1. Recovery of interest on delayed payments under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 — dispute over applicability to pre-enactment contracts. (Para 2 , 5 , 8 )
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2019 Supreme(SC) 58
SUPREME COURT OF INDIA
A. K. SIKRI, ASHOK BHUSHAN AND S.ABDUL NAZEER, JJ.
M/S. SHANTI CONDUCTORS(P) LTD. & ANR. – APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD & ORS. – RESPONDENT(S)
CIVIL APPEAL NOS.84428443 Of 2016
WITH
M/S. TRUSSES AND TOWERS (P)LTD. – APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD & Anr. – RESPONDENT(S)
CIVIL APPEAL NO.8445 Of 2016
WITH
ASSAM STATE ELECTRICITY BOARD & Anr. – APPELLANT(S)
VERSUS
M/S. TRUSSES AND TOWERS (P) LTD. – RESPONDENT(S)
CIVIL APPEAL NO.8448 Of 2016
WITH
M/S. BRAHMPUTRA CONCRETE PIPE INDUSTRIES. – APPELLANT(S)
VERSUS
ASSAM STATE ELECTRICITY BOARD – RESPONDENT(S)
CIVIL APPEAL NO.8450 Of 2016
Decided on : 23-01-2019
Advocates Appeared:
For the Appellant : Mr. Ajit Kr. Sinha, Sr. Adv. Mr. Prabhu Patil, Sr. Adv. Mr. Navniti Prasad, Sr. Adv. Mr. Devashish Bharuka, AOR Mr. Ravi Bharuka, Adv. Mr. N.M. Sharma, Adv. Mr. Justine George, Adv. Ms. Sarushree, Adv. Ms. Mohini Priya, Adv. Mr. Vaibhav Niti, Adv. Ms. Sneha Kalita, AOR
For the Respondent: Ms. Abha R. Sharma, Adv. Mr. D.S. Parmar, Adv. Mr. Mahendra Singh, Adv. Mr. P. I. Jose, AOR Ms. Sneha Kalita, AOR Mr. Dushyant Parashar, AOR Mr. Devashish Bharuka, AOR
For the Appellant : Mr. Ajit Kr. Sinha, Sr. Adv. Mr. Prabhu Patil, Sr. Adv. Mr. Navniti Prasad, Sr. Adv. Mr. Devashish Bharuka, AOR Mr. Ravi Bharuka, Adv. Mr. N.M. Sharma, Adv. Mr. Justine George, Adv. Ms. Sarushree, Adv. Ms. Mohini Priya, Adv. Mr. Vaibhav Niti, Adv. Ms. Sneha Kalita, AOR
For the Respondent: Ms. Abha R. Sharma, Adv. Mr. D.S. Parmar, Adv. Mr. Mahendra Singh, Adv. Mr. P. I. Jose, AOR Ms. Sneha Kalita, AOR Mr. Dushyant Parashar, AOR Mr. Devashish Bharuka, AOR
IMPORTANT POINTS
Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 is prospective.
Buyer is liable to make payment of interest notwithstanding agreement stipulating no interest.
Liability to make payment under Section 3 and liability to pay interest under Section 4 are not dependent on date of agreement between the parties to make supply.
The Act does not override Limitation Act, 1963.
Order of review judgment can be questioned on the ground on which review was permitted.
Even if a statute is not applicable to claim of interest, High Court in its jurisdiction, can award interest.
