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PETITIONER: VIJAYAWADA MUNICIPAL COUNCIL

       Vs.

RESPONDENT: ANDHRA PRADESH STATE ELECTRICITY BOARD & ANR.

DATE OF JUDGMENT20/10/1976

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH RAY, A.N. (CJ) SHINGAL, P.N.

CITATION:  1977 AIR   86            1977 SCR  (1) 886  1976 SCC  (4) 548

ACT:             Andhra  Pradesh (Andhra Area) Electricity Supply  Under-         taking   (Acquisition)  Act (Andhra 15 of  1954),  ss.  5(3)         (vi),  6(2)(a)(iii) and 10(2)(b)(iii)-Amounts due to  under-         taking  from consumers prior to vesting in State--If can  be         recovered by State from the licensee.

HEADNOTE:             Section 4 of the Andhra Pradesh (Andhra Area Electricity         Supply  Undertaking (Acquisition) Act, 1954,  empowered  the         Government to declare that an electricity undertaking of the         licensee  Municipal  Council shall vest in Government  on  a         specified  date.  Section 5 provides for compensation to  be         paid on one of three alternative bases, A, B or C set out in         the  Act.  Where compensation is on the basis ’C’,,  it  in-         cludes  under s. 5(3)(vi) the book value of  all  intangible         assets to the extent such value has not been written off  in         the books of the licensee; and s. 6(2)(a) mentions the items         that   would   vest  in  the   State   Government.   Section         6(2)(a)(iii)  relates  to all the  rights,  liabilities  and         obligations of the licensee under any other contract entered         into  bona  fide, not     being a contract relating  to  the         borrowing or lending for money. Section 10(2) (b)(iii)  lays         down  that the Government may deduct from  the  compensation         all  sums paid by consumers by way of security  deposit  and         arrears  of interest due thereon on the vesting date, in  so         far  as they have not been paid over by the licensee to  the         Government, less the amounts which according to the books of         the licensee are due from the consumers to the licensee  for         energy supplied to such consumers before that date.             In the present case, the State Government made a  decla-         ration regarding the vesting of the Electricity  Undertaking         of  the appellant in the State Government,  and  transferred         its  rights  to the respondent Electricity  Board.   Certain         amounts  were shown in the books of the appellant as due  to         it from consumers.  The respondent claimed those amounts and         flied a suit against the appellant for their recovery.         The  trial  court  dismissed the suit, but  the  High  Court         allowed the appeal.             In appeal to this Court, it was contended that past dues         from the consumers would not vest in the respondent as  they

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       were  not  specifically  mentioned  in s. 6(2)(a); and  that         under s. 10(2)(b)(iii) the appellant was entitled to  deduct         and appropriate the amounts due from consumers for supply of         electricity from their security deposits.         Dismissing the appeal to this Court,             HELD:  (1)  The  explicitly wide  language  used  in  s.         6(2)(a)(iii)  dispenses with the need to specify  all  items         which are covered by it; and, arrears of dues from consumers         are covered by the wide language of the clause. [850 A]             (2)(a)  Section  10(2)(b)(iii)  is  meant  for  security         deposits  and  arrears  of interest due on  them  which  are         generally  held in trust by the licensee so as to  be  ulti-         mately  returned to the consumers,. if the dues of the  con-         sumers have been met without resorting to the amounts depos-         ited.   They are used for a deduction of dues from  deposits         where these have not been paid.  If these deposits have  not         been made over by the licensee to the Government, they  will         be  claimable  by the depositors, and, therefore,  they  are         deducted  from the compensation. If however, there  are  any         amounts  due shown in the books of the licensee as duo  from         the consumers of energy they would become realisable by  the         Government  under  s. 6(2)(a)(iii).  It is for  this  reason         that the deduction of security          847         deposit  from compensation is reduced by the  amounts  which         are  due from consumers to the Undertaking for  energy  sup-         plied by the Undertaking before the date of vesting as  they         become the claims realisable by the successor-in-interest of         the  Undertaking.   An exclusion from an item  of  deduction         from compensation could only indicate that this was   being-         done  because  this  was  an item which is  covered  by  the         compensation provided for and to be paid. [850 A]             (b)  In  .the present case, the only contention  of  the         appellant  was that the right to appropriate the  amount  of         dues did not vest in the respondent but that the amount  had         vested in the appellant.  It was not argued on behalf of the         appellant  that what was vested in the Government  was  only         the right to realise the dues from the consumers and not  to         recover  from the appellant the amount which  the  appellant         had actually realised or could have realised.             (3) The High Court’s interpretation of s.  10(2)(b)(iii)         must  be accepted as a correct interpretation because it  is         in harmony with the meaning of the terms of s. 5(3)(vi) read         with s. 6(2)(a) of the Act. [851C]

