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TMI Blog2010 (5) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. - SPECIAL LEAVE PETITION (CIVIL) NO. 33984 OF 2009 - - - Dated:- 7-5-2010 - ALTAMAS KABIR, CYRIAC JOSEPH AND C.K. PRASAD, JJ. Parag Tripathy for the Petitioner. M.L. Lahoty for the Respondent. JUDGMENT Altamas Kabir, J. - The Respondent No. 1 is a Public Limited Company engaged in the manufacture and sale of two-wheelers, scooters and motor-cycles, having its registered office at Panaki Industrial Area in Kanpur, U.P. The Company obtained power load from the Kanpur Electricity Supply Administration, hereinafter referred to as "KESA", which was extended from time to time. In the year 2006, the sanctioned load of the Company was 8 MVA from 132 KV line. 2. On account of a decreasing market, the Company apprehended that its work force would be directly affected and, accordingly, made a represent-tation to the State Government for declaring the Respondent-Company as a "Relief Undertaking" under section 3(1) of the U.P. Industrial Undertak-in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1-Company wrote to KESCO indicating that once the normal work of the factory was restored, the payment of arrears of electricity dues would be finalized. 4. On 11-3-2007, the Respondent-Company restarted its manufacturing activities and requested KESCO to increase the load from 1.25 MVA to 2.25 MVA. KESCO, however, responded on 20-3-2007, informing the Petitioners that the load reduction could not be considered owing to non-submission of the Bank Guarantee by the Respondent-Company for the balance amount of the bill raised for the month of May, 2006. On 3-8-2007, a settlement was arrived at with regard to the payment of arrears. As the respondent was registered as a Sick Unit with the Board for Industrial and Financial Reconstruction, hereinafter referred as the "BIFR", the said Board by its order dated 22-10-2007 directed KESCO to continue to accept Rs. 5 lakhs per month against their arrears, besides payment of current electricity bills on actual consumption basis, and not to adopt coercive measures to disconnect the supply of electricity. However, on 6-4-2009, a disconnection notice was issued by KESCO against which the Respondent-Company filed Writ Petition No. 20499 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctricity bill of the previous two billing cycles. ( iii )Letter of approval from the Electric-Inspector, wherever applicable (or as per rules when framed under section 53). ( iv )Copy of the latest paid electricity bill. If matter related to dues is pending in court, the procedure as per clause 4.49 may be fol-lowed. ( b )The designated authority of the licensee shall communicate to the consumer the decision on his application within thirty days of receipt of the duly completed application. ( c )A fresh agreement for reduced load shall be executed for 2 years but the period of compulsory agreement 2 years for the purpose of payment of MCG shall be counted from the date of original agreement for the purpose of P.D. ( d )No refund shall be allowed for the deposited cost of the line and substation. However, if the security deposited earlier is in excess of the requirement for the reduced load, the excess of the requirement for the reduced load, the excess shall be adjusted in future bills. ( e )The effective date of such reduction shall be reckoned from the first day of the following month in which the application has been sanctioned by the licensee." 7. Clause 4.49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above, if any application for reduction of load is made by a consumer, such reduction could be permitted subject to : "Submission either of Bank Guarantee, or Bonds, or any instruments to the satisfaction of the licensee of equivalent amount of pending dues by the applicant." 9. The said condition was replaced in the amended provisions by the following condition : "Subject to submission of Bank Guarantee to the satisfaction of the licensee, of equivalent amount of pending dues, by the applicant or owner." 10. It is the difference between the said two provisions, whereby the submission of a Bond had been excluded from the amended provisions, which has given rise to the disputes in the present case. 11. It appears that the outstanding dues of the Respondent-Company were 8.42 crores as on 31-3-2006 and hence, the load was not reduced. In the meantime, after the amendment of clause 4.49 of the Code, a letter was sent to the Respondent-Company on 4-10-2006, asking it to submit a Bank Guarantee/Bond securing the amount of Rs. 10.24 crores outstanding as arrears on that date. The Respondent-Company, accordingly, by its letter dated 17-6-2007, submitted a Bond stating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure 6.5 to the above Code. It was also pointed out that although the load had not been reduced, as requested by the Respondent-Company, on 13-7-2007, another request was made for increase of the load from 1.25 MVA to 2.25 MVA, which action was not permissible. 14. The learned ASG submitted that till such time the provisions of clause 4.49 were not complied with by the Respondent-Company, the question of reduction of the contracted load from 8 MVA to 1.25 MVA did not arise and the further request to increase the same to 2.25 MVA was also not maintainable. The learned ASG submitted that the approach of the High Court to the problem was completely wrong and cannot, therefore, be sustained. 