M/s. Shanti Conductors Pvt. Ltd. ANR. Vs. Assam State Electricity Board & Ors.
[Civil Appeal Nos.8442-8443 of 2016 Arising out of SLP (C) Nos.9924-9925 of 2013]
[Civil Appeal No.8445 of 2016 Arising out of SLP (C) No.15274 of 2013]
[Civil Appeal No.8448 of 2016 Arising out of SLP (C) No. 9898 of 2014]
[Civil Appeal No.8450 of 2016 Arising out of SLP (C) No. 538 of 2016]
V. GOPALA GOWDA, J.
1. Leave granted in all the Special Leave Petitions.
2. The present appeals were listed together as a common question of law arises in all of them for consideration before this Court.
3. For the sake of convenience, reference is made to the facts of the appeals arising out of SLP (C) Nos. 9924-9925 of 2013, which have been directed against the impugned final judgment and orders dated 20.11.2012 and 20.12.2012 passed in RFA No. 66 of 2000 and MC No. 3472 of 2012 respectively, by the Gauhati High Court at Guwahati.
The facts of the case which are required to appreciate the rival legal contentions advanced on behalf of the parties are stated in brief as under: On 31.03.1992, the respondent-Assam State Electricity Board (hereinafter referred to as the "Electricity Board") placed an order for supply of Aluminium Electrical Conductors from the appellants-M/s Shanti Conductors Pvt. Ltd. for a total consideration of Rs. 1.22 crores. The supplies were to be made between June and December, 1992. On 13.05.1992, another order was placed by the Electricity Board to M/s Shanti Conductors for the supply of various types of conductors for a total consideration of Rs. 32.49 lacs. The supplies of the aforesaid goods were to be made between January and February, 1993.
On 23.09.1992, the President of India promulgated an ordinance, namely, the Interest on Delayed Payment to Small Scale Ancillary Industrial Undertakings Ordinance, 1992. Subsequently, on 02.04.1993, the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 (in short the "Act") was enacted and it was deemed to have come into force with effect from 23.09.1992. Meanwhile, the supply of equipments under the aforesaid purchase orders was completed by M/s Shanti Conductors on 04.10.1993. On 05.03.1994, the entire payment of Rs. 2.15 crores against the aforesaid supply orders was received by M/s Shanti Conductors. Subsequently, on 10.01.1997, M/s Shanti Conductors filed a suit for recovery of Rs.53.68 lacs on account of interest on delayed payments and future interest at the rate of 27% per annum on the decreetal amount.
The Electricity Board filed the written statement on 16.09.1998, inter-alia, raising the plea of limitation and contending that the Act is not applicable to the case of the appellant- M/s Shanti Conductors as the contract was concluded prior to the enactment of the Act. The Trial Court decreed the suit on 02.02.2000 for recovery of the amount of Rs. 51,60,507.42 with compound interest at the rate of 23.75% p.a. with monthly rests from the date of the suit till realization. Aggrieved of the impugned judgment and order, the Electricity Board filed Regular First Appeal No. 66 of 2000 before the High Court of Gauhati. Vide order dated 18.10.2001, the Division Bench of the High Court referred the matter to the Full Bench.
The Full Bench framed the following questions that needed to be answered: " Whether the suit for recovery of mere interest under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 is maintainable? Whether in the present case the suit for recovery of Interest under the Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would not be maintainable as the contract for supply of goods between the parties was entered into prior to enforcement of the Act, i.e. on 23.09.1992?
Whether the suit for recovery of interest under the Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 would not be maintainable if no reservation is made by the supplier retaining to it the right to recovery interest under the Act when the payment(s) of the principal sum is/are accepted, though these may be made beyond the prescribed period?"
The Full Bench of the High Court vide judgment and order dated 05.03.2002 answered the reference in affirmative by holding that a suit for interest alone could be filed. It further held that the Act is applicable to contracts entered into prior to 23.09.1992, i.e. the date on which the Act came into force. It was further held that the interest under the Act would be calculated from 23.09.1992 till the payment is made to the supplier. Having answered the reference in the above terms, the matter was sent back to the Division Bench for consideration of the appeal on merits.
Accordingly, the matter was placed before the Division Bench for its consideration in accordance with the decision of the Full Bench of the High Court in the reference. The Electricity Board contended before the Division Bench that this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board & Anr.[1] has held that the Act is applicable only to the agreements entered into after 23.09.1992. Accordingly, in terms of the judgment of this Court in Purbanchal Cables & Conductors Pvt. Ltd. (supra), the Division Bench of the High Court vide judgment and order dated 20.11.2012 set aside the judgment of the Trial Court by allowing Regular First Appeal No. 66 of 2000.
Similarly, in the connected appeals also, the High Court had held in the impugned judgment and orders therein that the appellants are not entitled for the interest on the delayed payment as the contracts had been entered into prior to the commencement of the Act. Hence the present appeals. We have heard Mr. M.H. Baig and Mr. Basava Prabhu S. Patil, learned senior counsel appearing on behalf of the appellants in the appeals arising out of SLP (C) Nos.9924-9925 of 2013 and SLP (C) No. 538 of 2016 and Mr. Ajit Kumar Sinha, learned senior counsel in appeal arising out of SLP (C) No. 15274 of 2013. We have also heard Mr. Vijay Hansaria, the learned senior counsel appearing on behalf of the Electricity Board. Mr. M.H. Baig, the learned senior counsel submits that the respondents cannot claim a vested right in procedure, as the same is not a matter of right and can be taken away.
