidation proceeding against the Corporate Debtor. It is a settled principle of law that the courts cannot go beyond the pleadings or the prayer put forth by the parties; and F (b) NCLAT erroneously proceeded on the basis that there is no difference between the liquidation and resolution process. On the commencement of liquidation proceedings, the corporate debtor is no longer a going concern. The assets of the corporate G debtor are sold for recovery of money. However, agreements with third parties are not assets. The appellant cannot be compelled to continue the agreement with a new person or entity for the benefit of the creditors of the Corporate Debtor. H

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A (ii) NCLAT’s direction to the appellant to pay for the electricity injected by the Corporate Debtor was flawed: (a) The appellant was entitled to terminate the PPA from 7 June 2019, and cannot be compelled to procure and pay for power to preserve the value of the B Corporate Debtor. The injection of electricity from 7 June 2019 is due to the orders of the court and not under the PPA. Under the principle of “actus curiae neminem gravabit”, the act of the court cannot prejudice any party. The court is under an obligation to undo the wrong caused to a party due to its actions. C The appellant cannot be made to suffer on account of the erroneous injunctions granted by NCLT/ NCLAT when it could have procured electricity at a lower cost from other solar power projects; (b) The appellant has paid the Corporate Debtor an amount of Rs 50 lakhs and Rs 1.07 crores pending the present appeal and against the undertaking that the amount would be returned with interest if the appeal is decided in its favour. Additionally, under Article 9.3.1 of the PPA, the compensation for termination of the PPA is Rs 55.80 crores; and (c) The issues relating to tariff determination and replacement of solar panels raised by the respondents were not considered by the NCLT/NCLAT, and are not relevant for the interpretation of the PPA and provisions of the IBC. G.2 Submissions on behalf of the respondents

36Copy pinpoint36. Mr C U Singh and Mr Nakul Dewan, learned Senior counsel appearing on behalf of the first respondent, have argued that NCLT had the jurisdiction to consider the validity of the termination of the PPA by the appellant on the sole ground of the initiation of the insolvency proceedings of the Corporate Debtor and that the jurisdiction was rightly exercised by the NCLT, in the present case. Mr C U Singh has made the following submissions on the jurisdiction of the NCLT: (i) The application for staying the termination of the PPA was filed by the first respondent before the NCLT under Section

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60(5) of the IBC. Section 60(5)(c) confers upon the NCLT A complete jurisdiction to decide any application by or against the Corporate Debtor on any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution of the Corporate Debtor, notwithstanding any other law for the time being in force. B Hence, notwithstanding the provisions of the Electricity Act, the NCLT has jurisdiction to consider an application filed by the RP which may not specifically relate to a particular section of the IBC (such as Section 14), provided the application involves any question of law or facts, arising out of or in relation to the insolvency resolution of the third respondent; (ii) Relatedly, since the jurisdiction vested in the NCLT under Section 60(5)(c) is of a residuary character, even where a question of law or fact is not specifically covered under Section 14, the NCLT would have the jurisdiction to consider such a question of law or fact, provided it arises out or is in relation to the insolvency resolution process of the corporate debtor. Any other interpretation of Section 60(5) would render it otiose; (iii) A narrow interpretation of Section 60(5) is neither warranted from the language of the section, nor is it in line with judicial precedents which have interpreted similar provisions in other insolvency laws. Provisions similar to Section 60(5)(c) have been read in an expansive way. In this regard, reliance is placed on the interpretation of Section 446(2) of the CA 1956, Section 4(1) of the PIA and Section 45-B of the BRA; F

(iv) The expressions used in Section 60(5)(c), i.e., ‘relating to’ and ‘arising out of’ have been interpreted as words of the widest amplitude. The expression ‘relating to’ has been held to be equivalent to or synonymous with ‘as to,’ ‘concerning with,’ and ‘pertaining to’. In view of the broad scope of G these terms, an interpretation divesting the NCLT of the power to injunct the termination of the PPA should not be countenanced in this case; (v) The first respondent is not advocating for the adoption of an absolute rule about what falls within and beyond the H

