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PETITIONER: MAHARASHTRA STATE ELECTRICITY BOARD AND THESTATE OF MAHARASH

       Vs.

RESPONDENT: NAGPUR ELECTRIC LIGHT AND POWER COMPANY LTD.& ANR.

DATE OF JUDGMENT07/01/1972

BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) SHELAT, J.M. DUA, I.D. KHANNA, HANS RAJ MITTER, G.K.

CITATION:  1972 AIR  706            1971 SCR  (3)  19

ACT: Indian  Electricity Act 1910, S. 4(3)-Amendment of  terms  & conditions   of  Nagpur  Electricity   Licence-Validity   of amendment made in 1966-Legality of notice under s. 6 of  Act for purchase of undertaking by Electricity Board.

HEADNOTE: On May 4, 1905 a licence was granted tinder s. 4(1) of’  the Indian Electricity Act, 1903 to Crompton & Co. Ltd. for  the supply  of electricity in the municipal area of  Nagpur.   A notification granting the above license was published in the Central  Provinces  Gazette  on May 6,  1905.   The  license provided  that the right of the government to  purchase  the undertaking shall arise after 42 years from the commencement of  the  license  and after every subsequent  period  of  10 years.   Para 4 of the license provided that it  would  come into force and have effect on the (lay when the notification confirming it was published in the Central Provinces Gazette and  that day would for the purpose of Act, be deemed to  be the  commencement  of the license.  On January 1,  1911  the Indian  Electricity Act, 1910 came into force.  On June  28, 1913 a notification permitting the assignment of the licence in  favour  of the Nagpur Electric Light and  Power  Company Ltd.  (respondent herein) was published in the gazette.   On May  2, 1947 amendments in the terms and conditions of’  the licence were made under s. 4(3) of the Act of 1910 and  were published  in  the gazette.  In the preamble it  was  stated that  these amendments were "in ’he terms and conditions  of the  Nagpur  Electricity licence grantees under  the  Public Works   Deptt.    Notification   No.  45   dated   4th   May 1905............  In the various amendments made  throughout the reference was made to May 4. 1947 as being the date when various changes were deemed to start or operate.  In  clause 3  paragraph (o) (i) was provided that "Option  of  purchase given  by  sub-section 1 of section 7 of the  Act  shall  be exercisable  on the expiration of ten years or 4th May  1957 and  the expiration of every subsequent period of ten  years during  continuance  of  this  licence."  On  September   4, 1948  the  Electricity  Supply Act, 1948  came  into  force. Section  71 of this Act provided that the right and  options

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to  purchase  under the Indian Electricity  Act.  1910  were deemed  to  have  been transferred to  the  Provincial  (now State) Electricity Board.  The Indian Electricity  Amendment Act. 1959 (32 of 1959) amended Indian Electricity Act. 1910. In the newly inserted section 4A(1) the proviso thereto said that  no alterations or amendments in the license  shall  be made  except  with the consent of the lisensee  unless  such consent   was  in  the  opinion  of  the  State   government unreasonably  withheld.   In  the  amended  Act  section   6 provided  for the purchase of the licensee’s undertaking  by the  State  Electricity  Board. but the old  section  7  was allowed to continue.  On September 15, 1965 notice was given to the respondent under sub-section (1) and’ sub-section (6) of section 6 of the Indian Electricity Act, 1910 whereby the respondent was required 20 to  sell  its undertaking to the Board on  the  midnight  of 3rd/4th  May,  1967  being the date of  the  expiry  of  the licence   granted   to   it.   Doubts  arose   as   to   the interpretation of clause 3 paragraph (o) (i) of the  licence because  of the use of the word ’or’ between words 10  years and  "the  4th  May. 1957" in the said  clause.   The  State Government  on  April  19,  1966  published  a  notification whereby in the said clause between the words "10 years"  and "the  4th  May, 1957" the word "on"  was’  substituted,  the effect of which was that the option to purchase became exer- cisable  on the expiration of period of 10 years on the  4th May.  1957.  After this amendment another notice  was  given under sub-section and (6) of s. 6 of the Indian  Electricity Act,  1910 on April 26, 190.  The words of this notice  were the same as that of the earlier notice but it was  expressly given in supersession of the earlier notice.. The respondent filed a writ petition under article 226 of the  Constitution challenging the aforesaid notice dated April 26, 1966.   The High  Court  held  that  since  the  operation  of   license commenced  on May, 6, 1905 it could not terminate on May  4, 1957  and therefore the amendment of 1966 was  invalid.   In appeal to this Court it was common ground that the  licensee had  never  replied to the letter of the  State  Electricity Board  asking  for  its consent for  the  amendment  of  the licence in 1966 in terms of section 4A(1) of the Electricity Act. HELD  : (i) In the circumstances of the case there could  be no doubt that the State Government was entitled to hold  the opinion that the consent of the licensee for the purchase of undertaking had been unreasonably withheld. [27 E] (ii) Two interpretations were possible of clause 3 paragraph (o)  (i) of the license, as it existed before the  amendment dated  April 19, 1966.  One was that the word ’or’ had  been wrongly used by some printing mistake and the true word  was "on".  The other interpretation was that two dates had  been provided for the exercise of the option; one, the expiration of  ten years from May 6, 1947 the other being May 4,  1957. Thus there was genuine doubts about the real date and if the State  Government sought to clarify the point it  cannot  be said that it made an unreasonable demand from the  licensee. It  was  not a case where government was providing  for  the option  to purchase which was not originally intended to  be given. [26 F-H] (iii)     The High Court was wrong in holding that May 6 was the  relevant date because the notification relating to  the original  license  was published on May 6, 1905.   When  the license was amended in 1947 with the consent of the licensee it  proceeded on the basis that the 42 years period  expired on May 3. 1947 because throughout the crucial effective date

