PETITIONER: M/S. WEST RAMNAD ELECTRIC DISTRIBUTION CO. LTD. Vs. RESPONDENT: STATE OF MADRAS DATE OF JUDGMENT: 02/05/1962 BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SUBBARAO, K. WANCHOO, K.N. SHAH, J.C. AYYANGAR, N. RAJAGOPALA CITATION: 1962 AIR 1753 1963 SCR (2) 747 CITATOR INFO : R 1964 SC 925 (44) E 1968 SC 377 (21) RF 1968 SC 394 (17) RF 1968 SC1138 (23) R 1970 SC 564 (143,144) E 1972 SC2205 (14,15,16,18) RF 1975 SC1389 (24,28) RF 1991 SC1676 (66) ACT: Electricity Undertaking Acquisition-Act Validating action taken under earlier Act declared ultra vires-Validity-Basis of computation of compensation, if valid-Madras Electricity Supply Undertakings (Acquisition) Act, (Mad, 43 of 1949), s. 4-Madras Electricity Supply Undertakings (Acquisition) .Act, 1954 (Mad. 29 of 1954), ss. 5, 24-Constitution India Arts. 20(1), 31 (1) (2). HEADNOTE: By an order dated May 17, 1951, the appellant undertaking vested in the respondent from September 21, 1951, under the provisions of s. 4(1) of the Madras Electricity apply Undertakings Act 1949. Thereafter the respondent appointed the Chief Electrical Adviser as the Acquisition Officer who took over possession on the appointed-date, and a part of the compensation payable under the Act was paid. The validity of the said Act was challenged by some other electrical undertakings in Madras and in Raja Chaudhry Electric Supply Corporation Ltd. v. State of Andhra Pradesh, the Supreme Court held that the Act of 1 949 was ultra vire8. After the said decision was pronounced, the Aadras Legislature passed the impugned Act, the Madras Act ' 29 of 1954. The Act incorporated the main provisions of earlier Act of 1949 and purported the validate action taken under the said earlier Act. A new Government order was issued and the Chief Electrical Adviser was appointed the Acquisition Officer of the appellant concerned. As a result of this order, the appellant undertaking which had been taken over by the respondent earlier in 1951, continued to be in the possession of the Respondent. The appellant filed two writ petitions and alleged that to the extent to which the Act purported to validate acts done under the earlier Act of 1949 it was ultra vires, ineffectual and inoperative, It was further urged that the three basis of compensation laid down by the Act were inconsistent with the requirements of' 748 Art. 31 of the Constitution, and so; the operative provisons of the Act were unconstitutional. The question was also raised whether or not it was competent to the Legislature to pass a law restrospectively to, validate action taken under a void Act. Held, that it was within the competence of the Madras Legislature to enact a law and make it retrospective in operation. The Madras Act, 29 of' 1954, in terms is intended to apply to undertakings of which possession had already been taken, and that obviously means that its material and opera- tive provisions are retrospective. The effect of s. 24 is that if a notification had been issued properly under the provisions of the earlier Act and validity could not have been impeached if the said provisions were themselves valid, it would be deemed to have been validly issued under the provisions of the Act, provided, of course it is not inconsistent with the other provisions of the Act. It is a saving and validating provision and it clearly intends to validate action taken under the relevant provisions of the earlier Act which was invalid from the start. Held, further, that Art. 31(1), of the Constitution, unlike Art;, 20(1), does not use the expression "law in force at the time it merely says "by authority of law" and so, if a subsequent law passed by the Legislature is retrospective in its operation, it would satisfy the requirement of Art. 31(1) and would validate the impugned notification in the present case. The Legislature can pass a law retrospectively validating action taken under a law which was void because it contravened fundamental rights, If the Legislature can by retrospective legislation cure the invalidity of action taken in pursuance of laws which were void for want of legislative competance and can validate such action by appropriate provisions, the same power can be equally effectively exercised by the Legislature for validating actions taken under laws which are void for the reason that they contravened fundamental rights. Held, also, that the failure of the Legislature to refer to the fair market value cannot, be regarded as conclusive or even presumptive evidence of the fact that what is intended to be paid under s. 5 does not amount to a just equivalent of the undertaking taken over. After all, in considering the 749 question as to whether compensation payable under one or the other of the bases amounts to a just equivalent, the court must try to assess what would be payable on the said basis of market value. It may be that in some basis B may work hardship and conceivably evert basis A or basis C may not be as satis- factory as it should be ; but when a party challenges the validity of a statutory provisions like s. 5, it is necessary that the party must adduce satisfactory and sufficient material before the Court on which it wants the court to hold that the compensation- which would be paid under everyone of the three bases under the impugned statutory provisions does not amount to a just equivalent. Looking merely at the scheme of the section itself, it is impossible to arrive at such a conclusion. Narasaraopeta Electric Corporation Ltd. v. State Of Madras, (1951) 11 M. L. J, 277, Rajamundru Electric Supply Corporation Ltd. v. State of Andhra, [1954] S. C. R. 779, and Deep Chand v. State of U. P., (1959) Supp. 2 S. C. R. 8, referred to. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 5 1 2 and
513 of 1960.
Appeal from the judgment and order dated March 27, 1956, of
the Madras High Court, in Writ Petition Nos. 326 of 1955 and
107 of 1956.
