No 457 of 1972 Under Article 32 of the Constitution of India Soli J Sorabji section Rangarajan Harish N Salve D N Mukharji Ranjan Kukherjee Udey K Lalit SK Nandi and section Parekh for the Petitioner
Dr Shankar Ghosh GL Sanghi P Chowdhary CS Vaidyanathan CV Subba Rao for the Respondents
Mrs AK Verma for the Intervener
The following Judgments of the Court were delivered SABYASACHI MUKHARJI J
I agree with Brother Venkata chaliah that the contentions urged on behalf of the peti tioner in support of the challenge to the impugned legisla tions must fail and the writ petitions must be dismissed
I would however like to express my 553 views only on one aspect of the matter which is common to this case as well as the writ petition No 45872 civil appeal No 411385 and writ petition No 5N74 ie the scope of judicial review of legislation where there is declaration in the legislation under article 31C of the Consti tution
In these writ petitions we are concerned with two legis lations namely the Indian Electricity Assam Amendment Act 1973 Assam Act IX of 1973 and the Tinsukhia  Dibrugarh Electric Supply Undertakings Acquisition Act 1973 Act X of 1973
The main point which is significant in these writ petitions is the extent and scope of judicial review of legislation where there is declaration under article 31 C of the Constitution which enjoins that no law giving effect to the policy of the State towards securing all or any of the principles laid down inter alia namely Arti cles 38 39 39A 40 41 42 43A 44 to 48 48A and 49 to 51 shall be deemed to be void on the ground that those are inconsistent or take away or abridge any of the rights conferred by Article 14 or 19 and further provides that no law containing a declaration that it is for giving effect to such a policy shall be called in question in any court on the plea that it does not give effect to such a policy
The two legislations in question are covered by the declaration under Article 31C of the Constitution
The principal question which falls for consideration is whether that declaration is justiciable and open to judicial review and the extent of that judicial review
Article 39b of the Constitution enjoins that the State in particular should direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as to best subserve the common good and that the operation of the economic system does not result in concentration of wealth and means of production to the common detriment
See in this connection the observations of Ray J as the learned Chief Justice then was in Kesava nanda Bharati vs State of Kerala at 45 1 452
Hence in order to decide whether a Statute is within Article 31C the Court if necessary may examine the nature and the character of legislation and the matter dealt with as to whether there is any nexus between the law and the principles mentioned in Article 39b and c
On such an examination if it appears that there is no such nexus be tween the legislation and the objectives and the principles mentioned in Article 39b  c the legislation will not enjoy the protection of Article 31C
In order to see the real nature of the Statute if need be the court may also tear the veil
554 Justice Jaganmohan Reddy in the same decision at page 530 of the report reiterated that a law not attracting Article 31C cannot be protected by a declaration by just mixing it with other laws really failing within Article 31 C with those that do not fall under that Article
Hence in such a case the Court will always be competent to examine the true nature and character of the legislation in the particular instance and its design and the primary matter dealt with its object and scope
In this connection reli ance was placed on the observations of the Privy Council in Charles Russel vs The Queen 1882 VII AC 829 at 838 840
Justice Palekar in the same decision at page 63 1 also reiterated that if the court comes to the conclusion that the object of the legislation was merely a pretence and the real object was discrimination or something other than the object specified in Article 39b and c Article 31C would not be attracted and the validity of the Statute would have to be tested independently of Article 31C
Whenever a question is raised that the Parliament or the State legislature have abused their powers and inserted a declaration in a law for not giving effect to securing the Directive Principles specified in Article 39b  c the court can and must necessarily go into that question and decide
See the observations of Justice Mathew in Kesavanan da Bharati s case supra at page 855 of the report
If the court comes to the conclusion that the declaration was merely a pretence and that the real purpose of the law is the accomplishment of some object other than to give effect to the policy of the State towards securing the Directive Principles as enjoined by Article 39b  c the declara tion would not debar the court from striking down any provi sion therein which violates Articles 14 19 or 31
In other words if a law passed ostensibly to give effect to the policy of the State is in truth and substance one for accomplishing an unauthorised object the Court would be entitled to tear the veil created by the declaration and decide according to the nature of the law
Also see pages 851  856 of the report
Justice Beg as the learned Chief Justice then was at pages 884 885 of the report reiterated that a colourable piece of legislation with a different object altogether but merely dressed up as a law intended for giving effect to the specified principles would fail to pass the test laid down by the first part and the declara tion by itself would not preclude a judicial examination of the nexus so that the courts can still determine whether the law passed is really the one covered by the niche carved out by Article 31C or merely pretends to be so protected by parading under cover of the declaration
Justice Dwived at page 934 of the report said that the Court still retains power to determine whether the law has relevancy to the distribution of the ownership and 555 control of the material resources of the community and to the operation of the economic system
If the Court finds that the law has no such relevancy it can declare the law void
The declaration cannot be utilised as a clog to pro tect law bearing no relationship with the objectives men tioned in the two clauses of Article 39
With respect I am inclined to agree with the observa tions of Justice Chandrachud as the learned Chief Justice then was at page 996 of the said report that the declara tion under Article 31 C does not exclude the jurisdiction of the Court to determine whether the law is for giving effect to the policy of the State towards securing the principles specified in Article 39b  c
Chief Justice Chandrachud in Minerva Mills Ltd vs Union of India  at 261 observed that the clear intendment of Article 31C is that the power to enquire into the question whether there is a direct and reasonable nexus between the provisions of a law and a Directive Principle can not confer upon the courts the power to sit on judgment over the policy itself of the State
At the highest courts can under Article 31C satisfy themselves as to identity of the law in the sense whether it bears a direct and reasona ble nexus with the directive principles
If the court is satisfied as to the existence of such nexus the inevitable consequence provided for by Article 31C must follow
He recorded that all the 13 Judges in Kesavananda Bharati s case supra agreed
The only question open to judicial review under Article 31 C is whether there is a direct and reasonable nexus between the impugned law and the provisions of Article 39b  c
Reasonableness is evidently regard ing the nexus and not regarding the law
Justice Bhagwati as the learned Chief Justice then was reiterated at pages 337 338 of the report that if the Court finds that the law though passed seemingly for giving effect to a Directive Principle is in pith and substance one for accomplishing an unauthorised purpose unauthorised in the sense of not being covered by any Directive Principle such law would not have the protection of the amended Article 31C which does not give protection to a law which has merely some remote or tenuous connection with a Directive Principle
What is necessary is that there must be a real and substantial connection and the dominant object of the law must be to give effect to the Directive Principles
Also see the observations of this Court in Sanjeev Coke Mfg Co vs Bharat Coking Coal Ltd  Anr  at 1020
556 Looked at from this point of view it cannot be said that the principles of colourable legislation would not be applicable
If it was demonstrated that there was no direct and reasonable nexus between these two impugned laws and the principles as enshrined under Article 3 lb  c of the Constitution then that would have been colourable legisla tions and would have been bad on that score
It was contended on behalf of the petitioner by Mr Sorabji as well as Mr Rangarajan that in order to bye pass the payment of compensation for acquisition of property of the petitioner in negotiations the device of the impugned Acts was envisaged
In that context the substitution of the book value in place of market value was therefore depriva tion of property and is illusory and would amount to taking away of  property without compensation
I do not and cannot agree
It is indisputed that the electric energy generated by the supplier petitioner compa nies constitutes material resources of the community within the scope and meaning of Article 39b and having regard to the true nature and the purpose of the legislations reading the legislations entirely the object of the legislations have a direct and reasonable nexus with the objective of distributing the material resources so as to subserve the common good
The determination of value thereof and the substitution of the bookvalue in place of market value are only methods for such acquisition and do not disclose the true nature and character of the legislation but are inci dental provisions thereof
If that is the position then it is incorrect to say that what was acquired was not the material resources but choses in action
The true nature and character of the legislations in
question was to acquire the material resources namely the electric energy for better supply and distribution
In that view of the matter the principles of the decision of the Division Bench of the Calcutta High Court in Bihar State Electricity Board  Ors
vs Patna Electricitv Supply Co Ltd would have no scope of application to this case
A Constitution Bench of this Court in State of Tamil Nadu  Ors
vs L Abu Kavur Bai  Ors has expressed the view that the Act giving effect to Article 39b  c is pro tected if a reasonable nexus is established
In that view of the matter I agree having regard to the true nature and character of the legislations that the impugned legislations are not colourable legislations in the sense that there was no direct and reasonable nexus with Article 31b  c of the Constitution
557 On the other aspects of the matter I agree with re spect with the conclusion indicated in the judgment of Justice Venkatachaliah
VENKATACHALIAH J 1
In these two writ petitions invok ing Article 32 of the Constitution of India the Tinsukia Electric Supply Company Limited and the Dibrugarh Electric Supply Company Limited which are licensees under the 19 10 for the supply of electricity within the areas of the municipal boards of Tinsukhia and Dibrugarh towns respectively in the
State of Assam and the share holder Managing Directors of the two companies assail the constitutional validity of the Indian Electricity Assam Amendment Act 1973 and of the Tinsukia and Dibrugarh Electric Supply Undertaking Acquisition Act 1973
By the latter enactments the undertakings of the two companies were sought to be acquired so as to vest them in the Govern ment with effect from 279
The petitioners also urge in the petitions a challenge to the validity of the Twentyfourth and Twenty fifth Amend ments to the Constitution
This part of the petition in view of the subsequent pronouncements of this court on these amendments does not survive
The petitioner companies are Public Limited Companies registered under the Indian Companies Act 1913 and are existing companies under the with their registered offices at Tinsukhia and Dibrugarh respectively in the State of Assam
The two companies Tinsukhia Electric Supply Company Ltd and the Dibrugarh Electric Supply Company Ltd hereinafter referred to respectively as the Tinsukhia Co  and Dibrugarh Co  were granted licences under the provisions of the  1910 Act for short for supply of electricity within the respective licenced areas viz of the Tinsukhia and Dibru garh Municipal Boards
The Dibrugarh Company  was granted the Dibrugarh Electricity Licence 1928  on terms and conditions particularised in the grant incorporating inter alia an option to the State to purchase the undertaking on the expiration of 50 years from 1321928 the date of com mencement of the licence and thereafter on the expiration of every subsequent period of twenty years
