2003 (11) TMI 339 - HC - Companies Law

Summary

Issues:
Challenge to legality of demands and threat of disconnection by Power Corporation for non-payment by a sick industrial undertaking under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis:
The petitioner company, declared as a 'Sick Industrial Undertaking,' challenged demands and threat of disconnection by the respondent Power Corporation. The petitioner contended that the threatened action conflicted with section 22 of the Act, which provides immunities during revival proceedings. The petitioner sought quashing of demands and restraint on disconnection, arguing the action was coercive and illegal.

The respondents defended the demand, stating it was justified, specifically the requirement of additional security equivalent to three months' average consumption. They cited court precedents upholding such demands. The petitioner's counsel argued that the threatened disconnection was coercive and violated section 22, seeking relief through quashing the demands and restraining the Power Corporation from cutting off the power supply.

The petitioner's counsel relied on the Supreme Court's interpretation of the term "proceeding" in section 22, emphasizing a broad understanding to include coercive measures against sick industrial undertakings. However, the respondents argued that demands for security deposits and disconnection threats were not considered proceedings under section 22 in a previous Division Bench decision, making the Supreme Court's interpretation inapplicable in this case.

The Court noted that the previous Division Bench decision had already determined that such demands were not proceedings under section 22. Consequently, the Court rejected the petitioner's contentions and dismissed the writ petitions, as it could not grant the relief sought by the petitioner based on the interpretation and precedent set by the earlier decision.

In conclusion, the Court dismissed the writ petitions, upholding the legality of the demands and disconnection threat by the Power Corporation against the sick industrial undertaking, based on the interpretation of section 22 and previous court decisions on similar demands not constituting proceedings under the Act.