M. K. Nambiyar and P. Ram Reddy for the appellant.
B. Ganapathy Iyer and P. D. Menon, for the respondents.
R. Gopatakrishnan, for the Intervener No. 1.
K. Bhimsankaran, B. R. G. K. Achar and
P. D. Menon, for the intervener No.
1962. May 2. The Judgment of the Court was delivered by
GAJENDRAGADKAR, J.-The principal question which arises in
these two appeals is related to the validity of s.24 of the
Madras Electricity
750
Supply Undertakings (Acquisition) Act, 1954 (XXIX of 1954)
(hereinafter called the Act). That question arises in this
way. The appellant, the West Ramnad Electric Distribution
Co. Ltd., Rajapalayam, was incorporated in 1935 to carry on,
within the State of Madras and elsewhere, the business of an
electric light and power company, to construct, lay down and
establish and carry on all necessary installations, to
generate, accumulate, distribute and supply electricity
under a licence granted under the Indian Electricity Act of
1910. On the 24th January, 1950, the Madras Legislature
passed an Act (XLIII) of 1949) for the acquisition of
undertaking supplying electricity in the Province of Madras.
Under the said Act, the Government was empowered to acquire
any electrical undertaking on payment of compensation
according to the relevant provisions of the s aid Act. In
pursuance of the provisions of s.4(1) of the said Act, the
respondent, State of Madras, passed on Order C.O. Ms.
No.2059 on the 17th May, 1951, declaring that the appellant
undertaking shall vest in the respondent from the 21st
September, 1951. Thereafter, the respondent appointed the
Chief Electrical Inspector as the Acquisition Officer, and
on the appointed day, the said Officer took over possession
of the appellant and all its assets, records and account-
books. The appellant then appointed the liquidator as its
Accredited Representative for the purposes of the Act in
order to claim compensation under the Act. The respondent
then paid over to the appellant Rs. 6 lakhs on the 24th
October, 1952 and Rs. 2,34,387-1-0 on the 5th July, 1953, as
compensation. According to the appellant-, Rs. 98,876-15-0
still remained to be paid to it by way of compensation under
the Act, whereas the respondent suggested that only Rs.
6000/was the balance due to the appellant. That is how the
appellant undertaking went into possession of
751
the respondent and the appellant was paid partial
compensation.
It appears that owners of some of the electrical
undertakings in Madras which had been taken over by the
respondent in accordant e with the provisions of s.4(1) of
the 1940 Act, filed writ petitions in the High Court of
Madras impugning the validity of the said Act. These writ
petitions however, failed and by its judgment in
Narasaraopeta Electric Corporation Ltd. v. State of
Madras(1) the Madras High Court upheld the validity of the
impugned Act in so far as it related to the licensees other
than municipalities. The said licenses then moved this
Court and their appeal succeeded. By its decision in the
Rajamundry Electric Supply Corporation Ltd. v. The State of
Andhra (2), this Court held that the impugned Act of 1949
was ultra vires. This decision was based on the ground that
the Act was beyond the legislative competence of the Madras
Legislature inasmuch as there was no entry in any of the
three Lists of the Seventh schedule of the Government of
India Act, 1935 relating to compulsory acquisition of any
commercial or industrial undertaking. This Court ohservel
that although s.299(2) of the said Constitution Act
contemplated a law authorising compulsory acquisition for
public purposes of a commercial or industrial undertaking, a
corresponding entry had not been included in any of the
three Lists and so., the Madras Legislature was not
Competent to pass the impugned Act. This decision was pro-
nounced on the 10th February, 1954.
Meanwhile, the Constitution came into force on the 26th
January, 1950, and the position of the legislative
competence of the Madras Legislature in respect of the
compulsory acquisition of commercial or industrial undertakings
for public purposes has been materially
altered. Entry 36 in List 11 of
(1) (1931) 11 M.L.J. 277.
(2) (1954) S.C.R. 779.
752
the Seventh Schedule to the Constitution refers to
acquisition or requisitioning of property, except for the
purposes of the Union, subject to the provisions of entry 42
of List 111, whereas entry 42 of List III deals with the
principles on which compensation for property acquired or
requisitioned for the purposes of the Union or of a State or
for any other public purpose is to be determined, and the
form and the manner in which such compensation is to ‘De
given. That is how the two entries read at the relevant
time.
After the decision of this Court was pronounced in the case
of Rajamundry Electric Supply Corpn. Ltd. (1), the Madras
Legislature passed the Act and it received the assent of the
President on the 9th October, 1954, and was published in the
Government Gazette on the 13th October, 1954. The Act
incorporated the main provisions of the earlier Act of 1949
and purported to validate action taken under the said
earlier Act. After the Act was passed, the respondent
issued a new Government Order No. 4388 on the 14th December,
1954, appointed the Chief Electrical Inspector to be the
Acquisition Officer of the appellant concern for purposes of
the Act. As a result of this order, the appellant
undertaking which had been taken over by the respondent on
the 21st September, 1951, continued, to be in the possession
of the respondent. It is under-these circumstances that the
appellant filed its writ petition No. 326 of 1955 on the
26th April, 1955.
