ivil Appeal No 4113 of 1985 etc
From the Judgment and Order dated 2071984 of the Bombay High Court in Misc
Petition No 1115 of 1977
TR Andhyarujina SB Bhasme RA Dada VS Desai AK Sen ML Dhamuka MA Firoz AS Bhasme AM Khan wilkar Harish Salve RF Nariman J
B Dadachanji Mrs AK Verma Joel Pares BH Vani DN Misra Arun Madan and Miss A Subhashini for the appearing parties The Judgment of the Court was delivered by VENKATACHALIAH J
These appeals the first two by the State Electricity Board of Maharashtra by certificate and the State of Maharashtra by special leave arise out of and are directed against the same judgment dated 207
1984 of the High Court of Judicature at Bombay made in proceedings under Article 226 of the Constitution in Misc
No 1115 of 1975
The writ petition before the High Court was filed by the respondent The Thana Electricity Supply Compa ny Limited  company  for short challenging the constitu tional validity of Sections 4 5 and 6 of the Indian Elec tricity Maharashtra Amendment Act 1976 Maharashtra Act No XLIV of 1976 Amending Act of 1976 for short and Sec 2 of the Indian Electricity Maharashtra Amendment and Validation Act 1974
Respondent Company by its CMP No 40944 of 1984 CA No 243 of 1985 sought certain reliefs which had been disallowed by the High Court
That CMP was treated as a petition for grant of Special Leave and Special Leave was granted on 111
That is how CA 243 of 1985 has come to be registered
The compass of the controversy before the High Court could broadly be indicated
The company became entitled by transfer to the benefit and privileges of the Thana Electricity Licence 1927 granted on 1491927 by the then Government of Bombay under the  for supply and distribution of electricity in the 524 areas covered by the license
The grant was originally in favour of a firm of partners under the name and style Messrs P Patel  Co  On 1621928 respondent Company was formed as a Private Limited Company with the object of taking over the license from the said firm Messrs P Patel  Co Government by its order dated 1161928 consented to the transfer of the license to the said Private Limited Company
On 1511965 the Private Limited Company became a Public Limited Company
The license was to expire by efflux of time on the 21st day of September 1977
Clause 11 of the license envisaged the option to the Government usual to such grants to purchase the undertaking on the expiration of the period of the license
The Bill for the Amending Act 1976 was intro duced in the Legislature on 1371976
The State Electricity Board by notice dated 26th of August 1976 served on the company exercised its option to purchase the undertaking on the expiry of the period of the license and accordingly required the company to sell and deliver the undertaking to the Appellant Board on the mid night between 21st and 22nd day of September 1977
The provisions of the Electricity Act 19 10 as they stood on the day the option was exer cised would entitle the Company to be paid the MarketVal ue of the undertaking
However on 209
1976 the Amending Act 1976
pursuant to the Bill introduced on 137
1976 became law
The Act received the assent of the President on 2nd September 1976 and came into force with effect from 20th September 1976 within a month of the option to purchase contained in the notice dated 2681976
By this Amending Act of 1976 the principle of Market Value in the relevant provisions of the 19 10 Act was substituted by the concept of an Amount legislatively fixed as a sum equal to the depreciated Book Value of the assets of the undertaking to be taken over
The Amended provisions were to govern cases where as here notices had been issued prior to the amendment
The Company and its shareholders challenged the Amending Act of 1976 as violative of Articles 14 191f  g and 31 of the Con stitution
The Appellants State of Maharashtra and the State Electricity Board claimed the protection of Article 31 C to the Amending Act of 1976 and the consequent immunity from attack on the ground of violation of Articles 14 19 and 31
While the High Court rejected the appellants  claim that the impugned Law had the protection of Article 31 C it did not also accept the contention of the company as to the constitutional infirmity 525 attributed to Section 2 of the 1974 Act and Sections 5 and 6 of the Amending Act of 1976 but the High Court declared that Section of the Amending Act of 1976 was violative of Article 191f and Article 14
The High Court rejected the contention of the Company  that upon the service of the Notice exercising the option to purchase the company s fight to be paid the  market value  under the law as it then stood was crystallised into an actionable claim or a chose inaction  and that what was sought to be acquired was not the undertaking  itself but a chose in action
While the State and Electricity Board assail the correctness of the view of the High Court that Section 4 of the Amending Act of 1976 was bad the Company in its appeal No CA 243 of 1985 has questioned the correct ness of the Judgment on the points held against it
The company filed the writ petition in the High Court on 191977
On 2191977 the High Court by its interlocuto ry order permitted the take over of the undertaking subject to the Board paying to the company Rupees four crores and five lakhs
The Board paid and took possession on 2122 September 1977
On 111
1985 in the appeals of the State and Board this Court ordered a further payment of Rupees one crore and sixteen lakhs to the company
We must here advert to three legislative events touching the provisions of the 1910 Act in relation to its application to the State of Maharashtra
On 27101974 the Governor of Maharashtra promulgated Ordinance No 18 of 1974 which was later replaced by the Indian Electricity Maharashtra Amendment and Validation Act No LXIII of 1974
By that Act inter alia Section i AA was inserted in Sec
3 of 19 10 Act which was deemed always to have been inserted to the effect to that licence granted shall be published in the Government Gazette and that as stipulated in Section 32cc the licence shall commence on the date on which such licence was published in the Gazette
The 1974 amending Act also substituted Sub section 6 and amended sub section 7 of Sec 6 of the 1910 Act
The substituted Sub Sec
6 provided that where notice exercising the option to purchase had been served the licensee shall deliver the undertaking pending determi nation and payment of the purchase price and interest
