- (1.) THIS is an application by the Amalgamated Electricity Co Ltd. Ajmer Branch against the State of Rajasthan and the Secretary to Government of Rajasthan, Public Works Department under Art. 226 of the Constitution for a writ of certiorari, prohibition, mandamus and other order or direction that this Court may be pleased to pass in connection with the notice given by the President of India to the applicant by which it was conveyed to the applicant that the President was exercising the option to purchase the undertaking run by the applicant at Ajmer.
(2.) BRIEFLY the facts which are relevant for present purposes are these. The applicant is a limited liability company and was given a licence in 1928 for supplying electricity to the municipal town of Ajmer. The area of supply in the licence was mentioned as the whole area within the municipal limits of Ajmer and such extensions beyond these limits as might be permitted by the Chief Commissioner of Ajmer Merwara from time to time. This licence was issue under sec. 3 of the Indian Electricity Act (No. X of i910) and the applicant has since been supplying electric energy to the municipal area of Ajmer. Besides this, it appears that the area of supply has been extended by notification under sec. 27 of the Indian Electricity Act on various dates in the last thirty years. At present the applicant is admittedly supplying electric energy to the municipal area of Ajmer as well as to the Municipal of Pushkar and to certain areas within the jurisdiction of the District Board of Ajmer and outside the municipal limits of Ajmer Municipality. When the thirty years period of the licence was still to run for a little more two years, a notice was issued by the President of India to the applicant under sub-sec. (2) to sec. 7 of the Indian Electricity Act read with clause 13 of Ajmer Electric Licence of the applicant intimating to it that the President desired to purchase the undertaking. This notice was dated the 5th of Jan. 1956 and the applicant was told that the President would exercise his option on the midnight between the 11th and 19th of January, 1958 on which date the thirty years period of the licence expired. The applicant made representations to the President against his decision to exercise the option of purchasing the undertaking. He was finally informed by letter dated the 10th of September 1957 that the decision had already been taken and would not be revoked. A draft of an agreement had also been forwarded to it, but it had not taken any action on it. It was finally informed that the Government was willing to pay the fair market price of the under taking plus 20% thereof as specified in sec. 7 of the Indian Electricity Act and as contained in the licence. It was further informed that no further unnecessary correspondence in the matter should be made unless it agreed to execute the agreement. Thereafter the present application was made to this Court and the main contentions of the applicant are these: - (1) That the notice of the option to purchase issued by the President in 1956 is invalid and of no effect because the President had not the power to issue the notice and that it should have been issued by the then State Government of Ajmer. (2) That the President had no power under sec. 7 (2) (a) and (b) of the Indian Electricity Act, even if he was the person who had the right to issue notice to exercise the option to purchase the undertaking. (3) That the licence was not heard before the President decided to exercise the option to purchase the undertaking and that a decision as to the option was a judicial or quasi-judicial decision and natural justice required that the applicant should have been heard before the President decided to exercise the option. (4) That the action of the President was mala fides, though the applicant did not really give any facts on which this is based. (5) The applicant also took up cudgels on behalf of the Chief Commissioner and the Council of Ministers of the State of Ajmer and also the Municipality of Ajmer as if these authorities were incapable of defending their own interests and it was alleged that these authorities had been denied the exercise of their constitutional and legal right of exercising the option. The application has been opposed on behalf of the State of Rajasthan and they have traversed all the grounds raised on behalf of the applicant. Their contention is that the President had full authority to give notice when he did so in January 1956, that the option was rightly exercised under S. 7 (2) (a) and (b) of the Indian Electricity Act, that the act was an act of executive nature and there was no question of the applicant being heard on the ground of natural justice before the President decided to exercise the option and that there was no question of mala fides. As to the Chief Commissioner and the Council of Ministers of Ajmer, the reply of the State was that the President took action on being requested by the State of Ajmer to exercise the option of purchasing the undertaking and that the Municipality was not in any way concerned because it had expressed its inability to find funds to purchase and run this undertaking We propose to take these points one by one and being with the first point relating to the power of the President to issue the notice of January, 1956. The argument of the applicant in this connection is that in view of the provisions of the Government of Part G States Act, 1951 (No. XLIX of 1951) and particularly sec. 38 thereof, the notice could only and should have been issued by the Chief Commissioner