2016 (7) TMI 643 - HC - Companies Law

Winding up - non-payment of dues - inclusion of outstanding debt as part of the advertisement for sale proclamation - notice of sale of the immovable properties of the Company (in liquidation - auction purchases - Held that - Held that - As far as the terms and conditions are concerned as quoted hereinabove, the purchaser is clearly informed that he would be liable for all the dues. As far as present applicants are concerned, it is an admitted position that the electricity Companies under the provisions of the regulations and/or supply code as applicable have already disconnected the electricity connections of the Company (in liquidation) in the instant case and therefore, there is no question of reconnection. As regards the contention raised by learned counsel for the applicants that as per amended supply code, and more particularly Regulation 4.1.11 would apply to all intending purchaser, it is to be noted that the provisions of the Indian Electricity Act, 2003 and Supply Code has no bearing on the proceedings under the Companies Act and the same would apply to purchaser as and when he becomes consumer of the electricity Company. So on both the counts, the applicants are not entitled to say that in the advertisement itself, it is required to be mentioned that some amount is due and payable towards electricity charges to the applicants electricity Companies. It is not the case of the applicants that they have any other additional or special right as far as the amount of due is concerned and therefore, the applicants have no right to insist that there has to be inclusion of their debts as part of the advertisement for sale proclamation. In opinion of this Court, on the contrary the applicants are required to lodge their claim before the Official Liquidator in accordance with the provisions of the Act and Rules. As far as applicability of Supply Code, more particularly clause 4.1.11 of the Regulation is concerned, the same would be a case between intending purchaser and the electricity Company and therefore, the Official Liquidator is not duty bound to bring to the notice of the purchaser and/or auction purchaser of the Company (in liquidation) that there is outstanding dues of the electricity Company along with interest thereon at the rate of 15 % per annum and that unless and until such dues are paid, no connection would be provided by a special mention in the sale proclamation as prayed for by the applicants. The same is therefore, de hors the provisions of the Act and the Rules and misconceived in law and facts. While giving an advertisement, list of secured, unsecured, or preferential is not to be provided or made part of the public advertisement especially when other clauses as enumerated hereinabove and a specific clause that sale is subject to the conditions as is where is and whatever there is basis . Thus both the applications fail and are hereby dismissed. The applicant of Company Application No.5 of 2011 is not entitled for any of the reliefs/claims as prayed for in the Judge s Summons.

Issues Involved:
1. Whether the Official Liquidator should inform bidders about outstanding electricity dues.
2. Whether the Official Liquidator should include specific terms in sale advertisements regarding outstanding electricity dues.
3. Whether the prayers of the applicants are in accordance with the Companies Act and relevant rules.
4. Applicability of the Gujarat Electricity Regulatory Commission (GERC) Notification and Supply Code to the liquidation process.

Detailed Analysis:

Issue 1: Informing Bidders About Outstanding Electricity Dues
The applicants, Torrent Power Ltd. and Paschim Gujarat Vij Company Ltd., requested that the Official Liquidator inform potential bidders about outstanding electricity dues. They argued that new connections would not be provided unless these dues, with interest, were fully paid. The Official Liquidator contended that the applicants had no locus under the Companies Act, 1956, and were at most preferential creditors. The Court noted that the terms and conditions for the sale of assets already provided that purchasers would be liable for all local dues and taxes, making additional notification unnecessary.

Issue 2: Including Specific Terms in Sale Advertisements
The applicants sought to include specific terms in sale advertisements that stated new electricity connections would not be granted unless outstanding dues were paid. The Official Liquidator argued that this was not required under the Companies Act or the Companies (Court) Rules, 1959. The Court agreed, stating that the existing terms and conditions already covered the necessary liabilities and that the applicants should lodge their claims through the appropriate process. The Court emphasized that the sale was on an "as is where is and whatever there is basis," and the purchasers were already informed of their liabilities.

Issue 3: Prayers in Accordance with the Companies Act and Relevant Rules
The Court examined whether the prayers of the applicants were in accordance with the Companies Act and the Rules. It found that the applicants' requests were contrary to the provisions of the Act and the Rules. The Court highlighted that the Official Liquidator's duties and the process of asset disposal were governed by Sections 429, 429A, 457, 529, 529A, and 530 of the Act, and Rules 149, 272, and 273. The Court concluded that the applicants' prayers were not supported by any provision in the Act or the Rules.

Issue 4: Applicability of GERC Notification and Supply Code
The applicants argued that the GERC Notification and Supply Code, specifically Regulation 4.1.11, required that new connections not be provided if dues were outstanding. The Court held that the provisions of the Indian Electricity Act, 2003, and the Supply Code did not apply to the liquidation process under the Companies Act. The Court noted that the electricity companies had already disconnected the connections for non-payment and that any new connection would be a matter between the purchaser and the electricity company, not the Official Liquidator.

Conclusion:
The Court dismissed both applications, stating that the applicants were not entitled to the reliefs sought. It held that the Official Liquidator was not required to include specific terms about outstanding electricity dues in sale advertisements and that the existing terms and conditions already adequately informed purchasers of their liabilities. The Court emphasized that the liquidation process must adhere to the provisions of the Companies Act and the Rules, and the applicants' requests were outside the scope of these provisions.

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