# 6 S.C.R. 362 MIS SHANTI CONDUCTORS (P) LTD. ANR v. ASSAM STATE ELECTRICITY BOARD & ORS

- **Citation:** [2016] 6 S.C.R. 362
- **Court:** Supreme Court of India
- **Decided:** 2016
- **Case number:** Civil Appeal Nos. 8442-8443of2016
- **Bench:** V. Gopala Gowda, Arun Mishra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-s-c-r-362-mis-shanti-conductors-p-ltd-anr-v-assam-state-electricity-board-ors-31535
- **Pages:** 78

## Headnote

Interest on Delayed Payments to Small Scale and Ancillary
Industrial U11dertakings Act. 1993 - Suit for recovery of illferest
under - Mai11tai11ability r~f - On facts, Stale Electricity Board placed
supp~y orders on 31.3.1992 and 13.5.1992 - Supply completed by
appellll11t on ../.10.1993 and last payment made on 5.3.199../ -
Meanwhile. Act <~( 1993 came inlo jorce with effect ji·om 23. 9.1992
- On 1 O. I.1997. appellalll filing suil for recm•e1:y of Rs.53. 68 lacs
on account of inlerest on delayed payments and fi1ture interest -
Afaintllinllbility of the sui/ - Held: D[fference <!f opinion between
the judges - Per V. Gop(l/a Gowda, J: Proi·isions of !he Act are
retroactire in nature: and non consideration of !he said w.pect
renders the Modern Industries case and Purbanchal Cables &
Conductors Pvt. Ltd. case as sub silentio - Per Aru11 Mishra, J: Act of
1993 cannot be said to bi: retrospective in operation or having
retroactive opera1io11 - SuppZv order having been placed before
the date of co111111e11ce111ent £!/'the Act, that is he/iire 23. 9.1992. the
beneficial provisions of the Act regarding higher i111ere.1·t would not
be applicable.
Per V. Gopala Gowda, J.
Allowing the appeals, the Court
HELD: 1.1 Section 3 of the Interest on Delayed Payments
to Small Scale and Ancillary Industrial Undertakings Act, 1993
lays down the liability of the buyer to make payment before the
appointed day, which, according to the definition in section 2, is
the day after the expiry of 30 days from the delivery of the goods
or the rendering of service. Section 4 of the Act provides the
date from which the interest is payable. According to Section 4 of
the Act, the liability on the buyer accrues from the appointed day.
Section 2(b) of the Act makes explicitly clear, appointed clay is
362
M/S SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS.
the clay following the expiry of thirty clays from the date of
acceptance, which is the clay of delivery of goods or rendering of
services. The language of the legislature could not have been
more clearer than what has been explicitly made it very clear. It
has clearly stated what the legislature had in contemplation at
the time of enactment of the Act as the focal date was the date of
actual delivery of goods or the rendering of services, and not the
date on which the transaction was entered into. [Para 26] [388G-H; 389-A-B]
1.2 While the statement of ob.iccts and reasons and
Parliamentary debates cannot be used tu ascertain the meaning
of the specific words of an enactment, the same can be used to
understand the general context in which the legislation was passed
by the Parliament, as well as the evil it sought to remedy. [Para
281 (389-E)
Stale 4 Wes/ Bengal i: Subodh Gopal Bose AIR 1954
SC 92 : 1954 SCR 587; S1a1e of Gujarnt r. /1'1ir;apur
Moti Kureshi Kasab .Jamal (2005) 8 SCC 534 : 2005
(4) Suppl. SCR 582 - referred to.
1.3 There is a need to reconcile the inconsistent legal tests
for the applicability of the Act as laid clown in the decisions of this
Court, 'date of contract altenition' in Modem Iudustries case; 'sale
agreement' in P11rb1111clu1/ ease; date of 'transaction' and 'supply
order' in 1h"sam Small Scale /11dustries case amt Slwkti Tubes case.
[Para 32) [393-E]
Modern Industries I'. Steel Aulhorily of l11dia Ltd. (2010)
5 SCC 44 : 2010 (4) SCR 560; Purbanc/wl Cables &
Conductors I'l'I. Lid. v. Assam Slate Electricily Board &
Anr. (2012) 7 SCC 462 : 2012 (6) SCR 905; Assum
Small Scale industries Develop111e11t Corporation Ltd
& Ors. v . .J.D. Plwr111aceuticals & Am: (2005) 13 SCC
l 1) : 2005 (4) Suppl. SCR 232; Slwk1i Tubes v. State <d
Bihm· & Ors. (2009) 7 SCC 673 : 2009 (10) SCR 739
- referred to.