of Ajmer and that the President had no authority to do so. In consequence it is urged that there was no valid notice as required by the law and, therefore, no further action could be taken on the basis of this notice. They reply to this on behalf of the State is that the President had full authority under Art. 239 of the Constitution and that sec. 38 of the Government of Part C States Act did not and could not take away the power of the President under Art. 239. Let us, therefore, look at Art. 239 which really concludes this matter. The relevant part of that Article is as follows: - "subject to the other provisions of this Part, a State specified in Part G of the First Schedule shall be administered by the President acting, to such extent as he thinks fit through a Chief Commissioner or a Lieutenant Governor to be appointed by him. . . . . " The rest of the Article immaterial for our purposes. A bare perusal of this Article shows that it is the President who administers Part G States. The Chief Commissioner was his agent and could only exercise such powers as the President thought to fit to confer on him. Further, it was open to the President to act through the Chief Commissioner to such extent as he thought fit and he could have acted through other agency which might be available to him and not through the Chief Commissioner if he did not think it fit. This power of the President under Art. 239 is much greater than that of a Governor under Art. 154. What we have to see, therefore, is whether sec. 38 of the Government of Part C States Act had made any curtailment in the power of the President conferred on him under Art. 239. ft may be noted before we refer to the terms of sec. 38 that there is no provision in the Government of Part C States Act corresponding to Art, 154 of the Constitution. This means that the executive power of the Part C States was declared to be vested in the Chief Commissioner or lieutenant-Governor and the reason for this is obvious viz the presence of Art. 239 by which the administration of Part C States was vested in the President. Now sec. 38 of the Government of Part C States Act provides for the conduct of business. The rules for the conduct of business have to be made not by the Chief Commissioner but by the President. Again, this has to be contrasted with the provisions of Art. 166 (3) where the rules for the conduct of business have to be made by the Governor. The very fact, therefore, that the rules for the conduct of business under sec. 38 have to be made by the President shows that it was not the Chief Commissioner in whom the executive power of a Part C States vested. It is sub-sec. (2) to sec. 38 on which special emphasis is being laid on behalf of the applicant. That section is as follows : - "all executive action of the Chief Commissioner whether taken on the advice of his Ministers or otherwise, shall be express sed to be taken in the name of the Chief Commissioner. " Now contrast this language with the language of Art. 166 (1 ). There it is provided that all executive power of the Government of a State shall be expressed to be taken in the name of the Governor. This again shows that the Chief Commissioner had not the same position in a Part C States as the Governor in a Part A State. All that sub-sec. (2) provides it that where executive action is taken by the Chief Commissioner, presumably under the rules framed by the president under sec. 38, it will be expressed to be taken in the name of the Chief Commissioner. It does not follow from this that all executive action can be taken only by the Chief Commissioner in relation to the affairs of a Part C State and that the President who is the authority empowered under Art. 239 of the Constitution to administer Part G States cannot take any executive action if he so desires to do. In this connection, learned counsel for the applicant referred us to Satya Deo Bushahri vs. Padam Dev (1 ). The particular passage to which reference is made appears at page 556 and is as follows: - "the argument is that the executive action of the Central Government is vested in the President, that the President is also the executive head of Part C States, and that, therefore, the contracts entered into with Part C States, are,, in law, contracts entered into with the Central Government. The fallacy of this reasoning is obvious. The President who is the executive head of the Part G States is not functioning as the executive head of the Central Government but as the head of the State under powers specifically vested in him under art. 239. The authority conferred under art. 239 to administer Part C States has not the effect of converting those States into the Central Government. Under Art. 239, the Presi dent occupies in regard to Part C States, a position analogous to that of a Governor in Part A States and of a Rajpramukh in Part B States. " Stress in particular was laid on the last sentence in the extract quoted above and it was urged that the President, according to this view, occupied in regard to Part G States a position analogous to that of a Governor in Part A States. Accepting (though we may point out that the President's powers under Art. 239 are much wider than the powers of a Governor under Art. 154) that the President's position is analogous to that of a Governor of a Part A State, we are of opinion that the applicant does not stand to gain by this observation of the Supreme Court. According to this view, the President is in the same position with respect to a Part G States as a Governor is with respect to a Part A States. The executive