M/S. West Ramnad Electric Distribution
Co. Ltd. Vs. State of Madras  INSC 183 (2 May 1962)
02/05/1962 GAJENDRAGADKAR, P.B.
AYYANGAR, N. RAJAGOPALA
CITATION: 1962 AIR 1753 1963 SCR (2) 747
R 1964 SC 925 (44) E 1968 SC 377 (21) RF 1968
SC 394 (17) RF 1968 SC1138 (23) R 1970 SC 564 (143,144) E 1972 SC2205
(14,15,16,18) RF 1975 SC1389 (24,28) RF 1991 SC1676 (66)
Electricity Undertaking Acquisition-Act
Validating action taken under earlier Act declared ultra vires-Validity-Basis
of computation of compensation, if valid-Madras Electricity Supply Undertakings
(Acquisition) Act, (Mad, 43 of 1949), s. 4-Madras Electricity Supply
Undertakings (Acquisition) .Act, 1954 (Mad. 29 of 1954), ss. 5, 24-Constitution
India Arts. 20(1), 31 (1) (2).
By an order dated May 17, 1951, the appellant
undertaking vested in the respondent from September 21, 1951, under the
provisions of s. 4(1) of the Madras Electricity apply Undertakings Act 1949.
Thereafter the respondent appointed the Chief Electrical Adviser as the
Acquisition Officer who took over possession on the appointed-date, and a part
of the compensation payable under the Act was paid.
The validity of the said Act was challenged
by some other electrical undertakings in Madras and in Raja Chaudhry Electric
Supply Corporation Ltd. v. State of Andhra Pradesh, the Supreme Court held that
the Act of 1 949 was ultra vire8. After the said decision was pronounced, the
Aadras Legislature passed the impugned Act, the Madras Act ' 29 of 1954. The
Act incorporated the main provisions of earlier Act of 1949 and purported the
validate action taken under the said earlier Act. A new Government order was
issued and the Chief Electrical Adviser was appointed the Acquisition Officer
of the appellant concerned. As a result of this order, the appellant
undertaking which had been taken over by the respondent earlier in 1951,
continued to be in the possession of the Respondent. The appellant filed two
writ petitions and alleged that to the extent to which the Act purported to
validate acts done under the earlier Act of 1949 it was ultra vires,
ineffectual and inoperative, It was further urged that the three basis of
compensation laid down by the Act were inconsistent with the requirements of'
748 Art. 31 of the Constitution, and so; the operative provisons of the Act
The question was also raised whether or not
it was competent to the Legislature to pass a law retrospectively to, validate
action taken under a void Act.
Held, that it was within the competence of
the Madras Legislature to enact a law and make it retrospective in operation.
The Madras Act, 29 of' 1954, in terms is
intended to apply to undertakings of which possession had already been taken,
and that obviously means that its material and operative provisions are
The effect of s. 24 is that if a notification
had been issued properly under the provisions of the earlier Act and validity
could not have been impeached if the said provisions were themselves valid, it
would be deemed to have been validly issued under the provisions of the Act,
provided, of course it is not inconsistent with the other provisions of the
Act. It is a saving and validating provision and it clearly intends to validate
action taken under the relevant provisions of the earlier Act which was invalid
from the start.
Held, further, that Art. 31(1), of the
Constitution, unlike Art;, 20(1), does not use the expression "law in force
at the time it merely says "by authority of law" and so, if a
subsequent law passed by the Legislature is retrospective in its operation, it
would satisfy the requirement of Art.
31(1) and would validate the impugned
notification in the present case. The Legislature can pass a law
retrospectively validating action taken under a law which was void because it
contravened fundamental rights, If the Legislature can by retrospective
legislation cure the invalidity of action taken in pursuance of laws which were
void for want of legislative competence and can validate such action by
appropriate provisions, the same power can be equally effectively exercised by
the Legislature for validating actions taken under laws which are void for the
reason that they contravened fundamental rights.
Held, also, that the failure of the
Legislature to refer to the fair market value cannot, be regarded as conclusive
or even presumptive evidence of the fact that what is intended to be paid under
s. 5 does not amount to a just equivalent of the undertaking taken over. After
all, in considering the 749 question as to whether compensation payable under
one or the other of the bases amounts to a just equivalent, the court must try
to assess what would be payable on the said basis of market value.
It may be that in some basis B may work
hardship and conceivably evert basis A or basis C may not be as satisfactory as
it should be ; but when a party challenges the validity of a statutory
provisions like s. 5, it is necessary that the party must adduce satisfactory
and sufficient material before the Court on which it wants the court to hold
that the compensationwhich would be paid under everyone of the three bases
under the impugned statutory provisions does not amount to a just equivalent.
Looking merely at the scheme of the section
itself, it is impossible to arrive at such a conclusion.
Narasaraopeta Electric Corporation Ltd. v.
State Of Madras, (1951) 11 M. L. J, 277, Rajamundru Electric Supply Corporation
Ltd. v. State of Andhra,  S. C. R. 779, and Deep Chand v. State of U. P.,
(1959) Supp. 2 S. C. R. 8, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 5 1 2 and 513 of 1960.
Appeal from the judgment and order dated
March 27, 1956, of the Madras High Court, in Writ Petition Nos. 326 of 1955 and
107 of 1956.
