In a recent judgement which could have wide-reaching ramifications, the National Company Law Appellate Tribunal (NCLAT) upheld the order of the National Company Law Tribunal (NCLT) that set aside termination of a power purchase agreement (PPA) between the corporate debtor, Lanco and the Gujarat distribution licensee, GUVNL. It held that the Insolvency and Bankruptcy Code, 2016 (IBC) will override existing contracts during the corporate insolvency resolution process (CIRP).
The termination was set aside citing importance of the PPA for the corporate debtors long-term economic and financial viability, which, in turn, is necessary for maximization of the value of assets. NCLAT was of the view that the PPA converts the physical asset namely, …
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