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TMI Blog2006 (9) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entire State of Madhya Pradesh as notified and constituted by 'States Reorganisation Act, 1956' (for short the 1956 Act ). 2. 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. 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 revenues collected to the MSEB till 30th November, 2000. The State of Madhya Pradesh also constituted a new Board with effect from 1.1.2001. 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. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertaining the total liabilities of the two States and their classification in terms of the purported criteria laid down in the notification dated 12.4.2001. 5. The State of Chhattisgarh filed a writ petition in the High Court of 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 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. 6. 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 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 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of assets, rights and liabilities in accordance with law and to ensure equitable, 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 Boards; and (e) Pass any other order and/ or direction, as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. 8. 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 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 contention of the Petitioner - Board and in particular in ignoring 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted 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. 11. 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 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. 12. The 2000 Act was enacted to provide for the reorganization of the 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Sub-section (1) in respect of the Board or the Corporation shall include a direction that the Act under which the Board or the Corporation was constituted shall, in its application to that Board or Corporation, have effect subject to such exceptions and modifications as the Central Government thinks fit. (3) The Board or the Corporation referred to in Sub-section (1) 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 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: (4) Nothing in the preceding provisions of this section shall be construed as preventing 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 Electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch body corporates as may be mutually agreed upon between the successor States, failing which such directions as may, from time to time found necessary, be issued by the Central Government. 16. 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 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. 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. 17. In the event of constitution of such Boards by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 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 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, and no 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 could not have been a direction in terms of Sub-section (4) of Section 58 of the 2000 Act. 20. There must have been some bickering between the two States with regard to collection of revenue. It appears that the Additional Secretary of 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 21.11.2000. 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores C. Right to revenues/ receivables D. Right to collect arrears E. Liabilities (mutual payment to be backed by State Govt. mandate 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. 22. 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 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 of Chhattisgarh has been constituted w.e.f. 1.11.2000. 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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the successor States under 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 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 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 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 consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the 2000 Act. 27. 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 Sub-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 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 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. 28. 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held in East End Dwellings Co. 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 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. (See also ITW Signode India Ltd. v. CCE Scale 2003(153)ELT501(SC) 71. These decisions, therefore, show that whenever a legal fiction is created by a statute, the same shall be given full effect. [See also Bharat Petroleum Corporation Ltd. v. P. Kesavan and Anr. AIR2004SC2206 ] 32. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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. 37. 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 would be vitiated in law. It could have been a relevant consideration but not the only one. 38. We, therefore, are of the opinion that the cut-off date fixed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, that in Sections 42 and 43 the division of assets and liabilities have 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. 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. 42. In U.J. Fernandes Co. v. The Deputy Chief Controller of Imports Exports and Ors. [1975]3SCR867 , this Court held: Really, the petitioner's contention is that the licensing authorities 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 Gulabdas Co. v. Assistant Collector of Customs and State of J. K. v. Mir Gulam Rasul.) A wrong application of law would not amount to a violation of fundamental right. Das, C.J. said in the case of Gulabd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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