TMI Blog2020 (8) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... the PPA was executed pursuant to a bidding process in which Corporate Debtor had participated. It was to last for 25 years and power was to be supplied to Appellant at the rate of ₹ 7 per KWH for the entire period of 25 years - On a plain reading of Clause 7 of the PPA, it emerges that the tariff at the rate of ₹ 7/- per KWH was quoted by the Corporate Debtor as per tariff bid submitted by it through Odisha Renewable Energy Development Agency (OREDA) and same was accepted with Corporate Debtor being the L1 bidder. The bid process culminated in acceptance of quoted tariff of Corporate Debtor for 25 years for Solar Power Plant at the fixed rate of ₹ 7/- per KWH and the terms and conditions agreed upon crystallized into the PPA executed inter se the Corporate Debtor and Appellant. The argument that presently the tariff of solar power is much less than ₹ 7/ KWH does not hold water as the tariff in PPA was decided on commercial consideration obtaining at the time the PPA was executed. Admittedly, PPA does not contain a provision for revision of tariff though it makes a provision for force majeure and default and termination. A bare perusal of provision co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. There is no merit in this appeal - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 1271 of 2019 - - - Dated:- 24-7-2020 - [Justice Bansi Lal Bhat] Acting Chairperson [V.P. Singh] Member (Technical) [Alok Srivastava] Member (Technical) For the Appellant : Mr. Raj Kumar Mehta and Ms. Himanshi Andley, Advocates For the Respondents : Mr. Krishnendu Datta, Senior Advocate with Ms. Meher Tandon and Mr. Jeevan Ballav Panda, Advocates for R-4. Mr. Abhijeet Sinha and Mr. Sudeep Vijayan, Advocates for R-1. JUDGMENT BANSI LAL BHAT, J. CA (IB) No. 1184/KB/2019 in CP (IB) No. 1439/KB/2018 filed by the Resolution Professional seeking certain directions against Respondent- GRIDCO Limited (Appellant herein) came to be disposed off, alongwith determination of two more CAs in terms of order dated 14th October, 2019 passed by the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited emerged as the Successful Resolution Applicant in the Corporate Insolvency Resolution Process initiated against the Corporate Debtor and it has been arrayed as Respondent No.4 in the instant appeal. 4. Learned counsel for the Appellant submitted that the Appellant was constrained to terminate the agreement with the Corporate Debtor as the Corporate Debtor failed to restore supply of power despite being asked to restore the same vide letters dated 29th November, 2018 and 19th February, 2019. It is submitted that the GRIDCO is a regulated entity under the Electricity Act, 2003 and its purchase and sale of power is regulated by the Odisha Electricity Regulatory Commission ( OERC for short). It is submitted that the market rate of solar power in State of Odisha is around ₹ 3/KWH and from outside the State it is around State ₹ 2.70/KWH. It is further submitted that the GRIDCO has signed agreements for solar capacity of 575 MW at a cost of ₹ 3/KWH and below. It is further submitted that at the time of putting up the solar power plant, the Corporate Debtor had bid for the sale of power from the plant which was substantially high i.e. around ₹ 10 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the assets of the Corporate Debtor. It is further submitted that the factum of commencement of Corporate Insolvency Resolution Process and passing of Moratorium order was communicated to Appellant by the Resolution Professional vide letter dated 25th February, 2019 alongwith the copy of order. The Appellant moved to terminate the PPA on 8th July, 2019 i.e. after delay of almost five months from the commencement of Corporate Insolvency Resolution Process. Such termination being challenged before the Adjudicating Authority, was held to be in violation of Section 14(1) of the I B Code and the PPA was restored in terms of the impugned order dated 14th October, 2019. Subsequently Respondent No.4 submitted its Resolution Plan which was approved by the requisite majority of the Committee of Creditors on 11th November, 2019. The Adjudicating Authority approved the Resolution Plan of Respondent No.4 on 25th November, 2019. This fact was notified to the Appellant. It is submitted that since the Appellant had terminated the PPA after imposition of Moratorium, it contravened provisions of Section 14(1) of the I B Code . It is further submitted that such termination was unsustainable und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent No.4. It is further submitted that this order passed in appeal has not been challenged by the Appellant and the same having attained finality is binding in rem on all stakeholders including the Appellant. It is further submitted that the instant appeal is limited to