1. M/s. Jagadhri Electric Supply and Industrial Company, Jagadhri, District Ambala, through Shri Darbari Lal Gupta, General Attorney of Shrimati Sarla Devi Gupta, sole proprietor (hereinafter referred to as 'the licencee company') was engaged in the business of supplying electric energy to the twin towns of Jagadhri and Yamuna Nagar, District Ambala, under the licence termed as 'The Jagadhri Electric Licence, 1935' granted by the erstwhile Punjab Government in November, 1935 under the provisions of Indian Electricity Act, 1910 (hereinafter referred to as 'the Act') for the initial period of 30 years. In the year 1948 the Electricity (Supply) Act, 1948 (hereinafter called 'the supply Act') was enforced with effect from 10th September. Under S. 5 of this Act the Punjab State Electricity Board was constituted by the erstwhile Punjab Government. The said Board, who in terms of the provisions of S. 6 of the Act and of clause 9 of the said licence had the option of purchasing the said undertaking on the expiration of the initial period of licence, served a notice requiring the petitioner to sell its undertaking at the expiration of the period of licence. In pursuance of the said notice, possession of the undertaking of the petitioner was taken over by the said Board on the midnight of 12th and 13th November, 1965. Whereas prior to the amendment of S. 7 of the Act in the year 1959, a licence was required to sell the undertaking on payment of the value of all lands, buildings, works, materials and plant used by him for the Undertaking, even before the determination and payment of the purchase price. At the time of the taking over of the petitioner's Undertaking, the erstwhile Punjab State Electricity Board made a token payment of Rs. 10,00,000/- and also debited an amount of Rs. 3,72,402.00 in the account of the petitioner on account of discharge of certain liabilities. The State of Punjab was re-organised with effect from 1st November, 1966, inter alia in two State of Punjab and Haryana. The new State of Haryana in due course constituted the Haryana State Electricity Board, which took over the liabilities of the erstwhile Punjab State Electricity Board in regard to the Undertakings located within the newly carved out State of Haryana, which included the petitioner's Undertaking also. The petitioner-Company claimed Rs. 58 lacs by way of purchase price of the said undertaking. Against the said claim, the respondent made a further payment of Rs. 5,50,000/- in the year 1966-67 and another amount of Rs. 1,24,000/- in the year 1967-68. The petitioner thus received a total amount of Rs. 20,46,402/- as against its claim of Rs. 58,00,000/-. The petitioner continued to negotiate with the Board up to the year 1969 for payment of rest of its claim, but having failed, the petitioner invoked the provisions of S. 7A(1) of the Act for reference of the claim to arbitration of two Arbitrators and the Umpire. Although the Arbitrators were appointed in the early period of the year 1970, but the arbitration proceedings have not made any head-way till the filing of the petition.
2. The licencee-Company has impugned the provisions of Ss. 6(5A) and 7 of the Indian Electricity Act, 1910, as amended by the Indian Electricity (Haryana Amendment and Validation) Act, 1975, as being violative of the fundamental rights of the petitioner guaranteed under Art. 19(1) (f) and (g) of the Constitution of India inter alia on the grounds that the licencee Company is compelled to deliver the Undertaking to the said Electricity Board on the expiration of the notice period on deferred payment; that the period of deferred payment may be howsoever lengthy, the licencee is entitled to only simple interest at the Reserve Bank rate and that too as prevailing at the time of the delivery of the Undertaking plus one percentum on the purchase price of the Undertaking.
3. It is further averred that the bank interest which was 6 per cent at the time of the delivery of the Undertaking, had risen to 10 per cent in 1982 and may further escalate by the time the payment may become due over and above the amount that has already been received. That unreasonableness is in built in the impugned provisions since it does not fix an outside limit for effecting the deferred payment. The said unreasonableness becomes unconscionable when the deferred payment carries only a simple interest prevailing at the time of the delivery plus 1 per cent on the purchase price of the Undertaking.
4. The respondent-Board in its return has raised preliminary objection on the ground of
I) Locus standi of the petitioner to file the petition.
ii) Delay in filing the petition.
iii) Non-impleading of the Punjab State Electricity Board as respondent, which was a necessary party.
On merits the respondent-Board has taken the stand that the impugned provisions are intra vires the provisions of Art. 19(1) (f) and (g) and the matter stands concluded by the judgment of Supreme Court reported as The Godhra Electricity Co. Ltd. v. State of Gujarat AIR 1975 SC 32.
