Case: Tinsukhia Electric Supply Co. Ltd Vs. State of Assam and Ors

15. The petitioner-companies are Public Limited Companies registered under the Indian Companies Act, 1913, and are existing companies under the Companies Act 1956 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 Indian Electricity Act, 1910 (1910 Act for short) for supply of electricity within the respective licenced areas viz. of the Tinsukhia and Dibrugarh 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 he expiration of 50 years from 13.2.1928 the date of commencement of the licence and thereafter on the expiration of every subsequent period of twenty years.The Tinsukhia Company was similarly granted the Tinsukhia 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 21.7.1954, the date of commencement of the licence, and thereafter on the expiration of every subsequent decennial period.16. However, by two Ordinances, namely, The Indian Electricity (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 213 of the Constitution, the Electricity Supply Undertakings of the two companies were acquired by, and stood vested in, the Government with effect from 23.30 hrs. on 27.9.1972. Possession and control of the two undertakings were, accordingly, taken-over by the Government of Assam that day. The two ordinances were subsequently replaced by the two corresponding legislative enactments 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(Acquisition) Act, 1973, (Assam Act, X of 1973).At the time of filing of the writ petitions the two Ordinances had not been replaced by the legislative measures. However, after the coming into force of the two legislative enactments, with retrospective effect from the date of promulgation of the earlier ordinances, petitioners sought, and were granted by an order of this Court dated 18.12.1973, leave to amend the petitions so as to direct the challenge against the enactments.17. An advertence, though brief, to the factual antecedents 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 perspective.Respondent No. 4 i.e. the Assam State Electricity Board, it would appear, had been expressing its intention to take-over the undertaking of the Tinsukia Co. by private negotiations even from the year 1964. Pursuant to and in implementation of this proposal the Board had constituted a committee of 3 members for assessing the value of the assets of the Tinsukhias undertaking. On the valuation so made and the inventories so prepared, the Board, on 27.3.1970, informed the Tinsukia Co. that the Board had approved the valuation of the assets of the undertaking at Rs. 30,54,246, excluding, the value of the land, whose value was later estimated at Rs. 2,40,000. By letter dated 4.3.1971, the Chairman of the Assam State Electricity Board 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 Rs. 33,00,000. 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 counter-proposal in mind and, in the expectation of persuading 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 Tinsukia sometime in June, 1971, and held discussion with the company. The company avers that pursuant to these discussions, the Executive Engineer of the Board was asked by the Chairman to prepare a fresh inventory as on 31.10.1971 in collaboration with the company.However, the Secretary of the Board sent a communication dated 10.12.1971 to the company to the effect that as the company had not conveyed its concurrence to the offer contained in the Boards letter dated 25.3.1970 the said offer be treated as withdrawn. Thereafter, the Board issued the notice dated 15/23 May 1972 to the company conveying the Boards intention to exercise its option of purchasing the undertaking under Section 6(1) of the 1910 Act read with clause 12(iv) 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 21.9.1974 when the 20 year period of the licence would come to an end. In response to this notice, the company sent its communication dated 17.8.1972 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 27.9.1972 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 Dibrugarh on 27.1.1965 for discussions as to the valuation of the undertaking. Nothing moved in the matter for some years. However, in the communication dated 3.8.1970 addressed by the Secretary to Government of Assam. Power (Electricity), Mines and Minerals Department, to the Secretary of the 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 companys undertaking was taken over on 27.9.1972 pursuant to the two ordinances promulgated by the Governor.18. 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 Indian Electricity Act, 1910, by the Indian Electricity (Assam Amendment) Act, 1973, are substantial and far-reaching, 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-section (2) of Section 5 by the expression an amount. Section 3 of the Amending Act which amended Sub-section (7) of Section 6 of the Principal Act substituted the words the purchase-price occurring in Sub-section (7) of Section 6 by the words an amount. The amendments brought about by Section 4 of the Amending Act to Section 7A 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-section (1) of Section 5 the purchase-price of the undertaking shall be the market-value of the undertaking at the time of purchase, or where the undertaking had been delivered before the purchase under Sub-section (3) of Section 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 substituted an entirely different provision in the place of the old Section 7A. It substituted book-value in place of market-price. Sections 5(2), 6(7) and 7-A, of the Principal Act after their amendment read thus:Section 5(2): Where an undertaking is sold under Sub-section (1) the purchaser shall pay to the licencee an amount in accordance with the provisions of