PETITIONER:
THE RAJAHMUNDRY ELECTRIC SUPPLYCORPORATION LTD.
Vs.
RESPONDENT:
THE STATE OF ANDHRA.
DATE OF JUDGMENT:
10/02/1954
BENCH:
DAS, SUDHI RANJAN
BENCH:
DAS, SUDHI RANJAN
MAHAJAN, MEHAR CHAND (CJ)
MUKHERJEA, B.K.
BOSE, VIVIAN
HASAN, GHULAM
CITATION:
1954 AIR 251 1954 SCR 779
CITATOR INFO :
D 1962 SC1753 (2,4)
RF 1968 SC1138 (23)
R 1970 SC 564 (40)
RF 1977 SC1825 (54)
E 1980 SC1955 (16)
ACT:
Madras Electricity Supply Undertakings (Acquisition)
Act--(Madras Act XLIII of 1949)--Validity of--No entry in
the three Legislative Lists of seventh schedule of
Government of India Act, 1935.
HEADNOTE:
The Madras Electricity Supply Undertakings
(Acquisition) Act (Madras Act XLIII of 1949) was beyond the
legislative competency of the Madras Legislature because
there was no entry in ,any of the three Lists of the
Seventh Schedule of the Government of India Act,
1935, relating to compulsory acquisition of any commercial
or industrial undertaking although s. 299 (2) clearly
contemplated a law authorising compulsory acquisition for
public purposes of a commercial or industrial undertaking.
State of Bihar v. Maharajadhiraja Sir Kameshwar
Singh ([1952] S.C.R. 889) referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 72 of 1952.
Appeal under articles 132 (1) and 133 (1) (b) of the
Constitution of India from the Judgment and Order dated the
27th April, 1951, of the High Court of Judicature at
Madras (Rajamannar C.J. and Satyanarayana Rao J.) in
Civil Miscellaneous Petition No. 4697 of 1951.
M.K. Nambiyar (U. Sethumadhava Rao, with him) for the
appellant.
M. Seshachalapathi for the respondent.
V.K.T. Chari, Advocate-General of Madras (Porus A. Mehta
and V.V. Raghavan, with him) for fife Intervener (State of
Madras).
1954. February 10. The Judgment of the Court was
delivered by
DAs J.–This is an appeal arising out’ of a judgment
delivered on the 27th April, 1951, by a Bench o15 the
Madras High Court in C.M.P. No. 4697 of 1951 filed under
article 226015 the Constitution for the issue of a writ of
certiorari or other appropriate writ to call
780
for the records and quash the order of the Government passed
under section 4(1) of the Madras Act XLIII of 1949
declaring the undertaking of the appellant company to
vest in the Government.
The appellant company was formed and registered under the
Indian Companies Act in 1924 with the object, inter alia, of
generating and supplying electrical ,energy to the public
in Rajahmundry. In 1949 the Madras Legislature passed
the Madras Electricity Supply Undertakings
(Acquisition) Act, 1949. The Act received the assent of
the Governor-General on the 18th January, 1950, and was
published in the Official Gazette on the 24th January,
1950. Upon the Constitution of India coming into force on
the 26th January, 1950, the Act was submitted to the
President for his certification and on the 12th April,
1950, the President certified that the Act should not be
called in question m any court on the ground that it
contravened the provisions of clause (2) of article 31 or
it-contravened the provisions of sub-section (2) of
section 299 of the Government of India Act, 1935. By an
order in writing made on the 2nd September, 1950, the
Government of Madras acting under section 4(1) of the Act
declared that the undertaking of the appellant company
should vest in the Government on the date specified
therein. Under the proviso to section 4(1) the Government
from time to time postponed the date of vesting and the 2nd
April, 1951, was the last-extended date fixed for such
vesting. On the 29th March, 1951, the appellant
company filed C.M.P. No. 4697 of 1951, under article 226
for quashing the order of the Government.
Shortly stated the contentions of the. appellant before
the High Court were that the Act was ultra vires in that (1)
it was beyond the legislative competency of the Madras
Legislature to enact it, (2) it was not enacted to
subserve any public purpose, and (3) the compensation
provided for was illusory. The High Court repelled each and
all of the aforesaid contentions of the appellant company.
It held that the legislation was with respect to
electricity under entry 31 of the
781
concurrent list in the seventh Schedule to the
Government of India Act, 1935, and was not a legislation
with respect to corporations under entry 33 in list I as
contended by the appellant and that, therefore, the
Madras Legislature was competent to enact it. It
further held that the Act having received the certificate
of the President the challenge based on an alleged absence
of public purpose or the illusory nature of the
compensation was shut out and could not be raised. The
High Court, however, held that certain sections and rule
19(2) of the Rules framed under the Act were invalid and
subject thereto dismissed the application of the
appellant company. The High Court granted leave to the
appellant company to appeal before this court. The appeal
has now come up for heating before us.
