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PETITIONER: GUJARAT ELECTRICITY BOARD

       Vs.

RESPONDENT: SHANTILAL R. DESAI

DATE OF JUDGMENT: 06/08/1968

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. BACHAWAT, R.S.

CITATION:  1969 AIR  239            1969 SCR  (1) 580  CITATOR INFO :  R          1975 SC  32  (6)  R          1987 SC1217  (13)  R          1990 SC 123  (31)

ACT: The  Electricity  Act  9  of  1910,  s.  7--The  Electricity (Supply)  Act  54 of  1948, s.  71--Compulsory  purchase  of electricity  from  licensee   under s. 7--Steps to be  taken by  purchaser--Option  to  purchase  whether    has  to   be separately    exercised    apart    from    notice     under section--Electricity    Board whether empowered under s.  71 of 1948  Act to make compulsory   purchase under s. 7.

HEADNOTE:  On  January  8,  1959 the Bombay  State  Electricity  Board purporting to  exercise its powers under s. 7 of the  Indian Electricity  Act, 1910 read   with s. 71 of the  Electricity (Supply) Act, 1948 gave notice to the res--  pondent that it would exercise its option of purchasing the electric  supply undertaking which the respondent ran under a licence, on the expiry  of   the said licenee on February 10, 1962.  On  the creation of the State of   Gujarat the appellant corpOration was formed and succeeded to the rights   and liabilities  of the Bombay State Electricity Board.  The respondent    filed a writ petition in the High Court in which he challenged the right    of the appellant to purchase his undertaking.   The High  Court came   to the conclusion that though the  notice issued on January 8, 1959 was a   valid notice under s. 7(4) of the Act that by itself was not sufficient to   compel the respondent to sell his undertaking to the appellant;  before the   respondent could be compelled to sell his  undertaking it was necessary   for the appellant to exercise its  option to purchase the undertaking on the expiration of the  period of  licenee,  which  it had not  done.    respondent’s  writ petition  was  therefore  allowed.  The  appellant  came  to this Court.  The questions that fell for consideration were: (i)  whether   the High Court’s interpretation of s.  7  was correct;  (ii) whether the appellant was empowered under  s. 71  of the Electricity (Supply) Act, 1948 to   exercise  the powers of the local authority under s. 7. HELD: (i) The provisions of the sub-section of s. 7 must  be read  together.  So read the section only means that  before

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a  licensee can be   compelled to sell his  undertaking  the authority entitled to purchase must   elect to purchase  the same  by  exercise  of  the option given  to  it  under  the licence  read with s. 7 of the Act followed by a  notice  as required  by   s. 7(4) of the Act.  In s. 7  the  expression ’option   of purchasing  an   undertaking’ merely means  the right  of purchasing the undertaking. The word  ’option’  is used   because  two  courses  are  open  to  the   concerned authority  namely.  either to purchase  the  undertaking  or renew  the licence.   Once the authority elects to  purchase then  the  notice prescribed in subs.   4  should  be  given before  the  period mentioned therein.  The  object  of  the provision  is that the licensee must know in good time  what course    authority is going to adopt.  Otherwise  there  is bound to be considerable   inconvenience to the licensec  as well as to the public. [584 F-H, 585   C-D]   There  is  no  good  reason  for  reading  into  s.  7   a requirement  that after   a notice under s. 7 (4) is  issued the  authority must again exercise its option   to  purchase on the expiration of the period of license.  The exercise of   option to purchase as well as electing to purchase is  one integral  process    and not two independent steps.  By  the very  act of electing to purchase the   authority  exercises its option to purchase., [585,E-F] 581     In  the present case therefore the requirements of s.  7 were fully complied with by the notice issued on January  8, 1954. [585 F-G]     (ii)  It  is true that before s. 71 can be  held  to  be attracted  to  a  case it must be shown that  the  right  or option.  to purchase the undertaking of the licensee  vested in  the  State  Government or a local  authority  under  the provisions  of  the Act.  In the present case the  right  to purchase  vested in the concerned authority by virtue of  s. 7,  and it could not be said that the right accrued only  by virtue of the agreement under which the licence was granted. The  right  to purchase may accrue  either   because  it  is directly  conferred by s. 7 or because it is obtained  as  a result  of a contract compelled by that section.  In  either case  it is a ’right obtained by the authority by virtue  of s. 7.  The appellant  Board  was  therefore empowered by  s. 071 to issue the notice under s. 7. [586 F-587 A]     Fazilka  Electric  Supply  Co. Ltd.  v.  The  Commr.  of Income-tax, Delhi, [1962] 3 Supp. S.C.R. 496, distinguished.     Okara  Electric Supply Ltd. & Anr. v. State  of  Punjab, [1962]  S.C.R. 239. applied.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil ,Appeal No. 2525  of 1966.     Appeal  from  the judgment and order dated  October  30, 1963 of the Gujarat High Court in Special Civil  Application No. 94 of 1962.     C.K.  Daphtary, Attorney-General and 1. N.  Shroff,  for the appellant.     H.R. Gokhale, S.B. Vakil, Janendralal and B.R. Agarwala, for the respondent. The Judgment of the Court was delivered by     Hegde  J.  The only question that falls for decision  in this appeal is whether on the basis of the notice issued  by the Bombay State Electricity Board on January 8, 1959  under s. 7 of the Indian Electricity Act, 1910 (to be  hereinafter referred to as the: Act) prior to its amendment in 1959, the

