Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.84428443 Of 2016
M/S. SHANTI CONDUCTORS(P) LTD. & ANR. ...APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD & ORS. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO.8445 Of 2016
M/S. TRUSSES AND TOWERS (P)LTD. ...APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD & Anr. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO.8448 Of 2016
ASSAM STATE ELECTRICITY BOARD & Anr. ...APPELLANT(S)
VERSUS
Signature Not Verified
Digitally signed by
DEEPAK SINGH
Date: 2019.01.24
10:03:47 IST
Reason:
M/S. TRUSSES AND TOWERS (P) LTD. ...RESPONDENT(S)
2
WITH
CIVIL APPEAL NO.8450 Of 2016
M/S. BRAHMPUTRA CONCRETE PIPE INDUSTRIES ...APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD ...RESPONDENT(S)
J U D G M E N T
ASHOK BHUSHAN,J.
These appeals have been filed questioning judgment
of Gauhati High Court by which judgment Regular First
Appeal filed by the Assam State Electricity Board has
been allowed setting aside the judgment and decree
passed by trial court in favour of appellants in
original suit proceedings. It shall be sufficient to
notice the pleadings in C.A. Nos. 84428443 of 2016 for
deciding the common questions of law involved in all
these appeals. The facts and pleadings in other appeals
shall also be briefly noticed.
3
C.A.Nos.84428443 of 2016
(M/s. Shanti Conductors (P) Ltd. & Anr. vs. Assam State
Electricity Board & Ors.)
2. The appellant is a Private Limited Company which
has been registered as a Small Scale Industrial Unit
for manufacturing electrical conductors and/or wires at
Kokrajhar, Assam. On 31.03.1992, the respondentAssam
State Electricity Board placed an order for supply of
Aluminium Electrical Conductors from the appellantsM/s
Shanti Conductors Pvt. Ltd. for a total consideration
of Rs. 1.22 crores. The supplies were to be made
between June and December, 1992. On 13.05.1992, another
order was placed by the Electricity Board to M/s Shanti
Conductors for the supply of various types of
conductors for a total consideration of Rs. 32.49 lacs.
The supplies of the aforesaid goods were to be made
between January and February, 1993. On 23.09.1992, the
President of India promulgated an ordinance, namely,
the Interest on Delayed Payment to Small Scale
Ancillary Industrial Undertakings Ordinance, 1992.
Subsequently, on 02.04.1993, the Interest on Delayed
Payment to Small Scale and Ancillary Industrial
4
Undertakings Act, 1993 (in short the “Act”) was enacted
and it was deemed to have come into force with effect
from 23.09.1992. Meanwhile, the supply of equipments
under the aforesaid purchase orders was completed by
M/s Shanti Conductors on 04.10.1993. On 05.03.1994, the
entire payment of Rs. 2.15 crores against the aforesaid
supply orders was received by M/s Shanti Conductors.
3. On 10.01.1997, M/s. Shanti Conductors filed a suit
for recovery of Rs.53.68 lakhs claiming interest on
delayed payments. The Assam Electricity Board
(hereinafter referred to as the “Board”) filed its
written statement raising the plea of limitation and
contending that the Act is not applicable to the case
of the appellant as the contract was concluded prior to
enactment of Act, 1993. The trial court decreed the
suit on 02.02.2000 for recovery of the amount of
Rs.51,60,507.42 with compound interest at the rate of
23.75% p.a. The Board filed the Regular First Appeal
No.66 of 2000 before the High Court of Gauhati. The
Division Bench of the High court while hearing the RFA
being of the view that certain important issues arise
5
for consideration, referred the matter to the Full
Bench. The Full Bench framed following questions of
law:
“i) Whether the suit for recovery of mere
interest under the Interest on Delayed
Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 is
maintainable?
ii) Whether in the present case the suit for
recovery of Interest under the Delayed
Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 would not
be maintainable as the contract for supply
of goods between the parties was entered
into prior to enforcement of the Act, i.e.
on 23.09.1992?
iii) Whether the suit for recovery of
interest under the Delayed Payments to Small
Scale and Ancillary Industrial Undertakings
Act, 1993 would not be maintainable if no
reservation is made by the supplier
retaining to it the right to recovery
interest under the Act when the payment(s)
of the principal sum is/are accepted, though
these may be made beyond the prescribed
period?”
4. The Full Bench of the High Court vide its judgment
dated 05.03.2002 answered the reference holding that a
suit for interest could be filed. It further held that
Act, 1993 is also applicable to contracts entered into
6
prior to 23.09.1992. It held that interest under the
Act would be calculated from 23.09.1992 till the
payment is made to the supplier. The Board filed an
appeal against the judgment of the Full Bench dated
05.03.2002 in this Court being C.A. NO.2351 of 2003
(Assam State Electricity Board and others vs. Shanti
Conductors Private Limited and another). The appeal
filed by the Board was heard along with another
C.A.No.2348 of 2003( Purbanchal Cables and Conductors
Private Limited vs. Assam State Electricity Board and
another). A twoJudge Bench of this Court decided both
the appeals vide common judgment dated 10.07.2012 which
judgment is reported in
(2012) 7 SCC 462 (Purbanchal
Cables and Conductors Private Limited vs. Assam State
Electricity Board and another) . The twoJudge Bench
relying on earlier judgments of this Court held that
suit for recovery of interest alone under the Act, 1993
is maintainable. It further held that the Act, 1993 has
no retrospective application. It further held that the
supplier has an accrued right to claim a higher rate of
interest in terms of the Act only with regard to sale
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agreements entered after the date of the commencement
of the Act i.e. 23.09.1992. After judgment of this
Court dated 10.07.2012 RFA No.66 of 2000 was decided by
the Division Bench vide its judgment dated 20.11.2012.
The Division Bench of the Gauhati High Court by the
impugned judgment has allowed the appeal of the Board.
The Division Bench following judgment of this Court in
held
Purbanchal Cables and Conductors Private Limited
that Act, 1993 would not apply to a contract entered
prior to the enforcement of the Act, 1993. The contract
between the parties being prior to the enforcement of
the Act, the appeal filed by the Board was thus allowed
setting aside the judgment and decree of the trial
court. A subsequent order dated 20.12.2012 was also
passed by the Division Bench directing the refund of
amount of Rs.38,03,381/. Aggrieved by both the
judgments dated 20.11.2012 and 20.12.2012 passed by the
Division Bench of the Gauhati High Court, Civil Appeal
Nos.84428443 of 2016 have been filed by the
appellants.
8
C.A.No.8445 of 2016 (M/s. Trusses and Towers (P) Ltd. V
Assam State Electricity Board and Anr.)
5. The Board placed two orders dated 17.02.1992 and
17.03.1992 with the appellant for supply of pre
stressed cement concrete poles. Written contract dated
10.06.1992 was entered between the parties. Poles were
supplied by the appellant to the Board during the
period 30.03.1992 to 30.09.1992. Payments were also
made between 23.04.1993 to 08.10.1993. The appellant
filed suit on 16.05.1994 against the Board seeking
decree of Rs.16,55,623/ with interest towards the
amount of delayed payment as per Act, 1993. The trial
court vide its judgment dated 15.06.1995 decreed the
suit. The Board filed Regular First Appeal against the
judgment of the trial court. On 05.04.2001, the High
Court allowed the Regular First Appeal filed by the
Board. The High Court held that all the bills raised by
the appellant were cleared by the Board prior to
commencement of Act, 1993. Further, the appellant
having received the principal amount could not sue for
interest. There was nothing on record to indicate that
9
the appellant has received the amount in question under
protest. The appellant filed SLP(C)No.12217/2001
against the judgment of the High court dated
05.04.2001. By following order the SLP was permitted to
be withdrawn by this Court:
“Learned counsel for the petitioner
seeks leave to withdraw the special leave
petition. He states that he will move the
High Court in review stating that it has
erred in recording that "all the bills were
paid and cleared earlier to the commencement
of the Act." The special leave petition is
dismissed as withdrawn accordingly.”
6. The appellant filed Review Application No.75 of
2001. The High Court vide its order dated 19.03.2013
partly allowed the review petition to the extent that
the appellant was held to be entitled to interest at
the rate of 9% per annum for the period of delayed
payment.
The appellant aggrieved by the said judgment has
filed C.A.No.8445 of 2016.
10
C.A.No.8448 of 2016(Assam State Electricity Board and
Anr. vs.Trusses and Towers (P) Ltd.)
7. The above appeal has been filed by the Board
against the order in Review Petition No.75 of 2001
filed by M/s. Trusses & Towers (P) Ltd. by which order
the High Court has partly allowed the review petition
to the extent that the appellant was held to be
entitled to interest at the rate of 9% p.a. as noted
above. The Board aggrieved by the grant of interest of
9% p.a. has come up in this appeal.
