Holding

The Central Government’s fixation of the dissolution date and the apportionment of assets based on power‑consumption ratios are within its statutory authority, are not arbitrary, and do not violate Article 14; therefore the writ is dismissed.

Summary

The Madhya Pradesh State Electricity Board (MPSEB) challenged two notifications issued by the Central Government fixing the dissolution date of the erstwhile MPSEB as 15‑Nov‑2000 and apportioning assets, rights and liabilities between MPSEB and the newly formed Chhattisgarh State Electricity Board (CSEB). MPSEB alleged that the date was arbitrary and violated Article 14, and that the apportionment ignored revenue‑generation capacity. The Supreme Court held that the date was fixed after a hearing, based on material before the Government, and therefore not arbitrary; the apportionment based on power‑consumption ratios had a rational nexus and was not irrational. The Court also clarified that under Article 32 it will not interfere with discretionary governmental decisions unless they are illegal. Consequently, the writ petition was dismissed and the transfer cases filed by CSEB were allowed.

Issues considered

The validity of the Central Government's fixation of the dissolution date of the erstwhile MPSEB under Section 58(3) of the Madhya Pradesh Reorganisation Act, 2000, vis‑à‑vis Article 14.
Whether the apportionment of assets, rights and liabilities between MPSEB and CSEB based on power‑consumption ratios is arbitrary, irrational or violative of Article 14.
The statutory jurisdiction of the Central Government to issue provisional orders under Section 58(4) and to fix a date under Section 58(3) without a final order.
The scope of judicial review under Article 32 of the Constitution in challenging administrative decisions of this nature.
The proper interpretation of the ambiguous provisions of Section 58(3) and (4) of the Madhya Pradesh Reorganisation Act, 2000.
The applicability of natural‑justice principles in the Government's decision‑making process.

Legislation cited

Electricity Act, 2003s. 31
Electricity (Supply) Act, 1948s. 12
General Clauses Act, 1897s. 14
Madhya Pradesh Reorganisation Act, 2000s. 58(3), s. 58(4)

Subjects

Article 14Article 32Madhya Pradesh Reorganisation ActSection 58bifurcationelectricity boardasset apportionmentstatutory interpretationarbitrarinessnatural justiceprovisional orderdissolution date

Judgment

M.P. STATE ELECTRICITY BOARD A
v.
UNION OF INDIA AND ORS.

SEPTEMBER 13, 2006

[S.B. SINHA AND DAL VEER BHANDARI, JJ.) B

Madhya Pradesh Reorganisation Act, 2000-Section 58-Bifurcation of
State of Madhya Pradesh-Constitution of new Electricity Boards in the two
bifurcated States on different dates-Chhattisgarh State Electricity Board C
constituted w.e.f 15.I 1.2000 and started collecting revenues-Complaint by
State of Madhya Pradesh-Central Government forbid the unilateral collection
till the bifurcation ofthe erstwhile Board-State ofMadhya Pradesh constituted
its Board w.e.f 1.1.2001-Central Government by notification approved
constitution of successor Boards w.e.f 15:4.2001-Provisional apportionment
of assets and liabilities between the two successor Boards w.e.f 15.4.2001- D
Notifications and allocations of assets and liabilities challenged before High
Court-Pursuant to High Court's direction date of dissolution of erstwhile
Board fixed as 15. I 1.2000 and perinitted same to be functional within State
of Madhya Pradesh-Order of dissolution challenged before Supreme Court-
Held: Cut offdate fixed by Central Government no/arbitrary hence not violative
of Article 14-As the date of bifurcation was fixed by Central Government in E
terms of its undertaking given before High Court and on compliance of the
principles of natural justice, the fixation cannot be said to be made by non-
application of mind-Apportionment of current assets and liabilities between
the successor Boards on the basis of power consumption ratio of the States
and on revenue generation capacity is not arbitrary or irrational-Constitution F
of India, 1950-Article 14.

Constitution of India, 1950-Article 32-Jurisdiction under-Scope of-
Held: Ordinarily in exercise of its discretionwy jurisdiction under Article 32,
where the decision of the Government which might be erroneous but not
illegal, is challenged, the Court shall not inte1fere. G
Interpretation of Statutes-Interpretation of ambiguous statute-Held:
When a statute is ambiguous, the construction which better serves the ends
and answers the principles offairness and justice, should be accepted

133 H
134 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A Madhya Pradesh State Electricity Board (MPSEB) was established
in 1957 in terms of Electricity (Supply) Act, 1948. A new State of
Chhattisgarh was carved out of the State of Madhya Pradesh and formed
on 1.11.2000 by virtue of Madhya Pradesh Reorganisation Act, 2000. In
furtherance of Section 58 of 2000 Act, State of Chhattisgarh constituted
B its own Electricity board w.e.f. 15.11.2000. It started collecting revenues
w.e.f. the said date. However, it remitted all the revenues collected to the
MPSEB from 15.11.2000 to 30.11.2000. The State of Madhya Pradesh
constituted a new board w.e.f. 1.1.2001. On a complaint from the State of
Madhya Pradesh that the revenues were being collected illegally by
Chhattisgarh State Electricity Board (CSEB), Government of India
C clarified that no unilateral action was to be taken by any State, and
revenues realized within the State relating to distribution of power should
be remitted without fail to MPSEB till the Board was bifurcated on a date
as certified by the competent authority. Government of India issued a
notification approving constitution of successor Boards w.e.f. 15.4.2001.
Guidelines with regard to division of assets, rights, liabilities, contracts,
D employees and arrangement for distribution of power were laid down
therein. State of Madhya Pradesh made a representation to the
Government of India requesting for modification of the notification with
regard to the basis of the apportionment of assets and liabilities. MPSEB
filed a Writ Petition before Delhi High Court against CSEB for remittance
E of revenues illegally retained from 1.12.2000 to 14.4.2001. Government of
India, by a letter dated 4.12.2001 provisionally confirmed the
apportionment of assets and liability w.e.f. 15.4.2001 and opined that the
revenue collected by CSEB before the said date should be remitted to
MPSEB. Central Government also appointed an independent agency for
ascertaining the total ·liabilities of the two States in terms of the purported
F criteria laid down in the notification dated 12.4.200 I. State of Chhattisgarh
filed a Writ Petition in the High Court of Chhattisgarh questioning the
orders of Government of India dated 12.4.2001and4.12.2001. This Petition
was transferred to Delhi High Court.
.
G Government of India issued an order on 23.5.2003 under Section
58(4) of2000 Act, provisionally allocating various liabilities of the former
MPSEB between new MPSEB and CSEB. This order was questioned by
CSEB before High Court of Delhi. Pursuant to an order of the High Court,
Government of India convened a meeting between the parties, and by a
notification dated 2.11.2004 fixed the date of dissolution of erstwhile
H MPSEB as 15.11.2000 and also provided that the same would remain
M.P. STATE ELECTRICITY BOARD v. ,U.0.1. 135
functional within the State of Madhya Pradesh upto 3.12.2000. Another A
notification dated 4.11.2004 was issued with regard to apportionment of
assets, rights and liabilities of MPSEB between the successor Boards. The
validity of the two notifications was questioned in the Writ Petitions before
this Court. The Writ Petitions filed by CSEB pending before High Court
were also transferred to this Court.
B
Appellants contended that fixation of date of dissolution as 5.11.2000
was ultra vires Article 14 of the Constitution of India; that division of assets .
and liabilities had been made without giving due regard to revenue
generation potential; that Government of India had acted arbitrarily in
ignoring the provision contained in Section 31 of Electricity Act, 2003; C
that it has been saddled with liabilities disproportionate to its revenues;
and that Government of India, having exercised its jurisdiction u/s. 58(4)
of 2000 Act, it acted illegally without jurisdiction in fixing a date purported
to be u/s. 58(3) of 2000 Act, as 15.1 L2000.