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appellant can compulsorily purchase from the respondent  his concern  ’The Bilimora Electric Power Supply Co.’.   In  his application  before  the High Court under Art.  226  of  the Constitution the respondent challenged the vires of s. 7  of the  Act.  But that contention remains to be examined.   The High  Court has chosen to allow the petition. solely on  the ground  that  as  the requirements of s.  7  have  not  been complied with, the appellant cannot compel the respondent to sell  the  undertaking.  If we come to the  conclusion  that that  conclusion is unsustainable then the matter will  have to   go   back   to  the  High  Court   for   deciding   the constitutionality of s. 7.     The  respendent  was given a licenee  on.  February  11, 1932,  under  the provisions of the Baroda  Electricity  Act Samvat  1983  for  supplying  electricity  within  the  area mentioned.  in  the  licenee.  Clause  27  of  that  licenee provided that the option of  purchase 582 given  by  s.  9  of the Baroda  Electricity  Act  shall  be exercisable first on the expiration of thirty years computed from  the commencement of the licence and thereafter on  the expiration  of every subsequent period of ten  years  during the  subsistence  of the licence.  The manner in  which  the undertaking  should be valued is laid down in that Act.   On the  merger of the former Baroda State with the Province  of Bombay,  the  Act as well as the Electricity  (Supply)  Act, 1948  (Act  54  of  1948)   were  made  applicable  to   the territories   of  the  former  State  of  Baroda,  and   the corresponding  Baroda Acts were repealed with   the   saving clause that the licences issued under the repealed Act shall continue  to  remain in force as if issued  under  the  Act, until  the expiration of the period of those  licences.   In exercise of the powers conferred by s. 5 of the  Electricity Supply  Act, 1948 the Government of Bombay  constituted  the Bombay  State  Electricity Board on January  31,  1945.   On January 8, 1959 that Board issued to the respondent a notice under  s.  7 of the Act.  That notice is important  for  our present  purpose.  Hence we shall quote        the  relevant portion thereof.  It runs thus:                  "In exercise of the powers conferred on the               Bombay   State Electricity Board by virtue  of               s. 71 of the Electri  city (Supply) Act,  1948               read  with s. 7 of the Indian      Electricity               Act,  1910, you are hereby notified  that  the               Bombay State Electricity Board has decided  to               exercise     and shall exercise the option  of               purchasing your under    taking on the  expiry               on   10-2-1962  of  the  licence  granted   to               you   ......  The receipt of this  notice  may               please be acknowledged."      As  a result of the Bombay Re-organization  Act,  1960, the present Gujarat State came into existence.  In  exercise of the powers conferred by s. 5 of the Electricity  (Supply) Act.   1948  read  with  sub-s. 4 of s.  68  of  the  Bombay Reorganization  Act,  1960  the  appellant  Corporation  was constituted  by  the  Government of Gujarat by  means  of  a notification  dated May 1, 1960. The Central  Government  by the  notification No. EL-1I-1(22)/60 dated the  17th   June, 1960 made in exercise of the powers conferred by cl. (a)  of sub-s.  (4) of s. 68 of the Bombay Reorganization Act,  1960 directed  that the appellant Corporation shall "with  effect from  1st  May  1960"  take  over  from  the  Bombay   State Electricity  Board all its undertakings, assets, rights  and liabilities  in the area comprised in the State of  Gujarat. The  said  notification  was  amended  in  some  respect  by