This was apparently intended to over come certain judicial observations touching the legalities of a take over without the tender 526 of the price
The amended Sub section 7 restricted the interest to the Reserve Bank of India rate ruling at the time of the delivery of the undertaking plus one per centum from the date of delivery of the undertaking to the date of payment of the purchase price
 The Amending Act of 1976 was indeed more far reaching and brought about certain fundamental changes in the basis of the payment for the take over
The idea of market value was done away with and was substituted by the concept of an Amount  which was to be limited to the depreciated book value 
The statement of objects and reasons accompanying the Amending Bill sets out its main objects Section 7A of the  provides for determination of purchase price where any undertaking of a licensec is sold under sub section 1 of section 5 or purchased under section 6 of the Act
The basis for determining such price is the market value of the undertaking at the time of purchase or at the time of delivery of the undertaking
Having regard to the present trend of rising prices the market value of an undertaking would be much higher than the original purchase price
In such an event the purchaser will be required to incur very heavy expenditure for payment of the purchase price or payment of compensation in accordance with the existing provisions of the Act and will involve the purchaser in heavy financial commitments
In the interest of the consumer and social justice therefore it is necessary to amend the Act suitably to provide for payment of an amount equal to the depreciated book value of the undertaking either in cash or in annual instalments
The Bill is intended to achieve these objects
 By the Amending Act of 1976 sub sec
2 of sec
5 of 19 10 Act was substituted
The Sub sec
2 as substituted reads 2 Where an undertaking is sold under sub section 1 the purchaser shall pay to the licensee for the undertaking an amount deter mined in accordance with the provisions of sub sections 1 and 2 of section 7A In Sub sec
3 and Proviso to Section 5 and Section 6 of 19 10 Act the words payment of market value were substituted by the words 527 payment of the amount for the undertaking
Sub sec
7 of Sec 6 was substituted
The substituted sub section provided 7 Where an undertaking is pur chased under this Section the purchaser shall pay tO the licensee the amount determined in accordance with the provisions of Section 7A and interest at the Reserve Bank of India rate ruling at the time of delivery of the under taking plus one per centum on the amount payable for the undertaking for the period from the date of delivery of the undertaking to the date of payment of such amount Sub sections 1 and 2 of the new Section 7A of Act said 7A1 where an undertaking of a licensee is sold under sub section 1 of section 5 or purchased under section 6 the amount payable for the undertaking shall be the book value of the undertaking at the time of delivery of the undertaking
2 The book value of an undertaking for the purposes of sub section 1 shah be deemed to be the depreciated book value as shown in the accounts rendered by the licensec in accordance with the provisions of section 11 of all lands buildings works materials and plant of the licensee suitable to and used for him for the purpose of the undertak ing other than i a generating station declared by the licensee not to form part of the undertak ing for the purpose of purchase and ii the service lines or other capital works or any part thereof which have been constructed at the expense of the consum ers but without any addition in respect of compulsory purchase or of goodwill or of any profits which may be or might have been made from the undertaking or of any similar consid eration Sub sec
3 the new Sec
7A envisaged payment of a solatium of ten per cent of the book value as determined under sub sec
1 and 2 of new Sec
7A overriding any stipula tion contained in any licence instrument order or agree ment or any law for the time being in force 528 for payment of any additional sum by whatever name it was called Similarly sub sec
4 of the new Sec
7A sought to give an overtiding effect to the provisions of the new Sec
7A and provided that no provisions of any Act for the time being in force including the other provisions of this Act or any rule made thereunder or any licence shall have effect in so far as they are inconsistent with sec
7A New Section 7A5 enabled the payment of the amount either in lump sum or in instalments together with the rate of inter est stipulated in Section 67 as amended
Section 5 of the Amending Act 1976 provided The provisions of section 5 6 and 7A of the Principal Act as amended by this Act shall have effect in relation to all the licensees in respect of their undertakings including any licensee on whom a notice re quiting him to sell the undertaking has been issued under sub section 1 of section 5 or on whom a notice exercising the option of purchasing the undertaking has been served under subsection 1 of section 6 of the Principal Act before the commencement of the Indian Electricity Maharashtra Amendment Act 1976 and the purchase price in respect of whose undertaking was not determined before such commencement Emphasis Supplied Another legislative development was the amending Act 1981 which occured during the pendency of the writ petition before the High Court
The amendment provided that where the amount was payable in instalments the interest would be payable from the date of the delivery of the undertaking to the date of payment of the last instalment
The effect of the Amending Act of 1976 in substance was that the concept of Market Value was substituted by the concept of an amount which was the book value of the undertaking at the time of its delivery
The book value was deemed to be the depreciated book value as shown in the accounts rendered by the licensee in accordance with section 11 of the 1910 Act of all lands buildings works materials plants etc
The licensee was given a solatium of ten per cent of such book value
The provisions of the Amending Act of 1976 were made applicable to all licensees including a licensee upon 529 whom a notice requiting him to sell the undertaking had been served prior to coming into force of the Amending Act of 1976 but the purchase price had not been determined before the Amendment of the Act