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 155 of 1971.             (Appeal  by  Special Leave from the Judgment  and  Order         dated  24-3-1975 of the Andhra Pradesh High Court in  Appeal         No. 19/72).         B.V. Subrahmanyam and A. Subba Rao, for the Appellant.             A.  K.  Sen, K.R. Chaudhary, Miss Nihar  Saha  and  Mrs.         Veena Devi Khanna, for the ReSpondent.         The Judgment of the Court was delivered by             BEG,  J.--This is a defendant’s appeal by special  leave         against  the  judgment of the High Court of  Andhra  Pradesh         decreeing, with costs, the claim of the plaintiffs  respond-         ents,  the Andhra Pradesh  State Electricity Board  and  the         Andhra   Pradesh  State  Government for Rs.  3,34,443.77  as         arrears  of  electricity  charges said to be  due  from  the         Vijayawada  Municipal  Council in respect of  amounts  which         were  shown  in its books as payable to it by  consumers  of         electricity.

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           The  plaintiff’s  claim  flowed from the  terms  of  the         Andhra Pradesh (Andhra Area) Electricity Supply  Undertaking         (Acquisition) Act 15 of 1954 (hereinafter refered to as ’the         Act’), the provisions of which were applied to the electric-         ity  undertaking  of the appellant  Municipal  Council  with         effect  from  22nd  December, 1961,. by  the  Government  of         Andhra Pradesh.  The rights of the State were transferred to         the  Andhra Pradesh Electricity Board the  co-plaintiff  re-         spondent.   The amounts claimed were shewn in the  books  of         the  Council’s electricity undertaking on the  date  of  its         acquisition as  due to it from direct consumers of electric-         ity  to whom it used to sell electricity supplied to  it  in         bulk.             The  "Electricity  undertaking" was taken  over  by  the         Government  by  an order under Section 4 (1 )  of  the  Act.         This section provided:                       "4.  Power  of  Government to  take  over  any                       undertaking :--                             (1  ) The Government may, in respect  of                       any undertaking not taken over by them  before                       the  commencement  of this Act,  by  order  in                       writing, declare that it shall vest in them on                       the                       848                       date  specified therein, such date  not  being                       earlier than four months from the date of  the                       declaration :"                           The  Municipal  Council was  the  licensee                       from  whom the "undertaking", as a  commercial                       concern,  was taken over.  A licensee  is  de-                       fined by section 2(j) to mean:                          "  ....  a person licensed under part II of                       the  Electricity  Act  to  supply  electricity                       energy, or a person who has obtained  sanction                       under section 28 of that Act to engage in  the                       business  of  supplying  electricity  and   in                       relation  to an undertaking taken  over.or  an                       undertaking which has vested in the Government                       under section 4 the person, who was the licen-                       see at the time the undertaking was taken over                       or  vested in the Government, as the case  may                       be,  and includes the successorin-interest  of                       any such person;"             The  State Electricity Board stepped into the  shoes  of         the  licensee on behalf of the State, to discharge  all  the         existing  obligations of the licensee, arising out  of  past         transactions,  and, for this reason, became entitled to  the         benefits  of all contracts, whether they had accrued in  the         past  or were to arise in future, which existed at the  time         of the taking over of the undertaking.         The  effect of the "taking over" of an undertaking  and  the         vesting    the rights and liabilities of the former licensee         in the State, by operation of law, was indicated by sections         5 and 6 of the Act.             Section 5 provided for compensation to be paid on one of         three  alternative bases specified in this  provision.   The         licensee could opt for one of the three bases.             The  provisions  of  section 6(2) of the  Act  give  the         consequences of vesting.  Section 6(2) of the Act enacts:                             "6(2) (a) If compensation is payable  in                       respect of an undertaking under Basic C,  only                       the  property, rights liabilities and  obliga-                       tions specified herein shall vest or be deemed                       to have vested in the Government on the  vest-                       ing date :--

