The KARNATAKA ELECTRICITY SUPPLY UNDERTAKINGS (ACQUISITION) ACT, 1974

 1
THE KARNATAKA ELECTRICITY SUPPLY  UNDERTAKINGS (ACQUISITION) ACT, 1974 
ARRANGEMENT OF SECTIONS 
Statements of Objects and Reasons: 
Sections: 
 1. Short title, extent and commencement. 
 2. Declaration. 
 3. Definitions. 
 4. Undertakings of the companies to vest in the Government. 
 5. Amount to be given to companies. 
 6. General effect of vesting. 
 7. Deductions from the amount. 
 7A. Application to the Tribunal 
 8. Duty to deliver possession of property acquired and documents relatingthereto. 
 9. Duty of the company to supply particulars. 
 10. Right of Government to disclaim certain agreement. 
 11. Provisions respecting the officers and employees of the company. 
 12. Provident and other funds. 
 13. Transaction resulting in dissipation of assets. 
 14. Constitution and powers of Tribunal. 
 15. Penalties. 
 16. Offences by companies. 
 17. Protection of action taken under the Act. 
 18. Power to make rules. 
 19. Power to remove difficulties. 
 20. Laying of rules and orders before the State legislature. 
 21. Effect of other laws. 
 22. Act to apply to undertaking voluntarily handed over to Government. 
  SCHEDULE. 
* * * * 
STATEMENTS OF OBJECTS AND REASONS 
I 
 Act 36 of 1974.- Seven private electrical undertakings are presently engaged in the 
distribution and supply of electricity in their resp ective licensed areas in the Belgaum Division of 
the State under the licenses granted to them by the erstwhile Bombay Government under section 
3 of the Indian Electricity Act 1910. In addition to  these, a co-operative society set up under the 
Pilot Scheme of the Government of India has al so been authorised under Indian Electricity Act to 
distribute power within the Hukkeri Taluk of t he State. The  period of licenses granted to the 
seven private electrical underta king by the erstwhile Bombay Government vary from 30 to 40 
years. As and when the licenses expire, the St ate Electricity Board has under the provision of 
section 6 of the Indian Electricity Act the opt ion of purchasing the undertakings after giving 
necessary notice to the licensees, in writing and the licensees are required to sell their 
undertaking to the Board. 
 2
 With the importance given by Government to the Rural Electrification Programme for 
economic development of the rural areas, it has been found that the growing demands for the 
rural parts of the licensed area may not be met adequately by the licensees and the interest of 
the consumers in these area will be  better served by the Board with  its vast orginisational and 
material resources at its disposal. In the pres ent changed circumstances, it is also considered 
that it will not be a healthy practice to allow private licensees to function when the Statutory 
Electricity Board charged with the same duty is f unctioning in the State. To do away with this 
anomalous situation, it is considered necessary to take over all the private electrical undertakings 
by a special legislation so that the supply of power to the consumers in the respective licensed 
area will be smooth and satisfactory as in the case of other areas where electricity is applied by 
the State Electricity Board. 
 It is accordingly proposed to take over all the seven private electrical undertakings and hence 
the Bill. 
 (Published in the Karnataka Gazette (Extraordi nary) Part IV- 2A, as No. 789, dated 13-5-1974 
at page 22.) 
II 
 Amending Act 5 of 1976.-  Sub-section (2) of section 13 of the Act enables the Government 
to make an application for relief in respect of any of the transactions enumerated in sub-section 
(1) which, in the opinion of Government, is unreasonable or made with lack of prudence, within 
one year from the date of vesting to a Tribunal to be constituted under section 14. 
 Writ petitions were filed in the High court of Karnataka challenging the validity of the Act and 
also against the possession by the Karnataka Electricity Board of the undertakings which have 
been taken over by Government. These writ petitio ns were admitted and a stay was also granted 
by the High Court of Karnataka.  Against the stay both the Stat e Government and the Karnataka 
Electricity Board preferred appeals which were allowed with certain restrictions but the 
possession of the undertaking by the  Karnataka Electricity Board remained unaltered. 
 Consequent to the litigations that ensued immediately after the vesting date, the majority of 
ex-licensees did not hand over all documents pertaining to the undertakings vested in 
Government and few documents were handed over by others. Also the rest rictions imposed by 
the High Court, rendered the Karnataka Electricit y Board unable to take action under sub-section 
(3) of section 8 of the Act to secure posse ssion of all the assets and documents of the 
undertakings. Hence it was considered necessary to extend the period of limitation for making 
application for relief under section 13 from one year to two years. 
 (Obtained from L.A. Bill No. 3 of 1976.)  
 (Published as Notification No.10884 LA dated 20.1.1976 in Karnat aka Gazette dated 22-1-
1976 at page 27.) 
