Full Judgment Text
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CASE NO.:
Appeal (civil) 6487-6488 of 1998
PETITIONER:
Bharat Hydro Power Corp. Ltd. & Ors.
RESPONDENT:
State of Assam & Anr.
DATE OF JUDGMENT: 07/01/2004
BENCH:
Ashok Bhan & S.B. Sinha.
JUDGMENT:
J U D G M E N T
BHAN, J.
These appeals are directed against a common judgment passed by the
Division Bench of the High Court of Gauhati wherein the Division Bench
while setting aside the judgment of the learned Single Judge dated 19th July,
1997 has dismissed the writ petition filed by the appellants. The writ
petition was filed by the appellants challenging the constitutional validity of
the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of
Undertaking) Act, 1996 being Assam Act 1 of 1997 published in the Assam
Gazette Extraordinary dated 6th January, 1997.
Facts:
In the year 1979, the Planning Commission of India sanctioned a
proposal of the Assam State Electricity Board (hereinafter referred to as ’the
Board’) for construction of a Hydro Electric Power Station in the District of
Karbi Anglong on the river Barapani at an estimated cost of Rs.36.36 crores.
The project comprised construction of 51 meter high concrete dam on the
river Barapani near Hatidubi for utilising flow of water from catchment area
of 1178 Sq. km. The installed capacity of the project was 2 x 50 MW. The
dam was to be completed in the year 1986, but due to the failure of the local
contractor, the project could not be completed and the Board terminated the
contract and protracted litigation ensued.
In the year 1992, after termination of the contract as aforesaid, the
project was entrusted to National Project Construction Corporation (in short
’NPCC’), but the similar fate followed and Board had to terminate their
contract as well in December, 1992. In the mean time, cost of the project
initially sanctioned at Rs. 36.36 crores rose to Rs. 189.90 crores. Out of the
aforesaid estimate, the work completed was of about Rs.116 crores and the
Board needed about Rs. 60 crores to complete the project excluding other
liabilities. The Board could not generate the additional fund required for
completing the project.
The Central Government in the year 1992-93 accepted the policy of
privatisation even in the power sector. The State Government following the
policy of privatisation of the Central Government decided to transfer the
project to joint sector.
On 25th March, 1993, Memorandum of Undertaking (MOU) was
signed between the Board, Government of Assam and M/s Subhash Project
and Marketing Limited (SPML), appellant No.2 herein. According to the
said MOU, SPML was to promote a new company to complete the project.
In terms of the said MOU a new company under the name and style of M/s.
Bharat Hydro Power Corporation Limited (hereinafter referred to as
’appellant No.1’) came into existence in which the equity participation was
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as follows:
ASEB(the Board) - 11%
SPML(appellant No.2) - 40%
General Public - 49%
On 8th April, 1993 the Deed of Assignment was executed between the
Board and the appellant No.1, in terms of which all the assets and liabilities
of the project were transferred to appellant No.1 w.e.f. 8.4.1993. In terms of
the said Deed of Assignment appellant No.1 was to complete the project and
start generation by June, 1995 which was subsequently extended to June,
1996. Disputes arose between the parties. According to Board as well as
the State of Assam, the appellant No.1 after its incorporation failed to take
charge of the project till 5th April, 1994. Even after taking over of the
project, the appellant No.1 could not achieve any progress towards
completion of the project due to serious lapses and negligence on its part.
On the other hand, appellants Nos. 1 & 2 put the entire blame on the Board
and the State Government for the delay in the progress of the project.
On 20th December, 1995, appellant No.1 filed a suit being TS No.
244/96 in the Court of the Assistant District Judge No.1, Guwahati for
specific performance of the contract against the Board alleging that the
Board was remiss in the performance of its obligation under the MOU and
the Deed of Assignment. Board filed an application for stay of suit in view
of arbitration clause. Appellant No.1 filed an application in the High Court
under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 for
appointment of Arbitrator to decide pending disputes between the parties.
On 27th May, 1996, Board wrote to appellant No.1 that due to the failure of
the appellant No.1 to complete the work within the extended period, the
MOU was liable to be terminated and repudiated.
