Vijayawada Municipal Council Vs.
Andhra Pradesh State Electricity Board & ANR [1976] Insc 257 (20 October
1976)
BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH RAY,
A.N. (CJ) SHINGAL, P.N.
CITATION: 1977 AIR 86 1977 SCR (1) 886 1976
SCC (4) 548
ACT:
Andhra Pradesh (Andhra Area) Electricity
Supply Undertaking (Acquisition) Act (Andhra 15 of 1954), ss. 5(3) (vi),
6(2)(a)(iii) and 10(2)(b)(iii)-Amounts due to undertaking from consumers prior
to vesting in State--If can be recovered by State from the licensee.
HEADNOTE:
Section 4 of the Andhra Pradesh (Andhra Area
Electricity Supply Undertaking (Acquisition) Act, 1954, empowered the
Government to declare that an electricity undertaking of the licensee Municipal
Council shall vest in Government on a specified date. Section 5 provides for
compensation to be paid on one of three alternative bases, A, B or C set out in
the Act. Where compensation is on the basis 'C',, it includes under s. 5(3)(vi)
the book value of all intangible assets to the extent such value has not been
written off in the books of the licensee; and s. 6(2)(a) mentions the items
that would vest in the State Government. Section 6(2)(a)(iii) relates to all
the rights, liabilities and obligations of the licensee under any other
contract entered into bona fide, not being a contract relating to the borrowing
or lending for money. Section 10(2) (b)(iii) lays down that the Government may
deduct from the compensation all sums paid by consumers by way of security
deposit and arrears of interest due thereon on the vesting date, in so far as
they have not been paid over by the licensee to the Government, less the
amounts which according to the books of the licensee are due from the consumers
to the licensee for energy supplied to such consumers before that date.
In the present case, the State Government
made a declaration regarding the vesting of the Electricity Undertaking of the
appellant in the State Government, and transferred its rights to the respondent
Electricity Board. Certain amounts were shown in the books of the appellant as
due to it from consumers. The respondent claimed those amounts and filed a suit
against the appellant for their recovery.
The trial court dismissed the suit, but the
High Court allowed the appeal.
In appeal to this Court, it was contended
that past dues from the consumers would not vest in the respondent as they were
not specifically mentioned in s. 6(2)(a); and that under s. 10(2)(b)(iii) the
appellant was entitled to deduct and appropriate the amounts due from consumers
for supply of electricity from their security deposits.
Dismissing the appeal to this Court, HELD:
(1) The explicitly wide language used in s. 6(2)(a)(iii) dispenses with the
need to specify all items which are covered by it; and, arrears of dues from
consumers are covered by the wide language of the clause. [850 A] (2)(a)
Section 10(2)(b)(iii) is meant for security deposits and arrears of interest
due on them which are generally held in trust by the licensee so as to be ultimately
returned to the consumers,. if the dues of the consumers have been met without
resorting to the amounts deposited. They are used for a deduction of dues from
deposits where these have not been paid. If these deposits have not been made
over by the licensee to the Government, they will be claimable by the
depositors, and, therefore, they are deducted from the compensation. If
however, there are any amounts due shown in the books of the licensee as duo
from the consumers of energy they would become realisable by the Government
under s. 6(2)(a)(iii). It is for this reason that the deduction of security 847
deposit from compensation is reduced by the amounts which are due from
consumers to the Undertaking for energy supplied by the Undertaking before the
date of vesting as they become the claims realisable by the
successor-in-interest of the Undertaking. An exclusion from an item of
deduction from compensation could only indicate that this was beingdone because
this was an item which is covered by the compensation provided for and to be
paid. [850 A] (b) In .the present case, the only contention of the appellant
was that the right to appropriate the amount of dues did not vest in the
respondent but that the amount had vested in the appellant. It was not argued
on behalf of the appellant that what was vested in the Government was only the
right to realise the dues from the consumers and not to recover from the
appellant the amount which the appellant had actually realised or could have
realised.
(3) The High Court's interpretation of s.
10(2)(b)(iii) must be accepted as a correct interpretation because it is in
harmony with the meaning of the terms of s. 5(3)(vi) read with s. 6(2)(a) of
the Act. [851C]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 155 of 1971.
