section 5 of electricity act

Supreme Court: In a case wherein an appeal was filed before this Court against the judgment and decree of the Bombay High Court (‘High Court’) of a suit brought by the appellants for a declaration that an Order issued by the Government of Bombay under the Defence of India Rules was void, the 3-Judges Bench of Harilal Kania, C.J., Patanjali Sastri* and S.R. Das, JJ., held that Sections 5(1)(a), 5(1)(e)(ii) and 5(1)(g) of the Electricity Act, 1910 (‘Act’) made it abundantly clear that on revocation of a licence under Section 5 of the Act, the “undertaking” of the licensee did not come to an end.


The appellants, Hubli Electricity Co. Ltd., were carrying on the business of generating and distributing electric current in Hubli in the district of Dharwar under a licence issued by the Government under the Act. As there were complaints of irregularity and inefficiency, the Government revoked the licence with effect from 1-5-1944. On 30-4-1944, the Government served a notice under Section 5 of the Act exercising their option to purchase the undertaking from the appellants. On 3-5-1944, the Government issued an Order under Rule 81(3) of the Defence of India Rules, 1939 purporting to authorise their Deputy Engineer “to exercise such effective control as to keep the said undertaking in efficient working order consistent with the provisions of the Act” and to prohibit the appellants from interfering with or obstructing the said officer in the discharge of his functions. The appellants filed a suit before the High Court for declaration that such an Order under Rule 81(3) was void. The High Court dismissed the suit and thus, an appeal challenging the judgment and decree of the High Court was filed before this Court.

Analysis, Law, and Decision

The Court noted that the only contention raised before this Court was that on the date on which the Government purported to issue the Order under Rule 81(3), that is, on 3-5-1944, there was no “undertaking” to be kept “in efficient working order” by the exercise of effective control by the officer named in the order as the revocation of the appellants’ licence had already taken effect on 1-5-1944. The Court further took note of the appellants’ submission that the revocation of the licence operated to put an end to the appellants’ “undertaking” and inasmuch as Rule 81(3) presupposed an existing undertaking, providing as it does for “the exercise of control over the whole or any part of an existing undertaking”, the order purporting to be issued under that Rule was inoperative and void. The Court rejected this contention and opined that it was manifestly untenable.

The Court stated that Section 5(1)(a) of the Act provided that on revocation, “all the powers and liabilities of the licensee under this Act shall absolutely cease and determine” and Section 5(1)(e)(ii) of the Act provided that “the revocation of the licence shall extend only to the revocation of the rights, powers, authorities, duties and obligations of the licensee from whom the undertaking is purchased, and save as aforesaid the licence shall remain in force, and the purchaser shall be deemed to be the licensee”. The Court further stated that Section 5(1)(g) of the Act provided that after the revocation took effect and before the purchase was completed, “the purchaser may, with the previous sanction of the Provincial Government, work the undertaking pending the completion of the sale”. Thus, the Court held that these provisions made it abundantly clear that on revocation of a licence under Section 5 of the Act, the “undertaking” of the licensee did not come to an end.

The Court dismissed the appeal with costs.

[Hubli Electricity Company Limited v. Province of Bombay, 1950 SCC 792, decided on 1-12-1950]

*Judgment authored by: Justice Patanjali Sastri

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