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Oil And Natural Gas ... v. Association Of Natur...
Factual and Procedural Background
After the disposal of a batch of civil appeals (CAs Nos. 8530-40 of 1983), the Oil and Natural Gas Commission (ONGC) filed eleven interlocutory applications seeking directions for recovery of arrears for natural gas supplied to several industrial consumers (“the respondents”). The arrears relate to the period prior to 29-1-1987 and accrued because the respondents had obtained stay orders during the pendency of the appeals, with undertakings to pay any shortfall later. The appeals were ultimately decided in favour of ONGC, but the principal amounts and accrued interest remained unpaid. ONGC produced a statement of dues as on 31-3-1993; the respondents admitted the principal sums while disputing the calculation of interest. The present order determines the manner in which ONGC may recover these sums, balancing the corporation’s entitlement with the financial condition of the industries.
Legal Issues Presented
- Whether the respondents, having benefited from stay orders, are unequivocally liable to pay the admitted principal amounts and the disputed interest to ONGC.
- What modalities—immediate recovery or structured instalments—should govern payment, given ONGC’s right to prompt recovery and the respondents’ claims of financial incapacity.
Arguments of the Parties
ONGC (Applicant)
- Asserted an undisputed right to recover both principal and interest because the respondents enjoyed uninterrupted gas supply under stay orders.
- Sought immediate payment, invoking the undertakings and securities furnished by the respondents.
Respondents (Industries)
- Generally acknowledged liability for principal amounts but disputed ONGC’s computation of interest.
- Claimed severe financial constraints and requested permission to liquidate dues in monthly instalments to avoid closure and attendant job losses.
Specific Submission – Ambica Mills
- Through senior counsel Shri P. Chidambaram, proposed selling vacant land at Vatwa, Ahmedabad, to satisfy ONGC’s claim.
- Sought liberty to approach the Board for Industrial and Financial Reconstruction (BIFR) for appropriate directions before this Court issues further orders.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court accepted that the respondents’ liability to pay ONGC is “beyond controversy,” noting that the arrears swelled solely due to non-payment during the pendency of the stay. At the same time, it recognised the adverse economic consequences of forcing lump-sum payments, including possible industrial closure and mass unemployment. Accordingly, the Court formulated a pragmatic, capacity-based recovery scheme:
- Assessment of Financial Capacity: The Court examined each industry’s financial position with counsel’s assistance and divided them into three categories.
- Category I – Instalment Facilities: Seven industries (New India Industries, Punjab Steel, Jayant Paper Mills, Gujarat Glass, Chandan Metal, Bharat Vijay Mills and Dinesh Mills) accepted responsibility to clear principal dues within five years. The Court fixed detailed monthly instalment schedules (commencing 20-4-1993) and imposed common conditions:
- Payments via bank drafts/pay orders to ONGC’s Baroda office.
- Default in any instalment (unless extended by the Court) would trigger immediate recovery of the entire outstanding amount with interest and permit disconnection of gas supply and enforcement against secured assets.
- Existing undertakings and securities remain intact; respondents barred from alienating encumbered properties until full clearance.
- Category II – Immediate Recovery: Seven industries (Alembic Glass Industries, Sarabhai Services, Alembic Chemicals, Metrowood Engineering Works, Melamine Fibre, Mahendra Mills, and Calico Dyeing & Printing) made no offer to pay within five years. ONGC was authorised to recover the entire dues forthwith, including by realising securities.
- Category III – Special Cases:
- Ambica Mills: Granted liberty to seek directions from BIFR concerning sale of vacant land; matter to be listed on mention.
- Priya Laxmi Mills: Nationalised undertaking. For pre-1-1-1986 dues, ONGC may proceed before the Commissioner of Payments under the Gujarat Sick Textile Undertakings (Nationalisation) Act, 1986. Post-1-1-1986 principal (₹1,34,47,961.20) to be paid in 60 monthly instalments of ₹2,25,000, subject to Category I conditions.