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A NCLT’s jurisdiction under Section 60(5)(c). Rather, it submits that this determination must be made on the facts of each case; (vi) The termination of the PPA in the present case is sought solely on the ground of insolvency. The cause of action for termination is therefore alleged to be the insolvency of the Corporate Debtor and the contention that the Corporate Debtor is no longer ‘reliable’ on account of the insolvency resolution process. There would be no termination of the PPA but for the initiation of the CIRP against the Corporate Debtor. Hence, the cause of action arises out of and is in relation to the insolvency resolution of the Corporate Debtor. This case is materially different from cases in which termination of the PPA is sought for reasons independent of the insolvency of the Corporate Debtor (for instance where termination is sought for non-supply of electricity); D (vii) The fact that Sections 20(2)(e) and 25 of the IBC are couched in terms of a duty, does not necessarily mean that the NCLT does not have jurisdiction to decide matters that arise from the duty of the RP to preserve the assets or maintain the Corporate Debtor as a ‘going concern’. On E the contrary, NCLT is the only forum which has the jurisdiction to oversee the resolution process of the Corporate Debtor which necessarily includes the continuation of the Corporate Debtor as a going concern and its successful resolution;

F (viii) The facts of this case are different from those of Embassy Property (supra) and Municipal Corporation vs Abhilash Lal36. Unlike Abhilash Lal (supra), the property in this case (long term contractual right under the PPA) is the property of the Corporate Debtor and not the property of a statutory authority. Further, there was no violation of law G when NCLT injuncted the appellant from terminating the PPA on the ground of the initiation of the CIRP of the Corporate Debtor. In addition, the facts in Abhilash Lal (supra) dealt with the public duty of Municipal Corporation

36 H (2020) 13 SCC 234; hereinafter referred to as “Abhilash Lal”

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in respect of the construction of a hospital. Further, there were existing defaults and a show cause-notice was issued in this regard prior to the commencement of the CIRP of the company. As opposed to this, in the present case, termination by the appellant is not on grounds of default but solely on the ground of the initiation of the insolvency resolution process of the Corporate Debtor and, that too, nearly six months after the admission of the application under Section 10 of the IBC; and (ix) In Embassy Property (supra), what was at issue in was whether the NCLT has jurisdiction over a matter which is in the realm of public law. In the present case, the decision of the appellant to terminate the PPA is not a decision taken by the Government or by a statutory authority in relation to a matter which is in the realm of public law. The decision of the appellant to terminate the PPA is only because the Corporate Debtor is undergoing insolvency resolution. The D Corporate Debtor has not defaulted in supplying solar power to the appellant and is otherwise not in breach of its obligations under the PPA.

37Copy pinpoint37. Assuming that the NCLT has jurisdiction, the following submissions were made by Mr C U Singh in relation to the interpretation of the PPA: (i) Article 9.2.1 of the PPA, read with Article 9.3.1, which allows the appellant to terminate the PPA if the third respondent commits an event of default, must be read with other provisions of the PPA. In this regard, our attention was drawn to: (a) The recitals to the PPA state that the Power Producer will include its successors and assignees; (b) Article 4.1(iii) of the PPA provides that the Corporate Debtor shall sell the power produced by it to the appellant on first priority basis and is not allowed to sell to any third party; (c) Article 4.1(x) of the PPA provides for the eventuality of an equity dilution of the power producer; H

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A (d) Article 9.1 of the PPA provides for the term of the agreement, i.e., 25 years from the commercial operation date; (e) Article 9.3.1 of the PPA provides that in case of a default of the Corporate Debtor, it shall have the B liability to make payments towards compensation to the appellant which is equivalent to three years billing based on the first-year tariff considered on normative PLF while determining the tariff by GERC, within 30 days from the termination notice; C (f) Article 12.9 of the PPA specifically provides that the financing parties may cause the power producer to assign its interest, rights and obligations to a third party; and (g) The PPA contemplates the financing of the project D and that there could be financial defaults by the Corporate Debtor. Hence, the PPA specifically allowed financing parties to step in and change the identity of the power producer provided the successor was capable of and willing to assume the obligations of the power producer under the PPA. Article E 9.2.1(e) must be read in light of this background. (ii) In relation to the interpretation of Article 9.2.1(e), it was submitted: (a) When the PPA was entered into in 2010, the IBC F was not in existence. The contract was a standard form contract. While the clause refers to insolvency or bankruptcy proceedings,the intent of Article 9.2.1(e) could only have been to cover liquidation proceedings as contemplated under the CA 1956. The CA 1956 did not contemplate ‘insolvency’ or G ‘bankruptcy’ proceedings. Insolvency at the time of the drafting of the clause was understood to include individual insolvency. Hence, Article 9.2.1(e) could not have intended to cover ‘insolvency resolution’ proceedings under the IBC as a trigger for an event of default; H