On 30th November, 1996 the State of Assam, keeping in view, the
inordinate delay in the completion of the project and to safeguard the public
interest by completing the project as early as possible in the context of acute
power shortage in the State, promulgated Bharat Hydro Power Corporation
Limited ( Acquisition and Transfer of Undertaking) Ordinance, 1996
acquiring the undertaking of Karbi Langpi Project of appellant No.1. The
Ordinance was subsequently replaced by Bharat Hydro Power Corporation
Limited (Acquisition and Transfer of Undertaking) Act, 1996 (hereinafter
referred to as ’the Act’). On 1st December, 1996, the State Government by
Notification transferred to and vested the said project in the Board. After the
said notification the possession of the project was handed over to the Board
in the presence of the representatives of the both sides on 2nd December,
1996. On 5th December, 1996 Memorandum of handing over and taking
over was signed. Thereafter writ petitions being CR 6/97 and CR 283/97
were filed in the High Court of Assam challenging the legality and validity
of the Ordinance and the Act.
In the writ petitions the appellants challenged the constitutional
validity of the Act being ultra vires and violative of Articles 14 and 19 (1)(g)
of the Constitution of India and on the ground of being vague, unfair and
arbitrary. It was prayed that the Act be struck down being unconstitutional
and beyond the legislative powers of the State and/or is inoperative and void
in law on the grounds mentioned in the writ petitions.
The Preamble of the Act reads as follows:
"ASSAM ACT NO.1 OF 1997
(Received the Assent of the Governor on 6th January, 1997)
THE BHARAT HYDRO POWER CORPORATION LIMITED
(ACQUISITION AND TRANSFER OF UNDERTAKING) ACT,
1996
AN ACT
To provide for the acquisition, in the public interest, of the
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right, title and interest of the undertaking of the Bharat Hydro
Power Corporation Limited and for matters connected therewith
or incidental thereto.
WHEREAS the Bharat Hydro Power Corporation Ltd., having
its registered office in the State of Assam, has been engaged for
speedy execution and completion of the Karbi Langpi (Lower
Barapani) Hydro Electric Project for ensuring supply of
electricity in the State of Assam in view of the chronic
shortages of power in the State;
Whereas it was agreed upon in the Memorandum of
Understanding entered into between the Government of Assam,
the Assam State Electricity Board and the M/s Subhas Project
and Marketing Limited on 25th March, 1993 that the project
would be completed and would be commissioned by the month
of June, 1995;
And whereas the company failed in the sole object of speedy
execution of the project within the specified time;
Whereas it is expedient in the public interest that the
undertaking of the Bharat Hydro Power Corporation Limited
should be acquired for the purpose of the enabling the State
Government to efficiently supervise manage and execute the
work expeditiously as to subserve the common good, in the
context of the acute power shortage in the State."
In the impugned Act Section 4 provides for general effect of vesting.
Section 5 provides that the State Government shall not be liable for past
liabilities. Section 6 provides that notwithstanding anything contained in
Sections 3 and 4, the State Government may, if it is satisfied that the Board
is willing to comply, or has complied with such terms and conditions as that
Government may think fit to impose, direct by notification, that the
undertaking of the company and the right, title and interest of the company
in relation to its undertaking which has vested in the Government, vest in the
Board either on the date of the notification or on such earlier or later date as
may be specified in the notification. The Board shall on and from the date
of such vesting, be deemed to have become the owner in relation to such
undertaking and all the rights and liabilities of the State Government in
relation to such undertaking shall, on and from the date of such vesting, be
deemed to have become the rights and liabilities, respectively of the Board.
Section 7 provides for payment of compensation that may be fixed by the
Commission considering the value of the assets of the company after
observing proper financial formalities. Section 8 provides for the gross
amount payable to the company. Section 9 provides that the State
Government if it is satisfied that the appellant has on or before the appointed
day, disposed of any fixed asset whether by way of sale, exchange, gift,
lease or otherwise than in the normal course of events, with a view to benefit
the company or some other person unduly and thereby causing loss to the
State Government as the succeeding owner of the company, the State
Government shall be entitled to deduct such amount from the amount
payable to the Company under the Act. Section 10 provides for recovery of
loss from the company. Section 11 provides for certain deductions to be
made from the gross amount payable. Section 12 provides for payment of
net amount. Section 13 provides for recovery of excess amount. Section 14
provides for constitution of Commission. Section 15 provides for the
continuance in service of employees already working on the same terms and
conditions as were applicable to them earlier. Section 16 provides for
provident fund and other funds. Section 17 provides for making inventory
of assets. Section 19 provides for penalty. Section 20 provides that no court
shall take cognizance of an offence punishable under this Act except with
the previous sanction of the State Government. Section 22 provides that no
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suit against the State Government or the Board shall lie for any act done by
them in good faith or intended to be done in good faith in pursuance of the
Act or the Rules made thereunder. Section 23 provides for bar of
jurisdiction of the court to call in question any act done or purported to have
been done under the Act or the Rules. Section 24 provides that no provision
of the Indian Electricity Act, 1910, Electricity (Supply) Act, 1948 or any
other Act for the time being in force and of any rule made under any of those
Acts, shall, in so far as it is inconsistent with any of the provisions of the
Act, have any effect. Section 26 provides for arbitration in case of any
dispute arising in respect of the matters mentioned thereunder.
