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PETITIONER: KERALA STATE ELECTRICITY BOARD

       Vs.

RESPONDENT: INDIAN ALUMINIUM CO.

DATE OF JUDGMENT01/09/1975

BENCH: ALAGIRISWAMI, A. BENCH: ALAGIRISWAMI, A. BHAGWATI, P.N. GOSWAMI, P.K. SARKARIA, RANJIT SINGH GUPTA, A.C.

CITATION:  1976 AIR 1031            1976 SCR  (1) 552  1976 SCC  (1) 466  CITATOR INFO :  RF         1976 SC1999  (8)  R          1978 SC 215  (30)  RF         1980 SC1955  (12)  F          1983 SC 937  (33)  R          1984 SC 981  (8)  MV         1985 SC 421  (61)  R          1986 SC  63  (7)  F          1987 SC1837  (54)  RF         1987 SC2034  (15)  F          1990 SC 781  (71)  R          1990 SC1637  (44)  E          1990 SC1851  (36)  RF         1990 SC2072  (10,44)

ACT:      Kerala Essential  Articles Control  (Temporary  powers) Act, 1961,  S.2(a) and  S.3-Kerala State  Electricity Supply (Kerala  State   Electricity  Board   and  Licensees  Areas) Surcharge Order made under s. 3-Constitutional validity of - constitution of  India, 1950-Art.  246-Notwithstanding"  and "Subject to"  in Art.  246(1) and  (3) meaning of-Entries 43 and 44  of List I and Entry 38 of  List III-Doctrine of pith and substance.      Presidential assent-If  could be given to cure possible repuganancy-If could be given to notifications-Assent to the whole  Act  not  merely  to  one  amendment  when  referred- Subordinate Legislation-Principle regarding validity of.      Section 2(a)  of the Kerala Esseential Articles Control (Temporary Powers)  Act, 1961 defines "essential article" as meaning any  article (not  being  an  essential  article  as defined in  Essential Commodities  Act. 1955)  which may  be declared by  the Government  by  a  notification  to  be  an essential article.  Section 3  enables the State Government, if of the opinion that it is necessary or expedient so to do for maintaining  or increasing the supplies of any essential article etc.  to make  certain notified  orders. The Act was originally intended  to be  in force  for five years but its life was extended by successive amendments.

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HEADNOTE:      In exercise of powers conferred by s.2(a) of the Kerala Act, the  State   Government declared  ’electricity’  as  an essential article  in 1965.  In 1968,  the State  Government passed an  Order called  the Kerala State Electricity Supply (Kerala  State   Electricity  Board   and  Licensees  Areas) Surcharge Order,  1968, under  s.3 of  the  Kerala  Act,  by which, the  State Electricity  Board was required to collect surcharge from  non-licensee consumers  of electricity  even though the  Board may  have entered into long term contracts with them  with  regard to the rate at which electricity was to be supplied to them.      The   respondents,   who   were   bulk   consumers   of electricity, questioned  before the  High Court the validity of the  order. The order having been struck down by the High Court, in  appeal to  this Court,  the respondents supported the judgment  of the  High Court  on the  grounds:  (i)  The Kerala Act is repugnant to the Electricity Act, 1910 and the Electricity (Supply)  Act, 1948  (both of  which are Central Acts) and,  in particular  the latter,  which  falls  within Entries 43 and 44 of List I; and that the State Act trenches upon the  field occupied  by the 1948-Act which falls partly under Entry  43 of  List I and partly under Entry 38 of List III. On  behalf of  the appellants it was contended that the Kerala Act  falls under Entries 26 and 27 of List II, and in any event,  the Presidential  assent to  the Kerala  Act has cured the repugnancy.      Allowing   the   appeal   (per   majority-Alagiriswami, Bhagwati, Goswami and Sarkaria, JJ.): ^      HELD: The  Kerala Act, the declaration of ’electricity’ as an  essential article  under s.  2(a), and  the Surcharge Order made under s. 3, are valid. [581 G]      1. The  question of repugnance arises only in case both the legislations  fall within  the same  List, namely,  List III. If any legislation is enacted by a State Legislature in respect of a matter falling within List I that will be void. There can,  therefore, be  no question of repugnance between the Electricity  Act, 1910 and the Electricity (Supply) Act. 1948 on the one hand, and the Kerala Act on the other if the first two  Acts fall in List I or List III and the State Act in List II. [562 D]      Indu Bhushan  v.  Sundari  Devi  [1970]  1  S.C.R.  443 referred to. 553      2. (a)  The words  "notwithstanding" in  clause (1) and "subject to"  in clause  (3) of Art. 246 of the Constitution mean that  where an entry is in general terms in List II and part of  that entry is in specific terms in List I the entry in List I takes effect notwithstanding the entry in List II. This is  also on  the principle  that the ’special" excludes the "general" and the general entry in List II is subject to the special entry in List I. [563 C]      (b) The word "notwithstanding" also means that if it is not possible  to reconcile the two entries the entry in List I will  prevail. But  before that  happens attempt should be made to decide in which List a particular legislation falls. For deciding  under which  entry  a  particular  legislation falls, the  theory of  "pith and substance" has been evolved by Courts.  If in  pith and  substance a  legislation  falls within one  list or  the other,  but  some  portion  of  the subject matter  of that  legislation  incidentally  trenches upon and might come to fall under another List, the Act as a whole  would   be  valid   notwithstanding  such  incidental trenching. [563 D-E]

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    (c) Both  the 1910  Act as  well as  the  1948-Act  are existing  law   as  contemplated   under  Art.  372  of  the Constitution. An  existing law  continues to  be valid  even though the  legislative power  with respect  to the  subject matter of  the existing  law might  be in  a different  List under the  Constitution from  the List  under which it would have fallen  under the  Government of  India Act, 1935. But, after the Constitution came into force an existing law could be amended  or repealed  only by the Legislature which would be competent  to enact  that law  if’ it  were to  be  newly enacted. [566 G]      3(a) The  Statement of  Objects and  Reasons though not relevant for  the purpose of interpreting the sections of an Act, will  throw light  upon the  object of  the Legislature from the historical point of view [569 A]      (b) The  1948-Act was  enacted for  the purpose  of co- ordinated development  of electricity in India on a regional basis. The  Statement of  objects and  Reasons  states  that there was  necessity for the constitution of semi-autonomous bodies like  Electricity Boards to administer grid system on quasi-commercial lines. The Act deals with the incorporation and regulation  of Electricity  Boards. It created a central authority (which  is not  an incorporated  body) as  well as various   provincial    Electricity   Boards    (which   are incorporated bodies). A Provincial Electricity Board located in one  Province and  operating in  a neighbouring  Province could carry  on its  operations by  agreement with the other Province or  Provinces. The  jurisdiction of  an Electricity Board, however,  was confined  mainly to the jurisdiction of an Province  under the Act the executive power vested in the Provinces. The Statement of objects and Reasons further says that the  semi-autonomous  Electricity  Boards  contemplated under the  Act could not be set up by provincial Governments under the  then existing constitutional Act as they would be in the  nature of  trading corporation within the meaning of entry 33  of the  Federal Legislative List of the Government of India Act, 1935. [568A-H]      4. The  argument that  the 1948_Act falls under entries 43 and 44 of List I has no substance. [568 A]      (a) A  reading of  the Statement of Objects and Reasons shows that  the 1948-Act was a legislation under an entry in the Concurrent  List. Although the Statement of objectcs and Reasons mentions  entry 33  of the  Federal  List    of  the Government of  India Act,  1935 (corresponding to entries 43 and  44   of  List   I  of   the  Seventh  Schedule  to  the Constitution) it does not show that the 1948-Act falls under entry 44.  Nor is  the fact  that entry  33 of List I of the Government of India Act, 1935 was mentioned in the Statement of objects and Reasons a conclusive test. [568 E]      (b) From  an examination of the provisions of the 1948- Act it  would be obvious that one part of the Act deals with the constitution of the Board,the incorporation of the Board and the  regulation of  its activities. But the main purpose of the  Act is  for, rationalising the production and supply of electricity.  The regulation  contemplated in  entries 43 and 44  of List  I is  not regulation  of  the  business  of production, distribution and supply of electri- 554 city  of   the  Corporation.  The  provision  regarding  the incorporation and    regulation of Electricity Boards should be taken  to be  only incidental to the provisions regarding production,  supply   and   distribution   of   electricity. Therefore, the  provisions of  the 1948  Act  regarding  the Board’s functions  do not make it one falling under entry 43 of List I. [570 H; 571A]

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    R. C.  Cooper v.  Union [1970] 3 S.C.R. 520 and Ramtanu Housing society v. Maharashtra [1971] 1 S.C.R. 719 followed.      (c) The  1948-Act in  pith  and  substance,  should  be deemed to  be one falling under entry 38 of List III. In the Present case  the incorporation  of  the  Stage  Electricity Boards is  merely for  the rationalisation of the production and supply  of electricity, for taking measures conducive to electrical  development   and  for  all  matters  incidental thereto. Furthermore,  Electricity Boards  are  not  trading corporations; they  are established  to promote co-ordinated development of  the generation,  supply and  distribution of electricity on  a no-profit-no-loss  basis. In the discharge of  their  functions,  they  are  guided  by  directions  on questions of  policy given  by the  State Governments. There are no shareholders and there is no distribution of profits. This is  another reason  why the  1948-Act cannot be said to fall under entry 43 of List I. [573 B-D]      (d) Even  assuming that  part  of  the  1948-Act  is  a legislation with  respect to incorporation and regulation of a trading  corporation, falling  under entry 48 of List I of Schedule Seven,  the rest  of it will fall under entry 38 of List III.  The  Kerala  Act  has  nothing  to  do  with  the incorporation and  regulation of the Electricity Boards and, therefore, it  can only  relate to entry 38, List III, if at all. [573 F-G]      (e) The  1910 and  1948-Acts together  form a  complete code with  respect to  entry 38 in List III and the Board is only an  instrument fashioned  for carrying out this object. [571 A]      (f) Therefore  both the  1910-Act and 1948-Act could be amended or  repealed by the Parliament and also by the State Legislature if  it obtains  Presidential assent  to  an  Act amending or repealing the 1910-Act or 1948-Act. [566 H]      A. K.  Krishna v. State of Madras [1957] SCR 399; P. N. Kaul v.  The State of J & K. [1959] Supp.2 SCR 270 and J & K State v. M. S. Farooqi [1972] (3) SCR 881, referred to.      (g) The  assent of  the President  should be deemed not merely to  the substitution  of the  words five years by the words seven  years in  the Kerala  Act but  to the  Act as a whole and  any repugnance  between the Kerala Act on the one hand and  the 1910-Act  and 1948-Act  on the other should be doemed to  have been cured by such assent. The Kerala Act in so far  as it  deals with  electrieity can  be deemed  to be legislation under entry 38 of List III Though the Act itself has not  declared any  article as an essential article, when the declaration was made under s.2(a) in 1965 it became part of the Act. When the President assented to the Amendment Act of 1967  the declaration  of electricity  as  and  essential article had  been made and should be deemed to have become a part of the Act. [575 F; C]      (5) But  the Kerala  Act  is  a  matter  falling  under entries 26 and 27 of List II. [575 A]           (a)  "Essential  article"  is  a  term  which  has      acquired a  defining connotation  in Indian legislative      practice  and  is  not  a  vague  or  a  general  term.      "Essential  commodity"   defined   in   the   Essential      Commodities Act, 1955 includes practically every matter      regarding industry within the legislative competence of      Parliament.  The   term  "essential  commodity"  is  an      expression corresponding  to a  commodity essential  to      the life  of the  community. It  is  not  open  to  the      authority exercising  powers under s.2(a) of the Kerala      Act to  declare and any every commodity as an essential      commodity. That  Act deals  with esential  articles not      being essential  article dealth with the by Central Act

