Holding

Pending BIFR proceedings do not exempt the petitioner from complying with payment obligations under the Indian Electricity Supply Act, and the Board may disconnect supply for default.

Summary

Indian Maize and Chemicals Ltd obtained electricity supply from the Uttar Pradesh State Electricity Board under an agreement governed by the Indian Electricity Act, 1910. The company accrued arrears of Rs 49.95 lakh and, to avoid disconnection, agreed to pay the amount in twelve monthly instalments, a plan accepted by the Board. After paying one instalment the company defaulted and sought a court order that, because it was a sick industrial company with rehabilitation proceedings pending before the BIFR, the Board could not recover the dues or disconnect supply. The High Court rejected this relief. On appeal, the Supreme Court held that Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 only stays legal proceedings such as winding‑up or execution, not contractual obligations under the Electricity Supply Act, and that the Board’s right to disconnect for non‑payment remains enforceable. Consequently, the petition was dismissed.

Issues considered

Whether Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 stays the electricity board's right to disconnect supply for default on payment.
Whether pending BIFR rehabilitation proceedings bar enforcement of payment obligations under the Indian Electricity Supply Act.

Legislation cited

Subjects

electricity supplydefaultsick industrial companyBIFRSection 22contractual obligationdisconnectionarrearsspecial leave petition

Judgment

A MIS INDIAN MAIZE AND CHEMICALS LTD.
v.
STATE OF U.P. AND ORS.

JANUARY 13, 1997
B
(K. RAMASWAMY AND G.T. NANAVATI, .JJ.)

Indian Electricity Act, 19)0:

Sick lndusuial Companies (Special Provisions) Act, 1985 : Section
c 22( 1).
E/eclliciry supply--Agreement between petitioner and respo11de11t
Board:-Outsta11ding payment-Witli a view to avoidi11g disco111iectio11 ~

v
petitioner agreeing to make payment i11 12 monthly i11stalments-Board agreed
D for same and gave reco11nection subject to the petitioner paying the agreed -t-
amount--Petitio11er paid one instalment a11d thereafter committed •
defau It-Anticipated disc01mectio11-Writ filed by petitionet-Seeking direc-
tio11 not to recover outstanding amount-Ground that as it was a sick industry
and its claim for rehabilitation was pending before B.I.F.R., thenfore, no
action could be taken in that behalf-High Court refused to gr<ult relief-Ap-
E peal before Supreme Court-Held under the Indian Electricity Supply Act,
..
one of the conditio11s is that conti11ued paymellt of the price of electrical
e11ergy :mpplied by the Board is a co11dition for the conti~ued supply-Default •
committed in the payment thereof entails .disconnection of the supply-Since
the petitioner had committed default and as a condition for re-connection, r-
F agreed t~ pay the amoullt in instalments, he is liable to comply with the
undertaking given for supply of electrical energy--lt is not elltitled to w.·k any
declaratio11 or direction from the Court that since the matter is pending before
the BIFR, he would be entitled to the supply of elecl1ical energy without the
compliance of the c01responding obligation of payment under regulations or
of the contract under the Indian Electdcity Supply Act.
G
C.E.S.C. Ltd. & Ors. v. Bowrech Cotton Mills Co. Ltd. & Ors., [1993)
Supp. 1 SCC 451, held inapplicable. •
Modi Spinning & Weaving Mills Co. Ltd. v. U.P.S.E.B. & Ors., AIR
H (1992) All. 247, referred to.
216
)
. '
M/S. INDIAN MAIZE AND CHEMICALS LTD. v. STATE 217

--~ CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) A
No. 1421of1997.

From the Judgment and Order dated 2.6.7.96 of the Allahabad High
Court in W.P. No. 2109 of 1996.

R. Santhanam, Rajendra Singhvi and Ashok Kumar Singh for the B

-·
Petitioner.

The following Order of the' Court·was delive~ed:

.. Delay condoned.
•, c
The petitioner is, through this petiticin, assailing the correctness of
the order of the Allahabad High Court, Lucknow Bench, made on July 26,
1996 in Writ Petition No. 2109 of 1996. The petitioner got the electricity
'· connection from the respondent-U.P. State Electricity Board on February
6, 1990 for the Supply of electric energy of 1650 KVA The petitioner had D
-4' executed an agreement and also complied with the formalities for the
supply of electricity in terms of Indian Electricity Act, 1910. The petitioner
claimed the rebate on the basis that he had established the industry in an
undeveloped area but we are not concerned with that controversy. Admit-
· tedly, a sum of Rs. 49.95 lacs was due from the petitioner. On a demand
·raised· by the Board on June 4, 1996 in that behalf, the petitioner ap- E
proached the High Court. The petitioner, with a view to avoid disconnec-
tion had agreed with the Board on June 10, 1996 for payment of above
outstanding amount in U monthly instalments and the Board had agreed
for the same and given re-connection subject to the petitioner paying the
~ amount as agreed. The petitioner after depositing one instalment, com· F
· mitted default in the payment. Since the petitioner anticipated disconnec-
tion, it approached the High Court for the direction not to recover the
amount putting forth the plea that the petitioner is a sick industry and his
claim for rehabilitation was pending before B.I.F.R. and, therefore, no
action could be taken in that behalf. The High Court has refused to grant
the relief by the impugned Order dated June 26, 1996. Thus, this special
G
leave petition.
-,_
Learned counsel for the petitioner has contended that the controver-
sy is covered by the judgment of this Court in C.E.S.C. Ltd. & Ors. v. _,
Bowrech Cotton Mills Co. Ltd. & Ors., [1993) Supp. 1 SCC 451. Therefore, , H
218 SUPREME COURT REPORTS (1997] 1 S.C.R.

