Case Note & Summary
The Supreme Court considered appeals arising from a common judgment of the Gauhati High Court which had set aside trial court decrees in favor of suppliers (appellants) claiming interest on delayed payments under the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993. The appellants, including M/s Shanti Conductors (P) Ltd., M/s Trusses and Towers (P) Ltd., and M/s Brahmaputra Concrete Pipe Industries, had supplied goods to the Assam State Electricity Board under contracts entered into before the Act came into force on 23.09.1992. Payments were made after that date, and the suppliers filed suits for interest on delayed payments. The trial courts decreed the suits, but the High Court, relying on this Court's judgment in Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board, (2012) 7 SCC 462, held that the Act does not apply to contracts entered into prior to its commencement. The suppliers appealed. The key legal issues were whether the Act applies retroactively to contracts entered before 23.09.1992 for delays occurring after that date, whether a suit for interest alone is maintainable, whether the Purbanchal Cables judgment operates as res judicata, and whether the suits were barred by limitation. The Court analyzed Sections 3, 4, and 5 of the Act, noting that the Act was enacted to provide a boost to small-scale industries and that the right to interest accrues on the date of payment, not the date of contract. It held that the Act is retroactive, applying to all payments made after its commencement, regardless of when the contract was entered. The Court also held that a suit for interest alone is maintainable, as the right to interest is a separate cause of action. Regarding res judicata, the Court found that the Purbanchal Cables judgment did not consider the issue of retroactivity and thus was sub silentio on that point. On limitation, the Court held that the suits were filed within three years from the date of payment, as per Article 113 of the Limitation Act, 1963. The Court allowed the appeals in part, setting aside the High Court's judgments and restoring the trial court decrees, but with modifications to the rate of interest as per the Act. The Court directed that interest be calculated at the rate specified in the Act from the due date until payment, and that the Board pay the amounts within three months.
Headnote
A) Interest on Delayed Payments - Retroactive Application - Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993, Sections 3, 4, 5 - The Act applies to contracts entered into prior to 23.09.1992 for delays occurring after that date, as the right to interest accrues on the date of payment, not the date of contract - Held that the Act is retroactive, not retrospective, and applies to all payments made after its commencement (Paras 44-50). B) Interest on Delayed Payments - Maintainability of Suit for Interest Alone - Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993, Sections 3, 4, 5 - A suit for recovery of interest alone under the Act is maintainable, as the right to interest is a separate cause of action - Held that the supplier can sue for interest even after accepting the principal amount without protest (Paras 51-55). C) Res Judicata - Applicability of Purbanchal Cables Judgment - Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 - The judgment in Purbanchal Cables & Conductors Pvt. Ltd. v. Assam State Electricity Board, (2012) 7 SCC 462, which held that the Act has no retrospective application, does not operate as res judicata in the present case as the issue of retroactive application was not considered - Held that the earlier decision was sub silentio on the point of retroactivity (Paras 56-60). D) Limitation - Suit for Interest Under the Act - Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993, Sections 3, 4, 5 - The suit for interest is not barred by limitation as the cause of action arises on the date of payment, and the suit was filed within three years from that date - Held that the limitation period under Article 113 of the Limitation Act, 1963 applies (Paras 61-65).
Issue of Consideration
Whether the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 applies to contracts entered into prior to its commencement (23.09.1992) for delays occurring after that date; whether a suit for recovery of interest alone under the Act is maintainable; whether the judgment in Purbanchal Cables operates as res judicata; whether the suit is barred by limitation.
Final Decision
The Supreme Court allowed the appeals in part, setting aside the High Court's judgments and restoring the trial court decrees, but with modifications to the rate of interest as per the Act. The Court directed that interest be calculated at the rate specified in the Act from the due date until payment, and that the Board pay the amounts within three months.
Law Points
- Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act
- 1993
- Retroactive application
- Maintainability of suit for interest alone
- Res judicata
- Limitation