III 
 Amending Act 6 of 1977.-  Sub-section (2) of section 13 of the Act enables the Government 
to make an application for relief in respect of any of the transactions enumerated in sub-section 
(1) which, in the opinion of Government, is unreasonable or made with lack of prudence, within 
one year from the date of vesting to a Tribunal to be constituted under section 14. 
 Writ petitions were filed in the High Court of Karnataka challenging the validity of the Act and 
also against the possession by the Karnataka Electricity Board of the undertakings which have 
been taken over by Government. These writ petitio ns were admitted and a stay was also granted 
by the High Court of Karnataka.  Against the stay both the Stat e Government and the Karnataka 
Electricity Board preferred appeals which were allowed with certain restrictions but the 
possession of the undertaking by the  Karnataka Electricity Board remained unaltered. 
 3
 Consequent to the litigations that ensued immediately after the vesting date, the majority of 
ex-licensees did not hand over all documents pertaining to the undertakings vested in 
Government and few documents were handed over by others. Also the rest rictions imposed by 
the High Court, rendered the Karnataka Electricit y Board unable to take action under sub-section 
(3) of section 8 of the Act to secure posse ssion of all the assets and documents of the 
undertakings. Hence it was considered necessary to extend the period of limitation for making 
application for relief under section 13 from two years to threes years. 
 In the circumstances,  an Ordinance was promulgated. Th is Bill seeks to replace the said 
Ordinance. 
 (Published in the Karnataka Gazette (Extraordi nary) Part IV- 2A, as No. 238, dated 28-3-1977 
at pages  2-3.) 
IV 
 Amending Act 23 of 1978.-  Sub-section (2) of section 13 of the Act enables the Government 
to make an application for relief in respect of any of the transactions enumerated in sub-section 
(1) which, in the opinion of Government, is unreasonable or made with lack of prudence, within 
one year from the date of vesting to a Tribunal to be constituted under section 14. 
 Writ petitions were filed in the High court of Karnataka challenging the validity of the Act and 
also against the possession by the Karnataka Electricity Board of the undertakings which have 
been taken over by Government. These writ petitio ns were admitted and a stay was also granted 
by the High Court of Karnataka.  Against the stay both the Stat e Government and the Karnataka 
Electricity Board preferred appeals which were allowed with certain restrictions but the 
possession of the undertaking by the  Karnataka Electricity Board remained unaltered. 
 Consequent to the litigations that ensued immediately after the vesting date, the majority of 
ex-licensees did not hand over all documents pertaining to the undertakings vested in 
Government and few documents were handed over by others. Also the rest rictions imposed by 
the High Court, rendered the Karnataka Electricit y Board unable to take action under sub-section 
(3) of section 8 of the Act to secure posse ssion of all the assets and documents of the 
undertakings. Hence it was considered necessary to extend the period of limitation for making 
application for relief under section 13 from three year to five years. 
 Hence the Bill. 
 (Published in the Karnataka Gazette (Extraordi nary) Part IV- 2A, as No. 1128, dated 9-8-1978 
at page 3.) 
V 
 Amending Act 14 of 1981.-  In the Karnataka Electricity Supply Undertakings (Acquisition) Act 
1974 by which seven private electric companies were taken over by the Government, the amount 
payable for acquisition is determined on the book value of the assets. There is no provision now 
in the Act for payment of solatium. Normally, in t he case of acquisitions, solatium is paid in view 
of the compulsory nature of the acquisition. Analogous statutes in several other States provide for 
the payment of such solatium. In these circum stances and having considered the representation 
made by the Companies, it is intended to provide for payment of solatium at ten per cent by 
suitably amending the Act. 
 Hence the Bill. 
 (Published in the Karnataka Gazette (Extraordinary) Part IV- 2A, as No. 101, dated 3-2-1981 
at page 3.) 
 4
VI 
 Amending Act 9 of 1995.- The High Court of Karnataka in their order in W.P.Nos 6761/1974 
and 6762/1974 struck down the Karnataka Electricity supply Undertakings (Acquisition) Act, 1974 
(Karnataka Act 36 of 1974) on the ground that the Act was unworkable as it did not provide for 
some machinery or adjudicatory forum for resolution  of the dispute arising from the provisions of 
the Act, particularly section 5, 6 and 7. The matte r is now pending before the Supreme court in 
Civil appeal No. 2573 / 74 of 1982 and likely to be listed for final hearing shortly. 
 Therefore, it is considered nec essary to amend the Act to provide for making application to the 
tribunal constituted under section 14 in respect of disputes arising from sections 5, 6 & 7. 
 Since the matter was urgent and the Karnataka Legislative Assembly was not in session, the 
Karnataka Electricity Supply Undertaking (Acquisition) (Amendment) Ordinance, 1995 (Karnataka 
Ordinance 2 of 1995) was promulgated to achieve the above object. 
 Hence the Bill. 
