Power PPAs cannot be terminated during insolvency process

The National Company Law Appellate Tribunal (NCLAT) has ruled that power distribution companies cannot terminate their power purchase agreement (PPA) with insolvent gencos during the entire corporate insolvency resolution process (CIRP)

According to NCLAT, asset classification of a power project includes the generation plant and its PPA and it should be looked together and not in isolation. So, the moratorium rules under Insolvency and Bankruptcy Code (IBC), where all debt resolution action is suspended during CIRP, would apply to power project as well including the PPA contracts it signed with beneficiaries. The ruling has come in regards to the resolution process of Lanco Infratech. The company is facing liquidation after having failed to clear dues to creditors including Rs 630 million provided by Yes Bank.

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