The Tinsukhia Company was similarly granted the Tinsuk hia Electricity Licence 1954  incorporating inter alia a condition as to the option exercisable by the State of Assam to purchase the electricity undertaking of the licencee on the expiration of 20 years from 217
1954 the date of commencement of the licence and thereafter on 558 the expiration of every subsequent decennial period
However by two Ordinances namely The Indian Elec tricity Assam Amendment Ordinance 1972 Assam Ordinance VII 1972 and the Tinsukhia  Dibrugarh Electricity Supply Undertakings Acquisition ordinance 1972 Assam Ordinance VIII of 1972 promulgated by the Governor in exercise of his legislative powers under Article 2 13 of the Constitution the Electricity Supply Undertakings of the two companies were acquired by and stood vested in the Government with effect from 2330 hrs
on 2791972
Possession and control of the two undertakings were accordingly taken over by the Government of Assam that day
The two ordinances were subse quently replaced by the two corresponding legislative enact ments viz the Indian Electricity Assam Amendment Act 1973 Assam Act IX 1973 and the Tinsukhia  Dibrugarh Electric Supply Undertakings Acquisition Act 1973 Assam Act X of 1973
At the time of filing of the writ petitions the two Ordinances had not been replaced by the legislative meas ures
However after the coming into force of the two legis lative enactments with retrospective effect fromthe date of promulgation of the earlier ordinances petitioners sought and were granted by an order of this Court dated 18121973 leave to amend the petitions so as to direct the challenge against the enactments
An advertence though brief to the factual anteced ents leading upto to the promulgation of the Ordinances and to certain earlier steps taken by the State Government to acquire the said undertakings first by negotiations and later by exercise of the option to purchase is necessary in order to put the grounds of challenge in their proper per spective
Respondent No 4 ie the Assam State Electricity Board it would appear had been expressing its intention to take over the undertaking of the Tinsukia Co by private negotia tions even from the year 1964
Pursuant to and in implemen tation of this proposal the Board had constituted a commit tee of 3 members for assessing the value of the assets of the Tinsukhia s undertaking
On the valuation so made and the inventories so prepared the Board on 2731970 in formed the Tinsukia Co that the Board had approved the valuation of the assets of the undertaking at Rs3054246 excluding the value of the land whose value was later estimated at Rs240000
By letter dated 431971 the Chairman of the Assam State Electricity Board 559 informed Tinsukia Co that the company should immediately signify and communicate its acceptance of the proposal to transfer the undertaking to the Board at the valuation of Rs3300000
The company appears to have tarried and did not signify and communicate its immediate and unqualified acceptance of the offer but appears to have had some coun ter proposal in mind and in the expectation of pursuading the Board to its view requested the Chairman of the Board to visit Tinsukia for holding further discussions in the matter of valuation of the Undertaking
Thereafter the Chairman along with the officers of the Board visited Tinsu kia sometime in June 1971 and held discussion with the company
The company avers that pursuant to these discus sions the Executive Engineer of the Board was asked by the Chairman to prepare a fresh inventory as on 31101971 in collaboration with the company
However the Secretary of the Board sent a communication dated 10121971 to the company to the effect that as the company had not conveyed its concurrence to the offer con tained in the Board s letter dated 2531970 the said offer be treated as withdrawn
Thereafter the Board issued the notice dated 1523 May 1972 to the company conveying the Board s intention to exercise its option of purchasing the undertaking under Section 61 of the 1910 Act read with clause 12iv of the licence on the expiration the term of the licence and accordingly required the company to sell the undertaking to the Board on the expiration of 2191974 when the 20 year period of the licence would come to an end
In response to this notice the company sent its communica tion dated 1781972 seeking confirmation of its expectation that the purchase price for the statutory sale would be determined in accordance with the provisions of section 7A of the 1910 Act and that such price would also be tendered to the company on or before the date of taking over
Nothing further appears to have happened pursuant to this notice to purchase
But as stated earlier the two Ordinances were promulgated on 2791972 for the compulsory acquisition of the undertaking of the company
So far as the Dibrugarh company is concerned similar negotiations for purchase by private negotiations had been initiated and the Chief Engineer of the Board accompanied by the Finance and Accounts Member of the Board visited Dibru garh on 2711965 for discussions as to the valuation of the undertaking
Nothing moved in the matter for some years
However in the communication dated 381970 addressed by the Secretary to Government of Assam Power Electricity Mines and Minerals Department to the Secretary of the 560 Board it was reiterated that Government had decided that the undertaking of the Dibrugarh Co should be taken over by negotiation
While matters remained thus the company s undertaking was taken over on 2791972 pursuant to the two ordinances promulgated by the Governor
We may briefly turn to the provisions of the two enactments which have since replaced the two Ordinances The amendments made to Sections 5 6 and 7A of the  by the Indian Electricity Assam Amendment Act 1973 are substantial and far reach ing
Section 2 of the Amending Act amended Section 5 of the Principal Act by substituting the expression the purchase price of the undertaking in sub sec
2 of Section 5 by the expression an amount 
Section 3 of the Amending Act which amended sub Sec
7 of Section 6 of the Principal Act substituted the words the purchase price  occurring in sub Sec
7 of Section 6 by the words an amount
The amendments brought about by Section 4 of the Amending Act to Section 7 A of the Principal Act were equally substantial
Section 7A of the Principal Act  it may be recalled pro vided that where an undertaking of a licensee not being a local authority was sold under sub Sec
1 of Section 5 the purchase price of the undertaking shah be the market value of the undertaking at the time of purchase or where the undertaking had been delivered before the purchase under sub Sec
3 of Sec 5 at the time of delivery of the undertaking and that if there was any difference of dispute regarding such purchase price the same shall be determined by arbitration
But Section 4 of the Amending Act substitut ed an entirely different provision in the place of the old section 7 A
It substituted book value in place of mar ket price
Sections 52 67 and 7 A of the Principal Act after their amendment read thus Section 52 Where an undertaking is sold under sub section 1 the purchaser shall pay to the licencee an amount in accord ance with the provisions of sub sections 1 and 2 of Section 7 A Sub sec
7 of Section 6 after the amend ment reads Section 67 Where an undertaking is purchased under this section the purchaser shall pay to the license an amount determined in accordance with the provisions of sub sections 1 2 and 3 of Section 7A 561 Section 7A reads 7 A Determination of amount pay able
1 where an undertaking of a licensee is sold under sub section 1 of Sec 5 or purchased under Sec 6 the amount payable for the undertaking shall be the book value of the undertaking at the time of purchase or where the undertaking has been delivered before the purchase under sub Section 3 of Sec 5 at the time of delivery of the undertaking
2 The book value of an undertaking for the purpose of sub section 1 shall be deemed to be the depreciated book value as shown in the audited balance sheet of the licensee under the law for the time being in force of all lands buildings works materi als and plant of the licensee suitable to and used by him for the purpose of the undertak ing other than i a generating station declared by the licensee not to form part of the undertaking for the purpose of purchase and ii service lines or other capital works or any part thereof which have been construct ed at the expense of the consumers but with out any addition in respect of compulsory purchase or of goodwill or any profit which may be or might have been made from the under taking or of any similar consideration
3 Notwithstanding anything contained in any licence or any instrument order agreement or law for the time being in force in respect of any additional sum by whatever name may it be called payable to a licensee for compulsory purchase the licensee shall be entitled only to a solatium of ten per centum of the book value as determined under sub sections 1 and 2 for compulsory purchase of his undertaking under Sec
4 No provision of any Act for the time being in force including the other provi sions of this Act and of any rules made there under or of any instrument including licence have effect by virtue of any of such Acts or any rule made thereunder shall in so far as it is inconsistent with any of the provisions of this section have any effect
 It is material to point out that sub section 3 of Section 1 of the Amending Act provides that the Amending Act shall be deemed to 562 have come into force on 2791972 which was the date of promulgation of the earlier Ordinance
We may now notice some of the material provisions of the Acquisition Act ie Assam Act X of 1973
Section 13 provides that the Act shall be deemed to have come into force on 2791972
Clauses f h j  l of the interpretation clause Sec 2 may be noticed 2f Fixed Assets  includes works spare parts stores tools motor and other vehicles office equipment and furniture 2h Licensee  means the Tinsukia Electric Supply Company Ltd andor the Dibrugarh Electric Supply Company Private Ltd as the case may be 2j Undertaking  means the Tinsukia Elec tric Supply Undertaking owned and managed by the Tinsukia Electric Supply Company Ltd andor the Dibrugarh Electric Supply Undertak ing owned and managed by the Dibrugarh Elec tric Supply Company Private Ltd as the case may be 21 Works  includes electric supply lines and any lands buildings machinery or appara tus required to supply energy and to carry into effect the object of a licence granted under the Electricity Act Section 32 provides 32 Any notice given under any of the provisions of the Electricity Act or the Electricity Supply Act to the licensee for the purchase of the undertaking and in pursuance of which notice the undertaking has not been purchased before the commencement of this Act shall lapse and be of no effect
Explanation There shall be no obliga tion on the part of the Government or the Board to purchase any undertaking in pursuance of any notice given as aforesaid nor shall the service of such notice  be deemed to prevent the Government from taking any pro ceeding de novo in respect of the undertaking under this Act
Section 4 provides 4
Vesting date
The Tinsukia and Dibrngarh Electric Sup 563 ply Undertakings shall be deemed to be trans ferred to and shall vest in the Government on the 27th day of September 1972 at 1130 PM Section 5 provides for the transfer of the undertaking so acquired by Government to the Board
Section 6 provides for the gross amount pay able to the licensee
Gross amount payable to Licensee
1 The gross amount payable to a licensee shall be the aggregate value of the amounts specified below i the book value of all completed works in beneficial use pertaining to the undertaking and taken over by the Government excluding works paid for by consumers less depreciation calculated in accordance with Schedule I ii the book value of all works in progress taken over by the Government exclud ing works paid for by consumers or prospective consumers iii the book value of all stores including spare parts taken over by the Gov ernment and in the case of used stores and spare parts if taken over such sums as may be decided upon by the Government iv the book value of all other fixed assets in use on the vesting date and taken over by the Government less depreciation calculated in accordance with Schedule I v the book value of all plants and equipments existing on the vesting date if taken over by the Government 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 licensee less depreci ation calculated in accordance with Schedule I vi the amount due from consumers in respect of every hire purchase agreement referred to in Sec