The learned senior counsel places reliance on the three Judge Bench decision of this Court in the case of State of U.P. v. Anand Swarup[2]. The learned senior counsel contends that the Act is applicable in respect of the contracts entered into by the Electricity Board with the appellants herein for supply of goods. Mr. Basava Prabhu Patil and Mr. Ajit Sinha, learned senior counsel appearing on behalf of some of the appellants contend that the usage of the words "transaction" and "supply order" as used by this Court in the case of Assam Small Scale Industries Development Corporation Ltd. v. J.D. Pharmaceuticals[3] is not the correct test to be applied to determine whether the provisions of the Act are applicable to the contracts entered into prior to the coming of the Act into force.
It is contended that this Court in the aforesaid case has referred to the said words without taking into consideration the Statement of Objects and Reasons of the Act and the parliamentary debates conducted while introducing the Bill before it was enacted. It is further contended that the same words were continued to be used in the case of Shakti Tubes v. State of Bihar[4], wherein it was held as under:
"21. We have considered the aforesaid rival submissions. 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 by the respondents and when this Court used the expression "transaction" it only meant a supply order. The Court made it explicitly clear in para 37 of the judgment which we have already extracted above.
In our considered opinion there is no ambiguity in the aforesaid judgment passed by this Court. The intent and the purpose of the Act, as made in para 37 of the judgment, are quite clear and apparent. When this Court said "transaction" it meant initiation of the transaction i.e. placing of the supply orders and not the completion of the transactions which would be completed only when the payment is made. Therefore, the submission made by the learned Senior Counsel appearing for the appellant- plaintiff fails.
22. Consequently, we hold that the supply order having been placed herein prior to the coming into force of the Act, any supply made pursuant to the said supply orders would be governed not by the provisions of the Act but by the provisions of Section 34 of the CPC." In the above case, it was held that an Act cannot be given retrospective effect. The learned senior counsel contend that what was however, not considered by this Court, is that though an Act may not be given retrospective effect, it can still have retroactive operation. The learned senior counsel appearing on behalf of the appellants place strong reliance upon another judgment of this Court in the case of Modern Industries v. Steel Authority of India Ltd.[5], wherein it was held as under:
"9. The 1993 Act was sequel to a policy statement on small-scale industries made by the Government in Parliament that suitable legislation would be brought to ensure prompt payment of money by buyers to the small industrial units. It was felt that inadequate working capital in a small-scale and ancillary industrial undertaking was causing an endemic problem and such undertakings were very much affected. The Small Scale Industries Board- an apex advisory body on policies relating to small-scale industrial units- also expressed its views that prompt payments of money by buyers should be statutorily ensured and mandatory provisions for payment of interest on the outstanding money, in case of default, should be made.
It was felt that the buyers, if required under law to pay interest, would refrain from withholding payments to small-scale and ancillary industrial undertakings. With these objects and reasons, initially an ordinance, namely, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992 was promulgated by the President on 23-9-1992 and then the Bill was placed before both the Houses of Parliament and the said Bill having been passed, the 1993 Act was enacted. The Preamble to the 1993 Act reads: "An Act to provide for and regulate the payment of interest on delayed payments to small-scale and ancillary industrial undertakings and for matters connected therewith or incidental thereto."
This Court further held as under:
"23. The wholesome purpose and object behind the 1993 Act as amended in 1998 is to ensure that the buyer promptly pays the amount due towards the goods supplied or the services rendered by the supplier. It also provides for payment of interest statutorily on the outstanding money in case of default..." Further, reliance is placed on the decision of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) wherein the date of "sale agreement" was considered to be crucial to determine the applicability of the Act as under:
"52...... Since the Act envisages that the supplier has an accrued right to claim a higher rate of 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." It is contended that the term "sale agreement" is not defined in the Act and thus, cannot be a
legal test for applicability of the Act. It is further contended that if the term "sale agreement" is to be the legal test for the applicability of the Act, then the same would be inconsistent with the judgment of this Court in Assam Small Scale Industries Development Corporation Ltd. (supra) where the "sale agreement" was prior to the date of commencement of the Act yet the Court applied the "transaction" and "supply order" test and applied the provisions of the Act on such "transactions" and "supply orders" which were issued on or after the aforesaid date of commencement of the Act.
If the "sale agreement" test as has been held in Purbanchal Cables & Conductors Pvt. Ltd. (supra) is applied, then the sellers in Assam Small Scale Industries Development Corporation Ltd. (supra) would not be entitled to higher rate of interest under the Act. It is further contended that if "sale agreement" is taken to be the legal test as to the applicability of the Act then the same would also be inconsistent with the decision of this Court in Modern Industries (supra), wherein after consideration of the Aims and Objects of the Act, it was held that interest is payable on "outstanding money" due from the buyer in case of default.
The learned senior counsel further draw our attention to the relevant statutory provisions of the Act, which are extracted as under: "2(b)(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;
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 therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day: Provided that in no case the period agreed upon between the supplier and the buyer in writing shall exceed one hundred and twenty days from the day of acceptance or the day of deemed acceptance. 4.Date from which and rate at which interest is payable.-
Where any buyer fails to make payment of the amount to the supplier, as required under section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at one and half time of prime Lending Rate charged by the State Bank of India.
Explanation.- For the purposes of this section," Prime Lending Rate" means the Prime Lending Rate of the State Bank of India which is available to the best borrowers of the bank.
