Tinsukhia
Electric Supply Co. Ltd. Vs. State of Assam & Ors [1989] INSC 125 (13 April 1989)
Venkatachalliah,
M.N. (J) Venkatachalliah, M.N. (J) Rangnathan, S. Pathak, R.S. (Cj) Mukharji, Sabyasachi (J)
Natrajan, S. (J)
CITATION:
1990 AIR 123 1989 SCR (2) 544 1989 SCC (3) 709 JT 1989 (2) 217 1989 SCALE
(1)1006
CITATOR
INFO : F 1990 SC 153 (19,20) RF 1991 SC 101 (30) RF&R 1992 SC 938
(22,28,35)
ACT:
Constitution
of India, 1950: Articles 14, 19, 31-C and
39(b) and (c)--Nationalisation--Acquisition and take over of electric supply
companies by State Government--Validity of--Nexus between the legislation and
the objectives and principles of nationalisation--Court to look into the real
nature of the statute.
Indian
Electricity Act, 1910/Indian Electricity (Assam Amendment) Act, 1973: Sections
5(2), 6(7) and 7A--Acquisition and take over of electricity supply compa-
nies--Constitutional validity of.
Tinsukhia
and Dibrugarh Electric Supply Undertakings (Acquisition) Act, 1973: Sections
1(3), 2(f), (h), (j), 2(1), 3 to 10, 20 and 23Constitutional validity
of--Acquisi- tion and take over of Tinsukhia Electric Supply Co. Ltd. and
Dibrugarh Electric Supply Co. Ltd.-Protection under Article 31-C of the
Constitution of India--Payment of compensation--Justiciability of.
HEAD NOTE:
The
petitioners--Public Limited Companies--were grant- ed licences under the
provisions of the Indian Electricity Act, 1910 for supply of electricity within
the respective licensed areas of Tinsukhia and Dibrugarh Municipal Boards.
The
Dihrugarh Company was granted licence in 1928 on certain terms and conditions
with an option to the State to purchase the under. taking on the expiry of 50
years and thereafter on the expiry of every subsequent period of twenty years.
So
also, the Tinsukhia company was granted licence in 1954 on certain terms and
conditions with an option to the State Government to purchase the undertaking
on the expiry of 20 years and thereafter on the expiry of every 20 years.
The
State Government negotiated with the companies for pur- 545 chasing them. The
negotiations were going on for several years. On 27.9.1972 the Governor
promulgated two ordinances for the compulsory acquisition of the undertakings
of the two companies. Subsequentiy, the ordinances were replaced by the Indian
Electricity (Assam Amendment) Act, 1973 and the Tinsukhia & Dibrugarh
Electric Supply Undertakings (Acquisi- tion) Act, 1973.
The
two legislations, one amending the provisions of Section 5(2), 6(7) and 7-A of
the Indian Electricity Act, 1910 and the other providing for the acquisition of
the two undertakings viz. the Tlnsukhia and Dibrugarh Electric Supply
Undertaking (Acquisition) Act, '1973 were Challenged in this Court by the
writ-petitioners on several grounds. It was contended that in view of the
private negotiations and the exercise of the option to purchase, the
legislations were not bona fide, but constituted a mere colourable exer- cise
of legislative power and that the real objects of the two legislations have no
direct and reasonable nexus to the objects envisaged in Article 39(b) of the
Constitution. It was also contended that what was sought to be acquired was not
the undertakings of the two companies, but the differ- ence between the market
value of the undertakings agreed to by the State Government and the Book-value
of the undertak- ings which the law has substituted by virtue of the amend-
ments made in the Indian Electricity Act, 1910. The Article 31-C protection
given to the legislations, and some of the specific provisions of the acquisition
law which excluded certain items from the computation of compensation and
authorised certain deductions in the amount of compensation have also been
challenged.
On
behalf of the Respondents, it was contended that electrical energy has been a material
source of the communi- ty and any legislative measure to nationalise the
undertak- ing fell squarely within the ambit of Article 39(b) and was entitled
to Article 31-C protection. It was also asserted that book-value has been a
well accepted concept of valua- tion in accountancy and it cannot be
characterised as illu- sory even if the legislations did not enjoy the
protection of Article 31-C.
Dismissing
the writ petitions,
HELD:
[R.S. Pathak. CJ, M.N. Venkatachaliah, S. Natara- jan and S.
Ranganathan, J
J----per Venkatachaliah, J.]
1.1.
The proposition that the legislative declaration of the nexus between the law
and the principles in Article 39 is inconclusive and justiciable is well
settled. The sequen- tor is that whenever any immunity 546 is claimed for a law
under Article 31-C, the Court has the power to examine whether the provisions
of the law are basically and essentially necessary for the effectuation of the
principles envisaged in Article 39(b) and (c). [539E, F]
1.2.
It can, hardly be gain-said that the electrical energy generated and
distributed by the undertakings of the petitioners constitutes "material
resources of the communi- ty". The idea of distribution of the material
resources of the community in Article 39(b) is not necessarily limited to the
idea of what is taken over for distribution amongst the intended beneficiaries.
That is one of the modes of "distri- bution". Nationalisation is
another mode. The economic cost of social and economic reform is, perhaps,
amongst the most vexed problems of social and economic change and constitute
the core element in Nationalisation. The need for constitu- tional immunities
for such legislative efforts at social and economic change recognise the
otherwise unaffordable econom- ic burden of reforms. It is not possible to
divorce the economic considerations or components from the scheme of
nationalisation with which the former are inextricably integrated. The
financial cost of a scheme of nationalisa- tion lies at its very heart and
cannot be isolated. Both the provisions relating to the vestiture of the
undertakings in the State and those pertaining to the quantification of the
"Amount" are integral and inseparable parts of the integral scheme of
nationalisation and do not ambit of being consid- ered as distinct provisions
independent of each other. The debate whether nationalisation is by itself to
be considered as fulfilling a public purpose or whether the nationalisa- tion
should be shown to be justified effectuation of the avowed objectives of such
nationalisation--the choice be- tween the pragmatic and the doctrinaire
approaches---is concluded and no longer available. [578C. D, E, 579C, D, H,
580A, B, E]
1.3.
The right, title and interest of the licensee in the undertaking does not get
transferred to the Board or the State, as the case may be, immediately upon the
mere exer- cise of the option to purchase. The exercise of the option would
have no such effect on the licensee's right to carry on his business until the
undertaking was actually taken over and paid for. The contentions that
immediately upon the exercise of the option, ipso-facto, the relationship
between the parties get transformed into one as between a Debtor and a Creditor
and that the interest of the licensee in the undertaking becomes an
"actionable-right", or a 'chosein- action" and that no
public-purpose could be said to be served by the acquisition of a
"chose-in-action" are all out of place in the instant case. [582E,
583C] 547
1.4.
The acquisition legislation was brought-forth for securing the principles
contained in Article 39(b) of the Constitution and is protected under Article
31-C. The Assam amendment made to the provisions of
the Indian Electricity Act, 1910, amending the basis for quantification of the
amount payable in the case of a statutory purchase pursuant to the exercise of
the option in terms of the licence would apply to and govern cases of
statutory-sales and would not assume any immateriality in the instant case.
[585E, F] Kesavananda Bharati v. State of Kerala; [1973] Suppl.
SCR 1;
Minerva Mills Ltd. v. Union of India, [1981] 1 SCR 206; Sanjeev Coke Mfg. Co.
v. Bharat Coking COal Ltd., [1983] 1 SCR 1000; State of Tamil Nadu v.L. Abu
Kavar Bai, AIR 1984 SC 326; Akadasi Padhart v. State of Orissa and Ors., AIR
1963 SC 1047; Godra Electricity Co. Ltd. and Anr. v. The State of Gujarat and
Anr., [1975] 2 SCR 42 and Madan Mohan Pathak v. Union of India and Ors., [1978]
2 SCR 334, relied on.
Fergusan
v. Skrupa, 372 U.S. 726; Fazilka Electric Supply Co.
Ltd. v. The Commissioner of Income Tax, Delhi, [1962] Suppl. 3 SCR 496 and Gujarat Electricity Board v. Shantilal,
[1969] 1 SCR 580, referred to.
Bihar
State Electricity Board v. Patna Electricity Supply Co. Ltd., AIR 1982 Cal, 74;
distinguished.
"History
of the treatment of choses in-action by the common law"--by W.S.
Holdsworth--Vol. 33--Harvard law Review referred to.
2. It
may not be just to deprive a recompence that is just and fair, in all cases.
But that. is not to say that even ,under a law which has the protection of Art.
31-A or 31-C, the adequacy, or justness or fairness of the compensa- tion
would, yet, be justiciable. Article 31-C is in effect and substance is to
'urban property' of what Article 31-A is to 'agricultural property'. All the
same, the concept of "Book-Value" is an accepted accountancy concept
of value. It cannot be held to be illusory. Even if the impugned law had no
protection of Article 31-C and tests appropriate to and available are applied,
in the circumstances of the present case, it cannot be said that the principles
envisaged in the acquisition law lead to an "amount" which can be
called unreal or illusory. [590C, 592B] 548 Eswari Khetan Sugar Mills v. State
of U.P., [1980] 3 SCR 331; relied on.
Gwalior
Rayon v. Union of India, [1974] SCR 1 671; referred to.
3.
Under the law when a requisition is made by an in- tending consumer for
electrical-energy, the licensee has an obligation to lay down service-lines.
But, according to the provisions the entire cost of service-line is not required
to be borne by the licensee. The licensee is entitled to call upon the consumer
to pay part of the cost of service- line--which may in a given case amount to a
substantial part--in accordance with the provisions in the Schedule to the
Electricity Supply Act. While it is true that the ex- pression 'works' in
Section 2(h) of the Indian Railways Act, 1910 includes 'Service-lines', the
reason why 'Service- lines' could justifiably be excluded from valuation for
purposes of determination of the 'amount', is that the new licensee is to
repair and maintain them. [593B, C; 592F, G] Dakor-Umreth Electricity Co. Ltd.
v. State of Gujarat, 13 GLR 88; approved.
4. On
a reasonable construction, the expressions 'amounts remaining' and 'in so far
as such amounts have not been paid over' necessarily exclude any such
duplication of the accountability of the licensee for these 'Reserves'. If any
part of the reserves is invested in "fixed assets" and the reserves
in the form of such "fixed assets" are taken- over by the Government
pursuant to the acquisition, what remains to he accounted for by the licensee
is only the 'amounts remaining' in the pertinent accounts. The liability of the
licensee for deduction of the 'Reserves' from the 'amount' would arise only if
the balance remaining in those accounts are not paid. [594F, G]
5. As
regards the liability of the licensee under Sec- tion 11(3) of the Acquisition
Act in respect of the amounts payable to employees retrenched by the Government
or the 'Board' as the case may be, within one year from the vesting date after
the take-over-even if this question is justicia- ble---it is not unreasonable
or arbitrary as it envisages the continuance of a liability which was,
otherwise, sub- stantially that of the licensee. [595F, G, H, 596A, B]
6.
Though some of the liabilities arising out of the conduct of the licensees'
business prior to vesting are not taken over by Government, some of those
liabilities are, yet, authorised to be deducted from the 549 amount. The
purpose of this provision is too obvious to require any statutory declaration
or the obligations that arise in law and are attandant upon these sums coming
to the hands of and retained by the Government. Quite obviously, the provision
is not intended for an unjust enrichment in the hands of Government. The
purpose is obviously to facili- tate recovery of certain types of debts owed to
public institutions etc., and the deduction is for the benefit of those
creditor institutions. The Government would, plainly, be under a legal obligation
to pay the sums so deducted, to the concerned creditors. The provisions of the
Statute must be read along, and in consonance, with the general princi- ples of
law which import such obligations on the part of the Government and an implied
corresponding discharge to the petitioners to the extent of such deductions in
their li- abilities. There is a resulting statutory-trust in the hands of the
Government to pay the sums so deducted to the respec- tive creditors, even in
the absence of express provisions in this behalf in the Statute, the general
principles of law operate. As a matter of construction it requires to be held
that these obligations and consequences follow. [596E, F, G, H, 597A]
7. The
Courts strongly lean against any construction which tends to reduce a Statute
to a futility. The provision of a Statute must be so construed as to make it
effective and operative, on the principle "but res majis valeat quam
periat". It is, no doubt, true that if a Statute is abso- lutely vague and
its language wholly intractable and abso- lutely meaningless, the Statute could
be declared void for vagueness. This is not in judicial-review by testing the
law for arbitrariness or unreasonableness under Article 14; but what a Court of
construction, dealing with the language of a Statute, does in order to
ascertain from, and accord to, the Statute the meaning and purpose which the
legislature in- tended for it. It is, therefore, the Court's duty to make what
it can of the Statute, knowing that the statutes are meant to be operative and
not inept and that nothing short of impossibility should allow a Court to
declare a Statute unworkable. [597F, G, 598C] Manchester Ship Canal Co. v.
Manchester Race Course Co., [1904] 2 Ch.
352 and Fawcet Properties v. Buckingham County Council, [1960] 3 AII.E.R. 503,
referred to.
8.
Section 10 of the Acquisition Act enjoins upon the Government to appoint a
person having adequate knowledge anti experience in matters relating to
accounts "to assess the net amount payable under the Act by the Government
to the licensee after making the deductions mentioned in sec- tion 9".