(Appeal by Special Leave from the Judgment
and Order dated 24-3-1975 of the Andhra Pradesh High Court in Appeal No.
19/72).
B.V. Subrahmanyam and A. Subba Rao, for the
Appellant.
A. K. Sen, K.R. Chaudhary, Miss Nihar Saha
and Mrs.
Veena Devi Khanna, for the ReSpondent.
The Judgment of the Court was delivered by
BEG, J.--This is a defendant's appeal by special leave against the judgment of
the High Court of Andhra Pradesh decreeing, with costs, the claim of the
plaintiffs respondents, the Andhra Pradesh State Electricity Board and the
Andhra Pradesh State Government for Rs. 3,34,443.77 as arrears of electricity
charges said to be due from the Vijayawada Municipal Council in respect of
amounts which were shown in its books as payable to it by consumers of
electricity.
The plaintiff's claim flowed from the terms
of the Andhra Pradesh (Andhra Area) Electricity Supply Undertaking
(Acquisition) Act 15 of 1954 (hereinafter refered to as 'the Act'), the
provisions of which were applied to the electricity undertaking of the appellant
Municipal Council with effect from 22nd December, 1961,. by the Government of
Andhra Pradesh. The rights of the State were transferred to the Andhra Pradesh
Electricity Board the co-plaintiff respondent. The amounts claimed were shown
in the books of the Council's electricity undertaking on the date of its
acquisition as due to it from direct consumers of electricity to whom it used
to sell electricity supplied to it in bulk.
The "Electricity undertaking" was
taken over by the Government by an order under Section 4 (1 ) of the Act.
This section provided:
"4. Power of Government to take over any
undertaking :-(1 ) The Government may, in respect of any undertaking not taken
over by them before the commencement of this Act, by order in writing, declare
that it shall vest in them on the 848 date specified therein, such date not
being earlier than four months from the date of the declaration :" The
Municipal Council was the licensee from whom the "undertaking", as a
commercial concern, was taken over. A licensee is defined by section 2(j) to
mean:
" .... a person licensed under part II
of the Electricity Act to supply electricity energy, or a person who has
obtained sanction under section 28 of that Act to engage in the business of
supplying electricity and in relation to an undertaking taken over or an
undertaking which has vested in the Government under section 4 the person, who
was the licensee at the time the undertaking was taken over or vested in the
Government, as the case may be, and includes the successorin-interest of any
such person;" The State Electricity Board stepped into the shoes of the
licensee on behalf of the State, to discharge all the existing obligations of
the licensee, arising out of past transactions, and, for this reason, became
entitled to the benefits of all contracts, whether they had accrued in the past
or were to arise in future, which existed at the time of the taking over of the
undertaking.
The effect of the "taking over" of
an undertaking and the vesting the rights and liabilities of the former
licensee in the State, by operation of law, was indicated by sections 5 and 6
of the Act.
Section 5 provided for compensation to be
paid on one of three alternative bases specified in this provision. The
licensee could opt for one of the three bases.
The provisions of section 6(2) of the Act
give the consequences of vesting. Section 6(2) of the Act enacts:
"6(2) (a) If compensation is payable in
respect of an undertaking under Basic C, only the property, rights liabilities
and obligations specified herein shall vest or be deemed to have vested in the
Government on the vesting date :-(i) all the fixed assets of the licensee and
all the documents relating to the undertaking;
(ii) all the rights, liabilities and obligations
of the licensee under hire-purchase agreements, if any, for the supply of
materials or equipment made bonafide before the vesting date;
(iii) all the rights, liabilities and
obligations of the licensee under any other contract entered into bona fide
before the vesting date, not being a contract relating to the borrowing or
lending for money.
(b) All the assets specified in clause (a)
(i) shall vest or shall be deemed to have vested in the Government free from
any debts, mortgages or similar obligations of the licensee or attaching to the
undertaking.
849 Provided that such debts, mortgages or
obligations shall attach or shall be deemed to have attached to them. Compensation.
payable under this Act for the assets".
