2023 (1) TMI 457 - SCH - Insolvency and Bankruptcy

Re-determination of tariff by the appellant was not successful - supervening circumstances of insolvency proceedings being admitted against M/s. Lanco Infratech Limited and liquidation proceedings commenced with the appointment of respondent No. 2 as the Liquidator and respondent No. 1 took possession of the assets - HELD THAT - There is no cavil to the issue that the appellant seeks to wriggle out of the PPA albeit on a ground that they are entitled to do so in terms of the agreement. There is no question of law raised to be examined by this Court within the parameters of Section 62 of the Code and the examination of the facts of the case under the law enunciated cannot be doubted - Appeal dismissed.

Summary

Issues:
1. Interpretation of Power Purchase Agreement (PPA) termination clause.
2. Validity of termination of PPA during insolvency proceedings.
3. Compliance with Insolvency and Bankruptcy Code, 2016.
4. Maximization of value of assets in insolvency resolution.

Interpretation of Power Purchase Agreement (PPA) termination clause:
The appellant entered into a Power Purchase Agreement (PPA) with a company for a solar power project. The appellant sought to terminate the PPA based on a specific clause, leading to a challenge by the respondent before the NCLT and NCLAT. The courts examined previous judgments and clauses in the PPA to understand the situation. The appellant's attempt to terminate the PPA was scrutinized, focusing on the agreement's terms and conditions.

Validity of termination of PPA during insolvency proceedings:
Insolvency proceedings were initiated against the company with which the PPA was signed, leading to liquidation. The appellant's attempt to terminate the PPA during this process was contested by the respondent. The NCLAT emphasized the importance of the solar power project functioning as a going concern during liquidation to maximize asset value. The termination of the PPA was deemed unjustified in light of the project's economic viability and creditor security.

Compliance with Insolvency and Bankruptcy Code, 2016:
The judgment considered the objectives of the Insolvency and Bankruptcy Code, 2016, which aim to maximize asset value for corporate resolution. The court highlighted the significance of the PPA in ensuring a steady revenue stream for the solar power project, which is crucial for financial viability. The decision to dismiss the appeal was based on aligning with the Code's objectives and the necessity of the project's continued operation during insolvency proceedings.

Maximization of value of assets in insolvency resolution:
The court emphasized the importance of the solar power project operating in conjunction with the PPA to realize its full economic value. Maintaining the PPA was seen as essential for maximizing asset value and ensuring financial creditor confidence. The judgment focused on the interdependence of the project and the PPA for long-term viability, ultimately leading to the dismissal of the appeal. The parties were directed to settle any outstanding dues within a specified timeframe.