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Vishnupur Electric Supply and Industrial Development Co. Ltd. and ors. Vs. State of West Bengal and ors. - Court Judgment

LegalCrystal Citation
SubjectElectricity
CourtKolkata High Court
Decided On
Case NumberC.R. No. 2865 (W) of 1973
Judge
Reported inAIR1978Cal88,82CWN377
ActsElectricity Act, 1910 - Sections 4, 4(1), 5, 5(1) and 6
AppellantVishnupur Electric Supply and Industrial Development Co. Ltd. and ors.
RespondentState of West Bengal and ors.
Appellant AdvocateArun Kr. Dutt (Jr.), Adv.
Respondent AdvocateNarayan Guptoo, ;T.K. Sengupta, Advs. (for Nos. 1 and 2) and ;Samir Kr. Mukherjee, Adv. (for Nos. 3 to 7)
Cases ReferredNarayana v. State of Kerala
Excerpt:
- .....supply and industrial development company limited to sell the undertaking to the west bengal state electricity board and deliver the same to the board on the 10th of august, 1973, a letter dated the 25th of july, 1973 requiring the said company to make inventory of the assets and to do diverse other acts for the purpose of handing over the undertaking and a further notification, dated the 27th of may, 1971 purporting to alter the option of purchase.2. the petitioner no. 1 is a company incorporated under the indian companies act, 1913 on dec. 22, 1939 with the objects inter alia of supplying electrical energy in the town of vishnupur in the district of bankura and its suburbs. the state government by a notification no. 2552-mp, dated nov. 6, 1950, in exercise of the power conferred.....
Judgment:
ORDER

Sudhamay Basu, J.

1. This Rule has been obtained to quash the order of revocation, dated the 16th July, 1973, another notice also dated the 16th of July, 1973 requiring the Vishnupur Electric Supply and Industrial Development Company limited to sell the undertaking to the West Bengal State Electricity Board and deliver the same to the Board on the 10th of August, 1973, a letter dated the 25th of July, 1973 requiring the said Company to make inventory of the assets and to do diverse other acts for the purpose of handing over the undertaking and a further notification, dated the 27th of May, 1971 purporting to alter the option of purchase.

2. The petitioner No. 1 is a Company incorporated under the Indian Companies Act, 1913 on Dec. 22, 1939 with the objects inter alia of supplying electrical energy in the town of Vishnupur in the District of Bankura and its suburbs. The State Government by a Notification No. 2552-MP, dated Nov. 6, 1950, in exercise of the power conferred by Section 3 of the Indian Electricity Act, 1910 (Act IX of 1910), granted the said Company a licence known as the Vishnupur Electric Licence, 1950.

3. The petitioner-Company erected power station with diesel generating plants and in 1953 illuminated the town of Vishnupur with electric lights. It started with a few domestic connections and supplied street lights free of charge. From the year 1957-58 there was a change over from power generating plant to the receiving of bulk supply from theWest Bengal State Electricity Board and that arrangement continued. The Commissioner and Secretary of the Government of West Bengal served with a show cause notice, dated Jan. 30, 1973 under Section 4(3) of the Indian Electricity Act, 1910 as to why the licence granted to it should not be revoked as in the opinion of the Government the financial position of the licensees was such that they were unable to discharge the duties and obligations imposed on them. On April 25, 1973 the petitioner-Company sent a representation against show cause notice which is Annexure 'B' to the petition. After that an order of revocation was served on the Company under Section 4(1) of the Indian Electricity Act which is Annexure 'C' to the petition. The said order of revocation was followed by another notice under Section 5(3)(1)(c) of the Indian Electricity Act, to the Company requiring it to sell the undertaking to the West Bengal State Electricity Board and to deliver the undertaking on August 10, 1973. The notice is Annexure 'D' to the petition. On July 25, 1973 another letter was addressed to the petitioner-Company to arrange for taking over and preparing the inventory of stores. The said letter is Annexure 'E' to the petition. It is alleged in the petition that order of revocation and the subsequent notice Annexure 'D' were not bona fide. It is stated that on the expiry of the period of licence of the petitioner-Company from the date of notification of the grants of licence, namely on the expiry of twenty years, it was given a go-by by the issuance of a notification, dated August 27, 1971 by the Government of West Bengal, Department of Commerce and Industries (Power Branch) which made alterations and amendments in Clause 15 of the Vishnupur Electricity Licence, 1950. An option for purchase given by Section 6 of the Act was to be first exercisable on Nov. 22, 1975 and thereafter at the end of every subsequent period of five years during the subsistence of the licence. The petitioner-Company on July 10, 1973 made a demand for justice to the State of West Bengal against the order of revocation on grounds which are stated in para. 18 of the petition. It is alleged in the petition that Section 4(1) of the Indian Electricity Act gives no power to the State Government to issue the order of revocation. It was also stated in the petition that Section 4(1) of the Indian Electricity Act, 1910 is ultra vides the Constitution, but the saidpoint was not argued in course of hearing.

