2010 (4) TMI 903 - SC - Indian Laws

Interest on delayed payment - What exactly is the meaning of words amount due from a buyer which are followed by the expression together with the amount of interest under sub-section (1) of Section 6 of 1993 Act? Do these words mean an admitted sum due? Or do they mean the amount claimed to be due?

Issues Involved:
1. Interpretation of the expression "amount due from a buyer, together with the amount of interest" under Section 6(1) of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.
2. Jurisdiction of the Industry Facilitation Council (IFC) under Section 6(2) of the 1993 Act.
3. Applicability of the 1993 Act to contracts executed before its enactment.

Detailed Analysis:

1. Interpretation of "amount due from a buyer, together with the amount of interest" under Section 6(1):

The primary question was the meaning of the words "amount due from a buyer" followed by "together with the amount of interest" under Section 6(1) of the 1993 Act. The court examined various definitions and interpretations of the term "due" from multiple legal dictionaries and precedents. The court concluded that the term "amount due" does not necessarily imply an admitted sum but can also mean the amount claimed to be due. The court emphasized that the expression should be interpreted keeping in mind the purpose and object of the 1993 Act, which is to ensure prompt payment to small scale and ancillary industrial undertakings. The court rejected a restricted interpretation that would require the supplier to pursue multiple proceedings for the recovery of the principal amount and interest separately. Instead, the court held that the term "amount due" includes both the principal amount and the interest, and the supplier can recover both through a single proceeding.

2. Jurisdiction of the IFC under Section 6(2):

The court examined whether the IFC's jurisdiction under Section 6(2) of the 1993 Act is limited to disputes concerning interest on delayed payments or extends to disputes regarding the principal amount as well. The court held that the IFC has the competence to determine the amount due for goods supplied or services rendered, even in cases where the buyer disputes the liability. The court emphasized that the scheme of Section 6 is to provide a single window for the supplier to address grievances related to non-payment for goods supplied or services rendered, as well as the recovery of interest as per Sections 4 and 5. The court rejected the High Court's interpretation that the IFC's jurisdiction is limited to cases where the amount due is admitted or settled. The court clarified that the IFC can adjudicate disputes concerning both the principal amount and the interest.

3. Applicability of the 1993 Act to contracts executed before its enactment:

The buyer argued that the 1993 Act should not apply to the contract in question as it was executed in 1983, before the Act came into effect in 1992. The court noted that this contention was not raised before the High Court and was being raised for the first time. The court also observed that the contract had been altered multiple times, with the last alteration occurring in 1995, after the 1993 Act had come into force. The court referred to its previous decisions in Assam Small Scale Industries Development Corporation Ltd. and Others v. J.D. Pharmaceuticals and Another and Shakti Tubes Ltd. v. State of Bihar and Others, which held that the 1993 Act is prospective in operation and applies to transactions initiated after the Act came into force. Based on these observations, the court concluded that the 1993 Act was applicable to the present case.

Conclusion:

The court allowed the appeals, set aside the High Court's judgment, and upheld the IFC's award. The court emphasized that the 1993 Act aims to ensure prompt payment to small scale and ancillary industrial undertakings and provides a mechanism for the recovery of both the principal amount and interest through a single proceeding. The court also clarified that the IFC has jurisdiction to adjudicate disputes concerning both the principal amount and interest, even in cases where the liability is disputed by the buyer.

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