power of the State undoubtedly vests in the Governor vide Art. 154. By analogy, therefore, the executive power of a Part G State vests in the President and not in the Chief Commissioner who is merely an agent of the President to carry out such duties as the President may assign him under Art. 239 read with sec. 38 of the Government of Part G States. Therefore, it is the President in whom the executive power of a Part G State vests. If a notice is to be given to a company like the applicant, it can be given by the person in whom the executive power of the State vests, for the giving of such a notice is exercising the executive power of the State. We shall later deal with the question whether such a notice can only be given in the exercise of judicial or quasi-judicial power. But assuming here that such a notice is the exercise of executive power, the person who will give such a notice is the person in whom the executive power vests, namely the President. Therefore, when the President gave this notice to the applicant, he was acting under Art. 239 because the executive power of the Part C State vested in him on the analogy of similar provisions relating to Governors in Part A States. It is true that for certain purposes, the President had delegated his powers to his agent, namely the Chief Commissioner. According to the rules of business, which the President himself framed, the power to make or authorise any contract for the purchase of any property movable or immovable or for any other purpose whatsoever involving or capable of involving a liability of less than rupees five lacs was apparently conferred on the Chief Commissioner. But, where the liability involved was rupees five lacs or more, the power was not delegated and the President kept it in himself. In this case, admittedly the undertaking is worth much more than five lacs. Therefore, it seems that when the question of purchasing this undertaking arose and it was felt that the liability would be more than five lacs, the notice of the option to purchase was issued by the President because eventually the purchase price being more than five lacs, the President would have to sanction the purchase. We are, therefore, of opinion that the executive power of Fart G States vests by virtue of Art. 239 in the President. As in this particular case, the liability involved would have been eventually more than five lacs, the President was the only authority which could have given notice or sanctioned the giving of the notice. In this particular case, instead of sanctioning the giving of the notice, the President himself gave the notice. It cannot be said, under the circumstances, that the action of the President is not perfectly legal and is not justified by the provisions of the Government of Part G States Act and the Constitution. We are, therefore of opinion that there is no force in the contention raised on behalf of the applicant that the notice in this case could only be given by the State Government of Ajmer in the name of the Chief Commissioner and could not be given by the President. The next point is about the authority of the President to purchase this undertaking under the law relating to the option to purchase viz. sec. 7 of the Indian Electricity Act. An attempt was made on behalf of the State Government to justify this right to exercise the option under sec. 7 (2) (a) of the Indian Electricity Act. We are of opinion that there is no substance in this contention. Sec. 7 (2) (a) deals with the case where the whole of the area of supply is included in the area under a single local authority and the local authority does not elect to purchase under sub-sec. (1 ). Now the only way in which the local authority's option not to purchase can be known is by resolution of the local authority not to do so. Admittedly, there is no resolution of the Ajmer Municipal Board in this connection. It is urged that the Chairman of the Board informed the Government that the Board had no funds to purchase the undertaking ; but that, in our opinion, is not enough. It is also urged that sometimes the local authority may collude with the licensee and may not pass a resolution and the State Government may in that case be helpless. The remedy for that, in our opinion, is quite clear. When the time approaches for the giving of the two years' notice and the local authority has taken no action, the State Government can always write to the local authority enquiring if it wishes to take action and if necessary, giving a time limit to it within which to take action under sec. 7 (1), failing which the State Government would take action under sec. 7 (2) (a ). If in this period, the local authority passes a resolution one way or the other, there is no difficulty. If it does not pass a resolution at all, the State Government can then proceed further, having given an opportunity to the local authority to exercise the option. We are, therefore, of opinion that this notice cannot be justified under sec. 7 (2) (a) of the Indian Electricity Act. Learned Advocate General has, however, justified this notice and, in our opinion, rightly under sec. 7 (2) (b ). The relevant portion of that provision is this: - "where the whole of the area of supply is not included in the area for which a single local authority is constituted. . . . . . . . . the State Government shall have the like option upon the like terms and conditions. " This clause applies to a case where the area of supply of a licence is not co-terminus with the area under a single local authority. In such a case if the area of supply is larger