1.4 A cumulative reading of the definition clauses of Sections
2, 3 and 4 of the Act leave absolutely no room for doubt that the
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test for applicability of the Act is uot the date of transaction, or
supply order, or contract alteration, but quite simply, the da

## Text

_Characters 0–39,962 of 169,756. This is a partial read: ask again with offset=39962 for what follows._

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[2016) 6 S.C.R. 362
MIS SHANTI CONDUCTORS (P) LTD. ANR.
v.
ASSAM STATE ELECTRICITY BOARD & ORS.
(Civil Appeal Nos. 8442-8443of2016)
AUGUST31,2016
[V. GOPALA GOWDA AND ARUN MISHRA, JJ.)
Interest on Delayed Payments to Small Scale and Ancillary
Industrial U11dertakings Act. 1993 - Suit for recovery of illferest
under - Mai11tai11ability r~f - On facts, Stale Electricity Board placed
supp~y orders on 31.3.1992 and 13.5.1992 - Supply completed by
appellll11t on ../.10.1993 and last payment made on 5.3.199../ -
Meanwhile. Act <~( 1993 came inlo jorce with effect ji·om 23. 9.1992
- On 1 O. I.1997. appellalll filing suil for recm•e1:y of Rs.53. 68 lacs
on account of inlerest on delayed payments and fi1ture interest -
Afaintllinllbility of the sui/ - Held: D[fference <!f opinion between
the judges - Per V. Gop(l/a Gowda, J: Proi·isions of !he Act are
retroactire in nature: and non consideration of !he said w.pect
renders the Modern Industries case and Purbanchal Cables &
Conductors Pvt. Ltd. case as sub silentio - Per Aru11 Mishra, J: Act of
1993 cannot be said to bi: retrospective in operation or having
retroactive opera1io11 - SuppZv order having been placed before
the date of co111111e11ce111ent £!/'the Act, that is he/iire 23. 9.1992. the
beneficial provisions of the Act regarding higher i111ere.1·t would not
be applicable.
Per V. Gopala Gowda, J.
Allowing the appeals, the Court
HELD: 1.1 Section 3 of the Interest on Delayed Payments
to Small Scale and Ancillary Industrial Undertakings Act, 1993
lays down the liability of the buyer to make payment before the
appointed day, which, according to the definition in section 2, is
the day after the expiry of 30 days from the delivery of the goods
or the rendering of service. Section 4 of the Act provides the
date from which the interest is payable. According to Section 4 of
the Act, the liability on the buyer accrues from the appointed day.
Section 2(b) of the Act makes explicitly clear, appointed clay is
362
M/S SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS.
the clay following the expiry of thirty clays from the date of
acceptance, which is the clay of delivery of goods or rendering of
services. The language of the legislature could not have been
more clearer than what has been explicitly made it very clear. It
has clearly stated what the legislature had in contemplation at
the time of enactment of the Act as the focal date was the date of
actual delivery of goods or the rendering of services, and not the
date on which the transaction was entered into. [Para 26] [388G-H; 389-A-B]
1.2 While the statement of ob.iccts and reasons and
Parliamentary debates cannot be used tu ascertain the meaning
of the specific words of an enactment, the same can be used to
understand the general context in which the legislation was passed
by the Parliament, as well as the evil it sought to remedy. [Para
281 (389-E)
Stale 4 Wes/ Bengal i: Subodh Gopal Bose AIR 1954
SC 92 : 1954 SCR 587; S1a1e of Gujarnt r. /1'1ir;apur
Moti Kureshi Kasab .Jamal (2005) 8 SCC 534 : 2005
(4) Suppl. SCR 582 - referred to.
1.3 There is a need to reconcile the inconsistent legal tests
for the applicability of the Act as laid clown in the decisions of this
Court, 'date of contract altenition' in Modem Iudustries case; 'sale
agreement' in P11rb1111clu1/ ease; date of 'transaction' and 'supply
order' in 1h"sam Small Scale /11dustries case amt Slwkti Tubes case.
[Para 32) [393-E]
Modern Industries I'. Steel Aulhorily of l11dia Ltd. (2010)
5 SCC 44 : 2010 (4) SCR 560; Purbanc/wl Cables &
Conductors I'l'I. Lid. v. Assam Slate Electricily Board &
Anr. (2012) 7 SCC 462 : 2012 (6) SCR 905; Assum
Small Scale industries Develop111e11t Corporation Ltd
& Ors. v . .J.D. Plwr111aceuticals & Am: (2005) 13 SCC
l 1) : 2005 (4) Suppl. SCR 232; Slwk1i Tubes v. State <d
Bihm· & Ors. (2009) 7 SCC 673 : 2009 (10) SCR 739
- referred to.
