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PETITIONER: GODHRA ELECTRICITY CO.  LTD. & ANR.

       Vs.

RESPONDENT: THE STATE OF GUJARAT AND ANOTHER

DATE OF JUDGMENT12/09/1974

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN RAY, A.N. (CJ)

CITATION:  1975 AIR   32            1975 SCR  (2)  42  1975 SCC  (1) 199  CITATOR INFO :  RF         1975 SC1303  (16,17)  F          1990 SC 123  (31)  R&E        1991 SC1947  (5,16)

ACT: Indian  Electricity  Act, 1960, ss. 6, 7  and  7A-’Date   of commencement  of  licence’ what  is-Taking  undertaking  and postponing payment of purchase price without interest  under s.  6(6). if affects fundamental right under Art. 19(1)  (f) and  (g)-Whether  shareholder  can  challenge  validity   of section.   Interpretation  of  Deeds-Notification-Subsequent conduct if relevant.

HEADNOTE: Section 6(1) of the Indian Electricity Act, 1910 as  amended by the Amendment Act of 1959, provided that where a, licence had been granted to any person, the State Electricity  Board shall,  in  the  case  of  a  licence  granted  before   the commencement of the Amendment Act, on the expiration of such period  as is specified in the licence, have the  option  of purchasing   the  undertaking  and  such  option  shall   be exercised  by the State Electricity Board serving  upon  the licensee  a  notice in writing of not less  than  one  year, requiring the licensee to sell the undertaking to it at  the expiry  of the period.  Section 6(6) provided that  where  a notice  exercising the option of purchasing the  undertaking has been served upon the licensee the licensee shall deliver the undertaking to the State Electricity Board on the expiry of  the  relevant  period referred  to  in  sub-section  (1) pending the determination and payment of the purchase price. By  a, notification dated November 16, 1922, a  licence  was granted  to the predecessor of the first appellant  company, under  s.  3  of the Act.  The licence was  signed  on  17th November  and the notification granting it was published  in the  official Gazette dated 23rd November.  The licence  was for a period of 50 years from its commencement.  The  second respondent exercised the option to purchase the  undertaking by or notice under s. 6(1) by calling upon the appellants to sell  the  undertaking  to it on  the  midnight  intervening between 15th and 16th November, 1972.  Thereafter, the first respondent took over management of the undertaking and  then handed it over to the second respondent.

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The  appellants  filed  a  writ  petition  challenging   the validity  of the notice issued by the second respondent  and the  vires  of ss. 6, 7 and 7A of the Act.  The  High  Court dismissed the petition. In  appeal to this Court it was contended that (1) the  date of the commencement of the licence was the date on which the notification  granting  the  licence was  published  in  the official  gazette,  namely,, November 23, 1922 and  not  the date  of  the  notification granting the  licence,  that  is November  16. 1922, and, therefore, the 50 years period  did not  expire  on the midnight intervening between,  15th  and 16th November, 1972, and so. the notice given by the  second respondent  was bad: and (2) that the provisions of s.  6(6) of  the  Art  were  invalid  as  they  abridged  the   right guaranteed under Art. 19(1) (f) and (g) of the Constitution. Allowing the appeal on the second ground, HELD  : There was no valid purchase of the  undertaking  and the  taking  delivery  of  the  undertaking  by  the  second respondent was unlawful and the, second respondent must  re- deliver the undertaking to the licensee. [56B] (1)  (a)  Rule  17 of the  Indian  Electricity  Rules,  1922 provides for the publication of the licence in the  official gazette to notify that it has been granted.  Rule 18  states that the date of notification under r. 17 shall be deemed to be the date of the commencement of the licence.  Clause 2(e) of the licence provides that the date of the notification in the gazette that the licence has been granted is the date of the commencement of the licence.  The words "the 43 licence has been granted" do not postulate that the  licence has  already  been  signed and  granted  because,  there  is nothing  strange in making the date of the  notification  in the  gazette  that  the licence have  been  granted,  though anterior  in  point  of  time to the  date  of  signing  the licence,  as, the date of the commencement of  the  licence. Clause  2(e) of the licence will have to be read in  harmony with rule 18 and if so read it will be found that ’,he  date of  the  notification is only deemed to be the date  of  the commencement  of  the  licence, that is,  the  date  of  the notification   granting   the  licence  and  the   date   of commencement of the licence are the same namely November 16, 1922. [46G-47E] (b)There  is  a  distinction  between  the  date  of   the notification and the date of Publication of the notification in   the  Gazette  and  the  parties  themselves  had   this distinction  in mind as is shown by the provision  by  which the  licence  was  subsequently amended.   A  Court  is  not prevented  from  looking  into  the  subsequent  conduct  or acting of parties to find out the meaning of the terms of a document  when  there  is  a  latent  ambiguity.   Extrinsic evidence  to  determine,  the effect  of  an  instrument  is permissible  when  there  remains a doubt  as  to  its  true meaning  and  evidence of the acts done under it is  a  safe guide to the intention of the varies, particularly when acts are  done shortly after the date of the instrument.  [47E-F; 52A-C] The inquiry before the Court is as to what the intention  of the  parties was from the language used.  If the meaning  of the  word or phrase or sentence in clear extrinsic  evidence is  not  admissible.   But a word or phrase  is  always  not crystal clear.  Parties themselves might not have been clear as  to the meaning of the word or phrase when  they  entered into the contract, or, unanticipated situations might  arise or come, into the contemplation of the parties subsequently. When  there  is latent ambiguity extrinsic evidence  in  the

