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Appeal from Original Order No. 119 of 1962, decided on 27th April 1965.

‑Valuation of assets ---Determination of market value‑Electrical undertaking not a commodity which can be hawked about‑Manner of arriving at fair market value not provided in Act‑Act re‑enacted in India by Indian Electricity (Supply) Act, 1948 and lacuna removed ---Arbitrators, for arriving at approximate figure regarding fair market value, making valuation on basis of calculations prescribed in Indian Act and then applying conditions prescribed by indigenous Act to come to final figure‑Reference to foreign Act, held, in circumstances of case, not only permissible but the only fair means of arriving at correct decision.

An electrical undertaking cannot be hawked about in the open market, nor can there be a market for such concerns. Therefore, other factors have to be considered to arrive at such a value. The Electricity Act was enacted in 1910 and there was no guidance in the Act itself. In India the Act was re‑enacted and the lacuna was removed in 1948. But there was no corres ponding amendment in Pakistan.

Although it is not advisable to rely on provisions of a foreign Act to arrive at any conclusion, in this case when the origin of the legislation was common and the conditions in the two countries similar it was permissible to refer to the pro visions introduced in the foreign Act by way of removing a lacuna occurring 'in the parent Act. The Arbitrator has taken the agreed valuation based on the calculations prescribed in the foreign Act to come to an approximate figure regarding the fair market value and then applied the conditions prescribed by the indigeneous Act to come to the final figure. In the circumstances of the case, held, that this was not only per missible but also the only fair means of arriving at a correct decision regarding the valuation of the assets.

‑Sale of electric concern‑Valuation of assets‑Balance‑sheet‑Does not represent actual state of affairs and cannot be a guide for arriving at fair market value.

The balance‑sheet does not represent the actual state of affairs and cannot be a guide for arriving at the fair market value as required by the statute. The Legislature has not itself indicated what would be the fair market price. If the balance‑sheet would be the standard, then the Legis lature would have indicated that; but in this case the Legislature 'has made no reference to the balance‑sheet.

‑Conciliation‑No difference between arbitra tion and conciliation‑All arbitrations involve conciliations.

‑Arbitration proceed ings‑Courts cannot be regarded as Courts of appeal from decision of Arbitrator‑Award can be set aside only on limited grounds set forth in S, 30.

Asrarul Hossain and Abdul Azim for Appellant.

Maksum‑ul‑Hakim, Advocate‑General and Syed A. B. M. Hussain, Government Pleader with A. H. Mirza for Respondent.

K. M. Subhan and Md. Nurul Huq, Joint Official Liquidator in person.

.‑This Miscellaneous appeal arises out of an order passed by a Subordinate Judge of Dacca setting aside an award. The Arbitration arose out of a dispute as to the valuation of the assets of the Dacca Electricity Development Company, which was acquired by the Government of West Pakistan being empowered by the provisions of section 5 (c) of the Electricity Act as amended. The Provincial Government elected to purchase the undertaking of the Dacca Electricity Company in the public interest. Having taken over the under taking the question arose, what would be the compensation, which was to be paid to the Company. As a dispute arose regarding the amount, the matter was referred to Arbitra tion under section 52 of the Electricity Act, 1910 under which the Provincial Government was to nominate the Arbitrator. The Arbitrator appointed by the Provincial Government was the District Judge of Dacca. There was prolonged proceeding before the Arbitrator regarding the valuation of the assets of the Company. The assets of the Company were taken over by the Government on 31‑5‑57. The Government offered Rs. 70,84,444 as the fair market value of the assets of the company whereas the electricity company demanded Rs. 1,75,78,977 as a fair market value of its assets. The relevant point for determination was framed by the Arbitrator as follows:

"What would be the fair market value on the date of acquisition of each of the items of the property under claim, regard being had to the utility and other conditions of the property acquired "

