2019 (10) TMI 1313 - AT - Insolvency and Bankruptcy

Termination of Power Purchase Agreement - CIRP process - Going Concern - HELD THAT - To keep the Corporate Debtor a going concern which is generating electricity and supplying only to Gujarat Urja Vikas Nigam Ltd. the Adjudicating Authority rightly asked Gujarat Urja Vikas Nigam Ltd. not to terminate the Power Purchase Agreement dated 30th April 2010. Gujarat Urja Vikas Nigam Limited being purchaser of the electricity cannot terminate the Power Purchase Agreement solely on the ground that the Corporate Insolvency Resolution Process has been initiated against Astonfield Solar (Gujrat) Pvt. Ltd. (Corporate Debtor) which is generating electricity and supplying it and there is no default in supplying electricity and during the Corporate Insolvency Resolution Process . On the other hand Gujarat Urja Vikas Nigam Limited is not paying the dues as alleged by Ms. Mahima Singh learned counsel for the Resolution Professional (M/s Astonfield Solar (Gujrat) Pvt. Ltd.). The observation of the Adjudicating Authority at page-35 is deleted where it is observed that the Appellant may terminate the Power Purchase Agreement if the Corporate Debtor goes into liquidation as during the liquidation process also the liquidator is to ensure that the Corporate Debtor remains a going concern - appeal disposed off.

Summary

Issues involved:
1. Termination of Power Purchase Agreement during Corporate Insolvency Resolution Process
2. Obligation of purchaser to pay dues during Corporate Insolvency Resolution Process

Analysis:
1. Termination of Power Purchase Agreement during Corporate Insolvency Resolution Process:
The case involved a situation where 'Gujarat Urja Vikas Nigam Ltd.' sought to terminate the 'Power Purchase Agreement' with 'Astonfield Solar (Gujrat) Pvt. Ltd.' (Corporate Debtor) during the Corporate Insolvency Resolution Process. The Adjudicating Authority had prohibited the termination of the agreement, emphasizing the need to keep the Corporate Debtor operational as it generated and supplied electricity exclusively to 'Gujarat Urja Vikas Nigam Ltd.' The Appellate Tribunal upheld this decision, highlighting that the termination of the agreement solely due to the initiation of insolvency proceedings was unjustified. It was noted that the purchaser cannot terminate the agreement if there was no default in electricity supply and emphasized the importance of maintaining the Corporate Debtor as a going concern during insolvency proceedings.

2. Obligation of purchaser to pay dues during Corporate Insolvency Resolution Process:
The Tribunal ruled that 'Gujarat Urja Vikas Nigam Ltd.' was liable to pay the dues of the Corporate Debtor for the electricity supplied from the Solar Power Plant during the Corporate Insolvency Resolution Process. The decision was based on the argument that the purchaser's obligation to pay dues was not contingent upon the initiation of insolvency proceedings but rather on the electricity supplied. The Tribunal dismissed the appeal and directed the purchaser to fulfill its payment obligations to the Corporate Debtor even during the insolvency resolution process. It was emphasized that the purchaser's failure to pay the dues was not justified merely by the existence of insolvency proceedings and that such payments were essential for the functioning of the Corporate Debtor.

In conclusion, the Appellate Tribunal affirmed the Adjudicating Authority's decision to prevent the termination of the Power Purchase Agreement during the Corporate Insolvency Resolution Process and held 'Gujarat Urja Vikas Nigam Ltd.' responsible for paying the dues of the Corporate Debtor for electricity supplied from the Solar Power Plant. The judgment underscored the importance of maintaining the Corporate Debtor's operations and ensuring the continuity of electricity supply even during insolvency proceedings, emphasizing the purchaser's obligation to fulfill payment commitments irrespective of the insolvency status of the Corporate Debtor.