6.Liability of buyer to pay compound interest.- Notwithstanding anything contained in any agreement between a supplier and a buyer or in any law for the time being in force, the buyer shall be liable to pay compound interest (with monthly interest) at the rate mentioned in section 4 on the amount due to the supplier." Mr. Basava Prabhu Patil, learned senior counsel contends that from a reading of Section 2(b) of the Act, it becomes clear that "appointed day" means the day following immediately after the expiry of the period of thirty days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier. It is submitted that a careful reading of Section 2(b) along with Sections 3, 4 and 5 of the Act would show that a statutory right is conferred upon the suppliers for payment of interest on the delayed payments.
Therefore, the provisions of the Act are retroactive in nature. The learned senior counsel further contends that the judgments of this Court sought to be relied upon by the learned senior counsel appearing on behalf of the Electricity Board have no application to the facts of the instant case, as in those cases two Judge Benches of this Court have not correctly examined the aforesaid statutory provisions of the Act while holding that the same is prospective in nature.
Mr. Ajit Kumar Sinha, learned senior counsel contends that the provisions of the Act are retroactive in nature and places reliance on the decision of the Bombay High Court in the case of Kingfisher Airlines Ltd. v. CCI[6] and the decision of this Court in the case of State of Bombay v. Vishnu Ramchandra[7], wherein it was held as under: "There are, however, statutes which create Do new punishment, but authorise some action based on past conduct.
To such statutes, if expressed in language showing retrospective operation, the principle is not applied. As Lord Coleridge, C. J.,observed during the course of arguments in Rex v. Birthwhistle: "Scores of Acts are retrospective, and may without express words be taken to be retrospective, since they are passed to supply a cure to an existing evil." Indeed, in that case which arose under the Married Women (Maintenance in Case of Desertion) Act, 1886, the Act was held retrospective without express words.
It was said: "It was intended to cure an existing evil and to afford to married women a remedy for desertion, whether such desertion took place before the passing of the Act or not." Another principle which also applies is that an Act designed to protect the public against acts of a harmful character may be construed retrospectively, if the language admits such an interpretation, even though it may equally have a prospective meaning." The said principle was reiterated more recently by this Court in the case of State of Maharashtra v. Krishnarao Dudhappa Shinde[8].
The learned senior counsel also places reliance on the meaning of the words "retroactive" and "retroactive inference", which have been defined in Black's Law Dictionary (Sixth Edn.) as under :- "Retroactive- Process of acting with reference to past occurrences. Retroactive inference- The inferring of a previous fact from present conditions by trier of facts." The learned senior counsel further contends that the observations made in Purbanchal Cables & Conductors Pvt. Ltd. (supra) are clearly contradictory to the decision of this Court in the case of Assam Small Scale Industries Development Corporation Ltd. (supra). The relevant paragraph of Purbanchal Cables (supra) reads as under:
"53. On a careful perusal of the judgment of this Court in Assam Small Scale Industries, we find that even the question regarding the applicability of the Act to contracts concluded prior to coming into force of the Act is no longer res integra. This question is answered by this Court in Assam Small Scale Industries Development Corpn. Ltd. v. J.D. Pharmaceuticals as under: (SCC p. 36, paras 37-38)
"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. Section 3 of the 1993 Act imposes a statutory liability upon 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. 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, Sl. Nos. 1 to 26 (referred to in the penultimate para of the trial court judgment), that is supply orders between 5-6-1991 to 28- 7-1992, were prior to the date of the 1993 Act coming into force. Only the transactions at Sl. Nos. 27 to 71 (that is supply orders between 22-10-1992 to 19-6-1993), will attract the provisions of the 1993 Act.
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 directing payment of interest at the rate of 23% up to June 1991 and 23.5% thereafter."
This Court in the abovesaid case held that any substantial law can only be applied prospectively unless retrospective operation is clearly made out in the language of the statute. It was further held that only a procedural or declaratory law operates retrospectively when there is no vested right in the procedure. Therefore, the learned senior counsel submits that none of the cases referred to above have actually examined whether the provisions of the Act are retroactive in nature or not. The learned senior counsel further submits that the suit for interest alone is maintainable, as held by this Court in the case of Modern Industries (supra) as under:
"45. It is true that word "together" ordinarily means conjointly or simultaneously but this ordinary meaning put upon the said word may not be apt in the context of Section 6. Can it be said that the action contemplated in Section 6 by way of suit or any other legal proceeding under sub-section (1) or by making reference to IFC under sub-section (2) is maintainable only if it is for recovery of principal sum along 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 Gauhati High Court in Assam State Electricity Board that word `together' in Section 6(1) would mean `along with' or "as well as". Seen thus, the action 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...."
The learned senior counsel further refers to the decision of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) and submits that in the case, the correct factual and legal position as laid down in the case of Assam Small Scale Indutries Development Corporation (supra) has not been appreciated. Therefore, the suit filed by the first appellant in respect of the interest cannot be held as barred by res judicata.
In support of this contention, the learned senior counsel places strong reliance on the decision of this Court in Sushil Kumar Mehta v. Gobind Ram Bohra[9], wherein it was held as under: ".........a pure question of a law unrelated to facts which are the basis or foundation of a right, cannot be deemed to be a matter in issue.