Proviso to Sections 8 and 9 envisages prior 550 notice to be issued to the
licensee by the Government to show cause against any deduction proposed to be
made under Section 8 or 9, as the case may be, within the period speci- fied in
the provisos. Even after the Government so makes such determination of the
amounts which, according to it, are deductible from the gross amount, such
determination would not be final. The assessment of the net amount payable to
the licensee will have to be made by the "Special Offi- cer". It is
reasonable to construe that the decision of the Government both under Sections
8 and 9 arrived at, even after giving an opportunity to the lincensee of being
heard, would not be final, but the final determination will have to be made by
the "Special Officer" appointed under section 10 of the Act. Section
10(1) and (2) of the Act must be so construed as to enable the "Special
Officer" to take into account the determination respecting the deduction
under Sections 9 and 10 of the ACt made by the Government and take the decision
of his own in the matter. The power to "assess" the net amount by
necessary implication takes within its sweep the power to examine the validity
of the determination made by the Government .in the matter of deduction from
the gross amount. This power to determine and assess the 'net- amount' payable
by necessary implication cover matters envisaged in Sections 8 and 9. Though
only Section 9 is specifically referred to in sub-sections (1) and (2) of
section 10, the language of sub-sections (1) and (2) which enable the Special
Officer to "assess" the net amount pay- able would by necessary
implication, attract the power to decide as to the validity and correctness of
the deduction to be made under Section 8 as well. So construed. the provi-
sions of Section 10 would furnish a reasonably adequate machinery for the
assessment of the "net-amount" payable to the licensee. [598E-H;
599A-E]
9. So far
as Arbitration is concerned, even after the decision of the "Special
Officer", there is the further arbitral forum to decide disputes in
respect of the specific areas in which disputes are rendered arbitrable under
Sec- tion 20. There is a provision for appointment of a sitting or retired
District or High Court Judge as arbitrator under the said section. Hence it
cannot be said that there is no proper machinery for resolving the disputes
between the Government and the licensee rendering the Acquisition Act
unworkable. [599F, G] Per Mukharji, J. (Concurring)
1.
Article 39(b) of the Constitution enjoins that the State in particular should
direct its policy towards secur- ing that the ownership and control of the
material resources of the community are so distri- 551 buted as to best
subserve the common good and that the operation of the economic system does not
result in concen- tration of wealth and means of production to the common
detriment. In order to decide whether a Statute is within Article 31-C, the
Court, if necessary, may examine the nature and the character of the
legislation and the matter dealt with as to whether there is any nexus between
the law and the principles mentioned in Article 39(b) and (c). On such an
examination if it appears that there is no such nexus between the legislation
and the objectives and the principles mentioned in Article 39(b) and (c), the
legisla- tion will not enjoy the protection of Article 31-C. In order to see
the real nature of the Statute, if need be, the Court may also tear the veil. [553E-H]
Kesavananda Bharati v. State of Kerala, [1973] Suppl. SCR 1; relied on. Charles Russel v. The Queen, [1882]
VII AC 829; referred to.
2.
Whenever a question is raised that the Parliament or the State Legislature have
abused their powers and inserted a declaration in a law for not giving effect
to securing the Directive Principles specified in Article 39(b) and (c), the
Court can and must necessarily go into that question and decide. If the Court
comes to the conclusion that the decla- ration was merely a pretence and that
real purpose of the law is the accomplishment of some object other than to give
effect to the policy of the State towards securing the Directive Principles as
enjoined by Article 39(b) and (c), the declaration would not debar the Court
from striking down any provision therein which violates Articles 14, 19 or 31.
In
other words, if a law passed ostensibly to give effect to the policy of the
State is, in truth and substance, one for accomplishing an unauthorised object,
the Court would be entitled to tear the veil created by the declaration and
decide according to the nature of the law. The only question open to judicial
review under_Article 31-C is whether there is a direct and reasonable nexus
between the impugned law and the provisions of Article 39(b) and (c).
Reasonableness is evidently regarding the nexus and not regarding the law.
[554D,
E, F, 555B, C] Kesavananda Bharati v. State of Kerala, [1973] Suppl.
SCR 1;
Minerva Mills Ltd. v. Union of India, [1981] 1 SCR 206 and Sanjeer Coke Mfg.
Co. v. Bharat Coking Coal Ltd. & Anr., [1983] 1 SCR 1000, relied on.
3. It
is indisputed that the electric energy generated by the petitioner companies
constitutes material resources of the community 552 within the scope and
meaning of Article 39(b), and having regard to the true nature and the purpose
of the legisla- tions, reading the legislations entirely, the legislations have
a direct and reasonable nexus with time objective of distributing the material
resources so as to subserve the common good. The determination of value thereof
and the substitution of the book-value in place of market value, are only
methods for such acquisition and do not disclose the true nature and character
of the legislation, but are inci- dental provisions thereof. if that is the
position then it is incorrect to say that what was acquired, was not the
material resources but chose-in-action. The true nature and character of the
legislations in question was to acquire the material resources, namely, the
electric energy for better supply and distribution. [556D, E, F] State of Tamil
Nadu & Ors. v. L. Abu Kavur Bai & Ors., [1984] 1 SCC 515, relied on.
Bihar State Electricity Board & Ors. v. Patna Electrici- ty Supply
Co. Ltd., AIR 1982 Cal. 74. distinguished.
4.
Having regard to the true nature and character of the legislations in question
the legislations are not colourable legislations in the sense that there was no
direct and reasonable nexus with Article 31(b) and (c) of the Constitu- tion.
[556H]
ORIGINAL
JURISDICTION: Writ Petition No. 457 of 1972 (Under Article 32 of the
Constitution of India) Soli J. Sorabji, S. Rangarajan, Harish N. Salve, D .N. Mukharji, Ranjan Kukherjee, Udey K.
Lalit, S.K. Nandi and S. Parekh for the Petitioner.
Dr.
Shankar Ghosh, G.L. Sanghi, P. Chowdhary, C.S. Vaidyanathan, C.V. Subba Rao,
for the Respondents.
Mrs.
A.K. Verma for the Intervener.
The
following Judgments of the Court were delivered:
SABYASACHI
MUKHARJI, J. I agree with Brother Venkata- chaliah, that the contentions urged
on behalf of the peti- tioner in support of the challenge to the impugned
legisla- tions must fail and the writ petitions must be dismissed. I would,
however, like to express my 553 views only on one aspect of the matter, which is
common to this case as well as the writ petition No. 458/72, civil appeal No
4113/85 and writ petition No. 5(N)/74, i.e. the scope of judicial review of
legislation where there is declaration in the legislation under Art. 31C of the
Consti- tution.
In these
writ petitions we are concerned with two legis- lations, namely, the Indian
Electricity (Assam Amendment Act, 1973, (Assam Act IX of 1973), and the
Tinsukhia & Dibrugarh Electric Supply Undertakings (Acquisition) Act, 1973
(Act X of 1973). The main point which is significant in these writ petitions,
is the extent and scope of judicial review of legislation where there is
'declaration under Art. 31-C of the Constitution, which enjoins that no law
giving effect to the policy of the State towards securing all or any of the
principles laid down, inter alia, namely, Arti- cles 38, 39, 39A, 40, 41, 42,
43A, 44 to 48, 48A and 49 to 51 shall be deemed to be void on the ground that
those are inconsistent or take away or abridge any of the rights conferred by
Article 14 or 19, and further provides that no law containing a declaration
that it is for giving effect to such a policy, shall be called in question in
any court on the plea that it does not give effect to such a policy. The two
legislations in question are covered by the declaration under Article 31C of
the Constitution.
The
principal question which falls for consideration is, whether that declaration
is justiciable and open to judicial review and the extent of that judicial
review. Article 39(b) of the Constitution enjoins that the State in particular
should direct its policy towards securing that the ownership and control of the
material resources of the community are so distributed as to best subserve the
common good and that the operation of the economic system does not result in
concentration of wealth and means of production to the common detriment. See,
in this connection, the observations of Ray J. as the learned Chief Justice
then was, in Kesava- nanda Bharati v. State of Kerala, [1973] Suppl. SCR 1 at
45 1-452. Hence, in order to decide whether a Statute is within Article 31C,
the Court, if necessary, may examine the nature and the character of
legislation and the matter dealt with as to whether there is any nexus between
the law and the principles mentioned in Article 39(b) and (c). On such an
examination if it appears that there is no such nexus be- tween the legislation
and the objectives and the principles mentioned in Article 39(b) & (c), the
legislation will not enjoy the protection of Article 31C. In order to see the
real nature of the Statute, if need be, the court may also tear the veil.
554
Justice Jaganmohan Reddy in the same decision at page 530 of the report
reiterated that a law not attracting Article 31C cannot be protected by a
declaration by just mixing it with other laws really failing within Article
31-C with those that do not fall under that Article. Hence, in such a case the
Court will always be competent to examine the true nature and character of the
legislation in the particular instance and its design and the primary matter
dealt with--its object and scope. In this connection, reli- ance was placed on
the observations of the Privy Council in Charles Russel v. The Queen, [1882]
VII AC 829 at 838-840.
Justice
Palekar in the same decision at page 63 1 also reiterated that if the court
comes to the conclusion that the object of the legislation was merely a
pretence and the real object was discrimination or something other than the
object specified in Article 39(b) and (c), Article 31C would not be attracted
and the validity of the Statute would have to be tested independently of
Article 31C.
Whenever
a question is raised that the Parliament or the State legislature have abused
their powers and inserted a declaration in a law for not giving effect to
securing the Directive Principles specified in Article 39(b) & (c), the
court can and must necessarily go into that question and decide. See the
observations of Justice Mathew in Kesavanan- da Bharati's case (supra) at page
855 of the report. If the court comes to the conclusion that the declaration
was merely a pretence and that the real purpose of the law is the
accomplishment of some object other than to give effect to the policy of the
State towards securing the Directive Principles as enjoined by Article 39(b)
& (c), the declara- tion would not debar the court from striking down any
provi- sion therein which violates Articles 14, 19 or 31. In other words, if a
law passed ostensibly to give effect to the policy of the State is, in truth
and substance, one for accomplishing an unauthorised object, the Court would be
entitled to tear the veil created by the declaration and decide according to
the nature of the law. Also see pages 851 & 856 of the report. Justice Beg,
as the learned Chief Justice then was, at pages 884-885 of the report
reiterated that a colourable piece of legislation with a different object
altogether but merely dressed up as a law intended for giving effect to the
specified principles would fail to pass the test laid down by the first part,
and the declara- tion by itself would not preclude a judicial examination of
the nexus, so that the courts can still determine whether the law passed is
really the one covered by the niche carved out by Article 31C or merely
pretends to be so protected by parading under cover of the declaration. Justice
Dwived at page 934 of the report said that the Court still retains power to
determine whether the law has relevancy to the distribution of the ownership
and 555 control of the material resources of the community and to the operation
of the economic system. If the Court finds that the law has no such relevancy,
it can declare the law void. The declaration cannot be utilised as a clog to
pro- tect law bearing no relationship with the objectives men- tioned in the
two clauses of Article 39.
With
respect, I am inclined to agree with the observa- tions of Justice Chandrachud,
as the learned Chief Justice then was, at page 996 of the said report that the
declara- tion under Article 31-C does not exclude the jurisdiction of the Court
to determine whether the law is for giving effect to the policy of the State
towards securing the principles specified in Article 39(b) & (c).
Chief
Justice Chandrachud in Minerva Mills Ltd. v. Union of India, [1981] 1 SCR 206
at 261 observed that the clear intendment of Article 31C is that the power to
enquire 'into the question whether there is a direct and reasonable nexus
between the provisions of a law and a Directive Principle can not confer upon
the courts the power to sit on judgment over the policy itself of the State. At
the highest, courts can, under Article 31C, satisfy themselves as to identity
of the law in the sense whether it bears a direct and reasona- ble nexus with
the directive principles. If the court is satisfied as to the existence of such
nexus, the inevitable consequence provided for by Article 31C must follow. He
recorded that all the 13 Judges in Kesavananda Bharati's case (supra) agreed.
The only question open to judicial review under Article 31-C is whether there
is a direct and reasonable nexus between the impugned law and the provisions of
Article 39(b) & (c). Reasonableness is evidently regard- ing the nexus and
not regarding the law.
Justice
Bhagwati, as the learned Chief Justice then was, reiterated at pages 337-338 of
the report that if the Court finds that the law though passed seemingly for
giving effect to a Directive Principle is, in pith and substance, one for
accomplishing an unauthorised purpose-unauthorised in the sense of not being
covered by any Directive Principle, such law would not have the protection of
the amended Article 31C, which does not give protection to a law which has
merely some remote or tenuous connection with a Directive Principle. What is
necessary is that there must be a real and substantial connection and the
dominant object of the law must be to give effect to the Directive Principles.
Also see the observations of this Court in Sanjeev Coke Mfg. Co. v. Bharat
Coking Coal Ltd. & Anr., [1983] 1 SCR 1000 at 1020.
556
Looked at from this point of view, it cannot be said that the principles of
colourable legislation would not be applicable. If it was demonstrated that
there was no direct and reasonable nexus between these two impugned laws and
the principles as enshrined under Article 3 l(b) & (c) of the Constitution,
then that would have been colourable legisla- tions and would have been bad on
that score.
It was
contended on behalf of the petitioner by Mr. Sorabji as well as Mr- Rangarajan
that in order to bye-pass 'the payment of compensation for acquisition of
property of the petitioner in negotiations the device of the impugned Acts was
envisaged. In that context, the substitution of the book-value in place of
market value was, therefore, depriva- tion of property and is illusory and
would amount to taking away of' property without compensation.
