2003 (3) TMI 542 - HC - Companies Law

Issues:
1. Whether the respondent-company is "State" as defined under Article 12 of the Constitution of India and therefore bound by the mandate contained in Article 14 of the Constitution of India.
2. Whether the Resolution dated 16-3-2001 of the respondent-company is intended to be acted upon and whether it was in fact acted upon uniformly with reference to all the Participating Industries.
3. Whether the decision of the respondent-company to dis-allocate the share of the energy to the appellant herein with effect from October 2002 billing month would amount to an act of oppression on the part of the majority shareholders against the appellant herein.
4. Whether on the facts and circumstances of the case, an interim mandatory injunction such as the one prayed by the appellant can be granted.

Issue-wise Detailed Analysis:

1. Whether the respondent-company is "State" as defined under Article 12 of the Constitution of India and therefore bound by the mandate contained in Article 14 of the Constitution of India:
The court examined whether the respondent-company qualifies as a "State" under Article 12 of the Constitution of India by applying the tests laid out in Ajay Hasia v. Khalid Mujib Sehravardi and Ramana Dayaram Shetty v. International Airport Authority of India. It was determined that the respondent-company does not meet these criteria as it is not wholly owned by the government, does not receive significant financial assistance from the state, lacks monopoly status, and is not under deep and pervasive state control. The court concluded that the generation and distribution of electrical energy are not essential governmental functions, hence the respondent-company is not a "State" under Article 12 and is not bound by Article 14.

2. Whether the Resolution dated 16-3-2001 of the respondent-company is intended to be acted upon and whether it was in fact acted upon uniformly with reference to all the Participating Industries:
The appellant argued that the resolution was not uniformly applied, citing that A.P. Transco and Cement Corporation of India were also in arrears but not subjected to the same action. The court found that the Cement Corporation of India was indeed notified and had its power allocation stopped for non-payment, demonstrating uniform application of the resolution. Regarding A.P. Transco, the court accepted the respondent's explanation that a bona fide dispute about the liability was pending before a committee, hence action was deferred. The court concluded that there was no discriminatory application of the resolution.

3. Whether the decision of the respondent-company to dis-allocate the share of the energy to the appellant herein with effect from October 2002 billing month would amount to an act of oppression on the part of the majority shareholders against the appellant herein:
The court noted that the right to obtain a share of the energy is conditional upon payment for the energy consumed. The appellant's failure to pay would unfairly burden other participating industries who pay regularly. The court rejected the argument of oppression, stating that the appellant's non-payment justified the respondent's decision to discontinue power allocation. The court emphasized that the respondent-company's actions were within the bounds of the agreements and did not constitute oppression of minority shareholders.

4. Whether on the facts and circumstances of the case, an interim mandatory injunction such as the one prayed by the appellant can be granted:
The court held that an interim mandatory injunction could only be granted if there was a breach of an obligation by the respondent. Given that the appellant had failed to pay for the energy consumed and the respondent had acted within its contractual rights, there was no breach of obligation by the respondent. Consequently, the court found no grounds to grant the interim mandatory injunction sought by the appellant.

Conclusion:
The court dismissed the appeal, upholding the respondent-company's decision to discontinue the allocation of power to the appellant due to non-payment of dues. The court found no merit in the appellant's arguments regarding the application of Article 12, discriminatory treatment, oppression of minority shareholders, or the need for an interim mandatory injunction.

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