- Navjivan Mills & Calico Mills, Kalol: Under liquidation; ONGC may recover in accordance with insolvency law.
- Calico Mills, Ahmedabad: A sick unit under the Bombay Relief Undertakings (Special Provisions) Act, 1958; ONGC may recover in accordance with law.
- Interest Dispute Deferred: While principal liability was settled, disputes concerning ONGC’s interest calculations were reserved for later determination after principal clearance.
Holding and Implications
ORDER: The interlocutory applications are disposed of with structured directions for recovery of ONGC’s dues, categorising respondents into instalment-paying entities, immediate-recovery entities, and special-case entities, with liberty to the parties to seek further directions as necessary.
Implications: The decision secures ONGC’s right to recover substantial arrears while preventing abrupt industrial shutdowns. It sets no new legal precedent but illustrates the Court’s equitable balancing of creditor entitlements against socio-economic considerations. Future proceedings will address calculation and recovery of interest once principal amounts are settled.
Order
IAs Nos. 1-11 in CAs Nos. 8530-40 of 1983
1. After the disposal of the civil appeals, these applications have been made by Oil and Natural Gas Commission (ONGC) for certain directions on account of the non-payment by the industries (the respondents in the appeals) of their dues for the period prior to 29-1-1987 remaining unpaid on account of certain stay orders made during the pendency of the civil appeals, of which the respondents have taken full benefit. This situation continues, in spite of the undertaking given by the respondents to avail benefit of the stay orders, and the appeals being decided in favour of ONGC.
2. According to the statement filed on behalf of ONGC, the particulars of the arrears due, as on 31-3-1993, towards the principal amount and the interest thereon, for the period prior to 29-1-1987, from each of these industries (respondents), is as under:
Sl. No. Name of the company Net arrears (in Rs)(31-3-1993) Interest (in Rs) 1. Dinesh Mills 2,78,05,569.00 8,86,05,454.63 2. Ambica Mills 1,58,00,500.00 4,96,58,985.70 3. New India Industries 1,90,15,408.00 6,05,00,335.29 4. Priya Laxmi Mills 5,85,75,828.00 18,51,98,026.45 5. Punjab Steel 1,79,00,737.00 5,90,95,028.57 6. Sarabhai Services 14,49,56,983.00 46,32,28,539.82 7. Alembic Glass Inds. 22,28,79,783.00 8,32,22,315.11 8. Alembic Chemicals 6,69,43,060.00 21,58,64,358.36 9. Chandan Metals 7,90,088.00 26,13,435.19 10. Jayant Paper Mills 2,04,85,254.00 6,52,52,651.74 11. Gujarat Glass 2,35,83,107.00 6,82,60,502.09 12. Metrowood Engg. Works 48,00,260.00 1,32,54,169.05 13. Melamine & Fibre 48,02,709.00 1,31,15,003.08 14. Mahendra Mills 6,63,09,463.00 19,18,04,459.12 15. Navjivan Mills 4,47,03,538.00 12,40,27,043.21 16. Bharat Vijay Mills 4,90,83,099.00 14,74,95,758.92 17. Calico Mills, Kalol 3,23,19,315.00 9,35,05,728.15 18. Calico Mills, Ahmedabad 13,82,88,987.00 39,56,82,667.60 19. Calico Dying & Printing 4,22,541.00 18,06,017.49
The above figures supplied by ONGC, as the arrears due from these respondents as on 31-3-1993, are disputed on behalf of the respondents only with regard to calculation of the interest. The principal amount is admitted, it being agreed between the parties that adjustment of any sum paid remaining to be made by ONGC will be made on proof of such payment being given to ONGC by the respondents claiming any further adjustment on that basis. For the present purpose, it is not necessary to go into this aspect, apart from placing this fact on record.
