PETITIONER:
KERALA STATE ELECTRICITY BOARD
Vs.
RESPONDENT:
INDIAN ALUMINIUM CO.
DATE OF JUDGMENT01/09/1975
BENCH:
ALAGIRISWAMI, A.
BENCH:
ALAGIRISWAMI, A.
BHAGWATI, P.N.
GOSWAMI, P.K.
SARKARIA, RANJIT SINGH
GUPTA, A.C.
CITATION:
1976 AIR 1031 1976 SCR (1) 552
1976 SCC (1) 466
CITATOR INFO :
RF 1976 SC1999 (8)
R 1978 SC 215 (30)
RF 1980 SC1955 (12)
F 1983 SC 937 (33)
R 1984 SC 981 (8)
MV 1985 SC 421 (61)
R 1986 SC 63 (7)
F 1987 SC1837 (54)
RF 1987 SC2034 (15)
F 1990 SC 781 (71)
R 1990 SC1637 (44)
E 1990 SC1851 (36)
RF 1990 SC2072 (10,44)
ACT:
Kerala Essential Articles Control (Temporary powers)
Act, 1961, S.2(a) and S.3-Kerala State Electricity Supply
(Kerala State Electricity Board and Licensees Areas)
Surcharge Order made under s. 3-Constitutional validity of -
constitution of India, 1950-Art. 246-Notwithstanding" and
"Subject to" in Art. 246(1) and (3) meaning of-Entries 43
and 44 of List I and Entry 38 of List III-Doctrine of pith
and substance.
Presidential assent-If could be given to cure possible
repuganancy-If could be given to notifications-Assent to the
whole Act not merely to one amendment when referred-
Subordinate Legislation-Principle regarding validity of.
Section 2(a) of the Kerala Esseential Articles Control
(Temporary Powers) Act, 1961 defines "essential article" as
meaning any article (not being an essential article as
defined in Essential Commodities Act. 1955) which may be
declared by the Government by a notification to be an
essential article. Section 3 enables the State Government,
if of the opinion that it is necessary or expedient so to do
for maintaining or increasing the supplies of any essential
article etc. to make certain notified orders. The Act was
originally intended to be in force for five years but its
life was extended by successive amendments.
HEADNOTE:
In exercise of powers conferred by s.2(a) of the Kerala
Act, the State Government declared 'electricity' as an
essential article in 1965. In 1968, the State Government
passed an Order called the Kerala State Electricity Supply
(Kerala State Electricity Board and Licensees Areas)
Surcharge Order, 1968, under s.3 of the Kerala Act, by
which, the State Electricity Board was required to collect
surcharge from non-licensee consumers of electricity even
though the Board may have entered into long term contracts
with them with regard to the rate at which electricity was
to be supplied to them.
The respondents, who were bulk consumers of
electricity, questioned before the High Court the validity
of the order. The order having been struck down by the High
Court, in appeal to this Court, the respondents supported
the judgment of the High Court on the grounds: (i) The
Kerala Act is repugnant to the Electricity Act, 1910 and the
Electricity (Supply) Act, 1948 (both of which are Central
Acts) and, in particular the latter, which falls within
Entries 43 and 44 of List I; and that the State Act trenches
upon the field occupied by the 1948-Act which falls partly
under Entry 43 of List I and partly under Entry 38 of List
III. On behalf of the appellants it was contended that the
Kerala Act falls under Entries 26 and 27 of List II, and in
any event, the Presidential assent to the Kerala Act has
cured the repugnancy.
Allowing the appeal (per majority-Alagiriswami,
Bhagwati, Goswami and Sarkaria, JJ.):
^
HELD: The Kerala Act, the declaration of 'electricity'
as an essential article under s. 2(a), and the Surcharge
Order made under s. 3, are valid. [581 G]
1. The question of repugnance arises only in case both
the legislations fall within the same List, namely, List
III. If any legislation is enacted by a State Legislature in
respect of a matter falling within List I that will be void.
There can, therefore, be no question of repugnance between
the Electricity Act, 1910 and the Electricity (Supply) Act.
1948 on the one hand, and the Kerala Act on the other if the
first two Acts fall in List I or List III and the State Act
in List II. [562 D]
Indu Bhushan v. Sundari Devi [1970] 1 S.C.R. 443
referred to.
553
2. (a) The words "notwithstanding" in clause (1) and
"subject to" in clause (3) of Art. 246 of the Constitution
mean that where an entry is in general terms in List II and
part of that entry is in specific terms in List I the entry
in List I takes effect notwithstanding the entry in List II.
This is also on the principle that the 'special" excludes
the "general" and the general entry in List II is subject to
the special entry in List I. [563 C]
(b) The word "notwithstanding" also means that if it is
not possible to reconcile the two entries the entry in List
I will prevail. But before that happens attempt should be
made to decide in which List a particular legislation falls.
For deciding under which entry a particular legislation
falls, the theory of "pith and substance" has been evolved
by Courts. If in pith and substance a legislation falls
within one list or the other, but some portion of the
subject matter of that legislation incidentally trenches
upon and might come to fall under another List, the Act as a
whole would be valid notwithstanding such incidental
trenching. [563 D-E]
(c) Both the 1910 Act as well as the 1948-Act are
existing law as contemplated under Art. 372 of the
Constitution. An existing law continues to be valid even
though the legislative power with respect to the subject
matter of the existing law might be in a different List
under the Constitution from the List under which it would
have fallen under the Government of India Act, 1935. But,
after the Constitution came into force an existing law could
be amended or repealed only by the Legislature which would
be competent to enact that law if' it were to be newly
enacted. [566 G]
3(a) The Statement of Objects and Reasons though not
relevant for the purpose of interpreting the sections of an
Act, will throw light upon the object of the Legislature
from the historical point of view [569 A]
(b) The 1948-Act was enacted for the purpose of co-
ordinated development of electricity in India on a regional
basis. The Statement of objects and Reasons states that
there was necessity for the constitution of semi-autonomous
bodies like Electricity Boards to administer grid system on
quasi-commercial lines. The Act deals with the incorporation
and regulation of Electricity Boards. It created a central
authority (which is not an incorporated body) as well as
various provincial Electricity Boards (which are
incorporated bodies). A Provincial Electricity Board located
in one Province and operating in a neighbouring Province
could carry on its operations by agreement with the other
Province or Provinces. The jurisdiction of an Electricity
Board, however, was confined mainly to the jurisdiction of
an Province under the Act the executive power vested in the
Provinces. The Statement of objects and Reasons further says
that the semi-autonomous Electricity Boards contemplated
under the Act could not be set up by provincial Governments
under the then existing constitutional Act as they would be
in the nature of trading corporation within the meaning of
entry 33 of the Federal Legislative List of the Government
of India Act, 1935. [568A-H]
4. The argument that the 1948_Act falls under entries
43 and 44 of List I has no substance. [568 A]
(a) A reading of the Statement of Objects and Reasons
shows that the 1948-Act was a legislation under an entry in
the Concurrent List. Although the Statement of objectcs and
Reasons mentions entry 33 of the Federal List of the
Government of India Act, 1935 (corresponding to entries 43
and 44 of List I of the Seventh Schedule to the
Constitution) it does not show that the 1948-Act falls under
entry 44. Nor is the fact that entry 33 of List I of the
Government of India Act, 1935 was mentioned in the Statement
of objects and Reasons a conclusive test. [568 E]
(b) From an examination of the provisions of the 1948-
Act it would be obvious that one part of the Act deals with
the constitution of the Board,the incorporation of the Board
and the regulation of its activities. But the main purpose
of the Act is for, rationalising the production and supply
of electricity. The regulation contemplated in entries 43
and 44 of List I is not regulation of the business of
production, distribution and supply of electri-
554
city of the Corporation. The provision regarding the
incorporation and regulation of Electricity Boards should
be taken to be only incidental to the provisions regarding
production, supply and distribution of electricity.
Therefore, the provisions of the 1948 Act regarding the
Board's functions do not make it one falling under entry 43
of List I. [570 H; 571A]
R. C. Cooper v. Union [1970] 3 S.C.R. 520 and Ramtanu
Housing society v. Maharashtra [1971] 1 S.C.R. 719 followed.
(c) The 1948-Act in pith and substance, should be
deemed to be one falling under entry 38 of List III. In the
Present case the incorporation of the Stage Electricity
Boards is merely for the rationalisation of the production
and supply of electricity, for taking measures conducive to
electrical development and for all matters incidental
thereto. Furthermore, Electricity Boards are not trading
corporations; they are established to promote co-ordinated
development of the generation, supply and distribution of
electricity on a no-profit-no-loss basis. In the discharge
of their functions, they are guided by directions on
questions of policy given by the State Governments. There
are no shareholders and there is no distribution of profits.
This is another reason why the 1948-Act cannot be said to
fall under entry 43 of List I. [573 B-D]
(d) Even assuming that part of the 1948-Act is a
legislation with respect to incorporation and regulation of
a trading corporation, falling under entry 48 of List I of
Schedule Seven, the rest of it will fall under entry 38 of
List III. The Kerala Act has nothing to do with the
incorporation and regulation of the Electricity Boards and,
therefore, it can only relate to entry 38, List III, if at
all. [573 F-G]
(e) The 1910 and 1948-Acts together form a complete
code with respect to entry 38 in List III and the Board is
only an instrument fashioned for carrying out this object.
[571 A]
(f) Therefore both the 1910-Act and 1948-Act could be
amended or repealed by the Parliament and also by the State
Legislature if it obtains Presidential assent to an Act
amending or repealing the 1910-Act or 1948-Act. [566 H]
A. K. Krishna v. State of Madras [1957] SCR 399; P. N.
Kaul v. The State of J & K. [1959] Supp.2 SCR 270 and J & K
State v. M. S. Farooqi [1972] (3) SCR 881, referred to.
(g) The assent of the President should be deemed not
merely to the substitution of the words five years by the
words seven years in the Kerala Act but to the Act as a
whole and any repugnance between the Kerala Act on the one
hand and the 1910-Act and 1948-Act on the other should be
doemed to have been cured by such assent. The Kerala Act in
so far as it deals with electrieity can be deemed to be
legislation under entry 38 of List III Though the Act itself
has not declared any article as an essential article, when
the declaration was made under s.2(a) in 1965 it became part
of the Act. When the President assented to the Amendment Act
of 1967 the declaration of electricity as and essential
article had been made and should be deemed to have become a
part of the Act. [575 F; C]
(5) But the Kerala Act is a matter falling under
entries 26 and 27 of List II. [575 A]
(a) "Essential article" is a term which has
acquired a defining connotation in Indian legislative
practice and is not a vague or a general term.
