# M/S PURBANCl-IAL CABLES & CONDUCTORS PVT. LTD v. ASSAM STATE ELECTRICITY BOARD & ANOTHER

- **Citation:** [2012] 6 S.C.R. 905
- **Court:** Supreme Court of India
- **Decided:** 2012-07-10
- **Case number:** Civil Appeal No. 2348 of 2003
- **Bench:** H.L. Dattu, Anil R. Dave
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-purbancl-ial-cables-conductors-pvt-ltd-v-assam-state-electricity-board-28250
- **Pages:** 55

## Headnote

A
B
INTEREST ON DELA YEO PAYMENT TO SMALL
SCALE AND ANCILLIARY INDUSTRIAL UNDERTAKINGS C
ACT, 1973:
Suit for interest on delayed payment - Held: Is
maintainable - Supplier may file a suit only for a higher rate
of interest on delayed payments made by the buyer from the D
commencement of the Act.
Prospective operation of the Act - Held: The Act is a
substantive law, as vested right of entitlement to a higher rate
of interest in case of delayed payment accrues in favour of
the supplier and a cormsponding liability is imposed on the E
buyer - Any substantive law shall operate prospectively unless
retrospective operation is clearly made out in the language
of the statute - 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
F
rate of interest against the buyer, the Act cannot be construed
to have retrospective effect - The Act, though enacted on
2. 4. 1993, by a legal fiction is deemed to have come into effect
·from the date of promulgation of the Ordinance, i.e. 23. 9. 1992
- Since the Act envisages that the supplier has an accrued G
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. 23.9.1992 and not
any time prior - Interpretation of Statutes - Precedent.
905
H
906
SUPREME COURT REPORTS
[2012] 6 S.C.R.
A
PRECEDENT:
Reconsideration of a decision - Held: Judicial discipline
demands that a decision of a Division Bench of two Judges
should be followed by another Division Bench of two Judges
8
- No case has been made out for reconsideration of the
decision of the Court in Assam Small Scale Industries -
Doctrine of stare decisis.
In the instant appeals arising out of the claim of the
appellants-suppliers for interest in terms of the Interest
C on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 (the Act), the questions
for consideration before the Court were: (1) "whether a
suit for interest alone is maintainable under the
provisions of the Act" and (2) "whether the suppliers can
D get the benefit of the provisions of the Act even if the
contract of supply was ..e'i)Cecuted prior to the
commencement of the Act, whereas the supplies are
made after the commencement 'of the Act."
E
Dismissing the appeals, the Court
HELD: 1. Since a Division Bench of this Court in
Modern Industries' case* 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
F
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. [para 12] [923-H; 924-A]
G
*Modern Industries v. Steel Authority of India Limited
2010 (4) SCR 560 = (2010) 5 sec 44 - relied on
2.1 The fundamental rule of construction is the same
for all statutes whether fiscal or otherwise. The underlying principle is that the meaning and intention of a
H
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 907
ASSAM STATE ELECTRICITY BOARD
statute must be
~ollected from the plain and A
unambiguous expression used therein rather from any
notion. To arrive at the real meaning, it is always
necessary to get an exact conception, scope and object
of the whole Act. [para 22] [9"29-B-C]
Zile Singh v. State of Haryana 2004 (5 ) Suppl. SCR 272
B
= (2004) a sec 1 - re.lied on
2'2 The remedy sought to be applied by the Act is
made clear in the Statement of Objects and Reasons, in
which, it is stated that due to the delayed payments by C
buyers to' the small scale ii;idustries, their working capital
was being affected" causing great harm to the small scale
industries ir'f general. The Act was passed by Parliament
to impose a heavy interest on the buyers who delayed
the payments of the small scale industries, in order to D
deter the buyers from delaying the pa

## Text

_Characters 0–39,671 of 106,544. This is a partial read: ask again with offset=39671 for what follows._

[2012] 6 S.C.R. 905
M/S PURBANCl-IAL CABLES & CONDUCTORS PVT.
LTD.
v.
ASSAM STATE ELECTRICITY BOARD & ANOTHER
(Civil Appeal No. 2348 of 2003 etc.)
JULY 10, 2012
[H.L. DATTU AND ANIL R. DAVE, JJ.]
A
B
INTEREST ON DELA YEO PAYMENT TO SMALL
SCALE AND ANCILLIARY INDUSTRIAL UNDERTAKINGS C
ACT, 1973:
Suit for interest on delayed payment - Held: Is
maintainable - Supplier may file a suit only for a higher rate
of interest on delayed payments made by the buyer from the D
commencement of the Act.