question of termination of PPA and the Appellant cannot be permitted to expand its scope. Referring to the tariff filings reproduced hereinbelow, it is submitted that the Appellant is procuring power at rates greater than ₹ 7/- per KWH which even extend to ₹ 12.72/- KWH, that the Appellant has accounted for the supply of power by Respondent No.4 at ₹ 7/- per KWH in their submissions to the OREC for both F.Y. 2019-20 2020-21 which shows that the Appellant is also proceeding on the basis of the PPA as valid and subsisting even as on date and that in terms of the PPA, the Corporate Debtor includes its successors and permitted assigns. Tariff filings referred to hereinabove are as under: Proposed Procurement Cost of Solar Power During FY-2019-20 Solar RE Sources Energy Proposed for FY 2019- 20(MU) OERC Approved Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is submitted that the Appellant cannot be allowed to unilaterally alter the terms of the PPA to the serious prejudice and detriment of Respondent No.4 after being the Successful Resolution Applicant . 8. The issues for consideration are whether the termination of PPA is in violation of Section 14(1) of the I B 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. It is also to be considered as to what is the effect of approval of the Resolution Plan on such termination of the PPA. It would be appropriate to bring on record that during the course of hearing in this appeal, the Appellant- GRIDCO offered to avail power from the Respondent No.4 if Respondent No.4 agrees to supply the power at the market rate but such offer of Appellant in regard to revised tariff has been rejected by Respondent No.4. 9. After hearing learned counsel for the parties at length and wading through the record, we find that the Appellant is a Government concern supplying electricity in bulk after purchasing power from four different generation Companies. The role of the Appellant is that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to continue to supply power in performance of its obligations under PPA. The effect of this provision is that the seller, in the event of such unforeseen event including damage caused to the plant due to a storm, lightening etc., would not be under an obligation to pay compensation to the Appellant for its inability to supply power due to disruption of power supply arising out of such unforeseen event. 12. Clause 17 dealing with default and termination of PPA is reproduced hereunder: 17. Default Termination: 17.1 The PPA may be terminated either by the Project Proponent or GRIDCO only in the event of default by GRIDCO or the Project Proponent respectively 17.2 Default by GRIDCO will mean nonpayment of electricity charges for a period of consecutive three months 17.3 Default by the Project Proponent shall mean non-supply of total net electricity generated and delivered at the Delivery Point for a period of three months for reasons exclusively attributable to the Project Proponent. 17.4 In case of default, the non-defaulting party shall issue a default notice to the defaulting party. If the default is not fully set right within one month from the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor, the cessation of power supply to Appellant did not arise out of any act of nonfeasance, misfeasance or malfeasance on the part of the Corporate Debtor but on account of storm damaging the plant and rendering it non-operational and such eventuality is squarely covered under the force majeure clause viz Clause 14 of the PPA. In these circumstances, 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 25th February, 2019, being in violation of Section 14(1) of the I B Code would not sustain. That apart, such termination of PPA not being in conformity with procedure set out in the contractual provision as noticed hereinabove cannot be supported. Admittedly, the Appellant did not issue the termination notice as contemplated in the contract and failed to comply with the mandate of clause 17.4 of PPA. 16. In view of the foregoing d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Swiss Ribbons Pvt. Ltd. v. Union of India- Writ Petition (Civil) No. 99 of 2018 :- 43. It is important to bear in mind that once the resolution plan is approved by the committee of creditors and thereafter by the Adjudicating Authority, the aforesaid plan is binding on all stakeholders as follows: 31. Approval of resolution plan.-(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of Section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan: Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation . This proposition of law was again reiterated by the Hon ble Apex Court in Committee of Creditors of Essar Steel India Limited through Authorised Signatory v. Satish Kumar Gupta Ors.- 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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