Kanpur
Elect.Supply Co.Ltd.& ANR. Vs. M/S L.M.L.Limited & Ors. [2010] INSC 370
(7 May 2010)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION SPECIAL LEAVE PETITION
(CIVIL) NO. 33984 OF 2009 Kanpur Elect. Supply Co. Ltd. & Anr. ...
Petitioners M/s. L.M.L. Limited & Ors. ... Respondents
ALTAMAS
KABIR, J.
1. The
Respondent No.1 is a Public Limited Company engaged in the manufacture and sale
of two- wheelers, scooters and motorcycles, 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 2 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 representation to the State
Government for declaring the Respondent- Company as a "Relief
Undertaking" under Section 3(1) of the U.P. Industrial Undertaking
(Special Provisions for Prevention of Unemployment) Act, 1966. A Notification
was issued by the State Government on 24th June, 2004, suspending all
contracts, agreements and other instruments in force under any law, for a
period of one year which resulted in a strike disrupting the operations of the
company. Consequently, all manufacturing activities of the Respondent-Company
came to a halt, ultimately leading to the declaration of a lockout on 7th
March, 2006. As a result, on 31st 3 March, 2006, the Respondent-Company applied
to the Kanpur Electricity Supply Company, hereinafter referred to as
"KESCO", for reduction of the contract load from 8 MVA to 1.25 MVA
with effect from 1st April, 2006. On 19th April, 2006, a meeting took place
between the officers of KESCO and the Respondent-Company in which a decision
was taken for reduction of the load with certain conditions.
On the
said date itself KESCO conveyed its agreement for reduction of load to the U.P.
Electricity
Regulatory Commission and sought its formal approval.
3. The
Commission did not raise any objection regarding the decision to reduce the
load but it observed that the agreement which had been reached between the
parties was internal to the parties and the same had to be implemented strictly
in accordance with the Electricity Supply Code, 2005.
Thereafter,
the Respondent wrote to KESCO on 17th 4 May, 2006, to reduce the load with
effect from 1st April, 2006. However, the electricity bill for the month of
May, 2006 based on 8 MVA load was presented to the Respondent on 7th June,
2006. The Respondent immediately sent a letter of protest indicating that the
bill amount ought to have been raised on the basis of the agreed load of 1.25
MVA.
The
respondent paid the bill on the basis of 1.25 MVA load and also invoked the
provisions of the Sick Industrial Companies (Special Provisions) Act, 1985,
hereinafter referred to as the "SICA". The said reference was
registered as Case No.80 of 2006 on 15th September, 2006 and, thereafter, on
8th May, 2007, the Respondent-Company was declared as a sick industrial company
under section 6(3)(o) of the 1985 Act and the IDBI Bank was appointed as the
Operating Agency. On 4th October, 2006, KESCO wrote to the Respondent-Company
for submitting a Bank Guarantee for the arrears of the amount as per Clause
4.49 of the U.P. Supply Code, 2005 so that 5 action could be taken to reduce
the load from 8 MVA to 1.25 MVA. In response, the Respondent 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
11th March, 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 20th March, 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 3rd August, 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, 6 hereinafter
referred as the "BIFR", the said Board by its order dated 22nd
October, 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 6th April, 2009, a disconnection notice was issued
by KESCO against which the Respondent-Company filed Writ Petition No.20499 of
2009 in which an interim order was passed by the Allahabad High Court on 22nd April,
2009, directing that in case the Respondent-Company continued to pay the amount
as directed by the BIFR, its electricity supply would not be disconnected. The
said writ petition is still pending disposal. However, since, in the meantime,
the claim of the Respondent-Company for reduction of the load from 8 MVA to
1.25 MVA with effect from 1st April, 2006, was not decided or implemented, the
Respondent-Company filed Writ Petition No.20499 of 7 2009, inter alia, for an
appropriate writ or direction to the effect that the load of the
Respondent-Company stood reduced from 8 MVA to 1.25 MVA pursuant to the then
prevalent provisions of Clause 4.41(b) of the 2005 Code, with effect from 1st
April, 2006, 2.25 MVA with effect from April, 2007 and 2.50 MVA with effect
from August, 2007.
5.
