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Madhya Pradesh High Court · body

2009 DIGILAW 757 (MP)

RAJAT CEMENTS PVT LTD v. STATE OF M P

2009-07-01

VINEY MITTAL

body2009
Judgment ( 1. ) THE petitioner, Rajat Cements Pvt. Ltd. (hereinafter referred as the petitioner-company) is a company incorporated under the provisions of the Companies Act, 1956. It is aggrieved against the communication dated december 20, 2005, issued by the Executive Director of M. P. Paschim Kshetra Vidyut Vitaran Company Ltd. (hereinafter referred as respondent-vitaran company), respondent No. 2, directing the petitioner-company to pay an amount of Rs. 37,95,024/ -. A copy of the aforesaid communication has been appended as Annexure P-9 with the petition. ( 2. ) THE relevant facts. One M/s Vallabh Cement Pvt. Ltd. was a consumer of electricity, having obtained the requisite electricity connection from M. P. State Electricity Board (predecessor-in-interest of respondent-vitaran company ). The aforesaid m/s Vallabh Cement came in arrears of the dues of commercial Tax Department to the extent of Rs. 83. 05 lacs. For the aforesaid arrears of dues, recovery proceedings under the provisions of Madhya Pradesh Land Revenue code, 1959 were initiated. The properties (plant, machinery etc.) of the aforesaid M/s Vallabh Cement was auctioned on february 22, 2003. One Anoop Jain, who later promoted the petitioner-company, purchased the aforesaid property of the defaulter-company. The bid offered by Anoop Jain was confirmed by the Commercial Tax Officer, Indore, on february 22, 2003. It is further maintained that a sale certificate of 3. 02 hectares land, plant and machinery of the aforesaid defaulter company was issued in favour of the said anoop Jain (later vesting in the petitioner-company) on march 24, 2003. ( 3. ) AFTER purchase, the petitioner-company made an application on September 8, 2004 for a new H. T. connection for 400 KVA to the respondent-vitaran company, and filed all requisite papers. In turn, the Executive Director of the respondent-vitaran company, through a communication dated December 20, 2005, informed the petitioner-company that a load of 400kva, would be sanctioned, subject to clearing the entire past arrears, outstanding the erstwhile consumer i. e. M/s Vallabh Cement Pvt. Ltd. , to the extent of rs. 37,95,024. 00/ -. In turn, the Executive Director of the respondent-vitaran company, through a communication dated December 20, 2005, informed the petitioner-company that a load of 400kva, would be sanctioned, subject to clearing the entire past arrears, outstanding the erstwhile consumer i. e. M/s Vallabh Cement Pvt. Ltd. , to the extent of rs. 37,95,024. 00/ -. The petitioner-company protested that since the property in question had been sold by the State government of Madhya Pradesh under the provisions of section 32 (13) (b) (v) of Madhya Pradesh Vanijiyik Kar adhiniyam, 1994, read with Section 147 (c) of M. P. Land revenue Code, 1959, therefore, the property purchased by anoop Jain, and later on vesting in the petitioner-company, is deemed to be free from all encumbrances, and no recovery could be made from the petitioner-company. ( 4. ) HOWEVER, since the respondent-vitaran company persisted with the demand against the petitioner-company, therefore, the petitioner-company has approached this Court through the present petition. ( 5. ) AT the outset, it may be noticed that vide an interim order dated April 7, 2006, this Court, while taking note of a decision rendered by the Apex Court in the case of ahmadabad Electricity Board Company Ltd. Vs. Gujrat Inns pvt. Ltd. and others (2004 AIR SC 2106), allowed the prayer for an ad-interim relief made by the petitioner-company and directions were issued to the vitaran-company, to provide fresh electricity connection to the petitioner-company. Correspondingly, the petitioner-company was also directed to ensure compliance of all the procedural formalities required for obtaining such electricity connection and was also directed to continue to pay/deposit the regular electricity charges form the electricity supplied and consumed by it. It is the conceded position between the parties that in pursuance to the aforesaid interim relief granted by this Court, the petitioner-company has been issued a fresh connection and as of date, is duly paying all its electricity charges on the said new connection. ( 6. ) IN these circumstances, the only grievance of the petitioner-company, which remains to be adjudicated is, as to whether the petitioner-company is liable in law to deposit/pay the arrears, which were due and recoverable from the erstwhile consumer M/s Vallabh Cement Pvt. Ltd. , whose property had been purchased by Anoop Jain (later vesting in the petitioner-company ). ( 7. ) THE claim made by the petitioner-company has been contested by respondent No. 2-vitaran company. ( 7. ) THE claim made by the petitioner-company has been contested by respondent No. 2-vitaran company. It has been maintained that since the petitioner-company had purchased the property from the State Government in the auction proceedings, belonging to a defaulter consumer M/s Vallabh cement Pvt. Ltd. therefore, as per the provisions of Clause 4. 