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(b) If the term ‘insolvency’ proceedings in Article A 9.2.1(e) of the PPA, which was entered into in 2010, is sought to be applied to the ‘insolvency resolution’ proceedings contemplated under the IBC then the exception in the clause, in the form of ‘reorganization’ will also necessarily need to be applied in light of the B updated understanding. Read thus, the term must extend to any form of reorganization because of which the company does not go into liquidation or winding- up. Read in this manner, Article 9.2.1(e) must be interpreted to exclude the reorganization proceedings under the IBC; and C (c) Assuming, arguendo, that Article 9.2.1(e) of the PPA is ambiguous, it ought to be interpreted in favour of the power producer. The PPA is a standard form contract. The third respondent and the appellant do not stand on a footing of equality. The application of D the rule of contra preferentum is well settled and an interpretation of the contract which favours the party with lesser bargaining power is preferred. Applying that rule here, any ambiguity in the interpretation of Article 9.2.1(e) must be resolved in favour of the third respondent. E

38Copy pinpoint38. Submissions were also urged by Mr C U Singh in relation to Sections 14 and 238 of the IBC: (i) In relation to the application of Section 238 of the IBC to the PPA, it was submitted that: F (a) Under Article 9.3.1 of the PPA, the third respondent is required to remedy the default (if any) within 30 days of service of the default notice. If read in this manner, on the receipt of a default notice during the pendency of the CIRP, the third respondent would G be required to complete the reorganization process within 30 days so as to obviate the consequence of the PPA getting terminated. The IBC provides a period of 330 days for the completion of the CIRP. There is a dichotomy between the provisions of the PPA and the IBC. The timelines under the PPA for H

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A curing a default are inconsistent with those under the IBC for completing the CIRP with respect to the third respondent. In view of the non-obstante clause in Section 238, the provisions of the IBC would override those of the PPA; B (b) The argument that the PPA is not an “instrument” under the IBC is incorrect. Since the term “instrument” has not been defined in the IBC, it may bear a meaning drawn from the definition in other statutes. The PPA is approved by the GERC and has the force of law under the Electricity Act. The C PPA sets out the rights and liabilities of the parties and is an instrument for the purposes of Section 238. Being an “instrument”, which is inconsistent with the provisions of the IBC, the latter would have overriding effect over the former, in view of Section 238 of the D IBC. Therefore, the right to terminate would only arise in case the third respondent fails to cure the default, i.e., resolve itself in accordance with the IBC; and (c) In view of Section 238, the IBC overrides the E provisions of the Electricity Act. Section 63 of the IBC provides that “No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which National Company Law Tribunal or the National Company Law Appellate Tribunal has jurisdiction under IBC.” F NCLT’s jurisdiction excludes that of the GERC. (ii) In relation to the legislative intent underlying Section 14 of the IBC, it was submitted that: (a) The Notes on Clauses to the Insolvency and G Bankruptcy Bill, 2015 and the Insolvency Law Committee Report dated 20 February 2020 suggest a clear legislative intent of Section 14 that, an ipso facto clause allowing a party to terminate the contract if the counterparty enters into some form of insolvency resolution process must either be declared H void or be suitably read down in order to ensure that

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the objective of the IBC in keeping the company as A a going concern is met. If in the facts of a given case, the relevant authorities find that to preserve the assets of the Corporate Debtor and to keep it as a going concern, certain contracts need to be protected, they ought to be invalidated or read down; B and (b) The nature of the third respondent and its business renders the PPA a valuable asset, and its termination would have the effect of running the third respondent to the ground. Therefore, in view of the legislative intent, and reading the provisions of the PPA as a C whole, Article 9.2.1 (e) must be read to exclude reorganization proceedings under the IBC as an event of default.

39Copy pinpoint39. Supplementing these submissions, Mr Nakul Dewan, learned Senior Counsel made the following additional submissions: D

(i) The Resolution Plan submitted by the Successful Resolution Applicant and approved by the CoC was dependent on the continuation of the PPA: (a) The following aspects of the resolution plan need to be highlighted: (i) the significance of the PPA to the continued commercial viability of the corporate debtor; (ii) the reason for the initiation of the CIRP including the nature of the debts; (iii) the experience of the RP in reviving the Corporate Debtor including the revival plan; (iv) the summary of the resolution plan, including the ‘haircut’ being taken by the creditors in order to ensure that the Corporate Debtor is restructured; (v) the relevant rates pertaining to solar tariff; (vi) the business plan; (vii) the financial plan; and (viii) the potential risks and mitigation measures; (b) The Corporate Debtor was put into financial difficulty on account of the force majeure events which transpired in 2015 and 2017. The first respondent had started putting the Corporate Debtor back on its H