5. So far as the preliminary objections are concerned, it may be observed that there is no merit in any of the objections. Dealing with the question of locus standi first, it may be observed that this Court had allowed the amendment of the 'cause title' by which the petitioner-Company is represented by the general attorney of Shrimati Sarla Devi, its sole proprietor. Along with the affidavit, assessment order for the year 1976-77 (P4) is annexed, in which Shrimati Sarla Devi has been shown to be the sole proprietor of the Company. Annexure P5 shows that without any objection from the respondent-Board, Shrimati Sarla Devi was impleaded as one of the parties to the arbitration in her capacity as the sole proprietary of the petitioner-Company Annexure P6 is yet another document depicting Shrimati Sarla Devi to be the sole proprietor of the petitioner-Company. In view of the aforesaid documents for the purpose of this writ petition. I hold that Srimati Sarla Devi had the locus standi to maintain this petition in this Court. It should however, be not understood as pronouncing finally upon her status as a sole proprietor of the said Company, if at any time in other proceedings her statuts as sole proprietor of the said Company, if at any time in other proceedings her status as sole proprietor of the company in question becomes an issue that shall be decided on merit in those proceedings independently of what is said herein in regard to her status for the purpose of this petition.
6. As regards the delay, it may be observed that the Constitutional vires of the statute can be challenged at any time by a party which feels aggrieved thereby.
7. As to the non-impleading of the Punjab State Electricity Board, it may be observed that in the written statement it is the case of the respondent-Board itself that it had taken over the responsibilities of the erstwhile Punjab State Electricity Board in regard to the matters concerning the State of Haryana. In view of this, Punjab State Electricity Board is not at all required to be impleaded to the petition.
8. Before examining the rival contentions, it would be necessary to recapitulate a bit of legislative history. Before the changes brought about by the Indian Electricity (Amendment) Act, 1959, Act No. 32 of 1959 (hereinafter referred to as '1959 Amending Act') S. 7 of the Act provided for purchase of the undertaking on payment. As a result of changes effected by 1959 Amending Act, S. 6 replaced S. 7 and it provided delivery of the Undertaking pending the determination and payment of the purchase price. The vires of this provision of sub-section (6) of S. 6 of the Amending Act which provided for delivery of the Undertaking on deferred payment, came to be impugned in The Godhra Electricity Co.'s case (AIR 1975 SC 32) (supra) as being violative of Art. 19(1) (f) and (g). Their Lordships struck down sub-section (6) of S.6 as ultra vires being violative of Fundamental Rights under Arts. 19(10(f) and 19(1)(g) after observing:--
'If the arbitrator could have awarded the interest for the period between the date of delivery of the undertaking and the payment of the purchase price, probably it could have been said that the provision for delivery without payment of the purchase price would not be unreasonable. But, to deprive the licensee of his Undertaking without payment of the purchase price and then ask him or it to go to a court to enforce the liability for interest for the period for which the purchase price has been withheld is unreasonable'.
The State Government including the State of Haryana thinking that sub-section (6) of S. 6 of the amending Act was also to be imposing unreasonable restriction on the fundamental rights of a company owning an Undertaking, which was liable to be purchased under the said provision because the said provision did not provide for payment of interest and the Arbitrator could not award interest as he had the authority only of determining the market value of the Undertaking, and that a company, whose Undertaking has been taken over, per force, shall have to approach the Civil Court for realising the amount of interest which under the general law, it was entitled to for the period that elapsed between the taking delivery of the Undertaking and the payment of the purchase price thereof, and, therefore, Haryana State Legislature enacted The Indian Electricity (Haryana Amendment and Validation) Act, 1975 (hereinafter referred to as 'the Haryana Amendment') and added S. 5A as sub-section to Section 6 in the place of existing sub-section (6), which reads as under:--
'5A Where a notice exercising the option to purchase the undertaking has been served upon the licensee under this section, the licensee shall deliver the undertaking to the State Electricity Board, the State Government or the local authority, as the case may be, on the expiration of the relevant period referred to in sub-section (1) pending the determination and payment of the purchase price: Provided that in any such case, the purchaser shall pay to the licensee, interest at the Reserve Bank rate ruling at the time of delivery of the Undertaking plus 1 percentum, on the purchase price of the Undertaking for the period from the date of delivery of the Undertaking to the date of payment of the purchase price'.
Sub-section (5A) which came to supplant the existing sub-section (6) to S.6 as a result of the Haryana Amendment provided for payment of interest at the rate allowed by the Reserve Bank at the time of the delivery plus 1 percentum of the purchase price.