Dismissing the Writ Petition and allowing the transfer cases filed ·by D
Chhattisgarh State Electricity Board, the Court

HELD: 1. The cut-off date fixed by the Central Government cannot
be said to be so arbitrary as to attract the wrath of Article 14 of the
Constitution of India. The logical corollary of the finding of the court
would be that the said date has been fixed in supersession of the earlier E
orders. Once an appointed day was fixed by the Central Government, this
Court can interfere therewith only if it is violative of Article 14 of the
Constitution of India being arbitrary in nature. The order impugned in
the writ petition was admittedly passed by the Central Government upon
giving an opportunity of hearing to both the parties. There had been F
certain materials before the Central Government to appoint a day for the
purpose of sub-section (3) of Section 58 of Madhya Pradesh Reorganisation
Act, 2000. [156-G-157-A; 159-GI

2.1. Sub-sections (3) and (4) of Section 58 provide for a scheme. A
meaningful interpretation is required to be given thereto. Both the G
provisions are required to be construed harmoniously. While interpreting
Section 58 of 2000 Act for determining the dispute between the Boards,
the Central Government was bound to consider the hardships which may
have been faced by the parties. It may also be that the writ petitioner -
Board had altered its position, pursuant to the provisional order of the
Central Government, but the same was not decisive. It could have been H
136 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A only one of the factors for arriving at a decision by the Central
Government. 1157-A; 157-01

2.2. Factually the CSEB started functioning with effect from
15.11.2000 although it had remitted all the revenues collected to the
MPSEB from 15.11.2000 to 30.11.2000. It had started independent
B collection of revenue with effect from 1.12.2000. MPSEB as also the State
of Madhya Pradesh although had all along been aware that the CSEB had
been realizing revenue from the consumers, a protest was not made. Only
in the meeting it was recorded that no new State should do it unilaterally.
The minutes of the said meeting or the direction of an officer of the Central
C Government was not and could not have been a direction in terms of Sub-
section (4) of Section 58 of the 2000 Act. 1151-F-GI

2.3. Although there does not exist any provision in Sub-section (4)
of Section 58, the Central Government in exercise of its statutory power
was not denuded to pass a provisional order. Even under Section 14 of
D the General Clauses Act, a statutory authority may exercise his statutory
power from time to time. Furthermore, on a plain reading of the provision
of Sub-section (4) of Section 58 vis-a-vis Sub-section (3) thereof, it appears
that any order passed by the Central Government directing a new Board
or Corporation to take over from an existing Board or Corporation
evidently would be a provisional power in the sense that the same would
E be subject to a final decision which may be taken by the Central
Government in terms of Sub-section (3) of Section 58 of the 2000 Act.
1156-B-DI

2.4. It cannot be said that sub-section (3) of Section 58 of the 2000
F Act must follow an order passed under sub-section (4) thereof. If such a
contention is accepted, the same would result in anomaly or absurdity. In
terms of sub-section (4) of Section 58, the Central Government is not
required to pass a final order in the sense that the take over may be in
relation to all or any of the undertakings and the assets, rights and
liabilities are qualified by the expression "take over". Whereas sub-section
G (3) of Section 58 contemplates dissolution of the erstwhile Board, the date
on which the new Board takes over from the existing Board may be
different from its dissolution. Constitution of two boards admittedly has
been made from different dates. The Central Government was to fix any
of them or specify another date. 1156-D-Fl

H 2.5. Sub-section (3) of Section 58 may not be a stand alone clause,
M.P. STA TE ELECTRICITY BOARD v. U.0.1. 137

but it envisages passing of a final order. Once an order is passed, a legal A
fiction is raised by reason whereof the e11:isting Board would be deemed
to be dissolved. For such purposes, it was not necessary that actual state
of affairs should have been the putative state of affairs. 1157-EI

Ashok Leyland Ltd. v. State of TN. and Anr., 1200413 SCC I and Bharat
Petroleum Corporation Ltd. v. P. Kesavan and Am:, 120041 9 SCC 772, relied B
on.

2.6. What is, thus, contemplated by clause (b) of Sub-section (4) of
Section 58 of the 2000 Act is that upon dissolution of the existing Board,
the assets, rights and liabilities instead of vesting or continuing to vest in C
the State as was contemplated under Sub-section (3) shall vest in the new
Board. 1158-DI

2. 7. It cannot be said the word "and" used in between clauses (a)
and (b) of sub-section ( 4) of Section 58 of the 2000 Act must be read
conjointly. Clauses (a) and (b) ofsr:b-section (4) of Section 58 of the 2000 D
Act operate in different fields. They have different consequences and, thus,
both cannot operate simultaneously. When an order. is passed by the
Central Government under clause (a) of sub-section (4) of Section 58, it
merely provides for only take over of the existing Board by the new Board
but the same would not mean that the date provisionally fixed must be
the date of dissolution as envisaged under sub-section (3) thereof. Two E
different dates are, thus, possible to be fixed, one provisional and other
final. When a date is appointed in terms of sub-section (3) of Section 58
of the 2000 Act, the same shall be final and the consequences arising
therefrom shall ensue. 1158-D-GI

2.8. In the backdrop of the events of the case and particularly in view F
of the fact that the Central Government had passed the impugned orders
in terms of its undertaking given before the High Court of Delhi and upon
compliance of the principles of natural justice, it is difficult for the Court
to say that the Central Government has failed to apply its mind.
1158-G; 159-AI G
2.9. Sub-section (I) of Section 58 of the 2000 Act contemplates only
a situation where the existing Board is dissolved after the appointed day
and it is continued till its dissolution. The Act to that effect is anomalous
but it does not lead to an absurdity. Although the writ petitioner-Board
came into force from 1.1.2001, having regard to the fixation of the H
138 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A appointed day as 1.1 t.2000, there cannot be a vacuum and with a view to
avoid an absurd situation, all attempts must be made to iron out the
creases. When a statute is ambiguous, the construction which better serves
the ends and answers the principles of fairQess and justice should be
accepted. I I 59-A-CI ..._
B 2.10. lllq:ality, if any, committed by CSER in taking over of the assets
of the Madhya Pradesh Electricity Board without there being any form.al
order of the Central Government in terms of Section 58(2) of the 2000
Act by itself may not be enough to arrive at the conclusion that the cut-
off date fixed would be vitiated in law. It could have been a relevant
C consideration but not the only one. 1159-E-FI

2.11. The apportionment of current assets and liabilities has been
made on the basis of power consumption ratio of States. Any other variable
might not have any rational nexus with the apportionment of current assets
and liabilities. Long term assets and liabilities were divided in the ratio of
D 90:10 and hence, overall, the MPSEB had been given 85% of the assets
and 84% of the liabilities. The action on the part of the Central
Government cannot hence be said to be irrational. (160-8-01

2.12. Population ratio as defined in Section 2(h) of the 2000 Act is
not relevant for application of Section 58. Whenever population ratio is
E to be applied for the purpose of apportionment of assets and liabilities,
the Parliament stated so catq:orically. In Sections 42 and 43 the division
of assets and liabilities has been made relatable to the population ratio.
In the instant case, the Central Government had maintained two other
criteria, viz., geographical constitution and fixed assets. 1160-G; 161-AI

F 2.13. Revenue generation capacity may although be one of the
grounds, the same cannot be said to be an irrelevant criteria as it has a
rational nexus with current assets and liabilities. Fixing current liabilities
on the basis of revenue generation capacity is not and cannot be held to
be arbitrary or irrational.1160-GI
G
3. Ordinarily, in a matter of this nature, this Court, in exercise of
its discretionary jurisdiction under Article 32 of the Constitution of India
shall not interfere. It would exercise judicial restraint. It may be erroneous
but not illegal. It may not be just and proper for one of the State Boards,
but it is for the other. (161-81
H
M.P. STATE ELECTRICITY BOARD v. U.0.1. [S.B. SINHA. J.) 139
UJ. Fernandes and Co. v. The Deputy Chief Controller of Imports and A
Exports and Ors., (1975( 1 SCC 716 and Fertilizer Corporation. Kamgar
Union (Regd.), Sindri and Ors. v. Union of India and Ors., (19811 I SCC
568, relied on.

