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The Gwalior and Malwa Industries and Electric Supply Ltd. Vs. Madhya Pradesh Electricity Board and anr. - Court Judgment

LegalCrystal Citation
SubjectElectricity
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 85 of 1962
Judge
Reported inAIR1963MP1
ActsElectricity Act, 1910 - Sections 6, 6(1) and 6(4)
AppellantThe Gwalior and Malwa Industries and Electric Supply Ltd.
RespondentMadhya Pradesh Electricity Board and anr.
Appellant AdvocateR.S. Dabir, ;V.S. Dabir and ;R.P. Sinha, Advs.
Respondent AdvocateB.L. Seth, Adv. for Respondent No. 1 and ;H.L. Khaskalam, Govt. Adv. for Respondent No. 2
DispositionPetition allowed
Excerpt:
.....to in section 6(1) in the light of clause 13 (2) of the..........that being so, the impugned notice is altogether ineffective and cannot give any right to the board to purchase the petitioner's undertaking on 1st january 1963 or demand its possession on that date.7. the question whether by its failure to give the intimation required under section 6(4) the board has lost its right of purchasing the undertaking depends on the determination of the expiry of the relevant period referred to in section 6(1) in the light of clause 13 (2) of the licence. the question is one of construction of 'if after ten years chambal hydro electric scheme materialises and electricity under that scheme can be supplied at neemuch'. learned counsel for the petitioner preferred to reserve his arguments on this point. he said that if need be the point, would be raised on.....
Judgment:

Dixit, C.J.

1. This is an application under Article 226 of the Constitution of India for the issue of a writ' of certiorari for quashing a notice dated the 16th December 1961 given under Section 6 of the Indian Electricity Act, 1910, (hereinafter referred to as the Act), by the Madhya Pradesh Electricity Board, Jabalpur, to the petitioner Company requiring the Company to sell its electrical undertaking at Neemuch including the distribution lines, transmission lines and all other equipment but excluding the generating plant, to the Board by 1st January 1963 at a price to be determined in accordance with Sub-section (4) of Section 7A of the Act, and to deliver possession of the undertaking etc., to the Board on 1st January 1963.

2. The petitioner is a limited liability company holding a licence for the supply of electri-city at Neemuch. The licence was granted on 8th October 1948 under the Gwalior Electricity Act, Sam vat-1995. On 2nd May 1961, the Company filed in this Court an application (M.P.No. 126 of 1961) under Article 226 of the Constitution for the issue of a writ of certiorari forquashing a direction made by the Government on14th April 1961 to the petitioner Company forhanding over its undertaking excluding the generating ' plant to the M. P. Electricity Board, Jabalpur. That petition was allowed by us and the direction, given by the Government on 14th April 196,1 was quashed. In the order disposing of Misc. Petition. No. 126 of 1961, it has been pointed out that, the licence granted to the petitioner on 8th October 1948 tinder the Gwalior Electricity Act, Samvat-1995, is now by fiction a licence granted under the Indian Electricity Act; that the licence is of a variable term ranging from ten years to thirty years; that the licence is terminable at any time after ten years in the circumstances stated in clause 13 (2) of the licence; and that its terms will be of thirty years if those circumstances do not come into play. It was further held by us in Misc. Petition No. 126 of 1961 that under Section 6 of the Act the option given to the Government under clause 13 (2) of the licence became the first option of the Board and that the Board would have had the first option under Section 6 even if the licence had not contained any term granting expressly an option to the local authority or the State Government. In Misc. Petition No. 126 of 1961, we proceeded to say :