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    of 1955.  It is  not  a  legislation  with  respect  to      electricity and,  therefore, does  not fall under entry      38 of  List III.  Electricity, being  beyond  doubt  an      essential article  may be  declared to  be an essential      article under the Act. In that case the power 555 exercised is  not in relation to electricity qua electricity but electricity  as an essential article. The Act, therefore in pith  and substance is with respect to trade and commerce and production,  supply and  distribution of electricity. It is not  a permanent  legislation with respect to electricity but a temporary one dealing with a temporary situation. [574 A; F-H]      (b) The  Surcharge order was necessary for the survival and existence  of the  Board without  which there  can be no production  or   supply  of  electricity.  It  is  no  valid criticism of  this view  to say that the powers of the Board under the  1948-Act are  over-ridden by  the Surcharge order and the  order is, therefore, repugnant to the 1948-Act. The Board was  anxious to  make no  Surcharge order.  This is  a simple case  of a  contract being over-ridden in exercise of statutory powers. [575 B]      6(a) It  is not  correct to  say that  in so far as the consequence of  a declaration under s.2(a) of the Kerala Act was that  the State  Government was  enabled to  make orders regarding   production,    supply   and    distribution   of electricity, there  was a  possibility of  such orders being repugnant to the provisions of the 1910-Act and the 1948-Act and, therefore,  any such repugnancy was cured by the assent given by  the President.  It is  only the  actual repugnancy that can  be  cured  by  Presidential  assent  and  not  the possibility of repugnancy. [575 G]      (b)  No   Presidential  assent   was  possible  to  the notification Art.  254(2) does  not contemplate Presidential assent to  notifications issued  under the  Act. The Article contemplates Presidential  assent only  to laws  made by the Legislature of a State. [567 G]      7(a)  Notwithstanding   the   fact   that   subordinate legislation is  laid on  the table of House of Parliament or State Legislature  and being subject to such   modification, annulment or  amendment as  they may  make  the  subordinate legislation cannot  be said  to be valid unless it is within the scope  of the rule making power provided in the statute. Where  an  executive  authority  is  given  power  to  frame subordinate legislation  within stated limits, rules made by such authority,  if outside  the scope  of  the  rule-making power should  not be  deemed to be valid merely because such rules have  been  placed  before  the  Legislature  and  are subject to  such modification, annulment or amendment as the Legislature may  think fit.  The process  of such amendment, modification or  annulment is not the same as the process of legislation and  in particular it lacks the assent either of the President or the Governor of the State. [576 E-G]      Minister of  Health v.  The King,  [1931] A.C.  494 and Institute of  Patent Agents  v. Lockwood,  [1894]  A.C.  347 referred to.      (b) If  a declaration  made under  s. 2(a)  or an order made under  s.3(a) is  not within  the scope  of the Act, it should be held to be not valid. [576 H]      (c) A  declaration can  still be attack if the power to make such  a declaration  was beyond  the scope of the power delegated. even if subsequent to the declaration the Act was amended and  the President  had given  his assent  to the to Amending Act.[577 A]      (d) But the power conferred by the Kerala Act is a case

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of conditional legislation. The various types of powers that can be  exercised under  that Act are enumerated in it. Only an article  with reference  to which  those powers are to be exercised is  left to  be determined  by the Executive. That will vary  from time to time. It is the Exceutive that would be in  a position to judge when and under what circumstances an article  becomes an  essential article and, therefore, it is  necessary.   to  control   the  production,  supply  and distribution of trade. and commerce in that article.[578 H]      The Queen  v. Burah (5 L.R.178@ 194) State of Punjab v. Khan Chand  A.I.R. 1974  SC. 543  and Gwalior Rayon Mills v. Asst. Commr. S.T. A.I.R. 1974 S.C. 1660 followed. 556      The  Kerala   Essential  Articles   Control  (Temporary Powers) Act,  1961 is an invalid piece of legislation on the ground of  excessive  delegation  and  the  declaration  and Surcharge order  made respectively  under s.2(a)  and s.3 of that Act are of no consequence.[582 G]      1(a) The  definition of  essential article leaves it to the State  Government to  decide what should be an essential article for  the purpose  of the Act. The legislature is, of course presumed  to know  the limits  of its  competence and assuming it is permissible to attribute similar knowledge to the Government  as to  the bounds  of  its  authority  under s.2(a) an  essential article  may be  any article covered by any of the entries in List II or List III except the classes of commodities  mentioned as  an essential  commodity in the Essential Commodities  Act. Until, therefore, the Government issued a  notification  under  s.2(a)  declaring  electrical energy to  be an  essential article  almost four years after the Act  came into  force, it was not possible even to guess what the  Act was  about. Thus  the Act  as  passed  had  no positive  content,   it  was   and  empty   husk   and   its insubstantiality, if  by itself  not an invalidating factor, exposes the  want of  a declared  legislative policy  in the Act. The  Act does  not provide any guidance or lay down any test to  ascertain what  makes an  article essential for the purpose  of   the  Act.   The  reference  to  the  Essential Commodities Act  in s.2(a) which defines "essential article" is merely  to  exclude  from  its  purview  the  commodities covered by  the Essential Commodities Act and only serves to emphasise its  indefiniteness and makes it more difficult to find any  clue to the nature of the articles the Legislature had in  mind in  enacting the  Kerala Act. Almost the entire legislative field  was left open to the Government to choose from and decide according to their own lights what should be an essential article. [583 C-G]      (b)  The  Legislature  cannot  delegate  the  essential legislative function,  which means that the Legislature must declare the policy of the law and provide a standard for the guidance of the subordinate law making authority. The Kerala Act authorises  the Government  to declare  any  article  as essential  except   those   mentioned   in   the   Essential Commodities Act without laying down any definite criteria or standards. This  is surrendering  unguided  and  uncanalised power to the executive. The Act cannot be called an instance of conditional  legislation. The  powers  conferred  on  the Government  by   the  Kerala   Act  exceed   the  limits  of permissible delegation. [583 H]      (c) The Kerala Act of 1961 was to remain in force for a period of five years from January 1962. The Principal Act as well as  the Amending  Acts of 1967, 1969, and 1970 received the assent  of the  President. But the Act as passed in 1961 did not  appear to contain any provision which was repugnant to any  Central Act  or existing  law; that  being  so,  the

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assent given  to it  seems redundant  and of no consequence. Article 254(2)  contemplates an  existing repugnancy and not possible future inconsistencies.      [Obiter: Assuming that assent given by the President to the amending  Acts would  have  the  effect  of  curing  the repugnancy between  the declaration  under  s.2(a)  and  the Surcharge Order  under s.3  of the  principal Act on the one hand and  the Central Acts of 1910 and 1948 on the other, If the declaration  and the  Surcharge Order  were outside  the Act,could not  cure the  repugnancy arising  from these  two orders.[584 H]      The orders  made by  the-State Government  under s.2(a) and s.3(1)  of the  impugned Act could not be called part of the Act.  The Act  did not even say that such orders were to be treated  as if enacted in the Act. The President’s assent could not  be said  to have  cured the repugnancy created by the Surcharge order. [585 G]      Arguments for the appellant:      The impugned Kerala Act is a legislation under Entry 26 of List  II (Trade  and Commerce).  It may  also fall  under Entry 27,  List II  (Production, Distribution  and Supply of Goods). Assuming that the Electricity Supply Act falls under Entries 43  and/or 44  of List  I, the  State Legislature is competent 557 to pass  legislation relating  to the trading and commercial activities of  the Corporation  set up under the Central Act passed under Entry 43 and/or 44 of List I.      Assuming that  the Kerala  Act encroaches on the powers of the  Electricity Board  under s.49,  such encroachment is incidental and  is justified  under the doctrine of pith and substance.      Assuming that  the Central  legislation as  well as the State legislation falls under Entry 38 of List III, there is no repugnancy  or conflict  between the  powers of the Board under s.49  and the impugned Act and the orders because they are made  within the  provisions of  the Act  and to aid and support the powers of the Board.      If  the   surcharge  had   not  been   introduced   the Electricity Board  would not  have been able to carry on the business and  would have  been compelled  to close  down its business.      Arguments on behalf of Electricity Board:      The Act  applies  to  essential  commodities  i.e.  all essential  commodities   as  understood   at  the   time  of legislation  in   1962.  In   view  of   the  programme   of industrialisation, and  the limited  scope  of  the  Central Essential  Commodities   Act,  1955,  the  present  Act  was conceived. The  background of the Act strongly indicates the content of the expression ’essential commodities’ as meaning the same  thing as "essential to the life of the community". Under the  impugned Act  by s.2(a)  the power  to select the articles for  control is  delegated to the State Government. The power  to take  orders for  control is delegated both to the State  Government and  authorised officers. The articles falling within  the Central  Essential Commodities Act, 1955 are excluded from the purview of the Act not because control of those  articles is  not desired  but  because  the  State Government have  the necessary  powers under the Central Act itself. The  definition in  s.2(a) should  be understood  to mean "essential  articles" notified  by the State Government and essential  articles should  be understood as those which are essential  to  the  life  of  the  community.  The  word ’control’ in the preamble is indicative of the limited scope of the  Act. This interpretation saves the Act from the vice

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of abdication  of  essential  legislative  function  by  the Legistature.      The  preamble   to  the   Act  is  a  key-note  to  the understanding of  an Act as well as the Statement of Objects and Reasons  clearly indicates  the scope and purpose of the Act.  "Trade   and  Commerce"   as  well   as  "supply   and distribution" must be in respect of articles or goods but on that account  it will  not be permissible to dissect the Act and make  it relatable  to each commodity over which control is imposed.  The pith  and substance  of the  Act makes them fall within List II, Entries 26 and 27. The law is not a law relating  to   electricity  as  such  nor  relating  to  the incorporation or  power of the Electricity Board established under the Electricity Supply Act, 1948.      The Supply  Act, 1948,  as  clearly  expressed  in  the preamble and  worked out in the Act through several agencies including the Board shows that the pith and substance of the Act is development of electricity and falls within List III, Entry  31   of  the  Government  of  India  Act.  1935.  The incorporation of  State Electricity  Board for each State is only one  of the means of achieving the objective. Moreover, the Board  is not  a trading  Corporation since  it  is  not created to  earn profits  but to  carry out  development and supply energy  at the  most economical  rate. Each  Board is established  by   a  State.  The  whole  law  falls  in  the Concurrent List  and in any event not under List I, Entry 43 because the  Board is  not a trading corporation nor does it fall under  Entry 44  because the Board is a State Board for the State. The Supply Act was passed under the Government of India Act,  1935 and  was  an  "existing  law"  and  not  an impediment to the State passing a law within its competence. There is  no conflict  between the impugned notification and the exercise of powers of the Board under s.40 of the supply Act. Assuming  that both  the legislations  fall under  List III,  the   President’s  assent  to  the  impugned  Act  was operative, the conflict was immaterial. 558      Arguments for the respondent:      The Electricity  Supply Act of 1948 is relatable partly to List  I entry  43 and  44 (Government of India Act List I Entry 33)  and partly  to List  III Entry  38 (Government of India Act  List III  Entry 31). Part of the Act is concerned with the  constitution and  powers of  the Electricity Board which is  something like  the memorandum  and Article  of  a Limited Company  and another  part of the Act may be said to be concerned with electricity.      The Kerala  Act is  a vague  piece of  legislation. The Articles to  which this  Act may apply are not mentioned. It is only  after the  power under the Act is exercised that it is possible  to say whether it would conflict with any other legislation.      The  impugned   Act  may   be  applicable  to  Articles relatable to  as many as 20 legislative entires from List I, II and III at the discretion of the Government.      Regulation and  Control with  regard  to  many  of  the matters  are  covered  by  existing  Central  Acts  such  as Industries Regulation  and Development  Act, Factories  Act, Central Excise  and Salt  Act, Defence  of India Act, Indian Electricity Act, 1910, Electricity Supply Act, 1948.      Every aspect  of electricity  in respect of generation, control price fixation must be relatable to entry 38 of List I and not Entry 26 or 27 of List II. The Central Legislature has already  legislated on  all these  aspects in the Indian Electricity Act  of 1910  and Supply Act 1948. If these were the subject  matter of  Entries 26  and 27  of List  II, the

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Central Legislature could not have legislated.      Any argument  on the  basis that the Electricity Supply Act 1948  is existing  law, is not relevant because the 1948 Act has  been extensively amended in 1956 and 1966 and these amendments relate  to the  field of control under the Kerala Act, if the same is applied in respect of electricity.      The Presidential  assent given  to the Kerala Act could be said  to be  an assent  within the meaning of Article 254 since at  the time when the assent was given the Act did not disclose any  inconsistency with  any Central  Act since the items to  which the Kerala Act was applicable did not appear in the  statute. The  conflict arose  only when an order was made  by   the  State   Government  applying   the  Act   to electricity. No  steps were even taken to incorporate in the Act the commodities to which the Act could apply and to take President’s assent thereon.      The  Kerala   Act  suffers  from  excessive  delegation because at the will of the State Government the Act could be made applicable  to any article, except those covered by the Essential Commodities  Act. The State Government could apply the Act  even to  items falling  in List I since there is no guideline.

