# · v. STATE OF BIHAR & ORS

- **Citation:** [2009] 10 S.C.R. 739
- **Court:** Supreme Court of India
- **Decided:** 2009-07-07
- **Case number:** Civil Appeal No. 172 of 2007
- **Bench:** Dr. Mukundakam Sharma, Dr. 8.S. Chauhan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-state-of-bihar-ors-24870
- **Pages:** 23

## Headnote

Interest on Delayed Payment to Small Scale Industries
Act, 1993 - ss.4 and 5 - Contract for supply of pipes - Pipes c
supplied - But certain amount remained payable to appellantsupplier- Money suit filed by appellant decreed by Trial Court
with interest compounding at monthly rest@ 24% p.a. - High
Court reduced the rate to simple interest @ 9% p.a. -
Challenge to - Appellant sought payment of interest at higher D
rate and compoundable interest in terms of ss.4 and 5 of the
1993 Act- Held: Since the supply order was placed prior to
coming into force of the Act, appellant not entitled to benefit
under ss.4 & 5 of the 1993 Act - Though the 1993 Act is a
welfare legislation enacted to protect the interest of suppliers,
E
especially suppliers of the nature of a small scale industry,
..
but the Act cannot be given retrospective effect when such
:>(
intention was not clearly made out and derived from the Act
itself - Contention raised by appellant regarding alteration &
"!
novation of contract giving rise to a new contract after coming
into force of the 1993 Act, had no legal and factual basis -
F
Code of Civil Procedure, 1908 - s.34 - Contract Act, 1872 -
s.62.
Interpretation of Statutes -
Presumption against
...,.
~
retrospectivity- Held: Every statute is prima facie prospective
G
unless it is expressly or by necessary implication made to
have a retrospective operation - However it is not necessary
that an express provision be made to make a statute
739
H
740
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A retrospective - Presumption against retrospectivity may be
)t
rebutted by necessary implication especially in a case where
-
the new law is made to cure an acknowledged evil for benefit
of the community as a whole - Maxims - Maxim "nova
constitutio futuris formam imponere debet non praeteritis''.
B
Constitution of India, 1950 -Art. 136 - Pleadings - New
plea - Mixed question of law and facts, not urged before the
courts below or even in memomndum of appeal filed in
)
Supreme Court - Held : Cannot be raised for the first time at
the time of final hearing of appeal before Supreme Court.
c
Appellant is a company incorporated under the
Indian Companies Act and registered as a Small Scale
Industry in the Industries Department, Government of
Bihar. It entered into an agreement with the State of Bihar
D for supply of pipes. Appellant supplied pipes as per the
agreement, but a sum of Rs. 38,13,4801- remained payable
which was allegedly withheld by the respondents.
Appellant filed suit seeking decree for payment of the
aforesaid amount of Rs. 38, 13,480/- with interest
E compounding at monthly rest at the rate of 24% per
annum on the aforesaid decreetal amount. The trial court
passed decree for payment of Rs.38, 13,480/- alongwith
..
interest compounding at monthly rest at the rate of 24%
)<'
per annum on the aforesaid amount. The respondents
F filed appeal challenging the payment of interest on the
ground that it was higher than what the appellant was
actually entitled to. The High Court directed that the
appellant would be entitled to simple interest at the rate
of 9% per annum.
G
In appeal to this Court, the appellant contended that
it was entitled to claim interest in terms of the provisions
• ....
of the Interest on Delayed Payment to Small Scale
Industries Act, 1993 since transaction in the instant case
came to an end after coming into force of the Act. It
H contended that the earlier supply order which was issued
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
741
,.
on 16.07 .1992 came to be materially altered and
A
substituted by a fresh supply order issued on 18.03.1993
by which date the aforesaid Act had already been
enforced and, therefore, the appellant was entitled to
claim interest at a higher rate as envisaged in Section 4
of the Act payable with compound interest as provided . B
for under Section 5 of the Act.
The only issue that thus arose for consideration in
the present appeal was as to whether the appellant was
entitled to a dir

## Text

_Characters 0–39,920 of 43,838. This is a partial read: ask again with offset=39920 for what follows._

[2009] 10 S.C.R. 739
.,
MIS. SHAKTI TUBES LTD.
A
·-
v.
STATE OF BIHAR & ORS.
(Civil Appeal No. 172 of 2007)
JULY 7, 2009
B
~
[DR. MUKUNDAKAM SHARMA AND DR. 8.S.
CHAUHAN, JJ.]
