{"id":90648,"date":"2000-05-03T00:00:00","date_gmt":"2000-05-02T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/diwan-sugar-mills-and-ors-vs-state-of-u-p-and-ors-on-3-may-2000"},"modified":"2015-08-26T02:05:12","modified_gmt":"2015-08-25T20:35:12","slug":"diwan-sugar-mills-and-ors-vs-state-of-u-p-and-ors-on-3-may-2000","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/diwan-sugar-mills-and-ors-vs-state-of-u-p-and-ors-on-3-may-2000","title":{"rendered":"Diwan Sugar Mills And Ors vs State Of U.P. And Ors on 3 May, 2000"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Diwan Sugar Mills And Ors vs State Of U.P. And Ors on 3 May, 2000<\/div>\n<div class=\"doc_bench\">Bench: B.N. Kirpal, Syed Shah Quadrj<\/div>\n<pre>           CASE NO.:\nAppeal (civil)  4872 of 1989\n\nPETITIONER:\nDIWAN SUGAR MILLS AND ORS.\n\nRESPONDENT:\nSTATE OF U.P. AND ORS.\n\nDATE OF JUDGMENT: 03\/05\/2000\n\nBENCH:\nB.N. KIRPAL &amp; SYED SHAH MOHAMMED QUADRJ\n\nJUDGMENT:\n<\/pre>\n<p>JUDGMENT<\/p>\n<p>2000 (3) SCR 948<\/p>\n<p>The following Order of the Court was delivered :\n<\/p>\n<p>The challenge in this appeal as well as in the connected writ petition is<br \/>\nto the decision of the Tribunal constituted under the U.P. Sugar Undertak-<br \/>\nings (Acquisition) ACT, 1971 which had interpreted Section 7 of the said<br \/>\nAct and had come to the conclusion that the claim of the appellant for<br \/>\npayment of Rs. 12 lakhs could not be accepted.\n<\/p>\n<p>Briefly stated, the facts are that M\/s. Diwan Sugar Mills was a partnership<br \/>\nfirm which owned a sugar factory. On 1st July, 1951, this factory is stated<br \/>\nto have been leased out to M\/s. Diwan Sugar and General Mills (Pvt.) Ltd.<br \/>\nThis factory was first taken over by the Government of India under the<br \/>\nDefence of India Rules on 4th December, 1965 and thereafter it was taken<br \/>\nover by the U.P. Government under Section 15 of the Industrial Development<br \/>\n&amp; Regulation Act. Ultimately, the factory was acquired by the U.P. Govern-<br \/>\nment under the aforesaid Acquisition Act.\n<\/p>\n<p>The owners, namely, the partnership firm filed a claim before the<br \/>\nprescribed authority for payment of compensation. The case of the owners<br \/>\nwas that under sub-section (5) of Section 7 read with the Schedule to the<br \/>\nsaid Act, a sum of Rs. 12 lakhs was payable in respect of the acquisition<br \/>\nof the properties and assets and the said payment should be made without<br \/>\ndeducting any liabilities of the lessee. On the prescribed authority<br \/>\nrejecting this con-tention, the owners then filed an appeal under Section<br \/>\n11 of the said Act before the Tribunal but without success. The appeal is<br \/>\nby special leave from the said decision of the Tribunal.\n<\/p>\n<p>In order to understand the controversy in issue, we may first refer to<br \/>\nrelevant provisions of the said Act. Section 2(h) defines &#8216;scheduled under-<br \/>\ntaking&#8217; to mean an undertaking engaged in the manufacture or production of<br \/>\nsugar and comprises of plants, machinery, workshop, etc. This scheduled<br \/>\nundertaking vested with the U.P. State Sugar Corporation Ltd. by virtue of<br \/>\nSection 3 of the Act which provides that such vesting and transfer shall be<br \/>\nfree from any debt, mortgage, charge or other encumbrance or lien, etc.<br \/>\nSection 7 provides for determination and mode of payment of compensation.<br \/>\nSub-sections (1) to (6) of Section 7 which are relevant for our purpose<br \/>\nread as follows .\n<\/p>\n<p>&#8220;7. Determination and mode of payment of compensation. -(l)(a) Subject to<br \/>\nthe provisions of clauses (b) and (c), the State Government shall pay as<br \/>\ncompensation for any sugar stocks com-prised in a scheduled undertaking<br \/>\ntheir value, which shall be calculated at the ex-factory market price<br \/>\nprevailing immediately before the appointed day, minus basic excise duty<br \/>\nand additional excise duty in lieu of sales tax leviable thereon.\n<\/p>\n<p>(b)  Such sugar stocks shall be disposed of from time to time (if<br \/>\nnecessary, by arrangement with any bank which has made advances before the<br \/>\nappointed day on the security thereof), and as and when the stocks are<br \/>\ndisposed of, so much of the said compensation as relates to the quantity<br \/>\ndisposed of shall be paid in cash by deposit with the prescribed authority<br \/>\nin accordance with the provisions, of sub-sections (6) and (9).