In its writ petition, the appellant alleged that to the
extent to which the Act purports to validate acts done under
the earlier Act of 1949, it is ultra vires, ineffectual and
inoperative. It was further urged that the three bases of
compensation as laip
(1) (1934) S.C.R, 779.,
753
down by the Act are inconsistent with the requirements of
Art. 31 of the Constitution and so, the operative provisions
of the Act are unconstitutional. On these grounds, the
appellant prayed for a writ of Certiorari or any other
appropriate writ, or order or direction calling for the
records relating to G.O. Ms. No. 2052 issued on the 17th May
1951 and quashing the same. Later, the appellant filed an-
other writ petition No. 107 of 1956 on the 31st January,
1956, and it added a prayer that a writ of Mandamus or any
other writ, or order, or direction should be issued
directing the respondent to restore possession of the
appellant undertaking with all its assets along with masne
profits from 21st September, 1951 or pay the market value of
the said undertaking as on 21st September 1951 and interest
thereon @ 6 per cent. per annum, and to direct payment of
costs and pass such other orders as may be appropriate and
just in the circumstances of the case.
The claim thus made by the appellant was denied by the
respondent. The respondent’s case was that the Act is valid
and s.24 which operates retrospectively has validly and
effectively validated actions taken under the earlier Act,
with the result that the possession of the appellant
undertaking which was taken on the 21st September, 1951,
must be deemed to have been taken under the provisions of
the Act and so the claim made by the appellant either for a
writ of certiorari or mandamus could not be granted It was
also urged that it would not be open to the appellant to
claim possession of the undertaking or to ask for mesne
profits in writ proceedings.
Mr. Justice Rajagopalan who beard the two writ petitions,
rejected the contentions raised by the appellant and
dismissed the said petitions. He held that having regard to
the fact that the
754
appellant had accepted compensation under the earlier Act,
no real relief could be granted to it even if its contention
that s. 34 of the Act was invalid in uphold. In other
words, the learned Judge took the view that even if the
challenge made by the appellant to the validity of s. 24 was
found to be justified, in the present writ proceedings he
would not be prepared to grant it the relief either of
possession or of mesne profits. Even so, the learned Judge
proceeded to examine the several points urged by the
appellant in support of its contention that s. 24 was
invalid, and rejected them. In his opinion, the Act was
valid and s. 24 being retrospective in operation, validated
the actions taken by the respondent under the earlier Act.
The argument that the Compensation awardable under the Act
was inconsistent with Art. 31(1) and 31(2) was not accepted,
inter alia, on the ground that so material had been placed
before the Court on which the appellant’s plea could be sus-
tained. The learned Judge has also recorded his conclusions
on some other points urged before him, but it is unnecessary
y to refer to them. After this decision was pronounced, the
appellant moved the learned Judge for a certificate under
Art. 132(1) of the Constitution and it is with the
certificate thus granted to it under the said Article that
the present appeals have been brought to this Court.
The first point which Mr. Nambiar has raised before us on
behalf of the appellant is that s. 34 which purports to
validate action taken under the earlier Act is, in law,
ineffective to sustain the order issued by the respondent on
the 17th May, 1951. It would be recalled that by this
order, the respondent obtained possession of the appellant
undertaking for the first time under the relevant provisions
of the earlier Act. The argument is that there is no
specific or express provision in the Act which makes the Act
retrospective and no, s 24
755
even if it is valid, is ineffective for the purpose of
sustaining the impugned order by which possession of the
appellant concern was obtained by the respondent. The
impugned order had recited that the appellant concern shall
west in the Government on the 21st September, 1951, and it
directed that under s. 4(2) of the earlier Act the said
order shall be published in the Gazette. Under the said
order a further direction had been issued appointing the
Chief Electrical Inspector to the respondent to be the
Acquisition Officer, and the appellant was requested to take
action for the appointment of an accredited respresentative
in accordance with s. 8 of the earlier Act and to submit the
inventories and all particulars required under ‘S. 17 of the
said Act. Mr. Nambiar contends that this order amounts to a
notification which must be held to be a law under Art. 13 of
the Constitution. For the purpose of the present appeals,
we will assume that the said order is notification amounts
to a law under Art. 13. Mr. Nambiar further contends that
this notification was invalid for two reasons; it was
invalid because it had been issued under the Provisions of
an Act which was void as being beyond the legislative
competence of the Madras Legislature, and it was void for
the additional reason that before it was issued, the
Constitution of India had come into force and it offended
against the provisions of Art. 31 of the Constitution, and
so, Art. 13(2) applied. Section 24 of the Act, no doubt,
purported or attempted to validate this notification, but
the said attempt has failed because the Act being
prospective, s. 24 cannot have retrospective operation.
That, in substance, is the first contention raised before
us.
Before dealing with this argument, it would be necessary to
examine the broad features of the Act and understand its
general scheme. The Act was passed because the Madras
Legislature thought
756
it expedient to provide for the acquisition of under takings
other than those belonging to and under the control of the
State Electricity Board constituted under section 5 of the
Electricity (Supply) Act, 1948 in the State of Madras
engaged in the business of supplying electricity to the
public. It is with that object that appropriate provisions
have been made by the Act to provide for the acquisition of
undertakings and to lay down the principles for paying
compensation for them. It is quite clear that the scheme of
the Act was to bring within the purview of its material
provisions under-‘ takings in respect of which no action bad
been taken under the earlier act and those in respect of
which action had been so taken. In fact, as we will
presently point out, several provisions made by the Act
clearly referred to both types of undertakings and leave Do
room for doubt that both types of undertakings are intended
to be governed by it. The definition of an ‘accredited
representative’ prescribed by s. 2(b) shows that the
accredited representative means the representative appointed
or deemed to have been appointed under s. 7. Similarly, s.