I do
not and cannot agree. It is indisputed that the electric energy generated by
the supplier petitioner compa- nies constitutes material resources of the
community within the scope and meaning of Article 39(b), and having regard to
the true nature and the purpose of the legislations, reading the legislations
entirely the object of the legislations have a direct and reasonable nexus with
the objective of distributing the material resources so as to subserve the
common good. The determination of value thereof and the substitution of the
bookvalue in place of market value, are only methods for such acquisition and
do not disclose the true nature and character of the legislation, but are inci-
dental provisions thereof. If that is the position then it is incorrect to say
that what was acquired, was not the material resources but choses-in-action.
The true nature and character of the legislations in. question was to acquire
the material resources, namely, the electric energy for better supply and
distribution. In that view of the matter the principles of the decision of the
Division Bench of the Calcutta High Court in Bihar State Electricity Board
& Ors. v. Patna Electricitv Supply Co. Ltd., AIR 1982 Cal. 74 would have no scope of application to this case. A
Constitution Bench of this Court in State of Tamil Nadu & Ors. v. L. Abu Kavur Bai & Ors., [1984] 1
SCC 515 has expressed the view that the Act giving effect to Article 39(b)
& (c) is pro- tected if a reasonable nexus is established.
In
that view of the matter, I agree having regard to the true nature and character
of the legislations that the impugned legislations are not colourable
legislations in the sense that there was no direct and reasonable nexus with
Article 31(b) & (c) of the Constitution.
557 On
the other aspects of the matter, I agree with re- spect, with the conclusion
indicated in the judgment of Justice Venkatachaliah.
VENKATACHALIAH,
J. 1. In these two writ petitions invok- ing Article 32 of the Constitution of
India, the Tinsukia Electric Supply Company Limited and the Dibrugarh Electric
Supply Company Limited, which are licensees under the Indian Electricity Act 19
10 for the supply of electricity within the areas of the municipal boards of
Tinsukhia and Dibrugarh towns respectively, in the. State of Assam and the share- holder-Managing
Directors of the two companies assail the constitutional validity of the Indian
Electricity (Assam Amendment) Act, 1973, and of the Tinsukia and Dibrugarh
Electric Supply Undertaking (Acquisition) Act, 1973. By the latter enactments,
the undertakings of the two companies were sought to be acquired so as to vest
them in the Govern- ment with effect from 27.9. 1972.
The
petitioners also urge, in the petitions, a challenge to the validity of the
Twentyfourth and Twenty fifth Amend- ments to the Constitution. This part of
the petition, in view of the subsequent pronouncements of this court on these
amendments, does not survive.
2. The
petitioner-companies are Public Limited Companies registered under the Indian
Companies Act, 1913, and are existing companies under the Companies Act 1956
with their registered offices at Tinsukhia and Dibrugarh respectively in the
State of Assam. The two companies, Tinsukhia Electric Supply Company Ltd., and
the Dibrugarh Electric Supply Company Ltd.--hereinafter referred to
respectively as the 'Tinsukhia Co.' and 'Dibrugarh Co.'--were granted 'licences
under the provisions of the Indian Electricity Act, 1910 ( 1910 Act for short)
for supply of electricity within the respective licenced areas viz. of the
Tinsukhia and Dibru- garh Municipal Boards. The 'Dibrugarh Company' was granted
the 'Dibrugarh Electricity Licence, 1928' on terms and conditions particularised
in the grant, incorporating, inter alia, an option to the State to purchase the
undertaking on the expiration of 50 years from 13.2.1928 the date of com-
mencement of the licence and thereafter on the expiration of every subsequent
period of twenty years.
The
Tinsukhia Company was similarly granted the 'Tinsuk- hia Electricity Licence,
1954', incorporating, inter-alia, a condition as to the option exercisable by
the State of Assam to purchase the electricity undertaking of the licencee on
the expiration of 20 years from 21.7. 1954, the date of commencement of the
licence, and thereafter on 558 the expiration of every subsequent decennial
period.
3.
However, by two Ordinances, namely, The Indian Elec- tricity (Assam Amendment)
Ordinance, 1972: (Assam Ordinance VII, 1972) and the Tinsukhia & Dibrugarh
Electricity Supply Undertakings (Acquisition) ordinance, 1972, (Assam Ordinance
VIII of 1972) promulgated by the Governor in exercise of his legislative powers
under Article 2 13 of the Constitution, the Electricity Supply Undertakings of
the two companies were acquired by, and stood vested in, the Government with
effect from 23.30 hrs. on 27.9.1972. Possession and control of the two
undertakings were, accordingly, taken-over by the Government of Assam that day.
The two ordinances were subse- quently replaced by the two corresponding
legislative enact- ments viz., the Indian Electricity (Assam Amendment) Act,
1973, (Assam Act IX, 1973) and the Tinsukhia & Dibrugarh Electric Supply
Undertakings (Acquisition) Act, 1973, (Assam Act, X of 1973).
At the
time of filing of the writ petitions the two Ordinances had not been replaced
by the legislative meas- ures. However, after the coming into force of the two
legis- lative enactments, with retrospective effect from:the date of
promulgation of the earlier ordinances, petitioners sought, and were granted by
an order of this Court dated 18.12.1973, leave to amend the petitions so as to
direct the challenge against the enactments.
4. An
advertence, though brief, to the factual anteced- ents leading upto to the
promulgation of the Ordinances and to certain earlier steps taken by the State
Government to acquire the said undertakings, first by negotiations, and later
by exercise of the option to purchase, is necessary in order to put the grounds
of challenge in their proper per- spective.
Respondent
No. 4 i.e. the Assam State Electricity Board, it would
appear, had been expressing its intention to take- over the undertaking of the
Tinsukia Co. by private negotia- tions even from the year 1964. Pursuant to and
in implemen- tation of this proposal the Board had constituted a commit- tee of
3 members for assessing the value of the assets of the Tinsukhia's undertaking.
On the valuation so made and the inventories so prepared, the Board, on
27.3.1970, in- formed the Tinsukia Co. that the Board had approved the
valuation of the assets of the undertaking at Rs.30,54,246, excluding, the
value of the land, whose value was later estimated at Rs.2,40,000. By letter
dated 4.3.1971, the Chairman of the Assam State Electricity Board 559 informed
Tinsukia Co., that the company should immediately signify and communicate its
acceptance of the proposal to transfer the undertaking to the Board at the
valuation of Rs.33,00,000. The company, appears to have tarried and did not
signify and communicate its immediate and unqualified acceptance of the offer;
but appears to have had some coun- ter-proposal in mind and, in the expectation
of pursuading the Board to its view, requested the Chairman of the Board to
visit Tinsukia for holding further discussions in the matter of valuation of
the Undertaking. Thereafter the Chairman along with the officers of the Board
visited Tinsu- kia sometime in June, 1971, and held discussion with the
company. The company avers that pursuant to these discus- sions, the Executive
Engineer of the Board was asked by the Chairman to prepare a fresh inventory as
on 31.10.1971 in collaboration with the company.
However,
the Secretary of the Board sent a communication dated 10.12.1971 to the company
to the effect that as the company had not conveyed its concurrence to the offer
con- tained in the Board's letter dated 25.3.1970 the said offer be treated as
withdrawn. Thereafter, the Board issued the notice dated 15/23 May 1972 to the
company conveying the Board's intention to exercise its option of purchasing
the undertaking under Section 6(1) of the 1910 Act read with clause 12(iv) of
the licence on the expiration "the term of the licence" and,
accordingly, required the company to sell the undertaking to the Board on the
expiration of 21.9.1974 when the 20 year period of the licence would come to an
end.
In
response to this notice, the company sent its communica- tion dated 17.8.1972
seeking confirmation of its expectation that the purchase price for the
statutory sale would be determined in accordance with the provisions of section
7A of the 1910 Act and that such price would also be tendered to the company on
or before the date of taking-over. Nothing further appears to have happened
pursuant to this notice to purchase. But, as stated earlier, the two Ordinances
were promulgated on 27.9.1972 for the compulsory acquisition of the undertaking
of the company.
So far
as the Dibrugarh company is concerned, similar negotiations for purchase by
private negotiations had been initiated and the Chief Engineer of the Board
accompanied by the Finance and Accounts Member of the Board visited Dibru- garh
on 27.1.1965 for discussions as to the valuation of the undertaking. Nothing moved
in the matter for some years.
However,
in the communication dated 3.8.1970 addressed by the Secretary to Government of
Assam, Power (Electricity), Mines and Minerals Department, to the Secretary of
the 560 Board, it was reiterated that Government had decided that the
undertaking of the Dibrugarh Co. should be taken-over by negotiation. While
matters remained thus, the company's undertaking was taken over on 27.9.1972
pursuant to the two ordinances promulgated by the Governor.
5. We
may briefly turn to the provisions of the two enactments which have since
replaced the two Ordinances:
The
amendments made to Sections 5, 6 and 7A of the Indian Electricity Act, 1910, by
the Indian Electricity (Assam Amendment) Act, 1973, are substantial and far-reaching.
Section 2 of the Amending Act amended Section 5 of the Principal Act by
substituting the expression "the purchase price of the undertaking"
in sub-sec. (2) of Section 5 by the expression 'an amount'. Section 3 of the
Amending Act which amended sub-Sec. (7) of Section 6 of the Principal Act
substituted the words 'the purchase-price' occurring in sub-Sec. (7) of Section
6 by the words "an amount". The amendments brought about by Section 4
of the Amending Act to Section 7-A of the Principal Act were equally substantial.
Section
7A of the Principal Act,' it may be recalled, pro- vided that where an
undertaking of a licensee, not being a local authority, was sold under sub-Sec.
(1) of Section 5 the purchase-price of the undertaking shah be the market-
value of the undertaking at the time of purchase, or where the undertaking had
been delivered before the purchase under sub-Sec. (3) of Sec. 5, at the time of
delivery of the undertaking, and that if there was any difference of dispute
regarding such purchase price, the same shall be determined by arbitration. But
Section 4 of the Amending Act substitut- ed an entirely different provision in
the place of the old section 7-A. It substituted "book-value" in
place of "mar- ket-price". Sections 5(2), 6(7) and 7-A, of the Principal
Act after their amendment-read thus:
"Section
5(2): Where an undertaking is sold under sub-section (1) the purchaser shall
pay to the licencee an amount in accordance with the provisions of sub-sections
(1) and (2) of Section 7-A." Sub-sec. (7) of Section 6, after the amendment,
reads:
Section
6(7): Where an undertaking is purchased under this section, the purchaser shall
pay to the license an amount determined in accordance with the provisions of
sub-sections (1), (2) and (3) of Section 7A.
561
Section 7A reads:
"7-A.
Determination of amount pay- able. (1) where an undertaking of a licensee is
sold under sub-section (1) of Sec. 5 or purchased under Sec. 6, the amount
payable for the undertaking shall be the book value of the undertaking at the
time of purchase or where the undertaking has been delivered before the
purchase under sub-Section (3) of Sec. 5, at the time of delivery of the
undertaking.
(2)
The book value of an undertaking for the purpose of sub-section (1) shall be
deemed to be the depreciated book value as shown in the audited balance-sheet
of the licensee under the law for the time being in force, of all lands,
buildings, works, materials and plant of the licensee, suitable to and used by
him for the purpose of the undertaking, other than (i) a generating station
declared by the licensee not to form part of the undertaking for the purpose of
purchase, and (ii) service lines or other capital works or any part thereof
which have been construct- ed at the expense of the consumers, but with- out
any addition in respect of compulsory purchase or of goodwill or any profit
which may be or might have been made from the under- taking or of any similar
consideration.
(3)
Notwithstanding anything contained in any licence or any instrument, order
agreement or law for the time being in force in respect of any additional sum
by whatever name may it be called, payable to a licensee for compulsory
purchase, the licensee shall be entitled only to a solatium of ten per centum
of the book value as determined under sub-sections (1) and (2) for compulsory
purchase of his undertaking under Sec. 6.
(4) No
provision of any Act for the time being in force including the other provi-
sions of this Act and of any rules made there- under or of any instrument including
licence have effect by virtue of any of such Acts or any rule made thereunder,
shall, in so far as it is inconsistent with any of the provisions of this
section, have any effect." It is material to point out that sub-section
(3) of Section 1 of the Amending Act provides that the Amending Act shall be
deemed to 562 have come into force on 27.9.1972, which was the date of
promulgation of the earlier Ordinance.
6. We
may now notice some of the material provisions of the Acquisition Act i.e.
Assam Act X of 1973. Section 1(3) provides that the Act shall be deemed to have
come into force on 27.9.1972. Clauses (f), (h), (j) & (l) of the
interpretation-clause (Sec. 2) may be noticed:
2(f)
'Fixed Assets' includes works, spare parts, stores, tools, motor and other
vehicles, office equipment and furniture;
2(h):
'Licensee' means the Tinsukia Electric Supply Company Ltd. and/or the Dibrugarh
Electric Supply Company Private Ltd., as the case may be;
2(j):
'Undertaking' means the Tinsukia Elec- tric Supply Undertaking owned and
managed by the Tinsukia Electric Supply Company Ltd., and/or the Dibrugarh
Electric Supply Undertak- ing owned and managed by the Dibrugarh Elec- tric
Supply Company Private Ltd., as the case may be;
2(1):
'Works' includes electric supply lines and any lands, buildings, machinery or
appara- tus required to supply energy and to carry into effect the object of a
licence granted under the Electricity Act;
Section
3(2) provides:
3(2):
Any notice given under any of the provisions of the Electricity Act or the
Electricity Supply Act to the licensee for the purchase of the undertaking and
in pursuance of which notice the undertaking has not been purchased before the
commencement of this Act, shall lapse and be of no effect.