A the High Court was not right in relying upon that Court's earlier judgment
. I
in Modi Spinning & Weaving Mills Co. Ltd. v. U.P.S.E.B. & Ors., AIR {1992)
All. 247. We find that the contention raised by the learned counsel is not
correct in law. It is seen that in CESC Ltd. case, this Court had expressly
left open the question of the undertaking given and the default committed
and fulfilment thereof since that question was not raised in the High Court
B
as expressly mentioned in paragraph 3 thereof. With regard to the delayed
payment, surcharge etc. the direction issued by the High Court was
modified in paragraph 4 and direction was given to pay the amount in
instalments as envisaged in paragraph 4 of the judgment. As far as the
arrears are concerned, since the first question was not considered, this
C Court had held that since the matter was pending before the BIFR it ..
needed to be considered by the BIFR itself.
. .
It is seen that Section 22(1) of the Sick Industrial Companies {Special
Provisi?ns) Act, 1985 envisages as under:

D
"22 Suspension of legal proceedings, contracts, etc. -(1) Where in
respect of an industrial company, an inquiry under Section 16 is
pending or any scheme referred to under Section 17 is under
preparation or consideration or a sanctioned scheme is under
implementation or where an appeal under Section 25 relating. to
E an industrial company is pending, then, notwithstanding anything
contained in the Companies Act, 1956 (1 of 1956), or any other
law or the memorandum and articles of association of the industrial
Company or any other instrument having effect under the said Act
or other law, no proceedings for the winding up of the industrial
F :, company or for execution, distress or the like against any of the
j properties of the industrial company or for the appointment of a
' i receiver in respect thereof (and no suit for the recovery of money

1 , or for the enforcement of any security against the industrial com-
pany or of any guarantee in respect of any loans or advance granted
to .the industrial company) shall lie or be proceeded with further,
G except with the consent of the Board or, as the case may be, the
appellate Authority.''

A reading of the above section would indicate that. when the
proceedings are pending before the BIFR in respect of any matter referred
H to therein for inquiry by the Board, the proceedings or order of execution,
M/S. INDIAN MAIZE AND CHEMICALS LTD. v. STATE 219

distress or the like would be stayed until the proceedings get concluded A
before the BIFR or would not be proceeded without the leave of the Board
or Appellate Authority. It is seen that under the Indian Electricity Supply
Act, one· of the conditions is that continued payment of the price of
electrical energy supplied by the Board is a condition for the continued
supply and the default committed in the payment thereof entails discon- B
nection of the supply of electrical energy, except in accordance with the
procedure prescribed under the contract or the regulation issued under the
Indian Electricity Supply Act. Execution connotes pre-existing decree. It is
true that any action for realisation etc. pending decision by BIFR or
without its permission is prohibited. Enforcement of compliance of the
obligation under the contract or regulation for supply of electrical energy C
by ordering payment of electrical energy is not and cannot be considered
to be execution of a decree. Execution of the decree presupposes existence
of a decree of a competent court and the dec.ree-holder should take steps
to have it executed pending proceeding before BIFR. There is no decree
of court. Since the petitioner had committed default and as a condition for D
re-connection, agreed to pay the amount in instalments, he is liable to
comply with thi; undertaking given for supply of electrical energy. The
petitioner committed default in that behalf. So, it is not entitled to seek any
declaration or direction from the Court that since the matter is pending
before the BIFR, he would be entitled to the supply of electrical energy
without the compliance of the corresponding obligation of payment under E
regulations or of the contract under the Indian Electricity Supply Act. It
is, therefore, not correct to say that since the ·proceedings are pending
before the BIFR, the electricity is required· to be supplied to the consumer
without compliance of the conditions. It is then sought to be contended
that. the authorities· may take coercive steps to recover the arrears. At this F
state, we need not go into the question.

The special leave petition is accordingly dismissed.

T.N.A. Petition dismissed.