In Brief
Gujarat Urja Vikas Nigam Limited sought to terminate a Power Purchase Agreement with Astonfield Solar (Gujarat) Private Limited (the Corporate Debtor) under Article 9.2.1(e) of the PPA, treating the initiation of insolvency proceedings as an event of default. The NCLT and NCLAT stayed the termination; the Supreme Court upheld their decision. The Court held that the NCLT has residuary jurisdiction under Section 60(5)(c) of the IBC to stay termination of contracts when termination is sought solely on the ground of insolvency and would cause the corporate death of the debtor. Since the PPA was the sole revenue-generating contract of the Corporate Debtor, allowing its termination would frustrate the object of the IBC to preserve the corporate debtor as a going concern. The Court left the broader question of ipso facto clause validity to the legislature.
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