Andhra HC (Pre-Telangana)
V.V. Rama Rao vs Union Of India And Others on 23 December, 1996
Equivalent citations: AIR1997AP344
Author: M.H.S. Ansari
Bench: M.H.S. Ansari
ORDER
1. Heard Sri V.V.N. Narasimham, learned counsel for the opetitioner and Sri D. Krishna Murthy, learned Addl. Standing Counsel for the Central Government on behalf of the Respondents.
2. The petitioner is a Proprietor of a Small Scale Industry carrying on business in the name and style of M/s. V. V, Rama Rao and Company. The petitioner applied for and was sanctioned three telephones in the name of the said Proprietary concern of M/s. V.V. Rama Rao and Company. The three telephones so installed bear Nos. 545124 (installed at the residence of the petitioner), 545125 and 547539 installed at the Factory.
3. The petitioner is also the Director of three Companies viz., M/s. Leonics Television Private Limited, M/s. Professional Grade Components Limited and Fenovision Limited. The said Companies are incorporated under the Companies Act, 1956 and have Telephones bearing Nos. 547206, 547835, 548499, 548525 and 548957. The said Companies have suffered losses and have not been able to pay the Telephone bills to the Telephone Department. The Telephone Department issued a notice to the petitioner on 22-10-1996 intimating that a sum of Rupees 6,59,502/- is due and owing in respect of the aforesaid Telephones standing in the name of the three companies and the petitioner was called upon to pay the said amount by 8-11-1996 failing which it was intimated that the petitioner's telephones bearing Nos. 545124, 545125 and 547339 would be disconnected. Subsequently, the said telephones were disconnected. The above writ petition is filed questioning the aforesaid action of the respondent authorities.
4. A Counter affidavit has been filed on behalf of the respondents. In the said Counter, it is admitted that the petitioner submitted two applications on behalf of M/s. V.V. Rama Rao and Company and another application for his personal telephone and accordingly two telephones with Nos. 545124, 545125 were installed in the name of M/s. V, V. Rama Rao and Company and a personal Telephone No. 545739 was installed at the residence of the petitioner. It is staled that there arc arrears of Telephone bills on these three telephones amounting to Rupees 45,920/- and that the petitioner in spite of notices did not pay the arrears.
5. In the counter-affidavit, it is further stated that the petitioner is the Managing Dircctor of M/ s. Leonics Television Private Limited and signed the application for Telephone as the Managing Director of the said Company. It is further stated that the petitioner signed the applications for Telephone connections on behalf of Professional Grade Components Limited of which he is a Director, Insofar as Phenovision Limited is concerned, the petitioner is also one of the Directors of the said Company. It is stated that all these three companies are functioning at Door No. 16-11-19, Saleemnagar Colony, Malakpet, Hyderabad where the two telephones in the name of V.V. Rama Rao and Company are installed. Accordingly the respondents, all these businesses arc being run by the petitioner and it is the petitioner who established these private limited companies and proprietary concerns according to the business needs and convenience. A sum of Rs. 6,59,502/- is payable against the five telephones provided to the three companies and as the said amount was not paid, Rule 443 of Indian Telegraph Rules was invoked and the telephones were disconnected after due notice to the petitioner. The total arrears of all eight telephones is Rs. 7,05,442/- which are working at the same address. A sum of Rs. 45,920/- is due in respect of all the Telephones standing in the name of the petitioner. It is the case of the respondents that unless the petitioner pays the entire arrears due in respect of the telephones, he is not entitled for reconnection of telephones.
6. The short point for consideration is whether the respondent authorities are entitled to disconnect the telephones standing in the name of the petitioner for non-payment of the bills in respect of telephones standing in the name of the three Private Limited Companies.
7. The power to disconnect telephones is found under Rule 443 of the Indian Telegraph Rules. The respondent authorities have alsorelied upon and invoked the said Rule 443 for disconnecting the telephones in question. Rule 443 reads as follows ;
"443. Default of Payment: If, on or before the due date the rent or other charges in respect of the telephone service provided are not paid by the subscriber in accordance with these rules, or bills for charges in respect of calls (local and trunk) or phonograms or other dues from the subscriber are not duly paid by him, any telephone or telephones or any telex service rented by him may be disconnected without notice. The telephones or the telex so disconnected may, if the Telegraph Authority thinks fit, be restored, if the defaulting subscriber pays the outstanding dues and the reconnection fee together with the rental for such portion of the intervening period (during which the telephone or telex remains disconnected) as may be prescribed by the Telegraph Authority from time to lime. The subscriber shall pay all the above charges within such period as may be prescribed by the Telegraph Authority from time to time."
