MAHARASHTRA STATE ELECTRICITY BOARD versus THANA ELECTRIC SUPPLY CO. & OTHERS.

Citation: [1989] 2 S.C.R. 518 · Decided: 13-04-1989 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
MAHARASHTRA STATE ELECTRICITY BOARD 
v. 
THANA ELECTRIC SUPPLY CO. & OTHERS. 
APRIL 13, 1989 
[R.S. PATHAK, CJ, SABYASACHI MUKHARJI, 
S .. NATARAJAN, M.N. VENKATACHALJAH AND 
S. RANGANATHAN, JJ.] 
Indian Eelectricity Maharashtra Amendment) Act, 1976 & Indian 
C 
Electricity (Maharashtra Amendment and Validation) Act, 1974: Sec-
tions 4, 5 and 6/Section 2-Constitutional validity of-Whether pro-
_, · 
tected by Article 3 JC of the Constitution. 
Constitution of India: Articles 14, 19, 31, 31C, 39(b)-Legisla-
D live enactment challenged as not conforming to Constitutional 
mandate-Duty of Court-Nexus between the law and objects of Article 
39(b )-Could be shown independently of any declaration of the 
legislature-Indian Electricity (Maharashtra Amendment) Act 1976, 
Sections 4 to 6 and Indian Electricity (Maharashtra Amendment and 
... 
Validation) Act 1974 Section 2-Whether constitutionally valid. 
E 
The respondent-Company took over, with the consent of the State 
Government, the licence granted to a private firm under the Indian 
Electricity Act, 1910 for supply and distribution of electricity in the 
areas covered by the licence, and became entitled to the benefits and 
f 
privileges of the licence. Under cl. (11) of th<l licence, Government had 
the option to purchase the undertaking on the.
1expiry of the period of 
licence. 
~ 
The licence was to expire on 21st September, 1977. The State 
Electricity Board, in exercise of its option, issued a notice to the Com-
G 
pany on 26th August, 1976 and required it to sell and deliver the under-
taking to the Board on the midnight between 2 lst and 22nd September, 
1977. 
Under the provisions of the Indian Electricity Act, 1910, as they 
H 
stood at the time of option, the Company was entitled to be paid the 
518 
.... 
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ELECTRICITY BOARD v. ELEC. SUPPLY CO. 
519 
' "' 
market value of the undertaking. But, by the Amending Act, 1976 the 
A 
Bill for which had been introduced in the State legislature on 13. 7 .1976 
the principle of market value in the relevant provisions of the 1910 Act was 
substituted by the concept of "Amount" legislatively fixed as a sum 
equal to the depreciated Book-Value of the assets of the undertaking to 
be taken over. The amended provisions were to govern cases where 
+ 
notices had been issued prior to the amendment. 
B 
). 
The responOeitt-Company filed writ petitions before the High 
Court challenging the validity of ss. 4, 5 and 6 of the Indian Electricity 
(Maharashtra Amendment) Act, 1976 ands. 2 of the Indian Electricity 
(Maharashtra Amendment and Validity) Act, 1974 as violative of Arts. 
14, 19(l)(f) and (g) and 31 of the Constitution. 
c 
t 
The appellants, the State and the Electricity Board, claimed 
protection of Art. 31-C to the Amending Act, 1976 and the consequent 
immunity from attack on the ground of violation of Arts. 14, 19 and 31. 
The High Court held that in the absence of a declaration in the 
D 
Amending Act of 1976 that.the law was one intended to give effect to the 
objects of Art. 39(b) and (c) of the Constitution, the Amending Act 
cannot have the protection of Art. 31-C. Declaring s. 4 of the Amending 
~ Act as violative of Art. 19(l)(f) and Art. 14, it held that the State could 
not unilaterally rednce, even by _legislation, its liability to pay the 
purchase price under a consensual transaction and that conferment on 
E 
Government of power to fix instalments was grossly unreasonable and 
-
arbitrary and that provision for payment of interest at the Reserve 
Bank rate plus one per cent made more nnreasonable the provisions of the 
Amending Act . 
.. 
The High Court also rejected the respondent-Company's claim as F 
't to the Constitutional infirmity attributed to s. 2 of the 1974 Act and ss. 5 
and 6 of the Amending Act, 1976. It further rejected the Company's 
contention that, upon the service of the notice exercising the option to 
purchase, the Company's right to be paid the market value under the 
law as it then stood, was crystallised into an "actionable claim" or "A 
~ 
chose-in-action" and that What was sought to be acquired was not the 
G 
undertaking itself but a chose-in-action, and that the law was bad for 
excluding the service lines from computation of the amount. 
The appellants filed appeal in this Court assailing the correctness 
of the High Court's view thats. 4 of the Amending Act was bad. The 
respondent-Company, also filed a cross appeal, questioning the correct-
H 
520 
SUPREME COURT RE

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