Case: STATE OF U.P Vs. THE UPPER JAMUNA VALLEY ELECTRICITY SUPPLY CO. LTD. AND OTHERS

2. Briefly stated the facts are as follows:On 28th June, 1929 the Government of Uttar Pradesh granted to one M/s. Martin & Co. a licence for supply of electric energy. This licence was subsequently transferred to the 1st Respondent. One of the terms of the licence was that at the end of the licence period the Government had a right to purchase the undertaking. The licence was for a period of 35 years. The 35 years period would thus end on 27th June, 1964. On 30th November, 1962 the Appellant served a notice on the 1st Respondent, u/s 6(1) of the Indian Electricity Act, 1910 (hereinafter called the said Act). By this the Appellants called upon the 1st Respondent to sell the undertaking to the Appellant on the expiry of the period of 35 years from the commencement of the licence, i.e., at 12 Oclock in the night between the 27th and 28th June, 1964.3. On February 4, 1975, Indian Electricity (U.P. Amendment and Validation) Ordinance No. 7 of 1975 was passed. This Ordinance amended certain provisions of the Indian Electricity Act. Subsequently this Ordinance was replaced by an Act namely Indian Electricity (U.P. Amendment and Validation) Act, 1976. The Ordinance and the Act amended amongst others Sections 6 and 7A of the Indian Electricity Act.

Reasoning:
8. It must be mentioned that the above mentioned Ordinances and Amendment Act were part of the policy of nationalisation of electric companies by the Union of India. Similar amendments were made by many States. Electric companies, all over India, were sought to be so purchased. Like the 1st Respondent, a number of other Electric Companies challenged the constitutional validity of the Amending Act/Ordinance. The challenge was, inter alia, on the ground that the rights under Article 19(1)(f) and Article 31(2) were being violated. It was also claimed that the Amending Act/Ordinance was invalid as it had no reasonable direct nexus to the principles under Article 39(b) of the Constitution. It was also claimed that, in effect and substance, the law was not one for acquisition of electrical undertakings but was one to acquire a chose-in-action and to extinguish rights, which had accrued in the Electric Companies, to get the market price. It was contended that the right to get compensation accrued on the day the notice was given. It was contended that what was being acquired was the difference between the market price which the State was obliged to pay and the book value to which the liability was now sought to be limited. It was claimed that as the Act was merely a cloak which the law was made to wear, to undo the obligations arising out of intended statutory sale, Article 31(c) was not attracted. It was also claimed that in any case, every provision of a statute was not entitled to protection of Article 31(c) but only those which are necessary for giving effect to the principles in Article 39(b) and accordingly the provision in the impugned law in relation to the determination of the amount do not attract Article 31(c). In all the matters it was claimed that the purchase price should be the market value.9. A Constitution Bench of this Court in the case of Tinsukhia Electric Supply Co. Ltd. Vs. State of Assam and others, , upheld the validity of the Act/Ordinance. This Court held that the Act had nexus with the principles in Article 39(b) and was therefore protected by Article 31(c). It was held that the Act was not a piece of colourable legislation. It was held that electric energy generated and distributed was a material resource of the community for the purpose and within the meaning of Article 39(b). It was held that the idea of distribution of natural resources in Article 39(b) envisages nationalisation. It was held that on an examination of the scheme of the impugned law the inescapable conclusion was that the legislature measure was one of nationalisation of the undertaking and this law was eligible for and entitled to protection of Article 31(C). It was held that it was not possible to divorce the economic consideration or component from the scheme of nationalisation with which the former are inextricably integrated. It was held that the financial costs of a scheme lies at its very heart and cannot be isolated. It was held that with the provisions relating to vestiture of the undertaking in the State and those pertaining to the quantification of the amount are integral and inseparable parts of the scheme of nationalisation and do not admit of being considered as distinct provisions independent of each other. It was held that the provisions for payment of amount to the undertaking, by reducing the market value to book value, formed an integral part of the nationalisation scheme and that economic consideration for nationalisation was not justiciable. It was held that what was being acquired was the material resources of the community. The contention that immediately upon giving of the notice the rights got crystallised was negatived. It was held that the exercise of the option did not affect licensees right to carry on business. It was held that the licensees rights would be affected only when the undertaking was actually taken over. Similar view was taken in the cases of Maharastra State Electricity Board Vs. Thane Electric Supply Co. and others, , and Vellore Electric Corporation Ltd. and Another Vs. State of Tamil Nadu and Others, .16. We have considered the submissions of Dr. Singhvi. Undoubtedly, the law which is to prevail is the law which was prevailing on the date of takeover, i.e. 28th of June, 1964. It is also clear that on that day the Constitution (Twenty-fifth Amendment) Act had not been enacted and Article 31(C) was not there. Undoubtedly, in Coopers case it has been held that even after amendment of Article 31(C) the term compensation meant just equivalent or full indemnification. However, Coopers case itself notes that there has been a change inasmuch