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notification  of  the Government of India dated  October  3, 1960  providing therein that the amendment thereby  made  in the notification dated June 17, 1960 shall be deemed  always to  have  been  made.  On the basis  of  the  aforementioned notifications,  the  appellant  is  claiming  the  right  to compulsorily purchase the undertaking. 583     The respondent is contesting the right of the  appellant to  compulsorily purchase his undertaking.  With a  view  to forestall the appellant from taking action against him,  the respondent an application under Art. 226 of the Constitution in  the  High  Court of Gujarat seeking  directions  to  the appellant to forbear from compelling him to sell or  deliver his  undertaking,  refrain  the appellant  from  ceasing  to supply  electricity  to  him for the  purpose  of  his  said undertaking  and also refrain the appellant from  preventing him from supplying electric energy in the area mentioned  in his  licence.  Some  other  incidental  reliefs  were   also sought.     The  High Court came to the conclusion that  though  the notice issued by the appellant on January 8, 1959 is a valid notice  under s. 7(4) of the Act but that by itself  is  not sufficient  to compel the respondent to sell his undertaking to the appellant; before the respondent can be compelled  to sell  his undertaking to the appellant it was necessary  for the  appellant  to  exercise  its  option  to  purchase  the undertaking on the expiration of the period of licence.   As the  appellant  had failed to exercise that  option  on  the expiration  of  the period of licence it cannot  compel  the respondent  to sell his undertaking.  On the basis of  these findings the High Court has substantially granted the relief prayed for by the respondent.  The appellant challenged  the correctness  of  this  conclusion.  On the  other  hand  the respondent is supporting the judgment of the High Court  not only  on the ground accepted by the High Court but  also  on some of the other grounds advanced on his behalf before  the High Court but rejected by that Court.     We  shall  first take up the question whether  the  High Court  was right in holding that the appellant had  to  take two independent steps viz. ( 1 ) an election to purchase the undertaking  followed  up by a notice to the  respondent  in pursuance of that election within the period mentioned in s. 7(4)  of the Act and (2) exercise its option to purchase  on the expiration of the period of licence and communicate  the same to the respondent.     Before  addressing  ourselves  to that  question  it  is necessary to mention that the High Court’s finding that  the rights   of   the  Shriman Sarkar,  (Baroda  Government)  to purchase   the   undertaking  under  s.  9  of  the   Baroda Electricity Act had devolved on the State Government was not challenged before us.  Therefore it is not necessary for  us to  trace how the rights of the  Baroda Government  came  to devolve on the then State of Bombay.  But the respondent did contest the appellant’s claim to exercise that right.   That question  we shall separately consider.  For the present  we shall proceed on the basis that the appellant is entitled to exercise  the  right  of purchase conferred  on  the  Baroda Government  under the licence read with s. 9 of  the  Baroda Electricity 584 Act.  We may also state at this stage that the conclusion of the  High  Court that the licence issued under s, 9  of  the Baroda  Electricity  Act should be considered as  a  licence issued under s. 7 of the Act was also not challenged  before us.

