# A.ppeals dismissed. • Chettiai' Gajendragadkar J, THE OKARA ELECTRIC SUPPLY CO. LTD., AND ANOTHER· v. THE STATE OF PUNJAB AND ANOTHER

- **Citation:** [1960] 2 S.C.R. 239
- **Court:** Supreme Court of India
- **Decided:** 1958-01-03
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. Subba Rao, K. C. DAS Gui:TA, J. C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-ppeals-dismissed-chettiai-gajendragadkar-j-the-okara-electric-supply-co-ltd-1858
- **Pages:** 14

## Headnote

1-
'
Constitution--Electricity undertaking-Grant of temporary
sanction for supplying energy-Condition imposed for compulsory
acquisition of undertaking on . payment of compensatio.n-W hether
ultra vires-Stat11te authorising imposition of such conditionW hether infringes fundamental rights-Indian Electricity Act, r9w
(IX of r9ro), s. 28(r)-Constitution of India, Arts. r9(r)(f) and
Art. 3r.
Section 28(r) of the Indian Electricity Act, l9IO authorised
the State Government to grant sanction to a non-licensee to
engage in the business of supplying energy on "such conditions
in this behalf" as it may fix.
By a notification dated May 26,
1948, issued under s. 28(1) the first respondent granted sanction
to the first petitioner, to engage in the business of supplying
energy to Mliktsar. Clause II of the notification provided that
"'
the Provincial Government shall have the option of acquiring
the undertaking at anytime after October 21, 1950, after giving
one year's notice and that it shall pay the price of lands, buildings,
works, material and plant. that may be acquired at the fair
market value. On January 3, 1958, the first respondent issued a
notice exercising the option given under cl. II and intimated to
the first petitioner that upon expiry of one year its undertaking
shall vest and become the absolute property of the first respondent. On January 4, 1959, the first respondent took possession
of the undertaking in pursuance of the notice. The petitioners
contended that cl. II of the notification was ultra vires s. 28 and
that if cl. II was justified by s. 28 then s. 28 was void as it
offended Arts. 19 and 31 of the Constitution. , ·
Held, that cl. II of the notification was intra vires s. 28.
A statutory provision which Q(!alt with the 9rant of sanction tq
-
I959
N oveniber r3.
•
240
SUPREME COURT REPORTS [1960(2)]
r959
a person to engage in the bnsiness of supplying energy must,
-
having regard to the special features of the business, necessarily
The Okara Electric deal with the position which would arise on the termination of
Supply Co., Ltd. the sanction; so it could be assumed that such statutory provision
v.
would make adequate provision empowering the State GovernThe State of
ment to provide for the compulsory acquisition of the assets of
Punjab
the supplier on payment of proper compensation. Though s. 28(1)
did not specifically provide for compulsory acquisition on payment
of compensation, the expression "such conditions in this behalf "
in s. 28(1) in the context would include conditions dealing with
the position . which would inevitably arise when the business
came to an end. The sanction under s. 28 being necessarily
temporary it was in the interest of the grantee himself that some
provision was made for payment of compensation to him. A
condition for acquisition like cl. rr was, therefore, within the
scope of s. 28(1).
New Orleans Gas Light Co. v. Louisiana Light and Heat
Producing and Manufacturing Co. rr5 U.S. 650; 29 L. Ed. 516,
referred to.
Held, further, that s. 28 was valid and did not offend either
Art. 19 or Art. 3r. The Act could not be challenged on the
ground of violating Art. 31(2) as it was an existing law which was
saved by clause (5) of the Art. 3r. Similarly, it was saved by
s. 299(4) of the Government of India Act, 1935. from an attack
under s. 299(2).
The restrictions imposed by s. 28 of the Act
were reasonable restrictions imposed in the interests of the
general public within the meaning of Art. 19(5). Such limitations
were generally imposed on the business of supplying energy.
ORIGINAL JURISDICTION: Petition No. 19 of 1959.
Petition under Article 32 of the Constitution of India,
for enforcement of fundamental rights.
