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CASE NO.: Appeal (civil)  312 of 2002

PETITIONER: Guntur Tobaccos Ltd

RESPONDENT: The Transmission Coprn. of A.P. & Anr

DATE OF JUDGMENT: 11/04/2008

BENCH: A.K. MATHUR & ALTAMAS KABIR

JUDGMENT: J U D G M E N T CIVIL APPEAL NO. 312 OF 2002

Altamas Kabir,J.

1.      This appeal, by way of special leave, is  directed against the judgment and order dated 29th  December, 2000, passed by the Division Bench of  the Andhra Pradesh High Court in Letters Patent  Appeal No. 78 of 1988, which was preferred against  the order passed by the learned single Judge in  A.S. No. 610 of 1979 on 24th June, 1987. 2.      As it appears from the materials on record, the  appellant herein, Guntur Power and Light Limited,  hereinafter referred as "GPL", was incorporated for  the purpose of running an Electrical Undertaking to  supply electricity to the Guntur area of Andhra  Pradesh.  It was granted a licence for the aforesaid  purpose under the provisions of the Indian Electricity  Act, 1910 and acquired various properties for the  Undertaking. 3.      In 1938, GPL ceased to generate electricity and  it confined itself only to distribution of power.   Receiving and distributing stations were located in  places belonging to the GPL, outside the properties  forming the subject matter of the present appeal.  It  is the categorical case of the appellant herein that  the said properties were not used by GPL for the  purposes of the Electricity Undertaking or for any  other ancillary purpose from the year 1939 onwards. 4.      On 3rd August, 1945, GPL granted a lease in favour  of Guntur Tobacco Company, hereinafter referred to as  "GTC", a sister company, in respect of two acres of  land with right to construct buildings thereon in  terms of Clause 5 of the registered Lease Deed and  also with an option to purchase the demised land in  terms of Clause 8 thereof.  By another registered  Lease Deed executed by GPL in favour of GTC on 4th  November, 1949, a further portion of vacant land  measuring one acre was also demised in favour of GTC,  which is the appellant in these proceedings.   Subsequently, two more lease deeds were executed by  GPL in favour of GTC on 15th March, 1950 and 18th March,  1954, extending the period of the lease till the end  of the year 1971.  In the Lease Deed of 18th March,  1954, clause 8 containing the option of purchase was  substituted by a new clause, which, inter alia,

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provided that even if the lessors came to be wound up  voluntarily or went into liquidation or became  insolvent, or if the lessors ceased to carry on  business, the lease would not terminate but would  remain in full force with the right to the lessees to  purchase the demised lands and buildings and  structures thereon belonging to the lessors at the  market value or be entitled to repayment of the market  value of the buildings and super structures which may  be put up by the lessees. 5.      In 1956, the Government of Andhra Pradesh  acquired the Electrical Undertaking from GPL in  exercise of its powers under the Andhra Pradesh  Electricity Supply Undertaking Acquisition Act, 1954,  whereupon the Undertaking of GPL vested in the State  Government with effect from 1st May, 1956.  Upon such  vesting, the demised premises, along with the land and  buildings situated thereupon, became the property of  the State Government by virtue of such acquisition.   The Transmission Corporation of Andhra Pradesh, being  the respondent No. 1 herein, was formed on 1st April,  1959, under Section 5 of the Electricity Supply Act,  1948, and pursuant to its policy the State Government  transferred the Undertaking of GPL with all its assets  to the Andhra Pradesh State Electricity Board, which  became the owner of the said properties. 6.      Even after formation of the respondent No. 1  Corporation, GTC continued to remain in possession of  the properties in question purportedly on the strength  of the Lease Deeds executed by GPL in its favour.   According to the respondent No. 1 Corporation, in 1961  the Lease Deeds executed by GPL in favour of GTC came  to be scrutinized and it was noticed that GPL had  executed the leases in favour of GTC without obtaining  requisite sanction of the Government in terms of  Section 9(2) of the Indian Electricity Act, 1910 which  rendered the Lease Deeds void.  The Andhra Pradesh  State Electricity Board was of the view that the  possession of GTC was in the nature of a licence and  GTC was entitled to remain in possession as long as  the respondent No. 1 Corporation, as owner of the  property, permitted it to do so.  Consequent  thereupon, the respondent No. 1 Corporation issued a  letter on 9th January, 1962, to the appellant informing  it that the Lease Deeds executed in its favour were  void and it was also called upon to vacate the demised  premises and to deliver possession thereof to the  respondent No. 1 Corporation.  The appellant responded  to the said letter by a lawyer’s notice dated 22nd  January, 1962, contending that it was entitled to  remain in possession of the demised property till  1971.  The appellant continued to remain in possession  of the demised property even after expiry of the lease  and instead of vacating the same sought to exercise  its option of purchase of the said properties by a  notice dated 29th October, 1969.  On 26th March, 1971,  the respondent No. 1 Corporation by its letter called  upon GTC to quit the suit properties and surrender the  possession thereof to the Electricity Board by 1st  January, 1972.  An attempt to arrive at an amicable  settlement having failed, the respondent No. 1  Corporation filed a suit, being O.S. No. 15 of 1973,  in the Court of Additional Subordinate Judge, Guntur,  against GTC in 1972 seeking its eviction from the suit  property, being the demised properties, on the ground