Interpreting the provisions of Clauses 4.41 and 4.49 of the U.P. Electricity
Code, 2005, the High Court came to the conclusion that the decision with regard
to the reduction of the load of the Respondent-Company stood approved on 19th
April, 2006, and, accordingly, the effective date of such reduction would have
to be reckoned from the first day of the following month, namely, from
1.5.2006, in terms of Clause 4.41(e) of the Code. The writ petition was,
accordingly, allowed and it is against such order of the writ court, that the
present Special Leave Petition has been filed.
6. From
what has been indicated hereinabove, it will be clear that the question
required to be answered in the present Petition involves the interpretation of
Clause 4.41 read with Clause 4.49 of the U.P. Electricity Supply Code, 2005,
framed under Section 50 of the Electricity Act, 2003. In order to appreciate
the issue raised, the provisions of Clause 4.41 are reproduced herein below :
"4.41
Reduction in Contracted load.
(a) Every
application for reduction of contracted load shall be made in duplicate to the
concerned officer on prescribed form (Annex-4.10) along with the prescribed
processing fee and charges for reduction of load alongwith the following documents:
(i) Work
completion certificate and test report from the licensed electrical contractor
where alteration of the installation is involved.
(ii)
Maximum demand recorded in the last two billing cycles if the meter has the
facility to record 9 maximum demand and the electricity 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 followed.
(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 10 application has been sanctioned by the
licensee.
(f)
.................."
7. Clause
4.49 was amended with effect from 14th September, 2006. Accordingly, both the
unamended provisions of Clause 4.49 and the amended provisions are set out
herein below :
Unamended
version :
"4.49.
Release of Connection/Load where arrears disputed are stayed by Court/other
forums :
Where
there is stay order by any Court, Forum, Tribunal, or by Commission, staying
the recovery of any dues by licensee, and during the operating period of any
such order:
(i) If a
consumer sells a premises and an application for release of new connection is
made by the purchaser.
Or (ii)
If any application for enhancement or reduction of load is made by a consumer.
11 the
licensee shall release the new connection to such consumer and also permit
reduction or enhancement of loads, Subject to 7 Submission either of Bank
Guarantee, or Bonds, or any instruments to the satisfaction of licensee of
equivalent amount of pending dues, by the applicant, and, 7 Agreement with
licensee on terms of extension/invoking of guarantee, and, 7 Levy of surcharge
amount on pending dues, And the application of such consumers shall not be kept
pending by the licensee."
Amended
version :
"4.49.
Permanent disconnection/ release of Connection/Enhancement and Reduction of
Load where arrears disputed are stayed by Court/other forums :- Where there is
a stay order by any Court, Forum, Tribunal, or by Commission, staying the
recovery of any dues by licensee, and during the operating period of any such
order - (i) If a consumer sells a premises and an application for release 12 of
new connection is made by the purchaser; or (ii) If any application for new
connection, reconnection, en- hancement or reduction of load is made by a
consumer; or (iii) If any application for permanent disconnection is made by a
consumer the licensee shall release the new connection to such consumer and
also permit reconnection reduction or enhancement of Loads, as well as allow
permanent disconnection.
Subject
to 7 Submission of Bank Guarantee to the satisfaction of licensee, of
equivalent amount of pending dues, by the applicant or owner, and, 7 Agreement
with licensee on terms of extension/invoking of guarantee, and 7 Levy of
surcharge amount on pending dues, and the application of such consumers shall
not be kept pending by the licensee."
8. As
will be seen from the 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 31st 14 March, 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 4th October, 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 17th June,
2007, submitted a Bond stating therein that the Company was agreeable to make
payment of the arrears, if any, to KESCO upon the directions of the Court and
the amount as was decided by the Courts. However, since the two affidavits and
the Bond did not secure the outstanding dues of the Petitioners and were also
not to its satisfaction, the load was not reduced.
As
indicated hereinabove, the Respondent-Company, thereafter, filed Civil Misc.
Writ Petition No.24900 of 2009 before the Allahabad High Court.
12.
Learned ASG, Mr. Parag Tripathy, appearing for the Petitioners, submitted that
since neither the two affidavits nor the Bond filed by the Respondent-Company
were acceptable to the Petitioners, the load was not reduced from 8 MVA to 1.25
MVA, as requested, since securing the outstanding balance was one of the
pre-conditions for such reduction. The learned ASG urged that since securing
the amount payable was involved, neither the affidavits nor the Bond could
guarantee recovery of the arrear dues in case of breach. It was further urged
that even the un amended version of clause 4.49, on which the
Respondent-Company relies, makes it very clear that either release of a new
connection or the reduction or enhancement of loads would be subject to
submission of either a Bank guarantee or Bond or any instrument to the
satisfaction of the licensee (emphasis added). The learned Additional Solicitor
General submitted that the High Court appears to have lost sight of the 16 said
condition and that the Petitioner-Company could not be compelled to accept the
affidavits or Bond as security/guarantee for the arrears due.
