PETITIONER:
VIJAYAWADA MUNICIPAL COUNCIL
Vs.
RESPONDENT:
ANDHRA PRADESH STATE ELECTRICITY BOARD & ANR.
DATE OF JUDGMENT20/10/1976
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SHINGAL, P.N.
CITATION:
1977 AIR 86 1977 SCR (1) 886
1976 SCC (4) 548
ACT
Andhra Pradesh (Andhra Area) Electricity Supply Under-
taking (Acquisition) Act (Andhra 15 of 1954), ss. 5(3)
(vi), 6(2)(a)(iii) and 10(2)(b)(iii)-Amounts due to under-
taking from consumers prior to vesting in State--If can be
recovered by State from the licensee.
HEADNOTE
Section 4 of the Andhra Pradesh (Andhra Area Electricity
Supply Undertaking (Acquisition) Act, 1954, empowered the
Government to declare that an electricity undertaking of the
licensee Municipal Council shall vest in Government on a
specified date. Section 5 provides for compensation to be
paid on one of three alternative bases, A, B or C set out in
the Act. Where compensation is on the basis ’C’,, it in-
cludes under s. 5(3)(vi) the book value of all intangible
assets to the extent such value has not been written off in
the books of the licensee; and s. 6(2)(a) mentions the items
that would vest in the State Government. Section
6(2)(a)(iii) relates to all the rights, liabilities and
obligations of the licensee under any other contract entered
into bona fide, not being a contract relating to the
borrowing or lending for money. Section 10(2) (b)(iii) lays
down that the Government may deduct from the compensation
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 to such consumers before that date.
In the present case, the State Government made a decla-
ration regarding the vesting of the Electricity Undertaking
of the appellant in the State Government, and transferred
its rights to the respondent Electricity Board. Certain
amounts were shown in the books of the appellant as due to
it from consumers. The respondent claimed those amounts and
flied a suit against the appellant for their recovery.
The trial court dismissed the suit, but the High Court
allowed the appeal.
In appeal to this Court, it was contended that past dues
from the consumers would not vest in the respondent as they
were not specifically mentioned in s. 6(2)(a); and that
under s. 10(2)(b)(iii) the appellant was entitled to deduct
and appropriate the amounts due from consumers for supply of
electricity from their security deposits.
Dismissing the appeal to this Court,
HELD: (1) The explicitly wide language used in s.
6(2)(a)(iii) dispenses with the need to specify all items
which are covered by it; and, arrears of dues from consumers
are covered by the wide language of the clause. [850 A]
(2)(a) Section 10(2)(b)(iii) is meant for security
deposits and arrears of interest due on them which are
generally held in trust by the licensee so as to be ulti-
mately returned to the consumers,. if the dues of the con-
sumers have been met without resorting to the amounts depos-
ited. They are used for a deduction of dues from deposits
where these have not been paid. If these deposits have not
been made over by the licensee to the Government, they will
be claimable by the depositors, and, therefore, they are
deducted from the compensation. If however, there are any
amounts due shown in the books of the licensee as duo from
the consumers of energy they would become realisable by the
Government under s. 6(2)(a)(iii). It is for this reason
that the deduction of security
847
deposit from compensation is reduced by the amounts which
are due from consumers to the Undertaking for energy sup-
plied by the Undertaking before the date of vesting as they
become the claims realisable by the successor-in-interest of
the Undertaking. An exclusion from an item of deduction
from compensation could only indicate that this was being-
done because this was an item which is covered by the
compensation provided for and to be paid. [850 A]
(b) In .the present case, the only contention of the
appellant was that the right to appropriate the amount of
dues did not vest in the respondent but that the amount had
vested in the appellant. It was not argued on behalf of the
appellant that what was vested in the Government was only
the right to realise the dues from the consumers and not to
recover from the appellant the amount which the appellant
had actually realised or could have realised.
(3) The High Court’s interpretation of s. 10(2)(b)(iii)
must be accepted as a correct interpretation because it is
in harmony with the meaning of the terms of s. 5(3)(vi) read
with s. 6(2)(a) of the Act. [851C]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 155 of 1971.