C.A.No.8450 of 2016(M/s. Brahmaputra Concrete Pipe
Industries vs. Assam State Electricity Board)
8. The Board placed two supply orders dated 17.02.1992
& 17.03.1992 for prestressed cement concrete poles to
the appellant. The payment to the tune of
Rs.23,04,585.90 was withheld by the Board, principal
amount, however, was started making payment with
effect from 23.04.1993 and the whole sum was paid upto
18.12.1993. The appellant filed Money Suit No.32/1996
for recovery of sum of Rs.10,03,466.23 with interest.
The Civil Judge has decreed the Suit No.32/1996 by
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order dated 30.09.2002 for an amount of Rs.5,46,233.14
with interest and costs. Board filed RFA No.78 of 2003
against the judgment of the trial court. The High Court
vide judgment dated 12.02.2005 allowed the appeal filed
by the Board and dismissed the suit filed by the
appellant. The High Court relied on the judgment of the
Purbanchal Cables and Conductors (P) Ltd. held that
there is no applicability of Act, 1993 with regard to
transaction which took place prior to 23.09.1992.
Against the judgment dated 12.02.1015. appeal
NO.8448/2016 has been filed.
9. We have heard Shri Ajit Kumar Sinha, Shri Basava
Prabhu S. Patil and Shri Navaniti Prasad Singh, learned
senior counsel appearing for the appellants. Shri Vijay
Hansaris, learned senior counsel has appeared for Assam
State Electricity Board.
10. All these appeals were heard by a twoJudge Bench
of this Court consisting of Justice V. Gopala Gowda and
Justice Arun Mishra. Both Hon'ble Judges of the Bench
delivered separate opinion dated 31.08.2016. In
12
paragraph 28 of the judgment following questions of law
have been noticed:
“i) Whether provisions of the Act are
retroactive in nature?
ii) Whether non consideration of this
aspect of the matter renders the decisions
of this Court in Modern Industries (supra)
and Purbanchal Cables & Conductors Pvt. Ltd.
(supra) as sub silentio?
iii) Whether the judgment rendered in
Purbanchal Cables & Conductors Pvt. Ltd.
(supra) operates as res judicata in the
instant case?
iv) Whether the suit filed by the
appellants is barred by limitation?
v) Whether the appeal against the review
in the connected matter in Civil Appeal @
SLP (C) No.15274 of 2013 (M/s Trusses &
Towers Pvt. Ltd.) is maintainable?
vi) What order?”
11. Dealing with Sections 3, 4, 5 of Act,1993 following
opinion was expressed by Justice Gowda:
“44.The Act was enacted in order to
provide a boost to the small scale and
ancillary industries, which were suffering
as a result of irregular and delayed
payments. A perusal of the statement of
objects and reasons of the Act, the relevant
portion of which has been extracted supra,
makes it clear that the small scale
industries were suffering as a result of
13
lack of working capital, which was affecting
the economic health of such industries.
Prompt payment on the outstanding money, it
was felt, that was the need of the hour. In
this context, the provisions of Sections 3,
4, 5 of the Act, assume significance. More
so in light of the fact that in the
definition clause of Section 2 of the Act,
the legislature has not defined the words
‘transaction’ or ‘supply order’. It chose to
only give definition to the terms, inter
alia, ‘appointed day’, ‘buyer’ and
‘supplier’. Since the focus of the Act is on
delayed payment, which is in consonance with
the definition of the term ‘appointed day’
as well, there is no need to consider when
the ‘transaction’ was entered into or the
date of the ‘supply order’. Section 3 of the
Act clearly provides that the liability of
the buyer to make payment accrues after the
supplier supplies goods or renders any
services to the buyer. Thus, what was
envisaged by the legislature as delayed
payment was payment of the outstanding money
due to the supplier after the goods had been
supplied, and after the date agreed upon or
the date of deemed acceptance. A bare
reading of the Section makes it clear that
the date of entering into the agreement or
the date of supply order were not in
contemplation of the legislature at all.
Thus, it is amply clear from a bare reading
of Section 3 that for the purpose of the
Act, it does not matter when the contract
was entered into, as long as the supply of
the goods was after the Act came into force
on 23.09.1992. It is in that sense that the
question of retrospective application of the
Act does not arise at all. This is further
supported by the use of the non obstante
clause in Section 4 of the Act.
14
45. At the cost of repetition, Section 4 of
the Act is extracted hereunder:
“4. Date from which and rate at which
Where any buyer
interest is payable.
fails to make payment of the amount to
the supplier, as required under section
3, the buyer shall, notwithstanding
anything contained in any agreement
between the buyer and the supplier or in
any law for the time being in force, be
liable to pay interest to the supplier
on that amount from the appointed day
or, as the case may be, from the date
immediately following the date agreed
upon, at one and half time of prime
Lending Rate charged by the State Bank
of India.”
(emphasis supplied)
The use of the non obstante clause before
the term “agreement” also makes it clear
that once the money becomes due, which is
after the supply of the goods and rendering
services, the buyer is liable to pay the
statutory interest on the delayed payment to
the supplier no matter what is contained in
the agreement between the buyer and the
supplier.
46.Further, even on the issue of
retrospectivity, what was required to be
examined by this Court in the aforesaid
cases was whether by reading the relevant
statutory provisions Sections 3, 4, 5 and 6
of the Act, a vested statutory right is
conferred. As I have already held that
aforesaid provisions of the Act are
retroactive in nature therefore, non
consideration of this aspect in Purbanchal
Cables & Conductors Pvt. Ltd. (supra) and
cases mentioned therein, renders the said
15
judgment sub silentio on this question. The
contention advanced by Mr. Vijay Hansaria,
learned senior counsel appearing on behalf
of the Electricity Board in this regard
cannot be accepted.”
12. It was further observed that this Court in
did not
Purbanchal Cables and Conductors (P) Ltd.
consider the important aspect of the matter as to
whether provisions of the Act are retroative or not.
Issue No.1 and 2 were answered in favour of the
appellant. Other issues were also answered in favour of
the appellant. In paragraphs 56 and 57, the appeals
were allowed by Justice Gowda in the following manner:
“56. For the reasons stated supra, I
answer the points framed in these appeals in
favour of the appellants as stated above.
The appeals are accordingly allowed. All
pending applications are disposed of.
57. In the Civil Appeals arising out of
SLP (C) Nos. 99249925 of 2013,vide order
dated 17.02.2015, the appellants M/s Shanti
Conductors were directed to pay an amount
of Rs.38,70,000/ back to the respondents.
The respondents shall refund the amount to
the appellants with 9% interest per annum
within six weeks from the date of receipt of
the copy of this Order.”
13. Another Hon'ble Judge, Justice Arun Mishra who
16
delivered separate opinion disagreed with the opinion
of Justice Gowda. While disagreeing with the opinion of
Justice Gowda following was held in paragraphs 77, 78,
79 and 80:
“77. In view of the aforesaid catena of
decisions of this Court, it has to be held
that the Act of 1993 cannot be said to be
retrospective in operation or having
retroactive operation. The question stands
answered affirmatively beyond pale of doubt
and the decisions are binding on a Co
ordinate Bench. It cannot be said that the
decisions are sub silentio or per incuriam in
any manner whatsoever and, in my opinion, it
is not open to the Coordinate Bench to take
a different opinion. There is no confusion
with respect to meaning of transaction,
supply order and agreement. This Court while
deciding aforesaid cases was not in oblivion
of aims and objects of beneficial
legislation, considered same and it has
Page 104 104 affirmatively pronounced on all
the aspects. Hence, I find no scope to dwell
further into the same arena to declare the
various judgments to be sub silentio, per
incuriam or not laying down the law
correctly.
78. Even otherwise, on merits, in my
opinion, considering the scheme of the Act,
various provisions of the Act it cannot be
said to have retrospective operation or
retroactive operation and where a supply
order has been placed before the date of
commencement of the Act, that is before
23.9.1992, the beneficial provisions of the
Act regarding higher interest would not be
applicable.
17
79. In the case of appellant M/s. Shanti
Conductors (P) Ltd. itself decided along with
Purbanchal Cables (supra) aforesaid findings
have been recorded by this Court while
remanding the case to the High Court for
decision on merits as an appeal arising of
same lis was pending before the High Court
and the High Court has rightly followed the
decisions in Purbanchal Cables & Conductors
(supra) decided along with M/s. Shanti
Conductors (P) Ltd. The finding recorded by
this Court in the remand order is final and
binding on the appellant M/s. Shanti
Conductors (P) Ltd. They cannot question the
same again in the instant appeals. Page 105
105
80. In view of the aforesaid discussion, the
appeals have no merit and the same deserve
dismissal and are hereby dismissed. No
costs.”
14. In view of the divergent opinion expressed by
learned Judges consisting the Bench the matter has been
placed before this threeJudge Bench.