7iii less a sum which bears to the difference between the total amount of the instalments and the original cost of the material or equipment the same proportion as the amount due bears to the total amount of the instalments 564 vii any amount paid actually by the licensee in respect of every contract referred to in Section 7iiii
Explanation The book value of any fixed asset means its original cost and shall com prise i the purchase price paid by the licensee for the asset including the cost of delivery and all charges properly incurred in erecting and bringing the asset into benefi cial use as shown in the books of the under taking ii the cost of supervision actually incurred but not exceeding fifteen per cent of the amount referred to in paragraph i Provided that before deciding the amounts under this subsection the licensee shall be given an opportunity by the Govern ment of being heard after giving him a notice of at least 15 days therefor
2 In addition a sum equal to 10 per cent of the amounts assessed under Clauses i to iv of sub section 1 shall be paid to the licensee by the Government
3 When any asset is acquired by the licensee after the expiry of the period to which the latest annual accounts relate the book value of the asset shall be such as may be decided upon by the Government Provided that before deciding the book value of any such asset the licensee shall be given an opportunity by the Government of being heard after giving him a notice of at least 15 days therefor
Section 7 provides 7
Vesting of undertakings
1 The property rights liabilities and obligations specified below in respect of the undertaking shall vest in the Government of the vesting date i all the fixed assets of the licensee and all the documents relating to the under taking 565 ii all the rights liabilities and obligations of the licensee under hire pur chase 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 licensee under any other contract entered into bona fide before the vesting date not being a contract relating to the borrowing or leading of money or to the employment of staff
2 All the assets specified in sub Section 1i shall vest in the Government free from any debts mortgages or similar obligations of the licensee or attaching to the undertaking Provided that such debts mortgages or obligations shall attach to the amount payable under this Act for the assets
3 In the case of an undertaking which vests in the Government under this Act the license granted to it under part II of the Electricity Act shall be deemed to have been terminated on the vesting date and all the rights liabilities and obligations of the licensee under any agreement to supply elec tricity entered into before that date shall devolve or shall be deemed to have devolved on the Government Provided that where any such agreement is not in conformity with the rates and condi tions of supply approved by the Government and in force on the vesting date the agreement shall be voidable at the option of the Govern ment
4 In respect of any undertaking to which Sec
4 applies it shall be lawful for the Government or their authorised representa tive on and
after the vesting date after removing any obstruction that may be or might have been offered to take possession of the entire undertaking or as the case may be the fixed assets and of all documents relating to the undertaking which the Government may require for carrying it on
5 All the liabilities and obliga tions other than those vesting in the Govern ment under sub Sections 1 and 3 shall continue to be the liabilities and obligations of the licensee after the vesting date
Explanation
All liabilities and obligations in respect of 566 staff taxes provident fund employees  state Insurance Industrial disputes and all other matters upto and including the vesting date shall continue to be the liabilities and obligations of the licensee after the vesting date
Section 9 provides 9
Deductions from the gross amount
The Government shall be entitled to deduct the following sums from the gross amount payable under this Act to a licensee a the amount if any already paid in ad vance b the amount if any specified in Sec 8 c the amount due if any including interest thereon from the licensee to the Board for energy supplied by the Board before the vesting date d all amounts and arrears of interest if any thereon due from the licensee to the Government e the amount 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 amount of such loss being deemed to be the amount by which the market value of such property or rights exceeds the amount payable therefor under this Act to gether with any income which might have been realized by the Government if the property or rights had been handed over on the vesting date f the amount of all loans due from the licensee to any financial institutions consti tuted by or under the authority of the Govern ment and arrears or interest if any there on 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 licensee to the Government less the amounts which according to the books of the licensee are due from the consumers to the licensee for energy supplied by him before that date h all advances from consumers and prospec tive consum 567 ers and all sums which have been or ought to be set aside to the credit of the consumers  fund in so far as such advances or sums have not been paid over by the licensee to the Government i the amounts remaining in Tariffs and Dividends Control Reserve Contingencies Reserve and Development Reserve in so far as such amounts have not been paid over by licen see to the Government j the amount if any as specified in Ss
112 and 113 k the amount if any relating to debts mortgages or obligations as mentioned in proviso to sec
72 Provided that before making any deduc tion under this section the licensee shall be given a notice to show cause against such deduction within a period of fifteen days from the date of receipt of such notice
Section 10 enables the Government to appoint by order in writing a person having adequate knowledge and experience in matters relating to accounts as Special Officer to assess the net amount payable under this Act after making the deductions enumerated in section 9
Section 20 provides 20
Arbitration
1 Where any dispute arises in respect of any of the matters speci fied below it shall be determined by an arbitrator appointed by the Government who shall be a sitting or retired District or High Court Judge a whether any property belonging or any right liability or obligation attaching to the undertaking vests in the Government b whether any fixed asset forms part of the undertaking c whether any contract or hire pur chase agreement or other contract referred to in SEC
71ii or iii has been entered into bona fide or not d whether any agreement to supply electricity entered into by the licensee prior to the vesting date is of the nature referred to in proviso to section 73
568 2 Subject to the provisions of this section the provisions of the Central Act 10 of 1940 shall supply to all arbitrations under this Act
Section 23 of the Act incorporates a declaration to the effect that the legislation is for giving effect to the policy of the State to secure the principle of State Policy contained in Article 39b of the Constitution of India
The two legislations one amending the provisions of Sections 52 67 and 7 A of the  and the other providing for the acquisition of the two undertakings are challenged by the petitioner on several grounds the principal attack however being that the legislations brought forth as they were in the wake of the private negotiations and the exercise of the option to purchase are not bona fide but constitute a mere colour able exercise of the legislative power and that at all events the real objects of the two legislations have no direct and reasonable nexus to the objects envisaged in clause b of Article 39 of the Constitution and that a careful and critical discernment of the context in which the legislation was brought forth would lay bare before the judicial eye that what was sought to be acquired was not the undertakings of the two companies but really the differ ence between the market value of the undertakings which the State has agreed under the private treaties to pay and what in any event the State was obliged to pay under the provisions of Section 7A as it then stood on the one hand and the Book Value of the undertaking which the law seeks to substitute on the other
If the protective umbrella of Article 31 C is thus out of the way the amount  payable under the impugned law it is urged would be illusory even on the judicially accepted tests applied to Article 312 as it then stood
The validity of some of the specific provi sions of the acquisition law which excluded certain items from valuation and envisaged and authorised certain deduc tions in the amount are also assailed
These writ petitions were heard along with a batch of writ petitions viz WP Nos
5 14 and 15 of 1974 where the constitutionality of an analogous statute of the State of Tamil Nadu was assailed by the companies whose undertak ings were similarly sought to be acquired and civil appeal No 243 of of 1985 and CA 4113 of 1985 arising out of the Judgment dated 2071984 of the High Court of Bombay striking down certain amendments to the  made by the Maharashtra State Legislature in the matter of statutory purchase of some of the private 569 electricity supply undertakings in the State of Maharashtra
The three batches of cases arising from Assam Tamil Nadu and Maharashtra were heard together as there were certain aspects common to them
However in view of the distinctiveness and particularities of the facts of the cases and the situational variations even in respect of the legal context in which questions arise for decision the three batches of cases are disposed of by separate Judg ments
The present Judgment disposes of the challenge made to the Assam Legislation
We have heard Shri Soli J Sorabji learned Senior Advocate and Shri Harish Salve learned Advocate for the petitioner in WP 457 of 1972 and Sri Rangarajan learned Senior AdVocate for the petitioner in WP 458 of 1972 and Dr Shankar Ghosh learned Senior Advocate for the State of Assam and Sri GL Sanghi learned Senior Advocate for the Assam State Electricity Board and its authorities
On the contentions urged at the hearing the points that fall for consideration in the writ petitions admit of being formulat ed thus a That the declaration in Sec
23 of Assam Act X 1973 is invalid as the impugned Act has no reasonable and direct nexus to the principles in Article 39b of the Constitu tion and is merely a cloak which the law is made to wear to undo the legitimate obliga tions arising out of the intended statutory sale of the undertakings and accordingly Article 31 C is not attracted
That at all events not every provision of a statute is entitled to the protection of Article 31 C but only those provisions which are basically and essentially necessary for giving effect to the principle in Article 39b and that accordingly the provisions in the impugned law relating to the determination of the amount do not attract Article 31 C b That in effect and substance the law is not one for the acquisition electricity undertakings but is merely one to acquire a chose in action  and to extinguish the legal rights of the Tinsukhia Co for the difference between the market price of the undertakings which the State was obliged to pay under the intended statutory purchase and the Book Value to which the liability is sought to be limited under the impugned legislations
c That if the immunity under Article 31 C for the legis 570 lations is not available the amount  payable in accordance with the provision of the ac quiring law is wholly illusory and is an attempt to take away a fortune for a far thing 
And accordingly the law is ultra vires and violative of Article 312 of the Consti tution as it then stood
Payment of Book Value of the assets acquired irrespective of their market value  renders the amount  unreal and illusory
d That the exclusion of service lines which are part of the assets of the licensee as from valuation renders the law unconstitutional and ultra vires
e That the provision of Section 9i for the deduction of the Reserves  from the Amount in addition to the takingover of the same in the form of fixed assets  and the omission to value the unexpired period of licence are unreasonable and arbitrary
f That the continued liability of the petitioner licensee under Section 113 for payment to employees retrenched by Government after the vesting date and the provision for deduction of such sums from the Amount payable for the acquisition are arbitrary and unreasonable
g That while Section 75 makes all the liabilities of the licensee other than those specifically referred to and expressly taken over by Government under the Act as the continuing liabilities of the licensee yet some of those liabilities referred to in clauses c d and f of Section 9 are yet made deductible from the Amount without the corresponding express obligation on the part of the Government to hold the sums so deducted in trust for and for benefit of the concerned creditors and without statutory discharged to the petitioner in that behalf
