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Madhya Pradesh High Court · body

2006 DIGILAW 1184 (MP)

CHANDRA VALLABH v. STATE OF M. P.

2006-10-09

S.S.KEMKAR

body2006
ORDER Shantanu Kemkar, J. These appeals filed u/s 41 of M.P. Vidyut Sudhar Adhiniyam, 2000 (for short 'VSA') arise out of the order dated 20-2-2002 passed by the M.P. Electricity Regulatory Commission (for short 'Commission') in petition No. 47/01. In all these appeals common question of law and facts arises for decision and as such they are being disposed of by this common order. Briefly stated the facts are that the Respondents Gramin Vidyut Co-operative Societies (for short 'Societies') registered under the M.P. Co-operative Societies Act, 1960 (for short 'MPCSA') were holding licence granted by the State Government u/s 3 of the Indian Electricity Act, 1990 empowering them to transmit, supply and distribute electrical energy in the area specified in their respective licence. The societies were having board of directors through elections held from time to time. However for some reason the elections could not be held in respect of the societies for a long time. During the said period a meeting was convened by the State Government through the committee headed by the Chief Minister. The Committee in its meeting held on 26-5-1995 resolved that as the financial condition of the societies are not good and as they are not properly functioning, the work of the societies be handed over to the M.P. Electricity Board (for short 'Board'). The Committee also resolved that in exercise of powers vested u/s 49(8) of the MPCSA the Superintending Engineer of the Board be appointed as Officer In-charge in the said societies. It was further resolved that after appointment of such Officer In-charge in each society the registration of the societies be cancelled and the work of the societies be handed over to the Board. It was further resolved by the said committee that the services of the daily wage employees be terminated, and after screening, the eligible regular employees of the societies be taken in the employment of the Board. Pursuant to the aforesaid decision in exercise of powers u/s 49(8) of the MPCSA the Officers of the Board were sent on deputation to function in the capacity of Managing Directors of the societies. On 18-6-2001 the State Government submitted a reference petition u/s 18(1)(b) of the VSA to the Commission for revocation of licence of as many as 12 societies. On 18-6-2001 the State Government submitted a reference petition u/s 18(1)(b) of the VSA to the Commission for revocation of licence of as many as 12 societies. The said reference petition submitted by the State Government was accompanied by the letters written by the Officer In-charge of the societies functioning in the capacity of Managing Directors requesting for revocation of licenses of their respective societies and for handing over of the responsibility of supply of electricity to the Board. The revocation of the licence was sought on the following grounds: (a) Poor financial conditions of the societies, (b) exceptionally high level of technical and commercial loss, (c) meagre rate of realization, (d) difficulties exercised by societies in recovering their dues from consumers, (e) the samities not being in a position to rearrange funds to carry out strengthening and extension of distribution networks to achieve the purpose of rural electrification, (f) samities, in view of lack of technical competency and resources, are unable to achieve 100% meterization, (g) difficulties experienced in carrying out routine maintenance works of transmission and distribution system owing to acute resource crunch. On receipt of the reference petition the Commission issued notices to the Board, Commissioner and Registrar, Co-operative Societies, the Rural Electricity Corporation ('REC for short), the Managing Director, Rajya Sahkari Gramin Vidyut Sangh, Maryadit, Jabalpur and to the Managing Directors of the societies. The Commission after hearing the parties exercising the powers under Sections 18(1)(b) and 2(d) of the VSA ordered for revocation of the licence of supply and distribution of power of 10 societies out of the 12 societies in regard to which the petition was filed before it. Feeling aggrieved the members, shareholders and employees of the 4 societies viz Gramin Vidyut Sahkari Samiti, Manawar District Dhar, Gramin Vidyut Sahkari Samiti, Amarpatan, District Satna, Gramin Vidyut Sahkari Samiti Multai, Gramin Vidyut Sahkari Samiti Naogaon district Chhatarpur have filed these appeals. In these appeals it is the common ground of the Appellants that as per the byelaws of the societies each subscriber/consumer of the electricity from the society is required to become member of the respective societies by purchasing share capital as prescribed in the byelaws of the societies. In these appeals it is the common ground of the Appellants that as per the byelaws of the societies each subscriber/consumer of the electricity from the society is required to become member of the respective societies by purchasing share capital as prescribed in the byelaws of the societies. The Appellants case is that in view of the byelaws of the societies they are members and shareholders of the societies and are aggrieved by the order of the Commission revoking the licence of their society. According to the Appellants, the revocation of the licence of the societies on a reference petition presented by the State Government without issuing notice of it for general information to the shareholders and members of the societies is