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Benaras Electric Light and Power Co. Ltd. Vs. U.P. State Electricity Board - Court Judgment

LegalCrystal Citation
SubjectCompany;Electricity
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. Nil of 1980
Judge
Reported in[1983]53CompCas597(Cal)
ActsCompanies Act, 1956 - Sections 468, 518 and 529; ;Indian Electricity Act, 1910 - Section 7A; ;Uttar Pradesh Electricity (Amendment and Validation) Acts, 1974 and 1975 - Sections 6, 6, 7 and 7A
AppellantBenaras Electric Light and Power Co. Ltd.
RespondentU.P. State Electricity Board
Appellant AdvocateS.B. Mukherjee and ;M.B. Mukherjee, Advs.
Respondent AdvocateD.P. Gupta and ;Ramen Mitra, Advs.
Cases ReferredKrishna Chandra Boumick v. Pabna Dhanabhandar Co. Ltd.
Excerpt:
- .....mines nationalisation act, 1973, and the sick textile mills nationalisation act, 1975, where the word 'undertaking' has been defined and has been made inclusive of book debts. in the present act, there is no such inclusive definition ; on the other hand, reading the indian electricity act, 1910, and the u.p. amendments of 1974 and 1975, of the relevant sections, it makes it clear that the arrears of electricity charges up to the date of the taking over, being the book debt due to the company (in liquidation) and not vested in the board after the date of taking over and, therefore, the court should pass an order as asked for. 7. mr. d. p. gupta, appearing with mr. ramen mitra, for the respondent board, submitted that the word ' undertaking' includes the bookdebts on the date of vesting......
Judgment:

Salil K. Roy Chowdhury, J.

1. This is an application by the petitioner, Benaras Electric Light & Power Co. Ltd., hereinafter referred to as ' the company (in liquidation)', under Sections 468 and 518(1)(b) and (4) of the Companies Act, 1956, for anorder against the respondent, U. P. State Electricity Board, hereinafter referred to as ' the Board ', to pay to the liquidators of the company (in liquidation) a sum of Rs. 68,29,636'87 together with interest thereon at the rate, the court may think fit being the amount collected or realised by the Board between 4/5th February, 1975, till 30th of April, 1979, and all further collections made by the Board during the period 1st May, 1979, till the date of the order to be made herein from the company's (in liquidation) consumers on account of arrears of charges of electricity supplied to them by the company (in liquidation) up to the midnight of 4th/5th of February, 1975, which the respondent-Board is now holding for and on behalf of the company (in liquidation) and/or in trust for and as agent of the company (in liquidation) within a week from the date of the order and render a complete account of such collections.

2. The admitted facts are that the company before it was voluntarily wound up acquired the right to generate, supply and distribute its electrical energy to its consumers within and outside the municipal city of Benaras known as ' Varanasi' and the company's fight to generate, supply and distribute was subject to the terms and conditions of the-licence and the Indian Electricity Act, 1910. The said licence was granted for a period of 50 years. By a letter dated the 1st of February, 1974, addressed to the managing agent of the company (now in liquidation), M/s. Martin Burn Ltd., a notice under Section 6 of the Indian Electricity Act, 1910, was given to sell and deliver the undertaking of the said company to the respondent, the said Board, on the expiry of the initial period of the company's licence, that is to say, on the midnight between 5th and 6th of February, 1975. Thereafter, the company challenged the said notice of purchase in a writ petition before this court on various grounds and ultimately, by an order dated the 11th of August, 1976, passed by M.M. Dutta J. the rule and the application was withdrawn by the company on the grounds that there have been some adjustment between the parties, who have filed an affidavit expressing their consent to such withdrawal. Therefore, the said rule was discharged and the petition was withdrawn and all interim orders were vacated. There was also a minute of a meeting held on the 8th of June, 1975, between the company and the Board in the room of the Chairman of the said Board at Lucknow a copy of which is annexed to the affidavit-in-reply affirmed by one Saradindu Gupta on the 23rd of May, 1080, wherein it has been recorded that the valuation of the undertaking of the company (in liquidation) would be made under the provisions of the Indian Electricity Act, 1910, as amended by the Indian Electricity U.P. (Amendment & Validation) Act, 1975, and the Board and the company would do everything in their power to expedite the completion of the valuation of the undertaking by the Special Officerappointed by the U.P. Govt. by its order dated the 29th of March, 1976, so that the final payment of the amount payable by the Board, if any, to the company was to be made within 12 months from the date of withdrawal of the writ petition and it was resolved that the same final payment, if any, was to be made within a period of 12 months from the date of withdrawal of the said case and obviously thereafter the said writ petition was withdrawn.