On completion of the pleadings, the writ petitions were placed for
hearing before a learned Single Judge who after hearing the counsel for the
parties, passed a detailed order striking down Sections 3, 4, 5, 6, 7, 7A,
15(2), 23 and 24 of the Act being repugnant to the Central Acts, i.e, the
Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948. It was
observed that because of the striking down of the various provisions, the
impugned Act could not be given effect to. The entire Act was held to be
unenforceable.
The Board and the State of Assam filed separate Writ Appeals Nos.
460 of 1997 and 464 of 1997 challenging the order of the learned Single
Judge. The Division Bench by its impugned judgment has set aside the
judgment of the learned Single Judge and held the Act and its provisions to
be intra vires of the Constitution. Resultantly the writ appeals were accepted
and writ petition filed by the appellants were ordered to be dismissed.
Before adverting to the submissions made before us we would broadly
refer to a few fundamental principles regarding the competence of the
respective legislatures to enact laws and as to which law would prevail in
case of inconsistency between the laws made by the Parliament and the laws
made by the State Legislature. The principles are being referred to in the
context of the controversy involved in the present appeals.
India being a Union of States has Union Legislature (Parliament) and
the State Legislatures for framing laws. Legislative fields in which the
union or the State legislatures can frame laws are prescribed in the three lists
contained in the Seventh Schedule to the Constitution of India \026 Union List
(List I); State List (List II); and Concurrent List (List III ). Source of power
for enacting laws relating to the three lists is to be found in Articles 245 and
246 of the Constitution of India. Article 245 provides that subject to the
provisions of the Constitution, Parliament may make laws for the whole or
any part of the territory of India, and the Legislature of a State may make
laws for the whole or any part of the State. Law made by the Parliament
shall not be deemed to be invalid on the ground that it would have extra-
territorial operation. Article 246 reads:
"246. Subject-matter of laws made by
Parliament and by the Legislatures of States.-
(1) Notwithstanding anything in clauses (2) and
(3), Parliament has exclusive power to make laws
with respect to any of the matters enumerated in
List I in the Seventh Schedule (in this Constitution
referred to as the "Union List").
(2) Notwithstanding anything in clause (3),
Parliament and, subject to clause (1), the
Legislature of any State also, have power to make
laws with respect to any of the matters enumerated
in List III in the Seventh Schedule (in this
Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature
of any State has exclusive power to make laws for
such State or any part thereof with respect to any
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of the matters enumerated in List II in the Seventh
Schedule (in this Constitution referred to as the
’State List’).
(4) Parliament has power to make laws with
respect to any matter for any part of the territory of
India not included in a State notwithstanding that
such matter is a matter enumerated in the State
List."
Without going into the finer aspects but broadly speaking it provides
that Parliament has exclusive power to legislate with respect to matters in
List I. The State Legislature has exclusive power to legislate in respect to
matters in List II. Both Parliament and the State Legislature have power to
make laws with respect to any of the matters enumerated in List III.
In a federal Constitution, in which there is a division of legislative
powers between the Central and the Provincial Legislatures, controversies
often arise as to whether one or the other legislature is not exceeding its
legislative power, and encroaching on the other’s constitutional legislative
power. To resolve the dispute as to which law would prevail in a case where
both the Union as well as the State Legislature have the competence to enact
laws, Article 254 provides that if any provision of a law made by the
Legislature of a State is repugnant to any provision of law made by
Parliament which Parliament is competent to enact, or to any provision of an
existing law with respect to one of the matters enumerated in the Concurrent
List, then, subject to the provisions of clause (2), the law made by
Parliament shall prevail and the law made by the Legislature of the State
shall to the extent of the repugnancy be void. Clause (2) provides that
where a law made by the Legislature of a State with respect to one of the
matters enumerated in the Concurrent List contains any provisions repugnant
to the provisions of an earlier law made by the Parliament or an existing law
with respect to the matters, then, the law so made by the Legislature of such
State shall, if it has been reserved for the consideration of the President and
has received his assent, prevail in that State.