Prospective operation of the Act - Held: The Act is a
substantive law, as vested right of entitlement to a higher rate
of interest in case of delayed payment accrues in favour of
the supplier and a cormsponding liability is imposed on the E
buyer - Any substantive law shall operate prospectively unless
retrospective operation is clearly made out in the language
of the statute - 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
F
rate of interest against the buyer, the Act cannot be construed
to have retrospective effect - The Act, though enacted on
2. 4. 1993, by a legal fiction is deemed to have come into effect
·from the date of promulgation of the Ordinance, i.e. 23. 9. 1992
- Since the Act envisages that the supplier has an accrued G
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. 23.9.1992 and not
any time prior - Interpretation of Statutes - Precedent.
905
H
906
SUPREME COURT REPORTS
[2012] 6 S.C.R.
A
PRECEDENT:
Reconsideration of a decision - Held: Judicial discipline
demands that a decision of a Division Bench of two Judges
should be followed by another Division Bench of two Judges
8
- No case has been made out for reconsideration of the
decision of the Court in Assam Small Scale Industries -
Doctrine of stare decisis.
In the instant appeals arising out of the claim of the
appellants-suppliers for interest in terms of the Interest
C on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 (the Act), the questions
for consideration before the Court were: (1) "whether a
suit for interest alone is maintainable under the
provisions of the Act" and (2) "whether the suppliers can
D get the benefit of the provisions of the Act even if the
contract of supply was ..e'i)Cecuted prior to the
commencement of the Act, whereas the supplies are
made after the commencement 'of the Act."
E
Dismissing the appeals, the Court
HELD: 1. Since a Division Bench of this Court in
Modern Industries' case* 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
F
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. [para 12] [923-H; 924-A]
G
*Modern Industries v. Steel Authority of India Limited
2010 (4) SCR 560 = (2010) 5 sec 44 - relied on
2.1 The fundamental rule of construction is the same
for all statutes whether fiscal or otherwise. The underlying principle is that the meaning and intention of a
H
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 907
ASSAM STATE ELECTRICITY BOARD
statute must be
~ollected from the plain and A
unambiguous expression used therein rather from any
notion. To arrive at the real meaning, it is always
necessary to get an exact conception, scope and object
of the whole Act. [para 22] [9"29-B-C]
Zile Singh v. State of Haryana 2004 (5 ) Suppl. SCR 272
B
= (2004) a sec 1 - re.lied on
2'2 The remedy sought to be applied by the Act is
made clear in the Statement of Objects and Reasons, in
which, it is stated that due to the delayed payments by C
buyers to' the small scale ii;idustries, their working capital
was being affected" causing great harm to the small scale
industries ir'f general. The Act was passed by Parliament
to impose a heavy interest on the buyers who delayed
the payments of the small scale industries, in order to D
deter the buyers from delaying the payments after
accepting the supplies made by the suppliers. Keeping
in view the said object, the Act was enacted by
Parliament. Before such enactment, the supplier whose
payment was delayed by the buyer prior to the E
commencement of the Act, could file a suit for payment
of the principal amount along with the interest.. The
. supptier, thus, had the vested right to claim the principal
amount along with interest thereon in case of a delay in
payment by the buyer and it was the discretion of the F
court to award such interest. The court has the discretion
~o award interest along with the principal amount and the
same is clear from the use of the word 'may' in all the
three provisions, namely s.34 of the CPC, s. 61 of the Sale
of Goods Act, 1930 ~nd s. 3 of the Interest Act, 1978. [para G
24-26] [929-F-H; 9(30-C-D, F-G]
2.3 With the cbmmencement of the Act, a new vested
right exists with the supplier, that being, if there is delay
in payment after the acceptance of the goods by the
buyer, the supplier can file a suit for claiming interest at H
908
SUPREME COURT REPORTS
[2012] 6 S.C.R.
A
a higher rate, as prescribed by the Act. This position has
been approved by this Court in the case of Modern
Industries. Thus, if there is
1a delayed payment by the
buyer, then a right to claim a higher rate of interest as
prescribed by the Act accrues to the supplier. A statute
B creating vested rights is a substantive statute. There is
no doubt about the fact that the Act is a substantive law
as vested right 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
c 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
0
in procedure. [para 27, 29 and 39] [931-A-D; 932-B; 938H; 939-A-B]
Bibi Sayeeda Vs. State of Bihar 1996 ( 1 ) Suppl. SCR
799 = (1996) 9 SCC 516; Executive Engineer, Dhenkanal
Minor Irrigation Division Vs. N. C. Budharaj - 2001 ( 1 ) SCR
E 264 = (2001) 2 SCC 721; Thirumalai Chemicals Limited Vs.
Union of India 2011 (4) SCR 838 = (2011) 6 SCC 739;
Shyam Sunder Vs. Ram Kumar 2001 (1 ) Suppl. SCR 115
= (2001) 8 sec 24 - relied on
F
Katikara Chintamani Dora Vs. Guntreddi Annamanaidu
1974 (2) SCR 655 = (1974) 1 SCC 567; and Govind Das Vs.