13. The
learned ASG then submitted that while the Respondent-Company had relied upon
Annexure 6.5 to the U.P. Electricity Supply Code, 2005, the same only provides
relief to Sick Industrial Companies and Relief Undertakings falling under
Clause 6.16 of the said Code, which provides as follows :- "6.16.
Disconnected Industrial Units seeking revival : For industries lying
disconnected over six months and seeking to revive, the Commission order dated
12th July, 2005 given in Annexure 6.5, shall apply to the extent specified in
the order, and if not contrary to any G.O., or any court order."
Mr.
Tripathy urged that the said clause would not apply to the case of the
Respondent-Company since it was not the case of a disconnected industrial unit
seeking revival and hence no reliance could be placed on Annexure 6.5 to the
above Code. It was 17 also pointed out that although the load had not been
reduced, as requested by the Respondent- Company, on 13th July, 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
the 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 18 financial health of the Company and apprehending a
further adverse effect on its work force, the State Government on 24th June,
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-Company the status of a
"Relief Undertaking". The notification, which was initially issued
for a period of one year, was subsequently extended for two consecutive periods
of one year each on 14th June, 2005 and 23rd June, 2006, respectively. The
consequence of the same was that all contracts, agreements, etc. stood
suspended for a period of one year and all proceedings pending before any
Court, Tribunal, Authority, etc. stood stayed.
16. On
account of the deteriorating market conditions and suspension of most of its
manufacturing activities, the Respondent-Company applied for reduction of load
from 8 MVA to 1.25 19 MVA and made a formal application to KESCO to reduce its
load in the manner indicated above with effect from 1st April, 2006. The said
application was in the prescribed proforma under Clause 4.41 of the U.P. Supply
Code, 2005.
17. In
order to prevent a stalemate, the Respondent-Company sought the intervention of
the Member Secretary (Energy), U.P., regarding reduction of the contracted load
from 8 MVA to 1.25 MVA on account of the market conditions.
According
to Mr. Lahoty, this led to a meeting between the Managing Director of KESCO and
the Executive Director of LML on 19th April, 2006, in which a decision was
taken to reduce the load from 8 MVA to 1.25 MVA, as requested by the
Respondent- Company, with effect from 1st April, 2006. The said decision of
load reduction was, of course, subject to the condition that (i) LML would pay
its monthly electricity dues, (ii) both LML and KESCO would 20 accept the
decision on dues pending in the Courts and (iii) the decision on load reduction
would be sent for approval to the Regulatory Commission (UPERC), which would be
acceptable to both the parties. Mr. Lahoty contended that once a decision had
been arrived at between the Managing Director of KESCO and the Executive
Director of the Respondent-Company, KESCO ought not to have raised inflated
bills based on 8 MVA load thereafter.
18. Mr.
Lahoty urged that while the aforesaid controversy was continuing, on 8th May,
2007, the Respondent-Company was declared to be a "Sick Industrial
Company" under Section 3(1)(o) of SICA.
In
addition to the above, the BIFR also invoked its jurisdiction under Section
22(3) of SICA on 22.10.2007 directing that (i) against arrears, KESCO would
continue to accept Rs.5 lakhs per month, (ii) current bills would be paid on
actual consumption basis and (iii) KESCO would not resort 21 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 3rd August, 2007, and the order
dated 22nd October, 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 1st April, 2006.
It was submitted that all the submissions made on behalf of KESCO relating to
the application for load reduction, were not in 22 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 KESCO were negated by the Division Bench of
the High Court in its impugned judgment. Mr. Lahoty submitted that having
regard to the decision of the Rajasthan High Court in Modern Syntax (I) (2001)
Raj. 170) which in its turn is based on the judgment of this Court in Doburg
Lager Breweries SCC 382], wherein it was held by this Court that the object of
a Relief Undertaking Act is to sub- serve the public interest and to prevent
unemployment in particular, the relevant provisions are to be given a liberal
interpretation.
19. Mr.
Lahoty also submitted that in clause 4.49 of the Code prior to its amendment,
there was an 23 option of furnishing a Bond and filing an instrument in the
nature of a Bond, apart from furnishing a Bank Guarantee and no fault could,
therefore, be found with the affidavits and the Bond submitted on behalf of the
Respondent-Company.
