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

Citation: [2021] 13 S.C.R. 611 · Decided: 08-03-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Dismissed

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Judgment (excerpt)

[2021] 13 S.C.R. 611
611
GUJARAT URJA VIKAS NIGAM LIMITED
v.
MR. AMIT GUPTA & ORS.
(Civil Appeal No. 9241 of 2019)
MARCH 08, 2021
[DR. DHANANJAYA Y CHANDRACHUD AND
M. R. SHAH, JJ.]
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
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
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 an

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