It is likely to happen from time to time that enactment though
purporting to deal with a subject in one list touches also on a subject in
another list and prima facie looks as if one legislature is impinging on the
legislative field of the another Legislature. This may result in large number
of statutes being declared unconstitutional because the legislature enacting
law may appear to have legislated in a field reserved for the other
legislature. To examine whether a legislation has impinged in the field of
other legislatures, in fact or in substance, or is incidental, keeping in view
the true nature of the enactment, the Courts have evolved the doctrine of
"pith and substance" for the purpose of determining whether it is legislation
with respect to matters in one list or the other. Where the question for
determination is whether a particular law relates to a particular subject
mentioned in one list or the other, the courts look into the substance of the
enactment. Thus, if the substance of enactment falls within Union List then
the incidental encroachment by the enactment on the State List would not
make it invalid. This principle came come to be established by the Privy
Council when it determined appeals from Canada or Australia involving the
question of legislative competence of the federation or the States in those
countries. This doctrine came to be established in India and derives its
genesis from the approach adopted by the Courts including the Privy
Council in dealing with controversies arising in other federations. For
applying the principle of "pith and substance" regard is to be had (i) to the
enactment as a whole, (ii) to its main objects, and (iii) to the scope and effect
of its provisions. For this see: Southern Pharmaceuticals & Chemicals
Vs. State of Kerala, AIR 1981 SC 1863; State of Rajasthan Vs.
G.Chawla, AIR 1959 SC 544; Thakur Amar Singh Vs. State of
Rajasthan, 1955 (2) SCR 303, Delhi Cloth and General Mills C o. Ltd.
Vs. Union of India AIR 1983 SC 937 and Vijay Kumar Sharma & Ors.
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Vs. State of Karnataka & Ors., AIR 1990 SC 2072. In the last mentioned
case it was held:
"Where a law passed by the State Legislature
while being substantially within the scope of the
entries in the State List entrenches upon any of the
Entries in the Central List the constitutionality of
the law may be upheld by invoking the doctrine of
pith and substance if on an analysis of the
provisions of the Act it appears that by and large
the law falls within the four corners of the State
List and entrenchment, if any, is purely incidental
or inconsequential."
Another principle which needs to be stated here is that when the
question is as to whether a provincial legislation is repugnant to the laws
enacted by the Parliament the onus to showing its repugnancy and the extent
to which it is repugnant would be on the party attacking its validity. There
ought to be a presumption in favour of its validity and every effort should be
made to reconcile them and construe both so as to avoid they being
repugnant to each other. Repugnancy has to be there in fact and not based
on a mere possibility. If the two enactments operate in different fields
without encroaching upon each other then there would be no repugnancy. In
Shyamakant Lal Vs. Rambhajan Singh & Ors., AIR 1939 FC 74, the
Court held:
"When the question is whether a provincial
legislation is repugnant to an existing Indian Law,
the onus of showing its repugnancy and the extent
to which it is repugnant should be on the party
attacking its validity. There ought to be a
presumption in favour of its validity, and every
effort should be made to reconcile them and
construe both so as to avoid their being repugnant
to each other; and care should be taken to see
whether the two do not really operate in different
fields without encroachment. Further repugnancy
must exist in fact, and not depend merely on a
possibility:
Their Lordships can discover no adequate
grounds for holding that there exists repugnancy
between the two laws in districts of the province of
Ontario where the prohibitions of the Canadian Act are
not and may never be in force: (1896) AC 348 at pages
369-370."
It was conceded by the learned counsels appearing on both sides that
this view has been accepted and reiterated by this Court in a number of
judgments. It is not necessary to refer to all those cases which would be
repetitive only. Though in the High Court (both before the learned Single
Judge as well as Division Bench) and in the special leave petition number of
points were taken/argued but before us the submissions were limited to three
points to which reference would be made in the subsequent paragraphs.
Before adverting to the actual submissions made by the respective
learned counsels, entries in the three lists relating to generation of
power/electricity and acquisition may be noticed, which read:
Entry 56 of List I: Regulation and development of inter-State rivers
and river valleys to the extent to which such
regulation and development under the control of
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the Union is declared by Parliament by law to be
expedient in the public interest.
Entry 17 of List II: Water, that is to say, water supplies, irrigation and
canals, drainage and embankments, water storage
and water power subject to the provisions of entry
56 of List I.
Entry 38 of List III: Electricity;
Entry 42 of List III: Acquisition and requisitioning of property.