Interest on Delayed Payment to Small Scale Industries
Act, 1993 - ss.4 and 5 - Contract for supply of pipes - Pipes c
supplied - But certain amount remained payable to appellantsupplier- Money suit filed by appellant decreed by Trial Court
with interest compounding at monthly rest@ 24% p.a. - High
Court reduced the rate to simple interest @ 9% p.a. -
Challenge to - Appellant sought payment of interest at higher D
rate and compoundable interest in terms of ss.4 and 5 of the
1993 Act- Held: Since the supply order was placed prior to
coming into force of the Act, appellant not entitled to benefit
under ss.4 & 5 of the 1993 Act - Though the 1993 Act is a
welfare legislation enacted to protect the interest of suppliers,
E
especially suppliers of the nature of a small scale industry,
..
but the Act cannot be given retrospective effect when such
:>(
intention was not clearly made out and derived from the Act
itself - Contention raised by appellant regarding alteration &
"!
novation of contract giving rise to a new contract after coming
into force of the 1993 Act, had no legal and factual basis -
F
Code of Civil Procedure, 1908 - s.34 - Contract Act, 1872 -
s.62.
Interpretation of Statutes -
Presumption against
...,.
~
retrospectivity- Held: Every statute is prima facie prospective
G
unless it is expressly or by necessary implication made to
have a retrospective operation - However it is not necessary
that an express provision be made to make a statute
739
H
740
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A retrospective - Presumption against retrospectivity may be
)t
rebutted by necessary implication especially in a case where
-
the new law is made to cure an acknowledged evil for benefit
of the community as a whole - Maxims - Maxim "nova
constitutio futuris formam imponere debet non praeteritis''.
B
Constitution of India, 1950 -Art. 136 - Pleadings - New
plea - Mixed question of law and facts, not urged before the
courts below or even in memomndum of appeal filed in
)
Supreme Court - Held : Cannot be raised for the first time at
the time of final hearing of appeal before Supreme Court.
c
Appellant is a company incorporated under the
Indian Companies Act and registered as a Small Scale
Industry in the Industries Department, Government of
Bihar. It entered into an agreement with the State of Bihar
D for supply of pipes. Appellant supplied pipes as per the
agreement, but a sum of Rs. 38,13,4801- remained payable
which was allegedly withheld by the respondents.
Appellant filed suit seeking decree for payment of the
aforesaid amount of Rs. 38, 13,480/- with interest
E compounding at monthly rest at the rate of 24% per
annum on the aforesaid decreetal amount. The trial court
passed decree for payment of Rs.38, 13,480/- alongwith
..
interest compounding at monthly rest at the rate of 24%
)<'
per annum on the aforesaid amount. The respondents
F filed appeal challenging the payment of interest on the
ground that it was higher than what the appellant was
actually entitled to. The High Court directed that the
appellant would be entitled to simple interest at the rate
of 9% per annum.
G
In appeal to this Court, the appellant contended that
it was entitled to claim interest in terms of the provisions
• ....
of the Interest on Delayed Payment to Small Scale
Industries Act, 1993 since transaction in the instant case
came to an end after coming into force of the Act. It
H contended that the earlier supply order which was issued
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
741
,.
on 16.07 .1992 came to be materially altered and
A
substituted by a fresh supply order issued on 18.03.1993
by which date the aforesaid Act had already been
enforced and, therefore, the appellant was entitled to
claim interest at a higher rate as envisaged in Section 4
of the Act payable with compound interest as provided . B
for under Section 5 of the Act.
The only issue that thus arose for consideration in
the present appeal was as to whether the appellant was
entitled to a direction for payment of interest C
compounding at monthly rest at the rate of 24% per
annum.
Dismissing the appeal, the Court
HELD :1.1. In facts of the present case, there is no o
dispute with regard to the fact that the supply order was
placed with the respondents on 16.07 .1992 for supply of
the pipes which date is admittedly prior to the date on
which Interest on Delayed Payment to Small Scale
Industries Act, 1993 came into effect. [Para 17] [753-G-H;
E
754-A]
1.2. As regards the contention raised by the appellant
that the transactions became complete only when it made
the supply and since the supply was made in after
coming irtto force of the Act, the appellant would be
F
entitled to the benefit of Section 4 and 5 of the Act, this
Court in Assam Small Scale Industries case has finally set
at rest the issue raised by stating that as to what is to be
considered relevant is the date of supply order placed.
The expression "transaction" means initiation of the
G
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.
Consequently, the supply order having been placed
H
742
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A 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 of Section 34 CPC. [Paras 18, 20, 21 and 22]
[754-8-C, E··F, G-H; 755-A-B]
B
Assam Small Scale Industries Development Corporation
Ltd. & Ors. v. J.D. Pharmaceuticals & Anr. 2005 (13) SCC 19,
relied on.
