Compensation payable to a licensee.

The compensation payable to a licensee on whom an order has been served under section 4 or whose undertaking has been taken over by the Government before the commencement of this Act, shall be determined under any one of the Basis A, B and C specified below, as may be chosen under section 8. (1) Basis A.—(i) The compensation payable under this basis shall be an amount equal to twenty times the average net annual profit of the undertaking during a period of five consecutive account years immediately preceding the vesting date. Explanation.- For the purpose of this clause, the net annual profit shall be determined in the manner laid down in Part A or Part B, as the case may be, of Schedule I. (ii) This basis shall not apply to an undertaking which has not been supplying electricity for five consecutive account years immediately preceding the vesting date. (2) Basis B.— The compensation payable under this basis shall be the aggregate value of all the shares constituting the share capital of the undertaking, reckoned as shown below:- (a) In the case of shares issued on or before the 31st March 1946, the value of each share shall be reckoned at its average value as arrived at from the quotations for the shares as given in the official list of the Madras Share Market on the 15th day of each month and where such market was closed on that day, the quotations on the next working day, during the period of three years commencing on the 1st April 1946 and ending on the 31st March 1949: Provided that this clause shall not apply if any one or more of the different classes of shares constituting the capital of the undertaking were not being regularly quoted in such market during the period of three years aforesaid, or of such quotations during the whole of any one of those three years were not based on actual transactions in such year. (b) In the case of shares issued on or before the 31st March 1946, if clause (a) does not apply but there have been bonafide transfers in each of the different classes of shares in everyone of the three years aforesaid and such transfers have been duly registered in the appropriate books of the licensee, the value of each share of each such class shall be reckoned at one-third of the aggregate of its three annual average values for the three years, the average value for each year being determined from the transactions in that year. (c) Where the amounts called for in respect of any share referred to in clause (a) or clause (b) are in arrears, the value of such share shall be taken to be a sum which bears to its value as reckoned under clause (a), or clause (b) as the case may be, the same proportion as the amount paid-up bears to the full amount payable in respect of the share. (d) In the case of shares issued after the 31st March 1946, their aggregate value shall be taken to be the amount actually paid in respect thereof (including the premium, if any), together with an additional sum by way of solatium, calculated at the rate of two per cent for every completed year preceding the vesting date on the amount so paid which was in existence during the whole of such year as shown in the licensee‗s book: Provided that no part of such amount shall be entilled to a solatium exceeding ten per cent thereof. Explanation. — This basis shall not apply unless clause (a) or clause (b) is applicable. (3) Basis C—The compensation payable under this basis shall be the aggregate value of the amounts specified below:— (i) the book value of all completed works in benificial use pertaining to the undertaking and handed over to the Government (excluding works paid for by consumers) less depreciation calculated in accordance with Schedule II; (ii) the book value of all works in progress handed over to the Government excluding works paid for by consumers or prospective consumers; (iii) the book value of all stores including spare parts pertaining to and usable in the undertaking handed over to the Government and in the case of used stores and spare parts, such sum as may be decided upon by mutual agreement between the Government and the licensee; (iv) the book value of all other fixed assets in use on the vesting date and handed over to the Government less depreciation calculated in accordance with Schedule II;

(v) the book value of all plant and equipment existing on the vesting date but no longer in use owing to wear and tear or to obsolescence, to the extent such value has not been written off in the books of the licensee less depreciation calculated in accordance with Schedule II;

(vi) the book value of all intangible assets to the extent such value has not been written off in the books of the licensee;

(vii) the amount due from consumers in respect of every hire-purchase agreement referred to in section 6 (2) (a) (ii) less a sum which bears to the difference between the total amount of the instalments and the original cost of the material or equipment, the same proportion as the amount due bears to the total amount of the instalments;

(viii) any amount paid actually by the licensee in respect of every contract referred to in section 6(2)(a)(iii); and

(ix) an additional sum by way of solatium—

(a) in case the licensee is a person licensed under Part II of the Electricity Act, at the rate specified in the licence in respect of compulsory purchase, or where no rate is specified in the licence, at fifteen per cent on the values referred to in sub-clauses (i) and (v) at the rate of ten per cent on the value referred to in sub-clause (ii) and at the rate of five per cent on the value referred to in sub clause (iii);

(b) in case the licensee is a person who has obtained sanction under section 28 of that Act to engage in the business of supplying electrical energy, at the rate of ten per cent on the values referred to in sub-clauses (i) and (v) and at the rate of five per cent on the values referred to in sub-clauses (ii) and (iii).

Explanation.—(1) For the purposes of Basis C, the book value of any fixed asset means its original cost, and shall comprise—

(i) the purchase price paid by the licensee for the asset, including the cost of delivery and all charges properly incurred in erecting and bringing the asset into beneficial use as shown in the books of the undertaking;

(ii) interest charges on capital expenditure incurred from borrowed money and shown in the books of the undertaking as properly attributable to the asset up to the date of bringing it into beneficial use at a rate not exceeding six per cent per annum; and

(iii) cost of supervision actually incurred, but not exceeding fifteen per cent of the amount referred to in paragraph (i).

(2) Where any asset was acquired after the expiry of the period to which the latest annual account relates, or where no annual account has to be rendered under the Electricity Act, the book value of the asset shall be such sum as may be decided upon by mutual agreement between the Government and the licensee.