17 of M. P. Electricity Supply Code, 2004 (hereinafter called as the Code), it was bound in law to clear the aforesaid arrears. The claim made by the petitioner-company to the effect that the property in question had vested in anoop Jain, and later in the petitioner-company, free from all encumbrances, has also been contested, by maintaining that pre-existing rights of the Electricity Board/vitaran Company could not have been abolished or taken away by subsequent sale in favour of the auction purchaser. ( 8. ) I have heard Shri T. N. Singh, learned senior counsel for the petitioner-company, Shri Vivek Patwa, learned deputy Government counsel for respondent No. 1 and Shri s. S. Chouhan, learned counsel appearing for respondent no. 2-vitaran company, and with their assistance, have also gone through the record of the case. ( 9. ) AT the outset, it may be noticed that the facts, as noticed above, are not a matter of any contest between the parties. It is not a matter of any dispute, even by respondent no. 2, that the property in question belonging to M/s Vallabh cement Pvt. Ltd. , the erstwhile consumer, had been put to auction, being a defaulter of the Commercial Tax department and the said property had been purchased by anoop Jain, who had later on promoted the petitioner-company. In these circumstances, the said property had clearly vested in the petitioner-company. ( 10. ) THE only issue, which arises for consideration in the present case, is as to whether the petitioner-company, being not a purchaser of the assets of the erstwhile consumer through a private sale, but having purchased the aforesaid assets in a sale conducted by the Commercial Tax department, could it be said that the amount recoverable from the erstwhile consumer by respondent No. 2, was still recoverable from the petitioner-company? ( 11. ) AT the outset, it may be noticed that learned counsel for respondent No. 2, has brought to the notice of the Court the un-amended provisions of Clause 4. 17 of the Code, (as existing prior to 28. 8. ( 11. ) AT the outset, it may be noticed that learned counsel for respondent No. 2, has brought to the notice of the Court the un-amended provisions of Clause 4. 17 of the Code, (as existing prior to 28. 8. 2006),which reads as follows. "4. 17 If the consumer, in respect of an earlier agreement executed in his name or in the name of a firm or company with which he was associated either as a partner, director or managing director, has any arrears of electricity dues or other dues for the premises where the new connection is applied for and such dues are payable to the licensee, the requisition for supply may not be entertained by the licensee until the dues are paid in full. In case of a person occupying a new property, it will be the obligation of that person to check the bills for the previous months or, in case of disconnected supply, the amount due as per the licensees records immediately before his occupation and ensure that all outstanding electricity dues as specified in the bills are duly paid up and discharged. The licensee shall be obliged to issue a certificate of the amount outstanding from the connection that was installed or is installed in such premise on request made by such person. The licensee may refuse to supply electricity to the premises through the already existing connection or refuse to give a new connection to the premises till such outstanding dues to the licensee are cleared. " ( 12. ) ON August 11, 2006, clause 4. 17 was amended and the said amendment become operative w. e. f. August 28, 2006. The relevant portion of the said amended Clause 4. 17, reads as follows. "4. 17 If the consumer, in respect of an earlier agreement executed in his name or in the name of a firm or company with which he was associated either as a partner, director or Managing Director or as occupier and/or owner of the premises, has any arrears of electricity dues or other dues on the premises where the new connection is applied for and such dues are payable to the licensee, the requisition for supply may not be entertained by the licensee until the dues are paid in full. However, release of new connection shall not be refused by the Distribution Licensee in following cases:. . . . However, release of new connection shall not be refused by the Distribution Licensee in following cases:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (ii) If the property is attached and sold by the Income tax Department/commercial Tax Department or such other Govt. Departments for recovery of their dues, then the new purchaser shall not be required to pay the energy dues of erstwhile consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " ( 13. ) STILL further, Clause 4. 