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
(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
The Government’s views on the matter were as under :
(1) It is unsafe to predict if, and when, prices will
(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
(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
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.
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.
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.
|20% of the
|10% of the
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
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.
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
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
(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
"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