2004 (10) TMI 339 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
2. Obligation of the petitioner to pay electricity dues post-BIFR order.
3. Validity of demand notices issued by U.P. Power Corporation Limited.

Issue-wise Detailed Analysis:

1. Applicability of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985:
The petitioner argued that as a sick industry declared under the Sick Industrial Companies Act, 1985, no coercive steps could be taken for the realization of electricity dues without permission from the Board. Reliance was placed on the Supreme Court's decision in Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd., which emphasized that no proceedings for execution, distress, or the like against the properties of a sick industrial company could proceed without such permission.

2. Obligation of the Petitioner to Pay Electricity Dues Post-BIFR Order:
The respondents contended that the petitioner was not entitled to protection under Section 22 as the dues included amounts for periods after the BIFR order. They highlighted that the petitioner continued to pay installments even after the BIFR order until 1993, indicating an acknowledgment of their obligation. Furthermore, the Supreme Court in Indian Maize & Chemicals Ltd. v. State of U.P. clarified that continued payment for electricity is a condition for continued supply, and non-payment could lead to disconnection.

3. Validity of Demand Notices Issued by U.P. Power Corporation Limited:
The respondents argued that the demand notices were valid as they pertained to periods both before and after the BIFR order. They asserted that the petitioner's obligation to pay minimum consumption guarantee charges and actual consumption charges remained intact and was not suspended by any BIFR order. The Supreme Court's observations in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association and SRF Ltd. v. Garware Plastics and Polyesters Ltd. were cited to emphasize that the legislative intent was not to allow sick companies to avoid their obligations indefinitely.

Conclusion:
The court concluded that the petitioner's reliance on Section 22(1) of the Sick Industrial Companies Act was misplaced. The petitioner was obligated to fulfill its contractual obligations, including the payment of electricity dues, which were not suspended by any BIFR order. The court found no infirmity or illegality in the recovery proceedings initiated by the respondents and dismissed the petitions.

Judgment:
The petitions were dismissed, affirming the validity of the demand notices and the obligation of the petitioner to pay the electricity dues.