M. K. Nambiyar and P. Ram Reddy for the
B. Ganapathy Iyer and P. D. Menon, for the
R. Gopatakrishnan, for the Intervener No. 1.
K. Bhimsankaran, B. R. G. K. Achar and P. D.
Menon, for the intervener No. 1962. May 2. The Judgment of the Court was
delivered by GAJENDRAGADKAR, J.-The principal question which arises in these
two appeals is related to the validity of s.24 of the Madras Electricity 750
Supply Undertakings (Acquisition) Act, 1954 (XXIX of 1954) (hereinafter called
the Act). That question arises in this way. The appellant, the West Ramnad
Electric Distribution Co. Ltd., Rajapalayam, was incorporated in 1935 to carry
on, within the State of Madras and elsewhere, the business of an electric light
and power company, to construct, lay down and establish and carry on all
necessary installations, to generate, accumulate, distribute and supply
electricity under a licence granted under the Indian Electricity Act of 1910.
On the 24th January, 1950, the Madras Legislature passed an Act (XLIII) of
1949) for the acquisition of undertaking supplying electricity in the Province
Under the said Act, the Government was
empowered to acquire any electrical undertaking on payment of compensation
according to the relevant provisions of the s aid Act. In pursuance of the
provisions of s.4(1) of the said Act, the respondent, State of Madras, passed
on Order C.O. Ms. No.2059 on the 17th May, 1951, declaring that the appellant
undertaking shall vest in the respondent from the 21st September, 1951.
Thereafter, the respondent appointed the Chief Electrical Inspector as the
Acquisition Officer, and on the appointed day, the said Officer took over
possession of the appellant and all its assets, records and accountbooks. The
appellant then appointed the liquidator as its Accredited Representative for
the purposes of the Act in order to claim compensation under the Act. The
respondent then paid over to the appellant Rs. 6 lakhs on the 24th October,
1952 and Rs. 2,34,387-1-0 on the 5th July, 1953, as compensation. According to
the appellant-, Rs. 98,876-15-0 still remained to be paid to it by way of
compensation under the Act, whereas the respondent suggested that only Rs.
6000/was the balance due to the appellant.
That is how the appellant undertaking went into possession of 751 the
respondent and the appellant was paid partial compensation.
It appears that owners of some of the
electrical undertakings in Madras which had been taken over by the respondent
in accordant e with the provisions of s.4(1) of the 1940 Act, filed writ
petitions in the High Court of Madras impugning the validity of the said Act.
These writ petitions however, failed and by its judgment in Narasaraopeta
Electric Corporation Ltd. v. State of Madras(1) the Madras High Court upheld
the validity of the impugned Act in so far as it related to the licensees other
than municipalities. The said licenses then moved this Court and their appeal
succeeded. By its decision in the Rajamundry Electric Supply Corporation Ltd.
v. The State of Andhra (2), this Court held that the impugned Act of 1949 was
ultra vires. This decision was based on the ground that the Act was beyond the
legislative competence of the Madras Legislature inasmuch as there was no entry
in any of the three Lists of the Seventh schedule of the Government of India
Act, 1935 relating to compulsory acquisition of any commercial or industrial
undertaking. This Court on servel that although s.299(2) of the said
Constitution Act contemplated a law authorising compulsory acquisition for
public purposes of a commercial or industrial undertaking, a corresponding
entry had not been included in any of the three Lists and so., the Madras
Legislature was not Competent to pass the impugned Act. This decision was pronounced
on the 10th February, 1954.
Meanwhile, the Constitution came into force
on the 26th January, 1950, and the position of the legislative competence of
the Madras Legislature in respect of the compulsory acquisition of commercial
or industrial undertakings for public purposes has been materially altered.
Entry 36 in List 11 of (1) (1931) 11 M.L.J. 277.
(2) (1954) S.C.R. 779.
752 the Seventh Schedule to the Constitution
refers to acquisition or requisitioning of property, except for the purposes of
the Union, subject to the provisions of entry 42 of List 111, whereas entry 42
of List III deals with the principles on which compensation for property
acquired or requisitioned for the purposes of the Union or of a State or for
any other public purpose is to be determined, and the form and the manner in
which such compensation is to 'De given. That is how the two entries read at
the relevant time.
After the decision of this Court was
pronounced in the case of Rajamundry Electric Supply Corpn. Ltd. (1), the
Madras Legislature passed the Act and it received the assent of the President
on the 9th October, 1954, and was published in the Government Gazette on the
13th October, 1954. The Act incorporated the main provisions of the earlier Act
of 1949 and purported to validate action taken under the said earlier Act.
After the Act was passed, the respondent issued a new Government Order No. 4388
on the 14th December, 1954, appointed the Chief Electrical Inspector to be the
Acquisition Officer of the appellant concern for purposes of the Act. As a
result of this order, the appellant undertaking which had been taken over by
the respondent on the 21st September, 1951, continued, to be in the possession
of the respondent. It is under-these circumstances that the appellant filed its
writ petition No. 326 of 1955 on the 26th April, 1955.
