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PETITIONER:

U.P. STATE ELECTRICITY BOARD

Vs.

RESPONDENT:

UPPER JAMUNA VALLEY ELECTRICITY SUPPLY CO. LTD.

DATE OF JUDGMENT: 12/05/2000

BENCH:

S.S.Ahmad, S.N.Variava, Y.K.Sabharwal

JUDGMENT:

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J U D G M E NT

S. N. Variava, J.

1. This Civil Appeal is against the Judgment dated

17th September, 1987 delivered by a Division Bench of the

Calcutta High Court. By this Judgment the Division Bench

dismissed the Appeal filed by the Appellant against a

Judgment of a learned single Judge of the Calcutta High

Court which upheld the challenge of the 1st Respondent to

Ordinances and Amendment Act set out hereinafter.

2. Briefly stated the facts are as follows: On 28th

June, 1929 the Government of Uttar Pradesh granted to one

M/s Martin & Co. a licence for supply of electric energy.

This licence was subsequently transferred to the 1st

Respondent. One of the terms of the licence was that at the

end of the licence period the Government had a right to

purchase the undertaking. The licence was for a period of

35 years. The 35 years period would thus end on 27th June,

1964. On 30th November, 1962 the Appellant served a notice

on the 1st Respondent, under Section 6(1) of the Indian

Electricity Act, 1910 (hereinafter called the said Act). By

this the Appellants called upon the 1st Respondent to sell

the undertaking to the Appellant on the expiry of the period

of 35 years from the commencement of the licence, i.e., at

12 O'clock in the night between the 27th and 28th June,

1964.

3. On February 4, 1975, Indian Electricity (U.P.

Amendment and Validation) Ordinance No. 7 of 1975 was@@

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passed. This Ordinance amended certain provisions of the

Indian Electricity Act. Subsequently this Ordinance was

replaced by an Act namely Indian Electricity (U.P.

Amendment and Validation) Act, 1976. The Ordinance and the

Act amended amongst others Sections 6 and 7-A of the Indian

Electricity Act. 4. At this stage it is necessary to see

what the unamended Sections 6 and 7-A provided for. They@@

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read as follows: "6. Purchase of undertakings. - (1)@@

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Where licence has been granted to any person, not being a

local authority, the State Electricity Board shall, -

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(a) in the case of a licence granted before the

commencement of the Indian Electricity (Amendment) Act, 1959

(32 of 1959), on the expiration of each such period as is

specified in the licence; and (b) in the case of a licence

granted on or after the commencement of the said Act, on the

expiration of such period not exceeding thirty years and of

every such subsequent period, not exceeding twenty years, as

shall be specified in this behalf in the licence;

have the option of purchasing the undertaking and such

option shall be exercised by the State Electricity Board

serving upon the licensee a notice in writing of not less

than one year requiring the licensee to sell the undertaking

to it at the expiry of the relevant period referred to in

this sub- section.

(2) Where a State Electricity Board has not been

constituted, or if constituted, does not elect to purchase

the undertaking, the State Government shall have the like

option to be exercised in the like manner of purchasing the

undertaking.

(3) Where neither the State Electricity Board nor the

State Government elects to purchase the undertaking, any

local authority constituted for an area within which the

whole of the area of supply is included shall have the like

option to be exercised in the like manner of purchasing the

undertaking.

(4) If the State Electricity Board intends to exercise

the option of purchasing the undertaking under this section,

it shall send an intimation in writing of such intention to

the State Government at least eighteen months before the

expiry of the relevant period referred to in sub-section (1)

and if no such intimation as aforesaid is received by the

State Government the State Electricity Board shall be deemed

to have elected not to purchase the undertaking.

(5) If the State Government intends to exercise the

option of purchasing the undertaking under this section, it

shall send an intimation in writing of such intention to the

local authority, if any, referred to in sub- section (3) at

least fifteen months before the expiry of the relevant

period referred to in sub-section (1) and if no such

intimation as aforesaid is received by the local authority,

the State Government shall be deemed to have elected not to

purchase the undertaking.