Veda Vyasa, S. K. Kapur and Ganpat Rai, for the
petitioners.
·
S. M. Sikri, Advocate-General for the State of Punjab,
N. S. Bindra and D. Gupta, for the respondents.
1959. November 13.
The Judgment of the Court
was delivered by
Gajendragadkar}.
GAJENDRAGADKAR J.-The Okara Electric Supp

## Text

S.C.R.
SUPREME COURT REPORTS
239
principal appeal fails it would not be necessary to
z959
make any effective orders on the rest of the appeals in N h. PP
Chettiar
this group. The said appeals also fail and are ac ia v~
dismissed ; but there would be no order as to costs.
Subramaniam
.A.ppeals dismissed.
•
Chettiai'
Gajendragadkar J,
THE OKARA ELECTRIC SUPPLY CO. LTD.,
AND ANOTHER·
v.
THE STATE OF PUNJAB AND ANOTHER
(B. P. SINHA, C.J., P. B. GAJENDRAGADKAR,
K. SUBBA RAO, K. C. DAS Gui:TA and J. C. SHAH, JJ.)
1-
'
Constitution--Electricity undertaking-Grant of temporary
sanction for supplying energy-Condition imposed for compulsory
acquisition of undertaking on . payment of compensatio.n-W hether
ultra vires-Stat11te authorising imposition of such conditionW hether infringes fundamental rights-Indian Electricity Act, r9w
(IX of r9ro), s. 28(r)-Constitution of India, Arts. r9(r)(f) and
Art. 3r.
Section 28(r) of the Indian Electricity Act, l9IO authorised
the State Government to grant sanction to a non-licensee to
engage in the business of supplying energy on "such conditions
in this behalf" as it may fix.
By a notification dated May 26,
1948, issued under s. 28(1) the first respondent granted sanction
to the first petitioner, to engage in the business of supplying
energy to Mliktsar. Clause II of the notification provided that
"'
the Provincial Government shall have the option of acquiring
the undertaking at anytime after October 21, 1950, after giving
one year's notice and that it shall pay the price of lands, buildings,
works, material and plant. that may be acquired at the fair
market value. On January 3, 1958, the first respondent issued a
notice exercising the option given under cl. II and intimated to
the first petitioner that upon expiry of one year its undertaking
shall vest and become the absolute property of the first respondent. On January 4, 1959, the first respondent took possession
of the undertaking in pursuance of the notice. The petitioners
contended that cl. II of the notification was ultra vires s. 28 and
that if cl. II was justified by s. 28 then s. 28 was void as it
offended Arts. 19 and 31 of the Constitution. , ·
Held, that cl. II of the notification was intra vires s. 28.
A statutory provision which Q(!alt with the 9rant of sanction tq
-
I959
N oveniber r3.
•
240
SUPREME COURT REPORTS [1960(2)]
r959
a person to engage in the bnsiness of supplying energy must,
-
having regard to the special features of the business, necessarily
The Okara Electric deal with the position which would arise on the termination of
Supply Co., Ltd. the sanction; so it could be assumed that such statutory provision
v.
would make adequate provision empowering the State GovernThe State of
ment to provide for the compulsory acquisition of the assets of
Punjab
the supplier on payment of proper compensation. Though s. 28(1)
did not specifically provide for compulsory acquisition on payment
of compensation, the expression "such conditions in this behalf "
in s. 28(1) in the context would include conditions dealing with
the position . which would inevitably arise when the business
came to an end. The sanction under s. 28 being necessarily
temporary it was in the interest of the grantee himself that some
provision was made for payment of compensation to him. A
condition for acquisition like cl. rr was, therefore, within the
scope of s. 28(1).
New Orleans Gas Light Co. v. Louisiana Light and Heat
Producing and Manufacturing Co. rr5 U.S. 650; 29 L. Ed. 516,
referred to.
Held, further, that s. 28 was valid and did not offend either
Art. 19 or Art. 3r. The Act could not be challenged on the
ground of violating Art. 31(2) as it was an existing law which was
saved by clause (5) of the Art. 3r. Similarly, it was saved by
s. 299(4) of the Government of India Act, 1935. from an attack
under s. 299(2).