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A track, and along with the Resolution Applicant had formulated a plan under which the Corporate Debtor would be revived. The resolution plan was dependent on the continuation of the PPA; and (c) If the termination is permitted, the Corporate Debtor B would not be able to revive in terms of the resolution plan which has been agreed upon by the lenders, even though it continues to be able to perform its obligations under the PPA. (ii) In relation to the interpretation of Article 9.2.1(e): C (a) The term ‘law’, in Article 9.2.1(e) must be interpreted in a dynamic sense. The interpretation of Article 9.2.1(e) must be considered at the point of time it was sought to be invoked in order to ascertain whether there was an event of default. The exception under which “reorganization” is excluded as an event of default, would apply to the proceedings which were initiated under section 10 of the IBC for the sole purpose of the reorganization of the Corporate Debtor; and (b) The invocation of Article 9.2.1(e) on the ground that proceedings under Section 10 of the IBC had been commenced was both erroneous and premature. It was erroneous because at the time of commencement of the proceedings, the Corporate Debtor was looking at the reorganization of its affairs. It squarely fell within the exception to Article 9.2.1(e). It was premature because unless and until the appellant was sure that after a reorganization the resulting entity would not have the financial standing to perform its obligations or as to its lack of creditworthiness, it had no basis to terminate the PPA on the ground that it constituted an event of default under Article 9.2.1(e). (iii) In relation to the jurisdiction of the NCLT, it was submitted that: (a) The NCLT’s jurisdiction with respect to Section 60(5) was invoked to seek quashing of the default notice issued by “taking insolvency proceedings as Event

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of Default.” Therefore, the application filed before the NCLT was within the realm of its jurisdiction under Section 60(5) of the IBC; (b) The appellant’s submission about GERC having jurisdiction should not be accepted. Instead, this Court should adopt the position that, should the commencement of proceedings under the IBC be used as a ground to terminate a contract, then the matter ought to be determinable by the NCLT. This is further bolstered by the exclusion of the jurisdiction of civil courts under Section 231 of the IBC; and C (c) IBC, being a special law, enacted after the Electricity Act, the NCLT and NCLAT have exclusive jurisdiction to govern all questions of fact and law relating to the insolvency process of the corporate debtor. D

40Copy pinpoint40. Mr V Giri, learned senior counsel on behalf of the second respondent, made the following submissions in support of the arguments made by the first respondent: (i) Once an application under sections 7, 9 or 10 of the IBC is admitted by the NCLT, it is conferred with the jurisdiction E to deal with matters relating to the insolvency of the corporate debtor; (ii) Both the Electricity Act and the IBC are special legislations, which have been enacted to deal with electricity related issues and insolvency, respectively. In Ashoka Marketing F vs PNB37 this court held that a harmonious construction of two special laws containing non-obstante clauses can be undertaken by looking at the purpose of both the laws. This Court was also mindful of the principle that a special law enacted at a later date prevails over the earlier special law. In this regard, the non-obstante clause under Section 174 G of the Electricity Act would be overridden by Section 238 of IBC in case of a conflict of jurisdiction to resolve a dispute;

37 1990 (4) SCC 406 H

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A (iii) The NCLT can exercise its jurisdiction under Section 60(5) of the IBC to ensure that the Corporate Debtor survives as a ‘going concern’. It would not be possible to enter into another PPA with the same terms and conditions as the current PPA; B (iv) The second respondent as a lender bank may not be able to initiate a dispute resolution process under Section 86(f) of the Electricity Act since it contemplates the resolution of disputes between a generator and a trading licensee; (v) Section 60(5)(c) of the IBC provides that the NCLT can entertain or dispose of any event or action arising out of, in relation to, effecting or hampering the insolvency resolution process. NCLT has the jurisdiction to intervene to the extent of removing any obstacle in the CIRP process for it to reach its logical end, which is approval of the resolution plan or liquidation. The contours of Section 14 of the IBC must be determined under such an understanding of Section 60(5)(c); (vi) The moratorium under Section 14 of IBC is not exhaustive because: (a) The object of section 14 is protection of the Corporate E Debtor during the CIRP; (b) The preamble of the IBC provides for preserving the maximum value of the assets of the Corporate Debtor; and (c) Section 14(3) only excludes certain kinds of agreements and transactions from moratorium under Section 14(1), as notified by the Central Government in consultation with the financial regulator or any other authority. The NCLT has the power to impose moratorium or status quo in the interest of protecting the corporate debtor and the CIRP in addition to the protections enumerated in Section 14(1); (vii) Maintaining the Corporate Debtor as a ‘going concern’ is the soul of the CIRP. Section 14(2A) provides that a supply of goods or services which an IRP or RP considers critical for protecting and preserving the value of the Corporate H