In its writ petition, the appellant alleged
that to the extent to which the Act purports to validate acts done under the
earlier Act of 1949, it is ultra vires, ineffectual and inoperative. It was
further urged that the three bases of compensation as laip (1) (1934) S.C.R,
779., 753 down by the Act are inconsistent with the requirements of Art. 31 of
the Constitution and so, the operative provisions of the Act are
unconstitutional. On these grounds, the appellant prayed for a writ of
Certiorari or any other appropriate writ, or order or direction calling for the
records relating to G.O. Ms. No. 2052 issued on the 17th May 1951 and quashing
the same. Later, the appellant filed another writ petition No. 107 of 1956 on
the 31st January, 1956, and it added a prayer that a writ of Mandamus or any
other writ, or order, or direction should be issued directing the respondent to
restore possession of the appellant undertaking with all its assets along with
masne profits from 21st September, 1951 or pay the market value of the said
undertaking as on 21st September 1951 and interest thereon @ 6 per cent. per
annum, and to direct payment of costs and pass such other orders as may be
appropriate and just in the circumstances of the case.
The claim thus made by the appellant was
denied by the respondent. The respondent's case was that the Act is valid and
s.24 which operates retrospectively has validly and effectively validated
actions taken under the earlier Act, with the result that the possession of the
appellant undertaking which was taken on the 21st September, 1951, must be
deemed to have been taken under the provisions of the Act and so the claim made
by the appellant either for a writ of certiorari or mandamus could not be
granted It was also urged that it would not be open to the appellant to claim
possession of the undertaking or to ask for mesne profits in writ proceedings.
Mr. Justice Rajagopalan who beard the two
writ petitions, rejected the contentions raised by the appellant and dismissed
the said petitions. He held that having regard to the fact that the 754
appellant had accepted compensation under the earlier Act, no real relief could
be granted to it even if its contention that s. 34 of the Act was invalid in
uphold. In other words, the learned Judge took the view that even if the
challenge made by the appellant to the validity of s. 24 was found to be
justified, in the present writ proceedings he would not be prepared to grant it
the relief either of possession or of mesne profits. Even so, the learned Judge
proceeded to examine the several points urged by the appellant in support of
its contention that s. 24 was invalid, and rejected them. In his opinion, the
Act was valid and s. 24 being retrospective in operation, validated the actions
taken by the respondent under the earlier Act.
The argument that the Compensation awardable
under the Act was inconsistent with Art. 31(1) and 31(2) was not accepted, inter
alia, on the ground that so material had been placed before the Court on which
the appellant's plea could be sustained. The learned Judge has also recorded
his conclusions on some other points urged before him, but it is unnecessary y
to refer to them. After this decision was pronounced, the appellant moved the
learned Judge for a certificate under Art. 132(1) of the Constitution and it is
with the certificate thus granted to it under the said Article that the present
appeals have been brought to this Court.
The first point which Mr. Nambiar has raised
before us on behalf of the appellant is that s. 34 which purports to validate
action taken under the earlier Act is, in law, ineffective to sustain the order
issued by the respondent on the 17th May, 1951. It would be recalled that by
this order, the respondent obtained possession of the appellant undertaking for
the first time under the relevant provisions of the earlier Act. The argument
is that there is no specific or express provision in the Act which makes the
Act retrospective and no, s 24 755 even if it is valid, is ineffective for the
purpose of sustaining the impugned order by which possession of the appellant
concern was obtained by the respondent. The impugned order had recited that the
appellant concern shall west in the Government on the 21st September, 1951, and
it directed that under s. 4(2) of the earlier Act the said order shall be
published in the Gazette. Under the said order a further direction had been
issued appointing the Chief Electrical Inspector to the respondent to be the
Acquisition Officer, and the appellant was requested to take action for the
appointment of an accredited representative in accordance with s. 8 of the
earlier Act and to submit the inventories and all particulars required under
'S. 17 of the said Act. Mr. Nambiar contends that this order amounts to a
notification which must be held to be a law under Art. 13 of the Constitution.
For the purpose of the present appeals, we will assume that the said order is
notification amounts to a law under Art. 13. Mr. Nambiar further contends that
this notification was invalid for two reasons; it was invalid because it had
been issued under the Provisions of an Act which was void as being beyond the
legislative competence of the Madras Legislature, and it was void for the
additional reason that before it was issued, the Constitution of India had come
into force and it offended against the provisions of Art. 31 of the
Constitution, and so, Art. 13(2) applied. Section 24 of the Act, no doubt,
purported or attempted to validate this notification, but the said attempt has
failed because the Act being prospective, s. 24 cannot have retrospective
That, in substance, is the first contention
raised before us.
Before dealing with this argument, it would
be necessary to examine the broad features of the Act and understand its
general scheme. The Act was passed because the Madras Legislature thought 756
it expedient to provide for the acquisition of under takings other than those belonging
to and under the control of the State Electricity Board constituted under
section 5 of the Electricity (Supply) Act, 1948 in the State of Madras engaged
in the business of supplying electricity to the public. It is with that object
that appropriate provisions have been made by the Act to provide for the
acquisition of undertakings and to lay down the principles for paying
compensation for them. It is quite clear that the scheme of the Act was to
bring within the purview of its material provisions under-' takings in respect
of which no action bad been taken under the earlier act and those in respect of
which action had been so taken. In fact, as we will presently point out, several
provisions made by the Act clearly referred to both types of undertakings and
leave Do room for doubt that both types of undertakings are intended to be
governed by it. The definition of an 'accredited representative' prescribed by
s. 2(b) shows that the accredited representative means the representative
appointed or deemed to have been appointed under s. 7. Similarly, s. 2(j) which
defines a licensee provides that in relation to an undertaking taken over or an
undertaking which has vested in the Government under s. 4, it shall be the
person who was the licensee at the time when the undertaking was taken over or
vested is the Government as the case may be, or his successor-in-interest.
