DIWAN SUGAR MILLS AND ORS. versus STAIB OF U.P. AND ORS.

Citation: [2000] 3 S.C.R. 948 · Decided: 03-05-2000 · Supreme Court of India · Bench: B.N. KIRPAL, S.S.M. QUADRI · Disposal: Dismissed

Judgment (excerpt)

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DIWAN SUGAR Mll..LS AND ORS. 
v. 
STAIB OF U.P. AND ORS. 
MAY3, 2000 
B 
[B.N. KIRPAL AND SYED SHAH MOHAMMED QUADRI, JJ.] 
~ ..... 
U.P. Sugar Undertakings (Acquisition) Act, 1971 : 
S. 7-Sugar factory-Taken over by State Government-Compensation 
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for-Distribution of amongst interested persons after deduction towards liabili-
ties-Sugar factory owned by a partnership finn-Leased out to another com-
pany-Owners filing a claim before Prescribed Authority for Compensation 
contending that the amount payable in respect of acquisition of the properties 
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and assets should be paid without deducting any liabilities of the lessee-
Contention rejected by Prescribed Authority as also by Tribunal-Held, s. 7 
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requires types of cGmpensation payable under sub-sections ( 1) to ( 5) being first 
utilised for discharging liabilities under sub-section (6) and thereafter if any 
amount remains that is to be deposited with the Prescribed Authority for 
distribution amongst interested persons. 
East India Coal Company limited v. East Bulliaree/Kendwadih Colliery 
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Co. (P) limited and others, (1987) 2 SCC 124, held inapplicable. 
CIVILAPPELL.KI'E JURISDICTION :Civil Appeal No. 4872of1989. 
From the Judgment and Order dated 7.7.84 of the U.P. Sugar Under-
takings (Acquisition) Advt. 1971, 26/16, at Lucknow in Appeal No. 6 of 
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1983. 
t-
WITH 
Writ Petition (Civil) No. 15781 of 1984 
(Under Article 32 of the Constitution of India.) 
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Bedri Dass Agarwala, Rajinder Sachar, Shivi Sharma, N.N. Sharma, 
--
Shobha Dikshit, A.S. Pundir, H.K. Puri, S.K. Puri, Rajesh Srivastava, Ujjwal 
Banerjee, Pramod Swarup, R.B. Misra, Pradeep Misra and S.K. Sabharwal for 
the appearing parties. 
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The following Order of the Court was delivered : 
948 
DIWAN SUGAR MILLS v. STATE 
949 
;;;, 
j. 
The challenge in this appeal as well as in the r.onnected writ p~tition 
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is to the decision of the Tribunal constituted under the U.P. Sugar Undertak-
ings (Acquisition) ACT, 1971 which had interpreted Secti6n 7 of the said Act 
and had come to the conclusion that the claim of the appellant for payment 
of Rs. 12 lakhs could not be accepted. 
Briefly stated, the facts are that M/s. Diwan Sugar Mills was a 
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partnership fnm which owned a sugar factory. On 1st July, 1951, this factory 
.... 
is stated to have been leased out to Mis. Diwan Sugar and General Mills (Pvt.) 
Ltd. This factory was first taken over by the Government of India under the 
Defence of India Rules on 4th December, 1965 and thereafter it was taken 
over by the U.P. Government under Section 15 of the Industrial Development c 
& Regulation Act. Ultimately, the factory was acquired by the U.P. Govern-
ment under the aforesaid Acquisition Act. 
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The owners, namely, the partnership firm filed a claim before the 
prescribed authority for payment of compensation. The case of the owners 
was that under sub-section (5) of Section 7 read with the Schedule to the said 
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Act, a sum of Rs. 12 lakhs was payable in respect of the acquisition of the 
properties and assets and the said payment should be made without deducting 
any liabilities of the lessee. On the prescribed authority rejecting this con-
y 
tention, the owners then filed an appeal under Section 11 of the said Act 
before the Tribunal but without success. The appeal is by special leave from 
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the said decision of the Tribunal. 
In order to understand the controversy in issue, we may first refer to 
relevant provisions of the said Act. Section 2(h) defines 'scheduled under-
taking' to mean an undertaking engaged in the manufacture or production of 
sugar and comprises of plants, machinery, workshop, etc. This scheduled 
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undertaking vested with the U.P. State Sugar Corporation Ltd. by virtue of 
Section 3 of the Act which provides that such vesting and transfer shall be 
free from any debt, mortgage, charge or other encumbrance or lien, etc. 
Section 7 provides for determination and mode of payment of compensation. 
Sub-sections (1) to (6) of Section 7 which are relevant for our purpose read 
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as follows : 
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"7. Determination and mode of payment of compensation. -
(l)(a) Subject to the provisions of clauses (b) and (c), the State 
Government shall pay as compensation for any sugar stocks com-
prised in a scheduled undertaking their value, which shall be calcu-
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950 
SUPREME COURT REPORTS 
[2000] 3 S.C.R. ' 
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lated at the ex-factory market price prevailing immediately before the 
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appointed day, minus basic 

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