Judgment Case ID: 6040

Judgment:
ivil Appeal No. 4113 of 1985 etc. From the Judgment and Order dated 20.7.1984 of the Bombay High Court in Misc. Petition No. 1115 of 1977. T.R. Andhyarujina	 S.B. Bhasme	 R.A. Dada	 V.S. Desai	 A.K. Sen	 M.L. Dhamuka	 M.A. Firoz	 A.S. Bhasme	 A.M. Khan wilkar	 Harish Salve	 R.F. Nariman	 J. B. Dadachanji	 Mrs. A.K. Verma	 Joel Pares	 B.H. Vani	 D.N. 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 20.7. 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 11.1. 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 14.9.1927 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 16.2.1928	 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 11.6.1928	 consented to the transfer of the license to the said Private Limited Company. On 15.1.1965	 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 13.7.1976. 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 20.9. 1976	 the Amending Act 1976. pursuant to the Bill introduced on 13.7. 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 26.8.1976. 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	 19(1)(f) & (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 19(1)(f) 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 1.9.1977. On 21.9.1977 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 21/22 September	 1977. On 11.1. 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 27.10.1974	 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 3(2)(cc)	 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: "7A(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 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 7A(5) enabled the payment of the amount either in lump sum or in instalments	 together with the rate of inter est stipulated in Section 6(7) 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 26.8.1976	 i.e. 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	 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 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 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 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 W.P. 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 39(b) 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 39(b) or (c). This could be done either by specific reference to Article 39(b) or (c) in the enactment or by incorporating in it the word ing of Article 39(b) 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 39(b) 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 Rs.4	05	00	000	 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 Rs.4	05	00	000 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 19(1)(f). 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 19(1)(f). 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 19(1)(f). 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 19(1)(f). (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 19(1)(g)	 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 19(1)(g). " Further	 the conferment on Government of the power to fix instalments was held to be "grossly unreasonable and. arbitrary and violative of Article 19(1)(f) 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 i.e. C.A. 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 A.K. 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 39(b) 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 39(b) 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 39(b) and was entitled to the protection of Article 31 C. Sri A.K. 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 39(b). 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 39(b) 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	 19(1)(f) 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 19(1)(f) 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 19(1)(f) 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 39(b) 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. 39(b). 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 39(b) 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 10(2)(vii) 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 77	700 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 10(2)(vii) 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 s.(1) 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 39(b) is alien to the present case which was one of a con tractual sale. Sri Sen also referred to Arti cle 31(2A)	 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 39(b). Sri Sen	 also referred to Bihar State Electricity Board and Ors vs Patna Electricity Supply Co. Ltd. & Anr.	 In that case	 on 5.1.1973 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 5th/6th 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 19(1)(f) and article 31(2) of the Consti tution " It was held in that case the amending processes were violative of the Licensees ' fundamental rights under Article 31(2) 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 39(b) 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 39(b). 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 6(1) 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 39(b) and that the legislative expedient by which the State seeks to achieve the objective of Article 39(b) 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 39(b) 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 39(b). 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 39(b). 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 39(b). 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 39(b). 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 39(b). 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 39(b) 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 39(b)? 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 1976	it 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 39(b). 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 39(b) 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 20.7.1984 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. C.A. 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. S.K.A. Appeals allowed.

Summary:
The respondent Company took over	 with the consent of the State Government	 the licence granted to a private firm under the for supply and dis tribution of electricity in the areas covered by the li cence	 and became entitled to the benefits and privileges of the licence. Under cl. (11) of the licence	 Government had the option to purchase the undertaking on the expiry of the period of licence. The licence was to expire on 21st September	 1977. The State Electricity Board	 in .exercise of its option	 issued a notice to the Company on 26th August	 1976 and required it to sell and deliver the undertaking to the Board on the midnight between 21st and 22nd September	 1977. Under the provisions of the 	 as they stood at the time of option	 the Company was entitled to be paid the 519 market value of the undertaking. But	 by the Amending Act	 1976 the Bill for which had been introduced in the State legislature on 13.7.1976 the principle of market value in the relevant provisions of the 1910 Act was substituted by the concept of "Amount" legislatively fixed as a sum equal to the depreciated Book Value of the assets of the undertak ing to be taken over. The amended provisions were to govern cases where notices had been issued prior to the amendment. The respondent Company filed writ petitions before the High Court challenging the validity of sections 4	 5 and 6 of the Indian Electricity (Maharashtra Amendment) Act	 1976 and section 2 of the Indian Electricity (Maharashtra Amendment and Validity) Act	 1974 as violative of articles 14	 19(1)(f) and (g) and 31 of the Constitution. The appellants	 the State and the Electricity