U.P. STATE ELECTRICITY BOARD versus UPPER JAMUNA VALLEY ELECTRICITY SUPPLY CO. LTD.

Citation: [2000] SUPP. 1 S.C.R. 411 · Decided: 12-05-2000 · Supreme Court of India · Bench: S. SAGHIR AHMAD · Disposal: Appeal(s) allowed

Judgment (excerpt)

U.P. STATE ELECTRICITY BOARD 
v. 
UPPER JAMUNA VALLEY ELECTRICITY 
SUPPLY CO. LTD. 
MAY 12, 2000 
[S. SAGHIR AHMAD, Y.K. SABHARWAL AND S.N. VARIAVA, JJ.] 
A 
B 
Indian Electricity Act, 1910-Section 6, 7, 7 A-Amend'11ent in, by Indian 
Electricity (UP. Amendment and Validation) Ordinance No. 7of1975/Indian 
Electricity (U.P. Amendment and Validation) Act, 1976-Policy of C 
nationalisation of electric companies-Amendment envisaging the book value 
of the undertaking as the purchase price instead of its market value for the 
purpose of acquiring the undertaking-Constitutional validity of the 
Amending Act/Ordinance challenged on the ground that such amendment 
extinguished the right which had accrued in the electric companies, to get D 
the market price-Held, the provisions for payment of amount to the 
undertaking, by reducing the market value to book value. formed an integral 
part of the nationalisation scheme and that economic consideration for 
nationalisation was not justifiable-Concept of book value being an accepted 
accountancy concept, cannot be held to be illusory-Contention that 
respondent was entitled to receive market value of the property as rights of E 
the respondent had crystallised on the date of take-over, negatived-
Constitution of India, 1950-Articles I9(I)(f),31,32,39.(b). 
Compensation-Determination of-Method/principle-Application of-
Held, if several principles are appropriate and one is selected for F 
determination of the value of the property to be acquired, selection of that 
principle to the exclusion of other principles is not open to challenge-In 
the present case, the only right accruing to the undertaking was a right to 
receive compensation which was to be worked out on certain principles-
The Amending Act merely changed the method or principle on the basis of 
which the compensation was to be worked out and it would not be open to G 
the Court to question the valuation. 
The 1st respondent obtained, by way of transfer, a licence for supply of 
electric energy. One of the terms of the licence was that at the end of the 
licence period the Government had a right to purchase the undertaking. The H 
411 
412 
SUPREME COURT REPORTS [2000] SUPP. I S.C.R. 
A licence was for a period of 35 years. Some time before the expiry of licence, 
tlie appellant served a notice on the 1st respondent under Section 6(1) of the 
Indian Electricity Act calling lljij)n the 1st respondent to sell the undertaking 
to the appellant on the expiry of the period of 35 years from the commencement 
of the licence. In pursuance to the policy of nationalisation of electric 
B companies by the Union of India, an Ordinance was passed which was later on 
replaced by an Act, namely, Indian Electricity (U.P. Amendment and validation) 
Act, 1976. Both the Ordinance as well as the Act amended certain provisions 
of the Indian Electricity Act, 1910, including Sections 6 and 7 A dealing with 
provisions regarding purchase of undertakings and determination of purchase 
price respectively. The amendment which was carried out was that under 
C Section 7 A instead of purchase price being the market value, the amount 
payable for the undertaking would be the book value of the undertaking. 
The 1st respondent challenged the constitutional validity of the 
amending Act/Ordinance on the ground that the rights under Article 19(1 )(f) 
and Article 31(2) of the Constitution were being violated. A Single Judge of 
D the High Court upheld the challenge of the 1st respondent The appeal against 
the said judgement was dismissed by a Division Bench of High Court Hence 
the present appeal. 
On behalf of the respondent, it was contended that the Amending Act/ 
E Ordinance was invalid as it had no reasonable direct nexus to the principles 
under Article 39(b) of the Constitution; that in effect and substance, the law 
was not one for acquisition of electrical undertakings but was one to acquire 
a chose in action and to extinguish rights, which had accrued in the Electric 
Companies, to get the market price; that the right to get compensation accrued 
on the day the notice was given; that what was being acquired was the difference 
F between the market price which the State was obliged to pay and the book 
value to which the liability was now sought to be limited; that the provisions 
in the impugned law in relation to the determination of the amount do not 
attract Article 31(c); that in all the matters the purchase price should be the 
market

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