# Odisha State Financial Corporation v. Vigyan Chemical Industries and Others

- **Citation:** 2025 INSC 928
- **Court:** Supreme Court of India
- **Decided:** 2025-08-05
- **Case number:** Civil Appeal No. 10047 of 2025
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/odisha-state-financial-corporation-v-vigyan-chemical-industries-and-others-38696
- **Pages:** 90

## Headnote

The High Court dismissed the writ petition filed by the appellant
u/Art.227 of the Constitution of India, challenging the civil
proceedings and the orders passed by the Courts below regarding
the computation of interest on the decretal amount and the
consequential execution proceedings.
Headnotes†
Doctrines/Principles - Doctrine of Sub silentio - When earlier
judgment only adjudicated upon issue of limitation - Other
critical issues were not adjudicated - Earlier judgment cannot
be held to be a binding precedent on those undecided issues:
Held: It is a settled principle that a judgment is an authority only for
what it decides - When a judgment fails to address other issues
raised, it is said to be 'sub silentio', and cannot be held as a binding
precedent on those undecided issues - In the instant case, from
the records, it is very clear that in the earlier judgment of this Court
challenging the original decree, only the issue of limitation was
adjudicated - Critical issues such as (i) the jurisdiction of the trial
Court to entertain the suit against the appellant in the absence of a
notice u/s.80 CPC, (ii) the maintainability of the suit, (iii) the power
of the Court to modify the decree by entertaining an application
u/s.21 of the Limitation Act, 1963, and (iv) the applicability of
the Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993, were not adjudicated - This
is where the concept of 'sub silentio' assumes significance -
Therefore, it can safely be concluded that the judgment of this
Court in Civil Appeal No.2073/2010 is silent on the issues now
under consideration - When the judgment of a Court is silent on
questions of law either raised earlier but not decided, or raised in the
* Author
2
[2025] 9 S.C.R.
Supreme Court Reports
subsequent proceedings, it is settled law that constitutional courts
are empowered to decide such questions of law independently
and the earlier judgment cannot be cited as a binding precedent
or conclusive. [Para 13]
Code of Civil Procedure, 1908 - s.47 - Whether the issues
that go to the root of jurisdiction and maintainablity can still
be raised at the stage of execution u/s.47 of CPC:
Held: It is settled legal position, applying the doctrine of sub silentio,
that a decision is not an authority on a point that has not been argued
or decided - In the instant case, the trial Court had not framed any
issues regarding the maintainability of the suit filed by respondent
no. 1 against the appellant, for the alleged default committed by
respondent no. 2, despite a plea in the written statement - Without
any issue having been framed on maintainability, the matter reached
up to this Court, and the decision was rendered solely on the issue
of limitation - Therefore, the issues that remained undecided, but
go to the root of jurisdiction and maintainability, can still be raised
at the stage of execution u/s.47 CPC. [Para 14]
Code of Civil Procedure, 1908 - s.47 - Scope of - Discussed:
Held: As per s.47, the Executing Court is empowered to examine
the questions relating to execution, discharge, or satisfaction of
the decree - It cannot go beyond the decree; but at the same
time, when a plea is raised that the decree is a nullity and hence,
unenforceable, the executing court is bound to examine and decide
such an application on its merits - The court must execute the
decree according to its tenor, and cannot entertain objections on
the ground that the decree is erroneous in law or on facts - Until
it is set aside by an appropriate proceeding in appeal or revision,
a decree, even if erroneous, remains binding on the parties -
A decree may, however, be challenged in execution proceedings,
if it is a nullity-for instance, if it is passed without bringing on
record the legal representative of a person who was dead at the
time the decree was passed, or where the cause of action was not
maintainable, or if it was passed against a ruling prince without
a certificate - Simila

## Text

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[2025] 9 S.C.R. 1 : 2025 INSC 928
Odisha State Financial Corporation
v.
Vigyan Chemical Industries and Others
(Civil Appeal No. 10047 of 2025)
05 August 2025
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
The High Court dismissed the writ petition filed by the appellant
u/Art.227 of the Constitution of India, challenging the civil
proceedings and the orders passed by the Courts below regarding
the computation of interest on the decretal amount and the
consequential execution proceedings.
Headnotes†
Doctrines/Principles - Doctrine of Sub silentio - When earlier
judgment only adjudicated upon issue of limitation - Other
critical issues were not adjudicated - Earlier judgment cannot
be held to be a binding precedent on those undecided issues:
Held: It is a settled principle that a judgment is an authority only for
what it decides - When a judgment fails to address other issues
raised, it is said to be 'sub silentio', and cannot be held as a binding
precedent on those undecided issues - In the instant case, from
the records, it is very clear that in the earlier judgment of this Court
challenging the original decree, only the issue of limitation was
adjudicated - Critical issues such as (i) the jurisdiction of the trial
Court to entertain the suit against the appellant in the absence of a
notice u/s.80 CPC, (ii) the maintainability of the suit, (iii) the power
of the Court to modify the decree by entertaining an application
u/s.21 of the Limitation Act, 1963, and (iv) the applicability of
the Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993, were not adjudicated - This
is where the concept of 'sub silentio' assumes significance -
Therefore, it can safely be concluded that the judgment of this
Court in Civil Appeal No.2073/2010 is silent on the issues now
under consideration - When the judgment of a Court is silent on
questions of law either raised earlier but not decided, or raised in the
* Author
2
[2025] 9 S.C.R.