as if the law pertains to change in the principles of the method of determination of compensation and the method is a recognized principle applicable in the determination of compensation and the principle is appropriate in determining the value of the property, then it would not be open to the Courts to question the valuation. Coopers case also lays down that if several principles are appropriate and one is selected for determination of the value of the property to be acquired, selection of that principle to the exclusion of other principles is not open to challenge, for the selection must be left to the wisdom of the Parliament. Of course, the principles specified must be appropriate to the determination of compensation for an appropriate class of property sought to be acquired.17. In Tinsukhias case, this Court has gone into the question as to whether the principles would be appropriate even if Article 31(C) was not applicable. It ultimately held as follows:96. Even if the impugned law did not have the protection of Article 31C, a hypothesis on which contention (c) is based, the adequacy or inadequacy of the amount is not justiciable. The limitations of the courts scrutiny explicit in Article 31(2), are referred to by Mathew, J. in the Keshavananda case (SCC p. 889,para 1751):... the wordamount conveys no idea of any norm. It supplies no yardstick. 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 yardstick or norm for determining the adequacy of the amount and the relevancy of the principle fixed by law.97. Referring to what might, yet to open to judicial scrutiny, under Article 31(B), Shelat and Grover, JJ. observed in the Kesavananda case : (SCC p. 457 para 591)But still on the learned Solicitor Generals argument, the right to receive the amount continues to be a fundamental right. That cannot be denuded of its identity. The obligation to act on some principle while fixing the amount arises both from Article 31(2) and from the nature of the legislative power. For, there can be no power which permits in a democratic system and arbitrary use of power...But the norm or the principles 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 requisitioned and one or more of the relevant principles have been applied and further that he 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 31(2). The question of adequacy or inadequacy, however, cannot be gone into.Justice Chandrachud observed: (SCC p. 1000. para 2122)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.98. All the same, the concept of book value is an accepted accountancy concept of value. It cannot be held be illusory.Even though Coopers case has not been specifically referred to, in Tinsukhias case, still the principles laid down in Coopers case have been kept in mind and dealt with. Keeping those principles in mind, in Tinsukhias case it has been held that the concept of book value is an accepted accountancy concept and that it cannot be held to be illusory.18. Further, in Thana Electric Supply Companys case it has been held as:15. 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 companys undertaking, were violative of Articles 14, 19(1)(f) 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 31C of the Constitution rendering the law immune from assailment on the ground of violation of fundamental rights. The contentions of the parties would require to be examined as the provisions of Articles 19(1)(f) and 31 stood at the relevant time. Articles 19(1)(f) and 31 were deleted later; but that does not affect the constitutional position with reference to which the present case would require to be decided.Thus, in this case this Court proceeded on the basis that Articles 19(1)(f) and 31 applied to the facts of that case. The Court still set aside the Judgment of the High Court, which had upheld the challenge. This Court still held that the challenge on grounds of violation of Articles 14, 19 and 31 fails. The contention that compensation was not adequate and/or illusory was not accepted. In Vellore Electric Corporations case also this Court considered the challenge to the change in the method of valuation from market value to book value on the basis of Articles 19(1)(g) and 31. In this case also it was held that such a contention was not available, as it had been negatived in Tinsukhias case.19. In our view, the authorities in Tinsukhias case, Thana Electric Supply Companys case and Vellore Electric Corporations case fully cover the point urged by Dr. Singhvi. Even if the principles laid down in Coopers case (supra) are applicable, still it has been held by this Court, in the above mentioned three cases that principles of valuation on book value is a well known concept of valuation and that the amount is not illusory. We, therefore, see no substance in this challenge.22. We are unable to accept the submission. As has been held in Tinsukhias case, Thana Electric Supply Companys case and Vellore Electric Corporations case what has been acquired is not a chose-in-action or a debt. What has been acquired is the undertaking which dealt with material resource of the country. There was no crystallisation of any amount. The only right was a right to receive compensation which was to be worked out on certain principles. All that the amending Act has done is to change the method or principle on the basis of which the compensation was to be worked out. It has been held that the legislation is not a piece of colourable legislation. It has also been held, in the above mentioned cases, that the provisions for quantification of the amount payable to the undertaking form an integral and inseparable part of the nationalisation and do not admit of being considered as distinct provisions independent of each other. It has been held that the economic costs of nationalization was not justiciable. In our view this case is fully covered by the judgments in Tinsukhias case, Thana Electric Supply Companys case and Vellore Electric Corporations case.