/TO 1976 (3) SCR 44 = (1976) 1 SCC 906; Jose Da Costa
Vs. Bascora Sadasiva Sinai Narcomium (1976) 2 SCC 917;
K. Kapen Chako Vs. Provident Investment Co. (P) Ltd 1977
G (1) SCR 1026 = (1977) 1 SCC ~93; Dahiben Vs. Vasanji
Keva/bhai 1995 (3) SCR 234 = 1995 Supp. (2) SCC 295; Zi/e
Singh Vs. State of Haryana 2004 (5) Suppl. SCR 272 =
(2004) 8 SCC 1; State of Punjab Vs. Bhajan Kaur - (2008)
12 sec 112 - referred to.
H
Black's Law Dictionary (6th Edn.) - referred to.
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 909
ASSAM STATE ELECTRICITY BOARD
2.4 In the absence of any express legislative
A
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. The Act, though
enacted on 2nd April 1993, by a legal fiction is deemed to
B
have come into effect from the date of promulgation of the
Ordinance, i.e. 23rd September 1992. Since the Act
envisages that the supplier ha~ 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 c
of commencement of the Act, i.e. 23.9.1992 and not any
time prior. [para 8 and 40) (918-D-E; 939-B-D]
2.5 On a careful perusal of the judgment of this Court
in Assam Small Scale Industries,** even the question
regarding the applicability of the Act to co.ntracts
D
concluded prior to coming into force of the Act is no
longer res integra. In the said case the Court has held that
the Act will have no application in relation to the
transacti.ons entered into between June 1991 and 23-91992. [para 40-41] (939-E; 940-C]
E
**Assam Small Scale Industries Development Corpn.
Ltd. Vs. J.D. Pharmaceuticals 2005 (4) Suppl. SCR 232 =
(2005) 13 SCC 19; Shakti Tubes Ltd. Vs. State of Bihar 2009
(10) SCR 739 = (2009) 7 SCC 673; Rampur Fertilizers
F
Limited v. Vigyan Chemical Industries 2009 (2) SCR 650 =
(2009) 12 SCC 324; and Modern Industries v. Steel Authority
of India Limited 2010 (4) SCR 560 = (2010) 5 SCC 44 - relied
on.
2.6 It cannot be said that this Court in Assam Small G
Scale Industries Development Corporation's case did not
specifically consider and decide the issue of whether the
Act would apply to the contracts executed prior to the
commencement of the Act but the supplies being made
after the commencement of the Act. In that case, the
H
910
SUPREME COURT REPORTS
[2012] 6 S.C.R.
A question of retrospective operation of the Act or whether
past contracts were governed by the Act, was argued.
Further, in the case of Shakti Tubes Ltd., this issue was
canvassed due to which, this Court referred to the
precedent in the case of Assam Small Scale Industries.
B This Court, in Shakti Tubes Ltd. expressly rejected the
argument that the Act should be given retrospective
effect because it was a beneficial legislation. In the case
of Rampur Fertilizers Limited, this Court again examined
the entire scheme of the Act before following the dicta of
c this Court in the case of Assam Small Scale Industries.
D
E
Even in Modern Industries, this Court did not differ from
the dicta of this Court in Assam Small Scale Industries
and Shakti Tubes. [para 43, 51-54] [942-A-B; 947-D-G. 948G-H; 951-C-D]
3.1 Judicial discipline demands that a decision of a
Division Bench of two Judges should be followed by
another Division Bench of two Judges and this has been
stated time and again by this Court. [para 62] [955-E]
Waman Rao Vs. Union of India 1981 (2) SCR 1 = (1981)
2 SCC 362; and Union of India Vs. Paras Laminates (P) Ltd.
- 1990 (3) SCR 789 = (1990) 4 sec 453 - relied on
Union of India Vs. Raghubir Singh 1989 (3) SCR 316
F =(1989) 2 SCC 754; Krishena Kumar Vs. Union of India 1990
(3) SCR 352 = (1990) 4 SCC 207; Mishri Lal Vs. Dhirendra
Nath 1999 (2) SCR 453 = (1999) 4 SCC 11; Central Board
of Dawoodi Bohra Community Vs. State of Maharashtra, 2004
(6) Suppl. SCR 1054 = (2005) 2 SCC 673; Shanker Raju Vs.
Union of India 2011 (2) SCR 1 = (2011) 2 SCC 132; Fida
G Hussain Vs. Moradabad Development Authority 2011 (9)
SCR 290 = (2011) 12 sec 615 - referred to.