17 of the Code was again amended. The said amended provisions which are operative, as of date as well, read as follows. "clause 4. 17: If the consumer, in respect of an earlier agreement executed in his name or the name of a firm or Company with which he was associated either as a partner, Director or Managing Director or as occupier and or owner of the premises, has any arrears of electricity dues or other dues for the premises where the new connection is applied for and such dues are payable to licensee, the requisition for supply may not be entertained by the licensee until the dues are paid in full. However, release of new connection shall not be refused by the Distribution Licensee in following cases:- (i) If the lease deed is cancelled by the State Govt. on account of any reason and allocated to a new party/consumer, then the new party/consumer shall not be required to pay the energy dues of erstwhile consumer. (ii) If property is attached and sold by Income Tax department/commercial Tax Department or such other Govt. Departments for recovery of their dues, then the new purchaser shall not be required to pay the energy dues of erstwhile consumer. (iii) If the Financial Institutions created under the state Act/central Act attach and Sale property for recovery of their dues, then the purchaser shall not be required to pay the energy dues of erstwhile consumer. Departments for recovery of their dues, then the new purchaser shall not be required to pay the energy dues of erstwhile consumer. (iii) If the Financial Institutions created under the state Act/central Act attach and Sale property for recovery of their dues, then the purchaser shall not be required to pay the energy dues of erstwhile consumer. (iv) On Vacation of Govt. Quarter/flat on transfer of an employee leaving arrears of energy charges, new occupant shall not be required to pay the energy dues of erstwhile consumer. (v) If there is a specific order from a Court for non-recovery of arrears outstanding on the premises". ( 14. ) A bare perusal of Clause 4. 17 after the latest amendment, clearly shows that it has been enacted with a view to enforce liability, with regard to premises, on account of electricity dues, where a new connection is applied. According to the said Clause, the application made by such an applicant may not be entertained by the Vitran Company, until the dues are paid in full. However, a few exceptions have also been inserted in the said Clause. The first exception is of a situation, where a lease deed is cancelled by the State Government on account of any reason and the premises is allocated to the new party or consumer. In such a situation, the new party/consumer is not required to pay the energy dues of the erstwhile consumer. The second situation is, if a property is attached and sold by the Income tax Department/ Commercial Tax Department or such other government Department for recovery of the dues, a new purchaser is not required to pay the energy dues of the erstwhile consumer. The third situation is, if the property is sold by a financial institution, created under the State act/central Act, for recovery of dues, in that case also, the purchaser of such a property, is not required to pay the energy dues of the erstwhile consumer. There are two more exceptions, which are not relevant to be noticed. ( 15. ) ON a thoughtful consideration of the entire language of Clause 4. There are two more exceptions, which are not relevant to be noticed. ( 15. ) ON a thoughtful consideration of the entire language of Clause 4. 17, and on conjoint reading of exceptions to the general Rule, it is apparent that a purchaser of sold property, through intervention of the state Government, Tax Departments, or other Government departments, and even by the Financial Institutions, under the State Act/central Act, would not be required to pay energy dues of the erstwhile consumer. The intention of the framers, while enacting Clause 4. 17, is clearly discernible from the said exceptions. It is clear that a purchaser through the intervention of a Government agency etc. is protected. Such a purchaser, cannot be burdened for the energy dues of the erstwhile consumer. However, any private transaction/transfer, merely, between the erstwhile consumer and a purchaser is not recognized, and no such protection, is made available, to such a purchaser, through a private sale. The intention seems to be to grant sanctity to an official sale, and correspondingly to protect a purchaser, of such an official sale. The said intention is in fact in complete consonance with the Public Policy. The same is also in conformity with the principle that the official acts of a State agency and its Instrumentality cannot be deemed to be prejudicial to a person accepting such acts, and acting thereupon. ( 16. ) IT is apparent, even from perusal of the un-amended clause 4. 