{"id":262464,"date":"2000-05-12T00:00:00","date_gmt":"2000-05-11T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-uttar-pradesh-vs-the-banaras-electricity-light-on-12-may-2000"},"modified":"2015-06-08T03:32:20","modified_gmt":"2015-06-07T22:02:20","slug":"state-of-uttar-pradesh-vs-the-banaras-electricity-light-on-12-may-2000","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-uttar-pradesh-vs-the-banaras-electricity-light-on-12-may-2000","title":{"rendered":"State Of Uttar Pradesh vs The Banaras Electricity Light & … on 12 May, 2000"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of Uttar Pradesh vs The Banaras Electricity Light & … on 12 May, 2000<\/div>\n
Author: S N Variava<\/div>\n
Bench: S.S.Ahmad, S.N.Variava, Y.K.Sabharwal<\/div>\n
           PETITIONER:\nSTATE OF UTTAR PRADESH\n\n\tVs.\n\nRESPONDENT:\nTHE BANARAS ELECTRICITY LIGHT & POWER CO.  LTD.\t AND ORS.\n\nDATE OF JUDGMENT:\t12\/05\/2000\n\nBENCH:\nS.S.Ahmad, S.N.Variava, Y.K.Sabharwal\n\n\n\n\nJUDGMENT:\n<\/pre>\n
L…..I………T…….T…….T…….T…….T…….T..J<\/p>\n
      J U D G M E NT<\/p>\n
      S.  N.  Variava, J.\n<\/p>\n
      1.   This\t Civil Appeal is against the Judgment  dated
\n11th  January,\t1989  delivered by a Division Bench  of\t the
\nCalcutta  High\tCourt.\tBy this Judgment the Division  Bench
\ndismissed  the\tAppeal\tfiled  by the  Appellant  against  a
\nJudgment  of  a\t learned single Judge of the  Calcutta\tHigh
\nCourt  which  upheld the challenge of the 1st Respondent  to
\nOrdinances and Amendment Act<\/a> set out hereinafter.\n<\/p>\n
      2.   Briefly stated the facts are as follows:  On\t 6th
\nFebruary,  1925\t the Government of Uttar Pradesh granted  to
\none  M\/s  Martin  & Co.\t a licence for\tsupply\tof  electric
\nenergy.\t  This\tlicence was subsequently transferred to\t the
\n1st Respondent.\t One of the terms of the licence was that at
\nthe  end of the licence period the Government had a right to
\npurchase  the undertaking.  The licence was for a period  of
\n50  years.   The  50  years period would  thus\tend  on\t 5th
\nFebruary,  1975.  On February 1, 1974 the Appellant served a
\nnotice\ton  the\t 1st Respondent, under Section 6(1)<\/a>  of\t the
\nIndian\tElectricity  Act, 1910 (hereinafter called the\tsaid
\nAct).  By this the Appellants called upon the 1st Respondent
\nto  sell  the undertaking to the Appellant on the expiry  of
\nthe period of 50 years from the commencement of the licence,
\ni.e.,  at  12 O’clock in the night between the 5th  and\t 6th
\nFebruary, 1975.\n<\/p>\n
      3.   On  February\t 4, 1975, Indian  Electricity  (U.P.
\nAmendment  and\tValidation)  Ordinance No.  7  of  1975\t was@@
\nJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
\npassed.\t  This\tOrdinance amended certain provisions of\t the
\nIndian\tElectricity  Act<\/a>.  Subsequently this  Ordinance\t was
\nreplaced   by  an  Act\t namely\t Indian\t Electricity   (U.P.