9. It is claimed on behalf of the petitioner-Company that the Haryana Amendment does not go far enough to mitigate the unreasonableness detected by their Lordships The Godhra Electricity Co.'s case (AIR 1975 SC 32) (supra) in sub-section (6) of S.6 of the Amending Act as the amended provision would not ensure fair compensation for the losses that a company may suffer as a result of the non-payment of the purchase price at the time of the delivery of the Undertaking.
10. The observation of their Lordships extracted above would show that their Lordships considered the provision of sub-section (6) of S.6 as unreasonable only because of the fact that no provision was made for payment of interest in the Act and to realise the interest the petitioner-Company would have to launch proceedings in the Civil Court.
11. The question, therefore, that falls for consideration is as to whether despite the provision having been made for payment of interest, the provision of sub-section (5A) of S. 6 of the Act would still suffer from the vice of unconstitutionality as being violative of Art. 19(1) (f) and (g) of the Constitution of India.
12. To my mind the basic provision enabling the purchasing authority to take the delivery of the undertaking so purchased pending determination of the amount of purchase price attracted the label of unreasonableness only because no provision was made for the payment of interest for the period the amount of purchase price remained to be paid after taking over of the delivery of the undertaking. By so saying, I do not mean to say that if the existing provision of sub-section (6) of S. 6 of the Act had provided payment of interest, say at 1 per cent, their Lordships would have upheld the vires of the provision. The question that in a nutshell arises for consideration is as to whether the interest provided by the Haryana Amendment is so illusory or unconscionable or utterly inadequate that the provision of S. 6 sub-section (6) even in its reincarnation as S.6 sub-section (5A) as a result of the Haryana Amendment, would attract the epithet of unreasonableness. In this regard let us turn our gaze to some other statute providing for acquisition of property and payment of market value. In this regard the first statute that attracts attention is the Land Acquisition Act, 1894. S. 34 of this Act provides for payment of interest at the relevant time at 6 per cent and S. 23 provides for payment of 15 per cent of the purchase price as solatium,. In comparison sub-section (5A) of S.6 provides for payment of interest at the rate of Reserve Bank plus 1 per cent of the purchase price and proviso to sub-section (4) of S.7A of the Act provides for payment of 20 per cent of the purchase price as solatium. Admittedly, at the relevant time, the interest of the Reserve Bank was 6 per cent. Thus the Haryana Amendment provided for payment of 7 per cent interest. Yet another Act that deserves special mention for comparing with the aforesaid provision of the Electricity Act is the Karnataka Contract Carriages (Acquisition) Act (21 of 1976). By this Act almost all the contract carriages and their corresponding permits were acquired in the State. Section 11 sub-section (1) which provided for the manner of payment of amount for the acquired property is in the following terms:--
'The amount determined under S. 6 shall, after deduction, if any, made under this Act, be given in cash by the State Government to the person interested:--
(a) in one lump sum where the amount does not exceed ten thousand rupees; and
(b) in ten equal annual instalments in other cases, the amount of each instalment carrying interest at the rate of six per cent per annum from the notified dated '.
A perusal of the aforesaid provision would show that the acquiring authority was to pay the amount determined under S.6, if it exceeded Rs. 10,000/-, in 10 equal instalments and the interest was to be paid at 6 per cent for the given instalment i.e. it was not the whole amount that was to carry interest at 6 per cent i.e. on payment of first instalment the interest was to be paid at that time was on the amount representing the first instalment and so on and so forth. The High Court struck down the statute as unconstitutional. The matter was then taken to the Supreme Court by the State Government. Their Lordships upheld the vires of the Act including the provision providing for the manner of the payment of the determined amount. In this regard the following observations of Untwalia, J., who delivered opinion of the majority, in State of Karnataka v. Ranganatha Reddy, AIR 1978 SC 215, can be aptly recalled:--
'On the interpretations aforesaid which we have put to the relevant provisions of the Act, it was difficult--rather impossible--to argue that the amount so fixed will be arbitrary or illusory. In some respects it may be inadequate but that cannot be a ground for challenging of the constitutionality of the law under Art. 31(2)'.
As compared to the Karnataka Act the relevant provision of Electricity Act appears to be very reasonable, rather than unreasonable. The Karnataka Act provided not only for deferred payment of the purchase price but the amount that may be determined was made payable in 10 equal instalments and not the whole amount was to carry interest. It was the given instalment that was to carry interest at 6 per cent.