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in  the amendments is May 4, 1947.  Para 4 of  the  original license  thus  ceased  to have effect  for  the  purpose  of construing the license as amended  in 1947 and subsequently. (iv) If  clause (3) paragraph (o)(i) is interpreted  in  the light of the rest of     the amendments made in the  license in  1947,  it is quite clear that the  previous  period  was deemed  to have expired on May 3, 1947 and the fresh  period started  on  May 4, 1947 and the subsequent  periods  of  10 years  ended  on  May  3,  1957 and  May  3,  1967.   It  is impossible  to  read the license as amended in 1947  in  any other  way  than that it was agreed that the  period  of  10 years  in  the license would start from May  4,  1947.   The details  of distribution system, the valuation of assets  as on  May  4,  1947  and  other  clauses  all  point  to  this conclusion.   The  license rightly talked of Sec. 7  of  the Electricity  Act because the license still provided for  the start of period of 10 years from May 1947 and 21 this could only be provided for while the old sec. 7  stood. The notice dated April 26, 1966 was thus in accordance  with terms  of the license and the law.  The impugned notice  did not  suffer from any infirmity. The appeal must  accordingly be allowed. [28D-H]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1429 & 1764 of 1968. Appeal  from  the judgment and order dated the  26th  April, 1967 of the Bombay High Court, Nagpur Bench in Special Civil Application No. 125 of 1967. Niren De, Attorney-General for India, A. G. Ratnaparkhi,  C. K.  Ratnaparkhi and Rajiv Shah, for the appellant  (in  C.A. No. 1429 of 1968) and Respondent No. 3 (in C.A. No. 1764  of 1968. M.   C.  Setalvad and I. N. Shroff, for respondents  Nos.  1 and 2 (in C.A. No. 1429 of 1968). B.  D.  Sharma, for respondent No. 3 (in C.A.  No.  1429  of 1968). V.   S.  Desai, P. K. Chatterjee and B. D. Sharma,  for  the appellant (in C.A. No. 1764 of 1968). S.   J.  Sorabjee and 1. N. Shroff, for respondents  Nos.  1 and 2 (in C.A. No. 1764 of 1968). S.   J.  Sorabjee,  Ashok  H. Desai and  R.  P.  Kapur,  for intervenar No. 1 (in both the Appeals). R.   N.  Banerjee and R. P. Kapur, for Intervener No. 2  (in both the Appeals). The Judgment of the Court was delivered by Sikri,  C. J. These two appeals by certificate are  directed against the judgment of the High Court of Bombay  (Abhyankar and Paranjpe, JJ).  By this judgment the High Court came  to the conclusion that the notice dated April 26, 1966,  issued by  the  Maharashtra  State  Electricity  Board  under   the provisions of S. 6 of the Indian Electricity Act, 1910,  was invalid  in  law  and was  unenforceable  having  failed  to satisfy  the essential conditions of the notice.   The  High Court accordingly allowed the petition under art. 226 of the Constitution and quashed the said notice. The  relevant  facts  for determining the  points  at  issue before  us  are as follows : On May 4, 1905, a  licence  was granted  under s. 4(1) of the Indian Electricity Act,  1903, to   Crompton  &  Co.  Ltd.,  London,  for  the  supply   of electricity in the municipal area of Nagpur.  A notification granting the above licence was