(Appeal by Special Leave from the Judgment and Order
dated 24-3-1975 of the Andhra Pradesh High Court in Appeal
No. 19/72).
B.V. Subrahmanyam and A. Subba Rao, for the Appellant.
A. K. Sen, K.R. Chaudhary, Miss Nihar Saha and Mrs.
Veena Devi Khanna, for the ReSpondent.
The Judgment of the Court was delivered by
BEG, J.--This is a defendant’s appeal by special leave
against the judgment of the High Court of Andhra Pradesh
decreeing, with costs, the claim of the plaintiffs respond-
ents, the Andhra Pradesh State Electricity Board and the
Andhra Pradesh State Government for Rs. 3,34,443.77 as
arrears of electricity charges said to be due from the
Vijayawada Municipal Council in respect of amounts which
were shown in its books as payable to it by consumers of
electricity.
The plaintiff’s claim flowed from the terms of the
Andhra Pradesh (Andhra Area) Electricity Supply Undertaking
(Acquisition) Act 15 of 1954 (hereinafter refered to as ’the
Act’), the provisions of which were applied to the electric-
ity undertaking of the appellant Municipal Council with
effect from 22nd December, 1961,. by the Government of
Andhra Pradesh. The rights of the State were transferred to
the Andhra Pradesh Electricity Board the co-plaintiff re-
spondent. The amounts claimed were shewn in the books of
the Council’s electricity undertaking on the date of its
acquisition as due to it from direct consumers of electric-
ity to whom it used to sell electricity supplied to it in
bulk.
The "Electricity undertaking" was taken over by the
Government by an order under Section 4 (1 ) of the Act.
This section provided:
"4. Power of Government to take over any
undertaking :--
(1 ) The Government may, in respect of
any undertaking not taken over by them before
the commencement of this Act, by order in
writing, declare that it shall vest in them on
the
848
date specified therein, such date not being
earlier than four months from the date of the
declaration :"
The Municipal Council was the licensee
from whom the "undertaking", as a commercial
concern, was taken over. A licensee is de-
fined by section 2(j) to mean:
" .... a person licensed under part II of
the Electricity Act to supply electricity
energy, or a person who has obtained sanction
under section 28 of that Act to engage in the
business of supplying electricity and in
relation to an undertaking taken over.or an
undertaking which has vested in the Government
under section 4 the person, who was the licen-
see at the time the undertaking was taken over
or vested in the Government, as the case may
be, and includes the successorin-interest of
any such person;"
The State Electricity Board stepped into the shoes of
the licensee on behalf of the State, to discharge all the
existing obligations of the licensee, arising out of past
transactions, and, for this reason, became entitled to the
benefits of all contracts, whether they had accrued in the
past or were to arise in future, which existed at the time
of the taking over of the undertaking.
The effect of the "taking over" of an undertaking and the
vesting the rights and liabilities of the former licensee
in the State, by operation of law, was indicated by sections
5 and 6 of the Act.
Section 5 provided for compensation to be paid on one of
three alternative bases specified in this provision. The
licensee could opt for one of the three bases.
The provisions of section 6(2) of the Act give the
consequences of vesting. Section 6(2) of the Act enacts:
"6(2) (a) If compensation is payable in
respect of an undertaking under Basic C, only
the property, rights liabilities and obliga-
tions specified herein shall vest or be deemed
to have vested in the Government on the vest-
ing date :--
(i) all the fixed assets of the licensee
and all the documents relating to the under-
taking;
(ii) all the rights, liabilities and
obligations of the licensee under hire-pur-
chase agreements, if any, for the supply of
materials or equipment made bonafide 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 lending for money.
(b) All the assets specified in clause
(a) (i) shall vest or shall be deemed to have
vested in the Government free from any debts,
mortgages or similar obligations of the licen-
see or attaching to the undertaking.
849
Provided that such debts, mortgages or
obligations shall attach or shall be deemed to
have attached to the. compensation. payable
under this Act for the assets".
A glance at clause (2) (a) (iii) of section 6
indicates that it clearly provides for the
vesting of "all the rights liabilities and
obligations of the licensee" under contracts
entered into "before the date of vesting".
