TMI Blog1962 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... r the acquisition of undertaking supplying electricity in the Province of Madras. Under the said Act, the Government was empowered to acquire any electrical undertaking on payment of compensation according to the relevant provisions of the s aid Act. In pursuance of the provisions of s.4(1) of the said Act, the respondent, State of Madras, passed on Order C.O. Ms. No.2059 on the 17th May, 1951, declaring that the appellant undertaking shall vest in the respondent from the 21st September, 1951. Thereafter, the respondent appointed the Chief Electrical Inspector as the Acquisition Officer, and on the appointed day, the said Officer took over possession of the appellant and all its assets, records and account books. The appellant then appointed the liquidator as its Accredited Representative for the purposes of the Act in order to claim compensation under the Act. The respondent then paid over to the appellant ₹ 6 lakhs on the 24th October, 1952 and ₹ 2,34,387-1-0 on the 5th July, 1953, as compensation. According to the appellant-, ₹ 98,876-15-0 still remained to be paid to it by way of compensation under the Act, whereas the respondent suggested that only ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is to De given. That is how the two entries read at the relevant time. After the decision of this Court was pronounced in the case of Rajamundry Electric Supply Corpn. Ltd. ) (1934) S.C.R, 779.,the Madras Legislature passed the Act and it received the assent of the President on the 9th October, 1954, and was published in the Government Gazette on the 13th October, 1954. The Act incorporated the main provisions of the earlier Act of 1949 and purported to validate action taken under the said earlier Act. After the Act was passed, the respondent issued a new Government Order No. 4388 on the 14th December, 1954, appointed the Chief Electrical Inspector to be the Acquisition Officer of the appellant concern for purposes of the Act. As a result of this order, the appellant undertaking which had been taken over by the respondent on the 21st September, 1951, continued, to be in the possession of the respondent. It is under-these circumstances that the appellant filed its writ petition No. 326 of 1955 on the 26th April, 1955. In its writ petition, the appellant alleged that to the extent to which the Act purports to validate acts done under the earlier Act of 1949, it is ultra vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several points urged by the appellant in support of its contention that s. 24 was invalid, and rejected them. In his opinion, the Act was valid and s. 24 being retrospective in operation, validated the actions taken by the respondent under the earlier Act. The argument that the Compensation awardable under the Act was inconsistent with Art. 31(1) and 31(2) was not accepted, inter alia, on the ground that so material had been placed before the Court on which the appellant s plea could be sustained. The learned Judge has also recorded his conclusions on some other points urged before him, but it is unnecessary y to refer to them. After this decision was pronounced, the appellant moved the learned Judge for a certificate under Art. 132(1) of the Constitution and it is with the certificate thus granted to it under the said Article that the present appeals have been brought to this Court. The first point which Mr. Nambiar has raised before us on behalf of the appellant is that s. 34 which purports to validate action taken under the earlier Act is, in law, ineffective to sustain the order issued by the respondent on the 17th May, 1951. It would be recalled that by this order, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the business of supplying electricity to the public. It is with that object that appropriate provisions have been made by the Act to provide for the acquisition of undertakings and to lay down the principles for paying compensation for them. It is quite clear that the scheme of the Act was to bring within the purview of its material provisions under- takings in respect of which no action bad been taken under the earlier act and those in respect of which action had been so taken. In fact, as we will presently point out, several provisions made by the Act clearly referred to both types of undertakings and leave Do room for doubt that both types of undertakings are intended to be governed by it. The definition of an accredited representative prescribed by s. 2(b) shows that the accredited representative means the representative appointed or deemed to have been appointed under s. 7. Similarly, s. 2(j) which defines a licensee provides that in relation to an undertaking taken over or an undertaking which has vested in the Government under s. 4, it shall be the person who was the licensee at the time when the undertaking was taken over or vested is the Government as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive character of the Act. On the contrary, in construing s. 24, we have to bear in mind the fact that the Act is retrospective in operation and is intended to bring within the scope of its material provisions undertakings of which possession had already been taken. Let us then construe s.24 and decide whether it serves to validate the impugned notification issued by the respondent on the 21st September, 