2(j) which defines a licensee provides that in relation to
an undertaking taken over or an undertaking which has vested
in the Government under s. 4, it shall be the person who was
the licensee at the time when the undertaking was taken over
or vested is the Government as the case may be, or his
successor-in-interest. Section 2 (e) defines an undertaking
taken over as meaning an undertaking taken over by the
Government after the 1st January, 1951 and before the
commencement of this Act. The ,vesting date’ under s. 2 (m)
means in relation to an undertaking, the date fixed under s.
4 (1) as the date on which the undertaking shall vest in the
Government or in the case of an undertaking taken over, the
date on which it was taken over. These
757
definitions thus clearly point out that the Act was intended
to apply to undertakings of which possession would be taken
after the Act was passed as well as undertakings of which
possession had already been taken under the relevant
provisions of the earlier Act.
Section 3 which deals with the application of the Act,
provides that it shall apply to all undertakings of
licensees including : (a) undertakings in respect of which
notice for compulsory purchase has been served under s. 7 of
the Electricity Act, such undertakings not having been taken
over before the commencement of this Act; and (b)
undertakings taken over. Similarly, section 4 which gives
powers to the respondent to take over any undertaking
clearly” says that that ‘power can be exercised in respect
of any ‘undertaking which had already not been taken over.
In dealing with the appointment of sole representative, s.
7, sub-ss. (3) and (5) bring out the same distinction
between undertakings already taken over and those which had
yet to be taken over. The same distinction is equally
clearly brought out in s. 10 (3), 11 sub-s,(2), (5) and (1
1), and s. 14 (3). It is thus clear that the Act, in terms,
is intended to apply to undertakings of which possession had
already been taken, and that obviously means that its
material and operative provisions are retrospective.
Actions taken under the provisions of the earlier Act are
deemed to have been taken under the provisions of the Act
and possession taken under the said earlier provisions is
deemed to have been taken under the relevant provisions of
the Act. This retrospective operation of the material
provisions of the Act is thus writ large in all the relevant
provisions and is an essential part of the scheme of the
Act. Therefore, Mr. Nambiar is not right when he assumes
that the rest of the Act is intended to be prospective and
so, section 24 should be construed
758
in the light of the said prospective character of the Act.
On the contrary, in construing s. 24, we have to bear in
mind the fact that the Act is retrospective in operation and
is intended to bring within the scope of its material
provisions undertakings of which possession had already been
taken.
Let us then construe s.24 and decide whether it serves to
validate the impugned notification issued by the respondent
on the 21st September, 1951.
Section 24 reads thus: –
“Orders made, decisions or directions given,
notifications issued, proceedings taken and
acts of things done, in relation to any under-
taking taken ever, if they would have been
validly made, given, issued, taken or done,
had the Madras Electricity Supply Undertakings
(Acquisition) Act,, 1949 (Madras Act XLIII of
1949), and the rules made thereunder been in
force on the date on which the said orders,
decisions or directions, notifications,
proceeding, acts or things were made given,
issued, taken or done are hereby declared to
have been validly made, given, issued, taken
or done, as the case may be, except to the
extent to which the said orders, decisions,
directions, notifications, proceedings, acts
or things are repugnant to the provisions of
this Acts.”
The first part of the section deals, inter alia”, with
notifications which have been validly issued under the
relevant provisions of the earlier Act. and it means that if
the earliar Act had been valid at the relevant time; it
ought to appear that the notifications in question could
have been and had. in fact been made properly under the said
Act. In other words, before any notification can claim the
benefit of s. 24, it must be shown that it was issued
properly under the relevant provisions of the earlier Act,
759
assuming that the said provisions were themselves valid and
in force at that time. The second part of the section
provides that the notifications covered by the first part
are declared by this Act to have been validly issued; the
expression “hereby declared” clearly means “declared by this
Act” and that shows that the notifications covered by the
first part would be treated as issued under the relevant
provisions of the Act and would be treated as validly issued
under the said provisions. The third part of the section
provides that the statutory declaration about the validly of
the issue of the notification would be subject to this
exception that the said notification should not be
inconsistent with or repugnant to the provisions of the Act.
In other words, the effect of this section is that if a
notification had, been issued properly under the provisions
of the earlier Act and its validity could not have been
impeached if the said provisions were themselves valid, it
would be deemed to have been validly issued under the
provisions of the Act, provided, of course, it is not
inconsistent with the other provisions of the Act. The
section is not very happily worded, but on its fair and
reasonable construction, there can be no doubt about its
meaning or effect. It is a saving and validating provision
and it clearly intends to validate actions taken under the
relevant provisions of the earlier Act which was invalid
from the start.’ The fact that s. 24 does not use the usual
phraseology that the notifications issued under the earlier
Act shall be deemed to have been issued under the Act, does
not alter the position that the second part of the section
has and is intended to have the same effect.
No doubt, Mr. Nambiar suggested that s. 24 does not seem to
validate actions taken under the earlier Act on the basis
that the ‘earlier Act was void and honest and in support of
this argument, he ralies on the
760
fact that the notification following under the first part of
s. 24 are referred to as validly made and the earlier Act
and the rules made thereunder are assumed to have been in
force on the date on which the said notification was issued.
He also relies on the provisions of s. 25 which purports to
repeal the said Act and that, no doubt, gives room for the
argument that the Legislature did not recognise that the
said Act was nonest and dead right up from the start. It is
not easy to understand the genesis of s. 25 and the purpose
which it is intended to achieve. The only explanation given
by Mr. Ganpati Aiyer on behalf of respondent is that since
the earlier Act was in fact on the statute book, the
legislature may have thought that for the sake of form, it
may have to be repealed formally and so, s. 25 was enacted.
