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 B.E.S.T. Undertaking
 

One of the terms of the Agreement of 7th August, 1905 between the Municipality and the B.E.S.&T. Company gave the Municipality the right to buy the Company at the end of forty-two years. It was also laid down that if the right was exercised on 7th August 1947 - the Municipality would have to pay forty lakh rupees as goodwill, in addition to the agreed price of the Company’s assets; and that the notice of intention to make the purchase would have to be given by the Municipality at least six months in advance.

However, the Municipal Corporation started considering the matter as early as 1941. On 11th December of the year the Municipal Commissioner expressed himself against it in the report he submitted to the Corporation. The report doubted the feasibility of raising a loan to buy the B.E.S.T. Company in view of the serious financial situation in which the Corporation was, with several of its important schemes regarding water supply, drainage, education and medical aid having to be shelved for want of funds.

According to the Commissioner the inordinate rise in prices, owing to the war, also argued against the purchase. By the then ruling prices, the total valuation of the B.E.S.T. Company would have been anything between six and ten crores of rupees. In these circumstances, the Commissioner thought, it would be wiser to wait for ten years, by which time he expected the prices to slide back to their old level. Finally, he suggested that consideration of the matter be postponed for two or three years.

The right to buy the B.E.S.T. Company did not cover its Bus Service, which had been granted a permit by the Commissioner of Police under the provisions of the Motor Vehicles Act. However, as the permit did not imply a monopoly, the Municipal Corporation could operate its own bus service. This would have been perfectly legal, as the Commissioner pointed out, but not practicable.

The Municipal Corporation appointed a committee with the following persons on it to discuss the matter with the Government : the Mayor, the Chairman of the Standing Committee, the Chairman of the Law, Revenue and General Purposes Committee, Shri S.K. Patil, Shri A. P. Sabawalla, Shri Nagindas T. Master and Shri Mirza Akthar Hasan.

This Committee discussed the matter with the Government at Pune on 14th August 1946, the letter being represented by the Home and Revenue Minister, Shri Morarji Desai, the Minister for Local Self-Government, Shri G.D. Vartak, the Minister for Public Health and Public Works, Dr. M.D. Glider, and the Finance Minister, Shri Vaikunthlal Mehta.

The Corporation’s Committee presented the viewpoint of the body at the meeting. The main points they made were :

(1) The price of the Company will soar high on account of the steep rise in prices generally. A very big loan will have to be floated to meet it.

(2) The Company’s vehicles and machinery are in a ramshackle condition. For their repairs, renewal or replacement a lot of money will have to be set aside.

(3) In these circumstances, should the proposal to buy the Company be postponed by fourteen years, that  is, to the next stage for exercising the option to buy? But such postponement would suit the Corporation only if the Agreement in force was revised in some particulars. The particulars were :

(a) The period of fourteen years laid down for the next stage for exercising the option to buy should be reduced to ten years. By then the prices will have come back to their former level.

(b) The Corporation should be given effective representation on the Board of Directors of the Company and in its actual administration.

(c) Since the right to buy the Company devolves upon the Government in case the Corporation does not exercise it, the Government should approve of the revision.

(d) If the Government gives such approval, the revised Agreement should include the right of the Municipal Corporation to buy the bus service.

(4) If the Government does not approve of the proposal to revise the existing Agreement, the Municipal Corporation wishes to exercise its right to buy the Company on 7th August 1947. The bus service should be included in the deal.

(5) The Corporation will have to raise a loan of rupees ten crores in order to effect this deal.

(6) One item in this deal is particularly favourable to the Corporation. The Company has  to pay rupees forty lakhs every year as income tax. The Corporation will not have to pay it. Out of this amount the debt charges can be met easily.

The Government’s views on the matter were as under :

(1) It is unsafe to predict if, and when, prices will fall.

(2) That the Company’s vehicles and machinery are in a ramshackle condition is to the advantage of the Corporation, as it will have to pay a lower price for them.

(3) If the Company were to know that its ownership was to last for only ten years, it would be inclined to put its vehicles and machinery to the maximum use to augment its profits.

