JUDGMENT R.P. Misra and Shishir Kumar, JJ.
1. The petitioners have approached this Court for issuing a writ of certiorari quashing the demand notice dated 22.11.2006 (Annexure-6 to the writ petition). Further issuing a writ in the nature of mandamus directing the respondents not to adopt any coercive measures in pursuance of the aforesaid demand notice.
2. The petitioner No. 1 is a private limited company duly incorporated under the Companies Act, 1956. The petitioner has its work at E-7 to 12 U.P.S.I.D.C. Industrial Area Orai district, Jalaun. The petitioner No. 2 is one of the Directors of the aforesaid Company, as such, the Board of Directors has authorized in this regard. The electricity connection was obtained by the petitioners for 4000 K.V.A. for the purposes of running an induction furnace for manufacturing M.S. Ingots. The petitioners entered into an agreement with an erstwhile U.P.S.I.D.C. in the year 1997 and the load was released on 27.6.1997. The tariff rate applicable to the petitioners concern is of HV-II category and supply is at 33 K.V. The aforesaid unit was established in pursuance of an incentive scheme in the form of a subsidy granted by the Government of Uttar Pradesh with regard to units which were to be established in the hill districts and the Bundelkhand region. The subsidy which was provided by the Government was up to the 50% rebate for the consumption bills to the units established in the areas. The aforesaid subsidy was continuously being provided to the petitioner till 1999-2000 but after 1999-2000 the aforesaid subsidy was retrospectively withdrawn, and recovery alongwith disconnections were threatened to all such units, as such, the writ petition was filed and interim order was granted. The respondents filed a Special Leave Petition before the Hon'ble Supreme Court which is still pending for consideration. It has further been stated that in the meantime similar controversy arose in the case of Hitech Electrothermics and Hydropower Ltd. v. State of Kerala , before the Apex Court and the Court was pleased to direct the respondents to grant the subsidy on the basis of which unit was to establish.
3. However, the respondents continued to show the arrears towards the subsidy in the regular monthly bills. The dues towards 50% of the subsidy amount cannot be realized by the respondents in view of the Sick Industrial Companies (Sub Provision) Act, 1985 and neither the respondents are pressing for payment of the aforesaid amount shown in the bills. Since the respondents were pressing for recovery of the amount in pursuance of the withdrawal of the subsidy granted earlier and the petitioners' unit was on the verge of collapse, as such, they moved before the Board for Industrial and Financial Reconstruction under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. The Board was pleased to declare the petitioners' unit as sick unit and accordingly preparation of a rehabilitation package is in the offing. A copy of the same has been filed as Annexure-2 to the writ petition. The petitioners had accrued the arrears from October, 2005 to March, 2006 amounting to Rs. 3,00,37,125 and as the petitioners suffered a huge loss they were unable to clear the aforesaid dues. The petitioners have filed a writ petition before this Court bearing No. 15622 of 2006 and this Court was pleased to direct that the aforesaid dues be cleared in four quarterly instalments. As the instalment, which was fixed, the petitioners were not in a position to deposit the aforesaid amount, as such, moved an application for modification but the same was dismissed.
4. Petitioners state that the petitioners have paid three instalments but could not pay any further instalments, therefore, the electricity supply of the petitioners was disconnected on 21.11.2006. The petitioners have also not paid or able to pay the current bills amounting to Rs. 1,17,31,391. A recovery certificate has been issued by the respondents on 10.3.2006 for an amount of Rs. 2,01,54,476. That when the petitioners' paid the current bills dated 3.11.2006 and 2.12.2006 they were informed that the total arrears is amounting to Rs. 16,46,91,742, which is due against the petitioners.