15. Shri Ajit Kumar Sinha, leaned senior counsel for
the appellant in his submission referred to and relied
on the opinion of Hon'ble Judge allowing the appeal. He
submits that the Act, 1993 was enacted as beneficial
legislation to protect the small scale industries. The
Act, 1993 focused on supplies and the date of the
18
agreement for supply has no relevance. The Act applies
and protect the suppliers in the event supplies have
been effected subsequent to Act, 1993. Learned counsel
submits that even if the orders for supply were issued
prior to 23.09.1992 some of the supplies have been made
after the Act. The provisions of the Act are applicable
and the appellant was clearly entitled for interest on
delayed payment. He submits that the contrary view
expressed by this Court in Purbanchal Cables and
Conductors Private Limited judgment does not correctly
interpret the provisions of the Act, 1993. He submits
that what is relevant is amount due to the suppliers
and in event the amount due to supplier is subsequent
to Act, 1993 the liability to pay interest on delayed
payment accrues and is fastened on the buyer.
16. The Act was brought by an Ordinance. The Act
applies on amount due not for any previous period prior
to Act, 1993 but subsequent to enforcement of the Act,
1993. The Act, 1993 has prospective application and it
is not the case of the appellant that Act has any
retrospective operation.
19
Shri Patil adopting the arguments of Shri Sinha,
further submits that withdrawal of SLP (C)No.12217 of
2001 by the appellant shall not preclude the appellant
from challenging the subsequent order dated 19.03.2013
passed by the Gauhati High Court which has given a
fresh cause of action.
17. Shri Navaniti Prasad Singh submits that Act, 1993
was enacted for prompt payments of money by buyers and
to statutorily ensure by mandatory provisions for
payment of interest on the outstanding money, in case
of default. He submits that payment of interest even on
commercial transactions was a concept already contained
in several statutory provisions. By the Act, 1993
nothing new was done except payment of interest on
delayed payment was ensured to deter the buyer from
withholding amount of suppliers.
18. Shri Vijay Hansaria, learned senior counsel for
Board submits that twoJudge Bench of this Court in
Purbanchal Cables and Conductors (P) Ltd. has correctly
interpreted provisions of Act, 1993. The Act has no
20
application when contract to supply was entered prior
to enforcement of the Act, 1993. He submits that suit
filed by Shanti Conductors was barred by time.
According to the case of the appellant the amount
became due on 04.10.1993, the limitation will start
running from 04.11.1993 and suit having not been filed
within three years suit was barred by limitation. He
submits that benefit of the Act, 1993 cannot be allowed
to the appellant. He further submits that the appellant
was bound by the judgment of this Court in Purbanchal
Cables and Conductors (P) Ltd. since by the said
judgment dated 10.07.2012 the appeal filed by the Board
in which Shanti Conductors was also respondent has been
decided. The appellants are bound by the judgment
dated 10.07.2012 and what has been held in the said
judgment cannot be questioned by the appellant the
judgment being binding interparties.
19. He further submits that admittedly the entire
principal amount stood paid to the appellant by
04.10.1993 hence suit for only interest was not
maintainable.
21
20. Shri Hansaria submits that judgments of this Court
in Assam Small Scale Industries Development Corp. Ltd.
and others vs. J.D. Pharmaceuticals and another, (2005)
13 SCC 19 , Shakti Tubes Ltd. vs. State of Bihar and
others, (2009) 7 SCC 673 , Modern Industries vs. Steel
Authority of India Limited, ( 2010) 5 SCC 44, as well as
judgment of this Court in Purbanchal Cables and
Conductors Private Limited (supra) having held that Act
has no applicability with regard to contracts entered
into prior to enforcement of Act, the said law which is
a settled law for a quite long time need not be
unsettled by this Court. In view of the judgment of
this Court in Purbanchal Cables , the appeal of the
appellant has rightly been dismissed by the Gauhati
High Court.
21. Replying the submission of Shri Patil, Shri
Hansaria submits that when the SLP by this Court was
dismissed on 06.08.2001 against the judgment of the
High Court dated 05.04.2001 allowing the appeal of the
Board, this Court having not granted further liberty it
22
is not open for the appellant to file the appeal
against the impugned judgment deciding review petition.
22. Shri Hansaria further submits that the Board has
also filed appeal against the order of the High Court
deciding the review petition wherein the High Court has
granted 9% interest. Shri Hansaria lastly submitted
that the interest if any can be claimed by the
appellant only till the date they receive the final
payment.
23. In the rejoinder, Shri A.K. Sinha has refuted the
submissions of Shri Hansaria. He submits that the
judgment of this Court in cannot
Purbanchal Cables
operate as res judicata, since appeal which was decided
on 10.07.2012 was only against the reference of the
Full Bench. The Full Bench having only answered the
legal questions, the appeal in the High Court being
still pending and there being no decision in appeal the
principle of merger shall not be attracted. Shri
Sinha, however, submits that the suit was not barred by
limitation. The last payment made to the appellant
23
being on 05.03.1994, the suit filed by the appellant on
10.01.1997 was well within limitation.
24. Shri Patil in rejoinder submits that the order
passed in the review petition being an order partly
allowing the review petition the appeal filed by the
appellant is on separate cause of action and the
earlier order passed by this Court on 06.08.2001 shall
not come in the way of deciding the appeal on merits.
25. Learned counsel for the parties have relied on
various judgments of this Court which shall be referred
to while considering the submissions of the parties.
26. We have considered the submissions of the learned
counsel for the parties and have perused the divergent
opinion dated 31.08.2016 given by two Hon'ble Judges
of this Court in C.A.Nos.84428443 of 2016.
27. From the submissions of the learned counsel for the
parties and pleadings on record we need to answer the
following questions in these appeals:
(1) Whether Act, 1993 is not applicable when the
24
contract for supply was entered between the
parties prior to enforcement of the Act i.e.
23.09.1992 ?
(2) Whether in the event it is found that Act is
applicable also with regard to contract
entered prior to Act, 1993 in pursuance of
which contract, supplies were made after the
enforcement of Act, 1993, the Act, 1993 can
be said to have retrospective operation ?
(3) Whether money suit by M/s. Shanti Conductors
was barred by limitation ?
(4) Whether judgment of this Court in Purbanchal
Cables dated 31.08.2016 by which appeal of
M/s. Shanti Conductors was also dismissed is
binding between the parties i.e. M/s. Shanti
Conductors and Assam Electricity Board and
the appellant cannot be allowed to question
the said judgment in these appeals ?
(5) Whether the suit filed by the appellants for
recovery of only interest when admittedly
entire principal amount was paid prior to
filing of the suit can be said to be
maintainable ?
(6) Whether appeal filed by M/s Trusses and
25
Towers Pvt. Ltd. challenging the review
judgment dated 19.03.2003 cannot be
entertained since no liberty was granted by
this Court in SLP(C)No.12217 of 2001 when the
SLP filed against the main judgment of the
High court dated 05.04.2001 was dismissed as
withdrawn ?
(7) Whether the High court while considering the
Review petition no.75 of 2001 M/s Trusses &
Towers Pvt. Ltd. even after expressing that
Act, 1993 is not applicable could have
allowed 9% interest to the plaintiff?
28. Before we consider the issues which have arisen in
these appeals it is necessary to notice the provisions
of the Act, 1993. In the Parliament, the Government of
India made a policy statement on small scale
industries. It was also announced that suitable
legislation would be brought to ensure prompt payment
of money by buyers to the small industrial units. An
Ordinance, namely, the Interest on Delayed Payments to
Small Scale and Ancillary Industrial Undertakings
Ordinance, 1992 was promulgated by the President on
26
23.09.1993. To replace the Ordinance, The Interest on
Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 was introduced in the
Parliament. The Statement of Objects and Reasons of the
Act throws considerable light on the prevalent
situation and the remedially measures which was sought
in the legislation. In the Statement of Objects and
reasons following was observed:
“2. Inadequate working capital in a
small scale or an ancillary industrial
undertakings causes serious and endemic
problems affecting the health of such
undertaking. Industries in this sector have
also been demanding that adequate measures
be taken in this regard. The Small Scale
Industries Board, which is an apex advisory
body on policies relating to small scale
industrial units with representatives from
all the States, governmental bodies and the
industrial sector, also expressed this view.
It was, therefore, felt that prompt payments
of money by buyers should be statutorily
ensured and mandatory provisions for
payments of interest on the outstanding
money, in case of default, should be made.
The buyers, if required under law to pay
interest, would refrain from withholding
payments to small scale and ancillary
industrial undertakings.”
29. Act, 1993 is a special legislation. Section 2 of
the Act provides definitions, its clause (b) defined
27
the “appointed day” in the following manner:
"2(b)”appointed day” means the day following
immediately after the expiry of the period
of thirty days from the day of acceptance or
the day of deemed acceptance of any goods or
any services by a buyer from a supplier;”
30. Sections 3 to 6 of the Act, 1993 are as follows:
“Section 3.
Liability of buyer to make
payment. Where any supplier supplies any
goods or renders any services to any buyer,
the buyer shall make payment therefor on or
before the date agreed upon between him and
the supplier in writing or, where there is
no agreement in this behalf, before the
appointed day:
Provided that in no case the period
agreed upon between the supplier and the
buyer in writing shall exceed one hundred
and twenty days from the day of acceptance
or the day of deemed acceptance.
