Holding

The State Act is intra vires, operates in a field distinct from the central electricity statutes, and is not repugnant to them; therefore the appeals are dismissed.

Summary

The Assam State Legislature enacted the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996 to acquire a stalled hydro‑electric project and vest it in the State Electricity Board. The appellants, Bharat Hydro Power Corporation Ltd. and its partner, challenged the Act as ultra vires, alleging it fell under Entry 38 of List III (electricity) and was repugnant to the central Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948, violating Articles 14 and 19(1)(g). The Supreme Court examined the pith and substance of the State Act, held that it primarily dealt with acquisition of property under Entry 17 of List II (water) and did not encroach on the field of electricity regulation, and that the appellants were not "licensees" under the central Acts, so no direct conflict existed. Consequently, the State Act was deemed intra vires and not repugnant, and the appeals were dismissed.

Issues considered

The legislative competence of the Assam State Legislature to enact the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of Undertaking) Act, 1996: whether it falls under Entry 17 of List II or Entry 38 of List III.
Whether the State Act is repugnant to the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 under Article 254 of the Constitution.
Whether the State Act violates Articles 14 and 19(1)(g) of the Constitution.
Whether the State Act required presidential assent under Article 254(2).

Legislation cited

Companies Act, 1956
Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 245, s. Article 246, s. Article 254
Electricity Act, 1910s. 12-19, s. 3, s. 4, s. 4A, s. 5, s. 6, s. 7, s. 7A
Electricity (Supply) Act, 1948s. 2(4A), s. 2(6), s. 26A, s. 37

Subjects

legislative competencerepugnancyArticle 254electricity lawacquisition of undertakingstate legislationpith and substancepower sector privatizationconstitutional validity

Judgment

A BHARAT HYDRO POWER CORPN. LTD. AND ORS. '( l
v.
STATE OF ASSAM AND ANR.

JANUARY 7, 2004

B [ASHOK BHAN AND S.B. SINHA, JJ.]

t"'i
Constitution of India-Articles 245, 246 & 254; Entry 56 of list I; Entry
17 of list II and Entries 38 & 42 of list Ill to the Seventh Schedule-Indian
Electricity Act, 1910-Sections 6, 7, & 7A-Electricity (Supply) Act, 1948-
c Sections 2(4A) 2(6), 26A-Bharat Hydro Power Corporation Limited
(Acquisition and Transfer of Undertaking) Act, 1996-State Act meant to take
over appellant's power pr<4ect-Writ petition by appellant contending that
State Act is repugnant to the Central Acts-Validity of-Held, the State Act
and the Central Acts operate in two different fields and hence not repugnant
D to each other.

The Planning Commissi:>n of India sanctioned a proposal of the State
Electricity Board for construction of a Hydro Electric Power project at
an estimated cost of Rs. 36.36 crores. The project could not be completed
in time owing to the failure of local contra1:tors. The State Government,
E following the policy of privatisation adopted by the Central Government
in power sector, decided to transfer the project to a joint sector company.
A Memorandum of Undertaking (MOU) was entered into by the Board
with appellant no.2. The appellant no.I, after its incorporation could
complete the project within the stipulated time. The Board terminated and
repudiated the MOU on the failure of appellant No.I to complete the work
F
within the extended period.

The State on account of the inordinate delay in the completion of
..
the project and to safeguard the public interest by completing the project
as early as possible due to acute power shortage in the State, promulgated
G the Bharat Hydro Power Corporation Limited (Acquisition and Transfer
of Undertaking) Act, 1996 acquiring the undertaking of appellant No. I.
The State Government by a Notification transferred to and vested the
project in the Board.
..,,- '
Appellants filed writ petitions before High Court challenging the
H 284
BHARAT HYDRO POWER CORPN. LTD. v. STATE 285

legality anil constitutional validity of the Act being ultra vires and violative A
of Articles 14 and 19 (I) (g) of the Constitution of India. A Single Judge
of the High Court struck down the Act holding that the State Act falls
under Entry 38 of List Ill of Seventh Schedule to the Constitution of India
which is already covered· hy Central Acts viz. the Indian Electricity Act,
1910 (Act of 1910) and Electricity (Supply) Act, 1948 (Act of 1948); and B
that the State Legislature is not competent to enact laws repugnant to the
Central laws under the same Entry. In Writ appeals by the State and the
• 1 Board, the High Court held the State Act to be intra vires on the ground
that it falls under Entry 17 of List II and therefore not repugnant to the
Central legislation.
c
In appeal to this Court, the appellants contended that the State Act
falls under Entry 38 of List Ill of the Seventh Schedule to the Constitution
of India; that the two Central Acts are already operating in the same field
and the appellants are governed under the Central Acts; that there are
provisions under the Act of 1910 for compulsory purchase of undertakings
produci:1g electricity; that they are deemed licences being a 'Generating D
Company' under the Act of 1948; that the State Act creates a procedure
parallel to the existing procedure provided under the Act of 1910 & 1948
and hence the State Act is bad in law as it transgresses the Central Acts
and therefore repugnant to the Central Acts under Article 254 of the
Constitution of India. E
The respondents contended that in pith and substance, the State Act
is not repugnant to the Central Acts as they operate in different fields;
that the State Act is enacted to acquire the undertaking, whereas both the
Central Acts have mad~ general provisions with regard to supply and use
of electrical energy; and that the appellants were not licensees under the F
Central Acts and hence the State has the jurisdiction and power to acquire
any property for public purposes making necessary provisions for payment
of compensation.

Dismissing the appeals, the Court
G
HELD: I.I. The Bharat Hydro Power Corporation Limited
(Acquisition and Transfer of Undertaking) Act, 1996 has been enacted to
take over the Bharat Hydro Power Corporation in public interest as it
could not complete the project within time so that the State could
efficiently supervise, manage and execute the work expeditiously to H
subserve the common good in the context of the acute power shortage in
286 SUPREME COURT REPORTS (200~] I S.C.R.