The principle of res judicata is a facet of procedure but not of substantive law. The decision on an issue of law founded on fact in issue would operate as res judicata. But when the law has since the earlier decision had been altered by a competent authority or when the earlier decision declares a transaction to be valid despite prohibition by law it does not operate as res judicata. Thus a question of jurisdiction of a Court or of a procedure or a pure question of law unrelated to the right of the parties founded purely on question of fact in the previous suit is not res judicata in the subsequent suit. A question relating to jurisdiction of a Court or interpretation of provisions of a statute cannot be deemed to have been finally determined by an erroneous decision of a Court."
The learned senior counsel further places reliance on the three Judge Bench decision of this Court in the case of Mathura Prasad Bajoo Jaiswal v. Dossibai N.B. Jeejeebhoy[10], wherein it was held as under: "...But the doctrine of res judicata belongs to the domain of procedure: it cannot be exalted to the status of a legislative direction between the parties so as to determine the question relating to the interpretation of enactment affecting the jurisdiction of a Court finally between them, even though no question of fact or mixed question of law and fact and relating to the right in dispute between the parties has been determined thereby.
A decision of a competent Court on a matter in issue may be res judicata in another proceeding between the same parties: the "matter in issue" may be an issue of fact, an issue of law, or one of mixed law and fact. An issue of fact or an issue of mixed law and fact decided by a competent court is finally determined between the parties and cannot be re-opened between them in another proceeding. The previous decision on a matter in issue alone is res judicata: the reasons for the decision are not res judicata.
A matter in issue between the parties is the right claimed by one party and denied by the other, and the claim of right from its very nature depends upon proof of facts and application of the relevant law thereto. A pure question of law unrelated to facts which give rise to a right, cannot be deemed to be a matter in issue."
On the issue of limitation, the learned senior counsel places reliance upon Section 19 and Article 25 of the Limitation Act, 1963 and also places reliance on the decision of the Bombay High Court in the case of Angel Infin Pvt. Ltd. v. M/s Echjay Industries Ltd.[11], wherein it was held as under: "Applying the above observations of the Apex Court, one has to look to Section 19 of the Act and read the expression "debt" appearing therein along with the articles in the Schedule to the Limitation Act. The Articles provide for different periods of limitation for different types of debts. They also provide different dates from which the period of limitation begins to run.
A glance at the said Schedule would show that there are large variety of debts as for example, for Seamen's Wages, for price of Goods sold and supplied, for price of Lodging, for hire of Animals or Vehicles or price of Trees or growing Crops, for price of work done, for money lent under an agreement, for money lent without an agreement, for money received by the Defendants for Plaintiffs use, for interest on monies lent, for amounts due under Bills of Exchange, Promissory Notes etc.
This will show that Article 25 refers to only the debt of interest, while Article 19 refers to the debt of loan. Since there are various types of debts provided under the schedule with different periods of limitation and different dates from which the limitation begins to run, the Parliament in Section 19 of the said Limitation Act, 1963 has advisedly used the generic expression "debt". This debt may be of one type or another type, but the payment on account of one type of debt cannot extend the period of limitation for another type of debt. Debt could be either for principal loan amount or it could be for interest."
The learned senior counsel contends that in the instant case, the suit has been filed within the period of limitation as the last payment was made by the buyer on 05.03.1994, and Money Suit 21/97 was filed in March 1997. The period of limitation would start running from then only. The learned senior counsel further submits that the present appeal is maintainable even in light of the withdrawal of SLP (C) No. 12217 of 2001 in the case of M/s Trusses & Towers (P) Ltd. v. Assam State Electricity Board and Anr. on 06.08.2001.
It was stated therein that there was an error in the judgment of the High Court. Accordingly, the petitioner therein filed Review Petition No. 75 of 2001 before the High Court of Gauhati. The High Court on 19.03.2013 passed an order in the said Review Petition allowing only 9% simple interest per annum. Aggrieved of the said judgment and order, M/s Trusses & Towers Pvt. Ltd. filed SLP (C) No. 15274 of 2013 on 10.04.2013. The learned senior counsel places reliance on the decision of this Court in the case of Sushil Kumar Sen v. State of Bihar[12], wherein it was held as under:
"2. It is well settled that the effect of allowing an application for review of a decree is to vacate the decree passed. The decree that is subsequently passed on review, whether it modifies, reverses or confirms the decree originally passed, is a new decree superseding the original one..." The learned senior counsel further places reliance on the decision of this Court in the case of DSR Steel (Pvt.) Ltd. v. State of Rajasthan & Ors.[13] , wherein it was held as under:
"25. Different situations may arise in relation to review petitions filed before a court or tribunal.
25.1. One of the situations could be where the review application is allowed, the decree or order passed by the court or tribunal is vacated and the appeal/proceedings in which the same is made are reheard and a fresh decree or order passed in the same. It is manifest that in such a situation the subsequent decree alone is appealable not because it is an order in review but because it is a decree that is passed in a proceeding after the earlier decree passed in the very same proceedings has been vacated by the court hearing the review petition.
25.2. The second situation that one can conceive of is where a court or tribunal makes an order in a review petition by which the review petition is allowed and the decree/order under review is reversed or modified. Such an order shall then be a composite order whereby the court not only vacates the earlier decree or order but simultaneous with such vacation of the earlier decree or order, passes another decree or order or modifies the one made earlier. The decree so vacated reversed or modified is then the decree that is effective for the purposes of a further appeal, if any, maintainable under law."
On the other hand, Mr. Vijay Hansaria, learned senior counsel appearing on behalf of the Electricity Board places strong reliance upon the judgment of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) and contends that it is well settled position of law that the Act has no retrospective application. Therefore, the suit in the instant case which has been filed for claiming interest alone is not maintainable. The learned senior counsel further contends that the suit is barred by limitation.