Therefore, we find no merit in the objection,
on behalf of the Municipal Council, that past
dues of consumers of electricity, shown in the
books of Vijayawada Municipal Council, could
not vest in the State Government, in a case in
which basis C is applicable for compensation.
The compensation provided by Section
5(3)(vi) applicable to basis ’C’ takes in
"the book value of all intangible assets to
the extent such value has not been written off
in the books of the licensee". The result’ is
that "the aggregate value" of all items speci-
fied in section 5(3), including items falling
under sub-clause (vi), became payable as
compensation to the licensee on principle’s
specified in the Act.
The learned Counsel for the appellant has
placed a great deal of reliance on the provi-
sions of Section 10(2)(b) (iii), which are
applicable to cases of compensation payable on
basis ’C’. Section 10 gives a list of deduc-
tions from compensation. One of the items of
this ,deduction is found in section
10(2)(b)(iii) which lays down:
"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;"
The provision set out above is sought to be made the corner
stone of the arguments of the learned Counsel for the Appel-
lant Municipal Council, although this very provision was
held by the High Court to be decisive against the appel-
lant’s case that the amounts shown as due from the consumers
of the licensee for energy supplied before the vesting date
were claims for amounts which the Vijayawada Municipal
Council was entitled to appropriate as they must be deemed
to be exempted from the effects of vesting of rights and
obligations of the undertaking in the State.
It is true, as the learned Counsel for the Municipal
Council points out, that only those rights and liabilities
and obligations which are specified in section 6(2) (a) are
to vest in the State Government. But, the contention based
on alleged non-specification of the claims of the licensee
against direct consumers to whom it used to supply electric-
ity over-looks, the sweep of section 6(2) (a) (iii), already
indicated above, which will cover all rights and liabilities
under contracts entered into bona fide before the date of
vesting. It is not possible to assert that the rights of
the Municipal Council to realise arrears of dues from the
consumers will not be transferred to the State Government
when they are covered by the specific language of section
6(2) (a) (iii). The
850
explicitly wide language used dispenses with the need to
specify by enumerating all items which are covered by it.
That is the very object of such language.
We have also indicated how section 5(3)(vi), meant for
application to basis ’C’, mentions all intangible rights
shewn in the books of the licensee. This also supports the
interpretation we place on section 6(2)(a)(iii) and on the
wide ambit of the specification here which must, obviously,
not conflict with section 5(3)(vi). We are, therefore,
completely unimpressed by arguments based on supposed non-
specification of the claims of the former licensee under-
taking against consumers to whom it had supplied electricity
in the past and against which it had claims which vested,
from the specified date, in the State Government.
Learned Counsel’s argument, on the meaning of Section 10(b)
(iii), is really meant to reinforce the argument indicated
above, based on alleged non-specification of the claims of
the Municipal Council as a licensee for supplying electrici-
ty to consumers. If the meaning of relevant provisions of
section 5 and 6 is clear, we do not think that any assist-
ance could be derived’ by the appellant Municipal Council
from the provisions of section 10(2)(b)(iii) unless these
clearly conflicted with the other provisions. If, however,
two interpretations were possible of these provisions, we
should, we think, prefer the one which is in harmony with
the clear meanings of the terms of section 5(3), read with
section 6(2) (a) of the Act as indicated above. This is the
salutary rule of construction resting upon the doctrine that
a statute, like any other document, must be read as a whole
to extract its meaning and intendment correctly.
Learned Counsel for the appellant submits that the exclu-
sion by section 10(2)(b)(iii) of the amounts which, accord-
ing to the books of the licensee, "are due from the consum-
ers to the licensee for energy supplied by him before that
date" (i.e. the date of vesting), from the ambit of deduc-
tions from compensation, necessarily implies that these
amounts can be appropriated by the appellant Municipality.
’We are, quite unable to see how this inference follows from
an exclusion from items of deduction from compensation. A
deduction from an item of compensation may, if there was
nothing else to furnish a clue as to its meaning, imply that
it was not being compensated for because the party whose
rights were acquired was retaining the item. But, an
exclusion from an item of deduction from compensation itself
could, according to its natural meaning, only indicate that
this was being done because this was an item which is cov-
ered by the compensation provided for and to be paid.