It was conceded before us that Entry 56 List I would not be
applicable.
Learned Single Judge held that the Act enacted by the Assam
Legislature would fall under Entry 38 of List III. Since the Parliament had
already enacted comprehensive laws regarding the generation and supply of
electricity by enacting the Indian Electricity Act, 1910 (hereinafter referred
to "Act of 1910") and the Electricity (Supply) Act, 1948 (hereinafter
referred to "Act of 1948") covering the entire field, the field being
occupied, the State Legislature did not have the competence to enact the
laws under Entry 38 of List III. As the Act passed by the State Legislature
related to a field which was already occupied by enactments of the Central
Legislature, was not reserved for the assent of the President of India and
assented to by him the same was void being repugnant to the Central
legislation. Division Bench reversing the judgment of the learned Single
Judge held that the Act passed by the Assam Legislature would fall under
Entry 17 of List II and not under Entry 38 of List III and therefore would not
be repugnant to the Central legislation. Another finding recorded by the
Division Bench is that even if the Act is taken to be enacted under Entry 38
of List III, even, then there was no actual repugnancy as both the Acts did
not operate in the same field. Since there was no repugnancy, it was not
necessary to keep the Act for the assent of the President of India. Division
Bench held the Act to be valid, intra vires and falling within the legislative
competence of the State Legislature.
Mr. V.R. Reddy learned senior counsel for the appellants contended
that "Electricity" for the purpose of legislation is enumerated in Entry 38 of
the concurrent list. That electricity in broad term includes "generation of
electricity from any source whether thermal, water, gas, wind or any other
source". As far as generating company and licensee are concerned the
Central Government has made specific provisions in the Act of 1910 and
Act of 1948 for compulsory purchase of undertaking and a detailed
procedure has been prescribed under Sections 6, 7, 7A, 8, 9, 10 and 11 of
the Act of 1910 and Sections 37 of the Act of 1948. The impugned Act and
Acts of 1910 and 1948 passed by the Central Legislative operate in the same
field as in both the sets of Acts there are provisions for compulsory purchase
of undertakings producing electricity. The State Act transgresses the Central
Acts and therefore repugnant to the Central Acts. In view of the provisions
of Article 254 Central Acts would prevail as the State Act was neither kept
reserved for the assent of the President of India nor assented to by the
President of India. The State Act was bad in law and could not be enforced
being ultra vires of the Constitution of India and beyond the Legislative
competence of the State Legislature.
On the other hand, Mr. Vijay Hansaria, learned senior counsel
appearing for the State of Assam as well as the Board contended that the
impugned Act was not repugnant to the provisions of the Central Acts.
According to him, impugned Act and the Central Acts in the instant case
operate in two different fields without encroaching upon each others field in
as much as the true nature and character of the impugned State Act is to
acquire the undertaking, whereas both the Central Acts have made general
provisions with regard to supply and use of electrical energy. It was
vehemently contended that there was no violation of Sections 3, 4, 5, 6, 7 of
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7A of the Act of 1910, by Sections 3 and 4 of the impugned Act as the
appellants were not ’licensees’ under the Act of 1910 and the State
Government had the jurisdiction and power to acquire any property for
public purposes making necessary provisions for payment of compensation.
That the impugned Act has taken adequate care for payment of
compensation after proper assessment by the Commission to be constituted
by the authority. There is no direct conflict between the provisions of the
Central Act and the State Act bringing a position where one cannot be
obeyed without disobeying the other and the impugned Act and the Central
Act both can stand together even though the State law may provide for
certain additional/supplementary provisions. In substance the submission
made is that in pith and substance the State Act is not repugnant to the
Central Acts as the two sets of Acts operate in different fields.
Learned counsel appearing for the appellants placing reliance on a
Constitution Bench decision of this Court in Deepchand Vs. State of U.P.,
AIR 1959 SC 648, contended that even in the absence of direct conflict, the
State law would be inoperative as the Central Acts of 1910 and 1948
intended to be exhaustive Codes in the field of electricity and the State
Legislature did not have the legislative competence to enact law in the field
occupied by the Central Legislation. Law made by the State Legislature in
the occupied field could not come into operation unless it was reserved for
the assent of the President of India and assented by him in terms of Article
254 (2). It was observed in para 29:
"Nicholas in his Australian Constitution, 2nd Edn.