A glance at clause (2) (a) (iii) of section 6
indicates that it clearly provides for the vesting of "all the rights
liabilities and obligations of the licensee" under contracts entered into
"before the date of vesting".
Therefore, we find no merit in the objection,
on behalf of the Municipal Council, that past dues of consumers of electricity,
shown in the books of Vijayawada Municipal Council, could not vest in the State
Government, in a case in which basis C is applicable for compensation.
The compensation provided by Section 5(3)(vi)
applicable to basis 'C' takes in "the book value of all intangible assets
to the extent such value has not been written off in the books of the
licensee". The result' is that "the aggregate value" of all
items specified in section 5(3), including items falling under sub-clause (vi),
became payable as compensation to the licensee on principle's specified in the
Act.
The learned Counsel for the appellant has
placed a great deal of reliance on the provisions of Section 10(2)(b) (iii),
which are applicable to cases of compensation payable on basis 'C'. Section 10
gives a list of deductions from compensation. One of the items of this
,deduction is found in section 10(2)(b)(iii) which lays down:
"all sums paid by consumers by way of
security deposit and arrears of interest due thereon on the vesting date, in so
far as they have not been paid over by the licensee to the Government, less the
amounts which according to the books of the licensee are due from the consumers
to the licensee for energy supplied by him before that date;" The
provision set out above is sought to be made the corner stone of the arguments
of the learned Counsel for the Appellant Municipal Council, although this very
provision was held by the High Court to be decisive against the appellant's
case that the amounts shown as due from the consumers of the licensee for
energy supplied before the vesting date were claims for amounts which the
Vijayawada Municipal Council was entitled to appropriate as they must be deemed
to be exempted from the effects of vesting of rights and obligations of the
undertaking in the State.
It is true, as the learned Counsel for the
Municipal Council points out, that only those rights and liabilities and
obligations which are specified in section 6(2) (a) are to vest in the State
Government. But, the contention based on alleged non-specification of the
claims of the licensee against direct consumers to whom it used to supply
electricity over-looks, the sweep of section 6(2) (a) (iii), already indicated
above, which will cover all rights and liabilities under contracts entered into
bona fide before the date of vesting. It is not possible to assert that the
rights of the Municipal Council to realise arrears of dues from the consumers
will not be transferred to the State Government when they are covered by the
specific language of section 6(2) (a) (iii). The 850 explicitly wide language
used dispenses with the need to specify by enumerating all items which are
covered by it.
That is the very object of such language.
We have also indicated how section 5(3)(vi),
meant for application to basis 'C', mentions all intangible rights shewn in the
books of the licensee. This also supports the interpretation we place on
section 6(2)(a)(iii) and on the wide ambit of the specification here which
must, obviously, not conflict with section 5(3)(vi). We are, therefore,
completely unimpressed by arguments based on supposed non-specification of the
claims of the former licensee undertaking against consumers to whom it had
supplied electricity in the past and against which it had claims which vested,
from the specified date, in the State Government.
Learned Counsel's argument, on the meaning of
Section 10(b) (iii), is really meant to reinforce the argument indicated above,
based on alleged non-specification of the claims of the Municipal Council as a
licensee for supplying electricity to consumers. If the meaning of relevant
provisions of section 5 and 6 is clear, we do not think that any assistance
could be derived' by the appellant Municipal Council from the provisions of
section 10(2)(b)(iii) unless these clearly conflicted with the other
provisions. If, however, two interpretations were possible of these provisions,
we should, we think, prefer the one which is in harmony with the clear meanings
of the terms of section 5(3), read with section 6(2) (a) of the Act as
indicated above. This is the salutary rule of construction resting upon the
doctrine that a statute, like any other document, must be read as a whole to extract
its meaning and intendment correctly.
Learned Counsel for the appellant submits
that the exclusion by section 10(2)(b)(iii) of the amounts which, according to
the books of the licensee, "are due from the consumers to the licensee for
energy supplied by him before that date" (i.e. the date of vesting), from
the ambit of deductions from compensation, necessarily implies that these
amounts can be appropriated by the appellant Municipality.
'We are, quite unable to see how this
inference follows from an exclusion from items of deduction from compensation.