\nAmendment  and Validation) Act<\/a>, 1976.  The Ordinance and the
\nAct  amended amongst others Sections 6<\/a> and 7-A<\/a> of the Indian
\nElectricity Act.\n<\/p>\n
      4.   At  this  stage it is necessary to see  what\t the
\nunamended  Sections  6<\/a> and 7-A<\/a> provided for.  They  read  as@@
\nJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ
\nfollows:\n<\/p>\n
      “6.   Purchase  of undertakings.\t– (1) Where  licence
\nhas been granted to any person, not being a local authority,
\nthe State Electricity Board shall, –\n<\/p>\n
      (a)  in  the  case  of a licence\tgranted\t before\t the
\ncommencement of the Indian Electricity (Amendment) Act<\/a>, 1959
\n(32  of\t 1959), on the expiration of each such period as  is
\nspecified  in the licence;  and (b) in the case of a licence
\ngranted on or after the commencement of the said Act, on the
\nexpiration  of such period not exceeding thirty years and of
\nevery such subsequent period, not exceeding twenty years, as
\nshall be specified in this behalf in the licence;\n<\/p>\n
      have the option of purchasing the undertaking and such
\noption\tshall  be exercised by the State  Electricity  Board
\nserving\t upon  the licensee a notice in writing of not\tless
\nthan one year requiring the licensee to sell the undertaking
\nto  it\tat the expiry of the relevant period referred to  in
\nthis sub- section.\n<\/p>\n
      (2)  Where  a  State Electricity Board  has  not\tbeen
\nconstituted,  or if constituted, does not elect to  purchase
\nthe  undertaking,  the State Government shall have the\tlike
\noption\tto be exercised in the like manner of purchasing the
\nundertaking.\n<\/p>\n
      (3)  Where neither the State Electricity Board nor the
\nState  Government  elects to purchase the  undertaking,\t any
\nlocal  authority  constituted for an area within  which\t the
\nwhole  of the area of supply is included shall have the like
\noption\tto be exercised in the like manner of purchasing the
\nundertaking.\n<\/p>\n
      (4) If the State Electricity Board intends to exercise
\nthe option of purchasing the undertaking under this section,
\nit  shall send an intimation in writing of such intention to
\nthe  State  Government at least eighteen months\t before\t the
\nexpiry of the relevant period referred to in sub-section (1)
\nand  if\t no such intimation as aforesaid is received by\t the
\nState Government the State Electricity Board shall be deemed
\nto have elected not to purchase the undertaking.\n<\/p>\n
      (5)  If  the State Government intends to exercise\t the
\noption\tof purchasing the undertaking under this section, it
\nshall send an intimation in writing of such intention to the
\nlocal  authority, if any, referred to in sub- section (3) at
\nleast  fifteen\tmonths\tbefore the expiry  of  the  relevant
\nperiod\treferred  to  in  sub-section (1)  and\tif  no\tsuch
\nintimation  as aforesaid is received by the local authority,
\nthe  State Government shall be deemed to have elected not to
\npurchase the undertaking.\n<\/p>\n
      (6) Where a notice exercising the option of purchasing
\nthe undertaking has been served upon the licensee under this
\nsection,  the licensee shall deliver the undertaking to\t the
\nState  Electricity Board, the State Government or the  local
\nauthority,  as\tthe  case may be, on the expiration  of\t the
\nrelevant  period referred to in sub-section (1) pending\t the
\ndetermination and payment of the purchase price.\n<\/p>\n
      (7)  Where  an  undertaking is  purchased\t under\tthis
\nsection,  the  purchaser  shall\t pay  to  the  licensee\t the
\npurchase  price determined in accordance with the provisions
\nof sub-section (4) of Section 7-A<\/a>.”\n<\/p>\n
      5.   Thus,  under Section 6(1)<\/a> a notice in writing  of
\nnot  less  than\t one year was to be given and  the  purchase
\nprice was to be determined in accordance with the provisions
\nof sub-section (4) of Section 7-A<\/a>.\n<\/p>\n
      6.   Section  7-A<\/a>,  as it originally  stood,  read  as
\nfollows:   “7-A Determination of purchase price.- (1)  Where
\nan  undertaking of a licensee, not being a local  authority,
\nis  sold  under sub-section (1) of Section 5<\/a>,  the  purchase
\nprice  of  the undertaking shall be the market value of\t the
\nundertaking at the time of purchase or where the undertaking
\nhas  been  delivered before the purchase under sub-  section
\n(3)  of\t that  section, at the time of the delivery  of\t the
\nundertaking  and  if  there  is any  difference\t or  dispute
\nregarding  such purchase price, the same shall be determined
\nby arbitration.\n<\/p>\n
      (2) The market value of an undertaking for the purpose
\nof  sub- section (1) shall be deemed to be the value of\t all
