GODHRA ELECTRICITY CO. LTD. & ANR. versus THE STATE OF GUJARAT AND ANOTHER

GODHRA ELECTRICITY CO. LTD. & ANR.

THE STATE OF GUJARAT AND ANOTHER September 12, 1974 [A. N. RAY. C.J., AND K. K. MATHEW, JJ.J

l11dia1•1 Electricily Act, 1960, ss. 6.· 7 and 7A-'Date of comme11ceme111 of licence,' .what is-Taki1111 imdertnki11g and postpo11i11g payment of purchase price withom interest u11der s. 6(6). Ti affects fundamental right under Art. 19(1) (/) and (11)--Whether sharelwld,e1· can challenge validity of scct/011. lnterpretatio11 of. Deed;~Notificatio11-Subse1111e111 co11duct if relevalll.

Section 6(1) of the Indin Electricity Act, 1910 as amended by the Amendment Act of 1959, provided that where licence had be1:n granted to any person, the State Electricity Board shall, in the case of licence granted before the commencement of the Amendinent Act, on the expiration of such period as is specified 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 notice in writing of not less than one year, requiring the licensee to sell the undertaking to it at the expiry of the period. Section 6(6) provided that where notice exercising the option of purchasing the undertaking has been served upon the Hceiisee the licew,ee shall deliver the undertalting to the Stale Electricity Board on the' expiry of the relevant period referred to in sub-sectioa ( 1) pe11di1111 the determi'.'ati<m and paymelll of the purchase price.

By notification dated November 16, 1922, licence was ·granted to the predecessor of the first appellant company, under s. 3 of the Act The licence was signed on 17th November and the notification granting it was published in the offi:ial Gazette dated 23rd November. The licence was for period of 50 years from its commem:ement. The second respondent exercised the option to purchase the undertaking by notice under s. 6( 1) by calling upon. the appellants to sell the undertaking to it on the midniglit intervening between !Sth and 16th Nov~mber. 1972. Thereafter, the first respondent took over manage· ment of the undertaking and then handed it over to the second respondent.

The appellants filed writ petition challenging the validity of the notice issued by the second respondent and the vires of ss. 6, 7 and 7 of the Act. The High Court dismissed the petition.

Jn appeal to this Cou1t it was contended that-( I) the date of the commence-ment of the licence was the date on which the notifi,cation granting the licence was published in the official gazette, namely, November 23, 1922 .and not the date of the notification granting the licence, that is November 16: 1922, and. therefore. the 50 years period did not ,expire on the midnight intervening between 15th and 16th November, 1972, and $0, the notice given by the second respon-dent was bad: and ( 2) that the provisions of s. 6( 6) of the Act were invalid as they abridged the righli gmiranteed under Art, 19(1 )(f) and (g) of the Constitution.

Allowing the appeal on the second ground,

HELD : There was no valid purchase of the undertaking and the taking delivery of the undertakin1i by the second respondent was unlawful and the second respondent must re .. deliver the undertaking to the lkensee. [56BJ

(l)(a) Rule 17 of the Indi~n Electricity Rules, 1922 provides for the publica· tion of the licence in the official .gazette to notify that it has been granted. Rule 18 states that the date of notification under r. 17 shall be deemed to be the date of the commencem~nt of the licence. Clause 2(e) of the licence provid1is that the date of the notification in the gai:ette that the licence has been granted >s the date of tho: commencement of the Hcence. The words "the

The words "the

licence has been granted" do not postulate that the licence has already been. ~igned and granted because, there is · noihing strange . m making the date of the notification in the gazette that the licen:e has beelll granted, though anterior in point of time to the date of signing the licence, as. the date of the commencement of the qicence. Clause 2(e) of the licence will have to be read in harmony with rule 18 and if so read it will be found that the date of the notification is only deemed to be the date of the commencement of the licence, that is, the date of the notification. granting the li:ence and the 8 date of commencement of the licence are the same namely November 16, 1922~ [46G-47EJ

(b) There is distinction between the date of the notification and the dare of publication of the notification in the Gazette and the parties themselves had thi~ dis!inclion in mind as is shown by the provision by which the licence was sul;lsequently amended. Court is not prevented from looking into the subse-quent condu;t or actings of parties to find out the meaning of the terms of do ·ument when there is latent ambiguity. Extrinsic evidence to determine the efftct of an instrument· is permissible wl!en there remains doubt as to its true meaning and evidence of the acts done under it is safe guide to the inten-tion of the parties, particularly when acts are done shortly after the date of the instrument. [47E-F; 52A-CJ · , , ·