3. It also appears that the said company went into voluntary liquidation under members' voluntary winding-up and the deponent, Saradindu Gupta, and one Ramendra Nath Mukherjee were appointed Joint Liquidators of the said company (in liquidation). It 'is also now admitted as would appear from the annexures to the affidavit of Saradindu Gupta dated the 24th of January, 1980, being the grounds of this application that the said Board has collected up to June, 1978, a sum of Rs. 67,91,122.23 on account of arrears of electricity charges from the date of the taking over, that is, the midnight of 5th of February, 1975, to June, 1975, from the consumers of the said company (in liquidation) payable to the company up to the date of the taking over and there was still Rs. 19,31,06.32 outstanding on account of the said arrears of bills from the consumers of the company prior to the date of taking over by the Board.

4. It now appears that the amount payable to the company (in liquidation) has not yet been fixed by the Special Officer under the U.P. Electricity (Amendment & Validation) Act, 1975, read with the Amendment Act, 1974.

5. Now, the whole question in this application is whether the Board is liable to pay the said arrears of electricity charges collected by it, after the date of the taking over up to the date of the order, from the consumers of the company (in liquidation) on account of the electrical energy supplied up to the date of the taking over, to the liquidators. The said question depends on the interpretation of the word ' undertaking ' within the Indian Electricity Act, 1910, and also the U.P. (Amendment) Acts, 1974 and 1975, as it is an admitted position that no amount payable according to the said Electricity Act and the U.P. (Amendment) Act has yet been quantified or fixed or ascertained by the. Special Officer appointed within the meaning of the said Act. It is also admitted that the said undertaking of the company (in liquidation) was purchased by the Board under Section 6 of the Indian Electricity Act, 1910, and the computation of the amount payable to the company (in liquidation) is to be made or ascertained according to the provisions of Section 7A of the Indian Electricity Act, 1910, read with the U.P. Electricity (Amendment & Validation) Acts, 1974 and 1975.

6. Mr. S.B. Mukherjee, appearing with Mrs. U.B. Mukherjee, for the petitioner, submitted, after taking me through the pleadings in this application, wherein there are no disputed facts but the only question raised is whether the arrears of electricity charges up to the date of the taking over belong to the company (in liquidation) or the same has vested in the Board on the date of the taking over or it is liable to be set off or adjusted against the dues of the company (in liquidation) to the Board on account of energy supplied or on other accounts. Now, it cannot be disputed that, after the company was wound up, the provisions of Section 468 read with Section 518(1) (a), (b) and (4) of the Companies Act, 1956, is applicable. Mr. Mukherjee took me through the various provisions of the said Indian Electricity Act, particularly Section 6 and the U.P. Amendments thereof and Section 7(A) and various U.P. Amendments thereof in 1974 and 1975, and submitted that the word ' undertaking ' has not been defined in the said Act, but sufficient indication is given in the said Acts as to what is meant by the said word ' undertaking ' in the said Acts including the U.P. (Amendment) Act. He referred to Section 7A(2), (8) of the U.P. (Amendment) Act, 1974, and Section 2(b) and Section 3(3) of the U.P. (Amendment) Act, 1975, and submitted that the said U.P. (Amendment) Acts clearly indicate what is meant by the said word ' undertaking' under the said Electricity Act, and the various U.P. Amendments thereunder. Therefore, the arrears of electricity charges up to the date of taking over cannot be included within the meaning of the word ' undertaking' and, as such, the same has been realised by the Board as trustees and agent of the company (in liquidation) and, therefore, those are payable by them to the company (in liquidation) under Section 468 and the court has the power to pass such an order and determine the question under Section 518(1)(b) and (4) of the Companies Act, 1956. Mr. Mukherjee also referred to Section 293(1)(a) of the Companies Act, 1956, where the word ' undertaking ' has also been used but does not include the book debts on the face of it. He also referred to the definition of the word ' undertaking ' in the MRTP Act, and the Coal Mines Nationalisation Act, 1973, and the Sick Textile Mills Nationalisation Act, 1975, where the word 'undertaking' has been defined and has been made inclusive of book debts. In the present Act, there is no such inclusive definition ; on the other hand, reading the Indian Electricity Act, 1910, and the U.P. Amendments of 1974 and 1975, of the relevant sections, it makes it clear that the arrears of electricity charges up to the date of the taking over, being the book debt due to the company (in liquidation) and not vested in the Board after the date of taking over and, therefore, the court should pass an order as asked for.