JUDGMENT:      CIVIL  APPELLATE   JURISDICTION:  Civil   Appeals  Nos. 2557/69, 20/70, 1423-1434, 1733, 2474, 2575-2578/72, 95-105, 1318, 1371-74,  2040/73, 2100-2102/74  and 120, 121 & 536 of 1975.      From the Judgment and Order dated 24-9-69, 16-8-71, 25- 1-72, 16-2-72,  11-2-72, 10-2-72, 22-11-72, 21-7-72, 8-2-72, 25-7-72, 31-5-72 and 4-3-75 of the Kerala High Court in W.A. Nos.809/69, 846-47,  855, 867,  894 and  940 of 1969, 261/71 and 957-58,983,988  and 1021/69,942/69,  427/71,  458,  415, 407, 408  & 68  of 1971 and 211, 241/70, 3 and 7/71, 342/72, 36, 42 and 43 of 1971 and 559      Civil Appeal No. 2117 of 1972.      Appeal by  Special Leave  from the  Judgment and  Order dated 17-8-71  of the  Kerala High Court in W.A. No. 1021 of 1969.      Lal Narain  Sinha, Solicitor  General of  India, A.  G. Puddissery for the Appellant in C.A. No. 2557/69.      V. A.  Seyid  Mohammed  and  K.  M.  K.  Nair  for  the Appellant in C.A. No. 20/70.      A. K.  Sen (In  C.A. Nos.  1423/72), M. P. Jha (In C.A. 1423/72), A.  G. Puddissery  (In all  the petitions) for the appellants in C.As. Nos. 1423, 1434, 1735, 2474, 2575, 2576- 78/72, 1318,  1371, 1374,  2040/73,  2100-2102/74,  120-121, 536/75.      P. C.  Chandi, K.  M. K. Nair and K. R. Nambiar for the Appellants in CAs. Nos. 2117/72 and 95-105/73).      S. V.  Gupte, Ajay  Ray and P. Mathai, O. C. Mathur, K. J. John  and J.  B. Dadachanji for the Appellants in CA. No. 1457/71.      G. Rathi,  Advocate General for the State of Orissa and B. Parathasarthy for the Appellant in C.A. Nos. 1652/74.      Vinoo Bhagat  for the  Appellants (In  C.As. Nos. 1653- 54774).      S. V.  Gupte (In CA. No. 2557/69), P. Mathai, Ajay Ray, O. C.  Mathur K. John, J. B. Dadachanji and Mrs. S. Bhandare (In C.A.  No. 20/70  for  Respondent  Nos.  1  (In  CA.  No. 2557/69) & (In CAs. Nos.20/70, 1423-24/72).      G. B.  Pai, K.  J. John, O. C. Mathur, J. B. Dadachanji

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and P. K. Kurian (In CAs. Nos. 1733/72) for Respondent No. 1 (In CAs.Nos.  1426-1429, 1431-1434, 1733/72, 2577-78, 95-96, 99-100 and 102 -105/73).      N.  Sudharkaran,   P.  Mathai  and  P.  K.  Pillai  for Respondent Nos.  1  (In  CA.  No.  2575/72)  and  (C.A.  No. 1425/72).      K. R. Nambiar for Respondent No. 2 (In CA. No. 2575/72, 2576-78/72 and 2040/73).      Miss Lily  Thomas for  Respondent No.  1  (In  CA.  No. 2576/72).      A.  S.  Nambiar  for  Respondent  No.  1  (In  CA.  No. 2578/72).      N. Sudharkaran for Respondent No. 1 (In CA. No. 97773).      G. B.  Pai (In CA Nos. 2100-2102/74, 121/75), P. Mathai (In CA.  Nos. 1318/75) Ranjit Mahanty, Ajay Ray (In CAs. No. 1652/74) and  O. C.  Mathur, K. J. John and J. B. Dadachanji (In all  matters) for  Respondent No.1 (In C.A. No. 1318/73, 2100-2102/74, 121/75)  for the  Respondents (In  C.As.  Nos. 1652/74).      Lal Narain  Sinha, Solicitor  General of India (In C.A. No. 1457/71) A. G. Puddissery for the Respondent (In CA. No. 1457 and 1641/71). 560      T. S.  Krishnamoorthy Iyer,  P. Mathai,  N. Sudharkaran and P.  K. Pillai  for Respondent No. 1 (In CA. No. 1371 and 1374/73) and (In C.A. No. 1373/73)      K. M. K. Nair for Respondent No. 2 (In C.As. Nos. 1371- 1374/73).      G. L.  Sanghi, P.  Mathai, K. J. John, O. C. Mathur and J. B. Dadachanji for Respondent No. 1 (In CA. No. 1372/73).      G.Rathi, Advocate  General for  the State of Orissa and B. Parthasarthy for Respondents (In CAs. Nos. 1653-1654774).      P. K. Pillai for the Intervener (In CA. No. 20/70).      G. L.Sanghi,  P. V.  Kapur, U.  K. Khaitan  (for  Ferro Alloys Corpn.)  K. R.  Choudhry K.  Raj Choudhry  (for  A.P. Electricity Board) for the Intervener (In C.A. No. 1652/74).      S. Balakrishnan  for  Respondent  No.  1  (in  CA.  No. 2040/73).      Note: Mrs.  Sunanda Bhandare, Advocate appeared for the applicant intervener  in CA.  Nos. 1457  and 1642/71 and CA. Nos. 1652-1654/74  and Mr. B. Sen, Senior Advocate, appeared for Respondent  No. 1 (In CA. 20/70 and applicant intervener in CA. No. 1652/74).      The  Judgment   of   the   Court   was   delivered   by Alagiriswami, J. A. C. Gupta, J. gave a dissenting Opinion.      ALAGIRISWAMI, J.  The  validity  of  the  Kerala  State Electricity  Supply  (Kerala  State  Electricity  Board  and Licensees Areas)  Surcharge Order  1968 is  in  question  in these appeals.  That Order  was passed  in exercise  of  the powers conferred  by  section  3  of  the  Kerala  Essential Articles Control  (Temporary Powers)  Act, 1961.  It obliges the Board  to collect surcharges from non-licensee consumers of electricity  even though  the Board may have entered into long-term contracts  with them  with regard  to the  rate at which electricity  is to be supplied to them. The Act is one to provide,  in the  interest of  the general public for the control of  the production,  supply and distribution of, and trade and commerce in, certain articles. Section 2(a) of the Act defines "essential articles" as meaning any article (not being an  essential commodity  as defined  in the  Essential Commidities  Act,   1955)  which  may  be  declared  by  the Government by  notified order  to be  an essential  article. Section 3  enables the  Government, if of opinion that it is necessary  or   expedient  so   to  do  for  maintaining  or increasing the  supplies of  any essential  article  or  for

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securing their  equitable distribution  and availability  at fair prices, to make notified orders providing for:           (a) regulating  by licences,  permits or otherwise      the production or manufacture of any esential article:           (b) controlling  the price  at which any essential      article may be bought or sold; 561           (c) regulating  by licences, permits, or otherwise      the   storage,   distribution,   transport,   disposal,      acquisition,  use   or  consumption  of  any  essential      article;           (d) prohibiting  the withholding  from sale of any      essential article ordinarily kept for sale;           (e) requiring  any person  holding  in  stock  any      essential article to sell the whole or a specified part      of the  stock to  the Government  or to  an officer  or      agent of  the Government  or to  such other  person  or      class of  persons and  in such  circumstances as may be      specified in the order;           (f)  regulating   or  prohibiting   any  class  of      commercial or  financial transactions  relating to  any      essential  article,   which,  in  the  opinion  of  the      authority making  the order, are, or if unregulated are      likely to be detrimental to the public interest;           (g) collecting  any information or statistics with      a  view   to  regulating  or  prohibiting  any  of  the      aforesaid matters;           (h) requiring  persons engaged  in the production,      supply or  distribution of, or trade or commerce in any      essential  article   to  maintain   and   produce   for      inspection such books, accounts and records relating to      their business and to furnish such information relating      thereto as may be specified in the order;           (i) regulating  the processing  of  any  essential      article;           (j) exercising  over the  whole or  any part of an      existing undertaking,  such functions  of  control  and      subject to  such conditions, as may be specified in the      order;           (k)  any   incidental  and  supplementary  matters      including in  particular the  entering  and  search  of      premises vehicles, vessels and aircraft, the seizure by      a person  authorised to make such search of any article      in respect  of which  such person has reason to believe      that a contravention of the order has been, is being or      is about  to  be  committed,  the  grant  or  issue  of      licences, permits  or other documents, and the charging      of fees therefor. In exercise of the powers under section 2(a) electricity was declared as an essential article in 1965. Electricity is the only article  declared as an essential article under the Act so far and in spite of the wide powers with regard to making of notified  orders under  section 3  the impugned Surcharge Order is the only order so far made. It provides, as already stated,  for   levying  of   a  surcharge   on  supplies  of electricity  made  to  bulk  consumers,  many  of  whom  are respondents in these appeals.      The  validity  of  the  Act  itself  is  not  seriously questioned except  in one  respect which  we shall deal with later; but  it is  contended  that  by  the  declaration  of electricity as an essential article under the Act, the 562 Act impinges  upon various  matters either in List I or List III of  the Seventh  Schedule to the Constitution. According to Mr.  Gupte, who  appeared for  the  respondent  in  Civil

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Appeal No. 2557 of 1969, the legislation is repugnant to the Electricity Act,  1910 and  the  Electricity  (Supply)  Act, 1948, in  particular the  latter, which falls within Entries 43 and  44 of  List I. According to Mr. B. Sen, who appeared for the  respondents in Civil Appeal No. 20 of 1970, the Act trenches upon the field occupied by the Electricity (Supply) Act, 1948  which falls  partly under  Entry 43 of List I and partly under  Entry 38  of List  III. According to Mr. G. B. Pai, who  appeared for  the 1st respondent in Civil No. 1733 of 1972 the 1948 Act falls within Entry 44 of List I and the Kerala Act  impinges upon  that field.  On the contrary, the Solicitor General  appearing on  behalf of  the Kerala State Electricity Board  contends that  the Kerala Act falls under Entries 26  and 27 of List II of the Seventh Schedule to the Constitution.      There  is,   in  the   arguments  on   behalf  of   the respondents, a  certain amount of confusion. The question of repugnance arises  only in  case both  the legislations fall within the  same List  III.  There  can,  therefore,  be  no question of  repugnance between  the Electricity Act and the Electricity (Supply)  Act on the one hand and the Kerala Act on the  other, if  the former fall in List I or List III and the latter  in List  II. If  any legislation is enacted by a State Legislature in respect of a matter falling within List I that will be without jurisdiction and therefore void.      The scope  of the  legislative powers of the Parliament and the  State Legislatures  is now  well settled.  They are found in Article 246 of the Constitution, which reads :           246. (1)  Notwithstanding anything  in clauses (2)      and (3),  Parliament has  exclusive power  to make laws      with respect to any of the matters enumerated in List I      in the  Seventh Schedule (in this Constitution referred      to as the "Union List").           (2)  Notwithstanding   anything  in   clause  (3),      Parliament and,  subject to clause (1), the Legislature      of any State also, have power to make laws with respect      to any  of the  matters enumerated  in List  III in the      Seventh Schedule  (in this  Constitution referred to as      the "Concurrent List").           (3)  Subject   to  clauses   (1)  and   (2),   the      Legislature of a State has exclusive power to make laws      for such  State or any part thereof with respect to any      of the  matters enumerated  in List  II in  the Seventh      Schedule (in the Constitution referred to as the "State      List").           (4) Parliament has power to make laws with respect      to any  matter for  any part  of the territory of India      not included  in  a  State  notwithstanding  that  such      matter is a matter enumerated in the State List." 563      In view  of the provisions of Article 254, the power of Parliament to  legislate in  regard to  matters in List III, which  are   dealt  with  by  clause  (2)  is  supreme.  The Parliament has  exclusive power to legislate with respect to matters in List I. The State Legislature has exclusive power to legislate with respect to matters in List II. But this is subject to the provisions of clause (1) (leaving out for the moment the  reference to  clause 2). The power of Parliament to legislate  with respect  to matters included in List I is supreme notwithstanding  any thing  contained in  clause (3) (again leaving out of consideration the provisions of clause 2). Now  what is  the meaning of the words "notwithstanding" in clause  (1) and  "subject to"  in clause  (3) ? They mean that where  an entry is in general terms in List II and part of that  entry is  in specific terms in List I, the entry in

