A) ABSTRACT / HEADNOTE

The case The Rajahmundry Electric Supply Corporation Ltd. v. The State of Andhra [1954 SCR 779] stands as a pivotal authority on legislative competence concerning compulsory acquisition of commercial undertakings under the Government of India Act, 1935. This Supreme Court judgment examines whether the Madras Electricity Supply Undertakings (Acquisition) Act, 1949—which provided for the State acquisition of private electric supply companies—was within the legislative competence of the Madras Legislature. The judgment decisively ruled that there existed no specific legislative entry in the Seventh Schedule under the Government of India Act, 1935 that permitted the compulsory acquisition of commercial or industrial undertakings. Therefore, the court declared the Act ultra vires. It rejected the State’s argument that such power could be read as ancillary to the legislative entries dealing with electricity or corporations. This case reiterated the limits on provincial legislative authority under the 1935 Act and emphasized the importance of express constitutional authorization for acquisition-related laws. It also clarified the interpretation of legislative entries, distinguishing the subject-matter doctrine (pith and substance) from incidental encroachment, drawing heavily from earlier landmark decisions such as State of Bihar v. Maharajadhiraja Sir Kameshwar Singh [1952 SCR 889].

Keywords: Legislative Competence, Compulsory Acquisition, Government of India Act 1935, Industrial Undertakings, Electricity Laws

B) CASE DETAILS

i) Judgement Cause Title: The Rajahmundry Electric Supply Corporation Ltd. v. The State of Andhra
ii) Case Number: Civil Appeal No. 72 of 1952
iii) Judgement Date: 10 February, 1954
iv) Court: Supreme Court of India
v) Quorum: Mehr Chand Mahajan C.J., Mukherjea J., S.R. Das J., Vivian Bose J., Ghulam Hasan J.
vi) Author: S.R. Das J.
vii) Citation: AIR 1954 SC 251; 1954 SCR 779
viii) Legal Provisions Involved:

• Section 4(1), Madras Electricity Supply Undertakings (Acquisition) Act, 1949

• Article 226, Constitution of India

• Articles 132(1) and 133(1)(b), Constitution of India

• Section 299(2), Government of India Act, 1935

• Entry 31, List III & Entry 33, List I, Seventh Schedule, Government of India Act, 1935
  ix) Judgments Overruled by the Case: None
  x) Case is Related to which Law Subjects:

• Constitutional Law

• Administrative Law

• Electricity Law

• Public Sector Undertakings Acquisition Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The background of this case lies in the legislative efforts of post-Independence Indian states to nationalize key utility services. The Madras Electricity Supply Undertakings (Acquisition) Act, 1949, aimed at acquiring private electric supply companies operating within the State, including the Rajahmundry Electric Supply Corporation. The Act was enacted before the Constitution came into effect but was assented by the President post-Constitution under Article 31(2), which exempted such laws from judicial review on compensation and public purpose grounds. However, the appellant questioned the legislative competence of the Madras Legislature under the 1935 Act, from which the Constitution evolved. This judgment arose from a petition under Article 226 before the Madras High Court and was later appealed to the Supreme Court. The Court’s critical determination was whether the provincial legislature could acquire commercial undertakings when no specific entry in the Seventh Schedule permitted it.

D) FACTS OF THE CASE

The appellant, Rajahmundry Electric Supply Corporation Ltd., was a private company incorporated in 1924. Its business focused on generating and supplying electricity to Rajahmundry town under a license. In 1949, the Madras Government enacted a law to acquire such undertakings. The Act received the Governor-General’s assent in January 1950 and the President’s certification in April 1950, protecting it under Article 31(2) of the Constitution. On 2nd September 1950, the Government issued an order under Section 4(1) of the Act declaring the vesting of the company’s assets. The company challenged this before the High Court of Madras, contending the Act was ultra vires, enacted without public purpose, and offered illusory compensation. The High Court rejected all arguments, prompting the appeal to the Supreme Court. The Court had to resolve whether the provincial legislature under the 1935 Act had the legislative authority to enact a law for the acquisition of commercial undertakings.