1951. Section 24 reads thus: - Orders made, decisions or directions given, notifications issued, proceedings taken and acts of things done, in relation to any undertaking taken ever, if they would have been validly made, given, issued, taken or done, had the Madras Electricity Supply Undertakings (Acquisition) Act,, 1949 (Madras Act XLIII of 1949), and the rules made thereunder been in force on the date on which the said orders, decisions or directions, notifications, proceeding, acts or things were made given, issued, taken or done are hereby declared to have been validly made, given, issued, taken or done, as the case may be, except to the extent to which the said orders, decisions, directions, notifications, proceedings, acts or things are repugnant to the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d honest and in support of this argument, he ralies on the fact that the notification following under the first part of s. 24 are referred to as validly made and the earlier Act and the rules made there under are assumed to have been in force on the date on which the said notification was issued. He also relies on the provisions of s. 25 which purports to repeal the said Act and that, no doubt, gives room for the argument that the Legislature did not recognize that the said Act was no nest and dead right up from the start. It is not easy to understand the genesis of s. 25 and the purpose which it is intended to achieve. The only explanation given by Mr. Ganpati Aiyer on behalf of respondent is that since the earlier Act was in fact on the statute book, the legislature may have thought that for the sake of form, it may have to be repealed formally and so, s. 25 was enacted. But even if the enactment of the said section be held to be superfluous or unnecessary, that cannot assist the appellant in the construction of s. 24. We have no doubt that s. 24 was intended to validate actions taken under the earlier Act and on its fair and reasonable construction, it must be held that the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations would be controlled by Art. 30(1). A law in force at the time postulates actual factual existence of the law at the relevant time and that excludes the retrospective application of any subsequent law. Art. 31(1), on the other hand, does not use the expression ,law in force at the time . It merely says by authority of law , and so if subsequent law passed by the legislature is retrospective in its operation would satisfy the requirement of Art 31 (1) and would validate the impugned notification in the present case. Therefore, we are not satisfied that Mr. Nambiar is right in contending that the impugned notification is invalid for the reason that at the time when it was issued there was no law by whose authority it could be sustained. That takes us to the larger issue raised by Mr. Nambiar in the present appeals. He contends that the power of the legislature to make laws retrospective cannot validly be exercised so as to care the contravention of fundamental rights retrospectively. His contention is that the earlier Act of 1949 being dead and non-existent, the impugned notification contravened Art. 31(1) and this contravention of a fundamental right cannot be cured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered by appropriate entries in the relevant Lists of the 7th Schedule to the Constitution, the legislatures would be competent to make the provisions of the laws passed by them retrospective. He, however, seeks to import a limitation on this legislative power where the contravention of fundamental rights is involved. No authority has been cited in support of the plea that the legislative power of the legislature is subject to any such limitation even where the contravention of fundamental rights is involved. On principle, it is difficult to appreciate how such a limitation on the legislative power can be effectively pleaded. If a law is invalid for the reason that it has been passed by a legislature without legislative competence, and action is taken under its provisions, the said action can be validated by a subsequent law passed by the same legislature after it is clothed with the necessary legislative power. This position is not disputed. If the legislature can by retrospective legislation cure the invalidity in actions taken in pursuance of laws which were void for want of legislative competence and can validate such action by appropriate provisions, it is difficult to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying retrospectively the charging sections of the Taxing Act and their validity was impeached. In rejecting the argument that the levy authorised to be imposed by the amendments was ultra vires, Patanjali Sastri, C. J., observed that while it is true- that the Constitution has no retrospective operation, except where a different intention clearly appears, it is not correct to say that in bringing into existence new Legislatures and conferring on them certain powers of legislation, the Constitution operated retrospectively. The legislative powers conferred upon Parliament under Articles 245 and 246 read with List I of the, Seventh Schedule could obviously be exercised only after the Constitution came into force and no retrospective operation of the Constitution is involved in the conferment of these powers. But it is a different thing to say that Parliament