M/S SHANTI CONDUCTORS(P) LTD. & ANR. Vs. ASSAM STATE ELECTRICITY BOARD & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 8442-8443 of 2016, Judgment Date: Aug 31, 2016
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE
JURISDICTION
CIVIL APPEAL NOS.8442-8443 OF 2016
(Arising out of SLP (C) Nos.9924-9925 of 2013)
M/S SHANTI CONDUCTORS(P) LTD. ANR. ………APPELLANTS
Vs.
ASSAM STATE ELECTRICITY BOARD & ORS. ……RESPONDENTS
WITH
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)
AND
CIVIL APPEAL NO.8450 OF 2016
(Arising out of SLP (C) No. 538 of 2016)
J U D G M E N T
V. GOPALA GOWDA, J.
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)
Section 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 points framed in these appeals
in favour of the appellants as stated above. The appeals are accordingly
allowed. All pending applications are disposed of.
In the Civil Appeals arising out of SLP (C) Nos. 9924-9925 of
2013,vide order dated 17.02.2015, the appellants M/s Shanti Conductors were
directed to pay an amount of Rs.38,70,000/- back to the respondents. The
respondents shall refund the amount to the appellants with 9% interest per
annum within six weeks from the date of receipt of the copy of this Order.
……………………………………………J.
[V. GOPALA GOWDA]
New Delhi,
August 31, 2016
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 8442-8443 OF 2016
[Arising out of SLP [C] Nos.9924-25 of 2013]
M/s. Shanti Conductors (P) Ltd. & Anr. … Appellants
Vs.
Assam State Electricity Board & Ors. … Respondents
With
CIVIL APPEAL NO.8445 OF 2016
[Arising out of SLP [C] No.15274 of 2013]
With
CIVIL APPEAL NO.8448 OF 2016
[Arising out of SLP [C] No.9898 of 2014]
And
CIVIL APPEAL NO.8450 OF 2016
[Arising out of SLP [C] No.538 of 2016]
J U D G M E N T
ARUN MISHRA, J.
1. Leave granted.
2. I have gone through the draft judgment written by my learned Brother.
However, I find myself respectfully unable to agree with the opinion
expressed therein for the reasons mentioned hereinafter.
3. It is not in dispute that the Assam State Electricity Board had
placed supply orders on 31.3.1992 and 13.5.1992 and the Act called “The
Interest on Delayed Payments to Small Scale and Ancillary Industrial
Undertakings Act, 1993” (hereinafter referred to as “the Act of 1993”) came
into force with effect from 23.9.1992. The supply was completed on
4.10.1993. On 5.3.1994 last payment had been made. Suit for recovery of
interest amounting to Rs.53.68 lacs was filed on 10.1.1997.
4. My learned Brother has held that the decisions in Purbanchal Cables &
Conductors Pvt. Ltd. v. Assam State Electricity Board & Anr. (2012) 7 SCC
462, Assam Small Scale Industries Development Corporation Ltd. & Ors. v.
J.D. Pharmaceuticals & Anr. (2005) 13 SCC 19 and Shakti Tubes v. State of
Bihar & Ors. (2009) 7 SCC 673 etc. have not been correctly decided,
therefore are per incuriam and sub silentio. The Act has retroactive
operation. It has also been opined that the decision in Purbanchal Cables
(supra) decided along with Shanti Conductors does not operate as res
judicata.
5. It is apparent from the name of the Act itself that the same is to
provide interest on delayed payments to small scale and ancillary
industrial undertakings. The Act has as many as 11 sections. Section 1
deals with the extent of operation and date of its commencement. The Act
came into force on 23rd day of September, 1992. ‘Appointed day’ has been
defined in section 2(b) and ‘buyer’ in section 2(c). Both the definitions
are extracted hereunder :
“2(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;
(c) “buyer” means whoever buys any goods or receives any services from a
supplier for consideration;”
6. Section 3 deals with the liability of buyer to make payment. Payment
has to be made by the buyer before the appointed day if there is no
agreement to the contrary in writing between the buyer and supplier.
Section 3 is extracted hereunder :
“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 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.”
7. Section 4 deals with the date from which and rate at which interest
is payable. It is provided in section 4 itself that in case payment is not
made in terms of section 3 notwithstanding any agreement to the contrary or
any law for the time being in force, the buyer shall be liable to pay
interest from the appointed day or from the date immediately following the
date agreed to, at one-and-half time of Prime Lending Rate charged by the
State Bank of India which is available to the best borrowers of the bank.
Section 4 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.
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.”
8. Section 5 contains a non-obstante clause with regard to agreement to
the contrary or any law for the time being in force in case buyer fails to
pay before the appointed day. The buyer shall be liable to pay compound
interest, with monthly interest, at the rate mentioned in section 4.
Section 5 is extracted hereunder :
“5. 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.”
9. Section 6 deals with recovery of amount payable under sections 4 and
5 which is recoverable by way of a suit or other proceeding under any law
for the time being in force. Section 7 of the Act contains the provision
with respect to appeal. The buyer-appellant has to deposit 75 per cent of
the amount in terms of the decree, award or, other order in the appeal.
Same is a condition precedent for entertainment of the appeal. Section 7A
and 7B deal with establishment of Industry Facilitation Council and its
composition. Section 7C requires the State Government to lay before the
State Legislature every notification and rule made by the State Government
after it is issued or made. Section 8 requires a buyer in case of audit to
specify the amount together with the interest in his annual statement of
accounts as remains unpaid to any supplier at the end of each accounting
year. Section 9 provides that interest not to be allowed as deduction from
income of a buyer under the provisions of Income Tax Act. The Act has the
overriding effect over other laws as provided in section 10. Section 11
contains the provisions with respect to repeal and saving.
10. It is apparent from the provisions of the Act noticed above that none
of the provisions in the various sections indicates that the Act is
retrospective in operation in any manner whatsoever. On the contrary, the
Act requires payment to be made by a buyer before the appointed day that is
the day following immediately after the expiry of 30 days from the date of
acceptance or the deemed acceptance of the delivery of the goods or
services. The day of acceptance means day of actual delivery of goods or
rendering of service or where buyer has objected within 30 days, the day on
which such objection is removed by the supplier. Where no objection is
raised in writing by the buyer regarding acceptance of goods or services
within 30 days, the appointed day would be counted from the day on which
actual delivery of goods had been made or rendering of services. These
provisions are not capable of being put into retrospective operation. The
provisions of requirement of making the payment before the appointed day,
raising of objection within 30 days and deemed acceptance are not capable
of being put into retrospective operation. Section 3 deals with respect to
liability of the buyer to make the payment with reference to appointed day.
The payment has to be made on or before the date agreed upon between the
buyer and supplier in writing or where there is no agreement, before the
appointed day. The proviso further bars the agreement to extend the payment
beyond 120 days from the day of acceptance or the day of deemed acceptance.
Thus the provisions contained in section 3 also are prospective in nature.
None of the provisions at all speak of the existing liability/agreement as
on the date of commencement of the Act. Section 4 deals with the date from
which and the rate at which interest is payable. A bare reading of the same
leaves no iota of doubt that the Act is prospective in nature and the
higher interest rate is applicable only on failure to make the payment as
envisaged by the Act under section 3. If the buyer fails to make the
payment as required under section 3, the liability to make the payment with
interest arises. Section 4 contains non-obstante clause and overrides
agreement or any other law to the contrary. A conjoint reading of the
provisions of appointed day, sections 3 and 4 makes it clear that the Act
is prospective in operation. It has no retrospective operation or
retroactive operation. The Act does not contain any provision with respect
to the existing agreements as on the date of commencement of the Act that
would be governed by the provisions in force at the relevant time. The Act
does not have the effect of invalidating prior agreements. The liability to
make the payment of higher interest cannot operate retrospectively. The
provisions of the Act are capable of being complied with prospectively that
is from the date on which Ordinance initially came into force i.e.