"Essential commodity" defined in the Essential
Commodities Act, 1955 includes practically every matter
regarding industry within the legislative competence of
Parliament. The term "essential commodity" is an
expression corresponding to a commodity essential to
the life of the community. It is not open to the
authority exercising powers under s.2(a) of the Kerala
Act to declare and any every commodity as an essential
commodity. That Act deals with esential articles not
being essential article dealth with the by Central Act
of 1955. It is not a legislation with respect to
electricity and, therefore, does not fall under entry
38 of List III. Electricity, being beyond doubt an
essential article may be declared to be an essential
article under the Act. In that case the power
555
exercised is not in relation to electricity qua electricity
but electricity as an essential article. The Act, therefore
in pith and substance is with respect to trade and commerce
and production, supply and distribution of electricity. It
is not a permanent legislation with respect to electricity
but a temporary one dealing with a temporary situation. [574
A; F-H]
(b) The Surcharge order was necessary for the survival
and existence of the Board without which there can be no
production or supply of electricity. It is no valid
criticism of this view to say that the powers of the Board
under the 1948-Act are over-ridden by the Surcharge order
and the order is, therefore, repugnant to the 1948-Act. The
Board was anxious to make no Surcharge order. This is a
simple case of a contract being over-ridden in exercise of
statutory powers. [575 B]
6(a) It is not correct to say that in so far as the
consequence of a declaration under s.2(a) of the Kerala Act
was that the State Government was enabled to make orders
regarding production, supply and distribution of
electricity, there was a possibility of such orders being
repugnant to the provisions of the 1910-Act and the 1948-Act
and, therefore, any such repugnancy was cured by the assent
given by the President. It is only the actual repugnancy
that can be cured by Presidential assent and not the
possibility of repugnancy. [575 G]
(b) No Presidential assent was possible to the
notification Art. 254(2) does not contemplate Presidential
assent to notifications issued under the Act. The Article
contemplates Presidential assent only to laws made by the
Legislature of a State. [567 G]
7(a) Notwithstanding the fact that subordinate
legislation is laid on the table of House of Parliament or
State Legislature and being subject to such modification,
annulment or amendment as they may make the subordinate
legislation cannot be said to be valid unless it is within
the scope of the rule making power provided in the statute.
Where an executive authority is given power to frame
subordinate legislation within stated limits, rules made by
such authority, if outside the scope of the rule-making
power should not be deemed to be valid merely because such
rules have been placed before the Legislature and are
subject to such modification, annulment or amendment as the
Legislature may think fit. The process of such amendment,
modification or annulment is not the same as the process of
legislation and in particular it lacks the assent either of
the President or the Governor of the State. [576 E-G]
Minister of Health v. The King, [1931] A.C. 494 and
Institute of Patent Agents v. Lockwood, [1894] A.C. 347
referred to.
(b) If a declaration made under s. 2(a) or an order
made under s.3(a) is not within the scope of the Act, it
should be held to be not valid. [576 H]
(c) A declaration can still be attack if the power to
make such a declaration was beyond the scope of the power
delegated. even if subsequent to the declaration the Act was
amended and the President had given his assent to the to
Amending Act.[577 A]
(d) But the power conferred by the Kerala Act is a case
of conditional legislation. The various types of powers that
can be exercised under that Act are enumerated in it. Only
an article with reference to which those powers are to be
exercised is left to be determined by the Executive. That
will vary from time to time. It is the Exceutive that would
be in a position to judge when and under what circumstances
an article becomes an essential article and, therefore, it
is necessary. to control the production, supply and
distribution of trade. and commerce in that article.[578 H]
The Queen v. Burah (5 L.R.178@ 194) State of Punjab v.
Khan Chand A.I.R. 1974 SC. 543 and Gwalior Rayon Mills v.
Asst. Commr. S.T. A.I.R. 1974 S.C. 1660 followed.
556
The Kerala Essential Articles Control (Temporary
Powers) Act, 1961 is an invalid piece of legislation on the
ground of excessive delegation and the declaration and
Surcharge order made respectively under s.2(a) and s.3 of
that Act are of no consequence.[582 G]
1(a) The definition of essential article leaves it to
the State Government to decide what should be an essential
article for the purpose of the Act. The legislature is, of
course presumed to know the limits of its competence and
assuming it is permissible to attribute similar knowledge to
the Government as to the bounds of its authority under
s.2(a) an essential article may be any article covered by
any of the entries in List II or List III except the classes
of commodities mentioned as an essential commodity in the
Essential Commodities Act. Until, therefore, the Government
issued a notification under s.2(a) declaring electrical
energy to be an essential article almost four years after
the Act came into force, it was not possible even to guess
what the Act was about. Thus the Act as passed had no
positive content, it was and empty husk and its
insubstantiality, if by itself not an invalidating factor,
exposes the want of a declared legislative policy in the
Act. The Act does not provide any guidance or lay down any
test to ascertain what makes an article essential for the
purpose of the Act. The reference to the Essential
Commodities Act in s.2(a) which defines "essential article"
is merely to exclude from its purview the commodities
covered by the Essential Commodities Act and only serves to
emphasise its indefiniteness and makes it more difficult to
find any clue to the nature of the articles the Legislature
had in mind in enacting the Kerala Act. Almost the entire
legislative field was left open to the Government to choose
from and decide according to their own lights what should be
an essential article. [583 C-G]
(b) The Legislature cannot delegate the essential
legislative function, which means that the Legislature must
declare the policy of the law and provide a standard for the
guidance of the subordinate law making authority. The Kerala
Act authorises the Government to declare any article as
essential except those mentioned in the Essential
Commodities Act without laying down any definite criteria or
standards. This is surrendering unguided and uncanalised
power to the executive. The Act cannot be called an instance
of conditional legislation. The powers conferred on the
Government by the Kerala Act exceed the limits of
permissible delegation. [583 H]
(c) The Kerala Act of 1961 was to remain in force for a
period of five years from January 1962. The Principal Act as
well as the Amending Acts of 1967, 1969, and 1970 received
the assent of the President. But the Act as passed in 1961
did not appear to contain any provision which was repugnant
to any Central Act or existing law; that being so, the
assent given to it seems redundant and of no consequence.
Article 254(2) contemplates an existing repugnancy and not
possible future inconsistencies.
[Obiter: Assuming that assent given by the President to
the amending Acts would have the effect of curing the
repugnancy between the declaration under s.2(a) and the
Surcharge Order under s.3 of the principal Act on the one
hand and the Central Acts of 1910 and 1948 on the other, If
the declaration and the Surcharge Order were outside the
Act,could not cure the repugnancy arising from these two
orders.[584 H]
The orders made by the-State Government under s.2(a)
and s.3(1) of the impugned Act could not be called part of
the Act. The Act did not even say that such orders were to
be treated as if enacted in the Act. The President's assent
could not be said to have cured the repugnancy created by
the Surcharge order. [585 G]
Arguments for the appellant:
The impugned Kerala Act is a legislation under Entry 26
of List II (Trade and Commerce). It may also fall under
Entry 27, List II (Production, Distribution and Supply of
Goods). Assuming that the Electricity Supply Act falls under
Entries 43 and/or 44 of List I, the State Legislature is
competent
557
to pass legislation relating to the trading and commercial
activities of the Corporation set up under the Central Act
passed under Entry 43 and/or 44 of List I.
Assuming that the Kerala Act encroaches on the powers
of the Electricity Board under s.49, such encroachment is
incidental and is justified under the doctrine of pith and
substance.
Assuming that the Central legislation as well as the
State legislation falls under Entry 38 of List III, there is
no repugnancy or conflict between the powers of the Board
under s.49 and the impugned Act and the orders because they
are made within the provisions of the Act and to aid and
support the powers of the Board.
If the surcharge had not been introduced the
Electricity Board would not have been able to carry on the
business and would have been compelled to close down its
business.
Arguments on behalf of Electricity Board:
The Act applies to essential commodities i.e. all
essential commodities as understood at the time of
legislation in 1962. In view of the programme of
industrialisation, and the limited scope of the Central
Essential Commodities Act, 1955, the present Act was
conceived. The background of the Act strongly indicates the
content of the expression 'essential commodities' as meaning
the same thing as "essential to the life of the community".
Under the impugned Act by s.2(a) the power to select the
articles for control is delegated to the State Government.
The power to take orders for control is delegated both to
the State Government and authorised officers. The articles
falling within the Central Essential Commodities Act, 1955
are excluded from the purview of the Act not because control
of those articles is not desired but because the State
Government have the necessary powers under the Central Act
itself. The definition in s.2(a) should be understood to
mean "essential articles" notified by the State Government
and essential articles should be understood as those which
are essential to the life of the community. The word
'control' in the preamble is indicative of the limited scope
of the Act. This interpretation saves the Act from the vice
of abdication of essential legislative function by the
Legistature.
The preamble to the Act is a key-note to the
understanding of an Act as well as the Statement of Objects
and Reasons clearly indicates the scope and purpose of the
Act. "Trade and Commerce" as well as "supply and
distribution" must be in respect of articles or goods but on
that account it will not be permissible to dissect the Act
and make it relatable to each commodity over which control
is imposed. The pith and substance of the Act makes them
fall within List II, Entries 26 and 27. The law is not a law
relating to electricity as such nor relating to the
incorporation or power of the Electricity Board established
under the Electricity Supply Act, 1948.
The Supply Act, 1948, as clearly expressed in the
preamble and worked out in the Act through several agencies
including the Board shows that the pith and substance of the
Act is development of electricity and falls within List III,
Entry 31 of the Government of India Act. 1935. The
incorporation of State Electricity Board for each State is
only one of the means of achieving the objective. Moreover,
the Board is not a trading Corporation since it is not
created to earn profits but to carry out development and
supply energy at the most economical rate. Each Board is
established by a State. The whole law falls in the
Concurrent List and in any event not under List I, Entry 43
because the Board is not a trading corporation nor does it
fall under Entry 44 because the Board is a State Board for
the State. The Supply Act was passed under the Government of
India Act, 1935 and was an "existing law" and not an
impediment to the State passing a law within its competence.
There is no conflict between the impugned notification and
the exercise of powers of the Board under s.40 of the supply
Act. Assuming that both the legislations fall under List
III, the President's assent to the impugned Act was
operative, the conflict was immaterial.
558
Arguments for the respondent:
The Electricity Supply Act of 1948 is relatable partly
to List I entry 43 and 44 (Government of India Act List I
Entry 33) and partly to List III Entry 38 (Government of
India Act List III Entry 31). Part of the Act is concerned
with the constitution and powers of the Electricity Board
which is something like the memorandum and Article of a
Limited Company and another part of the Act may be said to
be concerned with electricity.
The Kerala Act is a vague piece of legislation. The
Articles to which this Act may apply are not mentioned. It
is only after the power under the Act is exercised that it
is possible to say whether it would conflict with any other
legislation.
The impugned Act may be applicable to Articles
relatable to as many as 20 legislative entires from List I,
II and III at the discretion of the Government.
Regulation and Control with regard to many of the
matters are covered by existing Central Acts such as
Industries Regulation and Development Act, Factories Act,
Central Excise and Salt Act, Defence of India Act, Indian
Electricity Act, 1910, Electricity Supply Act, 1948.
Every aspect of electricity in respect of generation,
control price fixation must be relatable to entry 38 of List
I and not Entry 26 or 27 of List II. The Central Legislature
has already legislated on all these aspects in the Indian
Electricity Act of 1910 and Supply Act 1948. If these were
the subject matter of Entries 26 and 27 of List II, the
Central Legislature could not have legislated.
Any argument on the basis that the Electricity Supply
Act 1948 is existing law, is not relevant because the 1948
Act has been extensively amended in 1956 and 1966 and these
amendments relate to the field of control under the Kerala
Act, if the same is applied in respect of electricity.