Explanation:
There shall be no obligation on the part of the Government or the Board to
purchase any undertaking in pursuance of any notice given as aforesaid, nor
shall the service of such notice' be deemed to prevent the Government from
taking any proceeding de novo in respect of the undertaking under this Act.
Section
4 provides:
4.
Vesting date. The Tinsukia and Dibrngarh Electric Sup- 563 ply Undertakings
shall be deemed to be trans- ferred to and shall vest in the Government, on the
27th day of September, 1972, at 11.30 P.M.
Section
5 provides for the transfer of the undertaking so acquired by Government to the
Board.
Section
6 provides for the gross amount pay- able to the licensee.
6.
Gross amount payable to Licensee. (1) The gross amount payable to a licensee shall
be the aggregate value of the amounts specified below:
(i) the
book value of all completed works in beneficial use pertaining to the
undertaking and taken over by the Government (excluding works paid for by
consumers) less depreciation calculated in accordance with Schedule I;
(ii) the
book value of all works in progress taken over by the Government, exclud- ing
works paid for by consumers or prospective consumers;
(iii)
the book value of all stores including spare parts taken over by the Gov-
ernment and in the case of used stores and spare parts, if taken over, such
sums as may be decided upon by the Government;
(iv) the
book value of all other fixed assets in use on the vesting date and taken over
by the Government less depreciation calculated in accordance with Schedule I;
(v)
the book value of all plants and equipments existing on the vesting date, if
taken over by the Government, but no longer in use owing to wear and tear or to
obsolescence, to the extent such value has not been written off in the books of
the licensee less depreci- ation calculated in accordance with Schedule I;
(vi)
the amount due from consumers in respect of every hire purchase agreement
referred to in Sec. 7(i)(ii) less a sum which bears to the difference between
the total amount of the instalments and the original cost of the material or
equipment, the same proportion as the amount due bears to the total amount of
the instalments;
564
(vii) any amount paid actually by the licensee in respect of every contract
referred to in Section 7(i)(iii).
Explanation--The book value of any fixed asset
means its original cost and shall com- prise-- (i) the purchase price paid by
the licensee for the asset, including the cost of delivery and all charges
properly incurred in erecting and bringing the asset into benefi- cial use as
shown in the books of the under- taking;
(ii) the
cost of supervision actually incurred but not exceeding fifteen per cent of the
amount referred to in paragraph (i);
Provided
that before deciding the amounts under this subsection, the licensee shall be
given an opportunity by the Govern- ment of being heard, after giving him a
notice of at least 15 days therefor.
(2) In
addition a sum equal to 10 per cent of the amounts assessed under Clauses (i)
to (iv) of sub-section (1) shall be paid to the licensee by the Government.
(3)
When any asset is acquired by the licensee after the expiry of the period to
which the latest annual accounts relate, the book value of the asset shall be
such as may be decided upon by the Government;
Provided
that before deciding the book value of any such asset, the licensee shall be
given an opportunity by the Government of being heard after giving him a notice
of at least 15 days therefor.
Section
7 provides:
7.
Vesting of undertakings. (1) The property, rights, liabilities and obligations
specified below in respect of the undertaking shall vest in the Government of
the vesting date;
(i) all
the fixed assets of the licensee and all the documents relating to the under-
taking;
565 (ii)
all the rights, liabilities, and obligations of the licensee under hire-pur-
chase agreements, if any, for the supply of materials or equipment made bona
fide 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 leading of money, or to the employment of staff.
(2)
All the assets specified in sub- Section (1)(i) shall vest in the Government free
from any debts, mortgages or similar obligations of the licensee or attaching
to the undertaking;
Provided
that such debts, mortgages or obligations shall attach to the amount payable
under this Act for the assets.
(3) In
the case of an undertaking which vests in the Government under this Act, the
license granted to it under part II of the Electricity Act shall be deemed to
have been terminated on the vesting date and all the rights, liabilities and
obligations of the licensee under any agreement to supply elec- tricity entered
into before that date shall devolve or shall be deemed to have devolved on the
Government;
Provided
that where any such agreement is not in conformity with the rates and condi-
tions of supply approved by the Government and in force on the vesting date,
the agreement shall be voidable at the option of the Govern- ment.
(4) In
respect of any undertaking to which Sec. 4 applies, it shall be lawful for the
Government or their authorised representa- tive on and. after the vesting date,
after removing any obstruction that may be or might have been offered, to take
possession of the entire undertaking, or as the case may be the fixed assets
and of all documents relating to the undertaking which the Government may
require for carrying it on.
(5)
All the liabilities and obliga- tions, other than those vesting in the Govern-
ment under sub-Sections (1) and (3), shall continue to be the liabilities and
obligations of the licensee, after the vesting date.
Explanation.
All liabilities and obligations in respect of 566 staff, taxes, provident fund,
employees' state Insurance, Industrial disputes and all other matters, upto and
including the vesting date, shall continue to be the liabilities and
obligations of the licensee, after the vesting date.
Section
9 provides:
9.
Deductions from the gross amount. The Government shall be entitled to deduct
the following sums from the gross amount payable under this Act to a licensee--
(a) the amount, if any, already paid in ad- vance;
(b) the
amount if any, specified in Sec. 8;
(c) the
amount due, if any, 'including interest thereon, from the licensee to the
Board, for energy supplied by the Board before the vesting date;
(d) all
amounts and arrears of interest, if any thereon, due from the licensee to the
Government,
(e)
the amount, if any, equivalent to the loss sustained by the Government by
reason of any property or rights belonging to the undertaking not having been
handed over to the Government, the amount of such loss being deemed to be the
amount by which the market value of such property or rights exceeds the amount
payable therefor under this Act, to- gether with any income which might have
been realized by the Government, if the property or rights had been handed over
on the vesting date;
(f)
the amount of all loans due from the licensee to any financial institutions
consti- tuted by or under the authority of the Govern- ment and arrears, or
interest, if any, there- on;
(g)
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;
(h)
all advances from consumers and prospec- tive consum- 567 ers, and all sums
which have been or ought to be set aside to the credit of the consumers' fund,
in so far as such advances or sums have not been paid over by the licensee to
the Government;
(i) the
amounts remaining in Tariffs and Dividends Control Reserve, Contingencies
Reserve and Development Reserve, in so far as such amounts have not been paid
over by licen- see to the Government;
(j) the
amount, if any, as specified in Ss. 11(2) and 11(3):
(k) the
amount, if any, relating to debts, mortgages or obligations as mentioned in
proviso to sec. 7(2);
Provided
that before making any deduc- tion under this section, the licensee shall be
given a notice to show cause against such deduction, within a period of fifteen
days from the date of receipt of such notice.
Section
10 enables the Government to appoint, by order in writing, a person having
adequate knowledge and experience in matters relating to accounts as Special
Officer to assess the net amount payable under this Act, after making the
deductions enumerated in section 9.
Section
20 provides:
20.
Arbitration. (1) Where any dispute arises in respect of any of the matters
speci- fied below, it shall be determined by an arbitrator appointed by the
Government, who shall be a sitting or retired District or High Court Judge--
(a) whether any property belonging, or any right, liability or obligation
attaching to the undertaking, vests in the Government;
(b) whether
any fixed asset forms part of the undertaking;
(c) whether
any contract or hire-purchase agreement or other contract referred to in SEC.
7(1)(ii) or (iii) has been entered into bona fide or not;
(d) whether
any agreement to supply electricity entered into by the licensee prior to the
vesting date is of the nature referred to in proviso to S. 7(3).
568
(2) Subject to the provisions of this section, the provisions of the
Arbitration Act, 1940 (Central Act 10 of 1940) shall supply to all arbitrations
under this Act.
Section
23 of the Act incorporates a declaration to the effect that the legislation is
for giving effect to the policy of the State to secure the principle of State
Policy contained in Article 39(b) of the Constitution of India.
7. The
two legislations, one amending the provisions of Sections 5(2) 6(7) and 7-A of
the Indian Electricity Act, 1910, and the other providing for the acquisition
of the two undertakings are challenged by the petitioner on several grounds,
the principal attack, however, being that the legislations, brought forth, as
they were, in the wake of the private-negotiations and the exercise of the
option to purchase, are not bona .fide, but constitute a mere colour- able
exercise of the legislative power and that, at all events the real objects of
the two legislations have no direct and reasonable nexus to the objects
envisaged in clause (b) of Article 39 of the Constitution and that a careful
and critical discernment of the context in which the legislation was brought
forth would lay bare before the judicial eye that what was sought to be
acquired was not the "undertakings" of the two companies but really
the differ- ence between the "market-value" of the undertakings which
the State has agreed, under the private treaties, to pay and what, in any event,
the State was obliged to pay under the provisions of Section 7A, as it then
stood on the one hand and the "Book-Value" of the undertaking, which
the law seeks to substitute on the other. If the protective umbrella of Article
31-C is, thus, out of the way, the 'amount' payable under the impugned law, it
is urged, would be illusory even on the judicially accepted tests applied to
Article 31(2) as it then stood. The validity of some of the specific provi-
sions of the acquisition law which excluded certain items from valuation and
envisaged and authorised certain deduc- tions in the amount are also assailed.
8.
These writ petitions were heard along with a batch of writ petitions, viz, WP
Nos. 5, 14, and 15 of 1974, where the constitutionality of an analogous statute
of the State of Tamil Nadu was assailed by the companies whose undertak- ings
were similarly sought to be acquired and civil appeal No. 243 of 1985, C.A. 344
of 1985 and C.A. 4113 of 1985 arising out of the Judgment, dated 20.7.1984, of
the High Court of Bombay striking down certain amendments to the Indian
Electricity Act, 1910, made by the Maharashtra State Legislature in the matter
of statutory purchase of some of the private 569 electricity supply
undertakings in the State of Maharashtra.
The
three batches of cases arising from Assam, Tamil Nadu and Maharashtra were heard together as there were
certain aspects common to-them. However, in view of the distinctiveness and
particularities of the facts of the cases and the situational variations even
in respect of the legal context in which questions arise for decision, the
three batches of cases are disposed of by separate Judg- ments. The present
Judgment disposes of the challenge made to the Assam Legislation.
9. We
have heard Shri Soli J. Sorabji, learned Senior Advocate, and Shri Harish
Salve, learned Advocate, for the petitioner in W.P. 457 of 1972 and Sri
Rangarajan, learned Senior AdVocate for the petitioner in W.P. 458 of 1972 and
Dr. Shankar Ghosh, learned Senior Advocate, for the State of Assam and Sri G.L.
Sanghi, learned Senior Advocate for the Assam State Electricity Board and its
authorities. On the contentions urged at the hearing, the points that fall for
consideration in the writ-petitions admit of being formulat- ed thus:
(a) That
the declaration in Sec. 23 of Assam Act X 1973 is invalid as the impugned Act
has no reasonable and direct nexus to the principles in Article 39(b) of the
Constitu- tion and is merely a cloak which the law is made to wear to undo the
legitimate obliga- tions arising out of the intended statutory- sale of the
undertakings and, accordingly, Article 31-C is not attracted.
That,
at all events, not every provision of a statute is entitled to the protection
of Article 31-C but only those provisions which are basically and essentially
necessary for giving effect to the principle in Article 39(b) and that,
accordingly, the provisions in the impugned law relating to the determination
of the amount do not attract Article 31-C.
(b)
That in effect and substance the law is not one for the acquisition electricity
undertakings but is merely one to acquire a 'chose-in-action' and to extinguish
the legal rights of the Tinsukhia Co. for the difference between the
"market-price" of the undertakings which the State was obliged to pay
under the intended statutory-purchase and the "Book- Value" to which
the liability is sought to be limited under the impugned legislations.
(c)
That, if the immunity under Article 31-C for the legis- 570 lations is not
available, the 'amount' payable in accordance with the provision of the ac-
quiring law is wholly "illusory" and is an attempt to take away a
'fortune for a far- thing'.
And
accordingly, the law is ultra-vires and violative of Article 31(2) of the
Consti- tution (as it then stood). Payment of "Book- Value" of the
assets acquired irrespective of their 'market-value' renders the 'amount'
unreal and illusory.
(d)
That the exclusion of "service- lines", which are part of the assets
of the licensee as from valuation, renders the law unconstitutional and
ultra-vires.
(e)
That the provision of Section 9(i) for the deduction of the 'Reserves' from the
"Amount", in addition to the takingover of the same in the form of
'fixed assets' and the omission to value the unexpired period of licence are
unreasonable and arbitrary.
(f)
That the continued liability of the petitioner-licensee under Section 11(3) for
payment to employees retrenched by Government after the vesting-date and the
provision for deduction of such sums from the "Amount" payable for
the acquisition are arbitrary and unreasonable.
(g)
That while Section 7(5) makes all the liabilities of the licensee, other than
those specifically referred to and expressly taken over by Government under the
Act, as the continuing liabilities of the licensee, yet some of those
liabilities referred to in clauses (c) (d) and (f) of Section 9, are yet made
deductible from the "Amount", without the corresponding express
obligation on the part of the Government to hold the sums so deducted in trust
for, and for benefit of the concerned creditors and without statutory
discharged to the petitioner in that behalf. This is unjust enrichment.
(h)
That there is no machinery envisaged by and set-up under the 'Act' to
adjudicate upon and determine either the amounts deducti- ble under clauses (c)
(d) and (e) of Section 9 or the "loss" deductible under Section 8.
This renders the provisions of the 'Act' intracta- ble and liable to be
declared unworkable.