23.9.1992 from which date the Act has been given effect. There is
absolutely no indication in the Act that it has retrospective operation or
retroactive operation.
Taking note of the various provisions of the Act, it is apparent that the
Act of 1993 is not retrospective in operation.
11. In ‘Principles of Statutory Interpretation’ 14th Edn. by Justice G.P.
Singh revised by Justice A.K. Patnaik, on the basis of due consideration of
catena of judicial decisions, following discussion has been made at page
580, para 2(a)(ii) with respect to retrospectivity of a statute :
“2. RETROSPECTIVE OPERATION
General principles
xxx xxx xxx
Statutes dealing with substantive rights.- It is cardinal principle of
construction that every statute is prima facie prospective unless it is
expressly or by necessary implication made to have retrospective operation.
There is a presumption of prospectivity articulated in the legal maxim
‘nova constitutio futuris formam imponere debet non praeteritis’, i.e. ‘a
new law ought to regulate what is to follow, not the past’, and this
presumption operates unless shown to the contrary by express provision in
the statute or is otherwise discernible by necessary implication. 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 constitutio futuris formam imponere debet non praeteritis’.
In the words of LORD BLANESBURG, “provisions which touch a right in
existence at the passing of the statute are not to be applied
retrospectively in the absence of express enactment or necessary
intendment.” “Every statute, it has been said”, observed LOPES, L.J.,
“which takes away or impairs vested rights acquired under existing laws, or
creates a new obligation or imposes a new duty, or attaches a new
disability in respect of transactions already past, must be presumed to be
intended not to have a retrospective effect.”
12. The Act of 1993 contains no provision which it can be said to be
expressly or by necessary implication of retrospective operation. The Act
has the effect of overriding the laws and the agreements, thus would not
affect the law and the agreements which prevailed before coming into force
of the Act. As a transaction/agreement is valid when made, it cannot be
invalidated by subsequent prohibition or provision.
13. This Court in Assam Small Scale Industries Development Corporation
Ltd. (supra) has considered the applicability of the Act of 1993 and has
laid down thus :
“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.
39. xxx xxx xxx
40. We, therefore, are of the opinion that in relation to the transactions
made prior to coming into force of the said Act, simple interest at the
rate of 9% per annum, which was the bank rate at the relevant time, shall
be payable both prior to date of filing of the suit and pendente lite and
as future interest in terms of Section 34 of the Code of Civil Procedure.
Interest, however, will be payable in terms of the provisions of the 1993
Act (compound interest at the rate of 23.5% per annum) in relation to the
transactions made after coming into force of the Act, both in respect of
interest payable up to the date of institution of the suit and pendente
lite and till realisation. The judgment and decree to that extent requires
to be modified. It is directed accordingly.”
This Court has clearly laid down that when payments are not made in terms
of section 3, section 4 would apply. The Act came into force w.e.f.
23.9.1992 and would not apply to transactions which took place prior to
that date and interest at the rate of 23 per cent was disallowed on the
transactions ‘entered’ into between June, 1991 and 23.9.1992.
14. In Shakti Tubes (supra) again, the question whether the Act is
prospective or retrospective, came up for consideration before a Division
Bench of this Court. Supply orders were made on 16.7.1992. Decree for
payment of interest was passed at the rate of 24 per cent in terms of the
Act of 1993. This Court held that the Act is prospective and is not
applicable to cases where supply orders were placed before the date of
commencement of the Act. Therefore, it was held that the provisions of
section 34 CPC would be applicable. The Court has consciously held after
elaborate consideration of the provisions that the Act is applicable with
reference from the date of initiation of the transaction, that is when the
supply order was made and not with reference to date of completion of the
transaction. This Court has also explained the term ‘transaction’ used in
Assam Small Scale Industries’ case (supra) to mean date of supply order.
This Court has also considered retrospective applicability of ‘welfare
legislation’. This Court has followed the decision in Assam Small Scale
Industries’s case (supra) and has laid down in Shakti Tubes (supra) thus :
“17. In the light of the said facts in Assam Small Scale Industries case
(2005) 13 SCC 19, it was recorded in para 37 of the judgment that while the
Act came into effect from 23-9-1992, the supply orders were placed only in
respect of Sl. Nos. 1 to 26 immediately and before coming into effect of
the Act and rest of the supply orders, namely, supply orders at Sl. Nos. 27
to 71 were placed between 22-10-1992 to 19-6-1993 which were subsequent to
the date when the Act came into force. In that context, it was clearly
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, Sl. Nos. 1 to 26 i.e. supply orders between 5-6-
1991 to 28-7-1992 being prior to 23-9-1992 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 the transactions at Sl. Nos. 27 to 71 only i.e. supply
orders between 22-10-1992 to 19-6-1993, would attract the
provisions of the Act. Therefore, those supply orders which were issued by
the Corporation between 22-10-1992 to 19-6-1993 were held to be the
transactions which would be entitled to get the benefit of the provisions
of the Act.
18. In our considered opinion, the ratio of the aforesaid decision in Assam
Small Scale Industries case (supra) is clearly applicable and would
squarely govern the facts of the present case as well. The said decision
was rendered by this Court after appreciating the entire facts as also 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 circumstances of the case.
x x x x x
20. Being faced with the aforesaid situation, the learned Senior Counsel
appearing for the appellant-plaintiff sought to 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 force of the Act, the
appellant-plaintiff would be entitled to the benefit of Sections 4 and 5 of
the Act. Refuting the aforesaid submission, the learned Senior Counsel
appearing for the respondents submitted that the aforesaid contention is
completely misplaced. He pointed out 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 or the
other.
21. 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 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 CPC.
23. At one stage, the learned Senior Counsel appearing for the appellant-
plaintiff submitted that the Act in question is a 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.
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.
“13. 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. [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 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 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 where the new law is made to cure an
acknowledged evil for the benefit of the community as a whole (ibid., p.
440).”*
25. In Zile Singh v. State of Haryana (2004) 8 SCC 1 at p. 9, this Court
observed as follows: (SCC pp. 9-10, paras 15-16)
“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 necessary
implication from the language employed. If it is a necessary 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 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 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)
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 explanatory and declaratory in nature. A classic
illustration is Attorney General v. Pougett (1816) 2 Price 381 : 146 ER 130
(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 this omission another Customs Act (53 Geo. 3,
c. 105) was passed later in the same year. Between the passing of 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 Act; but the
gross mistake of the omission of the weight, 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 passed, and
they must be taken together as if they were one and the same Act;’ (Price
at p. 392)”
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.”
15. The case of appellant - M/s. Shanti Conductors Pvt. Ltd. arose out of
same lis which was decided along with Purbanchal Cables (supra) in which a
Division Bench of this Court has similarly answered the questions involved
conclusively before remanding the matter to High Court for deciding the
appeals. The factual background of M/s. Shanti Conductors (P) Ltd. case has
been duly considered by this Court. It is apparent from the judgment that
this Court has dealt with appeals filed by both the appellants and with
respect to retrospective operation of the Act has laid down thus :
“Retrospective operation of the Act
32. The fundamental rule of construction is the same for all statutes
whether fiscal or otherwise. The underlying principle is that the meaning
and intention of a statute must be collected from the plain and unambiguous
expression used therein rather from any notion. To arrive at the real
meaning, it is always necessary to get an exact conception, scope and
object of the whole Act.