(4) The Government has been contemplating taking over all the road transport in the State. Once such a decision is taken, the Mumbai bus transport cannot be treated as an exception. However, if it is already acquired by the Municipal Corporation when the Government makes the decision, it will remain with the Corporation. The Corporation should buy the Company’s vehicles, only if they are offered for a reasonable price; else, it should buy new ones. In any case, the Government intends to restrain the Company from profiteering. The Company does not have a monopoly of the bus transport in the city. The permit given to the Company is valid for only four months at a time. If the Municipal Corporation takes over the bus transport, the B.E.S.T. Company’s permit will not be renewed.

(5) If the Corporation does not exercise the option to buy the Company, the Government will exercise its right to do it.

Finally, on 21st October 1946, the Municipal Corporation resolved to buy the Bombay Electric Supply & Tramways Company with its bus transport section. On 16th January 1947, the Municipal Commissioner wrote to the B.E.S.T. Company as follows :

"Pursuant to Clause 24 of the instrument known as the Deed of Concession dated the 7th day of August 1905 and entered into between the Municipal Corporation of the City of Bombay and the Bombay Electric Supply & Tramways Company Limited, and others, and with the sanction of the Standing Committee of the Corporation recorded by Resolution No.1463, dated the 3rd December 1946, and with the sanction of the Corporation recorded by Resolution No.1198, dated the 6th January 1947, I hereby give notice on behalf of the Corporation of their intention to purchase the combined undertaking (as defined in the said instrument) with all lands, buildings, installations, plant, machinery, rails, rolling stock, mains, apparatus, stores and property of every description belonging to the Bombay Electric Supply and Tramways Company Limited, or held for the purpose of or in connection with the combined undertaking or any part thereof, with effect from the 7th day of August 1947.

VALUATION OF THE B.E.S. & T. COMPANY

The valuation of the B.E.S.T. Company was a very complicated matter. It was to be referred to an arbitrator in the event of a difference of opinion between the Corporation and the Company. On the basis of the valuation the amount of the loan to be raised to buy the Company was to be fixed. It was most necessary that an expert agency should do the valuation. Accordingly, Messrs, Mulleneuy and Mulleneuy Ltd., Electrical and Mechanical Engineers and Technical Investigators, were engaged for the purpose for a fee of Rs.22,000. The assignment was twofold : (1) To draw up a record of the assets of the Company, with the necessary technical notes. (2) To settle the value of each item of the assets on the basis of the technical details and notes.

This was one part of the valuation. Another was to keep a justification of the valuation ready, in case the valuation prepared by the Corporation were to be submitted to an arbitrator. This was a highly responsible job. It was a complicated one too, so far as the engineering and the financial details were concerned. The Associated Engineering Firm was entrusted with this job. Messrs. Kennedy and Donkin, the renowned consultants of London, were a subsidiary of the Associated Engineering Firm, which therefore had the best experts available to it. The firm charged its fee on a percentage basis. It was two and a half per cent on value upto twenty thousand rupees .Then it scaled down by stages till it was one fourth per cent on value above one crore. There were in addition to the fee, the expenses on the experts travel from England and back, and on their stay here.

The valuation of the B.E.S.T. Company’s buildings was complicated. It was entrusted to Shri G.P. Dandekar, an Assistant Engineer in the Corporation’s service.

VALUATION OF THE BUS TRANSPORT SECTION

By his letter of 18th April 1947 to the Municipal Commissioner, the General Manager of the B.E.S.T. Company offered to sell the B.E.S.T. Company alongwith its bus transport section to the Corporation; but he wanted that since the original Agreement did not include the bus service in the item concerned, the deal should be regarded as an obligatory sale’, and that an amount equal to twenty per cent of the value of the bus transport section should be paid to the Company as goodwill. But this demand was rejected in view of the Government’s policy of nationalising transport and its intention of withdrawing the permission given to the  B.E.S.T. Company to run the bus service if the Corporation wanted to run it. However, the payment of goodwill was accepted in pricniple. The Corporation proposed that if there was no agreement on the quantum of compensation, the matter should be referred to arbitration.

THE VALUATION

According to the advisers of the Corporation, the value of the total assets of the B.E.S.T. Company, including its buildings and the land on which they stood, was Rs.5,39,81,000. The Company’s advisers pitched it at Rs.15,80,28,287. This amount was inclusive of the value of the bus service and the goodwill, which came to Rs.40,00,000. With this wide gap between the two valuations, it was inevitable that the decision should be left to an arbitrator. Meanwhile, the Corporation paid to the Company Rs.6,35,00,000, against the final valuation.

