1. Challenge to compulsory acquisition of an electricity undertaking under a condition in a sanction granted under Section 28 of the Indian Electricity Act, 1910. (Para 1 , 2 )
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1959 Supreme(SC) 201
SUPREME COURT OF INDIA
13th November, 1959.
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K. SUBBA RAO, K.C. DAS GUPTA AND J.C. SHAH, JJ.
The Okara Electric Supply Co. Ltd. and another, Petitioners
Versus
The State of Punjab and another, Respondents.
Petition No. 19 of 1959.
Advocates appeared
Mr. Veda Vyasa, Senior Advocate (M/s. S. K. Kapur and Ganpat Rai, Advocates, with him), for Petitioners; Mr. S. M. Sikri, Advocate-General for the State of Punjab and Mr. N. S. Bindra, Senior Advocate, (Mr. D. Gupta, Advocate, with them), for Respondents.
Advocates:
D.GUTPA, GANPAT RAI, N.S.BINDRA, S.K.KAPOOR, S.M.Sikri, Veda Vyasa
D.GUTPA, GANPAT RAI, N.S.BINDRA, S.K.KAPOOR, S.M.Sikri, Veda Vyasa
Section 28(1) of the Indian Electricity Act, 1910, permits the State to impose conditions for the compulsory acquisition of an undertaking, as such conditions are reasonable and relevant to the nature of the electricity supply business and the use of public infrastructure.
Headnote:(A) Indian Electricity Act, 1910 - Section 28 - Constitution of India - Articles 19 and 31 - Sanction for supplying energy - Conditions for compulsory acquisition - Validity of condition allowing State to acquire undertaking - Whether such condition is ultra vires the Act or violates fundamental rights - Interpretation of "conditions as the State Government may fix in this behalf" - Given the special nature of the business of supplying energy, which involves the use of public streets and infrastructure, conditions regarding the termination of sanction and the compulsory acquisition of assets on payment of compensation are reasonable and fall within the scope of the Act. (Paras 7, 14, 16)
(B) Constitution of India - Article 31 - Existing laws - Article 31(5) provides that nothing in Clause (2) shall affect the provisions of any existing law - A law passed prior to the commencement of the Constitution is protected and cannot be challenged under Article 31(2) unless specific exceptions apply. (Para 17)
(C) Constitution of India - Article 19 - Reasonable restrictions - Limitations imposed on the business of supplying energy, including the right of the State to acquire the undertaking, constitute reasonable restrictions in the interest of the general public within the meaning of Article 19(5). (Para 18)
Facts of the case:
A company was granted sanction to engage in the business of supplying electric energy subject to certain conditions. One such condition provided the State Government the option to acquire the undertaking after a specified date upon giving one year's notice. The State exercised this option and took possession of the property. The petitioners challenged the validity of the acquisition clause, contending it was ultra vires the governing Act and violated their fundamental rights under Articles 19 and 31 of the Constitution.
Findings of Court:
The condition allowing the State to acquire the undertaking is valid and falls within the scope of the power to impose conditions under Section 28 of the Act. The Act and the specific condition do not violate the fundamental rights guaranteed under the Constitution.
Issues: Whether a condition providing for the compulsory acquisition of an electricity undertaking is justified by the power to fix conditions under Section 28 of the Indian Electricity Act, 1910, and whether such a provision violates Articles 19 and 31 of the Constitution.
Ratio Decidendi: The phrase "conditions as the State Government may fix in this behalf" must be construed liberally. Due to the special features of the electricity supply business, which involves the use of public infrastructure and is often granted on a temporary basis, it is reasonable for the State to provide for the compulsory acquisition of assets upon termination to ensure continuity of supply and protect the supplier's investment. Such restrictions are reasonable in the interest of the general public.
Result: Petition dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether a condition for compulsory acquisition is ultra vires Section 28 of the Indian Electricity Act, 1910, and whether Section 28 violates Articles 19 and 31. (Para 3 , 4 , 5 , 8 )
3. The court analyzed international precedents and the practical nature of energy supply, concluding that conditions for sanction include provisions for the termination and acquisition of undertakings. (Para 6 , 7 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 19 , 20 )
4. Conditions imposed under Section 28(1) of the Indian Electricity Act, 1910, can liberally include provisions for the compulsory acquisition of the undertaking upon termination of sanction. (Para 16 )
5. Petition dismissed. (Para 21 )
6. Does the power to fix conditions under Section 28(1) of the Indian Electricity Act, 1910, include the power to mandate compulsory acquisition?