The Presidential assent given to the Kerala Act could
be said to be an assent within the meaning of Article 254
since at the time when the assent was given the Act did not
disclose any inconsistency with any Central Act since the
items to which the Kerala Act was applicable did not appear
in the statute. The conflict arose only when an order was
made by the State Government applying the Act to
electricity. No steps were even taken to incorporate in the
Act the commodities to which the Act could apply and to take
President's assent thereon.
The Kerala Act suffers from excessive delegation
because at the will of the State Government the Act could be
made applicable to any article, except those covered by the
Essential Commodities Act. The State Government could apply
the Act even to items falling in List I since there is no
guideline.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
2557/69, 20/70, 1423-1434, 1733, 2474, 2575-2578/72, 95-105,
1318, 1371-74, 2040/73, 2100-2102/74 and 120, 121 & 536 of
1975.
From the Judgment and Order dated 24-9-69, 16-8-71, 25-
1-72, 16-2-72, 11-2-72, 10-2-72, 22-11-72, 21-7-72, 8-2-72,
25-7-72, 31-5-72 and 4-3-75 of the Kerala High Court in W.A.
Nos.809/69, 846-47, 855, 867, 894 and 940 of 1969, 261/71
and 957-58,983,988 and 1021/69,942/69, 427/71, 458, 415,
407, 408 & 68 of 1971 and 211, 241/70, 3 and 7/71, 342/72,
36, 42 and 43 of 1971 and
559
Civil Appeal No. 2117 of 1972.
Appeal by Special Leave from the Judgment and Order
dated 17-8-71 of the Kerala High Court in W.A. No. 1021 of
1969.
Lal Narain Sinha, Solicitor General of India, A. G.
Puddissery for the Appellant in C.A. No. 2557/69.
V. A. Seyid Mohammed and K. M. K. Nair for the
Appellant in C.A. No. 20/70.
A. K. Sen (In C.A. Nos. 1423/72), M. P. Jha (In C.A.
1423/72), A. G. Puddissery (In all the petitions) for the
appellants in C.As. Nos. 1423, 1434, 1735, 2474, 2575, 2576-
78/72, 1318, 1371, 1374, 2040/73, 2100-2102/74, 120-121,
536/75.
P. C. Chandi, K. M. K. Nair and K. R. Nambiar for the
Appellants in CAs. Nos. 2117/72 and 95-105/73).
S. V. Gupte, Ajay Ray and P. Mathai, O. C. Mathur, K.
J. John and J. B. Dadachanji for the Appellants in CA. No.
1457/71.
G. Rathi, Advocate General for the State of Orissa and
B. Parathasarthy for the Appellant in C.A. Nos. 1652/74.
Vinoo Bhagat for the Appellants (In C.As. Nos. 1653-
54774).
S. V. Gupte (In CA. No. 2557/69), P. Mathai, Ajay Ray,
O. C. Mathur K. John, J. B. Dadachanji and Mrs. S. Bhandare
(In C.A. No. 20/70 for Respondent Nos. 1 (In CA. No.
2557/69) & (In CAs. Nos.20/70, 1423-24/72).
G. B. Pai, K. J. John, O. C. Mathur, J. B. Dadachanji
and P. K. Kurian (In CAs. Nos. 1733/72) for Respondent No. 1
(In CAs.Nos. 1426-1429, 1431-1434, 1733/72, 2577-78, 95-96,
99-100 and 102 -105/73).
N. Sudharkaran, P. Mathai and P. K. Pillai for
Respondent Nos. 1 (In CA. No. 2575/72) and (C.A. No.
1425/72).
K. R. Nambiar for Respondent No. 2 (In CA. No. 2575/72,
2576-78/72 and 2040/73).
Miss Lily Thomas for Respondent No. 1 (In CA. No.
2576/72).
A. S. Nambiar for Respondent No. 1 (In CA. No.
2578/72).
N. Sudharkaran for Respondent No. 1 (In CA. No. 97773).
G. B. Pai (In CA Nos. 2100-2102/74, 121/75), P. Mathai
(In CA. Nos. 1318/75) Ranjit Mahanty, Ajay Ray (In CAs. No.
1652/74) and O. C. Mathur, K. J. John and J. B. Dadachanji
(In all matters) for Respondent No.1 (In C.A. No. 1318/73,
2100-2102/74, 121/75) for the Respondents (In C.As. Nos.
1652/74).
Lal Narain Sinha, Solicitor General of India (In C.A.
No. 1457/71) A. G. Puddissery for the Respondent (In CA. No.
1457 and 1641/71).
560
T. S. Krishnamoorthy Iyer, P. Mathai, N. Sudharkaran
and P. K. Pillai for Respondent No. 1 (In CA. No. 1371 and
1374/73) and (In C.A. No. 1373/73)
K. M. K. Nair for Respondent No. 2 (In C.As. Nos. 1371-
1374/73).
G. L. Sanghi, P. Mathai, K. J. John, O. C. Mathur and
J. B. Dadachanji for Respondent No. 1 (In CA. No. 1372/73).
G.Rathi, Advocate General for the State of Orissa and
B. Parthasarthy for Respondents (In CAs. Nos. 1653-1654774).
P. K. Pillai for the Intervener (In CA. No. 20/70).
G. L.Sanghi, P. V. Kapur, U. K. Khaitan (for Ferro
Alloys Corpn.) K. R. Choudhry K. Raj Choudhry (for A.P.
Electricity Board) for the Intervener (In C.A. No. 1652/74).
S. Balakrishnan for Respondent No. 1 (in CA. No.
2040/73).
Note: Mrs. Sunanda Bhandare, Advocate appeared for the
applicant intervener in CA. Nos. 1457 and 1642/71 and CA.
Nos. 1652-1654/74 and Mr. B. Sen, Senior Advocate, appeared
for Respondent No. 1 (In CA. 20/70 and applicant intervener
in CA. No. 1652/74).
The Judgment of the Court was delivered by
Alagiriswami, J. A. C. Gupta, J. gave a dissenting Opinion.
ALAGIRISWAMI, J. The validity of the Kerala State
Electricity Supply (Kerala State Electricity Board and
Licensees Areas) Surcharge Order 1968 is in question in
these appeals. That Order was passed in exercise of the
powers conferred by section 3 of the Kerala Essential
Articles Control (Temporary Powers) Act, 1961. It obliges
the Board to collect surcharges from non-licensee consumers
of electricity even though the Board may have entered into
long-term contracts with them with regard to the rate at
which electricity is to be supplied to them. The Act is one
to provide, in the interest of the general public for the
control of the production, supply and distribution of, and
trade and commerce in, certain articles. Section 2(a) of the
Act defines “essential articles” as meaning any article (not
being an essential commodity as defined in the Essential
Commidities Act, 1955) which may be declared by the
Government by notified order to be an essential article.
Section 3 enables the Government, if of opinion that it is
necessary or expedient so to do for maintaining or
increasing the supplies of any essential article or for
securing their equitable distribution and availability at
fair prices, to make notified orders providing for:
(a) regulating by licences, permits or otherwise
the production or manufacture of any esential article:(b) controlling the price at which any essential
article may be bought or sold;561
(c) regulating by licences, permits, or otherwise
the storage, distribution, transport, disposal,
acquisition, use or consumption of any essential
article;(d) prohibiting the withholding from sale of any
essential article ordinarily kept for sale;(e) requiring any person holding in stock any
essential article to sell the whole or a specified part
of the stock to the Government or to an officer or
agent of the Government or to such other person or
class of persons and in such circumstances as may be
specified in the order;(f) regulating or prohibiting any class of
commercial or financial transactions relating to any
essential article, which, in the opinion of the
authority making the order, are, or if unregulated are
likely to be detrimental to the public interest;(g) collecting any information or statistics with
a view to regulating or prohibiting any of the
aforesaid matters;(h) requiring persons engaged in the production,
supply or distribution of, or trade or commerce in any
essential article to maintain and produce for
inspection such books, accounts and records relating to
their business and to furnish such information relating
thereto as may be specified in the order;(i) regulating the processing of any essential
article;(j) exercising over the whole or any part of an
existing undertaking, such functions of control and
subject to such conditions, as may be specified in the
order;(k) any incidental and supplementary matters
including in particular the entering and search of
premises vehicles, vessels and aircraft, the seizure by
a person authorised to make such search of any article
in respect of which such person has reason to believe
that a contravention of the order has been, is being or
is about to be committed, the grant or issue of
licences, permits or other documents, and the charging
of fees therefor.In exercise of the powers under section 2(a) electricity was
declared as an essential article in 1965. Electricity is the
only article declared as an essential article under the Act
so far and in spite of the wide powers with regard to making
of notified orders under section 3 the impugned Surcharge
Order is the only order so far made. It provides, as already
stated, for levying of a surcharge on supplies of
electricity made to bulk consumers, many of whom are
respondents in these appeals.The validity of the Act itself is not seriously
questioned except in one respect which we shall deal with
later; but it is contended that by the declaration of
electricity as an essential article under the Act, the
562
Act impinges upon various matters either in List I or List
III of the Seventh Schedule to the Constitution. According
to Mr. Gupte, who appeared for the respondent in Civil
Appeal No. 2557 of 1969, the legislation is repugnant to the
Electricity Act, 1910 and the Electricity (Supply) Act,
1948, in particular the latter, which falls within Entries
43 and 44 of List I. According to Mr. B. Sen, who appeared
for the respondents in Civil Appeal No. 20 of 1970, the Act
trenches upon the field occupied by the Electricity (Supply)
Act, 1948 which falls partly under Entry 43 of List I and
partly under Entry 38 of List III. According to Mr. G. B.
Pai, who appeared for the 1st respondent in Civil No. 1733
of 1972 the 1948 Act falls within Entry 44 of List I and the
Kerala Act impinges upon that field. On the contrary, the
Solicitor General appearing on behalf of the Kerala State
Electricity Board contends that the Kerala Act falls under
Entries 26 and 27 of List II of the Seventh Schedule to the
Constitution.There is, in the arguments on behalf of the
respondents, a certain amount of confusion. The question of
repugnance arises only in case both the legislations fall
within the same List III. There can, therefore, be no
question of repugnance between the Electricity Act and the
Electricity (Supply) Act on the one hand and the Kerala Act
on the other, if the former fall in List I or List III and
the latter in List II. If any legislation is enacted by a
State Legislature in respect of a matter falling within List
I that will be without jurisdiction and therefore void.The scope of the legislative powers of the Parliament
and the State Legislatures is now well settled. They are
found in Article 246 of the Constitution, which reads :246. (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 a State has exclusive power to make laws
for such State or any part thereof with respect to any
of the matters enumerated in List II in the Seventh
Schedule (in the 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.”563
In view of the provisions of Article 254, the power of
Parliament to legislate in regard to matters in List III,
which are dealt with by clause (2) is supreme. The
Parliament has exclusive power to legislate with respect to
matters in List I. The State Legislature has exclusive power
to legislate with respect to matters in List II. But this is
subject to the provisions of clause (1) (leaving out for the
moment the reference to clause 2). The power of Parliament
to legislate with respect to matters included in List I is
supreme notwithstanding any thing contained in clause (3)
(again leaving out of consideration the provisions of clause2). Now what is the meaning of the words “notwithstanding”
in clause (1) and “subject to” in clause (3) ? They mean
that where an entry is in general terms in List II and part
of that entry is in specific terms in List I, the entry in
List I takes effect notwithstanding the entry in List II.