 (Obtained from L.A. Bill No. 7 of 1995.) 
* * * * 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 5
KARNATAKA ACT NO. 36 OF 1974 
(First published in the Karnataka Gazette, Extraordinary on the Seventeenth day of 
December, 1974) 
THE KARNATAKA ELECTRICITY SUPPLY  UNDERTAKINGS (ACQUISITION) ACT, 
1974 
(Received the assent of the President on the Twelfth day of December, 1974). 
(As Amended by Acts 5 of 1976, 6 of 1977, 23 of 1978, 14 of 1981, 9 of 1995.) 
 An Act to provide for the acquisition of electrical undertakings in the State of 
Karnataka, supplying electricity for the purpose of ensuring better supply of electricity to 
the general public. 
 W HEREAS it is expedient for the purpose of ensuring better supply of electricity to the 
general public, to provide for the acquisition of electrical undertakings in the State of 
Karnataka supplying electricity to the public other than such undertakings belonging to 
and under the control of, (a) the Karnataka Electricity Board constituted under section 5 
of the Electricity (Supply) Act, 1948 (Central Act LIV of 1948) and (b) a co-operative 
society, and matters connected therewith and incidental thereto; 
 B E it enacted by the Karnataka State Legislature in the Twenty-fifth Year of the 
Republic of India as follows:- 
 1. Short title, extent and commencement.-   (1)  This Act may be called the 
Karnataka Electricity Supply Undertakings (Acquisition) Act, 1974. 
 (2) It extends to the whole of the State of Karnataka. 
 (3) It shall come into force on such 1[date]1 as the Government may, by notification, 
appoint. 
  1. Act came into force on 18.12.1974 by notification No. PWD 17 EIG 73 dated 18.12.1974 
 2. Declaration.-  In pursuance of Article 31C of the Constitution of India, it is hereby 
declared that the provisions of this Act are enacted for giving effect to the policy of the 
State towards securing the principles specified in clauses (b) and (c) of Article 39 of the 
Constitution. 
 3. Definitions.-   In this Act, unless the context otherwise requires,- 
 (1) ‘account year’ means the company’s financial year; 
 (2) ‘annual account’ means the account of the undertaking rendered to the 
Government annually under and in accordance with the Electricity Act, or where no such 
account has to be rendered under that Act, the account of the undertaking normally 
made up for the account year of the undertaking and audited by a Chartered Accountant 
in practice within the meaning of the Chartered Accountants Act, 1949 (Central Act 
XXXVIII of 1949); 
 (3) ‘appointed date’ means the date appointed under sub-section (3) of section 1; 
 (4) ‘Board” means the Karnataka Electricity Board constituted under section 5 of the 
Electricity Supply Act, 1948 (Central Act LIV of 1948); 
 (5) ‘companies’ means the Amalgamated Elec tricity Company Limited, Belgaum, the 
Nipani Electricity Company Limited, Nipani, the Karwar, Electric Supply and Trading 
Company Limited, Karwar, the Kanara Elec tric Supply Company Limited, Sirsi and 
 6
includes the following concerns engaged in the business of supplying electricity to the 
public, namely:- 
  (a) Manvi Brothers, Gadag; 
  (b) Manvi Brothers, Byadgi; 
  (c) Manvi Brothers, Ranebennur; and ‘c ompany’ means any of the companies 
aforesaid; 
 (6) ‘document’ in relation to an undertaking, includes its books, accounts, registers, 
maps, plans, section drawings, records of survey and all other documents of whatever 
nature relating to the undertaking; 
 (7) ‘Electricity Act’ means the Indian Electricity Act, 1910 (Central Act 9 of 1910); 
 (8) ‘Electricity (Supply) Act’ means the Electricity Supply Act, 1948 (Central Act LIV 
of 1948); 
 (9) ‘fixed assets’ includes works, spare parts, stores, stocks, instruments, tools, 
motor and other vehicles, office and other equipments and furniture; 
 (10) ‘Government’ means the State Government; 
 (11) ‘intangible assets’ means any amount paid on account of goodwill, under-writers’ 
commission and such preliminary and promotional expenditure shown as a debit in the 
capital account of the undertaking, as has fairly arisen in promoting electricity supply; 
 (12) ‘Tribunal’ means the Tribunal constituted under section 14; 
 (13) ‘undertaking; means an undertaking engaged in the business of supplying 
electricity to the public; 
 (14) ‘vesting date’ means the date on which the undertaking vest in the Government 
under sub-section (1) of section 4; 
 (15) ‘works’ includes electric supply-lines and any lands, buildings, workshops, 
projects, machinery, plant or apparatus, required to supply electricity and to carry into 
effect the objects of a licence granted for the supply of electricity under the Electricity 
Act; 
 (16) words and expressions used herein and not defined in this Act but defined in the 
Electricity Act, or the rules made under that Act, shall have the meanings respectively 
assigned to them in that Act or those rules. 
