# GUJARAT ELECTRICITY BOARD v. SHANTILAL R. DESAI

- **Citation:** [1969] 1 S.C.R. 580
- **Court:** Supreme Court of India
- **Decided:** 1968-08-06
- **Case number:** Civil Appeal No. 2525 of 1966
- **Bench:** R. S. Bachawat, K. S. l-fF.DGf
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gujarat-electricity-board-v-shantilal-r-desai-4448
- **Pages:** 9

## Headnote

The Electricity Act 9 of 1910, s. 7-The Electricity (Supply) Act
54 of 1948, s. 11--Coinpulsory purchase of
elcc1rici1y
/ron1
licen_\'Ce
under s. ?-Steps to be taken by purchc.ser--Option to purchase whether
has 10 be separately exercised apart from Mticc under sec1ion-Electrici1y
Hoard whether en1poH:ercd under s. 71 of 1948 Act to 1nake co1npulsory
pwchase under s. 7,
' On January 8, 1959 the Bombay State Electricity Board purporting to
exercise its po\\'crs under s. 7 of the Indian Ek•cLricity Act, 1910 read
with s. 71 of the Electricity (Supply) Act, 1948 gave notice to the respondent that it v.-·ould exercise its option of purchasing the electric supi)ly
undertaking which the respondent ran under a lic:::ncc, on the expiry cf
the said licence on February 10, 1962.
On the creation of the State of
Gujarat the appellant corporation was formed and succeeded to the rights
and liabilities of the Bombay State Electricity Board,
The respondent
filed a \\Tit petition in the High Court in which he chal!cngcd the right
of the appellant to purchase his undertaking.
The High Court cao-.e
to the conclusion that though the notice issued on January 8, 1959 was a
valid notioe under s. 7( 4) of the Act that by itself was not sufficient to
compel the respondent to sell his undertaking to the appellant; before the
respondent could be compelled to sell bis undertaking it was necessary
for the appcIJant to exercise its option to purchase the undertaking on
tbe expiration of th;, period of licence, which it bad not done.
Tr.e
respondent's writ petition was therefore allowed.
The appellant came to
this Court. The questions that fell for consideration were: (i) whether
the High Court's intcl'prctation of s. 7 was correct; (ii) whether the appellant was empowered under s. 71 of the Electricity (Supply) Act, 1948 to
exercise the powers of the local authority under s. 7.
HELD : (i) The provisions of the sub-section of s. 7 must he read
together. So read the section only means that before a licensee can be
compelled to sell his undertaking the authority entitled to purchase must
elect to pufcha~ the same by exercise of the option given to it under 1hc
licence read with s. 7 of the Act followed by a notice as required by
s. 7(4) of the Act.
In s. 7 the expression 'option
of purchasing
an
undertaking' merely means the right Of purchac;ing the undertaking. The
word 'option' is used because tv.·o courses arc open to the concerned
authority namely either to purchase the undertaking or renew the I cence.
Once the authority elects to purchase then the notice prescribed in sub-s.
4 should bo given before the period mentioned therein.
The object of
the prO'\rision is that the licensee must know in good time what course 1hc
authority is going to adopt.
OthcrwL~c there is hound .fl) be considerable
inconvenience to the licensee
as \\'Cll as to the public. 1584 F-H, 585
C-DJ
There is no good reason for reading into s. 7 a requirement that after
a notice under s. 7 ( 4) is issued the authority must again exercise its aption
to purchase on the expiration of the period of Jicense.
The exerci.~e of
option to purchase as well as electing to purchase is o~c integral process
and not two independent steps.
By the very act of elcchng to purchase the
alffhoritv e~erciscs its option to purchase. [585 E-FJ
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ELECTY. BOARD v. SHANTILAL (Hegde, l.)
581
In the present case therefore the requirements of s. 7 were fully complied with by the notice issued on January 8, 1954. [585 F-Gl
(ii) It is true that before s. 71 can be held to be attracted to a case
it must be shown that the right or option to purchase the undertaking of
the licensee vested in the State Government or a local authorny under
the provisions of the Act. In the present case the right to purchase .vested
in the concerned authority by virtue of s. 7, and it could n~t be said that
the right accrued only by virtue of the agreement under which the llc~n<:e
was granted.