This is also on the principle that the `special’ excludes
the `general’ and the general entry in List II is subject to
the special entry in List I. For instance, though house
accommodation and rent control might fall within either the
State List or the Concurrent List, Entry 3 in List I of
Seventh Schedule carves out the subject of rent control and
house accommodation in cantonments from the general subject
of house accommodation and rent control (see Indu Bhusan v.
Sundari Devi(1). Furthermore, the word `notwithstanding’ in
clause (1) also means that if it is not possible to
reconcile the two entries the entry in List I will prevail.
But before that happens attempt should be made to decide in
which list a particular legislation falls. For deciding
under which entry a particular legislation falls the theory
of “pith and substance” has been evolved by the Courts. If
in pith and substance a legislation falls within one List or
the other but some portion of the subject matter of that
legislation incidentally trenches upon and might come to
fall under another List, the Act as a whole would be valid
notwithstanding such incidental trenching. These principles
have been laid down in a number of decisions.In re The Central Provinces and Berar Act No. XIV of
1938(2) Sir Maurice Gwyer observed, with reference to the
corresponding provisions of the Government of India Act, as
follows :“It will be observed that by s.100(1) the Federal
Legislature is given exclusive powers enumerated in the
Federal Legislative List, “notwithstanding anything in
the two next succeeding sub-sections” of that section.
Sub-section (2) is not relevant to the present case,
but s.s.(3) is, as I have stated; the enactment which
gives to the Provincial Legislatures the exclusive
powers enumerated in the Provincial Legislative List.
Similarly Provincial Legislatures are given by s.100(3)
the exclusive powers in the Provincil Legislative List
“subject to the two preceding sub-sections”, that is
s.ss. (1) and (2). Accordingly, the Government of India
further contend that, even if the impugned Act were
otherwise within the competence of the Provincial
Legislature, it is nevertheless invalid, because the
effect of the
564
non-obstante clause in s.100(1), and a fortiori of that
clause read with the opening words of s.100(3), is to
make the federal power prevail if federal and
provincial legislative powers overlap.”He observed further :
“Only in the Indian Constitution Act can the
particular problem arise which is now under
consideration; and an endeavour must be made to solve
it, as the Judicial Committee have said, by having
recourse to the context and scheme of the Act, and a
reconciliation attempted between two apparently
conflicting jurisdictions by reading the two entries
together and by interpreting, and, where necessary,
modifying, the language of the one by that of the
other. If indeed such a reconciliation should prove
impossible, then, and only then, will the non-obstante
clause operate and the federal power prevail; for the
clause ought to be regarded as a last resource, a
witness to the imperfections of human expression and
the fallibility of legal draftsmanship.”In Subrahmanyan Chettiar v. Mutuswami Goundan(1) the
same learned C.J. observed :“Section 100(3) of the Constitution Act provides
that a Provincial Legislature has the exclusive power
of legislating with respect to the matters enumerated
in List II, the Provincial Legislative List. But this
power is expressly stated to be subject to the
provisions of s.100(1), which give an exclusive power
to the Federal Legislature to legislate with respect to
the matters enumerated in List I, the Federal
Legislative List. Hence, though Parliament has no doubt
done its best to enact two lists of mutually exclusive
powers, it has also provided, ex-majori cautela, that
if the two sets of legislative powers should be found
to overlap, then the federal legislation is to prevail.
And the reason for this is clear. However carefully and
precisely lists of legislative subjects are defined, it
is practically impossible to ensure that they never
overlap; and an absurd situation would result if two
inconsistent laws, each of equal validity, could exist
side by side within the same territory.”In the same case Sulaiman, J. observed :
“On a very strict interpretation of s.100, it
would necessarily follow that from all matters in List
II which are exclusively assigned to Provinicial
Legislatures, all portions which fall in List I or List
III, must be excluded. Similarly, from all matters
falling in List III, all portions which fall in List I
must be excluded. The section would then mean that the
Federal Legislature has full and exclusive power to
legislate with respect to matters in List I, and has
565
also power to legislate with respect to matters in List
III. A Provincial Legislature has exclusive power to
legislate with respect to List II, minus matters
falling in List I or List III, has concurrent power to
legislate with respect to matters in List III, minus
matters falling in List I. In its fullest scope, s. 100
would then mean that if it happens that there is any
subject in List II which also falls in List I or List
III, it must be taken as cut out from List II. On this
strict interpretation there would be no question of any
real overlapping at all. If a subject falls exclusively
in List II and no other List, then the power of the
Provincial Legislatures is supreme. But if it does also
fall within List I, then it must be deemed as if it is
not included in List II at all. Similarly, if it also
falls in List III, it must be deemed to have been
excluded from List II. The dominant position of the
Central Legislature with regard to matters in List I
and List III is thus established. But the rigour of the
literal interpretation is relaxed by the use of the
words “with respect to” which as already pointed out
only signify “pith and substance”, and do not forbid a
mere incidental encroachment.”In Governor General in Council v. Province of Madras(1)
the Judicial Committee of the Privy Council observed :“For in a Federal Constitution, in which there is
a division of legislative powers between Central and
Provincial legislatures, it appears to be inevitable
that controversy should arise whether one or other
legislature is not exceeding its own, and encroaching
on the other’s constitutional legislative power, and in
such a controversy it is a principle, which their
Lordships do not hesitate to apply in the present case,
that it is not the name of the tax but its real nature,
its “pith and substance” as it has sometimes been said,
which must determine into what category it falls.”In Prafulla Kumar Mukherjee and Others v. Bank of
Commerce, Limited, Khulna(2) the Judicial Committee of the
Privy Council quoted with approval the observations of Sir
Maurice Gwyer C.J. in Subrahmanyan Chettiar’s case (supra)
to the effect :“It must inevitably happen from time to time that
legislation, though purporting to deal with a subject
in one list, touches also on a subject in another list,
and the different provisions of the enactment may be so
closely intertwined that blind observance to a strictly
verbal interpretation would result in a large number of
statutes being declared invalid because the legislature
enacting them may appear to have legislated in a
forbidden sphere. Hence the rule which has been evolved
by the Judicial Committee, whereby the impugned statute
is examined to ascertain its `pith and substance,’ or
566
its `true nature and character,’ for the purpose of
determining whether it is legislation with respect to
matters in this list or in that.”They also held :
“Thirdly, the extent of the invasion by the
Provinces into subjects enumerated in the Federal List
has to be considered. No doubt, it is an important
matter, not, as their Lordships think, because the
validity of an Act can be determined by discriminating
between degrees of invasion, but for the purpose of
determining what is the pith and substance of the
impugned Act. Its provisions may advance so far into
Federal territory as to show that its true nature is
not concerned with Provincial matters, but the question
is not, has it trespassed more or less, but is the
trespass, whatever it be, such as to show that the pith
and substance of the impugned Act is not money lending
but promissory notes or banking ? Once that question is
determined the Act falls on one or the other side of
the line and can be seen as valid or invalid according
to its true content. This view places the precedence
accorded to the three lists in its proper perspective.”
The matter has been elaborately discussed in Union v.H. S. Dhillon(1). All the relevant earlier decisions have
been considered there and for the purpose of these cases it
is not necessary to enter into any further discussion on
this aspect.Having discussed the question of the legislative field
it might be necessary to discuss the question as to what
happens if it should be held that the matter under
consideration in these cases falls within the Concurrent
List, that is, Entry 38 in List III as contended in the
alternative by some of the respondents. As already mentioned
the question will arise only if it should be held that the
Kerala State Act falls under Entry 38 as contended by Mr. B.
Sen. If the impugned legislation falls under List III then
the question of repugnancy of that legislation with the
existing law or the law made by Parliament, as the case may
be, will have to be considered. Both the 1910 Act as well as
the 1948 Act are existing law as contemplated under Article
372 of the Constitution. An existing law continues to be
valid even though the legislative power with respect to the
subject matter of the existing law might be in a different
list under the Constitution from the list under which it
would have fallen under the Government of India Act, 1935.
But after the Constitution came into force an existing law
could be amended or repealed only by the legislature which
would be competent to enact that law if it were to be newly
enacted. In that sense both the 1910 Act and the 1948 Act
could be amended or repealed by the Parliament and also by
the State Legislature if it obtains the Presitential assent
to an Act amending or repealing the 1910 Act or 1948 Act
(leaving aside for the moment the question whether they
567
fall wholly or partly under Entries 43 and 44 of List I of
the Seventh Schedule to the Constitution). That the question
of repugnancy can arise only with reference to a legislation
falling under the Concurrent List is now well settled. In A.
S. Krishna v. State of Madras(1) after referring to section
107 of the Government of India Act, 1935, which is in terms
similar to clause (1) of Article 254, this Court observed:“For this section to apply, two conditions must be
fulfilled : (1) The provisions of the Provincial law
and those of the Central legislation must both be in
respect of a matter which is enumerated in the
Concurrent List, and (2) they must be repugnant to each
other. It is only when both these requirements are
satisfied that the provincial law will, to the extent
of the repugnancy, become void.”To the similar effect is the decision in P. N. Kaul v. The
State of J&K(2). The whole question of repugnancy is
elaborately discussed in J & K State v. M. S. Farooqi(3).Let us now, therefore, consider what in its pith and
substance is the subject matter of the Kerala Act. Is it an
Act dealing with incorporation, regulation and winding up of
trading corporations, including banking, insurance and any
financial corporations but not including cooperative
societies (Entry 43); or incorporation, regulation and
winding up of corporations, whether trading or not, with
objects not confined to one State, but not including
universities (Entry 44)? Clearly the Act itself does not
deal with any of these subjects. It is true that the
notification issued under section 2(a) declaring electricity
as an essential article enable orders to be made under
section 3 of the Act. But the only question we are concerned
with in this case is the validity of the surcharge order. No
notified order has been made under any of the powers
conferred on the State by section 3 except the impugned
Surcharge Order. If the Act had stood as it is or even if
the notification had stood as it is nobody would have any
cause for complaint. It is only by the issue of the
Surcharge Order that the respondents have been affected. It
is for the purpose of deciding the question of the validity
of the Surcharge Order that we have to decide the validity
of the declaration under section 2(a) of electricity as an
essential article. Does the notification make the
legislation one relating to electricity under Entry 38 of
List III ? Was it necessary to get the President’s assent
for this notification as contended of the respondents ?
Quite clearly no Presidential assent to the notification.