The restrictions imposed by s. 28 of the Act
were reasonable restrictions imposed in the interests of the
general public within the meaning of Art. 19(5). Such limitations
were generally imposed on the business of supplying energy.
ORIGINAL JURISDICTION: Petition No. 19 of 1959.
Petition under Article 32 of the Constitution of India,
for enforcement of fundamental rights.
Veda Vyasa, S. K. Kapur and Ganpat Rai, for the
petitioners.
·
S. M. Sikri, Advocate-General for the State of Punjab,
N. S. Bindra and D. Gupta, for the respondents.
1959. November 13.
The Judgment of the Court
was delivered by
Gajendragadkar}.
GAJENDRAGADKAR J.-The Okara Electric Supply
Co. Ltd., which is a Joint Stock Company and
Shrimati V. V. Oberoi, one of the principal shareholders of the said company (hereinafter called petitioners I and 2 respectively) have filed the present
petition against the State of Punjab and the Punjab
-
-< -
S.C.R.
SUPREME COUR'r REPORTS
241
State Electricity Board (hereinafter called respon-
:r959
dents 1 and 2 respectively) in which tiley have claimed
't
d
d'
t'
·
t f
t'
·
d The Okara Electric
a wri , or er or irec 10n in respec o a no ice issue
5 ppl c
Ltd
by respondent 1 on January 3, 1958. The petition
u
Y v.
0
••
•
was presented on January 3, 1959 and it claimed an
The Stats of
order or writ restraining the respondents from giving
Punjab
effect to the said notice. It appears that on January'4,
--
1959 .
f th
'd .
d ·
t'
th Gajendragadkar ].
, m pursuance o
e sa1 impugne
no we
e
respondents took possession of the petitioners' property in question, and so, by an order passed by the
learned Chamber Judge the petitioners were allowed
-to make an additional claim for a writ or order or
direction in the nature of mandamus directing the
respondents to hand over to the petltioners the said
property in question. This petition is made on the
ground that the impugned notice and action taken by
the respondents in pursuance of it are illegal and
unauthorised and they affect the petitioners' fundamental rights under Arts. 19 and 31 of the Constitution.
The first petitioner was granted sanction undel' s. 28
of the Indian Electricity Act, 1910 (9 of 1910) (hereinafter called the Act) authorising it to engage in the
business of supplying energy at Muktsar by Government Notification No. 1766-I & 0-48/28784 published
on May 26, 1948. By virtue of the said sanction the
first petitioner has ever since been engaged in the
business of supplying electric energy at the said place
and for the purpose of its business it has set up
an electricity undertaking at
considerable cost.
On January 3, 1958, the Secretary to respondent 1,
P. W. D., Irrigation and Electricity Branches, Ohandi- _
garh, issued notice against the first petitioner purport·
ing to exercise the option given to respondent 1 by
cl. 11 of the said notification. By this notice the first
,petitioner was told that respondent 1 had exercised its
option under the said clause, and that on the expiry of
the period of one year after the receipt of-the notice
by the first petitioner its undertaking shall vest in and
become the absolute property of respondent 1.
The first petitioner has been having bulk supply
from P. W. D. El~ctricity brainch of respondent 1, and,
31
242
SUPREME COURT REPORTS
[1960(2)]
'959
according to the petition, respondent 1 could not and
-
will not take over the plant and yet has ordered the
The OkO'a E1'ctric fi t
t "t'
h t ·
t
]j
]
J
•
Supply Co., Ltd.
rs pe. i 10ner t a it canno se
~ 1e p '.11:1t without
v.
pern11ss10n of respondent 1.
The impos1t1on of this
The State of
condition is wholly illegal and it amounts to an
Punjab
unreasonable restriction on the petitioners' right to
-
carry on business and to hold and dispose of its
Gajend,agadkar ]. property.
.