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   Now we shall proceed to consider the true scope of s.  7 of the Act.  For our present purpose only sub-ss. 1, 2 and 4 of s. 7 of the Act are relevant.  They read as follows:                     "Section  7 ( 1 ).  Where a license  has               been  granted to any person not being a  local               authority, and the whole of the area of supply               is  included  in the area for which  a  single               local  authority  is  constituted,  the  local               authority  shall,  on the expiration  of  such               period, not exceeding fifty years and of every               such  subsequent period not  exceeding  twenty               years, as shall be specified in this behalf in               the   license, have the option  of  purchasing                             the  undertaking, and, ff the local  a uthority,               with  the  previous  sanction  of  the   State               Government,  elects to purchase, the  licensec               shall  sell  the  undertaking  to  the   local               authority  on  payment  of the  value  of  all               lands,  buildings, works, materials and  plant               of  the licensee suitable to, and used by  him               for,  the purposes of the  undertaking,  other               than  a  generating station  declared  by  the               license  not to form part of  the  undertaking               for  the purpose of purchase,. such  value  to               be,   in  case  of  difference   or   dispute,               determined by arbitration:                     (4)  Not less than two years’ notice  in               writing of any election to purchase under this               section  shall be served upon the licensee  by               the local authority or the State Government as               the case may be.     In  our opinion sub-s. (4 ) of s. 7 is complementary  to sub-as. (1) and (2) of that Section and therefore they  must be  read together.  On an analysis of these provisions it is seen  that  before a licensec can be compelled to  sell  his undertaking,  the authority entitled to purchase must  elect to  purchase the same by exercise of the option given to  it under  the licence read with s. 7 of the Act followed  by  a notice  as  required by s. 7 (4) of the Act.  In  s.  7  the expression  "option  of purchasing  an  undertaking"  merely means  the  right of purchasing the  undertaking.  The  word ’option’  is  ’used  because two courses  are  open  to  the concerned   authority   namely,  either  to   purchase   the undertaking or renew the licenee. Once the authority  elects to  purchase then, the notice prescribed in sub-s. 4  should be  given  before the period mentioned thereto. We  are  not able  to  agree  with  the  High  Court  that  the   Section contemplates two stages namely (1) to elect to purchase the 585 undertaking  at least two years before  the  expiration   of the licenee and (2 ) exercise the option to purchase at  the end  of  the  licence period.  The  exercise  of  option  to purchase  as  well as electing to purchase is  one  integral process  and not two independent steps.  By the very act  of electing  to purchase the authority exercises its option  to purchase.   In our opinion sub-ss. 1, 2 and  4 of s.  7  are plain and unambiguous.  They do not lend  them selves to any subtleties. In  construing a provision, all its relevant  parts   should be  considered together and their true  effect  ascertained. One  can  easily find out the reasons behind  the  procedure prescribed in s. 7.  In view of the term of the licenee read with  s.  7 (1 ) and (2 ) the concerned  authority  has  two courses  open before it.  It can either decide  to  purchase

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the   undertaking  or  renew  the licence on the  expiration of  the  period  for which the   licence  is  granted.   The licensee must know in good time what course the authority is going  to adopt so that he may so arrange his affairs as  to Cause  least  inconvenience to himself.  Hence  though   the power  to  exercise  the option to purchase  arises  on  the expiration of the period of licence as per the terms of  the licenee,  s.  7  lays down that if the  authority  wants  to purchase the undertaking it must elect to do so at least two years  before the expiration of the licence and  communicate the  same to the  licensec.  Once  the  concerned  authority exercises  its  option  and communicates  the  same  to  the licensee,  the same is binding on the authority as  well  as the licensec.  Otherwise there is bound to be   considerable inconvenience  both to the licensee and to the  public.   We are not able to find any good reason for reading into s. 7 a requirement that after a notice under s. 7(4) is issued  the authority must again exercise its option to purchase on  the expiration  of the period of licence.  It is no  doubt  true that  the right to purchase    the undertaking accrues  only at  the  expiration  of  the  period  of  licenee  but   for exercising that right, the authority must make its  election within the period prescribed in s. 7 (4) and issue a  notice as  required by that sub-section.  The requirements of s.  7 were fully complied with by the notice issued by the  Bombay State Electricity Board on January 8, 1959.   We shall. now take up the other  contention  advanced   by Mr.  H.R.  Gokhale, learned Counsel for  the  respondent  in support of the decision under appeal.     One  of  his  contentions was  that  whether  the  State Government  was  competent  to purchase the  undertaking  or not,  neither  the Bombay State Electricity  Board  nor  the appellant   was   competent   to   exercise   that    right. His  .argument on this question proceeds thus: Section  7(1) prior to its amendment in 1959 empowered the local authority or the State Government to make the purchase 586 contemplated  under that Section; the Electricity  Board  is not within the contemplation of that Section; the finding of the High Court that the provisions contained in sub-ss. 1, 2 and 4 of s. 7 of the Act read with s. 71 of the  Electricity (Supply) Act, 1948, confers on the appellant such a power is not  correct  because the right or option  to  purchase  the undertaking  was  conferred on the State Government  or  the appropriate local authority under the licence and not  under the provisions of the Act; in other words the said right  is merely a contractual right and not a right flowing from  the provisions  contained  in s. 7 of the Act as. held  by  this Court  in Fazilka Electric Supply Co., Ltd.  v.  The  Commr. of  Income Tax, Delhi(1) and therefore the appellant  cannot take  any assistance from s. 71 of the Electricity  (Supply) Act,  1948.  This contention did not commend itself  to  the High  Court.   We shall now proceed to examine how  far  the same is correct.     Section  71  of  the  Electricity  (Supply)  Act,   1948 provides:                      "Rights  and options to purchase  under               Act  9  of    1910 to vest  in  Board.   Where               under   the  provisions  of       the   Indian               Electricty  Act, 1910 (9 of 1910),  any  right               or  option  to purchase the undertaking  of  a               licensec     vests in the State Government  or               a  local  authority such     right  or  option               shall  be  deemed  to be  transferred  to  the               Board,  and shall be exercisable by the  Board