A deduction from an item of compensation may, if there was nothing else to
furnish a clue as to its meaning, imply that it was not being compensated for
because the party whose rights were acquired was retaining the item. But, an
exclusion from an item of deduction from compensation itself could, according
to its natural meaning, only indicate that this was being done because this was
an item which is covered by the compensation provided for and to be paid.
A close examination of section 10(2)(b)(iii)
wilt show that it is meant for security deposits and arrears of interest due on
them which are generally held in trust by the licensee so as to be ultimately
returned to the consumers, if the dues of the consumers have been met without
resorting to the amounts deposited. They are used for a deduction of dues where
these have not been paid; We know that these deposits are required so as to
cover claims from defaulting consumers in order to avoid the trouble of
litigating to enforce them. If these deposits have not been made over by the
licensee to the Government, they will be claimable by the depositors from the
licensee. Hence, it seems fair to deduct them from any item of compensation as
these deposits are not meant to be kept by the licensee. They do not constitute
profits of the business or price for anything supplied or payment for services
rendered or an asset out of which liabilities of the licensee may be met. If,
however, there are any amounts shewn in the books o[ the licensee as due from
the consumers of energy supplied before the date of vesting, they would become
realisable by the Govt.
Hence, the amounts for which deductions from
items of compensation will have to be made is reduced by the amounts which are
due from consumers to the licensee for energy supplied by the licensee before
the date of vesting as they become the claims realisable by the
successor-in-interest of the licensee. Therefore, the High Court's
interpretation was, obviously, correct. This provision supports the case of the
respondents rather than that of the former licensee Municipal body. It is very
difficult to see how it supports the appellant's case.
It appears that no question was raised before
'the High Court as to the nature of the obligation incurred by the Municipal
Council to pay the amount claimed apart from its right to appropriate the
amount itself as part of the assets which had, it was asserted, not vested in
the State Government. An attempt was, however, made before us to confuse it
with the payment made by the Municipal Council itself to the Government for the
bulk supply of electricity used, inter alia, for street lighting and other
purposes by the Council itself. But, no question was raised in the pleadings to
indicate that the plaintiff's claim included these past dues. We do find that
the licensee had set up certain reasons for its inability to realise certain
amounts from the consumers. We do not know what all these reasons precisely were
or whether the licensee, was really unable to realise them for any of these
reasons. But, ground No. 1 of the special leave petition shows that the
Municipal Council had Rs. 9 lakhs with it in deposit for the recovery of the
claims not realised from which it proposed to deduct the amounts claimable
towards dues and to. appropriate them itself. The ground runs as follows:
"In the instant; case the learned trial
judge found that there was a deposit of 3 lakhs of rupees with the Vijayawada
Municipality and the Vijayawada Municipality by virtue of section 10(2)(b)(iii)
is certainly entitled to adjust and by virtue of section 10(2)(b)(iii) of the
Act 15 of 1964, the Government can deduct that security from out of
compensation less the amount due to the licensee from its consumers upto the
vesting date." We may also mention that it was not argued on behalf of the
Municipal Council that what was vested in the Government was only the right to
realise the claims itself and not an amount of money which the Municipal
Council had actually realised or could have realised if 852 it took steps to
make realisations. On the other hand, ground No. 1 of the grounds of appeal
quoted above, shows that the case of the Municipal Council was simply that it
is 'entitled to deduct amounts claimed from whatever may be the amounts in
deposit because. the claims against the consumers had vested in the Municipal
Council and not in the Government. We think that legal questions of
interpretation of the Act, to which the learned Counsel for the parties rightly
confined their arguments, apart from some attempts to raise questions outside
the pleadings which could not succeed, were rightly answered by the High Court
when it held that the relevant provisions, if correctly interpreted, meant that
the claims for dues on electricity supplied at enhanced rates, the validity of
which had been unsuccessfully challenged by some consumers in certain other
proceedings initiated before filing of the suit now before us, had vested in
the State Government.
Consequently, we affirm the judgment and
decree of the High Court and dismiss this appeal with costs.
V.P.S. Appeal dismissed.
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