Section 2 (e) defines an undertaking taken over as meaning an undertaking taken
over by the Government after the 1st January, 1951 and before the commencement
of this Act. The ,vesting date' under s. 2 (m) means in relation to an
undertaking, the date fixed under s. 4 (1) as the date on which the undertaking
shall vest in the Government or in the case of an undertaking taken over, the
date on which it was taken over. These 757 definitions thus clearly point out
that the Act was intended to apply to undertakings of which possession would be
taken after the Act was passed as well as undertakings of which possession had
already been taken under the relevant provisions of the earlier Act.
Section 3 which deals with the application of
the Act, provides that it shall apply to all undertakings of licensees
including : (a) undertakings in respect of which notice for compulsory purchase
has been served under s. 7 of the Electricity Act, such undertakings not having
been taken over before the commencement of this Act; and (b) undertakings taken
over. Similarly, section 4 which gives powers to the respondent to take over
any undertaking clearly" says that that 'power can be exercised in respect
of any 'undertaking which had already not been taken over.
In dealing with the appointment of sole
representative, s. 7, sub-ss. (3) and (5) bring out the same distinction
between undertakings already taken over and those which had yet to be taken
over. The same distinction is equally clearly brought out in s. 10 (3), 11
sub-s,(2), (5) and (1 1), and s. 14 (3). It is thus clear that the Act, in terms,
is intended to apply to undertakings of which possession had already been
taken, and that obviously means that its material and operative provisions are
Actions taken under the provisions of the
earlier Act are deemed to have been taken under the provisions of the Act and
possession taken under the said earlier provisions is deemed to have been taken
under the relevant provisions of the Act. This retrospective operation of the
material provisions of the Act is thus writ large in all the relevant
provisions and is an essential part of the scheme of the Act. Therefore, Mr.
Nambiar is not right when he assumes that the rest of the Act is intended to be
prospective and so, section 24 should be construed 758 in the light of the said
prospective character of the Act.
On the contrary, in construing s. 24, we have
to bear in mind the fact that the Act is retrospective in operation and is
intended to bring within the scope of its material provisions undertakings of
which possession had already been taken.
Let us then construe s.24 and decide whether
it serves to validate the impugned notification issued by the respondent on the
21st September, 1951.
Section 24 reads thus: "Orders made,
decisions or directions given, notifications issued, proceedings taken and acts
of things done, in relation to any undertaking taken ever, if they would have
been validly made, given, issued, taken or done, had the Madras Electricity
Supply Undertakings (Acquisition) Act,, 1949 (Madras Act XLIII of 1949), and the
rules made there under been in force on the date on which the said orders,
decisions or directions, notifications, proceeding, acts or things were made
given, issued, taken or done are hereby declared to have been validly made,
given, issued, taken or done, as the case may be, except to the extent to which
they said orders, decisions, directions, notifications, proceedings, acts or
things are repugnant to the provisions of this Acts." The first part of
the section deals, inter alia", with notifications which have been validly
issued under the relevant provisions of the earlier Act. and it means that if
the earliar Act had been valid at the relevant time; it ought to appear that
the notifications in question could have been and had. in fact been made properly
under the said Act. In other words, before any notification can claim the
benefit of s. 24, it must be shown that it was issued properly under the
relevant provisions of the earlier Act, 759 assuming that the said provisions
were themselves valid and in force at that time. The second part of the section
provides that the notifications covered by the first part are declared by this
Act to have been validly issued; the expression "hereby declared"
clearly means "declared by this Act" and that shows that the
notifications covered by the first part would be treated as issued under the
relevant provisions of the Act and would be treated as validly issued under the
said provisions. The third part of the section provides that the statutory
declaration about the validly of the issue of the notification would be subject
to this exception that the said notification should not be inconsistent with or
repugnant to the provisions of the Act.
In other words, the effect of this section is
that if a notification had, been issued properly under the provisions of the
earlier Act and its validity could not have been impeached if the said
provisions were themselves valid, it would be deemed to have been validly
issued under the provisions of the Act, provided, of course, it is not
inconsistent with the other provisions of the Act. The section is not very
happily worded, but on its fair and reasonable construction, there can be no
doubt about its meaning or effect. It is a saving and validating provision and
it clearly intends to validate actions taken under the relevant provisions of
the earlier Act which was invalid from the start.' The fact that s. 24 does not
use the usual phraseology that the notifications issued under the earlier Act
shall be deemed to have been issued under the Act, does not alter the position
that the second part of the section has and is intended to have the same
No doubt, Mr. Nambiar suggested that s. 24
does not seem to validate actions taken under the earlier Act on the basis that
the 'earlier Act was void and honest and in support of this argument, he ralies
on the 760 fact that the notification following under the first part of s. 24
are referred to as validly made and the earlier Act and the rules made there under
are assumed to have been in force on the date on which the said notification
He also relies on the provisions of s. 25
which purports to repeal the said Act and that, no doubt, gives room for the
argument that the Legislature did not recognise that the said Act was nonest
and dead right up from the start. It is not easy to understand the genesis of
s. 25 and the purpose which it is intended to achieve. The only explanation
given by Mr. Ganpati Aiyer on behalf of respondent is that since the earlier
Act was in fact on the statute book, the legislature may have thought that for
the sake of form, it may have to be repealed formally and so, s. 25 was
But even if the enactment of the said section
be held to be superfluous or unnecessary, that cannot assist the appellant in
the construction of s. 24. We have no doubt that s. 24 was intended to validate
actions taken under the earlier Act and on its fair and reasonable
construction, it must be held that the intention has been carried out by the
legislature by enacting the said section. Therefore, the argument that s. 24,
even if valid, cannot effectively validate the impugned notification, cannot
Mr. Nambiar then contends that the impugned
notification is invalid and inoperative because it contravenes Art. 31 (1) of
the Constitution. Article 31 (1) provides that no person shall be deprived of
his property save by authority of law.