 4. Undertakings of the Companies to vest in the Government.-   (1)  With effect 
on and from the appointed date the undertakings of the companies shall, by virtue of this 
Act, stand transferred to and vest in the Government. 
 (2) Every company which after the vesting date, was in possession of, or deriving 
any benefit from the undertaking vested in the Government under sub-section (1) shall 
be liable to pay to the Government, for the period, after such vesting for which it was in 
such possession or deriving such benefit, an amount as compensation for the use, 
occupation or enjoyment of that undertaking as the prescribed authority may fix in the 
prescribed manner.  Such authority shall take into consideration such factors as may be 
prescribed. 
 5.  Amount to be given to Companies.-  (1)  The amount to be given to a 
company, the undertaking of which vests in the Government under this Act, shall be 
determined and paid in the manner hereinafter provided. 
 7
 (2) The amount to be given shall be the aggregate value of the sums specified 
below:- 
  (i) the book value of all completed works in beneficial use pertaining to the 
undertaking and handed over to the Government (excluding works  paid for by 
consumers) less depreciation  calculated in the manner specified in the Schedule; 
  (ii) the book value of all works in progress handed over to the Government, 
excluding works paid for by consumers or prospective consumers; 
  (iii) the book value of all stores including spare parts handed over to the 
Government and in the case of used stores and spare parts, such sum as may be 
decided upon by mutual agreement between the Government and the companies; 
  (iv) the book value of all other fixed assets in use on the vesting date and 
handed over to the Government less depreciation calculated in the manner specified in 
the Schedule; 
  (v) the book value of all plant and equ ipment existing on the vesting date but no 
longer in use owing to wear and tear or to obsolescence, to the extent such value has 
not been written off in the books of the company less depreciation calculated in the 
manner specified in the Schedule; 
  (vi) the book value of all intangible assets to the extent such value has not been 
written off in the books of the companies; 
  (vii) the sum due from consumers in respect of every hire-purchase agreement 
referred to in section 6 (1) (ii) less a sum which bears to the difference between the total 
sum of the instalments and the original cost of the material or equipment, the same 
proportion as the sum due bears to the total sum of the instalments; 
  (viii) any sum paid actually by the com pany in respect of every contract referred 
to in section 6 (1) (iii). 
  1[(ix) a sum equal to ten percent of the aggregate of the amounts specified in 
clauses  (i) to (vi), in consideration of the compulsory nature of acquisition;]1 
   1. Inserted by Act 14 of 1981 w.e.f. 07.04.1981. 
 Explanation.- (a)  For the purposes of this sub-section the book value of any fixed 
asset means its original cost, and shall comprise,- 
  (i) the purchase price paid by the company for the asset, including the cost of 
delivery and all charges properly incurred in erecting and bringing the asset into 
beneficial use as shown  in the books of the undertaking; 
  (ii) interest charges on capital expenditure incurred from borrowed money and 
shown in the books of the undertaking as properly attributable to the asset up to the date 
of bringing it into beneficial use, at a rate not exceeding six percent per annum; 
  (iii) cost of supervision actually incurred, but not exceeding fifteen percent of the 
sum referred to in paragraph (i). 
 (b) Where any asset was acquired after the expiry of the period to which the latest 
annual account relates, or where no annual account has to be rendered under the 
Electricity Act, the book value of the asset shall be such sum as may be decided upon 
by the Government after giving an opportunity of being heard to the companies. 
 8
 (3) The amount to be given according to sub-section (2) less the amounts to be 
deducted therefrom as provided in this Act shall be the amount due and shall carry 
interest at the rate of five percent per annum from the vesting date. 
 (4) The amount due may, subject to rules made in this behalf, be paid in full or in 
instalments not exceeding five or in bonds, negotiable or non-negotiable carrying interest 
at the rate specified in sub-section (3) and of guaranteed face value maturing within a 
specified period not exceeding ten years. 
 6. General effect of vesting.-   (1)  The Undertakings of the companies vesting in 
the Government under section 4 shall be deemed to consist only of property, rights, 
liabilities and obligations specified hereunder,- 
 (i) all the fixed assets of the companies and all documents relating to the 
undertakings; 
 (ii) all the rights, liabilities and obligations of the companies under hire purchase 
agreements, if any, for the supply of materials or equipment made bona fide before the 
vesting date; 
 (iii) all the rights, liabilities and obligations of the companies under any other 
contract entered into bona fide before the vesting date not being a contract relating to 
the borrowing or lending of money. 
 (2) All the assets specified in item (i) of sub-section (1) shall vest in the Government 
free from any debts, mortgages or similar obligations of the companies for attaching to 
the undertakings: 
 Provided that such debts, mortgages or obligations shall attach to the amount to be 
given under this Act for the assets. 
