2016 (2) TMI 1358 - HC - Indian Laws

Director's Liability for Electricity Dues: Court Questions Recovery Authority

Izharul Hauque Versus State Of U.P. And 6 Others

The Court examined the validity of allowing recovery of electricity dues from a Director of a body corporate, which is the consumer, under Clause 4.3 (f) ... Recovery towards electricity dues - liability of the dues on Director of the Body Corporate - Scope of expression 'consumer' is defined in Section 2 (15) of the Electricity Act, 2003 - whether the recovery of electricity dues is authorized as against a person who is not the consumer but a Director of a body corporate which is the consumer? HELD THAT:- The basis of the challenge is that the expression 'consumer' is defined in Section 2 (15) of the Electricity Act, 2003. The submission is that where a body corporate is a consumer, recovery cannot be enforced against its Directors. Hence, it has been submitted that the subordinate legislation is ultra vires. The issue requires consideration. The recovery citation shall not be enforced against the petitioner. However, this shall not restrain the enforcement of the amount due in accordance with law against the seventh respondent - List on 28 March 2016. Issues: Recovery of electricity dues from a Director of a body corporate which is the consumer, challenge to the validity of Clause 4.3 (f) (v) of the Electricity Supply Code 2005, interpretation of the term 'consumer' under Section 2 (15) of the Electricity Act, 2003.Analysis:The judgment revolves around a recovery citation issued for electricity dues against a Director of a private limited Company, who is not the consumer but represents the consumer entity. The central issue is whether recovery from a Director of a body corporate, which is the consumer, is authorized. The recovery citation was based on Clause 4.3 (f) (v) of the Electricity Supply Code 2005, allowing recovery from Directors of a defaulting Company. The challenge raised questions the validity of this provision under the Electricity Act, 2003, arguing that recovery cannot be enforced against Directors of a body corporate that is the consumer.The Court examined the definition of 'consumer' under Section 2 (15) of the Electricity Act, 2003, to determine the scope of recovery actions against individuals associated with a corporate consumer. The contention was that when a body corporate is the consumer, recovery should not extend to its Directors. The challenge was based on the argument that the subordinate legislation, allowing recovery from Directors, is ultra vires the parent Act.To address the complex legal issues involved, the Court issued notices to the Advocate General and the concerned respondent for a detailed examination of the matter. The Court also directed the filing of counter affidavits within a specified timeframe. In the interim, the Court ordered a stay on enforcing the recovery citation against the petitioner, who is the Director, while emphasizing that this should not impede the lawful recovery process against the actual consumer, the seventh respondent.The judgment highlights the need for a thorough legal analysis of recovery proceedings against Directors of body corporates acting as consumers of utilities. By delving into the statutory framework and legislative intent, the Court aims to determine the validity and scope of recovery actions against individuals associated with corporate consumers. The decision to stay the enforcement against the Director reflects a cautious approach to balance the interests of individual liability with the obligations of the corporate entity. The case underscores the importance of clarity in legal provisions governing recovery actions in the context of corporate structures and consumer relationships in the electricity sector.