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that the leases in question executed and registered in  favour of GTC were not valid and that GTC was liable  to be evicted as mere licensees of the respondent No.  1 Corporation.  The appellant herein contested the  suit by filing written statement contending that  although GPL had been incorporated for the purpose of  distributing electricity in Guntur area and was also a  licensee under the Indian Electricity Act, 1910, for  the generation and distribution of electricity in the  said area, in 1938 it ceased its operations relating  to generation of electricity and confined itself to  distribution of power only.  According to the  appellant, since the suit properties were no longer  used by GPL from 1939 for the purposes of the  Electricity Undertaking or for any other connected  purpose, from 1939 it ceased to be part of the  Undertaking for the purposes of generation and  distribution of electricity and the Lease Deeds  executed by GPL in favour of GTC were not, therefore,  hit by the provisions of Section 9(2) and (3) of the  Indian Electricity Act, 1910.  It was also contended  that since the suit properties had ceased to be part  and parcel of the Electricity Undertaking after 1939,  it could not have vested in the Andhra Pradesh State  Electricity Board or the State Government and  consequently the appellant was entitled to remain in  possession of the suit properties at least till the  end of 1971, particularly, when the respondent No. 1  Corporation had accepted the rents from the appellant  herein in the manner stipulated in the Lease Deeds and  had even issued receipts therefor.  It was contended  that because of the conduct of the respondent No. 1  Corporation it was estopped from disowning such  relationship and could not treat the appellant as a  licensee. 7.      On the basis of the pleadings, initially five  issues were framed, namely: - "1.     Whether the lease deeds dated 3rd August,  1945, 4th November, 1945, 15th March, 1950 and  18th March, 1954 obtained by the defendant  are void under Section 9(3) of the Indian  Electricity Act of 1910? 2.      Whether this Court has jurisdiction to  entertain the suit in view of the specific  provisions of the Andhra Pradesh Buildings,  Lease and Rent Control Act? 3.      Whether the plaintiff is entitled to claim  the future profits? 4.      Whether the plaintiff is entitled to recover  possession of the suit property from the  defendant? 5.      To what relief?"

Subsequently, two additional issues were framed  on 19th August, 1976, namely: - "1.     Whether the defendant is entitled to the  benefits of Section 53A of the Transfer of  Property Act? 2.      To what equities is the defendant entitled?"

8.      The trial court decided issue No. 1 initially  framed in favour of respondent No. 1 Corporation/  plaintiff and against the appellant/defendant on the  ground that the Lease Deeds were void since they were  contrary to Section 9(2) and (3) of the Indian