The inquiry before the Court is· as to what the intention of the parties was from .the language 11.sed. If the meaning of the word or phrase or sentence in clear extrinsic evidence is not admissible. But word or phrase is always not crystal clear. Parties themselves might not have been clear as to the meaning of the word or phrase when they entered into the contract, or, unanticipated situations might arise or come into the contemplation of the parties subsequently. When there is latent ambiguity extrinsic evidence in the shape of an interpreting statement in which both plllfties have conourred should b!l admissible. When both parties subsequently say that, by the word or phrase which in the context is ambiguous. they meant partic\ilar intention, it only supplies glossary as to the meaning of the word or phrase. [SIA-DI

Prenn v. Simmonds [1971) 3 All E.R. 237; lames Miller and Partners Ltd. v: Whitworth Street Estates (Manc/1ester) Ltd. (1970] 1 All E.R. 796 A.G. v. Wickma11 Ltd. (1973] 2 All E.R. 39; Watcham v. East African Pratectorate, [19191 A.C. 533; Dee v. Rias (1832) 8 Bing, 178 at p. 186, Chapma11 v. Bluck (1838) 4 Bing N.G. 187 at p. 195. Odgers' Con.rtructi011 of Dr.eds and Statutes 5th e.d. bv Dworkin p. 83. Lamb v. Gorin11 Brick Co. (19321 I. K.B. 710 at 721 Balkishim v. Legge 21 IA. 58 and Abdulla Ahmed v. Animendra Kissan Mitter [1950] S.C.R. 30, 46 referred to.

(2) But s. 6(6) of the Act as amended violates the fundamental right under Art. !9(1)(f) artd (g) of the second appellant. [54G-H]

(a) The State Electricity Board is 1iable to pay interest under the general Jaw for the period during which the licensee bas not· been paid the purchase pc-ice but the arbitra!or appointed under s. 7 A, though he is l>ound to det·:rmine the purchase price ~nd make the award within_ specified t!!De, .canno~ award any interest on the market value of the undertakmg as determined by him, because, there is no provision which enab'.es him to do so. Therefore, the licensee's claim for interest can be enforced only in suit. The fact that the claim for interest can be enforced in su.it by the licensee would not mitigate the unreasonableness of the provisions which authorise the Board to take delivery of the und·:rtaking without payment of purchase price. [53F-li)Satinder Singh v. Amrao Singh (1961] 3 S.C.R. 676 Toronto City Corpora-tion v. Toro1110 Rai/wav Corporation [19251 A.C. 177 at pp. )9~-194. M.P . .Electricity Board v. Central flldia Electric Supply Co. A.LR. 1972 M.P. 47, Upper lamuna Valley Electricity Supply Co. Ltd, v. Municipal Corporation of Del/ii unreported decision referred to.

. (b) Under the proviso to s. 7(ii) if an undertaking is sold or delivere~ to the Electricity Board or to the State the licence ceases to have any further opera-tion. But the words sale or delivery in this proviso mean valid sale or

valid delivery. licensee cannot be told that he has no right to carry on business .unless valid purchase is made at the expiry of the period. If the licensee. c.annot be requfred to sell the underlitking with~:mt paym.ent of the Pl;lr,chas.e pnce at the time of the delivery of the undertakmg or without prov1s1on in law for payment of interest on the purchase price during the period when payment _is . withhekl there would be no valid termination of the lic:en:e and the licensee will be entitled to carry on th!' business. [54C-F]

(c) The first appellant being Corporation is not citizen and hits no fundamental right under Art. 19. But the value of the investment in the company by the second appellant is substanti111lly reduced by the illegal delivery of the undertaking to the Board a11d his right fo carry on 'the business of supplying electricity through the agency of the .company is abridged, and he, alongwith other shareholders, are left with the burden of the debts of the undertaking. If ·the second appellant's right to carry on busine•ss through the agency of the com-pany is taken away or is abrid~ed or his right to divisible share in future of the property of the company 1s diminished or abridged by taking delivery of the undertaking without payment of the purchase price, there is no reason why he should be disabled from challenging the validity of the sub-section. [54H-55A-B, E.J

R. C. Cooper v. Union of India [1970] 3 S.C.R. 530 at p. 556, Bennett Colema11 .& Co. v. U11io11 of !11dia [1973] 2 S.C.R. 757 at p. 773, foilowed.

CIVIL APPELLATE JURISDICTION : Civil Appe:al No. 2016 of 1973.

Appeal by Special Leave from the judgment and order dated the 15th/16th October, 1973 of the Gujarat High Court in Sp!. Civil Appls. No. 1752 of 1972.

B. Sen, R. Tl. Dhebar, P. C. Kapoor, P. R. Ramasesh and R. V. ·Desai, for the appellants.

G. A. Shah and R. N. Sachthey, for respondent No. 1.

F. S. Narima11, Addi. Sol. Genl. of India and N. M. Shroff, for Tespondent No. 2.

Soli J. Sorabjee, Ravinder Narain and K .. John, for the intervener. (The Amalgamated Elect. Co. Ltd).

