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TMI Blog2005 (10) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... n shall bear the costs of the Respondent in this appeal. Counsel's fee is assessed at Rs. 25,000/-. - Appeal (civil) 6324 of 2005 - - - Dated:- 7-10-2005 - S. B. Sinha And R. Raveendran,JJ. JUDGMENT Leave granted. The Legislature of State of Assam and the Parliament took legislative measures to allay the difficulties faced by the small scale industries. The State of Assam made rules known as The Assam Preferential Stores Purchase Rules in the year 1972. The said rules having not served its purpose, the Assam Preferential Stores Purchase Act, 1989 (for short the 1989 Act ) was enacted which received the assent of the Governor on 14th July, 1989. The said Act was enacted for encouraging growth of industries in the State of Assam specially small scale and cottage industries and for taking measures ancillary thereto. The State intended to patronize the products of the small scale and cottage industries on preferential basis and to rationalize the procedure for purchase of stores required by the State Government Institutions, Government companies and State Government undertakings, as would appear from the preamble thereof. Section 2(d) of the 1989 Act defines State B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Schedule is 'drugs and pharmaceuticals and clinical equipments'. An office memorandum dated 28th March, 1988 referred to in Section 7(1)(c) of the 1989 Act is based on a cabinet decision and issued in the name of the Governor of Assam laid down guidelines for strict adherence thereof by all government departments, their subordinate authorities, governments organizations and public sector undertakings while making their purchases of any SSI products which are dealt in or manufactured by the Corporation. The said office memorandum satisfies the requirements of Article 166 of the Constitution of India and has been made a part of the 1989 Act. In terms of the said guidelines, the Corporation is required to publish a list of items/ materials/products to be dealt in or manufactured by it as detailed in Annexure 1 thereof. The price of such SSI products is to be fixed by any Technical Committee constituted by the Corporation with members from neutral organization and concerned departments. As per the said OM, purchasing authorities shall pay to the Corporation upto 5% as commission over the price fixed by the Corporation. The purchasing authorities shall pay advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds manufactured by the Principal as specified in the schedule appended to this agreement, under the marking support scheme formulated by the Corporation under the AP SP Act, 1989. The principal hereby covenants with the Corporation as hereinafter provided : 1. The Principal shall quote lowest rates in respect of Scheduled Goods to the Corporation and shall not quote to any party mentioned above directly or indirectly, rate lower than those quoted to the Corporation in respect of the goods for which competitive rates are being quoted by them. The rates so quoted to the Corporation by the Principal shall be valid for a period of one year from the date of submission of the quotation. 4. The Principal shall, when advised to do so, supply the goods wherever required within the stipulated time at his cost. In event of failure to comply with aforesaid clause, if any penalty is imposed by the actual buyer of the goods in the event of the Principal failing to comply the above provision of conditions, or if any losses are otherwise incurred, the said penalty or loss is to be borne by the Principal by reimbursing the said amount to the Corporation within 15 days from the date of dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: 4. The Stores must be supplied through your challan issued in favour of indenting department and should be properly a/c Assam Small Industries Development Corporation Limited, marketing Division and will be submitted to this office after duly receipted by the department and stamped. 5. The above prices are inclusive of packing/ forwarding/ transportation charge, but exclusive of 5% commission and tax as admissible. 8. After execution of the order your bill should be submitted for payment. Payment will be made subject to receipt of the fund from the indenting department. No interest/ compensation can be claimed for delay in payment. 10. Terms and conditions other than the above, will be as per the deed of agreement executed by you, red with other tenders/quotations. The Parliament also enacted 'Interest on Delayed payments to Small Scale and Ancillary Industrial Undertakings Act, 1993' (for short the 1993 Act ) being Act No. 32 of 1993 which came into force with effect from 23rd September, 1992. Appointed day has been defined in Section 2(b) to mean the day following immediately after the expiry of the period of thirty days from the day of acceptanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiff firm as per the APSP Act, 1989 and as per the indent of the Govt. department. It was agreed in the terms and conditions of the order that the payment of the bills would be released to the plaintiffs on receipt of payment by the defendants from the concerned Government Department. This condition of payment has also been agreed to by the plaintiff and as per the terms and conditions of the agreement executed by the parties. The defendants submit that it has not received payment against the value of the medicines supplied by the plaintiff to the Government department and as such, the bill amount could not be released due to the aforesaid factor. The Drug Association, Assam where the plaintiff firm is also a Member, has informed the defendants by letter that the firm registered under them, are agreeable to accept orders without 90 percent advance payment at the time of placement of the order and accordingly orders were placed and as per the terms and conditions of the agreement, the defendants were to release payment on receipt of the same from the concerned Government department. As stated earlier since the defendants has not received any payment from the Government Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the actual buyer only. (iii) The provisions of the 1993 Act for payment of interest, are not applicable in view of the fact that the same applies only to a buyer of any goods or recipient of a service from a supplier for a consideration. Further clause 8 of the terms and conditions of the orders for supply provide that no interest can be claimed for delay in payment. (iv) In the entire plaint, the Respondent has admitted that it is bound by the terms and conditions of supply and in particular clause 8 therof and, thus, it does not lie in its mouth now to contend, as has been done