A the Stnte. The State after taking over the project had the power to hand y~

it over to the State Electricity Board for completing the project. Provision
has been made to pay adequate compensation which is to be determined
by a Commission constituted under the Act. There is no substance in the
contention of the appellants that under the Central Acts, there are specific
provisions for compulsory purchase of undertaking and that the State Act
B hos created a parallel procedure for purchase of the undertaking thereby
impinging on the Ceutral Acts. 1299-F-H; 300-AI
'r '
1.2. The provisions of the Indian Electricity Act, 1910 are applicable
to the licensees under the Act. The appellants are not licensees under the
c Act. Since the appellants have not been given a license and are not
licensees, Section 6 of the Act would not apply. Under Section 6, there is
an 'option' "'ith the Board to purchase. The word 'option' leaves two
courses open to the authority, i.e., either to purchase an undertaking or
to renew the license. Either of the two courses would not be available as
appellant No. 1 is not a licensee. Since the appellants are not the licensees,
D they would not be covered under any of the provisions dealing with the
sale or purchase of undertaking as provided under the Act of 1910. The
benefit of Sections 7 and 7A of the Act shall also not be available because
it speaks of an undertaking of a licensee. As the appellants are not covered
by the provisions of the Act of 1910, the State Act, which seeks to take
E over the appellants' undertaking and make provisions for compensation,
would not be repugnant to any of the provisions of the Act of 1910.
1301-G; 302-A-C[

1.3. The impugned Act and the Central Acts (Acts of 1910 and 1948)
operate in two different fields without encroaching upon each other's field
F in as much as the true nature and character of the State Act is to acquire
the undertaking and pay compensation as provided in the Act whereas
'>-
both the Central Acts have made general provisions with regard to supply
and use of electrical energy. The provisions regarding purchase of
undertaking in the Indian Electricity Act, 1910 would not be applicable
'
G as the appellants are not lice!' sees within the meaning of the Act of 1910.
There is not even a semblance of conflict what to talk of direct conflict
between the impugned State Act and the Central Acts to bring about the
situation where"one cannot be obeyed without disobeying the others. Both

'
the Acts can operate simultaneously as they do not occupy the same field. .,,
As the enactments operate in two different fields without encroaching upon
H each other's fields there is no repugnancy. Since there is no repugnancy
BHARAT llYDRO POWER CORPN. LTD. v. STATE [BHAN . .I.] 287
f '( the question of the State Act being kept for the consideration of the A
President or receiving his assent did not arise. (304-F-H; 305-AI

Southern Pharmaceuticals & Chemicals v. State of Kera/a, AIR (1981)
SC 1863; State of Rajasthan v. G. Chawla, AIR (1959) SC 544; Thakur Amar
Singh v. State of Rajasthan, 119551 2 SCR 303 Delhi Cloth and General Mills
Co. Ltd. v. Union of India, AIR (1983) SC 937; fliJay Kumar Sharma and B
Ors. v. State of Karnataka and Ors., AIR (1990) SC 2072; Shyamakant Lal
~ '""'!
v. Rambha/an Singh and Ors., AIR (1939) FC 74; Deepchand v. State of U.P.,
AIR (1959) SC 648 and M. Karunanidhi v. Union of India, AIR (1979) SC
898, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6487-6488 c
of 1998.

From the Judgment and Order dated 21.9.1998 of the Gauhati High
Court at Assam in W.A. Nos. 460 and 464 of 1997.

V.R. Reddy, Vijay Hansaria, Sushi! Kumar Jain, A.P. Dhamija, S. D
Borthakur, Jayesh K.U., J.R. Luwang, V.K. Sidtharan, Ms. Asha G. Nair and
Ms. Krishna Sarma for the appearing parties.
~
The Judgment of the Court was delivered by

BHAN, J. These appeals are directed against a common judgment passed E
by the Division Bench of the High Court of Gauhati wherein the Division
Bench while setting aside the judgment of the learned Single Judge dated
19th July, 1997 has dismissed the writ petition filed by the appellants. The
writ petition was filed by the appellants challenging the constitutional validity
of the Bharat Hydro Power Corporation Limited (Acquisition and Transfer of
Undertaking) Act, 1996 being Assam Act I of 1997 published in the Assam F
-t· Gazette Extraordinary dated 6th January, 1997.

• Facts:

In tlie year 1979, the Planning Commission of India sanctioned a
proposal of the Assam State Electricity Board (hereinafter referred to as 'the G
Board') for construction of a Hydro Electric Power Station in the District of
Karbi Anglong on the river Barapani at an estimated cost of Rs.36.36 crorcs.
~ The project comprised construction of 51 meter high concrete dam on the
" river Barapani near Hatidubi for utilising flow of water from catchment area
of 1178 Sq. km. The installed capacity (If the project was 2 x 50 MW. The H
288 SUPREME COURT REPORTS [200~ I I S.C.R.
A dam was to be conipleted in the year 1986, but due to the failure of the local Y•
contractor, the project could not be completed and the Board terminated the
contract and protracted litigation ensued.

In the year 1992, after termination of the contract as aforesaid, the
project was entrusted to National Project Construction Corporation (in short
B 'NPCC'), but the similar fate followed and Board had to terminate their
contract as well in December, 1992. In the mean time, cost of the project
initially sanctioned at Rs. 36.36 crores rose to Rs. 189.90 crores. Out of the 'r •
aforesaid estimate, the work completed was of about Rs.116 crores and the
Board needed about Rs. 60 crores to complete the project excluding other
c liabilities. The Board could not generate the additional fund required for
completing the project.

The Central Government in the year 1992-93 accepted the policy of
privatisation even in the power sector. The State Government following the
policy of privatisation of the Central Government decided to transfer the
D project to joint sector.

