REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2348 OF 2003
M/s Purbanchal Cables & Conductors Pvt. Ltd. .………… Appellant
Versus
Assam State Electricity Board & Another …………..Respondents
WITH
CIVIL APPEAL NO. 2351 OF 2003
Assam State Electricity Board & Others ………….. Appellants
Versus
M/s Shanti Conductors Pvt. Ltd. & Another ………..Respondents
J U D G M E N T
H.L. DATTU, J.
1) Since the issues in these appeals are common, they are disposed of by
this common judgment and order.
Factual background of the two appeals
2) The facts in brief needs to be stated for answering the issues raised.
They are: In the case of Purbanchal Cables (C.A. No. 2348 of 2003), the
supplier is the manufacturer of Aluminium Conductors Steel Reinforced
(for short “ACSR”) for various specifications. The respondent-Board had
placed orders for supply of ACSR of different specifications in three (3)
quarterly phases, i.e. in June 1992, September 1992 and December 1992
with the appellant vide supply order dated 31.3.1992. In pursuance to the
said supply order, the supplier had initially made delivery of goods with
respect to three bills on 16.09.1992, but did not receive payment from
the respondent. Subsequently, the supplier had made another delivery of
goods with respect to nine other bills in between 25.09.1992 and
30.03.1993. These supplies were made after the expiry of the time
stipulated in the agreement/supply order, but after obtaining specific
extension of time by the buyer. The supplier had completed the entire
supply by 12.10.1993 and received the payment for such supplies from the
respondent in the month of September and October, 1993. In pursuance to
such supplies, the supplier has raised the demand for interest on delayed
payment made by the respondent, vide its letters dated 14.12.1992 and
3.12.1993, however, the same was not acceded to by the buyer.
3) The supplier had instituted a Money Suit No.109 of 1996 before Assistant
District Judge No.1, Kamrup for the payment of interest to the tune of
`24,57,927.28/-, on delayed payment of principal amount by the
respondent, under the Interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertakings Act, 1993 (for short ‘the Act’). The
said suit was decreed by the Civil Judge (Senior Division) No. 1, Kamrup
vide his order dated 27.01.2000 in favour of the supplier, who granted
the compound interest @ 18.25% per annum plus interest of 5% above the
said rate of interest with monthly rest till realization. Being aggrieved
by the said order, the respondent had filed a Regular First Appeal No. 80
of 2000 before the High Court of Gauhati. The Division Bench of the High
Court has allowed the appeal and dismissed the suit vide its judgment and
order dated 18.8.2001 on the ground that suit is not maintainable as no
amount was due on the date of institution of the suit and thereby
followed its earlier view rendered by the Division Bench of the High
Court in Assam State Electricity Board and Another v. M/s Trusses and
Towers (P) Ltd. (F.A. NO. 109/95), 2001 (2) GLT 121, whereby and
whereunder a Division Bench of the High Court had held that a suit for
interest simpliciter was not maintainable when the principal amount was
received without any demur and that the Act did not revive the claims
that were already settled. The High Court has also, inter alia, directed
the appellant to refund the amount of ` 10 lakhs, paid by the respondents
pursuant to the Court’s direction at the time of admission of the appeal
to the respondent within a period of two months and failure to pay within
such period would entail interest at the rate of 12% per annum. Aggrieved
by this decision of the High Court, the supplier has preferred this
appeal.
4) In the case of Shanti Conductors (C.A. No. 2351 of 2003), the Board had
placed two supply orders for the manufacture and supply of KM ACSR
Penther Conductors, and the supplier completed the supplies in eight
parts between 22.03.93 and 04.10.93. In March 1997, about three and a
half years of making the supplies, and after the receipt of the entire
amount, the supplier filed a suit for interest on delayed payment by the
Board in terms of the provisions of the Act, in Money Suit No. 21/1997
before the Court of the Civil Judge (Sr. Divn.) No. 1, Guahati. The same
was disputed by the Board in the written statement filed in the suit.