in the counter-affidavit filed before this Court, that the said clause is illegal and of no effect being opposed to public policy. Mr. Pravir Choudhary, learned counsel appearing on behalf of the Respondent, on the other hand, would submit that both the 1989 Act and the 1993 Act are beneficial legislations. The 1989 Act having been enacted by the State of Assam for granting certain reliefs to the SSI units as a part of its industrial policy, the terms and conditions of the agreement as also the conditions of supply shall be subservient thereto and, thus, to the extent the same is inconsiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the required products with 90% advance whereupon the Corporation would immediately allot the work to the most suitable unit or units to complete supply within the stipulated time. In the event, such supplies are not made within the specified time, the supplier would be subjected to penalty. In view of the fact that the supplying authority will have to send advance of 90%, the Corporation owes a duty to release payment upto 90% on completion of supply. If the Corporation had not taken the advance in terms of the provisions of the scheme, it acted at its own peril. It is not disputed that the Respondent did not commit any breach or any irregularity in regard to the supplies. Once the supply of the goods was completed, having regard to the clause aforementioned, the Corporation was bound to release the payment upto 90% in view of the fact that the purchasing authorities were also obligated to issue indent to the Corporation with 90% advance. If such advance had not been given, the Corporation in terms of the scheme should not have issued the indent. It may be true that the terms and conditions appended with each order of supply stipulate that payment would be made subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to their interest. The terms used in the agreement must, therefore, be understood in that perspective. In Chairman, Life Insurance Corporation and others Vs. Rajiv Kumar Bhasker [2005 AIR SCW 3636], a bench of this Court opined: 39. Agency as is well-settled, is a legal concept which is employed by the Court when it becomes necessary to explain and resolve the problems created by certain fact situation. In other words, when the existence of an agency relationship would help to decide an individual problem, and the facts permits a court to conclude that such a relationship existed at a material time, then whether or not any express or implied consent to the creation of an agency may have been given by one party to another, the court is entitled to conclude that such relationship was in existence at the time, and for the purpose in question. [See Establishing Agency by GHL Fridman - 1968 (84) Law Quarterly Review 224 at p 231]. It is no longer in doubt or dispute that while interpreting the terms of agreement, it is necessary to look to the substance of the matter rather than its form. Use of a terminology may not be sufficient to lead to a conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision beyond the concept of agency as contained in the Contract Act. It is a special statute. In terms thereof the Respondent was not required to pay any commission to the Corporation, though the Corporation was described as 'agent' of the Respondent under the agreement. 5% commission was to be paid to the Corporation by the purchasing authorities. The provisions of the 1989 Act, thus, should be given full effect. The status of the parties must not, thus, be determined as to how they have described themselves but having regard to the substance of the transaction as envisaged under the Act and the scheme framed, which as noticed hereinbefore, is as a part of the Act. As a statutory agency came into being by and between the purchasing authorities and the Corporation in terms whereof the Corporation not only exercised the control in relation to the entire supply of materials, as a part of the statutory scheme, it also undertook to collect the price of the goods supplied from the purchasing authorities and pay the same to the manufacturers subject, of course, to the payment of its commission which would be a substantial amount. Under the scheme, the purchasing authorities h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit and hence no decree could have been passed nor could be executed against them. We are afraid we cannot uphold the contention. It is the case of the plaintiffs that the property was let to Papamiya. It is not even the case of the respondents that they were the tenants of the plaintiffs. They are claiming through Papamiya. At the most, therefore, they can be said to be sub-tenants i.e. tenants of Papamiya. There was no privity of contract between the landlord and the respondents. In our opinion, therefore, it was not necessary for the plaintiffs to join the respondents as defendants in the suit nor to give notice to them before initiation of the proceedings. The respondents cannot be said to be necessary party to the proceedings. 26. As held by this Court in Udit Narain Singh Malpaharia v. Addl. Member, Board of Revenue, Bihar 8 there is a distinction between necessary party and proper party . In that case, the Court said: (SCR p. 681) The law on the subject is well settled: it is enough if we state the principle. A necessary party is one without whom no order can be made effectively; a proper party is one in whose absence an effective order can be made but whose pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery and acceptance, and payment of balance of 10% after receipt of full payment from the purchasing department. As noticed above, the statutory scheme and the O.M. required the Corporation to receive the 90% payment in advance along with the indents from the purchasing departments and any relaxation by the Corporation of that provision was done at its own risk. APPLICABILITY OF THE 1993 ACT: We have held hereinbefore that Clause 8 of the terms and conditions relate to the payments of balance 10%. It is not in dispute that the plaintiff had demanded both the principal amount as also the interest from the Corporation. Section 3 of the 1993 Act imposes a statutory liability upon the buyer to make payment for the supplies of any goods either on or before the agreed date or where there is no agreement before the appointed day. Only when payments are not made in terms of Section 3, Section 4 would apply. The 1993 Act came into effect with effect from 23.9.1992 and will not apply to transactions which took place prior to that date. We find that out of the 71 suit transactions, sl. Nos.1 to 26 (referred to in penultimate para of the Trial Court Judgment), that is supply orders b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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