violative of principles of natural justice. They contend that the Commission without making the inquiry contemplated u/s 18(1) of the VSA and without forming its opinion about the public interest in revoking the licence as required u/s 18(2) of the VSA has mechanically and arbitrarily ordered for revocation of licence, thereby it has exercised its jurisdiction with gross illegality. They also contend that the formation of the opinion of the Commission about the precarious financial conditions of the societies is erroneous and there is no objective determination by the Commission about this allegation levelled by the State Government. They submit that the balance sheets of the societies in respect of the preceding years clearly demonstrate that the societies were running in profits. They also submit that it was factually incorrect and unjustified on the part of the Managing Directors to state that the societies are running in losses and are inefficient in performance when the balance sheets showing profits for the preceding years were submitted by the Managing Directors themselves. It is further contended that the various shareholders submitted sufficient material and had sent number of objections to the proposed revocation of licences to the State Government and to the Commission to show that the financial conditions of societies are satisfactory but neither they were noticed nor their objections were taken note of by the Commission while deciding the reference petition. According to the Appellants, the Managing Directors of the societies being employees of the Board and being on deputation had no right, jurisdiction or authority to seek revocation of the licence and give consent for handing over of the responsibility of supply of electricity to the Board. According to the Appellants, the Managing Directors of the societies being employees of the Board and being on deputation had no right, jurisdiction or authority to seek revocation of the licence and give consent for handing over of the responsibility of supply of electricity to the Board. It is further contended that prior to the issuance of the letter by the Managing Directors of the societies the special general meetings of the societies were called in which the proposed action of the State Government was unanimously opposed and a resolution to that effect was also passed. They also contend that the societies were required to provide free electricity and free single point electricity connection to poor persons and farmers and for this the State Government was obliged to make payments to the societies. However the State Government did not paid or reimbursed the societies. The societies have to receive crores of rupees towards this, from the State Government. In the circumstances the Appellants contend that the Commission overlooking the payments to be made by the State Government to societies has arbitrarily and mechanically reached to the conclusion that the financial condition of the societies is bad. According to them the entire process of revocation of the licences initiated at the behest of the Board is violative of the VSA, the MPCSA and the principles of natural justice. The Appellants also contend that the reference petition was heard by Chairman and two members of the Commission. After hearing of the matter the Chairman retired from the post and one of the Member assumed the charge of Chairman and was functioning as Acting Chairman. The said Acting Chairman and the other Member without fixing the matter for rehearing passed the final order and on this ground also the appeals deserve to be allowed. In reply, the Respondents raised a preliminary objection as to the locus standi of the Appellants to file appeal against the impugned order of the Commission. The Respondents contended that the Appellants were not party before the Commission and as such no appeal at their instance is maintainable. In reply, the Respondents raised a preliminary objection as to the locus standi of the Appellants to file appeal against the impugned order of the Commission. The Respondents contended that the Appellants were not party before the Commission and as such no appeal at their instance is maintainable. In order to support the order of the Commission on merits the Respondents contended that the societies were unable to repay the loan advanced by REC, they were also unable to pay the dues of the Board, in the circumstances the State Government reviewed the work of the societies and vide its meeting dated 26-5-1995 resolved to send the Officers of the Board to function as Officer In-charge of the societies. The said Officer In-charge functioning in the capacity of Managing Directors of the societies having given the consent for the revocation of the licence of the societies it was not necessary for the Commission to inquire into the financial condition of the societies nor it was necessary to issue notices to the shareholders and members of the societies before revocation of the licence of the societies. According to the Respondents the Commission having taken note of the outstanding amount towards repayment of loan advanced by REC has rightly taken the decision to revoke the licences of the societies. It is contended that the Commission has fully complied with Section 18 of the VSA and there is no violation of principles of natural justice. Heard Learned Counsel for the parties and perused the record of the Commission. Before dealing with the rival contentions of the parties it would be appropriate to quote relevant provisions of the Indian Electricity Act, 1910, the Vidyut Sudhar Adhiniyam, 2000 (VSA) and the Madhya Pradesh Co-operative Societies Act, 1960 (MPCSA). Relevant portion of Section 3 of the Indian Electricity Act, 1910 reads thus: Section 3. Grant of licences. Before dealing with the rival contentions of the parties it would be appropriate to quote relevant provisions of the Indian Electricity Act, 1910, the Vidyut Sudhar Adhiniyam, 2000 (VSA) and the Madhya Pradesh Co-operative Societies Act, 1960 (MPCSA). Relevant portion of Section 3 of the Indian Electricity Act, 1910 reads thus: Section 3. Grant of licences. - (1) The State Government may, on application made in the prescribed form and on payment of the prescribed fee (if any) [grant, after consulting the State Electricity Board, a licence to any person] to supply energy in any specified area, and also to lay down or place electric supply lines for the conveyance and transmission of energy, - (a) Where the energy to be supplied is to be generated outside such area, from a generating station situated outside such area to the boundary of such area, or (b) Where energy is to be conveyed or transmitted from any place in such area to any other place therein, across an intervening area not included therein, across such area. Since the subject-matter of energy and electricity falls in the concurrent list, the State Government promulgated the M.P. Vidyut Sudhar Adhiniyam, 2000 providing establishment and constitution of M.P. Electricity Regulatory Commission and also for licensing of transmission of supply of electricity. Section 14 of the M.P. Vidyut Sudhar Adhiniyam, 2000 deals with licencing of transmission and supply. Section 18 deals with revocation of licences. Relevant portion of Section 14 of the VSA: 14. Licensing. - (1) No person, other than those authorized to do so by licence or by virtue for exemption under this Act or who is authorized or exempted under Indian Electricity Act, 1910 (Act 9 of 1910) or the Electricity (Supply) Act, 1948 (Act of 1948) shall engage in the State in the business of: (a) transmitting electricity; or (b) supplying electricity including bulk supply, sub-transmission or distribution ; Provided that all persons who are authorized or exempted under the Indian Electricity Act, 1910 (Act of 1910) or the Electricity (Supply) Act, 1948 (Act 54 of 1948) shall be deemed to be licensees under this Act on the terms and conditions on which the licence or exemption has already been granted and the provisions of this Act applicable to a licensee shall apply mutatis mutandis to such person. .. .. Relevant portion of Section 18 of the VSA: 18. .. .. Relevant portion of Section 18 of the VSA: 18. Revocation of Licences: (1) The Commission may inquire into the conduct or functioning of any licensee in carrying out the obligations under this Act or the regulations framed thereunder or the terms and conditions of the licence - (a) upon receiving a complaint from any customer or consumer association or any trade association; or (b) upon a reference made to it by the State Government or by the Central Commission or the Central Government or the Central Electricity Authority or any other Authority; or (c) upon receiving a complaint from any company or person involved in the generation, transmission, sub-transmission, distribution or supply of electricity; or (d) upon its own knowledge or information derived from any source. (2) After making the inquiry under Sub-section (1), the Commission may, if in its opinion the public interest so required, revoke a licence in any of the following cases namely: (a)... (b)... (c)... (i)... (ii)... (d) where the financial position of the licensee is such that the licensee is unable to fully and efficiently discharge the duties and obligations imposed on him by the licence. (3)... (4) No licence shall be revoked under Sub-section (2) unless the Commission has given to the licensee not less than 30 days notice in writing, stating the grounds on which it is proposed to revoke the licence and has considered any cause shown by the licensee within the period of that notice, against the proposed revocation and has given reasons for such revocation. (5) The Commission may, instead of revoking the licence, permit it to remain in force subject to such further terms and conditions as it thinks fit to impose and the terms and conditions so imposed shall be binding upon, and be observed by, the licensee, and be of like force and effect as if they were contained in the licence. 8-A. Chapter V of the M.P. Co-operative Societies Act, 1960 deals with management of societies. 8-A. Chapter V of the M.P. Co-operative Societies Act, 1960 deals with management of societies. Relevant portion of Section 48 of it reads thus: Final authority in society - (1) The final authority in a society shall vest in the general body of members: [Provided that the bye-laws of a society may provide for the constitution of a smaller body consisting of delegates elected in accordance with such bye-laws to exercise powers of the general body or as may be specified in the bye-laws of the society.] (2) Subject to Sub-section (1), the management of every society shall vest in a committee constituted in accordance with this Act or rules made thereunder or bye-laws of the society and it shall exercise such powers and perform such duties as may be conferred or imposed respectively by the Act or rules made thereunder or bye-laws of the society. .. Section 48C deals with powers of committee reads thus: 48-C. Powers of Committee - The Board or the Committee of a society shall in accordance with the bye-laws, have power to - (a) admit and terminate membership; (b) elect