The petition alleges that cl. 11 of the notification on
which the impugned notice is founded is ultra vires
•
s. 28 of the Act, and that alternatively, if the inclusion of the said clause in the notification is justified by
s. 28 of the Act, s. 28 itself is ultra vires since it offends
against Arts. 19 and 31 of the Constitution. It is on
these allegations that originally the petition claimed
an order against the enforcement of the notice and
subsequently added the prayer for a writ of mandamus directfog respondent 1 to restore to the petitioners
possession of the property which has been taken
over by respondent 1 after the filing of the present
petition.
The claim thus made is denied by both the respondents. It is urged that the petitioners cannot challenge
the validity of cl. 11 which was accepted by them
before the Constitution came into force.
It is further
urged that the said clanse is justified by the provisions
of s. 28 of the Act and that both the said clause and
s. 28 are intra vires and valid. The respondents further
alleged that after possession was taken of the property
of the first petitioner in exercise of the option under
cl. 11 the first petitioner had been repeatedly called
upon by the respondents to assist them in making a
proper valuation of the assets of the first petitioner
taken over by the respondents. In fact an amount of
Rs. 60,000 has been paid to the first petitioner in part
payment by way of compensation and it has been
accepted by it though under protest; but the work
of completing the valuation of the total assets has
been delayed and hampered by the non-cooperative
attitude of the first petitioner.
Thus the first question which falls to be decided on
~
this petition is whether cl. 11 of the notification i&
,,.
\;-·
,
s.c.k.
SUPREME COURT REPORTS
justified by s. 28 of the Act.
The notification consists
r959
of 14 clauses and it sets out exhaustively the terms_
.-·
,
and conditions on which sanction had been granted The Okara Electnc
to the first petitioner under s. 28 of the Act. For the Supply v~o., Ltd.
purpose of the present petition it would be enough to
The State of ·
refer to cl. 11 only.
This clause provides that the
Punjab
Provincial Government shall have the option· to
--
acquire the undertaking at any time after October 21, Gajsndragadkar f.
1950, provided firstly that not less than one years'
notice in writing of the election to acquire shall be
served upon the supplier by the Provincial Government ; provided secondly that the generating station
1 shall not form part of the undertaking for the purpose
of acquisition if the undertaking is acquired after grid
supply from the East Punjab Public vVorks Department, Electricity Branch, has reached Muktsar; pro-
• vided thirdly that the price to be paid to the supplier
for such lands, buildings, works, materials and plant
as may be acquired by the Provincial Government
under this clause will be the fair market value at the
time of purchase (without any addition in respect of
compulsory purchase or of goodwill or of any profits
which may be or might have been made from the
updertaking) such value to be in case of difference or
dispute determined by arbitration in the manner
prescribed in s. 52 of the Act ; provided fourthly tha.t
the Provincial Government shall pay the price of the
property acquired under this clause within a period
of six months after the price has been determined."
Mr. Veda Vyas, for the petitioners, contends that the
condition which gives respondent 1 the option to
acquire the property of the petitioners is ultra vires.
We are concerned withs. 28 as it stood prior to its
amendment by Act 32 of 1959. Section 28(1) reads
thus:
"No person, other· than a license-e, shaTI engage
in the business of supplying energy except vdth the
·previous sanction of the State Government and in
accordance with such conditions as the State
Government may fix in this behalf, and any agreement to the contrary shall be void,"
' 244
SUPREME COURT REPORTS [1960 (2)]
z959
The Act which was passed in 1910, to amend the law
·-
relating to the supply and use of electrical energy was
The Okara Electric• t
d d t
'd
c
d
1
1
1
f
si1pply Co., Ltd. m en e
o pro~1 e. •Or an
regu ate t rn ~upp y ?
v.
·
energy by grantmg licences and so the prov1s10ns m
The State of
respect of licences are dealt with by ss. 3 to 27 in
Punjab
Part IL Part III in which s. 28 occurs deals with
. --
the supply of energv by non-licensees. It appears
Ga7endragadkar 1 ·that the Legislature ii; tended to adopt the course of
sanctioning the supply of energy by non-licensees
as a temporary measure and in areas wherever it was
expedient to do so.