'9. If, as we think, section 6 applies to the licence, then it is plain on the wording of the provision that the first option of purchasing the undertaking is of the Board. It is only if the Board does not elect to purchase the undertaking that the State Government can exercise the option of purchasing it in the same manner as the Board itself would have done. Section 6(1) also prescribes in so many words that the option shall be exercised by the Board serving upon the licensee a notice in writing of not less than one year requiring the licensee to sell the undertaking to it. Whether the undertaking is purchased by the Board or the State Government a notice of the period indicated above must be given to the licensee. Again, Sub-section (4) requires that if the Board intends to exercise the option of purchasing the undertaking, then an intimation in writing of such intention must be given 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 is received by the State, then the Board is deemed to have elected not to purchase the undertaking. Likewise, under Sub-section (5) the State Government is required to give an intimation to the local authority and if no such intimation of the intention as is spoken of in Sub-section (5) is received by the local authority, then the State Government is deemed to have elected not to purchase the undertaking. Now, in the present case, the minimum period of the licence was specified to be ten years and the maximum was specified to be 30 years. If in the circumstances mentionedin clause 13 (2) the Board desires to purchase the undertaking, then the Board must first give an intimation to the State Government of its intention to exercise the option of purchasing the undertaking at least eighteen months before the date from which it wishes to purchase the undertaking and also give a notice to the licensee in writing of not less than one year terminating the licence and intimating to it to sell the undertaking to the Board on the termination of the licence. If the Board does not elect to purchase the undertaking, then only the State . Government can have the option of purchasing the undertaking after giving an intimation to the local authority and a notice terminating the licence and calling upon the licensee to sell the undertaking to it on the termination of the licence.

10. In this case admittedly no notice or intimation as required by section 6 was given either by the Board or by the Government. That being so, the direction contained in the letter dated 14th April 1961 of the Government, whether regarded as one issued in relation to the purchase of the undertaking by the Board or the State Government, is wholly invalid. The direction must, therefore, be quashed.''

It was on this reasoning that the direction given to the petitioner-Company by the Government on 14th April 1961 was quashed by us on 28th September 1961.

3. After the disposal of Misc. Petition No. 126 of 1961, the M. P. Electricity Board gave the impugned notice to the petitioner-Company. The notice makes a reference to clause 13 (2) (a) of the licence on the basis of which we held in Misc. Petition No. 126 of 1961 that the licence would be terminable at any time after ten years in the circumstances stated in clause 13 (2), namely, when

''the Chambal Hydro-Electric Scheme materializes and electricity under that scheme can be supplied at Neemuch.'

It then summarizes our decision in Misc. Petition No. 126 of 1961 and proceeds to say :

'The contingency contemplated above has materialised, by the completion of the Chambal Hydro-Electric Power Station, and under the scheme the Electric Supply to Neemuch would become available from the Power station by 1st of January 1963.

That the M. P. Electricity Board is therefore entitled to exercise its option of purchasing your electric undertaking at Neemuch i.e. the distribution lines, transmission lines and all other equipment except the generating plant with effect from 1-1-1963 at 'the purchase price to be determined in accordance with the provisions of Section 7A of the Indian Electricity Act, 1910. Intimation in writing of the intention of this Board to exercise the option of purchasing the undertaking as described above, has already been given to the State Government vide this Board's letter No. 5-1/9455 dated 2-12-1960, and therefore now the Board gives this notice in writing to you of not less than one year requiring you to sell your electric undertaking at Neemuch i.e. the distribution lines, transmission lines and all other equipmentexcept the generating plant by 1-1-1963, on. the price to be determined in accordance with the provisions of Sub-section (4) of Section 7A, and put this Board in possession of the same on 1-1-1963.'

4. The petitioner Company contends that the M. P. Electricity Board cannot purchase the Company's undertaking pursuant to the impugned notice as the Board never sent any intimation in writing of its intention to the State Government of exercising its option of purchasing the undertaking under Section 6 (4) of the Act; that in the absence of any such intimation at least eighteen months before the expiry of the relevant period referred to in Sub-section (1) of section 6, the Board must be deemed to have elected pot to purchase the undertaking; and that the said relevant period expired sometime in March 1961 when supply of electricity was actually made by the Board to the Circuit House at Neemuch. The opponents, on the other hand, have averred in the return that the letter, which the Board addressed to the Government on 2nd December 1960 (An-nexure-7 to the return -- p. 94 of the paper-book), is an intimation on the part of the Board with regard to its exercise of the option of purchasing the undertaking and is in conformity with subsection (4) of section 6; and that the expiry of the relevant period referred to in Sub-section (1) of Section 6 of the Act is as per terms of clause 13 of the licence 'any time after ten years' from the date of the licence when the Chambal-Hydro Electric Scheme materialises and electricity under that scheme can be supplied at Neemuch. It has been further stated in the, return that the contingency contemplated by the aforesaid clause has materialised by the completion of the Chambal Hydro-Electric Power Station and under that scheme electricity supply to Neemuch would be available from the Power Station by 1st January 1963; and that consequently the Board would be competent to purchase the undertaking on 1st January 1963 as stated in the impugned notice.

