9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (5) TMI 389 - SC - Companies LawLowering of contract load - Held that - SLP dismissed. In the totality of the existing circumstances, of which KESCO was fully aware, the decision not to accept the Bond was not in accordance with the decision arrived at on 19-4-2006 to reduce the contract load from 8 MVA to 1.25 MVA. In fact, the Respondent-Company had been declared to be a Relief Undertaking by the State Government on an application dated 24-6-2004. Furthermore, soon after the decision was arrived at to lower the contract load, the Respondent-Company was also declared as a Sick Company on 8-5-2007 and the BIFR, while considering the revival of the Respondent-Company by its order dated 22-4-2007, directed KESCO to continue to accept ₹ 5 lakhs per month against the arrears apart from payment of the current electricity bills on actual consumption basis and also not to adopt coercive measures to disconnect the supply of electricity of the Respondent-Company. As indicated hereinabove, the result of the continued insistence of KESCO that a Bank Guarantee should be provided by the Respondent No. 1-Company in respect of its outstanding dues, had the effect of negating the decisions to revive the Company.
Issues Involved:
1. Reduction of Contract Load 2. Compliance with U.P. Electricity Supply Code, 2005 3. Submission of Bank Guarantee/Bond 4. Status of Relief Undertaking and Sick Industrial Company 5. Legal Obligations and Agreements Detailed Analysis: 1. Reduction of Contract Load: The Respondent-Company, a Public Limited Company engaged in the manufacture and sale of two-wheelers, applied for a reduction in its power load from 8 MVA to 1.25 MVA due to adverse market conditions. The application was made to KESCO on 31-3-2006, and a meeting on 19-4-2006 resulted in an agreement to reduce the load with certain conditions. The U.P. Electricity Regulatory Commission did not object but required compliance with the Electricity Supply Code, 2005. Despite this, KESCO continued to bill the Respondent-Company based on the 8 MVA load, leading to a dispute. 2. Compliance with U.P. Electricity Supply Code, 2005: The High Court interpreted clauses 4.41 and 4.49 of the U.P. Electricity Supply Code, 2005, concluding that the decision to reduce the load was approved on 19-4-2006, making the effective date of reduction 1-5-2006. The Respondent-Company's compliance with the Code was central to the dispute, particularly the requirements for reducing the contracted load. 3. Submission of Bank Guarantee/Bond: Clause 4.49 of the Code, both in its unamended and amended forms, required the submission of a Bank Guarantee or Bond to secure outstanding dues. The unamended version allowed a Bond or other instruments, while the amended version mandated a Bank Guarantee. The Respondent-Company submitted a Bond, which KESCO did not accept, arguing it did not secure the outstanding dues satisfactorily. This refusal to accept the Bond became a pivotal issue. 4. Status of Relief Undertaking and Sick Industrial Company: The Respondent-Company was declared a "Relief Undertaking" by the State Government on 24-6-2004, and a "Sick Industrial Company" under SICA on 8-5-2007. The BIFR directed KESCO to accept Rs. 5 lakhs per month against arrears and current bills based on actual consumption, preventing coercive measures like disconnection. The status of the company under these declarations influenced the legal obligations and agreements. 5. Legal Obligations and Agreements: Despite agreements and orders from the BIFR, KESCO continued to bill based on the higher load, leading to financial strain on the Respondent-Company. The High Court's decision to allow the writ petition was based on the interpretation that the load reduction was effective from 1-5-2006. The Supreme Court upheld this decision, emphasizing the need to support struggling industries and criticizing bureaucratic obstacles. Conclusion: The Supreme Court dismissed the Special Leave Petition, affirming the High Court's order. The decision highlighted the importance of adhering to agreements and legal provisions, especially in supporting industries facing financial difficulties. The judgment underscored the need for administrative bodies to act in good faith and not hinder recovery efforts through rigid adherence to procedural requirements.
|
