Full Judgment Text
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PETITIONER:
MAHARASHTRA STATE ELECTRICITY BOARD AND THESTATE OF MAHARASH
Vs.
RESPONDENT:
NAGPUR ELECTRIC LIGHT AND POWER COMPANY LTD.& ANR.
DATE OF JUDGMENT07/01/1972
BENCH:
SIKRI, S.M. (CJ)
BENCH:
SIKRI, S.M. (CJ)
SHELAT, J.M.
DUA, I.D.
KHANNA, HANS RAJ
MITTER, G.K.
CITATION:
1972 AIR 706 1971 SCR (3) 19
ACT:
Indian Electricity Act 1910, S. 4(3)-Amendment of terms &
conditions of Nagpur Electricity Licence-Validity of
amendment made in 1966-Legality of notice under s. 6 of Act
for purchase of undertaking by Electricity Board.
HEADNOTE:
On May 4, 1905 a licence was granted tinder s. 4(1) of’ the
Indian Electricity Act, 1903 to Crompton & Co. Ltd. for the
supply of electricity in the municipal area of Nagpur. A
notification granting the above license was published in the
Central Provinces Gazette on May 6, 1905. The license
provided that the right of the government to purchase the
undertaking shall arise after 42 years from the commencement
of the license and after every subsequent period of 10
years. Para 4 of the license provided that it would come
into force and have effect on the (lay when the notification
confirming it was published in the Central Provinces Gazette
and that day would for the purpose of Act, be deemed to be
the commencement of the license. On January 1, 1911 the
Indian Electricity Act, 1910 came into force. On June 28,
1913 a notification permitting the assignment of the licence
in favour of the Nagpur Electric Light and Power Company
Ltd. (respondent herein) was published in the gazette. On
May 2, 1947 amendments in the terms and conditions of’ the
licence were made under s. 4(3) of the Act of 1910 and were
published in the gazette. In the preamble it was stated
that these amendments were "in ’he terms and conditions of
the Nagpur Electricity licence grantees under the Public
Works Deptt. Notification No. 45 dated 4th May
1905............ In the various amendments made throughout
the reference was made to May 4. 1947 as being the date when
various changes were deemed to start or operate. In clause
3 paragraph (o) (i) was provided that "Option of purchase
given by sub-section 1 of section 7 of the Act shall be
exercisable on the expiration of ten years or 4th May 1957
and the expiration of every subsequent period of ten years
during continuance of this licence." On September 4,
1948 the Electricity Supply Act, 1948 came into force.
Section 71 of this Act provided that the right and options
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to purchase under the Indian Electricity Act. 1910 were
deemed to have been transferred to the Provincial (now
State) Electricity Board. The Indian Electricity Amendment
Act. 1959 (32 of 1959) amended Indian Electricity Act. 1910.
In the newly inserted section 4A(1) the proviso thereto said
that no alterations or amendments in the license shall be
made except with the consent of the lisensee unless such
consent was in the opinion of the State government
unreasonably withheld. In the amended Act section 6
provided for the purchase of the licensee’s undertaking by
the State Electricity Board. but the old section 7 was
allowed to continue. On September 15, 1965 notice was given
to the respondent under sub-section (1) and’ sub-section (6)
of section 6 of the Indian Electricity Act, 1910 whereby the
respondent was required
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to sell its undertaking to the Board on the midnight of
3rd/4th May, 1967 being the date of the expiry of the
licence granted to it. Doubts arose as to the
interpretation of clause 3 paragraph (o) (i) of the licence
because of the use of the word ’or’ between words 10 years
and "the 4th May. 1957" in the said clause. The State
Government on April 19, 1966 published a notification
whereby in the said clause between the words "10 years" and
"the 4th May, 1957" the word "on" was’ substituted, the
effect of which was that the option to purchase became exer-
cisable on the expiration of period of 10 years on the 4th
May. 1957. After this amendment another notice was given
under sub-section and (6) of s. 6 of the Indian Electricity
Act, 1910 on April 26, 190. The words of this notice were
the same as that of the earlier notice but it was expressly
given in supersession of the earlier notice.. The respondent
filed a writ petition under article 226 of the Constitution
challenging the aforesaid notice dated April 26, 1966. The
High Court held that since the operation of license
commenced on May, 6, 1905 it could not terminate on May 4,
1957 and therefore the amendment of 1966 was invalid. In
appeal to this Court it was common ground that the licensee
had never replied to the letter of the State Electricity
Board asking for its consent for the amendment of the
licence in 1966 in terms of section 4A(1) of the Electricity
Act.