3.2 No case has been made out for reconsideration
of the decision of this Court in Assam Small Scale
H Industries. In fact, a plea for reconsideration of the same
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 911
ASSAM STATE ELECTRICITY BOARD .
was rejected by a Division Bench of this Court in Shakti A
Tubes. It cannot be said that the provisions of the Act
were not considered in its entirety. In fact, the entire
scheme of the Act has been considered in the case of
Rampur Fertilizers and specific issue under consideration
was answered. In light of the dictum of this Court in
B
· Ambika Prasad Mishra and the factum that no case has
been made out for reconsideration, there is no reason
much less good reason to doubt the correctness of the
decision in Assam Small Scale Industries or Shakti Tubes,
and it would be against the spirit of the doctrine of stare c
decisis to take any view in divergence with same. [para
66 and 68] [958-C-D, F-H; 959-A]
Keshav Mills Co. Ltd. Vs. CIT (1965) 2 SCR 908- relied
on
Ambika Prasad Mishra Vs. State of U.P. 1980 (3) SCR D
1159 = (1980) 3 sec 719 - referred to
4. As regards the plea that the extension of date of
supply order, from time to time by the Board, amounts to
a novation of contract or supply order in terms of s. 62
E
of the Indian Contract Act and, therefore, the new
contract or supply order would be governed by the Act,
suffice it to say that the ground or issue of novation of
contract is a mixed question of fact and law and it is being
raised, for the first time, at the time of hearing of the case
F
which cannot be permitted to be raised. The said fact of
novation or alteration of contract is required to be urged
evidentially and scrutinised by the courts below. In
absence of such factual findings, it is not possible to
decide such a mixed question of law and facts. In Shakti
Tubes Ltd., the issue of novation of contract was raised G
before this Court for the first time at the time of hearing.
This Court declined to entertain such ground as being a
mixed question of law and fact. This Court further
observed that even on the merits of the case the
escalation of price, reduction of the quantity of the supply H
912
SUPREME COURT REPORTS
[2012] 6 S.C.R.
A
order and extension of date of supply does not amount
to novation or alteration in the supply order. [para 69]
[959-B-E]
Assam State Electricity Board and Another v. Mis
8
Trusses and Towers (P) Ltd. (F.A. NO. 109195) 2001 (2) GLT
121; Purbanchal cables & conductors pvt. Ltd . . vs. Assam
state electricity board & anr 2012(6 ) JT 327; Consolidated
Engineering Enterprises v. Municipal Secretary, Irrigation
Department, 2008 (5) SCR 1108 = (2008) 7 sec 169; Mukri
C
Gopalan v. Cheppilat Puthanpurayil Aboobacker, 1995 ( 2 )
Suppl. SeR 1 = (1995) 5 SCC 5; Rampur Fertilizers Limited
v. Vigyan Chemical Industries 2009 (2) SCR 650 = (2009) 12
SCC 324; Municipal Corporation, Delhi Vs. Gurnam Kaur
1988 (2) Suppl. SCR 929 = (1989) 1 sec 101; State of U.P.
Vs. Synthetics and Chemicals Ltd. (1991) 4 sec 139; Amit
D Das Vs. State of Bihar 2000 (1) Suppl. SCR 69 = (2000) 5
SCC 488, Tika Ram Vs. State of Uttar Pradesh (2009) 10
SCC 689; CIT Vs. Saheli Leasing and Industries Limited
2010 (6) SCR 747 = (2010) 6 sec 384 - cited.
E
Case Law Reference:
2001 (2) GLT 121
cited
para 3
2010 (4) SCR 560
relied on
para 11
F
2012 (6) JT 327
cited
para 18
2008 (5) SCR 1108
cited
para 18
1995 (2) Suppl. SCR 1
cited
para 19
2009 (2) SCR 650
cited
para 20
G
2004 (5) Suppl. SCR 272
relied on
para 23
1996 ( 1 ) Suppl. SCR 799 relied on
para 28
2001 ( 1 ) SCR 264
relied on
para 29
H
2011 (4) SCR 838
relied on
para 30
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 913
ASSAM STATE ELECTRICITY BOARD
2001 (1) Suppl. SCR 115
relied on
para31
A
1974 (2) SeR 655
referred to
para 32
1976 (3) SeR 44
referred to
para 33
1976 (2) sec 917
referred to
para 34
B
1977 (1) SCR 1026
referred to
para 35
1995 (3) seR 234
referred to
para 36
2004 (5) Suppl. SCR 272
referred to
para 37
c
2008 (12) sec 112
referred to
para 38
2005 (4) Suppl. SeR 232
relied on
para 41
2009 (10) SCR !39
relied on
para 42
1988 (2) Suppl. SCR 929
cited
para 47
D
(1991) 4 sec 139
cited
para 48
2000 (1) Suppl. SCR 69
cited
para 49
(2009) 10 sec 689
cited
para 50
E
1981 (2) SCR 1
relied on
para 55
1989 (3) SCR 316
referred to
para 56
1990 (3) SeR 352
referred to
para 57
F
1999 (2) SCR 453
referred to
para 58
2004 (6) Suppl. SCR 1054 referred to
para 59
2011 (2) SCR 1
referred to
para 60
2011 (9) SeR 290
referred to
para 61
G
1990 ( 3) SCR 789
relied on
para 63
2010 (6) SCR 747
cited
para 64
(1965) 2 SCR 908
relied on
para 65
H
A
914
SUPREME COURT REPORTS
[2012] 6 S.C.R.
1980 ( 3) SCR 1159
relied on
para 67
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
2348 of 2003 etc.