During the proceedings before the Arbitraror, various valuations of the assets of ‑the Company were submitted by different bodies which have been incorporated in a chart and there the valuation against each item is shown under six columns. The valuation is as per balance‑sheet. The second valuation is the valuation given by the Company, the third valuation is the valuation of the Chief Engineer of the Government, the fourth valuation is the valuation which is headed as the depreciated value of price structure worked out jointly by the representatives of Dacca Electricity Develop ment Limited and the Water and Power Development Authority. It may be mentioned here that the Water and Power Develop ment Authority is the statutory body, which now runs the electricity supply concern after the acquisition by the Govern ment. The fifth valuation is given as a fair market value as determined by the representatives of the Water and Power Development Authority and there is a sixth valuation which has been worked out according to the provisions of Indian Electricity (Supply) Act, 1948. There is a note appended to the chart, which shows the principles adopted for the calculations. So far as the agreed valuation is concerned, the note says that the price structure was worked out on the basis of replacement cost as depreciation, that is, cost of new plant as on 31‑5‑57 less depreciation. So far as the market valuation given by the Water and Power Development Authority is concerned, the note says that fair market value was obtained by applying section 5 of Electricity Act, 1910 to the price structure at column 6 (that is the agreed valuation) and the third note applies to the valuation according to the Indian Electricity Act, 1948 and was to the following effect:‑

"Value based, on Electricity Supply Act, 1948 original cost less depreciation on 90 % of the original cost of the assets."

Of the fifteen items, item No. 15, cash in hand of Commercial Manager, was not the subject‑matter of arbitration. The total of the agreed valuation excluded the lands owned by the Company (Item No. 1), unexpired premiums in respect of the land leased by Company (Item No. 2) and public lamps (Item No 10). These three items, as it appears from another note, were left by the representatives of the Dacca Electricity Development Company to be disposed of by the arbitrator. The agreed valuation was Rs, 95,37,127. The valuation according to the balance‑sheet was Rs. 74,05,124. The ' Chief‑Engineer's valuation was Rs. 70,84,444. The Arbitrator considered all the circumstances and the statutory provisions and came to the conclusion that the agreed valuation was fair market valuation but accepting the contention of the Government that the machinery was over worked, deducted from the value of the machinery of items Nos. 6 and 7 under the agreed valuation a sum of Rs. 6,00,000 by way of additional depreciation on account of overworking of the machinery and on account of prevailing inconvenient and uneconomic system. So far as the value of the land is concerned, it was assessed by the Arbitrator at a sum of Rs. 39,N13 as per the valuation by Water and Power Develop ment Authority. Accordingly, the Arbitrator awarded that the Government was liable for payment to the claiment Company a sum of Rs. 89,76,940. The Provincial Government not agreeing to the award, applied to the learned Arbitrator for filing the award in Court and the Arbitrator filed the award in Court under section 14, subsection (2), of the Arbitration Act. Thereafter the Provincial Government filed a memorandum containing objection to the award. The Government alleged that the Arbitrator had misconducted himself in passing the award and, secondly, that the award was illegal. The Dacca Electricity Development Company appeared and contest ed the case of the Government through its official Liquidator.

At the time of trial, the objection as to the misconduct was abandoned and the parties joined issue only on the point whether the award was illegal.

The learned Subordinate Judge held that the Arbitrator had acted illegally in over‑looking the different criteria enume rated in the proviso to the section 5 (b) of the Electricity Act and as such the basis of the calculation of the Arbitral or was wrong, being in contravention of section 5 (b) of the Act. The learned Subordinate Judge further held, in this connection, that the Arbitrator's entire basis of calculation was wrong as he had founded his calculation on the purchase price of the materials plus the cost of transport and installation instead of their fair market value at the time of purchase. Secondly, the learned Subordinate Judge held that the original depreciation value worked out jointly by the representatives of Dacca Electricity Development Company and the Water and Power Development Authority showed an increase over the published balance -sheet of the Company on 31‑5‑57 which was not explained. Thirdly, the learned subordinate Judge held that the agreed valuation was accepted by the Arbitrator without reference to the provisions inserted in the proviso to section 5 (b) of the Electricity Act, 1910, as he treated the case as not one for f Arbitration but as one for conciliation. Being of this view, the learned Subordinate Judge set aside the award as being

The Company has preferred this appeal.