4. The writ petitions filed by the CSER questioning the validity of
the orders dated 4.12.2000 and 12.4.2001, therefore, become infructuous. B
(159-H; 160-A(

CIVIL ORIGINAL JURISDICTION : Writ Petition (Civil) No. 675 of
2004.

(Under Article 32 of the Constitution of India) c
WITH
T.C. (C) No. 44 fo 2005

T.C. (C) No. 45 of 2005 and T.C. (C) No. 44 of 2005
D
Vivek Tankha, S.K. Dubey, G. Umapathy, Rohit Singh, Ashok Kumar
Singh, B.S. Banthia and Vibha Datta Makhijia (NP) for the Petitoner.

Amrendra Sharma, ASG Ravi Shankar Prasad, Ravish C Agrawal,
Suparana Srivastava, Pooja Mathani, Rajesh Srivastava, Amit Anand Tiwari, E
Gaurav Agrawal, V.K. Verma, Dharmendra Kumar Sinha and R.C.Agrawala
(N.P.) for the Respondents.

The Judgment of the Court was delivered by

S.B. SINHA, J : Interpretation and application of Section 58 of the F
Madhya Pradesh Reorganisation Act, 2000 (for short "the 2000 Act") arises
for consideration in these writ petitions.

Par.liament enacted Electricity (Supply) Act, 1948 (for short "the 1948
Act"), in terms whereof the Madhya Pradesh State Electricity Board (for
short "MPSEB") was established on 1.4.1957. It was a body corporate in
terms of Section 12 thereof. The territorial jurisdiction of the Board was the G
entire State of Madh~'a Pradesh as notified and constituted by 'States
Reorganisation Act, I YS6' (for short "the 1956 Act").
A new State known. as State of Chhattisgarh .comprising of 16 districts
carved out of the State of Madhya Pradesh was formed. on 1.11.2000. H
140 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A Distribution of assets and liabilities of the States are indisputably governed
by the 2000 Act. Pursuant to or in furtherance of the provisions of Section
58 of the 2000 Act, the State of Chhattisgarh was entitled to constitute its
own State Electricity Board. It was constituted with effect from 15.11.2000.
It started collecting revenue with effect from the said date but it offered the
B revenues collt:cted to the MSEB till 30th November, 2000. The State of
Madhya Pradesh also constituted a new Board with effect from 1.1.200 I. It
informed the Government of India about the formation thereof and requested
it to issue necessary orders under Section 58(4) of the 2000 Act enabling the
successor Boards to take over assets, liabilities of the existing Board.

c Secretary,
A meeting of the officers of both the States was held by the Special
Ministry of Home on creation of new States on I0.1.200 I. On a
complaint made by the State of Madhya Pradesh that the revenues were being
collected illegally by the Chhattisgarh State Electricity Board (for short
"CSEB"), it was recorded:

D 'The Government of India made clear that no unilateral action is to
be taken by any State and revenues realized within the State relating
to distribution of power should be remitted without fail to M.P. State
Electricity Board till the Board is bifurcated on a date as certified by
the competent authority. It was decided that the new Boards should
come into being by 3 lst March, 2001 positivdy. The Director, Ministry
E of Power indicated that steps were being taken by his Ministry to
settle disputes of successor States and exercises were underway to
complete the bifurcation of the State Electricity Board by end of the
current financial year."

Several correspondences also passed between the respective State
F Governments and the Boards as well by and between them and the Central
Government.

It stands admitted that the States could not arrive at a material agreement
on the division of assets and liabilities of the MSEB. A notification was
G issued by the Government of India approving constitution of the successor
Boards with effect from 15.4.2001. Guidelines in regard to division of assets,
rights, liabilities, contracts and employees as also for arrangement for
distribution of power were laid down therein. The State of Madhya Pradesh
made a representation to the Secretary, Government of India, Ministry of
Personnel requesting for modification and/ or review of the said notification
H in regard to the basis of the apportionment of assets and liabilities. A writ
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA.J.] 141

petition came to be filed by the MPSEB before the High Court of Delhi inter A
a/ia against the CSEB for remittance of revenues illegally retained for the
period 1.12.2000 to 14.4.200 I. Provisionally, apportionment of assets and
liabilities was confinned by the Government of India, Ministry of Personnel
1111:- by a letter dated 4.12.2001 with effect from 15.4.2001 opining thatthe revenue
collected by the CSEB before the said date should be remitted to MPSEB.
The Central Government appointed the Central Electricity Authority (CEA) B
as an independent agency for ascertaining the total liabilities of the two
States and their classification in terms of the purported criteria laid down in
the notification dated 12.4.200 I.

The State of Chhattisgarh filed a writ petition in the High Court of C
· Chhattisgarh questioning the said orders of the Central Government dated
12.4.2001 and 4.12.2001. A transfer application was filed by the MPSEB for.
transfer of the said writ petition to the High Court of Delhi which was
allowed by an order dated 19.8.2002.

The Central Government issued an order purported to be under Section D
58(4) of the 2000 Act on 23.5.2003 provisionally allocating various liabilities
of the MPSEB between the MPSEB and the CSEB. The said order was
questioned by the CSEB before the High Court of Delhi.

In the course of hearing before the High Court of Delhi, the Union of
India suggested that the dispute between the parties should be resolved by E
passing a final order by it upon giving an opportunity of hearing on all the
issues raised by the parties in the said writ petition. The said suggestion on
the part of the Central Government was accepted by the High Court of Delhi
by an order dated I0.8.2004. Pursuant to or in furtherance of the said
representation before the High Court, admittedly the Government of India F
convened formal meetings of the parties on 5.6.2004 and 28.9.2004. On or
about 2.11.2004, a notification was issued fixing 15.11.2000 as the date of
dissolution of the erstwhile MPSEB. It was further provided therein that the
erstwhile MPSEB would remain functional within the State of Madhya Pradesh
upto 31.12.2000. A notification was thereafter issued by the Government of
India on 4.11.2004 in regard to apportionment of assets, rights and liabilities G
of MPS EB between successor Boards of Madhya Pradesh and Chhattisgarh.
In the notification dated 4.11.2004, the basis of the apportionment of the

H
142 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A various items were stated to be as under:
Fixed Assets On the basis of geographical nexus
Current Assets 77.03:22.97 (MP : Chhattisgarh) in the
ratio of power con~umption
'"='""
B Security Deposits from On the basis of location of the
consumers consumers