It is urged that this provision postulates
the existence of an antecedent law, before a citizen is deprived of his
property. The notification was issued on the assumption that there was an
antecedent law, viz., the earlier Act of 1949 ; but since the said Act was
nonest, the notification is not supported by the authority of any pre-existing
law 761 and so, it must be held to be invalid and ineffective. In our opinion,
this argument is not well founded. If the Act is retrospective in operation and
s. 24 has been enacted for the purpose of retrospectively validating actions
taken under the provisions of the earlier Act, it must follow by the very
retrospective operation of the relevant provisions that at the time when the
impugned notification was issued, these provisions were in existence. That is
the plain and obvious effect of the retrospective operation of the statute.
Therefore in considering whether Art. 31(1) has been complied with or Dot, we
must assume that before the notification was issued, the relevant provisions of
the Act were in existence and so, Art. 31(1) must be held to have been complied
with in that sense.
In this connection, it would be relevant to
refer to the provisions of Art. 20 (1). because the said provisions illustrate
the point that where the' Constitution desired to prevent the retrospective
operations of any law, it has adopted suitable Phraseology to carry out that
30 (1) provides that no person shall be
convicted of any offence except for violation of a law in force at the time of
the commission of the act charged as an offence, nor be subjected to a penalty
greater than that which might have been inflicted under the law in force at the
,-lime of the commission of the offence. By using the expression ",law in
force" in both the parts of Art. 20 (1), the Constitution has clearly
indicated that even if a criminal law was enacted by any legislature retrospectively,
its retrospective operations would be controlled by Art. 30(1).
A law in force at the time postulates actual
factual existence of the law at the relevant time and that excludes the
retrospective application of any subsequent law. Art.
31(1), on the other hand, does not use the
expression ',law in force at the time". It 762 merely says "by
authority of law", and so if subsequent law passed by the legislature is
retrospective in its operation would satisfy the requirement of Art 31 (1) and would
validate the impugned notification in the present case.
Therefore, we are not satisfied that Mr.
Nambiar is right in contending that the impugned notification is invalid for
the reason that at the time when it was issued there was no law by whose authority
it could be sustained.
That takes us to the larger issue raised by
Mr. Nambiar in the present appeals. He contends that the power of the
legislature to make laws retrospective cannot validly be exercised so as to
care the contravention of fundamental rights retrospectively. His contention is
that the earlier Act of 1949 being dead and non-existent, the impugned
notification contravened Art. 31(1) and this contravention of a fundamental
right cannot be cured by the legislature by passing a subsequent law and making
it retrospective. In support of this argument, he has relied on the decision of
this Court in Deep Chand v. The State of Uttar Pradesh (1).
In that case, one of the questions which
arose for decision was whether the doctrine of eclipse applied to a law which
was found to be invalid for the reason that it contravened the fundamental
rights, and the majority decision held that it did not apply to such a law. In
feeling with a question as to the applicability of the doctrine of eclipse, a distinction
was drawn between a law which was void either for want of legislative power at
the time when it was passed, or because it contravened fundamental rights on
the one hand, and the law which was valid when it was passed but subsequently
became invalid because of supervening circumstances on the other. In the latter
case, the law was valid when it was passed and became invalid because a cloud
was cast on its validity by supervening (1) (1959) Supp. 2 S.C.R. 8.
763 circumstances. That being so, if the constitutional
amendment subsequently made removes the cloud, the validity of the law is
revived. That is the effect of application of the doctrine of eclipse; but
there can be no scope for the application of the said doctrine to a law which
is void and nonest either for want of legislative competence or because it
contravenes fundamental rights. That, in substance, is the effect of the
majority decision in Deep Chand's case.
In the present appeals it is not disputed
that the earlier Act of 1949 was dead and void from the start, and that no
doubt, is consistent with the majority decision in Deep Chand's case. But the
question as to whether the legislature can retrospectively validate actions
taken under a void law did not arise for consideration in Deep Chand's case.
The only point which was decided was that the removal of the cloud by a
subsequent constitutional amendment will not automatically revive a law which
was void from the start, but that obviously is not case before us. What we are
called upon to decide is the present appeals is whether or not it is competent
to the legislature to pass a law retrospectively to validate actions taken
under a void Act, and in deciding this question, Deep Chand's case would not
afford ue any assistance.
Mr. Nambiar did not dispute the position that
in enacting laws in respect of topics covered by appropriate entries in the
relevant Lists of the 7th Schedule to the Constitution, the legislatures would
be competent to make the provisions of the laws passed by them retrospective.