571
(i) That Section 20 limits arbitrabili- ty only to matters enumerated in
clauses (a) to (d) of that section, leaving many other disputes arising under
the 'Act' between the Government and the licensee without any ma- chinery for
their resolution, also rendering the 'Act' unworkable.
10.
The contentions noticed at (a), (b) and (c) cover amongst them certain
overlapping areas. The central attack, however, remains that Assam Act X of
1973 has no reasonable and direct nexus with the effectuation of the principles
envisaged in clause (b) of Article 39 of the Constitution and that the
relationship of the impugned legislation to the objects of Article 39(b), being
merely remote and tenuous, the legislation is a colourable legislation. The
contentions are, however, noticed distinctively to make due acknowledge- ment
for the shifts of emphasis in the course of the argu- ments.
In
this case the legal and constitutional position has to be examined with
reference to the provisions of the Constitution as they stood as in 1972.
Article 31C was inserted by the 25th Amendment with effect from 20.4.1972 prior
to its more comprehensive expansion to extend its protection to the laws giving
effect to "All or any of the provisions laid down in Part IV' brought
about by the Con- stitution (Fortysecond Amendment) 1976. Article 31C gave
protection in respect of a law giving effect to the policy of the State towards
securing the principles specified in clause (b) or clause (c) of Article 39.
Then again, though Article 31 had not, by then, been deleted, its content had
been cut-down so much, so that even under a law providing for acquisition of
property which did not have the protec- tion of 31C the adequacy of the
"Amount" determined was not justiciable and all that was necessary
was that it should not be unreal or illusory. By then the Constitution had done
away with the idea of a Just-equivalent or full idemnifica- tion principle and
substituted therefore the idea of an "Amount" and rendered the
question of the adequacy or the inadequacy of the amount non-justiciable.
The
Indian Constitutional experiments with the 'right to property' offer an
interesting illustration of how differ- ences in the interpretation of the
fundamental law sometimes conceal--or, perhaps, expose--conflicts of economic
idealog- ics and philosophies. With the right to property conceived of as a
fundamental fight at the inception of the Constitu- tion, it found so strong an
entrenchment that in its pris- tine vigour it tended to be overly demanding and
sought the sacrifice of too many social and economic goals at its alter and
made 572 the economic cost of social and economic change unaffordably
prohibitive and the fulfilment of the constitutional ethos of the promise of an
egalitarian social order difficult.
Inevitably
the constitutional process of de-escalation of this right in the constitutional
scale of values commenced culminating, ultimately, in the deletion of this
right from the fundamental-rights part. Articles 31-A and 31-C were significant
Constitutional milestones in the harnessing and socialisation of the concept of
the right to property which, in its laissez-faire trappings, became an unruly
horse.
Article
31-C in effect and substance is to urban property what Article 31-A is to
agricultural-property.
11.
The arguments in this case in regard to what, if at all, survives for judicial
scrutiny in the matter of the Constitutional-tests of the validity, under
Article 31(2) of the 'amount' if the law has the protection of Article 31C,
were marked by a forensic resourcefulness aimed at a resus- citation and
re-kindling of the relics and embers of old and hard fought--but lost--legal
battles. Sri Rangarajan, learned Senior Advocate, relying upon the construction
suggested by him of certain observations of Chandrachud, J.
in the
Keshavananda case (1973 SCR Suppl 1) and certain observations of Fazl Ali J. in
State of Tamil Nadu v. Abu Kavur Bai, AIR 1984 SC 326 strenuously, and quite
seriously, attempted the exercise that even if a law had the protection of
Article 31C, yet the court would be required--when the provision is
challenged--to go into the question of the "Amount" being illusory or
the principles for its determina- tion being arbitrary. Learned Counsel further
propounded that despite Article 31-C, the burden of proving that the amount is not
illusory and principles for its determination not arbitrary is on the State. We
may excerpt the substance of the contention from the written-submissions filed
by Sri Rangarajan:
"
..... Therefore, where the law provides for compensation, fin spite of the same
being protected by Article 31-C the Court can go into the question of the
amount being illusory or the principles being arbitrary.
Not
merely that, the burden of providing that the amount is not illusory and the
principles are not arbitrary, is on the State." We shah later examine how
far this contention is at all available in the light of the authoritative
pronouncements of this Court on the effect of Article 31C and whether if a law
has such protection, the plenitude of its constitutional immunity would not
extend to all attacks based on Articles 14, 19 and 31 (as it then stood).
573 We
may now examine the contentions seriatim. Contentions (a) and (b) admit of
being dealt with together.
12.
Re: Contentions (a) and (b):
Shri
Soli J Sorabjee submitted that in the present case, notwithstanding the
legislative declaration in Sec. 23 of Assam Act X of 1973, the question whether
there is any real nexus between the legislation and the principles envisaged in
Article 39(b) is justiciable and indeed the existence of such nexus or
connection is a condition-precedent for the attraction and applicability of
Article 31-C. Learned Coun- sel submitted that in order to decide whether a
Statute is within Article 31-C or not, the Court has to examine the nature and
character of the legislation and if upon such scrutiny it appears that there is
no nexus between the legislation and the principles in Article 39(b) the
legisla- tion must be held to fall outside the protection of Article 31-C. Shri
Sorabjee said, stripped of its veils and vest- ments, the law, would show its
real nature as one whose avowed nexus to Article 39(b) is merely a pretence and
that its purpose is other than the objects envisaged in Article 39(b). The
validity of the legislation, learned counsel says, would have to be examined
independently of the immuni- ty under Article 31C.
The
proposition that the legislative declaration of the nexus between the law and
the principles in Article 39 is in-conclusive and justiciable is well settled.
Indeed that part of Article 31-C which sought to impart a Constitutional
sanctity, conclusiveness and nonjusticiability to such legislative declarations
was struck-down in the Keshavanada case. The sequintor is that whenever any
immunity is claimed for a law under Article 31-C, the Court has the power .to
examine whether the provisions of the law are basically and essentially
necessary for the effectuation of the principles envisaged in Article 39(b) and
(c). The observations of Mathew, J. in Keshvananda case ( 1973 SCR Supp 1) may
be recalled:
"
..... Whenever a question is raised that the Parliament or State Legisla- tures
have abused their power and inserted a declaration in a law not for giving
effect to the State Policy towards securing the direc- tive principles
specified in Article 39-B or 39-C, the Court must necessarily go into that
question and decide it ..... " (P. 855) 574 " ..... If the Court
comes to the conclusion that the declaration was merely a pretence and that the
real purpose of the law is the accomplishment of some object other than to give
effect to the policy of the State towards securing the directive principles in
Article 39(b) and (c) the declaration would not be a bar to the court from
striking down any provision therein which violates Article 14, 19 or 31. In
other words, if a law passed ostensibly to give effect to the policy of the
State is, in truth and substance, one for accomplishing an unauthorised object,
the court would be entitled to tear the veil created by the declaration and
decide accord- ing to the real nature of the law ...... " (P. 855-56)
Chandrachud, J. observed in the Keshavananda case:
"'Laws
passed under Article 31-C can, in my opinion, be upheld only, and only if,
there is a direct and reasonable nexus between the law and the directive policy
of the State expressed in Article 39-B or C." (P. 996) To the same effect
are the observations of the learned Chief Justice in Minerva Mills Ltd. v. UOL.
[1981] 1 SCR 206:
"
..... the Courts can, under Article 31-C, satisfy themselves as to the identity
of the law in the sense whether it bears direct and reasonable nexus with a
directive principle." "The only question open to judicial review
under the unamended Article 31-C was whether there is a direct and reasonable
nexus between the impugned law and the provisions of Article 39(b) and
(c)" (P. 261) (Emphasis Supplied) In the same case, Bhagwati, J. observed:
"
..... The point that I wish to emphasis is that the amended Article 31-C does
not give protection to a law which has merely some remote or tenuous connection
with a directive principle." 575 " ..... Even where the dominant
object of a law is to give effect to a direc- tive principle it is not every
provision of the law which is entitled to claim protec- tion ......" (P.
338) " ..... it is not every provision of a statute which has been enacted
with the dominant object of giving effect to a direc- tive principle, that it
entitled to protec- tion, but only those provisions of the statute which are
basically and essentially necessary for giving effect to the directive
principles are protected under the amended Article 31-C " ...... (P. 339)
(Emphasis Supplied)
13.
The proposition of Sri Sorabjee, in principle, is, therefore, unexceptionable;
but the question remains wheth- er, upon the application of the appropriate
tests, the impugned statute fails to measure-up to the requirements of the
Constitution to earn the protection under Article 31-C.
Learned
counsel sought to contend that the Assam State Electricity Board having
exercised the option of purchasing the undertaking of the Tinsukia Co., under
Section 6(1) of 1910 Act by the statutory notice dated 23.5.1972 requiring the
company to sell the undertaking to the Board on the expiration of the period of
the licence, the question of any further need to acquire the undertaking for
the purpose of effectuating the objects envisaged in Art. 39(b) of the
Constitution by the expedience of a separate and independent legislation was,
indeed, unreal or non-existent. The real object, therefore, of the enactment of
Assam Act X of 1973 it was urged, was not to enact a law for purposes of effec-
tuating the objects envisaged by Article 39(b) of the Con- stitution which had
already been accomplished by the exer- cise of the option to purchase; but was
only to deprive the petitioner of its legitimate entitlements under the
statuto- ry-sale. What was sought to be acquired by the impugned law, it is
contended, was not the undertaking but the difference between the
'Market-price' and the 'Book-value' which the impugned legislation envisaged.
It is urged that the purpose of the impugned law is, therefore, something other
than the effectuation of principles in Article 39(b). It is also urged that
with the exercise of the option to purchase what remained to. be acquired--and
what really was sought to be acquired--was a mere actionable-claim or a
chose-in-action.
It is
further urged that, at all events, since not all the provisions of a
legislative enactment need necessarily qualify for protection of Article 31-C but
only those provi- sions that have a direct nexus with the principles of Arti-
cle 39(b), the 576 provisions in the impugned legislation touching the determi-
nation of the quantum of the "Amount" are not so protected as they
are intended merely to inter-dict and extinguish the vested rights of the
Tinsukhia Co. under the intended statu- tory-sale. The object of the
legislation, it was urged, was not the legitimate one of securing the objects
envisaged in Article 39(b) but a less honourable and less sanctimonious one of
depriving the petitioner of the benefit of the statu- tory-contract for the
sale of the undertaking pursuant to and in terms of the statutory notice dated
23.5.1972. The court, so goes the argument, is entitled to pierce the apparent
veil under which the acquiring legislation masquer- ades as one for securing
the object of Article 39(b).
Dr.
Shankar Ghosh and Sri G.L. Sanghi for the State of Assam and the Assam State Electricity Board,. the contest- ing-Respondents, however,
say that the Assam Act X, 1973, is entitled to the protection of Article 31-C
as, indisputably, Electrical energy is a material resource of the community and
any legislative measure to nationalise the undertaking falls squarely within
the ambit of Article 39(b). Any appeal by the petitioner to the doctrine of
colourable legislation, they say, is wholly inapposite as, indeed, where, as
here, legislative competence is undisputed, any speculation as to the motives
of the legislative is impermissible. No mala- fides could be attributed to the
Legislature. Respondents further submit that on the question of even the
possible 'illusory' nature, let alone the adequacy, of the "Amount"
could not be agitated if the law has the protection of Article 31-C. They,
however, assert that 'Book-value' is a well accepted accountancy concept of
value and could never be characterised as illusory, even if the law did not
come under Article 31-C.
The
questions that arise for consideration are, sequen- tially, whether the
electrical-energy generated and supplied by the petitioner-companies is a
"material resource of the community" within the meaning of Article
39(b); whether the impugned legislation has a reasonable and direct nexus to
the objective of distributing this materials resource so as to subserve the
common good and what are the appropriate tests to ascertain this nexus. The
incidental questions that arise on certain specific contentions centre around
the effect of the option to purchase the undertaking exercised by the Assam
State Electricity Board in the case of Tinsukia Co. and whether immediately
upon the exercise of the option the proprietory rights respecting the
undertaking of the company get transformed into a mere
"actionableclaim" or "chose in action", as contended for by
the petitioners.
577
Apropos of the contention that, at all events, the provi- sions pertaining to
the "amount" could have no reasonable or direct nexus to the
principles envisaged in Article 39(b), but are merely intended to extinguish
the legitimate rights of the petitioner-company to receive the price of the
under- taking under the 1910 Act, as the law then stood, pursuant to the option
exercised by the 'Board', it would, perhaps, be necessary to ascertain the
composite-elements that make for a law of nationalisation and whether
provisions touching the quantification of the "amount" payable for
the acquisi- tion are not an essential and integral part of such law.
On the
contention urged by Shri Rangarajan as to what could be said to survive for
consideration under Article 31(2), (as it then stood), if the law has the
protection of Article 31-C the question that arises is whether anything at all
survives for consideration under Article 31. The conten- tion indeed, runs in
the teeth of several pronouncements of this Court which lay down that when
Article 31-C comes-in, Articles 14, 19 and 31 (the last mentioned article as it
then stood) go out. This we will consider under point (c).
14. It
is not disputed that the electricity generated and distributed by the undertakings
of the petitioner-compa- nies constitute "material resources of the
community" for the purpose and within the meaning of Article 39(b).
