Holding

The Supreme Court held that the distribution and transmission system is insurable property under the Scheme, depreciation as per the Electricity (Supply) Act is appropriate, Section 6 of the General Clauses Act preserves the Board’s liability despite the Act’s expiry, and the assets were deemed transferred to the Board, making it liable for the premium.

Summary

The Andhra Pradesh State Electricity Board was required under the Emergency Risks (Factories) Insurance Act, 1962 to insure its distribution and transmission lines against war‑risk damage. The Director of the Emergency Risks Insurance Scheme fixed a balance premium of Rs 47,59,109, which the Board contested on four grounds: that the lines were not a "factory" and thus not insurable; that depreciation should be calculated under the Income‑Tax Act rather than the Electricity (Supply) Act; that the Act, being temporary, had expired before the notice was issued; and that the assets had not vested in the Board at the relevant times. The Supreme Court held that the Scheme expressly includes the whole distribution and transmission system as insurable property, that depreciation may be taken as per the Electricity (Supply) Act, that Section 6 of the General Clauses Act preserves rights and obligations despite the Act’s expiry, and that the assets were deemed transferred to the Board, making it liable for the premium. Consequently, the appeal was dismissed.

Issues considered

Whether distribution and transmission lines constitute 'factory' and insurable property under the Emergency Risks (Factories) Insurance Act, 1962 and its Scheme.
Which method of depreciation—under the Income‑Tax Act, 1922 or the Electricity (Supply) Act, 1948—applies for valuing the insurable property.
Whether the expiry of the temporary Emergency Risks (Factories) Insurance Act, 1962 invalidates proceedings initiated thereafter, and the applicability of Section 6 of the General Clauses Act.
Whether the timing of asset transfer to the Electricity Board affects liability for the insurance premium.

Legislation cited

Electricity (Supply) Act, 1948
Emergency Risks (Factories) Insurance Act, 1962s. 11, s. 17, s. 2
General Clauses Acts. 6
Income Tax Act, 1922

Subjects

Emergency Risks (Factories) Insurance Actinsurable propertydepreciationGeneral Clauses Acttemporary legislationelectricity boardwar risk insurancedistribution and transmission lines

Judgment

ANDHRA PRADESH STATE ELECTRICITY BOARD
A
v.
UNION OF INDIA & ANR.

MARCH 11, 1988

B rs. NATARAJAN AND M.N. VENKATACHALIAH, JJ.]
Emergency Risks (Factories) Insurance Act, 1962/Emergency
Risks (Factories) Insurance Scheme-Sections 2, 11 and 17/Clause 7 of
Scheme-'Distribution and Transmission lines'-Whether constitute
'insurable property'-'Property insurable under this Act'-lnterpreta-
C tion of-Grant of depreciation while ascertaining value of insurable
property-Whether principles of Income Tax Act or Electricity
(Supply) Act to apply.

General Clauses Act-Applicability to expired temporary-statu-
tes.,..-Effect of section 6 specifically invoked-Effect of.
D
The Emergency Risks (Factories) Insurance Act, 1962 was enac-
ted to provide for expeditious rehabilitation of industrial undertakings
in the event of damage in times of war. The Central Government
accordingly undertook to insure the factories against war-risks. The
Act envisaged the promulgation and effectuation of the Emergency \.
E Risks (Factories) Insurance Scheme mandating a compulsory insurance !"- 11
of factories against war-risks on payment of prescribed premia. r
The Director of Emergency Risks Insurance Scheme, after giving
an opportunity to the appellant to show cause, determined the sum of ·
Rs.47,59, 109.00 as balance of premia due from the appellant.
I'
The appellate authority-the Central Government-dismissed the
appellant's appeal. The legality of the proceedings so culminating in the
said appellate order was assailed by the appellant in the Writ Petition
before the High Court of Andhra Pradesh, which was rejected. Hence
this appeal by special leave.
G
The contentions pressed by the appellant were (l) that "Distribu·
tion and Transmission lines" did not constitute 'Factory' in the concept )._
of 'insurable property' under the 'Act'; (2) that in ascertaining the
value of the insurable property, depreciation had had to be granted
under the relevant provisions of the Income Tax, Act, 1922; (3) and that
H the 'Act' was itself a piece of temporary legislation and the notice dated
216
A.P. STATE ELECT. BOARD v. U.0.1. 217

28. i l. 1968 issued after 10.1.1968 when the legislation had spent itself A
out by effiux of time was without the authority oflaw.