Article 254(2) does not contemplate assent to notifications
issued under the Act. The Article contemplates Presidential
assent only to laws made by the Legislature of a State. We
shall later deal with the question whether the assent of the
President to the Act after the 1965 notification declaring
electricity as an essential article validates that
notification.The Electricity Act 1910 and the Electricity (Supply)
Act, 1948 can be said to cover the whole field relating to
electricity under Entry
568
38 of List III of the Seventh Schedule. We are clearly of
the opinion that the argument of Mr. Pai that the 1948 Act
falls under Entry 44 of List I has no substance. It does not
deal with the incorporation, regulation and winding up of a
corporation with objects not confined to one State. The
Central Electricity Authority created by that Act is not an
incorporated body, whereas the various State Electricity
Boards are incorporated. The Act deals with the
incorporation and regulation of the State Electricity
Boards. Where a State Electricity Board is to operate beyond
the limits of the State for which it is constituted, it is
done only by means of an agreement with the other State in
which it is to operate. The Statement of Objects and Reasons
of that Act does not help his contention. The coordinated
development of electricity in India on a regional basis, for
which the Government felt it necessary to bring in
legislation which resulted in the Electricity (Supply) Act,
1948 cannot show that it deals with the incorporation and
regulation of an inter-State corporation. The statement
itself proceeds on the basis that the executive power will
vest in the Provinces, which means that the legislation
falls in the Concurrent List. The Statement of Objects and
Reasons also mentions the necessity for the constitution of
semi-autonomous bodies like Electricity Boards to administer
the grid systems. The Electricity Boards, as already
mentioned, are confined to the jurisdiction of States. The
Statement of Objects and Reasons itself shows that what was
contemplated was a legislation under the Entry in the
Concurrent List. The Statement of Objects and Reasons,
however, mentions Entry 33 of the Federal List of the
Government of India Act, 1935 as the Entry under which the
legislation was undertaken. That Entry corresponds to
Entries 43 and 44 of List I of Seventh Schedule to the
Constitution. Therefore, the Statement of Objects and
Reasons does not show that the Electricity (Supply) Act
falls under Entry 44. The question then is whether it falls
within Entry 43. The fact that the Statement of Objects and
Reasons mentions Entry 33 of List I (of the Government of
India Act) as the legislative head under which the
legislation was being undertaken is not conclusive. We have,
therefore to consider whether the Electricity (Supply) Act,
1948 falls under Entry 43 as contended by some of the
respondents.There is no doubt that the Act does deal with the
incorporation and regulation of the Electricity Boards, but
the question is whether in pith and substance it is a
legislation regarding the constitution and regulation of the
Electricity Boards falling under Entry 43 of List I or on
electricity falling under Entry 38 of List III. The object
of the Electricity (Supply) Act as seen from the preamble is
to rationalise the production and supply of electricity and
to take measures conducive to electrical development. In the
Statement of Objects and Reasons it is stated that “there is
necessity for the constitution of semi-autonomous bodies
like Electricity Boards to administer the grid system on
quasi-commercial lines, and that such Boards cannot,
however, be set up by Provincial Governments under the
existing Constitutional Act as they would be in the nature
of trading corporations within the meaning of Entry 33 of
the Federal Legislative List.” The Statement of Objects and
569
Reasons though not relevant for the purpose of interpreting
the sections of the Act, will throw light upon the object of
the legislature from the historical viewpoint.Let us now look at the Act itself. Section 3 provides
for the constitution of a Central Electricity Authority. It
says that the Central Government shall constitute a body
called the Central Electricity Authority to exerise such
functions and perform such duties and in such manner as the
Central Government may prescribe or direct. Section 5
provides for the constitution and composition of State
Electricity Boards. Section 6 says that the Government of
any State may in lieu of constituting a Board under section
5 enter into an agreement with the Government of a
contiguous State to provide that the Board constituted for
the latter State shall exercise the functions of a Board
under the Act in the former State. Section 7 deals with the
effect of inter-State agreement as contemplated in section6. Section 8 provides for terms and conditions of
appointment of the members of the Board. Section 9 relates
to the qualifications of the members of the Board. Section
10 deals with removal or suspension of the members of the
Board. Section 10A gives power to the State Government to
declare void certain transactions in connection with which a
member has been removed under the provisions of section 10
on 12 provides that the Board shall be a body corporate.
Section 14 provides for the meetings of the Board. Section
15 deals with the appointment of the staff by the Board.
Section 16 states that the State Government shall constitute
a State Electricity Consultative Council for the State and
provides for constitution of that body. Section 17 provides
for the constitution of a Local Advisory Committee. Section
18 describes the general duties of the Board. Section 19
says that the Board may supply electricity to any licensee
or person requring such supply in any area in which a schme
sanctioned under Chapter V is in force. Section 20 provides
for power of the Board to engage in certain undertakings.
Section 21 concerns the power of the Board in relation to
water-power. By section 22 the Board is invested with power
to conduct investigations, experiments and trials for the
improvement of the methods of transmission, distribution and
supply etc. of electricity. Section 24 deals with the power
of the Board to contribute to contribute to certain
associations engaged in generation, distribution and supply
of electricity. Section 25 says that the Board may, from
time to time, appoint qualified persons to be Consulting
Engineers to the Board. Section 26 says that the Board shall
have all the powers and obligations of a licensee under the
Indian Electricity Act, 1910. Section 28 concerns the
preparation of scheme for establishement of generating
stations etc. Section 29 provides for publication and
sanctioning of schemes prepared under section 28. Section 30
deals with the matters to be considered by the authority in
recommending a scheme. Sections 31 and 32 also relate to
sechemes. Section 34 deals with controlled stations. Section
35 provides for the supply by the Board to licensees owning
generating stations while section 36 gives power to the
Board to close down generating stations. Section 37 provides
for Purchase of generating stations of undertaking or main
transmission lines by the Board. Section 38 makes provision
for establishing new generating stations by
570
the Board. Section 39 deals with the arrangements to be made
with the licensee for operation of the Board’s generating
stations. Section 40 makes provision regarding the
connections with main transmission lines purchased by the
Board. Section 41 relates to the use by the Board of
transmission lines. Section 42 provides for power of the
Board for placing wires, poles etc. Section 43 describes the
powers of the Board to enter into arrangements for purchase
or sale of electricity’ under certain conditions. Section 44
places certain restrictions on establishment of new
generating stations or major additions or replacement of
plant in generating statons. Section 45 says that if any
licensee fails to close down his generating station,
pursuant to a declaration of the Board under section 36, or
if any person establishes or acquires a new. generating
station, the Board may authorise any of its officers to
enter upon the premisess of such station and shut down the
station. Section 46 provides for Grid Tariff. It says that a
tariff to be known as the Grid Tariff shall, in accordance
with any regulations made in this behalf, be fixed from time
to time by the Board in respect of each area for which a
scheme is in force, and tafiffs fixed under the section may,
if the Board thinks fit, differ for different areas, and
subsection (2) of that section provides that the Grid Tariff
shall apply to sales of electricity by the Board to
licensees in other so required under any of the first,
second and third schedules and shall also be applicable to
sales of electricity by the Board to licensees in other
cases. Section 47 vests power in the Board to make
alternative arrannements with licensees. Section 49 makes
provision for sale of electricity by the Board to persons
other than licensees. Section 50 says that the Board should
not supply electricity in certain circumstances. Section 55
provides that licensees should comply with the directions of
the Board. Section 63 says that the State Government may
make subventions to the Board for the purpose of the Act.
Section 64 provides for loans by the State Government to the
Board. Section 65 gives power to the Board to borrow.
Section 66 provides for guaranteeing of loans raised by the
Board by the State Government. Section 67 provides for
priority of the liabilies of the Board. Section 68 makes
provision for depreciation reserve. Secton 69 deals with the
accounts of the Board and their audit. Section 76 provides
for arbitration of all disputes arising between the State
Government or the Board and licensee or other person.
Section 78 vests power in the State Government to make
rules. Section 78A says that in the discharge of its
functions, the Board shall be guided by such directions on
question of policy as may be given to it by the Government.
Section 79 vests power in the Board to make regulations.
Section 81 says that all members, officers and servants of
the Board shall be deemed to be public servants within the
meaning of section 21 of the Indian Penal Code.It would be obvious that one part of the Act does deal
with the constitution of the Board, the incorporation of the
Board and the regulation of its activities. But the main
purpose of the Act is for rationalising the production and
supply of electicity. The regulation contemplated in Entries
43 and 44 is not regulation of the business of production,
distribution and supply of electricity of the corporation.
As the 1910 and 1948 Acts together form a complete code,
with res-571
pect to Entry 38 in List III the Board is only an instrument
fashioned or carrying out this object. The provision
regarding the incorporation and regulation of the
Electricity Board should be taken to be only incidental to
the provision regarding production, supply and distribution
of electricity.It was observed by this Court in R. C. Cooper v.
union(1)
“The argument raised by Mr. Setalvad, intervening
on behalf of the State of Maharashtra and the State of
Jammu and Kashmir, that the Parliament is competent to
enact Act 22 of 1969, because the subject-matter of the
Act is “with respect to” regulation of trading
corporations and matters subsidiary and incidental
thereto and on that account is covered in its entirety
by Entries 43 and 44 of List I of the Seventh Schedule
cannot be upheld. Entry 43 deals with incorporation,
regulation and winding up of trading corporations
including banking companies. Law regulating the
business of a corporation is not a law with respect to
regulation of a corporation. In List I entries
expressly relating to trade and commerce are Entries 41
& 42. Again several entries in List I relate to
activities commercial in character. Entry 45 “Banking”
Entry 46 “Bills of exchange, cheques, promissory notes
and other like instruments; Entry 47 “Insurance”; Entry
48 “Stock exchanges and future markets”, Entry 49
“Patents, inventions and designs.” There are several
entries relating to activities commercial as well as
non-commercial in List II-Entry 21 “Fisheries”, Entry
24
“Industries …. “; Entry 25 “Gas and Gas works”; Entry
26 “Trade and commerce”: Entry 30 “Money-lending and
money-lenders”; Entry 31 “Inns and Inn-keeping”; Entry
33 “Theaters and dramatic performances, cinemas etc.”;.
We are unable to accede to the argument that the State
Legislatures are competent to legislate in respect of
the subject matter of those entries only when the
commercial activities are carried on by individuals and
not when they are carried on by corporations.
Therefore the provisions in the 1948 Act regarding the
Board’s functions do not make it one falling under Entry 43
of List I.In Ramtanu Housing Society v. Maharashtra(2) this Court
had dealt with the Maharashtra Industrial Development Act,
1961 and the question whether the Maharashtra Development
Corporation formed under the Act was a trading corporation.
In holding that the legislation fell under Entry 24 of the
State List and not under Entry 43 of the Union List this
Court observed .(1)[1970] 3 S.C.R.530. (2)[1971] 1 S.C.R.719.