(6) Where a notice exercising the option of purchasing

the undertaking has been served upon the licensee under this

section, the licensee shall deliver the undertaking to the

State Electricity Board, the State Government or the local

authority, as the case may be, on the expiration of the

relevant period referred to in sub-section (1) pending the

determination and payment of the purchase price.

(7) Where an undertaking is purchased under this

section, the purchaser shall pay to the licensee the

purchase price determined in accordance with the provisions

of sub-section (4) of Section 7-A."

5. Thus, under Section 6 the compensation, i.e. the

purchase price was to be determined in accordance with the@@

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provisions of sub-section (4) of Section 7-A.

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6. Section 7-A, as it originally stood, reads as

follows: "7-A Determination of purchase price.- (1) Where@@

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an undertaking of a licensee, not being a local authority,

is sold under sub-section (1) of Section 5, the purchase

price of the undertaking shall be the market value of the

undertaking at the time of purchase or where the undertaking

has been delivered before the purchase under sub- section

(3) of that section, at the time of the delivery of the

undertaking and if there is any difference or dispute

regarding such purchase price, the same shall be determined

by arbitration.

(2) The market value of an undertaking for the purpose

of sub- section (1) shall be deemed to be the value of all

lands, buildings, works, materials and plant of the licensee

suitable to, and used by him, for the purpose of the

undertaking, other than; (i) a generating station declared

by the licence not to form part of the undertaking for the

purpose of purchase, and (ii) service lines or other capital

works or any part thereof which have been constructed at the

expense of consumers, due regard being had to be nature and

condition for the time being of such land, buildings, works,

materials and plant and the state of repair thereof and to

the circumstance that they are in such position as to be

ready for immediate working and to the suitability of the

same for the purpose of the undertaking, 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 consideration.

(3) Where an undertaking of a licensee, being a local

authority, is sold under sub-section (1) of Section 5,

purchase price of the undertaking shall be such as the State

Government, having regard to the market value of the

undertaking at the date of delivery of the undertaking, may

determine.

(4) Where an undertaking of a licensee is purchased

under Section 6, the purchase price shall be the value

thereof as determined in accordance with the provisions of

sub-sections (1) and (2): Provided that there shall be

added to such value percentage, if any not exceeding twenty

per centum of that value as may be specified in the licence

on account of compulsory purchase."

Section 7 is also relevant. It reads as follows:

"7. Vesting of the undertaking in the purchaser.-

Where an undertaking is sold under Section 5 or Section 6,

then upon the completion of the sale or on the date on which

the undertaking is delivered to the intending purchaser

under sub-section (3) of Section 5 or under sub-section (6)

of Section 6, as the case may be, whichever is earlier -

(i) the undertaking shall vest in the purchaser or the

intending purchaser, as the case may be, free from any debt,

mortgage or similar obligation of the licensee or attaching

to the undertaking: Provided that any such debt, mortgage

or similar obligation shall attach to the purchase money in

substitution for the undertaking;

(ii) the rights, powers, authorities, duties and

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obligations of the licensee under his licence shall stand

transferred to the purchaser and such purchaser shall be

deemed to be the licensee: Provided that where the

undertaking is sold or delivered to a State Electricity

Board or the State Government, the licence shall cease to

have further operation."

7. By the above mentioned Ordinance and the Act, the

amendment which was carried out was that under Section 7-A

instead of purchase price being the market value, it was now

provided that the amount payable for the undertaking would

be the book value of the undertaking. Thus, instead of

computing the market value, there had to be computation on

the book value.

8. It must be mentioned that the above mentioned

Ordinances and Amendment Act were part of the policy of@@

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nationalisation of electric companies by the Union of India.

Similar amendments were made by many States. Electric

companies, all over India, were sought to be so purchased.

