10 February 1954
Supreme Court
Download

THE RAJAHMUNDRY ELECTRIC SUPPLYCORPORATION LTD. Vs THE STATE OF ANDHRA.

Bench: MAHAJAN, MEHAR CHAND (CJ),MUKHERJEA, B.K.,DAS, SUDHI RANJAN,BOSE, VIVIAN,HASAN, GHULAM
Case number: Appeal (civil) 72 of 1952


1

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: THE RAJAHMUNDRY ELECTRIC SUPPLYCORPORATION LTD.

       Vs.

RESPONDENT: THE STATE OF ANDHRA.

DATE OF JUDGMENT: 10/02/1954

BENCH: DAS, SUDHI RANJAN BENCH: DAS, SUDHI RANJAN MAHAJAN, MEHAR CHAND (CJ) MUKHERJEA, B.K. BOSE, VIVIAN HASAN, GHULAM

CITATION:  1954 AIR  251            1954 SCR  779  CITATOR INFO :  D          1962 SC1753  (2,4)  RF         1968 SC1138  (23)  R          1970 SC 564  (40)  RF         1977 SC1825  (54)  E          1980 SC1955  (16)

ACT:      Madras  Electricity  Supply  Undertakings  (Acquisition)  Act--(Madras  Act XLIII of 1949)--Validity of--No  entry  in  the   three  Legislative  Lists  of  seventh   schedule   of  Government of India Act, 1935.

HEADNOTE:    The    Madras    Electricity     Supply     Undertakings (Acquisition) Act (Madras Act XLIII of 1949) was beyond  the legislative   competency of the Madras  Legislature  because there  was  no  entry  in ,any of the  three  Lists  of  the Seventh   Schedule   of  the  Government   of   India   Act, 1935,  relating to compulsory acquisition of any  commercial or   industrial  undertaking  although  s. 299  (2)  clearly contemplated   a law authorising compulsory acquisition  for public  purposes of a commercial or industrial  undertaking.       State  of  Bihar  v.  Maharajadhiraja  Sir  Kameshwar Singh ([1952] S.C.R. 889) referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil   Appeal No. 72 of 1952.     Appeal  under  articles 132 (1) and 133 (1) (b)  of  the Constitution of India from the Judgment and Order dated  the 27th  April,   1951,  of the High  Court  of  Judicature  at Madras  (Rajamannar  C.J. and  Satyanarayana  Rao   J.)   in Civil  Miscellaneous  Petition No. 4697 of 1951.     M.K.  Nambiyar (U. Sethumadhava Rao, with him)  for  the appellant. M. Seshachalapathi for the respondent.     V.K.T. Chari, Advocate-General of Madras (Porus A. Mehta and V.V. Raghavan, with him)  for fife Intervener (State  of