\nlands, buildings, works, materials and plant of the licensee
\nsuitable  to,  and  used  by him, for  the  purpose  of\t the
\nundertaking,  other than;  (i) a generating station declared
\nby  the licence not to form part of the undertaking for\t the
\npurpose of purchase, and (ii) service lines or other capital
\nworks or any part thereof which have been constructed at the
\nexpense\t of consumers, due regard being had to be nature and
\ncondition for the time being of such land, buildings, works,
\nmaterials  and plant and the state of repair thereof and  to
\nthe  circumstance  that they are in such position as  to  be
\nready  for  immediate working and to the suitability of\t the
\nsame  for  the purpose of the undertaking, but\twithout\t any
\naddition in respect of compulsory purchase or of goodwill or
\nof any profits which may be or might have been made from the
\nundertaking or of any similar consideration.\n<\/p>\n
      (3)  Where an undertaking of a licensee, being a local
\nauthority,  is\tsold  under sub-section (1)  of\t Section  5<\/a>,
\npurchase price of the undertaking shall be such as the State
\nGovernment,  having  regard  to\t the  market  value  of\t the
\nundertaking  at the date of delivery of the undertaking, may
\ndetermine.\n<\/p>\n
      (4)  Where  an undertaking of a licensee is  purchased
\nunder  Section\t6<\/a>,  the purchase price shall  be  the  value
\nthereof\t as determined in accordance with the provisions  of
\nsub-sections  (1)  and\t(2):  Provided that there  shall  be
\nadded  to such value percentage, if any not exceeding twenty
\nper  centum of that value as may be specified in the licence
\non account of compulsory purchase.”\n<\/p>\n
      7.  Section 7<\/a> is also relevant.  It reads as follows:\n<\/p>\n
      “7.   Vesting  of the undertaking in  the\t purchaser.-
\nWhere  an undertaking is sold under Section 5<\/a> or Section  6<\/a>,
\nthen upon the completion of the sale or on the date on which
\nthe  undertaking  is  delivered to the\tintending  purchaser
\nunder  sub-section (3) of Section 5<\/a> or under sub-section (6)
\nof Section 6<\/a>, as the case may be, whichever is earlier –\n<\/p>\n
      (i) the undertaking shall vest in the purchaser or the
\nintending purchaser, as the case may be, free from any debt,
\nmortgage  or similar obligation of the licensee or attaching
\nto  the undertaking:  Provided that any such debt,  mortgage
\nor  similar obligation shall attach to the purchase money in
\nsubstitution for the undertaking;\n<\/p>\n
      (ii)  the\t rights,  powers,  authorities,\t duties\t and
\nobligations  of\t the licensee under his licence shall  stand
\ntransferred  to\t the purchaser and such purchaser  shall  be
\ndeemed\tto  be\tthe  licensee:\t  Provided  that  where\t the
\nundertaking  is\t sold  or delivered to a  State\t Electricity
\nBoard  or  the State Government, the licence shall cease  to
\nhave further operation.”\n<\/p>\n
      8.   By the above mentioned Ordinance and the Act, the
\namendment which was carried out was that instead of purchase
\nprice  being the market value, it was now provided that\t the
\namount\tpayable for the undertaking would be the book  value
\nof  the undertaking.  Thus, instead of computing the  market
\nvalue, there had to be computation of the book value.\n<\/p>\n
      9.   It  must  be mentioned that the  above  mentioned
\nOrdinances  and\t Amendment  Act<\/a> were part of the  policy  of
\nnationalisation of electric companies by the Union of India.
\nSimilar\t amendments  were  made by  many  States.   Electric
\ncompanies,  all over India, were sought to be so  purchased.
\nLike   the  1st\t Respondent,  a\t number\t of  other  Electric
\nCompanies  challenged  the  constitutional validity  of\t the
\namending  Act\/Ordinance.  The challenge was, inter alia,  on
\nthe  ground  that  the\trights under  Article  19(1)(f)<\/a>\t and
\nArticle 31(2)<\/a> were being violated.  It was also claimed that
\nthe  Amending  Act<\/a>\/Ordinance  was  invalid   as\t it  had  no
\nreasonable  direct  nexus  to the principles  under  Article
\n39(b)<\/a>  of  the Constitution.  It was also claimed  that,  in
\neffect and substance, the law was not one for acquisition of
\nelectrical  undertakings  but was one to acquire a chose  in
\naction\tand  to extinguish rights, which had accrued in\t the
\nElectric  Companies,  to  get  the  market  price.   It\t was
\ncontended  that the right to get compensation accrued on the
\nday  the  notice was given.  It was contended that what\t was
\nbeing  acquired was the difference between the market  price
\nwhich  the  State was obliged to pay and the book  value  to
\nwhich  the  liability was now sought to be limited.  It\t was