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List I  takes effect  notwithstanding the  entry in List II. This is  also on  the principle  that the ‘special’ excludes the ‘general’ and the general entry in List II is subject to the special  entry in  List I.  For instance,  though  house accommodation and  rent control might fall within either the State List  or the  Concurrent List,  Entry 3  in List  I of Seventh Schedule  carves out the subject of rent control and house accommodation  in cantonments from the general subject of house  accommodation and rent control (see Indu Bhusan v. Sundari Devi(1).  Furthermore, the word ‘notwithstanding’ in clause (1)  also  means  that  if  it  is  not  possible  to reconcile the  two entries the entry in List I will prevail. But before  that happens attempt should be made to decide in which list  a particular  legislation  falls.  For  deciding under which  entry a particular legislation falls the theory of "pith  and substance"  has been evolved by the Courts. If in pith and substance a legislation falls within one List or the other  but some  portion of  the subject  matter of that legislation incidentally  trenches upon  and might  come  to fall under  another List,  the Act as a whole would be valid notwithstanding such  incidental trenching. These principles have been laid down in a number of decisions.      In re  The Central  Provinces and  Berar Act No. XIV of 1938(2) Sir  Maurice Gwyer  observed, with  reference to the corresponding provisions  of the Government of India Act, as follows :           "It will  be observed that by s.100(1) the Federal      Legislature is given exclusive powers enumerated in the      Federal Legislative  List, "notwithstanding anything in      the two  next succeeding sub-sections" of that section.      Sub-section (2)  is not  relevant to  the present case,      but s.s.(3)  is, as  I have stated; the enactment which      gives to  the  Provincial  Legislatures  the  exclusive      powers enumerated  in the  Provincial Legislative List.      Similarly Provincial Legislatures are given by s.100(3)      the exclusive  powers in the Provincil Legislative List      "subject to  the two  preceding sub-sections",  that is      s.ss. (1) and (2). Accordingly, the Government of India      further contend  that, even  if the  impugned Act  were      otherwise  within  the  competence  of  the  Provincial      Legislature, it  is nevertheless  invalid, because  the      effect of the 564      non-obstante clause in s.100(1), and a fortiori of that      clause read  with the  opening words of s.100(3), is to      make  the   federal  power   prevail  if   federal  and      provincial legislative powers overlap." He observed further :           "Only in  the  Indian  Constitution  Act  can  the      particular   problem   arise   which   is   now   under      consideration; and  an endeavour  must be made to solve      it, as  the Judicial  Committee have  said,  by  having      recourse to  the context  and scheme  of the Act, and a      reconciliation   attempted   between   two   apparently      conflicting jurisdictions  by reading  the two  entries      together and  by interpreting,  and,  where  necessary,      modifying, the  language of  the one  by  that  of  the      other. If  indeed such  a reconciliation  should  prove      impossible, then,  and only then, will the non-obstante      clause operate  and the  federal power prevail; for the      clause ought  to be  regarded as  a  last  resource,  a      witness to  the imperfections  of human  expression and      the fallibility of legal draftsmanship."      In Subrahmanyan  Chettiar v.  Mutuswami Goundan(1)  the same learned C.J. observed :

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         "Section 100(3)  of the  Constitution Act provides      that a  Provincial Legislature  has the exclusive power      of legislating  with respect  to the matters enumerated      in List  II, the  Provincial Legislative List. But this      power  is   expressly  stated  to  be  subject  to  the      provisions of  s.100(1), which  give an exclusive power      to the Federal Legislature to legislate with respect to      the  matters   enumerated  in   List  I,   the  Federal      Legislative List. Hence, though Parliament has no doubt      done its  best to enact two lists of mutually exclusive      powers, it  has also  provided, ex-majori cautela, that      if the  two sets  of legislative powers should be found      to overlap, then the federal legislation is to prevail.      And the reason for this is clear. However carefully and      precisely lists of legislative subjects are defined, it      is practically  impossible to  ensure that  they  never      overlap; and  an absurd  situation would  result if two      inconsistent laws,  each of equal validity, could exist      side by side within the same territory." In the same case Sulaiman, J. observed :           "On a  very strict  interpretation  of  s.100,  it      would necessarily  follow that from all matters in List      II  which   are  exclusively  assigned  to  Provinicial      Legislatures, all portions which fall in List I or List      III, must  be excluded.  Similarly,  from  all  matters      falling in  List III, all portions which fall in List I      must be  excluded. The section would then mean that the      Federal Legislature  has full  and exclusive  power  to      legislate with respect to matters in List I, and has 565      also power to legislate with respect to matters in List      III. A  Provincial Legislature  has exclusive  power to      legislate  with  respect  to  List  II,  minus  matters      falling in  List I or List III, has concurrent power to      legislate with  respect to  matters in  List III, minus      matters falling in List I. In its fullest scope, s. 100      would then  mean that  if it  happens that there is any      subject in  List II  which also falls in List I or List      III, it  must be taken as cut out from List II. On this      strict interpretation there would be no question of any      real overlapping at all. If a subject falls exclusively      in List  II and  no other  List, then  the power of the      Provincial Legislatures is supreme. But if it does also      fall within  List I, then it must be deemed as if it is      not included  in List  II at all. Similarly, if it also      falls in  List III,  it must  be deemed  to  have  been      excluded from  List II.  The dominant  position of  the      Central Legislature  with regard  to matters  in List I      and List III is thus established. But the rigour of the      literal interpretation  is relaxed  by the  use of  the      words "with  respect to"  which as  already pointed out      only signify  "pith and substance", and do not forbid a      mere incidental encroachment."      In Governor General in Council v. Province of Madras(1) the Judicial Committee of the Privy Council observed :           "For in  a Federal Constitution, in which there is      a division  of legislative  powers between  Central and      Provincial legislatures,  it appears  to be  inevitable      that controversy  should arise  whether  one  or  other      legislature is  not exceeding  its own, and encroaching      on the other’s constitutional legislative power, and in      such a  controversy it  is  a  principle,  which  their      Lordships do not hesitate to apply in the present case,      that it is not the name of the tax but its real nature,      its "pith and substance" as it has sometimes been said,

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    which must determine into what category it falls."      In Prafulla  Kumar Mukherjee  and  Others  v.  Bank  of Commerce, Limited,  Khulna(2) the  Judicial Committee of the Privy Council  quoted with  approval the observations of Sir Maurice Gwyer  C.J. in  Subrahmanyan Chettiar’s case (supra) to the effect :           "It must  inevitably happen from time to time that      legislation, though  purporting to  deal with a subject      in one list, touches also on a subject in another list,      and the different provisions of the enactment may be so      closely intertwined that blind observance to a strictly      verbal interpretation would result in a large number of      statutes being declared invalid because the legislature      enacting them  may  appear  to  have  legislated  in  a      forbidden sphere. Hence the rule which has been evolved      by the Judicial Committee, whereby the impugned statute      is examined to ascertain its ‘pith and substance,’ or 566      its ‘true  nature and  character,’ for  the purpose  of      determining whether  it is  legislation with respect to      matters in this list or in that." They also held :           "Thirdly,  the  extent  of  the  invasion  by  the      Provinces into  subjects enumerated in the Federal List      has to  be considered.  No doubt,  it is  an  important      matter, not,  as their  Lordships  think,  because  the      validity of  an Act can be determined by discriminating      between degrees  of invasion,  but for  the purpose  of      determining what  is the  pith  and  substance  of  the      impugned Act.  Its provisions  may advance  so far into      Federal territory  as to  show that  its true nature is      not concerned with Provincial matters, but the question      is not,  has it  trespassed more  or less,  but is  the      trespass, whatever it be, such as to show that the pith      and substance  of the impugned Act is not money lending      but promissory notes or banking ? Once that question is      determined the  Act falls  on one  or the other side of      the line  and can be seen as valid or invalid according      to its  true content.  This view  places the precedence      accorded to the three lists in its proper perspective."      The matter  has been  elaborately discussed in Union v. H. S.  Dhillon(1). All  the relevant  earlier decisions have been considered  there and for the purpose of these cases it is not  necessary to  enter into  any further  discussion on this aspect.      Having discussed  the question of the legislative field it might  be necessary  to discuss  the question  as to what happens  if   it  should  be  held  that  the  matter  under consideration in  these cases  falls within  the  Concurrent List, that  is, Entry  38 in  List III  as contended  in the alternative by some of the respondents. As already mentioned the question  will arise  only if it should be held that the Kerala State Act falls under Entry 38 as contended by Mr. B. Sen. If  the impugned  legislation falls under List III then the question  of repugnancy  of that  legislation  with  the existing law  or the law made by Parliament, as the case may be, will have to be considered. Both the 1910 Act as well as the 1948  Act are existing law as contemplated under Article 372 of  the Constitution.  An existing  law continues  to be valid even  though the legislative power with respect to the subject matter  of the  existing law might be in a different list under  the Constitution  from the  list under  which it would have  fallen under  the Government of India Act, 1935. But after  the Constitution  came into force an existing law could be  amended or  repealed only by the legislature which

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would be  competent to enact that law if it were to be newly enacted. In  that sense  both the  1910 Act and the 1948 Act could be  amended or  repealed by the Parliament and also by the State  Legislature if it obtains the Presitential assent to an  Act amending  or repealing  the 1910  Act or 1948 Act (leaving aside for the moment the question whether they 567 fall wholly  or partly  under Entries 43 and 44 of List I of the Seventh Schedule to the Constitution). That the question of repugnancy can arise only with reference to a legislation falling under the Concurrent List is now well settled. In A. S. Krishna  v. State of Madras(1) after referring to section 107 of  the Government of India Act, 1935, which is in terms similar to clause (1) of Article 254, this Court observed:           "For this section to apply, two conditions must be      fulfilled :  (1) The  provisions of  the Provincial law      and those  of the  Central legislation  must both be in      respect  of   a  matter  which  is  enumerated  in  the      Concurrent List, and (2) they must be repugnant to each      other. It  is only  when both  these  requirements  are      satisfied that  the provincial  law will, to the extent      of the repugnancy, become void." To the  similar effect  is the decision in P. N. Kaul v. The State  of  J&K(2).  The  whole  question  of  repugnancy  is elaborately discussed in J & K State v. M. S. Farooqi(3).      Let us  now, therefore,  consider what  in its pith and substance is  the subject matter of the Kerala Act. Is it an Act dealing with incorporation, regulation and winding up of trading corporations,  including banking,  insurance and any financial  corporations   but  not   including   cooperative societies  (Entry  43);  or  incorporation,  regulation  and winding up  of corporations,  whether trading  or not,  with objects  not  confined  to  one  State,  but  not  including universities (Entry  44)? Clearly  the Act  itself does  not deal with  any of  these  subjects.  It  is  true  that  the notification issued under section 2(a) declaring electricity as an  essential article  enable orders  to  be  made  under section 3 of the Act. But the only question we are concerned with in this case is the validity of the surcharge order. No notified order  has  been  made  under  any  of  the  powers conferred on  the State  by section  3 except  the  impugned Surcharge Order.  If the  Act had  stood as it is or even if the notification  had stood  as it  is nobody would have any cause for  complaint.  It  is  only  by  the  issue  of  the Surcharge Order  that the respondents have been affected. It is for  the purpose of deciding the question of the validity of the  Surcharge Order  that we have to decide the validity of the  declaration under  section 2(a) of electricity as an essential  article.   Does   the   notification   make   the legislation one  relating to  electricity under  Entry 38 of List III  ? Was  it necessary  to get the President’s assent for this  notification as  contended of  the  respondents  ? Quite clearly  no Presidential  assent to  the notification. Article 254(2)  does not contemplate assent to notifications issued under  the Act. The Article contemplates Presidential assent only  to laws  made by the Legislature of a State. We shall later deal with the question whether the assent of the President to  the Act  after the 1965 notification declaring electricity  as   an  essential   article   validates   that notification.      The Electricity  Act 1910  and the Electricity (Supply) Act, 1948  can be  said to cover the whole field relating to electricity under Entry 568 38 of  List III  of the  Seventh Schedule. We are clearly of