Like the 1st Respondent, a number of other Electric

Companies challenged the constitutional validity of the

amending Act/Ordinance. The challenge was, inter alia, on

the ground that the rights under Article 19(1)(f) and

Article 31(2) were being violated. It was also claimed that

the Amending Act/Ordinance was invalid as it had no

reasonable direct nexus to the principles under Article

39(b) of the Constitution. It was also claimed that, in

effect and substance, the law was not one for acquisition of

electrical undertakings but was one to acquire a chose in

action and to extinguish rights, which had accrued in the

Electric Companies, to get the market price. It was

contended that the right to get compensation accrued on the

day the notice was given. It was contended that what was

being acquired was the difference between the market price

which the State was obliged to pay and the book value to

which the liability was now sought to be limited. It was

claimed that as the Act was merely a clock which the law was

made to wear, to undo the obligations arising out of

intended statutory sale, Article 31(c) was not attracted.

It was also claimed that in any case, every provision of a

statute was not entitled to protection of Article 31(c) but

only those which are necessary for giving effect to the

principles in Article 39(b) and accordingly the provision in

the impugned law in relation to the determination of the

amount do not attract Article 31(c). In all the matters it

was claimed that the purchase price should be the market

value.

9. A Constitution Bench of this Court in the case of

Tinsukhia Electric Supply Co. Ltd. v. State of Assam,@@

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reported in (1989) 3 SCC 709, upheld the validity of the

Act/Ordinance. This Court held that the Act had nexus with

the principles in Article 39(b) and was therefore protected

by Article 31(c). It was held that the Act was not a piece

of colourable legislation. It was held that electric energy

generated and distributed was a "material resource of the

community" for the purpose and within the meaning of Article

39(b). It was held that the idea of distribution of natural

resources in Article 39(b) envisages nationalisation. It

was held that on an examination of the scheme of the

impugned law the inescapable conclusion was that the

legislature measure was one of nationalisation of the

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undertaking and this law was eligible for and entitled to

protection of Article 31(c). It was held that it was not

possible to divorce the economic consideration or component

from the scheme of nationalisation with which the former are

inextricably integrated. It was held that the financial

costs of a scheme lies at its very heart and cannot be

isolated. It was held that with the provisions relating to

vestiture of the undertaking in the State and those

pertaining to the quantification of the amount are integral

and unseparable parts of the scheme of nationalisation and

do not admit of being considered as distinct provisions

independent of each other. It was held that the provisions

for payment of amount to the undertaking, by reducing the

market value to book value, formed an integral part of the

nationalisation scheme and that economic consideration for

nationalisation was not justiciable. It was held that what

was being acquired was the material resources of the

community. The contention that immediately upon giving of

the notice the rights got crystallised was negatived. It

was held that the exercise of the option did not affect

licensee's right to carry on business. It was held that the

licensee's rights would be affected only when the

undertaking was actually taken over. Similar view was taken

in the cases of Maharashtra State Electricity Board v.

Thana Electric Supply Co. & Ors., reported in (1989) 3 SCC

616, and Vellore Electric Corporation Ltd. v. State of

Tamil Nadu, reported in (1989) 4 SCC 138.

10. Dr. Singhvi submitted that the present case

would not be covered by the aforementioned Judgments because

in all those cases the Ordinance/Act was prior to or on the

same day that the respective undertakings were taken over.

Dr. Singhvi submitted that in this case the Ordinance came

on 4th February, 1975, i.e., almost 11 years after the

takeover of the undertaking by the Government. He submitted

that on 28th June, 1964 when the undertaking was taken over,

Sections 6, 7 and 7-A, as they then stood, provided for

payment of market value. He submitted that in 1962 Article

19(1)(f) and Articles 31(1) and 31(2) of the Constitution

were there. He submitted that on that day there was no

Article 31(c) in the Constitution of India. He submitted

that the law on the subject was very clear. He submitted

that the provisions of the Constitution and the law which

must apply are those which were prevalent at that time in

1962.

