TMI Blog2010 (4) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... eel Authority of India Limited - Rourkela Steel Plant (for short, `buyer') on January 15, 1983 for manufacture of Right Manipulator Side Guard. The order value was Rs. 8.19 lakhs. Inter alia, the terms and conditions of the order were (i) the job should be done exactly as specified in the drawings; (2) the alignment of bearing housings be made by the supplier and for this purpose, a spare shaft assembly would be issued against indemnity bond for checking the perfect alignment and free rotation of the shaft ; (3) the essentiality certificate would be issued by the buyer; (4) O.S.T./ T.O.T. 5% to be paid extra and (5) 90 per cent payment to be made against the proof of dispatch (R/R) and inspection certificate, balance 10 per cent payment would be made within thirty days after receipt of materials at site in good condition. It appears that initially buyer did not issue raw-materials but later on the buyer on May 28, 1985 agreed to supply the materials free of cost. The supplier also informed the buyer that the drawings were defective. According to the supplier, there was delay in supply of materials and removal of defects from drawings. The buyer ultimately extended the period of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition, ex- parte award dated March 24, 2000 was challenged and in the other, award dated July 11, 2000 as well as ex-parte award dated March 24, 2000 was assailed. In both writ petitions, the buyer also challenged the validity of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings (Amendment) Act 1998 (for short, ₹ 1998 Amendment Act'). 7. The Division Bench of the High Court vide its judgment dated February 18, 2008 allowed these writ petitions and quashed and set aside the awards dated March 24, 2000 and July 11, 2000. It is from this judgment that present appeals by special leave have arisen. 8. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 ; 12. Section 4 imposes a liability of interest upon the buyer on failure to make payment of the amount due to the supplier. Originally in 1993 Act, Section 4 was as follows :- S.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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to an arbitration agreement referred to in sub- section (1) of section 7 of that Act. ; 15. Section 7 provides that no appeal against any decree, award or other order will be entertained by any court or other authority unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, other order in the manner directed by such court or, as the case may be, such authority. 16. Mr. Prashant Bhushan, learned counsel for the supplier urged that the IFC under Section 6(2) has jurisdiction to decide the dispute between supplier and buyer relating not only in respect of interest but also the principal amount payable by buyer to supplier. He submitted that the interpretation put by the High Court upon the provisions of 1993 Act is erroneous and that jurisdiction of IFC in resolving the dispute under Section 6 (2) is not only confined to the dispute relating to interest but would also be available where there is dispute regarding the principal amount payable by the buyer to the supplier. He submitted that the High Court seriously erred in holding that the requirement of `settled amount' between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.D. Pharmaceuticals and Another (2005) 13 SCC 19 and Shakti Tubes Ltd., v. State of Bihar and Others (2009) 7 SCC 673. 19. The wholesome purpose and object behind 1993 Act as amended in 1998 is to ensure that 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. Section 4 fixes the rate of interest at one- and-half time of Prime Lending Rate charged by the SBI in case of default by the buyer in making payment of the amount to the supplier. The rate of interest fixed in Section 4 overrides any agreement between the buyer and supplier to the contrary. Section 5 imposes a liability on the buyer to pay compound interest at the rate mentioned in Section 4 on the amount due to the supplier. Section 6 is a crucial provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `owed', from debere `owe' 23. In Black's Law Dictionary (Eighth Edition), the word `due' is explained : adj. 1. Just, proper, regular, and reasonable due care due notice . 2. Immediately enforceable payment is due on delivery . 3. Owing or payable; constituting a debt..... 24. Wharton's Law Lexicon (Fourteenth Edition) makes the following comment with regard to word `due' ;anything owing. That which one contracts to pay or perform to another; that which law or justice requires to be paid or done. ; 25. P. Ramanatha Aiyar in `Law Lexicon'; 2nd Edition (Reprint 1997) explains the word `due'; as a noun an existing obligation; an indebtedness; a simple indebtedness without reference to the time of payment a debt ascertained and fixed though payable in future; as an adjective capable of being justly demanded; claimed as of right; owing and unpaid, remaining unpaid; payable; regular; formal; according to rule or form. 26. Jowitt's Dictionary of English Law; 2nd Edition (Vol. 1) defines `due'; `anything owing, that which one contracts to pay or perform to another. As applied to a sum of money, `due' means either that it is owing or that it is payable; in other words, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 31. In Maharashtra State Cooperative Bank Limited v. The Assistant Provident Fund Commissioner and Others (2009) 10 SCC 123 before a three-Judge Bench of this Court interpretation of the expression `any amount due from an employer' used in Section 11(2) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 came up for consideration. Section 11(2) of the said Act is as follows: S.11.