It was
submitted that since no shortcoming or illegality was mentioned in the decision
taken by the Managing Director of KESCO and the Executive Director of LML and
since the load reduction application was to be considered as per the unamended
Code, nothing further was required to be done by the Respondent-Company after
the said decision was taken on 19th April, 2006. It was urged that it was in
the said context that the Division Bench observed that KESCO's stand in raising
the monthly bills on the basis of 8 MVA contracted load was wholly unjust and
unfair, more particularly when the Respondent No.1 Company was on its part
complying with the conditions of payment of the monthly bills based on actual
24 consumption and instalments towards the arrears.
20.
Referring to the exercise of power by the UPERC under Section 23 of the
Electricity Supply Act, 2003 and Clause 9.5 of the Supply Code, it was
submitted that the same was a separate regime in the larger public interest
with the sole object of preventing unemployment and loss of production in order
to serve a social cause. It is in that context that it was recorded that only
current dues were to be realized from a "Relief Undertaking" or a
"Sick Industry" from whom only current dues would be realized and as
far as the past dues are concerned, the same would be recovered in equal
monthly instalments. As far as late payment sur- charge are concerned, the same
would be subject to the orders of the BIFR under the SICA or the State
Government under the 1966 Act. It was submitted that the said provisions of
paragraph 8(c) and (d) of Annexure 6.5 to the Code squarely applied to the 25
case of the Respondent No.1 Company after it was declared as a "Relief
Undertaking" on 24th June, 2004, and as a "Sick Industry" by
BIFR on 8th May, 2007, but with effect from 31st August, 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 KESCO by an amount of Rs.64 lakhs approx. which was
deposited by the Respondent No.1 Company as per Clause 4.20 of the Supply Code,
and the same could be utilized by KESCO in any eventuality. When against the
excess security deposit an amount of Rs.65 lakhs approximately was found to be
surplus, the Respondent-Company permitted KESCO to adjust the total amount of
Rs.84 lakhs as late as in October, 2009, which would show the bonafides of the
Respondent No.1 Company.
23. Mr.
Lahoty concluded his submissions by submitting that because of the financial hardship
under which the Respondent No.1 Company was functioning, both the State
Government as well as the BIFR had shown a great deal of concern and that the
Respondent-Company is continuing to pay Rs.5 lakhs in monthly instalments
towards arrears, along 27 with the current dues, and that it was in no position
to provide any Bank Guarantee as demanded by the Petitioners. Mr. Lahoty
submitted that a public authority should not be allowed to exert pressure when
the Respondent-Company was complying with its commitments and the order passed
under Section 22(3) of SICA by BIFR. Mr. Lahoty submitted that the Special
Leave Petition was without any merit and was liable to be dismissed.
24. The
facts of this case are relatively simple and straightforward. What is difficult
to comprehend is the inscrutable manner in which decisions arrived at in common
are sought to be negated on account of bureaucratic lethargy. The case of the
Respondent-Company, which is not denied on behalf of the Petitioners, is that
owing to market fluctuations the Respondent-Company had to put a halt to its
manufacturing activities and to make a representation to the State Government
for 28 declaring it to be a "Relief Undertaking" under the relevant
provisions of the U.P. Industrial Undertaking (Special Provisions for
Prevention of Unemployment) Act, 1966. Responding to the said representation,
the State Government issued a notification on 24th June, 2004, suspending all
contracts, agreements and other instruments in force for a period of one year
leading to strikes and complete disruption of the work of the Respondent
No.1-Company, impelling the Respondent- Company to apply to the Petitioners for
reduction of the contracted load from 8 MVA to 1.25 MVA from 1st April, 2006.