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22 published  in the Central Provinces Gazette on May 6,  1905. On  January 1, 1911, the Indian Electricity Act, 1910,  came into force.  On June 28, 1913 a notification permitting  the assignment  of the licence in favour of the Nagpur  Electric Light  and  Power Company Ltd., respondent  before  us,  was published in the gazette.  On May 2, 1947, amendments in the terms and conditions of the licence made in exercise of  the powers  conferred  by  sub-s.  (3) of s.  4  of  the  Indian Electricity  Act, 1910, were published.  In the preamble  it was  stated  that these amendments were "in  the  terms  and conditions of the Nagpur Electricity Licence, granted  under the  Public Works Department Notification No. 46, dated  the 4th  May,  1905..  .  ."  In  the  various  amendments  made throughout, reference was made to May 4, 1947, as being  the date  when various changes were deemed to start or  operate. For  instance,  in  clause 2 paragraph  (v)  the  expression "deposited map" was defined as follows :               "2(v)  the  expression "deposited  map"  shall               mean the plans and statements showing               (a)   the area of supply;               (b)   details of distribution system laid  and               in use as on 4th May 1947;               (c)   additions  or  alterations  or  both  to               existing  distribution  system as on  4th  May               1947. . . . " Again  clause 2 paragraph (ix) defined the expression  "Nett Book Value" to mean the written down value of the assets  as on  May  4,  1947.  In clause 3 paragraph  (b)  (ii)  it  is provided that "nothing in this licence shall be construed to prevent  the  Great  Indian Peninsula  Railway,  the  Bengal Nagpur  Railway or the Provincial Government or the  Central Government  from  taking  from the Government  a  supply  of electrical  energy for its exclusive use within the area  of supply  for new installations set up by them after 4th  May, 1947".  In clause 3 paragraph (d) it was provided that  "the licencee  shall,  within six months from the 4th  May  1947, reduce its retail rates for the supply of energy for various purposes to its consumers. . . . " In clause 3 paragraph (e) (i) (b) it was provided that the "continuous current  system shall  be in use for a limited period of 5 years up  to  4th May  1952,  or  such longer period  as  the  Government  may direct......  It was provided further in clause 3  paragraph (f) (vii) as follows               "It    is   desirable   that   the    existing               distribution  system viz. as on 4th May,  1947               should also conform with the foregoing in  all               respects. . .                              23 (Sikri, C.J.) In clause 3 paragraph (o) (i), which is the clause which  we have to interpret, it was provided as follows :               "The  option of purchase given by  sub-section               (1)   of  section  7  of  the  Act  shall   be               exercisable on the expiration of ten years  or               4th  May  1957  and the  expiration  of  every               subsequent period of ten years during the con-               tinuance of this license." We may mention that there was some debate before us  whether the  word  "or" in this para was a misprint  for  "on".   We checked  up  the original and it is common ground  that  the word in the original license is "or" and not "on". In the first annexe headed "Compulsory Works" (see Clause  3 of   the  License)  it  is  provided  that   the   "existing distribution  system together with transformers and  control