This is unjust enrichment
h That there is no machinery envisaged by and set up under the Act  to adjudicate upon and determine either the amounts deducti ble under clauses c d and e of Section 9 or the loss deductible under Section 8
This renders the provisions of the Act  intracta ble and liable to be declared unworkable
571 i That Section 20 limits arbitrabili ty only to matters enumerated in clauses a to d of that section leaving many other disputes arising under the Act  between the Government and the licensee without any ma chinery for their resolution also rendering the Act  unworkable
The contentions noticed at a b and c cover amongst them certain overlapping areas
The central attack however remains that Assam Act X of 1973 has no reasonable and direct nexus with the effectuation of the principles envisaged in clause b of Article 39 of the Constitution and that the relationship of the impugned legislation to the objects of Article 39b being merely remote and tenuous the legislation is a colourable legislation
The contentions are however noticed distinctively to make due acknowledge ment for the shifts of emphasis in the course of the argu ments
In this case the legal and constitutional position has to be examined with reference to the provisions of the Constitution as they stood as in 1972
Article 31C was inserted by the 25th Amendment with effect from 2041972 prior to its more comprehensive expansion to extend its protection to the laws giving effect to All or any of the provisions laid down in Part IV  brought about by the Con stitution Fortysecond Amendment 1976
Article 31C gave protection in respect of a law giving effect to the policy of the State towards securing the principles specified in clause b or clause c of Article 39
Then again though Article 31 had not by then been deleted its content had been cut down so much so that even under a law providing for acquisition of property which did not have the protec tion of 31C the adequacy of the Amount determined was not justiciable and all that was necessary was that it should not be unreal or illusory
By then the Constitution had done away with the idea of a Just equivalent or full idemnifica tion principle and substituted therefore the idea of an Amount and rendered the question of the adequacy or the inadequacy of the amount non justiciable
The Indian Constitutional experiments with the right to property  offer an interesting illustration of how differ ences in the interpretation of the fundamental law sometimes conceal or perhaps expose conflicts of economic idealog ics and philosophies
With the right to property conceived of as a fundamental fight at the inception of the Constitu tion it found so strong an entrenchment that in its pris tine vigour it tended to be overly demanding and sought the sacrifice of too many social and economic goals at its alter and made 572 the economic cost of social and economic change unaffordably prohibitive and the fulfilment of the constitutional ethos of the promise of an egalitarian social order difficult
Inevitably the constitutional process of de escalation of this right in the constitutional scale of values commenced culminating ultimately in the deletion of this right from the fundamental rights part
Articles 31 A and 31 C were significant Constitutional milestones in the harnessing and socialisation of the concept of the right to property which in its laissez faire trappings became an unruly horse
Article 31 C in effect and substance is to urban property what Article 31 A is to agricultural property
The arguments in this case in regard to what if at all survives for judicial scrutiny in the matter of the Constitutional tests of the validity under Article 312 of the amount  if the law has the protection of Article 31C were marked by a forensic resourcefulness aimed at a resus citation and re kindling of the relics and embers of old and hard fought but lost legal battles
Sri Rangarajan learned Senior Advocate relying upon the construction suggested by him of certain observations of Chandrachud J in the Keshavananda case and certain observations of Fazl Ali J in State of Tamil Nadu vs Abu Kavur Bai  strenuously and quite seriously attempted the exercise that even if a law had the protection of Article 31C yet the court would be required when the provision is challenged to go into the question of the Amount being illusory or the principles for its determina tion being arbitrary
Learned Counsel further propounded that despite Article 31 C the burden of proving that the amount is not illusory and principles for its determination not arbitrary is on the State
We may excerpt the substance of the contention from the written submissions filed by Sri Rangarajan   
Therefore where the law provides for compensation fin spite of the same being protected by Article 31 C the Court can go into the question of the amount being illusory or the principles being arbitrary
Not merely that the burden of providing that the amount is not illusory and the principles are not arbitrary is on the State
 We shah later examine how far this contention is at all available in the light of the authoritative pronouncements of this Court on the effect of Article 31C and whether if a law has such protection the plenitude of its constitutional immunity would not extend to all attacks based on Articles 14 19 and 31 as it then stood
573 We may now examine the contentions seriatim
Contentions a and b admit of being dealt with together
Re Contentions a and b Shri Soli J Sorabjee submitted that in the present case notwithstanding the legislative declaration in Sec
23 of Assam Act X of 1973 the question whether there is any real nexus between the legislation and the principles envisaged in Article 39b is justiciable and indeed the existence of such nexus or connection is a condition precedent for the attraction and applicability of Article 31 C Learned Coun sel submitted that in order to decide whether a Statute is within Article 31 C or not the Court has to examine the nature and character of the legislation and if upon such scrutiny it appears that there is no nexus between the legislation and the principles in Article 39b the legisla tion must be held to fall outside the protection of Article 31 C Shri Sorabjee said stripped of its veils and vest ments the law would show its real nature as one whose avowed nexus to Article 39b is merely a pretence and that its purpose is other than the objects envisaged in Article 39b
The validity of the legislation learned counsel says would have to be examined independently of the immuni ty under Article 31C
The proposition that the legislative declaration of the nexus between the law and the principles in Article 39 is in conclusive and justiciable is well settled
Indeed that part of Article 31 C which sought to impart a Constitutional sanctity conclusiveness and nonjusticiability to such legislative declarations was struck down in the Keshavanada case
The sequintor is that whenever any immunity is claimed for a law under Article 31 C the Court has the power to examine whether the provisions of the law are basically and essentially necessary for the effectuation of the principles envisaged in Article 39b and c
The observations of Mathew J in Keshvananda case  may be recalled   
Whenever a question is raised that the Parliament or State Legisla tures have abused their power and inserted a declaration in a law not for giving effect to the State Policy towards securing the direc tive principles specified in Article 39 B or 39 C the Court must necessarily go into that question and decide it    P 855 574   
If the Court comes to the conclusion that the declaration was merely a pretence and that the real purpose of the law is the accomplishment of some object other than to give effect to the policy of the State towards securing the directive principles in Article 39b and c the declaration would not be a bar to the court from striking down any provision therein which violates Article 14 19 or 31
In other words if a law passed ostensibly to give effect to the policy of the State is in truth and substance one for accomplishing an unauthorised object the court would be entitled to tear the veil created by the declaration and decide accord ing to the real nature of the law   P 855 56 Chandrachud J observed in the Keshavananda case  Laws passed under Article 31 C can in my opinion be upheld only and only if there is a direct and reasonable nexus between the law and the directive policy of the State expressed in Article 39 B or C P 996 To the same effect are the observations of the learned Chief Justice in Minerva Mills Ltd vs UOL     the Courts can under Article 31 C satisfy themselves as to the identity of the law in the sense whether it bears direct and reasonable nexus with a directive principle The only question open to judicial review under the unamended Article 31 C was whether there is a direct and reasonable nexus between the impugned law and the provisions of Article 39b and c P 261 Emphasis Supplied In the same case Bhagwati J observed   
The point that I wish to emphasis is that the amended Article 31 C does not give protection to a law which has merely some remote or tenuous connection with a directive principle 575   
Even where the dominant object of a law is to give effect to a direc tive principle it is not every provision of the law which is entitled to claim protec tion   P 338    it is not every provision of a statute which has been enacted with the dominant object of giving effect to a direc tive principle that it entitled to protec tion but only those provisions of the statute which are basically and essentially necessary for giving effect to the directive principles are protected under the amended Article 31 C   P 339 Emphasis Supplied 13
The proposition of Sri Sorabjee in principle is therefore unexceptionable but the question remains wheth er upon the application of the appropriate tests the impugned statute fails to measure up to the requirements of the Constitution to earn the protection under Article 31 C Learned counsel sought to contend that the Assam State Electricity Board having exercised the option of purchasing the undertaking of the Tinsukia Co under Section 61 of 1910 Act by the statutory notice dated 2351972 requiring the company to sell the undertaking to the Board on the expiration of the period of the licence the question of any further need to acquire the undertaking for the purpose of effectuating the objects envisaged in article 39b of the Constitution by the expedience of a separate and independent legislation was indeed unreal or non existent
The real object therefore of the enactment of Assam Act X of 1973 it was urged was not to enact a law for purposes of effec tuating the objects envisaged by Article 39b of the Con stitution which had already been accomplished by the exer cise of the option to purchase but was only to deprive the petitioner of its legitimate entitlements under the statuto ry sale
What was sought to be acquired by the impugned law it is contended was not the undertaking but the difference between the Market price  and the Book value  which the impugned legislation envisaged
It is urged that the purpose of the impugned law is therefore something other than the effectuation of principles in Article 39b
It is also urged that with the exercise of the option to purchase what remained to
be acquired and what really was sought to be acquired was a mere actionable claim or a chose in action
It is further urged that at all events since not all the provisions of a legislative enactment need necessarily qualify for protection of Article 31 C but only those provi sions that have a direct nexus with the principles of Arti cle 39b the 576 provisions in the impugned legislation touching the determi nation of the quantum of the Amount are not so protected as they are intended merely to inter dict and extinguish the vested rights of the Tinsukhia Co under the intended statu tory sale
The object of the legislation it was urged was not the legitimate one of securing the objects envisaged in Article 39b but a less honourable and less sanctimonious one of depriving the petitioner of the benefit of the statu tory contract for the sale of the undertaking pursuant to and in terms of the statutory notice dated 2351972
The court so goes the argument is entitled to pierce the apparent veil under which the acquiring legislation masquer ades as one for securing the object of Article 39b
Dr Shankar Ghosh and Sri GL Sanghi for the State of Assam and the Assam State Electricity Board
the contest ing Respondents however say that the Assam Act X 1973 is entitled to the protection of Article 31 C as indisputably Electrical energy is a material resource of the community and any legislative measure to nationalise the undertaking falls squarely within the ambit of Article 39b