2

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

Madras).     1954.  February   10.  The Judgment  of  the  Court  was delivered by     DAs  J.--This is an appeal  arising out’ of  a  judgment delivered   on  the  27th April, 1951, by a  Bench  o15  the Madras  High  Court  in C.M.P. No.  4697 of 1951 filed under article  226015 the Constitution for the issue of a writ  of certiorari or other appropriate  writ to  call 780 for the records and quash the order of the Government passed under   section  4(1)  of  the  Madras  Act  XLIII  of  1949 declaring   the  undertaking  of the appellant   company  to vest in the Government.   The appellant company was formed and registered under  the Indian Companies Act in 1924 with the object, inter alia, of generating  and  supplying  electrical ,energy to the public in  Rajahmundry.  In 1949 the  Madras   Legislature   passed the      Madras      Electricity    Supply      Undertakings (Acquisition)   Act,  1949.  The Act received the assent  of the  Governor-General  on the 18th January,  1950,  and  was published  in the Official Gazette  on the   24th   January, 1950.  Upon  the Constitution  of India coming into force on the  26th  January,  1950,  the Act  was  submitted  to  the President  for  his  certification and on  the  12th  April, 1950,  the President certified  that the Act should  not  be called  in  question  m  any court on  the  ground  that  it contravened  the provisions of clause (2) of article  31  or it-contravened   the  provisions  of  sub-section  (2)    of section  299 of the Government of India Act,  1935.   By  an order  in  writing  made on the 2nd  September,   1950,  the Government  of Madras acting under section 4(1) of  the  Act declared  that  the  undertaking of  the  appellant  company should  vest  in  the  Government  on  the  date   specified therein.  Under  the proviso to section  4(1) the Government from time to time postponed the date of vesting and the  2nd April,  1951,  was  the last-extended date  fixed  for  such vesting.    On   the   29th   March,  1951,  the   appellant company filed  C.M.P.  No. 4697 of 1951,  under article  226 for quashing the order  of the Government.     Shortly stated the contentions of the. appellant  before the High Court were that the Act was ultra vires in that (1) it  was  beyond  the legislative competency  of  the  Madras Legislature   to  enact  it,   (2) it  was  not  enacted  to subserve  any  public  purpose,  and  (3)  the  compensation provided for was illusory.  The High Court repelled each and all of the aforesaid contentions of the  appellant  company. It   held   that   the  legislation  was  with  respect   to electricity under  entry 31 of  the 781 concurrent   list  in  the   seventh   Schedule    to    the Government  of  India Act, 1935, and was not  a  legislation with  respect to corporations  under entry 33 in list  I  as contended  by  the  appellant  and  that,   therefore,   the Madras   Legislature   was  competent  to   enact   it.   It further held that  the Act having received  the  certificate of  the President the challenge based on an alleged  absence of   public   purpose   or  the  illusory  nature   of   the compensation   was  shut out and could  not be  raised.  The High  Court,  however, held that certain sections  and  rule 19(2)  of the Rules framed under the Act were  invalid   and subject    thereto   dismissed   the   application  of   the appellant   company.  The  High  Court granted leave to  the appellant  company to appeal before this court.  The  appeal has now come up for heating before us.     Learned  counsel appearing in support of the appeal  has

3

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

not  pressed  before us the contention raised  in  the  High Court  as to the absence of public purpose or  the  illusory nature   of the compensation  provided  by  the Act. He  has confined his submissions to the question of the  legislative competency of the Madras Legislature to enact this piece  of legislation.  In the High Court the contest  centered  round the   question   whether the Act was a law with  respect  to electricity under entry 31 of the concurrent  list  or  with respect  to corporations under entry 33 in list I. The  High Court  held that the Act was,  in pith and substance, a  law with  respect  to electricity  and was,   therefore,  within the   legislative   competency    of   the        Provincial Legislature.  In his arguments  before us   learned  counsel contended  that the act is in substance and effect  one  for the  acquisition  of  an  electrical undertaking   and,   as such,  is ultra vires because-   (a)  the  acquisition  of  an  electrical undertaking  was not  a  legislative item in any of the three  lists  in  the seventh  schedule  to the Government of India Act, 1935, and   (b) in     so  far   as  it  relates  to  the  acquisition of  an  electrical  undertaking  of  a  corporation  it is a law with respect to corporations under entry 33 in list I. 782 In  our opinion this appeal can be disposed of on the  first of the two grounds mentioned above.     Turning   to  the Act it will be noticed that  the  long title   of  the Act is  "an Act to make provision  for   the acquisition  of  undertakings  in the  Province   of  Madras supplying    electricity."   The   preamble   recites    the expediency  of  making  Provision "for  the  acquisition  of undertakings   in   the   Province  of  Madras   engaged  in supplying  electricity."  Section 1 gives  the short  title, extent  and  commencement  of  the  Act.  Section  2  is   a definition   section.  Section  3  provides  that  the   Act shall  apply  to  all undertakings  of  licensees  including certain    undertakings  therein   mentioned.    Section   4 empowers   the  Government to take over any  undertaking  by making  an order in writing declaring that such  undertaking shall  vest  in  the  Government  on   a   specified   date. Section   5  provides   for   compensation   payable  to   a licensee who is not a local authority. The section gives  an option  to  the licensee to claim compensation  on  one   of three   bases    therein   specified. Section 6  deals  with compensation  payable  where  the  licensee   is  a    local authority.    Section    7   specifies the   properties   or assets   which   will  vest  according  aS  compensation  is claimed under one basis or another. Section  8 provides  for the   appointment  of  a  sole representative to act as  the sole  and  accredited  representative  of  the  licensee  in connection  with the handing over of the   undertaking   and performing   on  behalf  of  the  licensee   the   functions thereinafter     specified.    The  choice   of   basis   of compensation is to be made within one month under section  9 and  such choice once intimated to the Government is not  to be  open   to revision except  with   the   concurrence   of the   Government. Section  10  authorises  the   Government, in   case  the licensee has disposed of any  of  the  assets otherwise  than in the normal course of events causing  loss to  the Government as succeeding owners, to deduct from  the compensation payable  to the licensee  an amount which  they consider  to be  the  loss   sustained  by  them. Section 11 prescribes the various deductions which the Government shall be  entitled to make from the compensation   payable   under the  Act.  The-manner of 783