A close examination of section 10(2)(b)(iii) wilt show
that it is meant for security deposits and arrears of inter-
est due on them which are generally held in trust by the
licensee so as to be ultimately returned to the consumers,
if the dues of the consumers have been met without resorting
to the amounts deposited. They are used for a deduction
of dues where these have not been paid; We know that these
deposits are required so as to cover claims from defaulting
consu-
851
mers in order to avoid the trouble of litigating to enforce
them. If these deposits have not been made over by the
licensee to the Government, they will be claimable by the
depositors from the licensee. Hence, it seems fair to
deduct them from any item of compensation as these deposits
are not meant to be kept by the licensee. They do not
constitute profits of the business or price for anything
supplied or payment for services rendered or an asset out
of which liabilities of the licensee may be met. If, howev-
er, there are any amounts shewn in the books o[ the licensee
as due from the consumers of energy supplied before the date
of vesting, they would become realisable by the Govt.
Hence, the amounts for which deductions from items of
compensation will have to be made is reduced by the amounts
which are due from consumers to the licensee for energy
supplied by the licensee before the date of vesting as they
become the claims realisable by the successor-in-interest of
the licensee. Therefore, the High Court’s interpretation
was, obviously, correct. This provision supports the case
of the respondents rather than that of the former licensee
Municipal body. It is very difficult to see how it supports
the appellant’s case.
It appears that no question was raised before ’the High
Court as to the nature of the obligation incurred by the
Municipal Council to pay the amount claimed apart from its
right to appropriate the amount itself as part of the assets
which had, it was asserted, not vested in the State Govern-
ment. An attempt was, however, made before us to confuse
it with the payment made by the Municipal Council itself to
the Government for the bulk supply of electricity used,
inter alia, for street lighting and other purposes by the
Council itself. But, no question was raised in the plead-
ings to indicate that the plaintiff’s claim included these
past dues. We do find that the licensee had set up certain
reasons for its inability to realise certain amounts from
the consumers. We do not know what all these reasons
precisely were or whether the licensee, was really unable to
realise them for any of these reasons. But, ground No. 1
of the special leave petition shows that the Municipal
Council had Rs. 9 lakhs with it in deposit for the recovery
of the claims not realised from which it proposed to deduct
the amounts claimable towards dues and to. appropriate them
itself. The ground runs as follows:
"In the instant; case the learned trial
judge found that there was a deposit of 3
lakhs of rupees with the Vijayawada Municipal-
ity and the Vijayawada Municipality by virtue
of section 10(2)(b)(iii) is certainly entitled
to adjust and by virtue of section
10(2)(b)(iii) of the Act 15 of 1964, the
Government can deduct that security from out
of compensation less the amount due to the
licensee from its consumers upto the vesting
date."
We may also mention that it was not argued
on behalf of the Municipal Council that what
was vested in the Government was only the
right to realise the claims itself and not an
amount of money which the Municipal Council
had actually realised or could have realised
if
852
it took steps to make realisations. On the
other hand, ground No. 1 of the grounds of
appeal quoted above, shows that the case of
the Municipal Council was simply that it is
’entitled to deduct amounts claimed from
whatever may be the amounts in deposit be-
cause. the claims against the consumers had
vested in the Municipal Council and not in the
Government. We think that legal questions of
interpretation of the Act, to which the
learned Counsel for the parties rightly con-
fined their arguments, apart from some at-
tempts to raise questions outside the plead-
ings which could not succeed, were rightly
answered by the High Court when it held that
the relevant provisions, if correctly inter-
preted, meant that the claims for dues on
electricity supplied at enhanced rates, the
validity of which had been unsuccessfully
challenged by some consumers in certain other
proceedings initiated before filing of the
suit now before us, had vested in the State
Government.
Consequently, we affirm the judgment and
decree of the High Court and dismiss this
appeal with costs.
V.P.S. Appeal
dismissed.
853