However, the suit filed by the supplier was decreed and the Learned
Assistant District Judge awarded a sum of `51,60,507.42 by way of
interest for the delayed payment. Being aggrieved by the said order, the
Board preferred a Regular First Appeal (F.A. No. 66 of 2000) before the
Guahati High Court. The Division Bench hearing the appeal of the Board in
the case of Shanti Conductors doubted the correctness of the view taken
by the Division Bench in the case of Trusses and Towers, and referred the
matter to the Full Bench to determine whether a suit is maintainable only
for interest and whether the provisions of the Act is applicable to
contracts concluded prior to its commencement, where the delayed payment
is made after its commencement.
5) The Full Bench of the High Court after considering the provisions of the
Act, concluded that the findings of the Division Bench in the case of
Trusses & Towers that once a principal amount is received without any
protest, then no further claim for interest can be made; is not the
correct legal position in law. In other words, the Full Bench came to the
conclusion that a suit for only interest was also maintainable. Further,
the Full Bench also held that the Act is applicable to any contracts
entered into prior to the commencement of the Act, and a higher rate of
interest could be charged in terms of the provisions of the Act, however,
the same was to be done after 23.09.1992, i.e. after the Act came into
force. The matter was then remitted back to the Division Bench to decide
the other issues in accordance with law and in the light of the
observations made therein. Aggrieved by the decision of the Full Bench,
the Board is before us in Civil Appeal No.2351 of 2003.
6) The issues that are required to be answered by us in these appeals are
whether a suit for interest alone is maintainable under the provisions of
the Act, and whether the Act would be applicable to contracts that have
been concluded prior to the commencement of the Act. In other words, we
are required to examine whether the Act would apply to those contracts
which were entered prior to the commencement of the Act but supplies were
effected after the Act came into force.
The Scheme of the Act:
7) The Statement of Objects and Reasons read as under:
“A policy statement on small scale industries was made by the
Government in Parliament. It was stated at that time that suitable
legislation would be brought to ensure prompt payment of money by
buyers to the small industrial units.
2. Inadequate working capital in a small scale or an ancillary
industrial undertaking causes serious and endemic problems affecting
the health of such undertakings. Industries in this sector have also
been demanding that adequate measures by taken in this regard. The
Small Scale Industries Board, which is an apex advisory body on
polices relating to small scale industrial units with representatives
from all the States, governmental bodies and the industrial sector,
also expressed this view. It was, therefore, felt that prompt payments
of money by buyers should be statutorily ensured and mandatory
provisions for payment of interest on the outstanding money, in case
of default, should be made. The buyers, if required under law to pay
interest, would refrain from withholding payment to small scale and
ancillary industrial undertakings.
3. An Ordinance, namely, the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Ordinance, 1992, was,
therefore, promulgated by the President on 23rd September, 1992.”
8) The long title of the Act reads as “An Act to provide for and regulate
the payment of interest on delayed payments to small scale and ancillary
industrial undertakings and for matters connected therewith or incidental
thereto.” The Act though enacted on 2nd April 1993, by a legal fiction is
deemed to have come into effect from the date of promulgation of the
Ordinance, i.e. 23rd September 1992. The provisions of the Act largely
deal with the liability of the buyer to make payment for supplies,
determination of the date from which and the rate at which interest is
payable to the supplier from the buyer, liability of the buyer to pay
compound interest, recovery of the amount due to the supplier from the
buyer, and other provisions relating to appeal, etc.
9) Section 2(b) of the Act defines the meaning of the expression ‘appointed
day’ to mean the day following immediately after the expiry of the
payment period of thirty days from the date of payment, acceptance of any
goods or any services by a buyer from a supplier. Section 3 of the Act
imposes a statutory liability upon the buyer to make payment for the
supplies of any goods either on or before the appeal date or where there
is no agreement, before the appointed day. Section 4 provides for the
award of interest where the price has not been paid within time. Section
5 provides for the liability of the buyer to pay compound interest.
Section 6 of the Act gives a right to the buyer to file a civil suit.
Section 10 of the Act gives overriding effect to any other law which are
inconsistent with the provisions of the Act.
On the question of maintainability of a suit for interest
10) Shri Rakesh Dwivedi and Shri Sunil Gupta, learned Senior Counsel appear
for the suppliers and Shri Vijay Hansaria, learned Senior Counsel appears
for the buyer – Assam State Electricity Board (hereinafter referred to as
‘the Board’).
