TMI Blog2020 (10) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... , but not before this Tribunal? - HELD THAT:- Now the company is under liquidation. When CERC has categorically stated in para 10 of the order that when moratorium under section 14 of the IBC was pending no proceeding lies before CERC. Relying on the decision of the CERC since the Corporate Debtor is under liquidation and by virtue of Article 12.9 of the PPA, the applicant has to approach the Adjudicating Authority under section 60(5)(c) of the I B Code and not before CERC to decide the dispute. It is true the asset without producing power and supply of power will not meet the object of the Code, viz. maximisation of value of the asset. Termination is not on the ground that power plant is unable to supply power. It is purely on the ground that the Corporate Debtor has gone into liquidation. Therefore, when the unit of the Corporate Debtor is sold as an ongoing concern and then only the object of the Code can be achieved. The Adjudicating Authority has to see the object of the Code, which is maximisation of value of the asset. The financial creditor, who is having security interest be allowed to continue with the secured asset till it is disposed of. Therefore, termination noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding and took possession of the secured asset under SARFAESI Act. Bhadrada Project is functioning under PPA dated 29.04.2010 (ANNEXURE A-4) entered into between the corporate debtor and respondent No. 1. 2.4 It is averred in para 8 of the application that respondent No. 1 issued Default Notice dated 23.07.2019 (ANNEXURE A-5) under the PPA for the sole reason that occurrence of insolvency proceedings constitutes a default under the PPA. 2.5 It is averred in paras 9 to 11 of the application that the applicant addressed letter dated 07.08.2019 (ANNEXURE A-6) to respondent No. 1 not to terminate the PPA on the grounds enumerated in para 9. However, regardless of the above letter dated 07.08.2019, respondent No. 1has issued Termination Notice dated 30.08.2019 (ANNEXURE A-7) under Article 9.3.1 (a) of the PPA and thereby terminated the PPA. Loan statement from 05.09.2000 to 28.08.2018 is at ANNEXURE A-8. 2.6 It is averred in para 12 of the application that PPA was terminated oblivious of the fact that the secured asset is an independent, viable power generating asset and if PPA is allowed to be terminated, it will be an impediment to secured creditors to exercise rights under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) or under section 52(5) of the I B Code is not maintainable. The PPA is terminated for future period as the terms of PPA provide for such right to respondent No. 1, due to initiation of 3.2 In para 4 of the Counter, respondent No. 1 averred that duration of the agreement is provided in Article 9.1 of the PPA, which reads as under: Term of the Agreement: This Agreement shall become effective upon the execution and delivery thereof by the parties hereto and unless terminated pursuant to other provisions of the Agreement, shall continue to be in force for such time until the completion of a period of 25 years from the Commercial Operation Date. 3.3 In paras 5 and 6 of the Counter it is averred that Article 9.2.1 read with Article 9.3 of the PPA provides for termination of PPA on account of the corporate debtor's (power producer) default and empowers respondent No. 1 to do so. It is contended in para 7 of the Counter that the event envisaged under Article 9.2.1(3) did happen in the present case and the applicant itself admits breach of PPA. 3.4 It is averred in paras 8 and 9 of the Counter that respondent No. 1 has the absolute right to issue Termination Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report dated 12.11.2018 is misconceived. Said report is for Stressed Thermal Project and not to Solar Power Projects, such as project of the corporate debtor. Respondent No. 1has quoted full recommendation of the Committee, which reads as under: The Committee recommends that DISCOMS, CIL, PGCIL, Ministry of Environment and Forests and appropriate Governments may be advised not cancel PPA, FSA, transmission connectivity, EC/ FC and all other approvals including water, even if the project is referred to NCLT or is acquired by another entity subject to the provisions of the contracted PPA and/ or applicable rules. It also recommends that all clearances may be linked to the plant and not to the promoter. It is thus, clear that the above Report does not prohibit the Distribution Companies/ respondent No. 1from exercising rights under the PPA. 3.10 In para 34 of the Counter it is reiterated that right to continue to supply electricity under the PPA cannot be a secured asset within the scope of section 52 of the I B Code. Provisions of section 52 of I B Code cannot be read as a term of the financing document. 3.11 Having reiterated the submissions it is prayed by responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary and illegal. The applicant is further seeking relief to restrain respondent No. 1 from taking any steps or from taking any further steps pursuant to the impugned notice and for continuance of Power Purchase Agreement (hereinafter referred to as 'PPA') dated 29.04.2010. 7. The learned counsel for the applicant would content that CIRP is initiated against the Corporate Debtor by order dated 07.08.2017. This Tribunal has passed order of liquidation dated 27.08.2018. The Corporate Debtor, viz. Lanco Infratech Limited is now under liquidation. 8. The learned counsel would contend that the applicant being secured creditor is having security over the entirety of Bhadrada Project including the cash flow under the PPA entered into with respondent No. 1, namely, Gujarat Urja Vikas Nigam Ltd ('GUVNL' for brevity). The learned counsel contended that Article 12.9 of the PPA allows explicitly the applicant herein to subrogate itself into possession of the Corporate Debtor or assign rights and liabilities under the PPA of the Corporate Debtor to a third party, in case of default by the Corporate Debtor qua the applicant. 9. There is no dispute that the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PPA is also against the objects of the Code. Since termination of PPA was issued only on account of the Corporate Debtor contend that termination of the PPA is against the provisions of I B Code. Further, Article 12.9 of the PPA protects the interest of the applicant being secured creditor. 