Mr. Asrarul Hossain, appearing on behalf of the appellant, has taken us through the relevant record and has contended that the basis for setting aside the award was the finding of the learned subordinate Judge (a) that the learned Arbitrator had not applied his mind to the provisions of section 5 (b) of the aforesaid Act before accepting the agreed valuation (b) that there was no explanation for the increase over the balance‑sheet figure and (c) that the Arbitrator had treated the case as that of Conciliation, instead of arbitration. Mr. Asrarul Hossain has argued that the first finding of the learned Subordinate Judge is not correct. As regards the increase in valuation, he has argued that the valuation in the balance‑sheet is only for the purpose of income‑tax and has got no reference to the actual state of affairs, that is, the fair market value and he has further argued that there is no difference between the arbitration and

So far as the first point is concerned, it appears that the learned Subordinate Judge was not justified in making the com ment that the valuation arrived at by the Arbitrator, was without reference to the provisions of the Act. After setting out in his award the circumstances leading to the agreed valuation, the learned Arbitrator states as follows: ‑

"On the other hand; the learned counsel for, the opposite- party contends that it is but a theoretical price structure which should be further scaled down in consideration of the depreci atory factors mentioned in section 5 of the Electricity Act, 1910. It is therefore, necessary to refer to section 5 of the aforesaid Act under which the valuation is to be made. Section 5 (b) lays down the provision for sale of the assets of an electric concern on cancellation of licence to its licensee. This is followed by an important proviso which runs

"Provided that the value of such lands, building works, materials and plants shall be‑deemed to‑be their fair market value at the time of purchase, due regard being had to the nature and condition for the time being of such lands, to the circumstances that they are in such a position as to be ready for immediate working and to the suitability of the same for the purpose of undertaking but without any addition in respect of compulsory purchase or of good‑will or of any profits which may be or might have been made from the undertaking or of any other similar consideration. "It follows therefore, that in assessing the value of the assets, of the claimant company the factors to be kept in view are the nature and conditions for the time being of the assets, the state of their repair and the circumstances that they are in such a position as to be ready for immediate working and their suitability for the purpose."

He then proceeded to take, item by item, each of the factors mentioned in the proviso. So far as the state of repair is concerned, he considered the various items and then came to the conclusion:‑

"Nevertheless I find that the machinery had been working well for the last 4 years after the acquisition by Government without any breakdown which is a positive proof of proper maintenance of the electrical undertaking."

So far as the second factor is concerned, he has held:

"There is no evidence either to hold that the assets of the claimant company were not in a position to be readily available for immediate working. As a matter of fact the opposite party has been using the very same machinery as they took over in 1957 and other assets of ‑ the claimant company for the last four years."

So far as the depreciation is concerned, he has considered the question in detail and accepting the contention of the Govern ment that the machinery being over‑worked, depreciation beyond the normal depreciation should be given and has assessed the figure of additional depreciation at Rs. 6,00,000. Therefore it is apparent from the award that the learned Arbitrator strictly adhered to the provisions of the Electricity Act in determining the valuation of the assets of the Company. The learned Advocate‑General who appeared for the Government, could not support this finding of the learned Subordinate Judge. But he argued that the fair market price which one could expect from a willing purchaser if offered in the market. To this contention it must be said, first, that electrical undertaking is not such a commodity which can be hawked about for the favour of purchase by any customer. Secondly, the Act itself has not laid down what the fair market price would be, but it has laid down some‑criteria which must be considered.. It is clearly stated (as already quoted) by the Arbitrator:‑

"the value shall be deemed to be their fair market value at the dime of purchase, due regard being had to the nature and condition for the time being of, such lands, . . . and the state of their repair . . . and that they are in such a position as to be ready for immediate working and their suitability for the purpose."

It is expressly stated that the fair market value shall not be increased by any addition for compulsory purchase or of good will or of any profit which may 'be or might have been made from the undertaking. Therefore, the additional factors which are to be considered in arriving at a fair market value of an undertaking of this nature has been provided in the statute itself but has not laid down how the fair market value has to be arrived at. Therefore, the other' question which the learned Subordinate Judge has posed in this connection requires exami nation. He has stated:‑

"In actual calculation the learned Arbitrator did not take the value of lands buildings, works, materials, etc., to be their fair market value at the time of purchase subject to the depreci ation charge. He based his calculation on the purchase price of these materials plus the cost of transport and installation to be ready for working. Hence the entire basis of the calcu lation was wrong and was illegal being the contravention of section 5 (b) of the Act."