11) The learned Senior Counsel appearing for the suppliers has brought to
our notice that the first question that has been raised for our
consideration has been answered by this Court in favour of the suppliers,
in the case of Modern Industries v. Steel Authority of India Limited,
(2010) 5 SCC 44, in which this Court has held:
“40. In Assam SEB v. Shanti Conductors (P) Ltd. inter alia the
question that fell for consideration before the Full Bench of the
Gauhati High Court was as to whether the suit for recovery of a mere
interest under the 1993 Act is maintainable. The argument on behalf of
the appellant therein was that no suit merely for the recovery of the
interest under the 1993 Act is maintainable under the provisions of
Section 6. It was contended that both principal sum and the interest
on delayed payment simultaneously must coexist for maintaining a suit
under Section 6 of the 1993 Act.
41. The Full Bench held that the suit is maintainable for recovery of
the outstanding principal amount, if any, along with the interest on
delayed payments as calculated under Sections 4 and 5 of the 1993 Act.
It said: (Assam SEB case, Gau LR pp. 559-60, para 12)
“12. … The opening words of Section 6(1) ‘the amount due from the
buyer, together with the amount of interest….’ can only mean that
the principal sum due from the buyer as well as or along with the
amount of interest calculated under the provisions of the Act, are
recoverable. The word ‘together’ here would mean ‘as well as’ or
‘along with’. This cannot mean that the principal sum must be due on
the date of the filing of the suits. The suits are maintainable for
recovery of the outstanding, principal amount, if any, along with
the amount of interest on the delayed payments as calculated under
Sections 4 and 5 of the Act. We are unable to agree with that if the
principal sum is not due, no suit would lie for the recovery of the
interest on the delayed payments, which might have already accrued.
If such an interpretation is given the very object of enacting the
Act would be frustrated. The Act had been enforced to see that small-
scale industries get the payment regarding supply made by them
within the prescribed period and in case of delay in payments the
interest would be at a much higher rate (one-and-a-half times of
lending rate charged by State Bank of India). The obligation of
payment of higher interest under the Act is mandatory. Sections 4
and 5 of the Act of 1993 contain a non obstante clause i.e.
‘Notwithstanding anything contained in any agreement between the
buyer and the supplier’. In other words, the parties to the contract
cannot even contract out of the provisions of the 1993 Act. Even if
such provision that interest under the Act on delay meant would not
be chargeable is incorporated in the contract, Sections 4 and 5 of
the Act of 1993 would still prevail as the very wording of these
sections indicate. Take for instance that the buyer has not paid the
outstanding amount of the supply by the due date. After much delay
he offers the outstanding amount of the supply to the supplier. If
the argument of the learned counsel for the appellant is to be
accepted, then, if the supplier accepts entire amount he would be
losing his right to recover the amount of interest on the delayed
payment under the Act. Therefore, he would have to refuse to accept
the amount of payment and then file a suit for recovery of the
principal amount and the interest on the delayed payment under the
Act. The Act does not create any embargo against supplier not to
accept principal amount at any stage and thereafter file a suit for
the recovery or realisation of the interest only on the delayed
payments under the Act.”
42. The word “due” has a variety of meanings, in different context it
may have different meanings. In its narrowest meaning, the word “due”
may import a fixed and settled obligation or liability. In a wider
context the amount can be said to be “due”, which may be recovered by
action. The amount that can be claimed as “due” and recoverable by an
action may sometimes be also covered by the expression “due”. The
expression “amount due from a buyer” followed by the expression
“together with the amount of interest” under sub-section (1) of
Section 6 of the 1993 Act must be interpreted keeping the purpose and
object of the 1993 Act and its provisions, particularly Sections 3, 4
and 5 in mind. This expression does not deserve to be given a
restricted meaning as that would defeat the whole purpose and object
of the 1993 Act. Sub-section (1) of Section 6 provides that the amount
due from a buyer together with amount of interest calculated in
accordance with the provisions of Sections 4 and 5 shall be
recoverable by the supplier from the buyer by way of suit or other
proceeding under any law for the time being in force.