The Judgment of the Court was delivered by

MATHEW, J.-The appellants filed writ petition before the .High -Court of Gujarat challenging the validity of notice issued by the ·Gujarat State Electricity Board, respondent No. 2, dated November 8, 1971, whereby respondent No. 2 purported to exercise the option of purchasing the electrical undertaking of appellant No. 1 under s. 6 •Of the Indian Electricity Act, 1910 (hereinafter referred to as 'the Act') and for declaration that the provisions of sections 6, 7 and 7A of the Act are ultra vires Articles 14, 19(1)(0, 19(1)(g) and 31 of the Constitution. The High Court dismis!;ed the petition and this appeal, by certificate, is against that judgment.

The Government of the Province of B9mbay granted licence by notification dated November 16, 1922, under s. 3 of the Act known <is the 'Godhra Electric Licence, 1922' in favour of Lady Sulochana Chinubliai and Company, Ahmedabad. The lic(:nce ·was signed on ·November 17, 1922 and the notification granting it was published in

the Bombay Governme11t Gazette dated November 23, 1922. The licence was tra11sferred to the 1st appellant-company viz., the Godhra. Electricity Co. Ltd. The licence was for period of 50 years initially from its comme11cement. The initial period of 50 years, according to the respondents, was to expire on the midnight intervening between the 15th and 16th November, 1972. The second respondent exercised the option to purchase the undertaking of the I st appellant .company by 11 notice dated November 8, 1971, under s. 6(1) of the .Act by calling upon the appellants to sell the undertaking to it on the mid-night intervening between the 15th and 16th of November, 1972. Thereafter, the Government of Gujarat issued notification under rule 115(2) of the Defence of India Rules taking over the manage-ment of the undertaking on November 18, 1973. On December 21, 1973 of the State Government handed over the undertaki~ to the 2nd r(?spondent. ·

Before we proceed further, it would be convenient at this stage to note the amenement made in the Act by Act 32 of 1959. com-parison of the original s. 7 with sections 6, 7 and 7 shows that the changes made by sections 6, 7 and 7 in tho original s, 7 were six in number. They were : (I) the maximum length of the initial' porli'd to be specified in the licence for exercise of the option to pur~ chase wns originally fifty /ears whereas after the 11ntendment, it was reduced to thirty yenrs an the maximum length of subsequent periods , was also reduced by the amendments from twenty years to ten years: ( 2) the notice of exercise of option was originally ,required to be of not Im than two years but after the 11mendments, notice of not less than one year would be sufficient for exercising· the option; (3) th1r option to purchase under the old law vested in the Board but after the amendments It was also conferred on the Stnte Government and' the local authori\y in case the B'oard did not elect to purchase; ( 4 )' the licensee could not be obliged under the old law to sell the under-taking to the purchaser except against payment of the purchase price· but after the amendments, the licensee was bound to dehver the unde,--· takin~ to the purchaser on the expiration of the relevant period perid~ ing the determination and payment of the purchase price; (5) there· was right of waiver of the option to purchase under the old law but as 11 result of the amendments, that right was taken away; and (6)' the service lines constructed at the expense of the consumers were· net required by ~he old law to be excluded in determininit the pur-chase price but under the amended law they were required to be ~pcc\fic111ly excluded. ·

Jn this 11ppenl we are concerned with two contentions raised by the appellanis. Tbey are that the. date of the commencement of the lkc1\ce was the date on which the notification gr11ntln~ the licence was published In the Bombily Gazette, viz., November 23, 1922 and not th~ dnte ol' the notification granting the licence i'.e., November Hi, 1922, 1111d, therefore. the 50 years' period did not expire on the mid· night intervening between the 15th and 16th November, 1972 and so, the notice requirina the licensee to sell the undertaking on. the expiry· of the period, namely, tSh November, 1972 was bad; and that. the-

provisions of sub-section ( 6) of s. 6 of tht:\ Act are invalid as they .abridge the right guaranteei:i under Article 19i(l)(f) and 19(l)(g).

Section 6 ( 1) of the Act provides that whe:re licence has been _granted to any person, not being local authority, the State Electricity .Board shall:-

(a) in the case~ of licence granted before the com-

mencement of the Indian Electricity (Amendment) Act 32 of 19S9, on the expiration of such period as is specified in the licence, and

(b) in the case of licence granted on· or after the commencement of the said Act, on the expiration of such period not exceeding twenty years, and of every such sub-sequent period, not exceeding ten years, as shall be specified in this behalf in tlte licence;

bave the option of purchasing the undertaking and such option shall be exercised by the State Electricity Board servin~ upon the licensee notice in writing of not less than one year requ1ring the licensee to ·11e1J the undertaking to it at the expiry of the relevant period referred to in this sub-section.

