Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8
PETITIONER:
GUJARAT ELECTRICITY BOARD
Vs.
RESPONDENT:
SHANTILAL R. DESAI
DATE OF JUDGMENT:
06/08/1968
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
BACHAWAT, R.S.
CITATION:
1969 AIR 239 1969 SCR (1) 580
CITATOR INFO :
R 1975 SC 32 (6)
R 1987 SC1217 (13)
R 1990 SC 123 (31)
ACT:
The Electricity Act 9 of 1910, s. 7--The Electricity
(Supply) Act 54 of 1948, s. 71--Compulsory purchase of
electricity from licensee under s. 7--Steps to be taken
by purchaser--Option to purchase whether has to be
separately exercised apart from notice under
section--Electricity Board whether empowered under s. 71
of 1948 Act to make compulsory purchase under s. 7.
HEADNOTE:
On January 8, 1959 the Bombay State Electricity Board
purporting to exercise its powers under s. 7 of the Indian
Electricity Act, 1910 read with s. 71 of the Electricity
(Supply) Act, 1948 gave notice to the res-- pondent that it
would exercise its option of purchasing the electric supply
undertaking which the respondent ran under a licence, on the
expiry of the said licenee on February 10, 1962. On the
creation of the State of Gujarat the appellant corpOration
was formed and succeeded to the rights and liabilities of
the Bombay State Electricity Board. The respondent filed
a writ petition in the High Court in which he challenged the
right of the appellant to purchase his undertaking. The
High Court came to the conclusion that though the notice
issued on January 8, 1959 was a valid notice under s. 7(4)
of the Act that by itself was not sufficient to compel the
respondent to sell his undertaking to the appellant; before
the respondent could be compelled to sell his undertaking
it was necessary for the appellant to exercise its option
to purchase the undertaking on the expiration of the period
of licenee, which it had not done. respondent’s writ
petition was therefore allowed. The appellant came to
this Court. The questions that fell for consideration were:
(i) whether the High Court’s interpretation of s. 7 was
correct; (ii) whether the appellant was empowered under s.
71 of the Electricity (Supply) Act, 1948 to exercise the
powers of the local authority under s. 7.
HELD: (i) The provisions of the sub-section of s. 7 must be
read together. So read the section only means that before
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8
a licensee can be compelled to sell his undertaking the
authority entitled to purchase must elect to purchase the
same by exercise of the option given to it under the
licence read with s. 7 of the Act followed by a notice as
required by s. 7(4) of the Act. In s. 7 the expression
’option of purchasing an undertaking’ merely means the
right of purchasing the undertaking. The word ’option’ is
used because two courses are open to the concerned
authority namely. either to purchase the undertaking or
renew the licence. Once the authority elects to purchase
then the notice prescribed in subs. 4 should be given
before the period mentioned therein. The object of the
provision is that the licensee must know in good time what
course authority is going to adopt. Otherwise there is
bound to be considerable inconvenience to the licensec as
well as to the public. [584 F-H, 585 C-D]
There is no good reason for reading into s. 7 a
requirement that after a notice under s. 7 (4) is issued
the authority must again exercise its option to purchase
on the expiration of the period of license. The exercise of
option to purchase as well as electing to purchase is one
integral process and not two independent steps. By the
very act of electing to purchase the authority exercises
its option to purchase., [585,E-F]
581
In the present case therefore the requirements of s. 7
were fully complied with by the notice issued on January 8,
1954. [585 F-G]
(ii) It is true that before s. 71 can be held to be
attracted to a case it must be shown that the right or
option. to purchase the undertaking of the licensee vested
in the State Government or a local authority under the
provisions of the Act. In the present case the right to
purchase vested in the concerned authority by virtue of s.
7, and it could not be said that the right accrued only by
virtue of the agreement under which the licence was granted.
The right to purchase may accrue either because it is
directly conferred by s. 7 or because it is obtained as a
result of a contract compelled by that section. In either
case it is a ’right obtained by the authority by virtue of
s. 7. The appellant Board was therefore empowered by s.