He, however, seeks to import a limitation on this legislative power where the
contravention of fundamental rights is involved. No authority has been cited in
support of the plea that the legislative power of the legislature is subject to
any such limitation even where the contravention of fundamental rights is
involved. On principle, it is difficult to appreciate how such 764 a limitation
on the legislative power can be effectively pleaded. If a law is invalid for
the reason that it has been passed by a legislature without legislative
competence, and action is taken under its provisions, the said action can be
validated by a subsequent law passed by the same legislature after it is
clothed with the necessary legislative power. This position is not disputed. If
the legislature can by retrospective legislation cure the invalidity in actions
taken in pursuance of laws which were void for want of legislative competence
and can validate such action by appropriate provisions, it is difficult to see
why the same power cannot be equally effectively exercised by the legislature
in validating actions taken under law which are void for the reason that they
contravened fundamental rights. As has been pointed out by the majority
decision in Deep Chand's case, the infirmity proceeding from lack of
legislative competence as well as the infirmity proceeding from the
contravention of fundamental rights lead to the same result and that is that
the offending legislation is void and honest. That being so, if the legislature
can validate actions taken under one class of void legislation, there is no
reason why it cannot exercise its legislative power to validate actions taken
under the other class of void legislation. We are, therefore, not prepared to
accept 'Jr. Nambiar's contention that where the contravention of fundamental
rights is concerned, the legislature cannot pass a law retrospectively validate
actions taken under a law which was void because it contravened fundamental
In this connection, it may be useful to refer
to some decisions which deal with the legislature's power to pass retrospective
laws. in the United Provinces v. Mst.
Atiqabegum (1) Gwyer C.J. observed that
"the validation of doubtful executive acts is (1) (1940) F.C.R. 110. 136.
765 not so unusual or extraordinary a thing
that little surprise would be felt if Parliament had overlooked it, and it
would take a great deal to persuade me that the legislative power for the
purpose has been denied to every Legislature, including the Central or Federal
Legislature, in India." It is true, ",he added," that validation
of executive orders or any entry even remotedly analogous to it is not to be
found in any of the three lists; but I am clear that legislation for that
purpose must necessarily be regarded as subsidiary or ancillary to the power of
legislating on the particular subjects in respect of which the executive orders
may have been issued." The same principle was stated by Speans C. J.
in Piare Dusadh v. The King Emperor.(1) This
question has been considered by this Court in several decisions to some of
which we will now briefly refer. In the Union of India v. Madan Gopal Kabra
this Court had occasion to consider the validity of certain amendments made in
the Income Tax Act by section 3 of the Finance Act (XXV of 1950). These
amendments had the effect of applying retrospectively the charging sections of
the Taxing Act and their validity was impeached. In rejecting the argument that
the levy authorised to be imposed by the amendments was ultra vires, Patanjali
Sastri, C. J., observed that "while it is truethat the Constitution has no
retrospective operation, except where a different intention clearly appears, it
is not correct to say that in bringing into existence new Legislatures and
conferring on them certain powers of legislation, the Constitution operated
retrospectively. The legislative powers conferred upon Parliament under
Articles 245 and 246 read with List I of the, Seventh Schedule could obviously
be exercised only after (1) (1944) F.C.R. 61, 105.
(2) (1954) S.C.R. 541, 554.
766 the Constitution came into force and no
retrospective operation of the Constitution is involved in the conferment of
these powers. But it is a different thing to say that Parliament in exercising,
the powers thus acquired is precluded from making a retrospective law,"
and so, the conclusion was that Parliament was content to make a law imposing a
tax on the income of any year prior to the commencement of the Constitution.
In M. P. V. Sundararamier & Co. v. The State
of Andhra Pradesh (1), the validity of the Sales Tax laws Validation Act, 1956
(7 of 1956) was questioned and the majority of the Court held that the said Act
was in substance one lifting the ban on taxation of inter-State sales and
within the authority conferred on the Parliament under Art. 286(2) and further
that under that provision, it was competent to the Parliament to enact a law
with retrospective operation.
This conclusion also proceeded on the basis
that the Power of a legislature to pass a law included a power to pass it
retrospectively, and so, the argument that the impugned Act was ban on the
ground that it was retrospective in operation was rejected. The same principle
has been again enunciated by this Court in M/s. J. K. Jute Mills Co. Ltd. v.
State of Uttar Pradesh (2). it has been held in this case that the power of the
legislature to enact a reference to a topic entrusted to it is unqualified,
subject only to any limitation imposed by the Constitution in the exercise of
such a power, and that I it would be competent for the Legislature to enact a
law which is either prospective or retrospective, vide also Mt. Jadao Bahuji v.
The Municipal Committee, Khandwa, Jadab Singh v. The Himanchal Pradesh
Administration and Raghubar Dayal Jai Prakash v. The Union of India(5).
Therefore, there is no doubt about (1958) S.C.R. 1022. (2) (1962) 2 S C.R. I.
(3) (1962) 1 S.C.R. 633. (4) (1960) 3 S.C.R.
(5) (1962) 3 S.C.R. 547.
767 the competence of the Legislature to
enact a law and 'make it retrospective in operation in regard to topics
included within the relevant Schedules of the Constitution. Our conclusion,
therefore, is that the appellant's contention that it was beyond the competence
of the Madras Legislature to make the Act retrospective so as to validate the
impugned notification, cannot be accepted.
