Guntur
Tobaccos Ltd Vs. The Transmission Coprn. of A.P. & ANR [2008] INSC 635 (11 April
2008)
A.K. MATHUR & ALTAMAS KABIR
CIVIL APPEAL NO. 312 OF 2002 Altamas Kabir,J.
1. This appeal, by way of special leave, is directed against the judgment
and order dated 29th December, 2000, passed by the Division Bench of the Andhra
Pradesh High Court in Letters Patent Appeal No. 78 of 1988, which was preferred
against the order passed by the learned single Judge in A.S. No. 610 of 1979 on
24th June, 1987.
2. As it appears from the materials on record, the appellant herein, Guntur
Power and Light Limited, hereinafter referred as "GPL", was
incorporated for the purpose of running an Electrical Undertaking to supply
electricity to the Guntur area of Andhra Pradesh. It was granted a licence for
the aforesaid purpose under the provisions of the Indian Electricity Act, 1910
and acquired various properties for the Undertaking.
3. In 1938, GPL ceased to generate electricity and it confined itself only
to distribution of power.
Receiving and distributing stations were located in places belonging to the
GPL, outside the properties forming the subject matter of the present appeal.
It is the categorical case of the appellant herein that the said properties
were not used by GPL for the purposes of the Electricity Undertaking or for any
other ancillary purpose from the year 1939 onwards.
4. On 3rd August, 1945, GPL granted a lease in favour of Guntur Tobacco
Company, hereinafter referred to as "GTC", a sister company, in
respect of two acres of land with right to construct buildings thereon in terms
of Clause 5 of the registered Lease Deed and also with an option to purchase
the demised land in terms of Clause 8 thereof. By another registered Lease Deed
executed by GPL in favour of GTC on 4th November, 1949, a further portion of
vacant land measuring one acre was also demised in favour of GTC, which is the
appellant in these proceedings.
Subsequently, two more lease deeds were executed by GPL in favour of GTC on
15th March, 1950 and 18th March, 1954, extending the period of the lease till
the end of the year 1971. In the Lease Deed of 18th March, 1954, clause 8
containing the option of purchase was substituted by a new clause, which, inter
alia, provided that even if the lessors came to be wound up voluntarily or went
into liquidation or became insolvent, or if the lessors ceased to carry on
business, the lease would not terminate but would remain in full force with the
right to the lessees to purchase the demised lands and buildings and structures
thereon belonging to the lessors at the market value or be entitled to
repayment of the market value of the buildings and super structures which may
be put up by the lessees.
5. In 1956, the Government of Andhra Pradesh acquired the Electrical
Undertaking from GPL in exercise of its powers under the Andhra Pradesh
Electricity Supply Undertaking Acquisition Act, 1954, whereupon the Undertaking
of GPL vested in the State Government with effect from 1st May, 1956. Upon such
vesting, the demised premises, along with the land and buildings situated
thereupon, became the property of the State Government by virtue of such
acquisition.
The Transmission Corporation of Andhra Pradesh, being the respondent No. 1
herein, was formed on 1st April, 1959, under Section 5 of the Electricity
Supply Act, 1948, and pursuant to its policy the State Government transferred
the Undertaking of GPL with all its assets to the Andhra Pradesh State
Electricity Board, which became the owner of the said properties.
6. Even after formation of the respondent No. 1 Corporation, GTC continued
to remain in possession of the properties in question purportedly on the
strength of the Lease Deeds executed by GPL in its favour.
According to the respondent No. 1 Corporation, in 1961 the Lease Deeds
executed by GPL in favour of GTC came to be scrutinized and it was noticed that
GPL had executed the leases in favour of GTC without obtaining requisite
sanction of the Government in terms of Section 9(2) of the Indian Electricity
Act, 1910 which rendered the Lease Deeds void. The Andhra Pradesh State
Electricity Board was of the view that the possession of GTC was in the nature
of a licence and GTC was entitled to remain in possession as long as the
respondent No. 1 Corporation, as owner of the property, permitted it to do so.
Consequent thereupon, the respondent No. 1 Corporation issued a letter on 9th
January, 1962, to the appellant informing it that the Lease Deeds executed in
its favour were void and it was also called upon to vacate the demised premises
and to deliver possession thereof to the respondent No. 1 Corporation. The
appellant responded to the said letter by a lawyer's notice dated 22nd January,
1962, contending that it was entitled to remain in possession of the demised
property till 1971. The appellant continued to remain in possession of the
demised property even after expiry of the lease and instead of vacating the
same sought to exercise its option of purchase of the said properties by a
notice dated 29th October, 1969. On 26th March, 1971, the respondent No. 1
Corporation by its letter called upon GTC to quit the suit properties and
surrender the possession thereof to the Electricity Board by 1st January, 1972.