071 to issue the notice under s. 7. [586 F-587 A]
Fazilka Electric Supply Co. Ltd. v. The Commr. of
Income-tax, Delhi, [1962] 3 Supp. S.C.R. 496, distinguished.
Okara Electric Supply Ltd. & Anr. v. State of Punjab,
[1962] S.C.R. 239. applied.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil ,Appeal No. 2525 of
1966.
Appeal from the judgment and order dated October 30,
1963 of the Gujarat High Court in Special Civil Application
No. 94 of 1962.
C.K. Daphtary, Attorney-General and 1. N. Shroff, for
the appellant.
H.R. Gokhale, S.B. Vakil, Janendralal and B.R. Agarwala,
for the respondent.
The Judgment of the Court was delivered by
Hegde J. The only question that falls for decision in
this appeal is whether on the basis of the notice issued by
the Bombay State Electricity Board on January 8, 1959 under
s. 7 of the Indian Electricity Act, 1910 (to be hereinafter
referred to as the: Act) prior to its amendment in 1959, the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8
appellant can compulsorily purchase from the respondent his
concern ’The Bilimora Electric Power Supply Co.’. In his
application before the High Court under Art. 226 of the
Constitution the respondent challenged the vires of s. 7 of
the Act. But that contention remains to be examined. The
High Court has chosen to allow the petition. solely on the
ground that as the requirements of s. 7 have not been
complied with, the appellant cannot compel the respondent to
sell the undertaking. If we come to the conclusion that
that conclusion is unsustainable then the matter will have
to go back to the High Court for deciding the
constitutionality of s. 7.
The respendent was given a licenee on. February 11,
1932, under the provisions of the Baroda Electricity Act
Samvat 1983 for supplying electricity within the area
mentioned. in the licenee. Clause 27 of that licenee
provided that the option of purchase
582
given by s. 9 of the Baroda Electricity Act shall be
exercisable first on the expiration of thirty years computed
from the commencement of the licence and thereafter on the
expiration of every subsequent period of ten years during
the subsistence of the licence. The manner in which the
undertaking should be valued is laid down in that Act. On
the merger of the former Baroda State with the Province of
Bombay, the Act as well as the Electricity (Supply) Act,
1948 (Act 54 of 1948) were made applicable to the
territories of the former State of Baroda, and the
corresponding Baroda Acts were repealed with the saving
clause that the licences issued under the repealed Act shall
continue to remain in force as if issued under the Act,
until the expiration of the period of those licences. In
exercise of the powers conferred by s. 5 of the Electricity
Supply Act, 1948 the Government of Bombay constituted the
Bombay State Electricity Board on January 31, 1945. On
January 8, 1959 that Board issued to the respondent a notice
under s. 7 of the Act. That notice is important for our
present purpose. Hence we shall quote the relevant
portion thereof. It runs thus:
"In exercise of the powers conferred on the
Bombay State Electricity Board by virtue of
s. 71 of the Electri city (Supply) Act, 1948
read with s. 7 of the Indian Electricity
Act, 1910, you are hereby notified that the
Bombay State Electricity Board has decided to
exercise and shall exercise the option of
purchasing your under taking on the expiry
on 10-2-1962 of the licence granted to
you ...... The receipt of this notice may
please be acknowledged."
As a result of the Bombay Re-organization Act, 1960,
the present Gujarat State came into existence. In exercise
of the powers conferred by s. 5 of the Electricity (Supply)
Act. 1948 read with sub-s. 4 of s. 68 of the Bombay
Reorganization Act, 1960 the appellant Corporation was
constituted by the Government of Gujarat by means of a
notification dated May 1, 1960. The Central Government by
the notification No. EL-1I-1(22)/60 dated the 17th June,
1960 made in exercise of the powers conferred by cl. (a) of
sub-s. (4) of s. 68 of the Bombay Reorganization Act, 1960
directed that the appellant Corporation shall "with effect
from 1st May 1960" take over from the Bombay State
Electricity Board all its undertakings, assets, rights and
liabilities in the area comprised in the State of Gujarat.