572
“The Act is one to make a special provision for
securing the orderly establishment in industrial areas
and industrial estates of industries in the State of
Maharashtra, and to assist generally in the
organisation thereof, and for that purpose to establish
an Industrial Development Corporation, and for purposes
connected with the matters aforesaid.The Corporation is established for the purpose of
securing and assisting the rapid and orderly
establishment and organisation of industries in
industrial areas and industrial estates in the State of
Maharashtra.Broadly stated the functions and powers of the
Corporation are to develop industrial areas and
industrial estates by providing amenities of road,
supply of water or electricity, street lighting,
drainage …. Or otherwise transfer any property held
by the Corporation on such conditions as may be deemed
proper by the Corporation……The principal functions of the Corporation in
regard to ‘ the establishment, growth and development
of industries in the State are first to establish and
manage industrial estates at selected places and
secondly to develop industrial areas selected by the
State Government. When industrial areas are selected
the necessity of acquisition of land in those areas is
apparent. The Act, therefore, contemplates that the
State Government may acquire land by publishing a
notice specifying the particular purpose for which such
land is required……… Where the land has been
acquired for the Corporation or any local authority,
the State Government shall, after it has taken
possession of the land, transfer the land to the
Corporation or that local authority
It is in the background of the purposes of the Act
and powers and functions of the Corporation-that the
real and true character of the legislation will be
determined…………. Industries come within Entry 24
of the State List. The establishment, growth and
development of industries in the State of Maharashtra
does not fall within Entry 7 and Entry 52 of the Union
List. Establishment, growth and development of
industries in the State is within the State List of
industries.. …Acquisition or requisition of land
falls under Entry 42 of the Concurrent List. In order
to achieve growth of industries it is necessary not
only to acquire land but also to implement the purposes
of the Act. The Corporation is therefore established
for carrying out the purposes of the Act. The pith and
substance of the Act is establishment, growth and
organisation of industries, acquisition of land in that
behalf and carrying out the purposes of the Act by
setting up the Corporation as one of the limbs or
agencies of the Government. The powers and functions of
the Corporation show in no uncertain terms that these
are all in
573
aid of the principal and predominant purpose of
establishment, growth and establishment of industries.
The Corporation is established for that purpose.. We,
therefore, hold that the Act is a valid piece of
legislation.”In the present case the incorporation of the State
Electricity Boards is merely for the rationalisation of the
production and supply of electricity. for taking measures
conducive to Electrical development and for all matters
incidental thereto. The incorporation of the Electricity
Boards being incidental to the rationalisation of the
production and supply of electricity and for being conducive
to electrical development, the 1948 Act in pith and
substance should be deemed to be one falling under Entry 38
of List III. Furthermore, Electricity Boards are not trading
corporations. They are public service corporations. They
have to function without any profit motive. Their duty is
to promote co-ordinated development of the generation,
supply and distribution of electricity in the most efficient
and economical manner with particular reference to such
development in areas not for the time being served or
adequately served by any licensee (Section 18). The only
injunction is that as far as practicable they shall not
carry on their operations at a loss (Section 59). They get
subventions from the State Governments (Section 63). In the
discharge of their functions they are guided by directions
on questions of policy given by State Governments (Section
78A). There are no shareholders and there is no distribution
of profits. This is another reason why the 1948 Act cannot
be said to fall under Entry 43 of List I.The question, therefore, is whether the impugned
legislation falls under Entry 38 of List III or Entries 26
and 27 of List II and if the former, whether it is repugnant
to the existing law on the subject. that is, the 1910 and
1948 Acts and if that were so, whether that repugnancy has
been cured by Presidential assent ?Even assuming that part of the 1948 Act is legislation
with respect to incorporation and regulation of a trading
corporation, falling under Entry 43 of List I of Schedule
Seven, the rest of it will fall under Entry 38 of List III.
That part of the Act relating to the regulation of the
activities regarding production and distribution of
electricity would, as we have shown, fall under the Entry
‘Electricity’. The Kerala Act has nothing to do with the
incorporation and regulation of the Electricity Board and,
therefore, it can only relate to Entry 38 of List III, if at
all.The argument of the learned Solicitor General appearing
on behalf of the Kerala Electricity Board in support of his
submission that the legislation falls under Entries 26 and
27 of List II may be summarised as follows: Those entries do
not enable the State Legislatures to legislate with regard
to all conceivable goods like arms, ammunition, atomic
minerals etc. as was argued by Mr. Sen. A legislature while
legislating with respect to matters within its competence
should be deemed to know its limits and its legislative
authority and should not be deemed to be legislating beyond
its jurisdiction. One thing that has always
574
got to be kept clear in one’s mind is that there may be more
than one aspect with regard to a particular subject matter.
“Essential articles’ is a term which has acquired a definite
connotation in Indian legislative practice and is not a
vague or a general term. In the Government of India Act 1935
Entries 27 and 29 in List I correspond to Entries 26 and 27
of List II in the Constitution. There was no entry in that
Act corresponding to Entry 33 of List III of the
Constitution. Section 102 of that Act enabled the Federal
Legislature to legislate in the State List during the
emergency. During the World War the Defence of India Act
1939 enabled the Central Government to make such rules as
appeared to it necessary or expedient for maintaining
supplies and services essential to the life of the
community. Rule 81 of the Defence of India Rules dealt with
maintaining supplies and services essential for the life of
the community and electricity was specifically referred to
as an article within the scope of that rule Many orders
regarding electricity were made during the course of that
war like Electricity Control order, 1942 of Bihar. When the
proclamation of emergency was revoked on 1.4.1946 the laws
made by the Federal Legislature with respect to matters
included in the Provincial Legislative List would have
ceased to have effect and therefore the British Parliament
enacted India (Central Government and Legislative) Act, 1946
enabling the Federal Legislature to make laws with respect
to trade and commerce (whether or not within the Province )
in, and production, supply and distribution of cotton,
woollen textiles, papers, foodstuffs etc. and in exercise of
that power the Central Legislature enacted Essential
Supplies (Temporary Powers) Act, 1946 for continuance of
powers to control production, supply and distribution etc.
In respect of articles not covered by the Central Act the
Provinces passed similar laws regarding other essential
commodities, for instance, Madras Essential Articles Control
and Requisitioning Act, 1949 in respect of ten articles
including electricity. At present electricity is the only
article included within the scope of that Act. The Essential
Commodities Act 1955 was passed by Parliament on 1.4.55.
Essential commodity was defined in that Act. It practically
included every matter regarding industry within the
legislative competence of Parliament. Thus the word
‘essential commodity’ is an expression corresponding to a
commodity essential to the life of the community. It is not,
therefore, open to the authority exercising powers under
section 2(a) of the Kerala Act to declare any and every
commodity as an essential commodity. That Act deals with
essential articles not being essential articles dealt with
by the Central Act of 1955. It is not an Act with respect to
the incorporation or regulation of trading corporations and
therefore does not all under Entry 43 or 44 of List I. It is
not a legislation with respect to electricity and therefore
does not fall under Entry 38 of List III. Electricity being
beyond doubt an essential article may be declared to be an
essential article under the Act. In that case the power
exercised is not in relation to electricity qua electricity
but electricity as an essential article. The Act therefore
in pith and substance is with respect to trade and commerce
and production, supply and distribution. We agree that this
is the correct view. It is not a permanent legislation with
respect to electricity but a temporary one dealing with a
temporary situation. There can be no
575
doubt about the argument on behalf of the Board that the
Surcharge order is necessary for its survival and existence
without which there can be no production or supply of
electricity. That is why it is a matter falling under
Entries 26 and 27 of List II. It is no valid criticism of
this view to say that the powers of the Board under the 1948
Act are overridden by the Surcharge order and the order is
therefore repugnant to the 1948 Act. Indeed the Board is
more than willing, it is anxious, for the Surcharge order to
be made. It is not necessary to resort to section 59 for
this purpose. This is a simple case of a contract being
overridden in exercise of statutory powers. In the
alternative it is argued as follows: The Kerala Act insofar
as it deals with electricity can be deemed to be legislation
under Entry 38 in List III. Though the Act itself has not
declared any article as an essential article, when a
declaration was made under section 2(a) in 1965 declaring
electricity as an essential article for the purposes of the
Act, it became part of the Act. When the President assented
to the Kerala Act in 1962 it may be that it cannot be deemed
that he had assented to it on the basis that the provisions
of that Act were repugnant to some Act made by Parliament or
some existing law in the concurrent field because there was
nothing in the Act itself which made it repugnant to any Act
passed by Parliament or any existing law. But when he
assented in 1967 to the Act extending the life of the Kerala
Act by another two years the declaration of electricity as
an essential article had been made and should be deemed to
have become part of the Act. So far we are in agreement with
the argument of the learned Solicitor General. But when he
goes further and argues that insofar as the consequence of
such declaration was that the State Government was enabled
to make orders regarding production, supply and distribution
of electricity, there was a possibility of such orders being
repugnant to the provisions of the Electricity Act, 1910 and
the Electricity (Supply) Act, 1948 and therefore any such
repugnance was cured by the assent given by the President,
we cannot agree. We agree that the assent should be Deemed
not merely to the substitution of the words “five years” by
the words “seven years” in the Kerala Act, but to the Act as
a whole, that is, as amended by the 1967 Act and any
repugnance between the Kerala Act and the Electricity Act,
1910 and the Electricity (Supply) Act, 1948 should be deemed
to have been cured by such assent. When assenting to the
1967 Act the President should naturally have looked into
the. whole Act, that is, the 1961 Act as amended by the 1967
Act. But the declaration itself did not create any
repugnancy with the 1948 Act. It was in 1968 that the
Surcharge order was made, in pursuance of which the bills
were served on the various respondents in these appeals and
demands made for enhancing charges for electricity. And it
was the Surcharge order that can be said to create the
repugnancy if at all. It is only actual repugnancy that can
be cured by Presidential assent and not the possibility of
repugnancy.Mr. Krishnamoorthy Iyer appearing for the respondents
in Civil Appeals Nos. 1371 and 1373-74 of 1973 is therefore
right when he argues that the declaration of electricity as
an essential article in 1965 did not in any way affect the
rights of the respondents but only the
576
Surcharge order of 1968 and that as the bills for enhanced
charges for electricity were served on the respondents in
1968 before the 1969 amendment of the Act the Surcharge
order and the demands made were not cured of their
repugnancy till the 1969 Amendment Act was assented to by
the President assuming that there is such repugnancy. It
there is such repugnancy by virtue of the Surcharge order
the assent of the President can cure the repugnancy between
the Kerala Act and the 1910 and 1948 Acts only if it is
subsequent to the Surcharge order. It is the exercise of the
power under section 3 of the Kerala Act that is alleged to
have created the repugnancy. We do not pause to consider
whether there is in fact any repugnancy between the
Surcharge order and the 1948 Act.The question still remains whether when a declaration
is made under section 2(a) of the Act declaring an article
as an essential article or an order is made under section 3
such a declaration or order becomes part of the Act ? In
England even where an Act declares that subsidiary
legislation shall have effect as if enacted in the Act it
does not preclude the Court from calling in question the
subsidiary legislation where it is inconsistent with the
provisions of the Act Minister of Health v. The King(1). But
it would appear that where the statute provides for the
laying of the rules before Parliament and the Parliament
could have annulled them, such a provision would make the
subordinate legislation beyond challenge Institute of Patent
Agents v. Lockwood (2). In India many statutes both of
Parliament and of State Legislatures provide for subordinate
legislation made under the provisions of those statutes to
be placed on the table of either the Parliament or the State
Legislature and to be subject to such modification,
amendment or annulment, as the case may be, as may be made
by the Parliament or the State Legislature. r Even so, we do
not think that where an executive authority is given power
to frame subordinate legislation within stated limits, rules