Liability on account of ED payable 77.03:22.97 (MP : Chhattisgarh)-in
to the State Government the ratio of power consumption
Liabilities Long term 90: I0 (MP : Chhattisgarh)-in the ratio
c of fixed assets
Current 77.03:22.97 (MP : Chhattisgarh)-in
the ratio of power consumption
Post and Staff As per recommendations of State
Advisory Committee-EB
Staff related liabilitit> As per Ministry of Power letter no.
D 42/8/2000-R&R (Vol. V) dated
6.1.2004
MPEB Power Right to power Along with plants
A statement showing principles adopted in orders dated 12.4.200 I and
23.5.2003 and changes made by order dated 4.11.2004 reads as under:
E
S.No. Head (assets/ Principle of Principle of
liabilities) allocation as per allocation as per
order dated order dated
12.4.2001 & 4.11.2004
23.5.2003
F Fixed Assets On geographical On geographical
nexus nexus
2. Movable assets Population ratio Power
(73.38:26.62) consumption ratio
(77.03:22.97)
3. Liabilities
G a. Project/asset With asset In asset ratio
specific (90: I0)
b. other + current Population ratio Power
liability (73.38:26.62) consumption ratio
(77.03:22.97)
4. Date of dissolution 15.11.2000
H
M.P. STATE ELECTRICITY BOARD'" U.0.1. [S.B. SINHA, J.) 143
A statement showing the consequences of increasing the liabilities of A
MPSEB by more than about Rs. 2000 crores is given heretobelow:

Rs. in crores

Liabilities Total MPS EB CSEB Remarks
Liabi.1 ities as 16620 12976 3644 Division of liabilities B
as on 14.4.2001 per GOI order dt.
23.5.2003
Liabilities as 11851 9946 1905 Division of liabilities
as on per GOI order dt.
15.11.2000 4.11.2004
c
Undistributed 107.99 . 107.99 0
liabilities
payable to
NTPC
Undistributed 12.15 12.15 0
D
liabilities
payable to
NPCIL
Other 4646.08 4646.08 0 To be borne by
undistributed MPSEB as per GOI
liabilities Order dt. 4.11.2004 E
Addi. 16617.22 14712.22 1905 Revised liabilities as
(88.54%) (11.46%) 011 14.2~2003
Liabilities as
per order dt. · 1736.22 -1739 Addi. Liabilities on
4.11.2004 SEBs F
305 -305 Net of surplus revenue
with CSEB claimed by
MPSEB·
60 -60 Approx. revenue for
the period 15.11.00 to G
30.11.00
2101.22 -2104 Net loss as on
14.4.2001
The legality and/or validity of the said two notifications are in question
in the writ petition filed before th is Court. H
144 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A The writ petitions filed by the CSEB and pending before the High
Court of Delhi questioni.1g the legality of the orders dated 12.4.2001, 4.12.200 I
and 23.5.2003 passed by the Central Government, have been transferred to
this Court by orders dated 25.4.2005 and 10.5.2005.

We may notice that in this writ petition the writ petitioner has prayed
B for the following reliefs:

.. (a) Call for records of the proceedings of the Central Government
relating to the Notifications/ Orders dated 12.04.200 I, 26.12.200 I,
23.5.2001, 2.11.2004 and 4.11.2004 passed by the Ministry of Power,
Govt. uf India;
c
(b) Quash the impugned Notifications/ Orders dated 2.11.2004 and
4.11.2004 being unconstitutional and in violation of Article 14 of the
Constitution;

(c) Direct Respondent No. I to dissolve MPEB in consonance with
D orders/directions dated 12.4.200 I, 4.12.200 I and 23.5.2003 passed
by the Government of India under Section 58(4) of the MPRA;

(d) Direct Respondent No. l to perform its constitutional and the
statutory duty to lay down proper criterion for apportionment of assets,
rights and liabilities in accordance with law and to ensure equitable,
E just, fair and reasonable apportionment of assets, rights and liabilities
amongst the successor Boards on the basis of revenue potential so as
to avoid undue hardship and disadvantage to any of the successor
ords; and

(e) Pass"·. nther order and/ or direction, as this Hon'ble Court may
F deem fit and p1v~ •r in the facts and circumstances of the case."

The main contentions raised in the writ petition as also the transfer
petitions are :

(i) Fixation of a date of dissolution as 15.11.2000 is ultra vires
G Article 14 of the Constitution of India.
(ii) Division of assets and liabilities had been made without giving
due regard to revenue generation potential which is of paramount
importance.
(iii) The Central Government acted arbitrarily in rejecting the
H
M.P. STATE ELECTRICITY BOARD v. U.0.1. [S.B. SINHA. .I.] 145

contention of the Petitioner-Board and in particular in ignoring A
the provisions contained in the proviso appended to Section 131
of the Electricity Act, 2003.
(iv) Apportionment of assets and liabilities pursuant to fixation of
cut-off date as 15.11.2000 had caused serious prejudice to the
Petitioner-Board as would be evident from the following: B
(a) as against the consumption of 78%, the capacity allotted was only
68%.

(b) as against 88% of liabilities allocated to Madhya Pradesh, the
revenues allocated is 64%. C
(c) The order of the Ceritral Government has failed to take into account
the adverse consumer mix. .

(d) MPSEB has to service large agricultural load with low revenue
yield and thus left with lower average realizable tariff as compared to CSEB D
which is as under:

Description Unit MPEB MPS EB CSEB

- Units sold Mus I8,958.20 13,560.11 5398.08
E
Total Rs. Crore 5,234.22 3,460.41 1773.81

Revenue (100%) (66%) (34%)

Average Paise/KWH 276 255 329
F
Realisable

Tariff

(e) The effect of tl1e bifurcation as per the impugned notifications dated
2.11.2004 & 4.11.2004 on the MPSEB finances are as under:
G

•
Particulars MPEB After Bifurcation
MPS EB CSEB

Total Income 5.993.02 3,991.27 2,00 I. 75 H
146 SUPREME COURT REPORTS [20061 SUPP. 6 S.C.R.

A -Sale of Power 5,318.60 3,543.65 1,774.95

-Subsidy & 279.46 205.06 74.40
Grants

-Other Income 394.96 242.5 152.41
B
Total 7,466.83 6,007.15 1,459.68
Expenditure

-Power Purchase 2,866.56 2,338.08 528.48

c -Power Generation 1,488.43 1,175.39 313.04

-Repairs & Maint. 218.03 142.86 75.17

-Employee Cost I, 142.56 899.94 242.62

-Interest & Fin. 953.31 785.65 167.66
D Charge (Net)

-Depreciation 564.46 459.59 104.87

-Admin. Charges 92.27 77.65 14.62

E -Other Debits 150.96 125.00 25.96

-Net prior period 84.50 78.26 6.24
Exp.

-Expenses -94.25 -75.27 -18.98
F Capitalised

Net Surplus (+)/ (-) 1,473.81 (-)2,015.88 (+)542.07
Deficit (-)

It is contended that by reason thereof, the petitioner - Board has been
G saddled with an additional liability of Rs. 2015 crores whereas the CSEB was
created with an annual profit and a power surplus. The ratio of population
between the States of Chhattisgarh and Madhya Pradesh although is 27:73 •
but in view of the fact that the State of Madhya Pradesh got lesser proportion
of both natural resources and physical assets; yet it was saddled with liabilities
H which are disproportionate to its revenues. The Central Government having
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA. J.] 147

exercised its power. under Section 58( 4) of the 2000 Act and the parties have A
acted on the basis thereof, it acted illegally without jurisdiction in fixing a
date purported to be under Sub-section (3) of Section 58 of the 2000 Act as
15.11.2000.