It is submitted that the last date of supply was 04.10.1993. Thus, the period of limitation for recovery of amount of Rs.53.68 lakhs, which is the amount due towards the interest on delayed payments and the future interest @ 27% expired on 03.10.1996. The learned senior counsel further contends that the case of the first appellant is not maintainable not only on the question of limitation but also in view of the decision of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) wherein the appellant was also a party. In that case, this Court while dismissing the appeal reiterated the legal principle that the provisions of the Act do not have retrospective effect.
The learned senior counsel contends that the said judgment between the appellant and the respondent-Board is binding on the appellant. Therefore, the same issue cannot be re-agitated in this appeal as the decision of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) operates as res judicata. We have heard the learned senior counsel appearing on behalf of the parties. With reference to the aforesaid rival legal contentions the following questions of law would arise for consideration: Whether provisions of the Act are retroactive in nature?
Whether non consideration of this aspect of the matter renders the decisions of this Court in Modern Industries (supra) and Purbanchal Cables & Conductors Pvt. Ltd. (supra) as sub silentio? Whether the judgment rendered in Purbanchal Cables & Conductors Pvt. Ltd. (supra) operates as res judicata in the instant case?
Whether the suit filed by the appellants is barred by limitation? Whether the appeal against the review in the connected matter in Civil Appeal @ SLP (C) No.15274 of 2013 (M/s Trusses & Towers Pvt. Ltd.) is maintainable?
What order?
Answer to Point nos. 1 and 2 In my considered view after considering the rival legal submissions and judgments of this Court referred to supra, issue Nos. 1 and 2 are required to be answered in favour of the appellants for the following reasons: At the outset, it would be necessary to advert to the statement of the objects and reasons of the Act, the relevant parts of which read as under: "
A policy statement on small scale industries was made by the Government in Parliament. It was stated at that time 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 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 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. ......."
Before examining the decisions of this Court in which the provisions of the Act have been interpreted, it would be useful to advert to the provisions themselves and understand the scheme of the Act. Section 2(b) of the Act defines 'appointed day' as under:
"b) "Appointed day, means the day following immediately after the expiry of the period of thirty days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier.
Explanation- For the purposes of this clause, -
(i) 'The day of acceptance' means, -
(a) The day of the actual delivery 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 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;
(emphasis laid by this Court)
At this stage, it is also important to examine Sections 3 and 4 of the Act, which provide for liability of the supplier to make payment, and the date from which such interest is payable.
They read as under:
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 therefore on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day. 4. Date from which and rate at which interest is payable.--Where any buyer fails to make payment of the amount to the supplier, as required under section 3 the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the day immediately following the date agreed upon, at such rate which is five per cent. points above the floor rate for comparable lending.
Explanation.-- For the purposes of this section, 'floor rate for comparable lending' means the highest of the minimum lending rates charged by scheduled banks (not being co-operative banks) on credit limits in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949.(10 of 1949)."
(emphasis laid by this Court)
3 of the Act lays down the liability of the buyer to make payment before the appointed day, which, according to the definition in section 2, is the day after the expiry of 30 days from the delivery of the goods or the rendering of service. Section 4 of the Act provides the date from which the interest is payable. According to Section 4 of the Act, the liability on the buyer accrues from the appointed day. At the cost of repetition, as Section 2(b) of the Act makes explicitly clear, appointed day is the day following the expiry of thirty days from the date of acceptance, which is the day of delivery of goods or rendering of services.
In my considered view, the language of the legislature could not have been more clearer than what has been explicitly made it very clear. It has clearly stated what the legislature had in contemplation at the time of enactment of the Act as the focal date was the date of actual delivery of goods or the rendering of services, and not the date on which the transaction was entered into.
The interpretation of the provisions of the Act has been the subject matter of four recent decisions of this Court. Starting with the case of Assam Scale Industries Development Corporation Ltd (supra), wherein it was erroneously held that the Act came into force with effect from 23.09.1992 and therefore the provisions of the Act has no application to "transactions" which took place prior to that date.
This Court in the said case adverted to the words "transaction" and "supply order" though they are not defined under Section 2 of the Act. This Court further did not take into consideration the statement of objects and reasons of the Act and the Parliamentary debates before the Act was enacted while arriving at the said conclusion regarding the applicability of the Act.
While the statement of objects and reasons and Parliamentary debates cannot be used to ascertain the meaning of the specific words of an enactment, it is well settled position of law laid down by various decisions of this Court that the same can be used to understand the general context in which the legislation was passed by the Parliament, as well as the evil it sought to remedy. A constitution bench of this Court held in the case of State of West Bengal v. Subodh Gopal Bose[14] as under:
"It is well settled by this court that the statement of objects and reasons is not admissible as an aid to the construction of a statute (See Aswini Kumar Ghose v. Arabinda Bose) and I am not, therefore, referring to it for the purpose of construing any part of the Act or of ascertaining the meaning of any word used in the Act but I am referring to it only for the limited purpose of ascertaining the conditions prevailing at the time which actuated the sponsor of the Bill to introduce the same and the extend and urgency of the evil which he sought to remedy."