From the Judgment & Order dated 18.08.2001 of the
B
Gauhati High Court (The High Court of Assam: Nagaland:
c
Meghalaya: Manipur: Tripura: Mizoram: and Arunachal
Pradesh) in R.F.A. No. 80 of 2000.
WITH
C.A. No. 2351 of 2003.
Rakesh Dwivedi, Vijay Hansaria, Sunil Gupta, Ritesh
Agrawal, Rima, Ranjan Mukherjee, Rajiv Mehta, Sneha Kalita
(for Sunil Kumar Jain), Rajiv K. Garg, Ashish Garg, Himanshu
D
Shekhar, Avijit Roy, Vartika Sahay Walia (for Corporate Law
Group), Ambhoj Kumar Sinha, Devashish Bharukka for the
appearing parties.
E
F
The Judgment of the Court was delivered by
H.L. DATIU, J. 1. Since the issues in these appeals are
common, they are disposed of by this common judgment and
order.
Factual background of the two appeals
2. The facts in brief needs to be stated for answering the
issues raised. They are: In the case of Purbanchal Cables (C.A.
No. 2348 of 2003), the supplier is the manufacturer of Aluminium
Conductors Steel Reinforced (for short "ACSR") for various
specifications. The respondent-Board had placed orders for
G supply of ACSR of different specifications in three (3) quarterly
phases, i.e. in June 1992, September 1992 and December
1992 with the appellant vide supply order dated 31.3.1992. In
pursuance to the said supply order, the supplier had initially
made delivery of goods with respect to three bill-$ on
H
· PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 915
ASSAM STATE ELECTRICITY BOARD [H.L. DATTU, J.]
16.09.1992, but did not receive payment from the respondent.
A
Subsequently, the supplier had made another delivery of goods
with respect to nine other bills in between 25.09.1992 and
30.03.1993. These supplies were made after the expiry of the
time stipulated in the agreement/supply order, but after
obtaining specific extension of time by the buyer. The supplier a
had completed the entire supply by 12.10.1993 and received
the payment for such supplies from the respondent in the month
of September and October, 1993. In pursuance to such
supplies, the supplier has raised the demand for interest on
delayed payment made by the respondent, vide its letters dated c
14.12.1992 arid 3.12.1993, however, the same was not
acceded to by the buyer.
3. The supplier had instituted a Money Suit No.109 of 1996
before Assistant District Judge No.1, Kamrup for the payment
of interest to the tune of Rs. 24,57,927.28/-, on delayed D
payment of principal amount by the respondent, under the
Interest on De1ayed Payments to Small Scale and Ancillary
Industrial Un<:lertakings Act, 1993 (for short 'the Act'). The said
suit was decreed by the Civil Judge (Senior Division) No. 1,
Kamrup vide his order dated 27.01.2000 in favour of the E
supplier, who granted the compound interest @ 18.25% per
annum plus interest of 5% above the said rate of interest with .
monthly rest till realization. Being aggrieved by the said order,
the respondent had filed a Regular First Appeal No. 80 of 2000
before the High Court of Gauhati. The Division Bench of the
F
High Court has allowed the appeal and dismissed the suit vide
its judgment and order dated 18.8.2001 on the ground that suit
is not maintainable as no amount was due on the date of
institution of the suit and thereby followed its earlier view
rendered by the Division Bench of the High Court in Assam G
State Electricity Board and Another v. Mis Trusses and
Towers (P) Ltd. (F.A. NO. 109/95), 2001 (2) GLT 121, whereby
and whereunder a Division Bench of the High Court had held
that a suit for interest simpliciter was not maintainable when the
principal amount was received without any demur and that the
H
,.
916
SUPREME COURT REPORTS
(2012] 6 S.C.R. ·
A
Act did not revive the claims that were already settled. The High
Court has also, inter alia, directed the appellant to refund the
amount of · 10 lakhs, paid by the respondents pursuant to the
Court's direction at the time of admission of the appeal to the
respondent within a period of two months and failure to pay
B
within such period would entail interest at the rate of 12% per
annum. Aggrieved by this decision of the High Court, the
supplier has preferred this appeal.
4. In the case of Shanti Conductors (C.A. No. 2351 of
2003), the Board had placed two supply orders for the
C
manufacture and supply of KM ACSR Penther Conductors, and
the supplier completed the supplies in eight parts between
22.03.93 and 04.10.93. In March 1997, about three and a half
years of making the supplies, and after the receipt of the entire
amount, the supplier filed a suit for interest on delayed payment
D
by the Board in terms of the provisions of the Act, in Money
Suit No. 21/1997 before the Court of the Civi.l Judge (Sr. Divn.)