Yes. The court held that the power to fix conditions should be construed liberally to include provisions dealing with the inevitable termination of the business, including the compulsory acquisition of assets on payment of compensation. (Para 14 , 15 , 16 )
7. Is Section 28 of the Indian Electricity Act, 1910, valid under Article 19 of the Constitution?
Yes. The limitations imposed by Section 28 are considered reasonable restrictions imposed in the interests of the general public within the meaning of Article 19(5) of the Constitution. (Para 18 )
8. Can the validity of the Indian Electricity Act, 1910, be challenged under Article 31(2) of the Constitution?
No. Article 31(5) provides that nothing in Clause (2) shall affect the provisions of any existing law, and the Act is an existing law not subject to Clause (6). (Para 17 )
Judgement
GAJENDRAGADKAR, J. : The Okara Electric Supply Co. Ltd., which is a Joint Stock Company and Shrimati V. V. Oberoi, one of the principal shareholders of the said company (hereinafter called petitioners 1 and 2 respectively) have filed the present petition against the State of Punjab and the Punjab State Electricity Board (hereinafter called respondents 1 and 2 respectively) in which they have claimed a writ, order or direction in respect of a notice issued by respondent 1 on January 3, 1958. The petition was presented on January 3, 1959, and it claimed an order or writ restraining the respondents from giving effect to the said notice. It appears that on January 4, 1959, in pursuance of the said impugned notice the respondents took possession of the petitioners property in question, and so, by an order passed by the learned Chamber Judge the petitioners were allowed to make an additional claim for a writ or order or direction in the nature of mandamus directing the respondents to hand over to the petitioners the said property in question. This petition is made on the ground that the impugned notice and action taken by the respondents in pursuance of it are illegal and unauthorised and they affect the petitioners fundamental rights under Arts. 19 and 31 of the Constitution.
2. The first petitioner was granted sanction under S. 28 of the Indian Electricity Act 9 of 1910 (hereinafter called the Act) authorising it to engage in the business of supplying energy at Muktsar by Government Notification No. 1766-I & C-48/28784 published on May 26, 1948. By virtue of the said sanction the first petitioner has ever since been engaged in the business of supplying electric energy at the said place and for the purpose of its business it has set up an electricity undertaking at considerable cost. On January 3, 1958, the Secretary to respondent 1, P. W. D. Irrigation and Electricity Branches, Chandigarh, issued notice against the first petitioner purporting to exercise the option given to respondent 1 by cl. 11 of the said notification. By this notice the first petitioner was told that respondent 1 had exercised its option under the said clause, and that on the expiry of the period of one year after the receipt of the notice by the first petitioner its undertaking shall vest in and become the absolute property of respondent 1.
3. The first petitioner has been having bulk supply from P. W. D. Electricity Branch of respondent 1, and, according to the petition, respondent 1 could not and will not take over the plant and yet has ordered the first petitioner that it cannot sell the plant without permission of respondent 1. The imposition of this condition is wholly illegal and it amounts to an unreasonable restriction on the petitioners right to carry on business and to hold and dispose of its property.
4. The petition alleges that cl. 11 of the notification on which the impugned notice is founded is ultra vires S. 28 of the Act; and that alternatively, if the inclusion of the said clause in the notification is justified by S. 28 of the Act. S. 28 itself is ultra vires since it offends against Arts. 19 and 31 of the Constitution. It is on these allegations that originally the petition claimed an order against the enforcement of the notice and subsequently added the prayer for a writ or mandamus directing respondent 1 to restore to the petitioners possession of the property which has been taken over by respondent 1 after the filing of the present petition.
5. The claim thus made is denied by both the respondents. It is urged that the petitioners cannot challenge the validity of Cl. 11 which was accepted by them before the Constitution came into force. It is further urged that the said clause is justified by the provisions of S. 28 of the Act and that both the said clause and S. 28 are intra vires and valid. The respondents further alleged that after possession was taken of the property of the first petitioner in exercise of the option under cl