4

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

payment  or deposit of compensation is laid down in  section 12.   Section  13  permits  the  Government   to  repay  all loans,   debentures,  mortgages  and  the  like  outstanding on the vesting  date at any time before the time fixed   for repayment.  Section 14 is the arbitration section.   Section 15   provides  for   the   termination   of  the    managing agency.     Section   16   authorises   the  Government   to terminate  the  services of any person on the staff  of  the licensee  immediately before the vesting ’date. Section   17 requires  all  licensees  to prepare and hand  over  to  the Government a complete inventory of all the assets.   Section 18   gives  power of entry to the Government or any  officer authorised  by the Government upon any land or  premises  in the  possession  of the licensee.   Section   19  prescribes penalties for various defaults  therein  specified.  Section 20  makes   certain  officers of a company  liable  for  the offence  committed  by  the  company.   Section   21   gives protection   against suit or prosecution for  anything  done in  good faith under any rule or order made under  the  Act. Section   22  confers    rule-making    power     on     the Government. Section  23  provides  that  the  provisions  of certain  Acts  in so far as they are inconsistent  with  the provisions  of  this Act shall have no effect.   Section  24 gives  power to the Government to do anything which  appears to  them  necessary  for  the  purpose   of   removing   any difficulty.  From the above summary it will be noticed  that the  Act  does  not purport to make any  provision  for  the granting of licenses or maintenance of works for  generating or   transmitting   energy  or   for   supplying  electrical energy  as  one would expect to find in a law  dealing  with electricity nor does  the Act purport to make any  provision for   the   incorporation,   regulation  or  winding  up  of trading  corporations.  On the contrary,  it  is  abundantly clear  from the long title,  the preamble and  the  sections that  it  is,  in  pith  and  substance, nothing but an  Act to provide for the acquisition of electrical undertakings.     Section  299 (2)  of the Government of India Act,  1935, provided   that  neither  the  Federal  nor   a   Provincial Legislature would have power to make any law authorising the compulsory acquisition for public purposes 784 of  any land or any commercial or industrial undertaking  or any  interest in or in any  company  owning  any  commercial or   industrial  undertaking  unless  the law provided   for the   payment  of compensation  for  the property  acquired. Compulsory  acquisition  of  property  is   undoubtedly   an important sovereign right of the State but this right has to be  exercised  under  a law. The legislative power   of  the State was distributed by sections  99  and  100 amongst  the Federal   Legislature and the Provincial   Legislatures   in the  manner provided’ in the  several  lists  set  forth  in the   Seventh  Schedule to the Act.  Section  100 read  with entry  9 in list II authorised the  Provincial   Legislature to  make  a  law with  respect  to compulsory acquisition of land. There was no entry in any of the three lists  relating to   compulsory   acquisition   of   any    commercial    or industrial  undertaking, although section 299  (2)   clearly contemplated   a law  authorising   compulsory   acquisition for   public   purposes  of  a  commercial   or   industrial undertaking.    The    acquisition  of  a   commercial    or industrial  undertaking not being the subject-matter of  any entry  in any of the  three legislative lists,  neither  the Federal  Legislature nor the Provincial  Legislature   could enact  a  law with respect to compulsory  acquisition  of  a commercial  or industrial  undertaking.  Under  section 104,