No. 1, Guahati. The same was disputed by the Board in the
written statement filed in the suit. However, the Sl.lit filed by the
supplier was decreed and the Learned Assistant Distri'ct Judge
E
awarded a sum of '51,60,507.42 byway of interest for the
delayed payment. Being aggrieved by the said order, the
Board preferred a Regular First Appeal (F.A. No. 66 of 2000)
before the Guahati High Court. The Division Bench hearihg the
appeal of the Board in the case of Shanti Conductors doubted
F
the correctness of the view taken by the Division Bench in the
case of Trusses and Towers, and referred the matter to the Full
Bench to determine whether a suit is maintainable only for
interest and whether the provisions of the Act is applicable to
contracts concluded prior to its commencement, where the
G delayed payment is made after its commencement.
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5. The Full Be:nch of the High Court after considering the
provisions of the Act, concluded that the findings of the Division
Bench in the case of Trusses & Towers that once a principal
amount is received without any protest, then n0; further claim
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v.
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ASSAM STATE ELECTRICITY BOARD [H.L. DATTU, J.]
for interest can be made; is not the correct legal position in law.
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In other words, ttie Full Bench came to the conclusion that a
suit for only interest was also maintainable. Further, the Full
Bench also held that the Act is applicable to any contracts
entered into prior to the commencement of the Act, and a higher
rate of interest could be charged in terms of the provisions of
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the Act, however, the same was to be done after 23.09.1992,
i.e. after the Act came into force. The matter was then remitted
back to the Division Bench to decide the· other issues in
accordance with law and in the light of the observations made
therein. Aggrieved by the decision of the Full Bench, the Board c
is before us in Civil Appeal No.2351 of 2003.
6. The issues that are required to be answered by us in
these appeals are whether a suit for interest alone is
maintainable under the provisions of the Act, and whether the
Act would be applicable to contracts that have been concluded
D
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 prior to the commencement of
the Act but supplies were effected after the Act came into force.
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The Scheme of the Act:
7. The Statement of Objects and Reasons read as under:
"A policy statement on small scale industries was made
by the Government in Parliament. It was stated at that time
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that suitable legislation would be brought to ensure prompt
payment of money by buyers to the small industrial units.
2. Inadequate working capital in a small scale or an
ancillary industrial undertaking causes serious and
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endemic problems. affecting the health of such
undertakings. Industries in this sector have also been
demanding that adequate measures by taken in this
regard. The Small Scale Industries Board, which is an
apex advisory body on polices relating to small scale
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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 payment 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 payment to small scale and
ancillary industrial undertakings.
3. An Ordinance, namely, the Interest on Delayed
Payments to Small Scale and Ancillary Industrial
Undertakings Ordinance, 1992, was, therefore,
promulgated by the President on 23rd September, 1992."
8. The long title of the Act reads as "An Act to provide for
D and regulate the payment of interest on delayed payments to
small scale and ancillary industrial undertakings and for matters
connected therewith or incidental thereto." The Act though
enacted on 2nd April 1993, by a legal fiction i.s deemed to have
come into effect from the date of promulgation of the Ordinance,
E i.e. 23rd September 1992. The provisions of the Act largely
deal with the liability of the buyer to make payment for supplies,
determination of the date from which and the rate at which
interest is payable to the supplier from the buyer, liability of the
buyer to pay compound interest, recovery of the amount due
F to the supplier from the buyer, and other provisions relating to
appeal, etc.
9. Section 2(b) of the Act defines the meaning of the
expression 'appointed day' to mean the day following
immediately after the expiry of the payment period of thirty days
G from the date of payment, acceptance of any goods or any
services by a buyer from a supplier. Section 3 of the Act
imposes a statutory liability upon the buyer to make payment
for the supplies of any goods either on or before the appeal
date or where there is no agreement, before the appointed day.
H
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 919
ASSAM STATE ELECTRICITY BOARD [H.L. DATTU, J.]
Section 4 provides for the award of interest where the price has A
not been paid within time. Section 5 provides for the liability of
the buyer to pay compound interest. Section 6 of the Act gives
a right to the buyer to file a civil suit. Section 10 of the Act gives
overriding effect to any other law which are inconsistent with
the provisions of the Act.
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On the question of maintainability of a suit for interest
10. Shri Rakesh Dwivedi and Shri Su nil Gupta, learned
Senior Counsel appear for the suppliers and Shri Vijay
Hansaria, learned Senior Counsel appears for the buyer -
C
Assam State Electricity Board (hereinafter referred to as 'the
Board').
11. The learned Senior Counsel appearing for the
suppliers has brought to our notice that the first question that o
has been raised for our consideration has been answered by
this Court in favour of the suppliers, in the case of Modern
Industries v. Steel Authority of India Limited, (2010) 5 SCC.
44, in which this Court has held:
"40. In Assam SEB v. Shanti Conductors (P) Ltd. inter alia
E
the ques~jo,n that fell for consideration before the Full
Bench of t~ Gauhati High Court was as to whether the
,,suit fo~ recovery of a mere interest under the 1993 Act is
maintainable. The argument on behalf of the appellant
therein was that no suit merely for the recovery of the
F
interest under 'he 1993 Act is maintainable under the
provisions of Section 6. It was contended that both
principal sum and the interest on delayed payment
simultaneously must coexist for maintaining a suit under
Section 6 of the 1993 Act.