That takes us to the last argument raised by
Mr. Nambiar before us. He contends that section 5 of the Act which provides for
the payment of compensation to the licensees whose undertakings are taken over,
is invalid because it is inconsistent with Art. 31(2). It is common ground that
the provisions of Art. 31(2) with which we are concerned in the present appeals
are those as they stood before the 4th Constitutional Amendment came into
force. Art. 31(2) then provided, enter alia, that no property shall be
compulsorily acquired save for the public purpose and save by authority of law
which provides for compensation for the property so acquired and either fixes
the amount of the compensation or specifies the principles on which, and the
manner in which, the compensation is to be determined and given. In support of
his argument, Mr. Nambiar has relied on the decision of this Court in the State
of West Bengal v. Mrs. Bala Banerjee-(1). In dealing with the question about
the scope and effect of the provisions of Art. 31(2) in so far as they referred
to the payment of compensation, this Court observed that though entry 42 of
List III conferred on the Legislature the discretionary power of laying down the
principles which should govern the determination of the amount to be given to
the owner of the property acquired, Art. 31 (2) required that such principles
must ensure that what is determined as (1) (1954) S. C. R. 558.
768 payable must be "compensation', that
is, a just equivalent of what the owner has been deprived of. That is why in
considering the validity of any statute is the light of Art.
31(2) it would be open to the Court to
enquire whether all the elements which make up the true value of the property
acquired have been taken into account in lying down the principles for
determining compensation. It appears that section 8 of the West Bengal Land
Development and Planning Act, 1948 (XXI of 1948) which was impugned in that
case limited the amount of compensation so as to not to exceed the market value
of the land on December, 31, 1946, no matter when the land was acquired. This
part of s. 8 was struck down as invalid because it was hold that in fixing the
market value on December 31, 1946, as the ceiling on Compensation, the
legislature had patently ignored the fact that prices of lands had considerably
risen after the said date and that tended to show that the compensation
awardable under the said provision could not be said to be just equivalent of what
the owner would be deprived of. Mr. Nambiar, therefore, contends that since
section 5 does not authorise the payment of compensation which can be treated
as just equivalent of the property which would be taken over under its
provisions, it must be struck down as inconsistent with Art. 31 (2). It may be
conceded that the 4th Constitution amendment which substantially changed the
provisions of Art. 31 (2) would be inapplicable in the present case, and that
the High Court was in error in making a contrary assumption.
In support of this argument, Mr. Nambiar has
also referred us to section 7A of the Indian Electricity Act 1910 (No. 9 of
1910) as it then stood. Section 7A (2) of the said Act lays down 769 that in
purchasing undertakings under s. 7A (1), the value of such lands, buildings,
works, materials, and plant shall be deemed to be their market E value at the
time of purchase, due regard being had to the nature and condition for the time
being of such lands, buildings, materials and plant and the state of repair
thereof and to the circumstance that they are in such position as to be ready
for immediate working and to the suitability of the same for the purpose of the
undertaking. The proviso to a. 7A lays down that to the value determined under
sub-s. (2) shall be added such percentage, if any, not exceeding twenty per
centum of that value as may be specified in the license on account of
compulsory purchase. Mr. Nambiar suggests that the provisions made in s. 7A (2)
and the proviso to a. 7A of this Act give a fair picture of what could be
regarded as a reasonable compensation that should be paid to the undertakings
before they are acquired.
Before dealing with this argument, it is necessary
to examine the scheme of s.5 which provides for the compensation to be paid to
the licensees. Section 5 provides that the compensation payable to a licensee
on whom an order has been served under s.4 or whose undertaking has been taken
over before the commencement of the act, shall be determined under any one of
the Bases A, B and C specified by the section as may be chosen under a. 8. Then
follow detailed provisions about the three Bases A, B and C. Under Basis A, the
compensation payable shall be an amount equal to twenty times the average not
annual profit of the undertaking during a period of five consecutive account
years immediately preceding the vesting date. The explanation makes it clear
that the net annual profit shall be determined in the manner laid down in Part
A or Part B, as the case may be, of Sch. 1. It is also clear that this basis
shall 770 not apply to an undertaking which has not been supplying electricity
for five consecutive account years immediately preceding the vesting date.
Under Basis B, the compensation payable shall
be the aggregate value of all the shares constituting the share capital of the
undertaking, reckoned as indicated in (a), (b), (c), and (d) 'thereof. These
respective clauses have reference to the dates on or before which the shares of
the undertaking have been issued, for instance, cl. (a) provides that in the
case of shares issued on or before the 31st March, 1946, the value of each
share shall be reckoned at its average value as arrived at from the quotations
for the shares as given in the official list of the Madras share Market on the
15th day of each month and where such market was closed on that day, the
quotations on the next working day during the period of there years commencing
on the 1st April, 1946, and ending on the 31st March, 1949. Under clause (b) it
is provided that in the case of shares issued on or before the 31st March,
1946, if clause (a) does not apply but there have been bonafide transfers in
each of the different classes of shares in every one of the three years
aforesaid, and such transfers have been duly registered in the appropriate
books of the licensee, the value of each share of each such class shall be
reckoned at one-third of the aggregate of its three annual average values for the
three years, the average value for each year being determined' from the
transactions in that year. It is not necessary to set out clauses (c) and (d).