Sub-sections (1) and (2) of Sectionn (7) of Section 6, after the amendment, reads:Section 6(7): Where an undertaking is purchased under this section, the purchaser shall pay to the licensee an amount determined in accordance with the provisions of Sub-sections (1), (2) and (3) of Sectionn 7-A reads:7-A. Determination of amount payable, (1) 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 purchase or where the undertaking has been delivered before the purchase under Sub-section (1) of Section 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, materials and plant of the licensee, suitable to and used by him for the purpose of the undertaking, 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 constructed at the expense of the consumers, but without any addition in respect of compulsory purchase or of goodwill or any profit which may be or might have been made from the undertaking 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 Section 6.(4) No provision of any Act for the time being in force including the other provisions of this Act and of any rule made thereunder 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 have come into force on 27.9.1972, which was the date of promulgation of the earlier Ordinance.19. We may now notice some of the material provisions of the Acquisition Act i.e. Assam Act X of 1973. Section 1(3) provides that the Act shall be deemed to have come into force on 27.9.1972. Clauses (f), (h), (J) & (l) of the interpretation-clause (Section 2) may he noticed:2(f) Fixed Assets includes works, spare parts, stores, tools, motor and other vehicles, office equipment and furniture:2(h): Licensee means the Tinsukia Electric Supply Company Ltd. and/or the Dibrugarh Electric Supply Company Private Ltd., as the case may be;2(j): Undertaking means the Tinsukia Electric Supply Under-taking owned and managed by the Tinsukia Electric Supply Company Ltd., and/or the Dibrugarh Electric Supply Undertaking owned and managed by the Dibrugarh Electric Supply Company Private Ltd., as the case may be;2(l): Works includes electric supply lines and any lands, buildings, machinery or apparatus required to supply energy and to carry into effect the object of a licence granted under the Electricity Act;Section 3(2) provides:3(2): 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 obligation 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 proceeding de novo in respect of the undertaking under this Act.Section 4 provides:4. Vesting date. The Tinsukia and Dibrugarh Electric Supply Undertakings shall be deemed to be transferred to and shall vest in the Government, on the 27th day of September, 1972, at 11.30 P.M.Section 5 provides for the transfer of the undertaking so acquired by Government to the Board.Section 6 provides for the gross amount payable to the licensee.20. 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, excluding works paid for by consumers or prospective consumers;(iii) the book value of all stores including spare parts taken over by the Government 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 depreciation calculated in accordance with Schedule I;(vi) the amount due from consumers in respect of every hire-purchase agreement referred to in Section 7(i)(ii) less a sum which bears to the difference between the total amount of the installments and the original cost of the material or equipment, the same proportion as the amount due bears to the total amount of the installments;(vii) any amount paid actually by the licensee in respect of every contract referred to in Section 7(i)(iii).Explanation-The book value of any fixed asset means its original cost and shall comprise-(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 beneficial use as shown in the books of the undertaking;(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 Government of being heard, after giving him a notice of at least 15 days therefore.(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 I; test 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 therefore.Section 7 provides:21. 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 undertaking;(ii) all the rights, liabilities, and obligations of the licensee under hire-purchase agreements, if any, for the supply of materials or equipment made bona fide before the vesting date:(iii) all the rights, liabilities and obligations of the 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 (l)(i) shall vest in the Government free from any debts, mortgages of 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 electricity 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 conditions of supply approved by the Government and in force on the vesting date, the agreement shall be voidable at the option of the Government.(4) In respect of any undertaking to which Section 4 applies, it shall be lawful for the Government or their authorised representative 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 obligations, other than those vesting in the Government 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 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:22. 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 advance;(b) the amount if any, specified in Section 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 therefore under this Act, together 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 constituted by or under the authority of the Government and arrears, or interest, if any, thereon;(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 prospective consumers, 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 licensee to the Government;(j) the amount, if any, as specified in Sections 11(2) and 11(3):(k) the amount, if any, relating to debts, mortgages or obligations as mentioned in proviso to Section 7(2);Provided that before making any deduction 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:23. Arbitration. (1)Where any dispute arises in respect of any of the matters specified 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-purchase agreement or other contract referred to in Section 7(l)(ii) 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 7(3).