G
41. The Full Bench held that the suit is maintainable for
recovery of the outstanding principal amount, if any, along
with the interest on delayed payments as calculated under
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Sections 4 and 5 of the 1993 Act. It said: (As$ar'n SES
case, Gau LR pp. 559-60, para 12)
"12 .... The opening words of Section 6(1) 'the·
amount due from the b'uyer, together with the
amount of interest .... ' can onliY mean that the
principal sum due from tne bu}iler as well as or
along with the amount of interest calculated u11der
the provisions of the Act, are recoverable. The word
'together' here would mean 'as well as' or 'along
with'. This cannot mean that the principal sum must
be due on the date of the filing of the suits. The suits
are maintainable for recovery of the outstanding,
principal amount, if any, cftong with the amount of
interest on the delayed payments as calculated
under Sections 4 and 5 of the Act. We are unable
to agree with that if the principal sum is not due, no
suit would lie for the recovery of the interest on the
delayed payments, which might have already
accrued. If such an interpretation is given the very
object of enacting the Act would be frustrated. The
Act had been enforced to see that small- scale
industries get the payment regarding supply made·
by them within the prescribed period and in case
of delay in payments the interest would be at a
much higher rate (one-and-a-half times of lending
rate charged by State Bank of India). The obligation
of payment of higher interest under the Act is
mandatory. Sections 4 and 5 of the Act of 1993
contain a non obstante clause i.e. 'Notwithstanding
anything contained in any agreement between the
buyer and the supplier'. In other words, the parties
to the contract cannot even contract out of the
provisions of the 1993 Act. Even· if such provision
that interest under the Act on delay meant would not
be chargeable is incorporated in the contract,
Sections 4 and 5 of the Act of 1993 would still
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 9,1
ASSAM STATE ELECTRICITY BOARD [H.L. DATTU, J.]
prevail as the very wording of these sections
A
indicate. Take for instance that the buyer has not
paid the outstanding amount of the supply by the
due date. After .much delay he offers the
outstand.i11g amount of the supply to the supplier. If
the argument of the learned counsel-f-0r the
B
appellant is to be accepted, then, if the supplier
accepts entire amount he would be losing his right
to recover the amount of interest on the delayed
payment under the Act. Therefore, he would have
to refuse to accept the amount of payment and then c
file a suit for recovery of the principal amount and
the interest on the delayed payment under the Act.
The Act does not create any embargo against
supplier not to accept principal amount at any
stage and thereafter file a suit for the recovery or D
realisation of the interest only on the delayed
payments under the Act."
42. The word "due" has a variety of meanings, in different
context it may have different meanings. In its narrowest
meaning, the word "due" may import a fixed and settled
E
obligation or liability. In a wider context the amount can be
said to be "due", which may be recovered by action. The
amount that can be claimed as "due" and recoverable by
an action may sometimes be also covered by the
expression "due". The expression "amount due from a
F
buyer'' followed by the expression "together with the amount
of interest" under sub-section (1) of Section 6 of the 1993
Act must be interpreted keeping the purpose and object
of the 1993 Act and its provisions, particularly Sections 3,
4 and 5 in mind. This expression does not deserve to be
G
given a restricted meaning as that would defeat the whole
purpose and object of the 1993 Act. Sub-section ( 1) of
Section 6 provides that the amount due from a buyer
together with amount of interest calculated in accordance
with the provisions of Sections 4 and 5 shall be
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recoverable by the supplier from the buyer by way of suit
or other proceeding under any law for the time being in
force.
4~. ltthe-a.rgument of the Senior Coynsel for the buyer is
accepted, that would mean that where the buyer has raised
some dispute in respect of goods supplied or services
rendered by the supplier or disputed his liability to make
payment then the supplier shall have to first pursue his
remedy for recovery of amount due towards goods
supplied or services rendered under regular procedure and
after the amount due is adjudicated, initiate action for
recovery of amount of interest which he may be entitled to
in accordance with Sections 4 and 5 by pursuing remedy
under sub-section (2) of Section 6.
44. We are afraid the scheme of Section 6 of the 1993
Act read with Sections 3, 4 and 5 does not envisage
multiple proceedings as canvassed. Rather, whole idea of
Section 6 is to provide a single window to the supplier for
redressal of his grievance where the buyer has not made
payment for goods supplied or services rendered in its
entirety or part of it or such payment has not been made
within time prescribed in Section 3 for whatever reason
and/or for recovery of interest as per Sections 4 and 5 for
such default. It is for this reason that sub-section ( 1) of
Section 6 provides that "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 buyer by way of a suit or other legal
proceeding. Sub-section (2) of Section 6 talks of a dispute
being referred to IFC in respect of the matters referred to
in sub-section (1) i.e. the dispute concerning amount due
from a buyer for goods supplied or services rendered by
the supplier to the buyer and the amount of interest to which
the supplier has become entitled under Sections 4 and 5.
