Union of India Vs. Lakshmi Sugar &
Oil Mills Ltd., Hardoi [1985] INSC 243 (21 November 1985)
PATHAK, R.S. PATHAK, R.S.
THAKKAR, M.P. (J)
CITATION: 1986 AIR 388 1985 SCR Supl. (3) 758
1986 SCC (1) 27 1985 SCALE (2)1088
ACT:
The Sugar Undertakings (Taking over of
Management) Ordinance 1978 Clause 3(1) & The Sugar Undertakings (Taking
over of Management) Act, 1978. Section 3(a) (b) - Scope of.
Sugar Undertaking - Arrears of cane dues -
Accumulation of - Initiation of action by Central Government - Whether arrears
to be confined to current 'sugar year' or earlier 'sugar year'.
HEADNOTE:
The Respondent company manufactures sugar
from sugar cane. On November 18, 1978, the Central Government issued a notice
under sub-para (1) of para 3 of the Sugar Undertakings (Taking over of
Management) Ordinance, 1978 stating that as on November 15, 1978, the
respondent-company was in arrears of cane dues in relation to the cane
purchased before that date for the purpose of its sugar undertaking to the
extent of more than ten per cent of the total price of the cane purchased by it
during the immediately proceeding "sugar year", the total arrears
being Rs. 475.99 lacs, and called upon the respondent to explain in writing the
circumstances in which the sugar undertaking had failed to clear the arrears of
cane dues and why the undertaking should not be taken over by the Central
Government under that Ordinance. On November 25, 1978 the respondent replied to
the notice denying that it was in arrears. However, the Central Government
issued an order dated December 1, 1978 reciting that it was satisfied after
considering the report sent by the respondent that the arrears of cane dues had
not been cleared by the respondent, and directing that the management of the
sugar undertaking would vest in the Central Government for a period of three
years commencing on and from December 2, 1978.
The respondent filed a writ petition in the
High Court which was allowed. It was held that while the Central Government
could take action in respect of the arrears due in respect of sugar cane
purchased during the current "sugar year" it could not do so in
respect of the arrears pertaining to a preceding "sugar year", and
therefore, the impugned orders were invalid. The High Court quashed the order
and directed handing over of the possession of the sugar undertaking.
759 Allowing the appeal of the Union of India
to this Court, ^
HELD: 1. The language of clause (b) of
sub-section (a) of section 3 is clear. It speaks of arrears of cane dues in
relation to the cane purchased "before that date". The language is
wide enough to include all the arrears of cane dues accumulated upto "that
date" including the arrears pertaining to sugar cane purchased in earlier
years. The judgment and order of the High Court is set aside and the writ
petition is dismissed. [765 D-E]
2. The Sugar Undertakings (Taking over of
Management) Ordinance, 1978 was replaced by the Sugar Undertakings (Taking over
of Management) Act, 1978. An analysis of the provisions of the Ordinance, and
of the Act which replaced it, indicates that the principal purpose of the
legislation is to put mismanaged sugar undertakings into proper functioning
order by empowering the Central Government to assume the temporary management
of the undertakings. [761 E; 763 H - 764 A]
3. The legislation indicates two kind of
cases evidencing mismanagement. One is the failure of the undertaking to
commence the manufacture of sugar on or before the appointed day in the sugar
year, or where the sugar undertaking, having started the manufacture of sugar
on or before that date, has ceased to manufacture sugar before the expiry of
the average period of manufacture of sugar. (Clause (a) of sub-section (1) of
section 3). The other is the case where the sugar undertaking has accumulated
arrears of cane dues upto a date in a sugar year to the extent of more than ten
per cent of the total price of the cane purchased during the immediately
preceding sugar year. (Clause (b) of sub-section (1) of section 3). The two
cases merely provide evidence from which a presumption can be drawn that the
sugar undertaking is in distress. [764 B- C]
4. The action intended under the legislation
is intended to serve more than the object of recovering arrears of cane dues.
If the object of recovering arrears of cane dues alone was the purpose to be
achieved, there was already sufficient provision in existing statutes such as
the U.P.
Sugarcane (Regulation of Supply and Purchase)
Act, 1953, which by section 17 thereof provides for the recovery of arrears of
cane dues. The impugned Ordinance and Act cannot be considered at par with the
statutes providing merely for the recovery of arrears of cane dues. The object
of the legislation covers a wider range of purpose. [764 G 765 A]
5. The permissible limit of arrears of cane
dues provided for in cl.(b) of sub-section (a) of section 3 merely constitutes
a standard for determining whether the arrears of cane dues fall 760 within the
permissible limit or have exceeded it. It does nothing more than that. It cannot
be extended as a criterion or determining whether the arrears of cane dues
should be confined to the sugar purchased during the instant sugar year or can
include also the arrears in relation to sugar purchased during an earlier sugar
year. [765 C-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 162 of 1979.
From the Judgment and Order dated 19.12.1978
of the Allahabad High Court in Writ Petition No. 2774 of 1978.
M.S. Gujaral, Dalveer Bhandari and R. N.
Poddar for the Appellant.
Anil Kumar Gupta and Brij Bhushan Sharma for
the Respondent.