4. Mr. Dutt learned advocate appearing in support of the Rule placed relevant provisions of the Indian Electricity Act, 1910 with its amendments, the terms of licence of the Vishnupur Electric Supply and Industrial Development Company Limited, the Electricity Supply Act, 1948 and other relevant provisions. He challenged the order of revocation and the notice requiring the petitioner to sell the undertaking to the State Electricity Board which are annexures 'C' and 'D' to the petition. According to him, no valid notice of revocation was served by the State Government under Section 5(1)(a) of the Indian Electricity Act upon the licensee fixing a date on which the revocation shall take effect. According to him the condition precedent to the exercise of power under Section 5(3) does not exist as no notice under Section 5(1)(a) has been served on the licensee. He argued further that the annexure 'D' to the petition is without any authority and the licensee is not bound to deliver the undertaking to the designated purchaser in terms of annexure 'D'.

5. Mr. Dutt strongly relied on a Supreme Court decision in Narayana v. State of Kerala reported in : [1974]2SCR60 and argued that the purported order of revocation, viz., annexure 'C' is ultra vires the statute inasmuch as the West Bengal State Electricity Board endorsed the proposal for revocation for licence before the explanation of the petitioners to the show cause notice reached the State Authority and there was no consultation with the Board. The consultation with the Board, according to Mr. Dutt, was a condition precedent for making an order of revocation. According to him, the Board was consulted before the receipt of the petitioners' explanation to the show cause notice.

6. So far as the latter contention is concerned the Supreme Court case construed Clauses (e) to (d) of Section 4 of the Indian Electricity Act and held that they prescribed some of the conditions precedent for the exercise of power. The order of revocation in breach of any one of these conditions will undoubtedly be void. The Clause '(a)', 'if in its opinion the public interest so requires' is a condition precedent. On a successful showing that the order of revocation has been made without Government applying its mind to the aspect of publicinterest or without forming an honest opinion on that aspect it will he void. So also the consultation with the Board is a condition precedent for making an order of revocation. The breach of this condition should also entail the same consequence. It was also specifically held in that case that Section 4 contemplates that the Board should make its recommendation only after considering the explanation of the licensee. It was also pointed out by the Supreme Court that the phrase 'after consulting the State Electricity Board' did not find place in Section 4 as it stood originally. It was introduced by an amendment in 1959. It was obviously introduced with the object of providing an additional safeguard to the licensee. When revoking the licence, the State Government really acts in two stages. Initially it forms a tentative opinion in favour of revoking the licence and calls for an explanation from the licensee. When the explanation is received it considers the same and if not satisfied passes a final order of revocation. The Board is an independent body and consultation with it is a mandatory provision the breach of which will make the order of revocation void.

7. The position in law, therefore, is amply clear but it would appear that the facts of the said Supreme Court case are somewhat different from those in the present one. In that case the Court held that there was no second consultation between the Government and the Board after the receipt of the explanation. The Court dismissed the said argument by holding that such consultation could not be held with three members collectively. The evidence on record in that case excluded the possibility of consultation with the Board after the receipt of the explanation. In this case Annexure 'B' to the affidavit-in-opposition which is a letter addressed to the Assistant Secretary of the Government of West Bengal, dated May 29, 1973, written by the Secretary of the Board clearly states 'we have gone through the extract from the reply given by the licensee.' The order of revocation which is Annexure 'C' to the petition it-self states, inter alia, 'and whereas on a consideration of the facts and circumstances of the case and all the causes shown by the said licensee, and after consulting the West Bengal State Electricity Board, the Government is of the opinion that the public interest so requires'. It is to be noted that the explanation by the licensee was submitted on the 25th of April, 1973 and the order of revocation is dated July 16, 1973. In between these two dates is the date of the letter from the Secretary of the Board. In the Supreme Court case the consultation with the Board after receipt of the explanation was not possible. In this case there is recital in the order of revocation itself. The circumstances also show that consultation was possible, In fact, as already noted, the Board's letter itself shows that consultation was held after the explanation was received. In this connection the Court also finds substance in the contention of Mr. Mukherjee, learned Advocate who appeared on behalf of the Board that unless definite materials are placed before the Court, the Court should not presume that the official act was not done in a regular way.