43. If the argument of the Senior Counsel for the buyer is accepted,
that would mean that where the buyer has raised some dispute in
respect of goods supplied or services rendered by the supplier or
disputed his liability to make payment then the supplier shall have to
first pursue his remedy for recovery of amount due towards goods
supplied or services rendered under regular procedure and after the
amount due is adjudicated, initiate action for recovery of amount of
interest which he may be entitled to in accordance with Sections 4 and
5 by pursuing remedy under sub-section (2) of Section 6.
44. We are afraid the scheme of Section 6 of the 1993 Act read with
Sections 3, 4 and 5 does not envisage multiple proceedings as
canvassed. Rather, whole idea of Section 6 is to provide a single
window to the supplier for redressal of his grievance where the buyer
has not made payment for goods supplied or services rendered in its
entirety or part of it or such payment has not been made within time
prescribed in Section 3 for whatever reason and/or for recovery of
interest as per Sections 4 and 5 for such default. It is for this
reason that sub-section (1) of Section 6 provides that “amount due
from a buyer together with the amount of interest calculated in
accordance with the provisions of Sections 4 and 5” shall be
recoverable by the supplier from buyer by way of a suit or other legal
proceeding. Sub-section (2) of Section 6 talks of a dispute being
referred to IFC in respect of the matters referred to in sub-section
(1) i.e. the dispute concerning amount due from a buyer for goods
supplied or services rendered by the supplier to the buyer and the
amount of interest to which the supplier has become entitled under
Sections 4 and 5.
45. It is true that word “together” ordinarily means conjointly or
simultaneously but this ordinary meaning put upon the said word may
not be apt in the context of Section 6. Can it be said that the action
contemplated in Section 6 by way of suit or any other legal proceeding
under sub-section (1) or by making reference to IFC under sub-section
(2) is maintainable only if it is for recovery of principal sum along
with interest as per Sections 4 and 5 and not for interest alone? The
answer has to be in negative.
46. We approve the view of the Gauhati High Court in Assam SEB that
word “together” in Section 6(1) would mean “along with” or “as well
as”. Seen thus, the action under Section 6(2) could be maintained for
recovery of principal amount and interest or only for interest where
liability is admitted or has been disputed in respect of goods
supplied or services rendered. In our opinion, under Section 6(2)
action by way of reference to IFC cannot be restricted to a claim for
recovery of interest due under Sections 4 and 5 only in cases of an
existing determined, settled or admitted liability. IFC has competence
to determine the amount due for goods supplied or services rendered in
cases where the liability is disputed by the buyer. Construction put
upon Section 6(2) by the learned Senior Counsel for the buyer does not
deserve to be accepted as it will not be in conformity with the
intention, object and purpose of the 1993 Act. The Preamble to the
1993 Act, upon which strong reliance has been placed by the learned
Senior Counsel, does not persuade us to hold otherwise. It is so
because the Preamble may not exactly correspond with the enactment;
the enactment may go beyond the Preamble.”
12) The decision of the Full Bench of the Gauhati High Court which has been
approved by this Court in Modern Industries (supra) is impugned before
us in one of the appeals. Since a Division Bench of this Court has
already approved the dictum of the Full Bench of the High Court with
regard to the maintainability of a suit only for interest, that question
is no longer res integra. Therefore, the suppliers may file a suit only
for a higher rate of interest on delayed payments made by the buyer from
the commencement of the Act.
13) The other question that remains for our consideration is; as to whether
the suppliers can get the benefit of the provisions of the Act even if
the contract of supply was executed prior to the commencement of the Act,
whereas the supplies being made after the commencement of the Act. In
other words, the question we are called upon to answer is with regard to
the status of contracts of supply concluded prior to the commencement of
the Act vis-à-vis the Act.