\nclaimed that as the Act was merely a clock which the law was
\nmade to wear to undo the obligations arising out of intended
\nstatutory rule Article 31(c)<\/a> was not attracted.\t It was also
\nclaimed\t that in any case, every provision of a statute\t was
\nnot  entitled to protection of Article 31(c)<\/a> but only  those
\nwhich  are necessary for giving effect to the principles  in
\nArticle\t 39(b)<\/a> and accordingly the provision in the impugned
\nlaw  in\t relation to the determination of the amount do\t not
\nattract\t Article  31(c).<\/a>  In all the matters it was  claimed
\nthat the purchase price should be the market value.\n<\/p>\n
      10.  A Constitution Bench of this Court in the case of
\nTinsukhia  Electric  Supply Co.\t Ltd.  v.  State  of  Assam<\/a>,
\nreported  in  (1989) 3 SCC 709, upheld the validity  of\t the
\nAct\/Ordinance.\t This Court held that the Act had nexus with
\nthe  principles in Article 39(b)<\/a> and was therefore protected
\nby  Article 31(c).<\/a>  It was held that the Act was not a piece
\nof colourable legislation.  It was held that electric energy
\ngenerated  and\tdistributed  was a “material source  of\t the
\ncommunity” for the purpose and within the meaning of Article
\n39(b).<\/a>\tIt was held that the idea of distribution of natural
\nresources  in  Article 39(b)<\/a> envisages nationalisation.\t  It
\nwas  held  that\t on  an examination of\tthe  scheme  of\t the
\nimpugned  law  the  inescapable\t  conclusion  was  that\t the
\nlegislature  measure  was  one\tof  nationalisation  of\t the
\nundertaking  and  this law was eligible for and entitled  to
\nprotection  of\tArticle 31(c).<\/a>\tIt was held that it was\t not
\npossible  to divorce the economic consideration or component
\nfrom the scheme of nationalisation with which the former are
\ninextricably  integrated.   It was held that  the  financial
\ncosts  of  a  scheme lies at its very heart  and  cannot  be
\nisolated.   It was held that with the provisions relating to
\nvestiture  of  the  undertaking\t in   the  State  and  those
\npertaining  to the quantification of the amount are integral
\nand   unseparable   parts   of\t the  integral\t scheme\t  of
\nnationalisation\t and  do  not admit of being  considered  as
\ndistinct  provisions independent of each other.\t It was held
\nthat   the  provisions\tfor  payment   of  amount   to\t the
\nundertaking,  by  reducing the market value to\tbook  value,
\nformed\tan  integral part of the nationalisation scheme\t and
\nthat  economic\tconsideration  for nationalisation  was\t not
\njusticiable.   It was held that what was being acquired\t was
\nthe  material  resources of the community.   The  contention
\nthat  immediately  upon giving of the notice the rights\t got
\ncrystallised  was negatived.  It was held that the  exercise
\nof  the\t option did not affect licensee’s right to carry  on
\nbusiness.   It was held that the licensee’s rights would  be
\naffected  only when the undertaking was actually taken over.
\nSimilar\t view  was taken in the cases of  Maharashtra  State
\nElectricity  Board  v.\tThana Electric Supply Co.   &  Ors<\/a>.,
\nreported  in  (1989)  3\t SCC   616,  and  Vellore   Electric
\nCorporation  Ltd.   v.\t State of Tamil\t Nadu<\/a>,\treported  in
\n(1989) 4 SCC 138.\n<\/p>\n
      11.   This  case\tis  entirely covered  by  the  above
\nmentioned Judgments.  Dr.  Singhvi fairly conceded that this
\ncase would be covered by the above mentioned Judgments.\n<\/p>\n
      12.   In\tthis  view  of the  matter,  the  Appeal  is
\nallowed.   The\tJudgments of the Division Bench\t dated\t11th
\nJanuary,  1989 as well as the learned single Judge dated 4th
\nApril  1984  are set aside.  The Writ Petition filed by\t the
\n1st Respondent stands dismissed.  There shall be no order as
\nto costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of Uttar Pradesh vs The Banaras Electricity Light & … on 12 May, 2000 Author: S N Variava Bench: S.S.Ahmad, S.N.Variava, Y.K.Sabharwal PETITIONER: STATE OF UTTAR PRADESH Vs. RESPONDENT: THE BANARAS ELECTRICITY LIGHT & POWER CO. LTD. AND ORS. DATE OF JUDGMENT: 12\/05\/2000 BENCH: S.S.Ahmad, S.N.Variava, Y.K.Sabharwal JUDGMENT: L…..I………T…….T…….T…….T…….T…….T..J J […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-262464","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of Uttar Pradesh vs The Banaras Electricity Light & ... on 12 May, 2000 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-uttar-pradesh-vs-the-banaras-electricity-light-on-12-may-2000\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Uttar Pradesh vs The Banaras Electricity Light & ... on 12 May, 2000 - 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