)
2.1. Generally, an Act should always be regarded as
c prospective in nature unless the legislature has clearly
intended the provisions of the said Act to be made
applicable with retrospective effect. It is a cardinal
principle of construction that every statute is prima facie
prospective unless it is expressly or by necessary
D implication made to have a retrospective operation. The
aforesaid rule in general is applicable where the object
of the statute is to affect vested rights or to impose new
burdens or to impair existing obligations. Unless there
are words in the statute sufficient to show the intention
E of the legislature to affect existing rights, it is deemed to
be prospective only -
"nova constitutio futuris formam
imponere debet non praeteritis" -
a new law ought to
regulate what is to follow, not the past. It is not necessary
that an express provision be made to make a statute
•
F retrospective and the presumption against retrospectivity
may be rebutted by necessary implication especially in
a case where the new law is made to cure an
acknowledged evil for the benefit of the community as a
whole. [Para 24) [755-D-H; 756-A]
G
2.2. Though the Act in question is a welfare
legislation which was enacted to protect the interest of
¥
.,.
the suppliers, especially suppliers of the nature of a small
scale industry, but, at the same time, the intention and the
purpose of the Act cannot be lost sight of and the Act in
H
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
743
question cannot be given a retrospective effect so long
A
as such an intention is not clearly made out and derived
from the Act itself. [Para 25] [757-C-E]
life Singh v. State of Haryana (2004) 8 SCC 1, relied
on.
B
Principles of Statutory Interpretation by Justice G.P.
Singh, 9th Edn., 2004 at p.438 - referred to
-a
3.1. As regards the contention raised by the appellant
that there was a novation and alteration of the contract
giving rise to a new contract between the parties due to c
alteration of terms and conditions of the contract and,
therefore, Section 62 of the Indian Contract Act was
applicable, it is found, on analysis of the documents
available on record, that in none of the courts below any
D
~
such issue was raised by the appellant. Neither any issue
~
was framed by the courts below in respect of such a
submission nor any ground to that effect was taken
earlier. Even in the memorandum of appeal filed in this
Court, no such ground has been urged or mentioned.
E
Therefore, the issue is being raised, for the first time, at
the time of hearing of the case before this Court, which
'
cannot be permitted to be raised for the first time for the
-
simple reason that the issue that is being urged now is
J\
not only a question of law but is a mixed question of law
and facts as to whether there is a novation or alteration
F
of contract. The said facts were required to be urged
evidentially before the courts below. Unless such a
factual foundation is available it is not possible to decide
such a mixed question of law and facts. Therefore, such
a mixed question of law and facts should not be allowed
G
~
to be raised at the time of final hearing of appeal before
-.
this Court. [Paras 26 and 28] [757-E-F, 759-E-H; 760-A]
3.1. Even otherwise, this Court is of the considered
H
744
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A view that there was neither any alteration of the contract
nor any novation of the contract in the present case. The
correspondence between the parties clearly disclosed
that after the respondents issued the supply order, the
appellant did not supply the pipes in terms of the supply
B order and it urged mainly for the increase in the price of
the goods. Subsequently, they relied upon the price
escalation clause and asked for increase in the price of
pipes. The perusal of the records also disclosed that
)
subsequently the Government thought it fit that the
c appellant may not be able to supply the prescribed
•
quantity of goods which was earlier required by the
Government and, therefore, they curtailed the quantity of
the goods from 7 lakh metres of pipes to 4 lakh metres
of pipes. In the process, the Government kept the
D contents of the supply order intact except a variation in
the quantity to be supplied with extention of date of
~
supply. However, the Government gave effect to the price
escalation clause which was a part of the earlier supply
order and also of the agreements which were entered into
E
between the parties prior to the coming into force of the
Act. Therefore, the said contention, as raised by the
appellant, has no legal and factual basis. [Para 29) [760A-E]
-
,.
3.3. In any event, it is not possible to decide the
F aforesaid issue in this case as full factual foundation for
such an argument was not placed so as to enable this.
Court to know as to why the quantity to be supplied by
the appellant was curtailed by the Government and as to
why the appellant was not supplying the goods despite
G the receipt of the supply orders for several months. It is
also not clear from the records that whether there was
any failure or negligence on the part of the appellant in
..
....
not supplying the goods for a long period of time without
any reasonable basis or whether there were !aches on
H the part of the respondents in sorting out the transaction.
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
745
These are some of the factual issues .which are required
A
to be gone into to answer finally such issue which was
raised at the time of hearing of the appeal and which
cannot be done in the absence of any evidence in that
regard. [Para 30] [760-F-H; 761-A]
B
Andheri Bridge View Co-op. Hsg. Society Ltd. v.
Krishnakant Anandrao Deo and others 1991 AIR Bombay
129, referred to.
Case Law Reference:
c
2oos (13) sec 19
relied on
Para 9
(2004) s sec 1
relied on
Para 24
1991 AIR Bombay 129
referred to
Para 27
CIVIL AP PELLA TE JURISDICTION : Civil Appeal No. 172
D
of 2007.
From the Judgment & Order dated 20.2.2006 of the High
Court of Judicature at Patna in First Appeal No. 8/2000.
G.C. Bharuka, Devashish Bharuka, Jaya Bharuka, Anjani
E
Kumar Singh for the Appellants .