5. It is not disputed, and indeed in view of our decision in the earlier petition under Article 226 it cannot be disputed, that if in the circumstances mentioned in clause 13 (2) of the licence the Board desires to purchase the undertaking of the petitioner Company, then the Board must first give an intimation to the State Government of its intention to exercise its option of purchasing the undertaking at least eighteen months before the date of the expiry of the relevant period referred to in Sub-section (T) of section 6 and must also give a notice to the licensee in writing of not less than one year requiring the licensee to sell the undertaking to it at the expiry of the said relevant period. There is also no dispute that after the disposal of Misc. Petition No. 126 of 1961 the Board did not address any communication to the State Government intimating its intention ' of exercising the option of purchasing the undertaking under Section 6 of the Act. The question that first arises for determination is whether the letter addressed by the Board to the Government on 2nd December 1960 is an intimation on the part of the Board as required by Sub-section (4) of Section 6, and if it is not, whether the Board can acquire anyauthority to purchase the undertaking of the petitioner-Company as expressed in the notice under challenge. Shri Dabir, learned counsel for the petitioner, argued that the letter addressed by the Board on 2nd December 1960 to the Government was no more than a request to the Government to direct the petitioner-Company to sell its undertaking to the Board in terms of clause 13 (2) (b) of the licence and was not any intimation under section 6(4) of the Act of the desire of the Board to exercise its option of purchasing the undertaking under section 6, and that as there was no intimation as required by Sub-section (4) -of Section 6, the notice given to the petitioner-Company by the Board on i6th December 1961 requiring the Company to sell its undertaking by 1st January 1963 was altogether ineffective.

6. In our judgment, the contention advanced on behalf of the petitioner must be given effect to. The letter of the Board to the Government which, according to the opponents, contains an intimation of the Board with regard to the exercise of its option of purchasing the undertaking under Section 6 of the Act, was addressed by the Board on 2nd December 1960 some nine months before our decision in Misc. Petiton No. 126 of 1961. That letter first made a reference to clause 13 of the licence and proceeded to say that? as ten years had expired from the date of the licence and as Chambal Hydro Power would be available for distribution at Neemuch, action under clause 13 (2) could be taken; and that under clause 13 (2) (b) the Government should entrust the distribution of electricity at Neemuch to the Board and accordingly direct the licensee to sell its undertaking to the Board. The concluding portion of the letter was as follows :

'Clause 13 (2) (b) provides that the assets will be sold at a price determined as per rules. The price of an undertaking when it is purchased under the terms of licence is determined in accordance with Sub-section (4) of Section 7A read with Section 6 of the Indian Electricity Act, 1910. The order directing the licensee to sell his assets to the Board may, therefore, provide that the relevant assets of the undertaking shall be delivered to the Board on the date to be appointed by the Board, their value determined and paid as if the assets were purchased in terms of Section 6, Sub-section (1) of the Indian Electricity Act, 1910. A draft order which may be vetted (sic) by law department and issued in this respect is enclosed.

It is requested that action as proposed above kindly be taken at a very early date.'

