U.P. State Electricity Board Vs. Banaras Electric Light & Power
Co. Ltd. [2001] Insc 404 (17 August 2001)
A.P.
Misra & D.P. Mohapatra D.P.Mohapatra, J.
In
these appeals filed by special leave, the U.P. State Electricity Board (for
short the Board), a statutory body constituted under the Electricity (Supply)
Act, 1948 assails the judgment of the Division Bench of the Calcutta High Court
vide its Judgment dated 26.8.1982 in the Appeal from Original Order No.229 of
1980 dismissing the appeal filed by the Board and confirming the judgment
passed by the single Judge.
The
core question that arises for determination in these cases is whether the Board
is liable to pay to the liquidators of the company (in liquidation)respondent
herein the sum of Rs.68,29,636.87 together with interest being the amount
collected by the Board between the 4th/5th February, 1975 till 30th April, 1979
towards arrears of electricity charges for the electricity supplied to
consumers during periods prior to the take over of the Undertaking by the
Board, and all collections made by the Board subsequently on that account.
The
factual matrix of the case, which is not in dispute, may be stated thus:
Banaras
Electric Light & Power Co. Ltd. (hereinafter described as the Company) was
the holder of the license dated 6th February, 1925 for generation, supply and distribution of electric energy
in the city of Banaras under the Indian Electricity Act,
1910 (for short the Act). On 1st February, 1974 a notice under Section 6(1) of the Act was served upon the company
notifying the intention of the Board to purchase the undertaking of the
company.
The
possession of the Undertaking was taken over at midnight between 5th and 6th February, 1975. The undertaking of the company
thereupon vested in the Board. On the date of the take over of the Undertaking
there were certain uncollected dues for the electricity supplied by the company
to its consumers up to the date of vesting which were thereafter collected by
the Board. Up to 30th
April, 1979 a total
sum of Rs.68,29,636.87 had been collected. In the meantime the company had gone
into voluntary liquidation and joint liquidators had been appointed. On the
application filed by the liquidators on 30th January, 1980 under Sections 468
and 518 (1) (b) and (4) of the Companies Act, 1956 seeking an order against the
Board to pay to the liquidators of the company the aforementioned sum together
with interest thereon and all further collections made by the Board from 1st
May, 1979 till date. The gist of the case of the company was that the
aforementioned amount was the dues of the company from its consumers for the
electricity supplied before the date of vesting, which the Board collected from
the consumers after vesting of the undertaking. The company contended that the
amount was collected by the Board as agent of the company and the Board held
the amount as a trustee.
Therefore,
the Board was required in fact and in law to make over the amount collected by
it and any further sum which it may collect from the consumers towards such
arrear dues of the company to the liquidators.
Contesting
the claim of the company the Board took the stand that it was entitled to
retain and appropriate any amount collected by it after vesting of the
undertaking since the book-debts of the company which were part of the
undertaking vested in the Board. The further case pleaded by the Board was that
under the provisions of the Act it was entitled to adjust the said amount
towards dues of the company towards the cost of the electricity supplied and
the security deposits of the consumers which the company had failed to make
over to the Board at the time of vesting.
The
learned single Judge of the High Court on consideration of the case of the
parties and on interpretation of the relevant provisions of the Indian
Electricity Act and also the Indian Electricity (Uttar Pradesh Amendment and
Validation) Act, 1975 (U.P. Act No.16 of 1975) particularly Sections 6 and 7
(A) thereof held that the book-debts of the company were not a part of the
undertaking which vested in the Board and, therefore, the Board having
admittedly realised the arrears of charges which were due from the consumers to
the company (in liquidation) prior to the date of taking over had no right to
retain the same and the court in exercise of the jurisdiction vested under
Section 468 read with Section 518 (1)(b) and (4) of the Companies Act could
adjudicate the matter and direct that the amount collected by the Board as
trustee or agent of the Company (in liquidation) should be paid to the liquidators.