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Electricity Act, 1910.  The trial court also found  that the said agreements of lease were not binding on  the respondent No. 1 Corporation/plaintiff. 9.      On issue No. 2, the trial court found that it had  jurisdiction to entertain the suit. 10.     On additional issue No. 1, it was held that the  appellant herein/defendant was not entitled to claim  protection under Section 53A of the Transfer of  Property Act. 11.     On issue No. 4, it was held that the respondent  No. 1 Corporation/plaintiff was entitled to recover  possession of the suit property from the appellant  herein/defendant. 12.     Issue No. 3 and additional issue No. 2 were also  found in favour of the respondent No. 1 Corporation/  plaintiff.  Accordingly, a decree for possession was  passed in its favour against the appellant/defendant. 13.     The appellant herein filed an appeal before the  single Judge of the Andhra Pradesh High Court, which  was dismissed on 4th June, 1987, giving rise to a  Letters Patent Appeal before the Division Bench of the  said High Court. 14.     Before the Division Bench of the High Court, it  was contended that both the courts below had factually  erred in arriving at a finding that the leases in  question had been executed without the prior  permission of the Government as contemplated under  Section 9(2) of the Indian Electricity Act, 1910.  It  was urged that the State was fully aware of the fact  that the property had been demised to the appellant  herein, inasmuch as, when the appellant applied for a  loan under the State Aid to Industries Act, the State  Government advised the appellant to get the lease  extended so that there was sufficient time for the  appellant to pay back the loan.  It was also submitted  that the matter had been examined by the Government  Solicitor at Madras and in his opinion, which  has  been set out in the impugned judgment, it had been  indicated that the lessors of the leased lands, should  execute an undertaking to the borrowing company to  renew the leases until 1st May, 1971 or until the final  instalment of the State Aid Loan with interest was  repaid to the Government.  It was contended that it is  only after the said letter of the Government Solicitor  that the Government extended a loan of Rs.2 lacs to  the Company, which sum was also repaid during the  period of the lease and during such period the lease- hold property stood mortgaged with the Government. 15.     On the basis of the aforesaid submission, the  Division Bench of the High Court held that the  properties had been demised in favour of the appellant  with the implied sanction of the State Government and  the lease was not therefore hit by Section 9(2) and  (3) of the Indian Electricity Act, 1910. 16.     Despite the aforesaid finding, the Division Bench  while observing that the aforesaid finding was  sufficient to grant the relief prayed for by the  appellant, took note of certain further developments,  namely, that though the lease was to expire in 1971,  the Electricity Supply Undertakings (Acquisition) Act,  1954, came to be enacted in the meantime.  The  Division Bench observed that the Act had   been  enacted for the purpose of providing for the  acquisition by the Government of all Undertakings   which supplied electricity in the State of Andhra   

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Pradesh.  Section 4 of the Act empowers the Government  to pass an order in writing that an Undertaking would  vest in the Government on the dates specified therein.   Section 5 provides for payment of compensation to the  lessee.   Section 6 provides for vesting of all fixed  assests, cash security, investments, documents, and  obligations of the lessee Undertaking as on the date  of vesting.  The Division Bench found that the assets  of the Undertaking stood vested with the Government in  terms of an order passed in accordance with Section 3,  as a result whereof, the Undertaking stood vested with  the Government with effect from 1st May, 1956.  The  Division Bench also observed that neither the 1954 Act  nor the order of vesting of 1st May, 1956, had been  challenged by the appellants. 17.     On the basis of the aforesaid reasoning the  Division Bench came to the conclusion that since the  Electricity Undertaking of the appellant had vested in  the State Government from 1st May, 1956, the lessor  itself had lost all rights over the property and the  same stood extinguished by the promulgation of the  1954 Act.  The Division Bench came to the conclusion  that since the lessor had lost its rights of ownership  over the property in question, the provisions in the  lease deed regarding option of purchase as contained  in clause 6 thereof became unenforceable against the  lessor.  The State Government having stepped into the  shoes of the lessor, it was not empowered by the  provisions of the statute to sell any part of the  Undertaking to the licensees.  It was held that clause  6 of the agreement could not, therefore, be enforced  as it would be against public policy and would also  defeat the purpose of the Act itself. 18.     Thereafter, on an analysis of the provisions of  the licence which had been granted to GPL, the  Division Bench held that in the context of the  Electricity Act, 1910, all the properties of the  Electricity Undertaking remained a part of the  Undertaking even if it ceased to use the same for  generation or supply of electricity.  Referring to the  provisions of Section 3(2)(d)(ii) the Division Bench  held further that what was material, was the question  as to whether the properties formed part of the  Electricity Undertaking when the licence had been  granted to it.  In arriving at the aforesaid  conclusion, the Division Bench also mentioned that  clause 12(b) of the licence did not mention that if  generation was stopped from a particular site, that  site would be excluded from the Undertaking.  By  holding as above, the Division Bench negated the  submissions of the appellant that since the properties  were no longer used for generation of electricity, it  would have to be held that the said properties ceased  to be the properties of the Electricity Undertaking  and was not therefore affected by the Electricity  Supply Undertakings (Acquisition) Act, 1954.  On the  basis of the aforesaid findings, the Division Bench  ultimately held as follows :- "For all these reasons, we hold that  although the agreement dated 18.3.1954 was  not hit by Section 9 of the Indian  Electricity Act, 1910 but the second part of  the agreement which gives an option to the  licensee of purchasing the property cannot  be enforced because of the statutory

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obligation of A.P. Electricity Supply  Undertakings (Acquisition) Act, 1954."