HELD : (i) In the circumstances of the case there could be
no doubt that the State Government was entitled to hold the
opinion that the consent of the licensee for the purchase of
undertaking had been unreasonably withheld. [27 E]
(ii) Two interpretations were possible of clause 3 paragraph
(o) (i) of the license, as it existed before the amendment
dated April 19, 1966. One was that the word ’or’ had been
wrongly used by some printing mistake and the true word was
"on". The other interpretation was that two dates had been
provided for the exercise of the option; one, the expiration
of ten years from May 6, 1947 the other being May 4, 1957.
Thus there was genuine doubts about the real date and if the
State Government sought to clarify the point it cannot be
said that it made an unreasonable demand from the licensee.
It was not a case where government was providing for the
option to purchase which was not originally intended to be
given. [26 F-H]
(iii) The High Court was wrong in holding that May 6 was
the relevant date because the notification relating to the
original license was published on May 6, 1905. When the
license was amended in 1947 with the consent of the licensee
it proceeded on the basis that the 42 years period expired
on May 3. 1947 because throughout the crucial effective date
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in the amendments is May 4, 1947. Para 4 of the original
license thus ceased to have effect for the purpose of
construing the license as amended in 1947 and subsequently.
(iv) If clause (3) paragraph (o)(i) is interpreted in the
light of the rest of the amendments made in the license
in 1947, it is quite clear that the previous period was
deemed to have expired on May 3, 1947 and the fresh period
started on May 4, 1947 and the subsequent periods of 10
years ended on May 3, 1957 and May 3, 1967. It is
impossible to read the license as amended in 1947 in any
other way than that it was agreed that the period of 10
years in the license would start from May 4, 1947. The
details of distribution system, the valuation of assets as
on May 4, 1947 and other clauses all point to this
conclusion. The license rightly talked of Sec. 7 of the
Electricity Act because the license still provided for the
start of period of 10 years from May 1947 and
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this could only be provided for while the old sec. 7 stood.
The notice dated April 26, 1966 was thus in accordance with
terms of the license and the law. The impugned notice did
not suffer from any infirmity. The appeal must accordingly
be allowed. [28D-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1429 & 1764
of 1968.
Appeal from the judgment and order dated the 26th April,
1967 of the Bombay High Court, Nagpur Bench in Special Civil
Application No. 125 of 1967.
Niren De, Attorney-General for India, A. G. Ratnaparkhi, C.
K. Ratnaparkhi and Rajiv Shah, for the appellant (in C.A.
No. 1429 of 1968) and Respondent No. 3 (in C.A. No. 1764 of
1968.
M. C. Setalvad and I. N. Shroff, for respondents Nos. 1
and 2 (in C.A. No. 1429 of 1968).
B. D. Sharma, for respondent No. 3 (in C.A. No. 1429 of
1968).
V. S. Desai, P. K. Chatterjee and B. D. Sharma, for the
appellant (in C.A. No. 1764 of 1968).
S. J. Sorabjee and 1. N. Shroff, for respondents Nos. 1
and 2 (in C.A. No. 1764 of 1968).
S. J. Sorabjee, Ashok H. Desai and R. P. Kapur, for
intervenar No. 1 (in both the Appeals).
R. N. Banerjee and R. P. Kapur, for Intervener No. 2 (in
both the Appeals).
The Judgment of the Court was delivered by
Sikri, C. J. These two appeals by certificate are directed
against the judgment of the High Court of Bombay (Abhyankar
and Paranjpe, JJ). By this judgment the High Court came to
the conclusion that the notice dated April 26, 1966, issued
by the Maharashtra State Electricity Board under the
provisions of S. 6 of the Indian Electricity Act, 1910, was
invalid in law and was unenforceable having failed to
satisfy the essential conditions of the notice. The High
Court accordingly allowed the petition under art. 226 of the
Constitution and quashed the said notice.
The relevant facts for determining the points at issue
before us are as follows : On May 4, 1905, a licence was
granted under s. 4(1) of the Indian Electricity Act, 1903,
to Crompton & Co. Ltd., London, for the supply of
electricity in the municipal area of Nagpur. A notification
granting the above licence was
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published in the Central Provinces Gazette on May 6, 1905.
