2009 (7) TMI 1033 - SC - Companies Law

Whether the appellant-plaintiff is entitled to a direction for payment of interest compounding at monthly rest at the rate of 24% per annum? Held that - Appeal dismissed. Full factual foundation for such an argument was not placed before us so as to enable us to know as to why the quantity to be supplied by the appellant plaintiff was curtailed by the Government and as to why the appellant plaintiff was not supplying the goods despite the receipt of the supply orders for several months. It is also not clear from the records that whether there was any failure or negligence on the part of the appellant-plaintiff in not supplying the goods for a long period of time without any reasonable basis or whether there were laches on the part of the respondents in sorting out the transaction. These are some of the factual issues which are required to be gone into to answer finally such issue which was raised at the time of hearing of the appeal and which cannot be done in the absence of any evidence in that regard.

Issues Involved:
1. Entitlement to compound interest at 24% per annum.
2. Applicability of the Interest on Delayed Payment to Small Scale Industries Act, 1993.
3. Retrospective application of the Act.
4. Novation and alteration of contract under Section 62 of the Indian Contract Act.

Detailed Analysis:

1. Entitlement to Compound Interest at 24% per Annum:
The appellant-plaintiff sought a decree for payment of Rs. 38,13,480/- with compound interest at 24% per annum. The trial court decreed in favor of the appellant-plaintiff, but the High Court modified the decree, granting simple interest at 9% per annum instead. The Supreme Court examined whether the appellant-plaintiff was entitled to compound interest at 24% per annum under the Interest on Delayed Payment to Small Scale Industries Act, 1993.

2. Applicability of the Interest on Delayed Payment to Small Scale Industries Act, 1993:
The appellant-plaintiff argued that the transaction was governed by the Act, as the supply order issued on 16.07.1992 was materially altered by a fresh supply order on 18.03.1993, after the Act came into force. The respondents contended that the supply order dated 16.07.1992 was not altered and thus, the Act did not apply. The Supreme Court referred to the case of Assam Small Scale Industries Development Corporation Ltd. & Ors. v. J.D. Pharmaceuticals & Anr. [2005 (13) SCC 19], which held that the Act applies only to transactions after its commencement on 23rd September, 1992. The Court concluded that the original supply order dated 16.07.1992, being prior to the Act's commencement, was not governed by the Act.

3. Retrospective Application of the Act:
The appellant-plaintiff argued for a liberal interpretation of the Act, emphasizing its beneficial nature. The Supreme Court reiterated the principle that statutes are prima facie prospective unless explicitly stated otherwise. The Court found no indication that the legislature intended the Act to have retrospective effect, thus rejecting the appellant-plaintiff's contention.

4. Novation and Alteration of Contract under Section 62 of the Indian Contract Act:
The appellant-plaintiff claimed that the original contract was altered, resulting in a new contract, thus invoking Section 62 of the Indian Contract Act. The respondents refuted this, stating that the original supply order remained with minor variations. The Supreme Court noted that the issue of novation was not raised in the lower courts or in the appeal memorandum, making it inappropriate to address it for the first time at the final hearing. The Court also found no substantial evidence of contract alteration or novation, concluding that the original contract terms largely remained unchanged.

Conclusion:
The Supreme Court upheld the High Court's decision, affirming that the appellant-plaintiff was entitled to simple interest at 9% per annum, not compound interest at 24% per annum. The appeal was dismissed, with each party bearing its own costs.

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