The contentions of the CSEB, on the other hand, are:
B
(i) The writ petition is not maintainable as the Central Government
in exercise of its power under Section 58 of the 2000 Act acted
in a quasi-judicial capacity and, thus, the impugned order cannot
be said to be violative of Article 14 of the Constitution of India.
(ii) The impugned iiOtifications having been issued upon compliance C
of the principles of natural justice and upon due compliance of
the mandate contained in Section 58 of the 2000 Act, no exception ·
to the notifications dated 2.11.2004 and 4.11.2004 can be taken.
(iii) Power granted to a new State to constitute its Electricity Board
is an absolute one and it can be made functional with effect from D
the date of its constitution and having regard to the fact that the
CSEB was constituted on 15.11.2000, the Central Government
cannot be said to have acted illegally or without jurisdiction in
fixing the said date as the appointed day in terms of Sub-section
(3) of the 2000 Act.
E
The stand of the Central Government was that the provisional order
dated 12.4.2001 provided for only an interim arrangement and, thus, it could
fix a specific date in terms of sub-section (3) of Section 58 of the 2000 Act.
As CSEB came into existence on 15.11.2000, the date suggested by the
MPSEB, viz., 15.4.2001 would itself have been arbitrary and unreasonable.
Current assets and liabilities of the Board were required to be apportioned F
and the same having been done on the basis of power consumption ratio of
the States, which is roughly 77:23, the same cannot be said to be arbitrary
particularly when the current liabilities, mostly on fuel and power purchases,
were directly relatable to the power consumption ratio.

The 2000 Act was enacted to provide for the reorganization of the G
existing State of Madhya Pradesh and for matters connected therewith. Section
2 of the said Act provides for the interpretation of the terms mentioned
thereto. Section 2(a) defines the "appointed day" to mean the day which the
Central Government may, by notification in the Official Gazette, appoint.
Indisputably, the appointed day is 1.11.2000. H
148 SUPREME COURT REPORTS [2006J SUPP. 6 S.C.R.

A ·Population ratio' in relation to the States of Madhya Pradesh and
Chhattisgarh is defined to mean the ratio of 485. 7: 176.2. 'Successor State' in
relation to the existing State of Madhya Pradesh has been defined in Section
2U) to mean the State of Madhya Pradesh or Chhattisgarh.

The 2000 Act makes various provisions for apportionment of assets
B and liabilities between the two States. Section 37 of the 2000 Act provides
for apportionment of the assets and liabilities of two States. Section 43 provides
for the assets and liabilities relating to the undertaking of the existing State
of Madhya Pradesh whether directly owned or through a body corporate
constituted or incorporated or registered under any Central, State or Provincial
C Act. Three undertakings of the State, viz., the State Electricity Board, the
State Road Transport Corporation and the State Warehousing Corporation
have, however, been given a special treatment in terms of Section 58 of the
2000 Act. As interpretation of the said provision would fall for our
consideration, we may notice the relevant clauses thereof hzrein:

D "58. Provisions as to Madhya Pradesh State Electricity Board, State
Road 7'ransport Corporation and Stale Warehousing Corporation.-

(I) The following bodies corporate constituted for the existing State
of Madhya Pradesh, namely:-

(a) the State Electricity Board constituted under the Electricity Supply
E Act, 1948;

(b) the State Road Transport Corporation established under the Road
Transport Corporations Act, 1950; and

(c) the State Warehousing Corporation established under the
F Warehousing Corporations Act, 1962, shall, on and from the appointed
day, continue to function in those areas in respect of which they were
functioning immediately before that day, subject to the provisions of
this section and arrangements for the functioning of such body
corporates as may be mutually agreed upon between the successor
G States failing which to such directions as may, from time to time, be
issued by the Central Government.

(2) Any directions issued by the Central Government under sub-
section (I) in respect of the Board or the Corporation shall include a
direction that the Act under which the Board or the Corporation was
H constituted shall, in its application to that Board or Corporation, have
M.P. STATE ELECTRICITY BOARD v. U.0.1. (S.B. SINHA, J.] 149

effect subject to such exceptions and modifications as the Central A
Government thinks tit.

(3) The Board or the Corporation referred to in sub-section (I) shall
cease to function as from, and shall be deemed to be dissolved on
such date as the Central Government may, by order, appoint; and
upon such dissolution, its assets, rights and liabilities shall be B
apportioned between the successor States of Madhya Pradesh and
Chhattisgarh in such manner as may be agreed upon between them
within one year of the dissolution of the Board or the Corporation, as
the case may be, or if no agreement is reached, in such manner as the
Central Government may, by order, determine: C
(4) Nothing in the preceding provisions of this section shall be
construed as µreventing the Government of the State of Madhya
Pradesh or, as the case may be, the Government of the State of
Chhattisgarh from constituting, at any time on or after the appointed
day, a State Electricity Board or a State Road Transport Corporation D
or a State Warehousing Corporation for the State under the provisions
of the Act relating to such Board or Corporation; and if srch a Board
or Corporation is so constituted in either of the States before the
dissolution of the Board or the Corporation referred to in sub-section
(I),-
E
(a) provision may be made by order of the Central Government
enabling the new Board or the new Corporation to take over from the
existing Board or Corporation all or any of its undertakings, assets,
rights and liabilities in that State, and

(b) upon the dissolution of existing Board or Corporation,- F
(i) any assets, rights and liabilities which would otherwise have passed
to that State by or under the provisions of sub-section (3) shall pass
to the new Board or the new Corporation instead of to that State;

(ii) any employee who would otherwise have been transferred to or G
re-employed by that State under sub-section (3), read with clause (i)
of sub-section (5), shall be transferred to or re-employed by the new
Board or the new Corporation instead of to or by that State."

An electricity board is constituted under the 1948 Act. Constitution and
incorporation of a Board, thus, is a function required to be carried under the H
150 SUPREME COURT REPORTS (2006] SUPP,(; S.C.R.
~, ~--

A· 1948 Act. After coming into force of the 1948 Act, each State is enjoined
with a duty to constitute its own electricity board. On reorganization of the
State. the MPSEB was to be dissolved. Both the States were required to
constitute L~eir new Boards. Assets and liabilities of the: erstwhile Board
were, thus, required to be apportioned between'.the two new entities. The
framers of the Act probably opined that, keeping in view of the fact that the
B dispute in ·regard to apportionment of assets and liabilities would be a State
function, both the States can resolve the dispute, if any, amicably. However,
a provision had to be incorporated in the said Act that in case the parties
being not resolving their disputes amicably, the Central Government shall by
an order detennine a date as also issue requisite directions in regard to
C apportionment of assets and .liabilities.·

Sub-section (I) of Section 58 of the 2000 Act is an enabling provision
providing for continuation of function of the Board till arrangements for the
functioning of such body corporates as inay be mutually agreed upon between
the successor States, failing which such directions as may, from time to time
D found necessary, be issued by the Central Governmeni.

·I Sub-section (3) of Section 58 of the 2000 Act empowers the Central
: Government to fix a date as it may by order appoint. Once _such a date is
fixed, the Board would cease to function. With effect from the date so
E appointed by the Central Government, the Board shall be deemed to be
dissolved. Sub-section (3) of Section 58 of 2000 Act also provides for
consequences of such dissolution, i.e., upon such dissolution, its assets, rights
and liabilities shall be apportioned between the successor States. Such
apportionment is to be made in the manner, in absenCe of an agreement
between the two States, as the Central Government may by order determine.
F Sub-section (4) of Section 58, on the other hand, contains a special provision.
It enables both the States to constitute respective State Electricity Boards.
Such constitution of the State Electricity Boards could only be made on or
after the appointed day, i.e., 1.11.2000.