Any appeal by the petitioner to the doctrine of colourable legislation they say is wholly inapposite as indeed where as here legislative competence is undisputed any speculation as to the motives of the legislative is impermissible
No mala fides could be attributed to the Legislature
Respondents further submit that on the question of even the possible illusory  nature let alone the adequacy of the Amount could not be agitated if the law has the protection of Article 31 C They however assert that Book value  is a well accepted accountancy concept of value and could never be characterised as illusory even if the law did not come under Article 31 C
The questions that arise for consideration are sequen tially whether the electrical energy generated and supplied by the petitioner companies is a material resource of the community within the meaning of Article 39b whether the impugned legislation has a reasonable and direct nexus to the objective of distributing this materials resource so as to subserve the common good and what are the appropriate tests to ascertain this nexus
The incidental questions that arise on certain specific contentions centre around the effect of the option to purchase the undertaking exercised by the Assam State Electricity Board in the case of Tinsukia Co and whether immediately upon the exercise of the option the proprietory rights respecting the undertaking of the company get transformed into a mere actionableclaim or chose in action as contended for by the petitioners
577 Apropos of the contention that at all events the provi sions pertaining to the amount could have no reasonable or direct nexus to the principles envisaged in Article 39b but are merely intended to extinguish the legitimate rights of the petitioner company to receive the price of the under taking under the 1910 Act as the law then stood pursuant to the option exercised by the Board  it would perhaps be necessary to ascertain the composite elements that make for a law of nationalisation and whether provisions touching the quantification of the amount payable for the acquisi tion are not an essential and integral part of such law
On the contention urged by Shri Rangarajan as to what could be said to survive for consideration under Article 312 as it then stood if the law has the protection of Article 31 C the question that arises is whether anything at all survives for consideration under Article 31
The conten tion indeed runs in the teeth of several pronouncements of this Court which lay down that when Article 31 C comes in Articles 14 19 and 31 the last mentioned article as it then stood go out
This we will consider under point c
It is not disputed that the electricity generated and distributed by the undertakings of the petitioner compa nies constitute material resources of the community for the purpose and within the meaning of Article 39b
In Sanjeev Coke Manufacturing Company vs Bharat Coking Coal Ltd  this Court referring to what constitute material resources of the community and whether resources produced by or at the command of private as distinguished from the State agencies constitute such resources as the resources of the community noticed the contention urged in that case thus   
The submission of Shri AK Sen was that neither a coal mine nor a coke oven plant owned by private parties was a material resources of the community 
Accord ing to the learned counsel they would become material resources of the community only after they were acquired by the State and not until then
In order to qualify as material re sources of the community the ownership of the resources must vest in the community ie the State  
A law providing for acquisition was not a law for distribution   P 1022 578 Repelling this argument which suggested a limited concept of Material resources of the Community the Court observed   
We are unable to appreciate the submission of Shri Sen The expression material resources of the community  means all things which are capable of producing wealth for the community
There is no warrant for interpreting the expression in so narrow a fashion as suggested by Shri Sen and confine it to public owned material resources and exclude private owned material resources
The expression involves no dichotomy    P 1022  23 It can therefore hardly be gain said that the electri cal energy generated and distributed by the undertakings of the petitioner constitutes material resources of the commu nity
This takes us to the question whether the provisions of the impugned Assam Act X 1973 have any reasonable and direct nexus to the principles in Article 39b of the Constitution
It is true that if such a relationship is merely remote and tenuous the protection under Article 31 C may not be available
The idea of distribution of the mate rial resources of the community in Article 39b is not necessarily limited to the idea of what is taken over for distribution amongst the intended beneficiaries
That is one of the modes of distribution
Nationalisation is another mode
In State of Tamil Nadu vs L Abu Kavur Bai  this Court had occasion to refer to this aspect
It was held In other words the word distribu tion  does not merely mean that property of one should be taken over and distributed to others like land reforms where the lands from the big landlords are taken away and given to landless laboureft  
That is only one of the modes of distribution but not the only mode   By nationalising the transport as also the units the vehicles would be able to go the farthest comer of the State and pene trate as deep as possible  This would undoubtedly be a distri bution for the common good of the people and would be clearly covered by clause b of Article 39
 579 On an examination of the scheme of the impugned law the conclusion becomes inescapable that the legislative measure is one of nationalisation of the undertakings and the law is eligible for and entitled to the protection of Article 31 C 16
It was then contended that not all the provisions of a law can and need be eligible for the protection of Article 31 C and that accordingly in the present case the provi sions as to the quantification of the amount which were meant to achieve an oblique motive of interdicting and extinguishing the vested rights of the petitioner company to receive payment in accordance with the provisions of the 1910 Act as they then stood should not have the protection of Article 31 C
We are afraid this contention proceeds on an impermissible dichotomy of the components integral to the idea of nationalisation
The economic cost of social and economic reform is perhaps amongst the most vexed problems of social and economic change and constitute the core ele ment in Nationalisation
The need for constitutional immuni ties for such legislative efforts at social and economic change recognise the otherwise unaffordable economic burden of reforms
The observations of Mathew J in Keshavananda case on the point are worth recalling If full compensation has to be paid concentration of wealth in the form of immova ble or movable property will be transformed into concentration of wealth in the form of money and how is the objective underlined in Article 39b and c achieved by the trans formation And will there be enough money in the coffers of the State to pay full compensa tion   
I am unable to understand the purpose of substituting the word amount  for the word compensation  in the sub Article unless it be to deprive the Court of any yard stick or norm for determining the adequa cy of the amount and the relevancy of the principles fixed by law
I should have thought that this coupled with the express provision precluding the Court from going into the adequacy of the amount fixed or determined should put it beyond any doubt that fixation of the amount or determination of the princi ple for fixing it is a matter for the Parlia ment alone and that the Court has no say in the matter 1973 Supp
SCR 1 at page 846 It is therefore not possible to divorce the economic considera 580 tions or components from the scheme of nationalisation with which the former are inextricably integrated
The financial cost of a scheme of nationalisation lies at its very heart and can not be isolated
Both the provisions relating to the vestiture of the undertakings in the State and those per taining to the quantification of the Amount are integral and inseparable parts of the integral scheme of nationalisa tion and do not admit of being considered as distinct provi sions independent of each other
The memorandum of the writ petition contains aver ments as to the efficiency and public utility of the serv ices rendered by the undertakings and that on the date of the take over the market value of the Tinsukhia and Dibru garh undertakings were Rs55 lakhs and Rs35 lakhs respec tively and that
the undertakings were discharging their obligations to the consumers efficiently and satisfactorily
The case of the petitioners is that there was no justifica tion at all for the nationalisation as the undertakings were efficient and fully catered to the needs of the consumers
It was also averted that it was the Government and the Board the had come in the way of the expansion envisaged by the undertakings by withholding the requisite permission for the installation of additional capacity for generation of elec tricity
The Respondents have sought elaborately to traverse these grounds and to justify the measure for nationalisa tion
We are afraid the debate whether nationalisation is by itself to be considered as fulfilling a public purpose or whether the nationalisation should be shown to be justified by the actual effectuation of the avowed objectives of such nationalisation the choice between the pragmatic and the doctrinaire approaches is concluded and no longer avail able
In Akadasi Padhan vs State of Orissa and Ors
  this debate on the philosophy of nationalisa tion is concluded
was held   
Broadly speaking this discussion discloses a difference in approach
To the socialist nationalisation or State ownership is a matter of principle and its justification is the general notion of social welfare
To the rationalist nationalisation or
State ownership is a matter of expediency dominated by considerations of economic effi ciency and increased output of production     
The amendment made by the Legislature in article 196 shows that according to the Legislature a law 581 relating to the creation of State monopoly should be presumed to be in the interests of the general public     
In other words the theory underlying the amendment in so far as it relates to the concept of State monopoly does not appear to be based on the pragmatic ap proach but on the doctrinaire approach which socialism accepts  
Indeed in the United States of America after the hey days of the substantive due process the Supreme Court in 1963 in Ferguson vs Skrupa  said We refuse to sit as a superlegis lature to weigh the wisdom of legislation  and we emphatically refuse to go back to the time when courts used the Due Process Clause to strike down state laws regulatory of business and industrial conditions because they may be unwise improvident or out of harmony with a particular school of thought   
Whether the legislature takes for its textbook Adam Smith Herbert Spencer Lord Keynes or some other is no concern of ours Emphasis Supplied 18
Equally untenable is the contention based on the assumption that immediately upon the exercise of the option to purchase the proprietory rights of the Tinsukhia Company in relation to the undertaking stood transformed into and was crystalised in the form of a mere actionable claim or a chose in action and that therefore what was sought to be acquired by the present legislative measure was merely a chose in action
It was contended that no public purpose is achieved by the acquisition of a chose in action
This needs examination of the legal character and incidents of the consequences that flow from the exercise of the option to purchase under the 19 10 Act
The contention presupposes that contemporaneous with the service of the notice on the licensee the proprietory rights of the licensee in relation to the undertaking proprio vigore get transformed into a mere chose in action
This consequence does not flow from the pro visions of 1910 Act
In Fazilka Electric Supply Company Limited vs The Commissioner of Income Tax Delhi 1962 Supp
3 SCR 496 this court referring to the nature of the transaction emerging from the exercise of the option said 582 It merely provides for an option of purchase to be exercised on the expiration of certain periods agreed to between the parties and section 10 further provides that in an appropriate case Government may even forego the option
This section does not provide for a compulsory purchase or compulsory acquisi tion without reference to and independently of any agreement by the licencee
 See Page 505
Emphasis Supplied In Gujarat Electricity Board vs Shantilal  referring to the legal conse quences that ensue by a mere exercise of the option it was held   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 elec tion within the period prescribed in sec