5. It has further been submitted that out of the aforesaid amount Rs. 14,44,37,973 is the amount of Bundelkhand rebate which is subjudice before the Hon'ble Court. On 7.12.2006, the petitioners moved a representation stating therein that the petitioners' unit have been registered under the B.I.F.R. and as such, no recovery proceedings can be initiated against the petitioners. The recovery notice dated 22.11.2006 is ex Jade, illegal, unwarranted and unjustified in the eyes of law. As the petitioners' unit has been declared unit as sick registered before the B.I.F.R., as such, in view of Section 22(1), no coercive methods can be initiated pending decision of the proceeding before the B.I.F.R. The respondents come within the preview of the 'State' ambit of Article 12 of the Constitution of India, as such, they have to act reasonably with fairness for all actions. Article 300A of the Constitution of India clearly confers the constitutional rights upon every person and citizen of India that he shall not be deprived of his rights or livelihood except in accordance with the procedure prescribed under the law. Obviously, in the present case, the disconnection cannot be said to be in accordance with the procedure prescribed under the law and the total action initiated by the respondents is wholly illegal.
6. Further It has been submitted that power of recovery of the Government dues for the supply of electrical energy by the Government undertaking The Uttar Pradesh Government Electrical Undertaking (Dues and Recovery) Act, 1958 cannot be said to be a overriding effect of Section 22 of the Sick Industrial Companies (Special Provisions Act) 1985. Section 22 is being quoted below:
22. Suspension of legal proceedings, contracts, etc.--(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 to 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advice granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company is taken over or changed (in pursuance of any scheme sanctioned under Section 18), notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law:
(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.
(3) Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board:
Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate.
(4) Any declaration made under Sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything. contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a Court, Tribunal, officer or other authority or of any submission, settlement or standing order and accordingly:
(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any Court, Tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and
(b) on the declaration ceasing to have effect:
(i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and
(ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.
(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this Section shall be excluded.
22A. Direction not to dispose of assets.--The Board may, if it is of opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets:
(a) during the period of preparation or consideration of the scheme under Section 18; and
(b) during the period beginning with the recording of opinion by the Board for winding up of the company under Sub-section (1) of Section 20 and up to commencement of the proceedings relating to the winding up before the concerned High Court.
7. The further submission has been made that Section 32 of the aforesaid Act will have a overriding effect on all the provisions. The same is being reproduced below:
32. Effect of the Act on other laws:
(1) The provisions of this Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconstant therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in form or in the Memorandum or Articles of Association of an industrial company or in any other instrument having effect by virtue of any law other than this Act.
(2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of selection 72A of the Income-tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under the Section may be exercised by the Board without the Central Government under that Section may be exercised by the Board without any recommendation by the specified authority referred to in that Section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company.
8. Further it has been submitted that the proceeding before the Board is a judicial proceeding as such, the respondents are stopped from initiating any recovery against the petitioners.
9. Further it has been submitted on behalf of the petitioners that Regulatory Commission has itself issued an order regarding initiation of any action against the unit, which has been declared as sick unit by the B.I.F.R. Reliance has been placed upon Clause 6 of the aforesaid order:
6. While the licensees cannot be restrained from taking action in recovering their undisputed dues under Section 56 of the Act 2003, even if the unit is on the verge of closure or lay off, the Commission is of the firm belief that the adverse factors cannot be ignored, and these call for differential treatment. Though the amendment in general rule for meeting the ends of justice in the matters like these, is not called for, nevertheless the Commission is of considered view, that applying discretionary modification for annulment in a few circumstances, so that the literal terms of the rule do not negate the very intent, purpose and the preamble of any legislation, would restore heath to units in distress and serve the social cause in global context.
