2024 (5) TMI 682 - SC - Companies Law

Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings - HELD THAT - The contract postulated and the parties had agreed that MSSIDCL would be liable to pay SSPL only after the goods are delivered and accepted by the consignee, namely, Maharashtra State Electricity Board (MSEB) and on the payment being received by MSSIDCL from the MSEB. If the proviso to Section 3 applies, this contractual clause will get modified in terms of the proviso to Section 3, which has fixed the upper time limit for payment to 120 days from the day of acceptance or the day of deemed acceptance. However, the question would arise as to whether the said proviso would be applicable to the agreement in question, which was entered into between the parties on 30.03.1995, albeit the proviso was enacted and enforced with effect from 10.08.1998. There are no good ground and reason to interfere with the conclusion in the impugned judgment passed by the Division Bench of the High Court, setting aside the arbitral award dated 30.06.2003 - appeal dismissed.

Summary

Issues involved:
The interpretation of Sections 3, 4, and 5 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (1993 Act) in a case involving a dispute between a supplier (SSPL) and a buyer (MSSIDCL) regarding payment terms and interest calculations.

Interpretation of Section 3:
- Before the proviso, parties could agree on the payment date; if not, the "appointed day" was the due date.
- Section 4 mandates interest payment if the buyer fails to pay as per Section 3.
- The proviso from 1998 limits payment date to 120 days from acceptance.
- The contractual clause on payment date can override Section 4.

Effect of Proviso to Section 3:
- The proviso restricts parties' contractual rights on payment date to 120 days.
- Contractual clauses exceeding 120 days trigger interest payment beyond that period.

Application of Proviso to Section 3:
- A contract from 1995 may be subject to the proviso from 1998.
- Interest calculation post-proviso requires determining the acceptance date.

Judgment Conclusion:
- Upheld the High Court's decision setting aside an arbitral award.
- Mentioned Section 43(4) of the Arbitration and Conciliation Act, 1996 would apply.
- Clarified MSSIDCL's role as a supplier to MSEB for interest claims under the 1993 Act.
- Noted the need to ascertain facts related to MSEB for interest calculations.
- Addressed the liability under Section 5, emphasizing the payment of principal amount.
- Allowed MSSIDCL to seek restitution or enforcement if SSPL fails to refund the amount.
- Dismissed the appeal with no costs, disposing of pending applications.