NCLT/NCLAT's Jurisdiction on Insolvency Disputes Upheld, PPA Stay Maintained

The NCLT/NCLAT has jurisdiction under Section 60(5)(c) of the IBC to adjudicate disputes related to insolvency resolution processes. The court upheld the stay on terminating the PPA, emphasizing the importance of preserving the Corporate Debtor as a 'going concern.' The validity of ipso facto clauses remains open for legislative intervention, with the court recognizing the need for clarity on this issue. The NCLAT's consideration of the liquidation issue was deemed beyond its jurisdiction, and the appellant was held liable to pay for electricity post-termination reversal. The appeal was dismissed, and relevant applications were resolved.

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Issues Involved:
1. Jurisdiction of the NCLT/NCLAT over contractual disputes.
2. Validity of ipso facto clauses.
3. Appellant's right to terminate the PPA.
4. NCLAT's decision on the issue of liquidation.
5. Appellant's liability to pay for the electricity injected by the Corporate Debtor.

Detailed Analysis:

Jurisdiction of the NCLT/NCLAT over Contractual Disputes:
The primary issue was whether the NCLT/NCLAT can exercise jurisdiction under the IBC over disputes arising from contracts such as the PPA. Section 60(5)(c) of the IBC provides the NCLT with jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person, any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India, and any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under the Code.

The Court held that the NCLT has jurisdiction to adjudicate disputes that are related to the insolvency resolution process. The NCLT/NCLAT's jurisdiction under Section 60(5)(c) is broad and can include contractual disputes if they arise solely from or relate to the insolvency of the Corporate Debtor. The NCLT was empowered to restrain the appellant from terminating the PPA as the termination was solely on the ground of insolvency.

Validity of Ipso Facto Clauses:
Ipso facto clauses allow a party to terminate a contract due to the occurrence of an 'event of default,' including insolvency. The Court noted that globally, there is a trend towards invalidating such clauses to ensure the debtor remains a 'going concern.' The UNCITRAL Guide and the World Bank recommend overriding such clauses, subject to limited exceptions.

In India, the IBC does not explicitly invalidate ipso facto clauses except in specific contexts like government licenses and essential goods/services. The Court acknowledged the complexity of the issue and the need for legislative intervention to address the broader validity of ipso facto clauses.

Appellant's Right to Terminate the PPA:
The Court analyzed the PPA and noted that the termination of the PPA based on the initiation of insolvency proceedings would lead to the corporate death of the Corporate Debtor, as the PPA was its sole contract. The NCLT/NCLAT correctly stayed the termination of the PPA to preserve the Corporate Debtor as a 'going concern.' The Court emphasized that the NCLT's jurisdiction under Section 60(5)(c) was appropriately invoked as the termination was solely due to insolvency.

NCLAT's Decision on the Issue of Liquidation:
The NCLAT had exceeded its jurisdiction by considering the issue of liquidation, which was not raised by any party. The NCLT had upheld the appellant's right to terminate the PPA in case of liquidation, but the NCLAT set aside this observation without it being a subject matter of the appeal. The Court held that the NCLAT could not have considered this issue and that it was academic in nature.

Appellant's Liability to Pay for the Electricity Injected by the Corporate Debtor:
The appellant contended that it should not be liable to pay for electricity procured after the termination notice due to erroneous injunctions by the NCLT/NCLAT. The Court held that since the termination of the PPA was set aside, the appellant is liable to pay for the electricity procured after 7 June 2019. The appellant's claim for compensation under Article 9.3.1 of the PPA was rendered otiose.

Conclusion:
1. The NCLT/NCLAT could exercise jurisdiction under Section 60(5)(c) of the IBC to stay the termination of the PPA since it was based solely on the initiation of CIRP.
2. The NCLT/NCLAT correctly stayed the termination of the PPA to prevent the corporate death of the Corporate Debtor.
3. The broader question of the validity/invalidity of ipso facto clauses is left open for legislative intervention.

The appeal was dismissed, and pending applications were disposed of.

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