33. In Zile Singh v. State of Haryana (2004) 8 SCC 1 this Court observed
that there were four relevant factors which needed to be considered while
considering whether a statute applied prospectively or retrospectively:
(SCC p. 9, para 15)
“15. … Four factors are suggested as relevant: (i) general scope and
purview of the statute; (ii) the remedy sought to be applied; (iii) the
former state of the law; and (iv) what it was the legislature
contemplated.”
34. The general scope of the Act has been discussed above. The remedy
sought to be applied by the Act is made clear in the Statement of Objects
and Reasons, in which, it is stated that due to the delayed payments by
buyers to the small-scale industries, their working capital was being
affected, causing great harm to the small-scale industries in general. This
Act was passed by Parliament to impose a heavy interest on the buyers who
delayed the payments of the small-scale industries, in order to deter the
buyers from delaying the payments after accepting the supplies made by the
suppliers.
35. The policy statement of the Ministry of Micro, Small and Medium
Enterprises dated 6-8-1991, reads:
“3. (3.4) A beginning has been made towards solving the problem of delayed
payments to small industries by setting up of ‘factoring’ services through
Small Industries Development Bank of India (SIDBI). Network of such
services would be set up throughout the country and operated through
commercial banks. A suitable legislation will be introduced to ensure
prompt payment of small industries’ bills.”
36. Keeping in view the above object, the Act was enacted by Parliament.
Before such enactment, it is required to examine rights of the supplier qua
the buyer prior to the commencement of the Act. In case of delayed payment,
the supplier, prior to the commencement of the Act, was required to file a
suit for the payment of the principal amount, and could claim interest
along with the principal amount. The supplier could avail of the same under
Section 34 of the Code of Civil Procedure, 1908 (hereinafter referred to as
“CPC”), Section 61 of the Sale of Goods Act, 1930 and Section 3 of the
Interest Act, 1978.
37. In other words, the supplier whose payment was delayed by the buyer
prior to the commencement of the Act, could file a suit for payment of the
principal amount along with the interest. The supplier, thus, had the
vested right to claim the principal amount along with interest thereon in
case of a delay in payment by the buyer and it was the discretion of the
court to award this interest.
38. The court has the discretion to award interest along with the principal
amount and the same is clear from the use of the word “may” in all the
three provisions cited above. Section 34 CPC is the main provision under
which interest could be awarded by the court and Section 61 of the Sale of
Goods Act, 1930 is an offshoot of Section 34 CPC. Section 3 of the Interest
Act, 1978 also makes the Interest Act subject to the provision of Section
34 CPC. Hence, we can safely deduce that the interest awarded is a
discretion exercised by the court, on the principal amount claimed, in case
of a suit for recovery of payment by the supplier if such payment is
delayed by the buyer.
39. With the commencement of the Act, a new vested right exists with the
supplier, that being, if there is delay in payment after the acceptance of
the goods by the buyer, the supplier can file a suit for claiming interest
at a higher rate, as prescribed by the Act. This position has been approved
by this Court in Modern Industries (2010) 5 SCC 44. If a suit for interest
simpliciter is maintainable as held by this Court in Modern Industries
(supra), then a new liability qua the buyer is created with the
commencement of the Act giving a vested right to the supplier in case of
delayed payment. In other words, if there is a delayed payment by the
buyer, then a right to claim a higher rate of interest as prescribed by the
Act accrues to the supplier.
40. The phrase “vested right” has been defined by this Court in Bibi
Sayeeda v. State of Bihar (1996) 9 SCC 516 as: (SCC p. 527, para 17)
“17. The word ‘vested’ is defined in Black’s Law Dictionary (6th Edn.) at
p. 1563 as:
‘Vested; fixed; accrued; settled; absolute; complete. Having the character
or given the rights of absolute ownership; not contingent; not subject to
be defeated by a condition precedent.’
Rights are ‘vested’ when right to enjoyment, present or prospective, has
become property of some particular person or persons as present interest;
mere expectancy of future benefits, or contingent interest in property
founded on anticipated continuance of existing laws, does not constitute
vested rights. In Webster’s Comprehensive Dictionary (International Edn.)
at p. 1397 ‘vested’ is defined as:
‘[L]aw held by a tenure subject to no contingency; complete; established by
law as a permanent right; vested interests.’”
41. A statute creating vested rights is a substantive statute. This Court,
in Dhenkanal Minor Irrigation Division v. N.C. Budharaj (2001) 2 SCC 721,
opined: (SCC p. 742, para 23)
“23. … ‘Substantive law’, is that part of the law which creates, defines
and regulates rights in contrast to what is called adjective or remedial
law which provides the method of enforcing rights. Decisions, including the
one in Jena case13 while adverting to the question of substantive law has
chosen to indicate by way of illustration laws such as Sale of Goods Act,
1930 [Section 61(2)], Negotiable Instruments Act, 1881 (Section 80), etc.
The provisions of the Interest Act, 1839, which prescribe the general law
of interest and become applicable in the absence of any contractual or
other statutory provisions specially dealing with the subject, would also
answer the description of substantive law.”
42. In Thirumalai Chemicals Ltd. v. Union of India (2011) 6 SCC 739 this
Court comparing substantial law with procedural law, stated: (SCC pp. 748-
49, paras 23-24)
“23. Substantive law refers to a body of rules that creates, defines and
regulates rights and liabilities. Right conferred on a party to prefer an
appeal against an order is a substantive right conferred by a statute which
remains unaffected by subsequent changes in law, unless modified expressly
or by necessary implication. Procedural law establishes a mechanism for
determining those rights and liabilities and a machinery for enforcing
them. Right of appeal being a substantive right always acts prospectively.
It is trite law that every statute is prospective unless it is expressly or
by necessary implication made to have retrospective operation.
24. Right of appeal may be a substantive right but the procedure for filing
the appeal including the period of limitation cannot be called a
substantive right, and an aggrieved person cannot claim any vested right
claiming that he should be governed by the old provision pertaining to
period of limitation. Procedural law is retrospective meaning thereby that
it will apply even to acts or transactions under the repealed Act.”
43. In Shyam Sunder v. Ram Kumar (2001) 8 SCC 24, a Constitution Bench of
this Court discussing the scope and ambit of a declaratory law has
observed: (SCC p. 49, para 39)
“39. Lastly, it was contended on behalf of the appellants that the amending
Act whereby new Section 15 of the Act has been substituted is declaratory
and, therefore, has retroactive operation. Ordinarily when an enactment
declares the previous law, it requires to be given retroactive effect. The
function of a declaratory statute is to supply an omission or to explain a
previous statute and when such an Act is passed, it comes into effect when
the previous enactment was passed. The legislative power to enact law
includes the power to declare what was the previous law and when such a
declaratory Act is passed, invariably it has been held to be retrospective.
Mere absence of use of the word ‘declaration’ in an Act explaining what was
the law before may not appear to be a declaratory Act but if the court
finds an Act as declaratory or explanatory, it has to be construed as
retrospective. Conversely where a statute uses the word ‘declaratory’, the
words so used may not be sufficient to hold that the statute is a
declaratory Act as words may be used in order to bring into effect new
law.”
44. In Katikara Chintamani Dora v. Guntreddi Annamanaidu (1974) 1 SCC 567
this Court held: (SCC p. 582, para 50)
“50. It is well settled that ordinarily, when the substantive law is
altered during the pendency of an action, rights of the parties are decided
according to law, as it existed when the action was begun unless the new
statute shows a clear intention to vary such rights (Maxwell on
Interpretation of Statutes, 12th Edn. 220). That is to say, ‘in the absence
of anything in the Act, to say that it is to have retrospective operation,
it cannot be so construed as to have the effect of altering the law
applicable to a claim in litigation at the time when the Act is passed’.”