Section 4. Date from which and rate at
which interest is payable. Where any buyer
fails to make payment of the amount to the
supplier, as required under section 3, the
buyer shall, notwithstanding anything
contained in any agreement between the buyer
and the supplier or in any law for the time
being in force, be liable to pay interest to
the supplier on that amount from the
appointed day or, as the case may be, from
the date immediately following the date
agreed upon, at one and half time of prime
Lending Rate charged by the State Bank of
India.
28
Explanation. For the purposes of this
section," Prime Lending Rate" means the
Prime Lending Rate of the State Bank of
India which is available to the best
borrowers of the bank.
Section 5. Liability of buyer to pay
compound interest. Notwithstanding anything
contained in any agreement between a
supplier and a buyer or in any law for the
time being in force, the buyer shall be
liable to pay compound interest (with
monthly interests) at the rate mentioned in
section 4 on the amount due to the supplier.
Section 6. Recovery of amount due.
(1)
The amount due from a buyer,
together with the amount of interest
calculated in accordance with the provisions
of sections 4 and 5, shall be recoverable by
the supplier from the buyer by way of a suit
or other proceeding under any law for the
time being in force.
(2) Notwithstanding anything contained
in sub section (1), any party to a dispute
may make a reference to the Industry
Faciliation Council for acting as an
arbitrator or conciliator in respect of the
matters referred to in that sub section and
the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996 ) shall
apply to such dispute as if the arbitration
or conciliation were pursuant to an
arbitration agreement referred to in sub
section (1) of section 7 of that Act.
29
31. Section 3 creates a statutory liability of buyer to
make payment. The statutory liability is to the effect
that where any supplier supplies any goods to any
buyer, the buyer shall make payment, therefor on or
before the date agreed upon between him and the
supplier in writing or, where there is no agreement in
this behalf, before the appointed day. The statutory
liability has been fastened on the buyer to make
payment in the following manner:
(i)on or before the date agreed upon between
him and on the supplier in writing, or
(ii) where there is no agreement in this
behalf before the appointed day.
32. 'Appointed day' as defined in Section 2(b) means
the day following immediately after the expiry of the
period of thirty days from the day of acceptance or the
day of deemed acceptance of any goods or any services
by a buyer from a supplier. Thus, statutory liability
to make payment accrues to buyer as per Section 3, it
is relevant to notice the event contemplated under
30
Section 3 is ”where any supplier supplies any goods or
renders any services to any buyer”. The incidence of
liability is supply of goods or rendering any service.
The Act is clearly prospective in nature and shall
govern the incidence of supply and rendering service
which happens after enforcement of the Act i.e.
23.09.1992.
33. The second part of Section 3 is “buyer shall make
payment”. Obviously, question of payment shall arise
only after supply of goods or rendering any service.
Thus, by virtue of Section 3, both the incidents i.e.
supply or service on the one hand and payment on the
other has to be after the enforcement of Act, 1993.
Statutory provision of Section 3 further creates
statutory liability to make payment on the agreed day
in writing between the buyers and the supplier and if
there is no agreement then before appointed day. The
fact that agreement in writing between buyer and
supplier for supply and payment is prior to the
enforcement of the Act is neither relevant nor
material, what is material is that supply and services
31
had to be after the enforcement of the Act, only then
the liability of payment shall accrue.
34. We have already noticed that the purpose and object
of legislation was prompt payments of money by buyer
which has been statutorily ensured in Act, 1993 by
containing mandatory provisions of payment of interest.
35. Section 4 which deals with date from which and rate
at which interest is payable. The liability to make
payment of the amount to the supplier only arises when
any buyer fails to make payment as required under
Section 3.
36. Section 4 further provides “notwithstanding
anything contained in any agreement between the buyer
and the supplier or any law for the time being in
force”, thus, even if the agreement between the buyer
and the supplier contains clause that no interest on
late payment shall be made the liability to pay
interest is fastened by virtue of Section 4
disregarding any contract to the contrary. Whether the
contract between buyer and supplier is prior to
32
enforcement of Act, 1993 is also neither relevant nor
material and the material is that buyer fails to make
payment to supplier as required under Section 3. The
liability to pay interest thus arises when the payment
is not made as per Section 3.
37. The liability to make payment under Section 3 and
the liability to pay interest under Section 4 is not
dependent on date of agreement between the parties to
make supply. When the question of supply and payment
are incidents contemplated under the Act which have to
take place after the enforcement of the Act the day of
agreement between the parties has no relevance in so
far as statutory liability under the Act is concerned.
38. There are several twoJudge Benches judgments of
this Court where provisions of Act, 1993 especially
Sections 3 and 4 have been interpreted. We now refer
to judgments of this Court which have considered the
above provisions. The first judgment which has been
noticed is Assam Small Scale Industries Development
Corp. Ltd. and others vs. J.D. Pharmaceuticals and
33
another, (2005) 13 SCC 19. This Court in the above
judgment laid down that Act, 1993 will not apply to
transactions which took place prior to enforcement of
the Act. Following was laid down in paragraphs 37 and
38:
“37. We have held hereinbefore that
Clause 8 of the terms and conditions relate
to the payments of balance 10%. It is not in
dispute that the plaintiff had demanded both
the principal amount as also the interest
from the Corporation. Section 3 of the 1993
Act imposes a statutory liability upon the
buyer to make payment for the supplies of
any goods either on or before the agreed
date or where there is no agreement before
the appointed day. Only when payments are
not made in terms of Section 3, Section 4
would apply. The 1993 Act came into effect
with effect from 23.9.1992 and will not
apply to transactions which took place prior
to that date. We find that out of the 71
suit transactions, sl. Nos.1 to 26 (referred
to in penultimate para of the Trial Court
Judgment), that is supply orders between
5.6.1991 to 28.7.1992, were prior to the
date of 1993 Act coming into force. Only the
transactions at sl. no. 27 to 71 (that is
supply orders between 22.10.1992 to
19.6.1993). will attract the provisions of
the 1993 Act.
38. The 1993 Act, thus, will have no
application in relation to the transactions
entered into between June, 1991 and
23.9.1992. The Trial Court as also the High
Court, therefore, committed a manifest error
in directing payment of interest at the rate
34
of 23% upto June, 1991 and 23.5%
thereafter.”
39. The word 'transaction' used in the above judgment
has to include the supply, in the event word
transaction is understood as supply there cannot be any
quarrel with the proposition that Act will not apply
with regard to supply made prior to the Act.
40. The next judgment of this Court is Shakti Tubes
Ltd. vs. State of Bihar and others, (2009) 7 SCC 673 .
In the said case, Shakti Tubes had filed a suit for
payment of interest. In the above case, supply orders
were placed by the State of Bihar on 16.07.1992,
reliance on Act, 1993 was placed by the appellant. It
was also noticed in the said case that earlier supply
order dated 16.07.1992 was materially altered and
substituted by a fresh supply order issued on
18.03.1993. Referring to the judgment of this Court in
Assam Small Scale Industries case, twoJudge Bench held
that ratio of aforesaid decision is clearly applicable.
In paragraphs 17, 18 and 19 following was laid down:
35
“17. In the light of the said facts in
Assam Small Scale Industries case, it was
recorded in paragraph 37 of the judgment
that while the Act came into effect from
23rd September, 1992, the supply orders were
placed only in respect of Serial Nos. 1 to
26 immediately and before coming into effect
of the Act and rest of the supply orders
namely, supply orders at Serial Nos. 27 to
71 were placed between 22.10.1992 to
19.06.1993 which were subsequent to the date
when the Act came into force. In that
context, it was clearly recorded in the
judgment that the Act will have no
application to the transactions that took
place prior to the commencement of the Act.
In the next sentence the Court made it clear
as to what is referred to and understood by
the expression "transaction" when it clearly
stated that out of 71 transactions, Serial
Nos. 1 to 26, i.e. supply orders between
05.06.1991 to 28.07.1992 being prior to 23rd
September, 1992 when the Act came into
force, higher interest as envisaged under
Sections 4 and 5 of the Act cannot be paid
and demanded in respect of the said supply
orders/transactions. It was also made clear
that the transactions at Serial Nos. 27 to
71 only i.e. supply orders between
22.10.1992 to 19.06.1993, would attract the
provisions of the Act. therefore, those
supply orders which were issued by the
Corporation between 22.10.1992 to 19.06.1993
were held to be the transactions which would
be entitled to get the benefit of the
provisions of the Act.
18. In our considered opinion, the ratio
of the aforesaid decision in Assam Small
Scale Industries case is clearly applicable
and would squarely govern the facts of the
36
present case as well. The said decision was
rendered by this Court after appreciating
the entire facts as also all the relevant
laws on the issue and, therefore, we do not
find any reason to take a different view
than what was taken by this Court in the
aforesaid judgment. Thus, we respectfully
agree with the aforesaid decision of this
Court which is found to be rightly arrived
at after appreciating all the facts and
circumstances of the case.
