| CITATION | AIRONLINE 2021 SC 123 |
| DATE OF JUDGEMENT | 8 MARCH 2021 |
| COURT | SUPREME COURT OF INDIA |
| APPELLANT | GUJRAT URJA VIKAS NIGAM LTD |
| RESPONDENT | MR. AMIT GUPTA |
| BENCH | JUSTICE M.R. SHAH, JUSTICE D. Y CHANDRCHUD |
INTRODUCTION
The Insolvency and Bankruptcy Code, 2016 (IBC) is considered a major change in insolvency and corporate law in India. Unlike earlier laws such as the Recovery of Deposits and Receivable Accounts Act, 1993 (RDBA) and the Financial Instruments and Securities Regulation and Development Act, 2002 (SARFAESI), IBC is not a company under the Act. The main purpose of IBC is the restructuring of credit institutions. This is achieved through timely resolution, balancing the interests of the debtor and creditors, allowing creditors to continue business as usual and making the best use of credit companies. NCLT is limited to summary judgment only under IBC and Companies Act, 2013; that is, it is limited only to identifying default and ensuring that all CIRPs and cancellations comply with the IBC. However, since the establishment of the IBC, there have been many legal issues regarding the NCLT’s jurisdiction to adjudicate disputes, in addition to the CIRP and the NCLT’s jurisdiction in civil matters. This article is based on Urja Vikas Nigam v. Amit Kumar in Gujarat.
FACTS OF THE CASE
- The applicant signs a power supply contract with the borrower. The contract is for a period of 25 years and the applicant is the sole purchaser of the electricity generated by the credit company.
- The debt of the company then goes to the NCLT under Section 10 of the IBC.
- The power purchase agreement (PPA) contains an ipso facto clause that allows the contract to be terminated if the contractor commits a breach.
- This situation creates a difficult problem because, for the credit companies, the applicant is the electricity buyer. According to the requester’s agreement, the PPA has set the price and that price by adjusting it against the base price, and there is a clear statement that they want to promise a better negotiation with the other party elsewhere. Therefore, the plaintiff requested reconciliation.
- If the PPA is terminated, the loan companies will not be able to continue their operations and there will be no claimants to resolve the problem and hence the purpose of the IBC will be lost.
ISSUES RAISED
- Whether NCLT/NCLAT can exercise jurisdiction under IBC in disputes arising out of agreements like PPA.
- Whether the petitioner’s right to terminate the PPA under clauses 9.2.1€ and 9.3.1 is provided by the IBC.
CONTENTIONS OF THE PETITIONER
- The PPA provides a mechanism to resolve issues arising from the PPA, the National Commission.
- Therefore, NCLT has no jurisdiction in matters related to PPAs and it is not possible for corporate lenders to approach NCLT.
- Although the NCLT has jurisdiction under Article 60(5), its jurisdiction would prevail under the PPA.
- Such a provision to interfere with contracts was present in the SICA, IBC was introduced because SICA had failed.
- Therefore, Parliament’s failure to enact certain provisions is deliberate and the courts cannot interpret them to give effect to them.
- That person becomes the buyer. Under the electricity Act, credit companies have the option to supply electricity to other consumers even after the expiry of the PPA.
- It is foreseen in the Electricity Law that the task of resolving “disputes between license holders” will be fulfilled by the National Commission.
CONTENTIONS OF THE RESPONDENT
- The jurisdiction of the NCLT cannot be questioned because Article 60(5)© confers jurisdiction on the NCLT in all matters relating to questions of law or fact.
- The reason for the termination of the PPA is solely due to the initiation of the CIRP process and therefore the reason for the decision is economic reality and there is no other reason in the first place.
- In determining that the right to terminate is not granted for reasons other than unemployment (such as default).
- Therefore, it cannot be said that PPA cannot be included in this.
- When an application is accepted under Section 7, 9 or 10, NCLT takes a decision.
- Unnecessary provisions of the Energy Code will be deleted by S238 because the IBC is the final law.
JUDGEMENT
The Supreme Court noted that Article 60 (5) of the IBC provides the NCLT with discretionary power “to resolve any question of merit or any question of law or fact arising out of or in connection with the financial settlement or settlement of the debtor Law”.
Accordingly, in Arcelor Mittal v, the NCLT is the sole authority to entertain or dispose of petitions against creditors in the IBC and would indicate that the NCLT has jurisdiction to decide legal or constitutional questions under the IBC.
Insolvency cases Clarifying the applicability of these provisions, the Supreme Court held that since contractual disputes fall within the scope of disputes arising out of or in connection with compromise or settlement, the NCLT has jurisdiction to decide the dispute.
However, the existing provisions under which the NCLT is subject to restrictions by the IBC remain unchanged.
ANALYSIS
This decision provides important guidance for future disputes involving the intersection of the IBC and other laws. The decision made it clear that in case of conflict, the IBC will prevail over other laws. Moreover, in matters related to CIRP of companies involved in electricity generation/distribution and joint ventures, the importance of IBC will facilitate the promotion of the company, if the termination of the PPA does not affect the incentive as a whole. The Supreme Court has clearly stated that NCLT and NCLAT have ensured that they do not interfere with the laws of other tribunals, tribunals and forums in case the dispute does not arise in connection with the entirety or insolvency of the debts of the company. Consequently, the decision clarifies other Important aspects of the IBC and paves the way for improvement of the IBC to ensure continuity and resilience of credit companies.
CONCLUSION
In conclusion, the court said that NCLT and NCLAT are empowered to exercise jurisdiction under the provisions of the IBC in disputes arising from contracts such as the purchase agreements (PPA) in question. According to the old official article, the general question regarding its use was left to the legislature to decide, since it was a matter of law. However, in the present case, the termination of the PPA was due solely to the complaints and since the termination would render the CIRP process invalid and in view of the purpose of the IBC, the Court ordered that the petitioner IBC be jointly granted to Read. 9.3.1 has the right to terminate the PPA. The court emphasized the importance of speedy resolution in the IBC process and the aim of the Act to ensure better development in its implementation.
References
- MANU/USSC/0257/1904
- Swiss Ribbons Pvt Ltd & Anr vs. Union of India & Ors [2019] ibclaw.in 03 SC
- Para 67 in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta and Ors. (2021) ibclaw.in 44 SC
- https://insolvencytracker.in
- https://nclat.nic.in
- https://main.sci.gov.in
- https://indiankanoon.org
- https://blog.ipleaders.in
- https://ibc.in
This Article is written by Rupali Sharma, student of The Law School, University of Jammu; an Intern at Legal Vidhiya.