The up shot of the Amending Act of 1976 was that the entitlement of the company for payment for its undertaking respecting which the notice exercising the Board s option to purchase had been served on 2681976 ie prior to the date of coming into force of the Amending Act 1976 also came to be governed by the provisions of the Amending Act 1976
While on the basis of the provisions as they then stood the respondent company was entitled to the payment of the market value as determinable under these provisions now by virtue of the Amending Act of 1976 the respondent company became entitled to the payment of an amount which was equal to and represented the depreciated book value of all the lands buildings
works etc instead of the Market Value
As stated earlier the principal controversy before the High Court was whether the provisions of the Amendment Act 1976 which scaled down quite drastically the measure of the recompense for the taking over of the company s undertaking were violative of Articles 14 191f and g
and 31 of the Constitution of India as contended by the company or whether the Amending Act of 1976 had the protection of and attracted the provisions of Article 31 C of the Constitution rendering the law immune from assailment on the ground of violation of fundamental fights
The contentions of the parties would require to be examined as the provisions of Articles 191f and 31 stood at the relevant time
Articles 191f and 31 were deleted later but that does not affect the constitutional position with reference to which the present cases would require to be decided
Some aspects of the contentions beating on the inter relation between a law of the kind we are concerned with and Article 31 C have been considered in our judgment in the companion matters arising out of the Assam Legislation in WP Nos 457 and 458 of 1972 rendered separately today
The High Court was persuaded to the view that the ab sence of a legislative declaration in the Amending Act of 1976 itself was decisive against the acceptability of the State s contention that the law was one for giving effect to the objects of Article 39b and c
The High Court ob served A Division Bench of this court to which one of us Rege 530 J was a party has held in writ petition No 2401 of 1983 The Elphinstone Spinning and Weaving Mills Company Ltd vs The Union of India that to bring an enactment within the protection of Article 31 C so as to bar a chal lenge to it on the ground of infringement of Articles 14 or 19 it was necessary that the enactment should contain a declaration mani festing the intention of Parliament or a State Legislature to give effect by that enactment to the directive principles in Article 39b or c
This could be done either by specific reference to Article 39b or c in the enactment or by incorporating in it the word ing of Article 39b or c
The Amending Act of 1976 does not contain a declaration mani festing the State Legislature s intention to give effect thereby to the directive princi ples contained in Article 39 b or c
Having regard to this counsel for the re spondents have not pressed before us the argument based on Article 31 C but have re served it should it be necessary for the Supreme Court Emphasis Supplied On this premise the High Court did not enter into the question whether the Amending Act of 1976 was really one for giving effect to the policy in Article 39b and c
With the protection of Article 31C to the legislation so held unavailable the High Court proceeded to consider whether the provisions of the impugned law including those that gave power to Government to postpone payment by instalments and those that limited the rate of interest etc
violated the fundamental rights under Articles 14 and 19
Rejecting the contention of the appellants that with the payment of Rs40500000 under the order of the Court the grievance of the company about the arbitrariness of the provisions giving power to the Government to decide either or pay the amount in lump sum or in instalments becoming purely aca demic the High Court said It is crystal clear from the orders of the learned Judge that the payment of Rs40500000 was made by the Board to the company pursuant to these orders and as a condition of being allowed to take possession of the company s undertaking
The company is therefore entitled to urge that the provi sions delaying payment of the purchase price and enabling it to be paid by instalments are unreasonable and unconstitutional 531 8
In the view of the High Court the State Electricity Board as a matter of its declared policy was purchasing the private electricity undertakings as and when their licenses ex pired and that the reduction in the measure of payment sought to be achieved by the Amending Act of 1976 was violative of Article 191f
The High Court held   
Electricity undertakings were compulsorily purchased upon payment of their market value until 1976 when the Amend ing Act of 1976 was mooted
There is no expla nation in the affidavit made on behalf of the respondents as to what it was that made it imperative in the public interest at that point of time to reduce the purchase price from market value to depreciated book value
There is no statement in the affidavits that upon the basis of market value the Board could no longer have effected compulsory purchase   emphasis supplied   
The obligation to pay market value did not deter the State from adopting this policy
The affidavits on behalf of the respondents do not aver that after compulsory purchases in the past the electric ity tariff had to be raised all that they state is that the expenditure incurred on compulsory purchases had to be taken into ac count     
Considering all these factors the objects and reasons for the Amending Act of 1976 could only be thus to reduce the Board s liability on compulsory purchase
Legislation enacted to reduce the State s liability or augment the State s funds as its only purpose infringes the fundamental right given by Article 191f
We have already cited the cases that so hold
 It is to be recalled that the Statement of Objects and Reasons and the Financial Statement appended to the Bill set out these considerations compelling the State to cut down the compensation
But according to the High Court the absence of their reiteration in the affidavits would assume materiality