On January 1, 1911, the Indian Electricity Act, 1910, came
into force. On June 28, 1913 a notification permitting the
assignment of the licence in favour of the Nagpur Electric
Light and Power Company Ltd., respondent before us, was
published in the gazette. On May 2, 1947, amendments in the
terms and conditions of the licence made in exercise of the
powers conferred by sub-s. (3) of s. 4 of the Indian
Electricity Act, 1910, were published. In the preamble it
was stated that these amendments were "in the terms and
conditions of the Nagpur Electricity Licence, granted under
the Public Works Department Notification No. 46, dated the
4th May, 1905.. . ." In the various amendments made
throughout, reference was made to May 4, 1947, as being the
date when various changes were deemed to start or operate.
For instance, in clause 2 paragraph (v) the expression
"deposited map" was defined as follows :
"2(v) the expression "deposited map" shall
mean the plans and statements showing
(a) the area of supply;
(b) details of distribution system laid and
in use as on 4th May 1947;
(c) additions or alterations or both to
existing distribution system as on 4th May
1947. . . . "
Again clause 2 paragraph (ix) defined the expression "Nett
Book Value" to mean the written down value of the assets as
on May 4, 1947. In clause 3 paragraph (b) (ii) it is
provided that "nothing in this licence shall be construed to
prevent the Great Indian Peninsula Railway, the Bengal
Nagpur Railway or the Provincial Government or the Central
Government from taking from the Government a supply of
electrical energy for its exclusive use within the area of
supply for new installations set up by them after 4th May,
1947". In clause 3 paragraph (d) it was provided that "the
licencee shall, within six months from the 4th May 1947,
reduce its retail rates for the supply of energy for various
purposes to its consumers. . . . " In clause 3 paragraph (e)
(i) (b) it was provided that the "continuous current system
shall be in use for a limited period of 5 years up to 4th
May 1952, or such longer period as the Government may
direct...... It was provided further in clause 3 paragraph
(f) (vii) as follows
"It is desirable that the existing
distribution system viz. as on 4th May, 1947
should also conform with the foregoing in all
respects. . .
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(Sikri, C.J.)
In clause 3 paragraph (o) (i), which is the clause which we
have to interpret, it was provided as follows :
"The option of purchase given by sub-section
(1) of section 7 of the Act shall be
exercisable on the expiration of ten years or
4th May 1957 and the expiration of every
subsequent period of ten years during the con-
tinuance of this license."
We may mention that there was some debate before us whether
the word "or" in this para was a misprint for "on". We
checked up the original and it is common ground that the
word in the original license is "or" and not "on".
In the first annexe headed "Compulsory Works" (see Clause 3
of the License) it is provided that the "existing
distribution system together with transformers and control
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gear as laid in use on 4th May 1947 in streets and roads
delineated in the deposited map shall be the Compulsory
Works for purposes of the section."
On September 10, 1948, the Electricity (Supply) Act, 1948,
came into force. We need only notice s. 71 of this Act
under which the rights and options to purchase under the
Indian Electricity Act, 1910 were deemed to have been
transferred to the Provincial (now State) Electricity Board.
The Indian Electricity (Amendment) Act, 1959 (32 of 1959
amended the Indian Electricity Act, 1910. We need only
notice the insertion of new section 4A(1) at present. This
reads :
"4A. Amendment of licensees.-(I ) Where in
its opinion the public interest so permits,
the State Government, on the application of
the licensee or otherwise and, after
consulting the State Electricity Board, and if
the licensee is not a local authority, also
the local authority, if any, concerned, may
make such alterations and amendments in terms
and conditions of a license, including the
provisions specified in section 3, sub-section
(2), clause (f), as it thinks fit :
Provided that no such alterations or
amendments shall be made except with the
consent of the licensee unless such consent
has. in the opinion of the State Government,
been unreasonably withheld."
The purchase of undertakings is to be
regulated by s. 6 which treads :
" 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)
24
Act, 1959, on the expiration of each such
period as is specified 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."
Sub-section (4) of s. 6 provides that "if the State
Electricity Board intends to exercise the option of
purchasing the undertaking tinder 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. Sub-section
(6) of section 6 provides that "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". Under sub-s. (7), s. 6, "where an
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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".
