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1998 Supreme(MP) 2
High Court Of Madhya Pradesh
DEEPAK VERMA
KESHRI STEELS - Appellant
Versus
M.P.ELECTRICITY BOARD - Respondents
W. P. 348 Of 1997
Decided On : 01/06/1998
P.B.S.NAYAR, Piyush Mathur, PRADIP CHAUDHARY
Arrears of electrical charges do not fall within the category of loan or advance under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, and therefore, recovery proceedings for such arrears can be initiated against a Sick Industrial Unit.
Headnote:
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 - SECTION 22 - ENCASHMENT OF BANK GUARANTEES - ARREARS OF ELECTRICAL CHARGES - RECOVERY - RESTRAINING ENCASHMENT OF BANK GUARANTEES - JURISDICTION OF BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) - INTERPRETATION OF SECTION 22 - SCOPE OF PROTECTION UNDER SECTION 22 - DISTINCTION BETWEEN LOAN/ADVANCE AND ARREARS OF ELECTRICAL CHARGES - POWER OF APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (AAIFR) - JUDICIAL PRECEDENTS - CONDITIONS FOR GRANTING INJUNCTION TO RESTRAIN ENCASHMENT OF BANK GUARANTEES - FRAUD OR IRRETRIEVABLE HARM.
Fact of the Case:
Petitioners, Mini Steel Plant and Rolling Mill, declared as Sick Industrial Units under the Sick Industrial Companies (Special Provisions) Act, 1985, sought to quash a notice issued by the Madhya Pradesh Electricity Board (Board) for encashment of five Bank Guarantees furnished by them for payment of arrears of electrical charges. Petitioners contended that BIFR was seized of the matter and recovery proceedings could not be initiated against them under Section 22 of the Act.
Finding of the Court:
The Court held that arrears of electrical dues did not fall within the category of loan or advance as contemplated under Section 22 of the Act. The Board was not legally competent or justified in getting the Bank Guarantees encashed as the arrears of electrical charges were payable under an agreement between the parties and not a loan or advance. The Court further held that BIFR had not passed any order restraining recovery of such arrears and that Petitioners had not challenged the recovery before the AAIFR.
Issues: 1. Whether arrears of electrical dues can be considered as loan or advance under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985? 2. Whether the Board can be restrained from encashing Bank Guarantees for recovery of electrical dues under Section 22 of the Act? 3. Whether BIFR or AAIFR has the power to consider Petitioners' prayer for restraining the Board from encashing the Bank Guarantees?
Ratio Decidendi: 1. Section 22 of the Act does not prohibit recovery of arrears of electrical charges or steps to encash Bank Guarantees furnished by a Sick Industrial Unit. 2. Invocation of Bank Guarantee does not amount to initiation or continuation of legal proceedings against the properties of the Company. 3. BIFR or AAIFR has no power to restrain the Board from encashing Bank Guarantees for recovery of electrical dues.
Final Decision: The petition was dismissed, holding that no case was made out for interference and that the Board was not restrained from encashing the Bank Guarantees.
( 1 ) BY filing this petition under Art. 226 of the Constitution, Petitioners are praying for quashment of letter dt. 24-2-1997 (Annexure P-1), issued by the Senior Accounts Officer, M. P. Electricity Board to State Bank of Indore/dewas, for encashment of five Bank Guarantees mentioned in the said letter.
( 2 ) FACTS material for deciding the said petition are mentioned hereinbelow;petitioners Nos. 1 and 2 are Mini Steel Plant and Rolling Mill respectively, situated at Dewas. Both the Units are divisions of Reliance Ispat Industrieslimited, a duly registered Company under the provisions of Companies Act. For the purposes of manufacturing their products, the Petitioners need electrical energy, which constitute about 20% of the raw material cost of the plants of the Petitioners, which are intensively power based industries. Respondent No. 1/m. P. Electricity Board (for short referred to as os;board') has been constituted by State Government under S. 5 of the Electricity Supply Act, 1948.
( 3 ) PETITIONERS have furnished five Bank Guarantees in favour of Respondent/board for a sum of Rs. 55,39,000/ -. Since the Respondents are taking steps to encash the bank guarantees, for non payment of arrears of electrical charges, consumed by Petitioners, they have approached this Court for quashment of the same. Petitioners' submission is, that they have been declared as Sick Industrial Units, under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (for short the 'act'), thus, no recovery towards arrears of electrical charges, or, steps for encashment of the bank guarantees can be made by the Respondent/board.
( 4 ) ACCORDING to them, the Board for Industrial and Financial Reconstruction (for short, hereinafter referred to as 'bifr') is now seized of the matter and, is, in process of considering financing of the Scheme submitted by operating Agency, ICICI. The matter relating to the said Sick Industrial Units is still pending before the BIFR, thus, no recovery proceedings can be initiated against the Petitioners. They are taking shelter under S. 22 of the Act.
( 5 ) PETITIONERS have also made reference to a circular issued by Government of Madhya Pradesh dt. 29-6-1988. In the light of the same, their submission is, that as per the package policy of the Government of Madhya Pradesh, Petitioners' Units are entitled to all the benefits under the provisions of M. P. Sahayata Upkram (Vishesh Upbandh) Adhiniyam, 1978 (for short the 'adhiniyam' ). It has further been averred, that Board was sufficiently represented through the State Government in the proceedings before BIFR, which, includes implementation of the Scheme for revival of the Sick Industrial Units. Thus, according to them, the only option open to the Board is to approach the BIFR for redressal of its grievances. Petitioners have placed reliance on the orders passed by BIFR on 11-5-1996 and on 3-6-1996. They have further submitted, that Petitioners have also filed M. P. No. 93/1994 and W. P. No. 1331/1996 in the High Court of Madhya Pradesh at Indore Bench, which, would go to show that Petitioners having been declared as Sick Industrial Undertakings by theAuthority, would be covered under the provisions of the Act, consequently shall be protected under S. 22 of the Act. Their thrust of the matter is, that in this view of the legal position should be restrained from invoking Bank Guarantees furnished to the Board.
( 6 ) SHOW cause notice against admission was directed to be issued by this Court on 5-3-1997. On the said date, by way of interim measure, it was further directed that Respondents shall not encash the Bank Guarantees in question till Bi-parte hearing.
( 7 ) RESPONDENTS Nos. 1 to 3 have filed their Reply in oppugnation. Other Respondents have not filed any reply to the petition.
( 8 ) RESPONDENTS Nos. 1 to 3 have submitted, that Board had entered into an agreement dt. 13-2-1995 with the Petitioners for supply of High Tension Electricity
