Uncrystallised Contractual Rights Not Covered by Moratorium: NCLT Mumbai Rejects Fabtech Sugar’s Grid Connectivity Plea
Pranav B Prem
The National Company Law Tribunal (NCLT), Mumbai Bench, has held that uncrystallised contractual rights do not constitute “assets” of a corporate debtor protected under the moratorium imposed during the Corporate Insolvency Resolution Process (CIRP). The ruling came while dismissing Fabtech Sugar Limited’s application seeking restoration of grid connectivity cancelled by Maharashtra State Electricity Transmission Company Limited (MSETCL) under its Energy Purchase Agreement (EPA).
A bench of Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati, while pronouncing the order on December 4, 2025, held that the EPA merely provided Fabtech with a contractual permission to evacuate surplus power and did not amount to an asset protected under Section 14 of the Insolvency and Bankruptcy Code (IBC). The tribunal made it clear that the moratorium safeguards only those assets which form part of the corporate debtor’s estate on the insolvency commencement date.
The tribunal observed that Fabtech had proposed to set up a bagasse-based co-generation plant and entered into the EPA in August 2015, which required grid connectivity for exporting surplus power. While Fabtech completed its portion of the transmission line in 2018, MSETCL’s work was delayed and completed only in March 2021. MSETCL later issued a notice on February 23, 2022 requiring Fabtech to apply for final grid connectivity within 15 days. As Fabtech failed to respond, MSETCL cancelled the grid connectivity on April 7, 2022 — a day before the Committee of Creditors (CoC) approved the resolution plan.
Fabtech contended that the cancellation violated the moratorium as the EPA and resulting access to the grid were essential for the viability of the approved resolution plan. It argued that the right to sell surplus power amounted to a protected asset during CIRP. MSETCL, however, maintained that the cancellation was based purely on Fabtech’s failure to complete the required documentation and was not linked to insolvency.
Accepting MSETCL’s position, the tribunal held that the EPA had not been operationalised due to Fabtech’s failure to complete the formalities, and therefore did not mature into a crystallised right capable of being treated as an asset of the corporate debtor. It emphasised that “mere expectant contingent or un-crystalized contractual rights do not constitute ‘Assets’ within the meaning of the Code” and added that “not every executory or conditional contract amounts to an asset.”
The tribunal further clarified that Section 14 protects against termination of licences or approvals only when such termination is on account of insolvency, and not where the corporate debtor has failed to perform its own obligations. Since Fabtech’s cancellation was based on its non-compliance rather than insolvency, the moratorium argument did not arise.
While dismissing the application, the tribunal noted that the Resolution Professional had independently applied for grid connectivity after the resolution plan was approved, and fresh grid connectivity was granted to the company on August 1, 2024. The tribunal observed that this development effectively resolved the substantive grievance raised. The application was accordingly dismissed, with the tribunal holding that the dispute was contractual and outside its jurisdiction under Section 60(5)(c) of the IBC.
Appearance
For Applicant: Advocates Rohit Gupta, Niharika Jalan with Baraka Legal
For Respondents: Advocate Kinjal Khandelwal with KP Law Associates LLP
Cause Title: Fabtech Sugar Limited vs Maharashtra State Electricity Transmission Company Limited
Case No: IA(IBC) No. 4622 of 2024 in CP(IB) No. 1398/MB/2020
Coram: Judicial Member Mohan Prasad Tiwari, Technical Member Charanjeet Singh Gulati