1.4 A cumulative reading of the definition clauses of Sections
2, 3 and 4 of the Act leave absolutely no room for doubt that the
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test for applicability of the Act is uot the date of transaction, or
supply order, or contract alteration, but quite simply, the date of
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[2016) 6 S.C.R.
the delivery of goods or rendering of services.[Para 33) (393-EFI
1.5 The phraseology of the Section 4 makes it amply clear
that the liability of the buyer arises after the supply of the goods
or rendering of services. Section 4 is just a reiteration of the
legislative intent as to the applicability of the Act, which is in
those cases where the supply of goods or rendering of services
took place after the coming into force of the Act. [Para 34] [394D-EJ
1.6 A cumulative reading of Sections 2, 3 amd 4 of the Act
shows that though a catena of cases which have been extensively
adverted to in the case of 1'11rba11clwl Cables & Co11d11ctors Pvt.
Ltd. have held that the statutory provisions of the 1993 Act do
not have retrospective operation, they have failed to consider
the said statutory aspects in a proper perspective keeping in
view the objects and reasons of the Act and the usage of the 11011
obstante clause phrase in Section 4 of the Act. [Para 35) [394-FJ
1. 7 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, makes it clear that
the small scale industries were suffering as a result of lack of
working capital, which was affecting the economic health of such
industries. Prompt payment on the outstanding money, it wits 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, infer 11/ia,
'appointed day', 'buyer' and 'supplier'. Since the focus of the Act
is on delayed payment, ll'hich 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 dne to the supplier after the goods had
MIS SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS.
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 ofSection 3 that for the purpose
of the Act, it docs 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 11011 obsta11te clause in Section
4. [Para 36] [394-G-H; 395-A-E]
1.8 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. [Para 36) (395H; 396-A]
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1.9 The question required to be examined in P11rba11clwl
Cables & Conductors Pvt. ltd. case was non-consideration of the
relevant statutory provisions of the Act adverted to and
interpreting the same for the purpose of examining as to whether
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the provisions of the Act would be retroactive in nature and confer
a statutory right on the supplier. Non-consideration of the said
provisions in a proper perspective would render the judgment
ver i11c11riam. [Para 37] (396-E-F)
Purbanchal Cables & Conductors Pvt. Ltd. v. Assam
F
State Electricity Board & Anr. (2012) 7 SCC 462 : 2012
(6) SCR 905 - per incuriam.
1.10 Since a reading of the .statement of objects and reasons
of the Act makes it very clear that the Act has been enacted for
the benefit of the small scale and ancillary industries at large, the
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decision in the case of P11rba11clwl Cables & Conductors case docs
not correctly lay down the position of law with respect to the
nature of the Act and its effect on its prospectivity as well. [Para
37) (398-C-D]
1.11 Sections 3, 4, 5 and 6 of the Act are retroactive in
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nature. Purbanclwl Cables & Conductors Pvt. Ltd. 's case and other
decisions of this Court referred did not consider the important
aspect of the matter namely as to whether the provisions of the
Act are retroactive or not. They merely held that the provisions
of the Act have no retrospective effect. Thus, the judgments have
been rendered sub silentio on this aspect. !Paras 37, 38) [396-B;
398-D-EJ
2.1 The submission of the counsel for the Electricity Board
on the question of res judicata is wholly untenable in law. The
issue of whether an appellant is entitled to prefer a claim on the
interest as provided under Section 4 was not the issue decided
in P11rba11c/111/ Cables & Conductors Pl't. Lid. 's case. Therefore,
the decision in the same cannot be said to operate as res judicata.
The material and substantial issue with regard to legal contention
was not framed and answered, therefore, it docs not operate as
res judicata. !Para 39) !398-F-H; 399-A)
2.2 Taking into consideration the supply order against the
actual supply of the goods with payment made, the last payment
was made on 05.03.1994. Thus, time began to run from that date.
Taking into consideration the fact that the date of the institution
of the suit is 10.01.1997, the suit has been filed within the period
of limitation as prescribed in the Limitation Act. The question of
limitation is answered in favour of the appellants by placing
reliance on Section 19 read with Article 25 of the Limitation Act,
1963. [Paras 41, 40) [400-E; 399-Bj
2.4 The appeal filed by M/s Trussees & Towers Pvt. Ltd
questioning the correctness of the order passed in Review
Petition, is maintainablc.!Para 42) [400-f-G]
3. The points framed in the a1>peals are answered in favour
of the appellants. In the Civil Appeals arising out of SLP (C) Nos.
9924-9925 of 2013 vide order dated 17.02.2015, the appellants
were directed to pay Rs.38,70,000/- back to the respondents.
The respondents shall refund the amount to the appellants with
9% interest pa within the stipulated period. [Para 43) [400-G-H;
401-A-B)
State of UP v. Anand Swarup (1974) 1 SCC 42 : 1974 .
(2) SCR 188; Kingfisher Airlines Ltd. v. CCI 2011 (100)
MIS SHANTI CONDUCTORS IP) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS.