10. The reliance have also been placed upon Judgment of the Apex Court in State of U.P. and Ors. v. Uptron Employees Unions C.M.D. and Ors. 2006 SCC (L&S) 1092, and reliance has been placed upon para 18 of the said Judgment. The same is being reproduced below:
18. Before parting with this case, we must notice that the proceedings under S.I.C.A. in the instant case are pending before B.I.F.R. since August. 1994. We are told that in view of the pendency of the appeals before this Court B.I.F.R. as well as the High Court did not proceed further in the matters. This is rather unfortunate, because in the absence of any order of stay, passed by this Court in these proceedings, the High Court as well as B.I.F.R. should have proceeded with the matters before them and concluded the proceedings. It is most unfortunate that a sick industrial company which needs immediate attention and treatment has to wait for 12 years with no result in sight. B.I.F.R. must be conscious of the fact that in the sick industrial companies the liabilities accumulate as time passes and, therefore the condition of the sick unit becomes worse day after day. If a proceeding before B.I.F.R. is not concluded within a reasonable time, it becomes counterproductive because rather than reviving the sick industrial unit it makes it more sick and, therefore, it becomes even more difficult to revive such an undertaking. One can well imagine what may be the dues now payable to the workmen and employees of the sick industrial company in this case. If no one was willing to submit a viable proposal in the year 1994, it will be even more difficult today to secure a proposal for the revival of the company. The pendency of the proceedings before B.I.F.R. for almost 12 years has made the situation worse. The net worth of the sick unit was negative to begin with and as of date the dues to the workmen and the interest, etc. payable to the creditors may have to be added to the liabilities of the company. We only wish to impress upon B.I.F.R. that proceedings under B.S.I.C.A. must not be kept pending for so long and having regard to the fact that every day's delay adversely affects the financial condition of the undertaking, a final decision one way or the other must be taken within a reasonable time. We also cannot lose sight of the fact that the protective provisions of S.I.C.A. place the creditors of the sick industrial company in a rather precarious position, since they are not able to realize their dues from the sick industrial company in view of the provisions of Section 22 of the S.I.C.A. It is only desirable that the formulation of the scheme and its execution must be done within a reasonable time.
11. The further reliance has been placed upon a judgment of the Apex Court in Rishabh Agro Industries Ltd. v.P.N.B. Capital Services Ltd., and reliance has been placed upon paras 5 and 9 of the said judgment. The same are being reproduced below:
5. The Act is shown to have been made, in public interest, with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. The object of the Act appears to be to afford maximum protection of employment, optimize the use of financial resources, salvaging the assets of production, realizing the amounts due to the banks' and to replace the existing time-consuming and inadequate machinery by efficient machinery for expeditious determination by a body of experts to safeguard the economy of the country and protect viably sick units. Chapter III deals with the reference, inquiries and claims. Section 15 provides that when an industrial company becomes a sick industrial company as defined under Section 2(o) of the Act, the Board of Directors of the company, shall, within 60 days from the date of finalization of the duly audited accounts of the company for the financial year make a reference to the Board for determination of the measures which shall be adopted with respect to the company. Section 16 obliges the Board to make such inquiry as it may deem fit for determining whether any industrial company had become a sick industrial company in accordance with the procedure prescribed therein. Explanation to Sub-section (3) of Section 16 was inserted by Act 12 of 1994 which provides:
Explanation. -- For the purposes of this sub-section, an inquiry shall be deemed to have commenced upon the receipt by the Board of any reference or information or upon its own knowledge reduced to writing by the Board.
It follows, therefore, that from the date of submission of reference under Section 15, an inquiry shall be deemed to have been commenced for the purposes of Section 22 of the Act. This Court dealt with this aspect of the matter in Real Value Appliances Ltd. v. Canara Bank and held as under (SCC p. 564, para 23) In our view, when Section 16(1) says that B.I.F.R. can conduct the inquiry in such manner as it may deem fit the said words are intended only to convey that a wide discretion is vested in B.I.F.R. in regard to the procedure it may follow for conducting an inquiry under Section 16(1) and nothing more. In fact, once the reference is registered after scrutiny, it is, in our view, mandatory for B.I.F.R. to conduct an inquiry. If one looks at the format of the reference as prescribed in the Regulations, it will be clear that it contains more than fifty columns regarding extensive financial details of the company's assets, liabilities, etc. Indeed, it will be practically impossible for B.I.F.R. to reject a reference outright without calling for information/documents or without hearing the company or other parties. Further, the Act is intended to revive and rehabilitate sick industries before they can be wound up under the Companies Act, 1957. Whether the company seeks a declaration that it is sick or some other body seeks to have it declared as a sick company, it is, in our opinion, necessary that the company be heard before any final decision is taken under the Act. It is also the legislative intention to see that no proceedings against the assets are taken before any such decision is given by B.I.F.R. for in case of company's assets are sold, or the company wound up it may indeed become difficult late to restore the status quo ante. Therefore, in our view, the High Courts of Allahabad in Industrial Finance Corpn. of India v. Maharashtra Steels Ltd., the High Court of Andhra Pradesh in Sponge Iron India Ltd. v. Neelima Steels Ltd., the High Court of Himachal Pradesh in Orissa Sponage Iron Ltd. v. Rishab Ispaat Ltd. are right in rejecting such a contention and in holding that the inquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny and that from that time, action against the company's assets must remain stayed as stated in Section 22 till final decisions are taken by the B.I.F.R.