The High Court in substance also held that the State could not unilaterally reduce even by legislation its liability to pay the purchase price under a consensual transaction and that such an attempt would be violative of Article 191f
We may set out the 532 reasoning of the High Court where the inference drawn on the premise appears a non sequitur   
Though the purchase is compulsory though the terms of the contract are amendable by legislation though the electricity franchise and its returns are controlled by legislation and though the purchase deals with a material resource control over which is a directive principle the State as the purchaser under a contract cannot be countenanced to act unilaterally to drastically reduce its liability in regard to the purchase price
Such a reduction is not reasonable not in the public interest and infringes the fundamental right under Article 191f
Emphasis Supplied Upholding the company s contention that the reduction in the quantum of the payment brought about by the Amending Act of 1976 violated Article 191g the High Court said The reduction in the purchase price cannot but have a direct and proximate effect on the licensee s fight to carry on the busi ness of electricity supply while the licence was current
Upon compulsory purchase of his undertaking the licensed would do or want to do other business
The depletion in his capi tal of so considerable a nature as that caused by the reduction of the purchase price of his  undertaking from market value to depreciated book value cannot but hinder him in doing so
There would therefore also be a transgres sion of the guarantee of Article 191g
 Further the conferment on Government of the power to fix instalments was held to be grossly unreasonable and
arbitrary and violative of Article 191f and g and Article 14
The provision for payment of interest at the Reserve Bank rate plus one percent according to the High Court made more unreasonable the provisions of the Amend ing Act 1976 and that A rate approximating if not equal to the higher commercial rate of interest would have been more appropriate
The High Court however rejected the company s contention that its right to payment of market value  became crystallised upon the service on it of the notice exercising the Board s option to purchase the undertaking and that what was sought to be acquired was 533 a mere chose in action  and not the undertaking itself
High Court also rejected the contention that the law was bad for excluding the service lines  from the computation of the amount 
The correctness of these rejections is chal lenged in the company s cross appeal ie CA No 243 of 1985
We have heard Shri Andhyarujina learned Senior Advocate for the State of Maharashtra and the State Elec tricity Board and Shri AK Sen learned Senior Advocate for the respondent company
The principal contention urged on behalf of the State and the Electricity Board was that the High Court was in error in denying to the impugned law the protection of Article 31 C
It was urged that the High Court fell into a serious error in postulating that the absence of an express legislative declaration in the law that the law was enacted for giving effect to the principles of State Policy in Article 39b and c was itself conclusive against the attraction of Article 31 C
It was urged that the presence of an express legislative declaration in that behalf merely furnished evidence of a reasonable and direct nexus between the legislation and the objects of Article 39b and c but such a declaration was however not by itself conclusive either way and the court was entitled to go behind the facade of the declaration where there is one and scrutinise whether really there was such a direct and reasonable nexus and that as a corollary it followed that the absence of such an express declaration did not preclude the State from showing the existence of the requisite nexus
The impugned law it was contended was one intended to give effect to the directive principles contained in Article 39b and was entitled to the protection of Article 31 C Sri AK Sen for the licensee company contended that any appeal to and reliance upon Article 31 C is wholly misplaced inasmuch as the option to purchase the undertaking was in effectuation of a purely consensual transaction and that the scheme of the Electricity Act 1910 and the covenants in the license enabling the Government or the Board as the case may be to exercise the option to purchase did not amount to a compulsory acquisition of the undertaking
It was urged that the impugned provisions of the Amending Act of 1976 which had the effect of bringing down the purchase price payable under a mutual agreement could not be justified on any nexus with or for the effectuation of the objects of Article 39b
The point that arises for consideration in these ap peals therefore is whether 534 the Maharashtra Act No XLIV of 1976 which statutorily modifies the princi ples for the determination of the purchase price for the undertaking from the principle of Market value contained in the unamended Section 7A of 1910 Act to the concept of an amount  equal to the depreciated book value of the assets under Section 7A as amended by Maharashtra Act No XLIV of 1976 could be said to be a law enacted for the acquisition of the undertaking with a reasonable and direct nexus with the object of Article 39b of the Constitution and has therefore the protection of Article 31 C If the contention of the State and the Electricity Board prevails and is accepted all other contentions which in turn rest on an alleged infraction of Articles 14 191f and g and 31 do not survive
It is however the conten tion of Shri Andhyarujina that the question whether the power given to the Government to postpone payment of the price by fixing instalments and statutory limitations on the rate of interest are violative of Article 191f and g became purely academic in the present case as indeed under the orders of the High Court Rupees Four Crores and Five Lakhs had been paid even before possession was taken and that a further sum of Rupees One Crore and Sixteen Lakhs was paid pursuant to the orders of this Court
Learned counsel also submitted further that apart altogether from the pro tection of Article 31 C the Amending Act of 1976 is justi fiable as a reasonable restriction on the freedom under Article 191f and g