The said principle of law was reiterated by a Seven-Judge Bench of this Court more recently in the case of State of Gujarat v. Mirzapur Moti Kureshi Kasab Jamat[15] as under: "Reference to the Statement of Objects and Reasons is permissible for understanding the background, antecedent state of affairs in relation to the statute, and the evil which the statute was sought to remedy. (See -Principles of Statutory Interpretation by Justice G.P. Singh, 9th Edition, 2004, at p. 218). In State of West Bengal v. Subodh Gopal Bose and Ors.; the Constitution Bench was testing the constitutional validity of the legislation impugned therein.
The Statement of Objects and Reasons was used by S.R. Das, J. for ascertaining the conditions prevalent at that time which led to the introduction of the Bill and the extent and urgency of the evil which was sought to be remedied, in addition to testing the reasonableness of the restrictions imposed by the impugned provision. In his opinion, it was indeed very unfortunate that the Statement of Objects and Reasons was not placed before the High Court which would have assisted the High Court in arriving at the right conclusion as to the reasonableness of the restriction imposed.
State of West Bengal v. Union of India approved the use of Statement of Objects and Reasons for the purpose of understanding the background and the antecedent state of affairs leading upto the legislation."
Again in the case of Shakti Tubes (supra) this Court continued to use the words "transaction" and "supply orders" as have been referred to in the case of Assam Small Scale Industries Development Corporation Ltd. (supra). It was held that the Act in question cannot be given retrospective effect. On this aspect, this Court observed as under:
"26. 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 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."
(emphasis laid by this Court)
While the Court made this observation, it did not correctly appreciate the intention and purpose of the Act, which was to ensure that the small scale and ancillary industries do not suffer as a result of delay in payment of outstanding money in cases of default. This Court in the case of Modern Industries (supra), interpreted the scope of the Act as under:
"9. The 1993 Act was sequel to a policy statement on small-scale industries made by the Government in Parliament that suitable legislation would be brought to ensure prompt payment of money by buyers to the small industrial units. It was felt that inadequate working capital in a small- scale and ancillary industrial undertaking was causing an endemic problem and such undertakings were very much affected. The Small Scale Industries Board- an apex advisory body on policies relating to small-scale industrial units- also expressed its views that prompt payments of money by buyers should be statutorily ensured and mandatory provisions for payment of interest on the outstanding money, in case of default, should be made.
It was felt that the buyers, if required under law to pay interest, would refrain from withholding payments to small-scale and ancillary industrial undertakings. With these objects and reasons, initially an ordinance, namely, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992 was promulgated by the President on 23-9-1992 and then the Bill was placed before both the Houses of Parliament and the said Bill having been passed, the 1993 Act was enacted. The Preamble to the 1993 Act reads: "An Act to provide for and regulate the payment of interest on delayed payments to small-scale and ancillary industrial undertakings and for matters connected therewith or incidental thereto.
23. The wholesome purpose and object behind the 1993 Act as amended in 1998 is to ensure that the buyer promptly pays the amount due towards the goods supplied or the services rendered by the supplier. It also provides for payment of interest statutorily on the outstanding money in case of default. Section 3, accordingly, fastens liability upon the buyer to make payment for goods supplied or services rendered to the buyer on or before the date agreed upon in writing or before the appointed day and when there is no date agreed upon in writing, the appointed day shall not exceed 120 days from the day of acceptance."
(emphasis laid by this Court)
In the said case, while it was held that the provisions of the Act are prospective in nature based on the decisions of this Court in the case of Assam Small Scale Industries Development Corporation Ltd. (supra) and Shakti Tubes (supra), it was observed that the said cases have no applicability to the facts of the case because while the contract had been entered into on 15.01.1983, there were alterations to it through the years, with the last alteration on 29.04.1995. Since the contract was last altered in 29.04.1995, the Act would be applicable to the facts of the case.
Thus, while the 'transaction', as understood from the meaning sought to be given to them in the judgments of Assam Small Scale Industries Development Corporation Ltd. (supra) and Shakti Tubes (supra) was entered into in that case prior to the Act coming into force, the Act was made applicable to it on the basis that the contract has been altered after the Act came into force. Essentially, what the decision in the case of Modern Industries ends up by introducing a new test for the applicability of the Act, that of 'date of contract alteration'. This Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra), has held as under:
"52... Since the Act envisages that the supplier has 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 of commencement of the Act i.e. 23-9-1992 and not any time prior." The said conclusion of the two Judge Bench has been arrived at without noticing that the term "sale agreement" has not been defined in the Act and is not even a legal test for applicability of the Act.
If a "sale agreement" is taken to be the legal test, the same would be inconsistent with the judgment of this Court in the case of Assam Small Scale Industries Development Corporation Ltd. (supra), wherein though the "sale agreement" was prior to the date of commencement of the Act, this Court held that it was the date of "transaction" and "supply order" test which applied as the transaction was entered into after the commencement of the Act, and if the "sale agreement" test is to be applied, then the seller in the said case would not be entitled to higher rate of interest under the Act.
Further if "sale agreement" is taken to be the legal test, the same would also be inconsistent with the decision of this Court in the case of Modern Industries (supra), wherein the test is neither of "transaction" nor "supply order", but that of "contract alteration". In the said case, the Act was deemed to apply even though the "transaction" had been entered into prior to the coming into force of the Act, the contract had been altered several times, and these alterations had happened after the Act had come into effect.
Therefore, there is a need to reconcile the aforesaid inconsistent legal tests for the applicability of the Act as laid down in the decisions of this Court in the four cases referred to supra. As I have already discussed above, a cumulative reading of the definition clauses of Sections 2, 3 and 4 of the Act as extracted supra leave absolutely no room for doubt that the test for applicability of the Act is not the date of transaction, or supply order, or contract alteration, but quite simply, the date of the delivery of goods or rendering of services.