17, as per amendment in the year 2006, that a protection was granted to a purchaser of a property in a sale conducted by the Income Tax Department/commercial Tax department, or such other Government Department, for recovery of the dues. In such a situation, a purchaser was not required to pay the energy dues of the erstwhile consumer. Even in the amended clause 4. 17, the intention of the framers clearly is reflected to grant a sanctity to an official sale, and as such protect the interests of any such purchaser, in such a sale. Needless to re-assert that a purchaser of a property of the erstwhile consumer, in a private transaction/transfer, is not protected at all, and by any stretch of imagination, is not covered under the various exceptions of clause 4. 17, amended, as well as, un-amended. ( 17. Needless to re-assert that a purchaser of a property of the erstwhile consumer, in a private transaction/transfer, is not protected at all, and by any stretch of imagination, is not covered under the various exceptions of clause 4. 17, amended, as well as, un-amended. ( 17. ) IT would be relevant to extract certain observations made by the Apex Court in Isha Marbles Vs. Bihar State electricity Board (1995) 2 SCC 648 . "56. From the above it is clear that the High Court has chosen to construe Section 24 of the Electricity act correctly. There is no charge over the property. Where that premises comes to be owned or occupied by the auction-purchaser, when such purchaser seeks supply of electric energy he cannot be called upon to clear the past arrears as a condition precedent to supply. What matters is the contract entered into by the erstwhile consumer with the board. The Board cannot seek the enforcement of contractual liability against the third party. Of course, the bona fides of the sale may not be relevant. 57. The form of requisition relating to the contract is in Annexure VIII prescribed under clause vi of the Schedule to the Electricity Act. They cannot make the auction-purchaser liable. In the case of isha Marbles we have already extracted the relevant clause wherein the consumer was asked to state his willingness to clear off the arrears to which the answer was in the negative. Therefore, the High court has rightly held that the auction-purchaser, namely,"the writ petitioner before us is ready and willing to enter into a new contract (sic and) that the auction-purchaser does not intend to obtain the continuance of supply of electrical energy on the basis of the old agreement". It is true that it was the same premises to which reconnection is to be given. Otherwise, with the change of every ownership new connections have to be issued does not appear to be the correct line of approach as such a situation is brought about by the inaction of the Electricity board in not recovering the arrears as and when they fall due or not providing itself by adequate deposits. 58. This is a case of sale under Section 29 of the corporations Act. Of course, what the Corporation seeks to recover are the loans advanced by enforcement of a mortgage. 58. This is a case of sale under Section 29 of the corporations Act. Of course, what the Corporation seeks to recover are the loans advanced by enforcement of a mortgage. Such sale cannot affect the right of the Board to recover its dues. The failure of the Board to recover the dues as and when such dues arose, is a point to be put against it". ( 18. ) WITH the aforesaid observations, it was held by the supreme Court, that it was impossible to impose on the purchasers, the liability, which was not incurred by them. To the similar effect, relying upon the law laid in the case of Isha Marbles, the Apex Court again, in the case of ahmedabad Electricity Co. Ltd Vs. Gujarat Inns Private limited and others (2004) 3 SCC 587 , reiterated that in case of a fresh connection, for the premises, an auction purchaser cannot be held liable to clear the arrears, incurred by the previous owners for the power supply to the premises, in the absence of there being a statutory provision in that regard. ( 19. ) HOWEVER, learned counsel for respondent No. 2, has placed strong reliance upon the provisions of Clause 4. 17 of the Code, as it originally existed prior to its amendment in the year 2006 (the said un-amended provisions have also been extracted above ). It has been maintained by learned counsel that since the property in question had been purchased by Anoop Jain (later on vesting in the petitioner-company), in the year 2003, and an application had been filed for the new connection on September 8, 2004, therefore, apparently, the un-amended Clause 4. 17 of the code was attracted, and no such protection was available to such a purchaser, as had been made available in the amended provisions, and therefore, the petitioner-company is liable in law to clear its outstanding arrears of the erstwhile consumer. ( 20. ) I have duly considered the aforesaid contention of learned counsel for respondent No. 2 also. In my considered view, the said contention also cannot be accepted, in view of the authoritative pronouncement with regard to the interpretation of Clause 4. 