The materials on record indicate that as a result of such representation a
meeting took place between the Managing Director of KESCO and the Executive
Director of the Respondent- Company on 19th April, 2006, wherein a decision was
taken to reduce the load as requested by the Respondent-Company with effect
from 1st April, 2006, on certain terms and conditions, which have been 29 set
out hereinabove in paragraph 18. Apart from the above, the Respondent-Company
was also declared as a "Sick Company" under SICA on 8th May, 2007,
and an order was passed by BIFR under Section 22(3) of SICA on 22nd October,
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 1st
April, 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 30 parties regarding payment of the arrears in
instalments along with the dues, and despite the same being duly followed by
one of the parties to the agreement. The threat to yet again disrupt its
manufacturing operations looms large on the horizon on account of the inability
of the Respondent No.1- Company to comply with the provisions of Clause 4.41
read with Clause 4.49 of the U.P. Electricity Code, 2005. On 31st March, 2006,
the outstanding dues of the Respondent-Company was Rs.8.42 crores and when
Clause 4.49 was amended, the Respondent- Company was asked to submit a Bank
Guarantee/Bond to secure the amount of Rs.10.24 crores outstanding as arrears
on that date. In compliance thereof, the Respondent-Company duly furnished a
Bond on 17th June, 2007, which was not accepted by the Petitioners on the
ground that it did not secure the outstanding dues of the Petitioner No.1 and
were not to its satisfaction. As a result of the above, although, the
Petitioners were fully aware 31 of the precarious financial condition of the
Respondent-Company and having agreed to reduce the contract load from 8 MVA to
1.25 MVA, it refused to do so on the ground that the Bond provided did not
secure the outstanding dues, resulting in a vicious circle of events. On the
one hand, the high MVA load continued to contribute to the raising of high
electricity bills, which the Respondent-Company was not able to pay, and, on
the other hand, the Respondent-Company continued to suffer further financial
losses on account thereof.
26. An
argument had been advanced on behalf of the Petitioners that in the un amended
provisions of Clause 4.49, provision had been made for the defaulting Company
to furnish a Bond and as an alternative, to furnish a Bank Guarantee,
apparently to assuage the aggravated economic conditions. In the amended
provisions of Clause 4.49 the furnishing of a Bond by way of security 32 was
excluded. However, the discretion not to accept such Bond always lay with the
Petitioners, giving them the discretion not to accept the Bond furnished by the
Respondent-Company. That is exactly what has happened in the instant case.
While
agreeing to give the Respondent-Company the benefit of a reduced MVA, the
Petitioners had prevented the Respondent-Company from accessing such privilege
by continuing to raise bills on the basis of the high MVA which the
Respondent-Company apparently was unable to bear on account of its financial
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 33 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 22nd October, 2007 upon the Respondent No.1- Company being declared a
Sick Industrial Company under Section 3(1)(o) of SICA on 8th May, 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 of 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 Petitioners themselves, but they allowed
themselves to be tied up in knots over compliance with the provisions of
Clauses 4.41 and 4.49 which are Rules framed for 34 application in special
cases in order to help industries which had fallen on difficult days, to recoup
its losses and to bring its finances on an even keel.
28. There
is no dispute that pursuant to an application made on 31st March, 2006 by the
Respondent No.1-Company, praying for the reduction of the contract load from 8
MVA to 1.25 MVA with effect from 1st April, 2006, a Meeting had been held
between the Managing Director of KESCO and the representatives of the
Respondent-Company in which a decision was taken for reduction of the load with
certain conditions. There is also no dispute that on the said date itself KESCO
conveyed its agreement for reduction of load to the U.P.
Electricity
Regulatory Commission and sought its formal approval and that no objection was
raised by the Commission with regard to the said decision except to indicate
that the said decision would 35 have to be implemented strictly in accordance
with the Electricity Supply Code, 2005. There is also no dispute that when the
decision was taken on 19th April, 2006 to reduce the contract load, the
unamended version of Clause 4.49 of the Code was in existence and that the same
provided for submission of either a Bank Guarantee or a Bond or any other
instrument to the satisfaction of the licensee of the equal amount of pending
dues. The only problem which has arisen is KESCO's decision not to accept the
Bond given by the Respondent-Company on the ground that it did not provide
sufficient security for the outstanding dues. 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 19th April, 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 24th June, 36 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 8th May, 2007 and the BIFR, while
considering the revival of the Respondent-Company by its order dated 22nd
April, 2007, directed KESCO to continue to accept Rs.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.
29. We
are, therefore, of the view that no interference is called for in this petition
in 37 regard to the impugned order of the High Court.
The
Special Leave Petition is, accordingly, dismissed, but this will not prevent
the Petitioner-Company from taking appropriate steps against the
Respondent-Company in the event the latter Company commits default in paying
the installments as directed by the BIFR towards the arrears or in respect of
the current electricity bills.
30. There
will be no order as to costs.
.................................................J. (ALTAMAS
KABIR)
.................................................J. (CYRIAC
JOSEPH)
.................................................J.
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