The learned single Judge rejected the plea of the Board for adjustment/set off
of the amount against dues of the company (in liquidation) to the Board. The
operative portion of the order/judgment reads as hereunder:
Therefore,
I am making an order in terms of prayer (a) directing the respondent Board to
pay the said amount of Rs.68,29,636.87 together with interest at the rate of 6%
per annum from the date of realisation of the said bills until payment being
the arrears of electricity charges supplied to the consumer of the said company
in liquidation up to the midnight of 4/5th February 1975 as the said sums were
collected by the respondent Board as trustee or agent on behalf of the company
in liquidation. Such payment of be made to the Joint Liquidators within a
fortnight from date. The Joint Liquidators will keep the said amount in
separate account invested in a nationalised bank on a short term deposit for a
period not less than 181 days and keep the same renewed until further order of
this court. The said respondent Board will also pay the outstanding arrears of
charges which are to be collected by them as trustee or agent from the
consumers due up to the said date of taking over to the Joint Liquidators in
terms of this order as and when realise and the Joint Liquidators will also
keep the said amount in a separate account in a nationalised Bank invested in
the same manner as hereinafter stated.
The
Board assailed the said order/judgment in appeal which, as noted earlier, was
dismissed by the Division Bench of the High Court by the judgment which is
under challenge in the present appeals. From the discussions in the judgment it
is clear that the Division Bench took note of the contentions raised by the
counsel appearing for the parties, particularly, the question whether the
book-debts of the company were included in the expression undertaking and as
such vested in the Board.
Interpreting
the provisions of Section 7 and 7(A) of the Act as substituted by the Indian
Electricity (U.P. Amendment and Validation) Act, 1975 the Division Bench held
that there was no specific provision for book- debts of the company as a part
of the undertaking and the licensee did not have to account for the book-debts
or unpaid bills on the date of service of notice or at any point of time
thereafter. Taking note of the provisions of Section 7 which provides that the
rights, powers, authorities, dues and obligations of the licensee under its licence
shall stand transferred to the purchaser and such purchaser shall be deemed to
be the licensee and the provisions in sub-sections 4 and 5 of Section 7(A)
which empower the purchaser to deduct certain sums from the purchased money to
be paid to the company, the Division Bench observed that Section 7(A) (5) lays
down the method of adjustment of liabilities of the licensee against the
compensation money and it does not contain any rule for calculation of
compensation of the purchase money to be paid to the licensee. The Division
Bench recorded its finding: why should the licensee get credit for the unpaid
bills of the consumers and his liability on account of security deposits be
reduced unless the outstanding amount of the unpaid bills are regarded as
property of the licensee?. The Division Bench was of the view that no other
construction will make any sense. The Division B ench took the view that if the
appellants argument is to be accepted, the statute must be taken to have given
the licensee the credit for money which do not belong to the licensee; this
construction will lead to absurdity and should be avoided. The Division Bench
was of the opinion that the unpaid bills of the consumers are not covered by
the expression undertaking and under the Act the outstanding amounts payable on
the bills belong to the licensee. On these observations and findings the
Division Bench came to the conclusion that in the facts of the case the
decision of the learned trial Judge directing the Board to make the payment
collected so far together with interest to the liquidators is correct. The Division
Bench dismissed the appeal and confirmed the judgment passed by the learned
trial Judge and directed the Board to carry out the direction given by the
learned trial Judge within a period of eight weeks from the date.
Before
considering the case on merit it will be convenient to notice some relevant
statutory provisions.