made by such authority if outside the scope of the rule
making power should be deemed to be valid merely because
such rules have been placed before the legislature and are
subject to such modification, amendment or annulment, as the
case may be, as the legislature may think fit. The process
of such amendment, modification or annulment is not the same
as the process of legislation and in particular it lacks the
assent either of the President or the Governor of the State,
as the case may be. We are therefore, of opinion that the
correct view is that notwithstanding the subordinate
legislation being laid on the table of the House of
Parliament or the State Legislature and being subject to
such modification, annulment or amendment as they may make,
the subordinate legislation cannot be said to be said unless
it is within the scope of the rule making power provided in
the statute.What happens then to a declaration made under section
2(a) or an order made under section 3 If such a declaration
or order is not within the scope of the Act it should be
held to be not valid. Does the subsequent assent of the
President to an Amending Act, which as
(1) [1931] A.C.494. (2)[1894] A.C.347.577
we have shown earlier in effect amounts to an assent to the
whole Act, cure this defect ? We consider that the
declaration itself can still be attacked if the power to
make such a declaration is beyond the scope of the power
delegated. Whether the power delegated can be attacked on
the ground of excessive delegation of the legislative powers
or on the ground that in so conferring the legislative power
on the executive authority the legislature has abdicated its
function or the legislature itself could not have me such a
law is’ a different question. There is a slight difference
between such a situation and the one where it is held that
the declaration is beyond the scope of the Act. That
electricity is an essential article and therefore the 1965
declaration under section 2(a) declaring electricity as an
essential article is valid cannot be disputed. It is not
disputed- that an article which is not in fact an essential
article cannot be declared to be an essential article.The next question to be considered, therefore, is
whether the declaration or the order can be said to be bad
on the ground either that there was excessive delegation or
that the legislature can be said to have abdicated its
powers ? In The Queen v. Burah(1) it was observed:“Their Lordships agree that the Governor-General
in Council could not by any form of enactment, create
in India, and arm with general legislative authority, a
new legislative powers. not created or authorized by
the Council’s Act. Nothing of that kind has, in their
Lordships’ opinion, been done or attempted in the
present case. What has been done is this. The Governor-
General in Council has determined, in the due and
ordinary course of legislation, to remove a particular
district from the jurisdiction of the ordinary Courts
and offices, and to place it under new Courts and
offices, to be appointed by and responsible to the
Lieutenant-Governor of Bengal; leaving it to the
Lieutenant-Governor to say at what time that change
shall take place; and also enabling him, not to make
what laws he pleases for that or any other district,
but to apply by public notification to that district
any law, or part of a law, which either already was, or
from time to time might be, in force, by proper
legislative authority, “in the other territories
subject to his government.” The Legislature determined
that, So far, a certain change should take place; but
that it was expedient to leave the time, and the
manner, of carrying it into effect to the discretion of
the Lieutenant-Governor. and also, that the laws which
were or might be in force in the other territories
subject to the same Government were such as it might be
fit and proper to apply to this district also; but
that, as it was not certain that all those laws, and
every part of them, could with equal convenience be so
applied, it was expedient, on that point also, to
entrust a discretion to the Lieutenant Governor This
having been
(1) 5.L.R.178,194.578
done as to the Garo Hills, what was done as to the
Khasi and Jaintia Hills ? The Legislature decided that
it was fit and proper that the adjoining district of
the Khasi and Jaintia Hills should also be removed from
the jurisdiction of the existing Courts, and brought
under the same pro visions with the Garo Hills, not
necessarily and at all events but if and when the
Lieutenant-Governor should think it desirable to do so;
and that it was also possible that it might be
expedient that not all, but some only, of those
provisions should be applied to that adjoining
district. And accordingly the Legislature entrusted,
for these purposes also, a discretionary power to the
Lieutenant Governor.Their Lordships think that it is a fallacy to
speak of the powers thus conferred upon the Lieutenant-
Governor (large as they undoubtedly are) as if, when
they were exercised, the efficacy of the acts done
under them would be due to any other legislative
authority than that of the Governor General in Council.
Their whole operation is, directly and immediately,
under and by virtue of this Act (XXII of 1869) itself.
The proper Legislature has exercised its judgment as to
place, person, laws, powers; and the result of that
judgment has been to legislate conditionally as to all
these things. The conditions having been fulfilled, the
legislation is now absolute. Where plenary powers of
legislation exist as to particular subjects, whether in
an imperial or in a provincial Legislature, they may
(in their Lordships’ judgment) be well exercised,
either absolutely or Conditionally. Legislation,
conditional on the use of particular powers, or on the
exercise of a limited discretion, entrusted by the
Legislature to persons in whom it places confidence, is
no uncommon thing; and, in many circumstances, it may
be highly convenient. The British Statute Book abounds
with examples of it: and it cannot be sup posed that
the Imperial Parliament did not, when constituting the
Indian Legislature, contemplate this kind of
conditional legislation as within the scope of the
legislative powers which it from time to time
conferred.”We are of opinion that the power conferred by the Kerala Act
is a case of conditional legislation as contemplated in the
above decision. The various types of powers that can be
exercised under that Act are enumerated in it. Only the
article with reference to which those powers are to he
exercised is left to be determined by the executive. That
will vary from time to time; at one time salt may be an
essential article, at another time rice may be an essential
article and on a third occasion match boxes. It is the
executive that would be in a position to judge when and
under what circumstances an article becomes an essential
article and therefore it is necessary to
579
control the production, supply and distribution or trade and
commerce in a particular article. The corresponding Madras
Act, the Madras Essential Articles Control and
Requisitioning (Temporary Powers) Act, 1949 originally had
ten articles included in the schedule as “essential
articles” with powers to add others to the schedule. It now
contains only one article in the schedule, electricity. It
cannot therefore be said to suffer from the vice of
excessive delegation either. Subsequent decisions of this
Court only emphasize this point.We may however refer to two recent decisions of this
Court. In State of Punjab v. Khan Chand(1) dealing with East
Punjab Movable Property (Requisitioning) Act, 1947 this
Court held as follows:“The Act confers uncontrolled power on the State
Government or the officers authorised by it to
requisition any movable property. No guidelines have
been laid down regarding the object or the purpose for
which it becomes necessary or expedient to requisition
a movable property. Even the authority requisitioning
movable property is not required to specify the purpose
for which it has become necessary or expedient to
requisition that property. There is no provision in the
Act that the power of requisitioning movable property
can be exercised under the Act only for a public
purpose nor is there any provision that powers under
the Act can be exercised only in an emergency or in
some special contingency. Hence the provisions of the
Act violate Articles 14 and 19 of Constitution
The Act did not even. provide for suitable machinery for
determining the compensation payable to the owner of the
movable property nor did it contain any guiding principles
for determining the amount of compensation. But in the very
same decision it was observed:‘Considering the complex nature of problems which
have to be faced by a modern State, it is but
inevitable that the matter of details should be left to
the authorities acting under an enactment. Discretion
has, therefore, to be given to the authorities
concerned for the exercise of the powers vested in them
under an enactment.”
This decision considered the relevant decisions on the
subject and is not against the view which we have taken
We must, however, refer to the decision of this
Court in Gwalior Rayon Mills v. Asst. Commr. 5. T.(2)
relied upon by the respondents. In that case it was
found that the Parliament had laid down legislative
policy and had not abdicated its legislative function.
It is necessary to refer to the view taken in that case
by the majority judgment that it is not correct to say
that if the legislature can repeal an enactment, it
retains enough control over the authority making the
subor-
(1) A.I.R.1974 S.C.543. (2) A.I.R l974 S.C.1660.
580
dinate legislation and, as such, it is not necessary for the
legislature to lay down legislative policy, standard or
guidelines in the statute. That was, of course, not the
argument on behalf of the appellants in this case. But
having regard to the fact that reference was made to the
decision in Cobb & Co. Ltd. v. Kropp(1) which is very often
relied upon for contending that if the legislature conferred
certain powers on an executive authority it could be upheld
because the legislature could any time repeal the
legislation and withdraw such authority and discretion as it
had vested in that authority, it is necessary to look a
little more closely into that judgment. The main dispute
there was about the State Transport Act, 1960 passed by the
legislature of Queensland. It was attacked on the ground
that it unlawfully and unconstitutionally delegated to the
Commissioner for Transport sovereign plowers of the
legislature of Queensland to impose and levy taxes and would
constitute an unlawful and unconstitutional transfer of
sovereign power of legislature to the Commissioner or an
abdication of such power in his favour. There were various
other contentions to which it is not necessary to refer. In
the same case the validity of the State Transport Facilities
Act, 1946 was also in question. Under the 1946 Act, however,
a determination or a decision of the Commissioner was to be
submitted to the Minister for his confirmation. Stable J.
described this provision as one under which ‘the
commissioner had a Parliamentary hand on his shoulder’.
After referring to the various provisions of the Acts as
well as the powers of the Queensland Legislature the Privy
Council rejected the argument that the effect of the Acts
was to create a new legislative authority. The Privy Council
pointed out that it cannot rationally be said that there was
any abandonment or abdication of power in favour of a newly
created legislative authority, and referred to the
observations of the Privy Council in the Queen v. Burah
(supra). The Privy Council then went on to point out that’
nothing comparable with “a new legislative power” armed with
“General authority” has been created by the passing by the
Queensland Legislature of the various Transport Acts.
Reference was then made to the decisions in Hodge v. The
Queen(2) and Powel v. Apollo Candle Company Ltd.(3) and it
was pointed out that the Queensland Legislature preserved
its own capacity insect and retained perfect control over
the Commissioner for Transport. It was in that context that
they added “inasmuch as it could at any time repeal the
legislation and withdraw such authority and discretion as it
had vested in him”. This portion of the observations cannot
be relied upon in every case where the question of excessive
delegation arises to justify it merely on the ground that it
is open to the legislature to repeal the legislation and
withdraw the authority. This would be apparent from the
extract from the judgment of Stable J. which immediately
follows thereafter:
“obviously Parliament cannot directly concern
itself with all the multitudinous matters and
considerations which necessarily arise for daily and
hourly determination within
(1)[1967] 1 A.C.141. (2)(1883)9 App.Cas.117 P.C.
(3)(1885)10App.Cas.282 P.C.
581
the ramifications of a vast transport system in a great
area in the fixing of and collection of licensing fees.
So, as I see it on the face of the legislation,
Parliament has lengthened its own arm by appointing a
commissioner to attend to all these matters, including
the fixing and gathering of the taxes which Parliament
itself has seen fit to impose. The commissioner has not
been given any power to act outside the law as laid
down by Parliament. Parliament has not abdicated from
any of its own power. It has laid down a framework, a
set of bounds, within which the person holding the
office created by Parliament may grant, or refrain from
granting licenses, and fix, assess, collect or refrain
from collecting fees which are taxes.”
and the succeeding observations to the following effect:
“The legislature were entitled to use any agent or
any subordinate agency or any machinery that they
considered appropriate for carrying out the objects and
purposes that they had in mind and which they
designated. They were entitled to use the Commissioner
for Transport as their instrument to fix and recover
the licences and permit fees. They were not abrogating
their power to levy taxes and were not transferring
that power to the commissioner. What they created by
the passing of the Transport Acts could not reasonably
be described as a new legislative power or separate
legislative body armed with general legislative
authority (see R. v. Burah, 3 App. Case. 889). Nor did
the Queensland legislature “create and endow with its
capacity a new legislative power not created by the Act
to which it owes its own existence” (see In re The
Initiative and Referendum Act. 1910 A.C. 945; 35 TLR
630 P.C.). In no sense did the Queensland Legislature
assign or transfer or abrogate their powers or renounce
or abdicate their responsibilities. They did not give
away or relinquish their taxing powers. All that was
done was done under and by reason of their authority.