74 and issue a notice as required by that sub section    Emphasis Supplied That the right title and interest of the licensee in the undertaking does not get transferred to the Board or the State as the case may be immediately upon the mere exer cise of the option to purchase is further clear from what is implicit in the observa tions of this Court in Godra Electricity Company Limited and another vs The State of Gujarat and another  at page 54
The proposition contended for by the Learned Additional Solicitor General in that case was noticed thus In support of the contention that when once the notice exercising the option to purchase the undertaking has been served the licensee has no further right to carry on the business the learned Additional Solicitor General placed reliance on the decision of this Court in Kalyan Singh vs State of U P    This Court held that the exercise of the option would have no such effect on the licen see s right to carry on his business until the undertaking was actually taken over and paid for
It was held A licensee cannot be told that he has no right to carry on the business unless a valid purchase is made at the expiry of the period    583  
Admittedly the undertak ing belonged to the licencee and if delivery of the undertaking is to be taken by the State Electricity Board the purchase price must be paid before the delivery or there must be a provision for payment of interest on the purchase price for the period during which payment is withheld
Otherwise the licence will not cease to have operation and the licensee wilt be entitled to carry on the business See Page 54
The contentions that immediately upon the exercise of the option ipso facto the relationship between the parties get transformed into one as between a Debtor and a Creditor and that the interest of the licensee in the undertaking becomes an actionableright or a chose in action and that no public purpose could be said to be served by the acquisition of a chose in action are all out of place in this case
It is not necessary therefore to go into the question whether a chose in action can at all be acquired
Certain observations of this Court in Madan Mohan Pathak vs Union of India and Ors  do suggest that chose in action could also be acquired
It will also not be necessary to go into the legal concept of a chose in action in Indian law and its distinctiveness from the principles in English law
Williams on Personal property refers to chose in action thus    another important distinction exists among personal things
Such things are said to be in possession or in action or they are called in law French choses in posses sion or choses in action
Choses in possession are movable goods of which their owner has actual possession and enjoyment and which he can deliver over to another upon a gift or sale tangible things as cattle clothes furniture or the like   The term choses in action appears to have been applied to things to recover or realise which if wrongfully withheld an action must have been brought things in respect of which a man had no actual posses sion or enjoyment but a mere right enforce able by action
The most important personal things recoverable by action only were 584 money due from another the benefit of a contract and compensation for a wrong and these have always been the most prominent choses in action though not the only things to which the term has been applied   see page 29 and 30 Indeed in English law the difficulties in the precise definition of chose in action arise out of the fact that the meaning attributed to the expression has been expanded from time to time by judicial decisions and the principles pertaining to the concept did not develop on any logical or scientific basis
WS Holdsworth also refers to this diffi culty in apprehending the precise incidents of the concept of a chose in action It is sometimes difficult to ascer tain the sense in which the legislature has used the term chose in action we have seen that Bankruptcy Act affords one illustration and as we can see from the case of Edwards vs Dicard the modifications introduced by the Courts have some times occasioned a similar difficulty
Some of these difficulties might be perhaps mitigated by a codifying Act for which there is plenty of material
But it is probable that a branch of the law which comes at the meeting place of the law of property and the law of obligation can never be any thing but difficult to formulate and apply Emphasis Supplied See The History of the treatment of chose inaction by the common law Vol
33 Harvard Law Review 997 at 1030
Petitioners however placed strong reliance upon a decision of the Calcutta High Court in Bihar State Electricity Board vs Patna Electricity Supply Co Ltd and in particular on the following observations of the Division Bench of the High Court in para 22  
The purported acquisition of part of the debt or chose in action by Sections 2ii and 3 of the Bihar Act 7 of 1976 with retrospective effect is therefore without any public purpose
Sections 2ii and 3 also do not provide for payment of compensa tion
In the circumstances it must be 585 held that Sections 2ii and 3 of the Bihar Act 7 of 1976 are ultra vires article 312 of the Constitution
 It is not necessary to consider the correctness of this pronouncement in view of the circumstance that even to the extent the decision goes it is distinguishable
On 511973 the Electricity Board exercised its option to purchase the undertaking
On 221974 the Board paid a sum of Rs3600000 on account to the licensee
On 621974 possession was taken
On 221974 Ordinance 50 of 1974 was promulgated amending Section 7A of the 19 10 Act reducing the price payable under Section 7A to the book value of the assets
This Ordinance was renewed by two successive ordi nances No 83 of 1974 and 123 of 1974
The last ordinance was replace by Bihar Act 15 of 1975
On 1021976 the Indian Electricity Bihar Amendment Act 7 of 1976 was brought into force validating the substitution of Section 6 and 7A made by Bihar Act 15 of 1975 with retrospective effect from 221974
The Validating Act sought to affect the rights and obligations of the parties retrospectively
The High Court was persuaded to the view that the purported acquisition virtually pertained to the debt or chose inaction and not the undertaking itself
It is therefore not necessary to consider the submissions of the learned counsel for the respondent that it does not lay down the law correctly in as much as the arguments based on Article 31 C were neither advanced nor considered in that case
It requires therefore to be held that the impugned legislation viz Assam Act X 1973 was broughtforth for securing the principles contained in Article 39b of the Constitution and is protected under Article 31 C
The amend ment made to the provisions of the  by Assam Act IX of 1973 amending the basis for quan tification of the amount payable in the case of a statutory purchase pursuant to the exercise of the option in terms of the licence would apply to and govern cases of statutory sales and would not assume any immateriality in this case as the Assam Act X of 1973 is itself as we have held a valid piece of legislation
We find therefore no substance in the contentions a and b urged by the petitioner
Re contention C This pertains to the question whether the principles laid down in the Act for determination of the amount payable for the acquisition 586 are so arbitrary as to render the amount unreal and merely illusory
This contention would not in law be available to the petitioners inasmuch as the law providing for the acqui sition has the protection of Article 31 C of the Constitu tion
The arguments of Shri Soli J Sorabjee in regard to the alleged illusory nature of the amount presupposes and proceeds on the premise that the impugned law does not have the protection of Article 31 C Now that we have held that Article 31 C is attracted the argument in regard to the alleged illusory nature of the amount does not survive at all
Shri Rangarajan however contended that notwith standing that a law has the protection of Article 31 C the question would yet be justiciable under Article 312 as it then stood if the amount is illusory or the principles for its determination arbitrary
To support this somewhat difficult proposition Shri Rangarajan relied upon certain observations of Chandrachud J in the Keshavananda case whose import and importance according to the learned coun sel has not been fully and properly comprehended in subse quent cases
The passages relied upon are  
But to say that an amount does not bear reasonable relationship with the market value is a different thing from saying that it bears no such relationship at all none whatsoever
In the later case the payment becomes illusory and may come within the ambit of permissible challenge See para 2 137 at page 2051 of AIR 1973   
Courts would have the powers to question such a law if an amount fixed thereunder is illusory if the princi ples if any are stated for determining the amount are wholly irrelevant for fixation of the amount if the power of compulsory acqui sition or requisition is exercised for a collateral purpose if the law offends Consti tutional safeguards other than the one con tained in Article 191f or if the law is in the nature of a fraud on the Constitution 
See para 2138 at page 2051 of AIR 1973
These observations
Sri Rangarajan says were intended to govern even a law which had the protection of Article 31 C Shri Rangara jan also relied upon certain observations of Fazal Ali J in State of Tamil Nadu vs L Abu Kaur Bai  which say 87
Thus so far as this aspect of the matter is con 587 cerned two conclusions broadly emerge 1 that in view of the express provisions of Article 31 C which excludes article 312 also where a property is acquired in public interest for the avowed purpose of giving effect to the principles enshrined in article 39b and c no compensation is neces sary and article 312 is out of the harm s way and 2 that even if the law provides for compensation the courts cannot go into the details or adequacy of the compensation and it is sufficient for the State to prove that the compensation was reasonable and not monstrous or illusory so as to shock the conscience of the court Emphasis of counsel Sri Rangarajan would say that the observations empha sised would show that even if Article 31 C was attracted yet the State should show that compensation was reasonable and not illusory
We are afraid these passages are quoted out of context and if properly understood were not intended to support the proposition now propounded by Shri Rangarajan
Indeed in the Keshavananda case itself Chandrachud J referring to the effect of Article 31 C observed 
In fact article 31 C is a logi cal extension of the principles underlying article 314 and 6 and article 31A  
The true nature and char acter of article 31 C is that it identifies a class of legislation and exempts it from the operation of articles 14 19 and 31    1973 supp
SCR 1 at 995 Khanna J observed in that case Both articles 31A and 31C deal with right to property
Article 31 A deals with certain kinds of property and its effect is broadly speaking to take those kinds of property from the persons who have rights in the said property
The objective of article 31C is to prevent concentration of wealth and means of production and to ensure the distri bution of ownership and control of the materi al resources of the community for the common good
Article 588 31C is thus essentially an extension of the principle which was accepted in article 31A  page 743 Beg J said Article 31 C has two parts
The first part is directed at removing laws passed for giving effect to the policy of the State towards securing the principles specified in clause b or clause c of Article 39 of the Constitution from the vice of invalidity on the ground that any such law is inconsistent with or takes away or abridges any of the rights conferred by Articles 14 19 and 31 of the Constitution  the effect of invalidity for alleged violations of Articles 14 or 19 or 31 would vanish so long as the law was really meant to give effect to the princi ples of Article 39b and c   In State of Karnataka vs Ranganath Reddy  this Court had occasion to observe   
For the purpose of deciding the point which fails for consideration in these appeals it will suffice to say that still the over whelming view of the majority of judges in Kesavandanda Bharati s case is that the amount payable for the acquired property either fixed by the legislature or determined on the basis of the principles engrafted in the law of acquisition cannot be wholly arbitrary and illusory
When we say so we are not taking into account the effect of Article 31 C inserted in the Constitution by the 25th Amendment leaving out the invalid part as declared by the majority p 653 Emphasis Supplied In Sanjeev Coke Manufacturing Co vs Bharat Coking Coal Company Lt  this Court said   