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                         (i)  all the fixed assets of the  licensee                       and  all the documents relating to the  under-                       taking;                           (ii)  all  the  rights,  liabilities   and                       obligations  of the licensee  under  hire-pur-                       chase  agreements, if any, for the  supply  of                       materials  or equipment made  bonafide  before                       the vesting date;                          (iii)  all  the  rights,  liabilities   and                       obligations  of the licensee under  any  other                       contract  entered  into bona fide  before  the                       vesting date, not being a contract relating to                       the borrowing or lending for money.                             (b)  All the assets specified in  clause                       (a) (i) shall vest or shall be deemed to  have                       vested in the Government free from any  debts,                       mortgages or similar obligations of the licen-                       see or attaching to the undertaking.                       849                             Provided  that such debts, mortgages  or                       obligations shall attach or shall be deemed to                       have  attached to the.  compensation.  payable                       under this Act for the assets".                       A glance at clause (2) (a) (iii) of section  6                       indicates  that  it clearly provides  for  the                       vesting  of  "all the rights  liabilities  and                       obligations  of the licensee" under  contracts                       entered  into  "before the date  of  vesting".                       Therefore, we find no merit in the  objection,                       on behalf of the Municipal Council, that  past                       dues of consumers of electricity, shown in the                       books  of Vijayawada Municipal Council,  could                       not vest in the State Government, in a case in                       which basis C is applicable for compensation.                           The   compensation  provided  by   Section                       5(3)(vi)  applicable   to basis ’C’  takes  in                       "the  book value of all intangible  assets  to                       the extent such value has not been written off                       in the books of the licensee".  The result’ is                       that "the aggregate value" of all items speci-                       fied in section 5(3), including items  falling                       under  sub-clause  (vi),  became  payable   as                       compensation  to the licensee  on  principle’s                       specified in the Act.                           The learned Counsel for the appellant  has                       placed a great deal of reliance on the  provi-                       sions  of  Section 10(2)(b) (iii),  which  are                       applicable to cases of compensation payable on                       basis ’C’.  Section 10 gives a list of  deduc-                       tions from compensation.  One of the items  of                       this   ,deduction   is   found   in    section                       10(2)(b)(iii) which lays down:                             "all  sums paid by consumers by  way  of                       security  deposit and arrears of interest  due                       thereon on the vesting date, in so far as they                       have not been paid over by the licensee to the                       Government,  less the amounts which  according                       to the books of the licensee are due from  the                       consumers to the licensee for energy  supplied                       by him before that date;"         The provision set out above is sought to be made the  corner         stone of the arguments of the learned Counsel for the Appel-         lant  Municipal  Council, although this very  provision  was         held  by  the High Court to be decisive against  the  appel-         lant’s case that the amounts shown as due from the consumers