Section
6 of the Act which deals with purchase of undertakings enumerates the procedure
to be followed when the State Electricity Board or the State Government or any
local authority constituted for an area intends to purchase an Undertaking. The
provisions of the said section so far as material for the purpose of the
present case are quoted hereunder:
Section
6 PURCHASE OF
UNDERTAKINGS:
(1)
Where a license has been granted to any person, not being a local authority,
the State Electricity Board shall-
(a) In
the case of a license granted before the commencement of the Indian Electricity
(amendment) Act, 1959 (32 of 1959) on the expiration of each such period as is
specified in the license, and
(b) In
the case of a license granted on or after the commencement of the said Act, on
the expiration of such period not exceeding twenty years and of every such
subsequent period, not exceeding ten years, as shall be specified in this
behalf in the license;
Have
the option of purchasing the undertaking and such option shall be exercised by
the State Electricity Board serving upon the licensee a notice in writing of
not less than one year requiring the licensee to sell the undertaking to it at
the expiry of the relevant period referred to in this sub-section.
XXX XXX
XXX (4) If the State Electricity Board intends to exercise the option of
purchasing the undertaking under this section, it shal send an intimation in
writing of such intention to the State Government at least eighteen months
before the expiry of the relevant period referred to in sub-section(1) and if
no such intimation as aforesaid is received by the State Government the State
Electricity Board shall be deemed to have elected not to purchase the
undertaking.
XXX XXX
XXX (6) Where a notice exercising the option of purchasing the undertaking has
been served upon the licensee under this Section, the licensee shall deliver
the undertaking to the State Electricity Board, the State Government or the
local authority, as the case may be, or to such officer as the Board, the
Government or the local authority may appoint in that behalf on the expiration
of the relevant period referred to in sub-section (1) pending the determination
and payment of the amount referred to in sub-section (7);
Provided
that the licensee shall, in addition to the said amount, be entitled to
interest thereon at the Reserve Bank rate ruling at the time of delivery of the
undertaking plus one per centum for the period from the date of delivery of the
undertaking to the date of payment of said amounts.
(6-A)
After the service upon the licensee under this Section of a notice by the State
Electricity Board exercising the option of purchasing the undertaking
(a)
the licensee shall prepare and furnish to the Board within a period of three
months from the date of service of such notice an inventory of all lands,
buildings, works, materials and plant belonging to the undertaking at the time
of the service of such notice and shall be bound to allow the Board or its
agents or the Electrical Inspector to the State Government or any officer
subordinate to him authorised by him in that behalf, at all reasonable times
during the pendency of the said notice and until delivery of the undertaking to
the Board under sub-section (6), to enter upon such lands, buildings and works,
and inspect such lands, buildings, works, materials and plant and prepare an
inventory thereof or to check the correctness of the inventory furnished by the
licensee;
(b) the
licensee shall be bound to keep all his lands, buildings, works, materials and
plant belonging to the undertaking in as good condition as they were at the
time of the service of such notice, subject only to changes caused by
reasonable wear and tear or by irresistible force, and to allow the said Board
and its agents, or the Electrical Inspector to the State Government or any
officer subordinate to him authorised by him in that behalf, at all reasonable
times during the pendency of the said notice and until delivery of the
undertaking to the Board under sub-section (6), to enter upon such lands,
buildings, and works and inspect the condition thereof and the condition of the
said material and plant;
(c)
the licensee may use the said lands, buildings, works, materials and plant as a
person of ordinary prudence would use them if no such notice as aforesaid were
served, but he shall not pull down or damage any such buildings, works,
material or plant or commit any other act which is destructive thereof or permanently
injurious thereto of remove any such materials or plant from the undertaking;
(d) the
licensee shall be liable to account to the Board for all such lands, buildings,
works, materials and plant, as existed at the time of the service of such
notice.
(7)
Where an undertaking is purchased under this section, the purchaser shall pay
to the licensee an amount determined in accordance with the provisions of
Section 7 and Section 7- A as substituted by the Indian Electricity (U.P.
Amendment and Validation) Act, 1975.
Section
7 of the Act which makes the provisions regarding vesting of the undertaking in
the purchaser reads as follows.
7.
