Kanpur Elect.Supply Co.Ltd.& Anr vs M/S L.M.L.Limited & Ors

Kanpur Elect. Supply Co. Ltd. & Anr. ... Petitioners

Vs.

M/s. L.M.L. Limited & Ors. ... Respondents

J U D G M E N T

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. 8

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

hereinbelow :

"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 hereinbelow :

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." 13

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. 15

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 unamended 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)

Ltd. Vs. Debts Recovery Tribunal, Jaipur [AIR

(2001) Raj. 170) which in its turn is based on the

judgment of this Court in Doburg Lager Breweries

Pvt. Ltd. Vs. Dhariwal Bottle Trading Co. [(1986) 2

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.

26

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 unamended 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

instalments 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. (C.K. PRASAD)

New Delhi Dated: 07.05.2010