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       of the licensee for energy supplied before the vesting  date         were  claims  for  amounts which  the  Vijayawada  Municipal         Council  was entitled to appropriate as they must be  deemed         to  be  exempted from the effects of vesting of  rights  and         obligations of the undertaking in the State.             It  is  true, as the learned Counsel for  the  Municipal         Council  points out, that only those rights and  liabilities         and obligations which are specified in section 6(2) (a)  are         to vest in the State Government.  But, the contention  based         on  alleged non-specification of the claims of the  licensee         against direct consumers to whom it used to supply electric-         ity over-looks, the sweep of section 6(2) (a) (iii), already         indicated above, which will cover all rights and liabilities         under  contracts entered into bona fide before the  date  of         vesting.    It is not possible to assert that the rights  of         the  Municipal Council to realise arrears of dues  from  the         consumers  will not be transferred to the  State  Government         when  they are covered by the specific language  of  section         6(2) (a) (iii). The         850         explicitly  wide  language used dispenses with the  need  to         specify   by enumerating all items which are covered by  it.         That is the very object of such language.             We  have also indicated how section 5(3)(vi), meant  for         application  to  basis ’C’, mentions all  intangible  rights         shewn in the books of the licensee.   This also supports the         interpretation  we place on section 6(2)(a)(iii) and on  the         wide ambit of the specification  here which must, obviously,         not  conflict  with section 5(3)(vi).   We  are,  therefore,         completely  unimpressed by arguments based on supposed  non-         specification  of the claims of the former  licensee  under-         taking against consumers to whom it had supplied electricity         in  the past and against which it had claims  which  vested,         from the specified date,  in the  State Government.         Learned Counsel’s argument, on the meaning of Section  10(b)         (iii),  is really meant to reinforce the argument  indicated         above,  based on alleged non-specification of the claims  of         the Municipal Council as a licensee for supplying electrici-         ty to consumers.   If the meaning of relevant provisions  of         section  5 and 6 is clear, we do not think that any  assist-         ance  could be derived’ by the appellant  Municipal  Council         from  the provisions of section 10(2)(b)(iii)  unless  these         clearly conflicted with the other provisions.   If, however,         two   interpretations were possible of these provisions,  we         should,  we think, prefer the one which is in  harmony  with         the  clear meanings of the terms of section 5(3), read  with         section 6(2) (a) of the Act as indicated above.  This is the         salutary rule of construction resting upon the doctrine that         a statute, like any other document, must be read as a  whole         to extract its meaning and intendment correctly.            Learned Counsel for the appellant submits that the exclu-         sion by section 10(2)(b)(iii) of the amounts which,  accord-         ing to the books of the licensee, "are due from the  consum-         ers  to the licensee for energy supplied by him before  that         date"  (i.e. the date of vesting), from the ambit of  deduc-         tions  from  compensation, necessarily  implies  that  these         amounts  can be appropriated by the appellant  Municipality.         ’We are, quite unable to see how this inference follows from         an exclusion from items of deduction from compensation.    A         deduction  from  an item of compensation may, if  there  was         nothing else to furnish a clue as to its meaning, imply that         it  was  not being compensated for because the  party  whose         rights  were  acquired  was retaining the  item.    But,  an         exclusion from an item of deduction from compensation itself         could, according to its natural meaning, only indicate  that