An attempt to arrive at an amicable settlement having failed, the respondent
No. 1 Corporation filed a suit, being O.S. No. 15 of 1973, in the Court of
Additional Subordinate Judge, Guntur, against GTC in 1972 seeking its eviction
from the suit property, being the demised properties, on the ground that the
leases in question executed and registered in favour of GTC were not valid and
that GTC was liable to be evicted as mere licensees of the respondent No.
1 Corporation. The appellant herein contested the suit by filing written
statement contending that although GPL had been incorporated for the purpose of
distributing electricity in Guntur area and was also a licensee under the Indian Electricity
Act, 1910, for the generation and distribution of electricity in the said
area, in 1938 it ceased its operations relating to generation of electricity
and confined itself to distribution of power only. According to the appellant,
since the suit properties were no longer used by GPL from 1939 for the purposes
of the Electricity Undertaking or for any other connected purpose, from 1939 it
ceased to be part of the Undertaking for the purposes of generation and
distribution of electricity and the Lease Deeds executed by GPL in favour of
GTC were not, therefore, hit by the provisions of Section 9(2) and (3) of the Indian Electricity
Act, 1910. It was also contended that since the suit properties had ceased
to be part and parcel of the Electricity Undertaking after 1939, it could not
have vested in the Andhra Pradesh State Electricity Board or the State
Government and consequently the appellant was entitled to remain in possession
of the suit properties at least till the end of 1971, particularly, when the
respondent No. 1 Corporation had accepted the rents from the appellant herein
in the manner stipulated in the Lease Deeds and had even issued receipts
therefor. It was contended that because of the conduct of the respondent No. 1
Corporation it was estopped from disowning such relationship and could not
treat the appellant as a licensee.
7. On the basis of the pleadings, initially five issues were framed, namely:
- "1. Whether the lease deeds dated 3rd August, 1945, 4th November, 1945,
15th March, 1950 and 18th March, 1954 obtained by the defendant are void under
Section 9(3) of the Indian Electricity Act
of 1910?
2. Whether this Court has jurisdiction to entertain the suit in view of the
specific provisions of the Andhra Pradesh Buildings, Lease and Rent Control
Act?
3. Whether the plaintiff is entitled to claim the future profits?
4. Whether the plaintiff is entitled to recover possession of the suit
property from the defendant? 5. To what relief?"
Subsequently, two additional issues were framed on 19th August, 1976,
namely: - "1. Whether the defendant is entitled to the benefits of Section
53A of the Transfer of Property Act? 2. To what equities is the defendant
entitled?"
8. The trial court decided issue No. 1 initially framed in favour of
respondent No. 1 Corporation/ plaintiff and against the appellant/defendant on
the ground that the Lease Deeds were void since they were contrary to Section
9(2) and (3) of the Indian Electricity Act,
1910. The trial court also found that the said agreements of lease were not
binding on the respondent No. 1 Corporation/plaintiff.
9. On issue No. 2, the trial court found that it had jurisdiction to
entertain the suit.
10. On additional issue No. 1, it was held that the appellant
herein/defendant was not entitled to claim protection under Section 53A of the
Transfer of Property Act.
11. On issue No. 4, it was held that the respondent No. 1
Corporation/plaintiff was entitled to recover possession of the suit property
from the appellant herein/defendant.
12. Issue No. 3 and additional issue No. 2 were also found in favour of the
respondent No. 1 Corporation/ plaintiff. Accordingly, a decree for possession
was passed in its favour against the appellant/defendant.
13. The appellant herein filed an appeal before the single Judge of the
Andhra Pradesh High Court, which was dismissed on 4th June, 1987, giving rise
to a Letters Patent Appeal before the Division Bench of the said High Court.