On 25th March, 1993, Memorandum of Undertaking (MOU) was signed
between the Board, Government of Assam and Mis Subhash Project and
Marketing Limited (SPML), appellant No.2 herein. According to the said
MOU, SPML was to promote a new company to complete the project. In
E terms of the said MOU a new company under the name and style of Mis.
Bharat Hydro Power Corporation Limited (hereinafter referred to as 'appellant
No. I') came into existence in which the equity participation was as follows:

ASEB (the Board) 11%

F SPML (appellant No. 2) 40%
~
General Public 49%
f

On 8th April, 1993 the Deed of Assignment was executed between tht>
Board and the appellant No. I, in terms of which all the assets and liabilities
G of the project were transferred to appellant No. I w.e.f. 8.4.1993. In terms of
the said Deed of Assignment appellant No. I was to complete the project and
start generation by June, 1995 which was subsequently extended to June,
1996. Disputes arose between the parties. According to Board as well as the 'y' ~
State of Assam, the appellant No. I after its incorporation failed to take charge
of the project till 5th April, 1994. Even after taking over of the project, the
H
BHARAT HYDRO POWER CORPN. LTD. v. STATE [BHAN. J.] 289
~..,
I appellant No. I could not achieve any progress towards completion of the A
project due to serious lapses and negligence on its part. On the other hand,
appellants Nos. I & 2 put the entire blame on the Board and the State
Government for the delay in the progress of the project.

On 20th December, 1995, appellant No. I filed a suit being TS No. 244/
96 in the Court of the Assistant District Judge No. I, Guwahati for specific B
performance of the contract against the Board alleging that the Board was
}l remiss in the performance of its obligation under the MOU and the Deed of
Assignment. Board filed an application for stay of suit in view of arbitration
clause. Appellant No. I filed an application in the High Court under Sections
8 and 11 of the Arbitration and Conciliation Act, 1996 for appointment of
Arbitrator to decide pending disputes between the parties. On 27th May,
c
1996, Board wrote to appellant No. I that due to the failure of the appellant
No. I to complete the work within the extended period, the MOU was liable
to be terminated and repudiated.

On 30th November, 1996 the State of Assam, keeping in view, the D
inordinate delay in the completion of the project and to safeguard the public
interest by completing the project as early as possible in the context of acute
power shortage in the State, promulgated Bharat Hydro Power Corporation
Limited ( Acquisition and Transfer of Undertaking) Ordinance, 1996 acquiring
the undertaking of Karbi Langpi Project of appellant No. I. The Ordinance
was subsequently replaced by Bharat Hydro Power Corporation Limited E
(Acquisitio1: and Transfer of Undertaking) Act, 1996 (hereinafter referred to
• as 'the Act'). On Ist December, 1996, the State Government by Notification
transferred to and vested the said project in the Board. After the said
notification the possession of the project was handed over to the Board in the
presence of the representatives of the both sides on 2nd December, 1996. On F
-"" 5th December, 1996 Memorandum of handing over and taking over was
J~
signed. Thereafter writ petitions being CR 6/97 and CR 283/97 were filed in
the High Court of Assam challenging the legality and validity of the Ordinance
and the Act.

In the writ petitions the appellants challenged the constitutional validity G
of the Act being ultra vires and violative of Articles 14 and 19 (l)(g) of the
Constitution of India and on the ground of being vague. unfair and arbitrary.
t It was prayed that the Act be struck down· being unconstitutional and beyond
" the legislative powers of the State and/or is inoperative and void in law on
the grounds mentioned in the writ petitions.
H
'
A

290 SUPREME COURT REPORTS [200~) I S.C.R.

y.
A The Preamble of the Act reads as follows:

"ASSAM ACT NO.I OF 1997

(Received the Assent of the Governor on 6th January, 1997)

B THE BHARAT HYDRO POWER CORPORATION LIMITED
(ACQUISITION AND TRANSFER OF UNDERTAKING) ACT, 1996 AN
ACT l' •
To provide for the acquisition, in the public interest, of the right, title
and interest of the undertaking of the Bharat Hydro Power Corporation
c Limited and for matters connected therewith or incidental thereto.

WHEREAS the Bharat Hydro Power Corporation Ltd., having its
registrred office in the State of Assam, has been engaged for speedy
execution and completion of the Karbi Langpi (Lower Barapani) Hydro
Electric Project for ensuring supply of electricity in the State of Assam
D in vi(:w of the chronic shortages of power in the State;

Whereas it was agreed upon in the Memorandum of Understanding
entered into between the Government of Assam, the Assam State
Electricity Board and the Mis Subhas Project and Marketing Limited
""'
on 25th March, 1993 that the project would be completed and would
E be commissioned by the month of June, 1995;

And whereas the company failed in the sole object of speedy execution
of the project within the specified time;
•