A person pther than a licensee
cannot engage in the business of supplying energy
except with the previous sanction of the State Govern-'
merit and s. 28(1) authorises the State Government to
impose conditions subject to which it proposes to
grant sanction. This position is not disputed ; but
the argument is that the conditions which can be ·
legitimately imposed in granting sanction must be
such as would relate to or have bearing on the business of supplying energy. Such conditions "in this
behalf", it is urged, cannot include any conditions
as to compulsory acquisition of the property of the
person to whom sanction is intended to be given.
The acquisition of such property does not relate ao.d
has no bearing on the business of supplying energy
and is in no manner connected with it. It would be
competent to the State Government to provide for the
area of supply, the aerial lines, the nature of the
•
supply, the limitation of prices to be charged for the
supply of energy and the purchase of energy in bulk.
These and other similar conditions can be properly
regarded as conditions" in behalf of" the business of
supplying energy ; bnt the condition of compulsory
acquisition of the supplier's property cannot be
treated as falling under s. 28(1).
In support of this construction reliance is placed on
the provisions o~ ss. 5 and 6 which specifically deal
with the question· about the acquisition of the under.
ta.king. Section 3 of the Act provides for the granting
of licences and s. 4 for the revocation and amendment
of licences. Having provided for the grant, revoc-
. ation and amendment of the licences s. 5 deals inter
'
,
•
s.o.ft.
stl:PREME codR± REPORTS
alia with the question of paying compensation to the
r959
licensee whose licence has been revoked. Similary,
k
1
.
6
k
.
. .
.c
t'
The 0 ara E eclnc
s.
ma es appropriate prov1s10ns 1or compensa 10n 5,,pply Co., Ltd.
where the licence of a local authority has been revov.
ked. Section 7 makes a provision for the purchase
The state of
of an undertaking and lays down the procedure for
P"njab
determining the value of the properties. The peti-
. -
tioners urge that where the Legislature. thought it Ga;endragadkar J.
necessary to acquire properties of the licensees either
on the revocation or the cancellation of the licences it
has made express provisions in that behalf; a similar
provision would have been made in respect of persons
other than licensees to whom sanction is granted
under s. 28 if it was in the contemplation of the
Legislature that the properties of such persons may
be acquired. Thus presented, ·the argument no doubt
appears to be plausible. Prima facie there is some
force in the contention that conditions " in this
behalf" in the context should mean conditions which
are relevant to or connected with the business of
supplying energy, In deciding this question, however, it is essential to bear. in mind the special nature
of the article, viz., energy for the supply of which
sanction is granted, and to take into account the
scheme of the Act in regard to the conditions which
are intended to be imposed on the business of its
supply.
In this connection it would not be unreasonable to
ascertain how the supply of energy is regulated in
England and America. It is clear that the Act is
based on the provisions of the English law and it would
be useful to inquire whether conditions for the acquisition of the supplier's property were treated as a part
of the conditions on which the supplier was allowed to
carry on the business of supplying electricity.
This
aspect is considered by Halsb'ury under the heading
" Acquisition of undertaking by Local Authority ".
"In Local Authority", it is observed, "within whose
jurisdiction the area of supply or any part of it is
situated may within six months after the expiration
of 42 years or any shorter period specified in the
special order from the coming to force of the said
246
SUPREME COURT REPORTS [1960 (2))
r959
·Order ... by a notice in \Vriting require the under-
-
takers to sell (and thereupon the undertakers must
The Okara Electric
JI
th
h ·
d
k"
h
f ·
5 ppl c
Ltd se to
em t e1r un erta mg or so muc
o it as
u
Yv. o.,
· within its jurisdiction) upon terms of paying the then
The State of
value of all lands, buildings, works, materials and
Punjab
plant of the undertakers suitable to and used by them
-
for the purpose of the undertaking within such jurisdicGajendragadkar ]. t"
h
1
t b
d t
· d b
b't ' ·
·
ion sue va ue o e
e ermme
y ar I rat10n m
case of difference (1)".