What is also interesting to note in this case at this stage is point no. 3 of the statement of objects and reasons appended to the Act, which reads as under: "Since Parliament was not in session and circumstances existed which rendered it necessary to take immediate action, the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Ordinance, 1992 (15 of 1992) was promulgated by the President on the 23rd September, 1992."
(emphasis laid by this Court)
Further, Section 4 did not figure in the Act when it was originally passed. It was introduced by way of an amendment (Act 23 of 1998). The statement of objects and reasons of the Amendment Act reads as under: "Though the Act has been in operation for a period of five years, the problem of delays in the payment of outstanding dues to the small scale industrial units continues unabated. There have been widespread discussions on the provisions of the Act among the various interest groups including the Departments of State Governments dealing with industries, banks and small industry associations.
The general consensus emerged from such discussions is that certain amendments to the Act are necessary in order to make it more effective so that the aims and objectives of the Act are achieved." It was in the backdrop of this introduction that Section 4 of the Act was inserted. The phraseology of the Section makes it amply clear that the liability of the buyer arises after the supply of the goods or rendering of services. Section 4 is just a reiteration of the legislative intent as to the applicability of the Act, which is in those cases where the supply of goods or rendering of services took place after the coming into force of the Act.
A cumulative reading of the aforesaid Sections of the Act shows that though a catena of cases which have been extensively adverted to in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) have held that the statutory provisions of the 1993 Act do not have retrospective operation, they have failed to consider the aforesaid statutory aspects in a proper perspective keeping in view the objects and reasons of the Act and the usage of the non obstante clause phrase in Section 4 of the Act which has been extracted supra. The Act was enacted in order to provide a boost to the small scale and ancillary industries, which were suffering as a result of irregular and delayed payments.
A perusal of the statement of objects and reasons of the Act, the relevant portion of which has been extracted supra, makes it clear that the small scale industries were suffering as a result of lack of working capital, which was affecting the economic health of such industries. Prompt payment on the outstanding money, it was felt, that was the need of the hour. In this context, the provisions of Sections 3, 4, 5 of the Act, assume significance. More so in light of the fact that in the definition clause of Section 2 of the Act, the legislature has not defined the words 'transaction' or 'supply order'.
It chose to only give definition to the terms, inter alia, 'appointed day', 'buyer' and 'supplier'. Since the focus of the Act is on delayed payment, which is in consonance with the definition of the term 'appointed day' as well, there is no need to consider when the 'transaction' was entered into or the date of the 'supply order'.
Section 3 of the Act clearly provides that the liability of the buyer to make payment accrues after the supplier supplies goods or renders any services to the buyer. Thus, what was envisaged by the legislature as delayed payment was payment of the outstanding money due to the supplier after the goods had been supplied, and after the date agreed upon or the date of deemed acceptance. A bare reading of the Section makes it clear that the date of entering into the agreement or the date of supply order were not in contemplation of the legislature at all. Thus, it is amply clear from a bare reading of Section 3 that for the purpose of the Act, it does not matter when the contract was entered into, as long as the supply of the goods was after the Act came into force on 23.09.1992. It is in that sense that the question of retrospective application of the Act does not arise at all.
This is further supported by the use of the non obstante clause in Section 4 of the Act. At the cost of repetition, Section 4 of the Act is extracted hereunder:
"4.Date from which and rate at which interest is payable.- Where any buyer fails to make payment of the amount to the supplier, as required under section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at one and half time of prime Lending Rate charged by the State Bank of India."
(emphasis laid by this Court)
The use of the non obstante clause before the term "agreement" also makes it clear that once the money becomes due, which is after the supply of the goods and rendering services, the buyer is liable to pay the statutory interest on the delayed payment to the supplier no matter what is contained in the agreement between the buyer and the supplier. Further, even on the issue of retrospectivity, what was required to be examined by this Court in the aforesaid cases was whether by reading the relevant statutory provisions Sections 3, 4, 5 and 6 of the Act, a vested statutory right is conferred. As I have already held that aforesaid provisions of the Act are retroactive in nature therefore, non- consideration of this aspect in Purbanchal Cables & Conductors Pvt. Ltd. (supra) and cases mentioned therein, renders the said judgment sub silentio on this question.
The contention advanced by Mr. Vijay Hansaria, learned senior counsel appearing on behalf of the Electricity Board in this regard cannot be accepted. The learned senior counsel places reliance on the decisions of this Court in the case of State of U.P. & Anr. v. Synthetics And Chemicals Ltd. & Anr.[16], as well as Arnit Das v. State of Bihar[17] in support of the proposition that taking note of the hierarchical character of judicial system in India, it is of paramount importance that law declared by this Court be certain, clear and consistent.
The said proposition of law cannot be doubted at all. But the question required to be examined in Purbanchal Cables & Conductors Pvt. Ltd. (supra) was non- consideration of the relevant statutory provisions of the Act adverted to above and interpreting the same for the purpose of examining as to whether the provisions of the Act would be retroactive in nature and confer a statutory right on the supplier. Non-consideration of the said provisions in a proper perspective would render the abovesaid judgment per incuriam, as held by this Court in State of U.P. & Anr. v. Synthetics And Chemicals Ltd. & Anr. (supra), wherein it was held as under:
"39. But the problem has arisen due to the conclusion in the case of Synthetic and Chemicals. The question was if the State legislature could levy vend fee or excise duty on industrial alcohol. The bench answered the question in the negative as industrial alcohol being unfit for human consumption the State legislation was incompetent to levy any duty of excise either under Entry 51 or Entry 8 of List II of the Seventh Schedule. While doing so the bench recorded the conclusion extracted earlier. It was not preceded by any discussion. No reason or rationale could be found in the order. This gives rise to an important question if the conclusion is law declared under Article 141 of the Constitution or it is per incuriam and is liable to be ignored. 40.'Incuria' literally means 'carelessness'.