\n<\/p>\n<p>(c) Out of the said compensation the amount of any advance or, as the case<br \/>\nmay be, the proportionate amount of advance, made on the security of the<br \/>\nquantity disposed of together with interest and any other charges relating<br \/>\nthereto payable under the terms of the advance, and storage and other<br \/>\nincidental charges relating thereto payable to the Corporation or to any<br \/>\nother person, shall be paid first, and the balance shall be deposited as<br \/>\naforesaid with the prescribed authority and be paid to the persons entitled<br \/>\nthereto in accordance with the decisions of that authority or of the<br \/>\nTribunal, as the case may be, under sub-section (9) or sub-section (12) or<br \/>\nunder Section 8, Section 9 or Section 11.\n<\/p>\n<p>(2)  The State Government shall pay as compensation for the acquisition of<br \/>\nany stocks of molasses comprised in the scheduled undertaking their value<br \/>\ncalculated at the price prevailing immediately before the appointed day, as<br \/>\nfixed under the Uttar Pradesh Sheera Niyantran Adhiniyam,  1964 (U.P. Act<br \/>\nXXIV of 1964), and the provisions of clauses (b) and (c) of sub-section (1)<br \/>\nshall mutatis mutandis apply in relation to such compensation.\n<\/p>\n<p>(3)  The State Government shall pay as compensation for the acquisition of<br \/>\nany stocks of sugarcane comprised in the scheduled undertaking the actual<br \/>\ncost of their purchase, as may be agreed upon between the State Government<br \/>\nand the persons interested and failing such agreement, as may be determined<br \/>\nby the prescribed authority.\n<\/p>\n<p>(4)  The State Government shall pay as compensation of the acquisition of<br \/>\nany sugar in the process of production or any bagasse or press-mud<br \/>\ncomprised in the scheduled undertaking its market value as may be agreed<br \/>\nupon between the State Government and the persons interested, and failing<br \/>\nsuch agreement, as may be determined by the prescribed authority.\n<\/p>\n<p>(5)  In addition to the compensation, if any, payable under sub-sections<br \/>\n(1), (2), (3) and (4) for the acquisition of the properties and assets<br \/>\nreferred to in those sub-sections, the State Government shall pay as<br \/>\ncompensation for the acquisition of every scheduled under-taking specified<br \/>\nin Column 2 of any of the Schedules to this Act an amount specified against<br \/>\nit in Column 3 thereof, by depositing it with the prescribed authority in<br \/>\naccordance with the provisions of sub-sections (6) and (9) and the same<br \/>\nshall be paid to the persons entitled thereto in accordance with the<br \/>\ndecisions of that authority or of the Tribunal, as the case may be, under<br \/>\nsub-section (9) or sub-section (12) or under Section 8, Section 9 or<br \/>\nSection 11.\n<\/p>\n<p>(6)  The State Government shall provisionally deduct from the compensation<br \/>\nreferred to in sub-sections (1), (2), (3), (4) and (5) the following<br \/>\namounts, namely :\n<\/p>\n<p>(a) any amount due on account of any debt, mortgage, charge or other<br \/>\nencumbrance or lien, trust or similar obligation attached to the scheduled<br \/>\nundertaking which by virtue of the provisions of Section 3 shall, on the<br \/>\nappointed day, attach to the compensation in substitution for the<br \/>\nundertaking :\n<\/p>\n<p>(b)  any amount due to any cane-growers or any cane growers&#8217; cooperative<br \/>\nsocieties in respect of the price of sugarcane sup-plied by such cane-<br \/>\ngrowers or by members of such society to the scheduled undertaking before<br \/>\nthe appointed day;\n<\/p>\n<p>(c) any amount of wages, retaining allowance, bonus, provident fund or<br \/>\nother payment due to persons employed as workmen (within the meaning of the<br \/>\nU.P. Industrial Disputes Act, 1947) in connection with the scheduled<br \/>\nundertaking immediately before the appointed day;\n<\/p>\n<p>(d) any amount due in respect of either the employer&#8217;s contribu-tion or the<br \/>\nemployees&#8217; contribution realised by the employer or any other dues<br \/>\nrecoverable from the employer under the Employees&#8217; Provident Fund Act, 1952<br \/>\nor the Employees&#8217; State Insur-ance Act, 1948, in respect of persons<br \/>\nemployed in connection with the scheduled undertaking immediately before<br \/>\nthe appointed day that the employer may have failed to pay in accordance<br \/>\nwith the respective Acts;\n<\/p>\n<p>(e) any amount, not being an amount referred to in clause (a), claimed by<br \/>\nthe State Government to be due immediately before the appointed day from<br \/>\nany person interested in the scheduled undertaking on account of any loan,<br \/>\ntax or cess, or any penalty or interest due in respect of such loan, tax or<br \/>\ncess, &#8211; and deposit the balance, if, any, with the prescribed authority,<br \/>\nand where such deductions arc equal to or exceed the compensation, it shall<br \/>\ninform the prescribed authority accordingly :\n<\/p>\n<p>Provided that the amount provisionally deducted under clause (a), in so far<br \/>\nit is not claimed by the State Government as due to itself, be deposited<br \/>\nwith the prescribed authority for disbursement to the persons interested<br \/>\naccording to their respective titles.\n<\/p>\n<p>Explanation. &#8211; The amounts referred to in clauses (a), (b), (c) and (d)<br \/>\nshall be provisionally deducted on the basis of information available with<br \/>\nthe State Government in respect thereof, and it shall be open to the State<br \/>\nGovernment to obtain relevant information either from the Corporation or<br \/>\nfrom the Cane Commissioner, the Labour Commissioner, the Employees&#8217;<br \/>\nProvident Fund Commissioner or the Employees&#8217; State Insurance Corporation,<br \/>\nas the case may be.&#8221;\n<\/p>\n<p>As already noticed in Schedule I to the Act at SI. No. 6 it is stated that<br \/>\ncompensation of Rs. 12 lakhs is to be paid to Diwan Sugar Mills which is<br \/>\nalso described as Diwan Sugar and General Mills (Pvt.) Ltd. which is stated<br \/>\nto be the lessee of the factory.\n<\/p>\n<p>Mr. Rajinder Sachar, learned senior counsel for the appellant has contended<br \/>\nthat the compensation referred to in sub-section (5) of Section 7 is<br \/>\npayable only to the owner of the undertaking and no deduction from the said<br \/>\namount of Rs. 12 lakhs is required to be made under clauses (b) to (e) of<br \/>\nsub-section (6) of Section 7. He has submitted that me amounts due which<br \/>\nare referred to under clauses (b) to (e) are attributable or relatable only<br \/>\nto the lessee and from the amount of compensation payable to the owner it<br \/>\nwill be unfair and unjust to deduct any such amount.\n<\/p>\n<p>Despite the fact that along with the appeal, a petition under Article 32<br \/>\nhas been filed by one of the partners of the firm which owned the said<br \/>\nfactory, there is no challenge to the vires of the Act or Section 7 in<br \/>\nparticular. What we are, therefore, to see is what is the correct<br \/>\ninterpretation of the said Section 7.\n<\/p>\n<p>Sub-sections (1) to (4) of Section 7 talk of compensation in respect of<br \/>\nsugar, molasses, sugarcane and sugar in process of production or any<br \/>\nbagasse or press-mud. The manner in which compensation in respect of the<br \/>\nsugar stocks to be calculated is indicated in clauses (a) to (c) of sub-<br \/>\nsection (1) of Section 7. Sub-section (5) provides that in addition to the<br \/>\ncompensation payable under sub-sections (1) to (4) an amount stipulated in<br \/>\nthe Scheduled will also be payable as compensation for the acquisition of<br \/>\nthe scheduled undertaking. From the amount of compensation arrived at under<br \/>\nsub-sections (1) to (5) of Section 7, the State Government is required to<br \/>\ndeduct the amounts referred to in clauses (a) to (e) of sub-section (6).<br \/>\nWhat remains after the said deductions is the sum which is required to be<br \/>\ndeposited with the prescribed authority which is then distributed or<br \/>\ndisbursed to the persons interested according to their respective titles.