The ruling of this Court make it clear that when the State or the ·state Electricity Board exercises its statutory option to purchase the undertaking of licensee, it must in all respects conform strictly to the requirements. of s. 6( 1) and that the failure to conform to any o.ne of them would render the exercise of the option ineffective (see -Gujarat Electricity Board v. Shanti/al R. Desai(!) and Gu/arat Elec-tricity Board v. Girdharlal Motilal and Another).([2]) Clause ll(a) of the licence states that the option to purchase given by s. 7 of the Act shall be exercisable first on the expiration of SO years computed from 1he commencement of the. licence. Accordingly. it was necessary that tbe notice in this case should have required the licensee to sell the wdertaking at the expiry of the initial period of 30 years. As already stated, the notice specified the date of the expiry of· the period as November lS, 1972. So, the question is, whether the period of SO years expired on November lS, 1972, and, that will depend upon the answer to the question as to what is the date of the commencement -of the licence. Clause 2 ( e) of the licence says ·:

"The date of th1: notification by the Government of Bombay iri the Bombay Government Gazette that this licence has been granted is in this licence referred to as 'the com-mencement of this licence' ".

Rule 17 of the Indian Electricity Rules, 1922, provides for pub-lication of the licence in the local official gazette to notify that it has been f!J:anted. Rule 18 states that the date of the notification under Rule 17 shall be deemed to be the date of the commencement of the licence. Clause 2(e) of the licence makes it clear that ii the date. -of the notification in the gau:tte that the licence has been granted is --- O> O> [1969] 1 S, S, C.R. 580. (2) [1969] I. S. S. •. R. 889."1 •. R. 889."1 R. 889."1 889."1

- O> O> [1969] 1 S, S, C.R. 580. (2) [1969] I. S. S. •. R. 889."1 •. R. 889."1 R. 889."1 889."1

. A. the date of 'commencement of this licence'. As already stated, the date of the notification granting the licence was November 16, 1922. There can, therefore, be no doubt that the date of commencement of the licence was November 16, 1922. ·

But counsel for the appellants as wel! ·as the intervener contended that it is impossible to imagine that licence could be granted with· out the licensor signing the licence and as the licence bears the date November 17, 1922 and was signed .only on that day, it could not be said that 'the licence has been granted' before November 16, 1922. The arguinent was that there could be no grant of licence before it is signed by the licensor and when clause 2 ( e) of the licence speaks of the date of "the notification ........ in. the Bombay Government Gazette that this licence has been granted" it postulates that the licence has already been signed and granted and, therefore, the date of the notification granting the licence can never be November 16, 1922 when it is seen that the, licence has been signed on November 17, 1922. We have already seen that rule 18 provides that the date of the notification shal! be deemed to be the date of commencement of the licence. We have to read clause 2 ( e) of the licence in the light of the provisions of r. 18. Therefore, there is nothing strange in making the date of the notification in the Gazette that the licence has been granted, though anterior in point of time to the date of signing the . licence, as the date of commencement of the licence. In other words, ciause 2 ( e) of the licence will have to be read in harmony with rule 18 and if so, read, it will be· found that the date of the notification is only deemed to be the date of the commencement of the licence ...

The Additional Solicitor General also submitted that there is distinction between the date of notification and the date of the pub-lication of the notification in the Gazette and that the parties them-selves had this distinction in mind is clear from the provision by whicJ:i the licence was subsequently amended. That amendment reads : " ... that the following amendment be made . in the fourth annexure to the Godhra Electric Licence, 1922, which was granted in Government notification No. 177, dated 16th November, 1922, and published at pages 2652 to 2656 of Part I of the Bombay Government Gazette dated 23rd November 1922 viz., the clause mentioned below be inserted as clause 5 to the said fourth annexure . . . ".

The question whether subsequent 'interpreting statement' made by parties to written instrument is admissible in evidence to const~e the written instrument is not free from doubt. In Prenn v. Sim-monds, (I) the House of Lords held that ne&otiati~ns. between parties previous to. the formation of contract are madm1ss1ble to prove the intention of thJ: parties in case of ambiguity in, tpe terms of the con-tract. In James Miller and Partners Ltd. v. w.11tworth Street Estates (Manchester) Ltd.([2]), the House of Lords he!~ !hat subsequent con-H duct of the parties to contract is not adm1ss1ble to construe the

-(1) [1971]3 All E. R. 237. (2) [1970] 1 All E. R. 796.

contract. The decision was followed in the recent case of Schuler A.G. v. Wickman Ltd.([1]) where Lord Reid said at pp. 45··46:

''I must add some observations about matter which was fully argued before your Lordships. The majority of the Court of Appeal. were inlluenced by consideration of actings subsequent to the making of the contr1.1ct. In my view, this was inconsistent with the decision of this House in .James Miller and Partners Ltd. v. Whitworth Street Es-tates (Manchestel') Ltd."