Dismissing the appeal, it was

HELD: ( 1) The inhibitions of the limited import of the expression B
'factory' do not limit the identity of the 'insurable property' which will
have to be ascertained and determined in accordance with the provisions
of the 'scheme'. The Act enables the .Central Government to declare
that provisions of the 'Act' and of the 'scheme'. shall apply to assets
specified in section 17(l)(d), which include the whole or a specified part
of the distribution and transmission system. The 'scheme' prepared and
promulgated by notification S.O. 3974 which came into force with effect c
frolD 1. 1. 1963 provides, among other things, that the whole of the
"Distribution and Transmission Systems" shall constitute 'insur-
able property' and that the 'Act' and the 'scheme' shall be applied to
tbein. [220C-H]
D '
(2) The provisions as to depreciation in a taxing law like the
Income Tax Act contain elements of incentives and ~re also informed by
considerations of policy of the tax and do not reflect purely economic
criteria relevant to the determination of the depreciation. In the instant
case, the High Court found-that the Electricity (Supply) Act itself
provided a formula for working out the allowance of depreciation and E
the appellant had been adopting that formula for valuation of its
properties, assets, etc. There was, therefore, no error in principle in
applying the standard of depreciation provided in Electricity (Supply)
Act, 1948. [22IG; 2220] .

(3) Whatever be the principles of construction of temporary-sta- f
totes and the effect of the rights and obligations under them after the
expiry of the statute itself, the 'Act' in the instant case contains specific
provisions preserving the rights and obligations. For that purpose the
'Act' invokes the provisions of section 6 of the General Clauses Act. The
principle behinds. 6 of the General Clauses Act is that all the provisions
of Acts would continue in force for purposes of enforcing the liability G
incurred when the Acts were in force and any investigation, legal pro-
ceedings, or remedy, may be instituted, continued or enforced as if the
Acts had .not expired. fa22F~H; 223A-B]

Amadalavalasa Cooperative Agricultural & Industrial Society
Ltd. v. Union of India, [1976] 2 SCR 731at738, followed. H
_,
218 SUPREME COURT REPORTS [1988] 3 S.C.R.

A CIVIL APPELLATE WRISDICTION: Civil Appeal No. 881
of 1974

From the Judgment and Order dated 25.7.1973 of the Andhra
Pradesh High Court in Writ Petition No. 3950 of 1971.

B K. Raj. Choudhary for the AppeIIant.
)..
V.C. Mahajan, C.V.S. Rao and R.P. Srivastava for the Res-
pondents.

The Judgment of the Court was delivered by /'.
c VENKATACHALIAH, J. This appeal; by Special Leave, by the
Andhra :Pradesh State Electricity Board- a corporation and consti- ~
luted under The Electricity (Supply) Act, 1948- arises out of the
Judgment and Order dated, 25.7.1973, of the Andhra Pradesh High
Court in.Writ Petition No. 3950 of 1971 on its file, rejecting appeilant's
D challenge to certain proceedings for the recovery of insurance premia
respecting the appellant's undertaking under the Emergency Risks
(Factories) Insurance Act 1962 ('Act') culminating in the appeIIate-
order, dated, 12.5.1971 of the Central Government under Section
11(3) of the Act affirming, in turn, that dated, 15.10.1969 of the
Director of Emergency Risks Insurance Schemes determining the
E balance of the premia payable at Rs.47,59, 109 .00. >-
2. The scheme under the Act which came into force on 1.1.1963
lapsed with the termination of the emergency on 10.1.1968. The
legislation was to meet the need to provide for expeditious rehabilita-
tion of industrial undertakings in the event of damage in times of war
F and th.e Central Government, accordingly, undertook to insure the t-
factories against such war-risks and. to indemnify the owners in respect
of loss and damage caused by enemy-action, so that, there might be an
expeditious industrial rehabilitation so vital in national interests.