Whereas it is expedient in the public interest that the unde11aking of
F the Bharat Hydro Power Corporation Limited should be acquired for
the purpose of the enabling the State Government to efficiently ...
supervise manage and execute the work expeditiously as to subserve
the common good, in the context of the acute power shortage in the
•
State."
G In the impugned Act Section 4 provides for general effect of vesting.
Section 5 provides that the State Government shall not be liable for past
liabilities. Section 6 provides that notwithstanding anything contained in
Sections 3 and 4, the State Government may, if it is satisfied that the Board ""- {
is willing to comply, or has complied with such terms and conditions as that
I-I Government may think fit to impose, direct by notification, that the undertaking
BHARAT HYDRO POWER CORPN. LTD. v. STATE [BllAN. J.J 291
t -r of the company and the righ( title and interest of the company in relation A
to its undertaking which has vested in the Government, vest in the Board
either on the date of tlle notification or on such earlier or later date as may
be specified in the notification. The Board shall on and from the date of
such vesting, be deemed to have become the owner in relation to such
unde1taking and all the rights and liabilities of the State Government in
relation to such undertaking shall, on and from the date of such vesting, be B
deemed to have become the rights and liabilities, respectively of the Board.
~ \'
Section 7 provides for payment of compensation that may be fixed by the
Commission considering the value of .the assets of the company after
observing proper financial formalities. Section 8 provides for the gross amount
payable to !he company. Section 9 provides that the State Government if it c
is satisfied that the appellant has on or before the appointed day, disposed
of any fixed asset whether by way of sale, exchange, gift, lease or otherwise
than in the normal course of events, with a view to benefit the company or
some other person unduly and thereby causing loss to the State Govemme.nt
as the succeeding owner of the company, the State Government shall be
entitled to deduct such amount froin the amount payable to the Company D
under the Act. Section I0 provides for recovery of loss from the company.
~ Section 11 provides for certain deductions to be made from the gross amount
payable. Section 12 provides for payment of net amount. Section 13 provides
for recovery of excess amount. Section 14 provides for constitution of
Commission. Section 15 provides for the continuance in service of employees E
already working on the same terms and conditions as were applicable to
, them earlier. Section 16 provides for provident fund and other funds. Section
17 provides for making inventory of assets. Section 19 provides for penalty.
Section 20 provides that no court shall take cognizance of an offence
punishable under this Act except with the previous sanction of the State
Government. Section 22 provides that no suit against the State Government F
1" or the Board shall lie for any act done by them in good faith or intended to
.. be done in good faith in pursuance of the Act or the Rules made thereunder.
Section 23 provides for bar of jurisdiction of the court to call in question
any act done or purported to have been done under the Act or the Rules.
Section 24 provides that no provision of the Indian Electricity Act, 1910, G
Electricity (Supply) Act, 1948 or any other Act for the time being in force
and of any rule made under any of those Acts, shall, in so far as it is
I inconsistent with any of the provisions of the Act, have. any effect. Section
I
"' 26 provides for arbitration in case of any dispute arising in respect of the
matters mentioned thereunder.
H
).

292 SUPREME COURT REPORTS (2004] I S.C.R.
T;
A On completion of the pleadings, the writ petitions were placed for
hearing before a learned Single Judge who after hearing the counsel for the
parties, passed a detailed order striking down Sections 3, 4, 5, 6, 7, 7A,.
15(2), 23 and 24 of the Act being repugnant to the Ce.ntral Acts, i.e, the
Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948: It was
B observed that because of the striking down of the various provisions, the
impugned Act could not be given effect to. The entire Act was held to be
unenforceable.

The Board and the State of Assam filed separate Writ Appeals Nos. 460
of 1997 and 464 of 1997 challenging the order of the learned Single Judge.
C The Division Bench by its impugned judgment has set aside the judgment of
the learned Single Judge and held the Act and its provisions to be intra vires
of the Constitution. Resultantly the writ appeals were accepted and writ petition
filed by the appellants were ordered to be dismissed.

Before adverting to the submissions made before us we would broadly
D refer to a few fundamental principles regarding the competence of the
respective legislatures to enact iaws and as to which law would prevail in
case of inconsistency between the laws made by the Parliament and the laws
made by the State Legislature. The principles are being refen-ed to in the
context of the controversy involved in the present appeals.

E India being a Union of States has Union Legislature (Parliament) and
the State Legislatures for framing laws. Legislative fields in which the Union
or the State legislatures can frame laws are prescribed in the three lists
contained in the Seventh Schedule to the Constitution of India Union List
.
(List I); State List (List If); and Concurrent List (List Ill ). Source of power
F for enacting laws relating to the three lists is to be found in Articles 245 and
246 of the Constitution of India. Article 245 provides that subject to the
provisions of the Constitution, Parliament may make laws for the whole or
any part of the territory of India, and the Legislature of a State may make
laws for the whole or any part of the State. Law made by the Parliament shall
not be deemed to be inv~lid on the ground that it would have extra-territorial
G operation. Article 246 reads:
"246. Subiect-matter of fall's made by Parliament and hy the
legfalatures of States.-( I) Notwithstanding anything in clauses (2)
and (3), Parliament has exclusive power to make laws with respect to
any of the matters enumerated in List I in the Seventh Schedule (in
H this Constitution referred to as the "Union List").
BHARAT HYDRO POWER CORPN. LTD. v. STATE [Bl-IAN, J.) 293
) -r (2) Noiwithstanding anything in clause (3), Parliament and, subject to A
clause (I), the Legislature of any State also, have power to make laws
with respect to any of the matters enumerated in List Ill in the Seventh
Schedule (in this Constitution referred to as the "Concurrent List").

(3) Subject to clauses (I) and (2), the Legislature of any State has
exclusive power to make laws for such State or any part thereof with B
respect to any of the matters enumerated in List II in the Seventh
> i Schedule (in this Constitution referred to as the 'State List').

(4) Parliament has power to make laws with respect to any matter for
any part of the territory of India not included in a State notwithstanding
that such matter is a matter enumerated in the State List." c
Without going into the finer aspects but broadly speaking it provides
that Parliament has exclusive power to legislate with respect to matters
in List I. The State Legislature has exclusive power to legislate in
respect to matters in List II. Both Parliament and the State Legislature
have power to make laws with respect to any of the matters enumerated D
in List Ill.

