Supreme Court-IBC prevails over power purchase agreement

It has been held by the Supreme Court that power purchase a greener cannot be terminated during the Moratorium period under the insolvency and bankruptcy code says the Supreme Court.

A bench of two judges justice Dhananjaya Chandrachud and justice MR Shah said that a buyer cannot terminate a power purchase agreement even though the the agreement contains a clause allowing an action if there is an insolvency application against a power supplier.

The apex court said that the insolvency tribunals correctly stayed the termination because any action otherwise would have resulted in corporate death of company.

The case emanates from 25 year agreement for purchase rig solar power between Gujarat utha Vikas Nigam Ltd, which is a state undertaking and Astonfield solar Gujarat private limited -power generator.Astonfield underwent financial crisis on account of natural calamities which led the lender to declare it non performing asset.

The national company law tribunal allowed the insolvency process of company in 2019. Which prompts GVNL to issue the termination of power purchase agreement.

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