11. In support of this submission he relied upon the

authority in the case of Waman Rao v. Union of India,@@

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reported in (1981) 2 SCC 362. In this case the validity of

the Maharashtra Agricultural Land (Ceiling and Holdings) Act

27 of 1961 and the subsequent amendment by Acts 21 of 1975,

47 of 1975 and 2 of 1976 were challenged. While considering

this challenge this Court, inter alia, held as follows:

"11. By Section 7 of the Constitution (Forth-fourth

Amendment) Act, 1978 the reference to Article 31 was deleted

from the concluding portion of Article 31-A(1) with effect

from June 20, 1979, as a consequence of the deletion, by

Section 2 of the 44th Amendment, of clause (f) of Article

19(1) which gave to the citizens the right to acquire, hold

and dispose of property. The deletion of the right to

property from the array of fundamental rights will not

deprive the petitioners of the arguments which were

available to them prior to the coming into force of the 44th

Amendment, since the impugned Acts were passed before June

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20, 1979 on which date Article 19(1)(f) was deleted."

12. He also relied upon Paragraph 15 of the Judgment

in Thana Electric Supply Company's case (supra), wherein

this Court has held that the contentions of the parties

would require to be examined in the light of Articles

19(1)(f) and 31 as they stood at the relevant time. It was

held that Articles 19(1)(f) and 31 were deleted later, but

that such deletion did not affect the Constitutional

position with reference to which the present case would

require to be decided.

13. Dr. Singhvi also relied upon Ishwari Khetan

Sugar Mills (P) Ltd. v. State of U.P., reported in (1980)

4 SCC 136. In this case the challenge was under the U.P.

Sugar Undertakings (Acquisition) Act 23 of 1971. While

considering this challenge the Constitution Bench of this

Court held that as the legislation was put on the Statute

Book on 27th August, 1971, the Court would have to consider

it in the light of Article 31(2) as it stood on the relevant

date. It was held that Article 31(2) as amended by the 25th

Constitutional Amendment Act would not be attracted.

14. Dr. Singhvi submitted that the principles

governing grant of compensation would, therefore, be those

which are laid down by 11 Judge Bench of this Court in the

case of R. Gavasjee Cooper and Ors. v. Union of India,

reported in (1970) 1 SCC 248. In this case the vires of the

Banking Companies (Acquisition and Transfer of Undertakings)

Ordinance 8 of 1969 and the Banking Companies (Acquisition

and Transfer of Undertakings) Act 22 of 1969 was challenged.

The challenge to the takeover of the banks was on the basis

of Articles 14, 19 and 31 of the Constitution. This Court,

inter alia, held that prior to the amendment of Article

31(2) the term "compensation" had been interpreted to mean

"full indemnification". It was held that the law was that

the expropriated owner was on that account entitled to

market value of the property on the date of the deprivation

of the property. It was held that even though Article 31(2)

was amended with effect from 27th April, 1955 by the

Constitution (Fourth Amendment Act, 1955), the expression

"compensation" continued to mean "just equivalent" or "full

indemnification". It was held that there was no dispute

that Article 31(2) before and after amendment guaranteed a

right to compensation for compulsory acquisition of the

property and that by giving to the owner, for compulsory

acquisition of his property, compensation which was

illusory, or determined by the application of principles

which were irrelevant, the constitutional guarantee of

compensation was not complied with. It was, however, noted

that after the amendment of the Article 31(2) it was not

open to the Courts to call in question the law providing for

compensation on the ground that it is inadequate. It was

noted that there was a line of thought that a reasonable

interpretation of this provision was that neither the

principles prescribing the "just equivalent" nor the "just

equivalent" could be questioned in Court on the ground of

inadequacy of the compensation fixed or arrived at by the

working of the principles. It was held that this meant that

there could be many methods of valuation and that the

application of different principles of valuation may lead to

different results. The adoption of one principle may give a

higher value and the adoption of another principle may give

a lessor value, but nonetheless they were all principles on

which compensation could be determined. It was held that

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the Court could not say that the law should have adopted one