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gear  as  laid in use on 4th May 1947 in streets  and  roads delineated  in  the deposited map shall  be  the  Compulsory Works for purposes of the section." On  September 10, 1948, the Electricity (Supply) Act,  1948, came  into force.  We need only notice s. 71 of  this  Act under  which  the rights and options to purchase  under  the Indian  Electricity  Act,  1910 were  deemed  to  have  been transferred to the Provincial (now State) Electricity Board. The  Indian  Electricity (Amendment) Act, 1959 (32  of  1959 amended  the  Indian Electricity Act, 1910.   We  need  only notice the insertion of new section 4A(1) at present.   This reads :               "4A.   Amendment of licensees.-(I )  Where  in               its  opinion the public interest  so  permits,               the  State Government, on the  application  of               the   licensee   or   otherwise   and,   after               consulting the State Electricity Board, and if               the  licensee is not a local  authority,  also               the  local authority, if any, concerned,  may               make such alterations and amendments in  terms               and  conditions  of a license,  including  the               provisions specified in section 3, sub-section               (2), clause (f), as it thinks fit :               Provided   that   no   such   alterations   or               amendments  shall  be  made  except  with  the               consent  of the licensee unless  such  consent               has.  in the opinion of the State  Government,               been unreasonably withheld."               The   purchase  of  undertakings  is   to   be               regulated by s. 6 which treads :               "  6.  Purchase of undertakings. (1)  Where  a               license  has been granted to any  person,  not               being a local authority, the State Electricity               Board shall,-               (a)   in the case of a license granted  before               the  commencement  of the  Indian  Electricity               (Amendment)               24               Act,  1959,  on the expiration  of  each  such               period as is specified in the license;......               have the option of purchasing the  undertaking               and  such  option shall be  exercised  by  the               State  Electricity  Board  serving  upon   the               licensee a notice in writing of not less  than               one  year requiring the licensee to  sell  the               undertaking  to  it  at  the  expiry  of   the               relevant  period  referred  to  in  this  sub-               section." Sub-section  (4)  of  s.  6  provides  that  "if  the  State Electricity   Board  intends  to  exercise  the  option   of purchasing  the  undertaking tinder this section,  it  shall send an intimation in writing of such intention to the State Government at least eighteen months before the expiry of the relevant  period  referred to in sub-section (1) and  if  no such  intimation  as  aforesaid is  received  by  the  State Government  the State Electricity Board shall be  deemed  to have  elected not to purchase the undertaking.   Sub-section (6)  of section 6 provides that "where a  notice  exercising the  option  of purchasing the undertaking has  been  served upon  the  licensee under this section, the  licensee  shall deliver the undertaking to the State Electricity Board,  the State Government or the local authority, as the case may be, on the expiration of the relevant period referred to in sub- section  (1)  pending the determination and payment  of  the purchase  price".   Under  sub-s.  (7),  s.  6,  "where   an

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undertaking  is purchased under this section, the  purchaser shall pay to the licensee the purchase price determined  in accordance with the provisions of sub-section (4) of section 7A". On  September  15, 1965 notice was given to  the  respondent under  sub-s.  (1)  and sub-s. (6) of s.  6  of  the  Indian Electricity Act, 1910, as follows :               "I  am  directed to give you notice  that  the               Maharashtra   State  Electricity   Board   has               decided    to   purchase   your    Electricity               Undertaking  at  Nagpur (District  Nagpur)  in               exercise  of the option to purchase vested  in               the  Board by sub-section (1) of section 6  of               the  Indian  Electricity  Act,  1910,  and  to               require  you to sell your said undertaking  to               the Board on the midnight of 3rd/ 4th May 1967               being  the  date  of  expiry  of  the  license               granted  to  you by the Government  under  the               said Act and also to call upon you under  sub-               section  (6) of Section 6 of the said  Act               to  deliver the said undertaking to the  Board               on the said date of expiry of the said license               pending determination and payment of  purchase               price."               Doubts  arose  as  to  the  interpretation  of               clause 3 paragraph (o)    (i) of the  license,               which we have set out above.  The State 25 Government,  therefore, decided to amend the para so  as  to remove any doubts that there might be on the matter, and  on April  19,  1966  published a notification  which  reads  as follows :               "Whereas  as  required by sub-section  (3)  of               Section  4-A  of the Indian  Electricity  Act,               1910  (11  of  1910) a draft  of  the  further               amendment   proposed   to  be  made   by   the               Government  of  Maharashtra in the  terms  and               conditions of the Nagpur Electricity  License,               granted  by  the  Government  of  the  Central               Provinces,     Public    Works     Department,               Notification No. 46, dated the 4th May,  1905,               as  subsequently  amended,  was  published  in               Government Notification, Industries and Labour               Department   No.  LNA-(M)-1265/8126-Elec.   1,               dated  the  4th January,  1966,  for  inviting               objections and suggestions               And whereas no objections or suggestions  have               been received by the Government of Maharashtra               :               And whereas the Government of Maharashtra  has               consulted  the Maharashtra  State  Electricity               Board and the local authorities concerned  and               obtained   the   consent   of   the    Central               Government.               And  whereas  the, Government  of  Maharashtra               also   requested  the  Licensee,  the   Nagpur               Electricity Light & Power Company Limited,  to               give its consent to the proposed amendment, as               required  by the proviso to subsection (1)  of               the  said section 4-A but, in the  opinion  of               the  Government of Maharashtra.  such  consent               has been unreasonably withheld               And  whereas in the opinion of the  Government               of Maharashtra, the Public interest so permits               to make the proposed amendment :