The Judgment of the Court was delivered by
PATHAK, J. This appeal by special leave is direct against the judgment and
order of the Allahabad High Court allowing a writ petition and quashing an
order made by the Central Government under cl.(b) of sub-para (2) of para 3 of
the Sugar Undertakings (Taking over of Management) Ordinance, 1978 and a
consequential order issued under sub- para (4) of para 4 of the Ordinance.
The respondent company manufactures sugar
from sugar cane. On November 18, 1978 the Central Government issued a notice
under sub-para (1) of para 3 of the Sugar Undertakings (Taking over of
Management) Ordinance, 1978 (hereinafter referred to as the
"Ordinance") stating as on November 15, 1978 the respondent was in
arrears of cane dues in relation to the cane purchased before that date for the
purpose of its sugar undertaking to the extent of more than ten per cent of the
total price of the cane purchased by it during the immediately preceding "sugar
year", the total arrears being 475.99 lacs, and that as the Central
Government was satisfied that the effective functioning of the sugar
undertaking was necessary for the purposes of the said Ordinance, the Central
Government called upon the respondent to explain in writing the circumstances
in which the sugar undertaking had failed to clear the arrears of cane dues and
why the undertaking should not be taken over by the Central Government under
that Ordinance. On November 25, 1978 the respondent repelled to the notice
denying that it was in arrears to the extent of Rs. 475.99 lacs and claimed the
right to tender oral and documentary 761 evidence on a date fixed for the
hearing of the case.
However, the Central Government issued an
Order S.O. 696 (E) dated December 1, 1978 reciting that it was satisfied after
considering the report sent by the respondent that the arrears of cane dues in
excess of ten per cent had not been cleared by the respondent, and directing
that the management of the sugar undertaking would vest in the Central
Government for a period of three years commencing on and from December 2, 1978.
The respondent filed a writ petition in the
Allahabad High Court, and on December 19, 1978 the High Court allowed the writ
petition holding that while the Central Government could take action in respect
of the arrears due in respect of sugar cane purchased during the current
"sugar year" (that is to say, the sugar year during which the action
is taken) it could not do so in respect of the arrears pertaining to a
preceding sugar year, and therefore the impugned orders were invalid. The order
dated December 1, 1978 and the consequential order were quashed and the
appellant was directed to hand over possession of the sugar undertaking to the
respondent.
The Ordinance has since been replaced by the
Sugar Undertakings (Taking over of Management) Act, 1978 which while repealing
the Ordinance adopts everything done or action taken under the Ordinance as if
it had been done or taken under the corresponding provisions of the Act.
The Preamble of the Sugar Undertakings
(Taking over of Management) Act, 1978 (hereinafter referred to as the
"Act") recites that for "maintaining the continuity of
production of sugar, for avoiding undue hardship to cane producing farmers and
to best subserve the interest of all sections of the people, it is expedient in
the public interest to provide for the taking over for a limited period the
management of every sugar undertaking which fails or ceases to manufacture
sugar or which fails to pay promptly amounts due for the cane acquired for the
purposes of the undertaking." Sub-s. (1) of s.3 of the Act provides :-
"3.(1) Where the Central Government is satisfied - (a) that any sugar
undertaking has in any sugar year failed to commence the manufacture of sugar
on or before the appointed day in respect of that year, or 762 having started
the manufacture of sugar on or before that day ceased to manufacture sugar
before the expiry of the average period of manufacture of sugar in relation to that
undertaking; or (b) that on any date in any sugar year any sugar undertaking
has, in relation to the cane purchased before that date for the purposes of the
undertaking, arrears of cane dues to the extent of more than ten per cent of
the total price of the cane purchased for the purposes of the undertaking
during the immediately preceding sugar year; and (c) that in either case the
effective functioning of the undertaking is necessary for the purposes of this
Act, the Central Government may issue a notice in such form and in such manner
as may be prescribed to the owner or the manager of such sugar undertaking
calling upon such owner or manager to report in writing within such time, not
being less than five days, as may be specified in the notice, the circumstances
under which such undertaking has so failed to commence or ceased to manufacture
sugar or, as the case may be, clear the said arrears of cane dues and to show
cause as to why the management of such undertaking should not be taken over by
the Central Government under this Act." And sub-s. (2) of s. 3 reads :-
"(2) As soon as may be, after the receipt of the report under sub-section
(1) from the sugar undertaking, or where the sugar undertaking has failed to
make such report within the time specified in the notice to that undertaking
under sub-section (1), after the expiry of such time, the Central Government
may make such further inquiry (if any) as it may be deem fit and - (a) if the
Central Government is satisfied that having regard to all the circumstances of
the case and the purposes of this Act that it would be expedient to give
further time to the undertaking to enable it to 763 commence or resume
production of sugar or, as the case may be, clear the arrears of cane dues, it
may, by order in writing, specify the date on or before which and the manner in
which such undertaking shall commence or resume production of sugar or, as the
case may be, clear the said arrears of cane dues; or (b) if the Central
Government is not satisfied as provided in clause (a), declare by notification
that the management of such undertaking shall vest in the Central Government on
and from such date as may be specified in such notification." The
expression "sugar year" has been defined by cl.(g) of s.2 of the Act
to mean "the period of twelve months commencing on the 1st day of October
and ending with the 30th day of September next following". Sub-s.(5) of
s.3 of the Act provides that a notification issued under sub-s.(2) for vesting
the management of a sugar undertaking in the Central Government shall be in
force for such period not exceeding three years from the date of vesting as may
be specified in the notification and that although such period may be extended
the total period for which the management may remain vested in the Central
Government should in no case exceed three years from the date of vesting.