E) LEGAL ISSUES RAISED

i) Whether the Madras Legislature had legislative competence under the Government of India Act, 1935, to enact a law for the compulsory acquisition of commercial or industrial undertakings.

ii) Whether acquisition of electric undertakings falls under the entry for “Electricity” in Entry 31 of List III (Concurrent List) or the entry for “Corporations” in Entry 33 of List I.

iii) Whether the Act was protected by presidential assent under Article 31(2) despite the issue of legislative competence under the pre-Constitution law.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that the Madras Legislature lacked competence to legislate for acquisition of commercial undertakings, as there was no such entry in any of the three lists under the Seventh Schedule of the Government of India Act, 1935[1]. They argued that while Entry 9 of List II permitted acquisition of land, there was no entry enabling acquisition of commercial enterprises.

ii) They stressed that the Act’s pith and substance concerned compulsory acquisition, not electricity regulation. Hence, Entry 31 of List III (Electricity) was inapplicable.

iii) The Act did not concern the incorporation, regulation, or winding up of corporations, so Entry 33 of List I (Corporations) also failed as a source of competence.

iv) The counsel relied on State of Bihar v. Maharajadhiraja Sir Kameshwar Singh [(1952) SCR 889] which clarified that acquisition laws must be specifically authorised under the legislative lists, and any omission rendered them invalid[2].

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that the Act fell within Entry 31, List III, which includes laws “with respect to electricity”, encompassing matters relating to control, regulation, and acquisition of supply companies[3].

ii) They contended that acquisition is incidental or ancillary to the primary legislative subject of electricity regulation. Hence, the legislature had implied powers to acquire assets of licensees.

iii) The Advocate-General of Madras also cited the doctrine of “ancillary powers”, arguing that every entry includes all that is reasonably necessary to effectuate its object[4].

iv) He maintained that the President’s assent under Article 31(2) barred courts from questioning the law on the grounds of lack of compensation or public purpose.

H) RELATED LEGAL PROVISIONS

i) Section 299(2), Government of India Act, 1935 – Required laws authorising compulsory acquisition of commercial undertakings to provide for compensation.

ii) Entry 9, List II, Schedule VII, Government of India Act, 1935 – Gave provinces power to enact laws for compulsory acquisition of land only.

iii) Entry 31, List III – Dealt with laws relating to electricity.

iv) Entry 33, List I – Related to corporations and their incorporation, regulation, and winding up.

v) Article 31(2), Constitution of India – Protected laws related to acquisition from being challenged on the grounds of lack of compensation, subject to presidential assent.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Court held that the power to compulsorily acquire commercial or industrial undertakings was absent in all three legislative lists. Thus, the Madras Legislature acted beyond its competence.

ii) The Court held that Entry 31, List III does not cover acquisition. It governs regulation and supply, not ownership or takeover[5].

iii) Entry 33 of List I, which concerns corporations, does not apply because the Act is not about incorporation or regulation.

iv) The Court emphasized that section 299(2) of the 1935 Act explicitly contemplated such acquisitions, but no corresponding legislative entry empowered provincial legislation in this area.

v) The doctrine of ancillary powers cannot override express limitations of legislative entries.

b. OBITER DICTA

i) The Court observed that if the Governor-General had authorised the legislature under Section 104 of the 1935 Act, the situation might have differed. However, no such authorization existed.

ii) The Court clarified that President’s assent under Article 31(2) does not cure a constitutional incompetence under the previous regime.

c. GUIDELINES 

• No legislature may assume a power not expressly provided or implied in the Schedule entries.

• The pith and substance doctrine does not extend to cover subjects not included in the legislative lists.

• Ancillary powers doctrine cannot be invoked to justify laws that go beyond the core legislative field.

• Entry-based legislative analysis must strictly determine the competence.

J) CONCLUSION & COMMENTS

This judgment remains a landmark exposition on legislative federalism and constitutional limits. It carved out a decisive boundary around provincial autonomy under the Government of India Act, 1935, reaffirming that the acquisition of commercial undertakings required special authority. The ruling refused to stretch legislative entries beyond recognition and preserved the integrity of constitutional structure. Its meticulous dissection of the pith and substance doctrine, and rejection of the ancillary power argument, reaffirmed the principle of legality. In modern Indian jurisprudence, this case underlines the need for clear legislative authorisation when states seek to assume control over private commercial entities.

J) REFERENCES

a. Important Cases Referred
[1] State of Bihar v. Maharajadhiraja Sir Kameshwar Singh, AIR 1952 SC 252; [1952] SCR 889
[2] Lakhmir Singh v. State of Punjab, AIR 1962 SC 1515 (referred later for similar issues on acquisition and compensation)

b. Important Statutes Referred
[3] Government of India Act, 1935, Section 299(2), Section 104, Section 127, Entry 9 (List II), Entry 31 (List III), Entry 33 (List I)
[4] Constitution of India, Article 31(2), Article 226, Article 132(1), Article 133(1)(b)
[5] Madras Electricity Supply Undertakings (Acquisition) Act, 1949 – especially Section 4(1)