THE ARBITRATION

By a resolution passed on 4th March 1948, the Corporation appointed Sir John Kennedy as the arbitrator. He was the Chairman of the Electricity Commission of Great Britain, which looked after the supply of electricity to the country.

The arbitrator’s work was started on 21st February, 1950, and it was over on 11th March 1950. The arbitrator gave his award on 16th March. On the opposite page is a comparative statement of the three valuations : the Company’s, the Corporation’s and the arbitrator’s

The total expenditure on the arbitration came to Rs.57,000. It was shared equally by the two parties. Beside this, the Corporation spent about Rs.88,000 on the experts it had invited to present its case before the arbitrator.

The Municipal Corporation had to raise a loan of seven and a half crores of rupees for this deal.

VALUATION OF THE B.E.S.T. CO. LTD.
  Category Valuation of 
the B.E.S.T. 
Co.Ltd. 
(In Lakhs) 
Rs.
Valuation of 
The Municipality 
 (in Lakhs) 
    Rs.
Valuation as 
per the 
Award 
    (in Lakhs) 
Rs.
(I) Combined Undertaking 
(Tramways and 
Electricity) 
     
1)  Land and 
Buildings 
371.17 161.76 268.98
2) Other Assets  1,155.17 263.74 556.41
3)  Goodwill  40.00 40.00 40.00 
(II) Bus Undertaking      
1) Lands and 
Buildings
32.01 27.63 23.73
2) Other Assets 110.57  42.35  77.46
3) Payment for 
taking over 
a running 
concern
20% of the 
total value
10% of the 
total value
20.00 
(works out 
to 19.7)
      Total 986.58
  COMPANY’S STAFF

Once it was decided that the ownership of the B.E.S.T. Company was to be transferred to the Municipal Corporation, a decision about the Company’s staff had to be taken promptly. The Municipal Commissioner wrote to the General Manager of the Company on 22nd February 1947 to explain the Corporation’s standpoint on the question.

Accordingly, it was decided to absorb the entire staff of the Company in the Corporation’s service on 7th August 1947. The Municipal Commissioner suggested that the staff should be given an assurance to that effect, their attention being drawn to the following :

(1) Since the Share Department was not to continue, its staff would not be absorbed.

(2) Those who had attained the age of 60 on the date would not be accpted. Those who were more than 55, would be allowed to remain in the Corporation’s service for two years or till they were 60, whichever was earlier.

(3) The age of retirement will be 55.

(4) On 21st October 1946 the Corporation resolved to take over the Company. It will grant the absorbed staff the pay and pay-scale on which they were on that day.

Acting on the above letter from the Municipal Commissioner, the General Manager of the Company issued a circular to the members of his staff. It stated that as the Company was to be taken over on 7th August 1947 by the Corporation it would not need the services of its staff after 31st August 1947, and that as the Corporation had offered to take over the staff too, with the exception of those above a certain age, the Company would release on 6th August from its service those who would avail of the offer.

The provision that the members of the Company’s staff taken over by the Corporation, would be given the pay and pay scale on which they were working on 21st October, 1946 was intended to stop improper promotions as the Municipal Commissioner explained later. He also gave the assurance that it would not affect any normal and justifiable promotion.

GENERAL MANAGER

Mr. A.L. Guilford was the General Manager of the B.E.S.T. Company when its ownership passed on to the Municipal Corporation, which retained him in the post. The main terms of the appointment were :

(1) The salary to be Rs.4,500 per month during the first year and Rs.5,000 during the second year.

(2) A house-rent allowance equivalent to ten per cent of the salary, free electricity for domestic use, and a motor car allowance of Rs.200 per month.

(3) One month’s full-pay leave (to be spent in India) for every eleven month’s service, and two month’s halfpay furlough leave (for going abroad) for every twelve months’ service, with the expenses on travel paid; one month’s sick leave per year, on full pay.

(4) Such benefits as Provident Fund, Gratuity and Saving Fund, according to the rules of the B.E.S.T. Company.

(5) Permission to assist the B.E.S.T. Company or its liquidator, and to accept remuneration for the work.

LONDON AGENCY

The BEST Company had to import equipment of various kinds from other countries. It had appointed Tata Limited, London, to represent it in this behalf - to negotiate with manufacturers, to purchase plant and other equipments, to ship it to Mumbai, and to advise the Company on technical matters after consulting the persons and institutions concerned. The Corporation continued the same concern as its agent.