In. the event of constitution of such Boards by either of the States
G before the dissolution of the Board by the State concerned, the Central
I " .; , "
Go~ernm~nt by_ order direct take over of the new Board or Corporation from
the existing Board or Corporation all or any of its undertakings, assets, rights
and liabilities thereof. Clause (b) of Sub-section (4) of Section 58 contemplates
that upon such dissolution any asset, right and liability which would ~therwise
H haxe passed to tha(.S~ by or ur.Je.- the provisions of sub-sectio11"(3) shall
-~
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA, J.) 151

... pass to the new Board or the new Corporation instead of to or by that State. A
The principal question which arises for consideration is that ifthe Central
Government had directed that the Board constituted by the respective States
shall act in a particular manner, whether the same could subsequently be
"':
changed. The difficulty which arises in application of the provisions of Sub-
sections (3) and (4) of Section 58 of the 2000 Act lies principally due to the B
fact that both the Boards have been constituted with effect from different
dates. Whereas CSEB was constituted with effect from 15.11.2000, the MPSEB
was constituted with effect from 1.1.200 I. Unfortunately, the Central
Government passed a provisional order. It is, however, difficult to acceptthe
submission of Mr. Vivek Tankha, learned senior counsel appearing on behalf
of the Petitioner, that no provisional order could at all be passed. Passing of
c
a provisional order, in our opinion, in terms.of sub-section (4) of Section 58
is implicit. By reason of the said provision, not only the States are enabled
-to constitute separate State Electricity Boards which even otherwise could
have been done in terms of the 1948 Act but also to take over the functions
of the erstwhile Board. Such taking over of the functions may i.Je in its D
entirety or in phases. We may notice that whereas in clause (a) of sub-section
(4) of Section 58 of the 2000 Act the expression "all or any of its undertakings,
assets, rights and liabilities in that State" having been used, the word "all" is
missing in clause (b) thereof. Evidently, the Parliament thought it to be
unnecessary. Whereas clause (I) provides for mere take over of function
E
from the existing Board all or any of its undertakings; clause (b) has a direct
nexus with the final order which may be passed under Sub-section (3) of
Section 58 of the 2000 Act.

We may notice that factually the CSEB started functioning with effect
from 15.11.2000 although it had remitted all the revenues collected to the F
MPSEB from 15.11.2000 to 31.11.2000. It had started independent collection
of revenue with effect from 1.12.2000. MPSEB as also the State of Madhya
• Pradesh although had all along been aware that the CSEB had been realizing
revenue from the consumers, a protest was made. Only in the meeting it was
recorded that no new State should do it unilaterally. The minutes of the said
meeting or the direction of an officer of the Central Government was not and G
could not have been a direction in terms of Sub-section (4) of Section 58 of
the 2000 Act.

There must have been some bickering between the two States with
regard to collection of revenue. It appears that the Additional Secretary of
H
152 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A MPSEB by a letter dated 21.11.2000 directed the Chief Engineer, CSEB that
the revenue collections should be kept in Chhattisgarh and should not be
remitted to the Madhya Pradesh with effect from 21.1 L2000. Yet again in
the minutes of discussions between the Chief Ministers of the States of
Chhattisgarh and Madhya Pradesh held on 25th November, 2000. it was
acknowledged that the State of Chhattisgarh had already set up a separate
B Electricity Board with effect from 15.11.2000. It was further noticed that it
has also approached the Government of India for orders under Section 58( 4)
of the 2000 Act. In the said backdrop, it was inter alia agreed:

"Since the Government of Chhattisgarh has already set up a separate
Electricity Board w.e.f. 15.11.2000 and approached the Government
c of India for orders u/s 58(4) of the MPRA, 2000, it has become
imperative to consider relevant principles for apportionment of assets,
rights & liabilities and manpower of the MPEB analogous to the
principles enunciated in the Madhya Pradesh Reorganization Act,
2000 for apportionment of assets and liabilities of the State
D Government (Chapter VI) and for undertakings (Section 43 ). assets
and liabilities should be shared in the same ratio - more so because
the ability to discharge liabilities is dependant on the productive
potential of the assets. Relevant ratios for the successor States of
Madhya Pradesh and Chhattisgarh are as follows:
E Item Chhattisgarh M.P.
I. Population ratio 176.2 485.7
(S.2(h), MPRA)
2. Own generation 31.03% 69.87%
3. Energy supply 21.43% 78.57%
F (ex-bus)
Assets, rights and liabilities of the MPEB can provisicnally be shared
between the successor States according to any of these ratios, since
entry/ operation of non-State owned organizations is now not barred
by law as well as practice. However, in order to maintain present
G arrangements for generation, transmission and supply of electric power
in both the successor States safeguards should also be provided u/s
75 of the Madhya Pradesh Reorganization Act."

Yet again the Chief Secretary of the Government of Madhya Pradesh
by a letter dated 28.11.2000 add~e~st:d to the Secretary, Ministry of Power
H
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA, J.) 153
opined that the principles for apportionment of the assets should be as given A
in the record of discussions of the meeting dated 25th November, 2000. The
Government of Madhya Pradesh expressed its view that the assets, rights and
liabilities of the MPSEB provisionally be shared between the successor States
according to any of those ratios. It was, however, suggested:

" ..... However, while issuing orders under Section 58(4)(a) of the MP B
Reorganisation Act, 2000, prior to dissolution of the MPEB, the
Government of India should simultaneously make provision for the
division of : -
A. Fixed assets
B. Movable assets/ stores
c
c. Right to revenues! receivables
D. Right to collect arrears
E. Liabilities (mutual payment to be backed by State Govt. mandate D
to RBI)
F. Contracts (including PPAs)
G. Allocation of employees
So that the successor organizations may be enabled to become fully
functional without any delay." E
Yet again, the Chief Minister of the Government Of Madhya Pradesh in
a letter dated 27.12.2000 addressed to the Chief Minister of the State of
Chhattisgarh recognized the necessity of having talks at their level so as to
arrive at a mutually acceptable solution to the issues relating .to the division F
of Electricity Board. From a circular letter dated 19th December, 2000 issued
by the MPSEB, it appears that it was recognized that the CSEB had been
constituted and it had started working independently with effect from 1.12.2000
stating:

"The new State ofChhattisgarh has been constituted w.e.f. 1.11.2000. G
Thereafter a separate Chhattisgarh State Electricity Board has been
constituted for the new State, which has started working independently
w.e.f. 1.12.2000. In respect thereof, it has been decided that after the ·
issue of this circular, matters relating to the various offices/ employees
. of the Electricity Board situated in the State of Chhattisgarh may not
H
154 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

A be forwarded to the Board for its approval and all such pending
matters may be returned after listing them out."

The Minister of Power, Government of India noticing certain grid
indiscipline as regards drawal of power from the grid requested the Chief
Minister of the State of Chhattisgarh stated:
B
" ... .I would also urge upon you to take in immediate review of the
pattern of drawls from the regional grid and ensure that drawls under
no circumstances exceed the quantum is scheduled by Regional Load
Despatch Centre. For this purpose you may kindly give instructions
to your SEB to strictly maintain grid discipline, including resort to
c load shedding it and when necessary."

This also goes to show that the functioning of the CSEB had been
recognized by the Central Government.

Yet again the Chief Secretary of the Government of Madhya Pradesh
D by a letter dated 29th January, 200 I addressed to the Secretary, Ministry of
Power stated:

" .... I would also urge that while assets, rights and liabilities may be
transferred to the successor Boards in the respective States by the
order of the Central Govt. u/s 58(4), unilateral appropriation by States
E is not permissible under the Act; and this view was confirmed by
Govt. of India, in the meeting convened by the Ministry of Home
Affairs on I0.1.200 I, who had made clear that no unilateral action is
to be taken by any State and revenues realized within the State relating
to distribution of power should be remitted without fail to the MPEB
F till the Board is bifurcated on the date as certified by a competent
authority."

Allocation of power between the two States had also started, as would
appear from an order of the Central Government of the Ministry of Power
dated 3 Ist January, 200 I.
G
Furthermore, the Chief Minister of the Government of Madhya Pradesh
in a letter dated 20th February, 200 I addressed to the Minister of Power,
Government of India stated:

"As you are aware, the State of Madhya Pradesh was bifurcated on
H 1st November 2000 and the rights, assets and liabilities of the MP
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA, J.] 155
Electricity Board have to be divided between the successor States A
nnder Section 58 of the MPRA, 2000.