Arguments on behalf of the suppliers
14) Shri Rakesh Dwivedi, learned Senior Counsel, would submit that the Act
is a beneficial legislation and is aimed at providing relief to suppliers
which are small scale industries, who are not paid on time even after
supplies are effected and accepted and hence had to suffer severe
financial crunch. He would submit that the Act is supply oriented and the
date of the supply is the critical and crucial date for applying the
provisions of the Act, and not the date on which the contract is entered
into by the parties. Shri. Dwivedi, learned Senior Counsel would state
that Section 1(3) of the Act by way of a deeming fiction, brought the Act
into force from the date of the promulgation of the Ordinance i.e. 23rd
September 1992. He would then draw our attention to the text of Section
3, and submit that the liability of a buyer to make payment arose on the
completion of the event of supply of the good by the
supplier/manufacturer. The learned Senior Counsel refers to the
definition of ‘appointed day’ to mean the day of acceptance of the supply
of goods or the date of deemed supply of goods. He would refer to
Sections 4 and 5 and also Section 10 of the Act and submit that the
liability and payment of higher rate of interest is a result of delayed
payment by the buyer to the supplier at the time of the supply. He would
also stress on the non-obstante clause that is found in the text of
section 5 and overriding effect given to the Act vide section 10 to
stress upon the fact that the provisions of the Act with regard to
compound interest would prevail even if there was an agreement to the
contrary that the Act would override the provisions of any other law. He
would lay emphasis upon the crucial date for the operation of the Act as
the date on which the supply is made and not the date on which the
contract of supply was concluded as understood by the decisions of this
Court in Assam Small Scale Industries and Shakti Tubes. He would also lay
emphasis on the expression “appointed day” as defined in Section 2(b) of
the Act to contend that though the contract between the parties was prior
to the enactment, it is the date of acceptance of the goods or any other
service by a buyer from the supplier and thus, is the relevant date for
applying the beneficial supply oriented legislation. In the alternative,
it is contended by Shri Dwivedi that even if the contract is entered into
prior to the date of commencement of the Act, and the supply was
subsequent, then the Act would apply in respect of such buyers that made
delayed payments to the suppliers. He would also submit that the ills of
delayed payment was causing great inconvenience and hardship to the small
scale industries, and that being the reason for the enactment of the
legislation, coupled with the fact that the event of supply is the core
theme of the legislation, hence all the supplies made after the 23rd
September 1992 would attract the provisions of the Act.
15) In conclusion, Shri Dwivedi contends: (1) that the Act is a supply
oriented; (2) that on a wholesome reading of Sections 4 and 5 and Section
10 of the Act gives overriding effect to any other law which are
inconsistent with the provisions of the Act; (3) the emphasis on the text
of Section 3 on the supply of the goods and the liability of the buyer
arose on the supply of goods; (4) It is a beneficial legislation and a
purposive construction is required to be adopted. He points out that
since these salient features are neither noticed nor considered in Assam
Small Scale Industries, the decision needs reconsideration by a larger
Bench.
16) Shri Sunil Gupta, learned Senior Counsel while adopting the principal
arguments of Shri Rakesh Dwivedi would submit, that, on a plain reading
of the Statement of Objects and Reasons of the Act, it is clear that
Parliament enacted the legislation in order to assist the small scale
industries to get their payment on time from the buyers. He would state
that there is extrinsic evidence in the Act to show that the Act would
apply even to those contracts, which were executed prior to 23rd
September 1992. Shri Gupta would further rely on the long title of the
Act to make good his submission that the scope of the Act was not
restricted to contracts entered into after the Act came into force. He
would further submit that the Act did not apply to those contracts or
payment disputes that were ceased to exist but are maintainable to all
those disputes, even if those cases in which recovery suit was filed and
pending after the Act has come into force. The learned Senior Counsel
would further submit that the Act is prospective and applies to all those
contracts which had been executed earlier but supplies were made after
the Act came into force. Shri Gupta would state that even if the
agreement and supply was prior to the coming into force of the Act, it
would still apply, if the issue with regard to delayed payment was still
alive. He would submit that the vested right that has accrued in favour
of the supplier should not be abrogated. Shri Gupta would also take us
through the debates in Parliament by the various members while the
legislation was being enacted and decisions of this Court in support of
his submissions. Shri Gupta would also submit that the question to be
addressed is not as to who is within the scope of the Act but who is
necessarily out of the ambit of the Act.