Supreme Court Reports
subsequent proceedings, it is settled law that constitutional courts
are empowered to decide such questions of law independently
and the earlier judgment cannot be cited as a binding precedent
or conclusive. [Para 13]
Code of Civil Procedure, 1908 - s.47 - Whether the issues
that go to the root of jurisdiction and maintainablity can still
be raised at the stage of execution u/s.47 of CPC:
Held: It is settled legal position, applying the doctrine of sub silentio,
that a decision is not an authority on a point that has not been argued
or decided - In the instant case, the trial Court had not framed any
issues regarding the maintainability of the suit filed by respondent
no. 1 against the appellant, for the alleged default committed by
respondent no. 2, despite a plea in the written statement - Without
any issue having been framed on maintainability, the matter reached
up to this Court, and the decision was rendered solely on the issue
of limitation - Therefore, the issues that remained undecided, but
go to the root of jurisdiction and maintainability, can still be raised
at the stage of execution u/s.47 CPC. [Para 14]
Code of Civil Procedure, 1908 - s.47 - Scope of - Discussed:
Held: As per s.47, the Executing Court is empowered to examine
the questions relating to execution, discharge, or satisfaction of
the decree - It cannot go beyond the decree; but at the same
time, when a plea is raised that the decree is a nullity and hence,
unenforceable, the executing court is bound to examine and decide
such an application on its merits - The court must execute the
decree according to its tenor, and cannot entertain objections on
the ground that the decree is erroneous in law or on facts - Until
it is set aside by an appropriate proceeding in appeal or revision,
a decree, even if erroneous, remains binding on the parties -
A decree may, however, be challenged in execution proceedings,
if it is a nullity-for instance, if it is passed without bringing on
record the legal representative of a person who was dead at the
time the decree was passed, or where the cause of action was not
maintainable, or if it was passed against a ruling prince without
a certificate - Similarly, when the decree is made by a court that
has no inherent jurisdiction to pass it, an objection as to its validity
may be raised in an execution proceeding if the objection appears
on the face of the record. [Paras 15, 16]
[2025] 9 S.C.R.
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Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
Jurisdiction - Scope of:
Held: A decree passed without jurisdiction is null and void -
A court is said to lack jurisdiction if it has no territorial jurisdiction,
or if it has no pecuniary jurisdiction, or if its jurisdiction over the
subject matter is circumscribed by any law - Such laws may be
either substantive or procedural and may, by express provision
or necessary implication, take away the jurisdiction of a court to
deal with a matter, leaving no room for any judicial discretion -
These provisions may either impose a total bar on the court from
dealing with certain subject matters or impose any pre-conditions,
non-compliance with which may prevent the court from entertaining
the suit, even if it otherwise has jurisdiction over the subject matter -
A plea questioning the jurisdiction of the court can be raised at any
stage, including before the High Court or this Court, particularly
when it involves a pure question of law. [Para 20]
Code of Civil Procedure, 1908 - s.2(9) and Or. XX Rule 4 (2) -
Judgment to satisfy requirement u/Or.XX, Rule 4(2):
Held: A "Judgment", as defined u/s.2(9) CPC, to be valid, must
satisfy the requirements u/Or.XX Rule 4(2) CPC - It should not
only trace, record, consider and decide all the points of disputes
but should also reflect the same - The decision must be based on
reasons reflected in the judgment - Once the issue of maintainability
is raised, or if the facts as pleaded by themselves create a cloud
over the jurisdiction of the court or the maintainability of the
proceedings, the same will have to be addressed, failing which
the judgment will be unsustainable and a nullity. [Para 21]
Code of Civil Procedure, 1908 - s.80 - When State, which
was not a party originally, was impleaded - Whether, in such
cases also, the plaintiff is duty bound to issue a notice as
contemplated u/s.80(1) CPC or obtain leave u/s.80(2) CPC
before an application for impleadment is taken out:
Held: In cases such as the one under consideration, the State, which
was not originally a party, could be impleaded and the plaint could
be amended by inclusion of pleadings, cause of action and relief
against the State - In such cases also, the plaintiff, immediately
upon becoming aware of the necessity to implead the State, is duty
bound to either issue a notice as contemplated u/s.80(1) CPC or
obtain leave u/s.80(2) CPC before an application for impleadment
4
[2025] 9 S.C.R.