The right t

## Text

580
GUJARAT ELECTRICITY BOARD
v.
SHANTILAL R. DESAI
August 6, 1968
[R. S. BACHAWAT AND K. S. l-fF.DGf,, JJ.j
The Electricity Act 9 of 1910, s. 7-The Electricity (Supply) Act
54 of 1948, s. 11--Coinpulsory purchase of
elcc1rici1y
/ron1
licen_\'Ce
under s. ?-Steps to be taken by purchc.ser--Option to purchase whether
has 10 be separately exercised apart from Mticc under sec1ion-Electrici1y
Hoard whether en1poH:ercd under s. 71 of 1948 Act to 1nake co1npulsory
pwchase under s. 7,
' On January 8, 1959 the Bombay State Electricity Board purporting to
exercise its po\\'crs under s. 7 of the Indian Ek•cLricity Act, 1910 read
with s. 71 of the Electricity (Supply) Act, 1948 gave notice to the respondent that it v.-·ould exercise its option of purchasing the electric supi)ly
undertaking which the respondent ran under a lic:::ncc, on the expiry cf
the said licence on February 10, 1962.
On the creation of the State of
Gujarat the appellant corporation was formed and succeeded to the rights
and liabilities of the Bombay State Electricity Board,
The respondent
filed a \\Tit petition in the High Court in which he chal!cngcd the right
of the appellant to purchase his undertaking.
The High Court cao-.e
to the conclusion that though the notice issued on January 8, 1959 was a
valid notioe under s. 7( 4) of the Act that by itself was not sufficient to
compel the respondent to sell his undertaking to the appellant; before the
respondent could be compelled to sell bis undertaking it was necessary
for the appcIJant to exercise its option to purchase the undertaking on
tbe expiration of th;, period of licence, which it bad not done.
Tr.e
respondent's writ petition was therefore allowed.
The appellant came to
this Court. The questions that fell for consideration were: (i) whether
the High Court's intcl'prctation of s. 7 was correct; (ii) whether the appellant was empowered under s. 71 of the Electricity (Supply) Act, 1948 to
exercise the powers of the local authority under s. 7.
HELD : (i) The provisions of the sub-section of s. 7 must he read
together. So read the section only means that before a licensee can be
compelled to sell his undertaking the authority entitled to purchase must
elect to pufcha~ the same by exercise of the option given to it under 1hc
licence read with s. 7 of the Act followed by a notice as required by
s. 7(4) of the Act.
In s. 7 the expression 'option
of purchasing
an
undertaking' merely means the right Of purchac;ing the undertaking. The
word 'option' is used because tv.·o courses arc open to the concerned
authority namely either to purchase the undertaking or renew the I cence.
Once the authority elects to purchase then the notice prescribed in sub-s.
4 should bo given before the period mentioned therein.
The object of
the prO'\rision is that the licensee must know in good time what course 1hc
authority is going to adopt.
OthcrwL~c there is hound .fl) be considerable
inconvenience to the licensee
as \\'Cll as to the public. 1584 F-H, 585
C-DJ
There is no good reason for reading into s. 7 a requirement that after
a notice under s. 7 ( 4) is issued the authority must again exercise its aption
to purchase on the expiration of the period of Jicense.
The exerci.~e of
option to purchase as well as electing to purchase is o~c integral process
and not two independent steps.
By the very act of elcchng to purchase the
alffhoritv e~erciscs its option to purchase. [585 E-FJ
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ELECTY. BOARD v. SHANTILAL (Hegde, l.)
581
In the present case therefore the requirements of s. 7 were fully complied with by the notice issued on January 8, 1954. [585 F-Gl
(ii) It is true that before s. 71 can be held to be attracted to a case
it must be shown that the right or option to purchase the undertaking of
the licensee vested in the State Government or a local authorny under
the provisions of the Act. In the present case the right to purchase .vested
in the concerned authority by virtue of s. 7, and it could n~t be said that
the right accrued only by virtue of the agreement under which the llc~n<:e
was granted.