19. Now coming to the facts of the present
case we find that there is no dispute with
regard to the fact that the supply order was
placed with the respondents on 16.07.1992
for supply of the pipes which date is
admittedly prior to the date on which this
Act came into effect. ”
41. The Bench further referring to earlier judgment of
this Court in Assam Small Scale Industries observed
that the use of expression 'transaction' was only for
supply order. In paragraph 21 following was laid down:
“21. We have considered the aforesaid
rival submissions. This Court in Assam Small
Scale Industries case has finally set at
rest the issue raised by stating that as to
what is to be considered relevant is the
date of supply order placed by the
respondents and when this Court used the
expression "transaction" it only meant a
supply order. The Court made it explicitly
clear in paragraph 37 of the judgment which
we had already extracted above. In our
37
considered opinion there is no ambiguity in
the aforesaid judgment passed by this Court.
The intent and the purpose of the Act, as
made in paragraph 37 of the judgment, are
quite clear and apparent. When this Court
said "transaction" it meant initiation of
the transaction i.e. placing of the supply
orders and not the completion of the
transactions which would be completed only
when the payment is made. therefore, the
submission made by the learned senior
counsel appearing for the appellant
plaintiff fails .”
42. The Court further held that there was neither any
alteration of the contract nor novation of the contract
in paragraph 31 which is to the following effect:
“31. Even otherwise, we are of the
considered view that there was neither any
alteration of the contract nor any novation
of the contract in the present case. The
correspondence between the parties clearly
disclosed that after the respondents issued
the supply order, the appellantplaintiff
did not supply the pipes in terms of the
supply order and it urged mainly for the
increase in the price of the goods.
Subsequently, they relied upon the price
escalation clause and asked for increase in
the price of pipes .”
43. Next judgment we notice is Modern Industries vs.
Steel Authority of India Limited, ( 2010) 5 SCC 44.
Noticing the purpose and object of the Act, 1993
38
following was observed in paragraph 23:
“23. The wholesome purpose and object
behind 1993 Act as amended in 1998 is to
ensure that buyer promptly pays the amount
due towards the goods supplied or the
services rendered by the supplier. It also
provides for payment of interest statutorily
on the outstanding money in case of default.
Section 3, accordingly, fastens liability
upon the buyer to make payment for goods
supplied or services rendered to the buyer
on or before the date agreed upon in writing
or before the appointed day and when there
is no date agreed upon in writing, the
appointed day shall not exceed 120 days from
the day of acceptance. ”
44. The Court had also considered one of the
submissions that the suit for recovery of mere interest
under Act, 1993 is not maintainable. The Bench answered
the issue by holding that the suit even for interest is
also maintainable. Following was laid down in
paragraphs 4546:
“45. It is true that word 'together'
ordinarily means conjointly or
simultaneously but this ordinary meaning
put upon the said word may not be apt in
the context of Section 6. Can it be said
that the action contemplated in Section 6
by way of suit or any other legal
proceeding under Subsection (1) or by
making reference to IFC under Subsection
(2) is maintainable only if it is for
39
recovery of principal sum along with
interest as per Sections 4 and 5 and not
for interest alone? The answer has to be in
negative.
46.We approve the view of Gauhati High
Court in Assam State Electricity Board
(2002) 2 GLR 550 that word 'together' in
Section 6(1) would mean 'alongwith' or 'as
well as'. Seen thus, the action under
Section 6(2) could be maintained for
recovery of principal amount and interest
or only for interest where liability is
admitted or has been disputed in respect of
goods supplied or services rendered. In our
opinion, under Section 6(2) action by way
of reference to IFC cannot be restricted to
a claim for recovery of interest due under
Sections 4 and 5 only in cases of an
existing determined, settled or admitted
liability. IFC has competence to determine
the amount due for goods supplied or
services rendered in cases where the
liability is disputed by the buyer.
Construction put upon Section 6(2) by
learned senior counsel for the buyer does
not deserve to be accepted as it will not
be in conformity with the intention, object
and purpose of 1993 Act. Preamble to 1993
Act, upon which strong reliance has been
placed by learned senior counsel, does not
persuade us to hold otherwise. It is so
because Preamble may not exactly correspond
with the enactment; the enactment may go
beyond Preamble.
45. In the above case also the contract was entered on
15.01.1993 but the contract was subsequently altered.
40
Last alteration being on 29.04.1995 hence the Bench
repelled the submission that Act, 1993 was not
applicable.
46. Now we come to the judgment of this Court in
Purbanchal Cables and Conductors Private Limited
(supra) which is a judgment on which reliance has been
placed by the High Court while allowing the appeal of
the Board. Learned counsel for the Board has also
placed heavy reliance on the said judgment.
47. In the above case, Board placed order dated
31.03.1992 for delivery of goods on 16.09.1992.
Further, supplies were made between 25.9.1992 and
30.03.1993. Entire supply was completed on 12.10.1993
entire payment was received by October, 1993. The
supplier instituted money suit for payment of interest
on delayed payment under Act, 1993. The issues to be
answered have been noted in paragraph 10 of the
judgment which is to the following effect:
"10.The issues that are required to be
answered by us in these appeals are whether
a suit for interest along is maintainable
under the provisions of the Act, and whether
the Act would be applicable to contracts
41
that have been concluded prior to the
commencement of the Act. In other words, we
are required to examine whether the Act
would apply to those contracts which were
entered into prior to the commencement of
the Act but supplies were effected after the
Act came into force.”
48. On the question of maintainability of the suit for
interest, the Bench held that the supplier may file
suit only for a higher rate of interest on delayed
payment made by the buyer from the commencement of the
Act. The Bench held that Act, 1993 being a substantive
law it shall operate prospectively. In paragraph 51
following has been laid down:
“51. There is no doubt about the fact
that the Act is a substantive law as vested
rights of entitlement to a higher rate of
interest in case of delayed payment accrues
in favour of the supplier and a
corresponding liability is imposed on the
buyer. This Court, time and again, has
observed that any substantive law shall
operate prospectively unless retrospective
operation is clearly made out in the
language of the statute. Only a procedural
or declaratory law operates retrospectively
as there is no vested right in procedure.”
49. The Court further held that Act, 1993 shall be
applicable only for sale agreements after the date of
42
the commencement of the Act and not any time prior.
Following was laid down in paragraph 52:
“52. In the absence of any express
legislative intendment of the retrospective
application of the Act, and by virtue of the
fact that the Act creates a new liability of
a high rate of interest against the buyer,
the Act cannot be construed to have
retrospective effect. Since the Act
envisages that the supplier has an accrued
right to claim a higher rate of interest in
terms of the Act, the same can only be said
to accrue for sale agreements after the date
of commencement of the Act i.e. 2391992
and not any time prior.”
50. The Bench also expressly rejected the submission of
the learned counsel appearing for the supplier that the
earlier judgments of this Court in Assam Small Scale
Industries and Shakti Tubes need consideration. On
question of limitation of the suit no final opinion was
expressed. The appeals were ultimately dismissed by the
Bench.
Issue NO.1
51. The judgment of this Court in Purbanchal Cables and
Conductors Pvt. Ltd relying on Assam Small Scale
Industries and Shakti Tubes had laid down that Act,
43
1993 cannot be made applicable with regard to sale
agreements which were entered into prior to the
enforcement of the Act and Act can be invoked only for
the sale agreements which were entered after the
enforcement of the Act. Although attempt was made in
Purbanachal Cables to get judgment in Assam Small Scale
Industries and Shakti Tubes reconsidered but co
ordinate Bench in Purbanchal Cables has refused to
permit any such reconsideration. The matter now having
been referred to this threeJudge Bench we have to
consider and answer as to whether the above
interpretation of Act, 1993 as given is in consonance
with the statutory scheme.
52. We have noticed above that the incidence of
applicability of the liability under the Act is supply
of goods or rendering of service . In event the supply
of goods and rendering of services is subsequent to
Act, can liability to pay interest on delayed payment
be denied on the ground that agreement in pursuance of
which supplies were made were entered prior to
enforcement of the Act? Entering into an agreement
44
being not expressly or impliedly referred to in the
statutory scheme as an incident for fastening of the
liability, making the date of agreement as date for
imposition of liability does not conform to the
statutory scheme. This can be illustrated by taking an
example. There are two small scale industries who
received orders for supply of materials. 'A' received
such orders prior to the enforcement of the Act and 'B'
received the order after the enforcement of the Act.
Both supplied the goods subsequent to enforcement of
the Act and became entitled to receive payment after
the supply, on or before the day agreed upon between
the supplier and buyer or before the appointed day.
Payments were not made both to A and B as required by
Section 3. Can the buyer who has received supplies from
supplier A escape from his statutory liability to make
payment of interest under Section 3 read with Section 4
? The answer has to be Two suppliers who supply
No.
goods after the enforcement of the Act, become entitled
to receive payment after the enforcement of the Act one
supplier cannot be denied the benefit of the statutory
45
protection on the pretext that agreement in his case
was entered prior to enforcement of the Act. When the
date of agreement is not referred as material or
incidence for fastening the liability, by no judicial
interpretation the said date can be treated as a date
for fastening of the liability. The Act, 1993 being
beneficial legislation enacted to protect small scale
industries and statutorily ensure by mandatory
provision for payment of interest on the outstanding
money, accepting the interpretation as put by learned
counsel for the Board that the day of agreement has to
be subsequent to the enforcement of the Act, the entire
beneficial protection of the Act shall be defeated. The
existence of statutory liability depends on the
statutory factors as enumerated in Section 3 and
Section 4 of the Act, 1993. Factor for liability to
make payment under Section 3 being the supplier
supplies any goods or renders services to the buyer,
the liability of buyer cannot be denied on the ground
that agreement entered between the parties for supply
was prior to Act, 1993. To hold that liability of
46
buyer for payment shall arise only when agreement for
supply was entered subsequent to enforcement of the
Act, it shall be adding words to Section 3 which is not
permissible under principles of statutory construction.