·"' In a federal Constitution, in which there is a division of legislative
powers between the Central and the Provincial Legislatures, controversies
often arise as to whether one or the other legislature is not exceeding its
legislative power, and encroaching on the other's constitutional legislative E
power. To resolve the dispute as to which law would prevail in a case where
both the Union as well as the State Legislature have the competence to enact
laws, A11icle 254 provides that if any provision of a law made by the
Legislature of a State is repugnant to any provision of law made by Parliament
which Parliament is competent to enact, or to any provision of an existing F
_... law with respect to one of the matters enumerated in the Concurrent List,
then, subject to the provisions of clause (2), the law made by Parliament shall
•
'
prevail and the law made by the Legislature of the State shall to the extent
of the repugnancy be void. Clause (2) provides that where a law made by the
Legislature of a State with respect to one of the matters enumerated in the
Concurrent List contains any provisions repugnant to the provisions of an G
earlier law made by the Parliament or an existing law with respect to the

I ,. matters, then, the law so made by the Legislature of such State shall, if it has
been reserved for the consideration of the President and has received his
assent, prevail in that State.
H
294 SUPREME COURT REPORTS [2004] I S.C.R.

A It is likely to happen from time to "time that enactment though purporting
.,. ,
to deal with a subject in one list tQuches also on a subject in another list and
prima facie looks as if one legislature is impinging on the legislative field of
the another Legislature. This may result in large .number of statutes being
declared unconstitutional because the legislature enacting law may appear to
have legislated in a field reserved for the other legislature. To examine whether
B a legislation has impinged in the field of other legislatures, in fact or in
substance, or is incidental, keeping in view the true nature of the enactment,
the Courts have evolved the doctrine of "pith and substance" for the purpose
of determining whether it is legislation with respect to matters in one list or
the other. Wh<:re the question for determination is whether a particular law
C relates to a particular subject mentioned in one list or the other, the courts
look into the substance of the enactment. Thus, if the substance of enactment
falls within Union List then the incidental encroachment by the enactment on
the State List would not make it invalid. This principle came come to be
established by the Privy Council when it determined appeals from Canada or
Australia involving the question of legislative competence of the federation
D or the States in those countries. This doctrine came to be established in India
and derives its genesis from the approach adopted by the Courts including
the Privy Council in dealing with controversies arising in other federations.
For applying the principle of "pith and substance" regard is to be had (i) to
the enactment as a whole, (ii) to its main objects, and (iii) to the scope and
E effect of its provisions. For this see: Southern Pharmaceuticals & Chemicals
v. State of Kerala, AIR (1981) SC 1863; State of Rajasthan v. G. Chawla,
AIR (1959) SC 544; Thakur Amar Singh v. State of Rajasthan, (1955] 2 SCR
303, Delhi Cloth and General Mills Co. ltd. v. Union of India, AIR (1983)
SC 937 and Vijay Kumar Sharma and Ors. v. State of Karna/aka and Ors.,
AIR (1990) SC 2072. In the last mentior1ed case it was held:
F
"Where a law passed by the State Legislature while being substantially
within the scope of the entries in the State List entrenches upon any
of the Entries in the Central List the constitutionality of the law may
be upheld by invoking the doctrine of pith and substance if on an
analysis of the provisions of the Act it appears that by and large the
G law falls within the four corners of the State List and entrenchment,
if any, is purely incidental or inconsequential."

Another principle which needs to be stated here is that when the Y '
question is as to whether a provincial legislation is repugnant to the laws
H enacted by the Parliament the onus to showing its repugnancy and the extent
BHARAT HYDRO POWER CORPN. LTD.'" STATE [BHAN, J.] 295
l 't
to which it is repugnant would be on the party attacking its validity. There A
ought to be a presumption in favour of its validity and every effort should
be made to reconcile them and construe both so as to avoid they being
repugnant to each other. Repugnancy has to be there in fact and not based
on a mere possibility. lfthe tv.'o enactments operate in different fields without
encroaching upon each other then there would be no repugnancy. In
Shyamakant Lal v. Rambhajan Singh and Ors., AIR (1939) FC 74, the Court
B
>.,.. held:

"When the question is whether a provincial legislation is repugnant
to an existing Indian Law, the onus of showing its repugnancy and
the extent to which it is repugnant should be on the party attacking
its validity. There ought to be a presumption in favour of its validity,
c
and every effort should be made to reconcile them and construe both
so as to avoid their being repugnant to each other; and care should
be taken to see whether the two do not really operate in different
fields without encroachment. fu1ther repugnancy must exist in fact,
and not depend merely on a possibility: D
Their Lordships can discover no adequate grounds for holding
"" that there exists repugnancy between the two laws in districts of the
province of Ontario where the prohibitions of the Canadian Act are
not and may never be in force: (1896) AC 348 at pages 369-370."
E
It was conceded by the learned counsels appearing on both sides that
this view has been accepted and reiterated by this Court in a number of
judgments. It is not necessary to refer to all those cases which would be
repetitive only. Though in the High Court (both before the learned Single
Judge as well as Division Bench) and in the special leave petition number of
_,.. points were taken/argued but before us the submissions were limited to three F
points to which reference would be made in the subsequent paragraphs.

Before adverting to the actual submissions made by the respective
learned counsds, entries in the three lists relating to generation of power/
electricity and acquisition may be noticed, which read:
G
Entry 56 of List /: Regulation and development of inter-State rivers and
river valleys to the extent to which such regulation and
} "I
development under the control of the Union is declared

- by Parliament by law to be expedient in the publiC
interest. 1
H
,
)..

296 SUPREME COURT REPORTS [200.i] I S.C.R.
t' •
A Entry 17 of list II: Water, that is to say, water supplies, irrigation and
canals, drainage and embankments, water storage and
water power subject to the provisions of entry 56 of
List I.

Entry 38 of List Ill: Electricity;
B
Entry 42 of list ///: Acquisition and requisitioning of property.
'r •
It was conceded before us that Entry 56 List I would not be applicable.