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             in  accor-  dance with the provisions  of  the               said  Act  applicable to     the  exercise  of               such  right or option by the State  Government               or a local authority, as the case may be." Board  is defined in s. 2(2) of that Act as  meaning,  State Electricity  Board  constituted under s. 5 thereof.   It  is true that before s. 71 can be held to be attracted to a case it  must be shown that the right or option to  purchase  the undertaking  of the licensec vested in the State  Government or a local authority  under  the provisions of the Act.   It is  also true that this Court had held in. Fazilka  Electric Supply Company’s(x) case that from the provisions of the Act read with the rules made thereunder it is manifest that  the condition  as to the option of purchase either by the  local authority  or  by  the  Government  is  the  result  of   an agreement between the applicant who had applied for  licenee and  the Government who granted the licenee.  In  that  case this  Court  was consideting whether the sale  concerned  in that  case  fell  within  the scope of s.  10(2)(7)  of  the Indian  Income  Tax Act or whether it’ ’can be held  ’to  be compulsory acquisition as contended by the assessee.  A sale compelled  by  law may also be a ’sale’ under  the  Sale  of Goods  Act.   But  that does not mean  that  the  right   to purchase  the  undertaking does not vest  in  the  concerned authority  (1) [1962] 3 Supp. S.C.R. 496. 587 by virtue of s. 7.  That right may accrue either because  it is directly conferred by s. 7 or because it is obtained as a result  of a contract compelled by that Section.  In  either case it is a right obtained by the authority by virtue of s. 7.   There  is  no dispute that  the  licence  granted  must conform to the requirements of s. 7.     In  Okara  Electric  Supply Ltd. and Anr.  v.  State  of Punlab(1) this Court observed that ss. 5,. 6 and 7 show that in  the  case of a licensee, specific provisions  have  been made  for  the acquisition of the undertaking  in  cases  of revocation   or   cancellation   of   licenses.   For    the aforementioned  reasons we hold that appellant had  acquired the  right  to  purchase the  undertaking  by  the  combined operation  of s. 7 of the Act and s. 71 of  the  Electricity (Supply) Act, 1948.     It  was next contended on behalf of the respondent  that by the time the licence period expired, s. 7 of the Act  had been  amended and s. 71 of the Electric (Supply)  Act,  1948 repealed,  no  provision  was made to  preserve  the  rights already acquired under those provisions, hence the appellant is not entitled to purchase the undertaking.  It is not  the case of the respondent that either expressly or by necessary implication,  the new law had taken away the right  acquired earlier.   That  being so s. 6 of the  General  Clauses  Act comes  to the aid of the appellant.  That  Section  provides that  where that Act or any Central Act or  Regulation  made after  the  commencement of that Act  repeals  an  enactment hitherto  made  or  hereafter  to be  made  then  unless   a different intention appears, the repeal shall not affect any right,   privilege,  obligation  or    liability   acquired, ’accrued  or incurred under any enactment so  repealed.   It also  saves  the  previous operation  of  any  enactment  so repealed or anything duly done or suffered thereunder.     The right to purchase the respondent’s undertaking  came to  vest  firsfly  in the  Bombay  State  Electricity  Board subsequently  in  the  appellant in view.  of  the   various notifications   referred  to earlier.  That right has to  be worked  on  the  basis of law as it stood on  the  date  the

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notice under s. 7(4) of the Act was given.     In  this Court a new contention was taken on  behalf  of the  respondent  namely that in any  case,  the  appellant’s right to purchase is conditional on the payment of the price as  provided in s. 7 and hence the appellant  cannot  demand possession of the undertaking without paying the price after the  same is determined according to law.   This  contention had  not been taken before the High Court.  The  High  Court may go into this question while deciding the writ petition. (1). [1962] S.C.R., 239. 588     For the reasons mentioned earlier we allow this  appeal, set  aside  the order of the High Court and remit  the  case back  to High Court for deciding the issues that  were  left open.  Costs of this appeal shall be costs in the cause. G.C.                                      Appeal allowed. 589