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       this  was being done because this was an item which is  cov-         ered by  the  compensation provided for and to be paid.             A  close examination of section 10(2)(b)(iii) wilt  show         that it is meant for security deposits and arrears of inter-         est  due  on them which are generally held in trust  by  the         licensee  so as to be ultimately returned to the  consumers,         if the dues of the consumers have been met without resorting         to  the amounts deposited.   They are used for  a  deduction         of dues where these have not been paid;   We know that these         deposits are required so as to cover claims from  defaulting         consu-         851         mers in order to avoid the trouble of litigating to  enforce         them.    If  these deposits have not been made over  by  the         licensee  to the Government, they will be claimable  by  the         depositors  from   the  licensee. Hence, it  seems  fair  to         deduct them from any item of compensation as these  deposits         are  not  meant  to be kept by the licensee.   They  do  not         constitute  profits  of the business or price  for  anything         supplied   or payment for services rendered or an asset  out         of which liabilities of the licensee may be met.  If, howev-         er, there are any amounts shewn in the books o[ the licensee         as due from the consumers of energy supplied before the date         of  vesting,  they  would become  realisable  by  the  Govt.         Hence,  the  amounts for which deductions  from  items    of         compensation will have to be made is reduced by the  amounts         which  are  due from consumers to the  licensee  for  energy         supplied by  the licensee before the date of vesting as they         become the claims realisable by the successor-in-interest of         the licensee.   Therefore,  the High Court’s  interpretation         was, obviously, correct.   This provision supports the  case         of  the respondents rather than that of the former  licensee         Municipal body.  It is very difficult to see how it supports         the appellant’s case.             It appears that no question was raised before ’the  High         Court  as  to the nature of the obligation incurred  by  the         Municipal  Council to pay the amount claimed apart from  its         right to appropriate the amount itself as part of the assets         which had, it was asserted, not vested in the State  Govern-         ment.    An attempt was, however, made before us to  confuse         it with the payment made by the Municipal Council itself  to         the  Government  for the bulk supply  of  electricity  used,         inter  alia, for street lighting and other purposes  by  the         Council itself.   But, no question was raised in the  plead-         ings  to indicate that the plaintiff’s claim included  these         past  dues. We do find that the licensee had set up  certain         reasons  for its inability to realise certain  amounts  from         the  consumers.    We  do not know what  all  these  reasons         precisely were or whether the licensee, was really unable to         realise  them for any of these reasons.   But, ground No.  1         of  the  special  leave petition shows  that  the  Municipal         Council had Rs. 9 lakhs with it in deposit for  the recovery         of the claims not realised from which it proposed to  deduct         the amounts claimable towards dues and to. appropriate  them         itself. The ground runs as follows:                             "In the instant; case the learned  trial                       judge  found  that there was a  deposit  of  3                       lakhs of rupees with the Vijayawada Municipal-                       ity and the Vijayawada Municipality by  virtue                       of section 10(2)(b)(iii) is certainly entitled                       to   adjust   and   by   virtue   of   section                       10(2)(b)(iii)  of  the  Act 15  of  1964,  the                       Government  can deduct that security from  out                       of  compensation  less the amount due  to  the                       licensee  from its consumers upto the  vesting

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                     date."                           We may also mention that it was not argued                       on  behalf of  the Municipal Council that what                       was  vested  in the Government  was  only  the                       right to realise the claims itself and not  an                       amount  of money which the  Municipal  Council                       had  actually realised or could have  realised                       if                       852                       it  took steps to make realisations.   On  the                       other  hand,  ground No. 1 of the  grounds  of                       appeal  quoted above, shows that the  case  of                       the  Municipal Council was simply that  it  is                       ’entitled  to  deduct  amounts  claimed   from                       whatever  may  be the amounts in  deposit  be-                       cause.  the claims against the  consumers  had                       vested in the Municipal Council and not in the                       Government.   We think that legal questions of                       interpretation  of  the  Act,  to  which   the                       learned  Counsel for the parties rightly  con-                       fined  their  arguments, apart from  some  at-                       tempts  to raise questions outside the  plead-                       ings  which  could not succeed,  were  rightly                       answered  by the High Court when it held  that                       the  relevant provisions, if correctly  inter-                       preted,  meant  that the claims  for  dues  on                       electricity  supplied at enhanced  rates,  the                       validity  of  which  had  been  unsuccessfully                       challenged by some consumers in certain  other                       proceedings  initiated  before filing  of  the                       suit  now before us, had vested in  the  State                       Government.                           Consequently,  we affirm the judgment  and                       decree  of  the  High Court and  dismiss  this                       appeal with costs.         V.P.S.                                                Appeal         dismissed.         853