45. In Govind Das v. ITO (1976) 1 SCC 906 this Court speaking through P.N.
Bhagwati, J. (as he then was) held: (SCC p. 914, para 11)
“11. Now it is a well-settled rule of interpretation hallowed by time and
sanctified by judicial decisions that, unless the terms of a statute
expressly so provide or necessarily require it, retrospective operation
should not be given to a statute so as to take away or impair an existing
right or create a new obligation or impose a new liability otherwise than
as regards matters of procedure. The general rule as stated by Halsbury in
Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several
decisions of this Court as well as English courts is that all statutes
other than those which are merely declaratory or which relate only to
matters of procedure or of evidence are prima facie prospective and
retrospective operation should not be given to a statute so as to affect,
alter or destroy an existing right or create a new liability or obligation
unless that effect cannot be avoided without doing violence to the language
of the enactment. If the enactment is expressed in language which is fairly
capable of either interpretation, it ought to be construed as prospective
only.”
46. In Jose Da Costa v. Bascora Sadasiva Sinai Narcornim (1976) 2 SCC 917
this Court held: (SCC p. 925, para 31)
“31. Before ascertaining the effect of the enactments aforesaid passed by
the Central Legislature on pending suits or appeals, it would be
appropriate to bear in mind two well-established principles. The first is
that ‘… while provisions of a statute dealing merely with matters of
procedure may properly, unless that construction be textually inadmissible,
have retrospective effect attributed to them, provisions which touch a
right in existence at the passing of the statute are not to be applied
retrospectively in the absence of express enactment or necessary
intendment.’ (See Delhi Cloth and General Mills Co. Ltd. v. CIT (1926-27)
54 IA 421, IA p. 425.)
The second is that a right of appeal being a substantive right the
institution of a suit carries with it the implication that all successive
appeals available under the law then in force would be preserved to the
parties to the suit throughout the rest of the career of the suit. There
are two exceptions to the application of this rule viz. (1) when by
competent enactment such right of appeal is taken away expressly or
impliedly with retrospective effect and (2) when the court to which appeal
lay at the commencement of the suit stands abolished (see Garikapati
Veeraya v. N. Subbiah Choudhry AIR 1957 SC 540 and Colonial Sugar Refining
Co. Ltd. v. Irving 1905 AC 369 : (1904-07) All ER Rep Ext 1620 [PC]).”
47. In K. Kapen Chako v. Provident Investment Co. (P) Ltd. (1977) 1 SCC 593
this Court discussing the dicta of the English courts on the aspect of
retrospectivity observed: (SCC pp. 602-03, paras 37-39)
“37. A statute has to be looked into for the general scope and purview of
the statute and at the remedy sought to be applied. In that connection the
former state of the law is to be considered and also the legislative
changes contemplated by the statute. Words not requiring retrospective
operation so as to affect an existing statutory provision prejudicially
ought not be so construed. It is a well-recognised rule that statute should
be interpreted if possible so as to respect vested rights. Where the effect
would be to alter a transaction already entered into, where it would be to
make that valid which was previously invalid, to make an instrument which
had no effect at all, and from which the party was at liberty to depart as
long as he pleased, binding, the prima facie construction of the Act is
that it is not to be retrospective. (See Gardner v. Lucas (1878) 3 AC 582
(HL).
38. In Moon v. Durden (1848) 2 Ex 22 : 154 ER 389 a question arose as to
whether Section 18 of the Gaming Act, 1845 which came into effect in August
1845 was retrospective so as to defeat an action which had been commenced
in June 1845. The relevant section provided that no suit shall be brought
or maintained for recovering any such sum of money alleged to have been won
upon a wager. It was held that it was not retrospective. Parke, B. said:
(ER p. 398)
‘It seems a strong thing to hold, that the legislature could have meant
that a party, who, under a contract made prior to the Act, had as perfect a
title to recover a sum of money, as he had to any of his personal property,
should be totally deprived of it without compensation.’
39. Again in Smithies v. National Assn. of Operative Plasterers (1909) 1 KB
310, Section 4 of the Trade Disputes Act, 1906 which enacted that an action
for tort against a trade union shall not be entertained by any court was
held not to prevent the courts from hearing and giving judgment in actions
of that kind begun before the passing of the Act. It is a general rule that
when the legislature alters the rights of parties by taking away or
conferring any right of action, its enactments, unless in express terms
they apply to pending actions, do not affect them. But there is an
exception to this rule, namely, where enactments merely affect procedure
and do not extend to rights of action. See Suche (Joseph) & Co. Ltd., In re
(1875) 1 Ch D 48. If the legislature forms a new procedure alterations in
the form of procedure are retrospective unless there is some good reason or
other why they should not be. In other words, if a statute deals merely
with the procedure in an action, and does not affect the rights of the
parties it will be held to apply prima facie to all actions, pending as
well as future.”
48. In Dahiben v. Vasanji Kevalbha 1995 Supp (2) SCC 295 this Court held:
(SCC pp. 299-300, para 12)
“12. As the amendment in question is not to a procedural law, it may be
stated that the settled principle of interpretation, where substantive law
is amended, is that the same does not operate retrospectively unless it is
either expressly provided or the same follows by necessary implication.
Lest it be thought that a vested right cannot be taken away at all by
retrospective legislation, reference may be made to Rafiquennessa v. Lal
Bahadur Chetri AIR 1964 SC 1511 where it was stated that even where vested
rights are affected, legislature is competent to take away the same by
means of retrospective legislation; and retrospectivity can be inferred
even by necessary implication.”
49. In Zile Singh v. State of Haryana (2004) 8 SCC 1 this Court examined
the various authorities on statutory interpretation and concluded: (SCC pp.
8-9, paras 13-14)
“13. 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 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 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 where the new law is made to cure an
acknowledged evil for the benefit of the community as a whole (ibid., p.
440).
14. The presumption against retrospective operation is not applicable to
declaratory statutes…. In determining, therefore, the nature of the Act,
regard must be had to the substance rather than to the form. If a new Act
is ‘to explain’ an earlier Act, it would be without object unless construed
retrospectively. An explanatory Act is generally passed to supply an
obvious omission or to clear up doubts as to the meaning of the previous
Act. It is well settled that if a statute is curative or merely declaratory
of the previous law retrospective operation is generally intended…. An
amending Act may be purely declaratory to clear a meaning of a provision of
the principal Act which was already implicit. A clarificatory amendment of
this nature will have retrospective effect (ibid., pp. 468-69).”
50. In State of Punjab v. Bhajan Kaur (2008) 12 SCC 112 this Court held:
(SCC p. 116, para 9)
“9. A statute is presumed to be prospective unless held to be
retrospective, either expressly or by necessary implication. A substantive
law is presumed to be prospective. It is one of the facets of the rule of
law.”
51. There is no doubt about the fact that the Act is a substantive law as
vested rights of entitlement to a higher rate of interest in case of
delayed payment accrues in favour of the supplier and a corresponding
liability is imposed on the buyer. This Court, time and again, has observed
that any substantive law shall operate prospectively unless retrospective
operation is clearly made out in the language of the statute. Only a
procedural or declaratory law operates retrospectively as there is no
vested right in procedure.
52. In the absence of any express legislative intendment of the
retrospective application of the Act, and by virtue of the fact that the
Act creates a new liability of a high rate of interest against the buyer,
the Act cannot be construed to have retrospective effect. 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.”