The right to purchase may accrue
enher
because 1: IS
directly conferred by s. 7 o~ because ~t is obtain.ed. as a .result of. a con·
tract compelled by that sectton. In either case it is a ·nght obtamed by
the authority by virtue of s. 7. The appellant
Board
was
therefore
empowered by s. 71 to issue the notice under s. 7. [586 F-587 Al
· Fazi/ka Electric Supply Co. Ltd. v. The Commr. of Income-tax, Deihl,
[19621 3 Supp. S.C.R. 496, distinguished.
Okara Electric Supply Ltd. & Anr. v. State of Punjab, [1962] S.C.R.
239. applied.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2525 of
1966.
Appeal from the judgment and order dated October 30, 31,
1963 of the Gujarat High Court in Special Civil Application No.
94 of 1962.
C. K. Daphtary, Attorney-General and l. N. Shroff, for the
appellant.
H. R. Gokhale, S. B. Vakil, Janendralal and B. R. Agarwala,
for the respondent.
The Judgment of the Court was delivered by
Hegde J.
The only question that falls for decision in this
appeal is whether on the basis of the notice issued by the Bombay
State Electricity Board on January 8, 1959 under s. 7 of the
Indian Electricity Act, 1910 (to be hereinafter referred to as the
Act) prior to its amendment in 1959, the appellant can compulsorily purchase from the respondent his concern 'The Bilimora
Electric Power Supply Co.'.
In his application before the High
Court under Art. 226 of the Constitution the respondent challeng·
ed the vires of s. 7 of the Act.
But that contention remains to
be examined.
The High Court has chosen to allow the petition
solely on the ground that as the requirements of s. 7 have not been
complied with, the appellant cannot compel the respondent to sell
the undertaking.
If. we come to the conclusion that that conclusiop. .is unsustainable then the matter will have to go back to the
aigh Court for deciding the constitutionality of s. 7.
The respondent was given a licence on February 11, 1932,
under the provisions of the Baroda Electricity Act Samvat 1983
for. supplying electricity within the area mentioned in the licence.
Clause 27 of that licence provided that the option of purchase
•
582
St;PREMI; COURT REPORTS
[1969] I S.C.R
given by s. 9 of the Baroda Electricity Act shall be exercisable
tirst on the expiration of thirty years computed from the commencement of the licence and thereafter on the expiration of
every subsequent period of ten years during the subsistence of
the licence.
The manner in which the undertaking should be
valued is laid down in that Act.
On the merger of the former
Baroda State with the Province of Bombay, the Act as well as the
Electricity (Supply) Act, 1948 (Act 54 of I 948)
were made
applicable to the territories of the former State of Baroda, and
the corresponding Baroda Acts were repealed with
the saving
clause that the licences issued under the repealed Act shall continue to remain in force as if issued under the Act, until the expiration of the period of those licences.
In exercise of the powers
conferred by s. 5 of the Electricity Supply Act, 1948 the Government of Bombay constituted the Bombay State Electricty Board
on January 31, 1945.
On January 8, 1959 that Board issued
to the respondent a notice under s. 7 of the Act.
That notice is
important for our present purpose.
Hence we shall quote the
relevant portion thereof.
It runs thus :
"In exercise of the powers conferred on the Bombay
State Electricity Board by virtue of s. 71 of the Electri- ·
city (Supply) Act, 1948 read with s. 7 of. the lnclian
Electricity Act, 1910, you are hereby notified that the
Bombay State Electricity Board has decided to exercise
and shall exercise the option of purchasing your undertaking on the expiry on I 0-2-1962 of the licence granted
to you ...... The receipt of tnis notice may plca'e be
acknowledged."
As a result of the Bombay Re-organization Act, 1960, the
present Gu_iarat State came into existence.
In exercise of the
powers conferred by s. 5 of the Electricity (Supply) Act. 1948
read with sub-s. 4 of s. 68 of the Bombay Reorganization Act,
! 960 the appellant Corporation was constituted by the Government of Gujarat by means of a notificauon dated May 1, 1960.