15. On other hand, appearing for the Respondent-Company, Mr. M.L. Lahoty, Advocate, reiterated the submissions made before the High Court that on account of the deteriorating financial health of the Company and apprehending a further adverse effect on its work force, the State Government on 24-6-2004, upon exercise of its power under section 3 of the U.P. Industrial Undertakings (Special Provisions for Prevention of Unemployment) Act, 1966, issued a notification granting the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ( iii ) KESCO would not resort to any coercive measures such as disconnection of supply. According to Mr. Lahoty, the Respondent-Company has been strictly adhering to the said order of the BIFR and has in the process already liquidated about Rs. 3.09 crores of the outstanding dues. Mr. Lahoty reiterated that although the Respondent-Company had complied with the provisions of the Supply Code and also complied with the payment schedule as per the agreement dated 3-8-2007, and the order dated 22-10-2007, passed by the BIFR in the light of Annexure 6.5 to the Supply Code, KESCO went on raising monthly electricity bills on the basis of 8 MVA which compelled the Respondent-Company to file Writ Petition (C) No. 24900 of 2009 before the Allahabad High Court, inter alia, for a direction upon the Petitioner-Company that the load stood reduced from 1-4-2006. It was submitted that all the submissions made on behalf of KESCO relating to the application for load reduction, were not in accordance with the provisions of the Code and in the absence of any stay order by any Court or Forum in respect of arrears, the provisions of clause 4.49 was not fulfilled. However, all the issues raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of the BIFR under the SICA or the State Government under the 1966 Act. It was submitted that the said provisions of paragraphs 8( c ) and ( d ) of Annexure 6.5 to the Code squarely applied to the case of the Respondent No. 1 Company after it was declared as a "Relief Undertaking" on 24-6-2004, and as a "Sick Industry" by BIFR on 8-5-2007, but with effect from 31-8-2006. 21. It was then submitted that even though KESCO was fully aware of the pendency of arrears, it decided to enter into an arrangement for load reduction as it was satisfied that the said decision was in the interest of both KESCO and LML and was warranted by the circumstances then existing. Since the arrangement was to the full satisfaction of KESCO it itself recommended to the Regulatory Body that KESCO s decision to reduce the load from 8 MVA to 1.25 MVA may be approved, notwithstanding the pendency of arrears. Mr. Lahoty submitted that being a public undertaking it did not lie in the mouth of KESCO to try to wriggle out of a conclusive decision which had been acted upon for at least four years. 22. A further submission was made by Mr. Lahoty to the extent that Respondent No. 1 Company had secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting took place between the Managing Director of KESCO and the Executive Director of the Respondent-Company on 19-4-2006, wherein a decision was taken to reduce the load as requested by the Respondent-Company with effect from 1-4-2006, on certain terms and conditions, which have been set out hereinabove in paragraph 18. Apart from the above, the Respondent-Company was also declared as a "Sick Company" under SICA on 8-5-2007, and an order was passed by BIFR under section 22(3) of SICA on 22-10-2007, inter alia, directing that KESCO would continue to accept Rs. 5 lakhs per month against the arrear dues together with the current dues on the basis of the actual consumption. What is of significance is that despite compliance by the Respondent No. 1-Company with the said order the Petitioners continued to raise bills on the Respondent-Company on the basis of 8 MVA load, although, it had agreed to reduce the same from 8 MVA to 1.25 MVA with effect from 1-4-2006. 25. This case is an example of how a positive decision taken to help a struggling industry to find its feet can be scuttled by legalese, although, an agreement had been reached between the parties regarding payment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions. As a result, instead of helping the Respondent-Company to come out of its financial crisis, the Petitioners have prevented the Company from doing so by refusing to lower the load from 8 MVA to 1.25 MVA, as agreed upon. It is not the case of the Petitioners that the agreement which had been arrived at between the Managing Director of the Petitioners and the Executive Director of the Respondent-Company, had been breached by the Respondent-Company. On the other hand, it has been categorically contended by the Company that it had scrupulously given effect to the said agreement as also the order of the BIFR dated 22-10-2007 upon the Respondent No. 1-Company being declared a Sick Industrial Company under section 3(1)( o ) of SICA on 8-5-2007. 27. It is apparent that while passing the impugned order, the High Court lost sight of the said order of the BIFR and confined itself to the provisions or Clauses 4.41 and 4.49 of the U.P. Electricity Supply Code, 2005 framed under section 50 of the Electricity Code, 2003. If the Respondent No. 1-Company is to revive, and, thereafter, survive, a certain amount of consideration has to be shown, which was fully realized by the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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