3. The liability of these respondents to make the payment of the amounts due from them to ONGC, as a result of benefit of the stay orders obtained by them giving the requisite undertaking, is beyond controversy and cannot be disputed. The amounts have increased on account of the failure of the respondents to make the payment while continuing to take the benefit of the supply of gas to them under the stay orders. However, in the present situation, the respondents find considerable difficulty in payment of their dues in a lump sum. On behalf of the respondents, prayer was made to permit the respondents to clear their dues in convenient monthly instalments.
4. We have taken into account all the relevant factors. It is true that ONGC must be permitted to recover its dues at the earliest. It is also true that the financial crunch faced by the respondents must also be taken into account to avoid the closure of any of these industries, which may have several adverse side effects, including the unemployment of a large number of workmen. We have, therefore, considered the matter taking into account the financial status and capacity of each respondent to decide the nature of order to be made at this stage for recovery of the dues of ONGC from the respondents, with the able assistance of the learned counsel for the parties.
5. In our view, those respondents which are prepared to pay their dues in monthly instalments fixed by us, in the first instance towards the principal amount, should be given that opportunity to clear their dues. However, the respondents which are unable to accept this proposition, for whatever reason, cannot be given this chance and, in their case, ONGC has to be permitted to recover its entire dues, in a lump sum, straightaway, also out of the securities furnished by such respondents, with their undertaking, for obtaining benefit of the stay orders made by the Court.
6. In the above background, we have proceeded to consider the case of each of the industries and we make this order, accordingly.
7. We consider it appropriate that at least the principal amount shown to be due from each of the industries as above, must be paid off within a period of five years latest by 31-3-1998. We have considered the fixation of instalments for payment of the principal amount in each case, on this basis, taking into account the present financial capacity. The respondents have been divided in different categories, on the above basis.
8. We shall first make the directions in respect of the seven industries on whose behalf the offer to pay off the principal amount within the aforesaid period i.e within a period of five years, has been made.
Category I
New India Industries (Item 3)
9. The payment shall be in equal monthly instalments of Rs 3,15,000.
Punjab Steel (Item 5)
10. The payment shall be in equal monthly instalments of Rs 2,75,000.
Jayant Paper Mills (Item 10)
11. The first 36 instalments would be of Rs 3,00,000 each and thereafter the remaining 24 instalments would be of Rs 4,00,000.
Gujarat Glass (Item 11)
12. The payment shall be made in equal monthly instalments of Rs 4,00,000.
Chandan Metal (Item 9)
13. The payment shall be made in equal monthly instalments of Rs 15,000.
Bharat Vijay Mills (Item 16)
14. The first 12 instalments would be of Rs 6,00,000 each, the next 12 instalments of Rs 7,00,000 each, the further 12 instalments of Rs 8,00,000 each and the remaining 24 instalments of Rs 10,00,000 each per month.
Dinesh Mills (Item 1)
15. The first 36 instalments would be of Rs 4,00,000 each and the remaining 24 instalments of Rs 5,00,000 each per month.
16. The general conditions applicable in the case of each of these industries which has been permitted to make payment in monthly instalments as indicated above, would be the following:
(i) The first instalment to be paid on or before 20-4-1993. The next instalment to be paid on or before 7-5-1993 and all the further instalments to be paid thereafter on or before 7th day of the succeeding month. In case of any deficiency remaining to be covered in the principal amount, the last instalment payable in March 1998 would cover the entire balance due towards the principal. If the amount paid during this period is found to be in excess of the principal amount due, the excess amount will be adjusted towards the interest payable on the principal amount.
(ii) These industries (respondents) will deposit the monthly instalments at the office of ONGC at Baroda by bank draft/bank pay order.
(iii) In the event of default in payment, within the specified time of any of the instalments unless the time for payment of any such instalments is extended by the court, ONGC will be entitled to recover the entire outstanding balance amount together with the interest due from the defaulting respondent and for this purpose it would be entitled to take the necessary steps against the properties of the respondent concerned, in accordance with the undertaking given to the court and ONGC would also be entitled to take steps regarding disconnecting the supply of gas in such event.