7. Mr. D. P. Gupta, appearing with Mr. Ramen Mitra, for the respondent Board, submitted that the word ' undertaking' includes the bookdebts on the date of vesting. He referred to Section 7A as amended by the U.P. (Amendment & Validation) Act, 1975, Sub-section (5)(f), where it has been laid down in provisions for the determination of the amount payable to the seller, whose undertaking has been sold, and in order to arrive at the amount payable to the purchaser, being the Board, is entitled to deduct various amounts as laid down in the said Sub-section (5), Sub-clause (f), includes in the same amounts which are to be deducted, are the security deposit of the consumers and arrears of interest due thereon, on the vesting date, in so far as they have not been paid over by the licensee, thereby meaning the company (in liquidation), to the purchaser, thereby meaning the Board, less the amount which according to the books of the licensee, that is, the company (in liquidation), are due from the respective consumers to the licensee for energy supplied by it before the date. Therefore, it is quite clear from the provisions of the said Act, according to Mr. Gupta, that the said arrears of electricity charges payable to the company (in liquidation) up to the date of the taking over also vests in the Board as that has to be deducted from the security not paid by the company to the said Board or refunded to the consumers.

8. Mr. Mukherjee in reply submitted that this is a wrong interpretation of the said Act, as, unless the gross amount payable is determined under Section 7A(2) and the various clauses thereunder of the 1959 U.P. Amendment Act, the question of deduction under Sub-section (5) and the various clauses thereunder cannot arise for obvious reasons. That will amount to putting the cart before the horse, as, unless the gross amount payable is determined, the question of deduction from that amount, which is yet undetermined, cannot arise.

9. After considering the respective contentions and the various provisions of the Electricity Act of 1910 and the U.P. Amend. Acts of 1974 and: 1975, I am of the view that the word ' undertaking ' has not been defined in the said Act but there is sufficient indication in the said Act that it cannot include the book debts or the arrears of electricity charges before the date of taking over which were due to the company in liquidation. If the word ' undertaking ' had been defined in the Electricity Act or the U.P. Amendments there would have been no difficulty but the definition of 'undertaking ' in the other Acts cannot be taken recourse to or enlarge the scope of the meaning of the word ' undertaking ' within the meaning of the Electricity Act, 1910, as also the U.P. Amend. Acts, 1974 and 1975. I have looked into the dictionary meaning of the word ' undertaking ' which does not help in any way, as for example, I am quoting from the Concise Commercial Dictionary by Osborn and Grandage where the word ' undertaking ' has been defined as follows : ' The works, functions or concern of a public utility company. ' I have also looked intothe meaning of the word ' undertaking ' in the Oxford Dictionary. There also the meaning has no relation to the book debts or assets of the company. On the other hand, there are different meanings of the word ' undertaking '. The admitted position is that the said Board has collected the arrears of charges payable to the company in liquidation up to the date of taking over as it is admitted in the various letters annexed to the affidavit which is the ground of this application as earlier referred to and the amount is also specified in the said letters as hereinbefore stated. It is also admitted that the said amount was collected on behalf of the company in liquidation by the said Board after the taking over on the midnight of 4/5th February, 1975, and there is still over rupees nineteen lakhs of arrears of electricity charges to be realised in the account of the company in liquidation. The word ' undertaking ', which is creating trouble and requires interpretation within the meaning of the Electricity Act, 1910, and the various U.P. Amendments, it will be clear, cannot include the book debts. Had it been the intention of the said Electricity Act and the U.P; Amendments it would have been specifically included in the various sections relevant for that purposes being Sections 6, 7, etc. On the other hand, the provisions of Section 5 have copiously used the word ' undertaking ', which is a provision for revocation of the licence granted to a licensee, where the word ' will' has been used giving the option to the State Govt. to produce or direct it to be sold to a local authority. It is also clear from Section 5,' sub-Section (3), that the word ' delivery of the undertaking ' to the purchaser is mentioned. Therefore, it makes it further clear that it is something other than the book debts as book debts cannot be delivered and it can be assigned or transferred in writing authorising the purchaser to collect the same by an agreement or under the statute.