CLA (Bom.); State of Bombay v. Vishnu Ra111chandra
AIR 1961 SC 307; State of Maharashtra v. Krishnarao
Dudhappa Shinde (2009) 4 SCC 219 : 2009 (1) SCR
756 ; Sushi! Ku111ar Mehta i: Gobind Ram Bohra (1990)
I SCC 193 : 1989 (2) Suppl. SCR 149; Mathura
Prasad Bajoo Jaiswal v. Dossibai N.B. Jeejeebhoy
(1970) 1 SCC 613 : 1970 (3) SeR 830 ; Angel lnj/11
Pvt. Ltd. v. Mis Echjay Industries Ltd. 2007 (4) Mh.L.J.
618; Mis Trusses & To1l'ers (P) Ltd. v. Assam State
Electricity Board and Am'. CA@ SLP (C) No. 15274 of
2013 on 06.08.2001; Sushi! Kumar Sen v. State of Bihar
(1975) 1 sec 774 : 1975 (3) SCR 942; DSR Steel (P1·t.)
Ltd. v. State 1~( Rajasthan & Ors. (2012) 6 SCC 782 :
2012 (5) SeR 583; State of UP & Anr. v. Synthetics
And Chemicals Ltd. & A111: (1991) 4 sec 139' Amit
Das 1: Stale ofBilwr (2000) 5 sec 488: 2000 (1) Suppl.
SCR 69; life Singh 1: Stale of Hmyana (2004) 8 SCC
1 : 2004 (5) Suppl. SCR 272 - referred to.
Black's Lm1· Dictionary (Sixth Ed11.) - referred to.
Per Arun Mishra, J. (Dissenting)
Dismissing the appeals, the Court
HELD: 1.1 It is apparent from the provisions of the Interest
on Delayed Payments to Small Scale and Ancillary lndustl'ial
Undertakings Act, 1993 that none of the provisions indicates that
the Act is retrospective in operation in any manner whatsoever.
On the contrary, the Act requires payment to be made by a buyer
before the appointed day that is the day following immediately
after the expiry of 30 days from the date of acceptance or the
deemed acceptance of the delivery of the goods or services. The
day of acceptance means day of actual delivery of goods or
rendering of service or where buyer has objected within 30 days,
the day on which such objection is removed by the supplier. Where
no objection is raised in writing by the buyer regarding acceptance
of goods or services within 30 days, the appointed day would be
counted from the day on which actual delivery of goods had been
made or rendering of services. These provisions arc not capable
of being put into retrospective operation. The provisions of
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ref!uirement of making the payment before the appointed day,
raising of objection within 30 days and deemed acceptance are
not capable of being put into retrospective operation. Section 3
deals with respect to liability of the buyer to make the payment
with reference to appointed day. The payment has to be made on
or before the date agreed upon between the buyer and supplier
in writing or where there is no agreement, before the appointed
day. The proviso further bars the agreement to extend the payment
beyond 120 days from the day of acceptance or the day of deemed
acceptance. Thus, the provisions contained in section 3 also are
prospective in nature. None of the provisions at all speak of the
existing liability/agreement as on the date of commencement of
the Act. Section 4 deals with the date from which and the rate at
which interest is payable. A bare reading of the same leaves no
iota of doubt that the Act is prospective in nature and the higher
interest rate is applicable only on failure to make the payment as
envisaged by the Act under section 3. If the buyer fails to make
the payment as required under section 3, the liability to make
the payment with interest arises. Section 4 contains non-obstante
clause and overrides agreement or any other law to the contrary.
A conjoint reading of the provisions of appointed day, sections 3
and 4 makes it clear that the Act is prospective in operation. It
has no retrospective operation or retroactive operation. The Act
does not contain any provision with respect to the existing
agreements as on the date of commencement of the Act that would
be governed by the provisions in force at the relevant time. The
Act docs not have the effect of invalidating prior agreements.
The liability to make the payment of higher interest cannot operate
retrospectively. The provisions of the Act arc capable of being
complied with prospectively that is from the date on which
Ordinance initially came into force i.e. 23.9.1992 from which date
the Act has been given effect. There is absolutely no indication
in the Act that it has retrospective operntion or rctrouctive
operation. Taking note of the various provisions of the Act, it is
apparent that the Act of 1993 is not retrospective in operation.
[Para 10] [404-C-ll; 405-A-D]
'Principles c!f Statu/OJ'.Y J11terpretatio11' by Justice G.P.
Singh 14'
11 Edn. - referred to.
M/S SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS.
1.2 The Act of 1993 contains no provision which it can be
said to be expressly or by necessary implication of retrospective
operation. The Act has the effect of overriding the laws and the
agreements, thus, would not affect the law and the agreements
which prevailed before coming into force of the Act. As a
transaction/agreement is valid when made, it cannot be invalidated
by subsequent prohibition or provision. (Para 121 (406-D-El
1.3 The decision of a Co-ordinate Bench is binding and there
has to be consistency and settled principle should not be unsettled.
