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Discom cannot terminate PPA with insolvent power company: SC

The Gujarat power distribution company had moved Supreme Court saying that neither the National Company Law Tribunal (NCLT) nor the NCLAT had the jurisdiction to stay the termination, which was done as per the clauses of the agreement

twitter-logoDipak Mondal | March 9, 2021 | Updated 13:25 IST
Discom cannot terminate PPA with insolvent power company: SC

Gujarat electricity distribution and trading company - Gujarat Urja Vikas Nigam Ltd - has been barred by the Supreme Court to terminate the power purchasing agreement (PPA) with an insolvent company - Astonfield Solar (India) Pvt Ltd.

The Supreme Court on Monday dismissed an appeal by the GUVNL against an order by the National Company Law Appellate Tribunal (NCLAT), which had earlier stayed the termination of PPA on grounds that the power generator - Astonfield Solar (India) - had filed for insolvency.

The Gujarat power distribution company had moved Supreme Court saying that neither the National Company Law Tribunal (NCLT) nor the NCLAT had the jurisdiction to stay the termination, which was done as per the clauses of the agreement.

However, the apex court maintained that NCLT and NCLAT were correct in staying the termination of the PPA as GUVNL wanted to terminate the PPA with Astonfield Solar on the grounds that the latter had filed for insolvency.

Also read: Rs 3 lakh crore lifeline to Discoms to perform or perish

The Supreme Court said that allowing GUVNL to terminate the PPA would certainly result in the corporate death of Astonfield Solar (Gujarat), which is undergoing corporate insolvency resolution process.

While dismissing the appeal, the court also argued that Section 14 of the IBC "clarifies that a license, permit, quota, concession, grant or right given by a government cannot be suspended or terminated on the grounds of insolvency, subject to certain exceptions."

Gujarat Urja Vikas Nigam Ltd had entered into a power purchasing agreement with Astonfield Solar (India) Pvt Ltd in 2010. As per the agreement, the PPA would remain in force for 25 years.

However, Astonfield Solar filed for insolvency in November 2018. In May 2019, Gujarat Urja Vikas Nigam threatened termination of the PPA against which the corporate debtor moved NCLT, which on 31 May 2019 stayed the termination of PPA.

The Gujarat power distribution company then moved NCLAT, which in October 2019 had also stayed the termination.

In a similar case, GUVNL had also tried to terminate its power purchasing agreement with Lanco Infratech. However, the same has also been stayed by both the NCLT and NCLAT.

Also read: Average rural power supply duration went up to 18.5 hours per day in 2019-20: RK Singh

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