1997 (8) TMI 425 - HC - Companies Law

Issues Involved:
1. Quashing of demand notice dated 5-3-1997.
2. Recovery proceedings without prior sanction of BIFR.
3. Applicability of res judicata.
4. Recovery of electrical bills during the period the company was declared sick.
5. Jurisdiction of Electrical Inspector.
6. Seizure of accounts by recovery authority.
7. Attachment of movable vs. immovable property.
8. Compliance with interim orders.
9. Petitioners' obligation to pay subsequent and current electrical bills.

Detailed Analysis:

1. Quashing of Demand Notice Dated 5-3-1997:
The petitioners sought to quash the demand notices dated 5-3-1997, arguing that the electrical bills could not be paid without the sanction of the Board for Industrial and Financial Reconstruction (BIFR) as proceedings were pending before it. The court held that the petitioners' request could not be granted due to the doctrine of res judicata. The petitioners had previously approached the court with similar prayers which were dismissed, and thus, the same issues could not be re-litigated.

2. Recovery Proceedings Without Prior Sanction of BIFR:
The petitioners argued that recovery proceedings should not commence without BIFR's sanction. The court referred to section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and cited previous judgments, including the Supreme Court's decision in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association, which clarified that section 22 does not allow a sick company to incur further liabilities without paying dues. The court concluded that the petitioners, having continued to consume electricity, were liable to pay the dues.

3. Applicability of Res Judicata:
The court emphasized that the petitioners' prayers were barred by the principle of res judicata. The petitioners had previously filed a writ petition on similar grounds which was dismissed. The court cited Mohan Lal Goenka v. Benoy Krishna Mukherjee to affirm that even erroneous orders operate as res judicata.

4. Recovery of Electrical Bills During the Period the Company was Declared Sick:
The court examined whether the petitioners, declared sick on 26-2-1988, were entitled to relief from paying electrical bills incurred from 1-10-1991 to 31-5-1996. The court held that the petitioners could not avoid payment for electricity consumed during this period. The legislative intent was to rehabilitate sick companies, but this did not exempt them from paying for services consumed.

5. Jurisdiction of Electrical Inspector:
The petitioners contended that their dispute should have been referred to the Electrical Inspector. The court found that the petitioners had not moved the Electrical Inspector for adjudication. Additionally, if the dispute was not about meter reading errors, it should have been raised under clause 16 of the agreement for arbitration, not before the Electrical Inspector.

6. Seizure of Accounts by Recovery Authority:
The petitioners argued that the recovery authority violated court orders by seizing their accounts. The court noted that the interim order allowed attachment of property but prohibited further coercive measures. The seizure of accounts was deemed appropriate and proportionate to the amount sought to be recovered.

7. Attachment of Movable vs. Immovable Property:
The petitioners argued that only immovable property could be attached under the Act. The court stated that this issue could be raised before the relevant authority, which would consider and answer it according to the law. The court clarified that the seizure of accounts should not be disproportionate to the amount due.

8. Compliance with Interim Orders:
The court reviewed compliance with its interim order dated 25-7-1997, which directed that no coercive measures be taken against the petitioners' personal property. The court found that the seizure of accounts was in line with the order, as it did not involve coercive measures against personal property.

9. Petitioners' Obligation to Pay Subsequent and Current Electrical Bills:
The court emphasized that the petitioners must pay subsequent and current electrical bills to avoid legal consequences. The court suggested that if the petitioners deposited the disputed amounts along with interest and recovery charges, recovery proceedings would be dropped, subject to adjudication by the Electrical Inspector or arbitrator.

Conclusion:
The writ petition was dismissed with observations and directions, emphasizing the petitioners' obligation to pay their dues and the applicability of res judicata. The court provided a pathway for the petitioners to resolve their disputes by depositing the disputed amounts and seeking adjudication from the appropriate authorities.

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