16. This Court in Purbanchal Cables (supra) has also taken note of
earlier decisions of Assam Small Scale Industries’ case (supra) and Shakti
Tubes (supra) and after referring to them has rejected the submission that
the Court in Assam Small Scale Industries (supra) did not consider and
decide the issue whether the Act would apply to those supply orders placed
prior to commencement of the Act and the supply being made after
commencement of the Act. This Court has held that :
“55. Assam Small Scale Industries (2005) 13 SCC 19 has been followed in
Rampur Fertiliser Ltd. (2009) 12 SCC 324 as well as Modern Industries
(2010) 5 SCC 44. Therefore, we cannot agree with the submission that this
Court in Assam Small Scale Industries Development Corpn. Case (2005) 13 SCC
19 did not specifically consider and decide the issue of whether the Act
would apply to such of those contracts executed prior to the commencement
of the Act but the supplies being made after the commencement of the Act.”
17. This Court in the case of Purbanchal Cables (supra) has also
considered the effect of the binding precedent and sub silentio ruling
since it was urged that Assam Small Scale Industries case (supra) and
Shakti Tubes (supra) did not lay down the law correctly. This Court has
rejected the submission thus :
“Binding precedent or sub silentio ruling
56. However, the learned Senior Counsel appearing for the suppliers, Shri
Rakesh Dwivedi and Shri Sunil Gupta would contend that the decision of this
Court is not a binding precedent.
57. Shri Rakesh Dwivedi, learned Senior Counsel would submit that the
decisions of this Court in Assam Small Scale Industries (2005) 13 SCC 19
and Shakti Tubes (2009) 7 SCC 673 regarding the prospective operation of
the Act were not law declared under Article 141, as the points under
consideration in those cases were different from the issues raised in these
appeals. He would further submit that the question about operation of the
Act for contracts concluded prior to 23-9-1992 was not even a question,
which came up for consideration before the Court and was not even argued by
the learned counsel appearing in that matter, and hence would not form a
part of the ratio of the decision. He would further submit that the
question was answered without adequately considering the provisions of the
beneficial legislation and therefore, it cannot be treated as a binding
precedent.
58. Shri Sunil Gupta, learned Senior Counsel while adopting the argument
advanced by Shri Dwivedi on this issue, would submit that there are two
exceptions to the doctrine of precedent, namely, per incuriam and sub
silentio. It was on the strength of the latter that Shri Gupta would submit
that the decisions of this Court in Assam Small Scale Industries (2005) 13
SCC 19 and Shakti Tubes (2009) 7 SCC 673 cannot be considered as
precedents. The learned Senior Counsel would state that a decision would
not apply as a precedent when the court has failed to consider the objects
and purpose of the Act in question and also certain previous judgments of
this Court. He would further contend that the aforesaid judgments suffer
from the sub silentio principle being rendered without full and adequate
arguments on the issue. The learned Senior Counsel would also state that
the Court did not look at the issue from the viewpoint canvassed presently.
59. The learned Senior Counsel would rely on the decision of this Court in
MCD v. Gurnam Kaur (1989) 1 SCC 101. This Court has held: (SCC pp. 110-11,
paras 11-12)
“11. Pronouncements of law, which are not part of the ratio decidendi are
classed as obiter dicta and are not authoritative. With all respect to the
learned Judge who passed the order in Jamna Das case [WPs Nos. 981-82 of
1984 decided on 29.3.1985 (SC)] and to the learned Judge who agreed with
him, we cannot concede that this Court is bound to follow it. It was
delivered without argument, without reference to the relevant provisions of
the Act conferring express power on the Municipal Corporation to direct
removal of encroachments from any public place like pavements or public
streets, and without any citation of authority. Accordingly, we do not
propose to uphold the decision of the High Court because, it seems to us
that it is wrong in principle and cannot be justified by the terms of the
relevant provisions. A decision should be treated as given per incuriam
when it is given in ignorance of the terms of a statute or of a rule having
the force of a statute. So far as the order shows, no argument was
addressed to the court on the question whether or not any direction could
properly be made compelling the Municipal Corporation to construct a stall
at the pitching site of a pavement squatter. Professor P.J. Fitzgerald,
editor of Salmond on Jurisprudence, 12th Edn. explains the concept of sub
silentio at p. 153 in these words:
A decision passes sub silentio, in the technical sense that has come to be
attached to that phrase, when the particular point of law involved in the
decision is not perceived by the court or present to its mind. The court
may consciously decide in favour of one party because of Point A, which it
considers and pronounces upon. It may be shown, however, that logically the
court should not have decided in favour of the particular party unless it
also decided Point B in his favour; but Point B was not argued or
considered by the court. In such circumstances, although Point B was
logically involved in the facts and although the case had a specific
outcome, the decision is not an authority on Point B. Point B is said to
pass sub silentio.
12. In Gerard v. Worth of Paris Ltd. (1936) 2 All ER 905 (CA), the only
point argued was on the question of priority of the claimant’s debt, and,
on this argument being heard, the court granted the order. No consideration
was given to the question whether a garnishee order could properly be made
on an account standing in the name of the liquidator. When, therefore, this
very point was argued in a subsequent case before the Court of Appeal in
Lancaster Motor Co. (London) Ltd. v. Bremith Ltd. (1941) 1 KB 675 : (1941)
2 All ER 11 (CA), the Court held itself not bound by its previous decision.
Sir Wilfrid Greene, M.R., said that he could not help thinking that the
point now raised had been deliberately passed sub silentio by counsel in
order that the point of substance might be decided. He went on to say that
the point had to be decided by the earlier court before it could make the
order which it did; nevertheless, since it was decided ‘without argument,
without reference to the crucial words of the rule, and without any
citation of authority’, it was not binding and would not be followed.
Precedents sub silentio and without argument are of no moment. This rule
has ever since been followed. One of the chief reasons for the doctrine of
precedent is that a matter that has once been fully argued and decided
should not be allowed to be reopened. The weight accorded to dicta varies
with the type of dictum. Mere casual expressions carry no weight at all.
Not every passing expression of a Judge, however eminent, can be treated as
an ex cathedra statement, having the weight of authority.”
60. In State of U.P. v. Synthetics and Chemicals Ltd. (1991) 4 SCC 139, His
Lordship R.M. Sahai, J., in his concurring judgment set out the principles
of per incuriam and sub silentio and has held thus: (SCC pp. 162-63, paras
40-41)
“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. 1944 KB 718
: (1944) 2 All ER 293 (CA) 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 AIR 1962 SC 83 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.
41. Does this principle extend and apply to a conclusion of law, which was
neither raised nor preceded by any consideration. In other words can such
conclusions be considered as declaration of law? Here again the English
courts and jurists have carved out an exception to the rule of precedents.
It has been explained as rule of sub silentio. ‘A decision passes sub
silentio, in the technical sense that has come to be attached to that
phrase, when the particular point of law involved in the decision is not
perceived by the court or present to its mind.’ (Salmond on Jurisprudence,
12th Edn., p. 153). In Lancaster Motor Co. (London) Ltd. v. Bremith Ltd.
