The Rajahmundry Electric Supply Corporation
Ltd. Vs. The State of Andhra  INSC 11 (10 February 1954)
DAS, SUDHI RANJAN MAHAJAN, MEHAR CHAND (CJ)
BOSE, VIVIAN HASAN, GHULAM
CITATION: 1954 AIR 251 1954 SCR 779
CITATOR INFO :
D 1962 SC1753 (2,4) RF 1968 SC1138 (23) R
1970 SC 564 (40) RF 1977 SC1825 (54) E 1980 SC1955 (16)
Madras Electricity Supply Undertakings
(Acquisition) Act--(Madras Act XLIII of 1949)--Validity of--No entry in the
three Legislative Lists of seventh schedule of Government of India Act, 1935.
The Madras Electricity Supply Undertakings
(Acquisition) Act (Madras Act XLIII of 1949) was beyond the legislative
competency of the Madras Legislature because 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
although s. 299 (2) clearly contemplated a law authorising compulsory
acquisition for public purposes of a commercial or industrial undertaking.
State of Bihar v. Maharajadhiraja Sir
Kameshwar Singh ( S.C.R. 889) referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 72 of 1952.
Appeal under articles 132 (1) and 133 (1) (b)
of the Constitution of India from the Judgment and Order dated the 27th April,
1951, of the High Court of Judicature at Madras (Rajamannar C.J. and
Satyanarayana Rao J.) in Civil Miscellaneous Petition No. 4697 of 1951.
M.K. Nambiyar (U. Sethumadhava Rao, with him)
for the appellant.
M. Seshachalapathi for the respondent.
V.K.T. Chari, Advocate-General of Madras
(Porus A. Mehta and V.V. Raghavan, with him) for fife Intervener (State of
1954. February 10. The Judgment of the Court
was delivered by DAs J.--This is an appeal arising out' of a judgment delivered
on the 27th April, 1951, by a Bench o15 the Madras High Court in C.M.P. No.
4697 of 1951 filed under article 226015 the Constitution for the issue of a
writ of certiorari or other appropriate writ to call 780 for the records and
quash the order of the Government passed under section 4(1) of the Madras Act
XLIII of 1949 declaring the undertaking of the appellant company to vest in the
The appellant company was formed and
registered under the Indian Companies Act in 1924 with the object, inter alia,
of generating and supplying electrical ,energy to the public in Rajahmundry. In
1949 the Madras Legislature passed the Madras Electricity Supply Undertakings
(Acquisition) Act, 1949. The Act received the assent of the Governor-General on
the 18th January, 1950, and was published in the Official Gazette on the 24th
January, 1950. Upon the Constitution of India coming into force on the 26th
January, 1950, the Act was submitted to the President for his certification and
on the 12th April, 1950, the President certified that the Act should not be
called in question m any court on the ground that it contravened the provisions
of clause (2) of article 31 or it-contravened the provisions of sub-section (2)
of section 299 of the Government of India Act, 1935. By an order in writing
made on the 2nd September, 1950, the Government of Madras acting under section
4(1) of the Act declared that the undertaking of the appellant company should
vest in the Government on the date specified therein. Under the proviso to
section 4(1) the Government from time to time postponed the date of vesting and
the 2nd April, 1951, was the last-extended date fixed for such vesting. On the
29th March, 1951, the appellant company filed C.M.P. No. 4697 of 1951, under
article 226 for quashing the order of the Government.
Shortly stated the contentions of the.
appellant before the High Court were that the Act was ultra vires in that (1)
it was beyond the legislative competency of the Madras Legislature to enact it,
(2) it was not enacted to sub serve any public purpose, and (3) the
compensation provided for was illusory. The High Court repelled each and all of
the aforesaid contentions of the appellant company.
It held that the legislation was with respect
to electricity under entry 31 of the 781 concurrent list in the seventh
Schedule to the Government of India Act, 1935, and was not a legislation with
respect to corporations under entry 33 in list I as contended by the appellant
and that, therefore, the Madras Legislature was competent to enact it. It
further held that the Act having received the certificate of the President the
challenge based on an alleged absence of public purpose or the illusory nature
of the compensation was shut out and could not be raised. The High Court,
however, held that certain sections and rule 19(2) of the Rules framed under
the Act were invalid and subject thereto dismissed the application of the
appellant company. The High Court granted leave to the appellant company to
appeal before this court. The appeal has now come up for heating before us.