But even if the enactment of the said section be held to be
superfluous or unnecessary, that cannot assist the appellant
in the construction of s. 24. We have no doubt that s. 24
was intended to validate actions taken under the earlier Act
and on its fair and reasonable construction, it must be held
that the intention has been carried out by the legislature
by enacting the said section. Therefore, the argument that
s. 24, even if valid, cannot effectively validate the
impugned notification, cannot succeed.
Mr. Nambiar then contends that the impugned notification is
invalid and inoperative because it contravenes Art. 31 (1)
of the Constitution. Article 31 (1) provides that no person
shall be deprived of his property save by authority of law.
It is urged that this provision postulates the existence of
an antecedent law, before a citizen is deprived of his
property. The notification was issued on the assumption
that there was an antecedent law, viz., the earlier Act of
1949 ; but since the said Act was nonest, the notification
is not supported by the authority of any pre-existing law
761
and so, it must be held to be invalid and ineffective. In
our opinion, this argument is not wellfounded. If the Act
is retrospective in operation and s. 24 has been enacted for
the purpose of retrospectively validating actions taken
under the provisions of the earlier Act, it must follow by
the very retrospective operation of the relevant provisions
that at the time when the impugned notification was issued,
these provisions were in existence. That is the plain and
obvious effect of the retrospective operation of the
statute. Therefore in considering whether Art. 31(1) has
been complied with or Dot, we must assume that before the
notification was issued, the relevant provisions of the Act
were in existence and so, Art. 31(1) must be held to have
been complied with in that sense.
In this connection, it would be relevant to refer to the
provisions of Art. 20 (1). because the said provisions
illustrate the point that where the’ Constitution desired to
prevent the retrospective operations of any law, it has
adopted suitable Phraseology to carry out that object. Art.
30 (1) provides that no person shall be convicted of any
offence except for violation of a law in force at the time
of the commission of the act charged as an offence, nor be
subjected to a penalty greater than that which might have
been inflicted under the law in force at the ,-lime of the
commission of the offence. By using the expression “,law in
force” in both the parts of Art. 20 (1), the Constitution
has clearly indicated that even if a criminal law was
enacted by any legislature retrospectively, its
retrospective operations would be controlled by Art. 30(1).
A law in force at the time postulates actual factual exis-
tence of the law at the relevant time and that excludes the
retrospective application of any subsequent law. Art.
31(1), on the other hand, does not use the expression ‘,law
in force at the time”. It
762
merely says “by authority of law”, and so if subsequent law
passed by the legislature is retrospective in its operation
would satisfy the requirement of Art 31 (1) and would
validate the impugned notification in the present case.
Therefore, we are not satisfied that Mr. Nambiar is right in
contending that the impugned notification is invalid for the
reason that at the time when it was issued there was no law
by whose authority it could be sustained.
That takes us to the larger issue raised by Mr. Nambiar in
the present appeals. He contends that the power of the
legislature to make laws retrospective cannot validly be
exercised so as to care the contravention of fundamental
rights retrospectively. His contention is that the earlier
Act of 1949 being dead and non-existent, the impugned
notification contravened Art. 31(1) and this contravention
of a fundamental right cannot be cured by the legislature by
passing a subsequent law and making it retrospective. In
support of this argument, he has relied on the decision of
this Court in Deep Chand v. The State of Uttar Pradesh (1).
In that case, one of the questions which arose for decision
was whether the doctrine of eclipse applied to a law which
was found to be invalid for the reason that it contravened
the fundamental rights, and the majority decision held that
it did not apply to such a law. In feeling with a question
as to the applicability of the doctrine of eclipse, a
distinction was drawn between a law which was void either
for want of legislative power at the time when it was
passed, or because it contravened fundamental rights on the
one hand, and the law which was valid when it was passed but
subsequently became invalid because of supervening
circumstances on the other. In the latter case, the law was
valid when it was passed and became invalid because a cloud
was cast on its validity by supervening
(1) (1959) Supp. 2 S.C.R. 8.
763
circumstances. That being so, if the constitutional
amendment subsequently made removes the cloud, the validity
of the law is revived. That is the effect of application of
the doctrine of eclipse; but there can be no scope for the
application of the said doctrine to a law which is void and
nonest either for want of legislative competence or because
it contravenes fundamental rights. That, in substance, is
the effect of the majority decision in Deep Chand’s case.
In the present appeals it is not disputed that the earlier
Act of 1949 was dead and void from the start, and that no
doubt, is consistent with the majority decision in Deep
Chand’s case. But the question as to whether the
legislature can retrospectively validate actions taken under
a void law did not arise for consideration in Deep Chand’s
case. The only point which was decided was that the removal
of the cloud by a subsequent constitutional amendment will
not automatically revive a law which was void from the
start, but that obviously is not case before us. What we
are called upon to decide is the present appeals is whether
or not it is competent to the legislature to pass a law
retrospectively to validate actions taken under a void Act,
and in deciding this question, Deep Chand’s case would not
afford ue any assistance.