13. On the other hand the learned counsel for respondent No. l/ GUVNL would contend that the applicant has no locus standi to file application against GUVNL. There is no privity of contract between the applicant on one hand and GUVNL on the other hand. The learned counsel contended that the applicant is a stranger to PPA. The learned counsel contended that if the applicant is aggrieved by termination of PPA the only course open to the applicant is to approach Gujarat Electricity Regulatory Commission ('GERC' for brevity). The learned counsel would contend that any dispute arising under the PPA is to be resolved by GERC and the Adjudicating Authority has no jurisdiction to decide validity of termination notice. 14. The learned counsel for respondent No. 1further contended that section 52(5) of I B Code is not applicable to the present case. The learned counsel contended that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured creditor of the Corporate Debtor. The applicant, no doubt, is not a direct party to the PPA. It is true that PPA is between the Corporate Debtor and GUVNL. The asset of the Corporate Debtor is the subject matter of the PPA over which the applicant has security interest. The Liquidator, who arrayed as respondent No. 2 in the application has not challenged the contention of the applicant that it is a secured creditor having security interest over the power plant. The applicant is contending that by virtue of documents entered with Corporate Debtor while advancing the loan it is allowed to receive cash flows directly from GUVNL and adjust the same to the loan account. The question is whether the applicant has locus standi being a secured creditor to challenge the termination order. The applicant is heavily relying on Article 12.9 of PPA. Article 12.9 is reproduced hereunder for better appreciation: 12.9 Assignment: Neither party shall assign this Agreement or any portion hereof without the prior written consent of the other party, provided further that any assignee shall expressly assume the assignor's obligations thereafter arising under this agreement pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent set of circumstances. The learned counsel contended that if the Corporate Debtor being Power Producer is subject to any bankruptcy or insolvency laws or goes into liquidation or dissolution or has a receiver appointed or liquidator is appointed, then it constitutes an Event of Default. It is to be noted that occurrence of default under Article 9.2.1(e) of PPA is subject to Article 12.9 of PPA. It cannot be said that Article 9.2.1(e) of PPA is independent by itself. It is always subject to Article 12.9 of PPA, wherein also it is clearly stated that relief provided in Article 12.9 of PPA is only on occurring of Even of Default. In other words, Article 12.9 of PPA would come into play soon after when an Event of Default occurs under Article 9.2.1(e) of PPA. 21. Therefore, we do not agree with the contention of the learned counsel for GUVNL that Articles 9.2.1(e) and 12.9 of PPA are working in different fields and are independent of each other. 22. The next contention of the learned counsel is that this Tribunal has no jurisdiction to entertain the application questioning the termination of PPA. In any event, the only course open to the applicant, an aggrieved party as a resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Apex Court. It is contended that there is no stay over the order passed by the Hon'ble NCLAT by the Hon'ble Apex Court. 24. The contention of the learned counsel is that the applicant being a stranger to the PPA has no locus standi to question the order of termination. Secondly, the provisions of section 60(5)(c) of the I B Code are not applicable. The present application is filed under section 60(5) as well as section 52(5) of the I B Code. For better appreciation said sections are reproduced hereunder: Section 60. Adjudicating Authority for corporate persons. (5) Notwithstanding anything to the contraiy contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (c) any question ofpriorities 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. Secured Creditor in liquidation proceedings. (5) If in the course of realising a secured asset, any secured creditor faces resistance from the corporate debtor or any person connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling or otherwise disposing of the security, then the secured creditor may make an application to the Adjudicating Authority to facilitate the secured creditor to realise such security interest in accordance with law for the time being in force. Termination of PPA directly affects the security interest of the applicant in the sense the applicant cannot realise the maximum value of the secured asset. Value of the secured asset lies with production of power and supply to GUVNL. The contention of the applicant is that the power plant without production and supply of power will not get maximisation of value of the asset. Maximisation of value of the asset lies in selling the asset as an ongoing concern. In other words, the asset will fetch maximum value only when PPA is allowed to remain. 28. It is true the asset without producing power and supply of power will not meet the object of the Code, viz. maximisation of value of the asset. Termination is not on the ground that power plant is unable to supply power. It is purely on the ground that the Corporate Debtor has gone into liquidation. Therefore, when the unit of the Corporate Debtor is sold as an ongoing concern and then only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercising its extraordinary jurisdiction under Article 226 of the Constitution, the High Court has wide power to pass appropriate order and issue proper direction as necessary in the facts and circumstances of the case and in the interest of justice. But that is not to say that the High Court can ignore the scope of the writ petition and nature of the dispute and enter the field pertaining to contractual obligations between the parties and issue such directions annulling the existing contract and introducing afresh contract in its place. 32. The learned counsel further relied on decision of the NCLT, Mumbai rendered on 02.04.2018 in MA 96/ 2018 in CP No. 1061/ I BC/ 2017 in the case of RAJENDRA K. BHUTIA Vs. MHADA. Relevant part is ' reproduced hereunder: 35. By reading this section Moratorium prohibits institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, or other authorities. The applicant counsel says that the word 'proceedings' mentioned in this clause will cover the termination of the contract by MHADA. But by reading this clause, the word 'proceedings' mentioned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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