Sub-section 3 of the Act envisages the promulgation and effec-
G tuation of the Emergency Risks (Factories) Insurance Scheme,
mandating a compulsory insurance of factories against war-risks and
the payment of premia in terms of and in accordance with the scheme. >--
3. The Director of the Emergency Risks Insurance Scheme
caused a show-eause notice, dat~d 28.11.1968 to be issued to the
H appeilant calling upon it as to why the balance of premia for the
A.P. STATE ELECT. BOARD v. U.0.1. [VENKATACHALIAH, J.[ 219
'(
relevant periods should not be fixed at Rs.47,59,109.00 as against a
A
much smaller sum indicated by appellant as its liability in that behalf.
The cause shown by the appellant by its representation, dated,
24.1.1969 against the proposed addition not having commended itself
to the Director, the latter, by his order dated 15.10.1969 over-ruling
objections of the appellant, determined that a snm of Rs.47,59, 109.00
was due and recoverable from the appellant by way of balance of B
premia.

Against this determination, appellant carried-up, under Section

•
11(3) of the Act, an appeal before the Central Govermnent. The Cent-
ral Government, after affording an opportuniiy to the appellant of
being heard and on a consideration of the merits, dismissed the appeal
i
;.. by its order dated, 12.5.1971. The legality of the proceedings so
c
culminating in the said appellate--0rder was assailed in the Writ Peti-
tion before the High Court.

4. We have heard Shri K. Rajendra Choudhary, learned counsel
for the appellant and Shri V.C. Mahajan, learned senior counsel for D
the Union of India, respondent in the appeal. The contentions urged
by Shri Choudhary in support of the appeal are substantially on the
lines of those raised and urged before the High Court. They admit of
being formulated thus:

(a) That the Distribution and Transmission lines cannot be E
said to fall within the concept of 'Factory' and in

- quantifying the extent and value of the insurable pro-
perty, the High Court fell into an error in including the
value of the "Distribution and Transmission lines"

(b) That in ascertaining the value of the insurable-pro- F
perty, depreciation had had to be granted under the
relevant provisions of the Income-Tax Act 1922 and
.that the limiting of the depreciation fo that under the
relevant schedules to The Electricity (Supply) Act 1943
was erroneous.
G
(c) That the 'Act' was itself a piece of temporary legisla-
tion which lapsed on 10.1.1968 and that the proceed-
ings by the Director initiated, as they have come to be,
pursuant to show--eause notice dated, 28.11.1968 sub-
sequent to the date of expiry of the statute itself, was
without the authority of law. H
220 SUPREME COURT REPORTS [1988] 3 S.C.R.

A (d) That substantial portions of the insurable properties
came to vest in the Appellant-Board on dates subse-
quent to 1.11.1963 and that the appellant, in respect of
those .11ssets was not liable to premia as appellant had
not become the legal---0wner of those assets.
B
We shall now proceed to examine the merits of these contentions l
seriatim. ~

5. Re: Contention (a)

c
The argument is that The "Distribution and Transmission Lines"
did not constitute 'Factory' and therefore their value was not includi- \
i.
ble in the concept of 'insurable property' under the 'Act'. The fallacy
in this argument lies in that it over-looks the definition of the words
"property insurable under this Act" and also the specific language of
.1
Section 17(1) of the Act. The argument also over-looks the express
D provisions of the statutory 'scheme' put into operation.

Section 2(1) of the 'Act' which defines "property insurable under
the Act", inter alia, enables the inclusion of "Such other plant machin-
ery or material as may be specified in the Scheme also."

E That apart, Section 17(1) of the 'Act' enables the Central ~-
Government, by notification, to declare that provisions of the 'Act'
and of the "scheme" promulgated thereunder shall apply to insuring of
the various classes of assets specified in clauses (a) to (d) of that
section.