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the opinion  that the  argument of Mr. Pai that the 1948 Act falls under Entry 44 of List I has no substance. It does not deal with  the incorporation, regulation and winding up of a corporation with  objects not  confined to  one  State.  The Central Electricity  Authority created by that Act is not an incorporated body,  whereas the  various  State  Electricity Boards  are   incorporated.   The   Act   deals   with   the incorporation  and   regulation  of  the  State  Electricity Boards. Where a State Electricity Board is to operate beyond the limits  of the  State for which it is constituted, it is done only  by means  of an agreement with the other State in which it is to operate. The Statement of Objects and Reasons of that  Act does  not help  his contention. The coordinated development of electricity in India on a regional basis, for which  the   Government  felt   it  necessary  to  bring  in legislation which  resulted in the Electricity (Supply) Act, 1948 cannot  show that  it deals  with the incorporation and regulation of  an  inter-State  corporation.  The  statement itself proceeds  on the  basis that the executive power will vest in  the Provinces,  which means  that  the  legislation falls in  the Concurrent  List. The Statement of Objects and Reasons also  mentions the necessity for the constitution of semi-autonomous bodies like Electricity Boards to administer the  grid   systems.  The  Electricity  Boards,  as  already mentioned, are  confined to  the jurisdiction of States. The Statement of  Objects and Reasons itself shows that what was contemplated was  a  legislation  under  the  Entry  in  the Concurrent List.  The  Statement  of  Objects  and  Reasons, however, mentions  Entry 33  of  the  Federal  List  of  the Government of  India Act,  1935 as the Entry under which the legislation  was   undertaken.  That  Entry  corresponds  to Entries 43  and 44  of List  I of  Seventh Schedule  to  the Constitution.  Therefore,   the  Statement  of  Objects  and Reasons does  not show  that the  Electricity  (Supply)  Act falls under  Entry 44. The question then is whether it falls within Entry  43. The fact that the Statement of Objects and Reasons mentions  Entry 33  of List  I (of the Government of India  Act)   as  the   legislative  head  under  which  the legislation was being undertaken is not conclusive. We have, therefore to  consider whether the Electricity (Supply) Act, 1948 falls  under Entry  43 as  contended  by  some  of  the respondents.      There is  no doubt  that the  Act does  deal  with  the incorporation and  regulation of the Electricity Boards, but the question  is whether  in pith  and  substance  it  is  a legislation regarding the constitution and regulation of the Electricity Boards  falling under  Entry 43  of List I or on electricity falling  under Entry  38 of List III. The object of the Electricity (Supply) Act as seen from the preamble is to rationalise  the production and supply of electricity and to take measures conducive to electrical development. In the Statement of Objects and Reasons it is stated that "there is necessity for  the constitution  of  semi-autonomous  bodies like Electricity  Boards to  administer the  grid system  on quasi-commercial  lines,   and  that   such  Boards  cannot, however, be  set up  by  Provincial  Governments  under  the existing Constitutional  Act as  they would be in the nature of trading  corporations within  the meaning  of Entry 33 of the Federal Legislative List." The Statement of Objects and 569 Reasons though  not relevant for the purpose of interpreting the sections of the Act, will throw light upon the object of the legislature from the historical viewpoint.      Let us  now look  at the Act itself. Section 3 provides for the  constitution of a Central Electricity Authority. It

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says that  the Central  Government shall  constitute a  body called the  Central Electricity  Authority to  exerise  such functions and  perform such duties and in such manner as the Central  Government  may  prescribe  or  direct.  Section  5 provides for  the  constitution  and  composition  of  State Electricity Boards.  Section 6  says that  the Government of any State  may in lieu of constituting a Board under section 5  enter   into  an  agreement  with  the  Government  of  a contiguous State  to provide  that the Board constituted for the latter  State shall  exercise the  functions of  a Board under the  Act in the former State. Section 7 deals with the effect of  inter-State agreement  as contemplated in section 6.  Section   8  provides   for  terms   and  conditions  of appointment of  the members  of the Board. Section 9 relates to the  qualifications of  the members of the Board. Section 10 deals  with removal  or suspension  of the members of the Board. Section  10A gives  power to  the State Government to declare void certain transactions in connection with which a member has  been removed  under the provisions of section 10 on 12  provides that  the Board  shall be  a body corporate. Section 14  provides for  the meetings of the Board. Section 15 deals  with the  appointment of  the staff  by the Board. Section 16 states that the State Government shall constitute a State  Electricity Consultative  Council for the State and provides for  constitution of that body. Section 17 provides for the  constitution of a Local Advisory Committee. Section 18 describes  the general  duties of  the Board.  Section 19 says that  the Board  may supply electricity to any licensee or person  requring such supply in any area in which a schme sanctioned under  Chapter V is in force. Section 20 provides for power  of the  Board to  engage in certain undertakings. Section 21  concerns the  power of  the Board in relation to water-power. By  section 22 the Board is invested with power to conduct  investigations, experiments  and trials  for the improvement of the methods of transmission, distribution and supply etc.  of electricity. Section 24 deals with the power of  the   Board  to  contribute  to  contribute  to  certain associations engaged  in generation, distribution and supply of electricity.  Section 25  says that  the Board  may, from time to  time, appoint  qualified persons  to be  Consulting Engineers to the Board. Section 26 says that the Board shall have all  the powers and obligations of a licensee under the Indian  Electricity  Act,  1910.  Section  28  concerns  the preparation  of  scheme  for  establishement  of  generating stations  etc.  Section  29  provides  for  publication  and sanctioning of schemes prepared under section 28. Section 30 deals with  the matters to be considered by the authority in recommending a  scheme. Sections  31 and  32 also  relate to sechemes. Section 34 deals with controlled stations. Section 35 provides  for the supply by the Board to licensees owning generating stations  while section  36 gives  power  to  the Board to close down generating stations. Section 37 provides for Purchase  of generating  stations of undertaking or main transmission lines  by the Board. Section 38 makes provision for establishing new generating stations by 570 the Board. Section 39 deals with the arrangements to be made with the  licensee for  operation of  the Board’s generating stations.  Section   40  makes   provision   regarding   the connections with  main transmission  lines purchased  by the Board. Section  41 relates  to  the  use  by  the  Board  of transmission lines.  Section 42  provides for  power of  the Board for placing wires, poles etc. Section 43 describes the powers of  the Board to enter into arrangements for purchase or sale of electricity’ under certain conditions. Section 44

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places  certain   restrictions  on   establishment  of   new generating stations  or major  additions or  replacement  of plant in  generating statons.  Section 45  says that  if any licensee  fails   to  close  down  his  generating  station, pursuant to  a declaration of the Board under section 36, or if any  person establishes  or acquires  a  new.  generating station, the  Board may  authorise any  of its  officers  to enter upon  the premisess  of such station and shut down the station. Section 46 provides for Grid Tariff. It says that a tariff to  be known  as the Grid Tariff shall, in accordance with any regulations made in this behalf, be fixed from time to time  by the  Board in  respect of  each area for which a scheme is in force, and tafiffs fixed under the section may, if the  Board thinks  fit, differ  for different  areas, and subsection (2) of that section provides that the Grid Tariff shall  apply  to  sales  of  electricity  by  the  Board  to licensees in  other so  required under  any  of  the  first, second and  third schedules  and shall also be applicable to sales of  electricity by  the Board  to licensees  in  other cases.  Section   47  vests  power  in  the  Board  to  make alternative arrannements  with licensees.  Section 49  makes provision for  sale of  electricity by  the Board to persons other than  licensees. Section 50 says that the Board should not supply  electricity in certain circumstances. Section 55 provides that licensees should comply with the directions of the Board.  Section 63  says that  the State  Government may make subventions  to the  Board for  the purpose of the Act. Section 64 provides for loans by the State Government to the Board. Section  65 gives  power  to  the  Board  to  borrow. Section 66  provides for guaranteeing of loans raised by the Board by  the State  Government.  Section  67  provides  for priority of  the liabilies  of the  Board. Section  68 makes provision for depreciation reserve. Secton 69 deals with the accounts of  the Board  and their audit. Section 76 provides for arbitration  of all  disputes arising  between the State Government or  the  Board  and  licensee  or  other  person. Section 78  vests power  in the  State  Government  to  make rules. Section  78A  says  that  in  the  discharge  of  its functions, the  Board shall  be guided by such directions on question of  policy as may be given to it by the Government. Section 79  vests power  in the  Board to  make regulations. Section 81  says that  all members, officers and servants of the Board  shall be  deemed to be public servants within the meaning of section 21 of the Indian Penal Code.      It would  be obvious that one part of the Act does deal with the constitution of the Board, the incorporation of the Board and  the regulation  of its  activities. But  the main purpose of  the Act  is for rationalising the production and supply of electicity. The regulation contemplated in Entries 43 and  44 is  not regulation of the business of production, distribution and  supply of  electricity of the corporation. As the  1910 and  1948 Acts  together form  a complete code, with res- 571 pect to Entry 38 in List III the Board is only an instrument fashioned  or   carrying  out  this  object.  The  provision regarding  the   incorporation   and   regulation   of   the Electricity Board  should be  taken to be only incidental to the provision  regarding production, supply and distribution of electricity.      It was  observed by  this Court  in  R.  C.  Cooper  v.      union(1)           "The argument  raised by Mr. Setalvad, intervening      on behalf  of the State of Maharashtra and the State of      Jammu and  Kashmir, that the Parliament is competent to

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    enact Act 22 of 1969, because the subject-matter of the      Act  is   "with  respect   to"  regulation  of  trading      corporations  and  matters  subsidiary  and  incidental      thereto and  on that account is covered in its entirety      by Entries  43 and 44 of List I of the Seventh Schedule      cannot be  upheld. Entry  43 deals  with incorporation,      regulation  and  winding  up  of  trading  corporations      including  banking   companies.  Law   regulating   the      business of  a corporation is not a law with respect to      regulation  of   a  corporation.   In  List  I  entries      expressly relating to trade and commerce are Entries 41      & 42.  Again  several  entries  in  List  I  relate  to      activities commercial  in character. Entry 45 "Banking"      Entry 46  "Bills of exchange, cheques, promissory notes      and other like instruments; Entry 47 "Insurance"; Entry      48 "Stock  exchanges  and  future  markets",  Entry  49      "Patents, inventions  and designs."  There are  several      entries relating  to activities  commercial as  well as      non-commercial in  List II-Entry  21 "Fisheries", Entry      24      "Industries .... "; Entry 25 "Gas and Gas works"; Entry      26 "Trade  and commerce":  Entry 30  "Money-lending and      money-lenders"; Entry  31 "Inns and Inn-keeping"; Entry      33 "Theaters and dramatic performances, cinemas etc.";.      We are  unable to accede to the argument that the State      Legislatures are  competent to  legislate in respect of      the subject  matter of  those  entries  only  when  the      commercial activities are carried on by individuals and      not when they are carried on by corporations. Therefore the  provisions in  the  1948  Act  regarding  the Board’s functions  do not make it one falling under Entry 43 of List I.      In Ramtanu Housing Society v. Maharashtra(2) this Court had dealt  with the  Maharashtra Industrial Development Act, 1961 and  the question  whether the  Maharashtra Development Corporation formed  under the Act was a trading corporation. In holding  that the  legislation fell under Entry 24 of the State List  and not  under Entry  43 of  the Union List this Court observed .      (1)[1970] 3 S.C.R.530.           (2)[1971] 1 S.C.R.719. 572           "The Act  is one  to make  a special provision for      securing  the orderly establishment in industrial areas      and industrial  estates of  industries in  the State of      Maharashtra,   and   to   assist   generally   in   the      organisation thereof, and for that purpose to establish      an Industrial Development Corporation, and for purposes      connected with the matters aforesaid.           The Corporation  is established for the purpose of      securing  and   assisting   the   rapid   and   orderly      establishment  and   organisation  of   industries   in      industrial areas and industrial estates in the State of      Maharashtra.           Broadly stated  the functions  and powers  of  the      Corporation  are   to  develop   industrial  areas  and      industrial estates  by  providing  amenities  of  road,      supply  of   water  or  electricity,  street  lighting,      drainage ....  Or otherwise  transfer any property held      by the  Corporation on such conditions as may be deemed      proper by the Corporation......           The principal  functions  of  the  Corporation  in      regard to  ’ the  establishment, growth and development      of industries  in the  State are first to establish and      manage  industrial   estates  at  selected  places  and      secondly to  develop industrial  areas selected  by the