Page 303, refers to three tests of inconsistency or
repugnancy:
(1) There may be inconsistency in the actual
terms of competing statutes;
(2) Though there may be no direct conflict, a
State Law may be inoperative because the
Common Wealth Law, or the award of the
Common Wealth Court, is intended to be a
complete exhaustive Code; and
(3) Even in the absence of intention, a conflict
may arise when both State and Common
Wealth seek to exercise their powers over
the same subject matter.
This Court in Tika Ramji vs. State of Uttar
Pradesh, 1956 SCR 393: [(S) AIR 1956 SC 676]
accepted the said three rules, among others, as
useful guides to test the question of repugnancy.
In Zaverbhai Amaidas vs. State of Bombay, 1955-
1 SCR 799: (AIR 1954 SC 752), this Court laid
down a similar test. At page 807 (of SCR): (at p.
757 of AIR), it is stated:
"The principle embodied in section 107 (2)
and Article 254 (2) is that when there is legislation
covering the same ground both by the centre and
by the Province, both of them being competent to
enact the same, the law of the Centre should
prevail over that of the State."
Repugnancy between two statutes may thus be
ascertained on the basis of the following three
principles:
(1) Whether there is direct conflict between the
two provisions;
(2) Whether Parliament intended to lay down an
exhaustive code in respect of the subject
matter replacing the Act of the State
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Legislature; and
(3) Whether the law made by Parliament and
the law made by the State Legislature
occupy the same field."
This Court laid down three broad principles to find out whether there is any
Repugnancy between the two statutes, i.e., whether there is a direct conflict
between the two statutes, whether the two statutes occupied the same field
and as to whether the Parliament intended to lay down an exhaustive code in
respect of the subject matter.
In M.Karunanidhi Vs. Union of India, AIR 1979 SC 898, Fazal
Ali, J. reviewed the authorities on repugnancy under Article 254 and held
that the following propositions emerged from decided cases:
"1. That in order to decide the question of
repugnancy it must be shown that the two
enactments contain inconsistent and irreconcilable
provisions so that they cannot stand together or
operate in the same field.
2. That there can be no repeal by implication
unless the inconsistency appears on the face of the
two statutes.
3. That where the two statutes occupy a
particular field, but there is room or possibility of
both the statutes operating in the same field
without coming into collision with each other, no
repugnancy results.
4. That where there is no inconsistency but a
statute occupying the same field seeks to create
distinct and separate offences, no question of
repugnancy arises and both the statutes continue to
operate in the same field."
Without entering into the controversy whether the State Act would fall
under Entry 17 of List II or under Entry 38 of List III and assuming (but not
holding that it falls under Entry 38 of List III) we examine as to whether
there is any conflict between the provisions of the Central Act and the State
Act. If there is no conflict at all the question of repugnancy would not arise.
The State Act has been enacted to take over the Bharat Hydro Power
Corporation in public interest as it could not complete the project within
time so that the State could efficiently supervise manage and execute the
work expeditiously to subserve the common good, in the context of the acute
power shortage in the State. The State after taking over the project had the
power to hand it over to the Board for completing the project. Provision has
been made to pay adequate compensation which is to be determined by a
Commission constituted under the Act for payment of adequate
compensation. Contention raised on behalf of the appellants is that Central
Act makes specific provisions for compulsory purchase of undertaking and a
detailed procedure has been prescribed and the State Act has created a
parallel procedure for purchase of the undertaking thereby impinging on the
Central Act and is therefore repugnant to the Central Act. We do not find
any substance in this submission.
The Act of 1910 relates to the supply and use of electrical energy.
Section 3 provides that the State Government may on an application made
in the prescribed form and on payment of the prescribed fee (if any) grant a
license to supply energy in any specified area and also to lay down or place
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electric supply \026lines for the conveyance and transmission of energy.
Section 4 speaks of revocation or amendment of licenses under the specified
conditions. Section 4A speaks of the amendment of licenses. Section 5
makes provisions where license of a licensee is revoked. Section 6 relates to
purchase of undertakings. Section 6 of the Act of 1910 reads:
"6. Purchase of undertakings.- (1) Where a
license has been granted to any person, not being a
local authority, the State Electricity Board shall,-
(a) in the case of a license granted before the
commencement of the Indian Electricity
(Amendment) Act, 1959 (32 of 1959) on the
expiration of each such period as is
specified in the license; and
(b) in the case of license granted on or after the
commencement of the said Act, on the
expiration of such period not exceeding
thirty years and of every such subsequent
period, not exceeding twenty years, as shall
be specified in this behalf in the license,
have the option of purchasing the undertaking and
such option shall be exercised by the State
Electricity Board serving upon the licensee a
notice in writing of not less than one year requiring
the licensee to sell the undertaking to it at the
expiry of the relevant period referred to in this sub-
section.
