Full Judgment Text
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CASE NO.:
Appeal (civil) 499-500 of 1983
PETITIONER:
U.P.STATE ELECTRICITY BOARD
Vs.
RESPONDENT:
BANARAS ELECTRIC LIGHT & POWER CO.LTD.
DATE OF JUDGMENT: 17/08/2001
BENCH:
A.P. Misra & D.P. Mohapatra
JUDGMENT:
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
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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
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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
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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.
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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
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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
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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 therefor 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
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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
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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
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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
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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.
(D.P. Mohapatra)
Dated: 17 August, 2001