Case Note & Summary
The matter arose from a writ petition filed by an industrial consumer challenging electricity dues and threatened disconnection. The petitioner, a company, had an agreement dated February 6, 1990 with the U.P. State Electricity Board for supply of 1650 KVA electric energy. The petitioner claimed rebate for establishing industry in an undeveloped area, but that controversy was not before the court. Admittedly, a sum of Rs. 49395 lacs was due from the petitioner. On June 4, 1996, the Board raised a demand for that amount. To avoid disconnection, the petitioner agreed with the Board on June 10, 1996 to pay the outstanding amount in 12 monthly instalments, and the Board reconnected supply on that condition. After depositing one instalment, the petitioner defaulted. Anticipating disconnection, the petitioner approached the Allahabad High Court, Lucknow Bench, in Writ Petition No. 2109 of 1996, seeking a direction not to recover the amount, pleading that it was a sick industry and its rehabilitation claim was pending before the Board for Industrial and Financial Reconstruction (BIFR). The High Court refused relief by order dated June 26, 1996. The petitioner then filed a special leave petition before the Supreme Court. The core legal issue was whether pendency of proceedings before BIFR under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 barred disconnection of electricity supply for non-payment of current dues, particularly when the consumer had agreed to pay arrears in instalments and defaulted. The petitioner relied on C.E.S.C. Ltd. & Ors. vs. Bowrech Cotton Mills Co. Ltd & Ors. [1993 Supp (1) SCC 451] to argue that the High Court erred in following Modi Spinning & Weaving Mills Co. Ltd. vs. U.P.S.E.B. & Ors. [AIR 1992 All. 247]. The Supreme Court rejected this contention, noting that in CESC Ltd. this Court had expressly left open the question of the undertaking given and the default committed, as mentioned in paragraph 3 thereof. The Court examined Section 22(1) of SICA, which suspends legal proceedings, contracts, etc. It stated that pending inquiry under Section 16 or scheme preparation or sanctioned scheme under implementation or appeal under Section 25, proceedings for winding up, execution, distress or the like against the company's properties, or for appointment of receiver, or suits for recovery of money or enforcement of security or guarantee, shall not lie or be proceeded with except with consent of the Board/Appellate Authority. The Court held that execution connotes a pre-existing decree of a competent court; there was no decree in this case. Enforcement or compliance of the obligation under the contract or regulation for supply of electrical energy by ordering payment is not execution of decree. Since the petitioner had committed default and as a condition for reconnection agreed to pay in instalments, it was liable to comply with that undertaking. Default disentitled it from seeking a declaration that supply must continue because BIFR proceedings were pending. Therefore, Section 22(1) did not protect the petitioner from disconnection for failure to pay current electricity charges. The Court also held that it was not correct to say that because proceedings were pending before BIFR, electricity must be supplied without compliance of conditions. On the additional argument about coercive steps to recover arrears, the Court declined to go into that question at that stage. Accordingly, the special leave petition was dismissed.
Headnote
A) Sick Industrial Companies - Suspension of Legal Proceedings - Section 22(1), Sick Industrial Companies (Special Provisions) Act, 1985 - Scope of Stay - The section stays proceedings for winding up, execution, distress or the like, but does not bar enforcement of contractual obligation to pay for electricity supply; execution connotes pre-existing decree and there was no decree of court - Court held that ordering payment of electrical energy dues is not execution, hence Section 22(1) did not apply to prevent disconnection for default in payment. B) Electricity Law - Conditions of Supply - Indian Electricity Supply Act and contract terms - Default in Payment and Undertaking - Consumer who agreed to pay arrears in 12 monthly instalments as condition for reconnection and then defaulted cannot claim protection under SICA; must comply with corresponding obligation of payment under regulations or contract; disconnection is permissible. C) Precedent - Applicability of Supreme Court Decision - C.E.S.C. Ltd. & Ors. vs. Bowrech Cotton Mills Co. Ltd & Ors. [1993 Supp (1) SCC 451] - Distinction - That case expressly left open the question of undertaking given and default committed, as noted in paragraph 3 thereof; High Court rightly relied on Modi Spinning & Weaving Mills Co. Ltd. vs. U.P.S.E.B. & Ors. [AIR 1992 All. 247]. So contention that controversy covered by CESC was incorrect.
Issue of Consideration
Whether pendency of proceedings before BIFR under Section 22(1) of Sick Industrial Companies (Special Provisions) Act, 1985 bars disconnection of electricity supply for non-payment of current dues where consumer agreed to pay arrears in instalments and defaulted.
Final Decision
The special leave petition is dismissed. The Court held that pendency before BIFR does not entitle petitioner to electricity without compliance of payment obligations. Section 22(1) of SICA does not bar enforcement of contractual obligation to pay for current electricity supply. Consumer's default on undertaking for instalments disentitled it from seeking direction to continue supply without payment.
Law Points
- Section 22(1) of Sick Industrial Companies (Special Provisions) Act
- 1985 bars only winding up
- execution
- distress or the like
- not enforcement of contractual payment for electricity
- execution presupposes a decree of a competent court
- enforcement of obligation to pay for electrical energy is not execution of a decree
- consumer who agreed to pay arrears in instalments and defaulted is not entitled to injunction against disconnection
- pendency before BIFR does not exempt compliance with conditions of supply
- C.E.S.C. Ltd. case distinguished as it left open the question of undertaking and default