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    State Government.  When industrial  areas are  selected      the necessity  of acquisition of land in those areas is      apparent. The  Act, therefore,  contemplates  that  the      State Government  may  acquire  land  by  publishing  a      notice specifying the particular purpose for which such      land is  required.........  Where  the  land  has  been      acquired for  the Corporation  or any  local authority,      the  State   Government  shall,   after  it  has  taken      possession of  the  land,  transfer  the  land  to  the      Corporation or that local authority           It is in the background of the purposes of the Act      and powers  and functions  of the  Corporation-that the      real and  true character  of the  legislation  will  be      determined............. Industries come within Entry 24      of  the  State  List.  The  establishment,  growth  and      development of  industries in  the State of Maharashtra      does not  fall within Entry 7 and Entry 52 of the Union      List.  Establishment,   growth   and   development   of      industries in  the State  is within  the State  List of      industries..  ...Acquisition  or  requisition  of  land      falls under  Entry 42  of the Concurrent List. In order      to achieve  growth of  industries it  is necessary  not      only to acquire land but also to implement the purposes      of the  Act. The  Corporation is  therefore established      for carrying  out the purposes of the Act. The pith and      substance of  the  Act  is  establishment,  growth  and      organisation of industries, acquisition of land in that      behalf and  carrying out  the purposes  of the  Act  by      setting up  the Corporation  as one  of  the  limbs  or      agencies of the Government. The powers and functions of      the Corporation  show in  no uncertain terms that these      are all in 573      aid  of   the  principal  and  predominant  purpose  of      establishment, growth  and establishment of industries.      The Corporation  is established  for that purpose.. We,      therefore, hold  that the  Act  is  a  valid  piece  of      legislation."      In the  present case  the incorporation  of  the  State Electricity Boards  is merely for the rationalisation of the production and  supply of  electricity. for  taking measures conducive to  Electrical development  and  for  all  matters incidental thereto.  The incorporation  of  the  Electricity Boards  being  incidental  to  the  rationalisation  of  the production and supply of electricity and for being conducive to  electrical   development,  the  1948  Act  in  pith  and substance should  be deemed to be one falling under Entry 38 of List III. Furthermore, Electricity Boards are not trading corporations. They are public service corporations. They  have  to function  without any profit motive. Their duty is to  promote  co-ordinated  development  of  the  generation, supply and distribution of electricity in the most efficient and economical  manner with  particular  reference  to  such development in  areas not  for  the  time  being  served  or adequately served  by any  licensee (Section  18). The  only injunction is  that as  far as  practicable they  shall  not carry on  their operations  at a loss (Section 59). They get subventions from  the State Governments (Section 63). In the discharge of  their functions  they are guided by directions on questions  of policy  given by State Governments (Section 78A). There are no shareholders and there is no distribution of profits.  This is  another reason why the 1948 Act cannot be said to fall under Entry 43 of List I.      The  question,   therefore,  is  whether  the  impugned legislation falls  under Entry  38 of List III or Entries 26

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and 27 of List II and if the former, whether it is repugnant to the  existing law  on the  subject. that is, the 1910 and 1948 Acts  and if  that were so, whether that repugnancy has been cured by Presidential assent ?      Even assuming  that part of the 1948 Act is legislation with respect  to incorporation  and regulation  of a trading corporation, falling  under Entry  43 of  List I of Schedule Seven, the  rest of it will fall under Entry 38 of List III. That part  of the  Act relating  to the  regulation  of  the activities  regarding   production   and   distribution   of electricity would,  as we  have shown,  fall under the Entry ’Electricity’. The  Kerala Act  has nothing  to do  with the incorporation and  regulation of  the Electricity Board and, therefore, it can only relate to Entry 38 of List III, if at all.      The argument of the learned Solicitor General appearing on behalf  of the Kerala Electricity Board in support of his submission that  the legislation  falls under Entries 26 and 27 of List II may be summarised as follows: Those entries do not enable  the State  Legislatures to legislate with regard to all  conceivable  goods  like  arms,  ammunition,  atomic minerals etc.  as was argued by Mr. Sen. A legislature while legislating with  respect to  matters within  its competence should be  deemed to  know its  limits and  its  legislative authority and  should not be deemed to be legislating beyond its jurisdiction. One thing that has always 574 got to be kept clear in one’s mind is that there may be more than one  aspect with regard to a particular subject matter. "Essential articles’ is a term which has acquired a definite connotation in  Indian legislative  practice and  is  not  a vague or a general term. In the Government of India Act 1935 Entries 27  and 29 in List I correspond to Entries 26 and 27 of List  II in  the Constitution. There was no entry in that Act  corresponding   to  Entry   33  of   List  III  of  the Constitution. Section  102 of  that Act  enabled the Federal Legislature to  legislate  in  the  State  List  during  the emergency. During  the World  War the  Defence of  India Act 1939 enabled  the Central  Government to  make such rules as appeared  to  it  necessary  or  expedient  for  maintaining supplies  and   services  essential   to  the  life  of  the community. Rule  81 of the Defence of India Rules dealt with maintaining supplies  and services essential for the life of the community  and electricity  was specifically referred to as an  article within  the scope  of that  rule Many  orders regarding electricity  were made  during the  course of that war like  Electricity Control order, 1942 of Bihar. When the proclamation of  emergency was  revoked on 1.4.1946 the laws made by  the Federal  Legislature with  respect  to  matters included in  the  Provincial  Legislative  List  would  have ceased to  have effect  and therefore the British Parliament enacted India (Central Government and Legislative) Act, 1946 enabling the  Federal Legislature  to make laws with respect to trade  and commerce (whether or not within the Province ) in, and  production,  supply  and  distribution  of  cotton, woollen textiles, papers, foodstuffs etc. and in exercise of that  power   the  Central   Legislature  enacted  Essential Supplies (Temporary  Powers) Act,  1946 for  continuance  of powers to  control production,  supply and distribution etc. In respect  of articles  not covered  by the Central Act the Provinces passed  similar  laws  regarding  other  essential commodities, for instance, Madras Essential Articles Control and Requisitioning  Act, 1949  in respect  of  ten  articles including electricity.  At present  electricity is  the only article included within the scope of that Act. The Essential

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Commodities Act  1955 was  passed by  Parliament on  1.4.55. Essential commodity  was defined in that Act. It practically included  every   matter  regarding   industry  within   the legislative  competence   of  Parliament.   Thus  the   word ’essential commodity’  is an  expression corresponding  to a commodity essential to the life of the community. It is not, therefore, open  to the  authority exercising  powers  under section 2(a)  of the  Kerala Act  to declare  any and  every commodity as  an essential  commodity. That  Act deals  with essential articles  not being  essential articles dealt with by the Central Act of 1955. It is not an Act with respect to the incorporation  or regulation of trading corporations and therefore does not all under Entry 43 or 44 of List I. It is not a  legislation with respect to electricity and therefore does not  fall under Entry 38 of List III. Electricity being beyond doubt  an essential  article may be declared to be an essential article  under the  Act. In  that case  the  power exercised is  not in relation to electricity qua electricity but electricity  as an  essential article. The Act therefore in pith  and substance is with respect to trade and commerce and production,  supply and distribution. We agree that this is the  correct view. It is not a permanent legislation with respect to  electricity but  a temporary  one dealing with a temporary situation. There can be no 575 doubt about  the argument  on behalf  of the  Board that the Surcharge order  is necessary for its survival and existence without which  there can  be  no  production  or  supply  of electricity. That  is why  it  is  a  matter  falling  under Entries 26  and 27  of List  II. It is no valid criticism of this view to say that the powers of the Board under the 1948 Act are  overridden by  the Surcharge order and the order is therefore repugnant  to the  1948 Act.  Indeed the  Board is more than willing, it is anxious, for the Surcharge order to be made.  It is  not necessary  to resort  to section 59 for this purpose.  This is  a simple  case of  a contract  being overridden  in   exercise  of   statutory  powers.   In  the alternative it  is argued as follows: The Kerala Act insofar as it deals with electricity can be deemed to be legislation under Entry  38 in  List III.  Though the Act itself has not declared  any  article  as  an  essential  article,  when  a declaration was  made under  section 2(a)  in 1965 declaring electricity as  an essential article for the purposes of the Act, it  became part of the Act. When the President assented to the Kerala Act in 1962 it may be that it cannot be deemed that he  had assented to it on the basis that the provisions of that Act were repugnant to some Act made by Parliament or some existing  law in the concurrent field because there was nothing in the Act itself which made it repugnant to any Act passed by  Parliament or  any  existing  law.  But  when  he assented in 1967 to the Act extending the life of the Kerala Act by  another two  years the declaration of electricity as an essential  article had  been made and should be deemed to have become part of the Act. So far we are in agreement with the argument  of the  learned Solicitor General. But when he goes further  and argues  that insofar as the consequence of such declaration  was that  the State Government was enabled to make orders regarding production, supply and distribution of electricity, there was a possibility of such orders being repugnant to the provisions of the Electricity Act, 1910 and the Electricity  (Supply) Act,  1948 and  therefore any such repugnance was  cured by  the assent given by the President, we cannot  agree. We  agree that the assent should be Deemed not merely  to the substitution of the words "five years" by the words "seven years" in the Kerala Act, but to the Act as

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a whole,  that is,  as amended  by  the  1967  Act  and  any repugnance between  the Kerala  Act and the Electricity Act, 1910 and the Electricity (Supply) Act, 1948 should be deemed to have  been cured  by such  assent. When  assenting to the 1967 Act  the President  should naturally  have looked  into the. whole Act, that is, the 1961 Act as amended by the 1967 Act.  But   the  declaration   itself  did  not  create  any repugnancy with  the 1948  Act. It  was  in  1968  that  the Surcharge order  was made,  in pursuance  of which the bills were served  on the various respondents in these appeals and demands made  for enhancing  charges for electricity. And it was the  Surcharge order  that can  be said  to  create  the repugnancy if  at all. It is only actual repugnancy that can be cured  by Presidential  assent and not the possibility of repugnancy.      Mr. Krishnamoorthy  Iyer appearing  for the respondents in Civil  Appeals Nos. 1371 and 1373-74 of 1973 is therefore right when  he argues that the declaration of electricity as an essential  article in  1965 did not in any way affect the rights of the respondents but only the 576 Surcharge order  of 1968  and that as the bills for enhanced charges   for electricity  were served on the respondents in 1968 before  the 1969  amendment of  the Act  the  Surcharge order  and   the  demands  made  were  not  cured  of  their repugnancy till  the 1969  Amendment Act  was assented to by the President  assuming that  there is  such repugnancy.  It there is  such repugnancy  by virtue  of the Surcharge order the assent  of the President can cure the repugnancy between the Kerala  Act and  the 1910  and 1948  Acts only  if it is subsequent to the Surcharge order. It is the exercise of the power under  section 3  of the Kerala Act that is alleged to have created  the repugnancy.  We do  not pause  to consider whether  there   is  in  fact  any  repugnancy  between  the Surcharge order and the 1948 Act.      The question  still remains  whether when a declaration is made  under section  2(a) of the Act declaring an article as an  essential article or an order is made under section 3 such a  declaration or  order becomes  part of  the Act ? In England  even   where  an   Act  declares   that  subsidiary legislation shall  have effect  as if  enacted in the Act it does not  preclude the  Court from  calling in  question the subsidiary legislation  where it  is inconsistent  with  the provisions of the Act Minister of Health v. The King(1). But it would  appear that  where the  statute provides  for  the laying of  the rules  before Parliament  and the  Parliament could have  annulled them,  such a  provision would make the subordinate legislation beyond challenge Institute of Patent Agents v.  Lockwood (2).  In India  many  statutes  both  of Parliament and of State Legislatures provide for subordinate legislation made  under the  provisions of those statutes to be placed on the table of either the Parliament or the State Legislature  and   to  be   subject  to  such  modification, amendment or  annulment, as  the case may be, as may be made by the Parliament or the State Legislature. r Even so, we do not think  that where  an executive authority is given power to frame subordinate legislation within stated limits, rules made by  such authority  if outside  the scope  of the  rule making power  should be  deemed to  be valid  merely because such rules  have been  placed before the legislature and are subject to such modification, amendment or annulment, as the case may  be, as  the legislature may think fit. The process of such amendment, modification or annulment is not the same as the process of legislation and in particular it lacks the assent either of the President or the Governor of the State,