It would thus appear that
where sanction was given to a person for carrying on
the business of supplying electricity under a special
order, a condition was introduced in the said order
itself for the compulsory acquisition of the undertaking
on payment of adequate compensation to the person
concerned.
Subsequently, after the pa.ssing of the Electric Lighting Act, 1909, powers to supply electricity were not
granted by provisional orders but a large number of
such orders still remained in force; and, as Hals bury
has observed, "many of these orders are in a standard
form but a number contain special clauses of which
the most common is a clause gh·ing special purchase
rights to local Authorities. These special orders were
confirmed by Acts and contained special clauses for
the protection of county bridges, for the breaking up
of streets, for the connection of the generating stations
and systems of different undertakings and the use of
such generating stations in common for the purpose
of such undertakings" ('). It is thus clear that where a
licence was given to a person to supply electricity it
generally included the right of the licensing authority
to acquire t.he licensee's property on terms and conditions included in the licence by the provisional order.
The American lawyers describe the right or privilege
to supply electricity as a franchise.
This right falls
under a class of rights · " in public streets which are
granted for furtherance of public purposes but which
involving as they do the right to use the streets in
(1) Halsbury's "Laws of England", 'rol. 1_2, 2nd Ed., page 597, Art.
1152.
(2) Halsbury's "Laws of England", \'ol. 12, '2nd Ed., page 668, footnote (t). ~
•
,
S.C.R.
SUPREME COURT REPORTS
247
various ways, give rise to a series . of questions as
x959
between the grantee of the right on the one hand and
--
.
the municipality or abutting owners on the other" (1). T~ o~ar~:E~c;i&
Dillon in " Muncipal Corporations " further observes
upp y /"' ·
1
•
that "for convenience these rights are described as
The state·of
franchises to use the public streets and highways, and
Punjab
whether correctly or incorrectly denominated franchi-
.. --
.
ses, they answer in essential respects to the definition Go;endragadkarJ.
and elements of a franchise from the State".· " The.
business of furnishing water and light '', ·observes the
author, "when carried on by a corporation or individual, of necessity involves the use of streets. and
highways of the municipality ; and the right to lay
pipes, mains and conduits, and to erect poles and stretch
wires therein and to maintain, operate and use them,
is a franchise vested in the State, and it can only be
exercised by a corporation or ·individual pursuant to
the authority granted by the State "( 2 )~ ·
.
-
The. question of the purchase of works of ,com~
panies by municipality is also considered by ·Dillon·:
"Where a municipal corporation has granted a franchise to a water or gas company to construct its plant,
to use the city streets for pipes and mains, . and to
furnish water or light to the city and its inhabitants,
it has been held that the legislature under special
constitutional restrictions was without authority to
compel the city to purchase the property or plant of
the company if it desired to acquire or construct works
of its own ; but in the absence of constitutional limitations statutes may be enacted and contracts made
which in their effect prevent municipalities from
establishing water works of their own until they have
at least offered to purchase the works of corporations
organised and· existing within their limits " (3).
The
learned author also says that "If a municipality
stipulates in a contract with a water or other public
service company that it shall have the right to .purchase the works of the company at a time and in a
(1) Dillon's "Municipal Corporations", 5th Ed., Vol. III, p. 1905,
s. 1210.
(2) Dillon's "Municipal Corporations", 5th Ed., Vol. III, p. 2136•
37. s. 1304.
(3) Ibid. p. 218~, s. r312.
248
SUPREME COURT REPORTS (1960 (2)]
z959
manner specified, and if such stipulation is inserted
-
in and becomes a part of a grant of the right to use
The Okara Electric th
t
t
d
bl"
]
f h
· ·
l"
c
supply Co .. Ltd.
e s ree s an pu _1c p ac~s o t e _mummpa ity 1or
v.
the purpose of laymg mams and pipes, the corporTh• state of
ation is estopped to deny the authority of the municiPunjab
pality to make and enforce the stipulation" (1).