(1941) 1 KB 675 : (1941) 2 All ER 11 (CA) the Court did not feel bound by
earlier decision as it was rendered ‘without any argument, without
reference to the crucial words of the rule and without any citation of the
authority’. It was approved by this Court in MCD v. Gurnam Kaur (1989) 1
SCC 101. The Bench held that, ‘precedents sub silentio and without argument
are of no moment’. The courts thus have taken recourse to this principle
for relieving from injustice perpetrated by unjust precedents. A decision
which is not express and is not founded on reasons nor it proceeds on
consideration of issue cannot be deemed to be a law declared to have a
binding effect as is contemplated by Article 141. Uniformity and
consistency are core of judicial discipline. But that which escapes in the
judgment without any occasion is not ratio decidendi. In B. Shama Rao v. UT
of Pondicherry AIR 1967 SC 1480 it was observed, ‘it is trite to say that a
decision is binding not because of its conclusions but in regard to its
ratio and the principles, laid down therein’. Any declaration or conclusion
arrived without application of mind or preceded without any reason cannot
be deemed to be declaration of law or authority of a general nature binding
as a precedent. Restraint in dissenting or overruling is for sake of
stability and uniformity but rigidity beyond reasonable limits is inimical
to the growth of law.”
61. In Arnit Das (1) v. State of Bihar (2000) 5 SCC 488 this Court held:
(SCC p. 498, para 20)
“20. A decision not expressed, not accompanied by reasons and not
proceeding on a conscious consideration of an issue cannot be deemed to be
a law declared to have a binding effect as is contemplated by Article 141.
That which has escaped in the judgment is not the ratio decidendi. This is
the rule of sub silentio, in the technical sense when a particular point of
law was not consciously determined. (See State of U.P. v. Synthetics &
Chemicals Ltd. (1991) 4 SCC 139, SCC para 41.)”
62. In Tika Ram v. State of U.P. (2009) 10 SCC 689 it was held: (SCC pp.
740-41, para 104)
“104. We do not think that the law laid down in these cases would apply to
the present situation. In all these cases, it has been basically held that
a Supreme Court decision does not become a precedent unless a question is
directly raised and considered therein, so also it does not become a law
declared unless the question is actually decided upon. We need not take
stock of all these cases and we indeed have no quarrel with the
propositions settled therein.”
63. Though the submissions made by Shri Rakesh Dwivedi and Shri Sunil
Gupta, learned Senior Counsel seem attractive at the first blush, we are of
the view, they lack merit. In Assam Small Scale Industries (2005) 13 SCC
19, the question of retrospective operation of the Act or whether past
contracts were governed by the Act, was argued by the learned Senior
Counsel appearing for the respondent. In the said judgment this Court has
observed: (SCC p. 30, para 19)
“19. … The 1993 Act, it was submitted, being also a beneficent statute, the
same should be construed liberally. The Act, Mr Chowdhury would argue, will
thus, have a retrospective effect.”
64. Further, in Shakti Tubes Ltd. (2009) 7 SCC 673, this issue was
canvassed by the learned counsel, due to which, this Court referred to the
precedent in Assam Small Scale Industries (2005) 13 SCC 19. The argument on
this point has been noted thus: (Shakti Tubes Ltd. case (2009) 7 SCC 673,
SCC pp. 676-77, paras 9-11)
“9. According to the appellant-plaintiff, 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 Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993 (hereinafter referred to as
‘the Act’). 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 Industries Development
Corpn. Ltd. v. J.D. Pharmaceuticals (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 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.
10. Mr Bharuka contended that the earlier supply order which was issued on
16-7-1992 came to be materially altered and substituted by a fresh supply
order issued on 18-3-1993 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.
11. 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 16-7-1992 and therefore, in 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.”
65. This Court in Shakti Tubes Ltd. (2009) 7 SCC 673 expressly rejected the
argument of the learned Senior Counsel appearing for the appellant in that
case, that the Act should be given retrospective effect because it was a
beneficial legislation, in paras 24 to 26, which have been set out below:
(SCC pp. 681-83)
“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.
‘13. 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. [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 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 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 where the new law is made to cure an
acknowledged evil for the benefit of the community as a whole (ibid., p.
440).’ (Zile Singh case (2004) 8 SCC 1, SCC pp. 8-9, para 13)
25. x x x x x
26. x x x x x”
66. In Rampur Fertiliser Ltd. (2009) 12 SCC 324 this Court again examined
the entire scheme of the Act before following the dicta of this Court in
Assam Small Scale Industries (2005) 13 SCC 19. Even in Modern Industries
(2010) 5 SCC 44 this Court did not differ from the dicta of this Court in
Assam Small Scale Industries (supra) and Shakti Tubes (2009) 7 SCC 673.”
It has been held in Shakti Tubes (supra) that in Rampur Fertiliser Ltd. v.
Vigyan Chemicals Industries (2009) 12 SCC 324, this Court has examined the
entire scheme of the Act and has followed the decision in Assam Small Scale
Industries’ case (supra). In Modern Industries v. Steel Authority of India
Ltd. (2010) 5 SCC 44, this Court has also not differed from the same. This
Court has also considered the binding value of the precedent on Co-ordinate
Bench and made elaborate discussion. Plea for reconsideration of decision
in Assam Small Scale Industries Development Corporation Ltd. (supra) was
also rejected by a Division Bench of this Court in Shakti Tubes (supra).
18. The Court in Purbanchal Cables (supra) has referred to large number
of decisions and made the following discussion with respect to binding
value of the precedent :
“Binding value of a precedent
67. In Waman Rao v. Union of India (1981) 2 SCC 362, His Lordship Y.V.
Chandrachud, C.J., speaking for the Constitution Bench, held: (SCC p. 393,
para 40)
“40. It is also true to say that for the application of the rule of stare
decisis, it is not necessary that the earlier decision or decisions of long
standing should have considered and either accepted or rejected the
particular argument which is advanced in the case on hand. Were it so, the
previous decisions could more easily be treated as binding by applying the
law of precedent and it will be unnecessary to take resort to the principle
of stare decisis. It is, therefore, sufficient for invoking the rule of
stare decisis that a certain decision was arrived at on a question which
arose or was argued, no matter on what reason the decision rests or what is
the basis of the decision. In other words, for the purpose of applying the
rule of stare decisis, it is unnecessary to enquire or determine as to what
was the rationale of the earlier decision which is said to operate as stare
decisis.”
68. In Union of India v. Raghubir Singh (1989) 2 SCC 754, this Court held:
(SCC p. 766, paras 8-9)
“8. Taking note of the hierarchical character of the judicial system in
India, it is of paramount importance that the law declared by this Court
should be certain, clear and consistent. It is commonly known that most
decisions of the courts are of significance not merely because they
constitute an adjudication on the rights of the parties and resolve the
dispute between them, but also because in doing so they embody a
declaration of law operating as a binding principle in future cases. In
this latter aspect lies their particular value in developing the
jurisprudence of the law.
9. The doctrine of binding precedent has the merit of promoting a certainty
and consistency in judicial decisions, and enables an organic development
of the law, besides providing assurance to the individual as to the
consequence of transactions forming part of his daily affairs. And,
therefore, the need for a clear and consistent enunciation of legal
principle in the decisions of a court.”
69. In Krishena Kumar v. Union of India (1990) 4 SCC 207, this Court
observed: (SCC p. 233, para 33)
“33. Stare decisis et non quieta movere. To adhere to precedent and not to
unsettle things which are settled. But it applies to litigated facts and
necessarily decided questions. Apart from Article 141 of the Constitution
of India, the policy of courts is to stand by precedent and not to disturb
settled point. When court has once laid down a principle of law as
applicable to certain state of facts, it will adhere to that principle, and
apply it to all future cases where facts are substantially the same. A
deliberate and solemn decision of court made after argument on question of
law fairly arising in the case, and necessary to its determination, is an
authority, or binding precedent in the same court, or in other courts of
equal or lower rank in subsequent cases where the very point is again in
controversy unless there are occasions when departure is rendered necessary
to vindicate plain, obvious principles of law and remedy continued
injustice. It should be invariably applied and should not ordinarily be
departed from where decision is of long standing and rights have been
acquired under it, unless considerations of public policy demand it.”