 (3) In the case of undertakings which vest in the Government under this Act, the 
licence granted or deemed to be granted for supplying electricity shall be deemed to 
have been terminated on the vesting date and all the rights, liabilities and obligations of 
the companies under any agreement to supply electricity entered into before that date 
shall devolve on the Government: 
 Provided that where any such agreement is not in conformity with the rates and 
conditions of supply approved by the Government and in force on the vesting date, the 
agreement shall be voidable at the option of the Government. 
 (4) The Government may, by notification, provide for the transfer to, and vesting in, 
the Board, in such manner and subject to such conditions as may be specified in the 
notification, of property, rights, liabilities and obligations which have vested in the 
Government under this Act and thereupon, such property, rights, liabilities and 
obligations shall stand transferred to, and vest in the Board. 
 7. Deductions from the amount.-  The Government shall be entitled to deduct the 
following sums from the amount to be given to a company under this Act:- 
 (a) the sum, if any, already given in advance by way of any amount to be given under 
section 5; 
 (b) the sum, if any, specified under sub-section (2) of section 4; 
 (c) the sum, if any, which may be, or ordered to be, deducted under section 9 or 11; 
 9
 (d) the sum due, if any, from the company to the Government or the Board for 
electricity supplied by the Board for any period prior to one month immediately preceding 
the vesting date; 
 (e) all other sums and arrears of interest, if any, thereon due from the company to 
the Government or the Board except loans and arrears of interest, if any, thereon: 
 Provided that instalments of such loans and arrears of interest, if any, thereon which 
have accrued due during any period prior to one month immediately preceding the 
vesting date and outstanding on that date shall be deducted; 
 (f) the sum, if any, equivalent to the loss sustained by the Government by reason of 
any property or rights belonging to the undertaking not having been handed over to the 
Government, the sum of such loss being deemed to be the sum by which the market 
value of such property or rights exceeds the amount payable therefor under this Act, 
together with any income which might have been realised as aforesaid; 
 (g) all sums paid by consumers by way of security deposit and arrears of interest due 
thereon on the vesting date in so far as they have not been paid over by the company to 
the Government, less the sums which according to the books of the company are due 
from the consumers to the company for electricity supplied by it before the date; 
 (h) all advances from consumers and prospective consumers, and all sums which 
have been or ought to be set aside to the credit of the consumer’s fund in so far as such 
advances or sums have not been paid over by the Company to the Government. 
 Explanation.-  For the purposes of this clause, “Consumers’ fund” shall, for any 
account year prior to the date on which the Sixth Schedule to the Electricity Supply Act 
came into force mean the amount referred to as such in the bulk supply agreement and, 
for any account year on and from the said date, it shall mean the amount specified in 
paragraph II (1) of the said Schedule as the amount to be set apart for distribution to 
consumers; 
 (i) if, under any law, award, agreement, contract of service or otherwise, the salary, 
wages, leave salary, bonus, pension, gratuity, provident fund, security deposit or other 
payment, becomes payable to a member of the staff after a specified period of service 
rendered by such member in connection with the undertaking, such member having 
been transferred to the Government,- 
  (a) before the expiry of such specified period, a sum equal to the sum which 
bears to the full salary, wages, leave salary , bonus, pension, gratuity, provident fund, 
security deposit or other payment payable afte r the expiry of the said specified period, 
the same proportion as the period upto the vesting date bears to the whole of the said 
specified period; 
  (b) after the expiry of such specified period,  a sum equal to full such salary, 
wages, leave salary, bonus, pension, gratuity,  provident fund, security deposit or other 
payment: 
 Provided that where any reserve fund has been created towards the salary, wages, 
leave salary, bonus, pension, gratuity, provident fund, security deposit or other payment  
referred to in this clause and such reserve fund shall vest in the Government under this 
Act, the amount of such reserve fund so vested shall not be deducted under this clause; 
 10
 (j) sums, if any, in the credit of development rebate reserve, contingencies, 
reserves, tariff and dividend control reserve, consumers rebate reserve, reserve for bad 
and doubtful debts or any other reserve fund. 
  1[7A. Application to the Tribunal.-  Any person disputing,- 
 (i) the amount determinable and payable under section 5; or, 
 (ii) as to which property, rights, liabilities and obligations of the companies   
 vest in the Government under section 6; or  
 (iii) the amount liable to be deducted under section 7; 
 may within three months from the date of commencement of the Karnataka Electricity 
Supply Undertakings (Acquisition) (Amendment) Act, 1995, apply to the Tribunal. 
 Provided that the Tribunal may entertain such application after the period specified 
above if it is satisfied that the person making the application had sufficient cause for not 
making the application within that period.]