Vesting of the undertaking in the purchaser:- Where an undertaking is sold
under section 5 or section 6, then upon the completion of the sale or on the
date on which the undertaking is delivered to the intending purchaser under the
sub-section (3) of section 5 or under sub-section (6) of section 6, as the case
may be, whichever is earlier
(i) the
undertaking shall vest in the purchaser or the intending purchaser, as the case
may be, free from any debt, mortgage or similar obligation of the licensee or
attaching to the undertaking:
Provided
that any such debt, mortgage or similar obligation shall attach to the purchase
money in substitution for the undertaking.
(ii) the
rights, powers, authorities, duties and obligations of the licensee under his
license shall stand transferred to the purchaser and such purchaser shall be
deemed to be the licensee:
Provided
that where the undertaking is sold or delivered to a State Electricity Board or
the State Government, the license shall cease to have further operation.
By the
U.P. Act No. 16 of 1975 the following changes were made in Section 7 of the
principal Act:
4.
Amendment of Section 7 In Section 7 of the principal Act,- (i) In sub-section
(1), for the proviso to clause (i), the following proviso shall be substituted,
namely :
Provided
that any such debt, mortgage or similar obligation shall attach to the amount
payable for the undertaking;
(ii) in
sub-sections (2), (3) and (5), for the words purchase money, wherever
occurring, the word amount shall be substituted.
Section
7A contains the provisions regarding determination of the purchase price. The
said section as substituted by the U.P. Act 16 of 1975, so far as material for
the purpose of the case, is quoted hereunder:
Section
7A Determination of amount (1) where an undertaking of a licensee is sold under
sub-section (1) of section 5 or is purchased under section 6 the amount payable
there for shall be determined as hereinafter provided.
(2)The
gross amount payable to such licensee shall be the aggregate value of the
amounts specified below :
(i)
the book value of all completed works in beneficial use pertaining to the
undertaking and taken over by the State Electricity Board, the State Government
or local authority, as the case may be (excluding works paid for by consumers)
less depreciation calculated in accordance with the Sixth Schedule read with
the Seventh Schedule to the Electricity (Supply) Act, 1948.
(ii)
The book value of all works in progress taken over, excluding works paid for by
the consumers or prospective consumers;
(iii)
The book value of all stores, including spare parts taken over, and in the case
of used stores and spare parts, if taken over, such sum as may be decided upon
by the Special Officer referred to in sub-section (6) hereinafter referred to
as the special officer);
(iv)
The book value of all other fixed assets in use on the date of vesting under
Section 7, hereinafter referred to as the vesting date, and taken over, less
depreciation calculated in accordance with the said schedules;
(v)
The book value of all plants and equipments existing on the vesting date, if
taken over but no longer in use owing to wear and tear or to obsolescence, to
the extent such value has not been written off in the books of the licensee,
less depreciation calculated in accordance with the said schedules;
Explanation:- The book value of any fixed asset
means its original cost, and shall comprise
(i)
the purchase price paid by the licensee for the asset, including the cost of
delivery and all charges properly incurred in erecting and bringing the asset
into beneficial use as shown in the books of the Undertaking;
(ii) the
cost of supervision actually incurred, but not exceeding fifteen percent of the
amount referred to in paragraph (1);
Provided
that before deciding the amount under this sub-section the licensee shall be
given an opportunity by the Special Officer of being heard, after giving him a
notice of at least 15 days therefor.
(3) A
sum equal to 10 percent of the amounts assessed under clauses (i) to (iv) of
sub-section (2) shall be paid to the licensee in respect of compulsory purchase
under section 6, (4) When any asset is acquired by the licensee after the
expiry of the period to which the latest annual accounts relate, the book value
of the asset shall be such as may be decided upon by the Special Officer;
Provided
that before deciding the book value of any such asset, the licensee shall be
given an opportunity by the special officer of being heard, after giving him a
notice of at least 15 days therefor.