8. The other arguments of Mr. Dutt relate to there being no notice of revocation before the actual order, Mr. Gun-too, learned Advocate appearing on behalf of the respondents Nos. 1 and 2 read the order, dated July 16, 1973 being Annexures 'C' and 'D' and also Annexure 'E' which is dated July 25, 1973 and submitted that the terms of the said letters are clear enough and they ex facie show that everything was done in compliance of the provisions of the Act. Mr. Mukherjee on behalf of the Board pointed out that the first letter, dated July 16, 1973 (Annexure 'C') was the order of revocation. The next letter of the same date vide Annexure 'D' was the notice contemplated under Section 5(1). He submits that the order of revocation is contemplated under Section 4(1). But Section 5(1) clearly stated that 'where the State Government revokes under Section 4(1), the licence of a licensee following provisions shall take effect; namely, (a) the State Government shall serve a notice of revocation upon the licensee and shall fix a date on which the revocation shall take effect ... ... ...' Sub-section (3)provides that 'where the State Government issues any notice under Sub-section(1) requiring the licensee to sell the undertaking it may by such notice require the licensee to deliver ... ... ... ... the licensee shall deliver on a date specified in the notice the undertaking to the designated purchaser pending the determination and payment of the price ... ... ...' Therefore, the scheme suggests that the service of notice was to be given subsequently. No form isgiven. Mr. Mukherjee of course suggested in the alternative that the order of revocation itself might be regarded as a combined notice. But that construction seems to be an effort to evade the real issue, which is whether under the scheme of the act the notice of revocation fixing a date is a condition precedent or the notice of revocation can follow the order of revocation.

9. After some anxious consideration it appears to the Court that a previous notice before the order of revocation, as Mr. Dutt contended, is not necessary. The schema of the act seems to suggest otherwise. Revocation under Section 4(1) is more or less a penal provision which is to be invoked by the State Government in certain cases in public interest. But in order to ensure that no injustice may be caused to the licensee, Section 5(1) contemplates that 'when the State Government revokes under Section 4(1) it shall serve a notice of revocation fixing the date on which the revocation shall take effect. That is to be indicated by the notice of revocation. The notice of revocation is also to indicate when the undertaking is to be sold or delivered to a designated purchaser. The State Government is to enquire if the State Electricity Board is willing to purchase the undertaking. If the latter is not willing the State Government may itself elect to purchase it or require the undertaking to be sold to a local authority. The section seems to indicate that notice fixing a date may follow the order of revocation. Since the order of revocation is to be effected in public interest it may be necessary in certain circumstances to make the order at once without giving any prior indication. A penal provision may require suddenness of action. At the same time, since Section 5(1) contemplates a notice fixing the date on which the revocation shall take effect, the same will not be inconsistent with the requirements of natural justice. In the present instance the licensee was required to deliver the undertaking to the Board on August 10, 1973 the notice being issued on July 16, 1973. In view of the above consideration the Court is constrained to reject the contention of Mr. Dutt. Another point incidentally canvassed was the soundness of the financial position of the company but since the 'financial predicament' was admitted in the correspondence which made the 'company unable to discharge its duties' (para 21) the matter need not be looked into more seriously.

10. It may be noted that the purposes of Sections 5 and 6 of the Electricity Act are quite different. Section 5 is brought into play when a license is revoked. This revocation of licence is under Section 4(1) and its provisions are attracted if the licensee makes wilful default or breaks any term or condition of the licence or fails to fully and efficiently discharge the duties or fails to make deposit or furnish security or when in the opinion of the State Government its financial position is such that it is unable to discharge the duties and obligation or when the licensee makes any default in complying with any direction. In such cases, in public interest, the licence may be revoked as to the whole or any part of the area of supply. Section 4-A includes provisions for amending the licenses in public interest on the application of the licensee or otherwise in consultation with the State Electricity Board.

