2006 (2) TMI 697 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the suit is barred by res judicata?
2. Whether the suit is barred by the law of limitation?
3. Whether the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 is applicable in this case and if the plaintiff is entitled to interest under the Act?

Issue-wise Detailed Analysis:

1. Whether the suit is barred by res judicata?
The appellants argued that the suit is barred by res judicata because the claim of interest was made in Money Suit No. 97 of 1996 and was also the subject matter in the writ application (C.W.J.C. No. 274 of 1994). The respondent countered that the issue of interest was not decided in either case. The judgment of Money Suit No. 97 of 1996 showed that no order was passed on the issue of interest due to the pending writ application. The High Court had allowed the withdrawal of the writ application to enable the filing of a properly constituted suit. Hence, the issue of interest was not heard and decided, and the suit is not barred by res judicata.

2. Whether the suit is barred by the law of limitation?
The appellants contended that the suit was barred by limitation. The respondent argued that the supplies continued until 30.4.1993, and the cause of action arose on 1.6.1993. The suit was filed on 20.12.1997, but the High Court's order dated 20.10.1997 in C.W.J.C. No. 274 of 1994 allowed the exclusion of the period from 10.1.1994 to 20.10.1997 under Section 14 of the Limitation Act. The lower court record confirmed that such an application was filed. Therefore, the suit was filed within the permissible period and is not barred by limitation.

3. Whether the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 is applicable in this case and if the plaintiff is entitled to interest under the Act?
The appellants argued that the Act is not applicable for three reasons: (1) there was no agreement for interest, (2) the Act came into force after the agreement was executed, and (3) the respondent failed to supply the materials on time. The respondent countered that the non obstante clauses in Sections 4 and 5 of the Act entitle them to interest regardless of any agreement. The Act came into force on 23.9.1992, and the cause of action for delayed payment arose on 1.6.1993. The Supreme Court's decision in Assam Small Scale Industrial Development Corporation Limited v. J.D. Pharmaceuticals established that the crucial date is the date of the supply order. Since the supply order in this case was placed on 16.7.1992, prior to the Act's commencement, the Act is not applicable. However, the Court allowed simple interest at the rate of 9% per annum in terms of Section 34 of the Code of Civil Procedure from 1.6.1993 till realization, modifying the trial court's decree of 24% compound interest.

Conclusion:
The appeal was allowed in part, modifying the trial court's judgment to award simple interest at the rate of 9% per annum from 1.6.1993 till realization instead of compound interest at 24%. The liability of payment of interest is subject to the decision of the First Appeal pending in the High Court arising out of Money Suit No. 97 of 1996.