Supreme Court Reports
is taken out - Failure to do so will bar the civil court from exercising
jurisdiction against the State, and the court will have no option but
to dismiss the suit - This is so because when a state government
or its instrumentality is impleaded in a pending suit, a new or fresh
cause of action is introduced - Similarly, if the amendment sought
by the plaintiff introduces a new cause of action within the period
of limitation and with the court's leave, a fresh notice u/s.80(1)
CPC must still be issued. [Para 26]
Code of Civil Procedure, 1908 - s.80 - Micro, Small And Medium
Enterprises Development Act, 2006 - s.18 - Commercial Courts
Act, 2015 - s.12-A - Appellant/4th defendant is a "State" within
the meaning of Art. 12 of the Constitution - Failure of issuing
notice u/s.80 of CPC - Effect of:
Held: The appellant/4th defendant is a "State" within the meaning
of Art.12 of the Constitution, the mandatory requirement of notice
u/s.80 has come into operation - A plain reading of s.80 along
with the settled position of law clearly enunciates that it is a duty
of the trial court to deal with that aspect of satisfaction of the
notice u/s.80 - Such preconditions to be satisfied before initiation
of a suit are recognized as mandatory in civil disputes where a
statute prescribes the same - A reference may be made to s.18
of the MSME Act, which provides for conciliation, or to s.12-A of
the Commercial Courts Act, 2015, which mandates pre-institution
mediation-failure of which would render the suit unsustainable
and liable to be rejected - The trial Court, in the present case,
failed to do so, thereby rendering the decree a nullity. [Para 30]
Small Scale and Ancillary Industrial Undertakings Act, 1993 -
Applicability of the interest on delayed payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993:
Held: The Act, 1993 came into force with effect from 23.09.1992
and remained in effect until it was repealed by the Micro, Small
and Medium Enterprises Development Act, 2006 - The Act, 1993
is clearly prospective in nature and governs the incidents of supply
and rendering service which happens after its enforcement, i.e.,
23.09.1992 - Further, it is the buyer who is liable to make the
payment after the supply of goods or rendering any service -
Thus, by virtue of s.3, both the incidents-i.e., the supply of goods
or services on the one hand, and the payment or default on the
[2025] 9 S.C.R.
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Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
other-must occur after the Act has come into force - The trial
Court committed a serious error in applying the provisions of the
repealed Act, 1993, to the present case, where the supply was
effected in 1985, and more particularly, a grave error in fastening
liability for interest and compound interest on the appellant, which
was not even a buyer in the transaction - Accordingly, the judgment
of the trial Court, to the extent of applying the repealed Act, 1993
and imposing liability on the appellant, is patently without authority
and is a nullity on that count - The High Court, in exercise of its
supervisory jurisdiction, also failed to examine and address these
vital aspects. [Paras 32, 32.2, 34]
State Financial Corporation Act, 1951 - Code of Civil Procedure,
1908 - s.80 - The appellant, State-owned Corporation, jointly
financed along with respondent no.3-IPICOL, to respondent
no. 2, for the establishment of a bleaching powder unit - On
29.07.1985, respondent no. 1 allegedly supplied raw materials
worth Rs.66,454.65 to respondent no. 2 - Owing to the
non-repayment of dues arising out of the financial assistance
provided by the appellant and respondent no.3, the appellant
took over possession of industrial unit of respondent no. 2 -
On 29.02.1988, respondent no.1, alleging that it had supplied
hydrated lime to respondent no. 2 in 1985, filed a recovery
suit in Civil Suit No.103 of 1988 before the Court of Civil
Judge (Sr. Division) - On 11.02.1993, respondent no.1 made
an application to implead the appellant as defendant no.4,
which was allowed - Whether the suit filed was maintainable:
Held: The appellant had filed a written statement denying liability
on multiple grounds, including: (i) U/s.29, no liability of respondent
no. 2 to third parties could be imposed on the appellant, (ii) There
was no privity of contract between the appellant and respondent
no. 1 as the appellant was not a party to the underlying transaction,
(iii) the suit against the appellant, was barred by limitation, (iv) the
suit was not maintainable, and (v) the trial Court lacked territorial
jurisdiction to entertain the suit - Without properly considering
the same, the trial Court decreed the suit in favour of respondent
no. 1 - Upon a perusal of the pleadings and the judgment, this
Court finds that the trial Court failed to frame any issues with
respect to maintainability, jurisdiction and limitation, nor did it
render any finding on the maintainability of the suit against the
appellant herein, there being a specific plea to that effect - The trial
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Court without analysing the scope and applicability of the S.F.C.
Act, 1951, the requirement of mandatory notice u/s.80 CPC, the
relevance of the repealed Act, 1993, and the specifically contested
issue of maintainability, proceeded to render findings only on the
limited issues - The judgment was passed without considering or
rendering any finding on the core legal issues in the case, thereby
vitiating the trial Court's judgment on fundamental jurisdictional
grounds. [Paras 36, 37, 38]
State Financial Corporation Act, 1951 - s.29 - Code of Civil
Procedure, 1908 - Whether there was privity of contract
between the appellant and respondent no. 1:
Held: Admittedly, there was no contract between the appellant and
respondent no.1 - The appellant has been impleaded solely on the
ground that it took possession of the defaulting industrial concern
and exercised its rights under the S.F.C. Act, 1951 to realize its
dues - In the absence of any privity of contract, the liability of the
appellant is limited strictly to the extent contemplated under Section
29 of the S.F.C. Act, 1951 - The appellant therefore, cannot be
saddled with the entire liability arising from a transaction to which
it was not a party. It is necessary to understand the object behind
Section 29 - The liability of the appellant is restricted to the
defaulting concern's funds in its hands, and under no stretch of law,
can be extended to its personal or corporate properties - In such
a situation, this Court fails to comprehend how the entire liability
has been fastened upon the appellant and how its properties and
bank accounts have been attached - This is clearly beyond the
jurisdiction of the trial Court or, for that matter, even the Executing
Court, which cannot proceed against the personal assets of the
appellant in such circumstances. [Paras 39, 40]
Small Scale and Ancillary Industrial Undertakings Act, 1993 -
State Financial Corporation Act, 1951 - Whether the appellant
is liable to pay any amount to respondent no.1 for alleged
default committed by respondent no.2, under decree:
Held: This Court is of the considered opinion that the suit itself
was not maintainable against the appellant and the provisions of
the repealed Act, 1993 were inapplicable to the present case -
Consequently, the execution proceedings to realize the principal
with exorbitant interest calculated under the repealed Act, 1993
[2025] 9 S.C.R.