in exercising, the powers thus acquired is precluded from making a retrospective law, and so, the conclusion was that Parliament was content to make a law imposing a tax on the income of any year prior to the commencement of the Constitution. In M. P. V. Sundararamier Co. v. The State of Andhra Pradesh (1958) S.C.R. 1022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the property so acquired and either fixes the amount of the compensation or specifies the principles on which, and the manner in which, the compensation is to be determined and given. In support of his argument, Mr. Nambiar has relied on the decision of this Court in the State of West Bengal v. Mrs. Bala Banerjee-(1954) S. C. R. 558. In dealing with the question about the scope and effect of the provisions of Art. 31(2) in so far as they referred to the payment of compensation, this Court observed that though entry 42 of List III conferred on the Legislature the discretionary power of laying down the principles which should govern the determination of the amount to be given to the owner of the property acquired, Art. 31 (2) required that such principles must ensure that what is determined as payable must be compensation , that is, a just equivalent of what the owner has been deprived of. That is why in considering the validity of any statute is the light of Art. 31(2) it would be open to the Court to enquire whether all the elements which make up the true value of the property acquired have been taken into account in lying down the principles for determining compensation. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of s.5 which provides for the compensation to be paid to the licensees. Section 5 provides that the compensation payable to a licensee on whom an order has been served under s.4 or whose undertaking has been taken over before the commencement of the act, shall be determined under any one of the Bases A, B and C specified by the section as may be chosen under a. 8. Then follow detailed provisions about the three Bases A, B and C. Under Basis A, the compensation payable shall be an amount equal to twenty times the average not annual profit of the undertaking during a period of five consecutive account years immediately preceding the vesting date. The explanation makes it clear that the net annual profit shall be determined in the manner laid down in Part A or Part B, as the case may be, of Sch. 1. It is also clear that this basis shall not apply to an undertaking which has not been supplying electricity for five consecutive account years immediately preceding the vesting date. Under Basis B, the compensation payable shall be the aggregate value of all the shares constituting the share capital of the undertaking, reckoned as indicated in (a), (b), (c), and (d) thereof. These respecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5 for assessing the compensation to be paid to a licensee. It is true that in none of the three bases does the Legislature refer to the market value of the undertaking, but that itself cannot justify the argument that what is intended to be paid by way of compensation must necessarily mean much less than the market value. The failure of the legislature to refer to the fair market value cannot, in our opinion, be regarded as conclusive or even presumptive evidence of the fact that what is intended to be paid under section 5 does not amount to a just equivalent of the undertaking taken over. After all, in considering the question as to whether compensation payable under one or the other of the Bases amounts to just equivalent. We must try to assess what would be payable under the said basis. On this point, the real difficulty,, in the way of the appellant is that it has produced no material before the Court on which its plea can be sustained. As the High Court has pointed out, in the absence of any satisfactory material it would be difficult 772 for the Court to come to any definite conclusion on the question as to whether just equivalent is provided for by s. 5 or not. Mr. Nambiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought that giving the undertaking twenty times the average not annual profit would amount to a just equivalent, prima facie it would be difficult to hold that the basis adopted by the legislature is such as could be held to be inconsistent with Art. 31 (2). The Basis B may or may not be satisfactory, but Basis C may prima facie be satisfactory in respect of new undertaking and in any case, the option in most cases would be with the undertaking itself. Therefore, in the absence of any material, we are unable to hold that on looking at the scheme adopted by s. 5 by itself, the appellant s argument that what is offered by way of compensation is not a just equivalent, can be accepted. It may be that in some oases basis B may work hardship and conceivably even basis A or basis C may not be as satisfactory as it should be; but, when a party challenges the validity of a statutory provision like s. 5, it is necessary that the party must adduce satisfactory and sufficient material before the Court on which it wants the Court to hold that the compensation which would be paid under everyone of the three Bases under the inpugned statutory provision does not amount to a just equivalent. Loo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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