F Clause (d) of Sub-section ( 1) of Section 17 refers to: t-
" .... The whole or a specified part of the distribution and
transmission systems, sub-stations, switch houses, and
transformer houses of electric supply undertakings gener-
ally or of specified electric undertakings .... "
G
The 'scheme' prepared and promulgated by Notification S.O.
3947 which came into force with effect from 1.1.1963, provides, among
other things, that the whole of the "Distribution and Transmission }-
Systems," "sul:rstations", "switch houses", "transformer-houses" etc.
shall constitute "insurable property" and that the 'Act' and the
H 'scheme' shall be applied to them. ·
A.P. STATE ELECT. BOARD v. U.0.1. [VENKATACHALIAH, J.] 221
' y ·· 6. It is, thus, clear that the inhibitions of the limited import of
A
the expression 'Factory' do not limit the identity of the 'insurable-
property' which will have to be ascertained and determined in accor-
dance with the provisions of the scheme. The view of the High Court
is, in our opinion, fully justified. There is no merit in this contention.
Contention (a) is, accordingly, held against the appellant.
B
A 7. Re: Contention (b)

- In determining the value of the insurable property, the scheme,
by its clause 7, envisages due allowance for the depreciation being
~ made. The question is whether depreciation allowed in accordance
with the schedules to the Electricity (Supply) Act, 1948, in preference
l to the rates of depreciation provided for in t_he Indian Income Tax Act, c
r-
1922 claimed by the appellant, is incorrect in principle. The High
Court noticed that the provisions of the Electricity (Supply) Act, 1948,
related to the electiricity undertakings themselves and that, further,
appellant had itself made-up its books in regard to valuation of various
properties, assets etc. adopting the depreciation based on the provi- D
sions of the Electricity (Supply) Act, 1948.

The argument of Shri Rajendra Choudhary, learned counsel, is
that where two alternative bases for the determination of the deprecia-
_,...( lion were available, appellant was entitled to opt for the more benefi-
cial and less dis-advantageous of the two. There is again a fallacy in E
this approach. The 'Act' or the 'Scheme' does not specify any bases for
the computation of depreciation. It would appear that there were some
administrative instructions to the effect that wherever the matter was
governed by specific statutory-provisions, those provisions be applied
-+ and wherever statutory provisions regulating the matter were not
available, then, the provisions of the Income Tax Act be taken into F
account. These instructions have no statutory force. But even to the
extent they go, it was not as if two alternative methods were open.
Indeed, the two methods were mutually exclusive and not alternative.

That apart, the provisions as to depreciation in a taxing law like
the Incmµe Tax Act· contain elements of incentives and are also G
..l, informed by considerations of policy of the tax and do not reflect
purely economic criteria relevant to the determination of the deprecia-
tion. The High Court, on the point, held:

" ... :When once it is found that the Electricity Board
(Supply) Act itself provides a formula for working out the H
,
222 SUPREME COURT REPORTS [1988] "3 S.C.R.

allowance of depredation and the Electricity Board has
A
been adopting that formula and writing down the allowance
of depreciation in its books we fail to see how, if that
method is taken into accotini it can be said to be inconsis-
tept with clause 7 of ihe insurance Scheme. Both the Tri-
bunals therefore in our opinion, rightly accepted that as the
B allowance for depreciation and permitted the same.

The contention that the statutory depreciation shouid
have been disregarded and instead the depreciation
worked out tinder the income Tax Act should have been ·
made applicable has no force, because no rule or provision A
C of law sustains any such contention .... " "{

There is no error in- principle-eamn!itled by die High toiiri in
applying the principles contained in tliesC!i~'C!ules to the Electricity
(Supply) Act, 1948. We do not find legal support for the ill§isieiice by
the appellant on the adoption of the standards of .dejJreciaiion con-
D tained in the provisions of tncoiiie tax Act, 1922. The finding of the
High Court in this behaif does not also call for interference. Conten·
lion (b) is lllso, accordingly, answered against the appellant