the Chairman and other office bearers; (c) remove from office the Chairman and office bearers; (d) fix staff strength with the approval of the Registrar; (e) frame policies concerning - (i) organization and provisions for services to members; (ii) qualifications, recruitment, service conditions of the staff and other matters relating to staff with the approval of the Registrar; (iii) mode of custody and investment of funds; (iv) manner of keeping accounts; (v) mobilization, utilization and investment of funds; (vi) monitoring and management of information system including statutory returns to be filed; (f) place the annual report, annual financial statements, plan and budget for the approval of the general body; (g) consider audit and compliance reports and place the same before the general body; and (h) undertake such other functions as specified in the bye-laws. Section 49(8) reads thus: (8)(i) It shall be obligatory on the outgoing committee of the society to hold elections prior to the expiration of the term under Sub-section (7A) or extended term under Sub-section (7AA). Section 49(8) reads thus: (8)(i) It shall be obligatory on the outgoing committee of the society to hold elections prior to the expiration of the term under Sub-section (7A) or extended term under Sub-section (7AA). The outgoing committee shall apply to the Registrar for holding election within a reasonable time which shall not be in any case less than ninety days before expiration of the term of the committee: Provided that if the outgoing committee has resolved and requested the Registrar to hold election at least ninety days in advance and the Registrar has failed to conduct elections on its request, the Registrar shall not assume charge of the committee and the members of the committee shall continue to hold the offices: Provided further, that if the Registrar fails to conduct elections of the committee within ninety days from the date of expiry of the term of the committee, the committee of the society shall appoint returning officer who shall conduct the election of the committee within 180 days from the date of the expiry of the term. (ii) If the committee fails to hold election and has not handed over the charge on expiration of the term, under Sub-section (7A) or extended term under Sub-section (7AA) to the Registrar or any officer authorized by him on his behalf, all the members of the committee shall be deemed to have vacated their seats and the Registrar shall assume charge and hold election as early as possible. So far as the preliminary objection raised by the Respondents about the maintainability of the appeal at the instance of the Appellants who were not party before the Commission, in my view this objection is not tenable in view of the Section 41 of the VSA which states that any person aggrieved by any decision or order of the Commission passed under this Act may file an appeal to the High Court. Thus having regard to the right conferred upon 'any person aggrieved' to file appeal to this Court, the Appellants being members and shareholders of the respective societies of which the licences are revoked and since the rights of the employees being affected by the impugned order the Appellants are certainly 'person aggrieved' and as such have right to file appeal against the said order. The Appellants have also filed applications seeking leave to appeal. The Appellants have also filed applications seeking leave to appeal. Having held that the Appellants are aggrieved persons against the order under challenge the applications are hereby allowed and they are permitted to prosecute their appeals. The preliminary objection of the Respondents is accordingly rejected. Coming to the merits of appeals, on perusal of the memo of appeal, reply of the Respondents and the record received from the Commission it is clear that on the basis of the decision taken by the Committee of State Government the Officers of the Board were sent on deputation, in the societies, in which the elections could not be held for few years to function as Officer In-charge in the said societies in exercise of powers conferred on the Registrar u/s 49(8) of the MPCSA. The proceedings of the aforesaid meetings filed by the Board as Annexure R-I reveals that the said OICs' were sent in the societies to send their proposal for merger of the societies in the Board on account of their financial incapacity to function. On receipt of the letters for revocation of licences and seeking merger handing over of the responsibility to supply electricity to the Board from the said Managing Directors, the State Government moved to the Commission by way of a petition accompanied by the said letters stating therein that the financial position of the societies are stringent and as such their Licence be revoked. The Commission on the basis of said petition issued notice to various authorities except to the societies in general through its members and shareholders. Thereafter, on the basis of the consent given by the Managing Directors and by the various Govt, departments, the Commission exercised the powers u/s 18(1)(b) and 2(d) of the VSA and ordered for revocation of licences of the societies. Having regard to the aforesaid, in my considered view the State Government through the Registrar Co-operative Societies has misused the powers vested in the Registrar u/s 49(8) of the MPCSA. As per Section 49(8) of the MPCSA in case of failure to hold the elections the Registrar is empowered to assume charge of the committee and is obliged to hold election as early as possible. However instead of directing to