GOVERNMENT ORDINANCE

The various departments of the Municipal Corporation of Mumbai were administered under the City of Bombay Municipal Act of 1888. But as the B.E.S.T. Company was not one of them, the Corporation had proposed some additions to the Act, and they were awaiting legislative sanction. Meanwhile to ensure a smooth transition of the services from company management to municipal management, legal sanction was necessary. So the Governor of Bombay promulgated the Government Ordinance II of 1947. The Ordinance provided for the constitution of a statutory committe of not more than nine persons to look after the affairs of the B.E.S.T. The Corporation set up the first B.E.S.T. Committee with the following as members :

(1) Sarvashri A.P. Sabavala (Mayor), (2) S.K. Patil, (3) D. V. Patel (4) D.B. Desai, (5) D.M. Khatav, (6) S.H. M. Premji, (7) M.S. Master, (8) R.K. Ruia, (9) V.B. Gandhi (Chairman of the Standing Committee).

The Committee met for the first time at 2.30 p.m. on Saturday, 2nd August 1947, at the head Office of the Corporation, and elected Shri A.P. Sabavala as its Chairman. It was resolved that the Committee would meet at 10.30 a.m. on alternate Fridays at the B.E.S.T. House. The other important decisions taken at the meeting were :

(a) Mr. A. L. Guilford, the General Manager, was given the power of attorney.
(b) The General Manager was given the authority to delegate work.
(c) Sanction was accorded to the following matters, which were subject to further sanction by the Corporation.
(1) The grading schedule of the B.E.S.T. Company.
(2) The Standing Orders of the B.E.S.T. Company.
(3) The Provident Fund Rules of the B.E.S.T. Company.

On 7th August 1947, the General Manager of the B.E.S.T. Company wrote as follows to the Municipal Commissioner regarding the change of hands in the ownership of the company.

"The General Manager on behalf of the  B.E.S.T. Co. Ltd. gave the possession of the Company to you on 7.8.1947 in presence of the representatives of the Corporation.

On that day, the newspapers carried a public announcement to the same effect, and at the meeting of the B.E.S.T. Committee held on 8th August the General Manager of the Company made a similar statement.

Although, thus, the deal between the B.E.S.T. Company and the Municipal Corporation went through without a hitch, there was some discontent among the employees of the B.E.S.T. No decision had been taken on the Rules and Conditions of Service applicable to them in the new set-up. In fact, a rumour had been going around that the employees were to go on strike on 7th August. Finally on 6th August, Shri Abid Ali Jafferbhoy, President of the B.E.S.T. Worker’s Union, met the Mayor in this connection, and a compromise was arrived at The Times of India of 7th August reported it as under :

B.E.S.T. Change Hands Today
Buses and Trams as Usual

The buses and tram services of Bombay will function as usual on Thursday (to-day) although the service conditions of the workers remain to be settled by the Municipal Corporation which has taken over the combined Undertakings of the bus and tram services of the B.E.S.T.

This follows a decision reached at a conference held at the Corporation on Wednesday between the Mayor, Mr. A.P. Sabavala, and Mr. Abid Ali Jafferbhoy, President of the B.E.S.T. Workers Union to discuss the service conditions under the new management.

The agreement on service conditions with the old management expired on Wednesday. It was agreed at the  Conference that the Mayor, who is the Chairman of the B.E.S.T. Committee and the Corporation, will put the case of the workers effectively before the Committee and bring about a fair settlement.

As such, there is no suspension of work by the workers as contemplated earlier, announces Mr. Abid Ali Jafferbhoy.

On 15th August, 1947, the country achieved freedom. On this joyous occasion the B.E.S.T. Committee announced a bonus for the employees of the concern, as a token of its good will towards them. Those in permanent service, as also the temporary employees who had served for over a year, were to get a month’s pay as bonus.

The  B.E.S.T. House and the Electric House, like several other public buildings in the city, were gorgeously illuminated on the night of 15th August to celebrate the historic event. Historic, if in a minor way, was also the nationalisation of the first concern in the country - now the Bombay Electric Supply and Transport Undertaking - which had just got under way, and one may say that it shared the celebration !

 
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