5

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

however,    the   Governor-General,   in   his    individual discretion,   could,  by  public    notification,    empower either  the Federal Legislature or a Provincial  Legislature to enact a law with respect to any matter not enumerated  in any  of the  lists in the  seventh  schedule to the Act.  It is,  therefore,  clear that although  Parliament   expressly entrusted  the  Provincial  Legislature with power to make a law with respect to compulsory  acquisition of land  it  did not   straightaway  grant any power, either to  the  Federal Legislature  or  the Provincial Legislature, to make  a  law with  respect to compulsory  acquisition of a commercial  or industrial undertaking  but  left  it  to  the    discretion of    the   Governor-General  to  empower  either   of   the Legislatures  to  enact such a law. There is  no  suggestion that  the  Governor-General   had,   in  exercise   of   his discretionary powers  under  section  104,  authorised   the Madras 785 Legislature to enact  the impugned  Act and, therefore,  the Act was, prima facie, beyond the  legislative competency  of the Madras Legislature.     The learned Advocate-General of Madras urges that  there was   implicit  in  every entry  in  the  legislative  lists in the Seventh  Schedule  to the  Government  of India  Act, 1935,  an  inherent power to make a law with  respect  to  a matter ancillary  or  incidental  to  the subject-matter  of each   entry.  His  argument  is  that each  entry  in   the list  carried with it an inherent power  to provide for  the compulsory  acquisition   of  any property,  land   or   any commercial   or industrial undertaking, while making  a  law under  such entry. It is quite  true that  the   powers   of each   Legislature   to make  laws  with  respect   to   the different   subjects assigned  to  it  by  the,  appropriate list   were   to be regarded as wide and  plenary  and  also covering   matters  incidental   or   ancillary   to    such subject-matter,  but it is,  nevertheless,  clear  from  the provision   of  the  Act that the power to make  a  law  for compulsory acquisition was, under entry 9 in list II,  given only  to  Provincial  Legislatures  and  that   such   power of   the Provincial  Legislatures  was,  under that   entry, limited  to making a law for the compulsory  acquisition  of land  only  and that  unless   the   Governor-General   made an  .order under  section  104 of the  Act   the  Provincial Legislatures  had no power to make a law for the  compulsory acquisition  of any property  other than  land ,and that the Federal  Legislature  had  no power to  make  any  law  with respect  to the compulsory acquisition of any  property   at all.  If the  argument of the learned Advocate-General  were correct   then  entry 9 in list II ’was wholly   unnecessary for  under entry 21  in list II the Provincial  Legislatures could  make a law for the compulsory  acquisition  of  land. A  similar  argument was repelled  by  this  court  in   the State  of Bihar v. Maharajadhiraja Sir Kameshwar  Singh(  ). The   matter   is placed beyond any doubt  or   dispute   by the  provisions  of section  127 of the Government of  India Act, 1935,  which provided that  the  Federal might,  if  it ,deemed  it necessary to acquire any land situate in a (1) [1952] S.C.R. 889. 786 Province  for  any  purpose connected  with  a  matter  with respect  to which the Federal Legislature had power to  make laws,  require the Province to acquire the land  on   behalf and at the expense of the Federation.  If  power’ inhered in the Federal Legislature to make a law for the acquisition of any property for any purpose connected  with a  matter  with

6

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

respect to which it had’ power to make laws then section 127 would not have’ been  necessary  at  all.  The  absence   of any   entry  empowering any Legislature to  make  laws  with respect  to  compulsory  acquisition of   a  commercial   or industrial undertaking and the provisions of section 127 to, which reference has just been made make it abundantly  clear that  the  contentions  urged  by  the   learned’  Advocate- General  cannot  possibly  be   sustained.   In our opinion, therefore, it must be held that the Madras Legislature   had no  legislative    competency  to enact the  impugned   law. This is  sufficient to dispose of this appeal and it is  not necessary to express any opinion, on the other points raised in the court below.     The  result,  therefore, is that this  appeal  must  be’ allowed with costs both in the High Court as well as in this court.                           Appeal  allowed. Agent  for  the appellant: M.S.K. Aiyangar. Agent  for  the  respondent:  R.H.  Dhebar. Agent for the intervener: R.H. Dhebar.