1 
 1. Section 7A Inserted by Act 9 of 1995 w.e.f. 18.12.1974. 
 8. Duty to deliver possession of property acquired and documents relating 
thereto.-  (1)  In respect of property vesting in the Government under section 4 every 
person in whose possession or custody or under whose control the property may be, 
shall deliver up the property to such officer or authority appointed by the Government for 
the purpose, forthwith and until it is delivered such person shall from the vesting date be 
deemed to be in possession, custody or control of the property on behalf of the 
Government. 
 (2) Any person who on the vesting date has in his possession or custody or under his 
control any document which has vested in the Government under this Act shall be liable 
to account for such document to the Government and shall deliver it up to the officer or 
authority referred to in sub-section (1). 
 (3) Without prejudice to the other provisions contained in this section it shall be lawful 
for such officer or authority to take all necessary steps for securing possession of all the 
assets and document which have vested in the Government under section 4. 
 9. Duty of the company to supply particulars.-   (1)  In respect of the undertaking 
of a company vesting in the Government under this Act, the company shall, within two 
months from the vesting date or such further period as the Government may allow in this 
behalf, furnish to the Government,- 
  (a) particulars of the book debts and investments belonging to and all liabilities 
and obligations of the company subsisting immediately before the vesting date; and 
  (b) particulars of all agreements entered into by the company and in force on the 
vesting date including any agreements whether express or implied relating to leave, 
pension, gratuity and other terms of service of any officer or other employee of the 
company under which by virtue of this Act the Government has or will or may have 
liabilities or obligations and for this purpose the Government shall afford the company all 
reasonable facilities. 
 (2) If the company fails to supply to the Government particulars of book debts, 
liabilities and agreement within the time allowed to it for the purpose under sub-section 
(1), nothing contained in this Act shall have effect so as to transfer any such book debts, 
liabilities and agreements or to vest the same in the Government: 
 11
 Provided that nothing in this sub-section sh all apply to any agreement if any party to 
such agreement supplies to the Government, particulars of the agreements within two 
months from the vesting date and the Government, within a period of six months after 
such submission of particulars accept the liabilities under the agreement. 
 (2) The Government may, by notice in writing within a period of six months after 
submission of the particulars  referred to under sub-section (1) intimate to the company 
that such book debts and investments as are specified in the notice are not included in 
the property vesting in the Government, whereupon the amount provided by section 5 
shall stand reduced by the amount of such excluded book debts and investments and 
the right of the company to recover and retain such excluded book debts shall remain 
unaffected by this Act. 
 10. Right of Government to disclaim certain agreement.-   (1)  Where it appears to 
the Government that the making of any such agreement as is referred to in section 9 or 
any of the terms thereof under which the Gove rnment has or will have liabilities was not 
reasonably necessary for the purposes of the activities of the company or has not been 
entered into in good faith, the Government may, make an order cancelling or varying 
(either unconditionally or subject to such conditions as it may think fit to impose) such 
agreement and thereafter the agreement shall have effect accordingly: 
 Provided that no agreement shall be cancelled or varied except after giving to the 
parties to the agreement a reasonable opportunity of being heard. 
 (2) Any person, aggrieved by an order made under sub-section (1) may within such 
time as may be prescribed make an application to the Tribunal for the variation or 
reversal of such order and thereupon the Tribunal may confirm, modify or vary such 
order. 
 11. Provisions respecting the officers and employees of the company.-   (1)  
Subject to the provisions of sections 10 and 13, every officer or other employee (except 
a Director, Advisor, Consumer or Auditor) employed before the vesting date in 
connection with the affairs of the undertakings which have vested in the Government by 
virtue of this Act, shall become as from that date, an officer or other employee  as the 
case may be, of the Government and shall hold his office or service by the same tenure, 
at the same remuneration and upon the same terms and conditions and with the same 
rights and privileges as to pension, gratuity and other matters as he would have held 
under the company if its undertakings had not vested in the Government and shall 
continue to do so unless and until his employm ent under the Government is terminated 
after giving him three calendar months notice in writing or paying him three months pay 
in lieu of such notice or until his remuneration, terms and conditions including the 
privileges as to pension and gratuity are altered by rules or orders made by the 
Government: 
 Provided that nothing contained in this sub-section shall apply to any officer or 
employee who has by notice in writing given to the Government or to any person 
nominated in this behalf by the Government, within thirty days from the appointed day 
intimated his intention of not becoming an officer or other employee of the Government. 
 (2) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (Central 
Act 14 of 1947) or in any other law for the time being in force, the transfer of the services 
of any officer or other employee of the company  by virtue of this Act shall not entitle any 
 12
such officer or other employee to any compensation under this Act or other law and no 
such claim shall be entertained by any court, tribunal or other authority. 
 12. Provident and other funds.-   (1)  Where a company has established a provident 
fund, superannuation, welfare or other fund for the benefit of its officers or other 
employees, the moneys relatable to the officers or other employees whose services 
have become transferred by or under this Act to the Government shall out of the moneys 
standing on the vesting date to the credit of such provident fund, superannuation, 
welfare or other fund, stand transferred to and vest in the Government. 