than the area under the jurisdiction of a single local authority, the State Government has the right to exercise the option without the necessity of the local authority passing any resolution refusing to exercise the option. The reason for this is clear. Where an electricity supply company has an area of supply which is larger than the area under one local authority, there may be disputes between various local authorities to which it might be supplying electric energy. In these circumstances, the law provides that the option should be not with this or that local authority, but with the State Government. In this case, it is not in dispute that the applicant is supplying electric energy not only to the area under the Municipal Board of Ajmer, but also to the area under the Municipal Board of Pushkar and certain other areas included in the jurisdiction of the District Board of Ajmer. Therefore, the whole area of supply of the applicant is not included in the area for which a single local authority is constituted. Consequently, clause (b) of sec. 7 (2) clearly applies and the State Government has got the right to exercise the option without waiting for any action by any local authority. It was urged, however, on behalf of the applicant that the whole area of supply of the applicant was not in excess of the area for which a single local authority is constituted. The argument is that under the terms of the licence, it was only the Municipal area of Ajmer which was the area of supply and that that stands as it is and there has been no amendment in the licence. We must say that we are not prepared to accept this argument. It is true that when the licence was granted, the area of supply was only the area within the Municipality of Ajmer J but the licence itself provides for extensions of that area. Such extensions were admittedly granted under sec. 27 of the Indian Electricity Act. These extensions became part of the area of supply of the terms of the licence and undoubtedly, the whole area of supply now is much greater than the area under the jurisdiction of the Municipality of Ajmer. We are, therefore, of opinion that as this is a case covered by clause (b) of sec. 7 (2), the State Government could exercise the option to purchase the undertaking irrespective of whether any of the local authorities within whose jurisdiction the supply is being made took any action or not. The State Government in this case at the relevant time was the Part C State of Ajmer. That State exercised the option through its executive head, namely the President. We are, therefore, of opinion that there is no force in this point either. Then we come to the third point, namely that the applicant licensee should have been heard on the principles of natural justice because the action of exercising the option was a judicial or quasi-judicial action. We are of the view that no argument is needed to show that the exercise of an option like this to make a purchase is purely executive action. We fail to see how any judicial or quasi-judicial considerations can enter into this matter. We also fail to see why the person who has a right to exercise the option should consult or hear the person against whom the option is to be exercised. For the rest, we may point out that the exercise of the option and the notice based on that exercise has to be given two years before the option is to be exercised. If the licensee has any representation to make against the exercise of the option, it has ample opportunity to do so. We are told that in this particular case, representations were made. In these circumstances, there is no question of there being any right on the principles of natural justice in the applicant of being heard before the President decided to exercise the option to purchase the undertaking. The next point is about the mala fides of the option. It is enough to say that there are no mala fides at all in this case. The sort of mala fides alleged in the application refer to the action of the President in acting in the manner he did without the authority of law. We have already held that the President had full authority to act in the manner he did. It is not suggested that there were any other kinds of mala fides. Reference in this connection was made to some meeting in 1952 long before this notice was issued. It was said that the applicant's representative in that meeting got some impression to the effect that the option would not be exercised. It is enough to say that the President was not responsible for any impression that the representative of the applicant might have carried away from any meeting. There is nothing whatsoever on this record to justify the contention that there was any mala fide on behalf of the President when the option was exercised. Lastly, we may refer to the point relating to the State Government, the Chief Commissioner and the Municipal Board of Ajmer. In the first place, we do not see why the applicant should plead on behalf of these authorities. If they were really aggrieved, we should have expected them to come to us for help. In the second place, it is enough to say that on the material placed before us by the State Government, there was infact no cause for grievance of any kind - factual, legal, or constitutional - on the part of any one of these. We are, therefore, of opinion that there is no force in this application and it is hereby dismissed with costs. In view of the vastness of the undertaking in connection with which this proceeding has arisen, we assess the costs of the learned Advocate General to Rs. 250/ - . ;