Lord Morris of Borth-y-Cest said at pp. 52-53 :

"But in case such as the present I si:e no reason to . doubt the applicability or the autho~ity of what was said in James Miller and Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. If on the true construction of contract right is given to party, that right is not diminished be-cause during some period eitbcr the existence of the right or its full extent was not appreciated." •

Lord Wilberforce has stated that subsequent actions ought not to have been taken into account, that cxtri1mc evidence is not admissible for the con~lruction Of written contract, th at the parties intentions must be a~certained, on legal principles of com;truction, from the words they havo used and that it is one and the s11me p!'inciple which excludes cl'idence of statements or actions, duri11g negotiations, 11t the time of the contract, or subsequent to the contrnct, a1iy of which to tht• lay mind might at first sigllt seem to be propc.r to receive. Lord Simon Hid, after referrlna to the case of Whitworth Strtet Estates : (supra)

"It is ~ue that, on strict analysis, what was said by Lord Hodson, Viscount Dilhorne and Lord Wilberforce cannot be regarded as vital step towards theil' conclusions; but, as I have already ventured to demonstrate, the point was directly in issue between the parties in your Lordship's House. I am therefore firmly of the opinion that what was said should be regarded as settling the law on this point. I am reinforced in this opinion because, in my view, Whitworth Street Estates was correct decision on the point for reasons additional to those given in the speeches."

He then said :

"Sir Edward Sugden's frequently quoted and epigramma-tic dictum In Attorney Oimera/ v. Dr11111mo11d (1842, DI'. & War 353, at 368) : ",. , . tell me what you have done under sue'h o deed, and I wll! tell you what that deed means" real'iy contains logical flaw: if you tell me what wou hove dqne under deed, I can at best tell you· only what you think that deed means. Mo!'eover, Sir Edward Su11dan was · expressly dealing with 'ancient instruments'. I would add

thirdly, that the practical difficulties involved in admitting subsequent conduct ·as an aid to interpretation arc only marginally, if at all, less than are involved in admitting evidence of prior negotiations."

In the ·process of interpretation of' the tctins of contract, the court can frequently . get great assistance from the interpreting state· ments made by the parties. themselves or from their conduct in render-ing or in receiving performance under it. Pa!'ties can, by mutual agreement, make their· own contracts; they can also, by mutual agree· · ment, remake ·them. The process of practical interpretation and application, 'however, is not regarded by the parties' as remaking of the· contract; 11-or do; the coui:is so regard it. . Insteaa, it is merely further expression by the parties of the .meaning that they give and have give~ to:.the terms of their contract previously made, There is no good reason w~y the courts should not give great weight to these further expressioriS'. by· the parties, · in view of the fact that they still ha~e .the same freedom of contract .. that they had originally. The American Courts receive subsequent actions as admissible guides in intcr,Pretation. It is true that one party cannot build up his case by making an Interpretation in his own favour. It is the concui:rence therein that such party can use against the other party. This con-currence may be· evidenced by the other party'R express assent thereto, by his acting in accordance with It, by his receipt without objection of 11er£crmances that indicate It, or by laying nothing when lie knows that the first .party Is actlnll on reliance upon the Interpretation (8ee Corbin on contracts, Vol. 3, pp. 249 and 254·55). . '

. The rule. that. obtains In ot~er jurisdictions ls also the same : · "In France construction of contract Is . wlthln,the AC>le province of' the Judaes of fact who are entll'l!Jy tree to use whatever. materlil seems relevant to them. . . The rule Is th"' same in Germany where since 1888 it is established that '"'ct1 statements made by one of the contracting parties to third person about the content of· the contractual intentions arc ·admissible, :gui.cles to interpret~tion. . . In Italy, Art. 1362(2)·p~sim impressively succinct language: .... The Vlenna,COziVention on the law of Treaties of 1969 . (which .to tarp extent merely codifies earlier international practice) Jnjolns the interpreter of treaty to take into ac· . cliunt.:any subs. eq. uent practice in the application of .the ,tre~ty . , which · establish the agreement of the l)art,ies regardi1111: its --'11n~tatlon', Art. 31(3)(b)" (see Notes by F. A. Mann ' 011 L ~~uler A. G. v. Wickman Machine Tool Sales Ltd. · (.i.973) 2 W. L. R. 683), Law Quarterly Review, Vol 89, pp. 464-465.). .

The real reason a~alnst . taklne: Into account the subsequent con· duct of the partle8 Is the rule which excludes extrinsic evldMI:~ In the construction of written contract.

Jn Watchman v. East Africa Protecrora./.11([1]) the question arose

as to whether the land intended to be conveyed was that described by

. (I) (1919) A.C. 533

. ~"'."'L151 SupCI/75

· the boundaries in the ce1tificate issued by tht: Government or the area marked on the plan, which clisagreed. The parties had always treated the latter as the true area conveyed. It was held by the Privy Council that evidence. of user may be given in order to show the sense in which the parties construed the language employed, and that this rule applies to both modern and ancient documents and whether the ambiguity be patent or latent.