At the outset the misconception that an express legisla tive declaration in the legislation is condition precedent to the attraction of Article 31 C would perhaps require to be removed
The High Court we say so with respect was under a clear misconception on the point that an express incantation was necessary in the law itself
The nexus between the law and the objects of Article 39b could be shown independently of any such declaration by the legisla ture
The absence of evidence of nexus in the form of an express declaration was not by itself evidence of absence of such nexus
Indeed in State of Maharashtra vs Basantibai  at 1475 this court while examining the correctness of the view of High Court that Article 31 C was inapplicable in the absence of such a declaration in the very law itself observed  
First Act
31C does not say that in an Act there should be a declaration by the appropriate legislature to 535 the effect that it is being enacted to achieve the object contained in Act
39b
In order to ascertain whether it is protected by Act
31C the Court has to satisfy itself about the character of the legislation by studying all parts of it
The question whether an Act is intended to secure the objects contained in article 39b or not does not depend upon the declaration by the legislature but depends on its contents   12
We may now turn to the principal contention
Sri Sen quite understandably places considerable reliance on the pronouncement of this Court in Fazilka Electric Supply Co Ltd vs The Commissioner of Income Tax Delhi 1962 Supp
3 SCR 496 which was a decision in an income tax case in the context of the question whether the sale of the electricity undertaking of the company as enabled by the relevant Section of the 19 10 Act could be regarded as a sale within the meaning of Section 102vii of the Income Tax 1922 and the excess realisation over the written down value of the Building Machinery Plant etc
as did not exceed the difference between the original cost and the written down value a sum of 77700 in that case was to be brought to tax
The question arose whether the sale pursuant to the option under the 1910 Act
was a consensual sale in which case Section 102vii stood attracted or whether it was a compulsory acquisition or compulsory sale
The contention urged by counsel was noticed by this Court thus  
He has argued that on a proper con struction of the provisions of the Electricity Act and the rules made thereunder the so called sale in the present case was really a compulsory acquisition of property and not a sale as legally understood Emphasis Supplied p 501 This proposition was not accepted
This Court said   
If the whole scheme of the Electric ity Act and the rules made thereunder is kept in mind it becomes obvious that notwithstand ing the use of the expression compulsory purchase in the second proviso to sub s1 of section 7 there is no compulsory purchase or compulsory acquisition in the sense in which that expression is ordinarily understood p 505 536 Placing strong reliance on these observations Sri Sen contended that any proposition of a compulsory acquisition with the cognate implication of the acquisition seeking to subserve the objects of Article 39b is alien to the present case which was one of a con tractual sale
Sri Sen also referred to Arti cle 312A as it then stood which provided 2A Where a law does not provide for the transfer of the ownership or right to posses sion of any property to the State or to any corporation owned or controlled by the State it shah not be deemed to provide for the compulsory acquisition or requisitioning of property notwithstanding that it deprives any person of his property Emphasis Supplied to contend that where the transfer of ownership is not brought about by the operation of law itself but as here only by a consensual transaction there is no idea of a compulsory acquisition in the situation which might in turn serve the objects of Article 39b
Sri Sen also referred to Bihar State Electricity Board and Ors vs Patna Electricity Supply Co Ltd  Anr In that case on 511973 the State Elec tricity Board exercised its option to purchase the licen see s undertaking on the expiry of 5th February 1974
On 2nd February 1974 Ordinance 50 of 1974 was promulgated substi tuting Section 7A of the 19 10 Act so as to reduce the concept of market value to one of Book Value
The Ordi nance was renewed b3 Ordinance 83 of 1974 and the latter by Ordinance 123 of 1974
Possession of the undertaking was taken 5th6th February 1974
On 15th January 1975 Bihar Act 15 of 1975 was enacted to replace the last of the Ordi nances
On 10th January 1976 Bihar Act 7 of 1976 was passed making its operation retrospective from 2nd February 1974 when the first Ordinance No 50 of 1974 had been issued
The Division Bench of the High Court held that as the option to purchase had been exercised prior to the issue of Ordinance 50 of 1974 the Licensee was entitled to the market value under the unamended Section 7A
The High Court in effect took the view that once the option was exercised and communicated the option with all the incidents that go with it including the stipulation as to the particular price implicit in the option binds both the parties and that the right to receive the purchase price was crystallised into a chose in action 
The reasoning of the High Court is on these lines 537   
At the time the option was exercised by the appellant under section 7 A of the Act the respondent company was entitled to the market value of the undertaking to be determined in accordance with the provisions of sub sec
2 of section 7 A
There was therefore an implied contract between the respondent company and the appellant that the appellant would pay to the respondent company the market price of the undertaking in the event it purchased the undertaking
The option of purchase was exer cised by the appellant before the amendment of section 6 and section 7A of the Act the Bihar Ordinance 50 of 1974
The appellant is therefore liable to pay to the respondent company the market value of the undertaking in terms of the unamended provision section 7A   
In other words when the option is exercised the licensee is bound to sell and the concerned authority is bound to purchase the undertaking
It is difficult to accept the contention that this binding effect on either party will be without the fixation of the purchase price or the consideration for the transaction