The learned Subordinate Judge has been misled by the wording of the section. It is true that the fair market value on the date of purchase by the Government is to be considered. But we have already pointed out that an undertaking of this nature cannot be hawked about in the open market, nor can there be a market for such concerns. Therefore, other factors have to be considered to arrive at such a value. The Electricity Act was enacted in 1910 and there was no guidance in the Act itself. In India the Act was re‑enacted and the lacuna was removed in 1948. But there was no corresponding amendment in Pakistan. The steps taken to arrive at the agreed valuation in this case has been stated by the learned Arbitrator as follows:‑

"A reference to this chart would show that the represen tatives of the parties jointly agreed upon a sum of Rs. 95,37,127 which was calculated on the basis of market price of new plants, etc., on the date of their acquisition on 31‑5‑57 together with cost of installation of the machinery and other incidental costs to put the machinery in working order less depreciation calculated on the normal life of the individual items of the assets according to the table appended to the 7th Schedule of the Indian Electricity Act, 1948. The Indian Electricity Act was taken recourse to only to arrive at a workable fair market value of the assets in the absence of similar provision in the earlier Electricity Act, 1910."

The course adopted by the learned Arbitrator was, therefore, not only fair but also the only one available. Although it is not advisable to rely on provisions of a Foreign Act to arrive at any conclusion, we hold that in this case when the origin of the legislation was common and the conditions in the two countries similar it was permissible to refer to' the provisions introduced in the Foreign Act by way of removing a lacuna occurring in the parent Act. The learned Arbitrator has taken the agreed valuation based on the calculations prescribed, in the Foreign Act to come to an approximate figure regarding the fair market value and then applied the conditions prescribed by the indigeneous Act to come to the final figure. In the circumstances of the case, we hold that this was not only permissible but also the only fair means of arriving at a correct decision regarding the valuation of the assets.

So far as the second finding of the learned Subordinate Judge is concerned it is obvious that the balance‑sheet does not repre sent the actual state of affairs and cannot be a guide for arriving at the fair market value as required by the statute. The Legis lature has not itself indicated what would ‑be the fair market price. If the balance‑sheet would be the standard, then the Legislature would have indicated that; but in this case the, Legislature has made no reference to the balance‑sheet. That the balance‑sheet cannot be the basis will be shown by the fact that the Chief Engineer of the Government himself values the item No. 6 Machinery (New Station), at Rs. 24,00,000 whereas the balance‑sheet shows the valuation of Rs. 8,34,870. The valuation of the building (item No. 3) is shown as Rs. 9,577 in the balance- sheet, whereas the Chief Engineer's own valuation is Rs. 2,88,000. Therefore, it is obvious that the balance‑sheet cannot even be a guide for the valuation of the assets for the purpose of purchase by the Government.

So far as the third point is concerned, it is almost peurile. We do not find that there is any difference between Arbitration and conciliation. All Arbitrations involve conciliation and it appears that the learned Subordinate Judge was swayed by the use of the word conciliation' in some legislation regarding indus trial disputes.

Therefore it is apparent that the learned Arbitrator has acted not only legally but also in all fairness. Before we part with this case, we must observe that it was not in the fitness of things for the Government to have required the award made by an Arbitrator appointed by itself to be filed in Court. In the absence of allegations of misconduct resort to Courts should not be encouraged. The Arbitrator was acting within his jurisdiction and has given an award which is even less than .the agreed valuation in such circumstances, for the Government to have resorted to the Court is to set a very bad example. It must be remembered that in proceedings arising out of arbitration the Courts cannot be regarded as Courts of Appeal from the decision of an Arbitrator. The award can be set aside only on the limited grounds set forth in section 30 of the Arbitration Act. There was no scope of application of provisions of subsections (a) and (b) of the Act in this case, nor was the first part of subsection (c) applicable. The only ground left was that the award was "otherwise invalid". Even accepting the proposition that the phrase "otherwise invalid" is not ejusdem generis, the grounds of objection raised by the Government do not appear to us to have been sufficient to seek interference by the Court.

In these circumstances, this appeal is allowed with costs against the plaintiff. The judgment and order of the learned Subordinate Judge are set aside. We direct that the Award be implemented without any further delay.

.‑I agree:

S. Q.

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