The said notification was amended in some respect by
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8
notification of the Government of India dated October 3,
1960 providing therein that the amendment thereby made in
the notification dated June 17, 1960 shall be deemed always
to have been made. On the basis of the aforementioned
notifications, the appellant is claiming the right to
compulsorily purchase the undertaking.
583
The respondent is contesting the right of the appellant
to compulsorily purchase his undertaking. With a view to
forestall the appellant from taking action against him, the
respondent an application under Art. 226 of the Constitution
in the High Court of Gujarat seeking directions to the
appellant to forbear from compelling him to sell or deliver
his undertaking, refrain the appellant from ceasing to
supply electricity to him for the purpose of his said
undertaking and also refrain the appellant from preventing
him from supplying electric energy in the area mentioned in
his licence. Some other incidental reliefs were also
sought.
The High Court came to the conclusion that though the
notice issued by the appellant on January 8, 1959 is a valid
notice under s. 7(4) of the Act but that by itself is not
sufficient to compel the respondent to sell his undertaking
to the appellant; before the respondent can be compelled to
sell his undertaking to the appellant it was necessary for
the appellant to exercise its option to purchase the
undertaking on the expiration of the period of licence. As
the appellant had failed to exercise that option on the
expiration of the period of licence it cannot compel the
respondent to sell his undertaking. On the basis of these
findings the High Court has substantially granted the relief
prayed for by the respondent. The appellant challenged the
correctness of this conclusion. On the other hand the
respondent is supporting the judgment of the High Court not
only on the ground accepted by the High Court but also on
some of the other grounds advanced on his behalf before the
High Court but rejected by that Court.
We shall first take up the question whether the High
Court was right in holding that the appellant had to take
two independent steps viz. ( 1 ) an election to purchase the
undertaking followed up by a notice to the respondent in
pursuance of that election within the period mentioned in s.
7(4) of the Act and (2) exercise its option to purchase on
the expiration of the period of licence and communicate the
same to the respondent.
Before addressing ourselves to that question it is
necessary to mention that the High Court’s finding that the
rights of the Shriman Sarkar, (Baroda Government) to
purchase the undertaking under s. 9 of the Baroda
Electricity Act had devolved on the State Government was not
challenged before us. Therefore it is not necessary for us
to trace how the rights of the Baroda Government came to
devolve on the then State of Bombay. But the respondent did
contest the appellant’s claim to exercise that right. That
question we shall separately consider. For the present we
shall proceed on the basis that the appellant is entitled to
exercise the right of purchase conferred on the Baroda
Government under the licence read with s. 9 of the Baroda
Electricity
584
Act. We may also state at this stage that the conclusion of
the High Court that the licence issued under s, 9 of the
Baroda Electricity Act should be considered as a licence
issued under s. 7 of the Act was also not challenged before
us.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8
Now we shall proceed to consider the true scope of s. 7
of the Act. For our present purpose only sub-ss. 1, 2 and 4
of s. 7 of the Act are relevant. They read as follows:
"Section 7 ( 1 ). Where a license has
been granted to any person not being a local
authority, and the whole of the area of supply
is included in the area for which a single
local authority is constituted, the local
authority shall, on the expiration of such
period, not exceeding fifty 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, ff the local a
uthority,
with the previous sanction of the State
Government, elects to purchase, the licensec
shall sell the undertaking to the local
authority on payment of the value of all
lands, buildings, works, materials and plant
of the licensee suitable to, and used by him
for, the purposes of the undertaking, other
than a generating station declared by the
license not to form part of the undertaking
for the purpose of purchase,. such value to
be, in case of difference or dispute,
determined by arbitration:
(4) Not less than two years’ notice in
writing of any election to purchase under this
section shall be served upon the licensee by
the local authority or the State Government as
the case may be.