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as the  case may  be. We  are therefore, of opinion that the correct  view   is  that   notwithstanding  the  subordinate legislation  being  laid  on  the  table  of  the  House  of Parliament or  the State  Legislature and  being subject  to such modification,  annulment or amendment as they may make, the subordinate legislation cannot be said to be said unless it is  within the scope of the rule making power provided in the statute.      What happens  then to  a declaration made under section 2(a) or  an order made under section 3 If such a declaration or order  is not  within the  scope of  the Act it should be held to  be not  valid. Does  the subsequent  assent of  the President to an Amending Act, which as      (1) [1931] A.C.494.                  (2)[1894] A.C.347. 577 we have  shown earlier in effect amounts to an assent to the whole  Act,   cure  this  defect  ?  We  consider  that  the declaration itself  can still  be attacked  if the  power to make such  a declaration  is beyond  the scope  of the power delegated. Whether  the power  delegated can  be attacked on the ground of excessive delegation of the legislative powers or on the ground that in so conferring the legislative power on the executive authority the legislature has abdicated its function or  the legislature itself could not have me such a law is’  a different  question. There is a slight difference between such  a situation  and the one where it is held that the declaration  is  beyond  the  scope  of  the  Act.  That electricity is  an essential  article and therefore the 1965 declaration under  section 2(a)  declaring electricity as an essential article  is valid  cannot be  disputed. It  is not disputed- that  an article which is not in fact an essential article cannot be declared to be an essential article.      The next  question  to  be  considered,  therefore,  is whether the  declaration or  the order can be said to be bad on the  ground either that there was excessive delegation or that the  legislature can  be said  to  have  abdicated  its powers ? In The Queen v. Burah(1) it was observed:           "Their Lordships  agree that  the Governor-General      in Council  could not  by any form of enactment, create      in India, and arm with general legislative authority, a      new legislative  powers. not  created or  authorized by      the Council’s  Act. Nothing  of that kind has, in their      Lordships’ opinion,  been  done  or  attempted  in  the      present case. What has been done is this. The Governor-      General in  Council has  determined,  in  the  due  and      ordinary course  of legislation, to remove a particular      district from  the jurisdiction  of the ordinary Courts      and offices,  and to  place it  under  new  Courts  and      offices, to  be appointed  by and  responsible  to  the      Lieutenant-Governor  of   Bengal;  leaving  it  to  the      Lieutenant-Governor to  say at  what time  that  change      shall take  place; and  also enabling  him, not to make      what laws  he pleases  for that  or any other district,      but to  apply by  public notification  to that district      any law, or part of a law, which either already was, or      from time  to  time  might  be,  in  force,  by  proper      legislative  authority,   "in  the   other  territories      subject to  his government." The Legislature determined      that, So  far, a  certain change should take place; but      that it  was expedient  to  leave  the  time,  and  the      manner, of carrying it into effect to the discretion of      the Lieutenant-Governor.  and also, that the laws which      were or  might be  in force  in the  other  territories      subject to the same Government were such as it might be      fit and  proper to  apply to  this district  also;  but

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    that, as  it was  not certain  that all those laws, and      every part  of them, could with equal convenience be so      applied, it  was expedient,  on  that  point  also,  to      entrust a  discretion to  the Lieutenant  Governor This      having been      (1) 5.L.R.178,194. 578      done as  to the  Garo Hills,  what was  done as  to the      Khasi and  Jaintia Hills ? The Legislature decided that      it was  fit and  proper that  the adjoining district of      the Khasi and Jaintia Hills should also be removed from      the jurisdiction  of the  existing Courts,  and brought      under the  same pro  visions with  the Garo  Hills, not      necessarily and  at all  events but  if  and  when  the      Lieutenant-Governor should think it desirable to do so;      and  that  it  was  also  possible  that  it  might  be      expedient  that  not  all,  but  some  only,  of  those      provisions  should   be  applied   to  that   adjoining      district. And  accordingly the  Legislature  entrusted,      for these  purposes also,  a discretionary power to the      Lieutenant Governor.           Their Lordships  think that  it is  a  fallacy  to      speak of the powers thus conferred upon the Lieutenant-      Governor (large  as they  undoubtedly are)  as if, when      they were  exercised, the  efficacy of  the  acts  done      under them  would  be  due  to  any  other  legislative      authority than that of the Governor General in Council.      Their whole  operation is,  directly  and  immediately,      under and  by virtue of this Act (XXII of 1869) itself.      The proper Legislature has exercised its judgment as to      place, person,  laws, powers;  and the  result of  that      judgment has  been to legislate conditionally as to all      these things. The conditions having been fulfilled, the      legislation is  now absolute.  Where plenary  powers of      legislation exist as to particular subjects, whether in      an imperial  or in  a provincial  Legislature, they may      (in  their  Lordships’  judgment)  be  well  exercised,      either  absolutely   or   Conditionally.   Legislation,      conditional on  the use of particular powers, or on the      exercise of  a limited  discretion,  entrusted  by  the      Legislature to persons in whom it places confidence, is      no uncommon  thing; and,  in many circumstances, it may      be highly  convenient. The British Statute Book abounds      with examples  of it:  and it  cannot be sup posed that      the Imperial  Parliament did not, when constituting the      Indian   Legislature,    contemplate   this   kind   of      conditional legislation  as within  the  scope  of  the      legislative  powers   which  it   from  time   to  time      conferred." We are of opinion that the power conferred by the Kerala Act is a  case of conditional legislation as contemplated in the above decision.  The various  types of  powers that  can  be exercised under  that Act  are enumerated  in it.  Only  the article with  reference to  which those  powers  are  to  he exercised is  left to  be determined  by the executive. That will vary  from time  to time;  at one  time salt  may be an essential article,  at another time rice may be an essential article and  on a  third occasion  match boxes.  It  is  the executive that  would be  in a  position to  judge when  and under what  circumstances an  article becomes  an  essential article and therefore it is necessary to 579 control the production, supply and distribution or trade and commerce in  a particular  article. The corresponding Madras Act,   the    Madras   Essential    Articles   Control   and

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Requisitioning (Temporary  Powers) Act,  1949 originally had ten  articles   included  in   the  schedule  as  "essential articles" with  powers to add others to the schedule. It now contains only  one article  in the schedule, electricity. It cannot  therefore  be  said  to  suffer  from  the  vice  of excessive delegation  either. Subsequent  decisions of  this Court only emphasize this point.      We may  however refer  to two  recent decisions of this Court. In State of Punjab v. Khan Chand(1) dealing with East Punjab Movable  Property  (Requisitioning)  Act,  1947  this Court held as follows:           "The Act  confers uncontrolled  power on the State      Government  or   the  officers   authorised  by  it  to      requisition any  movable property.  No guidelines  have      been laid  down regarding the object or the purpose for      which it  becomes necessary or expedient to requisition      a movable  property. Even  the authority requisitioning      movable property is not required to specify the purpose      for which  it has  become  necessary  or  expedient  to      requisition that property. There is no provision in the      Act that  the power  of requisitioning movable property      can be  exercised under  the  Act  only  for  a  public      purpose nor  is there  any provision  that powers under      the Act  can be  exercised only  in an  emergency or in      some special  contingency. Hence  the provisions of the      Act violate Articles 14 and 19 of Constitution The Act  did not  even. provide  for suitable  machinery for determining the  compensation payable  to the  owner of  the movable property  nor did  it contain any guiding principles for determining  the amount of compensation. But in the very same decision it was observed:           ’Considering the  complex nature of problems which      have  to  be  faced  by  a  modern  State,  it  is  but      inevitable that the matter of details should be left to      the authorities  acting under  an enactment. Discretion      has,  therefore,   to  be   given  to  the  authorities      concerned for the exercise of the powers vested in them      under an enactment." This decision  considered  the  relevant  decisions  on  the subject and is not against the view which we have taken           We must,  however, refer  to the  decision of this      Court in  Gwalior Rayon  Mills v. Asst. Commr. 5. T.(2)      relied upon  by the  respondents. In  that case  it was      found that  the Parliament  had laid  down  legislative      policy and  had not abdicated its legislative function.      It is necessary to refer to the view taken in that case      by the  majority judgment that it is not correct to say      that if  the legislature  can repeal  an enactment,  it      retains enough  control over  the authority  making the      subor-      (1) A.I.R.1974 S.C.543.        (2) A.I.R l974 S.C.1660. 580 dinate legislation and, as such, it is not necessary for the legislature   to lay  down legislative  policy, standard  or guidelines in  the statute.  That was,  of course,  not  the argument on  behalf of  the appellants  in  this  case.  But having regard  to the  fact that  reference was  made to the decision in  Cobb & Co. Ltd. v. Kropp(1) which is very often relied upon for contending that if the legislature conferred certain powers  on an executive authority it could be upheld because  the   legislature  could   any  time   repeal   the legislation and withdraw such authority and discretion as it had vested  in that  authority, it  is necessary  to look  a little more  closely into  that judgment.  The main  dispute there was  about the State Transport Act, 1960 passed by the

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legislature of  Queensland. It  was attacked  on the  ground that it  unlawfully and  unconstitutionally delegated to the Commissioner  for   Transport  sovereign   plowers  of   the legislature of Queensland to impose and levy taxes and would constitute an  unlawful  and  unconstitutional  transfer  of sovereign power  of legislature  to the  Commissioner or  an abdication of  such power  in his favour. There were various other contentions  to which it is not necessary to refer. In the same case the validity of the State Transport Facilities Act, 1946 was also in question. Under the 1946 Act, however, a determination  or a decision of the Commissioner was to be submitted to  the Minister  for his  confirmation. Stable J. described  this   provision  as   one   under   which   ’the commissioner had  a Parliamentary  hand  on  his  shoulder’. After referring  to the  various provisions  of the  Acts as well as  the powers  of the Queensland Legislature the Privy Council rejected  the argument  that the  effect of the Acts was to create a new legislative authority. The Privy Council pointed out that it cannot rationally be said that there was any abandonment  or abdication of power in favour of a newly created  legislative   authority,  and   referred   to   the observations of  the Privy  Council in  the Queen  v.  Burah (supra). The  Privy Council  then went on to point out that’ nothing comparable with "a new legislative power" armed with "General authority"  has been  created by the passing by the Queensland  Legislature   of  the  various  Transport  Acts. Reference was  then made  to the  decisions in  Hodge v. The Queen(2) and  Powel v.  Apollo Candle Company Ltd.(3) and it was pointed  out that  the Queensland  Legislature preserved its own  capacity insect  and retained  perfect control over the Commissioner  for Transport. It was in that context that they added  "inasmuch as  it could  at any  time repeal  the legislation and withdraw such authority and discretion as it had vested  in him". This portion of the observations cannot be relied upon in every case where the question of excessive delegation arises to justify it merely on the ground that it is open  to the  legislature to  repeal the  legislation and withdraw the  authority. This  would be  apparent  from  the extract from  the judgment  of Stable  J. which  immediately follows thereafter:           "obviously  Parliament   cannot  directly  concern      itself  with   all  the   multitudinous   matters   and      considerations which  necessarily arise  for daily  and      hourly determination within      (1)[1967] 1 A.C.141.       (2)(1883)9 App.Cas.117 P.C.                 (3)(1885)10App.Cas.282 P.C. 581      the ramifications of a vast transport system in a great      area in the fixing of and collection of licensing fees.      So, as  I see  it  on  the  face  of  the  legislation,      Parliament has  lengthened its  own arm by appointing a      commissioner to  attend to all these matters, including      the fixing  and gathering of the taxes which Parliament      itself has seen fit to impose. The commissioner has not      been given  any power  to act  outside the  law as laid      down by  Parliament. Parliament  has not abdicated from      any of  its own  power. It has laid down a framework, a      set of  bounds, within  which the  person  holding  the      office created by Parliament may grant, or refrain from      granting licenses,  and fix, assess, collect or refrain      from collecting fees which are taxes." and the succeeding observations to the following effect:           "The legislature were entitled to use any agent or      any subordinate  agency  or  any  machinery  that  they      considered appropriate for carrying out the objects and

