2014 (11) TMI 1162 - HC - Companies Law

Applicability of provisions of SICA - effect of direction issued by the BIFR and Applicability of Clause 2(j) of Supply Code - effect of overriding provision in SICA and in Electricity Act - Held that - Question that whether SICA is a special Act or not, when raised with reference to Companies Act, it is perhaps easier to answer the same. In the present case, attempt was made to urge that Electricity Act is a special Act. It is not possible to agree with this submission. With relation to Electricity Act also, SICA can be said to be special Act. The later Act relates to companies only - rather sick companies - while former Act would apply not only to all kind of companies, including the sick companies, but to every kind of consumer - be it commercial and non-commercial entities. In fact, definition of consumer under the Act includes even the Government. Any person , it says, who receives electricity comes within the sweep of the definition of consumer , while the simple definition of sick company , stated in short is, - a company whose accumulated losses of any given financial year exceeds its entire net worth. In short, while legislative net of consumer under the Electricity Act includes other than company or corporate sector also, while the wings of the SICA does not extend the area outside the sick company - the corporate world itself is much larger than the sick company. It may be noted that the Electricity Act is the only statute operating in the field and dealing with the subject and takes care of all and every kind of consumer, who receives electricity. It is not possible to agree with the submission that Electricity Act is a special Act with reference to SICA. Having said so, we may add that generally saying, neither the test that which of the two Acts are special Act nor the test that which of the two Acts is later in point of time, can be successfully applied in the present case. Both the tests can be more properly applied when both the Acts relate to or operate in, in the same field or the subject of both the Acts is analogous. Since the applicability of either of two tests is doubtful in the present case, we leave the question at that with the observation that if correct view is that, that the special Act versus General Act, test is applicable then application of such test would show that SICA is a special Act. SICA gives overriding effect not only to its provisions but also to the scheme framed under the special Act. Section 32 itself gives overriding effect to the scheme. Unlike that, Sections 173 and 174 do not refer or include conditions framed by the Board. It may be recalled that Clause 2(j) is framed by the Board i.e. GEB - it may have an effect of law but, so far giving of overriding effect is concerned, neither the conditions framed by the Board contain such provision nor Sections 173 and 174 take care of it. At the time of hearing, attention was not drawn to any such provision in conditions nor Sections 173 and 174 say so. Thus, Section 32 of SICA is apparently wider. When it comes to comparison, Sections 173 and 174 of Electricity Act cannot catch up or compete with Section 32 of the SICA. Further, still, scheme also contains clause giving overriding effect to the scheme. Overriding provision in the scheme has weighed with the learned Single Judge in the judgment under appeal. Learned Single Judge has not committed any error in relying on the said provision while considering the objection raised by the learned advocate for the appellant against the scheme.

Summary

Issues Involved:
1. Applicability of the BIFR scheme.
2. Binding nature of the BIFR scheme on GEB/DGVCL.
3. Applicability of Clause 2(j) of the Conditions of Supply.
4. Overriding effect of SICA and the Electricity Act, 2003.

Issue-Wise Detailed Analysis:

1. Applicability of the BIFR Scheme:
The BIFR scheme was framed to rehabilitate the sick unit, Navsari Cotton and Silk Mills Ltd. (NCSML). Despite efforts, the scheme failed to revive the unit, leading to its winding up. The workers formed a cooperative society, MDTLCIL, which took over the management, and a new rehabilitation scheme was introduced. The scheme included selling the mill's land to pay off debts. M/s. Amardeep Association Navsari (AAN) purchased the land and sought an electricity connection, which was denied due to outstanding dues. The BIFR directed the release of the power connection, leading to the present legal dispute.

2. Binding Nature of the BIFR Scheme on GEB/DGVCL:
The appellant argued that GEB/DGVCL was not a party to the BIFR scheme and hence not bound by it. However, the court found that the scheme explicitly addressed the issue of electricity dues and directed GEB to grant a connection without insisting on payment of previous dues. The court held that the scheme was binding on GEB/DGVCL, and the dues were unenforceable against the new purchaser, AAN. The court noted that the Government of Gujarat had unsuccessfully challenged the scheme, making it final and binding.

3. Applicability of Clause 2(j) of the Conditions of Supply:
Clause 2(j) stipulates that a new connection cannot be granted unless previous dues are cleared. The appellant argued that this clause applied to the present case. However, the court found that the clause was not applicable because MDTLCIL and NCSML were ongoing concerns, and GEB could recover dues from them. The court also noted that the scheme provided for the payment of dues by MDTLCIL within five years from 31.3.2006. Additionally, the court referred to the Full Bench decision in Sanjay Balvantray Desai's case, which held that a similar regulation was inconsistent with the Electricity Act, 2003, and thus invalid.

4. Overriding Effect of SICA and the Electricity Act, 2003:
The court considered the overriding provisions of both SICA and the Electricity Act, 2003. Section 32 of SICA gives overriding effect to its provisions and schemes framed under it, while Sections 173 and 174 of the Electricity Act provide for its overriding effect. The court concluded that SICA, being a special Act dealing with sick companies, had an overriding effect over the Electricity Act. The court emphasized that Section 32 of SICA was broader and provided overriding effect to the scheme itself, unlike the Electricity Act, which did not explicitly include conditions framed by the Board.

Conclusion:
The court dismissed the appeal, holding that the BIFR scheme was binding on GEB/DGVCL, and Clause 2(j) was not applicable. The court affirmed the overriding effect of SICA over the Electricity Act, 2003, and upheld the learned Single Judge's order directing the grant of an electricity connection to AAN without insisting on payment of previous dues.