Tag Archives: uttar pradesh electricity supply code

Electricity Dues – Liability of Directors

In a recent Judgment of the Allahabad High Court – Piyush Kumar v. State of U.P., it was held as under:
“A company is an artificial person and can only contract through agents. The normal mode of signing is to use the words ‘on behalf of the Company’ and if the Director, as an agent of the company signs the contract for the company, no personal liability is attached to him. The Directors thus under Section 46 of the Companies Act, 1956 can sign the contracts for the Company, which binds the Company, unless the Articles of Association of the Company or any resolution of the Board of Directors restricts or takes away such authority. The Directors are not personally liable, unless it appears that they take personal liability. The Directors may be made personally liable in damages, where they act beyond their powers; act by making negligent misrepresentation; acts in violation of the provisions of the Companies Act such as Section 77 or plays fraud representing the company.
Clause 4.3 (f) (iv) of The U.P. Electricity Supply Code, 2005 provides that outstanding dues will be first charge on the assets of the company and the licensee shall ensure that this is entered in the agreement with the new applicant. Sub-clause (v) provides that recovery proceedings against the defaulting consumer, and where the consumer is a company, from the directors of the Company, shall be ensured.
It is only after the assets of the Company are unable to meet the demand of the department then recovery proceedings may be initiated against the Directors of the Company. Clause (v) of Para 4.3 (f) of the Supply Code provides that where a financial institution has auctioned the property without consideration to licensee’s charge on assets, claims may be lodged with the concerned financial institution with diligent pursuance. The Directors manage the company for its shareholders. They are in charge of the management and the business of the Company for the benefit of the shareholders. They are not liable for the dues of the company on the ground that they have signed an agreement on behalf of the company, unless there is specific provision, or when they agree under the agreement or execute personal guarantees or bonds for due payment of the amount.”

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Filed under Electricity Laws, Liability of Directors

Unauthorised Use of Energy – Assessment of

In a recent judgment of the Allahabad High Court in Sanjay Rizvi v. Managing Director, Kanpur Electricity Supply Co., and others, decided on April 20, 2012, it was held as under:

Before issuing an assessment notice, the authority must record it’s conclusion that the person concerned or any other person benefited has used electricity unauthorisedly in terms as defined in Explanation (b) to Section 126 of the Electricity Act, 2003. Though the 2003 Act does not provide that Assessing Officer has to provide opportunity of hearing at the stage of recording of the conclusion, however, it does not simultaneously prohibit the same. No person can come to the conclusion of unauthorised use of electricity suo motu without giving an opportunity to the concerned person as deprivation will amount to violation of principles of natural justice.

A perusal of clause 6.8 (a) (i), (ii), (iv) and (v) of the U.P.  Electricity Supply Code, 2005,  on inspection of the premises by the Assessing Officer, if it is found that some irregularities constituting unauthorized use of electricity have been committed, the Assessing Officer shall prepare a report at the site giving details thereof and will hand over the copy of such report to the consumer or his representative. The emphasis is that prima facie conclusion recorded by the Assessing Officer should be communicated to the consumer. Clause 6.8 (b) (ii) shows that the notice shall require the consumer to give his objections against the charges and provisional assessment. Clause 6.8 (c) (i) provides that opportunity of personal hearing shall also be given and thereafter the Assessing Officer shall pass a speaking order specifically disclosing whether unauthorized use of energy is established or not and where it is so determined the quantum of amount which the consumer has to pay, i.e., assessment shall be made by him. Thus, Clause 6.8 provides a detailed procedure in which the assessment would have to be made by the Assessing Officer.

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Filed under Electricity Laws, Energy Laws