Learned counsel appearing in support of the appeal has
not pressed before us the contention raised in the High
Court as to the absence of public purpose or the illusory
nature of the compensation provided by the Act. He has
confined his submissions to the question of the legislative
competency of the Madras Legislature to enact this piece of
legislation. In the High Court the contest centered round
the question whether the Act was a law with respect to
electricity under entry 31 of the concurrent list or with
respect to corporations under entry 33 in list I. The High
Court held that the Act was, in pith and substance, a law
with respect to electricity and was, therefore, within
the legislative competency of the Provincial
Legislature. In his arguments before us learned counsel
contended that the act is in substance and effect one for
the acquisition of an electrical undertaking and, as
such, is ultra vires because-
(a) the acquisition of an electrical undertaking was
not a legislative item in any of the three lists in the
seventh schedule to the Government of India Act, 1935, and
(b) in so far as it relates to the acquisition
of an electrical undertaking of a corporation it is a
law with respect to corporations under entry 33 in list I.
782
In our opinion this appeal can be disposed of on the first
of the two grounds mentioned above.
Turning to the Act it will be noticed that the long
title of the Act is “an Act to make provision for the
acquisition of undertakings in the Province of Madras
supplying electricity.” The preamble recites the
expediency of making Provision “for the acquisition of
undertakings in the Province of Madras engaged in
supplying electricity.” Section 1 gives the short title,
extent and commencement of the Act. Section 2 is a
definition section. Section 3 provides that the Act
shall apply to all undertakings of licensees including
certain undertakings therein mentioned. Section 4
empowers the Government to take over any undertaking by
making an order in writing declaring that such undertaking
shall vest in the Government on a specified date.
Section 5 provides for compensation payable to a
licensee who is not a local authority. The section gives an
option to the licensee to claim compensation on one of
three bases therein specified. Section 6 deals with
compensation payable where the licensee is a local
authority. Section 7 specifies the properties or
assets which will vest according aS compensation is
claimed under one basis or another. Section 8 provides for
the appointment of a sole representative to act as the
sole and accredited representative of the licensee in
connection with the handing over of the undertaking and
performing on behalf of the licensee the functions
thereinafter specified. The choice of basis of
compensation is to be made within one month under section 9
and such choice once intimated to the Government is not to
be open to revision except with the concurrence of
the Government. Section 10 authorises the Government,
in case the licensee has disposed of any of the assets
otherwise than in the normal course of events causing loss
to the Government as succeeding owners, to deduct from the
compensation payable to the licensee an amount which they
consider to be the loss sustained by them. Section 11
prescribes the various deductions which the Government shall
be entitled to make from the compensation payable under
the Act. The-manner of
783
payment or deposit of compensation is laid down in section
12. Section 13 permits the Government to repay all
loans, debentures, mortgages and the like outstanding
on the vesting date at any time before the time fixed for
repayment. Section 14 is the arbitration section. Section
15 provides for the termination of the managing
agency. Section 16 authorises the Government to
terminate the services of any person on the staff of the
licensee immediately before the vesting ‘date. Section 17
requires all licensees to prepare and hand over to the
Government a complete inventory of all the assets. Section
18 gives power of entry to the Government or any officer
authorised by the Government upon any land or premises in
the possession of the licensee. Section 19 prescribes
penalties for various defaults therein specified. Section
20 makes certain officers of a company liable for the
offence committed by the company. Section 21 gives
protection against suit or prosecution for anything done
in good faith under any rule or order made under the Act.
Section 22 confers rule-making power on the
Government. Section 23 provides that the provisions of
certain Acts in so far as they are inconsistent with the
provisions of this Act shall have no effect. Section 24
gives power to the Government to do anything which appears
to them necessary for the purpose of removing any
difficulty. From the above summary it will be noticed that
the Act does not purport to make any provision for the
granting of licenses or maintenance of works for generating
or transmitting energy or for supplying electrical
energy as one would expect to find in a law dealing with
electricity nor does the Act purport to make any provision
for the incorporation, regulation or winding up of
trading corporations. On the contrary, it is abundantly
clear from the long title, the preamble and the sections
that it is, in pith and substance, nothing but an Act
to provide for the acquisition of electrical undertakings.
Section 299 (2) of the Government of India Act, 1935,
provided that neither the Federal nor a Provincial
Legislature would have power to make any law authorising the
compulsory acquisition for public purposes
784
of any land or any commercial or industrial undertaking or
any interest in or in any company owning any commercial
or industrial undertaking unless the law provided for
the payment of compensation for the property acquired.