13. Mr. Anand Swaroop, learned counsel for the petitioner, however, contends that in Karanataka case reasonableness of the provisions of the Karnataka Act in question did not come up for testing on the touchstone of Art. 19(1) (f) & (g). The vires of the said provision were considered qua the provisions of Art. 31(2) of the Constitution of India only.
14. It is no doubt true that specific argument that the given provisions of the Karnataka statute were unreasonable and thus violative of the provisions of Art. 19(1) (f) and (g), was not advanced before their Lordships. But in the light of the decision of their Lordships in that case, I do not think the contention advanced by Mr.Anand Swaroop that the provision of sub-section (5A) of S. 6 of the Act in unreasonable and violative of Art. 19(1) (f) and (g) would hold water. Mr. Anand Swaroop, learned counsel for the petitioner, however, urged that a provision providing for compulsory acquisition of property has not only to comply with the requirement of Art. 31(2) and Art. 31(2A), but has also to pass the test of reasonableness. He sought support for his submission from Rustom Cavasjee Cooper v. Union of India, AIR 1970 SC 564, Mr. Anand Swaroop drew particular attention to the following passage occurring in para 66 of the opinion delivered for the majority by Shah J., as he then was:-
'.................. A business organization deprived of its entire assets and undertaking, its managerial and other staff, its premises and its name, even if it has a theoretical right to carry on non-banking business, would not be able to do so, especially when even the fraction of the value of its undertaking made payable to it as compensation is not made immediately payable to it'.
There is no gainsaying the fact that their Lordships in Rustom Cavasjee Cooper's case (supra) have held that the validity of 'law' which authorised deprivation of property, or the 'law' which authorised compulsory acquisition of property for a public purpose must be judged by the application of the same tests. A citizen may claim in an appropriate case that the law authorising compulsory acquisition of property imposes fetters upon his right to hold property imposes fetters upon his right to hold property which are not reasonable. But their Lordships have also held that if the acquisition is for a public purpose, substantive reasonableness of the restriction which includes deprivation may, unless otherwise established, be presumed, but enquiry into reasonableness of the procedural provisions will not be excluded. While illustrating the meaning of the aforesaid, their Lordships took, for example, a situation where a tribunal is authorised by an Act to determine compensation for property compulsorily acquired, without hearing the owner of the property, the Act would be liable to be struck down under Art. 19(1)(f).
15. If, whether any immediate payment is made or not made, is considered as a relevant factor, as their Lordships seem to consider in 'Cooper's case (supra) from the paragraph extracted above, then one cannot lose sight of the fact that in this case, even according to the petitioner itself, Rs. 10,00,000/- were paid to it on the very day the delivery was taken and subsequently, within a year or two years another Rs. 10,00,000/- had been paid to it. It was stated at the bar and not refuted from the side of the petitioner that in all within two years of the delivery of the possession about Rs. 27 lacs had been paid to the petitioner-concern. The petitioner, however, demanded Rs. 58 lacs, and then the matter was referred to the Arbitrator.
16. In this case it cannot be urged that the acquiring authority has been so unreasonable as not to have paid anything. The acquiring authority, on the other hand, has submitted that in fact they had paid more to the petitioner than the value of the property. It was stated at the bar, and again without being refuted, that on receiving notice of acquisition, the company had transferred its assets to the present firm for a sum of Rs. 14 lacs. That means that just about the time the delivery of the Undertaking had been taken by the acquiring authority, the value of the assets was about Rs. 14 lacs.
17. I, however, do not intend to rest my finding in regard to the reasonableness of the impugned provision on the factum of aforesaid payments to the company. The provision for taking over of the Undertaking on deferred payment had been impliedly considered to be reasonable by their Lordships if the provision had also provided for payment of interest. This lacuna regarding payment of interest has been filled up. Sub-section (5A) of S. 6 provides for the payment of 1 per cent interest higher than the bank rate on the date of the delivery and, therefore, it is per se reasonable. Mr. Anand Swaroop nevertheless contended that since the interest payable was at a rate that was current on the date of the delivery of the undertaking and not on the date of the payment of the compensation amount, so such interest cannot be considered to be reasonable. I do not think there is any merit in the contention advanced by Mr. Anand Swaroop. The bank interests may not necessarily be higher in future than what, for instance, it is today or at any given time. The bank interest may be slashed. No valid contention can be founded on fortuitous circumstances.
18. For the reasons a forementioned, I hold that the provisions of sub-section (5A) of S. 6 of the Act are intra vires and dismiss the petition as being without any merit with no order as to costs.
19. Petition dismissed.