We, thus, are of the view that judgments in Purbanchal
Cables and Conductors (supra) , Assam Small Scale
Industries and Shakti Tubes which held that Act, 1993
shall be applicable only when the agreement to
sale/contract was entered prior/subsequent to the
enforcement of the Act, does not lay down the correct
law. We accept the submission of learned counsel for
the appellants that even if agreement of sale is
entered prior to enforcement of the Act, liability to
make payment under Section 3 and liability to make
payment of interest under Section 4 shall arise if
supplies are made subsequent to the enforcement of the
Act.
Issue No.2
53. In all the judgments of this Court referred above,
it has been held that Act, 1993 is not retrospective.
It is not even contended before us by any of the
47
parties that the Act, 1993 is retrospective in
operation. Judgments of this Court as noticed above
rightly hold that Act, 1993 is not retrospective.
54. The opinion of Justice Gowda dated 31.08.2016
although holds that Act is not retrospective but he
holds the Act retroactive. The word retroactive has
been defined in Black's Law Dictionary in the
following words:
" Retroactive.adj.(17C) (Of a statute,
ruling, etc.) extending in scope or effect
to matters that have occurred in the past.
Also termed retrospective. Cf. Prospective
(1).retroact,vb.”
55. TwoJudge Bench of this Court in State Bank's Staff
Union (Madras Circle) vs. Union of India and ors.,
(2005) 7 SCC 584, had occasion to examine the concept
of retroactive and retrospective. In paragraphs 20 and
21 of the judgment following has been laid down:
“20. Judicial Dictionary (13th Edn.)
K.J. Aiyar, Butterworth, p. 857, states that
the word "retrospective" when used, with
reference to an enactment may mean (i)
affecting an existing contract; or (ii)
reopening up of past, closed and completed
transaction; or (iii) affecting accrued
rights and remedies; or (iv) affecting
48
procedure. Words and Phrases, Permanent
Edn., Vol. 37A, pp. 22425, defines a
"retrospective or retroactive law" as one
which takes away or impairs vested or
accrued rights acquired under existing laws.
A retroactive law takes away or impairs
vested rights acquired under existing laws,
or creates a new obligation, imposes a new
duty, or attaches a new disability, in
respect to transaction or considerations
already past.
21. In Advanced Law Lexicon by P.
Ramanath Aiyar (3rd Edition, 2005) the
expressions "retroactive" and
"retrospective" have been defined as follows
at page 4124 Vol.4)
"Retroactive Acting backward; affecting
what is past. (Of a statute, ruling, etc.)
extending in scope or effect to matters that
have occurred in the past. Also termed
retrospective. (Black, 7th Edn. 1999)
'Retroactivity' is a term often used by
lawyers but rarely defined. On analysis it
soon becomes apparent, moreover, that it is
used to cover at least two distinct
concepts. The first, which may be called
'true retroactivity', consists in the
application of a new rule of law to an act
or transaction which was completed before
the rule was promulgated. The second
concept, which will be referred to as
'quasiretroactivity', occurs when a new
rule of law is applied to an act or
transaction in the process of completion....
The foundation of these concepts is the
distinction between completed and pending
transactions...."
(T.C. Hartley, The Foundations of European
49
Community Law 129 (1981).
*
Retrospective Looking back; contemplating
what is past.
Having operation from a past time.
'Retrospective' is somewhat ambiguous and
that good deal of confusion has been caused
by the fact that it is used in more senses
than one. In general however the Courts
regards as retrospective any statute which
operates on cases or facts coming into
existence before its commencement in the
sense that it affects even if for the future
only the character or consequences of
transactions previously entered into or of
other past conduct. Thus, a statute is not
retrospective merely because it affects
existing rights; nor is it retrospective
merely because a part of the requisite for
its action is drawn from a time and
antecedents to its passing. (Vol.44
Halsbury's Laws of England, Fourth Edition,
page 570 para 921) ”
56. Further in Jay Mahakali Rolling Mills vs. Union of
India and others, 2007 (12) SCC 198, explaining the
retroactive and retrospective following has been laid
down:
“8. “Retrospective” means looking
backward, contemplating what is past, having
reference to a statute or things existing
before the statute in question.
Retrospective law means a law which looks
backward or contemplates the past; one,
which is made to affect acts or facts
50
occurring, or rights occurring, before it
comes into force. Retroactive statute means
a statute, which creates a new obligation on
transactions or considerations or destroys
or impairs vested rights.”
57. Retroactivity in the context of the statute
consists application of new rule of law to an Act or
transaction which has been completed before the Rule
was promulgated.
58. In the present case the liability of buyer to make
payment and day from which payment and interest become
payable under Section 3 and 4 does not relate on any
event which took place prior to Act, 1993, it is not
even necessary for us to say that Act, 1993 is
retroactive in operation. The Act, 1993 is clearly
prospective in operation and it is not necessary to
term it as retroactive in operation. We, thus, do not
subscribe to the opinion dated 31.08.2016 of one of the
Hon'ble Judges holding that the Act, 1993 as
retroactive.
Issue No.3
Whether money suit no.21 of 1997 filed by appellant is
51
barred by time is one of the issues which has been
raised before us.
59. From the pleadings on the record it transpires that
two supply orders dated 31.03.1992 and 13.05.1992 was
issued to the appellant for supply of conductors. In
the Plaint, the appellant had given the details of date
of supply orders and date when supply was made on
different stores. The supplies made by the appellant
were both before enforcement of the Act i.e. 23.09.1992
and after the enforcement of the Act.
60. In view of the discussions as made above only the
supplies received after 23.09.1992 are relevant for
purposes of 1993 Act. As per pleadings on the record
entire supplies by the appellant was completed on
04.10.1993. Details of the payment has also been given
in the plaint which indicate that last payment dated
05.03.1994 was received. Paragraph 24 of the plaint
gives the details of cause of action for the suit which
states that cause of action for the suit arose on
31.03.1992 and thereafter on different date last date
being mentioned in paragraph 24 was 05.10.1993 and each
52
date subsequent thereafter. With regard to limitation
there is specific pleading in paragraph 21 of the
plaint which is to the following effect:
“21. That the transaction between
the plaintiffs and the defendants
are duly maintained by the
plaintiffs in the Books of Accounts
like ledger, Sale Register etc.
which are kept in the usual course
of the business of the plaintiffs
and those accounts between the
plaintiffs and the defendants are in
continuity and the interest payable
by the defendants to the plaintiffs
are carried over till date. As such
the suit of the plaintiff’s is in
within time. Apart from that the
provisions of the Limitation Act
does not apply in view of the
provisions contained in the Act,
1993 as because the Act of 1993 is
having overriding effect over the
Limitation Act and all other Acts.“
61. Written statement was filed by the defendants in
which written statement in paragraph 4 of the statement
plea was taken that suit is barred by limitation. Trial
Court in its judgment dated 02.02.2000 has noticed the
issues which were framed, one of the issues i.e. Issue
no.2 was “whether the issue was barred by the
53
limitation.” The entire discussion of issue no.2 by the
Trial Court is to the following effect:
“Issue No.2:
The supply order placed by the
defendant no.2 was exhibited as
Exts6 and 7 by the plaintiff. The
goods were supplied vide challans
which were exhibited as Exts8 to 37
and 69 to 71 and 73. The delivery
commenced on 21.06.92 and ended on
23.03.93. The bills were raised vide
Exts38 to 55 and Ext60 to 68. The
plaintiff had not denied about the
receipt of the bill amount. The bill
Exxt55 was raised on 02.01.93 and
the bill Ex68 was raised on
18.12.93. This is a case under the
provision of the interest on Delayed
Payments to Small Scale and
Ancillary Industrial Undertakings
Act and Section 10 of the said gives
overriding effect as follows:
“10. Overriding effect: The
provisions of this Act shall have
effect notwithstanding anything
inconsistent therewith contained
in any other law for the time being
in force.”
So, Section 10 has taken away the
plea of limitation in such type of
cases. So issue no.2 is also decided
in favour of the plaintiff.”
62. The Trial Court held that by virtue of Section 10
54
of Act, 1993 plea of limitation is taken away and the
suit is not barred by the limitation. The Division
Bench of the High Court in RFA No. 66 of 2000 filed by
the defendant had made a reference to the full bench.
Full Bench in its order dated 05.03.2002 has not
considered or decided the question of limitation.