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Debtor, and managing its operation as a going concern cannot be terminated, suspended or interrupted. Section 20(1) imposes a duty on the IRP to protect and preserve the value of the Corporate Debtor and manage the operations as a ‘going concern’. The ‘Resolution Plan’ has been defined under Section 5(26) of the IBC as a plan proposed by the resolution applicant for insolvency resolution of the Corporate Debtor as a ‘going concern’. The termination of the PPA would push the Corporate Debtor towards a corporate death, namely, liquidation; (viii) The Explanation to Section 14(1) clarifies that, inter alia, “a similar grant of right given by the Central government, C State government, local authority, sectoral regulator or any other authority shall not be terminated on the ground of insolvency”. This indicates the intent of the legislature that no right conferred on the Corporate Debtor can be taken away due to the initiation of the CIRP; D (ix) Article 9.2.1(e) must be read with Article 12.9 of the PPA, which provides that if a default is committed under the financing documents, lenders have a right to assign the rights and obligations of the Corporate Debtor under the PPA to a third party. Hence, the PPA contemplates a situation where the Corporate Debtor may go through a reorganization. The present proceedings under the IBC are in the nature of a reorganization. Hence, the CIRP cannot be construed as event of default under the PPA; (x) The lenders extended the loan based on the: (a) right of assignment granted under Article 12.9 of the PPA; (b) purchase of electricity as a fixed tariff; and (c) term of the PPA for a period of 25 years. The financial projections on the loan and its repayment were made on the above terms. The default notice is in violation of the terms of the PPA and the understanding reached between the parties; G (xi) Article 9.3.1 of the PPA is inconsistent with the IBC, since the PPA grants a time of 30 days to remedy the insolvency whereas the IBC provides a timeline of 180 days, which is extendable up to 330 days. Section 238 of IBC ensures that the IBC will prevail over the PPA. The phrase H

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A “instrument” in Section 238 can be interpreted in light of Section 2(14) of the Indian Stamp Act, 1899 and Section 2(b) of the Notaries Act, 1952 which provide that an “instrument”, “includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded.” Hence the PPA B qualifies as an instrument; (xii) Section 14(1)(d) provides for protection of the property of the Corporate Debtor. The expression “property” would include the PPA in terms of its definition in Section 3(27) of the IBC. Paras 8.1 to 8.3 of the Third Insolvency Committee C Report dated 20 February 2020 indicate that the intent of the IBC is to ensure that the Corporate Debtor remains a going concern and contracts cannot be terminated by way of ipso facto clauses relating to insolvency; and (xiii) The appellant terminated the PPA not due to the default D per se but due to a commercial decision to negotiate and reduce the purchase price of electricity under tariff. It is not the intent of the IBC to allow an entity to take the benefit of the CIRP to negotiate a better price for a contract and in effect reduce the value of the Corporate Debtor. E H Issues arising from the dispute

41Copy pinpoint41. The following two issues arise for determination: (i) Whether the NCLT/NCLAT can exercise jurisdiction under the IBC over disputes arising from contracts such as the PPA; and F (ii) 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. I Jurisdiction of the NCLT/NCLAT over contractual disputes

42Copy pinpoint42. The primary issue upon which the outcome of this appeal would turn is the nature of the jurisdiction which is exercised by the NCLT under Section 60(5) of the IBC. The provision reads thus: “(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law H Tribunal shall have jurisdiction to entertain or dispose of –

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(a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.”

43Copy pinpoint43. Sub-section (1) of Section 60 provides the NCLT with territorial jurisdiction over the place where the registered office of the corporate person is located. NCLT shall be the adjudicating authority “in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors”. The NCLT has been constituted under Section 408 of the CA 2013 “to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force”38.

44Copy pinpoint44. NCLT owes its existence to statute. The powers and functions which it exercises are those which are conferred upon it by law, in this case, the IBC.

45Copy pinpoint45. The NCLT in its decision dated 29 August 2019 did not specifically examine the issue of its jurisdiction under Section 60(5)(c) of the IBC. It prohibited the termination of the PPA on the ground that it is an “instrument” under Section 238; Articles 9.2.1(e) read with 9.3.1 of the PPA are inconsistent with the provisions of the IBC; and the latter overrides aninstrument having effect by virtue of law. One of the considerations which weighed with the NCLT while coming to its determination was that termination of the PPA would prejudice the status of the Corporate Debtor as a ‘‘going concern’, andlead to the failure of the CIRP. The NCLT observed:

G 38 “Section 408. The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.” H