As soon as this stage is reached after the exercise of option to purchase by the service of a notice as mentioned in section 6 of the Act the concerned authority has to purchase the undertaking on payment of the market value of the undertaking to be deter mined in accordance with the provision of section 7A of the Act   The right to receive the market value of the undertaking is a debt or a chose in action and is property within the meaning of article 191f and article 312 of the Consti tution  It was held in that case the amending processes were violative of the Licensees  fundamental rights under Article 312 of the Constitution
What in the ultimate analysis underlies and is indeed the emphasis in Sri Sen s submission is the postu late that in the take over by Government of an undertaking there is no element of nationalisation of the undertaking and consequently no question of effectua tion of the objects of Article 39b arises
The arguments addressed in the case are not without their interesting aspects as to 538 what in the last analysis is and should be the form and content of a law which seeks to serve the objects of Article 39b
In the decision of the Calcutta High Court relied upon by Sri Sen no appeal was made by the Electricity Board to the protection of Article 31 C
That apart the concept of the licensee s rights crystallising themselves into a chose in action upon the exercise of the option that com mended itself to the Calcutta High Court did not appeal to the Bombay High Court in the judgment under appeal
Sri Andhyarujina emphasised the essentially statuto ry character of the business of the Electricity Supply Undertaking carried on pursuant to the License granted under the 1910 Act and that the provisions of the said Act and the Electricity Supply Act 1948 leave no doubt that the license and the operations thereunder are totally controlled by statutory provisions
Section 57 of the latter Act re quires that the charges for consumption of Electricity levied on the consumers shall be in accordance with the financial principles guiding the matter prescribed in Sched ule VI of that Act
That schedule limits the profits of the licensee and tells as to how they should be arrived at for purposes of ensuring compliance with the provisions limiting the profits
Sri Andhyarujina also referred to the decision of this court in Gujarat Electricity Board vs Girdharilal Motilal and Anr  at 592 93   
It is a mode of exercising the power conferred on the State Electricity Board by the exercise of which the property rights of the licensees can be affected
Section 61 confers power on the State Electricity Board to take away the property of the licensee
Such a power must be exercised strictly in accordance with law    Emphasis Supplied 16
Sri Andhyarujina submitted that there was no dispute that electricity supplied by even a private enterprise was material resources of the community  for purposes of Arti cle 39b and that the legislative expedient by which the State seeks to achieve the objective of Article 39b that the ownership and control of that material resource is so distributed as best to subserve the common good is merely a matter of form than substance
If the State instead of resorting to this particular legislative expedient had enacted a separate law for the take over with the same principles for the determination of the amount  that law says learned counsel would have been quite unexceptionable from the point of view of its eligibility for protection 539 under Article 31 C Learned counsel submitted that it should in substance make no difference if the same result is sought to be achieved by a more simple legislative expe dient of enacting a law with Presidential assent which while unaffecting the take over under the 19 10 Act howev er made the economic cost of implementing the object of Article 39b less unaffordable by the State
Learned coun sel says that the arguments in the case accepted by the High Court laid stress more on form than on substance of the legislation
The business of an electricity supply undertaking a public utility service in pursuance of a license granted under the Electricity Act 19 10 is comprehensively con trolled by the terms of that Statute
The terms on which a franchise is created and conferred are amenable to unilater al modification by Statute
The terms which are so amenable to unilateral alteration to the disadvantage of the licensee include the term pertaining to the quantification of the price payable for the take over
It is difficult to accept the proposition that the right to the payment of the price gets crystallised into a chose in action  independently of or even before the actual transfer of ownership of the undertaking
In Fazilka Electric Supply Company s case 119621 3 SCR 496 it was no doubt held that the transfer of the ownership of the undertaking was the result of consensu al bilateral activity
However in Gujarat Electricity Board vs Girdharilal Motilal  referring to the relevant provisions of the 1910 Act it was held that they conferred power on the State Electricity Board to take away the property of the licensee
It appears to us that even if the provisions of the Electricity Act 1910 are held and understood to provide for take over by the State of a privately owned undertaking only by the adoption of the expedient of a consensual sale that circumstance by itself would not be decisive of whether the amending Act of 1976 has no direct and reasona ble nexus with the objects of Article 39b
The High Court itself referring to the object of the relevant provisions of the 1910 Act enabling a take over observed The Electricity Act 1910 as enacted contemplated State Control over the material resources of electricity by providing for compulsory purchase of electricity under takings
 But so far as the Amending Act was concerned the High Court said 540 This was already the objective of the parent Act
It cannot therefore be held to be the object of the Amending Act of 1976
 The reasoning of the High Court that the Amending Act 1976
which was incorporated into and became part of the principal Act would have no such purpose does not square with its own view of the purpose of the principal Act
After having said that the relevant provisions of the Amending Act did not share with the principal Act the objective of take over of an undertaking  the High Court on a logical corol lary of that premise held that the Amending Act had no nexus with the object of Article 39b