The explanation to this Basis provides that it shall not apply unless clause
(a) or clause (b) is applicable.
Under Basis C, the compensation payable shall
be the aggregate value of the amounts specified in cls. (i) to (viii). These
clauses refer respectively to the book Value of all completed works inbeneficial
771 use pertaining to the undertaking and handed over to the Government less
depreciation as specified; the book value of all works in progress: the book
value of all other fixed assets; the book value of all other fixed assets; the
book value of all plant and equipment; the book value of all intangible assets
to the extent such value has not been written off in the books of the licensee;
the amount due from consumers as specified in cl. (vii); and any amount paid
actually by the licensee in respect of every contract referred to in s. 6 (2)
(a) (iii). Where basis C is applied, an additional sum by way of solatium. is
required to be paid as specified in cls. (a) and (b) to cl. (ix).
The explanation to Basis C explains how the
book value of any fixed assets has to be ascertained. That, in broad outlines,
is the nature of the three Bases prescribed by section 5 for assessing the
compensation to be paid to a licensee.
It is true that in none of the three bases
does the Legislature refer to the market value of the undertaking, but that
itself cannot justify the argument that what is intended to be paid by way of
compensation must necessarily mean much less than the market value. The failure
of the legislature to refer to the fair market value cannot, in our opinion, be
regarded as conclusive or even presumptive evidence of the fact that what is
intended to be paid under section 5 does not amount to a just equivalent of the
undertaking taken over. After all, in considering the question as to whether
compensation payable under one or the other of the Bases amounts to just
equivalent. We must try to assess what would be payable under the said basis.
On this point, the real difficulty,, in the
way of the appellant is that it has produced no material before the Court on
which its plea can be sustained. As the High Court has pointed out, in the
absence of any satisfactory material it would be difficult 772 for the Court to
come to any definite conclusion on the question as to whether just equivalent
is provided for by s. 5 or not. Mr. Nambiar, no doubt, attempted to suggest
that in the Madras High Court oral evidence is not allowed to' be adduced on
questions of fact in writ proceedings. That may be so; but it is quite clear
that the affidavit made by the appellant in support of its petition could have
easily set forth all relevant facts showing that the compensation payable under
s. 5 was so inadequate that it could not be regarded as a just equivalent of
the property acquired. In the absence of any material, we do not see how we can
assess the validity of Mr. Nambiar's contention that section 5 contravenes Art.
31 (2) of the Constitution. It is true that in its petition, the appellant made
a general allegation that the market value of its assets at the relevant time
would be Rs. 16,49,350/-, but no satisfactory material was placed in the form
of proper affidavits made by competent persons to show how this market value
was determined. In fact, the appellant did not state before the High Court and
was unable to state even before this Court what principles should have been
laid down by the legislature in determining a just equivalent for the
undertaking taken over by the respondent. The general argument that s.5 does
not provide for the payment of market value cannot, in the absence of material,
help the appellant at all in challenging the validity of section 5.
In this connection, it must be borne in mind
that 8 of the Act leaves it to the opinion of the licensee to intimate to the
Government in writing which basis of compensation it wants to be adopted, and
so, it is not as if the choice of the basis is left to the Government in every
case. Take, for instance, Basis A; the compensation payable under this Basis
is: an amount equal to twenty times the aver ag 773 net annual profit of the
undertaking during a period of five consecutive account years preceding the
vesting date. Now, in determining the fairness A or otherwise of the
compensation awardable under basis A, it cannot be ignored that what is
acquired is an undertaking which is a going commercial concern and so, it
would, prima facie, be inappropriate to attempt to determine its value safely
or mainly by reference to the buildings it owns or the machinery it works. It
would also be relevant to remember that undertakings of this kind cannot claim
a general market in the sense in which lands can claim it. That being so, if
the legislature thought that giving the undertaking twenty times the average
not annual profit would amount to a just equivalent, prima facie it would be
difficult to hold that the basis adopted by the legislature is such as could be
held to be inconsistent with Art. 31 (2). The Basis B may or may not be
satisfactory, but Basis C may prima facie be satisfactory in respect of new
undertaking and in any case, the option in most cases would be with the
undertaking itself. Therefore, in the absence of any material, we are unable to
hold that on looking at the scheme adopted by s. 5 by itself, the appellant's
argument that what is offered by way of compensation is not a just equivalent,
can be accepted. It may be that in some oases basis B may work hardship and
conceivably even basis A or basis C may not be as satisfactory as it should be;
but, when a party challenges the validity of a statutory provision like s. 5,
it is necessary that the party must adduce satisfactory and sufficient material
before the Court on which it wants the Court to hold that the compensation
which would be paid under everyone of the three Bases under the inpugned
statutory provision does not amount to a just equivalent.
Looking merely at the scheme of the section
itself, it is impossible to arrive at such a conclusion. That is the view 774
taken by the Madras High Court and we see no reason to differ from it.
Therefore, the challenge to the validity of the Act on the ground that its
important provisions contained in section 5 offend against Art. 31 (2) must be
rejected. That being our view, we must held that the High Court was right in
rejecting both the writ petitions filed by the appellant. On that view, it is,
unnecessary to consider whether appellant would have been entitled to get the
relief of possession or mesne profits which it purported to claim by its two
The appeals accordingly fail and are
dismissed with costs.
One set of hearing fees.