From the facts set out before the High Court
it appears that the management of the undertaking had been taken over on the
ground that the respondent had not paid in full the price of the sugar cane
purchased before November 15, 1978, and that included the sugar cane purchased
during the sugar year 1977-78, and the arrears so due were more than ten per
cent of the total price of the cane purchased during the sugar year 1977-78. It
was contended by the respondent that the arrears of cane price for the sugar
year 1977-78 could not be a ground for making the impugned order. It was urged
that cl.(b) of sub-para (2) of para 3 of the Ordinance on a proper construction
thereof, empowered the Central Government to initiate action for assuming the
management of the undertaking only if the arrears of cane purchased during the
period from the commencement of the sugar price were due for sugar cane year
1978-79 to November 15,1978 which period would fall within the sugar year
1978-79. The contention found favour with the High Court, and it granted relief
on the writ petition.
It is apparent from an analysis of the
provisions of the Ordinance and thereafter the Act which replaced it, that the
764 principle purpose of the legislation is to put mismanaged sugar
undertakings into proper functioning order by empowering the Central Government
to assume the temporary management of the undertakings. The legislation
indicates two kind of cases evidencing such mismanagement. One is the failure
of the undertaking to commence the manufacture of sugar on or before the
appointed day in the sugar year or where the sugar undertaking, having started
the manufacture of sugar on or before that day, has ceased to manufacture sugar
before the expiry of the average period of manufacture of sugar. Vide cl.(a) of
sub-s.(1) of s.3. The other is the case where the sugar undertaking has
accumulated arrears of cane dues upto a date in a sugar year to the extent of
more than ten per cent of the total price of the cane purchased during the
immediately preceding sugar year. Vide cl.(b) of sub-s.(1) of s.3. The two
cases merely provide evidence from which a presumption can be drawn that the
sugar undertaking is in distress. In both cases the statute further requires
that the Central Government should be satisfied that the effective functioning
of the undertaking is necessary for the purposes of the Act, that is to say,
for maintaining the continuity of the production of sugar, for avoiding undue
hardship to cane producing farmers and far best subserving the interests of all
sections of the people. Vide cl.(c) of sub-s.(1) of s.3. In other words, what
the legislation intends is that where a sugar undertaking has been so
mismanaged that either the undertaking has failed to commence the manufacture
of sugar in the sugar year, or having commenced manufacture has ceased to carry
it on during the sugar year, or has accumulated arrears of cane dues in excess
of the prescribed standard, then in all these cases it must further be
determined whether the effective functioning of the undertaking is necessary
for the purposes mentioned earlier, and only upon being so satisfied can the
Central Government assume the temporary management of the undertaking. It takes
over the undertaking temporarily in order to put it back on the rails after
removing the aberrations and shortcomings responsible for the mismanagement and
restoring the undertaking to a normal condition of effective functioning. The
action intended under the legislation is intended to serve more than the object
of recovering the arrears of cane dues. If the object of recovering arrears of
cane dues alone was the purpose to be achieved, there was already sufficient
provision in existing statutes such as the U.P. Sugarcane (Regulation of Supply
and Purchase) Act, 1953, which by s.17 thereof provides for the recovery of
arrears of cane dues. The impugned Ordinance and Act cannot be considered at
par with statutes providing merely for the recovery of arrears of 765 cane
dues. As has been explained earlier, the object of the legislation covers a
wider range of purpose.
The argument of the respondent before the
High Court was that the permissible limit of arrears of cane dues had been
defined as ten per cent of the total price of the cane purchased during the
immediately preceding sugar year, and this, it was said, required the court to
confine the arrears of cane dues to the cane purchased between the commencement
of the instant sugar year and the date in the sugar year when cognizance of the
matter was taken. We are not satisfied that cl.(b) of sub-s.(a) of s.3 should
be so limited. The permissible limit merely constitutes a standard for
determining whether the arrears of cane dues fall within the permissible limit
or have exceeded it. It does nothing more than that. It cannot be extended as a
criterion for determining whether the arrears of cane dues should be confined
to the sugar purchased during the instant sugar year or can include also the
arrears in relation to sugar purchased during an earlier sugar year. The
language of the clause is clear. It speaks of arrears of cane dues in relation
to the cane purchased "before that date". It seems to us that the
language is wide enough to include all the arrears of cane dues accumulated
upto "that date", including the arrears pertaining to sugar cane
purchased in earlier years.
In the results, the appeal is allowed, the
judgment and order dated December 10, 1978 of the High Court is set aside and
the writ petition is dismissed. As the point is one of first impression, there
is no order as to costs.
N.V.K. Appeal allowed.
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