45. It is true that word "together" ordinarily means conjointly
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 923
ASSAM STAT.E ELECTRICITY BOARD [H.L. DATTU, J.)
or simultaneously but this ordinary meaning put upon the A
said word may not be apt in the context of Section 6. Can
it be said that the action contemplatetl in Section 6 by way
of suit or any other legal proceeding under sub-section (1)
or by making 1reference to IFC under sub-section (2) is
maintainable. only if it is for recovery of principal sum along
B
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 the Gauhati High Court in
Assam SEB that word "together" in Section 6(1) would
mean "along with" or "as well as". Seen thus, the action C
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 D
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
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buyer. Construction put upon Section 6(2) by the 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 the 1993 Act. The Preamble to the
1993 Act, upon which strong reliance has been placed by
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the learned Senior Counsel, does not persuade us to hold
otherwise. It is so because the Preamble may not exactly
"correspond with the enactment; the enactment may go
beyond the Preamble."
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12. The decision of the Full Bench of the Gauhati High
Court which has been approved by. this Court in Modern
Industries (supra) 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
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[2012) 6 S.C.R.
A
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.
8
13. The other question that remains for our consideration
is; as to whether the suppliers can get the benefit of the
provisions of the Act even if the contract of supply was executed
prior to the commencement of the Act, whereas the supplies
being made after the commencement of the Act. In other word~.
C the question we are called upon.to answer is with regard to the
status of contracts of supply concluded prior to the
commencement of the Act vis-a-vis the Act.
D
Arguments on behalf of the suppliers
14. Shri Rakesh Dwivedi, learned Senior Counsel, would
submit that the Act is a beneficial legislation and is aimed at
providing relief to suppliers which are small scale industries,
who are not paid on time even after supplies are effected (ind
accepted and hence had to suffer severe'financial crunch. He'
E
would submit that the Act is supply oriented ,and the date of the
supply is the critical and crucial date for applying the provisions
of the Act, and not the date on which the 9ontract is entered
into by the parties. Shri. Dwivedi, learned Senior Counsel would
state that Section 1 (3) of the Act by way of a deeming fiction,
F
brought the Act into force from the date of the promulgati9n. of
the Ordinance i.e. 23rd September 1992. He would then 'draw .
our attention to the text of Section 3, and ~ubmit that the liabiJity
of a buyer to make payment arose on the completion of the
event of supply of the good by the supplier/manufacturer. The
learned Senior Counsel refers to the definition of 'appointed
G day' to mean the day of acceptance of the supply of goods or
the date of deemed supply of goods. He would refer to Sections
4 and 5 and also Section 10 of the Act and ,.submit that the
. liability and payment of higher rate of interest is a result of
delayed payment by the buyer to the supplier at the time of the
H
supply. He would also stress on the non-obstante clause that
PURBANCHAL CABLES & CONDUCTORS PVT. LTD. v. 925
ASSAM STATE ELECTRICITY BOARD [H.L. DATTU, J.]
is found in the text of section 5 and overriding effect given to
A
the Act vide section 10 to stress upon the fact that the
provisions of the Act with regard to compound interest would
prevail even if there was an agreement to the contrary that the
Act would override the provisions of any other law. He would
l~y emphasis upon the crucial date for the operation of the Act B
as the date on which the supply is made and not the date on
which the contract of supply was concluded as understood by
the decisions of this Court in Assam Small Scale Industries and
Shakti Tubes. He would also lay emphasis on the expression
"appointed day" as defined in Section 2(b) of the Act to contend· C
that though th~ contract between the parties was prior to the
enactment, it is the date of acceptance of the goods or any
other service by a buyer from the supplier and thus, is the
relevant date for applying the beneficial supply oriented
legislation. In the alternative, it is contended by Shri Dwivedi D
that even if tne contract is entered into prior to the date of
commencement of the Act, and the supply was subsequent,
then the Act would apply in respect of such buyers that made
delayed payments to the suppliers. He would also submit that
the ills of delayed payment was causing great inconvenience
E
and hardship to the small scale industries, and that being the
reason for the enactment of the legislation, coupled with the fact
that the event of supply is the core theme of the legislation,
hence all the supplies made after the 23rd September 1992
would attract the provisions of the Act.
15. In conclusion, Shri Dwivedi contends: (1) that the Act
is a supply oriented; (2) that on a wholesome reading of
Sections 4 and 5 and Section 10 of the Act, the Act has
overriding effect over any other law which are inconsistent with
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the provisions of the Act; (3) the emphasis on the text of Section
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3 on the supply of the goods and the liability of the buyer arose
on the supply of goods; (4) It is a beneficial legislation and a
purposive construction is required to be adopted. He points out
that since these salient features are neither noticed nor
considered in Assam Small Scale Industries, the decision H
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needs reconsideration by a larger Bench.
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16.