hold the elections the Officers of the Board were directed to assume charge with intent to cancel the registration of the societies and to merge the societies into the Board. However instead of directing to hold the elections the Officers of the Board were directed to assume charge with intent to cancel the registration of the societies and to merge the societies into the Board. Thus in my considered view the State Government has misused the powers and acted in violation of the powers conferred u/s 49(8) of the MPCSA. So far as the alleged violation of Section 18(1) of the VSA by the Commission, I find that the Commission did not inquire into the conduct or functioning of the licencee societies in carrying out the obligations under the Act or the regulations or the terms and conditions of the licence on the receipt of the reference petition from the State Government. The impugned order clearly demonstrates that the Commission has also failed to form its opinion about the existence of the public interest in ordering for revocation of the licence as required u/s 18(2) of the VSA. It is also clear that before ordering for revocation of the licences the Commission has failed to issue 30 days show cause notice in writing to the societies stating therein the grounds on which it is proposed to revoke the licence as provided in Section 18(4) of the VSA. Thus I find that there is complete deviation from the requirements of Section 18(1)(2) and (4) of the VSA. The contention of the Respondents that because the Managing Directors themselves had applied for revocation of licence and had given consent for revocation of the licence of the societies the Commission was not required to make any inquiry or was not required to form its opinion about public interest and also was not required to issue show cause notice cannot be accepted in view of the fact that the very purpose for which the appointments of the officers of the Board were made is a clear misuse of the powers vested in the Registrar u/s 49(8) of the MPCSA. Even otherwise according to Section 48 of the MPCSA the final authority in a society is the general body of members. It is not the case of the Respondents that the bye-laws of the societies provide otherwise. Section 48C of the MPCSA though confers powers on the committee or the Board of Directors to perform certain acts but they are subject to the final authority of the general body of the society. It is not the case of the Respondents that the bye-laws of the societies provide otherwise. Section 48C of the MPCSA though confers powers on the committee or the Board of Directors to perform certain acts but they are subject to the final authority of the general body of the society. The contention of the Appellants that in the meeting convened by the Managing Directors the general body had resolved that the society shall not be merged in the Board has not been controverted by the Respondents. Thus the unilateral decision and consent given by the Managing Directors who were on deputation and who were employees of the Board, for revocation of the licence of the societies and handing over of the responsibility of supply of electricity to the Board should not have to be acted upon by the Commission to the extent of giving complete go-bye to the compliance of Section 18(1)(2) and (4) of the VSA. Under the MPCSA the powers conferred upon the committee or the Board of Directors are in the nature of delegated powers they are not supreme and the committee or the Board of Directors always required to keep the provision of Section 48 of the MPCSA in mind while performing of its functions and duties. It should always respect the wishes of the general body rather to act in detriment to it. The Managing Directors have not only acted against the wishes of the general body but by making an application for revocation of licence and by consenting for it had in fact acted towards making to societies defunct. The Commission has exercised its powers of revocation of licences merely on the basis of arrears of loan of REC and has concluded that the societies are in precarious financial conditions. The contentions of the Appellants that they have to recover huge amount running in crores from the State Government towards the supply of free electricity to the farmers and one point connection to the poor person which has not been controverted by the Respondents was also an important aspect of the matter and the action based upon the consent of the Managing Directors who were sent with the purpose to get the merger of the societies into the Board cannot be sustained. It was obligatory on the part of the Commission to independently assess and enquire about the grounds raised by the State Government in its petition for the revocation of the licences of the societies. In view of the aforesaid the impugned order passed by the Commission is liable to be and is hereby set aside to the extent of revocation of licences of the Respondent societies. However, setting aside of the impugned order would not come in the way of State Government and of the Commission to initiate fresh proceedings in conformity of Section 18 of VSA and in accordance with law, if need so arises. Since I have set aside the impugned order of the Commission for the reasons stated hereinabove, I have not dealt with the grounds raised by the Appellants that the Acting Chairman and Members could not have decided the reference on retirement of the Chairman who was also present and functioning when the reference petition was finally heard. These appeals are allowed. No orders as to costs. Final Result : Allowed