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shape  of  an interpreting statement in which  both  parties have  concurred  should be admissible.   When  both  parties subsequently  say that, by the word or phrase which  in  the context is ambiguous, they meant a particular intention,  it only  supplies a glossary as to the meaning of the  word  or phrase. [51A-D] Prernn v. simmonds [1971] 3 All E.R. 237; James Miller-  and Partners Ltd. v. Whitworth Street Estates (Manchester)  Ltd. [1970] 1 All E.R. 796 A.G. v. Wickman Ltd. [1973] 2 All E.R. 39;  Watchan v. East African Protectorate, [1919] A.C.  533: Dee  v. Rias (1832) 8 Bing, 178 at p. 186, Chapman v.  Bluck (1838)  4 Bing N.G. 187 at p. 195.  Odgers’ Construction  of Deeds and Statutes 5th ed. by Dworkin P. 83.  Lamb v. Goring Brick  Co. [1932] I. K.B. 710 at 721’ Balkishan v. Legge  27 IA.  58 and Abdulla Ahmed v. Animendra Kissan Mitter  [1950] S.C.R. 30, 46 referred to. (2)But  s.  6(6)  of  the  Act  as  amended  violates  the fundamental right under Art. 19(1)(f) and (g) of the  second appellant. [54G-H] (a)The  State Electricity Board is liable to pay  interest under  the  general  law for the  period  during  which  the licensee  has  not  been paid the  purchase  price  but  the arbitrator  appointed  under s. 7A, though he  is  bound  to determine  the  purchase price and make the award  within  a specified  time,  cannot award any interest  on  the  market value  of  the undertaking as determined  by  him,  because, there   is  no  provision  which  enables  him  to  do   so. Therefore,.  the  licensee’s  claim  for  interest  can   be enforced  only  in  a suit.  The fact  that  the  claim  for interest can be enforced in a suit by the licensee would not mitigate  the  unreasonableness  of  the  provisions   which authorise  the  Board to take delivery  of  the  undertaking without payment of purchase price.[53F-H] Satinder  Singh v. Amrao singh  [1961] 3  S.C.R.  676Toronto City Corporation v. Toronto Railway  Corporation [1925] A.C. 177at pp. 193-194. M.P’. Electricity Board v. Central  India Electric  Supply  Co.  A.I.R. 1972 M.P.  47,  Upper  Jammuna Valley Electricity Supply Co. Ltd. v. Municipal  Corporation of Delhi unreported decision referred to. (b)  Under the proviso to s. 7(ii) if an undertaking is sold or  delivered to the Electricity Board or to the  State  the licence  ceases  to, have any further  operation.   But  the words sale or delivery in this proviso mean a valid sale, or a. 44 valid  delivery.  A licensee cannot be told that he  has  no right  to carry on business unless a valid purchase is  made at  the  expiry of the period.  If the  licensee  cannot  be required  to  sell the undertaking without  payment  of  the purchase   price  It  the  time  of  the  delivery  of   the undertaking  or  without a provision in law for  payment  of interest  on  the  purchase price  during  the  period  when payment  is withheld there would be no valid termination  of the  licence and the licensee will be entitled to  carry  on the business. [54C-F] (c)  The  first  appellant  being a  Corporation  is  not  a citizen and has no fundamental right under Art. 19.  But the value  of  the  investment  in the  company  by  the  second appellant  is substantially reduced by the illegal  delivery of  the undertaking to the Board and his right to  carry  on the business of supplying, electricity through the agency of the   company   is  abridged,  and   he,   alongwith   other shareholders,  are left with the burden of the debts of  the undertaking.   If the second appellant’s right to  carry  on business through the agency of the company is taken away  or