(2) Where a State Electricity Board has not been
constituted, or if constituted, does not elect to
purchase the undertaking, the State Government
shall have the like option to be exercised in the like
manner of purchasing the undertaking.
(3) Where neither the State Electricity Board nor
the State Government elects to purchase the
undertaking, any local authority constituted for an
area within which the whole of the area of supply
is included shall have the like option to be
exercised in the like manner of purchasing the
undertaking.
(4) If the State Electricity Board intends to
exercise the option of purchasing the undertaking
under this section, it shall send an intimation in
writing of such intention to the State Government
at least eighteen months before the expiry of the
relevant period referred to in sub-section (1) and if
no such intimation as aforesaid is received by the
State Government the State Electricity Board shall
be deemed to have elected not to purchase the
undertaking.
(5) If the State Government intends to exercise the
option of purchasing the undertaking under this
section, it shall send an intimation in writing of
such intention to the local authority, if any,
referred to in sub-section (3) at least fifteen months
before the expiry of the relevant period referred to
in sub-section (1) and if no such intimation as
aforesaid is received by the local authority, the
State government shall be deemed to have elected
not to purchase the undertaking.
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(6) Where a notice exercising the option of
purchasing the undertaking has been served upon
the licensee under this section, the licensee shall
deliver the undertaking to the State Electricity
Board, the State Government or the local authority,
as the case may be, on the expiration of the
relevant period referred to in sub- section (1)
pending the determination and payment of the
purchase price.
(7) Where an undertaking is purchased under this
section, the purchaser shall pay to the licensee the
purchase price determined in accordance with the
provisions of sub-section (4) of section 7A."
Section 4 which provides for revocation or amendment of licenses,
Section 4A which provides for amendment of licenses at the instance of the
licensee or otherwise and Section 5 which enumerates the procedure to be
followed where the Government revokes the license under Section 4 would
not be attracted/applicable as the appellants are admittedly not licensees.
These provisions would apply to licensees only. Section 6 is again
applicable to licensees only. It is not applicable to sanction holders. It talks
of pre-emptory right of the Board to purchase the undertaking on the expiry
of the period mentioned in clauses (a) and (b) of Section 6 which can be
done after serving upon the licensee a notice in writing of not less than one
year requiring the licensee to sell the undertaking to it at the expiry of the
period referred to in clauses (a) and (b) of Section 6. Section 6 (7) provides
for payment of purchase price by the purchaser to the licensee determined in
accordance with the provisions of Section 7A. Since the appellants have not
been given a license and are not ’licensees’, Section 6 would not apply.
Under Section 6 there is an ’option’ with the Board to purchase. The word
’option’ leaves two courses open to the authority, i.e., either to purchase an
undertaking or to renew the license. Either of the two courses would not be
available as the appellant No. 1 is not a licensee.
Section 7A which deals with the determination of purchase price
again talks of where an undertaking of a licensee is purchased. Since the
appellants are not the licensees they would not be covered under any of the
provisions dealing with the sale or purchase of undertaking as provided
under the Act of 1910. The benefit of Sections 7 and 7A shall also not be
available because it speaks of an undertaking of a licensee. As the
appellants are not covered by the provisions of the Act of 1910 the question
of the State Act which seeks to take over the appellants’ undertaking and
make provisions for compensation would not be repugnant to any of the
provisions of the Act of 1910. Submission made by the learned counsel for
the appellants that the State Act creates procedure parallel to the existing
procedure provided under Section 6 of the Act of 1910 or for determing the
purchase price as provided under Section 7A cannot be accepted because the
provisions of Chapter II (Sections 3 to 11) are not applicable to the
appellants as they are not licensees.
Faced with this situation Mr.V.R. Reddy, learned senior counsel for
the appellants, submitted that the appellants are deemed licensees under the
provisions of Act of 1948. For this he has referred to Section 26A of the Act
of 1948. Section 26A reads as:
"26A. Applicability of the provisions of Act 9 of
1910 to Generating Company.- (1)
Notwithstanding anything contained in sub-
section (2), nothing in the Indian Electricity Act,
1910, shall be deemed to require a Generating
Company to take out a licence under that Act, or
to obtain sanction of the State Government for the
purpose of carrying on any of its activities.