To accept the submission of Shri Sen that a law rounded on discrimination is not entitled to the protection of Article 31 C as such a law can never be said to be to further the Directive Principle affirmed in article 39b would indeed be to use a hack neyed phrase to put the cart before the horse
If the law made to further the Direc tive Principle iS necessarily non discrimina tory or is based 589 on a reasonable classification then such law does not need any protection such as that afforded by article 31 C
Such law would be valid on its own strength with no aid from article 31 C
To make it a condition precedent that a law seeking the haven of article 31 C must be non discriminatory or based on reasonable classification is to make article 31 C meaning less   p1019 We are firmly of the opinion that where article 31 C comes in article 14 goes out   p 1021 What applies to Article 14 would equally apply to Article 31 as it then stood before its deletion by the Constitution Fortysecond Amendment Act 1978
In State of Tamil Nadu vs L Abu Kavur Bai  on which Shri Rangarajan relied Fazal Ali J categorily said It is manifest from a bare reading of the newly added article 31 C that any law effectuating the policy of the State in order to secure or comply with the directive princi ples specified in clauses b and c of article 39 would not be deemed to be void even if it is inconsistent with or violates Articles 14 19 or 31    P 332 In the same case Fazal Ali J further said  
If once the conditions mentioned in Article 31C are fulfilled by the law no question of compensation arises because the said Article expressly excludes not only Arti cles 14 and 19 but also 31 which by virtue of the 25th amendment had replaced the word amount  for the word compensation  in Arti cle 312    p 334 Emphasis supplied Sri Rangarajan cannot therefore draw any sustenance from Fazal Ali J for his argument
Sri Rangarajan then placed reliance on the following observa 590 tions of Krishna Iyer J in Gwalior Rayon vs UOL   the legislature is expected except in exceptional socio historical set ting to provide just payment for the deprived persons
To exclude judicial review is not to block out the beneficient provisions of Arti cles 14 19 and 31 p 695 But we see nothing in these observations which can lend support to justiciability of an alleged violation of Article 31 by a law protected under Article 31 C Ideally perhaps it may not be just to deprive a recompence that is just and fair in all cases
But that is not to say that even under a law which has the protection of 31 A or 31 C the adequacy or justness or fairness of the compensation would yet be justiciable
The contention of Shri Rangarajan in our opinion is wholly unsupportable
Indeed the purpose of Article 31 C is amongst others to exclude Article 31 as it then stood
The effect of accepting Sri Rangarajan s contention would be to let in Article 31 by the backdoor frustrating the very object of Article 31 C and to unsettle the law laid down in a series of authoritative pronouncements of this Court
The contention really is not available to the petitioners at all
Even if the impugned law did not have the protection of Article 31 C a hypothesis on which contention c is based the adequacy or inadequacy of the amount is not justiciable
The limitations of the courts  scrutiny explic it in Article 312 are referred to by Mathew J in the Keshavananda case   the word amount  conveys no idea of any norm
It supplies no yard stick
It furnishes no measuring rod
The neutral word amount  was deliberately chosen for the purpose
I am unable to understand the purpose in substituting the word amount  for the word compensation  in the sub article unless it be to deprive the Court of any yard stick or norm for determining the adequacy of the amount and the relevancy of the principles fixed by law para 1765 Referring to what might yet be open to judicial scrutiny under 591 Article 31b Shelat and Grower JJ observed in the Keshavananda case But still on the learned Solicitor General s argument the right to receive the amount continues to be a fundamen tal right
That cannot be denuded of its iden tity
The obligation to act on some principle while fixing the amount arises both from Article 312 and from the nature of the legislative power for there can be no power which permits in a democratic system an arbi trary use of power But the norm or the principle of fixing or determining the amount  will have to be disclosed to the Court
It will have to be satisfied that the amount  has reasonable relationship with the value of the property acquired or requestioned and one or more of the relevant principles have been applied and further that the amount  is neither illusory nor it has been fixed arbitrarily nor at such a figure that it means virtual deprivation of the right under Article 312
The question of adequacy or inadequacy however cannot be gone into Justice Chandrachud observed The specific obligation to pay an amount  and in the alternative the use of the word principles  for determination of that amount must mean that the amount fixed or determined to be paid cannot be illusory
If the right to property still finds a place in the Constitution you cannot mock at the man and ridicule his right
You cannot tell him I will take your fortune for a farthing 
All the same the concept of Book Value is an accepted accountancy concept of value
It cannot be held to be illusory
In Eswari Khetan Sugar Mills vs State of UP  at page 359 it has been held that even the concept of written down value which is more disadvantageous to the owner than the Bookvalue is not irrelevant   
This Court has in terms accepted that payment of compensation on the basis of written down value calculated accord ing to the income tax law for used 592 machinery is not irrelevant as a principle for determining compensation
That principle appears to have been adopted for valuing used machinery though the legislation fixes compen sation payable to each undertaking in round Sum   28
Accordingly even if the impugned law had no protec tion of Article 31 C and tests appropriate to and available are applied in the circumstances of this case it cannot be said that the principles envisaged in the impugned law lead to an amount which can be called unreal or illusory
Contention c is accordingly held and answered against the petitioners
Re Contention d This point is again available only if the impugned law is outside Article 31 C
The contention that Service Lines which are expressly excluded from the valuation do consti tute the property of the licensee and their exclusion from valuation would make the principles for determination of the amount  arbitrary does not have much to commend it
Learned counsel for the petitioner placed reliance on the definition of works  in Section 2n of the 1910 Act and on the pronouncement of this Court in Calcutta Electric Supply Corporation vs Commissioner of Wealth tax  The question in that case was whether in the computation of net wealth of the licensee the Service lines should be included
That was a converse case where the licensee rely ing upon the statutory provisions of the Electricity Act contended that Service lines were not a part of his wealth
This Court negatived that contention for purposes of assessment to wealth tax
Learned counsel placed some store by this pronouncement to contend that the exclusion of this wealth  from valuation is arbitrary
But in our opinion the pronouncement relied upon does not advance petitioners  case on the point
While it is true that the expression works  in Section 2n of the 1910 Act includes Service lines  the reason why Service lines  could justifiably be excluded from valuation for purposes of determination of the amount  is indicated in page 166 the report It is true that in view of Sec 7A2 of the Electricity Act in computing the market value of the undertaking sold under sub section 1 of section 5 of that Act the value of service lines which had been con structed at the expense 593 of the consumers will not be taken into con sideration
The reason for this provision is obvious
It will be the duty of the new licen see to not only maintain and repair those lines but also to replace them when they become unserviceable
 Under the law when a requisition is made by an intend ingconsumer for electrical energy the licensee has an obligation tO lay down Service lines
But according to the provisions the entire cost of service line is not required to be borne by the licensee
The licensee is entitled to call upon the consumer to pay part of the cost of service line which may in a given case amount to a substantial part in accordance with the provisions in the Schedule to the Electricity Supply Act
Dealing with a similar provision the Gujarat High Court in Dakor Umreth Electricity Company Ltd vs State of Gujarat  13 Gujarat Law Reporter 88 at page 106 held  
The question is whether the exclusion of such service lines from the valuation can be said to have rendered the principle of compensation irrelevant or inap propriate
We do not think so  
The petitioner is not constituted the owner of these service lines for all purposes
More over even after the purchase these service lines would continue to be utilised for sup plying electrical energy to the consumers who paid for them
It would be most inequitable in these circumstances to provide for payment of compensation to the petitioner for these service lines
There is no reason in logic or principle why the petitioner should be allowed to make unjust and undeserved profit from transfer of these service lines for which it has paid nothing and which are not the product of its own labour    This reasoning if we may say so with respect is sound and should be accepted
Contention d is therefore insub stantial and is answered against the petitioners
Re Contention e The apprehensions of the petitioners on this point is that while under Section 91i of the impugned Act X of 1973 Government 594 would be entitled to deduct from the amount  such sums as remain in the Tariffs and Devidend Control Reserve Contingency Reserve and the Development Reserve in so far as such amounts have not been paid over by the licensees to the Government the provision however does not take into account and provide for cases where such reserves are invested in fixed assets  and as such fixed assets vest in the Government under the Acquisition
There would there fore it is urged be a duplication of the liability of the licensee on this score in the sense that while the Re serves in the form of fixed assets vest in the Government the licensee is still exposed to the liability for the deduction of the amount shown in the accounts
Section 91i provides Deductions from the Gross amount The Government shall be entitled to deduct the following sums from the gross amount payable under this Act to the licensee
a to h Omitted as unnecessary i The amounts remaining in tariffs and dividends control reserve contingencies reserve and development reserve in so far as such amounts have not been paid over by licen see to the Government j k Omitted as unnecessary On a reasonable construction the expressions amounts remaining  and in so far as such amounts have not been paid overl  necessarily exclude any such duplication of the ac countability of the licensee for these Reserves 
If any part of the reserves is invested in fixed assets and the reserves in the form of such fixed assets are takenover by the Government pursuant to the acquisition what remains to be accounted for by the licensee is only the amounts re maining  in the pertinent accounts
The liability of the licensee for deduction of the Reserves  from the amount  would arise only if the balance remaining in those accounts are not paid
Indeed Dr Shankar Ghosh learned counsel for the State of Assam submitted that this is the correct interpretation to be placed on Section 91i of the Act
With this construction of the provision the contention of the petitionercompany on this point does not survive
595 31
The other contention raised under this point is that the property of the licensees represented by the unexpired portion of the licence has not been taken into account in computing the amount payable for the acquisition
As already indicated the law having the protection of Article 31C the contention is not available at all
Section 73 of the impugned Act provides In the case of an undertaking which vests in the Government under this Act the licence granted to it under Part II of the Electricity Act shall be deemed to have been terminated on the vesting date and all the rights liabilities and obligations of the licensee under any agreement to supply elec tricity entered into before that date shall devolve or shall be deemed to have devolved on the Government Provided that where any such agree ment is not in conformity with the rates and conditions of supply approved by the Govern ment and in force on the vesting date the agreement shall be voidable at the option of the Government This provision is a part of a scheme of nationalisation and is protected by Article 31C 32
