Judgment

CHANDRACHUD, J. :- On February 5, 1929 the Governor-in-Council of the then Government of the United Provinces granted to Messrs Martin and Company a licence under Section 3 of the Indian Electricity Act, 1910 for supply of electric energy within the Districts of Bijnor and Moradabad. Messrs. Martin and Company, who were Managing Agents of the appellant Company, assigned that licence to it. By a notice dated January 31, 1957 the Government of Uttar Pradesh exercised its option to purchase the Undertaking of the appellant on the expiry of two years from the date of the notice. This period was on appellant s request, extended till May 4, 1959. The respondent - Uttar Pradesh State Electricity Board - was constituted on April 1, 1959 and under Section 71 of the Electricity (Supply) Act, 1948, the option of the Government of Uttar Pradesh to purchase electrical undertakings stood transferred to the respondent.

2. By a letter dated May 1, 1959 respondent informed the appellant that it had decided to purchase the Undertaking on payment of a sum of Rupees 25,38,407/-, being the fair market value of all its assets, inclusive of solatium. On May 4, 1959 respondent made a provisional payment of Rupees 15 lakhs to the appellant which, the latter accepted under protest. The Undertaking was eventually taken over by the respondent on May 4/5, 1959.

3. Being unable to agree on the true market value of the Undertaking, parties referred their differences to two arbitrators. Out of the several contentions raised before the arbitrators, we are concerned with one only: whether, in the computation of the market value of its Undertaking, the appellant was entitled to compensation for the "service lines" which were laid with the help of the contributions made by consumers. On this question, arbitrators were unable to agree and therefore they referred it to the decision of an umpire, Shri Randhir Singh.

4. Out of the eight issues framed by the umpire, issues 1 (a), 1 (b), 7 and 8 only are relevant. These issues read thus :

Issues No. 1 (a) : Is the Board entitled to a get a credit for the amount of consumers contribution paid for the service lines, laid on their premises and at their cost ?

Issue No. 1 (b) : What is the amount of the Consumers contribution for the period 1st of April, 1958 to 4/5 May, 1959 ?

Issue No. 7 : Has any excess payment been made by the Board to the Company ? If so are the Board entitled to a refund, and interest thereon ? What should be the rate of interest if any ?

Issue No. 8 : What was the fair market value of the Undertaking on the midnight of 4/5 May 1959 ?

5. On these issues, the Umpire found thus :

Issue No. 1 (a) : "The Company is not entitled to claim from the Board the value of the portion of the service lines which were laid at the cost of the consumers."

Issue 1 (b) : "The Consumers contribution from 1-4-58 to 31st of March, 1959 is Rupees 2,38,255/-. The amount of the contribution from 1-4-59 to 4/5 May, 1959 has not been proved ."

6. On Issue No. 8, the Umpire found that on the date of purchase, the fair market value of the assets of the undertaking was Rs. 23,81,670/-. As the appellant had already received a sum of Rupees 15 lakhs from the respondent and as the respondent was entitled to a refund of Rupees 9,80,238/- on account of security deposits held by the appellant, the Umpire came to the conclusion by his award dated November 27, 1961 that the appellant had received Rupees 98,568/- in excess of the amount of the fair market value. On Issue No. 7, the Umpire accordingly held that the respondent had made an excess payment of the aforesaid amount to the appellant which the latter was liable to refund with future interest as awarded.

7. The appellant, by an application under Section 30 of the Arbitration Act, 1940 challenged the validity of the award in the Court of the Civil Judge, Moradabad on the ground that the Umpire had legally misconducted himself in not awarding compensation for the service lines. The