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             Now,  therefore,  in exercise  of  the  powers               conferred  by the said section 4-A and of  all               other  powers enabling it in this behalf,  the               Government  of Maharashtra hereby  amends  the               terms  and conditions of the said licence,  as               follows :               In  clause 3 of the license, in paragraph  (o)               in subparagraph (i) for the portion  beginning               with  the  words "shall  be  exercisable"  and               ending  with the word and figures  "May  1957"               the following shall be substituted. namely               "Shall be exercisable on the expiration of the               period of ten year on the 4th May 1957" L864SupCI/72 26 After this amendment, another notice was given under sub-ss. (1)  and (6) of s. 6 of the Indian Electricity Act, 1910, on April 26, 1966.   The wording of this notice is  similar  to the  notice dated September 15, 1965, which we have set  out above.   This notice was expressly given in supersession  of the earlier notice. While  approaching the Central Government for  its  consent, the  Government of Maharashtra in its letter  dated  January 17,  1966, stated that "the draft amendment seeks to  remove the  ambiguity, if any, in respect of the date on which  the option   of  purchase  is  exercisable  under   the   Indian Electricity Act, 1910". On  November  10, 1966, the licensee,  the  Nagpur  Electric Light and Power Company Ltd., filed the petition under  art. 226 challenging the aforesaid notice dated April 26, 1966. The High Court held that the amendments in the license  made in  1947  were  in order.  No  serious  challenge  to  these amendments  has  been  made  before  us.   The  High  Court, however,  seems to have held that the amendment of 1966  was invalid.   The  first  question which we may  deal  with  is whether  the  High  Court  is  right  in  holding  that  the amend ment of April 19, 1966 was valid or not.  It is common ground  that  the  licensee did not send any  reply  to  the demand  of  consent  made  by  the  State  Government.   The question  arises whether the licensee unreasonably  withheld the  consent.  It seems to us that in the  circumstances  of this  case there is no doubt that the State  Government  was entitled  to  hold  the opinion that the  consent  had  been unreasonably withheld. Two interpretations were possible of clause 3 paragraph  (o) (i) of the license, as it existed before the amendment dated April 19, 1966.  One was that the word ’or’ had been wrongly used  by  some printing mistake and the true word  was  ’on. The  other  interpretation  was  that  two  dates  had  been provided for the exercise of the option; one, the expiration of ten years from May 6, 1947, the other being May 4,  1957. Thus  there were genuine doubts about the real date  and  if the  State Government sought to clarify the point it  cannot be said that it made an unreasonable demand on the licensee. Every  licensee,  under  the Electricity Act,  1910  or  the earlier  Act,  knew that the statute gave an option  to  the State Government or a local authority or some board to  pur- chase,  and  that  option  had to  be  exercised  after  the expiration of certain periods mentioned in the licence.   So it  was  not a case where Government was providing  for  the option  to purchase which was not originally intended to  be given.  We are unable to appreciate the opinion of the  High Court that the "amendment effected in 1966 stating that  the option to purchase under the Act shall be exercisable on the expiration of the period of ten years on