In
Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd., [1983] 1 SCR
1000 this Court, referring to what constitute "material resources of the
community" and whether resources produced by, or at the command of,
private, as distinguished from the State agencies, constitute such resources as
the resources of the community, noticed the contention urged in that case thus:
"
..... The submission of Shri A.K. Sen was that neither a coal mine nor a coke
oven plant owned by private parties was a 'material resources of the
community'. Accord- ing to the learned counsel they would become material
resources of the community only after they were acquired by the State and not
until then. In order to qualify as material re- sources of the community the
ownership of the resources must vest in the community i.e. the State ..... A
law providing for acquisition was not a law for distribution ...... " (P.
1022) 578 Repelling this argument which suggested a limited concept of
"Material resources of the Community" the Court observed:
"
..... We are unable to appreciate the submission of Shri Sen: The expression
'material resources of the community' means all things which are capable of
producing wealth for the community. There is no warrant for interpreting the
expression in so narrow a fashion as suggested by Shri Sen and confine it to
public-owned material resources, and exclude private-owned material resources.
The expression involves no dichotomy ...... " ( P. 1022 & 23) It can,
therefore, hardly be gain-said that the electri- cal energy generated and
distributed by the undertakings of the petitioner constitutes "material resources
of the commu- nity".
15.
This takes us to the question whether the provisions of the impugned Assam Act
X 1973 have any reasonable and direct nexus to the principles in Article 39(b)
of the Constitution. It is true that if such a relationship is merely remote
and tenuous the protection under Article 31-C may not be available. The idea of
distribution of the mate- rial resources of the community in Article 39(b) is
not necessarily limited to the idea of what is taken over for distribution
amongst the intended beneficiaries. That is one of the modes of
"distribution". Nationalisation is another mode. In State of Tamil Nadu v. L. Abu Kavur Bai, AIR 1984 SC
326 this Court had occasion to refer to this aspect. It was held:
"In
other words, the word 'distribu- tion' does not merely mean that property of
one should be taken over and distributed to others like land reforms where the
lands from the big landlords are taken away and given to landless laboureft,
..... That is only one of the modes of distribution but not the only mode
...... " "By nationalising the transport as also the units the
vehicles would be able to go the farthest comer of the State and pene- trate as
deep as possible ......
"This
would undoubtedly be a distri- bution for the common good of the people and
would be clearly covered by clause (b) of Article 39." 579 On an
examination of the scheme of the impugned law the conclusion becomes
inescapable that the legislative measure is one of nationalisation of the
undertakings and the law is eligible for and entitled to the protection of
Article 31 -C.
16. It
was then contended that not all the provisions of a law can and need be
eligible for the protection of Article 31-C and that accordingly, in the
present case the provi- sions as to the quantification of the
"amount", which were meant to achieve an oblique motive of
interdicting and extinguishing the vested rights of the petitioner-company to
receive payment in accordance with the provisions of the 1910 Act, as they then
stood, should not have the protection of Article 31-C. We are afraid this
contention proceeds on an impermissible dichotomy of the components integral to
the idea of nationalisation. The economic cost of social and economic reform
is, perhaps, amongst the most vexed problems of social and economic change and
constitute the core ele- ment in Nationalisation. The need for constitutional
immuni- ties for such legislative efforts at social and economic change
recognise the otherwise unaffordable economic burden of reforms. The observations
of Mathew J. in Keshavananda case on the point are worth recalling:
"If
full compensation has to be paid, concentration of wealth in the form of
immova- ble or movable property will be transformed into concentration of
wealth in the form of money and how is the objective underlined in Article
39(b) and (c) achieved by the trans- formation? And will there be enough money
in the coffers of the State to pay full compensa- tion?" " ..... I am
unable to understand the purpose of substituting the word 'amount' for the word
'compensation' in the sub-Article unless it be to deprive the Court of any
yard-stick or norm for determining the adequa- cy of the amount and the
relevancy of the principles fixed by law. I should have thought that this
coupled with the express provision precluding the Court from going into the
adequacy of the amount fixed or determined should put it beyond any doubt that
fixation of the amount or determination of the princi- ple for fixing it is a
matter for the Parlia- ment alone and that the Court has no say in the
matter." (1973 Supp. SCR 1 at page 846) It is, therefore, not possible to
divorce the economic considera- 580 tions or components from the scheme of
nationalisation with which the former are inextricably integrated. The financial
cost of a scheme of nationalisation lies at its very heart and can not be
isolated. Both the provisions relating to the vestiture of the undertakings in
the State and those per- taining to the quantification of the
"Amount" are integral and inseparable parts of the integral scheme of
nationalisa- tion and do not admit of being considered as distinct provi- sions
independent of each other.
17.
The memorandum of the writ petition contains aver- ments as to the efficiency
and public-utility of the serv- ices rendered by the undertakings and that on
the date of the take-over the market value of the Tinsukhia and Dibru- garh
undertakings were Rs.55 lakhs and Rs.35 lakhs respec- tively and that. the
undertakings were discharging their obligations to the consumers efficiently
and satisfactorily.
The
case of the petitioners is that there was no justifica- tion at all for the
nationalisation as the undertakings were efficient and fully catered to the
needs of the consumers.
It was
also averted that it was the Government and the Board the had come in the way
of the expansion envisaged by the undertakings by withholding the requisite
permission for the installation of additional capacity for generation of elec-
tricity. The Respondents have sought elaborately to traverse these grounds and
to justify the measure for nationalisa- tion.
We are
afraid, the debate whether nationalisation is by itself to be considered as
fulfilling a public-purpose or whether the nationalisation should be shown to
be justified by the actual effectuation of the avowed objectives of such
nationalisation--the choice between the pragmatic and the doctrinaire
approaches--is concluded and no longer avail- able. In Akadasi Padhan v. State
of Orissa and Ors., AIR 1963 SC 1047 this debate on the philosophy of
nationalisa- tion is concluded. was held:
"
..... Broadly speaking, this discussion discloses a difference in approach.
To the
socialist, nationalisation or State ownership is a matter of principle and its
justification is the general notion of social welfare. To the rationalist,
nationalisation or. State ownership is a matter of expediency dominated by
considerations of economic effi- ciency and increased output of production
..... ".
"
...... The amendment made by the Legislature in Art. 19(6) shows that according
to the Legislature, a law 581 relating to the creation of State monopoly should
be presumed to be in the interests of the general public ...... " "
..... In other words, the theory underlying the amendment in so far as it relates
to the concept of State monopoly, does not appear to be based on the pragmatic
ap- proach, but on the doctrinaire approach which socialism accepts .....".
Indeed,
in the United States of America after the hey-days of the substantive due
process, the Supreme Court in 1963 in Ferguson v. Skrupa, 372 US 726 said:
"We
refuse to sit as a 'superlegis- lature to weigh the wisdom of legislation', and
we emphatically refuse to go back to the time when courts used the Due Process
Clause 'to strike down state laws, regulatory of business and industrial
conditions, because they may be unwise, improvident, or out of harmony with a
particular school of thought' .....
Whether
the legislature takes for its textbook Adam Smith, Herbert Spencer, Lord
Keynes, or some other is no concern of ours." (Emphasis Supplied)
18.
Equally untenable is the contention based on the assumption that immediately
upon the exercise of the option to purchase, the proprietory-rights of the
Tinsukhia Company in relation to the undertaking stood transformed into, and
was crystalised in the form of, a mere actionable-claim or a
"chose-in-action" and that, therefore, what was sought to be acquired
by the present legislative-measure was merely a "chose-in-action". It
was contended that no public purpose is achieved by the acquisition of a
"chose-in-action". This needs examination of the legal character and
incidents of the consequences that flow from the exercise of the option to
purchase under the 19 10 Act. The contention presupposes that contemporaneous
with the service of the notice on the licensee, the proprietory-rights of the
licensee in relation to the undertaking, proprio-vigore, get transformed into a
mere "chose-in-action". This consequence does not flow from the pro:
visions of 1910 Act. In Fazilka Electric Supply Company Limited v. The
Commissioner of Income-Tax, Delhi, [1962] Supp. 3 SCR 496 this court, referring
to the nature of the transaction emerging from the exercise of the option,
said:
582
"It merely provides for an option of purchase to be exercised on the
expiration of certain periods agreed to between the parties, and section 10
further provides that in an appropriate case Government may even forego the
option. This section does not provide for a compulsory purchase or compulsory
acquisi- tion without reference to and independently of any agreement by the
licencee." (See Page 505).
(Emphasis
Supplied) In Gujarat Electricity Board v. Shantilal, [1969] 1 SCR 580 referring
to the legal conse- quences that ensue by a mere exercise of the option, it was
held:
"
.... that the right to purchase the undertaking accrues only at the expiration
of the period of licence but for exercising that right, the authority must make
its elec- tion within the period prescribed in sec. 7(4) and issue a notice as
required by that sub- section ..... " (Emphasis Supplied) That the right,
title and interest of the licensee in the undertaking does not get transferred
to the Board or the State, as the case may be, immediately upon the mere exer-
cise of the option to purchase is further clear from what is implicit in the
observa- tions of this Court in Godra Electricity Company Limited and another
v. The State of Gujarat and another, [1975] 2 SCR 42 at
page
54.
The proposition contended for by the Learned Additional Solicitor General in
that case was noticed thus:
"In
support of the contention that when once the notice exercising the option to
purchase the undertaking has been served, the licensee has no further right to
carry on the business, the learned Additional Solicitor General placed reliance
on the decision of this Court in Kalyan Singh v. State of U.
P
........ " This Court held that the exercise of the option would have no
such effect on the licen- see's right to carry on his business until the
undertaking was actually taken over and paid- for. It was held:
"A
licensee cannot be told that he has no right to carry on the business unless a
valid purchase is made at the expiry of the period ..... " 583 "
...... Admittedly, the undertak- ing belonged to the licencee and if delivery
of the undertaking is to be taken by the State Electricity Board, the purchase
price must be paid before the delivery or, there must be a provision for
payment of interest on the purchase price for the period during which payment
is withheld. Otherwise, the licence will not cease to have operation and the
licensee wilt be entitled to carry on the business." (See Page 54).
The
contentions that immediately upon the exercise of the option, ipso-facto, the
relationship between the parties get transformed into one as between a Debtor
and a Creditor and that the interest of the licensee in the undertaking becomes
an "actionableright", or a "chose-in-action" and that no
public-purpose could be said to be served by the acquisition of a
"chose-in-action" are all out of place in this case.
19. It
is not necessary, therefore, to go into the question whether a "chose-in
action" can at all be acquired.
Certain
observations of this Court in Madan Mohan Pathak v. Union of India and Ors.,
[1978] 3 SCR 334 do suggest that "chose-in-action" could also be
acquired. It will also not be necessary to go into the legal concept of a
"chose-in- action" in Indian law and its distinctiveness from the
principles in English law.
Williams
on "Personal-property" refers to "chose-in-action" thus:
"
............ another important distinction exists among personal things. Such
things are said to be in possession or in action; or they are called, in law
French, choses in posses- sion or choses in action. Choses in possession are
movable goods, of which their owner has actual possession and enjoyment, and
which he can deliver over to another upon a gift or sale; tangible things, as
cattle, clothes, furniture, or the like .... " "The term choses in
action appears to have been applied to things, to recover or realise which, if
wrongfully withheld, an action must have been brought; things, in respect of
which a man had no actual posses- sion or enjoyment, but a mere right enforce-
able by action. The most important personal things recoverable by action only
were 584 money due from another, the benefit of a contract and compensation for
a wrong; and .these have always been the most prominent choses in action,
though not the only things to which the term has been applied .....
"(see
page 29 and 30) Indeed, in English law the difficulties in the precise
definition of chose-in-action arise out of the fact that the meaning attributed
to the expression has been expanded from time to time by judicial decisions and
the principles pertaining to the concept did not develop on any logical or
scientific basis.
W.S.
Holdsworth also refers to this diffi- culty in apprehending the precise
incidents of the concept of a "chose-in-action":
"It
is sometimes difficult to ascer- tain the sense in which the legislature has
used the term 'chose-in-action 'we have seen that Bankruptcy Act affords one
illustration, and, as we can see from the case of Edwards v. Dicard the
modifications introduced by the Courts have some times occasioned a similar
difficulty. Some of these difficulties might be perhaps mitigated by a
codifying Act, for which there is plenty of material. But, it is probable that
a branch of the law which comes at the meeting place of the law of property and
the law of obligation can never be any- thing but difficult to formulate and
apply." (Emphasis Supplied) (See: "The History of the treatment of
chose-inaction by the common law":- Vol. 33--Harvard Law Review 997 at
1030).
20.
Petitioners, however, placed strong reliance upon a decision of the Calcutta
High Court in Bihar State Electricity Board v. Patna Electricity Supply Co.
Ltd., AIR 1982 Cal. 74 and in particular on the
following observations of the Division Bench of the High Court in para 22:
"
...... The purported acquisition of part of the debt or chose in action by
Sections 2(ii) and 3 of the Bihar Act 7 of 1976 with retrospective effect is,
therefore, without any public purpose. Sections 2(ii) and 3 also do not provide
for payment of compensa- tion. In the circumstances, it must be 585 held that
Sections 2(ii) and 3 of the Bihar Act 7 of 1976 are ultra vires Art. 31(2) of
the Constitution." It is not necessary to consider the correctness of this
pronouncement in view of the circumstance that even to the extent the decision
goes it is distinguishable. On 5.1.1973, the Electricity Board exercised its
option to purchase the undertaking. On 2.2.1974, the Board paid a sum of Rs.36,00,000
"on-account" to the licensee. On 6.2.1974, possession was taken. On
2.2.1974, Ordinance 50 of 1974 was promulgated amending Section 7A of the 19 10
Act reducing the price payable under Section 7A to the book-value of the
assets. This Ordinance was renewed by two successive ordi- nances No. 83 of
1974 and 123 of 1974. The last ordinance was replace by Bihar Act 15 of 1975.