70. In Mishri Lal v. Dhirendra Nath (1999) 4 SCC 11 this Court held: (SCC
p. 18, para 13)
“13. … It is further to be noted that Meharban Singh case (1969) 3 SCC 542
came to be decided as early as 1970 and has been followed for the last
three decades in the State of Madhya Pradesh and innumerable number of
matters have been dealt with on the basis thereof and in the event, a
different view is expressed today, so far as this specific legislation is
concerned, it would unsettle the situation in the State of Madhya Pradesh
and it is on this score also that reliance on the doctrine of ‘stare
decisis’ may be apposite. While it is true that the doctrine has no
statutory sanction and the same is based on a rule of convenience and
expediency and as also on ‘public policy’ but in our view, the doctrine
should and ought always to be strictly adhered to by the courts of law to
subserve the ends of justice.”
71. In Central Board of Dawoodi Bohra Community v. State of Maharashtra
(2005) 2 SCC 673, a Constitution Bench of this Court held: (SCC p. 680,
para 8)
“8. In Raghubir Singh case (1989) 2 SCC 754 Pathak, C.J. pointed out that
in order to promote consistency and certainty in the law laid down by the
superior court the ideal condition would be that the entire court should
sit in all cases to decide questions of law, as is done by the Supreme
Court of the United States. Yet, His Lordship noticed, that having regard
to the volume of work demanding the attention of the Supreme Court of
India, it has been found necessary as a general rule of practice and
convenience that the court should sit in divisions consisting of Judges
whose number may be determined by the exigencies of judicial need, by the
nature of the case including any statutory mandate relating thereto and by
such other considerations which the Chief Justice, in whom such authority
devolves by convention, may find most appropriate. The Constitution Bench
reaffirmed the doctrine of binding precedents as it has the merit of
promoting certainty and consistency in judicial decisions, and enables an
organic development of the law, besides providing assurance to the
individual as to the consequence of transactions forming part of his daily
affairs.”
72. In Shanker Raju v. Union of India (2011) 2 SCC 132 this Court observed:
(SCC p. 139, para 10)
“10. It is a settled principle of law that a judgment, which has held the
field for a long time, should not be unsettled. The doctrine of stare
decisis is expressed in the maxim stare decisis et non quieta movere, which
means ‘to stand by decisions and not to disturb what is settled’. Lord Coke
aptly described this in his classic English version as ‘those things which
have been so often adjudged ought to rest in peace’. The underlying logic
of this doctrine is to maintain consistency and avoid uncertainty. The
guiding philosophy is that a view which has held the field for a long time
should not be disturbed only because another view is possible.”
(emphasis in original)
73. In Fida Hussain v. Moradabad Development Authority (2011) 12 SCC 615
this Court held: (SCC p. 622, para 15)
“15. Having carefully considered the submissions of the learned Senior
Counsel Shri Varma, we are of the view that the judgment in Gafar case
(2007) 7 SCC 614 does not require reconsideration by this Court. In Gafar
case (supra) this Court had meticulously examined all the legal contentions
canvassed by the parties to the lis and had come to the conclusion that the
High Court has not committed any error which warrants interference. In the
present appeals, the challenge is for the compensation assessed for the
lands notified and acquired under the same notification pertaining to the
same villages. Therefore, it would not be proper for us to take a different
view, on the ground that what was considered by this Court was on a
different fact situation. This view of ours is fortified by the judgment of
this Court in Ballabhadas Mathurdas Lakhani v. Municipal Committee,
Malkapur (1970) 2 SCC 267, wherein it was held that a decision of this
Court is binding when the same question is raised again before this Court,
and reconsideration cannot be pleaded on the ground that relevant
provisions, etc. were not considered by the Court in the former case.”
74. Judicial discipline demands that a decision of a Division Bench of two
Judges should be followed by another Division Bench of two Judges and this
has been stated time and again by this Court. In Raghubir Singh (1989) 2
SCC 754, a Constitution Bench of this Court speaking through R.S. Pathak,
C.J. held: (SCC p. 778, para 28)
“28. We are of the opinion that a pronouncement of law by a Division Bench
of this Court is binding on a Division Bench of the same or a smaller
number of Judges, and in order that such decision be binding, it is not
necessary that it should be a decision rendered by the Full Court or a
Constitution Bench of the Court.”
75. In Union of India v. Paras Laminates (P) Ltd. (1990) 4 SCC 453 this
Court has observed: (SCC pp. 457-58, para 9)
“9. It is true that a Bench of two members must not lightly disregard the
decision of another Bench of the same Tribunal on an identical question.
This is particularly true when the earlier decision is rendered by a larger
Bench. The rationale of this rule is the need for continuity, certainty and
predictability in the administration of justice. Persons affected by
decisions of Tribunals or courts have a right to expect that those
exercising judicial functions will follow the reason or ground of the
judicial decision in the earlier cases on identical matters. Classification
of particular goods adopted in earlier decisions must not be lightly
disregarded in subsequent decisions, lest such judicial inconsistency
should shake public confidence in the administration of justice.”
76. Shri Vijay Hansaria, learned Senior Counsel contends that a case for
referring the matter to a larger Bench though is pleaded by the learned
Senior Counsel, Shri Rakesh Dwivedi, this Court ought to test the same by
the parameters laid down by this Court in CIT v. Saheli Leasing and
Industries Ltd. (2010) 6 SCC 384 to find out whether the matter deserves to
be referred to a larger Bench.
77. In Saheli Leasing (supra), this Court held: (SCC p. 393, para 29)
“29. (x) In order to enable the court to refer any case to a larger Bench
for reconsideration, it is necessary to point out that particular provision
of law having a bearing over the issue involved was not taken note of or
there is an error apparent on its face or that a particular earlier
decision was not noticed, which has a direct bearing or has taken a
contrary view.”
78. The Constitution Bench of this Court in Keshav Mills Co. Ltd. v. CIT,
AIR 1965 SC 1636 crystallised the position with regard to what the Court
should do when a plea for consideration of an earlier judgment is made. It
was held: (AIR p. 1644, para 23)
“23. … When it is urged that the view already taken by this Court should be
reviewed and revised it may not necessarily be an adequate reason for such
review and revision to hold that though the earlier view is a reasonably
possible view, the alternative view which is pressed on the subsequent
occasion is more reasonable. In reviewing and revising its earlier
decision, this Court should ask itself whether in the interests of the
public good or for any other valid and compulsive reasons, it is necessary
that the earlier decision should be revised. When this Court decides
questions of law, its decisions are, under Article 141, binding on all
courts within the territory of India, and so, it must be the constant
endeavour and concern of this Court to introduce and maintain an element of
certainty and continuity in the interpretation of law in the country.
Frequent exercise by this Court of its power to review its earlier
decisions on the ground that the view pressed before it later appears to
the court to be more reasonable, may incidentally tend to make law
uncertain and introduce confusion which must be consistently avoided. That
is not to say that if on a subsequent occasion, the court is satisfied that
its earlier decision was clearly erroneous, it should hesitate to correct
the error; but before a previous decision is pronounced to be plainly
erroneous, the court must be satisfied with a fair amount of unanimity
amongst its members that a revision of the said view is fully justified. It
is not possible or desirable, and in any case it would be inexpedient to
lay down any principles which should govern the approach of the court in
dealing with the question of reviewing and revising its earlier decisions.