14. Before the Division Bench of the High Court, it was contended that both
the courts below had factually erred in arriving at a finding that the leases
in question had been executed without the prior permission of the Government as
contemplated under Section 9(2) of the Indian Electricity
Act, 1910. It was urged that the State was fully aware of the fact that the
property had been demised to the appellant herein, inasmuch as, when the
appellant applied for a loan under the State Aid to Industries Act, the State
Government advised the appellant to get the lease extended so that there was
sufficient time for the appellant to pay back the loan. It was also submitted
that the matter had been examined by the Government Solicitor at Madras and in
his opinion, which has been set out in the impugned judgment, it had been
indicated that the lessors of the leased lands, should execute an undertaking
to the borrowing company to renew the leases until 1st May, 1971 or until the
final instalment of the State Aid Loan with interest was repaid to the
Government. It was contended that it is only after the said letter of the
Government Solicitor that the Government extended a loan of Rs.2 lacs to the
Company, which sum was also repaid during the period of the lease and during
such period the lease- hold property stood mortgaged with the Government.
15. On the basis of the aforesaid submission, the Division Bench of the High
Court held that the properties had been demised in favour of the appellant with
the implied sanction of the State Government and the lease was not therefore
hit by Section 9(2) and (3) of the Indian Electricity
Act, 1910.
16. Despite the aforesaid finding, the Division Bench while observing that
the aforesaid finding was sufficient to grant the relief prayed for by the
appellant, took note of certain further developments, namely, that though the
lease was to expire in 1971, the Electricity Supply Undertakings (Acquisition)
Act, 1954, came to be enacted in the meantime. The Division Bench observed that
the Act had been enacted for the purpose of providing for the acquisition by
the Government of all Undertakings which supplied electricity in the State of
Andhra Pradesh. Section 4 of the Act empowers the Government to pass an order
in writing that an Undertaking would vest in the Government on the dates
specified therein.
Section 5 provides for payment of compensation to the lessee. Section 6
provides for vesting of all fixed assests, cash security, investments,
documents, and obligations of the lessee Undertaking as on the date of vesting.
The Division Bench found that the assets of the Undertaking stood vested with
the Government in terms of an order passed in accordance with Section 3, as a
result whereof, the Undertaking stood vested with the Government with effect
from 1st May, 1956. The Division Bench also observed that neither the 1954 Act
nor the order of vesting of 1st May, 1956, had been challenged by the
appellants.
17. On the basis of the aforesaid reasoning the Division Bench came to the
conclusion that since the Electricity Undertaking of the appellant had vested
in the State Government from 1st May, 1956, the lessor itself had lost all
rights over the property and the same stood extinguished by the promulgation of
the 1954 Act. The Division Bench came to the conclusion that since the lessor
had lost its rights of ownership over the property in question, the provisions
in the lease deed regarding option of purchase as contained in clause 6 thereof
became unenforceable against the lessor. The State Government having stepped
into the shoes of the lessor, it was not empowered by the provisions of the
statute to sell any part of the Undertaking to the licensees. It was held that
clause 6 of the agreement could not, therefore, be enforced as it would be
against public policy and would also defeat the purpose of the Act itself.
18. Thereafter, on an analysis of the provisions of the licence which had
been granted to GPL, the Division Bench held that in the context of the
Electricity Act, 1910, all the properties of the Electricity Undertaking
remained a part of the Undertaking even if it ceased to use the same for
generation or supply of electricity. Referring to the provisions of Section
3(2)(d)(ii) the Division Bench held further that what was material, was the
question as to whether the properties formed part of the Electricity
Undertaking when the licence had been granted to it. In arriving at the
aforesaid conclusion, the Division Bench also mentioned that clause 12(b) of
the licence did not mention that if generation was stopped from a particular
site, that site would be excluded from the Undertaking. By holding as above,
the Division Bench negated the submissions of the appellant that since the
properties were no longer used for generation of electricity, it would have to
be held that the said properties ceased to be the properties of the Electricity
Undertaking and was not therefore affected by the Electricity Supply
Undertakings (Acquisition) Act, 1954. On the basis of the aforesaid findings,
the Division Bench ultimately held as follows :- "For all these reasons,
we hold that although the agreement dated 18.3.1954 was not hit by Section 9 of
the Indian Electricity Act,
1910 but the second part of the agreement which gives an option to the
licensee of purchasing the property cannot be enforced because of the statutory
obligation of A.P. Electricity Supply Undertakings (Acquisition) Act,
1954."