(2) Subject to the provisions of this section, the provisions. of the Arbitration Act, 1940 (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 39(b) of the Constitution of India.20. The two legislations, one amending the provisions of Sections 5(2), 6(7) and 7-A of the Indian Electricity Act, 1910, 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 colourable 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 may bare before the judicial eye that what was sought to be acquired was not the undertakings of the two companies but really the difference 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 7-A, 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 31C 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 31(2) as it then stood. The validity of some of the specific provisions of the acquisition law which excluded certain items from valuation and envisaged and authorised certain deductions in the amount are also assailed,21. 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 undertakings were similarly sought to be acquired and civil appeal No. 243 of 1985, C.A. 344 of 1985 and C.A. 4113 of 1985 arising out of the Judgment, dated 20.7.1984, of the High Court of Bombay striking down certain amendments to the Indian Electricity Act, 1910, made by the Maharashtra State Legislature in the matter of statutory purchase of some of the private electricity supply undertakings in the State of Maharashtra.The three hatches 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 Judgments, The present Judgment disposes of the challenge made to the Assam Legislation.

Court's reasoning:
petitioners also urge, in the petitions, a challenge to the validity of the Twentyfourth and Twentyfifth Amendments to the Constitution. This part of the petition, in view of the subsequent pronouncements of this Court on these amendments, does not survive.25. Re: Contentions (a) and (b):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 31C which sought to impart a Constitutional sanctity, conclusiveness and non-justifiability to such legislative declarations was struck-down in the Keshavananda case. The sequitur is that whenever any immunity is claimed for a law under Article 31C, 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 39(b) and (c). The observations of Mathew, J. in Keshvananda case 1973 SCR Supp 1 may be recalled:...Whenever a question is raised that the Parliament or State Legislatures have abused their power and inserted a declaration in a law not for giving effect to the State Policy towards securing the directive principles specified in Article 39-B or 39-C, the Court must necessarily go into that question and decide it......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 39(b) 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 authorised object, the court would be entitled to tear the veil created by the declaration and decide according to the real nature of the law...Chandrachud, J. observed in the Keshavananda case:Laws passed under Article 31C can, in my opinion, be upheld only, and only if, there us a direct and reasonable nexus between the law and the directive policy of the State expressed in Article 39B oro the same effect are the observations of the learned Chief Justice in Minerva Mills Ltd. v. UOI [1981]1SCR206 :...the Courts can, under Article 31C, 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 31C was whether there is a direct and reasonable nexus between the impugned law and the provisions of Article 39(b) and (c).In the same case, Bhagwati, J. observed:...The point that I wish to emphasis is that the amended Article 31C does not give protection to a law which has merely some remote or tenuous connection with a directive principle....Even where the dominant object of a law is to give effect to a directive principle it is not every provision of the law which is entitled to claim protection.......it is not every provision of a statute which has been enacted with the dominant object of giving effect to a directive principle, that it entitled to protection, 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 31C ....26. The proposition of Sri Sorabjee, in principle, is, therefore. unexceptionable;Apropos of the contention that, at all events, the provisions pertaining to the amount could have no reasonable or direct nexus to the principles envisaged in Article 39(b), but are merely intended to extinguish the legitimate rights of the petitioner-company to receive the price of the undertaking 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 acquisition 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 31(2), (as it then stood), if the law has the protection of Article 31C the question that arises is whether anything at all survives for consideration under Article 31, The contention indeed, runs in the teeth of several pronouncements of this Court which lay down that when Article 31C comes-in. Articles 14, 19 and 31 (the last mentioned article as it then stood) go out. This we will consider under point (c).27. It is not disputed that the electricity generated and distributed by the undertakings of the petitioner-companies constitute material resources of the community for the purpose and within the meaning of Article 39(b).In Sanjeev Coke Manufacturing Company v. 