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2005 (10) TMI 494 - SC - Indian LawsWhether the Corporation chose to receive payment from the indenting departments or not? Held that - Appeal allowed in part. In relation to the transactions made prior to coming into force of the said Act, simple interest at the rate of 9% per annum, which was the bank rate at the relevant time, shall be payable both prior to date of filing of the suit and pendente lite and as future interest in terms of Section 34 of the Code of Civil Procedure. Interest, however, will be payable in terms of the provisions of the 1993 Act (compound interest at the rate of 23.5.% per annum) in relation to the transactions made after coming into force of the Act, both in respect of interest payable upto the date of institution of the suit and pendente lite and till realisation. The judgment and decree to that extent requires to be modified. It is directed accordingly. The appeal is, therefore, allowed in part in regard to interest and to the extent mentioned hereinbefore. The Corporation shall bear the costs of the Respondent in this appeal. Counsel s fee is assessed at Rs. 25,000/-.
Issues Involved:
1. Interpretation and application of the Assam Preferential Stores Purchase Act, 1989. 2. Liability of the Assam Small Industries Development Corporation Limited (ASIDC) for payment to the supplier. 3. Applicability of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. 4. Determination of the relationship between the supplier and ASIDC (principal-agent relationship). 5. Necessity of including the State of Assam as a party in the suit. Detailed Analysis: 1. Interpretation and Application of the Assam Preferential Stores Purchase Act, 1989: The Assam Preferential Stores Purchase Act, 1989 (1989 Act) was enacted to encourage the growth of small-scale and cottage industries in Assam. The Act mandates that certain items, including drugs and pharmaceuticals, must be purchased from the Assam Small Industries Development Corporation Limited (ASIDC). The Act and the associated Marketing Assistance Scheme require that purchasing authorities issue indents to ASIDC with a 90% advance payment, and ASIDC must release 90% of the payment to the supplier upon supply completion. The statutory obligation of ASIDC to collect this advance and make timely payments to suppliers is emphasized. 2. Liability of ASIDC for Payment to the Supplier: The Court determined that ASIDC, despite being described as an "agent" in the agreement, had a statutory duty to pay the supplier 90% of the value of the goods upon delivery, regardless of whether it received payment from the government departments. This obligation arises from the statutory provisions of the 1989 Act and the guidelines issued under it. ASIDC's failure to collect the 90% advance from the purchasing authorities and its subsequent failure to pay the supplier constituted a breach of its statutory duties. 3. Applicability of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993: The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (1993 Act) imposes a statutory liability on buyers to make timely payments to suppliers. The Act applies to transactions after its commencement date, 23rd September 1992. The Court found that only transactions after this date are subject to the 1993 Act's provisions for compound interest on delayed payments. Transactions prior to this date are not covered by the 1993 Act, and for those, simple interest at the rate of 9% per annum is applicable. 4. Determination of the Relationship between the Supplier and ASIDC (Principal-Agent Relationship): The Court analyzed the nature of the relationship between the supplier and ASIDC. Despite the agreement describing ASIDC as an "agent," the Court held that the statutory framework and the substance of the transaction indicated that ASIDC had more control and responsibility than a typical agent. ASIDC was responsible for quality control, pricing, and collection of payments, which are not typical functions of an agent. Therefore, ASIDC was deemed liable for the payments to the supplier. 5. Necessity of Including the State of Assam as a Party in the Suit: The Court concluded that the State of Assam was not a necessary party to the suit. The agreement and statutory provisions indicated that ASIDC had the responsibility to collect payments from the government departments and pay the supplier. The absence of the State of Assam did not affect the ability to make an effective order in the suit, making it a proper party but not a necessary one. Conclusion: The Court modified the judgment to award simple interest at 9% per annum for transactions before the 1993 Act's commencement and compound interest at 23.5% per annum for transactions after the Act's commencement. The appeal was allowed in part regarding the interest, and ASIDC was directed to bear the costs of the respondent.
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