12. In view of the aforesaid fact, Sri Mayank Agarwal, earned Counsel for the petitioners has submitted that the recovery against the petitioners be quashed as prima facie it is illegal and the respondents cannot adopt this procedure which has been adopted by the respondents and the writ petition deserves to be allowed.
13. On the other hand, Sri Ranjit Saxena, learned Counsel for the respondents has raised a preliminary objection to the effect regarding maintainability of the present writ petition and petitioners are not entitled for any relief by this Court in the present writ petition as the petitioners have concealed various facts and admittedly, the writ petition which was filed by the petitioners as Writ Petition No. 15622 of 2006, which was disposed of by this Court on 28.3.2006 fixing instalments for the purposes of payment of dues which was outstanding on the date when the writ petition mentioned above was filed. The petitioners were directed to pay the total amount due against the petitioners to pay in four equal quarterly instalments. The other condition was that immediately after payment of third instalment, the petitioners will approach the respondents authorities regarding detail statement of account indicating all the past deposits and the dues up to date alongwith the said documents as may be claimed by the petitioners. The further condition No. 6 was in case, the petitioners commit default of any condition mentioned in the said order, the order passed by this Court shall stand vacated automatically on the date of default itself without further reference to the Court. Admittedly, the petitioners have made default of payment and the modification application filed by the petitioners in Writ Petition No. 15622 of 2006 has already been dismissed.
14. Aggrieved by the dismissal of the application, the petitioners filed a Special Appeal before the Apex Court as Appeal No. 12037 of. 2006 in which the prayer for instalment was made and the said Special Leave Petition was dismissed on 4.8.2006.
15. Sri Ranjit Saxena, earned Counsel for the respondents further informed the Court that as the S.L.P. against the judgment passed by the High Court in Writ Petition No. 15622 of 2006 has also been filed and that is still pending the Apex Court on 19.10.2006 has passed the following orders:
Upon hearing the counsels the Court made the following order:
Shri Prakash Srivastava, earned Counsel accept notice for respondent No. 1 and states that he shall enter appearance for respondent No. 2, within 2 weeks from today, four weeks time is allowed for filing counter-affidavit. Rejoinder-affidavit may be filed to two weeks thereafter alongwith S.L.P. C.C. No. 7136/2006.
16. Further it has been brought to the notice of the Court that in the month of October 2006, the petitioners deposited second instalment by cheque for Rs. 63 lacs but the said cheque of the petitioners was dishonored and subsequent to that the petitioners have not deposited any amount. It has also been submitted by the earned Counsel for the respondents that as the petitioners deposited the first instalment of Rs. 50 lacs the connection of the petitioners was restored on the same day and the first instalment was deposited by the petitioner on 31.7.2006 for Rs. 63 lacs. Regarding dishonoring of cheque the petitioners have not stated anything in the writ petition and concealed this fact, therefore, the writ petition is liable to be dismissed on the ground alone that the petitioners have not approached this Court with clean hands and as such, is not entitled for any relief.
17. It has further been submitted on behalf of the respondents that the present writ petition is not maintainable in view of the final order passed on 28.3.2006 in Writ Petition No. 15622 of 2006. Admittedly, on the. date when the aforesaid order was passed the petitioners' company was declared as a sick unit and this fact was brought to the notice of the Court but the Court has not accepted the said contention and fixed an instalment regarding liability and demand made by the respondents. It clearly goes to show that the Division Bench of this Court has not accepted the contention of the petitioners regarding protection of Section 22 Sub-clause (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and in view of the order dated 28.3.2006 as the petitioners admittedly defaulted in complying the order of this Court and the cheque submitted by the petitioners were bounced as such, the electric connection of the petitioners was disconnected and recovery against the petitioners have been issued. As the petitioners have not approached this Court with clean hands, as such, the petitioners are not entitled for any relief and the writ petition is liable to be dismissed.