Learned counsel appearing in support of the
appeal has not pressed before us the contention raised in the High Court as to
the absence of public purpose or the illusory nature of the compensation
provided by the Act. He has confined his submissions to the question of the
legislative competency of the Madras Legislature to enact this piece of
legislation. In the High Court the contest centered round the question whether
the Act was a law with respect to electricity under entry 31 of the concurrent
list or with respect to corporations under entry 33 in list I. The High Court
held that the Act was, in pith and substance, a law with respect to electricity
and was, therefore, within the legislative competency of the Provincial
Legislature. In his arguments before us learned counsel contended that the act
is in substance and effect one for the acquisition of an electrical undertaking
and, as such, is ultra vires because- (a) the acquisition of an electrical
undertaking was not a legislative item in any of the three lists in the seventh
schedule to the Government of India Act, 1935, and (b) in so far as it relates
to the acquisition of an electrical undertaking of a corporation it is a law
with respect to corporations under entry 33 in list I.
782 In our opinion this appeal can be
disposed of on the first of the two grounds mentioned above.
Turning to the Act it will be noticed that
the long title of the Act is "an Act to make provision for the acquisition
of undertakings in the Province of Madras supplying electricity." The
preamble recites the expediency of making Provision "for the acquisition
of undertakings in the Province of Madras engaged in supplying electricity."
Section 1 gives the short title, extent and commencement of the Act. Section 2
is a definition section. Section 3 provides that the Act shall apply to all
undertakings of licensees including certain undertakings therein mentioned.
Section 4 empowers the Government to take over any undertaking by making an
order in writing declaring that such undertaking shall vest in the Government
on a specified date.
Section 5 provides for compensation payable
to a licensee who is not a local authority. The section gives an option to the
licensee to claim compensation on one of three bases therein specified. Section
6 deals with compensation payable where the licensee is a local authority.
Section 7 specifies the properties or assets which will vest according aS
compensation is claimed under one basis or another. Section 8 provides for the
appointment of a sole representative to act as the sole and accredited
representative of the licensee in connection with the handing over of the
undertaking and performing on behalf of the licensee the functions thereinafter
specified. The choice of basis of compensation is to be made within one month
under section 9 and such choice once intimated to the Government is not to be
open to revision except with the concurrence of the Government. Section 10
authorises the Government, in case the licensee has disposed of any of the
assets otherwise than in the normal course of events causing loss to the
Government as succeeding owners, to deduct from the compensation payable to the
licensee an amount which they consider to be the loss sustained by them.
Section 11 prescribes the various deductions which the Government shall be
entitled to make from the compensation payable under the Act. The-manner of 783
payment or deposit of compensation is laid down in section 12. Section 13
permits the Government to repay all loans, debentures, mortgages and the like
outstanding on the vesting date at any time before the time fixed for
repayment. Section 14 is the arbitration section. Section 15 provides for the termination
of the managing agency. Section 16 authorises the Government to terminate the
services of any person on the staff of the licensee immediately before the
vesting 'date. Section 17 requires all licensees to prepare and hand over to
the Government a complete inventory of all the assets. Section 18 gives power
of entry to the Government or any officer authorised by the Government upon any
land or premises in the possession of the licensee. Section 19 prescribes
penalties for various defaults therein specified. Section 20 makes certain
officers of a company liable for the offence committed by the company. Section
21 gives protection against suit or prosecution for anything done in good faith
under any rule or order made under the Act.
Section 22 confers rule-making power on the
Government. Section 23 provides that the provisions of certain Acts in so far
as they are inconsistent with the provisions of this Act shall have no effect.
Section 24 gives power to the Government to do anything which appears to them
necessary for the purpose of removing any difficulty. From the above summary it
will be noticed that the Act does not purport to make any provision for the
granting of licenses or maintenance of works for generating or transmitting
energy or for supplying electrical energy as one would expect to find in a law
dealing with electricity nor does the Act purport to make any provision for the
incorporation, regulation or winding up of trading corporations. On the
contrary, it is abundantly clear from the long title, the preamble and the
sections that it is, in pith and substance, nothing but an Act to provide for
the acquisition of electrical undertakings.
Section 299 (2) of the Government of India
Act, 1935, provided that neither the Federal nor a Provincial Legislature would
have power to make any law authorising the compulsory acquisition for public
purposes 784 of any land or any commercial or industrial undertaking or any
interest in or in any company owning any commercial or industrial undertaking unless
the law provided for the payment of compensation for the property acquired.