63. Against the judgment dated 05.03.2002 of Full Bench
of High Court answering the reference, the Assam State
Electricity Board had filed appeal in this court being
Civil Appeal No. 2351 of 2003. This Court decided Civil
Appeal No.2351 of 2003 along with Civil Appeal No. 2348
of 2003 on 10.07.2002 which judgment is Purbanchal
Cables and Conductors (P) Ltd. (Supra) . This Court in
paragraph 31 has noticed the submission of learned
Counsel for the State Electricity Board that suits
filed by both the suppliers were barred by time but
this Court did not express any opinion. Paragraph 31 of
the judgment is to the following effect:
“31. Though the learned Senior
Counsel would state that the suits
filed by both the suppliers in the
present batch of appeals were barred
by limitation. We do not intend to
55
express our view on the issue, since
some of the appeals filed by the
suppliers are still pending before
the High Court. Any observation that
we may make would certainly affect
the interest of both the parties
since that issue is yet to be
decided by the High Court.”
64. After the judgment of this Court dated 10.07.2012
when the matters went back to the High Court, Division
Bench decided the RFA 66 of 2000 by impugned judgment
dated 20.11.2012. The Division Bench in the impugned
judgment has noticed the issues in paragraph 5 of the
judgment and submissions on the limitations. In
paragraph 22, the submissions on behalf of the Assam
State Electricity Board have been noticed whereas the
reply given by the learned counsel for the appellant
has been noticed in paragraph 22, 24, 25 & 26 of the
judgment which are as follows:
“22. Yet another ground of
challenge, advanced at the time of
hearing of this appeal, by Mr. Das,
learned Senior counsel, is that the
learned trial Court has wrongly held
that the suit was not barred by
limitation and, in this regard,
reference made by the learned trial
Court to Section 10 of 1993 Act is
56
wholly erroneous in as much as
Section 10 merely lays down that
provisions of 1993 Act shall have
effect notwithstanding anything
inconsistent therewith contained in
any other law for the time being in
force.
24. As regards the question as to
whether 1993 Act would apply to the
contract at hand and whether the
suit was barred by limitation. Mr.
AK Sinha, learned Senior counsel,
has pointed out that it is not in
dispute that the payment of the dues
of the plaintiffsrespondents was
made by ASEB as late as 05.03.1994
and, in such circumstances, the
period of limitation started, in the
present case, with effect from
05.03.1994 and the suit, having been
instituted on 10.01.1997, it is
clear, submits Mr. A.K. Sinha, that
the suit deserved to be treated as a
suit instituted within the period of
limitation. This apart, it is the
submission of Mr. Sinha, learned
Senior Counsel, that on 06.09.1994 ,
Assam Conductors Manufacturers
Association had filed a writ
petition, which gave rise to Civil
Rule No. 1531 of 1993 on behalf of
its five named members of the
Association, which included M/s
Shanti Conductors,(i.e. the
plaintiff in the present suit), and
the High Court, vide its order,
dated 06.09.1994, directed the writ
petitioner to move the Civil Court
for realization of the dues of its
members, whereupon the Association,
57
immediately, filed Writ Appeal
No.474 of 1994, which was finally
dismissed on 28.08.1997.
25. In such a situation, as
indicated above, section 14(2) of
the Limitation Act, 1963, is,
according to Mr. Sinha, of great
relevance in as much as Section
14(2) of the Limitation Act, 1963,
provides that in computing the
period of limitation for any suit,
the time during which the applicant
had been prosecuting with due
diligence another civil proceeding,
the said period has to be excluded.
Under Section 2(a) of the Limitation
Act, 1963, points out Mr. Sinha, an
applicant includes:(I) petitioner;
and (II) a person from or through
whom an applicant derives his right
to apply. Thus, even assuming that
the Limitation Act, 1963, applies,
then also, the period during which
the writ petition and the writ
appeal of the said Association was
pending on behalf of, amongst
others, M/s Shanti Conductors, the
said period, contends Mr. Sinha,
deserves to be excluded under the
provisions of Section 14(2) of the
Limitation Act and, thus, the suit
was, reiterates Mr. Sinha, within
time.
26. Above all, points out Mr. Sinha,
learned Senior counsel, that the
appellants, in the present appeal,
have not challenged the learned
trial Court's decision on the issue
of limitation. In this regard,
58
taking the Court through the
memorandum of appeal, which the
appellants have preferred,Mr. Sinha,
Learned Senior counsel, has pointed
out that the memorandum of appeal is
wholly silent and does not raise or
challenge the learned trial Court's
decision on the issue of limitation.
Furthermore, points out Mr. Sinha,
the Full Bench, while deciding the
reference, has clearly observed, in
its decision that the suit was,
admittedly, within three years of
the last payment made by the
appellant Board. The observations of
the Full Bench read as follows:
"The suit was admittedly within 3
years of the last payment made by
the appellant Board.””
65. It is thus clear that the Division Bench although
noticed the submissions of both the parties on the
question as to whether the suit was barred by
limitation or not but Division Bench allowed the appeal
on the ground that supply orders having been issued
prior to enforcement of the Act. Act 1993 is not
applicable. The Division Bench did not return any
finding as to whether the suit was barred by the
limitation or not. The submission that suit has barred
by limitation has been pressed before us.
59
66. Shri Hansaria submits that according to the own
case of the appellant supplies was completed on
04.10.1993, hence, as per Section 4 of the 1993 Act
amount and interest shall become due after one month
i.e. w.e.f. 04.11.1993. Suit having not been filed
within 3 years from 04.11.1993 was clearly barred by
time.
67. The Trial court has held that suit is not barred by
time relying on Section 10 of 1993 Act. Section 10 of
the 1993 Act is as follows:
“10. Overriding effect: The
provisions of this Act shall have
effect notwithstanding anything
inconsistent therewith contained in
any other law for the time being in
force.”
68. Plaintiff themselves in the plaint as noted above
has pleaded that limitation will not apply by virtue of
Section 10 which submission was accepted by the Trial
Court. The provision of Section 10 of 1993 Act gives
overriding effect to “the provisions of Act
60
notwithstanding anything inconsistent herewith
contained in any other law for the time being in
force”. The overriding effect was given to the
provisions of the Act which were contained in the Act.
Section 10 provided that overriding effect is given to
the provisions of the Act over any inconsistent law for
the time being in force. It simply meant that if there
is anything inconsistent in any other law to the
provisions of the Act, the provisions of the Act shall
prevail and override any inconsistent law. For example,
when Section 4 requires payment of interest at
particular rate on delayed payment the said rate shall
have overriding effect to rate of interest provided in
any other law.
69. Further, as per Section 7 no appeal can be filed
against the decree or other order passed regarding
recovery of amount due without depositing 75 % of the
amount. Thus in a suit if a decree is passed on amount
due of interest appeal has to be entertained after
depositing 75% or as per any other order passed by the
Court. Normal right of appeal shall be overridden by
61
virtue of Section 7 of 1993 Act. The Trial Court fell
in error in reading overriding effect given in Section
10 to the Limitation Act also. There is no provision in
1993 Act pertaining to limitation, the provision of
Limitation Act pertaining to filing suit shall continue
to operate there being nothing contrary or overriding
under 1993 Act. Section 10 will operate only with
regard to expressed provisions contained in 1993 Act
which shall be given overriding effect but reading
Section 10 to the effect that it shall override
Limitation Act is not correct interpretation of Section
10 and Trial Court fell in error in relying on Section
10 in holding that Limitation Act will not apply.
70. We thus are of the view that Limitation Act, 1963
is fully applicable with regard to money suit filed by
the appellant hence, the question of limitation has to
be answered as per Limitation Act 1963. The limitation
for suit for recovery of interest under 1993 Act is a
suit of nature which shall be covered by Part X Article
113 of the Schedule which is to the following effect:
62
" PART XSUITS FOR WHICH THERE IS NO
PRECRIBED PERIOD
| Three<br>years | When the |
|---|---|
| right to | |
| sue | |
| accrues |
113. Any suit for
which no period
of limitation is
provided
elsewhere in this
Schedule”
71. The period for commencement of limitation for
filing suit under Article 113 begins “when the right to
sue accrues”. We have now to find out as to when the
right to sue accrues to the plaintiff as per 1993 Act.
Section 4 of 1993 Act deals with date from and rate at
which interest is payable. Section 4 contains
expression that where “any buyer fails to make any
payment of the amount to the supplier as required under
Section 3……..be liable to pay interest to the supplier
on that amount on the appointed day or as the case may
be from the date immediately following the date agreed
upon…….”. There is no agreed date of payment between
the parties as is clear from both the supplies orders
which are on the record. Thus, the payment shall become
due from the appointed day. Appointed day has been
63
defined in Section 2(d) to be “the day following
immediately after the expiry of period of 30 days from
the date of acceptance or the day of deemed acceptance
of any goods or any service from any buyer or
supplier.” It is pleaded by the appellant that last
supply was completed on 04.10.1993. Thus, appointed day
will be 04.11.1993. Thus when the payment was not made
on 04.11.1993 with regard to amount due, the interest
as per Section 4, the limitation for filing the suit
will start running.