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is  abridged or his right to a divisible share in future  of the  property  of the company is diminished or  abridged  by taking  delivery of the undertaking without payment  of  the purchase price, there is no reason why he should be disabled from challenging the validity of the sub-section. [54H55A-B, E.] R.   C.  Cooper v. Union of India [1970] 3 S.C.R. 530 at  p. 556, Bennett Coleman  & Co.   v.  Union  of India  [1973]  2 S.C.R. 757 at p. 773, followed.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2016  of 1973. Appeal  by Special Leave from the judgment and  order  dated the  15th/16th  October, 1973 of the Gujarat High  Court  in Spl.  Civil Apples.  No. 1752 of 1972. B.   Sen, R. H. Dhebar, P. C. Kapoor, P. R. Ramasesh and  R. V. Desai, for the appellants. G.   A. Shah and R. N. Sachthey, for respondent No. 1. F.   S.  Nariman,  Addl.   Sol.  Genl. of India  and  N.  M. Shroff, for respondent No. 2. Soli  J.  Sorabjee,  Ravinder Narain and K.  John,  for  the intervener. (The Amalgamated Elect.  Co. Ltd). The Judgment of the Court was delivered by MATHEW,  J.-The appellants filed a writ petition before  the High  Court of Gujarat challenging the validity of a  notice issued  by the ’Gujarat State Electricity Board,  respondent No.  2,  dated November 8, 1971, whereby  respondent  No.  2 purported   to  exercise  the  option  of   purchasing   the electrical undertaking of appellant No. 1 under S. 6 of  the Indian  Electricity  Act, 1910 (hereinafter referred  to  as ’the  Act’)  and for a declaration that  the  provisions  of sections 6, 7 and 7A of the Act are ultra vires Articles 14, 19(1)  (f), 19(1) (g) and 31 of the Constitution.  The  High Court   dismissed   the  petition  and   this   appeal,   by certificate, is against that judgment. The  Government of the Province of Bombay granted a  licence by  notification dated November 16, 1922, under S. 3 of  the Act  known as the ’Godhra Electric Licence, 1922’ in  favour of  Lady  Sulochana Chinubhai and Company,  Ahmedabad.   The licence was signed on November 17, 1922 and the notification granting it was published in 45 the  Bombay Government Gazette dated November 23,  1922  The licence  was transferred to the ist appellant-company  viz., the  Godhra  Electricity  Co. Ltd.  The licence  was  for  a period  of  50 years initially from its  commencement.   The initial  period of 50 years, according to  the  respondents, was  to expire on the midnight intervening between the  15th and  16th November, 1972.  The second  respondent  exercised the option to purchase the undertaking of the 1st  appellant company by a notice dated November 8, 1971, under s. 6(1) of the  Act  by  calling  upon  the  appellants  to  sell   the undertaking  to it on the midnight intervening  between  the 15th and 16th of November, 1972.  Thereafter. the Government of  Gujarat issued a notification under rule 115(2)  of  the Defence  of  India Rules taking over the management  of  the undertaking on November 18.1973. On December 21, 1973 of the State  Government  handed over the undertaking  to  the  2nd respondent. Before  we proceed further, it would be convenient  at  this stage  to  note the amendment mad& in the Act by Act  32  of 1959.  A comparison of the original s. 7 with sections 6,  7

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and  7A shows that the changes made by sections 6, 7 and  7A in  the original s. 7 were six in number.  They were  :  (1) the maximum length of the initial period to be specified  in the  licence  for  exercise of the option  to  purchase  was originally  fifty years whereas after the amendment, it  was reduced to thirty years and the maximum length of subsequent periods was also reduced by the amendments from twenty years to  ten  years;  (2) the notice of exercise  of  option  was originally  required to be of’ not less than two  years  but after  the  amendments, a notice of not less than  one  year would  be  sufficient  for exercising the  option;  (3)  the option to purchase under the old law vested in the Board but after  the  amendments it was also conferred  on  the  State Government  and’ the local authority in case the  Board  did not elect to purchase, (4) the licensee could not be obliged under  the old law to sell the undertaking to the  purchaser except  against payment of the purchase price but after  the amendments,  the  licensee was bound to deliver  the  under- taking  to the purchaser on the expiration of  the  relevant period pending the determination and payment of the purchase price;  (5)  there. was a right of waiver of the  option  to purchase  under  the  old  law  but  as  a  result  of   the amendments, that right was taken away; and (6)’ the  service lines  constructed at the expense of the consumers were  not required  by the old law to be excluded in  determining  the purchase price but under the amended law they were  required to be specifically excluded. In this appeal, we are concerned with two contentions raised by  the  appellants.   They  are,  that  the  date  of   the commencement  of  the  licence was the  date  on  which  the notification  granting  the  licence was  published  in  the Bombay Gazette, viz., November 23, 1922 and not the date  of the  notification  granting the licence i.e.,  November  16, 1922, and, therefore, the 50 years’ period did not expire on the midnight intervening between the 15th and 16th November, 1972  and so, the notice requiring the licensee to sell  the undertaking   on  the  expiryof  the  period,  namely,   15h November, 1972 was bad; and that the, 46 _provisions  of  sub-section  (6) of S. 6  of  the  Act  are invalid as they ,abridge the right guaranteed under  Article 19(1)(f) and 19(1)(g). Section  6(1) of the Act provides that where a  licence  has been granted to any person, not being a local authority, the State Electricity Board shall               (a)   in the case of a licence granted  before               the  commencement  of the  Indian  Electricity               (Amendment) Act 32 of 1959, on the  expiration               of such period as is specified in the licence,               and               (b)   in  the case of a licence granted on  or               after the commencement of the said Act, on the               expiration of such period not exceeding twenty               years,  and of every such  subsequent  period,               not exceeding ten years, as shall be specified               in this behalf in the licence; -have  the  option of purchasing the  undertaking  and  such option  shall  be exercised by the State  Electricity  Board serving  upon the licensee a notice in writing of  not  less than  one year requiring the licensee to se the  undertaking to  it at the expiry of the relevant period referred  to  in this sub-section. The  ruling of this Court make it clear that when the  State or  the  ’State Electricity Board  exercises  its  statutory option to purchase the undertaking of a licensee, it must in