G . d
dk 1
In New Orleans Gas Light Go. v. Louisiana Light
a1en raga
ar . nd H
p d
.
d
,;
·
G ( }
· h
a
eat
ro ucing an ManuJ acturing
o. 2 ,
it as
~een held by the Supreme Court of the United States
of America that "the manufacture and distribution
of gas by means of pipes, mains and. conduits plac.ed
under legislative authority in the public ways of a
municipality, is not an ordinary business in which
everyone may enga.ge as of common right upon terms
of equality; but is a franchise, relating to matters of
which the public may assume control and, when not
forbidden by the organic law of the State, may be
granted by the Legislature as a means of accomplishing public objects to whomsoever, and upon what
terms, it pleases". In that case the question which
arose for decision of the court related to the validity
of the constitutional prohibition upon State Jaws
impairing the obligation of contracts but with that
aspect of the matter we are not concerned in the
present appeal.
It thus appears that American
lawyers describe the business of supplying energy as
well as 1 the bus~ness of supplying w'.Lter an~ gas. as a
franchise, and it also appears th<tt m grantmg licence
or sanction to a person to engage in such business, a
condition is usually imposed for the compulsory acquisition of the business when the licence or sanction
comes to an end.
Let us look at this question from a practical point
of view. If a person is granted sanction to engage in
the business of supplying energy it is not denied that
s. 28(1) would justify the imposition of a time limit on
the grant of sanction. If sanction is granted for a
·specified number of years, and it· comes to an end what
would happen to the constructions made by the
.supplier for the purpose of supplying energy ? He
(1) Ibid. p. 2187, s. 1312.
(z) rr; U.S. 650; 29 L. E~. 516.
•
..
•
,
S.C.R.
SUPREME COURT REPORTS
249
cannot dismantle them because thereby he would cause
r959
damage to public property such as streets, and so he The Ok:;;: Electric
cannot take them away. In such a case the Legisla- supply co., Ltd.
ture may well provide for the acquisition of such
v.
constructions in order to safeguard the interest of the
The State of
person to whom temporary sanction is granted. Such
Punjab
a provision also serves another public purpose.
Itcajendragadkar J.
guarantees the availability of suitable constructions
and works which may be used for the continuance of
the supply of electricity by another agency. In other
words, the statutory provision which deals with the
grant of sanction to a person to engage in the business
of supplying energy must, having regard to the special
features of the business, necessarily deal with the
position which would arise on the termination of the
sanction; and· so it would not be unreasonable to
assume that the statutory provisions which deals with
this question would think of making adequate provision empowering the State Government to provide for
the compulsory acquisition of the assets of the supplier
on payment of proper compensation. It is in the light
of this special feature of the business of supplying
energy that we must construes. 28(1) of the Act.
Besides, the provisions of ss. 5, 6 and 7 also afford
assistance in the matter. They clearly show that in the
case of a licence specific provisions have been made for
the acquisition of the undertaking in cases of revocation
or cancellation of licences. The reason for thus providing for compulsory acquisition of licensee's undertaking
is equally relevant in the case of the sanction with
which s. 28(1) deals. It is true that s. 28 does not
specifically and expressly provide for compensation
as the other sections do ; but that must be because
recourse to the provisions of Pt. III was intended
not to be the rule but only as a temporary measure
wherever it was deemed necessary to do so; and so
the Legislature left it to the State Government to
provide for compulsory acquisition in the light of the
guidance given by the provisions contained in ss. 5, 6
and 7.
Let us then look at s. 28(1) in the light of these considerations. It authorises the State Government to
aa
'
250
SUPHEME COURT REPORTS [1960(2)]
'959
give sanction to a person to engage in the business of
Th• Oka.a Electric supplyi~1g ~~ergy on co.n~itio1rn in . that beh~lf: The
supply co. Ltd. express10n
such cond1t10ns m this behalf
m the
"· '
context should take in conditions dealing with the
The state of
position which would inevitably arise when the busiPunjab
ness comes to an end. There is no doubt that the
grant of sanction contemplated by s. 28 cannot be
GajmdYagadkar ].
