1972 (12) TMI 76 - SC - Companies Law

Whether the appellant is entitled to compensation for the service lines? Held that - It seems beyond the pale of controversy that the Umpire did not award compensation to the appellant in respect of the service lines for the sole reason that they were laid at the cost of the consumers. Some market- value the service-lines must have had, even if it be no more than the scrap value. But to the way of thinking which the Umpire adopted, that consideration had no relevance. The service-lines were paid for by the consumers and that for the Umpire, was the end of the matter. That, patently, was the wrong end. The date of sale being 4/5 May, 1959 the consumers contribution will roughly represent the market value of the service, lines even if, as, required by the first proviso to section 7(1) of the Act as it then stood, due regard is to be had to the nature and condition for the time being of the works to the state of repair thereof, to the circumstance that they are in such a position as to be ready for immediate working and to the suitability of the same for the purposes of the undertaking. Accordingly, we direct that the award of the Umpire will stand amended to the extent that the fair market value of the appellant s undertaking shall be ₹ 23,81,670 plus ₹ 2,38,255, plus ₹ 5,26,962/60 that is to say ₹ 31,46,887/60.

Summary

Issues Involved:
1. Entitlement to compensation for service lines laid with consumer contributions.
2. Determination of the fair market value of the undertaking.
3. Excess payment made by the Board and entitlement to refund with interest.

Issue-wise Detailed Analysis:

1. Entitlement to compensation for service lines laid with consumer contributions:
The primary issue was whether the appellant was entitled to compensation for the "service lines" laid with the help of contributions made by consumers. The arbitrators could not agree on this issue, referring it to an umpire who decided that the appellant was not entitled to claim the value of the portion of the service lines laid at the cost of consumers. The Civil Judge of Moradabad upheld the market value fixed by the umpire but misunderstood the appellant's contention regarding compensation for service lines, mixing it up with security deposits. The High Court of Allahabad dismissed the appellant's appeal, agreeing with the umpire. The Supreme Court, however, held that the appellant was entitled to compensation for service lines as per Section 7(1) of the Indian Electricity Act, 1910, which included electric supply lines within the definition of "works."

2. Determination of the fair market value of the undertaking:
The umpire determined the fair market value of the appellant's undertaking as Rs. 23,81,670, excluding the value of service lines laid at the cost of consumers. The appellant argued that this exclusion was erroneous. The Supreme Court found that the umpire had misconducted himself by excluding the value of service lines, which should have been included in the fair market value as per the provisions of the Indian Electricity Act, 1910. The Court noted that the umpire likely relied on the amended Section 7A of the Act, which was not applicable as the acquisition occurred before the amendment.

3. Excess payment made by the Board and entitlement to refund with interest:
The umpire found that the respondent had made an excess payment of Rs. 9,80,238 to the appellant, which was liable to be refunded with interest. The Supreme Court did not specifically address this issue in detail but focused on correcting the fair market value determination. The Court directed that the fair market value should include the previously excluded amount for service lines, thus amending the award to Rs. 31,46,887.60.

Conclusion:
The Supreme Court allowed the appeal to the extent that the fair market value of the appellant's undertaking was amended to include the value of service lines laid with consumer contributions. The amended fair market value was determined to be Rs. 31,46,887.60, and the appeal was allowed with costs. The Court emphasized the legal principle that an award can only be set aside if there is an error of law apparent on the face of the award, which was found in this case due to the umpire's exclusion of the value of service lines.