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all respects conform strictly to the requirements of S. 6(1) and  that  the failure to conform to any one of  them  would render  the exercise of the option ineffective (see  Gujarat Electricity Board v. Shantilal R. Desai(1) and Gujarat Elec- tricity Board v. Girdharlal Motilal and Another).(2)  Clause 11(a)  of  the licence states that the  option  to  purchase given  by S. 7 of the Act shall be exercisable first on  the expiration of 50 years computed from the commencement of the licence.   Accordingly, it was necessary that the notice  in this  case  should have required the licensee  to  sell  the undertaking at the expiry of the initial period of 50 years. As  already  stated, the notice specified the  date  of  the expiry of the period as November 15, 1972.  So, the question is,  whether the period of 50 years expired on November  15, 1972, and, that will depend upon the answer to the  question as  to what is the date of the commencement of the  licence. Clause 2(e) of the licence says :               "The   date   of  the  notification   by   the               Government of Bombay in the Bombay  Government               Gazette that this licence has been granted  is               in   this   licence  referred   to   as   ’the               commencement of this licence’ ". Rule 17 of the Indian Electricity Rules, 1922, provides  for publication of the licence in the local official gazette  to notify  that it has been granted.  Rule 18 states  that  the date of the notification under Rule 17 shall be deemed to be the date of the commencement of the licence.  Clause 2(e) of the  licence  make,  it clear that it is the  date  -of  the notification  in  the  gazette that  the  licence  has  been granted is (1) [1959] 1 S. C. R. 580. (2) [1969] 1 S. C. R. 889.11 47 the  date  of ’commencement of this  licence’.   As  already stated,  the date of the notification granting  the  licence was  November 16, 1922.  There can, therefore, be  no  doubt that  the date of commencement of the licence  was  November 16, 1922. But  counsel  for the appellants as well as  the  intervener contended  that it is impossible to imagine that  a  licence could  be granted without the licenser signing  the  licence and as the licence bears the date November 17, 1922 and  was signed  only  on that day, it could not be  said  that  ’the licence  has  been granted’ before November 16,  1922.   The argument  was  that  there could be no grant  of  a  licence before it is signed by the licenser and when clause 2(e)  of the licence speaks of the date of "the  notification........ in the Bombay Government Gazette that this licence has  been granted"  it  postulates that the licence has  already  been signed   and  granted  and,  therefore,  the  date  of   the notification granting the licence can never be November  16, 1922  when  it is seen that the licence has been  signed  on November  17,  1922.   We have already  seen  that  rule  18 provides  that the date of the notification shall be  deemed to  be the date of commencement of the licence.  We have  to read  clause  2(e)  of  the licence  in  the  light  of  the provisions of r. 18.  Therefore, there is nothing strange in making the date of the notification in the Gazette that  the licence  has been granted, though anterior in point of  time to  the  date  of  signing  the  licence,  as  the  date  of commencement of the licence.  In other words, clause 2(e) of the licence will have to be read in Harmony with rule 18 and if  so,  read,  it  will  be found  that  the  date  of  the notification   is  only  deemed  to  be  the  date  of   the commencement of the licence.

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The  Additional Solicitor General also submitted that  there is a distinction between the date of a notification and  the date  of the publication of the notification in the  Gazette and that the parties themselves had this distinction in mind is  clear  from  the  provision by  which  the  licence  was subsequently amended.  That amendment reads               "...  that the following amendment be made  in               the  fourth  annexure to the  Godhra  Electric               Licence, 1922, which was granted in Government               notification  No.  177, dated  16th  November,               1922,  and published at pages 2652 to 2656  of               Part I of the Bombay Government Gazette  dated               23rd November 1922 viz., the clause  mentioned               below  be  inserted as clause 5  to  the  said               fourth annexure. . . ". The  question  whether subsequent  ’interpreting  statement’ made  by  parties to a written instrument is  admissible  in evidence to construe the written instrument is not free from doubt.   In  Prenn v. Simmonds,(1) the House of  Lords  held that negotiations between parties previous to the  formation of a contract are inadmissible to prove the intention of the parties  in case of ambiguity in the terms of the  contract. In James Miller and Partners Ltd. v. Witworth Street Estates (Manchester)   Ltd.(2),  the  House  of  Lords   held   that subsequent  conduct  of  the parties to a  contract  is  not admissible to construe the (1) [1971] 3 All E. R. 237. (2) [1970] 1 All E. R. 796. 48 contract.    The decision was followed in the recent case of Schuler A.     G. v. Wickman Ltd.(1) where Lord Reid said at pp. 45-46 :               "I  must add some observations about a  matter               which was fully argued before your  Lordships.               The  majority  of  the Court  of  Appeal  were               influenced  by  a  consideration  of   actings               subsequent to the making of the contract.   In               my  view,  this  was  inconsistent  with   the               decision  of  this House in James  Miller  and               Partners  Ltd.  v.  Whitworth  Street  Estates               (Manchester) Ltd."               Lord Morris of Borth-y-Cest said at pp. 52-53               "But  in a case such as the present I  see  Do               reason  to  doubt  the  applicability  or  the               authority of what was said in James Miller and               Partners  Ltd.  v.  Whitworth  Street  Estates               (Manchester) Ltd.  If on the true construction               of  a  contract a right is given to  a  party,               that  right is not diminished  because  during               some period either the existence of the  right               or its full extent was not appreciated." Lord  Wilberforce has stated that subsequent  actions  ought not to have been taken into account, that extrinsic evidence is  not  admissible  for  the  construction  of  a   written contract,  that the parties intentions must be  ascertained, on  legal  principles of construction, from the  words  they have  used and that it is one and the same  principle  which excludes   evidence   of  statements  or   actions,   during negotiations, at the time of the contract, or subsequent  to the  contract, any of which to the lay mind might  at  first sight seem to be proper to receive.  Lord Simon said,  after referring to the case of Whitworth Street Estates (supra)               "it is true that, on strict analysis, what was               said  by  Lord Hodson, Viscount  Dilhorne  and               Lord Wilberforce cannot be regarded as a vital