I
l
b
d
b
permanent.
t was a ways
oun
to
e temporary,
issued on an ad hoc basis according to the requirement
of each case, and when grant.ing sanction for a specified number of years it is in the interest of the grantee
himself that some provision should be made for
payment of compensation to him in respect of the
investment made by him in carrying out the business
of supplying energy when otherwise it would be difficult
for him to collect his assets in that behalf. That is
why we think that the relevant words should not be
given a narrow and limited construction for which the
petitioners contend. In our opinion, the context requires
that the said words should receive a wider and liberal
construction. A condition for the acquisition of the
property of the petitioners, like cl. 11 would, therefore,
fall within the scope of s. 28(1).
The challenge to the
validity of this condition on the ground that it is
ultra vires s. 28(1) must accordingly fail.
Ifs. 28 permits the imposition of such a condition
does it violate Art. 19 or Art. 31 of the Constitution?
That is the next question which must be considered.
It is not seriously disputed that Art. 31(2) on which
reliance is placed by the petitioners cannot be of
much help to them for Art. 31(5) provides inter alia
that nothing in cl. (2) shall affect the provisions of any
exi~ting law other than the law to which the provisions of cl. (6) applies. It is conceded that cl. (6) does
not apply to the Act, so that it follows that Art. 31(2)
cannot be invoked to challenge the validity of the Act.
Mr. Veda Vyas attempted to contend that the vires of
the Act could be challenged if not under Art. 31(2) at
least under s. 299(2) of the Government of India Act,
1935; but he realised that he was up against a similar
difficulty created by the provisions of s. 299(4) which
says that nothing in s. 299 shall affect the provisions
,
•
\
S.C.H.
SUPREME COURT REPORTS
251
of any law in force at the date of the passing of
r9"s9
the Act; and he conceded that in 1910 when the Act
.
was. passed the Legislature was competent to pass it T~e o~ar~ El~~~'"
and it then suffered from no infirmity. That is why
upp Y v.
0
"
•
though an attempt was made to press -into service
The state of
Art. 31(2) it was ultimately given up. We need not,
Punjab
therefore, discuss this point any further.
In regard to the attack on 8. 28 on the ground that Gajendragadkar J.
it offends Art. 19(f) or (g) the answer is obvious. The
limitations imposed by s. 28 quite clearly are reasonable restrictions and have been imposed in the interests
of the general public within the meaning of Art 19(5)
of the Constitution. As we have already seen such
limitations are g~ner.ally imposed on the business of
supplying energy and their reasonableness cannot be
and has in fact not been seriously challenged. Therefore, we have no hesitation in holding that the vires of
s. 28 cannot be successfully challenged.
Incidentally we may observe that on the day when
the Constitution came into force what vested in the
petitioners was the property subject to the liability
imposec;l on it by cl. 11 of the notification ; and so,
when the Constitution came into force the only rights
which the petitioners had in their property in question
were rights of a limited character which were subject
to the exercise by the State of its election to acquire
the said property. In this connection the respondents
rely on the decision of this Court in Director of Endow- ·
ments, Government of Hyderabad v. Akram Ali(1) and
seek to urge that the exercise of the option given to
respondent 1 by cl. 11 of the notification cannot be
successfully challenged as ultra vires under Art. 19 of
the Constitution ; we do not, however, think it necessary to decide this point because it was fairly conceded
before us that if s. 28 is valid and is construed to
include a condition like cl. 11 of the notification no
other point would survive.
There is one more minor point to which reference
may be made. In the petition the validity of the
notice given by respondent 1 to the petitioners prohibiting them from dealing with the property was
(I) A.I.R. 1956 s.c. 60.
252
SUPREME COURT REPORTS [1960 (2)]
1959
challenged; but that is no longer a matter in dispute
-
between the parties since respondent 1 has in substance
The Okara Elecfric
· hd
h
"d
·
Th" f
t h
ld
Supply Co., Ltd. wit
rawn t e sa1
not1~e.
IS ac , owever, wou
v.
be relevant on the quest10n of costs.
The State of
The result is the petition fails but in the oircumPunjab
stances Of this case there would be no order as to
G . d-- k
costs.
a;en rag ad ar j.
Petition dismissed.
{
..
'""-)