..
Dinesh Dwivedi, Mohit Shah and Chandan Kumar (for
JI(
Gopal Singh) for the Respondents.
F
The Judgment of the Court was delivered by
DR. MUKUNDAKAM SHARMA, J. 1. This appeal is
directed against the judgment and order dated 22.02.2006,
passed by the Patna High Court whereby the High Court partly
G
allowed the appeal filed by the State of Bihar and others who
,)
"1'
are the respondents herein.
2. Mis. Shakti Tubes Ltd.-the appellant as plaintiff filed a
suit which was registered as Money Suit No. 153 of 1997
praying for a decree for payment of Rs. 38, 13,480/- with
H
746
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A pendente lite and future interest compounding at monthly rest
"
at the rate of 24% per annum on the aforesaid decreetal
amount till realization with costs of the suit. The trial court
decreed the said suit with costs in favour of the appellantplaintiff and ordered for payment of interest compounding at
B monthly rest at 24% on the decreetal amount of Rs. 38, 13,480/
3. Since the aforesaid decree was reversed by the High
Court whereby the High Court while mentioning the decree for
c payment for Rs. 38, 13,480/- reversed it to the extent of directing
for payment of 9% interest per annum instead of 24% interest
per annum, the present appeal is preferred by the appellantplaintiff.
4. In order to effectively deal with the rival contentions
D raised by the parties herein it would be necessary to state a
few facts leading to the filing of the aforesaid suit by the
appellant-plaintiff before the trial court.
5. In the plaint filed by the appellant-plaintiff it was stated
E that the plaintiff is a company incorporated under the Indian
Companies Act and registered as a Small Scale Industry in the
Industries Department, Government of Bihar and that it entered
into an agreement with the State of Bihar for supply of pipes
at the rate of Rs. 17 4. 95 paise. per metre subject to the terms
..
F
and conditions mentioned in the tender paper. A supply order
was placed by the respondent through Chief Engineer's letter
No. 8956 dated 16.07.1992 with the appellant-plaintiff for
making supply of the aforesaid pipes. It was mentioned in the
said letter that 90% of the total value of the material received
G
was to be paid after receipt of the material and the balance
10% of the value was to be paid within one month of the receipt
of the material, after full verification of the same. It was a ,
\.
.
stipulation in the said agreement entered into between the
parties that the payment would be made at the escalated rate
applicable for the quantity of pipes supplied after such
H
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
747
[DR. MUKUNDAKAM SHARMA, J.]
..
escalation come into force and that even in such cases other
A
terms of payment would remain the same. It was alleged in the
plaint by_ the appellant-plaintiff that they supplied the pipes as
the per agreement to the concerned consignees, who duly
accepted the pipes as per measurement, but the payment was
not made. After some time, the payment was made at the rate
B
of Rs. 190.48 paise per metre instead of actual escalated rate
of Rs. 199.04 P. per metre. A sum of Rs. 38,13,480/- thus
remained payable to the appellant-plaintiff which was withheld
illegally by the respondents in respect of the goods supplied.
6. Consequently, the appellant-plaintiff had to file a suit c
seeking for a decree for payment of the aforesaid amount of
Rs. 38, 13,480/- with interest compounding at monthly rest at
the rate of 24% per annum on the aforesaid decreetal amount
The trial court passed a judgment and decree dated
D
31.05.1999 in terms of the prayer made in the plaint decreeing
for a payment of Rs. 38, 13,480/- along with interest
compounding at monthly rest at the rate of 24% per annum on
the aforesaid amount with effect form 01.06.1993 till realization.
7. The respondents herein being aggrieved by the
E
aforesaid judgment and decree dated 31.05.1999 passed by
the trial court filled an appeal in the High Court of Patna which
'
l:
was registered as First Appeal No. 8 of 2000. The only issue
i
raised in the appeal before the High Court was with regard to
the decree for payment of higher interest than what the plaintiff
F
was actually entitled to. The High Court considered the
contentions of the parties and by its judgment and order dated
20.02.2006 directed that instead of compound interest with
monthly rest at the rate of 24% per annum, the appellant-plaintiff
/
would be entitled to simple interest at the rate of 9% per annum
with effect from 01.06.1993 till realization.
G
"
8. Being aggrieved by the aforesaid judgment and order
passed by the High Court, the appellant-plaintiff filed the present
appeal before this Court. The only issue that arises for our
consideration in the present appeal is as to whether the
H
748
SUPREME COURT REPORTS
(2009] 10 S.C.R.
A appellant-plaintiff is entitled to a direction for payment of interest
compounding at monthly rest at the rate of 24% per annum.
According to the appellant-plaintff, the said interest has been
claimed by the appellant-plaintiff since it is entitled to so claim
in terms of the provisions of the Interest on Delayed Payment
B to Small Scale Industries Act, 1993 (hereinafter referred to as
'the Act').