It is understood that the Government of India contemplate issue of
provisional orders in the near future, since successor Boards have
already set up by the Governments of Madhya Pradesh and
Chhattisgarh. MPEB has huge financial liabilities and the future B
interests of creditors (including GoI institutions) have also to be borne
in mind. It is our earnest desire that this distribution, though a complex
task, be fair to both the States by ensuring that assets and liabilities
are divided in the same proportion; and should not lose sight of the
fact that, unlike the State Government, the MPEB is a commercial C
entity.

You will agree that the earning capacity (turnover sales revenue) of
any enterprise is by far the best index of its capability to discharge
liabilities. While this capacity can be assessed by experts, in the
interim suitable proxies should be used to estimate the situation closely D
enough so that neither of the successor Boards is handicapped at
start. As you know, sales revenues of the Electricity Boards are
dependant on the generation capacity (variable), the tariff rate and the
consumer profile (which are relatively constant). Generation capacity
is, thus, directly correlated with sales revenues and we have, thert'fore,
suggested that this measure be used for distribution of liabilities instea<I E
of population, which has no economic nexus with the earning capacity
of the Electricity Board. I request that the Government of India may
abjure any unequal, interim division based on simplistic assumptions
which will endanger the viability of the successor boards,.while making
subsequent adjustments an arduous task. The provisional order may F
also come into force prospectively; and revenues unilaterally
appropriated by the CSEB remitted to the MPEB before that date, so
that the organization may discharge accrued liabilities towards coal
companies, NTPC, etc."

It appears that a meeting was also held between the Empowered G
Committees on 3rd July, 2002 at Bhopal in regard to the division of assets
and liatilities wherein a large number of officers represented their respective
States participated. In the context of independent working of the two State
Electricity Boards, it appears, an order dated 12th April, 200 I was issued.
Paragraph 2 of the said Order categorically states that the assets, liabilities,
H
156 SUPREME COURT REPORTS (2006] SUPP. 6 S.C.R.

A rights and undertakings of the existing Board would provisionally pass on to
the successor Boards with effect from 15.4.200 I in the manner specified
therein. CSEB contends that the said order was an artificial one. Such a
contention must have been raised by it before the Central Government also.

It may or may not be legal but indisputably it was a provisional one.
B Although there does not exist any provision in Sub-section (4) of Section 58
therefor, the Central Government in exercise of its statutory power was not
denuded to pass a provisional order. Even under Section 14 of the General
Clauses Act, a statutory authority may exercise his statutory power from time
to time. Furthermore, on a plain reading of the provision of Sub-section (4)
C of Section 58 vis-a-vis Sub-section (3) thereof, it appears that any order
passed by the Central Government directing a new Board or Corporation to
take over from an existing Board or Corporation evidently would be a
provisional power in the sense that the same would be subject to a final
decision which may be taken by the Central Government in terms of Sub-
section (3) of Section 58 of the 2000 Act.
D
It is difficult to accept the contention of Mr. Tankha that sub-section
(3) of Section 58 of the 2000 Act must follow an order passed under sull:
section (4) thereof. If such a contention is accepted, the same would result
in anomaly or absurdity. As we have noticed hereinbefore, in terms of sub-
section (4) of Section 58, the Central Government is not required to pass a
E final order in the sense that the take over may be in relation to all or any of
the undertakings and the assets, rights and liabilities are qualified by the
expression "take over". Whereas sub-section (3) of Section 58 contemplates
dissolution of the erstwhile Board, as we have noticed hereinbefore, the date
on which the new Board takes over from the existing Board may be different
p from its dissolution. Constitution of two boards admittedly has been made
from different dates. The Central Government was to fix any of them or
specify another date.

Once an appointed day was fixed by the Central Government, this
Court can interfere therewith only if it is violative of Article 14 of the
G Constitution of India being arbitrary in nature. The order impugned in the
writ petition was admittedly passed by the Central Government upon giving
an opportunity of hearing to both the parties. We have referred to some of
the correspondences exchanged between the parties and/ or the respective
State Governments inter se or with the Central Government only for the
H purpose of showing that there had been certain m:iterials before the Central
M.P. STATE ELECTRICITY BOARDv. U.0.1. [S.B. SINHA, J.) 157
Government to appoint a day for the purpose of sub-section (3) of Section A
58 of the 2000 Act. Sub-sections (3) and (4) provide for a scheme. A
meaningful interpretation is required to be given thereto. Both the provisions
are required to be construed harmoniously.

The Central Government under the 2000 Act has an important role to
play. Such a statutory role is envisaged only when the States differ in their B
approach. It was, therefore, required to resolve the dispute wherefor it was
obligatory on its part to arrive at an independent decision.

The respective Boards had come into being on 15.11.2000 and 1.1.200 I.
The Central Government as indicated hereinbefoi«,could have chosen any of C
the aforementioned dates. For the said purpose, 'the.. functioning of the
respective Boards was required to be considered.

While interpreting the said provisions for determining the dispute
between the Boards, the Central Government was bound to consider the
hardships which may have been faced by the parties. It may also be that the D
writ petitioner - Board had altered its position, pursuant to the provisional
order of the Central Government, but the same was not decisive. It could
have been only one of the factors for arrivinlj at a decision by the Central
Government.

Sub-section (3) of Section 58 may not be a stand alone clause, but it E
envisages passing of a final order. Once an order is passed, a legal fiction is
raised by reason whereof the existing Board would be deemed to be dissolved.
For such purposes, it was not necessary that actual state of affairs should
have been the putative state of affairs.

In Ashok Leyland Ltd. v. State of T.N and Anr., (2004] 3 SCC I, this F
Court observed: '

"In Bhavnagar University v. Palitana Sugar Mill (P) Ltd., (SCC 111
at p. 123) it was stated that the purpose and object of creating a legal
fiction in the statute is well known. But when a legal fiction is created
it must be given its full effect. It was held in East End Dwellings Co. G
ltd. v. Finsbury Borough Council: (All ER p. 599 B-C)

"If you are bidden to treat an imaginary state of.affairs as real, you
must surely, unless prohibited from doing so, also imagine as real the
consequences and incidents which, if the putative state of affairs had
H
158 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A in fact existed, must inevitably have flowed from or accompanied it.
One of these in this case is emancipation from the 1939 level of rents.
The statute says that you must imagine a certain state of affairs; it
does not say that, having done so, you must cause or permit your
imagination to boggle when it comes to the inevitable corollaries of
that state of affairs."
B
(See also /TW Signode India ltd v. CCE Scale : SCC para 58.)

71. These decisions, therefore, show that whenever a legal fiction is
created by a statute, the same shall be given full effect."

C [See also Bharat Petroleum Corporation Ltd v. P. Kesavan and Anr.,
12004] 9 sec 1121

What is, thus, contemplated by clause (b) of Sub-section (4) of Section
58 of the 2000 Act is that upon dissolution of the existing Board, the assets,
rights and liabilities instead of vesting or continuing to vest in the State as
D was contemplated under Sub-section (3) shall vest in the new Board.

In that view of the matter, the submission of Mr. Tankha that the word
"and" used in between clauses (a) and (b) of sub-section (4) of Section 58
of the 2000 Act must be read conjointly is devoid of any merit. The word
"and" has been used for the purpose of showing the two different consequences
E arising therefrom.