Mr. Nambiar did not dispute the position that in enacting
laws in respect of topics covered by appropriate entries in
the relevant Lists of the 7th Schedule to the Constitution,
the legislatures would be competent to make the provisions
of the laws passed by them retrospective. He, however,
seeks to import a limitation on this legislative power where
the contravention of fundamental rights is involved. No
authority has been cited in support of the plea that the
legislative power of the legislature is subject to any such
limitation even where the contravention of fundamental
rights is involved. On principle, it is difficult to
appreciate how such
764
a limitation on the legislative power can be effectively
pleaded. If a law is invalid for the reason that it has
been passed by a legislature without legislative competence,
and action is taken under its provisions, the said action
can be validated by a subsequent law passed by the same
legislature after it is clothed with the necessary
legislative power. This position is not disputed. If the
legislature can by retrospective legislation cure the
invalidity in actions taken in pursuance of laws which were
void for want of legislative competence and can validate
such action by appropriate provisions, it is difficult to
see why the same power cannot be equally effectively
exercised by the legislature in validating actions taken
under law which are void for the reason that they
contravened fundamental rights. As has been pointed out by
the majority decision in Deep Chand’s case, the infirmity
proceeding from lack of legislative competence as well as
the infirmity proceeding from the contravention of
fundamental rights lead to the same result and that is that
the offending legislation is void and honest. That being
so, if the legislature can validate actions taken under one
class of void legislation, there is no reason why it cannot
exercise its legislative power to validate actions taken
under the other class of void legislation. We are,
therefore, not prepared to accept ‘Jr. Nambiar’s contention
that where the contravention of fundamental rights is
concerned, the legislature cannot pass a law retrospectively
validate actions taken under a law which was void because it
contravened fundamental rights.
In this connection, it may be useful to refer to some
decisions which deal with the legislature’s power to pass
retrospective laws. in the United Provinces v. Mst.
Atiqabegum (1) Gwyer C.J. observed that “the validation of
doubtful executive acts is
(1) (1940) F.C.R. 110. 136.
765
not so unusual or extraordinary a thing that little surprise
would be felt if Parliament had overlooked it, and it would
take a great deal to persuade me that the legislative power
for the purpose has been denied to every Legislature,
including the Central or Federal Legislature, in India.” It
is true, “,he added,” that validation of executive orders or
any entry even remotedly analogous to it is not to be found
in any of the three lists; but I am clear that legislation
for that purpose must necessarily be regarded as subsidiary
or ancillary to the power of legislating on the particular
subjects in respect of which the executive orders may have
been issued.” The same principle was stated by Speans C. J.
in Piare Dusadh v. The King Emperor.(1)
This question has been considered by this Court in several
decisions to some of which we will now briefly refer. In
the Union of India v. Madan Gopal Kabra this Court had
occasion to consider the validity of certain amendments made
in the Income Tax Act by section 3 of the Finance Act (XXV
of 1950). These amendments had the effect of applying
retrospectively the charging sections of the Taxing Act and
their validity was impeached. In rejecting the argument
that the levy authorised to be imposed by the amendments was
ultra vires, Patanjali Sastri, C. J., observed that “while
it is true- that the Constitution has no retrospective
operation, except where a different intention clearly
appears, it is not correct to say that in bringing into
existence new Legislatures and conferring on them certain
powers of legislation, the Constitution operated
retrospectively. The legislative powers conferred upon
Parliament under Articles 245 and 246 read with List I of
the, Seventh Schedule could obviously be exercised only
after
(1) (1944) F.C.R. 61, 105.
(2) (1954) S.C.R. 541, 554.
766
the Constitution came into force and no retrospective
operation of the Constitution is involved in the conferment
of these powers. But it is a different thing to say that
Parliament in exercising, the powers thus acquired is
precluded from making a retrospective law,” and so, the
conclusion was that Parliament was content to make a law
imposing a tax on the income of any year prior to the
commencement of the Constitution.
In M. P. V. Sundararamier & Co. v. The State of Andhra
Pradesh (1), the validity of the Sales Tax laws Validation
Act, 1956 (7 of 1956) was questioned and the majority of the
Court held that the said Act was in substance one lifting
the ban on taxation of inter-State sales and within the
authority conferred on the Parliament under Art. 286(2) and
further that under that provision, it was competent to the
Parliament to enact a law with retrospective operation.
This conclusion also proceeded on the basis that the Power
of a legislature to pass a law included a power to pass it
retrospectively, and so, the argument that the impugned Act
was ban on the ground that it was retrospective in operation
was rejected. The same principle has been again enunciated
by this Court in M/s. J. K. Jute Mills Co. Ltd. v. State of
Uttar Pradesh (2). it has been held in this case that the
power of the legislature to enact a reference to a topic
entrusted to it is unqualified, subject only to any
limitation imposed by the Constitution in the exercise of
such a power, and that I it would be competent for the
Legislature to enact a law which is either prospective or
retrospective, vide also Mt. Jadao Bahuji v. The Municipal
Committee, Khandwa, Jadab Singh v. The Himanchal
Pradesh Administration and Raghubar Dayal Jai Prakash v.
The Union of India(5). Therefore, there is no doubt about
(1958) S.C.R. 1022. (2) (1962) 2 S C.R. I.
(3) (1962) 1 S.C.R. 633. (4) (1960) 3 S.C.R. 755.
(5) (1962) 3 S.C.R. 547.
767
the competence of the Legislature to enact a law and ‘make
it retrospective in operation in regard to topics included
within the relevant Schedules of the Constitution. Our
conclusion, therefore, is that the appellant’s contention
that it was beyond the competence of the Madras Legislature
to make the Act retrospective so as to validate the impugned
notification, cannot be accepted.