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Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
are unsustainable, and the decree cannot be enforced against the
appellant - The trial Court, having already passed the decree, could
not have entertained an application u/s.21 of the Limitation Act,
1963, and the post-decree application filed by respondent no.1 was,
therefore, not maintainable - Nearly four decades have elapsed in
protracted litigation - Article 142 of the Constitution empowers this
Court to pass any order necessary for doing complete justice in
any cause or matter pending before it - Accordingly, it is held that
the appellant (OSFC) is not liable to pay any amount to respondent
no. 1 for the alleged default committed by respondent no. 2, under
the decree - In view of the same, the impugned judgment and
orders passed by the Courts below are hereby set aside. [Para 45]
Litigation - Failure to raise appropriate legal objections at
the appropriate stages - Absence of timely and effective
representation - Non-disclosure of material facts - Strong
disapproval of the manner in which the present litigation has
been conducted by the appellant Corporation and its counsel
before the lower courts:
Held: Public Institutions-particularly those entrusted with the
stewardship of public funds-are expected to conduct themselves
in legal proceedings with the highest standards of diligence,
responsibility, and accountability - The failure to raise appropriate
legal objections at the appropriate stages, coupled with the absence
of timely and effective representation, has not only burdened the
judicial system but has also exposed the corporation to unwarranted
and protracted liability - The present case is a stark example of
how a State-owned corporation has been unjustly and unsustainably
saddled with financial liability - Courts are duty bound to ensure
that public resources are not unjustly depleted due to judicial
oversight or misapplication of law - This responsibility extends
equally to Government counsel and officials involved in litigation -
It is incumbent upon them to ensure that all material facts are
disclosed, all legal defences are properly pleaded, and all relevant
documents are placed on record - Government counsel, as officers
of the Court, bear a dual responsibility: to protect the interest of
the State, and to assist the Court in achieving outcomes that are
just, lawful and equitable - It is also imperative for the State to
establish and maintain robust internal mechanisms for regular
monitoring and effective follow-up of pending litigation, ensuring
it is pursued to its logical conclusion. [Para 47]
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[2025] 9 S.C.R.
Supreme Court Reports
Limitation Act, 1963 - s.21 - Impleadment of a party in a
pending suit, when to take effect - Discussed:
Held: The impleadment of a party in a pending suit takes effect only
from the date on which such an application is allowed - However,
the proviso enables the court to direct that such impleadment shall
relate back to an earlier date, provided that the omission was due
to a mistake made in good faith - A mistake in good faith would be
applicable if the person claiming shelter under such plea is able
to prove that he has exercised all possible diligence and believed
an existing fact or law to be true or applicable, which is probable
but not correct - Essentially, such a mistake in good faith can only
denote an error in judgment, but cannot include a plea that he
was not aware of the law, as per the maxim "Iqnorantia facti doth
excusat; Ignorantia juris non excusat" which means, ignorance of
fact is an excuse, but ignorance of law is not excused - Further,
Section 21 is applicable only in pending proceedings and the
provision is to be pressed into service when the application for
impleading is decided and not later - The trial Court, while passing
an order for impleadment has to consider the proviso to Section 21,
the facts pleaded, and the evidence both documentary or oral,
and then decide, whether the legal requirement is satisfied to
hold that the suit is deemed to have been instituted against the
impleaded party with effect from an earlier date - It is also open to
the Court to consider the facts and upon satisfaction, to apply the
proviso - However, such an exercise must be done while deciding
the application and a further order is to be passed to that effect
immediately and not after the suit is decreed. [Para 41.1]
Case Law Cited
Synthetics and Chemicals Ltd and Others v. State of U.P. and
Others [1989] Supp. 1 SCR 623 : (1990) 1 SCC 109; Ajay Hasia
and Others v. Khalid Mujib Sehravardi and Others [1981] 2 SCR
79 : (1981) 1 SCC 722 : MANU/SC/0498/1980 - followed.
Municipal Corpn. of Delhi v. Gurnam Kaur [1988] Supp. 2 SCR
929 : (1989) 1 SCC 101; The State of U.P. v. Synthetics and
Chemicals Ltd. [1991] 3 SCR 64 : (1991) 4 SCC 139 : (1992)
87 STC 289 : 1991 SCC OnLine SC 17; In Most Rev. P.M.A.
Metropolitan v. Moran Mar Marthoma [1995] Supp. 1 SCR 542 :
(1995) Supp. 4 SCC 286; Arnit Das v. State of Bihar [2000] Supp.
