UNION OF INDIA versus LAKSHMI SUGAR & OIL MILLS LTD., HARDOI

Citation: [1985] SUPP. 3 S.C.R. 758 · Decided: 21-11-1985 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
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G 
H 
758 
UNION OF INDIA 
v. 
LAKSHMI SUGAR & OIL MILLS LTD., HARDOI 
NOVEMBER 21, 1985 
[K.S. PATHAK AND M,P, THAKKAR, JJ,] 
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'. 
The Respondent company manufactures sugar from sugar cane. 
On November 18, 1978, the Central Government issued a notice 
under sub-para ( l) 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 du~ing the imne-
diately 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 l, 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 purcll.ased 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. 
u.o.r. v. LAKSHMI SUGAR & OIL MILLS 
759 
Allowing the appeal of the Union of India to this Court, 
A 
HELD: l. 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 accwmnulated 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 asswne 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 comoence 
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 
accwnulated arrears of cane dues upto a date in a sugar year to 
the extent of m<ire than ten per cent of the total price of the 
cane purchased 
during the illlnediately 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 

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