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                            27 4-5-1957, is saying something which is meaningless and unen- forceable." The High Court seems to think that the period of 10  years starting with the commencement of that  period  on May  6, 1947 could never end on May 4, 1957.  But  this  was exactly  the reason why the amendment was sought to be  made in  the  license.   May  6, 1947 was a  date  which  had  no relevance  once  the  amendments  of  1947  are  taken  into consideration.  The amendments of 1947 all the time speak of May  4, 1947 and not May 6, 1947.  The date May 6, 1947  was derived by the following process of reasoning.  The original license provided that "the right to purchase (para (g))  the undertaking,  in  respect of which the license  is  granted, shall  for  the purposes of the provisions  in  this  behalf contained in the said Act enure after the following periods, that is to say               (i)   after 42 years from the commencement  of               this Licence.               (ii)  after  every  subsequent  period  of  10               years.    The  terms  of  such   purchase   as               aforesaid shall be those set forth in  Section               7 of the Act." Para  4 of the original license provided that "this  License shall  come into force and have effect upon the day  when  a notification  confirming  it  is published  in  the  Central Provinces  Gazette, and that day shall for the  purposes  of the  said  Act  be deemed to be  the  commencement  of  this License".   It  is this para 4 that created  the  difficulty because  although the notification is dated May 4, 1905   it was  published  on May 6, 1905.  But when. the  license  was amended in 1947 with the consent of the licensee it proceed- ed  on the basis that the 42 years period expired on May  3, 1947,  because throughout the crucial effective date in  the amendments is May 4, 1947. It  seems  to  us that after the amendments para  4  of  the original  license ceased to have effect for the purposes  of construing the license as amended in 1 947 and subsequently. This takes us to the question whether the notice dated April 26,  1966  is  in  accordance with law.   For  the  sake  of convenience  we  may set out clause 3 paragraph (o)  (i)  as amended               "43  (o) (i) The option of purchase  given  by               subSection  (1) of section 7 of the Act  shall               be exercisable on the expiration of the period               of  ten  years on the 4th May  1957,  and  the               expiration  of every subsequent period of  ten               years during the continuance of this license."  It is the case of the licensee     that the        date  in the notice viz. MAy, 1967, is not in compliance with law the midnight of 3/4th and the terms of the licensee. 28 Mr. Sorabjee further submitted the following propositions               (i)   A day is regarded as indivisible  period               and the law does not regard fraction of a day;               (ii)  Person  for  whose  benefit  period   is               prescribed  is entitled to the benefit of  the               entire period.               (iii) Day of the happening of an event or  the               doing  of an Act ought to be  excluded  rather               than included.               (iv)  Notice   under  S.  6  is  a   condition               precedent and must be strictly construed. He also referred to us some authorities in support of  these propositions.   We need not quarrel with these  propositions but the first three must be regarded as ordinary  principles

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of construction and yield to the wording and the context  of the instrument. It  seems  to  us  that if clause 3  paragraph  (o)  (i)  is interpreted in the light of the rest of the amendments  made in the license in 1947, it is quite clear that the  previous period  was  deemed to have expired on May 3, 1947  and  the fresh  period  started  on May 4, 1947  and  the  subsequent periods of 10 years ended on May 3 1957 and May 3, 1967.  It is impossible to read the license as amended in 1947 in  any way  other  than that it was agreed that the  period  of  10 years mentioned in the license would start from May 4, 1947. The details of distribution system (para 2 extracted above), the valuation of assets as on May 4, 1947 and other  clauses extracted above all point to this conclusion. It  was pointed out that the license still talked of sec.  7 of  the Electricity Act.  Why was this not amended  when  it was  under sec. 6, as inserted in 1959, that the  option  to purchase  became  exercisable ? It seems to us that  it  was rightly  not amended because the license still provided  for the  starting  of the period of 10 yews from  May  4,  1947. This could only be provided for while the old sec. 7 stood. It  seems to us that the notice dated April 26, 1966 was  in accordance with the terms of the licence and the law. We accordingly hold that the impugned notice does not suffer from  any infirmity.  The appeals are allowed, the  judgment of the High Court reversed and the writ petition  dismissed. The  parties will bear their own costs throughout.   Parties may  mention  on  the 17th January,  1972  for  passing  any consequential and./or essential order which may be necessary in the circumstance G. C.                                   Appeals allowed. 29