Case: Godhra Electricity Co. Ltd. &amp; Anr Vs. The State Of Gujarat And Another

2. The Government of the Province of Bombay granted a licence by notification dated November 16, 1922, under Section 3 of the Act known as the Godhra Electric Licence, 1922 in favour of Lady Sulochana Chinubhai and Company, Ahmedabad The licence was signed on November 17, 1922 and the notification granting it was published in the Bombay Government Gazette dated November 23, 1922. The licence was transferred to the 1st appellant-company viz., the Godhra Electricity Co. Ltd. The licence was for a period of 50 years initial from its commencement. The initial period of 50 years, according to the respondents, was to expire on the midnight intervening between the 15th and 16th November, 1972. The second respondents exercised the option to purchase the undertaking of the 1st appellant company by a notice dated November 8, 1971, under Section 6 (1) of the Act by calling upon the appellants to sell the undertaking to it on the midnight intervening between the 15th and 16th of November, 1972. Thereafter, the Government of Gujarat issued a notification under R. 115 (2) of the Defence of India Rules, taking over the management of the undertaking on November 18, 1973. On December 21, 1973, the State Government handed over the undertaking to the 2nd respondent

Court's reasoning:
We have already seen that Rule 18 provides that the date of the notification shall be deemed to be the date of commencement of the licence. We have to read clause 2 (e) of the licence in the light of the provisions of Rule 18. Therefore, there is nothing strange in making the date of the notification in the Gazette that the licence has been granted, though anterior in point of time to the date of signing the licence, as the date of commencement of the licence. In other words, clause 2 (e) of the licence will have to be read in harmony with Rule 18 and if so read, it will be found that the date of the notification is only deemed to be the date of the commencement of the licence.In the process of interpretation of the terms of a contract, the Court can frequently get great assistance from the interpreting statements made by the parties themselves or from their conduct in rendering or in receiving performance under it. Parties can, by mutual agreement, make their own contracts, they can also by mutual agreement, remake them. The process of practical interpretation and application, however, is not regarded by the parties as a remaking of the contract; nor do the courts so regard it. Instead, it is merely a further expression by the parties of the meaning that they give and have given to the terms of their contract previously made. There is no good reason why the courts should not give great weight to these further expressions by the parties. In view of the fact that they still have the same freedom of contract that they had originally. The American Courts receive subsequent actings as admissible guides in interpretation. It is true that one party cannot build up his case by making an interpretation in his own favour. It is the concurrence therein that such a party can use against the other party. This concurrence may be evidenced by the other partys express assent thereto, by his acting in accordance with it, by his receipt without objection of performances that indicate it, or by saying nothing when he knows that the first party is acting on reliance upon theWe are not certain that if evidence of subsequent acting under a document is admissible, it might have the result that a contract would mean one thing on the day it is signed but by reason of subsequent event it would mean something a month or year later. Subsequent interpreting statements might not always change the meaning of a word or a phrase. A word or a phrase is not always crystal clear. When both parties subsequently say that by the word or phrase which, in the context, is ambiguous, they meant this, it only supplies a glossary as to the meaning of the word or phrase. After all. the inquiry is as to what the intention of the parties was from the language used. And, why is it that parties cannot clear the latent ambiguity in the language by a subsequent interpreting statement ? If the meaning of the word or phrase or sentence is clear, extrinsic evidence is not admissible. It is only when there is latent ambiguity that extrinsic evidence in the shape of interpreting statement in which both parties have concurred should be admissible. The parties themselves might not have been clear as to the meaning of the word or phrase when they entered into the contract.Unanticipated situation might arise or come into the contemplation of the parties subsequently which would sharpen their focus and any statement by them which would illuminate the darkness arising out of the ambiguity of the language should not be shut out. In the case of an ambiguous instrument, there is no reason why subsequent interpreting statement should be inadmissible.An arbitrator appointed under the section to determine the quantum of the purchase price can pass an award only in accordance with the terms of Sec. 7-A. Section 7-A provides that where an undertaking of a licensee is sold, the purchase price of the undertaking shall be the market value of the undertaking at the time of the purchase or, where the undertaking has been delivered before purchase under sub-section (3) of S. 5, at the time of the delivery of the undertaking and if there is any difference or dispute regarding such purchase price, the same shall be determined by the arbitrator. There is, therefore, no provision, which enables the arbitrator to award any interest on the market value of the undertaking at the time of the purchase merely because the market value is determined on a subsequent date.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. If the licensee cannot be required to sell the undertaking without payment of the purchase price at the time of delivery of the undertaking or without a provision in law for payment of interest on the purchase price during the period when payment is withheld, there would be no valid termination of the licence. It is unreasonable to require a licensee to deliver the undertaking without payment to him of the purchase price or, if the payment is deferred, without compensating him by way of interest for the period during which the payment has been withheld. The fact that an arbitrator is seized of the question of the determination of the purchase price and that he is bound to make the award within a specified time in law would not mean that the licensee need not be compensated for the delay in payment of the purchase price. The proviso to Section 7(ii) makes it clear that when an undertaking is sold or delivered to the Electricity Board or to the State, the licence shall cease to have any further operation. When the proviso talks of sale and delivery, it means a valid sale or a valid delivery. Admittedly, the undertaking belonged to the licensee 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 undertaking, no doubt, belonged to the 1st appellant, a corporation. Not being a citizen, it has no fundamental right under Article 19. The 2nd appellant is a shareholder and the Managing Director of the Company. If his right to carry on the business through the agency of the Company is taken away or abridged, Or, his right to a divisible share in future of the property of the company is diminished or abridged in taking delivery of the undertaking without payment of the purchase price, there is no reason why he should be disabled from challenging the validity of the sub-section.The second appellant contends that the value of his investment in the Company is substantially reduced by the illegal delivery of the undertaking to the Board, that his right to carry on the business of supplying electricity through the agency of the Company is abridged and that he, along with the other shareholders are left with the burden of the debts of the undertaking.We think the second appellant is entitled to challenge the validity of the sub-section on the ground that it abridged his fundamental right under Arts. 19 (1) (g) and 19 (1) (f).