Clauses (a) and (b) of sub-section (4) of Section 58 of the 2000 Act
operate in different fields. They have different consequences and, thus, both
cannot operate simu_ltaneously. When an order is passed by the Central
Government under clause (a) of sub-section (4) of Section 58, it merely
F provides for only take over of the existing Board by the new Board but the
same would not mean that the date provisionally fixed must be the date of
dissolution as envisaged under sub-section (3) thereof. Two different dates
are, thus, possible to be fixed, one provisional and other final. When a date
is appointed in terms of sub-section (3) of Section 58 of the 2000 Act, the
G same shall be final and the consequences arising therefrom shall ensue.
In the backdrop of the aforementioned events and particularly in view
of the fact that the Central Government had passed the impugned orders in
terms of its undertaking given before the High Court of Delhi and upon
compliance of the principles of natural justice, it is difficult for us to agree
H
M.P. STATE ELECTRICITY BOARD v. U.0.L[S.B. SINHA, J.] J59
with the contention of the learned senior counsel that the Central Government A
has failed to apply its mind.

We, however, agree with Mr. Tankha that sub-section (1) of Section 58
of the 2000 Act contemplates only a situation where the existing Board is
dissolved after the appointed day and it is continued till its dissolution. The
Act to that effect is anomalous but it does not lead to an absurdity. Although B
the writ petitioner - Board came into force from 1.1.200 I, having regard to
the fixation of the appointed day as I .11.2000, there cannot be a vacuum and
with a view to avoid .an absurd situation, all attempts must be made to iron
out the creases. When a statute is ambiguous, the construction which better
serves the ends and answers the principles of fairness and justice should be C
accepted.

Unfortunately, in this behalf, while enacting the 2000 Act, the Parliament
did not follow the corresponding provisions of the 1956 Act in terms whereof
the original State Electricity Board was to function for a period of one year
from the appointed day. The said provision evidently was made in the 1956 D
Act evidently for giving effect to the arrangements in regard to commencement
of functioning of the new Board which would take some time and with a
view to avoid a situation of this nature. But only because there does not exist
any such provision, the same leads to some amount of ambiguity, it would
not mean that we would not give effect to the substantive provision as
contained in Sub-section (3) of Section 58 of the 2000 Act. E
Illegality, if any, committed by CSEB in taking over of the assets of the
Madhya Pradesh Electricity Board without there being any formal order of
the Central Government in terms of Section 58(2) of the 2000 Act by itself
may not be enough to arrive at the conclusion that the cut-off date fixed · F
would be vitiated in law.

It couta have been a relevant consideration but not the only one.

We, therefore, are of the opinion that the cut-off date fixed by the
Central Government cannot be said to be so arbitrary so as to attract the G
wrath of Article 14 of the Constitution of India. The logical corollary of our
finding would be that the said date has been fixed in supersession of the
earlier orders.

We have noticed hereinbefore that the said order has been issued in
supersession of all earlier orders. The writ petitions filed by the CSEB H
160 SUPREME COURT REPORTS [2006) SUPP. 6 S.C.R.

A questioning the validity of the said orders, therefore, become infructuous.
The only question which survives now is as to whether the order dated
4.11.2004 regarding division of assets and liabilities between two successor
Boards is just and proper. The apportionment of current assets and liabilities
has been made on the basis of power consumption ratio of States. Any other
B variable might not have any rational nexus with the apportionment of current
assets and liabilities. It was submitted that the Central Government had adopted
the most rational method of apportionment of currerit assets and liabilities as
the power consumption ratio had a rational link with the subject matter of
apportionment. It was further submitted that any change from this principle
C would have resulted in the same grievance from the CSEB. Long term assets
and liabilities were divided in the ratio of 90: I0 and hence, overall, the
MPSEB had been given 85% of the assets and 84% of the liabilities. The
action on the part of the Central Government cannot hence be said to be
irrational. It may be observed that the revenue generation capacity would be
the most favourable variable to them as would be clear from the table given
D below:
Criteria Madhya Pradesh Chhattisgarh
Consumption 77% 23%
Connected load 79% 21%
E
Energy Consumption 77% 23%
Installed Capacity 67% 33%
Revenue Generation 64% 36%

F We have noticed hereinbefore that at one point of time, the MPSEB
was agreeable for apportionment of the assets on any of the grounds.

Revenue generation capacity may although be one of the grounds, the
same cannot be said to be an irrelevant criteria as it has a rational nexus with
current assets and liabilities. Fixing current liabilities on the basis of revenue
G generation capacity is not and cannot be held to be arbitrary or irrational.
Population ratio as defined in Section 2(h) is not relevant for application
of Section 58. Whenever population ratio is to be applied for the purpose cf
apportionment of assets and liabilities, the Parliament stated so categorically.
We may refer to, by way of example, that in Sections 42 and 43 the division
H of assets and liabilities have been made relatable to the population ratio. In
M.P. STA TE ELECTRICITY BOARD v. U.0.1. [S.B. SINHA, J.] 161

the instant case, the Central Government had maintained two other criteria, A
viz., geographical constitution and fixed assets.

Ordinarily, in a matter of this nature, this Court, in exercise of its
discretionary jurisdiction under Article 32 of the Constitution of India shall
not interfere. It would exercise judicial restraint. It may be erroneous but not
illegal. It may not be just and proper for one of the State Boards, but it is for B
the other.

In UJ. Fernandes & Co. v. The Deputy Chief Controller of Imports &
Exports and Ors., [1975] 1 SCC 716, this Court held:

"Really, the petitioner's contention is that the licensing authorities C
misapplied or wrongly applied the Imports and Exports Control Act.
A petition under Article 32 will not be competent to challenge any
erroneous decision of an authority. (See Gu/abdas & Co. v. Assistant
Collector of Customs and State of J.&K. v. Mir Gu/am Rasul.) A
wrong application of law would not amount to a violation of D
fundamental right. Das, C.J. said in the case of Gu/abdas & Co. that
if the provisions of law are good and the orders passed are within the
jurisdiction of the authorities there is no infraction of fundamental
right if the authorities are right or wrong on facts. In the case of
Gulabdas & Co. the petitioners challenged the order of the Assistant
Collector of Customs. The Customs Authorities assessed duty under E
Item 45(4) of the Indian Customs Tariff The petitioners in chat case
contended that the duty should have been assessed under Item 45(a).
This Court held that there was neither any violation of fundamental
right under Article 19 or any unequal treatment and the petition was
not maintainable. This Court in the case of Ujjam Bai v. State of U.P. F

I as also in the case of Bhatnagars & Co. Ltd. v. Union of India held_
the same view that any-erroneous decision would not be a violation
of fundamental rights."

In Fertilizer Corporation Kamgar Union (Regd.), Sindri and Ors v.
Union of India and Ors., (1981] 1 sec 568, this Court held: G
"In view of the fact that neither the decision to sell nor the sale
proceedings were unreasonable, unjust or unfair, it cannot be held
that the petitioner's rights if any, under Article 14 are violated. The
learned Attorney-General contended that arbitrariness would be
actionable under Article 32, only if it causes injury to the fundamental H
162 SUPREME COURT REPORTS f2006J SUPP. 6 S.C.R.

A rights of the petitioner, and that the petitioners in the instant case
have no fundamental right in the exercise of which they can challenge
the sale. We consider it unnecessary to examine this contention because
the sale is not vitiated by any unfairness or arbitrariness. If and when
a sale of public property is found to be vitiated by arbitrariness or
mala fides. it would be necessary to consider the larger question as
B to who has the right to complain of it."

We, therefore, are of the opinion that it is not a case where the Court
would exercise its extra-ordinary jurisdiction under Article 32 of the
Constitution of India.
c For the reasons aforementioned, the writ petition filed by MPSEB is
dismissed and the transfer cases filed by CSEB are allowed. No costs.

K.K.T. Appeal dismissed and Transfer
cases filed by CSEB allowed.