72. We have already held that Act shall apply with
regard to supplies made after the date of enforcement
of Act i.e. 23.03.1992. Last supply being received on
04.10.1993 at least from 04.11.1993, if not earlier,
the amount of interest under Section 4 shall become
due.
73. Shri Sinha has submitted that last payment having
been made on 05.03.1994 suit filed within 3 years and
suit being filed on 10.01.1997 was within 3 years from
05.03.1994 and hence was well within time. He submits
64
that last payment being on 05.03.1994 the refusal to
pay has to be treated from that day only and thereafter
suit could be filed within three years.
74. Article 113 as noted above provides for “time from
which period begins as when the right to sue accrues”.
1993 Act Section 4 creates statutory liability to pay
interest from the day as mentioned in Section 4 the
liability to pay is fastened on buyer. The amount
become due as soon as liability to pay arises. Section
6 also uses the word “amount due from buyer”. The
amount due is amount which is liable to be paid by
buyer under Section 4. Thus the fact that last payment
was made on 05.03.1994 cannot be treated as period for
beginning of the limitation and on that ground it
cannot be held that suit was within time.
75. Shri Sinha had made an alternative submission that
plaintiff was entitled for the benefit under section 14
of limitation Act. Since a W.P.No. giving rise to Civil
Rule No.1531 of 1993 on behalf of five main members of
the Associations i.e. Assam Conductors Manufacture
65
Association was filed in the High Court which on
06.09.1994 directed the petitioner to move to Civil
Court for realization of the dues of its member, hence
the period during which the writ was pending has to be
given benefit. According to pleading in paragraph 24,
the Writ Petition was filed by Assam Conductors
Manufacture Association. M/s Shanti Conductor(P) Ltd.
and another, is a different entity than the
Association.
76. We thus are of the view that benefit of the Section
14 cannot be claimed by the plaintiff in the facts of
the present case. We, thus in view of the foregoing
discussion come to the conclusion that suit filed by
the plaintiff being Money Suit No. 21 of 1997 was
barred by time.
Issue No.4
77. While deciding Issue No.3 we having held that
Money Suit filed by the appellant was barred by time,
it is not necessary to express any opinion on the above
issue.
66
Issue No. 5
78. The question as to whether suit filed only for
interest is maintainable has been considered in detail
by this Court. In paragraph 17, following has been laid
down in :
Purbanchal Cables (Supra)
"17. The decision of the Full Bench
of the Gauhati High Court which has
been approved by this Court in
Modern Industries is impugned before
us in one of the appeals. Since a
Division Bench of this Court has
already approved the dictum of the
Full Bench of the High Court with
regard to the maintainability of a
suit only for interest that question
is no longer res integra. Therefore,
the suppliers may file a suit only
for a higher rate of interest on
delayed payments made by the buyer
from the commencement of the Act.”
79. Section 6 of the 1993 Act provides that “the amount
due from the buyer, together with amount of interest
calculated in accordance with provision of Section 4
and 5 shall be recoverable ……”. Section 6 uses the
expression “together with the amount of interest with
the amount due from the buyer.” The interpretation put
by learned counsel for the Board is that proceeding for
67
recovery of interest can be undertaken only when any
amount is due. He submits that amount due used in
Section 6 is Principal amount. In event we accept the
interpretation put by counsel for the Board, then buyer
will very easily get away from payment of interest only
after making payment of Principal amount. This
interpretation shall defeat very purposes of 1993 Act.
It is well settled that provisions of Act has to be
interpreted in the manner so as to advance the object
of the Act. We thus fully approve the view taken by
this Court in Purbanchal Cables (Supra) that suit by
supplier for recovery of only interest is maintainable.
Issue No.6
80. The submission of the counsel to the board is that
since against the judgment of Gauhati High Court dated
15.04.2001, S.L.P. No.12217 of 2001 filed by M/s
Trusses & Towers was withdrawn without obtaining the
liberty, Civil Appeal No. 8445 of 2016 is not
maintainable challenging the Review Order and judgment
dated 19.03.2003. In the Order passed by this Court on
06.08.2001, this Court had noticed the submission of
68
the appellant that appellant shall move the High Court
in review stating that it has committed error in
recording that “all the bills were paid earlier to the
commencement of this act”. In the Review Petition, the
review has been partly allowed by allowing interest @
9% against which the appeal has been filed. A perusal
of the Review judgment indicates that High Court has
not returned any finding that all the bills were not
paid earlier to the commencement of the Act.
81. A perusal of Division Bench judgment of High Court
indicates that High Court proceed on the presumption
that even if 1993 Act is not applicable the entitlement
of the plaintiff could be considered in equity. When
the liberty to file review was obtained on the ground
as noticed in the Order the review judgment can be
questioned on the ground on which review was
permitted.
82. The Division Bench judgment does not indicate that
it proceeds on the ground as contended by the appellant
and noticed by this Court on 06.08.2001. The interest
69
of 9% was allowed on the premise that 1993 Act is not
applicable and said interest is allowed on equity
relying on an earlier judgment on this court in
Assam
Small Scale Industry Development Corporation and others
versus G.D. Pharmaceuticals and others, 2005(13) SCC
19. We thus are of the view that present appeal
challenging the review judgment cannot be entertained.
The ground on which the appellant can challenge the
review judgment can be the ground on which liberty was
obtained to file review. We thus hold that Civil Appeal
No. 8445 of 2016 is not maintainable.
Issue No.7
Whether the High court while considering the Review
Petition No.75 of 2001 (M/s Trusses & Towers Pvt. Ltd.)
even after expressing that Act 1993 is not applicable
could have allowed 9% interest to the plaintiff?
83. The High Court in its judgment dated 19.03.2013
allowed interest @ 9% per annum for the period of
delayed payment. Even if Act 1993 is not applicable,
the Court can very well exercise its jurisdiction to
award interest. In Assam Small Scale Industry
70
Development Corporation and others versus G.D.
pharmaceuticals and others (Supra), this Court in
paragraph 40 while considering the claim of the
respondent in a suit filed for recovery of interest
under 1993 Act has allowed 9% interest with respect to
the transaction made prior to coming into force of the
1993 Act. Paragraph 40 is to the following effect:
“40.We, therefore, are of the
opinion that in relation to the
transactions made prior to coming
into force of the said Act, simple
interest at the rate of 9% per
annum, which was the bank rate at
the relevant time, shall be payable
both prior to date of filing of the
suit and pendente lite and as future
interest in terms of Section 34 of
the Code of Civil Procedure.
Interest, however, will be payable
in terms of the provisions of the
1993 Act(compound interest at the
rate of 23.5 % per annum) in
relation to the transactions made
after coming into force of the Act,
both in respect of interest payable
up to the date of institution of the
suit and pendente lite and till
realization. The judgment and decree
to that extent requires to be
modified. It is directed
accordingly.”
71
84. High Court did not commit any error in awarding 9%
interest to plaintiff respondent. We thus did not find
any error in the judgment dated 19.03.2013 allowing
partly the review application filed by the plaintiff.
Civil Appeal No. 8450 of 2016
85. Now, we come to Civil Appeal No. 8450 of 2016. The
appellant has filed Money Suit No. 32 of 1996 for
recovery of a sum of Rs. 10,34,065.23 p. and Rs.
23,738.49 p. being the outstanding against the bills
for supply made and amount of security deposited and
amount of Rs.10,10,326.74 p. being the amount of
delayed interest. The suit was decreed by the learned
Civil Judge (Senior Division) vide its judgment and
order dated 30.09.2002 for recovery of Rs. 5,46,233.14
p. as on 18.12.93 from the date of enforcement of the
Act, 1993 and future interest on the decretal amount @
6% simple interest per annum with effect from
19.12.1993. Appeal was filed by the respondent in the
High Court being RFA No. 78 of 2003, which has been
72
allowed on 12.02.2015 setting aside the decree for
recovery of the amount and interest but maintaining the
claim of refund of security deposit to the tune of Rs.
23,738.49 with 9% interest. The High Court following
the judgment of this Court in Purbanchal Cables and
Conductors Pvt. Ltd. (supra) held that with regard to
transaction, which had taken place prior to 23.09.1992,
the 1993 Act is not applicable. The appellants have
appealed against the judgment of High Court dated
20.02.2015. The pleading on the record does not
indicate that any supply was made by the appellant
subsequent to enforcement of the 1993 Act. We have
already held that the mere fact that supply orders were
issued prior to enforcement of the Act does not deny
the applicability of the 1993 Act, in event, supply has
been made after the enforcement of the Act. There
being nothing on record to come to the conclusion that
any supply was made after the enforcement of the Act so
as to enable the appellant to claim interest under
Section 3 read with Section 4 of the 1993 Act, we are
of the view that judgment of the High Court does not
73
need any interference in this appeal.
86. Intervention applications are not entertained.
87. In result, all the appeals are dismissed.
......................J.
(A. K. SIKRI)
......................J.
(ASHOK BHUSHAN)
......................J.
(S.ABDUL NAZEER)
NEW DELHI,
JANUARY 23, 2019