Judicial discipline demands that a decision of the Division Bench
of this Court should be followed by another Bench of two Judges.
(Para 18) (437-C-DJ
1.4 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
arc binding on a Co-ordinate Bench. It cannot be said that the
decisions are sub silentio or per i11c11ria111 in any manner whatsoever
and, it is not open to the Co-ordinate Bench to take a different
opinion. There is no confusion with respect to meaning of
transaction, supply order and agreement. This Court while
deciding the said cases was not in oblivion of aims and objects of
beneficial legislation, considered same and it has aflirmatively
pronounced on all the aspects. Hence, there is no scope to dwell
further into the same arena tu declare the various judgments to
be s11b silenlio, per i11c11rla111 or not laying down the law correctly.
[Para 20] [438-D-F]
1.5 Even otherwise, on merits, 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. [Para
21] [438-F-G]
1.6 In the case of appellant itself decided along with
Purhw1c/111/ Cables 's case 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
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before the High Court and the High Court rightly followed the
decisions in Purbw1clwl Cables & Co11ductors's case decided along
with the instant case. The finding recorded by this Court in the
remand order is final and binding on the appellant. They cannot
question the same again in the instant appeals. [Para 22) [438-GH; 439-A-B)
Purbanchal Cables & Conductors Pvt. Ltd. v. Assam
State Electricity Board & Anr. (2012) 7 SCC 462 : 2012
(6) SCR 905; Assam Small Scale Industries
Development Corporation Ltd. & Ors. v. J. D.
Pharmaceuticals & Am: (2005) 13 SCC 19 : 2005 (4)
Suppl. SCR 232; Shakti Tubes v. Stale of Bihar & Ors.
(2009) 7 SCC 673 : 2009 (10) SCR 739;Rampur
Fer1iliser Lui. v. Vigyan Chemicals Industries (2009) 12
SCC 324: 2009 (2) SCR 650; Modem I11dus1ries v. Steel
All/hority of India Ltd. (2010) 5 SCC 44: 2010 (4) SCR
560 - referred to.
Case Law Reference
Judu;rnent ofV, Gonala Gowda1 J:
1974 (2) SCR 188
referred to
Para 11
2005 (4) Suppl. SCR 232
referred to
Para 11
(2009) 7 sec 673
referred to
Para 11
2010 (4) SCR 560
referred to
Para 12
2011 (100) CLA (Born.)
referred to
Para 16
AIR 1961 SC ,307
referred to
Para 16
2009 (1) SCR 756
referred to
Para 16
1989 (2) Suppl. SCR 149
referred to
Para 20
1970 (3) SCR 830
referred to
Para 20
2007 (4) Mh.L,J. 618
referred to
Para 21
1975 (3) SCR 942
referred to
Para 22
2P12 (5) SCR 583
referred to
Para 22
1954 SCR 587
referred to
Para 28 ·
2005 (4) Suppl. SCR 582
referred to
Para 28
MIS SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
371
ELECTRICITY BOARD & ORS.
(1991) 4 sec 139
referred to
Para 37
2000 (1) Suppl. SCR 69
referred to
Para 37
2012 (6) SCR 905
per incuriam Para 37
2004 (5) Suppl. SCR 2n
referred to
Para 37
Judgment of Arnn Mishra, J;
2012 (6) SCR 905
referred to
Para4
200~ (4) Suppl. SCR 232
referred to
Para4
2009 (10) SCR 739
referred to
Para4
2009 (2) SCR 650
referred to
Para 17
2010 (4) SCR 560
referred to
Para 17
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 84428443 of20\6.
From the Judgment and Order dated 20. 11.2012 and 20.12.2012
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.of the High Court ofGauhati in RFA No. 66 of2000 and MC 3472 of
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2012.
WITH
C. A. Nos. 8445, 8448 and 8450 of 2016.
Basava Prabhu S. Patil, Ajit Kr. Sinha, Vijay Hansaria, Sr. Advs.,
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Naren<lra Sharma, Devashish Bharuka, Ravi Barukha, Ankur Sood, Ms.
Prachi Gupta, Ms, Prachi Jauhti, Ms. Sakshi Mehley, Ms. Arpita Bishnoi,
Ms. Sneh11 Kalita, P, I. Jose, Avnish Pandey, Abhinav Hansaria, Advs.
for the appearing parties.
The Judgments of the Court were delivered by
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V. GOPALA GOWDA, J. I. Leave granted in all the Special
Leave Petitions,
·
2. The present appeals were listed together as a common question
of law arises in all of them for consideration before this Court.
3. For the sake of convenience, reference is made to the facts of
the appeals arising out ofSLP (C) Nos, 9924-9925 of2Q\ 3, which h11ve
been directed against the i1npugned final jucigrnent and orders clat11cl
20.11.2012 and 20.12.20\ 2 passed in RFA No,-66 of2000 a11d MC No.