18. We have heard earned Counsel for the petitioners Sri Mayank Agarwal, and Sri Ranjit Saxena who appears for the respondents.
19. A bill dated 13.3.2006, demanded by the respondents for a sum of Rs. 2,01,54,501. Aggrieved by the aforesaid bill the petitioners have approached this Court with a request that he may be permitted to deposit the aforesaid amount in instalments. Taking into consideration the aforesaid fact, this Court vide its order dated 28.3.2006 had passed an order that the petitioners will pay the total outstanding dues in four equal (Quarterly) instalments. It is admitted by the petitioners that only two instalments were paid and the cheque paid to the respondents for the third instalments to the tune of Rs. 63 lacks has been dishonored and it is also admitted by the petitioners that they have not made any payment subsequently. The petitioners have not disclosed this fact regarding dishonor of the cheque of the third instalment.
20. As regards, the contention of the petitioners regarding the benefit of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, there is no dispute to this effect that if the company is registered under the B.I.F.R. and has been declared as a sick unit, without any permission no recovery can be made. The benefit of the aforesaid Section will be available to a person who approaches the Court with a clean hand and comes before the Court after disclosing each and every fact. Whether in these circumstances of the present case, as the petitioners in the earlier writ petition has admitted his liability and got an order for instalments and admittedly defaulted in making the aforesaid instalments and has not complied the order of this Court, whether at this stage, the petitioners can claim the benefit of Section 22 of the Sick Industrial Act. Admittedly, the petitioners have taken all these pleas which have been taken in the earlier Writ Petition No. 15622 of 2006 but the aforesaid contention of the petitioners regarding the benefit was not accepted and the petitioners have accepted the instalment of the amount which is due against the petitioners. As such, in our opinion, now at this stage in the present writ petition, the petitioners are estopped from taking the aforesaid plea.
21. The one thing is very relevant in this case is that there is no whisper in the writ petition and no averment has been made that the petitioners have defaulted in making the payment in compliance of the order dated 28.3.2006 passed in Writ Petition No. 15622 of 2006. The petitioners have not mentioned this fact in the writ petition that the second instalments which was to be paid by the petitioners' cheque to the tune of Rs. 63 lacs. The aforesaid cheque has been dishonored and subsequently, he has not paid any amount to the respondents it is also clear from the record, that the petitioners have made an application for modification but the said application was rejected by this Court and against that order a Special Leave Petition has been filed before the Apex Court and the same has also been dismissed on 4.8.2006. Meaning thereby the order passed by this Court in Writ Petition No. 15622 of 2006 dated 28.3.2006 has been affirmed by the Hon'ble Supreme Court to the effect that admitted amount which is due against the petitioners, the petitioners have to pay in compliance of the order dated 28.3.2006.
22. As regards the submission made by the petitioners regarding the benefit of various provisions it should have been considered by this Court but as it clearly appears to us that the petitioners have concealed various things and conduct of the petitioners are not appreciated as it is well settled that if a person is not approaching the Court with a clean hand the Court can always decline to grant a relief in a discretionary jurisdiction under Article 226 of the Constitution of India. Admittedly, the petitioners are not intending to pay any amount which is due to the petitioners and now at this stage without mentioning various fact in the writ petition which was necessary for the purposes of present case, raised technical pleas for the purpose's of benefit to the petitioners. In our opinion, in such circumstances, this Court can decline to grant any relief to a person who is not approaching the Court with clean hands.
23. In view of the aforesaid fact, we are not inclined to interfere in the equitable discretionary jurisdiction of this Court while exercising the powers under Article 226 of the Constitution of India.
24. The writ petition lacks merits and is hereby dismissed.
25. There shall be no order as to costs.