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    purposes  that   they  had   in  mind  and  which  they      designated. They  were entitled to use the Commissioner      for Transport  as their  instrument to  fix and recover      the licences  and permit fees. They were not abrogating      their power  to levy  taxes and  were not  transferring      that power  to the  commissioner. What  they created by      the passing  of the Transport Acts could not reasonably      be described  as a  new legislative  power or  separate      legislative  body   armed  with   general   legislative      authority (see  R. v. Burah, 3 App. Case. 889). Nor did      the Queensland  legislature "create  and endow with its      capacity a new legislative power not created by the Act      to which  it owes  its own  existence" (see  In re  The      Initiative and  Referendum Act.  1910 A.C.  945; 35 TLR      630 P.C.).  In no  sense did the Queensland Legislature      assign or transfer or abrogate their powers or renounce      or abdicate  their responsibilities.  They did not give      away or  relinquish their  taxing powers.  All that was      done was  done under  and by reason of their authority.      It was  by virtue of their will that licence and permit      fees became payable.’ We agree  with the  view taken by the majority of this Court in Gwalior Rayon Mills’ case. In the result we hold that the Kerala Act,  the 1965 declaration under section 2(a) and the 1968 Surcharge order under section 3 are all valid      The result is that the appeals will have to be allowed; but in  Civil Appeals  Nos. 1425, 2575, 2576 of 1972 and 97, 1373 and  1374 of  1973 a  question regarding Article 14 has been raised which has not been considered by the High Court. In these  cases the  High Court will deal with that question alone and dispose of the matter afresh.      In Civil Appeal No. 1372 of 1973 the respondent is what is called  a sanction  holder under section 28 of the Indian Electricity Act, 191 582 and as  such a  licensee within  the meaning  of that term n clause (6)  of section  2 of  the Electricity  (SUPPLY) Act, 1948. The  respondent has  no objection  to  collecting  the surcharge from  those to  whom it  supplies electricity. The respondent’s contention  is a  limited one  that it need not pay surcharge  on the  electricity  which  it  consumes.  We consider this contention well founded and it is supported by the provisions  of clause (3) and (8) of the Surcharge order which read  together leave  no room for doubt on that point. Clause (3) reads as follows:           "3.  Notwithstanding   anything  to  the  contrary      contained  in  any  agreement  entered  into  with  any      consumer or  the conditions  of service  agreed upon by      the Kerala  State Electricity  Board; the  Kerala State      Electricity Board  shall levy a surcharge in accordance      with clause 5 on all supplies of electrical energy made      by it either directly or through licensees:           Provided that  no surcharge under this order shall be levied on-           (a)  Bulk supplies of energy to the licensees;           (b)  Low Tension  supplies of  energy for domestic                residential purposes;           (c)  Low   Tension    supplies   of   energy   for                agricultural purposes." The respondent  is a  licensee and  bulk supplies  have been made to the licensee. It is not a consumer to whom the Board supplies electrical  energy directly  or through a licensee. It cannot  be said  that in consuming electricity itself the respondent is supplying electricity to itself. The Surcharge order clearly  makes a  distinction between  the consumer on

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the one  hand and  the licensee  on the  other and  makes no provision for  surcharge  in  the  case  of  consumption  of electricity by  a licensee.  It would  be therefore declared that  the  respondent  in  this  appeal  need  not  pay  the surcharge on  the electricity  consumed by it. There will be no order as to costs.      GUPTA, J. I regret I am unable to agree that the Kerala Essential Articles  Control (Temporary Powers) Act, 1961 and the declaration  and the  surcharge order  made respectively under ss.  2(a) and  3 of  that Act are valid. In my opinion the Kerala  act is  an invalid  piece of  legislation and as such the  declaration and  the surcharge  orders are  of  no consequence. It  is not necessary to restate the facts which have  been   set  out  fully  in  the  Judgment  of  brother Alagiriswami J.;  I shall  briefly state the reasons for the view I have taken.n      The State  Lagislature has power to make laws only with regard to  matters specified  in List II and List III in the Seventh  Schedule   of  the   Constitution  subject  to  the provisions of Art. 254(2). The Kerala Act, as its long title shows, is in Act to provide for the control of the produc 583 tion, supply and distribution of, and trade and commerce in, "certain articles". The Preamble of the Act also states that it was  passed as it was considered expedient to provide for the control  of the  production, supply and distribution of, and trade  and commerce in, "certain articles", Sec. 1(3) of the Act provides that the Act would remain in force for five years from the date of its commencement which was in January 1962.  Sec.3(1)   empowers  the  State  Government  to  make provisions by a notified order for regulating or prohibiting the production  supply and  distribution of  any  ’essential article’ and  trade and  commerce therein  if the Government thought it  was  expedient  so  to  do  for  maintaining  or increasing  the  supplies  or  for  securing  the  equitable distribution of  such essentiai  articles. Sec. 2(a) defines essential article  as any  article not  being  an  essential commodity as  defined in the Essential Commodities Act, 1955 which the  Government by  notified order might declare to be an essential  article. The  definition leaves  it  to  State Government to decide what should be an essential article for the purpose  of  the  Act.  The  Legislature  is  of  course presumed to  know the  limits of its competence and assuming it is  permissible to  attribute similar  knowledge  to  the Government as  to the  bounds of  its authority  under  sec. 2(a), an essential article may be any article covered by any of the  entries in List 11 or List III except the classes of commodities  mentioned   as  essential   commodity  in   the Essential Commodities  Act. Until  therefore, the Government issued a  notification on  December 10, 1965 under sec. 2(a) declaring electrical  energy  to  be  an  essential  article almost four  years after the act came into force, it was not possible even  to guess what the Act was about. Thus the Act as passed  had no positive content, it was an empty husk and its insubstantiality, if by itself not, an ill   validating   factor,  exposes   the  want  of  a  declared legislative policy  in the  Act. The  Act does  not give any indication as  to the  nature of  the articles in respect of which it  sought  to  control  the  production,  supply  and distribution, and  trade and  commerce.  It  confer  on  the Government the authority to declare any article an essential article and  to exercise  the aforesaid powers in respect of that article.  The Act  does not provide any guidance or lay down any  test to  ascertain what makes an article essential for the  purpose of  the Act. The reference to the Essential

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Commodities  Act  in  sec.  2(a)  which  defines  ’essential article’  is   merely  to   exclude  from  its  purview  the commodities covered  by the  Essential Commodities Act., and only serves  to emphasize  its indefiniteness  and makes  it more difficult  to find  any  clue  to  the  nature  of  the articles the  Legislature had in mind in enacting the Kerala Essential Articles  Control (Temporary  Powers)  Act,  1961. Almost the  entire legislative  field was  left open  to the Government to  choose from and decide according to their own lights what should be an essential article.      It hardly  needs repetition that the Legislature cannot delegate the  essential legislative  function,  which  means that the  Legislature must declare the policy of the law and provide a  standard for the guidance of the subordinate law- making authority.  The Kerala  Act authorises the Government to declare  any article as essential, except those mentioned in the  Essential Commodities  Act, without  laying down any define criteria or standards. This, I think, is surrendering unguided and un 584 canalised power  to the  executive. I do not see how the Act can be   called  an instance of conditional legislation-this is not  a case  where the  Legislature having determined the policy has  left the details to be supplied by the executive authority. I  cannot think of a case where the Legislature’s self-effacement could  be more  complete. In  my opinion the power conferred  on the Government by the Kerala Act exceeds the limits of permissible delegation.      I may  now refer  to another  aspect of  the  case.  As stated  earlier,   the  Kerala  Essential  Articles  Control (Temporary Powers)  Act, 1961 came into operation in January 1962 and was to remain in force for five years from the date of its  commencement. However,  the  life  of  the  Act  was extended by  successive amending  Acts passed  in 1967, 1969 and 1970. Art. 254(2) of the Constitution provides:           "Where a  law made  by the  Legislature of a State      with respect  to one  of the  matters enumerated in the      Concurrent List contains any provision repugnant to the      provisions of  an earlier  law made by Parliament or an      existing law with respect to that matter, then, the law      so made  by the  Legislature of such State shall, if it      has  been   reserved  for   the  consideration  of  the      President and  has received his assent, prevail in that      State:           Provided that nothing in this clause shall prevent      Parliament from  enacting at  any  time  any  law  with      respect to  the same  matter including a law adding to,      amending, varying  or repealing  the law so made by the      Legislature of the State." It appears  that the  President had  given his assent to the principal Act  of 1961  and also  to the successive amending Acts extending  the life of the principal Act. The Act as it was passed  in 1961 does not appear to contain any provision which was repugnant to any Central Act or existing law, that being so,  the assent  given to it seems redundant and of no consequence.  (obviously,   Art.  254(2)   contemplates   an existing repugnancy and not possible future inconsistencies. in  December   10,  1965   the  State  Government  issued  a notification declaring  electrical energy to be an essential article under  sec. 2(a) of the Act, and on June 1, 1968 the State Government  made the  Kerala State  Electricity Supply Surcharge order  in exercise of the powers conferred by sec. 3.  The   surcharge  order   made  in   1968  following  the declaration of  electrical energy as an essential article in 1965 is  said to  be in  conflict with the provisions of the

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Indian Electricity  Act, 1910  and  the  Electricity  Supply Act,1948. Both  these Acts  are existing laws. It was argued that assent  of the President received for the amending Acts of 1967,  1969 and  1970 cured  the repugnancy introduced by the surcharge  order. Assuming  that  assent  given  to  the amending  Acts   would  have   the  effect   of  curing  the repugnancy, if  any, in  the  principal  Act,  the  question remains where  the declaration  and the surcharge order part of the Act under which they were made ? If they were not, if the  order  declaring  electrical  energy  as  an  essential article and  the surcharge  order were outside the Act, then the assent given to the Act could not cure 585 the repugnancy  arising from  these two  orders. Art. 254(2) requires the  State  legislation  containing  the  repugnant provision to  be  reserved  for  the  consideration  of  the President before he gives his assent to it. Could it be said that the declaration and the surcharge order were provisions in the  Kerala Essential Articles Control (Temporary Powers) Act 1961  ? this  Court considered a similar question though in a  different context  in Chief Inspector of Mines v. Lala Karam  chand   Thappar.(1)  In  that  case  this  Court  was examining the effect of the repeal of the Mines Act, 1923 on the regulations  framed under  that Act. Mines Act, 1923 was repealed and  was re-enacted  with certain  modifications as the Mines  Act, 1952. Sec. 29 of the 1923 Act empowering the Central Government  to make  regulations consistent with the Act for  specified purposes was reenacted in the 1952 Act as Sec. 57. Regulations were  made in 1926 under sec. 29 of the 1923 Act,  but no regulations had been made under sec. 57 of the 1952  Act at the relevant date in 1955. The question was whether in  view of  sec. 24  of the General Clauses Act the Mines Regulations  of 1926  could be  said to  have been  in force at the relevant date as there was nothing in the later providing  otherwise,   and   the   regulations   were   not inconsistent with the re-enacted provisions. Sub-sec. (4) of sec.  31  of  the  1923  Act  laid  down,  inter-alia,  that regulations and  rules made  under the  Act would  have  the effect  "as   if  enacted   in  this  Act."  overruling  the contention that  the regulations  became part  of the Act in view of  sub-sec. (4) of sec. 31 and that with the repeal of the Act  the regulations also stood repealed as part of that Act, this Court observed at page 23 of the report:           "The true  position appears  to be  that the rules      and regulations  do not  lose their  character as rules      and regulations  even though they are to be of the same      effect as  it contained in the Act. They continue to be      rules subordinate  to the  Act, and  though for certain      purposes, including  the purpose  of construction, they      are to  be treated  as if  contained in  the Act, their      true nature as subordinate rule is not lost. There is  thus at  least one  decision of  this Court  which seems to  support the view that the orders made by the State Government under sec. 2(a) and sec. 3(1) of the impugned Act could not  be called part of the Act; this Act does not even say that  such orders are to be treated as if enacted in the Act. This  is an  important aspect of the case, and I do not think it can be assumed or taken for granted without further consideration that  these orders  formed part of the Act and the President’s assent      (1)[1962] 1 S.C.R 9 7-L925SlupCI/75 586 to the  Act cured  the repugnancy  created by  the surcharge order. However, as I have already held the Act to be invalid

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on the  other ground.  I prefer not to express any concluded opinion on this point.      In may  judgment the  Kerala Essential Articles Control (Temporary Powers)  Act, 1961  is invalid  on the  ground of excessive delegation.  I would therefore dismiss the appeals but without any order  as to costs.                            ORDER      In view  of the  decision of  the majority. the appeals are allowed  and Civil Appeals Nos. 1425, 2575, 2576 of 1972 and 97,  1373 and  1374 of  1973 are  remanded to  the  High Court. There will be no order as to costs. P. B. R . 587