Case: Okara Electric Supply Company Limited &amp; Another Vs. State of Punjab &amp; Another

2. The first petitioner was granted sanction under S. 28 of the Indian Electricity Act 9 of 1910 (hereinafter called the Act) authorising it to engage in the business of supplying energy at Muktsar by Government Notification No. 1766-I and C-48/28784 published on May 26, 1948. By virtue of the said sanction the first petitioner has ever since been engaged in the business of supplying electric energy at the said place and for the purpose of its business it has set up an electricity undertaking at considerable cost. On January 3, 1958, the Secretary to respondent 1, P. W. D. Irrigation and Electricity Branches, Chandigarh, issued notice against the first petitioner purporting to exercise the option given to respondent 1 by cl. 11 of the said notification. By this notice the first petitioner was told that respondent 1 had exercised its option under the said clause, and that on the expiry of the period of one year after the receipt of the notice by the first petitioner its undertaking shall vest in and become the absolute property of respondent 1.3. The first petitioner has been having bulk supply from P. W. D. Electricity Branch of respondent 1, and, according to the petition, respondent 1 could not and will not take over the plant and yet has ordered the first petitioner that it cannot sell the plant without permission of respondent 1. The imposition of this condition is wholly illegal and it amounts to an unreasonable restriction on the petitioners right to carry on business and to hold and dispose of its property.4. The petition alleges that cl. 11 of the notification on which the impugned notice is founded is ultra vires S. 28 of the Act; and that alternatively, if the inclusion of the said clause in the notification is justified by S. 28 of the Act. S. 28 itself is ultra vires since it offends against Arts. 19 and 31 of the Constitution. It is on these allegations that originally the petition claimed an order against the enforcement of the notice and subsequently added the prayer for a writ or mandamus directing respondent 1 to restore to the petitioners possession of the property which has been taken over by respondent 1 after the filing of the present petition.

Court's reasoning:
15. Let us look at this question from a practical point of view. If a person is granted sanction to engage in the business of supplying energy it is not denied that S. 28 (1) would justify the imposition of a time limit on the grant of sanction. If sanction is granted for a specified number of years, and it comes to an end, what would happen to the constructions made by the supplier for the purpose of supplying energy? He cannot dismantle them because thereby he would cause damage to public property such as streets, and so he cannot take them away. In such a case the Legislature may well provide for the acquisition of such constructions in order to safeguard the interest of the person to whom temporary sanction is granted. Such a provision also serves another public purpose. It guarantees the availability of suitable constructions and works which may be used for the continuance of the supply of electricity by another agency. In other words, the statutory provision which deals with the grant of sanction to a person to engage in the business of supplying energy must, having regard to the special features of the business, necessarily deal with the position which would arise on the termination of the sanction; and so it would not be unreasonable to assume that the statutory provision which deals with this question would think of making adequate provision empowering the State Government to provide for the compulsory acquisition of the assets of the supplier on payment of proper compensation. It is in the light of this special feature of the business of supplying energy that we must construe S. 28 (1) of the Act.16. Besides, the provisions of Ss. 5, 6 and 7 also afford assistance in the matter. They clearly show that in the case of a licence specific provisions have been made for the acquisition of the undertaking in cases of revocation or cancellation of licences. The reason for thus providing for compulsory acquisition of licensees undertaking is equally relevant in the case of the sanction with which S. 28 (1) deals. It is true that S. 28 does not specifically and expressly provide for compensation as the other sections do; but that must be because recourse to the provisions of Pt. III was intended not to be the rule but only as a temporary measure wherever it was deemed necessary to do so; and so the Legislature left it to the State Government to provide for compulsory acquisition in the light of the guidance given by the provisions contained in Ss. 5, 6 and 7.17. Let us then look at S. 28 (1) in the light of these considerations.It authorises the State Government to give sanction to a person to engage in the business of supplying energy on conditions in that behalf. The expression "such conditions in this behalf" in the context should take in conditions dealing with the position which would inevitably arise when the business comes to an end. There is no doubt that the grant of sanction contemplated by S. 28 cannot be permanent. It was always bound to be temporary, issued on an ad hoc basis according to the requirement of each case, and when granting sanction for a specified number of years it is in the interest of the grantee himself that some provision should be made for payment of compensation to him in respect of the investment made by him in carrying out the business of supplying energy when otherwise it would be difficult for him to collect his assets in that behalf. That is whey we think that the relevant words should not be given a narrow and limited construction for which the petitioners contend. In our opinion, the context requires that the said words should receive a wider and liberal construction. A condition for the acquisition of the property of the petitioners, like Cl. 11 would, therefore, fall within the scope of S. 28 (1).The challenge to the validity of this condition on the ground that it is ultra vires S. 28 (1) must accordingly fail.In regard to the attack on S. 28 on the ground that if offends Art. 19 (f) or (g) the answer is obvious.The limitations imposed by S. 28 quite clearly are reasonable restrictions and have been imposed in the interests of the general public within the meaning of Art. 19 (5) of the Constitution. As we have already seen such limitations are generally imposed on the business of supplying energy and their reasonableness cannot be and has in fact not been seriously challenged. Therefore we have no hesitation in holding that the vires of S. 28 cannot be successfully challenged.20. Incidentally we may observe that on the day when the Constitution came into force what vested in the petitioners was the property subject to the liability imposed on it by Cl.11 of the notification; and so, when the Constitution came into force the only rights which the petitioners had in their property in question were rights of a limited character which were subject to the exercise by the State of its election to acquire the said property. In this connection the respondents rely on the decision of this Court in Director of Endowments, Govt. of Hyderabad v. Akram Ali, (S) AIR 1956 SC 60  , and seke to urge that the exercise of the option given to respondent 1 by Cl. 11 of the notification cannot be successfully challenged as ultra vires under Art. 19 of the Constitution; we do not, however, think it necessary to decide this point because it was fairly conceded before us that if S. 28 is valid and is construed to include a condition like Cl. 11 of the notification no other point would survive.21. There is one more minor point to which reference may be made. In the petition the validity of the notice given by respondent 1 to the petitioners prohibiting them dealing with the property was challenged; but that is no longer a matter in dispute between the parties since respondent 1 has in substance withdrawn the said notice. This fact, however, would be relevant on the question of costs.If S. 28 permits the imposition of such a condition, does it violate Art. 19 or Art. 31 of the Constitution? That is the next question which must be considered. It is not seriously disputed that Art. 31 (2) on which reliance is placed by the petitioners cannot be of much help to them for Art 31 (5) provides inter alia that nothing in Cl. (2) shall affect the provisions of any existing law other than the law to which the provisions of Cl. (6) apply. It is conceded that Cl. (6) does not apply to the Act, so that it follows that Art. 31 (2) cannot be invoked to challenge the validity of the Act. Mr. Veda Vyas attempted to contend that the vires of the Act could be challenged if not under Art. 31 (2) at least under S. 299 (2) of the Government of India Act,1935; but he realised that he was up against a similar difficulty created by the provisions of S. 299 (4) which says that nothing in S. 299 shall affect the provisions of any law in force at the date of the passing of the Act; and he conceded that in 1910 when the Act was passed the Legislature was competent to pass it and it then suffered from no infirmity. That is why though an attempt was made to press into service Art. 31 (2) it was ultimately given up. We need not, therefore, discuss this point any further.