10. Then again in Section 7A of the Electricity Act, 1910, Sub-section (2), it has been mentioned that the market value of the undertaking for the purpose of Sub-section (1), i.e., determination of the purchase price shall be deemed to be the value of all lands, buildings, works, materials and plants of the licensee suitable to and used by him for the purpose of the undertaking other than the generating station, service line, etc., specified in the said section.

11. Then again in the U.P. Amendment Act, Section 7A, Sub-sections (1) and (2), the words ' delivery of the undertaking ' by the seller, viz., the original licensee, has been used, which make it clear that it only relates to the lands, plants, etc., as hereinbefore stated and laid down in Section 7A of the Indian Electricity Act, 1910.

12. Reliance was very strongly placed by Mr. Gupta on Clause (f), Sub-section (5) of Section 7A of the U.P. Amendment Act, relating to the right of deduction of the charges recoverable from the consumer by the licensee, as in this case,the company in liquidation, being mentioned. Therefore, the book debt which includes the electricity charges up to the date of taking over which belonged to the company in liquidation is also liable to be appropriated or vested within the Board, and, in my view, that is not the correct interpretation of the said sub-section. On the other hand, if it is correctly read, it presupposes the right to the said arrears of electricity charges of the said company in liquidation, which were payable by the consumers, prior to the date of taking over by the Board, to the company, which can be collected by the Board on behalf of the company for the purpose specified in the said Sub-clause (f) of Section 7A(5) of the U.P. Amend. Act.

13. Therefore, the admitted position is that the said Board has realised the arrears of charges which were due from the consumers of electricity of the said company in liquidation prior to the date of taking over, which amount has been admitted by them in their various letters from time to time written to the said company. If the word ' undertaking ' does not include the book debts then it cannot be said that the U.P. State Electricity Board, the respondent herein, is entitled to the same and there-may be a situation that the same was to be set off against the Board's claim, which has not yet been ascertained. The provision of the Electricity Act read with the U.P. Amendments has to be complied with and the Special Officer has to determine the gross amount payable first and thereafter deduct the various items specified in the said Section 7A of the U.P. Amendment which has been referred to before. Without doing so it cannot have any right to retain the said sum collected on account of electricity charges payable to the company in liquidation. Therefore, under the Companies Act, under Section 468 read with Section 518(1)(b) and (4), this court can adjudicate the matter and the court can direct the said amount which is admittedly collected by the Board as trustee or agent of the said company in liquidation.

14. As I have already noted, the meaning of the word 'undertaking' as used in the Indian Electricity Act and the said U.P. Amendment has to be gathered from those Acts itself and as I have been able to understand from various sections where the word ' undertaking ' has been used, it has never included the book debts up to the date of the taking over, as it has been done in other cases like the MRTP Act, the Coal Nationalisation Act, the Sick Textile Nationalisation Act, etc. This is a sort of confiscation of the properties under the said Electricity Act and the U. P. Amendment and it has to be very strictly construed and, in my view, the word ' undertaking ' can in no way include the book debts being the arrears of electricity charges recoverable by the company in liquidation from its consumers up to the date of the taking over which have been collected by the Board as admitted in the letters and not disputed from the Bar.