8. The above rule insofar as relevant states that in the event of default on account of one telephone, other telephones of the subscriber of the defaulting telephone may be disconnected.
9. "Subscriber" has been defined in R. 2 (pp) of the same rules so as to mean a person to whom the telephone service has been provided by installation under the rules or under an Agreement.
10. Admittedly, the subscriber in respect of 5 telephones viz., 547206, 547835, 548499, 548525 and 548957 are the three private limited companies of which the petitioner was a Managing Director/Director. A sum of Rs. 6,59,502/- is due against the said five telephones provided to the said three companies. A Company is a juristic person having a separate legal entity and when it is the subscriber, its liability is not automatically transferred to the Directors. In a Private Limited Company, the liabilities of the share-holders/ Directors are limited and as such they being not the subscriber of the Telephone, a Telephone standing in the name of the share-holder/Director cannot be disconnected by invoking Rule 443 on account of any default in respect of the Telephones of which the subscriber is the private limited company.
11. It is therefore to be held that insofar as the said five telephones are concerned and there are arrears standing to the name of the said five telephones, subscriber of which are the three private limited companies, the petitioner even though he is a Director of the said three private limited companies, cannot on that account suffer, disconnection of telephones standing in petitioner's personal name or in the name of the firm of which he is the Proprietor. The subscriber of the telephones which are standing in the name of Private Limited Company is different and distinct entity.
12. Sri D. Krishna Murthy, learned Additional Standing Counsel for the Central Government, however, relied upon a Division Bench judgment of this Court in Assistant General Manager (OSD) v. Mahalakshmi Legal Tax Consultancy Services, Vijayawada, 1995 (3) ALD 307 in support of his contention that the Corporate veil can be lifted to find out who is the true subscriber. It is the contention of the learned Standing counsel for the respondent that the Telephones standing in the name of the three private limited companies are all installed at the same premises at Saleemnagar where the two telephones with indicator Nos. 545124, 545125 in the name of M/s. V.V. Rama Rao and Company are installed. As the telephones are under the same roof and the petitioner is the signatory to the application for the said telephones, the respondent authorities are entitled in law to invoke Rule 443 and disconnect the telephones for default of payment in respect of any of the telephones.
13. No doubt the decision relied upon by the learned Standing Counsel for the Respondents supports his contention that the cloak can be removed to ascertain the person behind the said cloak. It would be appropriate toexlract a passage from the judgment (cited supra) (1995 (3) ALD 307) to appreciate the observations made in that judgment with regard to piercing the veil or lifting the clock.
"2. A partnership firm or any other association of individuals which is a company are legal entities in their own rights, provided they satisfy the required conditions for the said purpose, hut they do not move unless such individuals who constitute the association i.e., the firm or the company move. It is well settled that inert organs of a Corporation, which is nothing but an association of individuals pulsate with the heart and soul of those who are managers and operate with the mind of the managers. A partnership, it is well settled, is a compendious name of the individuals who act for eaqch other and who are accountable to each other as well as for the activities of the firm".
14. The case (1995 (3) ALD 307) (supra) cited was one relating to partnership firm unlike in the instant case where the five telephones are standing in the name of private limited Companies incorporated under the Companies Act. The principle as applicable to a partner ship firm would not in the circumstances be applicable to the case of a private limited company. As already noticed above, a private limited company is a juristic entity and its liability is not automatically transferred to its Directors. A partnership firm is a Compendious name of the individuals who act for each other and who are accountable for each other as well as for the activities of the firm.
15. Insofar as the telephones standing in the name of V.V. Rama Rao and Company are concerned viz., 545124, 545125 and 545739, the petitioner is the Proprietor of the said firm of V. V. Rama Rao and Company and in the light of judgment cited (1995 (3) ALD 307) (supra) is personally liable for any outstandings due in respect of the said Telephones. In the instant case, a sum of Rs. 45,920/- is due and outstanding in respect of the said three telephones. Unless the outstanding amount is duly paid, the petitioner is not entitled to restoration of the telephone connection in respect of the said three telephones. For any default in payment of the telephone bills in respect of any of the telephones, the subscriber of which is the petitioner, the other two telephones can also be disconnected relying upon rule 443.
16. In the result, the writ petition is allowed in part and it is directed that upon the petitioner paying the arrears due in respect of the Telephones bearing Nos. 545124, 545125 and 545739, the telephone connection shall be restored notwithstanding the arrears in respect of the telephones standing in the name of the three private limited companies. It shall, however, be open to the respondents to take appropriate action as may he open to them under law for recovery of the amounts doe in respect of the telephones standing in the name of the said three Companies.
17. With the observation and direction as above, the writ petition is accordingly disposed of. But in the circumstances without costs.
18. Petition partly allowed.