Learned Single Judge held that the Act enacted by the Assam Legislature
c would fall under Entry 38 of List Ill. Since the Parliament had already enacted
compre:1ensive laws regarding the generation and supply of electricity by
enacting the Indian Electricity Act, 1910 (hereinafter referred to "Act of
191 O") and the Electricity (Supply) Act, 1948 (hereinafter referred to "Act of
1948") covering the entire field, the field being occupied, the State Legislature
did not have the competence to enact the laws under Entry 38 of List Ill. As
D the Act pass<:d by the State Legislature related to a field which was already
occupied by enactments of the Central Legislature, was not reserved for the
assent of the President of India and assented to by him the same was void
being repugnant to the Central legislation. Division Bench reversing the
judgment of the learned Single Judge held that the Act passed by the Assam
E Legislature would fall under Entry 17 of List II and not under Entry 38 of
List lll and therefore would not be repugnant to the Central legislation.
Another finding recorded by the Division Bench is that even if the Act is
taken to be enacted under Entry 38 of List lll, even, then there was no actual
repugnancy as both the Acts did not operate in the same field. Since there
was no repugnancy, it was not necessary to keep the Act for the assent of the
F President of India. Division Bench held the Act to be valid, intra vires and
falling within the legislative competence of the State Legislature. .....

Mr. V.R. Reddy learned senior counsel for the appellants contended
that "Electricity" for the purpose of legislation is enumerated in Entry 38 of
the concurrent Iist. That electricity in broad term includes "generation of
G electricity from any source whether thermal, water, gas, wind or any other
source". As far as generating company and licensee are concerned the Central
Government has made specific provisions in the Act of 1910 and Act of 1948 y '
for compulsory purchase of undertaking and a detailed procedure has been
prescribed under Sections 6, 7, 7A, 8, 9, IO and 11 of the Act of 1910 and
H Sections 37 of the Act of 1948. The impugned Act and Acts of 1910 and ....
..
BHARAT HYDRO POWER CORPN. LTD. v. STATE [BHAN, J.] 297
) 'f 1948 passed by the Central Legislative operate in the same field as in both A
the sets of Acts there are provisions for compulsory purchase of undertakings
producing electricity. The State Act transgresses the Central Acts and therefore
repugnant to the Central Acts. In view of the provisions of Article 254 Central
Acts would prevail as the State Act was neither kept reserved for the assent
of the President of India nor assented to by the President of India. The State
Act was bad in law and could not be enforced being ultra vires of the B
Constitution of India and beyond the Legislative competence of the State
> l' Legislature.

On the other hand, Mr. Vijay Hansaria, learned senior counsel appearing
for the State of Assam as well as the Board contended that the impugned Act
was not repugnant to the provisions of the Central Acts. According to him,
c
impugned Act and the Central Acts in the instant case operate in two different
fields without encroaching upon each others field in as much as the true
nature and character of th~ impugned State Act is to acquire the undertaking,
whereas both the Central Acts have made general provisions with regard to
supply and use of electrical energy. It was vehemently contended that there D
was no violation of Sections 3, 4, 5, 6, 7 and 7 A of the Act of 1910, by
Sections 3 and 4 of the impugned Act as the appellants were not 'licensees'
under the Act of 1910 and the State Government had the jurisdiction and
·"" power to acquire any property for public purposes making necessary provisions
for payment of compensation. That the impugned Act has taken adequate
E
care for payment of compensation after proper assessment by the Commission
to be constituted by the authority. There is no direct conflict between the
provisions of the Central Act and the State Act bringing a position where one
cannot be obeyed without disobeying the other and the impugned Act and the
Central Act both can stand together even though the State law may provide
for certain additional/supplementary provisions. In substance the submission F
--' made is that in pith and substance the State Act is not repugnant to the
Central Acts as the two sets of Acts operate in different fields.

Learned counsel appearing for the appellants placing reliance on a
Constitution Bench decision of this Com1 in Deepchandv. State'o/U.P., AIR
( 1959) SC 648, contended that even in the absence of direct conflict, the G
State law would be inoperative as the Central Acts of 1910 and 1948 intended
to be exhaustive Codes in the field of electricity and the State Legislature did
J ..., not have the legislative competence to enact law in the field occupied by the
Central Legislation. Law .made by the State Legislature in the occupied field
could not come into operation unless it was reserved for the assent of the H
"'
298 SUPREME COURT REPORTS [2004) I S.C.R.

A President of India and assented by him in terms of Article 254 (2). Ii was
observed in para 29:

"Nicholas in his Australian Constitution, 2nd Edn. Page 303, refers
to three tests .of inconsistency or repugnancy:

B (I) There may be inconsistency in the actual terms of competing
statutes;
(2) Though there may be no direct conflict, a State Law may be r,
inoperative because the Common Wealth Law, or the award of
th€: Common Wealth Court, is intended to be a complete
exhaustive Code; and
c
(3) Even in the absence of intention, a conflict may arise when both
State and Common Wealth seek to exercise their powers over the
same subject matter.
This Court in Tika Ramji v. State of Uttar Pradesh, [1956] SCR 393:
D (S) AIR (1956) SC 676 accepted the said three rules, among others,
as useful guides to test the question of repugnancy. In Zaverbhai
Amaidas v. State of Bombay, [1955] I SCR 799: AIR (1954) SC 752,
this Court laid down a similar test. At page 807 (of SCR): (at p. 757 ,,,.
of AIR), it is stated:

E "The principle embodied in section I 07 (2) and Article 254 (2)
is that when there is legislation covering the same ground both by the
centre and by the Province, both of them being competent to enact
the same, the law of the Centre should prevail over that of the State."

Repugnancy between two statutes may thus be ascertained on the
F basis of the following three principles:
(1) Whether there is direct conflict between the two provisions;
(2) Whether Parliament intended to lay down an exhaustive code in
respect of the subject matter replacing the Act of the State
G Legislature; and
(3) Whether the law made by Parliament and the law made by the
State Legislature occupy the same field."