The Central Govcrrunent by the notification No. EL-II-1 (22)/60
dated the 17th June, 1960 made in exercise of the powers conferred by cl. (a) of sub-s. ( 4) of s. 68 of the Bombay Reorgani1.ation Act, 1960 directed that the appellant Corporation shall
~with effect from !st May 1960" take over from the Bombay
State Electricity Board all its undertakings, assets, rights and liabilities in the area comprised in the State of Gujarat. The said
notification wa' amended in some respect by notification of the
Government of India dated October 3, 1960 providing therein that
the amendment thereby made in the notification dated June 17,
1960 shall be deemed always to have been made.
On the basi~
of the aforementioned notifications, the appellant is claiming the
right to compulsorily purchase the undertaking.
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ELECTY. BOARD v. SHANTILAL (Hegde, J.)
583
The respondent is contesting the. right of the appellant .. to
compulsorily purchase his undertaking.
With a view to forestall
the. appellant from taking action against him, the respondent filed
an application under Art. 226 of the Constitution in the High
Court of Gujarat seeking directions to the appellant to forbear
from compelling him to sell or deliver his undertaking, refrain
the- appellant from ceasing to supply electricity to him for the
purpose of his said undertaking and also refrain the appellant from
preventing him from supplying electric energy in the area mentioned in his licence.
Some other incidental reliefs were also
sought.
The High Court came to the conclusion that though the
notice issued by the appellant on January 8, 1959 is a valid notice
under s. 7 ( 4) of the Act but that by itself is not sufficient to
compel the respondent to sell liis undertaking to the appellant;
before the respondent can be compelled to sell his undertaking to
the appellant it was necessary for the appellant to exercise its
option to purchase the undertaking on the expiration of the period
of licence.
As the appellant ha'd failed to exercise that option on
the expiration of the period of licence it cannot compel the respondent to sell his undertaking.
On the basis of these findings
the High Court has substantially granted the relief prayed for by
the respondent.
The appellant challenged the correctness of this
conclusion.
On the other hand the respondent 1s supporting the
judgment of the High Court not only on the ground accepted by
the High Court but also on some of the other grounds advanced
on his behalf before the High Court but reiected by that Court.
We shall first take up the question whether the High Court
was right in holding that the appellant had to take two independent .steps viz. ( 1) an election to purchase the undertaking followed up by al notice to the respondent in pursuance of that election
within the period mentioned in s. 7 ( 4) of the Act and (2) exercise its option to purchase on the expiration of the period of
licence and communicate the same to the respondent.
Before addressing ourselves to that question it is necessary to
mention that the High Court's finding that the rights of the
Shriman Sarkar, (Baroda Government) to purchase the undertaking under s. 9 of the Baroda Electricity Act had devolved on
the State Government was not challenged before us.
Therefore
it is not necessary for us to trace how the rights of the Baroda
Government came to devolve on the then State of Bombay.
But
the respondent did contest the appt<llant's claim to exercise that
right.
That question we shall separately consider.
For the present we shall proceed on the basis that the appellant is entitled to
exercise the right of purchase conferred on the Baroda Government under the licence read with s. 9 of the Baroda Electricity
584
SUPREME COURT REPORTS
[ 1969) I S.C.R.
Act.
We may also state at this stage that the conclusion of. the
A
High Court that the licence issued under s. 9 of the Baroda Electricity Act should be considered as a licence issued under s. 7 of
the Act was also not challenged before us.
Now we shall proceed to consider the true scope of s. 7 of the
Act.
For our present purpose only sub-ss. I, 2 and 4 of s. 7 of
the Act arc relevant.
They read a<; follows :
"Section 7 (l). Where a license has been granted
to any person not being a local authority, and the whole
of the area of supply is included in the area for which
a single local authority is constituted, the local authority
shall, on the expiration of such period, not exceeding fifty
years and of every such subsequent period not exceeding
twenty years, as shall be specified in this behalf in the
license, have the option of purchasing the undertaking,
and, if the local authority, with the previous sanction
of the State Government, elects to purchase, the licensee
shall sell the undertaking to the local authority on payment of the value of all lands, buildings, works, materials and plant of the licensee suitable to, and used by
him for, the purposes of the undertaking, other than a
generating station declared by the license not to form
part of the undertaking for the purpose of purcha,e,
such value to be, in case of difference or dispute, determined by arbitration :
( 4) Not less than two years' notice in writing of
any election to purchase under this section shall be
served upon the licensee by the local authority or the
State Government as the case may be.