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 A.K. Sen was that neither a coal mine nor a coke oven plant owned by private parties was a material resources of the community. According 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 resources of the community the ownership of the resources must vest in the community i.e. theA law providing for acquisition was not a law forg 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....It can, therefore, hardly be gain-said that the electrical energy generated and distributed by the undertakings of the petitioner constitutes material resources of the community.It is true that if such a relationship is merely remote and tenuous the protection under Article 31C may not be available. The idea of distribution of the material resources of the community in Article 39(b) 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 v. L. Abu Kavur Bai [1984]1SCR725 this Court had occasion to refer to this aspect. It was held:In other words, the word distribution does not merely mean that property of one should be taken over and distributed to others like land reforms where the land from the big landlords are taken away and given to landlesst is only one of the modes of distribution but not the onlyy nationalising the transport as also the units the vehicles would be able to go the farthest corner of the State and penetrate as deep as possible....This would undoubtedly be a distribution for the common good of the people and would be clearly covered by Clause (b) of Article 39.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 31C.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 element in Nationalisation. The need for constitutional immunities 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 immovable or movable property will be transformed into concentration of wealth in the form of money and how is the objective underlined in Article 39(b) and (c) achieved by the transformation? And will there be-enough money in the coffers of the State to pay full compensation?...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 adequacy 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 principle for fixing it is a matter for the Parliament alone and that the Court has no say in the matter. 1972CriLJ1526It is, therefore, not possible to divorce the economic considerations 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 vestibule of the undertakings in the State and those pertaining to the quantification of the Amount are integral and inseparable parts of the integral scheme of nationalisation and do not admit of being considered as distinct provisions independent of each other.30. The memorandum of the writ petition contains averments as to the efficiency and public-utility of the services rendered by the undertakings and that on the date of the take-over the market value of the Tinsukhia and Dibrugarh undertakings were Rs. 55 lakhs and Rs. 35 lakhs respectively and that the undertakings were discharging their obligations to the consumers efficiently and satisfactorily. The case of the petitioners is that there was no justification at all for the nationalisation as the undertakings were efficient and fully catered to the needs of the consume7rs. It was also averred 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 electricity. The Respondents have sought elaborately to traverse these grounds and to justify the measure for nationalisation.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 available. In Akadasi Padhan v. State of Orissa and Ors. AIR1963SC1047 this debate on the philosophy of nationalisation is concluded. It 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 efficiency and increased output of production.......The amendment made by the Legislature in Article 19(6) shows that according to the Legislature, a law rel7ating to the creation of State monopoly should be presumed to be in the interests of the generaln 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 pragmatict on the doctrinaire approach which socialism, in the United States of America after the hey-days of the substantive due process, the Supreme Court in l963 in Ferguson v. Skrupa 372 US 726 said:We refuse to sit as a super legislature to weigh the wisdom of legislation, and we emphatically refuse to go back to the lime 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)31. Equally untenable is the contention based on the assumption that immediately upon the exercise of the option to purchase, the proprietary-rights of the Tinsukhia Company in relation to the under-taking 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 1910 Act. The contention presupposes that contemporaneous with the service of the notice on the licensee, the proprietary-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 provisions of 1910 Act. In Fazilka Electric Supply Company Limited v. 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: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 acquisition without reference to and independently of any agreement by the licencee.(Emphasis Supplied)In Gujarat Electricity Board v. Shantilal [1969]1SCR580 referring to the legal consequences 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 election within the period prescribed in Section 7(4) 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 exercise of the option to purchase is further clear from what is implicit in the observations of this Court in Godra Electricity Company Limited and Anr. v. The State of Gujarat and Anr. [ [1975]2SCR42 . 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 can on the business, the learned Additional Solicitor General placed reliance on the decision of this Court in Kalyan Singh v. State of U.P....This Court held that the exercise of the option would have no such effect on the licensees 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......Admittedly, the undertaking 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 will be entitled to carry on the business.