(5)
The purchaser shall be entitled to deduct the following sums from the gross
amount payable under the foregoing sub-section to a licensee (a) the amount, if
any, already paid in advance;
(b) where
the purchaser is the State Electricity Board the amount due, if any, including
interest thereon, from the licensee to the Board, for energy supplied by the
Board before the vesting date.
(c)
All amounts and arrears of interest, if any, thereon, due from the licensee to
the State Government or the State Electricity Board;
(d)
The amount, if any, equivalent to the loss sustained by the purchaser by reason
of property or rights belonging to the undertaking not having been handed over
to the purchaser, the amount of such loss being deemed to be the amount by
which the market value of such property or rights exceeds the amount payable therefor
under this section, together with any income which might have been realised by
the purchaser, if the property or rights had been handed over on the vesting
date;
(e)
The amount of all loans due from the licensee to any corporation as defined in
the U.P. Public Moneys (Recovery of dues) Act, 1972, and arrears of interest,
if any, thereon;
(f)
All sums paid by the consumers by way of security deposit and arrears of
interest due thereon on the vesting date, insofar as they have not been paid
over by the licensee to the purchaser, less the amounts which according to the
books of the licensee are due from the respective consumers to the licensee for
energy supplied by him before that date.
(g)
All advances from consumers and prospective consumers, and sums which have been
or ought to be set aside to the credit of the consumers, insofar as such
advances or sums have not been paid over by the licensee to the purchaser;
(h)
The amounts remaining in Tariffs and Dividends Control Reserve, contingencies
Reserve and the Development Reserve, in so far as such amounts have not been
paid over by the licensee to the purchaser.
(6)
The State Government shall appoint, by order in writing, a person having
adequate knowledge and experience in matter relating to accounts, to be Special
Officer to assess the net amount payable under this section to the licensee,
after making the deductions mentioned in this Section.
(7)(a)
The Special Officer may call for the assistance of such officers and staff of
the State Government or the State Electricity Board or the licensee as he may
deem fit in assessing the net amount payable.
(b)the
Special Officer shall have the same powers as are vested in a Civil Court under
the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit, in
respect of the following matters-
i) enforcing
the attendance of any person and examining him on oath;
ii) compelling
the production of documents; and
iii)
issuing commissions for the examination of witnesses.
The
Special Officer shall also have such further powers as may be specified by the
State Government by notification in the Gazette.
(8)Where
the gross amount payable to the licensee is equal to or less than the total
amount to be deducted under this section no payment shall be made to the
licensee by the purchaser.
On a
close reading of the provisions noted above it is clear that no provision is
made in the Act requiring the licensee to deliver the book debts of the company
to the Board on vesting of the Undertaking in the latter, nor is there any
provision in the statute empowering the Board to deduct the amount of unrealised
dues of the company from its consumers towards the electricity supplied to them
prior to the date of vesting from the purchase money to be paid by the Board to
the company. Further, there is no provision in the Act which enables the Board
to adjust the said amount towards security deposits or any other dues.
The
plea of adjustment/set off is untenable. The field being covered by statute the
exercise has to be done strictly in accordance with the statutory provisions.
It is not open for the Board to make any deduction by way of adjustment or set
off from the amount to be paid to the company without a statutory mandate in
that regard. It follows therefore that the company is entitled to receive from
the Board the amounts realised by the latter from consumers towards charges of
the electricity supplied by the company to them prior to the date of vesting.
The Division Bench has also referred to the correspondence between the Board
and Company indicating that the Board was conscious of its liability to hand
over a sum of Rs.68,29,636.87 to the company.
The
High Court was right in allowing the petition filed by the liquidators of the
company (in liquidation) and directing the Board to pay the amount realised by
it with interest to the liquidators.
In the
result, the appeals being devoid of merit, are dismissed. The hearing fee is
assessed at Rs.10,000/-.
..J.
(A.P.Misra)
.J.
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