Compulsory acquisition of property is undoubtedly an
important sovereign right of the State but this right has to
be exercised under a law. The legislative power of the
State was distributed by sections 99 and 100 amongst the
Federal Legislature and the Provincial Legislatures in
the manner provided’ in the several lists set forth in
the Seventh Schedule to the Act. Section 100 read with
entry 9 in list II authorised the Provincial Legislature
to make a law with respect to compulsory acquisition of
land. There was no entry in any of the three lists relating
to compulsory acquisition of any commercial or
industrial undertaking, although section 299 (2) clearly
contemplated a law authorising compulsory acquisition
for public purposes of a commercial or industrial
undertaking. The acquisition of a commercial or
industrial undertaking not being the subject-matter of any
entry in any of the three legislative lists, neither the
Federal Legislature nor the Provincial Legislature could
enact a law with respect to compulsory acquisition of a
commercial or industrial undertaking. Under section 104,
however, the Governor-General, in his individual
discretion, could, by public notification, empower
either the Federal Legislature or a Provincial Legislature
to enact a law with respect to any matter not enumerated in
any of the lists in the seventh schedule to the Act. It
is, therefore, clear that although Parliament expressly
entrusted the Provincial Legislature with power to make a
law with respect to compulsory acquisition of land it did
not straightaway grant any power, either to the Federal
Legislature or the Provincial Legislature, to make a law
with respect to compulsory acquisition of a commercial or
industrial undertaking but left it to the discretion
of the Governor-General to empower either of the
Legislatures to enact such a law. There is no suggestion
that the Governor-General had, in exercise of his
discretionary powers under section 104, authorised the
Madras
785
Legislature to enact the impugned Act and, therefore, the
Act was, prima facie, beyond the legislative competency of
the Madras Legislature.
The learned Advocate-General of Madras urges that there
was implicit in every entry in the legislative lists
in the Seventh Schedule to the Government of India Act,
1935, an inherent power to make a law with respect to a
matter ancillary or incidental to the subject-matter of
each entry. His argument is that each entry in the
list carried with it an inherent power to provide for the
compulsory acquisition of any property, land or any
commercial or industrial undertaking, while making a law
under such entry. It is quite true that the powers of
each Legislature to make laws with respect to the
different subjects assigned to it by the, appropriate
list were to be regarded as wide and plenary and also
covering matters incidental or ancillary to such
subject-matter, but it is, nevertheless, clear from the
provision of the Act that the power to make a law for
compulsory acquisition was, under entry 9 in list II, given
only to Provincial Legislatures and that such power
of the Provincial Legislatures was, under that entry,
limited to making a law for the compulsory acquisition of
land only and that unless the Governor-General made
an .order under section 104 of the Act the Provincial
Legislatures had no power to make a law for the compulsory
acquisition of any property other than land ,and that the
Federal Legislature had no power to make any law with
respect to the compulsory acquisition of any property at
all. If the argument of the learned Advocate-General were
correct then entry 9 in list II ‘was wholly unnecessary
for under entry 21 in list II the Provincial Legislatures
could make a law for the compulsory acquisition of land.
A similar argument was repelled by this court in the
State of Bihar v. Maharajadhiraja Sir Kameshwar Singh( ).
The matter is placed beyond any doubt or dispute by
the provisions of section 127 of the Government of India
Act, 1935, which provided that the Federal might, if it
,deemed it necessary to acquire any land situate in a
(1) [1952] S.C.R. 889.
786
Province for any purpose connected with a matter with
respect to which the Federal Legislature had power to make
laws, require the Province to acquire the land on behalf
and at the expense of the Federation. If power’ inhered in
the Federal Legislature to make a law for the acquisition of
any property for any purpose connected with a matter with
respect to which it had’ power to make laws then section 127
would not have’ been necessary at all. The absence of
any entry empowering any Legislature to make laws with
respect to compulsory acquisition of a commercial or
industrial undertaking and the provisions of section 127 to,
which reference has just been made make it abundantly clear
that the contentions urged by the learned’ Advocate-
General cannot possibly be sustained. In our opinion,
therefore, it must be held that the Madras Legislature had
no legislative competency to enact the impugned law.
This is sufficient to dispose of this appeal and it is not
necessary to express any opinion, on the other points raised
in the court below.
The result, therefore, is that this appeal must be’
allowed with costs both in the High Court as well as in this
court.
Appeal allowed.
Agent for the appellant: M.S.K. Aiyangar.
Agent for the respondent: R.H. Dhebar.
Agent for the intervener: R.H. Dhebar.