In our opinion sub-s. (4 ) of s. 7 is complementary to
sub-as. (1) and (2) of that Section and therefore they must
be read together. On an analysis of these provisions it is
seen that before a licensec can be compelled to sell his
undertaking, the authority entitled to purchase must elect
to purchase the same by exercise of the option given to it
under the licence read with s. 7 of the Act followed by a
notice as required by s. 7 (4) of the Act. In s. 7 the
expression "option of purchasing an undertaking" merely
means the right of purchasing the undertaking. The word
’option’ is ’used because two courses are open to the
concerned authority namely, either to purchase the
undertaking or renew the licenee. Once the authority elects
to purchase then, the notice prescribed in sub-s. 4 should
be given before the period mentioned thereto. We are not
able to agree with the High Court that the Section
contemplates two stages namely (1) to elect to purchase the
585
undertaking at least two years before the expiration of
the licenee and (2 ) exercise the option to purchase at the
end of the licence period. The exercise of option to
purchase as well as electing to purchase is one integral
process and not two independent steps. By the very act of
electing to purchase the authority exercises its option to
purchase. In our opinion sub-ss. 1, 2 and 4 of s. 7 are
plain and unambiguous. They do not lend them selves to any
subtleties.
In construing a provision, all its relevant parts should
be considered together and their true effect ascertained.
One can easily find out the reasons behind the procedure
prescribed in s. 7. In view of the term of the licenee read
with s. 7 (1 ) and (2 ) the concerned authority has two
courses open before it. It can either decide to purchase
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8
the undertaking or renew the licence on the expiration
of the period for which the licence is granted. The
licensee must know in good time what course the authority is
going to adopt so that he may so arrange his affairs as to
Cause least inconvenience to himself. Hence though the
power to exercise the option to purchase arises on the
expiration of the period of licence as per the terms of the
licenee, s. 7 lays down that if the authority wants to
purchase the undertaking it must elect to do so at least two
years before the expiration of the licence and communicate
the same to the licensec. Once the concerned authority
exercises its option and communicates the same to the
licensee, the same is binding on the authority as well as
the licensec. Otherwise there is bound to be considerable
inconvenience both to the licensee and to the public. We
are not able to find any good reason for reading into s. 7 a
requirement that after a notice under s. 7(4) is issued the
authority must again exercise its option to purchase on the
expiration of the period of licence. It is no doubt true
that the right to purchase the undertaking accrues only
at the expiration of the period of licenee but for
exercising that right, the authority must make its election
within the period prescribed in s. 7 (4) and issue a notice
as required by that sub-section. The requirements of s. 7
were fully complied with by the notice issued by the Bombay
State Electricity Board on January 8, 1959.
We shall. now take up the other contention advanced by
Mr. H.R. Gokhale, learned Counsel for the respondent in
support of the decision under appeal.
One of his contentions was that whether the State
Government was competent to purchase the undertaking or
not, neither the Bombay State Electricity Board nor the
appellant was competent to exercise that right.
His .argument on this question proceeds thus: Section 7(1)
prior to its amendment in 1959 empowered the local authority
or the State Government to make the purchase
586
contemplated under that Section; the Electricity Board is
not within the contemplation of that Section; the finding of
the High Court that the provisions contained in sub-ss. 1, 2
and 4 of s. 7 of the Act read with s. 71 of the Electricity
(Supply) Act, 1948, confers on the appellant such a power is
not correct because the right or option to purchase the
undertaking was conferred on the State Government or the
appropriate local authority under the licence and not under
the provisions of the Act; in other words the said right is
merely a contractual right and not a right flowing from the
provisions contained in s. 7 of the Act as. held by this
Court in Fazilka Electric Supply Co., Ltd. v. The Commr.
of Income Tax, Delhi(1) and therefore the appellant cannot
take any assistance from s. 71 of the Electricity (Supply)
Act, 1948. This contention did not commend itself to the
High Court. We shall now proceed to examine how far the
same is correct.