 (2) The moneys which stand transferred under sub-section (1) to the Government 
shall be dealt with by the Government in such manner as may be prescribed. 
 13. Transaction resulting in dissipation of assets.-   (1)  This section shall apply 
where the company has, after the first day of January 1972 and before the vesting date,- 
  (a) made any payment to any person without consideration or for an inadequate 
consideration; 
  (b) sold or disposed of any of its properties or rights without consideration or for 
an inadequate consideration; 
  (c) acquired any property or rights for an excessive consideration; 
  (d) entered into or varied any agreement so as to require an excessive 
consideration to be paid or given by the company; 
  (e) entered into any other transaction of such an onerous nature as to cause a 
loss to or impose a liability on the company exceeding any benefit accruing 
to the company; or 
  (f) sold or otherwise transferred any equipment or machinery or other property 
of book value exceeding rupees ten thousand; and 
the payment, sale, disposal, acquisition, agreement or variation thereof or other 
transaction or transfer, was not  reasonably necessary for the purpose of carrying on the 
undertakings of the company, or was made with lack of prudence on the part of the 
company regard being had, in either case, to the circumstances at the time. 
 (2) The Government may, at any time, within 1[five year]1 from the vesting date, apply 
for relief to the Tribunal in respect of any transaction to which in the opinion of the 
Government this section applies and all parties to the transaction shall, unless the 
Tribunal otherwise directs, be made parties to the application. 
   1. Substituted by Act 23 of 1978 w.e.f. 18.12.1974. 
 (3) Where the Tribunal is satisfied that the transaction in respect of which an 
application is made is a transaction to which this section applies, then, unless, the 
Tribunal is also satisfied that the transaction was a proper transaction made in the 
ordinary course of business, regard being had to the circumstances at the time, and was 
not in any way connected with any provisions made by this Act, or in anticipation of the 
making of any such provision, the Tribunal shall make such order against any of the 
parties to the application as it thinks just having regard to the extent to which the parties 
were respectively responsible for the transaction or benefited from it and all the 
circumstances of the case. 
 (4) Where an application is made to the Tribunal under this section in respect of any 
transaction and the application is determined in favour of the Government, the Tribunal 
 13
shall have exclusive jurisdiction to determine any claims outstanding in respect of the 
transaction.  On any such application, the Tribunal may order that Government deduct 
from the amount payable to the company under this Act, such amount as it may consider 
to be the loss sustained by the Government by virtue of any transaction referred to in 
sub-section (1). 
 (5) Any amount ordered by the Tribunal to be deducted from the amount under sub-
section (4) shall be a first charge on the amount payable to the company and shall have 
priority over the claims of any person in respect of the amount payable to the company. 
 (6) For the purpose of satisfying the first charge referred to in sub-section (5), the 
Government shall withhold ten per centum of the amount payable to the company  under 
section 5. 
 (7) After satisfying the first charge in favour of the Government under sub-section (5), 
the balance, if any of the amount withheld under sub-section (6), shall be paid to the 
company: 
 Provided that the Tribunal may at any ear lier time order payment of such amount as 
is in excess of the amount which in its opinion would be sufficient to satisfy the first 
charge under sub-section (5): 
 Provided further that all payments under this  sub-section shall be made in cash with 
interest at half percent from the vesting date. 
 14. Constitution and powers of Tribunal.-   (1)  The Government shall by 
notification constitute a tribunal consisting of an officer not below the rank of a District 
judge. 
 (2) For the purpose of deciding any matter 1[under sections 5, 6, 7, 7A,  10 and 13] 1 
the Tribunal may require any or all the parties to state their case in respect of such 
matter and may call upon them to adduce such evidence as may be necessary for the 
determination of the case. 
   1. Substituted by Act 9 of 1995 w.e.f. 18.12.1974 
 (3) The Tribunal shall have the powers of a Civil Court while trying a suit under the 
Code of Civil Procedure 1908 (Central Act V of 1908) in respect of the following 
matters:- 
  (a) summoning and enforcing attendance of any person and examining him on 
oath; 
  (b) requiring the discovery and production of documents; 
  (c) receiving evidence on affidavits; 
  (d) issuing commissions for the examination  of witnesses or documents; 
  (e) such other matters as may be prescribed. 
 (4) The Tribunal may regulate its own procedure and review its decision in the event 
of there being a mistake on the fact of the record or correct any arithmetical or clerical 
error therein but subject thereto and subject to the provisions of sub-section (5), the 
decision of the Tribunal on any matter within it's jurisdiction shall be final and shall not be 
called in question in any court of law. 
 (5) The Government or any person aggrieved by any order of the Tribunal may, 
within thirty days from the date of the order, appeal to the High Court of Karnataka and 
the High Court may pass such orders thereon as it thinks fit. 