Compulsory acquisition of property is
undoubtedly an important sovereign right of the State but this right has to be
exercised under a law. The legislative power of the State was distributed by
sections 99 and 100 amongst the Federal Legislature and the Provincial
Legislatures in the manner provided' in the several lists set forth in the
Seventh Schedule to the Act. Section 100 read with entry 9 in list II
authorised the Provincial Legislature to make a law with respect to compulsory
acquisition of land. There was no entry in any of the three lists relating to
compulsory acquisition of any commercial or industrial undertaking, although
section 299 (2) clearly contemplated a law authorising compulsory acquisition
for public purposes of a commercial or industrial undertaking. The acquisition
of a commercial or industrial undertaking not being the subject-matter of any
entry in any of the three legislative lists, neither the Federal Legislature
nor the Provincial Legislature could enact a law with respect to compulsory
acquisition of a commercial or industrial undertaking. Under section 104,
however, the Governor-General, in his individual discretion, could, by public
notification, empower either the Federal Legislature or a Provincial
Legislature to enact a law with respect to any matter not enumerated in any of
the lists in the seventh schedule to the Act. It is, therefore, clear that
although Parliament expressly entrusted the Provincial Legislature with power
to make a law with respect to compulsory acquisition of land it did not
straightaway grant any power, either to the Federal Legislature or the
Provincial Legislature, to make a law with respect to compulsory acquisition of
a commercial or industrial undertaking but left it to the discretion of the
Governor-General to empower either of the Legislatures to enact such a law.
There is no suggestion that the Governor-General had, in exercise of his
discretionary powers under section 104, authorised the Madras 785 Legislature
to enact the impugned Act and, therefore, the Act was, prima facie, beyond the
legislative competency of the Madras Legislature.
The learned Advocate-General of Madras urges
that there was implicit in every entry in the legislative lists in the Seventh
Schedule to the Government of India Act, 1935, an inherent power to make a law
with respect to a matter ancillary or incidental to the subject-matter of each
entry. His argument is that each entry in the list carried with it an inherent
power to provide for the compulsory acquisition of any property, land or any
commercial or industrial undertaking, while making a law under such entry. It
is quite true that the powers of each Legislature to make laws with respect to
the different subjects assigned to it by the, appropriate list were to be
regarded as wide and plenary and also covering matters incidental or ancillary
to such subject-matter, but it is, nevertheless, clear from the provision of
the Act that the power to make a law for compulsory acquisition was, under
entry 9 in list II, given only to Provincial Legislatures and that such power
of the Provincial Legislatures was, under that entry, limited to making a law
for the compulsory acquisition of land only and that unless the
Governor-General made an .order under section 104 of the Act the Provincial
Legislatures had no power to make a law for the compulsory acquisition of any
property other than land ,and that the Federal Legislature had no power to make
any law with respect to the compulsory acquisition of any property at all. If
the argument of the learned Advocate-General were correct then entry 9 in list
II 'was wholly unnecessary for under entry 21 in list II the Provincial
Legislatures could make a law for the compulsory acquisition of land.
A similar argument was repelled by this court
in the State of Bihar v. Maharajadhiraja Sir Kameshwar Singh( ).
The matter is placed beyond any doubt or
dispute by the provisions of section 127 of the Government of India Act, 1935,
which provided that the Federal might, if it ,deemed it necessary to acquire
any land situate in a (1)  S.C.R. 889.
786 Province for any purpose connected with a
matter with respect to which the Federal Legislature had power to make laws,
require the Province to acquire the land on behalf and at the expense of the
Federation. If power' inhered in the Federal Legislature to make a law for the
acquisition of any property for any purpose connected with a matter with
respect to which it had' power to make laws then section 127 would not have'
been necessary at all. The absence of any entry empowering any Legislature to
make laws with respect to compulsory acquisition of a commercial or industrial
undertaking and the provisions of section 127 to, which reference has just been
made make it abundantly clear that the contentions urged by the learned'
Advocate- General cannot possibly be sustained. In our opinion, therefore, it
must be held that the Madras Legislature had no legislative competency to enact
the impugned law.
This is sufficient to dispose of this appeal
and it is not necessary to express any opinion, on the other points raised in
the court below.
The result, therefore, is that this appeal
must be' allowed with costs both in the High Court as well as in this court.
Agent for the appellant: M.S.K. Aiyangar.
Agent for the respondent: R.H. Dhebar.
Agent for the intervener: R.H. Dhebar.