1 SCR 69 : (2000) 5 SCC 488 : 2000 SCC (Cri) 962 : 2000 SCC
OnLine SC 936; State of W.B. v. Kesoram Industries Ltd. [2004] 1
[2025] 9 S.C.R.
9
Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
SCR 564 : (2004) 10 SCC 201 : (2004) 266 ITR 721 : 2004 SCC
OnLine SC 70; (5-Judge Bench); Zee Telefilms Ltd. v. Union of
India [2005] 1 SCR 913 : (2005) 4 SCC 649 : 2005 SCC OnLine
SC 213; Delhi Airtech Services (P) Ltd v. State of U.P. [2011] 12
SCR 191 : (2011) 9 SCC 354 : (2011) 4 SCC (Civ) 673 : 2011
SCC OnLine SC 1115; NBCC (India) Ltd v. The State of West
Bengal and Ors. [2025] 1 SCR 610 : MANU/SC/0061/2025 : (2025)
3 SCC 440; Brakewel Automotive Components (India) (P) Ltd. v.
P.R. Selvam Alagappan [2017] 3 SCR 681 : (2017) 5 SCC 371 :
(2017) 3 SCC (Civ) 152 : 2017 SCC OnLine SC 265; Harshad
Chiman Lal Modi v. DLF Universal and Ors. [2005] Supp. 3 SCR
495 : (2005) 7 SCC 791 : MANU/SC/0710/2005; Jagmittar Sain
Bhagat v. Dir. Health Services, Haryana and Others [2013] 8 SCR
77 : MANU/SC/0703/2013 : (2013) 10 SCC 136; Shri Saurav Jain
and Another v. M/s A.B.P Design & Another [2021] 8 SCR 1020 :
MANU/SC/0509/2021 : (2022) 18 SCC 633; Masalti v. State of Uttar
Pradesh [1964] 8 SCR 133 : MANU/SC/0074/1964 : AIR 1965
SC 202; Bihari Chaudhari v. State of Bihar [1984] 3 SCR 309 :
AIR 1984 SC 1043 : (1984) 2 SCC 627; Gangappa Gurupadappa
Gugwad Gulbarga v. Rachawwa and Ors. [1971] 2 SCR 691 : AIR
1971 SC 442 : MANU/SC/0351/1970; Bishandayal and Sons v.
State of Orissa and Ors., AIR 2001 SC 544 : MANU/SC/0773/2000;
Shanti Conductors (P) Ltd v. Assam State Electricity Board and
Others [2019] 1 SCR 489 : MANU/SC/0068/2019 : (2019) 19
SCC 529 - relied on.
Celir LLP v. Mr. Sumati Prasad Bafna and Others [2024] 18 SCR
1618 : 2024 LiveLaw (SC) 991; R. Nagaraj (dead) through legal
heirs and Another v. Rajamani and Others, 2025 Livelaw SC 416;
Shaki Tubes Ltd v. State of Bihar [2009] 10 SCR 739 : (2009)
7 SCC 673; Fertilizer Corporation of India Ltd and Others v.
M/s Coromandel Sacks Pvt. Ltd. [2024] 5 SCR 321; Hira Lal
Patni v. Kali Nath [1962] 2 SCR 147 : 1961 SCC OnLine SC
42 : AIR 1962 SC 199 : (1961) 2 SCJ 592; Midnapore Peoples
Co-operative Bank Ltd and Others v. Chunilal Nanda and Others
[2006] Supp. 2 SCR 986 : (2006) 5 SCC 399 - referred to.
List of Acts
Micro, Small and Medium Enterprises Development Act, 2006;
Constitution of India; Code of Civil Procedure, 1908; Limitation
Act, 1963; State Financial Corporation Act, 1951; Commercial
Courts Act, 2015; Interest on Delayed Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993.
10
[2025] 9 S.C.R.
Supreme Court Reports
List of Keywords
Doctrine of Sub silentio; Computation of interest on the decretal
amount; Execution proceedings; Jurisdiction of the trial Court;
Notice u/s.80 CPC; Maintainability of the suit; Power of the
Court to modify the decree; Section 21 of the Limitation Act;
Applicability of the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993; Stage of
execution u/s.47 of CPC; Execution, discharge, or satisfaction
of the decree; Judgment to satisfy requirement u/Order XX,
Rule 4(2); State; Article 12; Privity of contract; Iqnorantia facti
doth excusat; Ignorantia juris non excusat; Impleadment of a
party in a pending suit; Litigation.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10047
of 2025
From the Judgment and Order dated 22.11.2022 of the High Court
of Uttarakhand at Nainital in WPMS No. 2314 of 2022
Appearances for Parties
Advs. for the Appellant:
Ravi Prakash Mehrotra, Sr. Adv., Jogy Scaria, Ms. Aparna Mehrotra,
Apoorv Srivastava.
Advs. for the Respondents:
Gopal Sankaranarayanan, Sr. Adv., Jasbir Singh Malik, Ms. Rhythm
Bharadwaj, Shourya Das Gupta, Ms. Aditi Gupta, Varun Punia,
Shubhranshu Padhi, Jay Nirupama, D.grish Kumar, Pranav Giri,
Ekansh Sisodia.
Judgment / Order of the Supreme Court
Judgment
R. Mahadevan, J.
1.
Leave granted.
