JUDGMENT

PATHAK, J.:— This appeal by special leave is directed 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 subpara. (4) of para. 4 of the Ordinance.

2. 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 that 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 replied 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 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.

3. 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 sugarcane 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.

4. 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.

5. 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 interests 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 very 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 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