This letter cannot by any stretch of language be treated as an intimation of the Board to the Government under Sub-section (4) of Section 6 of the Act. It was addressed by the Board on the view, albeit erroneous, that the terms of clause 13 (2) of the licence governed the sale of the petitioner's undertaking by the Government and other bodies and that it was for the Government to decide whether the distribution of electricity at Neemuch should be entrusted to the petitioner-Company or to any other person or company or whether the Government should itself take over the distribution. In addressing that letter the Board regarded clause 13 (2) as quite independent of Section 6 ofthe Act and uncontrolled by it. It was pursuant to this letter that the Government issued a direction to the petitioner Company on 14th April 1961 to handing over its undertaking to the Board. That direction was quashed by us in Misc. Petition No. 126 of 1961 on the reasoning that the matter of purchase of the undertaking ten years after the grant of the licence and on the materialisation of the Chambal Hydro Electric scheme was governed solely by Section 6 of the Act. It is noteworthy that in the return, which was filed on behalf of the Board and the State in Misc. Petition No: 126 of 1961, it was stated that the orderdated the 14th April, 1961, was one expressing the intention of exercising an option on the part of, theGovernment itself and there was nothing to present the State Government from taking over the undertaking and then handing it over to the Board, and that the order dated 14th April 1961 was not issued by the Government under Section 6 of the Act which was applicable only to those licenses which did not contain a term similar toclause 13. At the hearing of that petition, it was also admitted on behalf of the opponents that no notice or intimation of any kind as required by section 6 had been given either by the Board or by the Government, It is, therefore, difficult to appreciate the stand of the Board that the letter 'dated the 2nd December 1960 conveying its request to the Government to entrust the distribution of electricity at Neemuch to the Board in terms of clause 13 (2) (b) of the licence is an intimation under section 6(4) of the Act of its intention to exercise its right of option of purchasing the undertaking under Section 6 of the Act. What is essential under Section 6(4) is an intimation on the part of the Board to the Government of its intention to exercise the option of purchasing the undertaking under Section 6 and the intimation must be given at least 'eighteen months before the expiry of the relevant period referred to in subsection (1)'. An expression of the Board's desire to purchase the undertaking such as the one embodied in the letter dated 2nd December 1960 is not sufficient. For the validity of an option or election, it is essential that the party opting should be cognizant of its rights. When the Board addressed the letter on and December 1960, it was totally unaware of the position that Section 6 of the; Act applied and that it had the first option of purchasing the undertaking on the expiry of the relevant period mentioned in Sub-section (1) of section 6. That letter written on the supposition that it was for the Government to decide whether or not the distribution of electricity at Neemuch should be entrusted to the Board and whether the Board should be allowed to purchase the undertaking, and asking the Government to direct the petitioner-Company to sell its undertaking to the Board and deliver possession of the same on a date to be appointed by the Board, is clearly not an intimation of the Board's intention to exercise its option given by Section 6 of the Act. The giving of an intimation under Sub-section (4) is not ari empty formality between the Board and the State Government. The intimation whengiven makes the licensee, at least eighteen months ''before the expiry of the relevant period mentioned in Section 6(1), aware of the fact that the Boardintends to purchase the undertaking, and gives to the licensee the minimum statutory time of eighteen months within which to get ready for selling the undertaking to the Board. The absence of an intimation eliminates the Board from the field of those entitled to exercise the option of purchasing the undertaking and thus to that extent improves the chances of the licensee retaining its undertaking even after 'the expiry of the relevant period' referred to in Sub-section (1). We are unable to regard the letter dated the 2nd December 1960 addressed by the Board to the Government as an intimation under Section 6(4) of the Act. The impugned notice asks the licensee to sell its undertaking to the Board and deliver possession of the same to the Board on 1st January 1963. If the Board thought that the 'expiry of the relevant period' referred to in Sub-section (1) of Section 6 would correspond to 1st January 1963, then it should have given an intimation to the State Government of its intention to exercise the option of purchasing the undertaking at least eighteen months before 1st January 1963. No such intimation was given. That being so, the impugned notice is altogether ineffective and cannot give any right to the Board to purchase the petitioner's undertaking on 1st January 1963 or demand its possession on that date.

7. The question whether by its failure to give the intimation required under Section 6(4) the Board has lost its right of purchasing the undertaking depends on the determination of the expiry of the relevant period referred to in section 6(1) in the light of clause 13 (2) of the licence. The question is one of construction of 'If after ten years Chambal Hydro Electric scheme materialises and electricity under that scheme can be supplied at Neemuch'. Learned counsel for the petitioner preferred to reserve his arguments on this point. He said that if need be the point, would be raised on another occasion. He, however, suggested that the question whether the Chambal Hydro Electric scheme has materialised and electricity under that scheme can be supplied at Neemuch has to be judged in the light of the provisions contained in Chapter V of the Electricity (Supply) Act, 1948, and that the Board has not taken so far any steps for making available electric supply to Neemuch from the Hydro Electric Power Station by 1st January 1963 in conformity with the provisions contained in the aforesaid Chapter V. In the view we have taken of the matter, it is not necessary to examine the suggestion of the learned counsel and the question of the expiry of the relevant period, referred to in section 6(1) in regard to the petitioner's licence, must be left open.

8. For the foregoing reasons, this petition isallowed and it is declared that the opponent --M. P. Electricity Board, Jabalpur, is not entitledto purchase the petitioner's undertaking or demand its possession pursuant to the notice datedthe 16th December 1961. The opponents are restrained from giving effect to that notice in anymanner. The petitioner shall have costs of thispetition. Counsel's fee is fixed at Rs. 200/-. Theoutstanding amount of security deposit shall berefunded to the petitioner.


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