15. Mr. Gupta also raised a question of set off for the alleged claim of the Board against the company in liquidation and he has drawn my attention to Section 529 of the Companies Act which makes the Insolvency Rules applicable with regard to the debts (a) provable, (b) valuation of annuities, future and continuing liabilities, and (c) the respective rights of secured and unsecured creditors. He also referred to a Division Bench decision of this court in Krishna Chandra Boumick v. Pabna Dhanabhandar Co. Ltd. [1935] 5 Comp Cas 462, where it has been held that when there is a mutual dealing between an insolvent and a creditor an account has to be taken of what is due from the one to the other in respect of such mutual dealings. In short, a right to set off is recognised, but, in my view, the said decision has no application to the present case as the Board, which has collected the arrears of charges from the consumers of the company in liquidation after the date of taking over by the Board, which were payable to the company in liquidation before the date of taking over, cannot become a creditor of the company in liquidation in respect of the said amount collected by them as trustee or agent on behalf of the company. Section 529 makes the rules of insolvency applicable as regards the debts and liabilities pravailing between a company in liquidation and a creditor. Here the Board cannot be said to be a creditor to the extent of the collections made by them of the arrears of electricity charges payable to the company in liquidation up to the date of the taking over. The said decision and the said section have no application to the facts of the present case.

16. In these circumstances, having regard to the meaning of the word ' undertaking ', as can be gathered from the said Indian Electricity Act, 1910, and the U.P. Amendments, it is quite clear that it does not include the book debts, particularly the arrears of electricity charges payable by the consumers before the date of taking over to the company in liquidation as arrears of electricity charges. Admittedly, in the facts of this case, the Board has collected the same for and on behalf of the company either as a trustee or as an agent of the company in liquidation and, therefore, the said amount is payable to the Joint Liquidators together with reasonable interest which, in my view, in this particular case is 6% per annum from the date of collections until payment. The power of the court is clearly defined, after a company is voluntarily wound up, under Section 518(1)(a) and (b) which runs as follows :

'518. Power to apply to court to have questions determined or powers exercised.--(1) The liquidator or any contributory or creditor may apply to the court-

(a) to determine any question arising in the winding-up of a company ; or

(b) to exercise, as respects to enforcing the calls, staying of proceedings or any other matter, all or any of the powers which the court might exercise if the company were being wound up by the court.'

17. So it is quite clear that the liquidator can always come before the Company Court for the determination of any question which arises in the winding-up of the company and the court has the powers, to be exercised as if the company was wound up by the court, which brings into operation the said Section 468 which provides as follows :

' 468. Delivery of property to liquidator.--The court may, at any time after makings winding-up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, officer or other employee of the company to pay, deliver, surrender or transfer forthwith, or within such time as the court directs, to the liquidator, any money, property or books and papers in his custody or under his control to which the company is prima facie entitled.'

18. Therefore, the present application is a proper application to be made by the Joint Liquidators in the facts and circumstances of this case, where the U.P. Board without taking any step or proceeding for a determination of the purchase price under the Indian Electricity Act read with the various U.P. Amendments of 1974 and 1975 by the Special Officer, has taken over the undertaking of the company, now in liquidation, and realised the book debts, being the arrears of electricity charges, which are the assets of the company in liquidation, and the Joint Liquidators are entitled to the said amount which has been collected by the U.P. State Electricity Board, being the respondent herein, for and on behalf of the company in liquidation as trustee or agent. This position is unassailable and in fact admitted in the correspondence and, therefore, the Joint Liquidators, who have made the present application under Section 518(1)(a), (b) and (4) of the Companies Act, 1956, read with Section 468 of the Companies Act are entitled to an order which has been asked for.

19. 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 consumers of the said company in liquidation up to the midnight of 4/5th February, 1976, as the said sums were collected by the respondent-board as trustee or agent on behalf of the company in liquidation. Such payment to be made to the Joint Liquidators within a fortnight from date. The Joint Liquidators will keep the said amount in a 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 arrearsof 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 realised and the Joint Liquidators will also keep the said amount in a separate account in a nationalised bank invested in the same manner as hereinbefore stated.

20. No order as to costs.

21. Stay of operation of the order asked for is refused.

22. All parties to act on a signed copy of the minutes.


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