2.
The present appeal has been filed by the Odisha State Financial
Corporation, a government corporation in the State of Odisha, against
the final judgment and order dated 22.11.2022 passed by the High
[2025] 9 S.C.R.
11
Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
Court of Uttarakhand at Nainital1 in Writ Petition (M/S) No. 2314 of
2022, whereby the High Court dismissed the writ petition filed by the
appellant under Article 227 of the Constitution of India, challenging
the civil proceedings and the orders passed by the Courts below
regarding the computation of interest on the decretal amount and
the consequential execution proceedings.
BRIEF FACTS
3.
The appellant, which is a State Financial Corporation, along with
Industrial Promotion & Investment Corporation of Odisha2 jointly
financed an industrial unit, namely, M/s. Manorama Chemicals
Works Ltd., (Respondent No. 2 herein) on 22.11.1984 for setting
up a bleaching powder unit at Ganjam, Odisha. M/s.Vigyan
Chemical Industries Limited Dehradun (Respondent No.1 herein)
supplied raw materials worth Rs. 66,454.65 to Respondent No.
2 on 29.07.1985. Since Respondent No. 2 defaulted in repaying
the financial assistance received from the appellant and IPICOL,
possession of the industry of Respondent No.2 was taken over by
the appellant on 18.08.1987 under Section 29 of the State Financial
Corporation Act, 19513.
3.1. Thereafter, Respondent No. 1 filed Recovery Suit No.103 of
1988 against Respondent Nos. 2, 3, and 4 in the Court of
Second Additional Civil Judge (Senior Division), Dehradun4,
claiming Rs. 90,400/- with interest as the outstanding amount.
Respondent No. 1/Plaintiff also claimed pendente lite and future
interest at the rate of 24% per annum till realization of the
amount. The appellant was sought to be impleaded in the suit on
11.02.1993, which was allowed by the trial Court on 06.12.1994,
and the appellant was added as Defendant No. 4. The appellant
objected to its impleadment by filing a Miscellaneous Appeal
and thereafter, a Writ Petition, both of which ended in dismissal.
The trial Court was directed to adjudicate the suit expeditiously,
within one year, with the appellant as a party.
1
Hereinafter referred to as "the High Court"
2
For short, "IPICOL"
3
For short, "S.F.C. Act, 1951"
4
For short, "the trial Court"
12
[2025] 9 S.C.R.
Supreme Court Reports
3.2. Respondent No. 1 / plaintiff also sought leave to amend and
add certain paragraphs, contending that under Section 29(5)
of the S.F.C. Act, 1951, the appellant / Defendant No. 4 is
liable for the claimed amount, as it had taken possession of
Respondent No. 2, and the said industrial concern was now to
be sued through Defendant No. 4. The amendment application
was allowed, and the appellant / Defendant No. 4 filed a written
statement, stating that due to default in repayment of the loan,
it had taken possession of industry of Respondent No.2 on
18.08.1987 under Section 29 of the S.F.C. Act, 1951 for the
purpose of realization of its dues and thereafter sold the unit
to one Shri T.R.K. Rao.
3.3. During the pendency of the suit, the appellant opened a bank
guarantee on 27.11.1998 for a sum of Rs.6,36,243/- with Union
Bank of India, Cuttack, undertaking to pay the said amount to the
trial Court, on demand. Similarly, another bank guarantee was
opened on 16.10.1999 for a sum of Rs.3,50,000/- with Union
Bank of India, Cuttack to be deposited with the trial Court on
demand with respect to Suit No.103/1988. The trial Court was
accordingly informed by the Union Bank of India regarding the
issuance of the bank guarantee for Rs.3,50,000/- to the credit
of the suit. The appellant also instructed its lawyer vide letter
dated 22.10.1999, to submit the said bank guarantee to the
trial Court.
3.4. The suit filed by Respondent No. 1/Plaintiff was partly decreed
on 20.08.2001 for an amount of Rs. 84,170/- with pendente lite
and future interest to be calculated at 24% per annum from
01.03.1988 to 23.09.1992 and at 2% compounded monthly from
23.09.1992 till payment. Challenging the same, the appellant
preferred Civil Appeal No. 182 of 2001. Respondent No.1 filed
cross objection challenging the partial dismissal of the suit.
Meanwhile, Respondent No. 1 also filed an application under
the Limitation Act, 1963, on 11.04.2005 to treat the suit against
the appellant as having been filed from 29.02.1988. By order
dated 05.11.2005, the appellant was added as a defendant
in the suit from 29.02.1988, and by order dated 22.03.2006,
the trial Court held that the suit had been filed within limitation
against the appellant. Thereafter, the appeal filed by the appellant
was dismissed, and the cross-objection filed by Respondent
[2025] 9 S.C.R.
13
Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
No.1 was allowed, and consequently, the suit was decreed in
its entirety, by the Additional District Judge, Fast Track Court
No.VI, Dehradun5, by judgment dated 08.08.2006.