It was by virtue of their will that licence and permit
fees became payable.’
We agree with the view taken by the majority of this Court
in Gwalior Rayon Mills’ case. In the result we hold that the
Kerala Act, the 1965 declaration under section 2(a) and the
1968 Surcharge order under section 3 are all valid
The result is that the appeals will have to be allowed;
but in Civil Appeals Nos. 1425, 2575, 2576 of 1972 and 97,
1373 and 1374 of 1973 a question regarding Article 14 has
been raised which has not been considered by the High Court.
In these cases the High Court will deal with that question
alone and dispose of the matter afresh.
In Civil Appeal No. 1372 of 1973 the respondent is what
is called a sanction holder under section 28 of the Indian
Electricity Act, 191
582
and as such a licensee within the meaning of that term n
clause (6) of section 2 of the Electricity (SUPPLY) Act,
1948. The respondent has no objection to collecting the
surcharge from those to whom it supplies electricity. The
respondent’s contention is a limited one that it need not
pay surcharge on the electricity which it consumes. We
consider this contention well founded and it is supported by
the provisions of clause (3) and (8) of the Surcharge order
which read together leave no room for doubt on that point.
Clause (3) reads as follows:
“3. Notwithstanding anything to the contrary
contained in any agreement entered into with any
consumer or the conditions of service agreed upon by
the Kerala State Electricity Board; the Kerala State
Electricity Board shall levy a surcharge in accordance
with clause 5 on all supplies of electrical energy made
by it either directly or through licensees:
Provided that no surcharge under this order shall
be levied on-
(a) Bulk supplies of energy to the licensees;
(b) Low Tension supplies of energy for domestic
residential purposes;
(c) Low Tension supplies of energy for
agricultural purposes.”
The respondent is a licensee and bulk supplies have been
made to the licensee. It is not a consumer to whom the Board
supplies electrical energy directly or through a licensee.
It cannot be said that in consuming electricity itself the
respondent is supplying electricity to itself. The Surcharge
order clearly makes a distinction between the consumer on
the one hand and the licensee on the other and makes no
provision for surcharge in the case of consumption of
electricity by a licensee. It would be therefore declared
that the respondent in this appeal need not pay the
surcharge on the electricity consumed by it. There will be
no order as to costs.
GUPTA, J. I regret I am unable to agree that the Kerala
Essential Articles Control (Temporary Powers) Act, 1961 and
the declaration and the surcharge order made respectively
under ss. 2(a) and 3 of that Act are valid. In my opinion
the Kerala act is an invalid piece of legislation and as
such the declaration and the surcharge orders are of no
consequence. It is not necessary to restate the facts which
have been set out fully in the Judgment of brother
Alagiriswami J.; I shall briefly state the reasons for the
view I have taken.n
The State Lagislature has power to make laws only with
regard to matters specified in List II and List III in the
Seventh Schedule of the Constitution subject to the
provisions of Art. 254(2). The Kerala Act, as its long title
shows, is in Act to provide for the control of the produc
583
tion, supply and distribution of, and trade and commerce in,
“certain articles”. The Preamble of the Act also states that
it was passed as it was considered expedient to provide for
the control of the production, supply and distribution of,
and trade and commerce in, “certain articles”, Sec. 1(3) of
the Act provides that the Act would remain in force for five
years from the date of its commencement which was in January
1962. Sec.3(1) empowers the State Government to make
provisions by a notified order for regulating or prohibiting
the production supply and distribution of any ‘essential
article’ and trade and commerce therein if the Government
thought it was expedient so to do for maintaining or
increasing the supplies or for securing the equitable
distribution of such essentiai articles. Sec. 2(a) defines
essential article as any article not being an essential
commodity as defined in the Essential Commodities Act, 1955
which the Government by notified order might declare to be
an essential article. The definition leaves it to State
Government to decide what should be an essential article for
the purpose of the Act. The Legislature is of course
presumed to know the limits of its competence and assuming
it is permissible to attribute similar knowledge to the
Government as to the bounds of its authority under sec.
2(a), an essential article may be any article covered by any
of the entries in List 11 or List III except the classes of
commodities mentioned as essential commodity in the
Essential Commodities Act. Until therefore, the Government
issued a notification on December 10, 1965 under sec. 2(a)
declaring electrical energy to be an essential article
almost four years after the act came into force, it was not
possible even to guess what the Act was about. Thus the Act
as passed had no positive content, it was an empty husk and
its insubstantiality, if by itself not, an ill
validating factor, exposes the want of a declared
legislative policy in the Act. The Act does not give any
indication as to the nature of the articles in respect of
which it sought to control the production, supply and
distribution, and trade and commerce. It confer on the
Government the authority to declare any article an essential
article and to exercise the aforesaid powers in respect of
that article. The Act does not provide any guidance or lay
down any test to ascertain what makes an article essential
for the purpose of the Act. The reference to the Essential
Commodities Act in sec. 2(a) which defines ‘essential
article’ is merely to exclude from its purview the
commodities covered by the Essential Commodities Act., and
only serves to emphasize its indefiniteness and makes it
more difficult to find any clue to the nature of the
articles the Legislature had in mind in enacting the Kerala
Essential Articles Control (Temporary Powers) Act, 1961.
Almost the entire legislative field was left open to the
Government to choose from and decide according to their own
lights what should be an essential article.
It hardly needs repetition that the Legislature cannot
delegate the essential legislative function, which means
that the Legislature must declare the policy of the law and
provide a standard for the guidance of the subordinate law-
making authority. The Kerala Act authorises the Government
to declare any article as essential, except those mentioned
in the Essential Commodities Act, without laying down any
define criteria or standards. This, I think, is surrendering
unguided and un
584
canalised power to the executive. I do not see how the Act
can be called an instance of conditional legislation-this
is not a case where the Legislature having determined the
policy has left the details to be supplied by the executive
authority. I cannot think of a case where the Legislature’s
self-effacement could be more complete. In my opinion the
power conferred on the Government by the Kerala Act exceeds
the limits of permissible delegation.
I may now refer to another aspect of the case. As
stated earlier, the Kerala Essential Articles Control
(Temporary Powers) Act, 1961 came into operation in January
1962 and was to remain in force for five years from the date
of its commencement. However, the life of the Act was
extended by successive amending Acts passed in 1967, 1969
and 1970. Art. 254(2) of the Constitution provides:
“Where a law made by the Legislature of a State
with respect to one of the matters enumerated in the
Concurrent List contains any provision repugnant to the
provisions of an earlier law made by Parliament or an
existing law with respect to that matter, 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:
Provided that nothing in this clause shall prevent
Parliament from enacting at any time any law with
respect to the same matter including a law adding to,
amending, varying or repealing the law so made by the
Legislature of the State.”
It appears that the President had given his assent to the
principal Act of 1961 and also to the successive amending
Acts extending the life of the principal Act. The Act as it
was passed in 1961 does not appear to contain any provision
which was repugnant to any Central Act or existing law, that
being so, the assent given to it seems redundant and of no
consequence. (obviously, Art. 254(2) contemplates an
existing repugnancy and not possible future inconsistencies.
in December 10, 1965 the State Government issued a
notification declaring electrical energy to be an essential
article under sec. 2(a) of the Act, and on June 1, 1968 the
State Government made the Kerala State Electricity Supply
Surcharge order in exercise of the powers conferred by sec.
3. The surcharge order made in 1968 following the
declaration of electrical energy as an essential article in
1965 is said to be in conflict with the provisions of the
Indian Electricity Act, 1910 and the Electricity Supply
Act,1948. Both these Acts are existing laws. It was argued
that assent of the President received for the amending Acts
of 1967, 1969 and 1970 cured the repugnancy introduced by
the surcharge order. Assuming that assent given to the
amending Acts would have the effect of curing the
repugnancy, if any, in the principal Act, the question
remains where the declaration and the surcharge order part
of the Act under which they were made ? If they were not, if
the order declaring electrical energy as an essential
article and the surcharge order were outside the Act, then
the assent given to the Act could not cure
585
the repugnancy arising from these two orders. Art. 254(2)
requires the State legislation containing the repugnant
provision to be reserved for the consideration of the
President before he gives his assent to it. Could it be said
that the declaration and the surcharge order were provisions
in the Kerala Essential Articles Control (Temporary Powers)
Act 1961 ? this Court considered a similar question though
in a different context in Chief Inspector of Mines v. Lala
Karam chand Thappar.(1) In that case this Court was
examining the effect of the repeal of the Mines Act, 1923 on
the regulations framed under that Act. Mines Act, 1923 was
repealed and was re-enacted with certain modifications as
the Mines Act, 1952. Sec. 29 of the 1923 Act empowering the
Central Government to make regulations consistent with the
Act for specified purposes was reenacted in the 1952 Act as
Sec. 57. Regulations were made in 1926 under sec. 29 of the
1923 Act, but no regulations had been made under sec. 57 of
the 1952 Act at the relevant date in 1955. The question was
whether in view of sec. 24 of the General Clauses Act the
Mines Regulations of 1926 could be said to have been in
force at the relevant date as there was nothing in the later
providing otherwise, and the regulations were not
inconsistent with the re-enacted provisions. Sub-sec. (4) of
sec. 31 of the 1923 Act laid down, inter-alia, that
regulations and rules made under the Act would have the
effect “as if enacted in this Act.” overruling the
contention that the regulations became part of the Act in
view of sub-sec. (4) of sec. 31 and that with the repeal of
the Act the regulations also stood repealed as part of that
Act, this Court observed at page 23 of the report:
“The true position appears to be that the rules
and regulations do not lose their character as rules
and regulations even though they are to be of the same
effect as it contained in the Act. They continue to be
rules subordinate to the Act, and though for certain
purposes, including the purpose of construction, they
are to be treated as if contained in the Act, their
true nature as subordinate rule is not lost.
There is thus at least one decision of this Court which
seems to support the view that the orders made by the State
Government under sec. 2(a) and sec. 3(1) of the impugned Act
could not be called part of the Act; this Act does not even
say that such orders are to be treated as if enacted in the
Act. This is an important aspect of the case, and I do not
think it can be assumed or taken for granted without further
consideration that these orders formed part of the Act and
the President’s assent
(1)[1962] 1 S.C.R 9
7-L925SlupCI/75
586
to the Act cured the repugnancy created by the surcharge
order. However, as I have already held the Act to be invalid
on the other ground. I prefer not to express any concluded
opinion on this point.
In may judgment the Kerala Essential Articles Control
(Temporary Powers) Act, 1961 is invalid on the ground of
excessive delegation. I would therefore dismiss the appeals
but without any order as to costs.
ORDER
In view of the decision of the majority. the appeals
are allowed and Civil Appeals Nos. 1425, 2575, 2576 of 1972
and 97, 1373 and 1374 of 1973 are remanded to the High
Court. There will be no order as to costs.
P. B. R .
587