This Court laid down three broad principles to find out whether there is any
Rcpugnancy between the two statutes, i.e., whether there is a direct conflict
H between the two statutes, whether the two statutes occupied the same field
BHARA l" llYDRO POWER CORPN. LTD. v. STATE [BHAN. J.] 299

' -.../ and as to whether the Parliament intended to lay down an exhaustive code in A
respect of the subject matter.

In M. Karunanidhi v. Union of India, AIR (1979) SC 898, Fazal Ali,
J. reviewed the authorities on repugnancy under.Article 254 and held that the
'· following propositions emerged from decided cases:
B
"I. That in order to decide the question of repugnancy it must be
.., shown that the two enactments contain inconsistent and irreconcilable
~ provisions so that they cannot stand together or operate in the same
field.

2. That there can be no repeal by implication unless the inconsistency c
appears on the face of the two statutes.

3. That where the two statutes occupy a particular field, but there is
room or possibility of both the statutes operating in the same field
without coming into collision with each other, no repugnancy results.
D
4. That where there is no inconsistency but a statute occupying the
same field seeks to create distinct and separate offences, no question
of repugnancy arises and both the statutes continue to operate in the
~
same field."

Without entering into the controversy whether the State Act would fall E
under Entry 17 of List II or under Entry 38 of List Ill and assuming (but not
holding that it falls under Entry 38 of List Ill) we examine as to whether
there is any conflict between the provisions of the Central Act and the State
Act. If there is no conflict at all the question of repugnancy would not arise.

The State Act has been enacted to take over the Bharat Hydro Power F
.... Corporation in public interest as it could not complete the project within time
so that the State could efficiently supervise manage and execute the work
expeditiously to subserve the common good, in the context of the acute
power shortage in the State. The State after taking over the project had the
power to hand it over to the Board for completing the project. Provision has
been made to pay adequate compensation which is to be determined by a G
Commission constituted under the Act for payment of adequate compensation.
Contention raised on behalf of the appellants is that Central Act makes specific
-., provisions for compulsory purchase of undertuking and a detailed procedure
has been prescribed and the State Act has created a parallel procedure for
purchase of the undertaking thereby impinging on the Central Act and is H
)

300 SUPREME COURT REPORTS [2004) I S.C.R.

A therefore repugnant to the Central Act. We do not find any substance in this r,
submission.

The Act of 1910 relates to the supply and use of electrical energy.
Section 3 provides that the State Government may on an application made in
the prescribed form and on payment of the prescribed fee (if any) grant a
B license to supply energy in any specified area and also to lay down or place
electric supply lines for the conveyance and transmission of energy. Section
4 speaks of revocation or amendment of licenses under the specified conditions. r ,
Section 4A speaks of the amendment of licenses. Section 5 makes provisions
where license of a licensee is revoked. Section 6 relates to purchase of
C undertakings. Section 6 of the Act of 1910 reads:

"6. Purchase of under/akings.- (I) Where a license has been granted
to any person, not being a local authority, the State Electricity Board
shall,-·
(a) in the case of a license granted before the commencement of the
D Indian Electricity (Amendment) Act, 1959 (32 of 1959) on the
expiration of each such period as is specified in the license; and
3
(b) in the case of license granted on or after the commencement of
the said Act, on the expiration of such period not exceeding
E thi1iy years and of every such subsequent period, not exceeding
twenty years, as shall be specified in th is behalf in the license,

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
F 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
G manner of purchasing the undertaki1ig.

(3) Where neither the State Electricity Board nor the State Government
elects to purchase the unde11aking, 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
H
BHARAT HYDRO POWER CORPN. LTD. v. STATE [BllAN. J.] 301

·i the undertaking. A
(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 (I) and if no such intimation as aforesaid is received B
by the State Government the State Electricity Board shall be deemed
1 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- c
section (3) at least fifteen months before the expiry of the relevant
period referred to in sub-section (I) 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) \\'here a notice exercising the option of purchasing the undertaking D
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 (I) pending the
determination and payment of the purchase price.
E
(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 7A."

Section 4 which provides for revocation or amendment of licenses.
Section 4A which provides for amendment of licenses at the instance of the F
.Jr licensee or otherwise and Section 5 which enumerates the procedure to be
followed where the Government revokes the license under Section 4 would
not be attracted/applicable as the appellants are admittedly not licensees.
These provisions would apply to .licensees only. Section 6 is again applicable
to licensees only. It is not applicable to sanction holders. It talks of pre- G
emptory right of the Board to purchase the undertaking on the expiry of the
..J t ~
period mentioned in clauses (a) and (b) of Section 6 which can be done after
serving upon the licensee a notice in writing of not less than one year requiring
the licensee to sell the unde11aking to it at the expiry of the period referred
to in clauses (a) and (b) of Section 6. Section 6 (7) provides for payment of
purchase price by the purchaser to the licensee determined in accordance H
302 SUPREME COURT REPORTS (2004] I S.C.R.

A with the provisions of Section 7A. Since" the appellants have not been given r,
a license and are not 'licensees', Section 6 would not apply. Under Section
6 there is an 'option' with the Board to purchase. The word 'option' leaves
two courses open to the authority, i.e., either to purchase an undertaking or
to renew the license. Either of the two courses would not be available as the
appellant No. I is not a licensee.
B
Section 7A which deals with the determination of purchase price again
talks of where an undertaking of a licensee is purchased. Since the appellants y
are not the licensees they would not be covered un.der any of the provisions
dealing with the sale or purchase of undertaking as provided under the Act
c of 1910. The benefit of Sections 7 and 7A shall also not be available because
it speaks of an undertaking of a licensee. As the appellants are not covered
by the provisions of the Act of 1910 the question of the State Act which
seeks to take over the appellants' undertaking and make provisions for
compensation would not be repugnant to any of the provisions of the Act of
1910. Submission made by the learned counsel for the appellants that the
D State Act creates procedure parallel to the existing procedure provided under
Section 6 of the Act of 1910 or for determing the purchase price as provided
under Section 7A cannot be accepted because the provisions of Chapter 11
(Sections 3 to 11) are not applicable to the appellants as they are not licensees.