11. Section 6 relates to purchase of undertaking. This is not dependent on any default on the part of the licensee as under Section 5. Moreover the initiative under this section is to be from the State Electricity Board and not from the State which is contemplated to take action under Sections 4 and 5. It may be noted that the Electricity (Supply) Act, 1948 which brings into existence in its preamble mentions inter alia 'whereas it is expedient to provide for the rationalisation of the production and supply of electricity, for taking measures conducive to electrical development ... ... ... the coming into existence of the Electricity Board is for electrical development'. In that perspective the function of the State Electricity Board would be to see that production and supply of electricity are rationalised and properly carried on in the State. In discharging the said duty it may be necessary for the Board even in cases where there is no default on the part of the licensee to purchase the undertaking in the interest of electrical development in the State. Thus Section 6 enables the Board to purchase the undertaking. Notice in writing under Section 6 is of not less than one year but notice under Sections 4 and 5 in the case of default is given for lesser period. Notice in case of default is naturally expected to be shorter than in the case of purchase by the Board when no default is involved. Thus the scheme of the Act would seem to be that while provisions of Sections 4 and 5are brought into play when the licensee is in default at the initiative of the State, Section 6 is invoked at the initiative of the Board with at least a period of one year's notice. While the former is more or less penal in nature the latter seems to be in the interest of a rationalised production and supply of electricity, in the aforesaid backgorund the other contention of Mr. Dutt that by virtue of the amendments of the licence under Section 4-A of the Act the order of revocation was incompetent may be considered. It may be noted that by an order, dated May 27, 1971, (vide Annexure 'F') the Government with the consent of the licensee altered the terms of the Vishnupur Electric Licence, 1950 by substituting an option of purchase to be first exercisable on the 27th of Nov., 1975 and thereafter at the end of every subsequent period of five years during the subsistence of the licence. Mr. Dutt's contention is that after the amendment of the licence, as noted above, it was incompetent on the part of the Government or the Board to revoke the licence or purchase the undertaking in any event before Nov. 27, 1975. But it is to be noticed that the option of purchase under Section 6 by the Board is unconnected with any penal act or default on the part of the licensee. The licensee is not entitled to make default with impunity or take shelter under this amendment so as to avoid any liability under the provisions of Sections 4 and 5 which are to be invoked by the Government. The revocation of licence is a power which lies with the State Government and not with the Board. The Board has a right under Section 6 to exercise its option and the same it obviously sacrificed when it gave its consent to the Government's action. The status of the Board is quite different from that of the Government. What is to be noted clearly is that the consultation with the Board is by way of a check on the Government but the revocation of licence is a power resting entirely with the Government of a State and not with the Board. Moreover the amendment effected under Section 4-A, as Mr. Mukherjee rightly pointed out, was not a forced amendment. It was on consent of the licensee. Section 4-A contemplates an amendment either on the application of the licensee or otherwise. If it is to be effected irrespective of the consent of the licensee that power of the Government is exercised under Section 10, But in the instant case the amendmentwas not a forced one. By giving consent to the amendment for option to purchase under Section 4-A the licensee cannot affect the right of the State Government conferred by the other sections of the statute. At best it is possible to construe that the Board may have agreed to waive its right to exercise its power of purchase under Section 6 when it gave consent to the amendment of the license. But that would not in any way take away the right to initiate compulsory impositions under Section 4 or 5 of the Act. The amendment cannot confer immunity to the licensee to go on committing default. That would be conferring on amendment under Section 4-A a power to give shelter and protection in case of default and thus thwart public interest. This submission of Mr. Dutt, therefore, cannot be entertained. The result is that the petition fails.

12. The Rule is therefore discharged.

13. There will be no order as to costs.

14. The prayer was made for stay of the order by the petitioner.

15. Since the interim order of injunction was refused in this case and since the Board has already taken possession of the Company it is not thought expedient to grant the prayer, and, therefore, it is rejected.


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