In our opinion sub-s. ( 4) of s. 7 is complementary to sub-ss.
(I) and (2) of that Section and therefore they must be read
together.
On an analysis of these provisions it is seen that before
a licensee can be compelled to sell his undertaking, the authority
entitled to purchase must elect to purchase the same by exercise
of the option given to it under the licenc~ read with s. 7 of the
Act followed by a notice as required by s. 7 < 4) of the Act.
In
I.
s. 7 the exp.ression "option. of purchasing a~ undertaking", me~]~
means the nght of purchasing the und~rtaking. The word option
is used because two courses arc open to the concerned authority
namely, either to purchase the undertaking or renew the licence.
Once the authority elects to purchase then the notice prescribed
in sub-s. 4 should be given before the period mentioned theretn.
We are not able to agree "~th the High Court that the Section
contemplates two stages namely (I) to elect to purchase the
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ELECTY. BOARD v. SHANTILAL (Hegde, !.)
58 5
w;idertaking at least two years before the expiration of the
licence and (2) exercise the option to purchase at the end of the
licence period. The exercise of option to purchase as well ·as
electing to purchase is one integral process and not two independent steps.
By the very act of electing to purchase the authority
exercises its option to purchase. In our opinion; sub-ss. 1, 2 and
4 of s. 7 are plain and unambiguous.
They do not lend themselves to any subtleties.
In construing a provision, all its relevant parts should be
considered together and their true effect ascertained. One can
easily find out the reasons behind the procedure prescribed in
s. 7.
In view of the term of the licence read with s. 7 ( 1 ) and
(2) the concerned authority has two courses open before it. It
can either decide to purchase the undertaking or renew the
licence on the expiration of the period for which the licence is
granted.
The licensee must know in good time what course the
authority is going to adopt so that he. may so arrange his affairs
as to cause least inconvenience to himself.
Hence though the
power to exercise the option to purchase arises on the expiration
of the period of licence as per the terms of the licence, s. 7 lays
down that if the authority wants to purchase the undertaking it
must elect to do so at least two years before the expiration of the
licence and communicate the same to the licensee.
Once the
concerned authority exercises its option and communicates the
same to the licensee, the same is binding on the authority i1S well
as the licensee.
Otherwise there is bound to be considerable
inconvenience both to the licensee and to the public.
We are not
able to find any good reason for reading into s. 7 a requirement
that after a n9tice under s. 7 ( 4) is issued the authonty must
again exercise its option to purchase on the expiration of the ~
period of licence.
It is no doubt true that the right to purchase
the undertaking accrues only at the expiration of the period of
licence but for exercising that right, the authority must make its
election within the period prescribed in s. 7 ( 4) and issue a notice
as required by that sub-section.
The requirements of s. 7 were
fully complied with by the notice issued by the Bombay State
Electricity Board on January 8, 1959.
We shall now take up the other contention advanced by
Mr. H. R. Gokhale, learned Counsel for the respondent in support
of the decision under appeal.
One of his contentions was that whether the State Government
was competent to purchase the undertaking or not, neither the
Bombay State Electricity Board nor the appellant was competent
to exercise that right.
His :;rrgument on this question proceeds
thus : Section 7 ( 1) prior to its amendment in 1959 empowered
the local authority or the State Government to make the purchase
586
SUPREME COL'RT REPORTS
(1969] I S.C.R.
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cdntemplatc<l under that Section; the Elcctrictiy Board is not
within the contemplation of that Section; the finding of the High
Court that the provisions contained in sub-ss. l, 2 and 4 of s. 7
of the Act read with s. 71 of the Electricity (Supply) Act, 1948,
confers on the appellant such a power is not correct because the
right or option to purchase the undertaking was conferred on the
State Government or the appropriate local authority under the
B
licence and not under the provisions of the Act; in other words
the said right is merely a contractual right and not a right flowing
from the provisions contained in s. 7 of the Act a~ held by this
Court in Fazi/ka Electric Supply Co., Ltd. v.
The Commr. of
Income Tax, Delhi( 1 ) and therefore the appellant cannot take
any assistance from s. 71 of the Electricity (Supply) Act, 1948.
c
This contention did not commend itself to the High Court.