Faced with this situation Mr.V.R. Reddy, learned senior counsel for the
E appellants, submitted that the appellants are deemed licensees under the
provisions of Act of 1948. For this he has referred to Section 26A of the Act
of 1948. Section 26A reads as:

"26A. Applicability of the provisions of Act 9of1910 to Generating
Company.-( 1) Notwithstanding anything contained in sub-section
F (2), nothing in the Indian Electricity Act, I 910, shall be deemed to
require a Generating Company to take out a licence under that Act, ... •'"
or to obtain sanction of the State Government for the purpose of
carrying on any of its activities.

(2) Subject to the provisions of this Act, Sections 12 to 19 (both
G inclusive) of the Indian Electricity Act, 1910 (9of1910) and clauses
XIV to XVII (both inclusive) of the Schedule thereto, shall, as far as
may be, apply in relation to a Generating Company as they apply in
...
V'
relation to a licensee under that Act (hereafter in this section referred
to as the licensee) and in particular a Generating Company may, in
H connection with the performance of its duties, exercise-
BHARAT HYDRO POWER CORPN. LTD."· STATE [BHAN. J.] 303
~ i (a) all or any of the powers conferred on a licensee by sub-section(!) A
of Section 12 of the Indian Electricity Act, 1910, as if-

(i) the reference therein to licensee were a reference to the Generating
Company;
(ii) the reference to the terms and conditions of licence were a
reference to the provisions of this Act and to the articles of B
association of the Generating Company; and
' ..,. (iii) the reference to the area of supply were a reference to the area
specified under sub-section (3) of section J5A in relation to the
Generating Company;
c
(b) all or any of the powers conferred on a licer.see by sub-section (I)
of section 14 of the Indian Electricity Act, 1910 (9of1910), as if-

(i) the references therein to licensee were references to the Generating
Company, and
(ii) the Generating Company had the powers of a licensee under the D
said Act.
(3) The provisions of section 30 of the Indian Electricity Act, 1910
(9 of 1910) shall not apply to the transmission or use of energy by,
a Generating Company.
E
(4) For the removal of doubts, it is hereby declared that sections 3 I
to 34 (both inclusive) of the Indian Electricity Act, 1910 (9of1910)
shall apply to a Generating Company."

Section 26A provides that notwithstanding the provisions of Sub-Section
(2) a generating company would not be required to take a licence under the F
' A' Act of 1910 or to obtain sanction of the State Government for the purpose
of carrying on any of its activities. Under sub-section (2) provisions of Sections
12 to 19 of the Act of 1910 are made applicable to a generating company as
they apply to a lie.en see under the 1910 Act. It is to be noted that provisions
of Sections 3 to 11 of 1910 Act have not been made applicable to the
generating company. G

"Generating Company" has been defined in Section 2(4A) of the 1948
--y Act to mean:

"'Generating Company' means a company registered under the
H
304 SUPREME COURT REPORTS [200.J[ I S.C.R.

Companies Act I956 (I of 1956) and which has among its objects the t' •
A
establishment operation and maintenance of generating stations"

''Licensee" has been defined under this Act in Section 2(6) as under:

" "licensee" means a person license under Part II of the Indian
B Electricity Act, I9 I0 (9 of I9 I 0) to supply energy or a person who
has obtained sanction under Section 28 of that Act to engage in the
business of supplying energy but the provisions of Section 26, or -,..
26A of this Act notwithstanding, does not include the Board or a
Generating Company."

c A combined reading of Sections 2(4A) and 2(6) makes it clear that
even ifthe appellant No. I is taken to be a generating company (which is not
necessary to be determined in this case) it would not be a 'licensee' because
the generating company has been specifically excluded from being a licensee
notwithstanding the provisions of Sections 26 or 26A of the I948 Act. As
pointed out earlier only Sections 12 to 19 of the Act of 1910 have been made
D applicable to a generating company. Sections 3 to 11 of Act of 1910 do not
apply to a generating company.

Section 37 of Act of 1948 provides for purchase of generating stations
or undertakings or main transmission lines by the Board. This Section would
also not apply to the present case. The legislature in its wisdom made only
E
certain provisions of Act of 1910 applicable to a generating company in
Section 26A. Contention that the impugned Act is in violation of provisions
of Act of 1910 or the Act of 1948 has no basis to stand on. .....

The impugned Act and the Central Acts in the instant case operate in
F i.vo different fields without encroaching I upon each other's field in as much
as the true nature and character of the impugned State Act is to acquire the .,._
undertaking and pay compensation as provided in the Act whereas both the
Central Acts (Acts of 19 I0 and 1948) have made general provisions with
regard to supply and use of electrical energy. The provisions regarding
purchase of unde11aking in the Act of 1910 would not be applicable as the
G appellants are not licensees within the meaning of the Act of 1910. There is
not even a semblance of conflict what to talk of direct conflict between the
impugned State Act and the Central Acts to bring about the situation where
y·
one cannot be obeyed without disobeying the others. Both the Acts can
operate simultaneously as they do not occupy the same field. As the enactments.
H operate in two different fields without encroaching upon each other's field ..
(~

BHARAT HYDRO POWER CORPN. LTD. v. STATE (BHAN, .I.] 305
there is no repugnancy. A
Since there is no repugnancy the question of the State Act being kept
for the consideration of the President or receiving his assent did not arise.

For the reasons stated above, we do not find any merit in these appeals
and the same are dismissed. Parties shall bear their own costs in these appeals. B
B.S. Appeals dismissed.
r 1

;

>