On 10.2.1976, the Indian 'Electricity (Bihar Amendment) Act 7 of 1976 was
brought into force validating the substitution of Section 6 and 7A, made by
Bihar Act 15 of 1975 with retrospective effect from 2.2.1974. The Validating
Act sought to affect the rights and obligations of the parties retrospectively.
The
High Court was persuaded to the view that the purported acquisition, virtually,
pertained to the debt or "chose- inaction" and not the undertaking
itself. It is, therefore, not necessary to consider the submissions of the
learned counsel for the respondent that it does not lay down the law correctly
in as much as the arguments based on Article 31-C were neither advanced nor
considered in that case.
It
requires, therefore, to be held that the impugned legislation viz., Assam Act
X, 1973, was broughtforth for securing the principles contained in Article
39(b) of the Constitution and is protected under Article 31-C. The amend- ment
made to the provisions of the Indian Electricity Act, 1910, by Assam Act IX of
1973, amending the basis for quan- tification of the amount payable in the case
of a statutory purchase pursuant to the exercise of the option in terms of the
licence would apply to and govern cases of statutory- sales and would not
assume any immateriality in this case as the Assam Act X of 1973 is itself--as
we have held--a valid piece of legislation.
22. We
find, therefore, no substance in the contentions (a) and (b) urged by the
petitioner.
23.
Re. contention (C):
This
pertains to the question whether the principles laid down in the Act for
determination of the "amount" payable for the acquisition 586 are so
arbitrary as to render the "amount" unreal and merely illusory. This
contention would not, in law, be available to the petitioners inasmuch as the
law providing for the acquisition has the protection of Article 31-C of the
Constitution. The arguments of Shri Soli J. Sorabjee in regard to the alleged
"illusory" nature of the "amount" presupposes and proceeds
on the premise that the impugned law does not have the protection of Article
31-C. Now that we have held that Article 31-C is attracted, the argument in
regard to the alleged illusory nature of the amount does not survive at all.
24.
Shri Rangarajan, however, contended that notwith- standing that a law has the
protection of Article 31-C, the question would yet be justiciable under Article
31(2), as it then stood, if the "amount" is illusory or the
principles for its determination arbitrary. To support this, somewhat
difficult, proposition Shri Rangarajan relied upon certain observations of
Chandrachud, J. in the Keshavananda case;
whose
import and importance, according to the learned coun- sel, has not been fully
and properly comprehended in subse- quent cases. The passages relied upon are:
"
.... But to say that an amount does not bear reasonable relationship with the
market value is a different thing from saying that it bears no such
relationship at all, none whatsoever. In the later case the payment becomes
illusory and may come within the ambit of permissible challenge." (See
para 2 137 at page 2051 of AIR 1973).
"
..... Courts would have the powers to question such a law if an amount fixed
thereunder is illusory; if the princi- ples, if any are stated, for determining
the amount are wholly irrelevant for fixation of the amount; if the power of
compulsory acqui- sition or requisition is exercised for a collateral purpose;
if the law offends Consti- tutional safeguards other than the one con- tained in
Article 19(1)(f); or if the law is in the nature of a fraud on the Constitution
". (See: para 2138 at page 2051 of AIR 1973).
These
observations. Sri Rangarajan says, were intended to govern even a law which had
the protection of Article 31-C. Shri Rangara- jan also relied upon certain
observations of Fazal Ali, J. in State of Tamil Nadu v. L. Abu Kaur Bai AIR
1984 SC 326 which say:
"87.
Thus, so far as this aspect of the matter is con- 587 cerned, two conclusions
broadly emerge:
(1) that
in view of the express provisions of Article 31-C which excludes Art.
31(2)
also where a property is acquired in public interest for the avowed purpose of
giving effect to the principles enshrined in Art. 39(b) and (c), no
compensation is neces- sary and Art. 31(2) is out of the harm's way, and (2)
that even if the law provides for compensation, the courts cannot go into the
details or adequacy of the compensation and it is sufficient for the State to
prove that the compensation was reasonable and not monstrous or illusory so as
to shock the conscience of the court." (Emphasis of counsel) Sri
Rangarajan would say that the observations empha- sised would show that even if
Article 31-C was attracted yet the State should show that compensation was
reasonable and not illusory.
We are
afraid, these passages are quoted out of context and, if properly understood,
were not intended to support the proposition now propounded by Shri Rangarajan.
Indeed in the Keshavananda case itself Chandrachud J. referring to the effect
of Article 31-C observed:
"...
In fact article 31-C is a logi- cal extension of the principles underlying
article 31(4) and (6) and article 31A. ............. The true nature and char-
acter of article 31-C is that it identifies a class of legislation and exempts
it from the operation of articles 14, 19 and 31 ........
"
(1973 supp. SCR 1 at 995) Khanna J. observed in that case:
Both
articles 31A and 31C deal with right to property. Article 31-A deals with
certain kinds of property and its effect is, broadly speaking, to take those
kinds of property from the persons who have rights in the said property. The
objective of article 31C is to prevent concentration of wealth and means of
production and to ensure the distri- bution of ownership and control of the
materi- al resources of the community for the common good. Article 588 31C is
thus essentially an extension of the principle which was accepted in article 31A
...... "(page 743) Beg, J said:
"Article
31-C has two parts. The first part is directed at removing laws passed for
giving effect to the policy of the State towards securing the principles
specified in clause (b) or clause (c) of Article 39 of the Constitution from
the vice of invalidity on the ground that any such law "is inconsistent
with or takes away or abridges any of the rights conferred by Articles 14, 19
and 31 of the Constitution." ...... the effect of invalidity for alleged
violations of Articles 14 or 19 or 31 would vanish so long as the law was
really meant to give effect to the princi- ples of Article 39(b) and (c) ......
" In State of Karnataka v. Ranganath Reddy, [1978] 1 SCR
641 this Court had occasion to observe:
"
..... For the purpose of deciding the point which fails for consideration in
these appeals, it will suffice to say that still the over-whelming view of the
majority of judges in Kesavandanda Bharati's case is that the amount payable
for the acquired property either fixed by the legislature or determined on the
basis of the principles engrafted in the law of acquisition cannot be wholly
arbitrary and illusory. When we say so we are not taking into account the
effect of Article 31-C inserted in the Constitution by the 25th Amendment
(leaving out the invalid part as declared by the majority)." (p. 653)
(Emphasis Supplied) In Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal
Company Lt., [1983] 1 SCR 1000 this Court said:
"
..... To accept the submission of Shri Sen that a law rounded on discrimination
is not entitled to the protection of Article 31-C, as such a law can never be
said to be to further the Directive Principle affirmed in Art. 39(b), would
indeed, be, to use a hack- neyed phrase, to put the cart before the horse. If
the law made to further the Direc- tive Principle iS necessarily
non-discrimina- tory or is based 589 on a reasonable classification, then such
law does not need any protection such as that afforded by Art. 31-C. Such law
would be valid on its own strength, with no aid from Art. 31-C. To make it a
condition precedent that a law seeking the haven of Art. 31-C must be
non-discriminatory or based on reasonable classification is to make Art. 31-C
meaning- less ...... " (p.1019) "We are firmly of the opinion that
where Art. 31-C comes in Art. 14 goes out .... " (p. 1021) What applies to
Article 14 would equally apply to Article 31 (as it then stood before its
deletion by the Constitution Fortysecond (Amendment) Act, 1978).
In
State of Tamil Nadu v. L. Abu Kavur Bai, AIR 1984 SC
326 on which Shri Rangarajan relied, Fazal Ali J. categorily said:
"It
is manifest from a bare reading of the newly added Art. 31-C that any law
effectuating the policy of the State in order to secure or comply with the
directive princi- ples specified in clauses (b) and (c) of Art.
39
would not be deemed to be void even if it is inconsistent with or violates
Articles 14, 19 or 31 ..... " (P. 332) In the same case Fazal Ali J.
further said:
"
.... If, once the conditions mentioned in Article 31C are fulfilled by the law,
no question of compensation arises because the said Article expressly excludes
not only Arti- cles 14, and 19 but also 31 which, by virtue of the 25th
amendment, had replaced the word 'amount' for the word 'compensation' in Arti-
cle 31(,2) ..... " (p. 334) (Emphasis supplied) Sri Rangarajan cannot,
therefore, draw any sustenance from Fazal Ali J. for his argument.
Sri
Rangarajan then placed reliance on the following observa- 590 tions of Krishna
Iyer J. in Gwalior Rayon v. UOL, [1974] SCR 1671.
"
.... the legislature is expected except in exceptional socio-historical set- ting,
to provide just payment for the deprived persons. To exclude judicial review is
not to block out the beneficient provisions of Arti- cles 14, 19 and 31."
(p. 695) But we see nothing in these observations which can lend support to
justiciability of an alleged violation of Article 31 by a law protected under
Article 31-C. Ideally, perhaps, it may not be just to deprive a recompence that
is just and fair, in all cases. But that is not to say that even under a law
which has the protection of 31-A or 31-C, the adequacy, or justness or fairness
of the compensation would, yet, be justiciable.
The
contention of Shri Rangarajan in our opinion, is wholly unsupportable. Indeed,
the purpose of Article 31-C is, amongst others, to exclude Article 31, as it
then stood.
The
effect of accepting Sri Rangarajan's contention would be to let in Article 31
by the backdoor, frustrating the very object of Article 31-C and to unsettle
the law laid down in a series of authoritative pronouncements of this Court.
The contention really, is not available to the petitioners at all.
26.
Even if the impugned law did not have the protection of Article 31-C, a
hypothesis on which contention (c) is based, the adequacy or inadequacy of the
amount is not justiciable. The limitations of the courts' scrutiny explic- it
in Article 31(2), are referred to by Mathew J. in the Keshavananda case:
"
.... the word 'amount' conveys no idea of any norm. It supplies no yard-stick.
It
furnishes no measuring rod. The neutral word 'amount' was deliberately chosen
for the purpose. I am unable to understand the purpose in substituting the word
'amount' for the word 'compensation' in the sub-article unless it be to deprive
the Court of any yard stick or norm for determining the adequacy of the amount
and the relevancy of the principles fixed by law (para 1765) Referring to what
might, yet, be open to judicial scrutiny, under 591 Article 31(b), Shelat and
Grower, JJ observed in the Keshavananda case:
"But
still on the learned Solicitor General's argument, the right to receive the
amount continues to be a fundamen- tal right. That cannot be denuded of its
iden- tity. The obligation to act on some principle while fixing the amount
arises both from Article 31(2) and from the nature of the legislative power
for, there can be no power which permits in a democratic system an arbi- trary
use of power." "But the norm or the principle of fixing or
determining the 'amount' will have to be disclosed to the Court. It will have
to be satisfied that the 'amount' has reasonable relationship with the value of
the property acquired or requestioned and one or more of the relevant
principles have been applied and further that the 'amount' is neither illusory
nor it has been fixed arbitrarily, nor at such a figure that it means virtual
deprivation of the right under Article 31(2). The question of adequacy or
inadequacy, however, cannot be gone into." Justice Chandrachud observed:
"The
specific obligation to pay an 'amount' and in the alternative the use of the
word 'principles' for determination of that amount must mean that the amount
fixed or determined to be paid cannot be illusory. If the right to property
still finds a place in the Constitution, you cannot mock at the man and
ridicule his right. You cannot tell him:
'I
will take your fortune for a farthing'."
27.
All the same, the concept of "Book- Value" is an accepted accountancy
concept of value. It cannot be held to be illusory.
In
Eswari Khetan Sugar Mills v. State of U.P., [1980] 3 SCR 331 at page 359 it has
been held that even the concept of "written down value" which is more
disadvantageous to the owner than the "Bookvalue" is not irrelevant:
"
........ This Court has in terms accepted that payment of compensation on the
basis of written down value calculated accord- ing to the income-tax law for
used 592 machinery is not irrelevant as a principle for determining
compensation. That principle appears to have been adopted for valuing used
machinery though the legislation fixes compen- sation payable to each
undertaking in round Sum ....."
28.
Accordingly, even if the impugned law had no protec- tion of Article 31-C and
tests appropriate to and available are applied, in the circumstances of this
case, it cannot be said that the principles envisaged in the impugned law lead
to an "amount" which can be called unreal or illusory.
Contention
(c) is accordingly held and answered against the petitioners.
29.
Re: Contention (d):
This
point is again, available only if the impugned law is outside Article 31-C. The
contention that "Service Lines" which are expressly excluded from the
valuation do consti- tute the property of the licensee and their exclusion from
valuation would make the principles for determination of the 'amount' arbitrary
does not have much to commend it.
Learned-counsel
for the petitioner placed reliance on the definition of 'works' in Section 2(n)
of the 1910 Act and on the pronouncement of this Court in Calcutta Electric
Supply Corporation v. Commissioner of Wealth-tax, [1972] 1 SCR 159.
The
question in that case was whether in the computation of net wealth of the
licensee, the "Service-lines" should be included. That was a converse
case where the licensee rely- ing upon the statutory provisions of the
Electricity Act contended that "Service-lines" were not a part of his
wealth. This Court negatived that contention for purposes of assessment to
wealth tax. Learned counsel placed some store by this pronouncement to contend
that the exclusion of this 'wealth' from valuation is arbitrary.