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(2) Subject to the provisions of this Act,
Sections 12 to 19 (both inclusive) of the Indian
Electricity Act, 1910 (9 of 1910) and clauses XIV
to XVII (both inclusive) of the Schedule thereto,
shall, as far as may be, apply in relation to a
Generating Company as they apply in relation to a
licensee under that Act (hereafter in this section
referred to as the licensee) and in particular a
Generating Company may, in connection with the
performance of its duties, exercise-
(a) all or any of the powers conferred on a
licensee by sub-section (1) of Section 12 of the
Indian Electricity Act, 1910, as if -
(i) the reference therein to licensee were
a reference to the Generating
Company;
(ii) the reference to the terms and
conditions of licence were a reference
to the provisions of this Act and to the
articles of association of the
Generating Company; and
(iii) the reference to the area of supply
were a reference to the area specified
under sub-section (3) of section 15A
in relation to the Generating
Company;
(b) all or any of the powers conferred on a
licensee by sub-section (1) of section 14 of the
Indian Electricity Act, 1910 (9 of 1910), as if -
(i) the references therein to licensee were
references to the Generating Company, and
(ii) the Generating Company had the powers of
a licensee under the said Act.
(3) The provisions of section 30 of the Indian
Electricity Act, 1910 (9 of 1910) shall not apply to
the transmission or use of energy by a Generating
Company.
(4) For the removal of doubts, it is hereby
declared that sections 31 to 34 (both inclusive) of
the Indian Electricity Act, 1910 (9 of 1910) shall
apply to a Generating Company."
Section 26A provides that notwithstanding the provisions of Sub-
Section (2) a generating company would not be required to take a licence
under the Act of 1910 or to obtain sanction of the State Government for the
purpose of carrying on any of its activities. Under sub-section (2) provisions
of Sections 12 to 19 of the Act of 1910 are made applicable to a generating
company as they apply to a licensee under the 1910 Act. It is to be noted
that provisions of Sections 3 to 11 of 1910 Act have not been made
applicable to the generating company.
"Generating Company" has been defined in Section 2(4A) of the 1948
Act to mean:
"’Generating Company’ means a company
registered under the Companies Act 1956 (1 of
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1956) and which has among its objects the
establishment operation and maintenance of
generating stations"
"Licensee" has been defined under this Act in Section 2(6) as under:
" "licensee" means a person license under Part II of the
Indian Electricity Act, 1910 (9 of 1910) to supply energy
or a person who has obtained sanction under Section 28
of that Act to engage in the business of supplying energy
but the provisions of Section 26, or 26A of this Act
notwithstanding, does not include the Board or a
Generating Company."
A combined reading of Sections 2(4A) and 2(6) makes it clear that
even if the appellant No. 1 is taken to be a generating company (which is
not necessary to be determined in this case) it would not be a ’licensee’
because the generating company has been specifically excluded from being a
licensee notwithstanding the provisions of Sections 26 or 26A of the 1948
Act. As pointed out earlier only Sections 12 to 19 of the Act of 1910 have
been made applicable to a generating company. Sections 3 to 11 of Act of
1910 do not apply to a generating company.
Section 37 of Act of 1948 provides for purchase of generating stations
or undertakings or main transmission lines by the Board. This Section
would also not apply to the present case. The legislature in its wisdom made
only certain provisions of Act of 1910 applicable to a generating company in
Section 26A. Contention that the impugned Act is in violation of provisions
of Act of 1910 or the Act of 1948 has no basis to stand on.
The impugned Act and the Central Acts in the instant case operate in
two different fields without encroaching upon each other’s field in as much
as the true nature and character of the impugned State Act is to acquire the
undertaking and pay compensation as provided in the Act whereas both the
Central Acts (Acts of 1910 and 1948) have made general provisions with
regard to supply and use of electrical energy. The provisions regarding
purchase of undertaking in the Act of 1910 would not be applicable as the
appellants are not licensees within the meaning of the Act of 1910. There is
not even a semblance of conflict what to talk of direct conflict between the
impugned State Act and the Central Acts to bring about the situation where
one cannot be obeyed without disobeying the others. Both the Acts can
operate simultaneously as they do not occupy the same field. As the
enactments operate in two different fields without encroaching upon each
other’s field there is no repugnancy.
Since there is no repugnancy the question of the State Act being kept
for the consideration of the President or receiving his assent did not arise.
For the reasons stated above, we do not find any merit in these appeals
and the same are dismissed. Parties shall bear their own costs in these
appeals.