On September 15, 1965 notice was given to the respondent
under sub-s. (1) and sub-s. (6) of s. 6 of the Indian
Electricity Act, 1910, as follows :
"I am directed to give you notice that the
Maharashtra State Electricity Board has
decided to purchase your Electricity
Undertaking at Nagpur (District Nagpur) in
exercise of the option to purchase vested in
the Board by sub-section (1) of section 6 of
the Indian Electricity Act, 1910, and to
require you to sell your said undertaking to
the Board on the midnight of 3rd/ 4th May 1967
being the date of expiry of the license
granted to you by the Government under the
said Act and also to call upon you under sub-
section (6) of Section 6 of the said Act
to deliver the said undertaking to the Board
on the said date of expiry of the said license
pending determination and payment of purchase
price."
Doubts arose as to the interpretation of
clause 3 paragraph (o) (i) of the license,
which we have set out above. The State
25
Government, therefore, decided to amend the para so as to
remove any doubts that there might be on the matter, and on
April 19, 1966 published a notification which reads as
follows :
"Whereas as required by sub-section (3) of
Section 4-A of the Indian Electricity Act,
1910 (11 of 1910) a draft of the further
amendment proposed to be made by the
Government of Maharashtra in the terms and
conditions of the Nagpur Electricity License,
granted by the Government of the Central
Provinces, Public Works Department,
Notification No. 46, dated the 4th May, 1905,
as subsequently amended, was published in
Government Notification, Industries and Labour
Department No. LNA-(M)-1265/8126-Elec. 1,
dated the 4th January, 1966, for inviting
objections and suggestions
And whereas no objections or suggestions have
been received by the Government of Maharashtra
:
And whereas the Government of Maharashtra has
consulted the Maharashtra State Electricity
Board and the local authorities concerned and
obtained the consent of the Central
Government.
And whereas the, Government of Maharashtra
also requested the Licensee, the Nagpur
Electricity Light & Power Company Limited, to
give its consent to the proposed amendment, as
required by the proviso to subsection (1) of
the said section 4-A but, in the opinion of
the Government of Maharashtra. such consent
has been unreasonably withheld
And whereas in the opinion of the Government
of Maharashtra, the Public interest so permits
to make the proposed amendment :
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Now, therefore, in exercise of the powers
conferred by the said section 4-A and of all
other powers enabling it in this behalf, the
Government of Maharashtra hereby amends the
terms and conditions of the said licence, as
follows :
In clause 3 of the license, in paragraph (o)
in subparagraph (i) for the portion beginning
with the words "shall be exercisable" and
ending with the word and figures "May 1957"
the following shall be substituted. namely
"Shall be exercisable on the expiration of the
period of ten year on the 4th May 1957"
L864SupCI/72
26
After this amendment, another notice was given under sub-ss.
(1) and (6) of s. 6 of the Indian Electricity Act, 1910, on
April 26, 1966. The wording of this notice is similar to
the notice dated September 15, 1965, which we have set out
above. This notice was expressly given in supersession of
the earlier notice.
While approaching the Central Government for its consent,
the Government of Maharashtra in its letter dated January
17, 1966, stated that "the draft amendment seeks to remove
the ambiguity, if any, in respect of the date on which the
option of purchase is exercisable under the Indian
Electricity Act, 1910".
On November 10, 1966, the licensee, the Nagpur Electric
Light and Power Company Ltd., filed the petition under art.
226 challenging the aforesaid notice dated April 26, 1966.
The High Court held that the amendments in the license made
in 1947 were in order. No serious challenge to these
amendments has been made before us. The High Court,
however, seems to have held that the amendment of 1966 was
invalid. The first question which we may deal with is
whether the High Court is right in holding that the amend
ment of April 19, 1966 was valid or not. It is common
ground that the licensee did not send any reply to the
demand of consent made by the State Government. The
question arises whether the licensee unreasonably withheld
the consent. It seems to us that in the circumstances of
this case there is no doubt that the State Government was
entitled to hold the opinion that the consent had been
unreasonably withheld.
Two interpretations were possible of clause 3 paragraph (o)
(i) of the license, as it existed before the amendment dated
April 19, 1966. One was that the word ’or’ had been wrongly
used by some printing mistake and the true word was ’on.
The other interpretation was that two dates had been
provided for the exercise of the option; one, the expiration
of ten years from May 6, 1947, the other being May 4, 1957.
Thus there were genuine doubts about the real date and if
the State Government sought to clarify the point it cannot
be said that it made an unreasonable demand on the licensee.