The effect of the relevant provisions of the 1910 Act as amended by the amending Act of 1976 is the transfer of the ownership and control of material resources of the community for purposes of ensuring that they are so distrib uted as best to subserve the common good
In effect the provisions bring about nationalisation in the larger sense of that term
The Amending Act of 1976 sought to limit the economic burden of this reform
The expression nationalisation means the acquisition and control of privately owned business by Government  See Black s Law Dictionary 5th Edn p 924
In A New English Dictionary on Historical Principles  by Murray Vol
VI Page 32 the word nationalisation  is stated to connote the acquisition and operation by a national government of business enterprises formerly owned and operated by private indi viduals or corporations
Most States have nationalised their postal and telegraphic systems and many have nationalised railways and other means of transportation
It is the policy of socialism to nationalize all produc tive industry
 The idea of nationalisation of a material resource of the community cannot be divorced from the idea of distribu tion of that resource in the community in a manner which advanced common good
The cognate and sequential question would be whether the provisions of the amending Act 1976 had a reasonable and direct nexus with the objects of Arti cle 39b
It is true the protection of Article 31 C is accorded only to those provisions which are basically and essentially necessary forgiving effect to the objects of Article 39b
The High 541 Court from the trend of its reasoning in the Judgment appears to take to the view that while the provision for the take over in the Principal Act might amount to a power to acquire however the objects the Amending Act of 1976 which merely sought to beat down the price could not be said to be part of that power and was therefore incapable of establishing any nexus with Article 39b
There is we say so with respect a fallacy in this reasoning
The amending Act of 1976 renders the cost of this economic reforms brought about with the objects of Article 39b in view an affordable one in terms of money
Can this be held to have no direct or reasonable nexus with the objects of Article 39b When a legislative enactment is challenged as not conforming to the constitutional mandate the judicial branch of the Government it is said has only one duty to lay the article of the Constitution which is invoked beside the Statute which is challenged and to decide whether the latter squares with the former
See United States vs Butler  In the financial memorandum appended to the Amending Act of 1976it is inter alia stated   
So far as Maharashtra State is concerned it is a matter of policy that Maharashtra State Electricity Board is pur chasing private Electricity Undertakings as and when their licences expire
This policy will be continued and the Board will take over private undertakings hereafter also as and when their licence periods expire
Under Section 7A of the Indian Elec tricity Act on revocation of the licence as well as on the purchase of the undertaking the Board or the State Government as the case may be has to pay compensation or purchase price at the market value of the undertaking
In the normal course this market value will be very high
Under the amended Act the Board or the State Government will be required to pay as compensation or purchase price the depreci ated book value of the undertaking
This will be less than the compensation or purchase price to be paid under the present Act
Since purchase of an electrical undertaking by the State Government would be a rare possibility the extent of expenditure to Government involved can not be foretold with any amount of accuracy
 542 19
The community s economic burden for social and economic reform is an integral part of the exercise involved in social and economic change in the ushering in of an egalitarian and eclectic social and economic order in tune with the ethos of the Constitution
The cost in terms of monetary expenditure of economic change is a factor inte grated with the objects of Article 39b
The Court must on matters of economic policy defer to legislative judgment as conditioned by time and circumstances
The wisdom of social change is dependant in some degree upon trial and error on the felt needs of the time
A similar contention was urged in Writ Petition Nos 457 and 458 of 1972
We have discussed at para 16 of that judg ment the inevitability of integrating the costs of social and economic reform in terms of monetary burden on the State with the effectuation of the directive principles
We accordingly hold that the provisions of Amending Act of 1976 have a direct and substantial relationship with the objects of Article 39b and therefore are entitled to the protection of Article 39 C
If the impugned law has such protection as we indeed hold that it has all challenges to it on the ground of violation of Articles 14 19 and 31 must necessarily fail
That apart even on the merits many of the contentions are insubstantial
For instance the griev ance that service lines had been omitted from computation of the amount is without merit
That again has been dealt with in para 29 of the Judgment in Writ Petition Nos 457 and 458 of 1972
Insubstantial likewise is the contention that the value of the goodwill has been omitted from computation of the amount
So far as the company s cross appeal in CA 243 of 1985 in which the company assails the correctness of the judgment of the High Court to the extent it has gone against the company is concerned we approve the reasons of the High Court in coming to such conclusions as it did on those aspects
Some of those aspects have again been dealt with in our judgments in WP Nos 457 and 458 of 1972 and Writ Petition Nos 5 14 and 15 of 1974
In the result for the foregoing reasons Civil Appeal Nos 4113 of 1985 and 344 of 1985 are allowed the Judgment dated 2071984 of the High Court under appeal in so far as it has declared certain provisions of the Amending Act 1976 unconstitutional is set 543 aside and the civil petition No 1115 of 1977 before the High Court dismissed
CA No 243 of 1985 preferred by the company fails and is dismissed
In the circumstances of the cases we leave the parties to bear and pay their own costs both here and below
Ordered accordingly
SKA Appeals allowed


Summary:
The respondent was a Deputy Registrar of the appellant University
As the Controller of Examinations had proceeded on leave the respondent was discharging the duties of Con troller of Examinations
A complaint alleging that the respondent had delayed the payment of the bills of an out station party who had printed the question papers for the annual examination was received by the University
The Executive Council of the University appointed an Enquiry Officer to hold an enquiry to find out whether the bills were deliberately kept pending with any ulterior motive
The Enquiry Officer gave a clean chit to the respondent as to his conduct in discharging the duties as Controller of Examinations
The Executive Council of the University did not take any decision on the report of the Enquiry Officer but entrusted the question to the Vice Chancellor who was present at the meeting
The Vice Chancellor directed a departmental enquiry against the respondent and appointed an advocate as the Enquiry Officer
The Enquiry Officer by his report held the respondent guilty of all the charges levelled against him
The Vice Chancellor after giving a show cause notice and considering the reply of the respondent dismissed him from service
The respondent moved the High Court under Article 226 chal 455 lenging his dismissal
When the writ petition was taken up for hearing the High Court directed the entire matter to be placed before the Executive Council for an appropriate decision
The Executive Council considered the matter at its meeting and passed a resolution ratifying the action taken by the Vice Chancellor and confirming the dismissal of the respondent
At the final disposal of the writ petition the High Court examined the matter on merits and held that the action taken by the Vice Chancellor being without any au thority or power these defects could not be cured by rati fication by the Executive Council in its subsequent resolu tion
The High Court accordingly quashed the departmental proceedings taken against the respondent and also the order of termination of his services
In the appeal to this Court it was contended on behalf of the University iThat on a true construction of the several provisions of the Marathwada University Act 1974 the termination of services of the respondent cannot be assailed for want of power or jurisdiction on the part of the Vice Chancellor and 2 that if the order was defective or without authority the ratification by the Executive Council had rendered it immune from any challenge
Dismissing the Appeal the Court HELD 1
The Vice Chancellor in every university is the conscious keeper of the University and the constitutional ruler
He is the principal executive and academic officer of the University
He is entrusted with the responsibility of overall administration of academic as well as non academic affairs
464A B 2
As the principal executive officer the Vice Chancel lor also carries with him an implied power the magisterial power
This power is essential for him to maintain domestic discipline in the academic and non academic affairs
In a wide variety of situations in the relationship of tutor and pupil he has to act firmly and promptly to put down indis cipline and malpractice
It may not be illegitimate if he could call to aid his implied powers and also emergency powers to deal with all such situations
464D E 3
The Marathwada University Act 1974 confers both express and implied powers on the Vice Chancellor
The express powers include among others the duty to ensure that the provisions of the Act Statutes Ordinances and Regula tions are observed by all concerned
Section 113 He has a right to regulate the work and conduct of 456 Officers and teaching and other employees of the University Sec 11ba
He has also emergency powers to deal with any untoward situation Section 114 a very significant power
If he believes that a situation calls for immediate action he can take such action as he thinks necessary though in the normal course he is not competent to do so
However he must report to the concerned authority or body who would in the ordinary course have dealt with the matter
464B C 4
The power to regulate the work and conduct of the officers  cannot include the power to take disciplinary action for their removal
464F 5
When a statute prescribes a particular body to exercise a power it must be exercised only by that body
464G Halsbury s Laws of England Vol 1 4th Edn
page 32 re ferred to
The Marathwada University Act confers power to appoint officers on the Executive Council and it generally includes the power to remove
This power is located under Section 241 XXIX of the Act
464F G 7
The resolution of the Executive Council at a meet ing at which the Vice Chancellor was also present gave full power to the Vice Chancellor to take a decision on this question 
By the power delegated under the resolution the Vice Chancellor could either accept or reject the report with intimation to the Executive Council
He could not have taken any other action and indeed he was not authorised to take any other action
465F G  8
The resolution was also not in harmony with the statutory requirement
Approval of the Chancellor to the delegation of power by the Executive Council to the Vice Chancellor was mandatory under section 241xii read with section84 of the Marathwada University Act
The resolution not being in conformity with the statutory requirement could not confer power on the Vice Chancellor to take action j against the respondent
465H 466A C 9
Ratification is generally an act of principal with regard to a contract or an act done by his agent
The prin ciples of ratification in the context of the law of agency apparently do not have any application with regard to exer cise of power conferred under statutory provisions
The statutory authority cannot travel beyond the power conferred and 457 any action without power has no legal validity
It is ab initio void and cannot be ratified
468A B Friedman s Law of Agency 5th Edn Chapter 5at page 73 Bowstead on Agency 14th Ed at page 39 Parmeshwari Prasad Gupta vs Union of India  and Bernard vs National Dock Labour Board 1953 1 All Eng
Law Reports 1113
In the instant case there was no prior delegation of power to the Vice Chancellor to take disciplinary action against the respondent
There was no subsequent delegation either
Therefore neither the action taken by the Vice Chancellor nor the ratification by the Executive Council could be sustained
469F