LegalAware
LegalAware.ai
EMPOWERING LEGAL AWARENESS

Gujarat Urja Vikas Nigam Limited v. Amit Gupta & Ors.

Civil Appeal · 2021 INSC 163Decided 8 Mar 2021
Civil Appeal No. 9241 of 2019
Dr. Justice D.Y. Chandrachud · Justice M.R. Shah

Background

Gujarat Urja Vikas Nigam Limited (GUVNL), a Gujarat government power utility, had a 25-year Power Purchase Agreement (PPA) with a solar power company (the "Corporate Debtor") to buy all the electricity it generated. After floods damaged the plant and financial stress followed, the company itself applied for insolvency resolution (CIRP) under Section 10 of the IBC in 2018, and a Resolution Professional (RP) was appointed. Citing a clause in the PPA that treated the mere initiation of insolvency proceedings as an "event of default" (an "ipso facto" clause), GUVNL sought to terminate the PPA, which was the company's only source of revenue, while the CIRP was still underway. The RP and a secured lender approached the NCLT, which stayed the termination; the NCLAT upheld that stay and barred termination even in liquidation. GUVNL appealed to the Supreme Court, arguing the NCLT/NCLAT had no jurisdiction over what was really a contractual/regulatory dispute properly belonging before the Gujarat Electricity Regulatory Commission, and that nothing in the IBC barred it from exercising its contractual termination right.

Decision Breakdown

The Supreme Court held that the NCLT/NCLAT did have jurisdiction under the residuary clause in Section 60(5)(c) of the IBC to decide this dispute, because GUVNL's sole ground for terminating the PPA was the initiation of CIRP itself: a ground with a direct nexus to the insolvency process, not merely an ordinary contractual dispute collateral to the insolvency, so the matter was not confined to the electricity regulator's jurisdiction. On the merits, the Court held that the NCLT/NCLAT was right to restrain the termination in this specific case: since the PPA was the Corporate Debtor's only source of revenue, allowing termination solely because insolvency proceedings had begun would effectively cause the "corporate death" of the company, defeating the IBC's central purpose of preserving a debtor as a going concern during resolution. However, the Court expressly declined to lay down any general rule on the validity of "ipso facto" termination clauses in Indian insolvency law, noting this is a significant policy question (addressed by legislative reform in other countries) best left for Parliament to resolve, and left open whether such clauses are void in other circumstances. The appeal was dismissed.

Lesson Learnt

During a company's formal insolvency resolution process, a counterparty generally cannot terminate a critical contract purely because insolvency proceedings have begun, if doing so would strip the company of its only business and defeat the purpose of trying to rescue it, though Indian law has not yet settled, as a general rule, whether such "insolvency trigger" termination clauses are valid or void.

Official source (sci.gov.in)View Judgment (PDF)

More rulings in Company & Insolvency Law

Company & Insolvency LawDelhi High Court

M/S Meena Steels Limited vs. Punjab National Bank

The Court held that Section 125(2)(h) applies to money received by a company for allotment of securities, not to a refund arising from a court-sanctioned reduction of share capital, so the Bank's reliance on it was misplaced. Since the earlier orders had already been passed after considering the material on record and no error apparent on the face of the record was shown, the Court found no ground for review and dismissed the Bank's petition.

Decided 8 Oct 2026Read case
Company & Insolvency LawSupreme Court of India

Greenopolis Welfare Confederation v. Rakesh Kumar Gupta

The Supreme Court held that once an insolvency petition is admitted, the proceedings become proceedings "in rem" affecting all creditors and stakeholders, not just the original applicant, so the original applicant cannot simply withdraw, but if fraud and collusion are found, the Adjudicating Authority (AA) can and should disallow that fraudulent applicant from continuing, while deciding separately whether the wider insolvency process itself should still continue to protect other genuine stakeholders like homebuyers. The Court allowed this appeal in part, set aside the NCLAT's blanket recall of the entire CIRP, and restored the insolvency proceedings to the Adjudicating Authority, directing it to now decide afresh, after hearing the resolution professional, the committee of creditors, and the homebuyers, whether the CIRP should continue in view of the confirmed fraud, and to do so expeditiously given how long the case has run.