Every licensee, under the Electricity Act, 1910 or the
earlier Act, knew that the statute gave an option to the
State Government or a local authority or some board to pur-
chase, and that option had to be exercised after the
expiration of certain periods mentioned in the licence. So
it was not a case where Government was providing for the
option to purchase which was not originally intended to be
given. We are unable to appreciate the opinion of the High
Court that the "amendment effected in 1966 stating that the
option to purchase under the Act shall be exercisable on the
expiration of the period of ten years on
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27
4-5-1957, is saying something which is meaningless and unen-
forceable." The High Court seems to think that the period of
10 years starting with the commencement of that period on
May 6, 1947 could never end on May 4, 1957. But this was
exactly the reason why the amendment was sought to be made
in the license. May 6, 1947 was a date which had no
relevance once the amendments of 1947 are taken into
consideration. The amendments of 1947 all the time speak of
May 4, 1947 and not May 6, 1947. The date May 6, 1947 was
derived by the following process of reasoning. The original
license provided that "the right to purchase (para (g)) the
undertaking, in respect of which the license is granted,
shall for the purposes of the provisions in this behalf
contained in the said Act enure after the following periods,
that is to say
(i) after 42 years from the commencement of
this Licence.
(ii) after every subsequent period of 10
years. The terms of such purchase as
aforesaid shall be those set forth in Section
7 of the Act."
Para 4 of the original license provided that "this License
shall come into force and have effect upon the day when a
notification confirming it is published in the Central
Provinces Gazette, and that day shall for the purposes of
the said Act be deemed to be the commencement of this
License". It is this para 4 that created the difficulty
because although the notification is dated May 4, 1905 it
was published on May 6, 1905. But when. the license was
amended in 1947 with the consent of the licensee it proceed-
ed on the basis that the 42 years period expired on May 3,
1947, because throughout the crucial effective date in the
amendments is May 4, 1947.
It seems to us that after the amendments para 4 of the
original license ceased to have effect for the purposes of
construing the license as amended in 1 947 and subsequently.
This takes us to the question whether the notice dated April
26, 1966 is in accordance with law. For the sake of
convenience we may set out clause 3 paragraph (o) (i) as
amended
"43 (o) (i) The option of purchase given by
subSection (1) of section 7 of the Act shall
be exercisable on the expiration of the period
of ten years on the 4th May 1957, and the
expiration of every subsequent period of ten
years during the continuance of this license."
It is the case of the licensee that the date in
the notice viz. MAy, 1967, is not in compliance with law the
midnight of 3/4th and the terms of the licensee.
28
Mr. Sorabjee further submitted the following propositions
(i) A day is regarded as indivisible period
and the law does not regard fraction of a day;
(ii) Person for whose benefit period is
prescribed is entitled to the benefit of the
entire period.
(iii) Day of the happening of an event or the
doing of an Act ought to be excluded rather
than included.
(iv) Notice under S. 6 is a condition
precedent and must be strictly construed.
He also referred to us some authorities in support of these
propositions. We need not quarrel with these propositions
but the first three must be regarded as ordinary principles
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of construction and yield to the wording and the context of
the instrument.
It seems to us that if clause 3 paragraph (o) (i) is
interpreted in the light of the rest of the amendments made
in the license in 1947, it is quite clear that the previous
period was deemed to have expired on May 3, 1947 and the
fresh period started on May 4, 1947 and the subsequent
periods of 10 years ended on May 3 1957 and May 3, 1967. It
is impossible to read the license as amended in 1947 in any
way other than that it was agreed that the period of 10
years mentioned in the license would start from May 4, 1947.
The details of distribution system (para 2 extracted above),
the valuation of assets as on May 4, 1947 and other clauses
extracted above all point to this conclusion.
It was pointed out that the license still talked of sec. 7
of the Electricity Act. Why was this not amended when it
was under sec. 6, as inserted in 1959, that the option to
purchase became exercisable ? It seems to us that it was
rightly not amended because the license still provided for
the starting of the period of 10 yews from May 4, 1947.
This could only be provided for while the old sec. 7 stood.
It seems to us that the notice dated April 26, 1966 was in
accordance with the terms of the licence and the law.
We accordingly hold that the impugned notice does not suffer
from any infirmity. The appeals are allowed, the judgment
of the High Court reversed and the writ petition dismissed.
The parties will bear their own costs throughout. Parties
may mention on the 17th January, 1972 for passing any
consequential and./or essential order which may be necessary
in the circumstance
G. C. Appeals allowed.
29