Headnote:(a) Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 – Section 3 – Act is prospective – Incidence of liability is supply of goods or rendering of services – Supply of goods and making of payment should be after enforcement of the Act. (Para 32, 33)
(b) Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 – Section 4 – Buyer liable to make payment of interest notwithstanding agreement stipulating no interest. (Para 36)
(c) Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 – Section 3 and 4 – Liability to make payment under Section 3 and liability to pay interest under Section 4 – Not dependent on date of agreement between the parties to make supply. (Para 37)
(2012) 7 SCC 462; (2005) 13 SCC 19; (2009) 7 SCC 673 – Referred
(d) Words and phrases – Retrospective and retroactive – Retroactive statute would mean application of new rule of law to an act or transaction which has been completed before the Rule was promulgated – In view of sections 3 and 4 Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 held neither retrospective nor retroactive but prospective. (Para 57)
(2005) 7 SCC 584; (2007) 12 SCC 198 – Relied upon
(e) Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 – Section 10 – Overriding effect – Section 10 will operate only with regard to expressed provisions contained in 1993 Act giving them overriding effect – The Act does not override Limitation Act, 1963. (Para 69)
(f) Limitation Act, 1963 – Part X Article 113 of the Schedule – Limitation for suit for recovery of interest under 1993 Act starts from the date "when the right to sue accrues" – Instantly in absence of any agreed date of payment between the parties, payment shall become due from the appointed day – Supply having been completed on 04.10.1993, appointed day will be 04.11.1993 and limitation for filing the suit will start running limitation for filing the suit will start running from that date u/s 4, Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 – Suit filed in 1997, held, not within time. (Para 71, 72, 74)
(g) Administration of justice – Maintainability of appeal – Liberty of Supreme Court obtained for filing review petition before High Court – Order of review judgment can be questioned on the ground on which review was permitted. (Para 81)
(h) Administration of justice – Suit filed only for interest – Held maintainable. (Para 79)
(2012) 7 SCC 462 – Relied upon
(i) Administration of justice – Award of interest – Even if a statute is not applicable to claim of interest, High Court in its jurisdiction, can award interest. (Para 83, 84)
(2005) 13 SCC 19 – Relied upon
Facts of the case:
The respondent-Assam State Electricity Board placed an order with the appellant, a Private Limited Company registered as a Small Scale Industrial Unit for manufacturing electrical conductors and/or wires, for supply of Aluminium Electrical Conductors 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. 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.
On 02.04.1993, the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 was enacted and it was deemed to have come into force with effect from 23.09.1992.
On 10.01.1997, M/s. Shanti Conductors filed a suit for recovery of Rs. 53.68 lakhs claiming interest on delayed payments. 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.
The Division Bench of the High Court, in view of Purbanchal Cables and Conductors Private Limited vs. Assam State Electricity Board and another, (2012) 7 SCC 462 has allowed the appeal of the Board.
Finding of the Court:
Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 is prospective.
Buyer is liable to make payment of interest notwithstanding agreement stipulating no interest.
Liability to make payment under Section 3 and liability to pay interest under Section 4 are not dependent on date of agreement between the parties to make supply.
The Act does not override Limitation Act, 1963.
Suit filed in 1997 was, not within time.
Order of review judgment can be questioned on the ground on which review was permitted.
Even if a statute is not applicable to claim of interest, High Court in its jurisdiction, can award interest.
Result: Appeals dismissed.
Legal Category Hierarchy
- commercial law
- practice and procedure
- equity
Table of Contents
2. Whether the Act applies to contracts entered prior to enforcement if supplies occurred after — maintainability of suits for interest alone — applicability of limitation periods. (Para 3 , 15 , 16 , 17 , 18 , 19 , 21 , 23 , 24 )
3. The Act's liability is triggered by the supply of goods, not the date of agreement — Section 10 does not override the Limitation Act. (Para 31 , 32 , 33 , 36 , 37 , 52 , 68 , 69 , 74 )
4. Liability under the 1993 Act arises if supplies are made after enforcement, regardless of whether the agreement was entered into prior to the Act. (Para 52 )
5. Appeals dismissed — suits found barred by limitation, lacking evidence of post-enforcement supply, or challenging non-maintainable review orders. (Para 76 , 82 , 85 , 87 )
6. Does the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 apply to contracts entered into before its enforcement?
Yes, provided the actual supply of goods or rendering of services occurred after the Act's enforcement. The date of the agreement is irrelevant; the statutory liability is triggered by the act of supply. (Para 32 , 33 , 52 )
7. Is a suit maintainable for the recovery of interest alone under the 1993 Act when the principal amount has already been paid?
Yes, a supplier may file a suit for the recovery of interest alone. Restricting such suits to cases where the principal is still due would defeat the Act's purpose of ensuring prompt payment. (Para 44 , 46 , 78 , 79 )
8. Does the overriding effect provided in Section 10 of the 1993 Act exempt such suits from the Limitation Act, 1963?
No. Section 10 overrides inconsistent laws regarding the Act's specific provisions, but since the Act contains no provision on limitation, the Limitation Act, 1963 remains fully applicable. (Para 67 , 68 , 69 , 70 )
9. When does the limitation period begin for a suit to recover interest under the 1993 Act?
Limitation begins when the right to sue accrues, which is the appointed day (usually 30 days after acceptance of goods) if no other date was agreed upon in writing. (Para 70 , 71 )
JUDGMENT
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. 8442-8443 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.
C.A.Nos.8442-8443 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 respondent-Assam State Electricity Board placed an order for supply of Aluminium Electrical Conductors from the appellants-M/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 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 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 prior to 23.09.1992. It held that interest under the Ac