In practice per incuriam appears to mean per ignoratium. English courts have developed this principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. (Young v. Bristol Aeroplane Co. Ltd.). Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dubey this Court while pointing out the procedure to be followed when conflicting decisions are placed before a bench extracted a passage from Halsbury's Laws of England incorporating one of the exceptions when the decision of an appellate court is not binding."
Further, the cases referred to in the decision of this Court in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) on the issue of prospectivity have no bearing to the facts of the instant case. In one of the decisions cited in Purbanchal Cables & Conductors Pvt. Ltd. (supra), which is the decision of this Court in the case of Zile Singh v. State of Haryana[18], a three judge bench of this Court held as under:
"It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the 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 of the Legislature to affect existing rights, it is deemed to be prospective only 'nova Constitution futuris formam imponere debet non praeteritis' -- a new law ought to regulate what is to follow, not the past. (See : Principles of Statutory Interpretation by Justice G.P. Singh, Ninth Edition, 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 where the new law is made to cure an acknowledged evil for the benefit of the community as a whole."
(emphasis laid by this Court)
Since a reading of the statement of objects and reasons of the Act makes it very clear that the Act has been enacted for the benefit of the small scale and ancillary industries at large, the decision in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra) does not correctly lay down the position of law with respect to the nature of the Act and its effect on its prospectivity as well. In my considered view, Purbanchal Cables & Conductors Pvt. Ltd. (supra) and other decisions of this Court referred to supra did not consider the important aspect of the matter namely as to whether the provisions of the Act are retroactive or not?
They merely held that the provisions of the Act have no retrospective effect. Thus, the judgments have been rendered sub silentio on this aspect. Therefore, point Nos. 1 and 2 are answered in favour of the appellant- suppliers. Answers to Point Nos. 3,4 and 5: The contention raised by Mr. Vijay Hansaria, the learned senior counsel appearing on behalf of the Electricity Board on the question of res judicata is wholly untenable in law. The substantial question that was in issue in the case of Purbanchal Cables & Conductors Pvt. Ltd. (supra), this Court was not concerned with the issues that arose in Assam Small Scale Industries Development Corporation Ltd. (supra), the findings of which have been extracted supra.
This Court was only concerned with maintainability of a suit with regard to the interest on the basis of the statutory provisions of the Act, in relation to those agreements which had been entered into prior to coming into force of the Act. The issue of whether an appellant is entitled to prefer a claim on the interest as provided under Section 4 was not the issue decided in Purbanchal Cables & Conductors Pvt. Ltd. (supra). Therefore, the decision in the same cannot be said to operate as res judicata.
The material and substantial issue with regard to legal contention was not framed and answered, therefore, it does not operate as res judicata. On the question of limitation, I answer the same in favour of the appellants by placing reliance on Section 19 read with Article 25 of the Limitation Act, 1963, which have been extracted as hereunder:
"19. Effect of payment on account of debt or of interest on legacy - Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when payment was made:
Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the hand-writing of, or in a writing signed by the person making the payment.
Explanation - For the purposes of this section, -
(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent of produce of such land shall be deemed to be a payment;
(b) "debt" does not include money payable under a decree or order of a court.
25. Acquisition of easement by prescription -
(1) Where the access and use of light or air to and for any building have been peaceably enjoyed therewith as an easement, and as of right, without interruption and for twenty years, and where any way or watercourse or the use of any water or any other easement (whether affirmative or negative) has been peaceably and openly enjoyed by any person claiming title thereto as an easement and as of right without interruption and for twenty years, the right to such access and use of light or air, way, watercourse, use of other easement shall be absolute and indefeasible.
(2) Each of the said periods of twenty years shall be taken to be a period ending within two years next before the institution of the suit wherein the claim to which such period relates is contested.
(3) Where property over which a right is claimed under sub-section (1) belongs to the Government that sub-section shall be read as if for the words "twenty years" the words "thirty years" were substituted. Explanation - Nothing is an interruption within the meaning of this section, unless where there is an actual discontinuance of the possession or enjoyment by reason of an obstruction by the act of some person other than the claimant and unless such obstruction is submitted to or acquiesced in for one year after the claimant has notice thereof and of the person making or authorising the same to be made."
Taking into consideration the supply order against the actual supply of the goods with payment made, the last payment was made on 05.03.1994. Thus, time began to run from that date. Taking into consideration the fact that the date of the institution of the suit is 10.01.1997, the suit has been filed within the period of limitation as prescribed in the Limitation Act. Though on this aspect of the matter no finding has been recorded either by the Trial Court or by the High Court, I answer the question in favour of the appellants. In view of the judgments of this Court referred to supra, upon which strong reliance has been placed by Mr. Ajit Sinha, the learned senior counsel, on the question of maintainability of the appeal filed by M/S Trussees & Towers Pvt. Ltd questioning the correctness of the judgment and order passed in the Review Petition, we hold the same to be maintainable in law. Answer to Point no. 6:
For the reasons stated supra, I answer the poin