17 of the Code, by a Division bench of this Court, in the case of M. P. Paschim Kshetra vidyut Vitaran Company Ltd. Vs. In my considered view, the said contention also cannot be accepted, in view of the authoritative pronouncement with regard to the interpretation of Clause 4. 17 of the Code, by a Division bench of this Court, in the case of M. P. Paschim Kshetra vidyut Vitaran Company Ltd. Vs. Electricity Consumer grievances Redressal Forum and another, W. A. No. 45 of 2009, decided on May 11, 2009. The relevant observations by the Division Bench may be extracted as follows. "09. A fair understanding of clause 4. 17 would make it clear that if the consumer, in respect of an earlier agreement executed in his name or in the name of firm or company with which he was associated either as a Partner, Director or Managing Director or as occupier and or owner of the premises has any arrears of electricity due or other due for the premises where the new connection is applied for and such dues are payable to the licensee, the requisition for supply may not be entertained by the licensee until the dues are paid in full. 10. The endeavour of the learned counsel for the applicant was to convince us that the word "consumer" is to be read with an occupier and or owner of the premises. The submission in fact, is that any consumer who is occupying the premises or is owner of the premises as on today would be answerable to discharge the earlier liability. In our considered opinion, the submission made by the learned counsel for the appellant is based on misinterpretation of clause 4. 17 of the Supply Code, 2004. 11. The word "consumer", in our considered opinion, is to be read in juxtaposition with the word "earlier agreement" so executed and the association of the demanding consumer should be shown with the erstwhile firm or company as a Partner, Director or managing Director or as occupier and or owner of the premises. 12. We would be justified in reading the agreement by saying that if the present consumer in relation to the earlier agreement was associated with the firm or company either as a Partner Director or managing Director or as occupier and or owner of the premises then he would not be entitled to a new connection unless the earlier liability is discharged. The word "with which he was associated" are not ornamental words. The word "with which he was associated" are not ornamental words. The said words qualify a Partner, director or Managing Director or an occupier or owner of the premises of the firm or company which earlier had the agreement in its name. The reason behind putting clause 4. 17 is to put a check on the dishonesty which may be exhibited by the Partner, director or Managing Director who after finding that a great amount of money is to be paid refuse to pay the money and thereafter transfer the property in favour of some Director, Managing Director or partner. Clause 4. 17 would also show that if a person was occupying the premises or was owning the premises had some association with the earlier firm or company and again makes an application for grant of a fresh connection, then such person would not be entitled to get a fresh connection because at that point of time the Company can always ask him that he being an associate of the defaulter firm or company, he would not be entitled to a fresh connection. " ( 21. ) SINCE the language of Clause 4. 17 of the opening paragraph remains unaltered in all the three situations, i. e. prior to amendment in the year 2006; as amended in the year 2006; and as amended later on, therefore, the interpretation given by the Division Bench in the aforesaid judgment, and the law laid down therein, clearly shows that the arguments raised on behalf of respondent No. 2 cannot be accepted. Concededly, Anoop Jain was not at all concerned with or connected, in any manner, with the erstwhile consumer i. e. M/s Vallabh Cement, and as such the earlier agreement between the erstwhile M/s Vallabh cement, and the Electricity Board/vitaran Company, could not be treated to be in his name or in the name of firm or company with which he was associated, either as a Partner, director, or Managing Director or as a Occupier and/or owner of the premises. Therefore, it has to be held that the liability of erstwhile consumer, under no circumstances, could be fastened upon the petitioner-company. ( 22. ) NO other point has been urged. ( 23. ) CONSEQUENTLY, the present petition is allowed. The demand raised by respondent No. 2 against the petitioner-company, through communication dated December 20, 2005, annexure P-9, is hereby quashed. ( 24. ( 22. ) NO other point has been urged. ( 23. ) CONSEQUENTLY, the present petition is allowed. The demand raised by respondent No. 2 against the petitioner-company, through communication dated December 20, 2005, annexure P-9, is hereby quashed. ( 24. ) HOWEVER, a liberty is granted to respondent No. 2, to recover the aforesaid amount from the erstwhile consumer M/s Vallabh Cement, in accordance with law.