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             step towards their conclusions; but, as I have               already ventured to demonstrate, the point was               directly in issue between the parties in  your               Lordship’s  House.  I am therefore  firmly  of               the  opinion  that  what was  said  should  be               regarded as settling the law on this point.  I               am  reinforced in this opinion because, in  my               view,  Whitworth Street Estates was a  correct               decision  on the point for reasons  additional               to those given in the speeches."               He then said :               "Sir  Edward  Sugden’s frequently  quoted  and               epigrammatic  dictum  in Attorney  General  v.               Drurmmond  (1842,  Dr.  &  War  353,  at  368)               :...... tell me what you have done under  such               a  deed,  and I will tell you what  that  deed               means" really contains a logical flaw: if  you               tell me what won have done under a deed, I can               at best tell you only what you think that deed               means.    Moreover,  Sir  Edward  Sugdan   was               expressly dealing with ’ancient  instruments’.               I would add               (1)   [1973] 2 All E. R. 39.               49               thirdly,   that  the  practical   difficulties               involved in admitting subsequent conduct as an               aid to interpretation are only marginally,  if               at  all, less than are involved  in  admitting               evidence of prior negotiations." In the process of interpretation of the terms of a contract, them  court  can frequently get great  assistance  from  the interpreting  statements made by the parties- themselves  or from their conduct in rendering or in receiving  performance under it.  Parties can, by mutual agreement, make their  own contracts; they can also, by mutual agreement, remake  them. The   process  of  practical   interpretation   application, however, is not regarded by the parties as a remaking of the contract;  nor do the courts so regard it.  Instead,  it  is merely further expression by the parties of the meaning that they  give  and have given to the terms  of  their  contract previously  made.   There is no good reason why  the  courts should not give great weight to these further expressions by the  parties, in view of the fact that they still  have  the same  freedom  of contract that they  had  originally.   The American  Courts  receive subsequent actions  as  admissible guides in interpretation.  It is true that one party  cannot build  up  his case by making an interpretation in  his  own favour. it is the concurrence therein that such a party  can use  against  the  other party.   This  concurrence  may  be evidenced  by the other party’s express assent  thereto,  by his  acting  in accordance with it, by his  receipt  without objection  of  performances that indicate it, or  by  saying nothing  when  knows  that  the first  party  is  acting  on reliance  upon the interpretation (see Corbin on  contracts, Vol. III, pp. 249 and 254-55). The  rule that obtains in other jurisdictions is  also,  the same               "In  France  construction  of  a  contract  is               within the sole province of the judges of fact               who are entirely free to use whatever material               seems relevant to them... The rule is the same               in Germany where since 1888 it is  established               that  even  statements  made  by  one  of  the               contracting  parties to a third  person  about               the content of the contractual intentions  are

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             admissible guides to interpretation. In Italy,               Art. 1362(2) provides in impressively succinct               language.  The Vienna convention on the law of               Treaties  of  1969 (which to  a  large  extent               merely    codifies    earlier    international               practice) enjoins the interpreter of a  treaty               to take into account ’any subsequent  practice               in   the  application  of  the  treaty   which               establish   the  agreement  of   the   parties               regarding its interpretation’, Art.  31(3)(b)"               (see Notes by F. A Mann on L Schuler A. G.  v.               Wickman Machine Tool Sales Ltd. (1973) 2 W. L.               R.  683), Law Quarterly Review, Vol. 809,  pp.               464-465). The  real reason against taking into account the  subsequent conduct of the parties is the rule which excludes  extrinsic evidence in the construction of written contract. In  Watchman  v. East Africa  Protectorate(1)  the  question arose  as  to whether the land intended to be  conveyed  was that described by (1) [1919] A.C. 533 5-LI51 SupCI/75 50 the  boundaries in the certificate issued by the  Government or  the  area  marked on the  plan,  which  disagreed.   The parties  bad  always treated the latter as  the,  true  area conveyed.  It was held by the Privy Council that evidence of user  may be given in order to show the sense in  which  the parties construed the language employed, and that this  rule applies to both modern and ancient documents and whether the ambiguity be patent or latent. As  regards  Watcham’s  case, this is what  Lord  Reid  said Schitler A. G. v. Wickman Ltd.(supra)               "It was decided in Watcham v. Attorney General               of  East Africa Protectorate that in  deciding               the scope of an ambiguous title to land it was               proper  to have regard to subsequent  settings               and there are other authorities for that view.               There may be special reasons for construing  a               title   to   land  in  light   of   subsequent               possession   had  under  it  but  I  find   it               unnecessary   to   consider   that   question.               Otherwise I find no substantial support in the               authorities   for   any   general    principle               permitting subsequent acting of the parties to               a contract to be used as throwing light on its               meaning.  I would therefore reserve my opinion               with  regard to Watcham’s case but  repeat  my               view expressed in Whitworth with regard to the               general principle".               In Doe v. Rias(1), Tindal, C.J. said :               "We are to look at the words of the instrument               and  to the acts of the parties  to  ascertain               what their intention was; if the words of  the               instrument  be ambiguous, we may call  in  the               aid of the acts done under it as a clue to the               intention               of the parties".               And   in Chapman v. Bluck(2), Park J. said               "The intention of the parties may be collected               from the language of the instrument and may be               elucidated by the conduct they have pursued."               Odgers observers(1)               "In the case of an ambiguity, judicial  notice               will be taken of the way in which the  parties