As regards Watcham's case, this is what Lord Reid said in Schuler A. ·G. v. Wickman Ltd.(supra)·

"It was decided in Watcham v. Attorney General of East Africa Protectorate that. in deciding the sc:ope of an ambi-guous ti1tle to land it was proper to have regard to subse-c qµent settings and there are other authorities for that view. There may be special reasons for construimg title to land in light of subsequent possession had under it but I find. it unnecessary to. consider that question. Otherwise I find no substantial support in the authorities for any general principle permitting subsequent actings of the parties to contract to be used as throwing li~t on its meaning. I would therefore reserve my opmion with regard to Watcham's case but repeat my view expressed in Whitworth with regard to the general pnnciple".

In Doe v. Rias('), Tindal, C.J. said :

"We are to look at the words of the instrument and to the acts of the parties to ascertain what their. Intention was; if the words· of the instrument bi: ambiguous, we may call in the aid of the act~ done under it as clue to the intentlon of the parties".

And in Chapman v. Bluck([2]), Park J. said:

"The intention of the parties may be collected from the language of the instrument and may be elucidated by the conduct they have pursued."

Odgers observers (a) :

'"In the case of an ambiguity, judicial notice· will . be taken of the way in which the parties th~mselves have in· terpreted their rights and duties under the document".

We are not certain that if evidence of subsequent acting under document is admissible, it might have ·the result that contract would mean one thing on the day it is signed but by reason of subsequent event it would mean something month or year later. Subsequent

(I) (1832) 8 Bing. 178 at p, 186.

(2) (1838) 4 Ring, N. C. 187 at p. 195.

(3) See Odgers, Construction of Deeds and Statutes, Sth eel. by D~rkin, p, 83.

'interpreting' statements might not always change the meaning of \ word or phrase. word or phrase is not always crystal clear. When both parties subsequently say that by the word or phrase which, in the context, is ambiguous, they meant this, it only supplies glossary !IS to the meaning of the word or phrase. After all, the inquiry is as · to what the intention of the parties was from the language used. And, why is it that parties cannot clear the latent ambiguity in the language by subsequent interpreting statement ? If the meaning of .the word ·or phrase or sentence is clear, extrinsic evidence is not admissible. It is only when there is latent ambiguity that extrinsic evidence in the shape of interpreting statement in which both parties have concurred should be admissible. The parties themselves might not have been clear as to the meaning of the word or phrase when they entered into · the contract. Unanticipated situations might- arise or come into the contemplation of the parties, subsequently which would sharpen their focus and any statement by them which would illuminate the dark-ness arising out of the ambiguity of the language should not be shut out. In the case of an ambiguous instrument, there is no reason why subsequent interpreting statement should be inadmissible."The question involved is this : Is the fact that the parties to document, and particularly to contract, have interpreted its terms in particular way and have been in the habit of acting on the document in accordance with that interpretation, any admissible guide to the construction of the document ? In the case of an unambiguous document, the answer is 'No'. (see Odgers' Construction of Deeds and Statutes, 5th ed. by G. Dworkin, pp. 118-119). But, as we said, in the case of an ambiguous one, the answer must be 'yes'. In Lamb v. Coring Brick Co. ([1]), selling agency contract contained the words 'the price shall be mutually agreed'. Documents showing the mode adopted for ascertaining the price were put in evi-dence without objection. In the Court of Appeal, Greer L. J. said: "In my opinion, it is not necessary to consider how this contract was acted on in practice. If there had been an am-biguity and the intention of the parties had been in question at the trial, I think it might have been held that the parties had placed their own constructions . on the contract and, having acted upon certain view, had thereby agreed to ac-cept it as the true view of its meaning". In Balkrishen v. Legge([2]) the privy Council said that in deciding the question whether particular deed is mortgage by conditional sale or an out and out sale, oral evidence of the intention is inad-missible under s. 92 of the Evidence Act for construing. the deed nor can · evidence of an agreement at variance with the terms of the deed admitted, but the case must be decided on consideration of the contents of the document with such extrinsic evidence of other circumstanes as may show in what manner the langu-age of the document is related to existing facts. We do not think (I) (1932] I K. B. 710, at 721. (2) 27 I. A. 58.

it necessary to consider or decide in this case the exac.t reach of that decision. Nor is it necessary to advert to the various decisions of the High Courts where the ra.tio of that case has been h1terpreted. It is enough to say that there is nothing in that decision which would pre· vent court from looking into the subsequent conduct or actings of parties to find out the meaning of the terms c1f document when there is latent ambiguity. ·

In these circ.umstances,, we do not think we will be justified in not following the decision of this Court in Abdulla .Ahmed v. Animendra Kissen Mitter([1]1), where this Court said th.at extrinsic evidence to. determine the effect of an instrument is permissible where there re·. mains doubt as to its true meaning and that 1~vidence of the acts .. done under it is guide to the intention 9£ the parties, particularly, when acts are done shortly after the dat~ of the instrwnent.