3.5. Aggrieved by the judgment dated 08.08.2006 in First Appeal
No.182 of 2001, concurring with the trial Court's order
dated 22.03.2006 with the decision that the suit was filed
within limitation against the appellant, and the decree dated
20.08.2001 in Suit No.103/88, the appellant preferred Second
Appeal No.78 of 2006 before the High Court. By order dated
30.11.2006, the High Court stayed the judgment and decree,
subject to the condition that the appellant deposit the decretal
amount within 45 days. As stated earlier, two bank guarantees
for Rs.6,36,243/- and Rs.3,50,000/- had been opened by the
appellant on 27.11.1998 and 16.10.1999 respectively and were
offered as deposit.
3.6. Thereafter, by judgment, dated 07.05.2007 in Second Appeal
No.78 of 2006, the High Court dismissed the appeal, holding that
the suit was not barred by limitation. Aggrieved, the appellant
preferred SLP (Civil) CC No.10278/2007 (later Civil Appeal
No.2073/2010) before this Court. By order dated 10.03.2014,
this Court noted that the required bank guarantees, which
exceeded the decretal amount, had already been furnished
and accordingly, no further deposit was deemed necessary.
Ultimately, by judgment dated 23.11.2017, this Court dismissed
Civil Appeal No.2073/2010, thereby upholding the High Court's
judgment on limitation.
3.7. On 01.08.2018, Respondent No. 1 filed Execution Case
No.107 of 2018 in the Court of the Civil Judge (Senior Division)
Dehradun6 for recovery of the decretal amount, stated to be
Rs.8,88,33,416.30 from the appellant's bank accounts and
assets. Vide order dated 12.03.2020, the Execution Court
directed Union Bank of India, Cuttack, to remit the principal
amount along with interest accrued on TDR No.303/284391
and TDR No.303/284615 for payment to the decree holder.
5
For short, "the First Appellate Court"
6
For short, "the Execution Court"
14
[2025] 9 S.C.R.
Supreme Court Reports
3.8. Pursuant to the order dated 12.03.2020 passed by the
Execution Court, Union Bank of India released the proceeds
of the two TDRs opened by the appellant in 1998 and 1999 -
Rs. 40,16,606/- and Rs. 18,00,299/-, respectively - totaling
Rs. 58,16,905/- to the Execution Court towards satisfaction of the
decree amount of Rs.90,400/- with accrued interest. Thereafter,
by orders dated 01.09.2021, the Execution Court attached the
appellant's fixed and flexi deposits in Union Bank of India, Axis
Bank Limited and Odisha State Cooperative Bank in Cuttack,
amounting to approximately Rs. 22 Crores. Aggrieved by the said
orders of attachment dated 01.09.2021, the appellant filed Writ
Petition (Civil) No.28301/2021 before the High Court of Orissa,
which by order dated 16.09.2021, disposed of the writ petition
with liberty to the appellant to approach the appropriate forum.
3.9. Subsequently, on 07.10.2021, the Execution Court passed
two orders directing the appellant's banks, Axis Bank Ltd., and
Odisha State Cooperative Bank at Cuttack to remit the total
value of the attached fixed deposits, along with interest, to the
Court of the Additional Civil Judge VI (Senior Division) Dehradun.
Aggrieved, the appellant filed Writ Petition (C) No.1226/2021
before this Court, wherein vide order dated 18.11.2021, it was
observed that the appellant is at liberty to pursue any other
remedy available under law.
3.10. Thereafter, the appellant filed Misc. Petition No. 156/21 under
Section 47 of the Code of Civil Procedure, 19087, seeking a
stay of execution proceedings of Execution Case No.107/2018.
The said petition was dismissed on 18.04.2022. Aggrieved,
the appellant preferred Civil Revision No.40/2022 before the
District Judge, Dehradun, along with an application for stay of
further proceedings in Execution Case No.107/2018. During
its pendency, the Execution Court, by order dated 05.08.2022,
directed the Odisha State Co-operative Bank to deposit the
decretal amount by 30.08.2022, failing which, coercive steps
would be taken against the appellant.
3.11. Aggrieved by the order dated 05.08.2022 passed in Execution
Case No.107/2018, the appellant preferred Writ Petition (C)
7
For short, "CPC"
[2025] 9 S.C.R.
15
Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
No.2069/2022 before the High Court. By order dated 30.08.2022,
the High Court disposed of the writ petition with a direction to the
Revisional Court to consider the stay application on 02.09.2022.
However, on 02.09.2022, the Revisional Court dismissed Civil
Revision No.40/2022.
3.12. Consequently, the appellant approached the High Court by filing
Writ Petition No.2314/22 (M/S) for setting aside the order dated
02.09.2022 passed by the Revisional Court in Civil Revision
No.40/2022 and the order dated 18.04.2022 passed by the
Execution Court in Execution Case No.107/2018. However,
by the impugned judgment dated 22.11.2022, the High Court
dismissed the writ petition. Aggrieved thereby, the appellant has
approached this Court by way of the present appeal.
CONTENTIONS OF THE PARTIES
4.
Mr. Ravi Prakash Mehrotra, learned Senior Counsel for the
appellant Corporation submitted that the High Court, in the facts
and circumstances of the present case, was not justified in declining
to exercise its supervisory jurisdiction under Article 227 of the
Constitution of India, even in the face of a manifest miscarriage of
justice and irretrievable harm caused to the appellant, on account of
the proceedings and orders passed by the Courts below in relation
to the decree and the consequent execution case, which constitute
a flagrant violation of the fundamental principles of law and have
resulted in grave injustice to the appellant.
