(ET)
In what is likely to help allay concerns of the power sector about the impact of insolvency proceedings against electricity producers, the government said the process under the Insolvency and Bankruptcy Code will not have any impact on their power purchase and fuel supply agreements.
“There are enough NCLT (National Company Law Tribunal) rulings which say whatever supplies are essential for keeping the unit a ‘going concern’ cannot be stopped,” said a senior official. Companies have to have to make current payments for the supply of such goods and services during insolvency, he added. He said the government was clear that both power purchase and fuel supply agreements were covered under the moratorium granted to companies undergoing insolvency proceedings.
Under Section 14 of the IBC, the supply of essential goods and services to a corporate debtor cannot be suspended or terminated during the period of the corporate insolvency resolution process. The section also places a moratorium on suits against the corporate debtor for duration of proceedings.