Section 71 of the Electricity (Supply) Act, 1948
provides:
"Rights and options to purchase under
Act 9 of 1910 to vest in Board. Where
under the provisions of the Indian
Electricty Act, 1910 (9 of 1910), any right
or option to purchase the undertaking of a
licensec vests in the State Government or
a local authority such right or option
shall be deemed to be transferred to the
Board, and shall be exercisable by the Board
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8
in accor- dance with the provisions of the
said Act applicable to the exercise of
such right or option by the State Government
or a local authority, as the case may be."
Board is defined in s. 2(2) of that Act as meaning, State
Electricity Board constituted under s. 5 thereof. It is
true that before s. 71 can be held to be attracted to a case
it must be shown that the right or option to purchase the
undertaking of the licensec vested in the State Government
or a local authority under the provisions of the Act. It
is also true that this Court had held in. Fazilka Electric
Supply Company’s(x) case that from the provisions of the Act
read with the rules made thereunder it is manifest that the
condition as to the option of purchase either by the local
authority or by the Government is the result of an
agreement between the applicant who had applied for licenee
and the Government who granted the licenee. In that case
this Court was consideting whether the sale concerned in
that case fell within the scope of s. 10(2)(7) of the
Indian Income Tax Act or whether it’ ’can be held ’to be
compulsory acquisition as contended by the assessee. A sale
compelled by law may also be a ’sale’ under the Sale of
Goods Act. But that does not mean that the right to
purchase the undertaking does not vest in the concerned
authority
(1) [1962] 3 Supp. S.C.R. 496.
587
by virtue of s. 7. That right may accrue either because it
is directly conferred by s. 7 or because it is obtained as a
result of a contract compelled by that Section. In either
case it is a right obtained by the authority by virtue of s.
7. There is no dispute that the licence granted must
conform to the requirements of s. 7.
In Okara Electric Supply Ltd. and Anr. v. State of
Punlab(1) this Court observed that ss. 5,. 6 and 7 show that
in the case of a licensee, specific provisions have been
made for the acquisition of the undertaking in cases of
revocation or cancellation of licenses. For the
aforementioned reasons we hold that appellant had acquired
the right to purchase the undertaking by the combined
operation of s. 7 of the Act and s. 71 of the Electricity
(Supply) Act, 1948.
It was next contended on behalf of the respondent that
by the time the licence period expired, s. 7 of the Act had
been amended and s. 71 of the Electric (Supply) Act, 1948
repealed, no provision was made to preserve the rights
already acquired under those provisions, hence the appellant
is not entitled to purchase the undertaking. It is not the
case of the respondent that either expressly or by necessary
implication, the new law had taken away the right acquired
earlier. That being so s. 6 of the General Clauses Act
comes to the aid of the appellant. That Section provides
that where that Act or any Central Act or Regulation made
after the commencement of that Act repeals an enactment
hitherto made or hereafter to be made then unless a
different intention appears, the repeal shall not affect any
right, privilege, obligation or liability acquired,
’accrued or incurred under any enactment so repealed. It
also saves the previous operation of any enactment so
repealed or anything duly done or suffered thereunder.
The right to purchase the respondent’s undertaking came
to vest firsfly in the Bombay State Electricity Board
subsequently in the appellant in view. of the various
notifications referred to earlier. That right has to be
worked on the basis of law as it stood on the date the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8
notice under s. 7(4) of the Act was given.
In this Court a new contention was taken on behalf of
the respondent namely that in any case, the appellant’s
right to purchase is conditional on the payment of the price
as provided in s. 7 and hence the appellant cannot demand
possession of the undertaking without paying the price after
the same is determined according to law. This contention
had not been taken before the High Court. The High Court
may go into this question while deciding the writ petition.
(1). [1962] S.C.R., 239.
588
For the reasons mentioned earlier we allow this appeal,
set aside the order of the High Court and remit the case
back to High Court for deciding the issues that were left
open. Costs of this appeal shall be costs in the cause.
G.C. Appeal allowed.
589