8. Re: Contention (cj

E The assumption basic to the argument is that the 'Act' is a
temporary-statute which expired by efflux of Hme Bil iii.1. i968 and
that the proceedings subseqtientiy ttiiiliileiiced on 29.11.1968 were
without jurisdiction. Seoiioii i; of the general clauses Act is held in-
applicable to a tllse of expiry of a temporary-statute on the view that
Section 6 is attracted wherever thete is a repeal arid that !he case of
F expiry of a statute by efflux of iiitle I~ lloi a case of repeal. Whatever be
the principles of etll\Slruction of temporary-statutes and the effect on
the rights and obligations under them of the expiry of the statute itself,
the 'Act' in the present case contains specific provisions preserving the
rights and obligations. The 'Aci' invokes the provisions of Section 6 of
the General Clauses Aci. The matter is placed beyond controversy by
G the pronouncement of this court in Amadalavalasa Cooperative
Agricultural & Industrial Society ltd. & Anr. v. Union of India &
Anr., (See 1976 2 SCR 731at738).

" .... Therefore, if under s. 5 of the 'Factories Act' or
under s. 7 of the 'Goods Act', the liability to pay the pre-
H mia on full insurable value was incurred before the expiry
A.P. STATE ELECT. BOARD v. U.0.1. [VENKATACHALJAH, J.] 223
y of the Act, s. 6 of the General Clauses Act would enable A
the ascertainment of the extent of liability for the evaded
premia by an officer who was authorised when the Act was
in force or by an officer authorised after the expiry of the
Act. The principle behinds. 6 of the General Clauses Act is
that all the provisions of the Acts would continue in force B
for purposes of enforcing the liability incurred when the
Acts were in force and any investigation, legal proceeding,
remedy, may be instituted, continued or enforced as if the
Acts had not expired ..... "

Contention (c) is, accordingly, also held and answered against
the appellant. c
9. Re: Contention (d)

The argument is that though the Appellant-Board was consti-
tuted on 1.4.1959, the properties of the erstwhile electrilcity under- D
taking of the State Government were transferred to and became the
property of the Appellant-Board by notifications issued on various
dates subsequent to 1.11.1963 and that, accordingly, during the rele-
vant periods during which the legal ownership of the property did not
vest in the appellant, it was not liable for the premia.
E
It is relevant to mention here that the period for which the
demands were raised was between 1.1.1963 and 10.1.1968. Appellant's
contention in this behalf was repelled in the statutory-appeal on the
ground that though formally the notifications came to be issued on vari-
ous dates subsequent to 1.4.1959" the assets had infact been transfer-
red to and were acknowledged and treated by the appellant as its own in
-+ its Balance-Sheets.
F

10. Before the authorities, it would appear, this point had not
been seriously disputed by the appellant. In a let.ter dated, 24.1.1969,
the Secretary of the Appellant-Board wrote to the Director.
G
" .... We may mention that we are accepting your stand
that the properties transferred to the Board by the Govern-
ment become the properties of the Board as and from the
dates of original transfer .... "

The Director in his order, dated, 15.10.1969 observed: H
224 SUPREME COURT REPORTS [1988] 3 S.C.R.
'f
A " ....The assets had in fact been transferred by the State
Government to the Board from the 1st April, 1959 and the l
same had been shown as their own assets by the Board is
their balance sheets since then. If for certain reasons the
State Government issued the notifications long afler the
expiry of the two 'months period i.e., on 5.10.1964,
B
28.10.1966 and 14.12.1966, etc. it was only a sort of for-
mality, particularly in view of the fact that the said notifica- >-.
tions, referred to the ·assets as having been transferred to

c
the Board as on 1.4.1959. The Board correctly became
owner of such assets right from 1.4.1959. This point was
conceded by the Board in its letter, dated, 24th January,
1969 and was also not pressed in the discussions that I had
with them on the 26th and 27th July, 1969.
(underlining supplied)
..'i'
In·view of this nothing survives of contention (d) either. It is
D accordingly held against the appellant.

· 13. In ·the result, for the foregoing reasons, this appeal fails and
is dismissed. In the circumstances of the case, the parties· are, how-
ever, left to bear and pay their ciwn costs in the appeal.

R.S.S. · Appeal dismissed. _)._