(iv) The undertaking furnished by the respondents to this Court shall continue and remain available for discharge of the liability towards ONGC and the respondents would not in any manner alienate or encumber any of those properties until the entire dues of ONGC have been cleared.
These applications shall remain pending in respect of these respondents and would be listed for orders after the principal amount has been paid for further directions, including directions regarding payment of interest claimed by ONGC.
Category II
17. The seven industries viz. Alembic Glass Industries, Sarabhai Services, Alembic Chemicals, Metrowood Engg. Works, Melamine Fibre, Mahendra Mills and Calico Dyeing & Printing (shown at Serial Nos. 7, 6, 8, 12, 13, 14 and 19) have not made any offer to pay off even the principal amount in instalments within a period of five years. This being so, no further consideration of their case for this purpose is necessary. ONGC is entitled to recover their entire dues from each of them, by recourse also to the security given and undertaking furnished.
Category III
18. We would now deal with the remaining five industries viz. Ambica Mills, Priya Laxmi Mills, Navjivan Mills, Calico Mills, Kalol and Calico Mills, Ahmedabad (shown at Serial Nos. 2, 4, 15, 17 and 18).
Ambica Mills (Item 2)
19. Shri P. Chidambaram, learned Senior Counsel appearing for Ambica Mills, submitted that the respondent is prepared to sell off the vacant land at Vatwa near Ahmedabad in order to discharge the dues of ONGC in the present case. The learned counsel further submitted that since the matter relating to Ambica Mills is pending before the Board of Industrial Finance and Reconstruction (BIFR), liberty may be given to mention this matter before BIFR for suitable directions in this behalf before obtaining a direction from this Court for this purpose. Liberty, as prayed for, is granted. The matter relating to this respondent be listed for orders on being mentioned. The principal amount due from Ambica Mills as on 31-3-1993 in respect of the period from 1-4-1979 to 21-1-1987, as shown in the statement furnished by ONGC is Rs 1,58,00,500.00 and the interest calculated thereon by ONGC is Rs 4,96,58,985.70. On behalf of Ambica Mills, the principal amount is admitted while interest calculated by ONGC is subject to verification.
Priya Laxmi Mills (Item 4)
20. This industry has been nationalised under the Gujarat Sick Textile Undertakings (Nationalisation) Act, 1986 with effect from 1-1-1986. The principal amount due for the period prior to 1-1-1986, payable by the previous owner is Rs 4,51,27,866.80, while the principal amount due for the period subsequent to 31-12-1985 is Rs 1,34,47,961.20. For recovering the principal amount together with the interest thereon for the period prior to 1-1-1986, ONGC is at liberty to take steps through the Commissioner of Payments appointed under the Gujarat Sick Textile Undertakings (Nationalisation) Act, 1986. However, the principal amount together with the interest payable thereon for the period from 1-1-1986 to 29-1-1987 is to be paid by the present management. For payment of the principal amount due for the period subsequent to 1-1-1986 from the present management, facility of payment in 60 monthly instalments of Rs 2,25,000 each, commencing from April 1993 as in the other cases mentioned above, is granted subject to the same conditions which have been indicated above in respect of those cases.
Navjivan Mills (Item 15) and Calico Mills (Item 17)
21. Both these industries are under liquidation. ONGC is entitled to recover the amount due for the period from 1-4-1979 to 29-1-1987 on account of principal and the interest as on 31-3-1993 as indicated above, from these two companies in accordance with law.
Calico Mills Ahmedabad (Item 18)
22. This is a sick industry and is governed by the Bombay Relief Undertakings (Special Provisions) Act, 1958. ONGC is entitled to recover the amount due to ONGC from this concern as on 31-3-1993, on account of principal and interest thereon as shown above in accordance with law.
23. No further orders for the present are required on these applications as also on Interlocutory Applications Nos. 23-33 in CAs Nos. 8530-40 of 1993. Liberty to both the parties to mention for further directions, if necessary, is granted. The IAs are disposed of accordingly.
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