That takes us to the last argument raised by Mr. Nambiar
before us. He contends that section 5 of the Act which
provides for the payment of compensation to the licensees
whose undertakings are taken over, is invalid because it is
inconsistent with Art. 31(2). It is common ground that the
provisions of Art. 31(2) with which we are concerned in the
present appeals are those as they stood before the 4th
Constitutional Amendment came into force. Art. 31(2) then
provided, enter alia, that no property shall be compulsorily
acquired save for the public purpose and save by authority
of law which provides for compensation for the property so
acquired and either fixes the amount of the compensation or
specifies the principles on which, and the manner in which,
the compensation is to be determined and given. In support
of his argument, Mr. Nambiar has relied on the decision of
this Court in the State of West Bengal v. Mrs. Bala
Banerjee-(1). In dealing with the question about the scope
and effect of the provisions of Art. 31(2) in so far as they
referred to the payment of compensation, this Court observed
that though entry 42 of List III conferred on the
Legislature the discretionary power of laying down the
principles which should govern the determination of the
amount to be given to the owner of the property acquired,
Art. 31 (2) required that such principles must ensure that
what is determined as
(1) (1954) S. C. R. 558.
768
payable must be “compensation’, that is, a just equivalent
of what the owner has been deprived of. That is why in
considering the validity of any statute is the light of Art.
31(2) it would be open to the Court to enquire whether all
the elements which make up the true value of the property
acquired have been taken into account in lying down the
principles for determining compensation. It appears that
section 8 of the West Bengal Land Development and Planning
Act, 1948 (XXI of 1948) which was impugned in that case
limited the amount of compensation so as to not to exceed
the market value of the land on December, 31, 1946, no
matter when the land was acquired. This part of s. 8 was
struck down as invalid because it was hold that in fixing
the market value on December 31, 1946, as the ceiling on
Compensation, the legislature had patently ignored the fact
that prices of lands had considerably risen after the said
date and that tended to show that the compensation awardable
under the said provision could not be said to be just
equivalent of what the owner would be deprived of. Mr.
Nambiar, therefore, contends that since section 5 does not
authorise the payment of compensation which can be treated
as just equivalent of the property which would be taken over
under its provisions, it must be struck down as inconsistent
with Art. 31 (2). It may be conceded that the 4th
Constitution amendment which substantially changed the
provisions of Art. 31 (2) would be inapplicable in the
present case, and that the High Court was in error in making
a contrary assumption.
In support of this argument, Mr. Nambiar has also referred
us to section 7A of the Indian Electricity Act 1910 (No. 9
of 1910) as it then stood. Section 7A (2) of the said Act
lays down
769
that in purchasing undertakings under s. 7A (1), the value
of such lands, buildings, works, materials, and plant shall
be deemed to be their market E value at the time of
purchase, due regard being had to the nature and condition
for the time being of such lands, buildings, materials and
plant and the state of repair thereof and to the circums-
tance that they are in such position as to be ready for
immediate working and to the suitability of the same for the
purpose of the undertaking. The- proviso to a. 7A lays down
that to the value determined under sub-s. (2) shall be added
such percentage, if any, not exceeding twenty per centum of
that value as may be specified in the license on account of
compulsory purchase. Mr. Nambiar suggests that the
provisions made in s. 7A (2) and the proviso to a. 7A of
this Act give a fair picture of what could be regarded as a
reasonable compensation that should be paid to the
undertakings before they are acquired.
Before dealing with this argument, it is necessary to
examine the scheme of s.5 which provides for the
compensation to be paid to the licensees. Section 5
provides that the compensation payable to a licensee on whom
an order has been served under s.4 or whose undertaking has
been taken over before the commencement of the act, shall be
determined under any one of the Bases A, B and C specified
by the section as may be chosen under a. 8. Then follow
detailed provisions about the three Bases A, B and C. Under
Basis A, the compensation payable shall be an amount equal
to twenty times the average not annual profit of the
undertaking during a period of five consecutive account
years immediately preceding the vesting date. The
explanation makes it clear that the net annual profit shall
be determined in the manner laid down in Part A or Part B,
as the case may be, of Sch. 1. It is also clear that this
basis shall
770
not apply to an undertaking which has not been supplying
electricity for five consecutive account years immediately
preceding the vesting date.
Under Basis B, the compensation payable shall be the
aggregate value of all the shares constituting the share
capital of the undertaking, reckoned as indicated in (a),
(b), (c), and (d) ‘thereof. These respective clauses have
reference to the dates on or before which the shares of the
undertaking have been issued, for instance, cl. (a) provides
that in the case of shares issued on or before the 31st
March, 1946, the value of each share shall be reckoned at
its average value as arrived at from the quotations for the
shares as given in the official list of the Madras share
Market on the 15th day of each month and where such market
was closed on that day, the quotations on the next working
day during the period of there years commencing on the 1st
April, 1946, and ending on the 31st March, 1949. Under
clause (b) it is provided that in the case of shares issued
on or before the 31st March, 1946, if clause (a) does not
apply but there have been bonafide transfers in each of the
different classes of shares in every one of the three years
aforesaid, and such transfers have been duly registered in
the appropriate books of the licensee, the value of each
share of each such class shall be reckoned at one-third of
the aggregate of its three annual average values for the
three years, the average value for each year being
determined’ from the transactions in that year. It is not
necessary to set out clauses (c) and (d). The explanation
to this Basis provides that it shall not apply unless clause
(a) or clause (b) is applicable.