- Priority of payment of contributions over other debts.--(l) Where any employer is adjudicated insolvent or, being a company, an order for winding up is made, the amount due-- (a) * * * * * (b) * * * * * (2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer whether in respect of the employee's contribution (deducted from the wages of the employee) or the employer's contribution, the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. While interpreting the said expression `any amount due from an employer', this Court referred to Section 11(1) besides the other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities concerned to recover the dues as arrears of land revenue by contending that the movable or immovable property of the establishment is subject to other debts. Any such interpretation would frustrate the object of introducing the deeming provision and non obstante clause in Section 11(2). Therefore, it is not possible to agree with the learned Senior Counsel for the appellant Bank that the amount of interest payable under Section 7-Q and damages leviable under Section 14-B do not form part of the amount due from an employer for the purpose of Section 11(2) of the Act. ; 32. In Assam State Electricity Board and Ors. v. Shanti Conductors Pvt. Ltd. and Another (2002) 2 GLR 550 inter-alia, the question that fell for consideration before the Full Bench of Gauhati High Court was as to whether the suit for recovery of a mere interest under 1993 Act is maintainable. The argument on behalf of the appellant therein was that no suit merely for the recovery of the interest under 1993 Act is maintainable under the provisions of Section 6. It was contended that both principal sum and the interest on delayed payment simultaneously must co-exist for maintaining a suit under Section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have to refuse to accept the amount of payment and then file a suit for recovery of the principal amount and the interest on the delayed payment under the Act. The Act does not create any embargo against supplier not to accept principal amount at any stage and thereafter file a suit for the recovery or realization of the interest only on the delayed payments under the Act. 34. The word `due' has variety of meanings, in different context it may have different meanings. In its narrowest meaning, the word `due' may import a fixed and settled obligation or liability. In a wider context the amount can be said to be `due', which may be recovered by action. The amount that can be claimed as `due' and recoverable by an action may sometimes be also covered by the expression `due'. The expression `amount due from a buyer' followed by the expression `together with the amount of interest' under sub-section (1) of Section 6 of 1993 Act must be interpreted keeping the purpose and object of 1993 Act and its provisions, particularly Sections 3, 4 and 5 in mind. This expression does not deserve to be given a restricted meaning as that would defeat the whole purpose and object of 1993 Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We approve the view of Gauhati High Court in Assam State Electricity Board12 that word `together' in Section 6(1) would mean `alongwith' 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. In our opinion, under Section 6(2) action by way of reference to IFC cannot be restricted to a claim for recovery of interest due under Sections 4 and 5 only in cases of an existing determined, settled or admitted liability. IFC has competence to determine the amount due for goods supplied or services rendered in cases where the liability is disputed by the buyer. Construction put upon Section 6(2) by learned senior counsel for the buyer does not deserve to be accepted as it will not be in conformity with the intention, object and purpose of 1993 Act. Preamble to 1993 Act, upon which strong reliance has been placed by learned senior counsel, does not persuade us to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer i.e. the petitioner has alleged that the supply was not made by the opposite party No. 2 in time and there was delay in supply of materials which caused loss to the petitioner and by the time of supply of materials, technology has already been changed. Therefore, in nutshell, the petitioner has alleged breach of contract by opposite party No. 2 and therefore, in case of allegation of breach of contract, it cannot be said that there is any amount admitted to be due or settled amount. Hence, there is no question of delayed payment and referring the dispute to the IFC under the provisions of Sub- section 2 of the Section 6, to our mind, would be without jurisdiction. 37. We find it difficult to accept the reasoning of the High Court. The interpretation put by the High Court upon the expression `amount due from the buyer' is fallacious for the reasons indicated above which we need not respect. 38. Now, the submission of learned senior counsel for the buyer with regard to the applicability of the 1993 Act to the present case may be considered. His argument is that 1993 Act is not applicable to the present case as contract was entered into on January 15, 1983 and 1993 Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in Assam Small Scale Industries case,(2005)13 SCC 19, 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. 21. We have considered the aforesaid rival submissions. This Court in Assam Small Scale Industries case,(2005)13 SCC 19 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 judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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