9. Mr. G.C. Bharuka, learned senior counsel appearing for
the appellant .. plaintiff drew our attention to the provisions of the
Act and to the decision of this Court in Assam Small Scale
C industries Development Corporation Ltd. & Ors. v. J.D.
Pharmaceuticals & Anr. [2005 (13) SCC 19]. In support of his
contention that the transaction in the instant case came to an
end with the appellant-plaintiff supplying the goods after coming
into force of the Act he has taken us through the relevant
D sections of the Act as also the Statements of Objects and
Reasons of the Act. According to him, the appellant-plaintiff is
entitled to be paid in terms of the provisions of the Act. He
contended that the earlier supply order which was issued on
16.07.1992 came to be materially altered and substituted by a
E fresh supply order issued on 18.03.1993 by which date the
aforesaid Act had already been enforced and, therefore, the
appellant-plaintiff was entitled to claim interest at a higher rate
as envisaged in Sections 4 and 5 of the said Act.
F
10. Mr. Dinesh Dwivedi, learned senior counsel appearing
for the respondents strongly refuted the aforesaid submissions
made by the learned senior counsel appearing for the
appellant-plaintiff on the ground that the supply order was
issued in the instant case on 16.07.1992 and, therefore, in
G terms of and in line with the decision of this Court in Assam
Small Scale Industries case (supra) the appellant-plaintiff was
entitled to be paid interest only at the rate of 9% per annum
and not at a higher rate as contended by the appellant-plaintiff.
He submitted that the argument that there was novation of the
H supply order dated 16.07.1992 having not been argued before
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
749
[DR. MUKUNDAKAM SHARMA, J.]
.>I
any of the courts below nor any ground in that regard having
A
.
been taken earlier in this appeal, the same cannot be raised
.......
now for the first time, at the time of final hearing. He also
submitted that there was neither a new supply order created
by the parties nor was there any alteration of the earlier supply
order, but in fact, the earlier supply order continued with some
B
variation.
11. Before proceeding to decide the case at hand it would
be necessary to deal with the relevant provisions of the Act. The
Act came into force on 23rd September, 1992. Section 2(b), c
3, 4 and 5 are relevant for our purpose to enable us to answer
the issue raised herein. Therefore the same are being
~.
reproduced hereinbelow :
"2.Definitions.- In this Act, unless the context otherwise
,..
requires,-
D
(a) "ancillary industrial undertaking" has the meaning
assigned to it by clause (aa) of section 3 of the Industries
(Development and Regulation) Act, 1951 (65of1951); (b)
"appointed day" means the day following immediately after
E
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.
Explanation.- For the purposes of this clause,- (i) "the day
of acceptance" means,- (a) the day of the actual delivery
F
of goods or the rendering of services; or (b) where any
objection is made in writing by the buyer regarding
acceptance of goods or services within thirty days from the
day of the delivery of goods or the rendering of services,
the day on which such objection is removed by the
G
'
··supplier; (ii) "the day of deemed acceptance" means,
~
where no objection is made in writing by the buyer
regarding acceptance of goods or services within thirty
days from the day of the delivery of goods or the rendering
of services, the day of the actual delivery of goods or the
rendering of services; (c) "buyer'' means whoever buys any
H
750
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A
goods or receives any services from a supplier for
..
P
consideration; (d) "goods" means every kind of movable
property other than actionable claims and money; (e)
_
...
"small scale industrial undertaking" has the meaning
assigned to it by clause Q) of section 3 of the Industries
B
(Development and Regulation) Act, 1951 (65 of 1951); (f)
"supplier" means an ancillary industrial undertaking or a
small scale industrial undertaking holding a permanent
registration certificate issued by the Directorate of
Industries of a State 1 *[or Union territory and includes,- (i)
c
the National Small Industries Corporation, being a
company, registered under the Companies Act, 1956 (1
of 1956); (ii) the Small Industries Development Corporation
of a State or a Union territory, by whatever name called,
••
being a company registered under the Companies Act,
D
1956(1 of 1956)].
_.,
3. Liability of buyer to make payment.- Where any
supplier supplies any goods or renders any services to any
buyer, the buyer shall make payment therefor on or before
the date agreed upon between him and the supplier in
E
writing or, where there is no agreement in this behalf,
before the appointed day: 2*.[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.]
F
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
G
between the buyer and the supplier or in any law for the
time being in force, be liable to pay interest to the supplier
on that amount from the appointed day or, as the case may
~
be, from the date immediately following the date agreed
upon, at one and half time of prime Lending Rate charged
H
by the State Bank of India. Explanation.- For the purposes
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
751
[DR. MUKUNDAKAM SHARMA, J.]
"
of this section, "Prime Lending Rate" means the Prime
A
Lending Rate uf the State Bank of India which is available
..
to the best borrowers of the bank .