Under Basis C, the compensation payable shall be the
aggregate value of the amounts specified in cls. (i) to
(viii). These clauses refer respectively to the book Value
of all completed works in- beneficial
771
use pertaining to the undertaking and handed over to the
Government less depreciation as specified; the book value of
all works in progress: the book value of all other fixed
assets; the book value of all other fixed assets; the book
value of all plant and equipment; the book value of all
intangible assets to the extent such value has not been
written off in the books of the licensee; the amount due
from consumers as specified in cl. (vii); and any amount
paid actually by the licensee in respect of every contract
referred to in s. 6 (2) (a) (iii). Where basis C is
applied, an additional sum by way of solatium. is required
to be paid as specified in cls. (a) and (b) to cl. (ix).
The explanation to Basis C explains how the book value of
any fixed assets has to be ascertained. That, in broad
outlines, is the nature of the three Bases prescribed by
section 5 for assessing the compensation to be paid to a
licensee.
It is true that in none of the three bases does the
Legislature refer to the market value of the undertaking,
but that itself cannot justify the argument that what is
intended to be paid by way of compensation must necessarily
mean much less than the market value. The failure of the
legislature to refer to the fair market value cannot, in our
opinion, be regarded as conclusive or even presumptive
evidence of the fact that what is intended to be paid under
section 5 does not amount to a just equivalent of the
undertaking taken over. After all, in considering the
question as to whether compensation payable under one or the
other of the Bases amounts to just equivalent. We must try
to assess what would be payable under the said basis.
On this point, the real difficulty,, in the way of the
appellant is that it has produced no material before the
Court on which its plea can be sustained. As the High Court
has pointed out, in the absence of any satisfactory material
it would be difficult
772
for the Court to come to any definite conclusion on the
question as to whether just equivalent is provided for by s.
5 or not. Mr. Nambiar, no doubt, attempted to suggest that
in the Madras High Court oral evidence is not allowed to’ be
adduced on questions of fact in writ proceedings. That may
be so; but it is quite clear that the affidavit made by the
appellant in support of its petition could have easily set
forth all relevant facts showing that the compensation
payable under s. 5 was so inadequate that it could not be
regarded as a just equivalent of the property acquired. In
the absence of any material, we do not see how we can assess
the validity of Mr. Nambiar’s contention that section 5
contravenes Art. 31 (2) of the Constitution. It is true
that in its petition, the appellant made a general
allegation that the market value of its assets at the
relevant time would be Rs. 16,49,350/-, but no satisfactory
material was placed in the form of proper affidavits made by
competent persons to show how this market value was deter-
mined. In fact, the appellant did not state before the High
Court and was unable to state even before this Court what
principles should have been laid down by the legislature in
determining a just equivalent for the undertaking taken over
by the respondent. The general argument that s.5 does not
provide for the payment of market value cannot, in the
absence of material, help the appellant at all in
challenging the validity of section 5.
In this connection, it must be borne in mind that 8 of the
Act leaves it to the opinion of the licensee to intimate to
the Government in writing which basis of compensation it
wants to be adopted, and so, it is not as if the choice of
the basis is left to the Government in every case. Take,
for instance, Basis A; the compensation payable under this
Basis is: an amount equal to twenty times the aver ag
773
net annual profit of the undertaking during a period of five
consecutive account years preceding the vesting date. Now,
in determining the fairness A or otherwise of the
compensation awardable under basis A, it cannot be ignored
that what is acquired is an undertaking which is a going
commercial concern and so, it would, prima facie, be
inappropriate to attempt to determine its value safely or
mainly by reference to the buildings it owns or the machin-
ery it works. It would also be relevant to remember that
undertakings of this kind cannot claim a general market in
the sense in which lands can claim it. That being so, if
the legislature thought that giving the undertaking twenty
times the average not annual profit would amount to a just
equivalent, prima facie it would be difficult to hold that
the basis adopted by the legislature is such as could be
held to be inconsistent with Art. 31 (2). The Basis B may
or may not be satisfactory, but Basis C may prima facie be
satisfactory in respect of new undertaking and in any case,
the option in most cases would be with the undertaking
itself. Therefore, in the absence of any material, we are
unable to hold that on looking at the scheme adopted by s. 5
by itself, the appellant’s argument that what is offered by
way of compensation is not a just equivalent, can be
accepted. It may be that in some oases basis B may work
hardship and conceivably even basis A or basis C may not be
as satisfactory as it should be; but, when a party
challenges the validity of a statutory provision like s. 5,
it is necessary that the party must adduce satisfactory and
sufficient material before the Court on which it wants the
Court to hold that the compensation which would be paid
under everyone of the three Bases under the inpugned
statutory provision does not amount to a just equivalent.
Looking merely at the scheme of the section itself, it is
impossible to arrive at such a conclusion. That is the view
774
taken by the Madras High Court and we see no reason to
differ from it. Therefore, the challenge to the validity of
the Act on the ground that its important provisions
contained in section 5 offend against Art. 31 (2) must be
rejected. That being our view, we must held that the High
Court was right in rejecting both the writ petitions filed
by the appellant. On that view, it is, unnecessary to
consider whether appellant would have been entitled to get
the relief of possession or mesne profits which it purported
to claim by its two petitions.
The appeals accordingly fail and are dismissed with costs.
One set of hearing fees.
Appeals dismissed.