19.     Mr. Pallav Sishodia, learned counsel for the  appellant, while questioning the finding of the  Division Bench of the High Court submitted that since  the leases in question had been executed in compliance  with the provisions of Section 9(2) of the Indian  Electricity Act, 1910, the lessor was under an  obligation to comply with the conditions relating to  option of purchase as contained in clause 6 of the  lease deed.  It was submitted that even if the  properties of the Undertaking are accepted to have  vested in the State Government, the status of the  lessor remained the same though the identity may have  been altered and the person who had stepped into the  shoes of the lessor was equally bound to give effect  to the provisions of clause 6 of the lease deed in the  event the lessee opted to exercise such right.

20. However, Mr. Sishodia also reiterated the  submission that once the demised property was no  longer used for the purpose of generation of  electricity, it ceased to be a part of the Electrical  Undertaking and did not, therefore, vest in the State  under the 1954 Act.  Mr. Sishodia urged that the  Division Bench had erred in interpreting the  provisions of Section 3(2)(d)(ii) along with Section  4(A) and Section 6 of the Indian Electricity Act, 1910  in arriving at a finding that till such time the  licence granted for generation of power was either  modified or rectified, all the properties belonging to  the Undertaking would continue to remain a part of the  Undertaking.  It was urged that it was on account of  such faulty reasoning that the Letters Patent Appeal,  which was filed by the appellant, came to be  dismissed. 21.It was lastly urged by Mr. Sishodia that having  included the clause  relating to option of purchase  and having put the appellant into possession of the  demised property, the appellant’s possession was also  protected under Section 53A of the Transfer of  Property Act, 1982.  In support of his said contention  Mr. Sishodia referred to and relied upon the decision  of this Court in Shrimant Shamrao Suryavanshi and Anr.  Vs. Pralhad Bhairoba Suryavanshi   (2002 (3) SCC 676),  in which this Court observed that a person who  obtained possession of the property in part- performance of an agreement of sale, could defend his  possession in a suit for recovery of possession filed  by the transferor or by a subsequent transferee of the  property claiming under him, even if a suit for  specific performance of the agreement of sale becomes  barred by limitation.

22.     Mr. Rakesh K. Sharma fully supported the decision  of the Division Bench impugned in this appeal and  submitted that no case had been made out for  interference in the appeal.  He reiterated the  submissions made before the High Court that once the  Undertaking had vested in the State in terms of the  1954 Act, all the properties of the Undertaking,  whether being used or not for the generation of  electricity, would stand vested in the State

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Government.  He also reiterated that in view of the  provisions of the Indian Electricity Act the State  Government was under no obligation to act in terms of  the condition stipulating option of purchase by the  lessee.   He submitted that once the Electricity  Undertaking, namely, GPL, came to be vested in the  State Government under the 1954 Act and the lease was  terminated by the State Government, the appellant  continued to be in occupation of the demised premises  as a licensee and such licence could be terminated at  the will of the licensor.  Mr. Sharma urged that the  State Government was no longer under any obligation to  comply with the provisions relating to the option of  purchase contained in clause 6 of the lease agreement,  since the lease  deeds had ceased to be operative.

23. We have carefully considered the submissions of  the respective parties and do not find any reason to  disagree with the view taken by the Division Bench of  the High Court, in dismissing the Letters Patent  Appeal. Having regard to the opinion given by the  Government Solicitor, the finding arrived at by the  High Court regarding the implied consent of the State  Government does not require any interference.

24.     The other submission made on behalf of the  appellant that, since the State Government had stepped  into the shoes of the lessor, it was bound by the  terms of the lease agreement and in particular clause  6 thereof, cannot also be accepted in view of the  provisions of Sections 4 and 6 of the A.P. Electricity  Supply Undertakings (Acquisition) Act, 1954.  The  defence taken on behalf of the appellant/lessee that,  since the demised lands were no longer required by  GPL, they ceased to be part of the Electricity  Undertaking, has been rightly rejected by the High  Court.  The High Court has considered the matter in  some detail and various decisions of this Court and  other High Courts have been considered by it in  ultimately coming to the conclusion that in view of  Sections 4 and 6 of the 1954 Act read with the  provisions of the Indian Electricity Act, 1910, all  the properties of the Undertaking for which licence  was granted for generation of electricity, remained a  part of the Undertaking unless the licence had been  modified. As has been noted by the High Court, the  properties involved were mentioned and included in the  licence granted to GPL and the said licence remained  unchanged when on the basis of the order passed by the  Government under Section 3 of the 1954 Act, all the  properties of the Electricity Undertaking came to be  vested in the State. Moreover, once the lease came to  an end, the State Government was no longer under any  obligation to act in accordance with the option given  to the lessee to purchase the property. 25.     In view of the above, we find no merit in the  appeal and the same is accordingly dismissed, but  without any order as to costs.