The point then for consideration is whether s, 6( 6) of the Act· is violative of the fundamental right under Artic:les 19 (1) (£) and• 19(1)(g). Section 6(6) reads:

"Where notice exercising the option of purchasing the undertaking has been served upon the licensee under this sec· tlon,. the licensee shall deliver the undertaking to the State Electricity Board, the State Government or the local autho· rlty, ns the cue may be, on the expiration of the relevent period referred to In 1ub-sliCtion ( 1 ) pending the determlna· tlon and payment of the purchase price".

The appellants submitted thnt the provision of s. 6(6) which post· pones the payment of the purchase price till after the determination. · of the quantum of the purcliase price by the arbitrator is an unreason· able restriction upon the fundamental right of citizens to carry on busi· nm 'Under Article 19 ( 1) (g) and also violative of their fundamental right under Article 19(1) (f). They submitted that before the amend-ment in 1959 to th~ Act, the State Electricity Board was q!)und to pay the purchase price before they could take delivery of the under· taking but that under s. 6 ( 6), it. was not necessary that the purchase price should be paid before the undertaking is delivered to the State Electricity Board, and, that is urireasonable.

The learned Additional Solicitor General, on the ~ther hand, sub· milled that the appellants had no right to carry on the business whe11 the Board chose ·to exercise the option to purchase1 the undertaking at the expiry of the period. The argument was that when valid notice to exercise the option to purchase the undertaking has been served on the licensee tlie licemee thereafter has no right to carry on the business of su,pplyfng electricity and, therefore, the1re is, no question of subuctlon ( 6) of s. 6 abr!dgl!lg the fundamental rlght of the appel· !ants under Article 19 (1 )(81), He also subn1ittcd that, the obligntio11 to pay interest on the purchase l'rice. from the date of the delivery of the undertaking up to the date of its pay_ment is implicit in s. 7 A,

(I) (1960} S. C.R. 30, 46.

or at any rate the arbitrator functioning under that section is bound, under the common law of the land to award interest for the period during which the arbitration proceedings were pending.

An arbitrator appointed undei: the section to determine the quan· tum of the purchase price can pass an award only in accordance with the terms of s. 7 A. Section 7 provides that where an undertaking of licensee is sold, the purchase price of the undertaking shall be the market value of the undertaking at the time .of the purchase or, where the undertaking has been delivered before purchase under sub-section (3) of s. 5, 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 the arbitrator. There is, therefore, no pro· vision which enables the arbitrator to award any interest on the mar-c ket value of the undertaking at the time of the purchase merely because the market value is determined on subsequent date ..There can be no doubt about the correctness of the general rule under which purchaser who takes possession is charged with interest on his purchase money from that time until it is paid. This rule has been applied to compulsory purchases(11). But the question is whether the arbitrator has power under the Act to award interest on the pur-chase price. In Toronto City Corporation v. Toronto Railway Cor-poration (2), the Privy Council held that the general rule under which purchaser who takes possession is charged with interest on his purchase money from that time until it is paid was well established, and had on many occasions been applied to compulsory purchases but the duty of the arbitrators in that case was not to determine all the rights of the company, but only to ascertain the actual value of certain property at certain time and that it was truism to say that such value could not include interest upon it and that the liability for interest lay outside of the arbitration for its enforcement. In M.P. Electricity Board v. Central India Electric Supply Co.(8), the Madhya Pradesh High Court and in Upper lammuna Velley Electricity Supply Co., Ltd. v. Munic,ipal Corporation of Delhi(4) decided on April 3, 1972, · the Delhi High Court, took the view that the arbitrator func· tioning under the Act has no jurisdiction to award interest on the purchase price,

The position therefore,· is that although the State Electricity Board is liable to Pl!Y interest under the general law for the period during which the licensee has not been paid the purchase price, the arbitrator, functioning as he does, under the provisions of s. 7 of the Act cannot award any interest on the market value of the undertaking as determined by him. The licensee's claim for interest can be enforced only in suit. The fact that the claim for interest can be e.nforced in. suit by the licensee would not mitigate the unreasonableness of the provision which authorises the Board to take delivery of the under· taking without payment of the purchase price.

(!) see Satinder Singh v. Amrao Singh, (1961] 3 S. C.R. 676. (2) (1925] A. C. 177 at pp. 193-194. (3) A. I. R. 1972 M. P. 47. (4) Unreported decision.