principle and not the other for that would be a question

relating to adequacy. It was held that, on the other hand,

if a law laid down principles which were not relevant to the

property acquired or to the value of the property at the

time it was acquired, then the Courts could say that they

were not principles contemplated by Article 31(2) of the

Constitution. It was held that the line of thought

providing for full indemnification and the line of thought

stating that the principles of valuation could not be gone

into by the Court both ultimately supported the view that

the principles specified by law for determination of

compensation was beyond the pale of challenge, if it was

relevant to the determination of compensation and was a

recognised principle applicable in determination of

compensation for the property compulsorily acquired. It was

held that the broad object underlining the principle of

valuation was to award to the owner the equivalent of his

property with its existing advantages and its

potentialities. It was held that where there was a

established market for the property acquired the problem of

valuation presented a little difficulty but where there is

no established market for the property, the object of the

principle of valuation must be to pay to the owner for what

he had lost including the benefit of advantages present as

well as future. The Court then went on to set out certain

methods of determination of compensation. In this behalf it

laid down as follows: "94. The important methods of

determination of compensation are: (i) market-value

determined from sales of comparable properties, proximate in

time to the date of acquisition, similarly situate, and

possessing the same or similar advantages and subject to the

same or similar disadvantages. Market- value is the price

the property may fetch in the open market if sold by a

willing seller unaffected by the special needs of a

particular purchase; (ii) capitalization of the net annual

profit out of the property at a rate equal in normal cases

to the return from gilt-edged securities. Ordinarily value

of the property may be determined by capitalizing the net

annual value obtainable in the market at the date of the

notice of acquisition; (iii) where the property is a house,

expenditure likely to be incurred for constructing a similar

house, and reduced by the depreciation for the number of

years since it was constructed; (iv) principle of

reinstatement, where it is satisfactorily established that

reinstatement in some other place is bona fide intended,

there being no general market for the property for the

purpose for which it is devoted (the purpose being a public

purpose) and would have continued to be devoted, but for

compulsory acquisition. Here compensation will be assessed

on the basis of reasonable cost of reinstatement; (v) when

the property has outgrown its utility and it is reasonably

incapable of economic use, it may be valued as land plus the

break-up value of the structure. But the fact that the

acquirer does not intend to use the property for which it is

used at the time of acquisition and desires to demolish it

or use it for other purpose is irrelevant; and (vi) the

property to be acquired has ordinarily to be valued as a

unit. Normally an aggregate of the value of different

components will not be the value of the unit.

95. These are, however, not the only methods. The

method of determining the value of property by the

application of an appropriate multiplier to the net annual

income or profit is a satisfactory method of valuation of

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lands with buildings, only if the land is fully developed,

i.e., it has been put to full use legally permissible and

economically justifiable, and the income out of the property

is the normal commercial and not a controlled return, or a

return depreciated on account of special circumstances. If

the property is not fully developed, or the return is not

commercial the method may yield a misleading result."

It is to be noted that the Court itself laid down that

these were not the only methods of valuation.

15. Based upon the above authority Dr. Singhvi

submitted that even after the amendment of Article 31(2) the

principle remained "just equivalent" meaning "full

indemnification". He submitted that in this case in 1962,

i.e. the unamended Sections 6, 7 and 7-A of the Indian

Electricity Act, 1910 also provided for payment of market

value. He submitted that, therefore, the principle laid

down in Tinsukhia's case, Thana Electric Supply Company's

case and Vellore Electric Corporation's case did not apply

to this case. He submitted that all those cases were based

upon Article 31(c) which did not stand on the Statute Book

at the time when this undertaking was taken over by the

Government. He submitted that in this case the market value

have to be paid.

16. We have considered the submissions of Dr.

Singhvi. Undoubtedly, the law which is to prevail is the

law which was prevailing on the date of take over, i.e.,

28th of June, 1964. It is also clear that on that day the

Constitution (Twenty-fifth Amendment) Act had not been

enacted and Article 31(c) was not there. Undoubtedly, in

Cooper's case it has been held that even after amendment of

Article 31(c) the term "compensation" meant "just

equivalent" or "full indemnification". However, Cooper's

case itself notes that there has been a change inasmuch as

if the law pertains to change in the principles of the

method of determination of compensation and the method is a

recognized principle applicable in the determination of

compensation and the principle is appropriate in determining

the value of the property, then it would not be open to the

Courts to question the valuation. Cooper's case also lays

down that if several principles are appropriate and one is

selected for determination of the value of the property to

be acquired, selection of that principle to the exclusion of

other principles is not open to challenge, for the selection

must be left to the wisdom of the Parliament. Of course,

the principles specified must be appropriate to the

determination of compensation for an appropriate class of

property sought to be acquired.