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             themselves  have interpreted their rights  and               duties under the document". We  are  not certain that if evidence of  subsequent  acting under  a  document is admissible, it might have  the  result that a contract would mean one thing on the day it is signed but by reason of subsequent event it would mean something  a month or year later.  Subsequent (1)  (1832) 8 Bing. 178 at p. 186. (2)  (1838) 4 Ring, N. C. 187 at p. 195. (3)  See Odgers, Construction of Deeds and Statutes, 5th ed. by Dworkin, p. 83. 51 ’interpreting’  statements  might  not  always  change   the meaning  of a word or a phrase.  A word or a phrase, is  not always  crystal clear.  When both parties  subsequently  say that  by  the  word  or phrase which,  in  the  context,  is ambiguous,  they meant this, it only supplies a glossary  as to  the  meaning  of the word or  phrase.   After  all,  the inquiry is as to, what the intention of the parties was from the language used.  And, why is it that parties cannot clear the  latent  ambiguity  in  the  language  by  a  subsequent interpreting  statement  ?  If the meaning of  the  word  or phrase  or  sentence  is clear, extrinsic  evidence  is  not admissible.  It is only when there is latent ambiguity  that extrinsic evidence in the shape of interpreting statement in which both parties have concurred should be admissible.  The parties  themselves  might  not have been clear  as  to  the meaning  of  the word or phrase when they entered  into  the contract.  Unanticipated situations might arise or come into the  contemplation of the parties subsequently  which  would sharpen  their focus and any statement by them  which  would illuminate the darkness arising out of the ambiguity of  the language  should  not  be  shut out.   In  the  case  of  an ambiguous  instrument,  there is no  reason  why  subsequent interpreting statement should be inadmissible.               "The  question involved is this : Is the  fact               that   the   parties  to   a   document,   and               particularly  to a contract, have  interpreted               its terms in a particular way and have been in               the  habit  of  acting  on  the  document   in               accordance   with  that  interpretation,   any               admissible  guide to the construction  of  the               document  ?  In  the case  of  an  unambiguous               document,  the  answer is ’No’.  (see  Odgers’               Construction of Deeds and Statutes, 5th ed. by               G. Dworkin, pp. 118-119). But, as we said, in the case of an ambiguous one, the answer must  be ’yes’.  In Lamb v. Coring Brick Co. (1), a  selling agency  contract  contained the words ’the  price  shall  be mutually  agreed’.  Documents showing the mode  adopted  for ascertaining   the  price  were  put  in  evidence   without objection.  In the Court of Appeal, Greer L. J. said               "In  my  opinion,  it  is  not  necessary   to               consider  how  this contract was acted  on  in               practice.  If there had been an ambiguity  and               the  intention  of  the parties  had  been  in               question  at the trial, I think it might  have               been  held that the parties had  placed  their               own constructions on the contract and,  having               acted upon a certain view, had thereby  agreed               to accept it as the true view of its meaning". In  Balkrishen  v. Legge(2) the privy Council said  that  in deciding  the  question  whether  a  particular  deed  is  a mortgage  by conditional sale or an out and out  sale,  oral evidence of the intention is inadmissible under s. 92 of the