In support of the contention tha~ when once the notice ex~rcising the option to purchase the undertaking has been served, the licensee has no further right to carry on the business, the learned Additional Solicitor General placed reliance on the decision of this Court in Kalyan Singh v. State of U.P.(1[1]) where this Court said that if scheme has become .final under s. 680(3) of the Motor Vehicles .Act, it has the effect· of extinguishing all the rights of an operator to ply his stage carriage under the permit.

licensee cannot be told that he has no right to carry on the business unless valid purchase is made at the expiry of the period. If the licensee cannot be required to sell the. undertaki11g without pay-ment of the purchase price at the time of delivery of the undertaking or without provision in law for payment of interest on the purchase price during the period when payment is withheld,. there would be no valid termination of the licence. It is unreasonable to require licensee to deliver the undertaking without payment to· him of the purchase price or, if the payment is deferred, without compensating him by way of interest for the period during whic:h the payment has b'een withheld. The fact that an arbitrator is sei.1.ed of the question of the determination of the purchase price and that he is bound to make the awaJd within specified time in law would not mean that the licensee need not be compensated for the delay in payment of the purchase price. The proviso to s. 7 (ii) makes it clear that when an undertaking is sold or delivered to the Electricity Board or to the · State, the licence shall cease to have any further operation. When · the proviso talks of sale and de.livery, it means valid sale or valid delivery. Admittedly, the undertaking belonged to the licensee and if delivery of the undertaking is to be taken by the State. Electricity Board, the purchase price must be paid before the delivery or, there must be provision for payment of interest on the purchase price for the period during which payment is withheld. Otherwise, the licence wilL not cease to have operation and the licensee will be en-titled to carry on the business.

If the arbitrator could have awarded the · intere:st for the. period between the date of delivery of the undertaking and the payment of the purchase price, probaqly it could have been said that the provision for delivery without payment Qf the purchase price ·would not be un· reasonable. But, to deprive the licensee of his undertaking without payment of the purchase price and then ask him or ii. to go to court to enforce the liability for interest for the period for which the pur-chase. price has been withheld is unreasonable. We !hold that s. 6(6) violates the fundamental right under Art. 19(1)(g) and 19(1) (f) of the 2nd appellant.

T}te und~rtak~g, no d?~bt, b~longed to the 1st ;appellant, ccr-poration. Not bemg citizen, 1t has no fundamental right under

(I) (1962] Supp. 2 S. C.R. 76.

Art. 19. The 2nd appellant is shareholder and the Managing Director Qf the Company. If his right to carry on the business through the agency of the Company is taken away or abridged, or, his right to divisible share in future of the property of the company is dimi-nished or abridged in taking delivery of the undertaking without pay-B ment of the purchase price, there is no reason why he should be dis· abled from challenging the validity of the sub-section.

In R. C. Cooper v. Union of India(!) this Court said :

"Jurisdiction of the Court to grant relief cannot be denied, when by State action the rights of the individual shareholder are impaired, if that action impairs the rights of the Company as well. The test in determining whether the shareholder's right is impaired is not formal; it is essen-tially qualitative : if the State action impairs the right of the shareholders as well as to the Company, the Court will not, concentrating merely .upon the technical operation of the action deny itself jurisdiction to grant relief.'.'

The second appellant contends that the value of his investment in the Company is substantially reduced by the illegal delivery of the undertaking Jo the Board; that his right to carry on the business of . supplying electricity through the agency of the Company is abridged I' and that he, along with the other shareholders are left with the burden · of the debts of the undertaking.

Jn Bennett Coleman & Co. v. Union of lndia(2), one of us, Ray, J. as he then was, speaking for the majority said :

"As result of the Bank Nationalisation case (supra) it follows that the Court finds out whether the legislative mea-sure· directly touches the company of which the petitioner is shareholder. shareholder is- entitled to protection of Article 19. That individual right"is not lost by reason of the fact that he is shareholder of the company. The Bank Nationalisation case (supril) has established the view that the fundamental rights of shareholders as citizens are not lost when they associate to form company. When their fundamental rights as shareholders are impaired by State ac-tion their rights as shareholders are protected. The reason is that the shareholders' rights are equally and necessarily affected if the rights of the company are affected.".

(I) [19701 3 S. C. R. 530 at p. SS6 .. (2) [1973) 2 S. C.R. 757, at p, 773.

We think the second appellant is entitled t:: challenge the validity of the sub-section on the ground that it abridged his fundamental right under Articles 19(1) (g) and 19(1) (f).

In the result we hold that there was no valid purchase of the undertaking and that taking delivery of the u:dertaking was unlaw-fol. The State Electricity Board is directed : . r1~-<leliver the under-taking to the licensee. We set aside the judginent under appeal and :allow the appeal to the extent indicated but. in the circumstan:es, without any order as to costs.

Appeal al/owed.