Decided 30 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

M/S ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj

The Supreme Court upheld the NCLAT's decision and dismissed the appeal. It held that the e-auction notice explicitly provided for forfeiture of the entire amount paid, including the EMD, if a successful bidder failed to pay the balance sale consideration on time, and forfeiture followed automatically once that default occurred. The Court rejected the appellant's reliance on the "Triple Test" (rigged auction, lack of genuine bidder capacity, or extraneous prevention), finding none of those circumstances applied here, and held that a mere assertion of willingness to pay does not substitute for demonstrated financial capacity. The argument that liquidation regulations cap EMD at 10% of reserve price did not help the appellant, since it had voluntarily agreed to the auction notice's forfeiture clause covering the full deposit, not just the EMD.

Decided 28 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

Regional Provident Fund Commissioner-II v. Mamta Binani & Ors.

The Supreme Court agreed that the NCLAT correctly read Section 61(2) as allowing no condonation beyond 45 days, and that its own precedents (National Spot Exchange, Tata Steel) were correctly stated but factually distinguishable since those cases involved litigant fault, not tribunal system failure. Here, the delay was caused entirely by a backend/OTP failure in the NCLAT's own e-filing system, as confirmed by the NCLAT Registry's own report. Invoking the principle "actus curiae neminem gravabit" (an act of the court shall harm no one), the Court held that limitation runs against a litigant only when the court/tribunal's own systems are actually capable of receiving filings; when the tribunal's system itself fails, the litigant should not be penalised. It set aside the NCLAT's order and restored the appeal for fresh consideration, directing that the date of the first bona fide e-filing attempt be treated as the date of presentation.

Decided 10 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

M/S Kerala Industrial Infrastructure Development Corporation v. Central Board of Trustees and Anr.

The Court reaffirmed settled law that Provident Fund and Gratuity dues of workmen must be paid in full by the resolution applicant, since these funds are not part of the liquidation estate and cannot be subjected to the insolvency law's "waterfall" distribution mechanism. On the question of whether "damages"/penalty under Section 14B of the EPF Act for delayed payment is automatic and mandatory, or whether the authority has discretion to reduce or waive it, the Bench found itself doubting an earlier Supreme Court decision (Horticulture Experiment Station Gonikoppal) which had held such penalty to be automatic. Rather than deciding this specific legal question itself, the Bench referred it to a larger bench for authoritative resolution, while clarifying the appellants remain free to separately seek waiver/reduction of penalty from the Central Board under the statute's second proviso to Section 14B. As practical interim relief, the Court directed the appellant companies to pay the outstanding EPF dues (with Section 7Q interest) in four quarterly instalments running from December 2026 to September 2027, failing which EPFO could proceed with recovery.

Decided 9 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

The Authorised Representative for Granite Gate Properties Private Limited (Ms. Rakesh Verma) v. M/s New Okhla Industrial Development Authority

The Supreme Court held that NOIDA's lease with the original developer existed to serve a public welfare purpose, providing housing and industrial infrastructure, not pure profit-making, and that the penalty/time-extension charges were meant to deter and punish a defaulting developer, not innocent homebuyers or a new resolution applicant who had no role in the original default. Since the delay was solely the fault of the now-insolvent original developer, and the homebuyers and SRA had themselves funded and revived the stalled project, it would be unjust to pass on the developer's "past sins" as insolvency-resolution costs. The Court set aside the NCLAT's direction treating the time-extension charges as CIRP costs, and separately rejected NOIDA's own appeal for extending those penalty charges up to ten years under its newer, harsher policy. Granite Gate's appeal was allowed and NOIDA's appeal was dismissed.

Decided 3 Sept 2026Read case