5. Liability of buyer to pay compound interest. -
Notwithstanding anything contained in any agreement
B
between a supplier and a buyer or in any law for the time
being in force, the buyer shall be liable to pay compound
interest (with monthly interests) at the rate mentioned in
section 4 on the amount due to the supplier"
12. The appellant-plaintiff, relying on the aforesaid c
provisions of the Act, sought a decree for payment of interest
at the higher rate as mentioned in Section 4 which, according
-..-r
to the appellant-plaintiff, was payable with compound interest
as provided for under Section 5 of the Act.
D
13. The aforesaid provisions of the Act came to be
considered and interpreted by this Court in Assam Small Scale
Industries case (supra) wherein the Supreme Court not only
considered the ambit and scope of Section 34 of the Civil
Procedure Code, 1908 (for short 'the CPC') but also the ambit
E
and scope of Sections 1, 3, 4, 5 and 10 of the Act. After
discussing the said provisions, the Supreme Court in
paragraphs 37 and 38 recorded its findings and conclusions
i
in the following manner:
"Applicability of the 1993 Act
F
37. We have held hereinbefore that clause 8 of the terms
and conditions relates to the payments of balance 10%. It
is not in dispute that the plaintiff had demanded both the
principal amount as also the interest from the Corporation.
G
Section 3 of the 1993 Act imposes a statutory liability upon
-I
)I
the buyer to make payment for the supplies of any goods
either on or before the agreed date or where there is no
agreement before the appointed day. Only when payments
are not made in terms of Section 3, Section 4 would apply.
H
752
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A
The 1993 Act came into effect from 23-9-1992 and will not
"
apply to transactions which took place prior to that date.
We find that out of the 71 suit transactions, SI. Nos. 1 to
..
26 (referred to in the penultimate para of the trial court
judgment). that is supply orders between 5-6-1991 to 28B
7-1992, were prior to the date of the 1993 Act coming into
force. Only the transactions at SI. Nos. 27 to 71 (that is
supply orders between 22-10-1992 to 19-6-1993), will
attract the provisions of the 1993 Act.
c
38. The 1993 Act, thus, will have no application in relation
to the transactions entered into between June 1991 and
23-9-1992. The trial court as also the High Court, therefore,
committed a manifest error in di~cting payment of interest
·-
at the rate of 23% up to June 1991 and 23.5% thereafter."
D
14. In order to appreciate the aforesaid findings we may
also extract the contents of paragraph 14 of the said judgment
wherein this Court referred to the facts of the case leading to
recording of the aforesaid findings and conclusions:
E
"14. It is not in dispute that pursuant to the said agreement,
the Corporation placed orders for supply of medicines
manufactured by the respondent herein for the period of
June 1991 to June 1993. The total price of the medicines
supplied by the respondent in pursuance of the supply
}
F
orders of the Corporation stood at Rs 20,56,654.13 out of
which only a sum of Rs 46,512.80 was paid to the
respondent."
15. A careful perusal of the aforesaid jud~ment shows that
the decision in the aforesaid case was rendered after clearly
G recording the fact that the Assam Small Scale Industries
Development Corporation Ltd. (for short 'the Corporation')
..
~
placed orders for the supply of medicines manufactured by the
respondents therein for the period June, 1991 to June, 1993.
In the light of the said facts, it was recorded in paragraph 37
H of the judgment that while the Act came into effect from 23rd
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
753
[DR. MUKUNDAKAM SHARMA, J.]
l(
September, 1992, the supply orders were placed only in
A
respect of Serial Nos. 1 to 26 immediate!~· and before coming
-
into effect of the Act and rest of the supply orders namely,
supply orders at Serial Nos. 27 to 71 were placed between
22.10.1992 to 19.06.1993 which were subsequent to the date
when the Act came into force. In that context, it was clearly
B
recorded in the judgment that the Act will have no application
to the transactions that took place prior to the commencement
of the Act. In the next sentence the Court made it clear as to
what is referred to and understood by the expression
"transaction" when it clearly stated that out of 71 transactions, c
Serial Nos. 1 to 26, i.e. supply orders between 05.06.1991 to
28.07.1992 being prior to 23rd September, 1992 when the Act
..,..,
came into force, higher interest as envisaged under Sections
4 and 5 of the Act cannot be paid and demanded in respect of
the said supply orders/transactions. It was also made clear that
D
~
the transaction·s at Serial Nos. 27 to 71 only i.e. supply orders
between 22.10.1992 to 19.06.1993, would attract the
provisions of the Act. Therefore, those supply orders which were
issued by the Corporation between 22.10.1992 to 19.06.1993
were held to be the transactions which would be entitled to get
E
the benefit of the provisions of the Act.
