1980 (7) TMI 212 - HC - Companies Law

Summary

Issues involved:
1. Liability of the U.P. State Electricity Board to pay arrears of electricity charges collected from the company's consumers.
2. Interpretation of the term "undertaking" within the Indian Electricity Act, 1910, and the U.P. Amendments.
3. Applicability of Sections 468 and 518 of the Companies Act, 1956, in the context of the liquidation.
4. Right of set-off claimed by the Board against the company in liquidation.

Detailed Analysis:

1. Liability of the U.P. State Electricity Board to pay arrears of electricity charges collected from the company's consumers:
The petitioner, Benaras Electric Light & Power Co. Ltd. (in liquidation), sought an order against the U.P. State Electricity Board to pay Rs. 68,29,636.87 with interest, collected from the company's consumers for electricity supplied up to the midnight of 4th/5th February 1975. It was admitted that the Board collected Rs. 67,91,122.23 up to June 1978 and that Rs. 19,31,656.32 was still outstanding. The court concluded that the Board collected these arrears as trustees or agents of the company in liquidation and thus must pay the collected amount to the liquidators.

2. Interpretation of the term "undertaking" within the Indian Electricity Act, 1910, and the U.P. Amendments:
The court examined the word "undertaking" as used in the Indian Electricity Act, 1910, and the U.P. Amendments of 1974 and 1975. It was argued that the term did not include book debts or arrears of electricity charges. The court agreed, stating that the word "undertaking" referred to tangible assets like lands, buildings, and plants, not book debts. This interpretation was supported by the absence of book debts in the definition of "undertaking" in the relevant sections of the Electricity Act and the U.P. Amendments.

3. Applicability of Sections 468 and 518 of the Companies Act, 1956, in the context of the liquidation:
The court held that after the company was voluntarily wound up, the provisions of Section 468 read with Section 518(1)(a), (b), and (4) of the Companies Act, 1956, were applicable. Section 518 allows the liquidator to apply to the court to determine any question arising in the winding-up of a company. Section 468 empowers the court to require any trustee, agent, or other employee of the company to deliver any money or property to the liquidator. The court concluded that the liquidators were entitled to the arrears collected by the Board as trustees or agents of the company.

4. Right of set-off claimed by the Board against the company in liquidation:
The Board argued that the arrears of electricity charges should be set off against the company's dues to the Board. The court rejected this argument, stating that the Board could not claim a right of set-off for the amounts collected as trustees or agents of the company. The court emphasized that the gross amount payable must first be determined before any deductions could be made, as per the provisions of the Electricity Act and the U.P. Amendments.

Conclusion:
The court ordered the U.P. State Electricity Board to pay Rs. 68,29,636.87 with 6% interest per annum from the date of realization to the Joint Liquidators within a fortnight. The Joint Liquidators were directed to keep the amount in a separate account in a nationalized bank on a short-term deposit. The Board was also ordered to pay any outstanding arrears collected in the future to the Joint Liquidators. No order as to costs was made, and a stay of operation of the order was refused.