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 actionable-right, 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.32. 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 v. Union of India and Ors. (1978)ILLJ406SC 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 possession 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 possession or enjoyment, but a mere right enforceable by action. The most important personal things recoverable by action only were 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....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.W.S. Holdsworth also refers to this difficulty in apprehending the precise incidents of the concept of a chose-in-action:It is sometimes difficult to ascertain 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 v. Discard 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 anything but difficult to formulate and apply.(Emphasis Supplied)(See: The History of the treatment of chose-in-action by the common law:- 33 HLR 997.34. It requires, therefore, to be held that the impugned legislation viz., Assam Act X, 1973, was brought forth for securing the principles contained in Article 39(b) of the Constitution and is protected under Article 31C. The amendment made to the provisions of the Indian Electricity Act, 1910, by Assam Act IX of 1973, amending the basis for quantification 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.35. We find, therefore, no substance in the contentions (a) and (b) urged by the petitioner.36. Re. contention (C):contention would not, in law, be available to the petitioners inasmuch as the law providing for the acquisition has the protection of Article 31C of the Constitution. 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 31C. Now that we have held that Article 31C is attracted, the argument in regard to the alleged illusory nature of the amount does not survive at all.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 31C observed:...In fact article 31C is a logical extension of the principles underlying article 31(4) and (6) and article 31A.... The true nature and character of article 31C 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 distribution of ownership and control of the material resources of the community for the common good. Article 31C is thus essentially an extension of the principle which was accepted in article, J. said:Article 31C 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, 19 and 31 would vanish so long as the law was really meant to give effect to the principles of Article 39(b) and (c)....In State of Karnataka v. Ranganath Reddy [1978]1SCR641 this Court had occasion to observe:...For the purpose of deciding the point which falls for consideration in these appeals, it will suffice to say that still the over-whelming View of the majority of judges in Kesavandanda Bharatis 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 31C inserted in the Constitution by the 25th Amendment (leaving out the invalid part as declared by the majority).(Emphasis Supplied)In Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal Company Ltd.this Court said:...To accept the submission of Shri Sen that a law founded on discrimination is not entitled to the protection of Article 31C, as such a law can never be said to be to further the Directive Principle affirmed in Article 39(b), would indeed, be, to use a hackneyed phrase, to put the cart before the horse. If the law made to further the Directive Principle is. necessarily non-discriminatory or is based on a reasonable classification, then such law does not need any protection such as that afforded by Article 31C. Such law would be valid on its own strength, with no aid from Article 31C. To make it a condition precedent that a law seeking the haven of Article 31C must be non-discriminatory or based on reasonable classification is to make Article 31C meaningless....We are firmly of the opinion that where Article 31C comes in Article 14 goes out....What applies to Article 14 would equally apply to Article 31 (as it then stood before its deletion by the Constitution Forty second (Amendment) Act, 1978).In State of Tamil Nadu v. L. Abu Kavur Bai [1984]1SCR725 on which Shri Rangarajan relied, Fazal Ali J. categorily said:It is manifest from a bare reading of the newly added Article 31C that any law effectuating the policy of the State in order to secure or comply with the directive principles 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 and 31...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 Articles 14, and 19 but also 31 which, by virtue of the 25th amendment, had replaced the word amount for the word compensation in Article 31(2)....(Emphasis supplied)Sri Rangarajan cannot, therefore, draw any sustenance from Fazal Ali J. for his argument.38. The contention of Shri Rangarajan in our opinion, is wholly unsupportable. Indeed, the purpose of Article 31C is, amongst others, to exclude Article 31, as it then stood. The effect of accepting Sri Rangarajans contention would be to let in Article 31 by the backdoor, frustrating the very object of Article 31C 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.39. 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:...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 byg to what might, yet, be open to judicial scrutiny, under Article 31(b), Shelat and Grower, JJ. observed in the Keshavananda case: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 an arbitrary 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 requisitioned 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 31(2). 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.