16. In our considered opinion, the ratio of the aforesaid
t
decision is clearly applicable and would squarely govern the
facts of the presenfcase as well. The said decision was.
rendered by this Court after appreciating the entire facts as also
F
all the relevant laws on the issue and, therefore, we do not find
any reason to take a different view than what was taken by this
Court in the aforesaid judgment. Thus, we respectfully agree
with the aforesaid decision of this Court which is found to be
rightly arrived at after appreciating all the facts and
G
circumstances of the case.
_.
~
17. Now coming to the facts of the present case we find
that there is no dispute with regard to the fact that the supply
order was placed with the respondents on 16.07.1992 for
H
754
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A supply of the pipes which date is admittedly prior to the date
on which this Act came into effect.
18. Being faced with the aforesaid situation, the learned
senior counsel appearing for the appellant-plaintiff sought to
8
submit before us that the decision of this Court in Assam Small
Scale Industries case (supra) refers to the expression
"transactions". According to him, the transactions would be
complete only when the appellant-plaintiff made the supply and
since the supply was made in the instant case after coming into
C force of the Act, the appellant-plaintiff would be entitled to the
benefit of Section 4 and 5 of the Act.
19. Refuting the aforesaid submission, the learned senior
counsel appearing for the respondents submitted that the
aforesaid contention is completely misplaced. He pointed out
D that if such a meaning, as sought to be given by the learned
senior counsel appearing for the appellant-plaintiff, is accepted
that would lead to giving benefit of the provisions of the Act to
unscrupulous suppliers who, in order to get the benefit of the
Act, would postpone the delivery of the goods on one pretext
E or the other.
20. We have considered the aforesaid rival submissions.
This Court in Assam Small Scale Industries case (supra) 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
F by the respondents and when this Court used the expression
"transaction" it only meant a supply order. The Court made it
explicitly clear in paragraph 37 of the judgment which we had
already extracted above.
G
21. In our considered opinion there is no ambiguity in the
aforesaid judgment passed by this Court. The intent and the
purpose of the Act, as made in paragraph 37 of the judgment,
are quite clear and apparent. When this Court said "transaction"
it meant initiation of the transaction i.e. placing of the supply
H orders and not the completion of the transactions which would
}
. -
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
755
[DR. MUKUNDAKAM SHARMA, J.]
,,,
be completed only when the payment is made. Therefore, the
A
'I
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,
8
any supply made pursuant to the said supply orders would be
governed not by the provisions of the Act but by the provisions
i
of Section 34 of the CPC.
23. At one stage the learned senior counsel appearing for
the appellant-plaintiff submitted that the Act in question is a c
beneficial legislation and, therefore, a liberal interpretation and
wider meaning is to be given to such a beneficial and welfare
-
legislation so as to protect the interest of the supplier who is
being kept on a higher pedestal by giving a higher benefit in
the Act.
D
24. Generally, an Act should always be regarded as
prospective in nature unless the legislature has clearly intended
the provisions of the said Act to be made applicable with
retrospective effect. It is a cardinal principle of construction that
E
every statute is prima facie prospective unless it is expressly
or by necessary implication made to have a retrospective
operation. The aforesaid rule in general is applicable where the
object of the statute is to affect vested rights or to impose new
burdens or to impair existing obligations. Unless there are
F
words in the statute sufficient to show the intention of the
legislature to affect existing rights, it is deemed to be
prospective only -
"nova constitutio futuris formam imponere
debet non praeteritis" -
a new law ought to regulate what is
to follow, not the past. (See Principles of Statutory Interpretation
G
by Justice G.P. Singh, 9th Edn., 2004 at p. 438.). It is not
...
>
necessary that an express provision be made to make a statute
retrospective and the presumption against retrospectivity may
be rebutted by necessary implication especially in a case
H
756
SUPREME COURT REPORTS
[2009] 10 S.C.R.
A where the new law is made to cure an acknowledged evil for
"
the benefit of the community as a whole (ibid., p. 440). In the
case of life Singh v. State of Haryana, (2004) 8 SCC 1, at
page 9, this Court observed as follows:
B
"15. Though retrospectivity is not to be presumed and
rather there is presumption against retrospectivity,
according to Craies (Statute Law, 7th Edn.). it is open for
the legislature to enact laws having retrospective operation.
This can be achieved by express enactment or by
c
necessary implication from the language employed. If it is
a neces~ary implication from the language employed that
the legislature intended a particular section to have a
retrospective operation, the courts will give it such an
-
operation. In the absence of a retrospective operation
having been expressly given, the courts may be called upon
D
to construe the provisions and answer the question
whether the legislature had sufficiently expressed that
intention giving the statute retrospectivity. Four factors are
suggested as relevant: (i) general scope and purview of
the statute; (ii) the remedy sought to be applied; (iii) the
E
former state of the law; and (iv) what it was the legislature
contemplated. (p. 388) The rule against retrospectivity
does not extend to protect from the effect of a repeal, a
privilege which did not amount to accrued right. (p. 392)
F
16. Where a statute is passed for the purpose of supplying
an obvious omission in a former statute or to "explain" a
former statute, the subsequent statute has relation back to
the time when the prior Act was passed. The rule against
retrospectivity is inapplicable to such legislations as are
G
explanatory and declaratory in nature. A classic illustration
is the case of Attorney General v. Pougett (Price at
p. 392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a
'
duty was imposed upon hides of 9s 4d, but the Act omitted
to state that it was to be 9s 4d per cwt., and to remedy
H
this omission another Customs Act (53 Geo. 3, c. 105) was
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
757
[DR. MUKUNDAKAM SHARMA, J.]