19. Mr. Pallav Sishodia, learned counsel for the appellant, while
questioning the finding of the Division Bench of the High Court submitted that
since the leases in question had been executed in compliance with the
provisions of Section 9(2) of the Indian Electricity Act,
1910, the lessor was under an obligation to comply with the conditions
relating to option of purchase as contained in clause 6 of the lease deed. It
was submitted that even if the properties of the Undertaking are accepted to
have vested in the State Government, the status of the lessor remained the same
though the identity may have been altered and the person who had stepped into
the shoes of the lessor was equally bound to give effect to the provisions of
clause 6 of the lease deed in the event the lessee opted to exercise such
right.
20. However, Mr. Sishodia also reiterated the submission that once the
demised property was no longer used for the purpose of generation of
electricity, it ceased to be a part of the Electrical Undertaking and did not,
therefore, vest in the State under the 1954 Act. Mr. Sishodia urged that the
Division Bench had erred in interpreting the provisions of Section 3(2)(d)(ii)
along with Section 4(A) and Section 6 of the Indian Electricity
Act, 1910 in arriving at a finding that till such time the licence granted
for generation of power was either modified or rectified, all the properties
belonging to the Undertaking would continue to remain a part of the
Undertaking. It was urged that it was on account of such faulty reasoning that
the Letters Patent Appeal, which was filed by the appellant, came to be
dismissed.
21.It was lastly urged by Mr. Sishodia that having included the clause
relating to option of purchase and having put the appellant into possession of
the demised property, the appellant's possession was also protected under
Section 53A of the Transfer of Property Act, 1982. In support of his said
contention Mr. Sishodia referred to and relied upon the decision of this Court
in Shrimant Shamrao Suryavanshi and Anr.
in which this Court observed that a person who obtained possession of the
property in part- performance of an agreement of sale, could defend his
possession in a suit for recovery of possession filed by the transferor or by a
subsequent transferee of the property claiming under him, even if a suit for
specific performance of the agreement of sale becomes barred by limitation.
22. Mr. Rakesh K. Sharma fully supported the decision of the Division Bench
impugned in this appeal and submitted that no case had been made out for
interference in the appeal. He reiterated the submissions made before the High
Court that once the Undertaking had vested in the State in terms of the 1954
Act, all the properties of the Undertaking, whether being used or not for the
generation of electricity, would stand vested in the State Government. He also
reiterated that in view of the provisions of the Indian Electricity
Act the State Government was under no obligation to act in terms of the
condition stipulating option of purchase by the lessee. He submitted that once
the Electricity Undertaking, namely, GPL, came to be vested in the State
Government under the 1954 Act and the lease was terminated by the State
Government, the appellant continued to be in occupation of the demised premises
as a licensee and such licence could be terminated at the will of the licensor.
Mr. Sharma urged that the State Government was no longer under any obligation
to comply with the provisions relating to the option of purchase contained in
clause 6 of the lease agreement, since the lease deeds had ceased to be
operative.
23. We have carefully considered the submissions of the respective parties
and do not find any reason to disagree with the view taken by the Division
Bench of the High Court, in dismissing the Letters Patent Appeal. Having regard
to the opinion given by the Government Solicitor, the finding arrived at by the
High Court regarding the implied consent of the State Government does not
require any interference.
24. The other submission made on behalf of the appellant that, since the
State Government had stepped into the shoes of the lessor, it was bound by the
terms of the lease agreement and in particular clause 6 thereof, cannot also be
accepted in view of the provisions of Sections 4 and 6 of the A.P. Electricity
Supply Undertakings (Acquisition) Act, 1954. The defence taken on behalf of the
appellant/lessee that, since the demised lands were no longer required by GPL,
they ceased to be part of the Electricity Undertaking, has been rightly
rejected by the High Court. The High Court has considered the matter in some
detail and various decisions of this Court and other High Courts have been
considered by it in ultimately coming to the conclusion that in view of
Sections 4 and 6 of the 1954 Act read with the provisions of the Indian Electricity
Act, 1910, all the properties of the Undertaking for which licence was
granted for generation of electricity, remained a part of the Undertaking
unless the licence had been modified. As has been noted by the High Court, the
properties involved were mentioned and included in the licence granted to GPL
and the said licence remained unchanged when on the basis of the order passed
by the Government under Section 3 of the 1954 Act, all the properties of the
Electricity Undertaking came to be vested in the State. Moreover, once the
lease came to an end, the State Government was no longer under any obligation
to act in accordance with the option given to the lessee to purchase the
property.
25. In view of the above, we find no merit in the appeal and the same is
accordingly dismissed, but without any order as to costs.
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