1974 (9) TMI 116 - SC - Indian Laws

Validity of Notice under Indian Electricity Act Upheld; Payment Postponement Rule Struck Down

GODHRA ELECTRICITY CO. LTD. Versus STATE OF GUJARAT

The Court held that the notice issued by the Gujarat State Electricity Board under Section 6 of the Indian Electricity Act, 1910 was valid as the ... - Issues Involved:1. Validity of the notice issued by the Gujarat State Electricity Board under Section 6 of the Indian Electricity Act, 1910.2. Constitutionality of Sections 6, 7, and 7A of the Indian Electricity Act, 1910 under Articles 14, 19(1)(f), 19(1)(g), and 31 of the Constitution.3. Determination of the commencement date of the licence.4. Validity of Section 6(6) of the Indian Electricity Act, 1910 in light of Articles 19(1)(f) and 19(1)(g) of the Constitution.Detailed Analysis:1. Validity of the Notice Issued by the Gujarat State Electricity Board:The appellants challenged the validity of the notice issued on November 8, 1971, by the Gujarat State Electricity Board exercising the option to purchase the electrical undertaking under Section 6 of the Indian Electricity Act, 1910. The appellants contended that the notice was invalid as it was based on the incorrect assumption that the 50-year period of the licence expired on the midnight intervening between November 15 and 16, 1972. The Court examined Clause 2(e) of the licence, which stated that the date of the notification in the Bombay Government Gazette that the licence has been granted is referred to as the 'commencement of this licence.' The Court concluded that the date of commencement of the licence was November 16, 1922, thus validating the notice issued by the Board.2. Constitutionality of Sections 6, 7, and 7A of the Indian Electricity Act, 1910:The appellants argued that Sections 6, 7, and 7A of the Act were ultra vires Articles 14, 19(1)(f), 19(1)(g), and 31 of the Constitution. The Court noted the amendments made to the Act by Act 32 of 1959, which included changes such as reducing the maximum length of the initial period for exercising the option to purchase, reducing the notice period, and conferring the option to purchase on the State Government and local authority. The Court did not find these provisions to be in violation of the constitutional articles mentioned by the appellants.3. Determination of the Commencement Date of the Licence:The appellants contended that the commencement date of the licence was November 23, 1922, the date on which the notification granting the licence was published in the Bombay Gazette, rather than November 16, 1922, the date of the notification. The Court referred to Rule 18 of the Indian Electricity Rules, 1922, which states that the date of the notification under Rule 17 shall be deemed to be the date of the commencement of the licence. The Court held that the date of commencement of the licence was November 16, 1922, as per Clause 2(e) of the licence and Rule 18.4. Validity of Section 6(6) of the Indian Electricity Act, 1910:The appellants argued that Section 6(6) of the Act, which postpones the payment of the purchase price until after the determination by the arbitrator, was an unreasonable restriction on their fundamental rights under Articles 19(1)(f) and 19(1)(g). The Court noted that the arbitrator appointed under Section 7A could only determine the market value of the undertaking and had no jurisdiction to award interest on the purchase price. The Court held that it was unreasonable to require the licensee to deliver the undertaking without payment of the purchase price or without a provision for payment of interest on the purchase price during the period of delay. The Court concluded that Section 6(6) violated the fundamental rights of the second appellant under Articles 19(1)(f) and 19(1)(g).Conclusion:The Court held that there was no valid purchase of the undertaking and that taking delivery of the undertaking was unlawful. The State Electricity Board was directed to redeliver the undertaking to the licensee. The appeal was allowed to the extent indicated, but without any order as to costs.