\n<\/p>\n<p>Till the stage of distribution the amount of compensation is regarded as<br \/>\none composite sum. From the total amount payable, the deductions under sub-<br \/>\nsection (6) are first to be made and Section 7 does not provide that<br \/>\ncompensation for the acquisition of the scheduled undertaking referred to<br \/>\nin sub-section (5) is to be treated differently from the compensation of<br \/>\nthe stocks, etc., envisaged by sub-sections (1) to (4) of Section 7. It is<br \/>\nfrom the sum total of the compensation so arrived at that deductions under<br \/>\nsub-section (6) are to be made. It is true that the deductions refered to<br \/>\nby clauses (b) to (e) of sub-section (6) may relate to the enterprise which<br \/>\nwas actually running the undertaking, in this case the lessee, but sub-<br \/>\nclause (a) of sub-section (6) which refers to the amount due on account of<br \/>\ndebt, mortgage, charge or other encumbrances can conceivably relate to any<br \/>\nsuch debt, mortgage, charge, etc., undertaken by the owner himself. If the<br \/>\nproceeds of sub-sections (1) to (4) of Section 7 can be utilised, along<br \/>\nwith the compen-sation under sub-section (5), for paying the amount due on<br \/>\naccount of a debt or a mortgage which may have been incurred by an owner,<br \/>\nthan it is not incongruous that compensation referred to in sub-section (5)<br \/>\nof Section 7 may likewise be used for discharging the amounts due under<br \/>\nclauses (b) to (e) of Section 7(6). In other words, the Act requires the<br \/>\nentire compensation payable to put in one basket from which payments to<br \/>\ndifferent types of creditors under sub-section (6) have to be made and<br \/>\nthereafter the balance, if any, which remains is the only amount which is<br \/>\nrequired to be deposited with the prescribed authority for disbursement to<br \/>\nthe persons interested therein.\n<\/p>\n<p>Learned senior counsel for the appellant\/petitioner has placed reliance on<br \/>\na decision of this Court in <a href=\"\/doc\/897275\/\">East India Coal Company Limited v. East<br \/>\nBulliaree\/Kendwadih Colliery Co. (P) Limited and Others,<\/a> [1987] 2 SCC 124<br \/>\nand submitted that there has to be apportionment of the compensation.\n<\/p>\n<p>In our opinion, the said decision has no application in the present case.<br \/>\nEast India Coal Company Ltd. (supra) was concerned with the Coking Coal<br \/>\nMines (Nationalisation) Act, 1972. There were owners who owned the said<br \/>\nmines and there were also raising contractors and selling agents who were<br \/>\noperating the coking coal mines. That Nationalisation Act contemplated<br \/>\ncompensation being paid to the owners. The raising contractors and selling<br \/>\nagents had contended, and this is what this Court was concerned with, as to<br \/>\nwhether these raising contractors and selling agents could also be regarded<br \/>\nas owners or not. This Court held that after reading the scheme of the<br \/>\nNationalisation Act, the raising contractors would also come within the<br \/>\nambit of the expression &#8216;owner&#8217; in the Act and thereafter it determined as<br \/>\nto how the compensation between two types of owners was to be distributed.<br \/>\nThat question does not arise in the present case. As we have already seen,<br \/>\nSection 7 of the Acquisition Act requires all types of compensation payable<br \/>\nunder sub-sections (1) to (5) being first utilised for discharging the<br \/>\nliabilities under sub-section (6) and thereafter if any amount remains that<br \/>\nis to be deposited with the prescribed authority for distribution amongst<br \/>\ninterested persons. The aforesaid decision in East India Coal Company&#8217;s<br \/>\ncase has no application in the present case.\n<\/p>\n<p>Therefore, we come to the conclusion that there is no merit in the appeal<br \/>\nas well as in the writ petition and the same are dismissed. However,<br \/>\nparties will bear their own costs.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Diwan Sugar Mills And Ors vs State Of U.P. And Ors on 3 May, 2000 Bench: B.N. Kirpal, Syed Shah Quadrj CASE NO.: Appeal (civil) 4872 of 1989 PETITIONER: DIWAN SUGAR MILLS AND ORS. RESPONDENT: STATE OF U.P. AND ORS. DATE OF JUDGMENT: 03\/05\/2000 BENCH: B.N. KIRPAL &amp; SYED SHAH MOHAMMED [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-90648","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Diwan Sugar Mills And Ors vs State Of U.P. 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