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Evidence, Act for construing the deed nor can evidence of an agreement  at variance with the terms of the deed  admitted, but  the  case  must be decided on a  consideration  of  the contents  of  the document with such extrinsic  evidence  of other circumstances as may show in what manner the  language of  the  document is related to existing facts.  We  do  not think (1) [1932] 1 K. B. 710, at 721. (2) 27 I. A. 58. 52 it  necessary to consider or decide in this case  the  exact reach  of that decision.  Nor is it necessary to  advert  to the various decisions of the High Courts where the ratio  of that  case has been interpreted.  It is enough to  say  that there  is  nothing in that decision which  would  prevent  a court from looking into the subsequent conduct or actings of parties  to find out the meaning of the terms of a  document when.. there is latent ambiguity. In these circumstances, we do not think we will be justified in not following the decision of this Court in Abdulla Ahmed v.  Animendra Kissen Mitter(1), where this Court  said  that extrinsic evidence to determine the effect of an  instrument is  permissible where there, remains a doubt as to its  true meaning  and  that evidence of the acts done under it  is  a guide  to the intention of the parties,  particularly,  when acts are. done shortly after the date- of the instrument. The  point then for consideration is whether s. 6(6) of  the Act  is  violative of the fundamental right  under  Articles 19(1) (f) and 19(1) (g).  Section 6(6) reads :               "Where  a  notice  exercising  the  option  of               purchasing  the  undertaking has  been  served               upon  the  licensee under  this  section,  the               licensee shall deliver the undertaking to  the               State Electricity Board, the State  Government               or the local authority, as the case may be, on               the expiration of the relevant period referred               to  in sub-section (1) pending the  determina-               tion and payment of the purchase price". The appellants submitted that the provision of S. 6(6) which postpones  the payment of the purchase price till after  the determination,  of the quantum of the purchase price by  the arbitrator   is   an  unreasonable  restriction   upon   the fundamental  right  of citizens to carry on  business  under Article  19 (1) (g) and also violative of their  fundamental right  under Article 19(1) (f).  They submitted that  before the  amendment  in 1959 to the Act,  the  State  Electricity Board was bound to pay the purchase price before they  could take delivery of the undertaking but that under s. 6(6),  it was  not  necessary that the purchase price should  be  paid before the undertaking is delivered to the State Electricity Board, and, that is unreasonable. The learned Additional Solicitor General, on the other hand, submitted  that the appellants had no right to carry on  the business  when  the Board chose to exercise  the  option  to purchase the undertaking. at the expiry of the period.   The argument was that when a valid notice to exercise the option to purchase the undertaking has been served on the licensee, the  licensee  thereafter  has  no right  to  carry  on  the business  of supplying electricity and, therefore, there  is no  question  of  sub-section  (6) of  s.  6  abridging  the fundamental-right  of  the appellants under Article  19  (1) (g).  He also submitted- that the obligation to pay interest on  the purchase price from the date of the delivery of  the undertaking up to the date of its payment is-implicit in  s, 7A

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(1)  [1960] S.C. R. 30,46. 53 or at any rate the arbitrator functioning under that section is bound, under the common law of the land to award interest for the period during which the arbitration proceedings were pending. An  arbitrator appointed under the section to determine  the quantum  of  the purchase price can pass an  award  only  in accordance  with  the terms of s. 7A.  Section  7A  provides that  where  an  undertaking  of a  licensee  is  sold,  the purchase price of the undertaking shall be the market  value of the undertaking at the time of the purchase or, where the undertaking  has been delivered before purchase  under  sub- section  (3)  of s. 5, at the time of the  delivery  of  the undertaking  and  if  there is  any  difference  or  dispute regarding such purchase price, the same shall be  determined by the arbitrator.  There is, therefore, no provision  which enables  the arbitrator to award any interest on the  market value of the undertaking at the time of the purchase  merely because the market value is determined on a subsequent date. There  can be no doubt about the correctness of the  general rule under which a purchaser who takes possession is charged with interest on his purchase money from that time until  it is   paid.   This  rule  has  been  applied  to   compulsory purchases(1).   But the question is whether  the  arbitrator has  power under the’ Act to award interest on the  purchase price.   In  Toronto  City Corporation  v.  Toronto  Railway Corporation(2), the Privy Council held that the general rule under which a purchaser who takes possession is charged with interest  on his purchase money from that time until  it  is paid  was well established, and had on many  occasions  been applied  to  compulsory  purchases  but  the  duty  of   the arbitrators in that case was not to determine all the rights of  the company, but only to ascertain the actual  value  of certain property at a certain time and that it was a  truism to  say that such value could not include interest  upon  it and  that  the  liability for interest lay  outside  of  the arbitration for its enforcement.  In M.P. Electricity  Board v.Central  India Electric Supply Co.(3) the  Madhya  Pradesh High  Court and in Upper Jammuna Valley  Electricity  Supply Co.,  Ltd. v. Municipal Corporation of Delhi(4 ) decided  on April 3, 1972, the Delhi High Court, took the view that  the arbitrator functioning under the Act has no jurisdiction  to award interest on the purchase price. The   position  therefore,  is  that  although   the   State Electricity  Board  is  liable to  pay  interest  under  the general law for the period during which the licensee has not been paid the purchase price, the arbitrator, functioning as he  does, under the pro-visions of s. 7A of the  Act  cannot award any interest on the market value of the undertaking as determined by him.  The licensee’s claim for interest can be enforced  only  in  a suit.  The fact  that  the  claim  for interest can be enforced in a suit by the licensee would not mitigate   the  unreasonableness  of  the  provision   which authorises  the  Board to take delivery of  the  undertaking without payment of the purchase price. (1)  see  Satinder Singh v. Amrao Singh, [1961] 3 S.  C.  R. 676. (2)  [1925] A. C. 177 at pp. 193-194. (4)  Unreported decision. (3) A. I. R. 1972 M. P. 47. 54 In  support  of the contention, that when  once  the  notice exercising  the option to purchase the undertaking has  been served,  the licensee has no further right to carry  on  the