17. In Tinsukhia's case, this Court has gone into the

question as to whether the principles would be appropriate

even if Article 31(c) was not applicable. It ultimately

held as follows: "96. Even if the impugned law did not

have the protection of Article 31-C, a hypothesis on which

contention (c) is based, the adequacy or inadequacy of the

amount is not justiciable. The limitations of the courts'

scrutiny explicit in Article 31(2), are referred to by

Mathew,J. in the Kesavananda case (SCC p.889, para 1751) :

" the word 'amount' conveys no idea of any norm. It

supplies no yardstick. It furnishes no measuring rod. The

neutral word 'amount' was deliberately chosen for the

purpose. I am unable to understand the purpose in

substituting the word 'amount' for the word 'compensation'

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in the sub- article unless it be to deprive the court of any

yardstick or norm for determining the adequacy of the amount

and the relevancy of the principle fixed by law." 97.

Referring to what might, yet to open to judicial scrutiny,

under Article 31(b), Shelat and Grover, JJ. Observed in the

Kesavananda case: (SCC p.457, para 591) "But still on the

learned Solicitor General's argument, the right to receive

the 'amount' continues to be a fundamental right. That

cannot be denuded of its identity. The obligation to act on

some principle while fixing the amount arises both from

Article 31(2) and from the nature of the legislative power.

For, there can be no power which permits in a democratic

system an arbitrary use of power.But the norm or the

principles of fixing or determining the 'amount' will have

to be disclosed to the court. It will have to be satisfied

that the 'amount' has reasonable relationship with the value

of the property acquired or requisitioned and one or more of

the relevant principles have been applied and further that

the 'amount' is neither illusory nor it has been fixed

arbitrarily, nor at such a figure that it means virtual

deprivation of the right under Article 31(2). The question

of adequacy or inadequacy, however, cannot be gone into."

Justice Chandrachud observed: (SCC p.1000, para 2122) "The

specific obligation to pay an 'amount' and in the

alternative the use of the word 'principles' for

determination of that amount must mean that the amount fixed

or determined to be paid cannot be illusory. If the right

to property still finds a place in the Constitution, you

cannot mock at the man and ridicule his right. You cannot

tell him: 'I will take your fortune for a farthing'." 98.

All the same, the concept of "book value" is an accepted

accountancy concept of value. It cannot be held to be

illusory."

Even though Cooper's case has not been specifically

referred to, in Tinsukhia's case, still the principles laid

down in Cooper's case have been kept in mind and dealt with.

Keeping those principles in mind, in Tinsukhia's case it has

been held that the concept of book value is an accepted

accountancy concept and that it cannot be held to be

illusory.

18. Further, in Thana Electric Supply Company's case

it has been held as : "15. 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 rights. 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."

Thus, in this case this Court proceeded on the basis

that Articles 19(1)(f) and 31 applied to the facts of that

case. The Court still set aside the Judgment of the High

Court, which had upheld the challenge. This Court still

held that the challenge on grounds of violation of Articles

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14, 19 and 31 fails. The contention that compensation was

not adequate and/or illusory was not accepted. In Vellore

Electric Corporation's case also this Court considered the

challenge to the change in the method of valuation from

market value to book value on the basis of Articles 19(1)(g)

and 31. In this case also it was held that such a

contention was not available, as it had been negatived in

Tinsukhia's case.

19. In our view, the authorities in Tinsukhia's case,

Thana Electric Supply Company's case and Vellore Electric@@

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Corporation's case fully cover the point urged by Dr.