Contention e is accordingly held and answered against the petitioners
Re Contention f This contention pertains to the liability of the licen see under Section 113 of the Act in respect of the amounts payable to employees retrenched by the Government or the Board  as the case may be within one year from the vest ing date after the take over
Section 113 provides that if the Board or the Government as the case may be retrenches any employee within a period of one year from the vesting date the liability for the amounts payable to the re trenched employee shall be deducted from the amount 
This provision it is contended imposes a liability which is arbitrary
Dr Shankar Ghosh submitted that this point is purely academic inasmuch as there has been no such case of retrenchment
Dr Ghosh further submitted that the provision is not unreasonable because in the case of employees so 596 retrenched the amounts payable would substantially relate to the period during which the employment subsisted under the licensee and that it is not unreasonable to take this circumstances into account in continuing the licensee s liability which would even otherwise be substantially be that of the licensee On a consideration of the matter we are inclined to the view even if this question is justicia ble that the provision is not unreasonable or arbitrary as it envisages the continuance of a liability which was otherwise substantially that of the licensee
There is no merit in this contention f either
Re Contention g The grievance of the petitioners on this aspect we are afraid proceeds on a total misconception of the effect of the statutory provisions
The contention in substance is that while certain liabilities of the licensee arising out of its Quondam business operations are not expressly taken over by the Government and are declared to be the subsisting and continuing liabilities of the licensee however Section 97 authorises the deduction of some of those very liabilities from the amount  without a corre sponding statutory obligation on the part of the GOvernment in turn to pay the same to the creditors on whose account and for whose benefit the deductions are made and without providing an express statutory discharge to the petitioners in that behalf
There is no substance in this contention
The legisla tive intention is plain and manifest
Though some of the liabilities arising out of the conduct of the licensees  business prior to vesting are not taken over by Government some of those liabilities are yet authorised to be deduct ed from the amount
The purpose of this provision is too obvious to require any statutory declaration of the obliga tions that arise in law and are attendant upon these sums coming to the hands of and retained by the Government
Quite obviously the provision is not intended for an unjust enrichment in the hands of Government
The purpose is obvi ously to facilitate recovery of certain types of debts owing to public institutions etc and the deduction is for the benefit of those creditor institutionS Government would plainly be under a legal obligation to pay the sums so deducted to the concerned creditors
The provisions of the Statute must be read along and in consonance with the general principles of law which import such obligations on the part of the Government and an implied corresponding discharge to the petitioners to the extent of such deduc tions in their liabilities
There is a resulting statuto ry trust in the hands of the Gov 597 ernment to pay the sums so deducted to the respective credi tors even in the absence of express provisions in this behalf in the Statute the general principles of law operate
As a matter of construction it requires to be held that these obligations and consequences follow
There is really no justifiable grievance on this score
Contention g is accordingly held and answered against the petitioners
Re Contentions h and i These two contentions pertain to the machinery envisaged by and set up under the impugned law for resolution of disputes on questions essential for the determination of the amount in accordance with the provisions of the Act
The contention of the petitioners in substance is that there is no machinery set up under the Act to determine the amounts under Section 9c d and e and to assess the loss referred to in Section 8
The Other contention on the point is that the arbitra tion clause is a limited one and is confined only to dis putes in four areas specifically enumerated in clauses a to d of sub section 1 of Section 20 of the Act
These lacunae in the Statute it is contended render the scheme of the Act for the determination of the Amount  unreasonable and the scheme of the Act  in relation to the determination of the Gross Amount  the deductions to be made therefrom and the assessment of the amount  payable for the acquisition unworkable
The Courts strongly lean against any construction which tends to reduce a Statute to a futility
The provision of a Statute must be so construed as to make it effective and operative on the principle ut res majis valeat quam periat
It is no doubt true that if a Statute is abso lutely vague and its language wholly intractable and abso lutely meaningless the Statute could be declared void for vagueness
This is not in judicial review by testing the law for arbitrariness or unreasonableness under Article 14 but what a Court of construction dealing with the language of a Statute does in order to ascertain from and accord to the Statute the meaning and purpose which the legislature in tended for it
In Manchester Ship Canal Co vs Manchester Racecourse Co Farwell J said Unless the words were so absolutely senseless that I could do nothing at all with them I should be bound to find 598 some meaning and not to declare them void for uncertainty See page 360 and 361 In Fawcett Properties vs Buckingham Coun try Council Lord Denning approving the dictum of Farwell J said But when a Statute has some mean ing even though it is obscure or several meanings even though it is little to choose between them the Courts have to say what meaning the Statute to bear rather than reject it as a nullity Vide page 516 It is therefore the Court s duty to make what it can of the Statute knowing that the Statutes are meant to be operative and not inept and that nothing short of impossibility should allow a Court to declare a Statute unworkable
In Whitney vs Inland Revenue Commissioner Lord Dunedin said A Statute is designed to be worka ble and the interpretation thereof by a Court should be to secure that object unless cru cial omission or clear direction makes that end unattainable vide page 52 37
On consideration of the Statute on hand it is not possible to subscribe to the view that the impugned law has not envisaged any machinery for the due ascertainment of the sums referred to in clauses c d and e of Section 9 which require on such ascertainment and quantification to be deducted from the gross amount
Section 10 enjoins upon the Government to appoint a person having adequate knowledge and experience in matters reling to accounts to assess the net amount payable under this Act by the Government to the licensee after making the deductions mentioned in Section 9
Sub Section 2 of Section 10 provides that the Special Officer may call for the assistance of such Officer and staff of the Government or the Board or the undertaking as he may deem fit in assessing the net amountpayable
These provisions contemplate the determination by the Special Officer who is constituted as a statutory authority under the Act of the net amount payable
The functions of the Special Officer include an examination of the correctness of all the determinations made by the Government in the matter of the deductions except where Government is statutorily specially constituted as an appellate authority in respect of certain matters under the Act
The Proviso to Sections 8 and 9 envisages prior notice to be 599 issued to the licensee by the Government to show cause against any deduction proposed to be made under Section 8 or 9 as the case may be within the period specified in the Provisos
Even after the Government so makes such determina tion of the amounts which according to it are deductible from the gross amount such determination would not be final
The assessment of the net amount payable to the licensee will have to be made by the Special Officer
It is reasonable to construe that the decision of the Govern ment both under Sections 8 and 9 arrived at even after giving an opportunity to the licensee of being heard would not be final but the final determination will have to be made by the Special Officer appointed under Section 10 of the Act
Section 101 and 2 of the Act must be so con strued as to enable the Special Officer to take into account the determinations respecting the deduction under Section 9 and 10 of the Act made by the Government and take a decision of his own in the matter
The power to assess the net amount by necessary implication takes within its sweep the power to examine the validity of the determination made by the Government in the matter of deductions from the gross amount
This power to determine and assess the net amount  payable by necessary implication cover matters envisaged in Sections 8 and 9
Though only Section 9 is specifically referred to in sub section 1 of section 10 the language of sub section 1 and 2 which enable the Special Officer to assess the net amount paybale would by necessary implication attract the power to decide as to the validity and correctness of the deduction to be made under Section 8 as well
So construed the provisions of Section 10 would furnish a reasonably adequate machinery for the assessment of the net amount payable to licensee
So far as Arbitration is concerned even after the decision of the Special Officer there is the further Arbitral forum to decide disputes in respect of the specific areas in which disputes are rendered arbitrable under Sec tion 20
In view of these circumstances we think the grievance of the petitioners on these points questions are not sub stantial
The points h and i are also accordingly held and answered against the petitioners
In the result for the foregoing reasons all the contentions urged by the petitioners in support of their challenge to the impugned legislations fail
The Writ peti tions are accordingly dismissed but in the circumstances there will be no order as to costs
GN Petitions dis missed


Summary:
The Income tax Officer by his order dated October 9 1952 assessed the respondent for the assessment year 1952 53 and gave him credit for Rs 50603 15 0 as representing interest on tax paid in advance under section 18 A5 of the Income tax Act
On May 24 1953 the Indian Income tax Amendment Act 1953 came into force adding a proviso to s18 A5 of the Act to the effect that the assessee was entitled to interest not on the whole of the advance tax paid by him but only on the difference between the payment made and the amount assessed
The Amendment Act provided that it shall be deemed to have come into force on April 1 1952
The Income tax Officer acting under section 35 of the Act rectified the assessment order holding that the assessee was entitled to a credit of only Rs 21157 6 0 by way of interest on tax paid in advance as a result of the retrospective operation of the amendment in section 18 A5 and issued a notice of demand against the assessee for the balance of Rs 29446 9 0
The assessee filed a petition in the High Court of Bombay
under article 226 of the Constitution praying for a writ prohibiting the appellants from enforcing the rectified order and notice of demand
The High Court issued the writ holding that section 35 was not applicable to the case as the mistake mentioned in section 35 had to be apparent on the face of the order and the question could only be judged in the light of the law as it stood on the day when the order was passed Held that the Income tax Officer was justified in exercising his powers under section 35 and rectifying the mistake
As a result of the legal fiction about the retrospective operation of the Amendment Act the subsequently inserted proviso must be read as
forming part of section 18 A5 of the principal Act as from April 1 1952 and consequently the order of the income tax Officer dated October 9 1952 was inconsistent with the provisions of the proviso and suffered from a mistake apparent from the record
Commissioner of Income tax Bombay Presidency and Aden vs 704 Khemchand Ramdas 1938 LR 65 IA 236 and Moka Venkatap paiah vs Additional Income tax Officer Bapatla 195732 ITR 274 referred to
The order passed by the Income tax Officer under section 18 A was not final in the literal sense of the word it was and con tinued to be liable to be modified under section 35
It is also not correct to say that the retrospective operation of the amended s18 A5 was not intended to affect concluded transactions