Board	 claimed protection of article 31 C to the Amending Act	 1976 and the consequent immunity from attack on the ground of violation of articles 14	 19 and 31. The High Court held that in the absence of a declaration in the Amending Act of 1976 that 	the law was one intended to give effect to the objects of article 39(b) and (c) of the Constitution	 the Amending Act cannot have the protection of article 31 C. Declaring section 4 of the Amending Act as violative of article 19(1)(f) and article 14	 it held that the State could not unilaterally reduce	 even by legislation	 its liability to pay the purchase price under a consensual transaction and that conferment on Government of power to fix instalments was grossly unreasonable and arbitrary and that provision for payment of interest at the Reserve Bank rate pins one per cent made more unreasonable the provisions of the Amend ing Act. The High Court also rejected the respondent Company 's claim as to the Constitutional infirmity attributed to section 2 of the 1974 Act and sections 5 and 6 of the Amending Act	 1976. It further rejected the Company 's contention that	 upon the service of the notice exercising the option to purchase	 the Company 's right to be paid the market value under the law as it then stood	 was crystallised into an "actionable claim" or "A chose in action" and that What was sought to be ac quired was not the undertaking itself but a chose in action	 and that the law was bad for excluding the service lines from computation of the amount. The appellants filed appeal in this Court assailing the correctness of the High Court 's view that section 4 of the Amend ing Act. was bad. The respondent Company	 also filed a cross appeal	 questioning the correct 520 ness of the judgment on the points held against it. It was contended on behalf of the appellants that the law was entitled to the protection of article 31C and that the High Court was in error in postulating that the absence of the express legislative declaration in the law that it was enacted for giving effect to the directive principles of State Policy in article 39(b) and (c)	 was itself conclusive against the attraction of article 31 C. It was urged that the presence of such a declaration merely furnished evidence of a reasonable and direct nexus between the legislation and the objects of article 39(b) and (c) but the declaration was by itself not conclusive either way	 and the court was entitled to go behind the facade of the declaration and scrutinise whether there was really such a direct and reasonable nexus	 and that the absence of such an express declaration did not preclude the State from showing the existence of the requi site nexus	 and that apart altogether from the protection of article 31 C	 the Amending Act of 1976 was justifiable as a reasonable restriction on the freedom under article 19(1)(f) and (g). On behalf of the Company	 it was contended that any appeal to and reliance upon article 31 C was wholly misplaced	 as the option to purchase the undertaking was in effectua tion 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	 and that the provisions of the Amending Act	 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 39(b). The point for consideration was whether Indian Electric ity (Maharashtra Amendment) Act	 1976	 which statutorily modified the principles for the determination of the pur chase price for the undertaking from the principle of market value contained in the unamended section 7A of 1910 Act to the concept of "Amount" equal to the depreciated book value of the assets under section 7A as amended the Amending Act 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 39(b) of the Constitution and	 therefore	 had the protection of article 31 C. Allowing the appeals preferred by the appellants Maha rashtra State Electricity Board and dismissing the cross appeal of the 521 respondent Company	 this Cpurt	 HELD: The provisions of the Amending Act of 1976 have a direct and substantial relationship with the objects of article 39(b) and	 therefore	 are entitled to the protection of article 31 C. Therefore	 all challenge to the law on the ground of violation of Articles 14	 19 and 31 must necessarily fail. That apart	 there is no merit in the grievance that service lines had been omitted from computation of the amount. Similarly	 there is no merit in the contention that the value of the "goodwill" has been omitted from computa tion of the amount. [542D F] The nexus between the law and the objects of article 39(b) could be shown independently of an express declaration by the legislature in the law that it was enacted for giving effect to the directive principles of State Policy contained in article 39(b). The absence of evidence of nexus	 in the form of such an express declaration	 was not by itself evidence of absence of such nexus. [534F G] State of Maharashtra vs Basantibai	 ; at 1475 and Fazilka Electric Supply Co. Ltd. vs The Commis sioner of Income Tax	 Delhi 1962 Supp. 3 S.C.R. 496	 re ferred to. The business of an electricity supply undertaking	 a public utility service	 in pursuance of a license granted under the Electricity Act	 1910 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	 and include the term pertaining to the quantification of the price payable for the take over. The proposition that the right to the payment of the price gets crystallised into a 'chose in action ' independ ently of or even before the actual transfer of ownership of the undertaking	 cannot be accepted. [539C D] Fazilka Electric Supply Company 's case	 [1962] Supp. 3 S.C.R. 496 and Gujarat Electricity Board vs Girdharilal Motilal	 ; 	 referred to. 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 it self	 would not be decisive of whether the amending Act of 1976 had no direct and reasonable nexus with the objects of Art 39(b). [539F] 522 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. [540C D] The expression "nationalisation" means 'the acquisition and control of privately owned business by Government. ' [540D E] The idea of nationalisation of a material resource of the community cannot he divorced from the idea of distribu tion of that resource in the community in a manner which advanced common good. [540G] No doubt	 the protection of article 31 C is accorded only to those provisions which are basically and essentially necessary for giving effect to the objects of article 39(b). [540H] But	 the High Court	 was in error in taking the view that	 while the provision for the take over in the Principal Act might amount to a power to acquire	 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 39(b). 1541A B] The amending Act of 1976	 renders the cost of this economic reform brought about with the objects of article 39(b) in view an affordable one in terms of money. This can not he held to have no direct or reasonable nexus with the objects of Act. 39(b)? When a legislative enactment is challenged as not conforming to the constitutional mandate the judicial branch of the Government has only one duty to lay the Arti cle of the Constitution which is invoked beside the Statute which is challenged and to decide whether the latter squares with the former. [541B C] The community 's economic burden for social and economic reforms is an integral part of the exercise involved in social and economic change in the ushering in of an egali tarian 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 integrated with the objects of article 39(b). The Court must	 on matters of economic policy	 defer to legislative judgment as con 523 ditioned by time and circumstances. The wisdom of social change	 is	 dependant	 in some degree	 upon trial and error	 on the left needs of the time. [542A C]