4.1. Learned Senior Counsel further submitted that the Courts
below erred in computation of interest on the decretal amount,
particularly, in light of the fact that the appellant is facing coercive
measures at the instance of Respondent No.l, arising out of
the execution of a money decree of Rs.90,400/- passed on
20.08.2001, in respect of which the appellant had opened bank
guarantees prior to the decree, and the proceeds amounting
to Rs.58,16,905/- were released to Respondent No. 1 on
05.10.2020. However, based on an erroneous computation of
interest at 24% per annum, compounded monthly, the amount
sought is a staggering Rs. 8.89 Crores. The appellant, a
government corporation, is thus facing unwarranted attachment
proceedings, which gravely and adversely affect public interest.
16
[2025] 9 S.C.R.
Supreme Court Reports
4.2. Learned Senior Counsel also contended that the High Court
was not justified in dismissing the writ petition on the ground
that the appellant had not furnished the bank guarantee to
secure the decretal amount. In reality, the proceeds of the bank
guarantees were released to the decree holder / Respondent
No.1 - not out of his own volition, but under Court's direction.
Thus, it cannot be held that the bank guarantee was not a
deposit under Order XXIV Rule 1 CPC. The High Court erred
in holding that such a deposit must be voluntary and not under
compulsion. Despite furnishing bank guarantee in excess of the
decretal amount, the High Court adopted an unduly narrow view
of Section 47 CPC, while exercising jurisdiction under Article
227 of the Constitution.
4.3. Learned Senior Counsel further submitted that the execution
application filed by Respondent No. 1 was not maintainable
before the civil Court in view of Section 15(2) of the Commercial
Courts Act, 2015. Although this point may not have been
specifically pleaded before the lower courts, it was raised
before the High Court and hence, the same ought to have been
considered by the High Court.
4.4. Learned Senior Counsel emphasized that the High Court failed
to appreciate that the computation of interest on the decretal
amount was not only erroneous but also exorbitant. Interest
at the rate of 24% was impermissible under Section 34 CPC.
Furthermore, the appellant / Defendant No. 4 did not place any
orders for purchase; in fact, it had clearly pleaded in its written
statement that it had no connection with the underlying transaction
and hence, no liability can be fastened on them. It was also
contended that a specific plea regarding the excessive interest
was also taken. The High Court ought to have considered in the
petition under Article 227 that the appellant Corporation is now
facing unprecedented and unjustified attachment proceedings
and is saddled with a liability of Rs. 8.89 Crores - arising from
a decree of merely Rs.90,400/- - based on a suit instituted in
1988. The bank guarantees furnished in 1998 and 1999 (prior
to the decree), amounting to Rs.58,16,905/- were encashed
and improperly released to the decree holder. Hence, further
recovery, attachment, and coercive steps against the appellant
are unwarranted. Moreover, the continued accrual of interest is
[2025] 9 S.C.R.
17
Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others
wholly unjustified. In these circumstances, intervention by this
Court is warranted in the interest of justice to bring finality to
a matter that is prejudicial to the appellant and against public
interest.
4.5. Learned Senior Counsel placed reliance on the judgment of
this Court in Shaki Tubes Ltd v. State of Bihar8, to contend
that if the purchase / supply order predates the enactment
of the interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertakings Act, 1993, then interest is
governed by Section 34 CPC and not the Delayed Payments
Act, which operates prospectively. In the present case, the
supply order - i.e., the sale of raw materials to Respondent
No.2 by Respondent No. 1 - was made in 1985 long before
the Act came into force i.e., on 23.09.1992. Therefore, the trial
Court's decree dated 20.08.2001 awarding compound interest
at 2% per month from 23.09.1992 onward under the Delayed
Payments Act, was erroneous.
4.6. Learned Senior Counsel further pointed out that the amount being
claimed from the appellant is grossly exaggerated and irregularly
calculated. As a result, the appellant Corporation is now facing
attachment of all its bank accounts and assets, plunging it into
administrative disarray and financial chaos, including difficulty in
disbursing salaries. It is neither fair, just, nor legally sustainable
to subject a public sector corporation to such coercive measures.
Therefore, the Execution Court's insistence on recovering nearly
Rs. 9 crores is neither warranted nor justified.
4.7. Learned Senior Counsel further submitted that the appellant
corporation had continuously contested the decree before the
appellate forums from 2001 to 2017. In contrast, Respondent
No. 1, the decree holder, neither invoked the bank guarantee
nor initiated execution proceedings for nearly 17 years, after
the decree was passed. According to the learned Senior
Counsel, the decree holder received Rs.58,16,905/- on
05.10.2020 and Rs.2,34,40,654/- on 07.01.2022, thereby totaling
Rs.2,92,57,559/- out of attachment and encashment of two bank
guarantees and one fixed deposit of the appellant corporation.
8
(2009) 7 SCC 673
18
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Supreme Court Reports
4.8. Furthermore, reliance was placed on the decision of this
Court in Fertilizer Corporation of India Ltd and others v.
M/s. Coromandel Sacks Pvt. Ltd 9, wherein this Court applied
the principle of harmonious construction to balance competing
interests and safeguard the rights of judgment debtors.