Summary
The three-Judge Bench held that the 1993 delayed-payment legislation applies to supplies or services after 23 September 1992 even under an earlier contract. This is prospective application; contrary precedent tying entitlement to the contract date was disapproved. Interest alone may be recovered, but ordinary limitation applies and Shanti Conductors’ suit was time-barred. The connected challenges to a review order and to refusal of statutory interest also failed on their distinct facts. All appeals were dismissed.
Issues
- Whether an earlier contract excludes statutory interest for supplies made after commencement of the 1993 Act.
- Whether such application is retrospective or retroactive.
- Whether the Act excludes limitation, when the right to sue for interest accrues and whether Section 14 exclusion was available.
- Whether a suit only for interest is maintainable after payment of principal.
- Whether withdrawal of an earlier special-leave petition to pursue a specified review ground permits the connected review appeal.
- Whether nine-percent interest could be sustained despite non-application of the 1993 Act.
Provisions considered
- Sections 2(b), 3, 4 and 5, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993Post-commencement supply or service and resulting default trigger statutory payment and interest liability regardless of the contract date; this is prospective operation. (¶¶ 29, 30, 31, 32, 33, 34, 35, 36, 37, 51, 52, 53, 54, 55, 56, 57, 58)
- Section 6, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993An independent claim for interest survives payment of principal; restricting recovery to cases with unpaid principal would defeat the Act. (¶¶ 78, 79)
- Section 10, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993The overriding clause displaces inconsistent law only within matters covered by the Act; absence of any special limitation provision leaves the Limitation Act applicable. (¶¶ 67, 68, 69, 70)
- Article 113, Limitation Act, 1963The three-year period runs when statutory interest becomes due upon default, not merely from the subsequent last payment of principal. (¶¶ 70, 71, 72, 73, 74)
- Section 14, Limitation Act, 1963Exclusion for the association’s writ proceedings was refused on the facts, the supplier being a different entity. (¶¶ 75, 76)
Held
- The statutory event is supply of goods or rendition of services, not making the agreement. For supplies after 23 September 1992, an earlier contract does not defeat statutory interest. Purbanchal Cables, Assam Small Scale Industries and Shakti Tubes do not state the correct law insofar as they make the contract date decisive. (¶¶ 31, 32, 33, 35, 36, 37, 38, 40, 41, 46, 47, 48, 49, 50, 51, 52)
- The Act is prospective. Applying it to post-commencement supplies and defaults does not require describing it as retroactive merely because an underlying agreement predates commencement; the earlier separate opinion’s retroactivity characterization was not accepted. (¶¶ 53, 54, 55, 56, 57, 58)
- Section 10 does not exempt an interest-recovery suit from the Limitation Act. Article 113 applies; the right to sue accrues when interest becomes statutorily due following default. The later payment on 5 March 1994 did not itself commence limitation. (¶¶ 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74)
- The supplier could not on these facts claim Section 14 exclusion for writ litigation by a distinct manufacturers’ association. Its 1997 money suit was time-barred; consequently the Court left the separate inter-partes finality/res judicata issue undecided. (¶¶ 75, 76, 77)
- A supplier may sue for interest alone even after receipt of principal. The contrary interpretation would let buyers evade the statutory consequence of delayed payment simply by paying principal before suit. (¶¶ 78, 79)
- Trusses and Towers’ appeal against the review judgment was not maintainable: the review judgment rested on equitable interest rather than the specified factual ground for which review had been pursued after withdrawal of special leave. The permitted ground defined the available challenge. (¶¶ 80, 81, 82)
- The High Court could award nine-percent interest even where the 1993 Act did not apply, consistently with the earlier decision relied on; the Board’s challenge to that award failed. (¶¶ 83, 84)
- Brahmaputra Concrete Pipe Industries showed no supply after commencement of the Act. The change in the governing interpretation therefore furnished no ground to interfere with the High Court’s decision in its appeal. (¶ 85)
Result
All appeals dismissed. Shanti Conductors’ suit held time-barred; its separate res judicata issue left open. The connected nine-percent interest award remained undisturbed, and intervention applications were not entertained.