3472of2012 respectively, by the Gauhati High Court at Guwahati.
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The facts of the case which are required to appreciate the rival
legal contentions advanced on behalf of the parties are stated in brief as
under:
On 31.03. i 992, the respondent-Assam State Electricity Board
(hereinafter referred to as the "Electricity Board") placed an order for
supply of Aluminium Electrical Conductors from the appellants-Mis Shanti
Conductors Pvt. Ltd. for a total consideration of Rs. I .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 Mis
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.
4. On 23 .09.1992, the President oflndia promulgated an ordinance,
namely, the Interest on Delayed Payment to Small Scale Ancillary
lndustrial Undertakings Ordinance, 1992. Subsequently, on 02.04.1993,
the Interest on Delayed Payment to Sma II 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.
5. Meanwhile, the supply of equipments under the aforesaid
purchase orders was completed by Mis Shanti Conductors on 04. l 0.1993.
On 05.03.1994, the entire payment of Rs. 2.15 crores against the aforesaid
supply orders was received by Mis Shanti Conductors.
6. Subsequently, on I 0.01.1997, Mis Shanti Conductors filed a
suit for recovery of Rs.53.68 lacs on account of interest on delayed
payments and future interest at the rate of 27% per annum on the
decreetal amount. The Electricity Board filed the written statement on
16.09.1998, inter-alia, raising the plea of limitation and contending that
the Act is not applicable to the case of the appellant- Mis Shanti
Conductors as the contract was concluded prior to the enactment of the
Act. 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 of23.75%
p.a. with monthly rests from the date of the suit till realizati,)n.
7. Aggrieved of the impugned judgment and order, the Electricity
Board filed Regular First Appeal No. 66 of2000 before the I Iigh Court
ofGauhati. Vide order dated l 8.10.2001, the Division 13ench of the High
Court referred the matter to the Full Bench. The Full 13ench framed the
following questions that needed to be answered:
MIS SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
373
ELECTRICITY BOARD & ORS. [V. GOPALA GOWDA . .I.]
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'1
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 S111all 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 111ade beyond the prescribed period?"
The Full Be11ch of the High Court videjudgment and order dated
05.03.2002 answered the reference in affirmative by holding that a suit
for interest alone could be filed. It further held that the Act is applicable
to contracts entered into prior to 23.09.1992, i.e. the date on which the
Act came into force. It was further held that the interest under the Act
would be calculated from 23.09.1992 till the payment is made to the
supplier. Having answered the reference in the above terms. the matter
was sent back to the Division Bench for consideration of the appeal on
merits.
8. Accordingly. the matter was placed before the Division Bench
for its consideration in accordance with the decision of the Full Bench of
the High Cou1t in the reference. The Ekctricity Board contended before
the Division Bench that this Court in the case of Purba11clwl Cables &
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Co11d11ctor.1· Pvt. Ltt!. 1'. 1h.rn111 State E/ectrici(l' Board & Anr. 1 has
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held that the Act is applicable only to the agreements entered into after
23.09.1992. Accordingly. in k:rms of the judgment of this Court in
P11rba11clwl Cables & Co11t!uctors Pvt. Ltd. (supra). the Division Bench
of the High Court vi de judgment and order dated 20.11.2012 set aside
1 (2012) 1 sec 462
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the judgment of the Trial Courrby allowing Regular First Appeal No. 66
of2000.
9. Similarly, in the connected appeals also, the High Court had
held in the impugned judgment and orders therein that the appellants are
not entitled for the interest on the delayed payment as the contracts had·
been entered into prior to the commencement of the Act. Hence the
present ~J?peals.
I 0. We have heard Mr. M.H. Baig and Mr. Basava Prabhu S.
Patil, learned senior counsel appearing on behalf of the appellants in the
appeals arising out ofSLP (C) Nos.9924-9925of2013 and SLP (C) No.
538of2016 and Mr. Ajit Kumar Sinha, learned senior counsel in appeal
arising out ofSLP (C) No. 15274of2013. We have also heard Mr. Yijay
Hansaria, the learned senior counsel appearing on behalf of the Electricity
Board.
