STATE OF U.P. versus THE UPPER JAMUNA VALLEY ELECTRICITY SUPPLY CO. LTD. AND ORS.

Citation: [2000] SUPP. 1 S.C.R. 429 · Decided: 12-05-2000 · Supreme Court of India · Bench: S. SAGHIR AHMAD · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF U.P. 
v. 
THE UPPER JAMUNA VALLEY ELECTRICITY 
SUPPLY CO. LTD. AND ORS. 
MAY 12, 2000 
[S. SAGHIRAHMAD, Y.K. SABHARWAL AND S.N. VARIAVA, JJ.] 
A 
B 
Electricity Act 19/0-Sections 6 and 7-A-As amended by Electricity 
(U.P. Amendment and Validation) Act, 1976-Constitutionality-Take over C 
of electrical undertaking and determination of its purchase price-Under 
the licence granted by the State, State had a right to takeover the Electrical 
Undertakings at the end of its term-Amendment brought about in the Act 
by way of Amending Act of 1975-Changing the method or computation of 
compensation by introducing the concept of book value in Section 7-A of 
the Act and not the market value-Constitutionality of Amending Act D 
challenged-Held, that the takeover of undertaking on 28.06.1964 had to 
be tested on the touchstone of Articles 19(/)(j) and 31(2) and not Article 
3/(c) as Article 31 (c) was not a part of the Constitution on the date of 
takeover-Amending Act was not violative of Articles /9(l)(j) and 31(2)-
Further, determination of purchase price of the undertaking under Section E 
7-A was not open to challenge as it was an accepted accountancy concept 
and the same was not illusory-Quantification of the amount payable to 
such undertaking form an integral and inseparable part of nationalisation--
Hence, economic costs of nationalisation was not justiciable and on the 
date of takeover of undertaking, rights cannot be said to have been 
crystallised and not entitled to market value of the property-What was F 
acquired was not a chose-in action or debt but was the undertaking which 
dealt with material resources of the count~Thus Amending Act is not a 
colourable piece of legislation-C<f)lstitution of India, Articles /9(l)(j), 
31(2), 3/(c) and 39(b). 
On 28.06.1929 the Government of Uttar Pradesh granted a licence to G 
Company 'M' for a period of35 years and it was subsequently transferred to 
Respondent No. 1. Government had a right under the licence to purchase the 
undertaking at the end of the terms of licence. The term was to expire on 
27.06.1964. On 30.11.1962, the appellant served a notice to Respondent No. 
1 under Section 6(1) of the Indian Electricity Act calling upon it to sell the H 
429 
430 
SUPREME COURT REPORTS [2000] SUPP. I S.C.R. 
A undertaking to the appellant on the expiry of the said period. On 04.02.1975, 
certain amendments were made in the Act by Indian Electricity (U.P. 
Amendment and Validation) Ordinance No. 7 of 1975 and the same was 
replaced by Indian Electricity (U.P. Amendment and Validation) Act, 1976 
amending, inter alia, Sections 6 and 7-A of the Act in view of the 
B nationalisation of the electric companies by the Central Government whereby 
electric companies were sought to be purchased. Amendment sought to change 
the method of computation of compensation by introducing the concept of book 
value in Section 7-A of the Act and not the market value. Respondent No. I 
challenged the constitutional validity of the Amending Act/Ordinance before 
the High Court on the ground that rights under Articles 19(I)(t) and 31(2) 
C were infringed and that Amending Act/ordinance was invalid having no 
reasonable direct nexus to the principles under Article 39(b) of the 
Constitution. Single Judge of the High Court upheld the challenge. Division 
Bench dismissed the appeal filed against the judgement of the Single Judge. 
Hence this appeal. 
D 
It was contended by the appellant that the Ordinance came almost 11 
years after the take over of the undertaking by the Government; that on 
28.06.1964 when the undertaking was taken over, Sections 6, 7 and 7 A, as 
they then stood, provided for payment of market value; that in 1962, Article 
19(1)(t) and Article 31(1) and 31(2) of the Constitution were there and that 
E there was no Article 3l(c) in the Constitution; and that the provisions of the 
Constitution and the law which must apply are those which were prevalent at 
that time in 1962. 
It was contended by Respondent No. 1 that law was not one for acquisition 
of electrical undertakings but was one to acquire a chose-in action and to 
F extinguish rights, which had accrued in the Electric Companies, to get the 
market price; that the Act was merely a clock which the law was made to 
wear, to undo the obligations arising out of the intended statutory sale, Article 
3l(c) was not attracted; and that in any case every provision of a statute was 
not entitled to protection of Article 3l(

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