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business,  the learned Additional Solicitor  General  placed reliance  on the decision of this Court in Kalyan  Singh  v. State of U.P.(1) where this Court said that if a scheme  has become  final under S. 68D(3) of the Motor Vehicles Act,  it has  the  effect  of  extinguishing all  the  rights  of  an operator to ply his stage carriage under the permit. A  licensee cannot be told that he has no right to carry  on the  business unless a valid purchase is made at the  expiry of  the period.  If the licensee cannot be required to  sell the undertaking without payment of the purchase price at the time of delivery of the undertaking. or without a  provision in law for payment of interest on the purchase price  during the period when payment is withheld, there would be no valid termination of the licence.  It is unreasonable to require a licensee  to deliver the undertaking without payment to  him of  the  purchase  price or, if  the  payment  is  deferred, without  compensating him by way of interest for the  period during  which the payment has been withheld.  The fact  that an arbitrator is seized of the question of the determination of the purchase price and that he is bound to make the award within  a  specified  time in law would not  mean  that  the licensee need not be compensated for the delay in payment of the purchase price.  The proviso to S. 7(ii) makes it  clear that  when  an  undertaking  is sold  or  delivered  to  the Electricity  Board or to the State, the licence shall  cease to  have any further operation.  When the proviso  talks  of sale  and  delivery,  it  means a  valid  sale  or  a  valid delivery.   Admittedly,  the ’undertaking  belonged  to  the licensee  and if delivery of the undertaking is to be  taken by the State.  Electricity Board, the purchase price must be paid  before the delivery or, there must be a provision  for payment  of  interest on the purchase price for  the  period during  which payment is withheld.  Otherwise,  the  licence will  not cease to have operation and the licensee  will  be entitled to carry on the business. If  the arbitrator could have awarded the interest  for  the period  between the date of delivery of the undertaking  and the  payment of the purchase price, probably it  could  have been said that the provision for delivery without payment of the purchase price would not be reasonable.  But, to deprive the  licensee  of  his undertaking without  payment  of  the purchase  price and then ask him or it to go to a  court  to enforce the liability for interest for the period for  which the  purchase price has been withheld is  unreasonable.   We hold that S. 6(6) violates the fundamental right under  Art. 19(1)(g) and 19(1)(f) of the 2nd appellant. The undertaking, no doubt, belonged to the 1st appellant,  a corporation.   Not  being a citizen, it has  no  fundamental right under (1)  [1962] Supp. 2 S. C. R. 76. 55 Art.  19.   The  2nd  appellant is  a  shareholder  and  the Managing Director of the Company.  If his right to carry  on the business through the agency of the Company is taken away or  abridged, or,, his right to a divisible share in  future of the property of the company is diminished or abridged  in taking  delivery of the, undertaking without payment of  the purchase price, there is no reason why he should be disabled from challenging the validity of the sub-section. In R. C. Cooper v. Union of India(1) this Court said               "Jurisdiction  of  the Court to  grant  relief               cannot  be  denied, when by State  action  the               rights  of  the  individual  shareholder   are               impaired, if that action impairs the rights of               the Company as well.  The test in  determining

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             whether the shareholder’s right is impaired is               not formal; it is essentially qualitative : if               the  State  action impairs the  right  of  the               shareholders  as well as to the  Company,  the               Court will not, concentrating merely upon  the               technical operation of the action deny  itself               jurisdiction to grant relief." The  second  appellant  contends  that  the  value  of   his investment  in the Company is substantially reduced  by  the illegal  delivery of the undertaking to the Board; that  his right  to  carry on the business  of  supplying  electricity through  the agency of the Company is abridged and that  he, along  with the other shareholders are left with the  burden of the debts of the undertaking. In  Bennett  Coleman & Co. v. Union of India(2) one  of  us, Ray, J. as be then was, speaking for the majority said :               "As a result of the Bank Nationalisation  case               (supra)  it follows that the Court  finds  out               whether   the  legislative  measure   directly               touches the company of which the petitioner is               a  shareholder.  A shareholder is entitled  to               protection  of  Article 19.   That  individual               right  is not lost by reason of the-fact  that               he is a shareholder of the company.  The  Bank               Nationalisation  case (supra) has  established               the  view  that  the  fundamental  rights   of               shareholders  as  citizens are not  lost  when               they associate to form a company.  When  their               fundamental   rights   as   shareholders   are               impaired  by  State  action  their  rights               as shareholders are protected.  The reason  is               that the shareholders’ rights are equally  and               necessarily  affected  if the  rights  of  the               company are affected."               (1) [1970] 3 S. C. R. 530 at P. 556.               (2) [1973] 2 S. C. R. 757, at p. 773.                56 We  think the second appellant is entitled to challenge  the validity  of the sub-section on the ground that it  abridged his fundamental right under Articles 19(1)(g) and 19(1)(f). In  the result we hold that there was no valid  purchase  of the undertaking and that taking delivery of the  undertaking was  unlawful.  The State Electricity Board is  directed  to redeliver the undertaking to the licensee.  We set aside the judgment  under  appeal and allow the appeal to  the  extent indicated but, in the circumstances, without any order as to costs. V.P.S. Appeal allowed.  57