TMI Blog2019 (8) TMI 1561X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent Company on 01.05.2019. That termination of PPA at this stage may have adverse consequences on the status of the Corporate Debtor as going concern and eventually, may jeopardise the entire CIR Process - Further, by reading the clause 9.3.1 of the PPA and the impugned default notice dated 01.05.2019, it is clear that the Respondent Company has asked the Corporate Debtor to rectify the default mentioned in clause 9.2.1(e), which in turn, implies that, to prevent the termination of contract, the corporate Debtor had to terminate or complete the CIR process within 30 days, from the receipt of the notice - thus, the issuance of default notice dated 01.05.2019 has created a situation, which compels the Corporate Debtor to exit from the CIR process within 30 days, in order to save the PPA from getting terminated. The Power Purchase Agreement (PPA) is an 'instrument' for the applicability of Section 238 of IBC, 2016 and Clauses 9.2.1(e) read with 9.3.1 of the PPA under reference are inconsistent with the provisions of IBC, 2016. The PPA being an instrument within the ambit of Section 238 of IBC 2016, provisions of IBC 2016 and process initiated thereunder shall have ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2 Event of Default 9.2.1 Power Producer's Default: The occurrence of any of the following events at any time during the term of this Agreement shall constitute an Event of Default by Power Producer: a. O M Default on part of Power Producer. e. If the Power producer becomes voluntarily or involuntarily the subject of proceeding under any bankruptcy or insolvency laws or goes into liquidation or dissolution or has a receiver appointed over it or liquidator is appointed, pursuant to Law, except where such dissolution of the Power producer is for the purpose of a merger, consolidated or reorganization and where the resulting entity has the financial standing to perform its obligations under this Agreement and creditworthiness similar to the Power Producer and expressly assumes all obligations under this agreement and is in a position to perform them; or 9.3 Termination 9.3.1 Termination for Power Producer's Default: Upon the occurrence of an event of default as set out in sub-clause 9.21 above, GUNL may deliver a Default Notice to the Power Producer in writing which shall specify in reasonable detail the Event of Default giving rise to the default notice, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Is, might not submit a resolution plan, which will eventually lead to liquidation of the Corporate Debtor. 12. It is argued by the Applicants that clause 9.2.1(e) of the PPA is inconsistent with provisions of Section 238 of IBC 2016, which states that the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law . 13. In reply, the Respondent Company submits that it had followed the process provided in the clause 9.3 of PPA and accordingly, it had given notice of Default for the events specified in the clause 9.2.1 (e). The 30 days cure period provided in the clause 9.3.1 has expired on 07.06.2019 and the Event of Default has not been cured. They pleaded that GUVNL has thus acquired the absolute right to deliver the termination notice to the Corporate Debtor for termination of the PPA and discharge the GUVNL of all obligations under the PPA. 14. It is further submitted by the Respondent that the appointment of a Resolution Professional or any other agency under the provisions of the Insolvency and Bankruptcy Code, 2016 and decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here cannot be an omnibus application of section 238 to each and every issue related to corporate debtor except in the way as mentioned above . 18. To adjudicate the aforesaid issues, we believe, it is necessary to read the text of Section 238 of IBC 2016, which is reproduced as below: 238. The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 19. That from the plain reading of Section 238, it is evident that the aforesaid Section is applicable to an 'instrument' too. However, we find that the term 'instrument' has not been defined anywhere under IBC 2016. 20. To know, whether the Power Purchase Agreement (PPA) is an 'instrument' or not, we referred to the provisions of Section 3(37) of the Code, which is reproduced as below: Section 3(37): Words and expressions used but not defined in this Code but defined in the Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Securities Contract (Regulation) Act, 1956, the Securities Exchange Board of India Act, 1992, the Recovery of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inconsistent with the objective of IBC code, as the Resolution of the Corporate Debtor is highly dependent upon this agreement and if the agreement is terminated the Corporate Debtor will be forced to go into liquidation. 30. It is observed that the CIR process in the instant case was triggered on 20.11.2018, which was further extended by 90 days on 16.05.2019 and the default notices were issued by the Respondent Company on 01.05.2019. That termination of PPA at this stage may have adverse consequences on the status of the Corporate Debtor as going concern and eventually, may jeopardise the entire CIR Process. While elaborating on the objectives of IBC as enshrined in the Preamble, the Hon'ble Supreme Court, had held in the matter of Swiss Ribbons Pvt. Ltd. v Union of India, 2019 SCC Online SC 73: .......What is interesting to note is that Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern . 31. Further, by reading the claus ..... 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