Apassed later in the same year. Between the passing of
A
these two Acts some hides were exported, and it was
contended that they were not liable to pay the duty of 9s
4d per cwt., but Thomson, C.B., in giving judgment for the
Attorney General, said: (ER p. 134)
· "The duty in this instance was, in fact, imposed by the first
B
Act; but the gross mistake of the omission of the weight,
1
for which the sum expressed was to have been payable,
occasioned the amendment made by the subsequent Act:
but that had reference to the former statute as soon as it c
passed, and they must be taken together as if they were
one and the same Act;" (Price at p. 392)"
25. There is no dispute with regard to the fact that the Act
in question is a welfare legislation which was enacted to protect
;_
the interest of the suppliers especially suppliers of the nature
D
of a small scale industry. But, at the same time, the intention
and the purpose of the Act cannot be lost sight of and the Act
in question cannot be given a retrospective effect so long as
such an intention is not clearly made out and derived from the
Act itself.
E
26. It was next submitted by the learned senior counsel
appearing for the appellant-plaintiff that there was a novation
and alteration of the contract giving rise to a new contract
between the parties due to alteration of terms and conditions
F
of the contract and, therefore, Section 62 of the Indian Contract
Act (for short 'the Contract Act') was applicable to the present
case. Section 62 of the Contract Act is reproduced
hereinbelow:
"Effect of novation, rescission and alteration of contract.
G
_,
~
62. If the parties to a contract agree to substitute a new
contract for it, or to rescind or alter it, the original contract
need not be performed.
H
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SUPREME COURT REPORTS
[2009] 10 S.C.R.
A
Illustrations :
B
c
D
(a) A owes money to B under a contract. It is agreed
between A, B and C that B shall thenceforth accept C as
his debtor, instead of A. The old debt of A to B is at an
end, a new debt from C to B has been contracted.
(b) A owes B 10,000 rupees. A enters into an agreement
with B, and gives B a mortgage of his (A's) estate for
5,000 rupees in place of the debt of 10,000 rupees. This
is a new conlract and extinguishes the old.
(c) A owes B 1,000 rupees under a contract, B owes C
1,000 rupees. Borders A to credit C with 1,000 rupees in
his books, but C does not assent to the arrangement. B
still owes C 1,000 rupees, and no new contract has been
entered into."
27. Relying on the aforesaid provision of the Contract Act,
the learned senior counsel submitted that the original contract
was for the supply of 7 lakh metres of pipes which was curtailed
and changed to the supply of 4 lakh metres of pipes with change
E in the date of supply with extension of date of supply till
30.04.1993 and supplies were completed within that extended
time. In support of his submission he sought to rely upon a
judgment of the Bombay High Court in Andheri Bridge View
Co-op. Hsg. Society Ltd. v. Krishnakant Anandrao Deo and
F others reported in 1991 AIR Bombay 129 wherein it was held
that a new contract wouid come in existence in terms of Section
62 of the Contract Act. In the said judgment, the High Court
observed as follows in para 13:
G
H
"13. Now, even if the parties have referred to an agreement
as being not a new one but an old one with certain
modifications, that would carry no weight if the law on the
point is something contrary to what is understood by the
parties. For example, we know that when there is a change
in the constitution of a firm then the firm is a new
-·
1
SHAKTI TUBES LTD. v. STATE OF BIHAR & ORS.
759
[DR. MUKUNDAKAM SHARMA, J.]
partnership notwithstanding the fact that the parties may
A
refer to it as the old partnership with a changed constitution.
So also I would say that where there are material or
substantial changes which go to the root of the agreement
then this has to be regarded in law as a new agreement.
What would be the position if the parties agree to sell
B
property A and at a later stage they agree that not property
A but property B should be sold? Clearly this would be a
new agreement notwithstanding the fact that all other terms
regarding rate for payment etc. may also be similar. So
also payment of price or the rate of payment is a material c
part of the agreement for sale. Both the subject-matter and
the rate of payment are material parts of any agreement
for sale and change in either of these terms brings about
a new agreement. In our case therefore the
correspondence of 1983 brought about an entirely new
0
agreement -- between new parties, new property (so far a
F.S.I. is concerned), and new rates."
28.