 14
 15. Penalties.-  (1)  If any person wilfully withholds or fails to deliver to the 
Government as required by section 8 any documents which may be in his possession or 
wrongfully obtains possession of any property of the company which has vested in the 
Government under this Act, or having any such property in his possession wrongfully 
withholds it from the Government, or wilfully applies to purposes other than those 
expressed in or authorised by this Act, he shall be punishable with imprisonment for a 
term which may extend to two years or with fine which may extend to five thousand 
rupees, or with both and in the cases of a continuing offence with additional fine which 
may extend to five hundred rupees for every day after the first during which the offence 
continues and may be ordered by the court trying the offence to deliver up or refund 
within the time to be fixed by the court any such document or property improperly 
obtained or wrongfully withheld or wilfully misapplied, and in default, to suffer 
imprisonment for a further period which may extend to one year. 
 (2) Whoever fails without reasonable cause, to comply with any of the provisions of 
this Act or the rules made thereunder, or any direction or order issued in pursuance 
thereof shall, if the case be not governed by sub-section (1), be punishable with fine 
which may extend to five thousand rupees and in the case of a continuing offence with 
additional fine which may extend to five hundred rupees for every day after the first 
during which the offence continues. 
 (3) No court shall take cognizance of any offence punishable under this section 
except with the previous sanction of the Government or of an officer authorised by it in 
this behalf. 
 16. Offences by companies.-  (1)  Where an offence under this Act has been 
committed by a company, every person who at the time the offence was committed was 
in charge of and was responsible to , the company for the conduct of the business of the 
company, as well as the company, shall be dee med to be guilty of the offence and shall 
be liable to be proceeded against and punished accordingly: 
 Provided that nothing contained in this sub-section shall render any such person 
liable to any punishment, if he proves that the offence was committed without his 
knowledge or that he had exercised all due diligence to prevent the commission of such 
offence. 
 (2) Notwithstanding anything contained in sub-section (1), where any offence under 
this Act has been committed by a company and it is proved that the offence has been 
committed with the consent or connivance of, or is attributable to, any neglect on the part 
of, any director, manager, secretary or other officer of the company such director, 
manager, secretary or other officer shall be deemed to be guilty of that offence and shall 
be liable to be proceeded against and punished accordingly. 
 Explanation.-  For the purpose of this section,- 
 (a) “company” means any body corporate and in cludes a firm or other association of 
individuals; and 
 (b) “director”, in relation to a firm, means a partner in the firm. 
 17. Protection of action taken under the Act.-  No suit, prosecution, or other legal 
proceeding shall lie against the Government or any officer or servant of the Government 
or any person acting under the direction of the Government or of any officer or servant of 
 15
the Government in respect of anything which is in good faith done or intended to be 
done in pursuance of this Act or any rules or orders made thereunder. 
 18. Power to make rules.-  The Government may by notification make rules to carry 
out the purposes of this Act. 
 19. Power to remove difficulties.-  If any difficulty arises in giving effect to the 
provisions of this Act, the Government may, by notified order, not inconsistent with the 
provisions of this Act remove the difficulty: 
 Provided that no such power shall be exerci sed after the expiry of a period of two 
years from the commencement of this Act. 
 20. Laying of rules and orders before the State Legislature.-  Every rule made 
under this Act and every order issued under section 19 shall be laid as soon as may be 
after it is made or issued before each House of the State Legislature while it is in session 
for a total period of thirty days which may be comprised in one session or in two 
successive sessions and if, before the expiry of the session in which it is so laid or the 
session immediately following both Houses agree in making any modification in the rule 
or order or both Houses agree  that the rule, or order should not be made, the rule or 
order shall thereafter have effect only  in such modified form or be of no effect, as the 
case may be; so however that any such modification or annulment shall be without 
prejudice to the validity of anything previously done under such rule or order. 
 21. Effect of other laws.-  (1)  No provision of the Electricity Act or of the Electricity 
Supply Act or of any rule made under any of those Acts or of any instrument having 
effect by virtue of any of those Acts or any rule made thereunder shall in so far as it is 
inconsistent with any of the provisions of this Act have any effect. 
 (2) Save as otherwise provided in this Act, the provisions of this Act shall be in 
addition to and not in derogation of the Electricity Act and the Electricity Supply Act. 
 22. Act to apply to undertaking voluntarily handed over to Government.-  Where 
an undertaking has been voluntarily handed over by a company to the Government 
before the commencement of this Act, and the Government have taken possession of 
such undertaking, the provisions of this Act shall apply to such undertaking as if such 
undertaking vests in the Government under this Act.  All the provisions of this Act shall 
accordingly app

Excerpt shown. Open the full act in Lexace.

‹ Prev All Karnataka acts Next ›