Singhvi. Even if the principles laid down in Cooper's case

(supra) are applicable, still it has been held by this

Court, in the above mentioned three cases that principles of

valuation on book value is a well known concept of valuation

and that the amount is not illusory. We, therefore, see no

substance in this challenge.

20. Dr. Singhvi, however, submitted that the notice

to take over the undertaking was given on November 30, 1962

and the undertaking was taken over on June 28, 1964. He

submitted that on the date of takeover the rights of the 1st

Respondent had crystallised. He submitted that the 1st

Respondent, therefore, became entitled to receive the market

value of the property. He submitted that as the amount

payable had already got crystallised, a subsequent

acquisition could only be acquisition of money. He

submitted that on June 28, 1964 the vesting took place. He

submitted that thereafter nothing more than payment of money

was to be done. He submitted that by a retrospective

amendment, made in 1975, money could not be compulsory

acquired. He submitted that there could be no public

purpose in acquisition of money and that such acquisition

would amount to a forced loan. He submitted that the

restrictions laid down by the retrospective amendment were

not reasonable. He submitted that no reasons for such

restrictions were given or could exist. He submitted that

by the amendment the crystallised right to money was being

taken away.

21. In support of his submission Dr. Singhvi relied

upon the case of Madan Mohan Pathak v. Union of India,

reported in (1978) 2 SCC 50. In that case there was a

settlement between the management and the labour under which

an annual cash bonus was to be paid to Class III and Class

IV employees. By the Life Insurance Corporation

(Modification of Settlement) Act, 1976 Class III and Class

IV employees were sought to be deprived of the annual cash

bonus that they ere entitled to receive under the

settlement. This Court held that the term 'Property' under

Articles 19(1)(f), 31(1) and 31(2) had to be given the

widest interpretation and refers to property of every kind,

tangible or intangible, debts and chose-in-action. It was

held that the chose-in-action could be compulsory acquired

under Article 31(2). It was held that the right to receive

the annual cash settlement was a right to property within

the meaning of Article 31(2). It was held that

extinguishments of the debt of a creditor with the

corresponding benefit to the State or State owned/controlled

Corporation would be transfer of ownership to the State and

would amount to compulsory acquisition under Article 31(2).

It was held that acquisition of money, debt and/or chose in

action must be made to serve a public purpose. It was held

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that the impugned Act was a pure and simple case of

deprivation of the rights of the Class II and Class IV

employees without any apparent nexus with any public

interest. It was held that an acquisition of a

chose-in-action could not be for the purpose of augmenting

the revenues of the State or reducing State expenditure as

that would not be a public purpose and would be violative of

the constitutional guarantee embodied in Article 31(2). It

was held that an acquisition of this nature amounted to a

forced loan. Dr. Singhvi also relied upon the case of

State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of

Darbhanga reported in (1952) S.C.R. 889.

22. We are unable to accept the submission. As has

been held in Tinsukhia's case, Thana Electric Supply@@

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Company's case and Vellore Electric Corporation's case what@@

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has been acquired is not a chose-in-action or a debt. What

been acquired is the undertaking which dealt with material

resource of the country. There was no crystallisation of

any amount. The only right was a right to receive

compensation which was to be worked out on certain

principles. All that the amending Act has done is to change

the method or principle on the basis of which the

compensation was to be worked out. It has been held that

the legislation is not a piece of colourable legislation.

It has also been held, in the above mentioned cases, that

the provisions for quantification of the amount payable to

the undertaking form an integral and inseperable part of the

nationalisation and do not admit of being considered as

distinct provisions independent of each other. It has been

held that the

economic costs of nationalization was not justiciable.

In our view this case is fully covered by the judgments in

Tinsukhia's case, Thana Electric Supply Company's case and

Vellore Electric Corporation's case.

23. In this view of the matter, the Appeal is

allowed. The Judgment of the Division Bench dated September

17, 1987 as well as the Judgment of the learned single Judge

dated July 19, 1982 are set aside. The Writ Petition filed

by the 1st Respondent stands dismissed. There shall be no

order as to costs.