22 December 2021| Meenakshi Energy Limited v. PTC India Ltd. | OMP (I) (Comm.) 408 of 2021 | Sanjeev Narula J | Delhi High Court

The Delhi High Court has dismissed an application under Section 9 ACA that sought the stay of a termination notice and an order directing the respondent not to contract with another party. In the view of the court, “such reliefs are ex-facie misconceived and contrary to settled legal position.”

The Bangladesh Power Development Board had issued a bid for power procurement. The respondent PTC applied, was successful and executed a power purchase agreement. It contracted with the petitioner MEL on a back-to-back basis to purchase power for onward supply to the Bangladesh Board. Subsequently, MEL was admitted to the insolvency resolution process. The power supply continued for some time but stopped later. The Bangladesh Board issued a notice of default based on which PTC sent notice to MEL, and because the supply did not resume, terminated its arrangement with MEL.

The court found that all three “important elements” for grant of injunction were not in favour of MEL but rather PTC: the contract was determinable (no reasoning is given for this conclusion); since the supply stopped totally, there was a material breach; merely because some parties had shown interest in the insolvency process to take over the MEL did not mean that PTC was obligated to continue with the contract; “the effort to resolve the corporate debtor cannot be at the cost of PTC suffering damages at the hands of Bangladesh party for contractual breaches”; the two contracts were back-to-back and co-terminus, but PTC’s obligation under the Bangladesh agreement were independent.

Read the decision here.