11. Mr. M.H. Baig, the learned senior counsel submits that the
respondents cannot claim a vested right in procedure, as the same is not
a matter of right and can be taken away. The learned senior counsel
places reliance on the three Judge Bench decision of this Court in the
case of Sil/le of U.P. 1~ A11ll11d Swl/rup1• The learned senior counsel
contends that the Act is applicable in respect of the contracts entered
into by the Electricity Board with the appellants herein for supply of
goods. Mr. Basava Prabhu Patil and Mr. Ajit Sinha, learned senior counsel
appearing on behalf of some of the appellants contend that the usage of
the words "transaction" and "supply order" as used by this Court in the
case of Assllm Small Scale Industries Developmelll Corporation Ltd.
v. J.D. PIU1rmace11ticals-' is not the correct test to be applied to
determine whether the provisions of the Act are applicable to the contracts
entered into prior to the coming of the Act into force. It is contended that
this Court in the aforesaid case has referred to the said words without
taking into consideration the Statement of Objects and Reasons of the
Act and the parliamentary debates conducted while introducing the Bill
before it was enacted. It is further contended that the same words were
continued to be used in the case of SIU1kti Tubes v. Stale of Bilutr',
wherein it was held as under:
'(1974) 1sec42
' (2005) u sec J 9
'(2009J 7 sec 673
MIS SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS. [V. GOPALA GOWDA. J.]
"'2 I. We have considered the aforesaid rival submissions.
This Court in Assam Smal I 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 Cou1i used the expression
'"transaction'" it only meant a supply order. The Comi made
it explicitly clear in para 37 of the judgment which we have
already extracted above. In our considered opinion there is
no ambiguity in the aforesaid judgment passed by this Cowi.
The intent and the purpose of the Act. as made in para 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.
22. Consequently. we hold that the supply order having been
placed herein prior to the coming into force of the Act. any
supply made pursuant to the said supply orders would be
governed not by the provisions of the Act but by the
provisions ofSection 34 of the CPC.''
In the above case, it was held that an Act cannot be given
retrospective effect. The learned senior counsel contend that what was
however, not considered by this Court, is that though an Act may not be
given retrospective effect, it can still have retroactive operation.
12. The learned senior counsel appearing on behalf of the
appcl I ants place strong rel im1cc upon another judgment of this Cou1i in
the case of Modem liulu.1·tries r. Steel A11t/10ri(1' <d'fmlia Ltd. 5, wherein
it was held as under:
"9. The 1993 Act was sequel to a policy statement on smallscale industries made by the Government in Par! iament that
suitable legislation would be brought to ensure prompt
payment of money by bu~ c>rs to the small industrial units. It
was felt that inadequ<1k 11orking capital in a small-scale
and ancillaiy industrial undertaking was causing an endemic
'(20101ssec44
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problem and such unde11akings were very much affected.
The Small Scale Industries Board-an apex advisory body
on policies relating to small-scale industrial units-also
expressed its views that prompt payments of money by
buyers should be statutorily ensured and mandatory
provisions for payment of interest on the outstanding money,
in case of default, should be made. It was felt that the
buyers, if required under law to pay interest, would refrain
from withholding payments to small-scale and ancillary
industrial undertakings. With these objects and reasons,
initially an ordinance, namely. the Interest on Delayed
Payments to Small Scale and Ancillary Industrial
Undertakings Ordinance, 1992 was promulgated by the
President on 23-9-1992 and then the Bill was placed before
both the Houses of Parliament and the said Bill having been
passed, the 1993 Act was enacted. The Preamble to the
1993 Act reads:
"An Act to provide for and regulate the payment of interest
on delayed payments to small-scale and ancillary industrial
undertakings and for matters connected therewith or
incidental thereto.''
This Court furlher held as under:
''23. The wholesome purpose and object behind the 1993
Act as amended in 1998 is to ensure that the 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 mom:y in
case of default..."
13. Further, reliance is placed on the decision of this Court in the
case of P11rha11c//{// Cables & Conductors Pvt. Lttl (supra) wherein
the elate of "sale agreement" was considered to be crucial to determine
the applicability of the Act as under:
''52 ...... Since the Act envisages that the supplier has an
accrued right to claim a higher rate of intcr<:st in terms of
the Act, the same can only lx: said to accrue for sale
agreements after the date of commcnccn1cnl of the Act
i.e. 23-9-1992 and not any time prior."
M/S SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
ELECTRICITY BOARD & ORS. [V. GOPALA GOWDA. J.]
It is contended that the term "sale agreement" is not defined in
the Act and thus, cannot be a legal test for applicability of the Act.
14. It is further contended that if the term "sale agreement" is to
be the legal test for the applicability of the Act, then the same would be
inconsistent with the judgment of this Court in Assam Small Scale
Industries Developmeut Corporation Ltd. (supra) where the "sale
agreement" was prior to the date of commencement of the Act yet the
Court applied the "transaction" and ''supply order" test and applied the
provisions of the Act on such "transactions" and "supply orders" which
were issued on or after the aforesaid date of commencement of the
Act. If the "sale agreement" test as has been held in Purbaucha/ Cables
& Conductors Pvt. Ltd. (supra) is applied, then the sellers in Assam
Small Scale Industries Development Corporation Ltd. (supra) would
not be entitled to higher rate of interest under the Act. It is further
contended that if"sale agreement" is taken to be the legal test as to the
applicability of the Act then the same would also be inconsistent with the
decision of this Court in Modern /11d11stries (supra), wherein aticr
consideration of the Aims and Objects of the Act, it was held that interest
is payable on ;'outstanding money" due from the buyer in.case of default.