We
shall now proceed to examine how far the same is correct.
Section 71 of the Electricity (Supply) Act, 1948 provides :
"Rigl)ts and options to purchase under Act 9 of
I 910 to vest in Board.
Where under the provisions of
the Indian Electricty Act, 1910 (9 of 1910), any right
or option to purchase the undertaking of a licensee
vests in the State Government or a local authority such
right or option shall be deemed to be transferred to the
Board, and shall be exercisable by the Board in accordance with the provisions of the said Act applicable to
the exercise of such right or option by the State Government or a local authority, as the case may be."
Board is defined in s. 2(2) of that Act as meaning, State Electricity Board constituted under s. 5 thereof.
It is true that before
~- 71 can be held to be attracted to a case it must be shown that
the right or option to purchase the undertaking of the licensee
vested in the State Government or a local authority under the
provisions of the Act.
It is also true that this Court had held in
Fazilka Electric Supply Company's(1) case that from the provisions of the Act read with the rules made thereunder it is manifest
that the cond·ition as to the option of purchase either by the local
authority or by the Government is the result of an
agreement
between the applicant who had applied for licence and the Government who granted the licence.
In that case this Court was considering whether the sale concerned in that case fell within the
scope of s. 10(2 )(7) of the Indian Income Tax Act or whether
it can be held to 5c compulsory acquisition as contended by the
as.sesscc.
A sale compelled by law may also be a 'sale' under the
Sale of Goods Act.
But that does not mean that the right to
purchase the undertaking: does not vest in the concerned authority
(1)
[196~J 3 Supp. S.C.R. 49r,.
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ELECTY. BOARD v. SHANTILAL (Hegde, J.)
587
by virtue of s. 7.
That right may accrue either because it is
directly confen-ed by s. 7 or because it is obtained as a result of a
contract compelled by that Section. In either case it is a right
obtained by the authority by virtue of s. 7.
There is no dispute
that the licence granted must conform. to the requirements of s. 7.
In Okara Electric Supply Ltd. and Anr. v. State of Punjab(')
this Court observed that ss. 5, 6. and 7 show that in the case of a
licensee, specific provisions have been made for the acquisition of
the undertaking in cases of revocation or cancellation of licenses.
For the aforementioned reasons we hold that appellant had acquired the right to purchase the undertaking by the combined operation of s. 7 of the Act ands. 71 of the Electricity (Supply) Act,
1948.
It was next contended on behalf of the respondent that by the
time the licence period expired, s. 7 of the Act had been amended
ands. 71 of the Electric (Supply) Act, 1948 repealed, no provision was made to preserve tl)e rights already acquired under those
provisions, hence the appellant is not entitled to purchase the
undertaking.
It is not the case of the respondent that either
expressly or by necessary implication, the new law had taken
away the right acquired earlier.
That being so s. 6 of the General Clauses Act comes to the aid of the appellant. That Section
provides that where that Act or any Central Act or Regulation
made after the commencement of that Act repeals an enactment
hitherto made or hereafter to be made then unless a different
intention appears, the repeal shall not affect any right, privilege,
obligation or liability acquired, accrued or incurred under any
enactment so repealed. It also saves the previous operation of
any enactment so repealed or anything duly done or suffered
thereunder.
The right to purchase the respondent's undertaking came to
vest firstly in 'the Bombay State Electricity Board subsequently in
the appellant in view of the various notifications referred to
earlier. That right has to be worked on the basis of law as it
stood on the date the notice under s. 7 ( 4) of the Act was given.
G
In this Court a new contention was taken on behalf of the
respondent namely that in any case, the appellant's right to purchase is conditional on the payment of the price as provided in
s. 7 and hence the appellant cannot demand possession of the
undertaking without paying the price after the same is determined
according to law.
This contention had not been takeri before the
H
High Court.
The High Court may go into this question while
deciding the writ petition.
(1).
[1962] S.C.R.,
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588
SUPREME COURT REPORTS
[ 1969] I S.C.R.
For the reasons mentioned earlier we allow this appeal, set
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aside the order of the High Court and remit the case back to
High Court for deciding the issues that were left open.
Costs of
this ~ppeal shall be costs in the cause.
G.C.
Appeal allowed.
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