A suit by supplier for recovery of only interest is maintainable : Reiterates SC

Yesterday, on 23rd January, 2019, The Hon’ble Supreme Court delivered its judgement in the matter of M/s. Shanti Conductors(P) Ltd. & Anr. v. Assam State Electricity Board & Ors.in which it was held that there is no provision in the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 pertaining to limitation, therefore the limitation period for suit for recovery of interest under the said act shall be covered by Part X Article 113 of the Limitation Act, 1963. 

The Hon’ble Supreme Court observed that:

The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 is clearly prospective in nature and shall govern the  incidence of   supply   and  rendering   service which happens after enforcement of the Act i.e. 23.09.1992. (Para 32)

Obviously, question of payment shall arise only after supply of goods or rendering any service. Thus, by virtue of Section 3, both the incidents i.e. supply or service on the one hand and payment on the other has to be after the enforcement of Act, 1993. The fact that agreement in writing between buyer and supplier for supply and payment is prior to the enforcement of the Act is neither relevant nor material, what is material is that supply and services had to be after the enforcement of the Act, only then the liability of payment shall accrue. (Para 33)

Whether the contract between buyer and supplier is prior to enforcement of Act, 1993 is also neither relevant nor material and the material is that buyer fails to make payment to supplier as required under Section 3. The liability to pay interest thus arises when the payment is not made as per Section 3. (Para 36)

The liability to make payment under Section 3 and the liability to pay   interest under Section 4 is not dependent on date of agreement between the parties to make supply. When the question of supply and payment are incidents contemplated under the Act which have to take place after the enforcement of the Act the day of agreement between the parties has no relevance in so far as statutory liability under the Act is concerned. (Para 37)

Two suppliers who supply goods after the enforcement of the Act, become entitled to receive payment after the enforcement of the Act one supplier cannot be denied the benefit of the statutory protection on the pretext that agreement in his case was entered prior to enforcement of the Act. (Para  52)

When the date of agreement is not referred as material or incidence for fastening the liability, by no judicial interpretation the said date can be treated as a date for fastening of the liability. (Para 52)

The existence of statutory liability depends on the statutory factors as   enumerated in Section 3 and Section 4 of the Act, 1993. Factor for liability to make payment under Section 3 being the supplier supplies any goods or   renders services to the buyer, the liability of buyer cannot be denied on the ground that agreement entered between the parties for supply was prior to Act, 1993. To hold that liability of buyer for payment shall arise only when agreement for supply was entered subsequent to enforcement of the Act, it shall be adding words to Section 3 which is not permissible under principles of statutory construction. (Para 52)

The Interest on Delayed Payments to Small Scale and Ancillary Industrial UndertakingsAct, 1993 is not retrospective. (Para  53)

There is no provision inThe Interest on Delayed Payments to Small Scale and Ancillary Industrial UndertakingsAct, 1993 pertaining to limitation, the provision of Limitation Act pertaining to filing suit shall continue to operate there being nothing contrary or overriding under 1993 Act. Section 10 will operate only with regard to expressed provisions contained in 1993 Act which shall be given overriding effect but reading Section 10 to the effect that it shall   override Limitation Act is not correct interpretation of Section 10. (Para 69)

The limitation for suit for recovery of interest under The Interest on Delayed Payments to Small Scale and Ancillary Industrial UndertakingsAct, 1993 is a suit of nature which shall be covered by Part X Article 113 of the Limitation Act, 1963. (Para 70)

The day on which the last payment was made cannot be treated as period for beginning of the limitation, instead, the day on which the liability to pay interest as per Section 4 of The Interest on Delayed Payments to Small   Scale and Ancillary Industrial Undertakings Act, 1993 arises is to be considered as the period for commencement of limitation.(This inference has been drawn on the basis of Para 74)

A suit by supplier for recovery of only interest is maintainable. (Para 79)

Copy of judgement: Judgement 23rd-Jan-2019

-Tushar Kaushik

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