It would always depend on several relevant considerations:—What is the
nature of the infirmity or error on which a plea for a review and revision
of the earlier view is based? On the earlier occasion, did some patent
aspects of the question remain unnoticed, or was the attention of the court
not drawn to any relevant and material statutory provision, or was any
previous decision of this Court bearing on the point not noticed? Is the
court hearing such plea fairly unanimous that there is such an error in the
earlier view? What would be the impact of the error on the general
administration of law or on public good? Has the earlier decision been
followed on subsequent occasions either by this Court or by the High
Courts? And, would the reversal of the earlier decision lead to public
inconvenience, hardship or mischief? These and other relevant
considerations must be carefully borne in mind whenever this Court is
called upon to exercise its jurisdiction to review and revise its earlier
decisions.”
79. We are in full agreement with the view expressed in Keshav Mills case
(1965) 2 SCR 908. The learned Senior Counsel Shri Rakesh Dwivedi has not
been able to make out a case for reconsideration of the decision of this
Court in Assam Small Scale Industries (2005) 13 SCC 19. In fact, a plea for
reconsideration of the same was rejected by a Division Bench of this Court
in Shakti Tubes (2009) 7 SCC 673. We are unable to agree with the argument
of Shri Dwivedi and Shri Gupta that the provisions of the Act were not
considered in its entirety. In fact, the entire scheme of the Act has been
considered in Rampur Fertiliser (2009) 12 SCC 324 and specific answer to
the issue under consideration was answered.”
It is apparent from aforesaid discussion that the decision of a Co-ordinate
Bench is binding and there has to be consistency and settled principle
should not be unsettled as laid down in Raghubir Singh (supra) and other
decisions referred to above. Judicial discipline demands that a decision of
the Division Bench of this Court should be followed by another Bench of two
Judges.
19. In Modern Industries (supra), a Division Bench of this Court has also
held that the Act of 1993 is prospective in operation is settled by two
decisions of this Court in Assam Small Scale Industries’ case (supra) and
Shakti Tubes (supra). This Court has observed that since the earlier
contract got altered from time to time, it was last altered on 29.4.1995.
By that time Act of 1993 had already come into force. Hence the date of
alteration in the agreement was held to be material for the applicability
of the provisions of the Act. In Rampur Fertiliser Ltd. (supra), a Division
Bench of this Court has held that the provisions of the Act of 1993 are
prospective. The Court considered various provisions contained in sections
1, 3, 4, 5 and 10 of the Act. This Court followed the decision in Assam
Small Scale Industries’ case and has laid down thus :
“14. It was held in Assam Small Scale Industries Development Corpn. Ltd.
(1987) 3 SCC 80 that the provisions of the Act are applicable only with
prospective effect. Paras 37 and 38 of the said case which deal with the
scope of the applicability of the Act are reproduced hereunder : (SCC p.
36)
“37. x x x x x
38. x x x x x ”
In view of the ratio of the aforesaid decision the scope of the present
appeal is very limited for it is already laid down by this Court that the
Act, namely, the Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 came into effect from 23-9-1992.
Therefore, the said Act would have no application and would not apply to
transactions which took place prior to the aforesaid date. In the case in
hand the transaction which was the subject-matter of the suit took place
prior to 23-9-1992. This position is clear for the suit itself was filed on
31-10-1991 and therefore cause of action for filing the suit has to be
prior in point of time.”
20. In view of the aforesaid catena of decisions of this Court, it has to
be held that the Act of 1993 cannot be said to be retrospective in
operation or having retroactive operation. The question stands answered
affirmatively beyond pale of doubt and the decisions are binding on a Co-
ordinate Bench. It cannot be said that the decisions are sub silentio or
per incuriam in any manner whatsoever and, in my opinion, it is not open to
the Co-ordinate Bench to take a different opinion. There is no confusion
with respect to meaning of transaction, supply order and agreement. This
Court while deciding aforesaid cases was not in oblivion of aims and
objects of beneficial legislation, considered same and it has affirmatively
pronounced on all the aspects. Hence, I find no scope to dwell further
into the same arena to declare the various judgments to be sub silentio,
per incuriam or not laying down the law correctly.
21. Even otherwise, on merits, in my opinion, considering the scheme of
the Act, various provisions of the Act it cannot be said to have
retrospective operation or retroactive operation and where a supply order
has been placed before the date of commencement of the Act, that is before
23.9.1992, the beneficial provisions of the Act regarding higher interest
would not be applicable.
22. In the case of appellant M/s. Shanti Conductors (P) Ltd. itself
decided along with Purbanchal Cables (supra) aforesaid findings have been
recorded by this Court while remanding the case to the High Court for
decision on merits as an appeal arising of same lis was pending before the
High Court and the High Court has rightly followed the decisions in
Purbanchal Cables & Conductors (supra) decided along with M/s. Shanti
Conductors (P) Ltd. The finding recorded by this Court in the remand order
is final and binding on the appellant- M/s. Shanti Conductors (P) Ltd. They
cannot question the same again in the instant appeals.
23. In view of the aforesaid discussion, the appeals have no merit and
the same deserve dismissal and are hereby dismissed. No costs.
New Delhi; ……………………………J.
August 31, 2016. (Arun Mishra)
ITEM NO.1B-For JUDGMENT COURT NO.8 SECTION XIV
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
C.A. Nos.8442-8443/2016 @ Petition(s) for Special Leave to Appeal (C)
No(s). 9924-9925/2013
M/S SHANTI CONDUCTORS(P) LTD. & ANR. Petitioner(s)
VERSUS
ASSAM STATE ELECTRICITY BOARD & ORS. Respondent(s)
WITH
C.A. No.8445/2016 @ SLP(C) No. 15274/2013
C.A. No.8448/2016 @ SLP(C) No. 9898/2014
C.A. No.8450/2016 @ SLP(C) No. 538/2016
Date : 31/08/2016 These matters were called on for pronouncement of
JUDGMENTS today.
For Petitioner(s)
Mr. Devashish Bharuka,Adv.
Ms. Sneha Kalita,Adv.
For Respondent(s)
Ms. Sneha Kalita,Adv.
Mr. P. I. Jose,Adv.
Hon'ble Mr. Justice V.Gopala Gowda and Hon'ble Mr. Justice Arun
Mishra pronounced separate judgments of the Bench comprising Hon'ble Mr.
Justice V. Gopala Gowda and Hon'ble Mr. Justice Arun Mishra.
Leave granted.
Since there is divergent opinion judgments in these appeals and
disagreement on all the questions formulated, place the appeals before the
Hon'ble the Chief Justice for appropriate orders.
Applications for intervention are kept pending for consideration of
larger Bench.
|(VINOD KUMAR JHA) | |(SUMAN JAIN) |
|AR-CUM-PS | |COURT MASTER |
(Two Signed Reportable judgments are placed on
the file)
-----------------------
[1] [2] (2012) 7 SCC 462
[3] [4] (1974) 1 SCC 42
[5] [6] (2005) 13 SCC 19
[7] [8] (2009) 7 SCC 673
[9] [10] (2010) 5 SCC 44
[11] [12] 2011 (100) CLA (Bom.)
[13] [14] AIR 1961 SC 307
[15] [16] (2009) 4 SCC 219
[17] [18] (1990) 1 SCC 193
[19] [20] (1970) 1 SCC 613
[21] [22] 2007 (4) Mh.L.J. 618
[23] [24] (1975) 1 SCC 774
[25] [26] (2012) 6 SCC 782
[27] [28] AIR 1954 SC 92
[29] [30] (2005) 8 SCC 534
[31] [32] (1991) 4 SCC 139
[33] [34] (2000) 5 SCC 488
[35] [36] (2004) 8 SCC 1
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