But,
in our opinion, the pronouncement relied upon does not advance petitioners'
case on the point. While it is true that the expression 'works' in Section 2(n)
of the 1910 Act includes 'Service-lines', the reason why 'Service-lines' could
justifiably be excluded from valuation for purposes of determination of the
'amount' is indicated in page 166 the report:
"It
is true that in view of Sec. 7(A)(2) of the Electricity Act, in computing the
market value of the undertaking sold under sub-section (1) of section 5 of that
Act the value of service lines which had been con- structed at the expense 593
of the consumers will not be taken into con- sideration. The reason for this
provision is obvious. It will be the duty of the new licen- see to not only
maintain and repair those lines but also to replace them when they become
unserviceable." Under the law when a requisition is made by an intend-
ingconsumer for electrical-energy, the licensee has an obligation tO lay down
Service-lines. But, according to the provisions the entire cost of service-line
is not required to be borne by the licensee. The licensee is entitled to call
upon the consumer to pay part of the cost of service- line--which may in a
given case amount to a substantial part--in accordance with the provisions in
the Schedule to the Electricity Supply Act.
Dealing
with a similar provision the Gujarat High Court in Dakor-Umreth Electricity
Company Ltd. v. State of Gujarat, ( 13 Gujarat Law Reporter 88 at page 106)
held:
"
...... The question is whether the exclusion of such service lines from the
valuation can be said to have rendered the principle of compensation irrelevant
or inap- propriate. We do not think so ....... The petitioner is not
constituted .the owner of these service lines for all purposes. More- over,
even after the purchase, these service lines would continue to be utilised for
sup- plying electrical energy to the consumers who paid for them. It would be
most inequitable in these circumstances to provide for payment of compensation
to the petitioner for these service lines. There is no reason in logic or
principle why the petitioner should be allowed to make unjust and undeserved
profit from transfer of these service lines for which it has paid nothing and
which are not the product of its own labour ..... " This reasoning, if we
may say so with respect, is sound and should be accepted. Contention (d) is,
therefore, insub- stantial and is answered against the petitioners.
30.
Re: Contention (e):
The
apprehensions of the petitioners on this point is that while under Section
9(1)(i) of the impugned Act X of 1973, Government 594 would be entitled to
deduct from the 'amount' such sums as remain in the "Tariffs and Devidend
Control Reserve";
"Contingency-Reserve"
and the "Development Reserve", in so far as such amounts have not
been paid over by the licensees to the Government, the provision, however, does
not take into account and provide for cases where such reserves are invested in
'fixed assets' and as such "fixed assets" vest in the Government
under the Acquisition. There would, there- fore, it is urged be, a duplication
of the liability of the licensee on this score, in the sense that while the
"Re- serves" in the form of fixed-assets vest in the Government, the
licensee is still exposed to the liability for the deduction of the amount
shown in the accounts. Section 9(1)(i) provides:
"Deductions
from the Gross amount:
The
Government shall be entitled to deduct the following sums from the gross amount
payable under this Act to the licensee.
(a)
(to) (h) Omitted as unnecessary (i) The amounts remaining in tariffs and
dividends control reserve, contingencies reserve and development reserve, in so
far as such amounts have not been paid over by licen- see to the Government;
(j) (k)
Omitted as unnecessary On a reasonable construction, the expressions 'amounts
remaining' and 'in so far as such amounts have not been paid overl' necessarily
exclude any such duplication of the ac- countability of the licensee for these
'Reserves'. If any part of the reserves is invested in "fixed assets"
and the reserves in the form of such "fixed assets" are takenover by
the Government pursuant to the acquisition, what remains to be accounted for by
the licensee is only the 'amounts re- maining' in the pertinent accounts. The
liability of the licensee for deduction of the 'Reserves' from the 'amount'
would arise only if the balance remaining in those accounts are not paid.
Indeed, Dr. Shankar Ghosh, learned counsel for the State of Assam, submitted
that this is the correct interpretation to be placed on Section 9(1)(i) of the
Act.
With
this construction of the provision, the contention of the petitioner company on
this point, does not survive.
595
31.
The other contention raised under this point is that the property of the
licensees represented by the unexpired portion of the licence has not been
taken into account in computing the amount payable for the acquisition. As
already indicated, the law having the protection of Article 31C the contention
is not available at all.
Section
7(3) of the impugned Act provides:
"In
the case of an undertaking which vests in the Government under this Act, the
licence granted to it under Part II of the Electricity Act shall be deemed to
have been terminated on the vesting date and all the rights, liabilities and
obligations of the licensee under any agreement to supply elec- tricity entered
into before that date shall devolve or shall be deemed to have devolved on the
Government:
Provided
that where any such agree- ment is not in conformity with the rates and
conditions of supply approved by the Govern- ment and in force on the vesting
date, the agreement shall be voidable at the option of the Government."
This provision is a part of a scheme of nationalisation and is protected by
Article 31C.
32.
Contention (e) is accordingly held and answered against the petitioners.
33.
Re: Contention (f):
This
contention pertains to the liability of the licensee under Section 11(3) of the
Act in respect of the amounts payable to employees retrenched by the Government
or the "Board' as the case may be, within one year from the vesting-date
after the take-over. Section 11(3) provides that if the Board or the
Government, as the case may be, retrenches any employee within a period of one
year from the vesting- date, the liability for the amounts payable to the re-
trenched employee shall be deducted from the 'amount'. This provision, it is
contended, imposes a liability which is arbitrary. Dr. Shankar Ghosh submitted
that this point is purely academic inasmuch as there has been no such case of
retrenchment. Dr. Ghosh further submitted that the provision is not
unreasonable because in the case of employees so 596 retrenched, the amounts
payable would substantially relate to the period during which the employment
subsisted under the licensee and that it is not unreasonable to take this
circumstances into account in continuing the licensee's liability which would,
even otherwise, be substantially be that of the-licensee. 'On a consideration
of the matter, we are inclined to the view--even if this question is justicia-
ble--that the provision is not unreasonable or arbitrary as it envisages the
continuance of a liability which was, otherwise, substantially that of the
licensee. There is no merit in this contention (f) either.
34.
Re: Contention (g):
The
grievance of the petitioners on this aspect, we are afraid, proceeds on a total
misconception of the effect of the statutory provisions. The contention, in
substance, is that while certain liabilities of the licensee arising out of its
Quondam business-operations are not expressly taken-over by the Government and
are-declared to be the subsisting and continuing liabilities of the licensee,
however, Section 9(7) authorises the deduction of some of those very
liabilities from the 'amount' without a corre- sponding statutory obligation on
the part of the GOvernment, in turn, to pay the same to the creditors on whose
account and for whose benefit the deductions are made and without providing an
express statutory discharge to the petitioners in that behalf.
There
is no substance in this contention. The legisla- tive intention is plain and
manifest. Though some of the liabilities arising out of the conduct of the
licensees' business prior to vesting are not taken over by Government, some of
those liabilities are, yet, authorised to be deduct- ed from the amount. The
purpose of this provision is too obvious to require any statutory declaration
of the obliga- tions that arise in law and are attendant upon these sums coming
to the hands of and retained by the Government. Quite obviously, the provision
is not intended for an unjust enrichment in the hands of Government. The
purpose is obvi- ously to facilitate recovery of certain types of debts owing
to public institutions etc., and the deduction is for the benefit of those
creditor-institutionS. Government would, plainly, be under a legal obligation
to pay the sums so deducted to the concerned creditors. The provisions of the
Statute must be read along, and in consonance, with the general principles of
law which import such obligations on the part of the Government and an implied
corresponding discharge to the petitioners to the extent of such deduc- tions
in their liabilities. There is a resulting, statuto- ry-trust in the hands of
the Gov- 597 ernment to pay the sums so deducted to the respective credi- tors,
even in the absence of express provisions in this behalf in the Statute the
general principles of law operate.
As a
matter of construction it requires to be held that these obligations and
consequences follow. There is really no justifiable grievance on this score.
Contention (g) is, accordingly, held and answered against the petitioners.
35.
Re: Contentions (h) and (i):
These
two contentions pertain to the machinery envisaged by and set up under the
impugned law for resolution of disputes on questions essential for the
determination of the amount in accordance with the provisions of the Act. The
contention of the petitioners, in substance, is that there is no machinery set
up under the Act to determine the amounts under Section 9(c), (d) and (e) and
to assess the loss referred to in Section 8.
The
Other contention on the point is that the arbitra- tion clause is a limited one
and is confined only to dis- putes in four areas specifically enumerated in
clauses (a) to (d) of sub-section (1) of Section 20 of the Act.
These
lacunae in the Statute, it is contended, render- the scheme of the Act for the
determination of the 'Amount' unreasonable and the scheme of the 'Act' in
relation to the determination of the 'Gross Amount', the deductions to be made
therefrom and the assessment of the 'amount' payable for the acquisition,
unworkable.
36.
The Courts strongly lean against any construction which tends to reduce a
Statute to a futility. The provision of a Statute must be so construed as to
make it effective and operative, on the principle "ut res majis valeat
quam periat". It is, no doubt, true that if a Statute is abso- lutely
vague and its language wholly intractable and abso- lutely meaningless, the
Statute could be declared void for vagueness. This is not in judicial-review by
testing the law for arbitrariness or unreasonableness under Article 14; but
what a Court of construction, dealing with the language of a Statute, does in
order to ascertain from, and accord to, the Statute the meaning and purpose
which the legislature in- tended for it. In Manchester Ship Canal Co.
v. Manchester Racecourse Co., [1904] 2 Ch.
352 Farwell J. said:
"Unless
the words were so absolutely senseless that I could do nothing at all with
them, I should be bound to find 598 some meaning and not to declare them void
for uncertainty." (See page 360 and 361) In Fawcett Properties v.
Buckingham Coun- try Council, [1960] 3 All ER 503 Lord Denning approving the
dictum of Farwell, J. said:
"But
when a Statute has some mean- ing, even though it is obscure, or several
meanings, even though it is little to choose between them, the Courts have to
say what meaning the Statute to bear rather than reject it as a nullity."
(Vide page 516) It is, therefore, the Court's duty to make what it can of the
Statute, knowing that the Statutes are meant to be operative and not inept and
that nothing short of impossibility should allow a Court to declare a Statute
unworkable. In Whitney v. Inland Revenue Commissioner, [1926] AC 37 Lord
Dunedin said:
"A
Statute is designed to be worka- ble, and the interpretation thereof by a Court
should be to secure that object, unless cru- cial omission or clear direction
makes that end unattainable." (vide page 52)
37. On
consideration of the Statute on hand, it is not possible to subscribe to the
view that the impugned law has not envisaged any machinery for the due
ascertainment of the sums referred to in clauses (c), (d) and (e) of Section 9
which require, on such ascertainment and quantification, to be deducted from
the gross amount. Section 10 enjoins upon the Government to appoint a person
having adequate knowledge and experience in matters reling to accounts "to
assess the net amount payable under this Act by the Government to the licensee
after making the deductions mentioned in Section 9". Sub-Section (2) of
Section 10 provides that the Special Officer may call for the assistance of
such Officer and staff of the Government or the Board or the undertaking as he
may deem fit "in assessing the net amountpayable". These provisions,
contemplate the determination by the Special Officer, who is constituted as a
statutory authority under the Act, of the net amount payable. The functions of
the Special Officer include an examination of the correctness of all the
determinations made by the Government in the matter of the deductions, except
where Government is statutorily specially constituted as an appellate authority
in respect of certain matters under the Act.
The
Proviso to Sections 8 and 9 envisages prior notice to be 599 issued to the
licensee by the Government to show cause against any deduction proposed to be
made under Section 8 or 9, as the case may be, within the period specified in
the Provisos. Even after the Government so makes such determina- tion of the
amounts which, according to it, are deductible from the gross amount, such
determination would not be final. The assessment of the net amount payable to
the licensee will have to be made by the "Special Officer". It is
reasonable to construe that the decision of the Govern- ment both under
Sections 8 and 9 arrived at, even after giving an opportunity to the licensee
of being heard, would not be final, but the final determination will have to be
made by the "Special-Officer" appointed under Section 10 of the Act.
Section 10(1) and (2) of the Act must be so con- strued as to enable the
"Special-Officer" to take into account the determinations respecting
the deduction under Section 9 and 10 of the Act made by the Government and take
a decision of his own in the matter. The power to "assess" the net
amount by necessary implication takes within its sweep the power to examine the
validity of the determination made by the Government in the matter of deductions
from the gross amount. This power to determine and assess the 'net- amount'
payable by necessary implication cover matters envisaged in Sections 8 and 9.
Though only Section 9 is specifically referred to in sub-section (1) of section
10, the language of sub-section (1) and (2) which enable the Special Officer to
"assess" the net amount paybale would, by necessary implication,
attract the power to decide as to the validity and correctness of the deduction
to be made under Section 8 as well. So construed, the provisions of Section 10
would furnish a reasonably adequate machinery for the assessment of the
"net-amount" payable to licensee.
38. So
far as Arbitration is concerned, even after the decision of the
"Special-Officer", there is the further Arbitral forum to decide
disputes in respect of the specific areas in which disputes are rendered
arbitrable under Sec- tion 20.
In
view of these circumstances, we think the grievance of the petitioners on these
points questions are not sub- stantial. The points (h) and (i) are also,
accordingly, held and answered against the petitioners.
39. In
the result, for the foregoing reasons all the contentions urged by the
petitioners in support of their challenge to the impugned legislations fail.
The Writ petitions are, accordingly, dismissed; but in the circumstances, there
will be no order as to costs.
G.N.
Petitions dis- missed.
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