15. The learned senior counsel fu11her draw our attention to the
relevant statutory provisions of the Act, which are extracted as under:
"2(b )(ii)-tbe day of deemed acceptance" means, where
no objection is made in writing by th..: buyer regarding
acceptance of goods or services within thirty days from
the day of the delive1y of goods or the rendering of services,
the day of the actual delivery of goods or the rendering of
services;
3. Liability of buyer to make payment.- Where any
supplier supplies any goods or renders any services to any
buy..:r, the buyer shall make payment therefore 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.
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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 halftime of prime Lending Rate charged
by the State Bank of India.
Explanation.- For the purposes of this section, "Prime
Lending Rate" means the Prime Lending Rate of the State
Bank oflndia which is available to the best borrowers of
the bank.
6.Liability of buyer to pay compound interest.-
Notwithstanding anything contained in any agreement
between a supplier and a buyer or in any Jaw for the time
being in force, the buyer shall be liable to pay compound
interest (with monthly interest) at the rate mentioned in
section 4 on the amount due to the supplier."
Mr. Basava Prabhu Patil, learned senior counsel contends that
from a reading of Section 2(b) of the Act, it becomes clear that "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. It
is submitted that a careful reading of Section 2(b) along with Sections 3,
4 and 5 of the Act would show that a statutory right is conferred upon
the suppliers for payment of interest on the delayed payments. Therefore,
the provisions of the Act are retroactive in nature. The learned senior
counsel further contends that the judgments of this Court sought to be
relied upon by the learned senior counsel appearing on behalf of the
Electricity Board have no application to the facts of the instant case, as
in those cases two Judge Benches of this Court have not correctly
examined the aforesaid statutory provisions of the Act while holding that
the same is prospective in nature.
16. Mr. Ajit Kumar Sinha, learned senior counsel contends that
the provisions of the Act are retroactive in nature and places reliance on
M/S SHANTI CONDUCTORS (P) LTD. ANR. v. ASSAM STATE
379
ELECTRICITY BOARD & ORS. [V. GOPALA GOWDA, J.]
the decision of the Bombay High Cou11 in the case of Kingfisher Airlines
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Ltd. v. CCJ6 and the decision of this Court in the case of State of Bombay
v. Vishnu Ramchandra7, wherein it was held as under:
"There are, however, statutes which create Do new
punishment, but authorise some action based on past
conduct. To
such statutes, if expressed in language
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showing retrospective operation, the principle is not applied.
As Lord Coleridge, C. J.,observed during the course of
arguments in Rex v. Birthwhistle:
"Scores of Acts are retrospective, and may without
express words be taken to be retrospective, since
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they are passed to supply
a cure to an existing
evil."
!ndeed, in that
case which arose under the Married
Women (Maintenance in Case of Desertion) Act, 1886, the
Act was held retrospective without express words.
It was said:
"It was intended to cure an existing evil and to afford
to married women a remedy for desertion, whether
such desertion took place before the passing of the
Act or not."
Another principle which also applies is that an Act designed
to protect the public against acts of a harmful character
may be construed retrospectively, if the language admits
such an interpretation, even though it may equally have a
prospective meaning."
The said principle was reiterated more recently by this Court in
the case of State of Mllhllrttslttra v. Krislmllrao D11d//{/pf1" SltimfeH.
17. The learned senior counsel also places reliance on the meaning
of the words "retroactive" and "retroactive inference", which have
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"Retroactive- Process of acting with reference to past
occurrences.
'' 2011 (100) CLA (Bom.)
7 AIR 1961SC307
'(2009) 4 sec 219
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Retroactive inference- The inferring of a previous fact
from present conditions by trier of facts."
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18. The learned senior counsel further contends that the
observations made in Purb"nclwl C"bles & Conductors Pvt. Ltd.
(supra) are clearly contradictory to the decision of this Court in the case
of Ass"m Sm"ll Sc"le Industries Development Corporation Ltd.
(supra). The relevant paragraph of Purb"nclwl Cables (supra) reads
as under:
"53. On a careful perusal of the judgment of this Court in
Assam Small Scale Industries, we find that even the
question regarding the applicability of the Act to contracts
concluded prior to coming into force of the Act is no longer
res integra. This question is answered by this Court in Assam
Small Scale Industries Development Corpn. Ltd. v. J.D.
Pharmaceuticals as under: (SCC p. 36, paras 3 7-38)
"37. We have held hereinbefore that clause 8 of the
tenns and conditions relates to the payments of balance
I 0%. It is not in dispute that the plaintiff had demanded
both the principal amount as also the interest from the
Corporation.