Arguments of behalf of the Board
17) Shri Vijay Hansaria, learned Senior Counsel appearing for the Board,
would submit that the suits in both the cases of Shanti Conductors and
Purbanchal Cables were barred by limitation.
18) In case of Purbanchal Cables (C.A. No. 2348 of 2003), the learned
Senior Counsel would state that the last supply was made on 12.10.1993
and the suit was filed on 31.08.1996 i.e. after the expiry of the period
of limitation. He would contend that the only reason assigned in the suit
to take the benefit of Section 14 of the Limitation Act is that a writ
petition filed on behalf of the Assam Conductors Manufacturers
Association was pending and only after the same was disposed of, they
have filed the suit. He would refer to Section 14 of the Limitation Act,
1963 and state that writ proceedings which caused the delay of the filing
of the suit was filed by an Association on behalf of the suppliers.
Further, he would submit that when the suit was filed, a writ appeal was
pending. He would rely on the case of Consolidated Engineering
Enterprises v. Municipal Secretary, Irrigation Department, (2008) 7 SCC
169, to contend that for the operation of Section 14, it was required
that a civil proceeding be pending by the same party. Though, the learned
Senior Counsel would state that the writ petition would fall within the
ambit of a civil proceeding, it had to be filed by the same party, which
is not the case in the present suit. The writ petition, he would state,
was filed by an Association for different relief, than what was sought by
the supplier in the suit, and hence, the benefit of Section 14 of the
Limitation Act would not be available.
19) In case of Shanti Conductors (C.A. No. 2351 of 2003), the supply order
was completed on 4th October 1993 and the suit was filed only on 10th
January 1997 i.e. after the expiry of three year limitation period. The
learned Senior Counsel would submit that there was no specific pleading
with regard to applicability of Section 14 of the Limitation Act, 1963,
though it was raised by the defendant in the suit. He would assail the
trial court’s reasoning wherein it is held that in view of the Section 10
of the Act, the Limitation Act does not apply. He would submit that in
the light of the judgment of this Court in Mukri Gopalan v. Cheppilat
Puthanpurayil Aboobacker, (1995) 5 SCC 5, this Court while construing
Section 29 (2) of the Limitation Act has held that if the operation of
the Limitation Act has to be barred, then a time schedule has to be given
under the special law and in the absence of such, the Limitation Act
would apply.
20) On the question of applicability of Act, the learned Senior Counsel
would submit that since 2005, this Court has consistently held that the
Act was not applicable to the contracts which were concluded prior to
commencement of the Act. In aid of his submission, the learned Senior
Counsel would draw our attention to issues raised and arguments canvassed
in Assam Small Scale Industries, which was specifically answered in the
negative by observing that the Act is not applicable for the contracts
entered into prior to the commencement of the Act. Shri Hansaria, further
submits that this issue was again raised in the case of Shakti Tubes,
wherein this Court was called upon to reconsider the question of law
decided by this Court in Assam Small Scale Industries and this Court in
Shakti Tubes categorically refused to refer the matter to a larger Bench
for reconsideration by approving the decision in Assam Small Scale
Industries as correctly decided. He would then submit this Court had
also considered this issue in Rampur Fertilizers Limited v. Vigyan
Chemical Industries- (2009) 12 SCC 324 and Modern Industries (supra).
Therefore, he would submit that this Court has consistently followed the
above view and relying on several decisions of this Court, he would state
that it is desirable to further uphold the same view as per the doctrine
of stare decisis and precedents in order to maintain certainty of the
law.
Our Conclusion
21) Though the learned Senior Counsel would state that the suits, filed by
both the suppliers in the present batch of appeals, were barred by
limitation, we do not intend to express our view on the issue, since some
of the appeals filed by the suppliers are still pending before the High
Court. Any observation that we may make would certainly effect the
interest of both the parties since that issue is yet to be decided by the
High Court.
Retrospective operation of the Act
22) The fundamental rule of construction is the same for all statutes
whether fiscal or otherwise. The under-lying principle is that the
meaning and intention of a statute must be collected from the plain and
unambiguous expression used therein rather from any notion. To arrive at
the real meaning, it is always necessary to get an exact conception,
scope and object of the whole Act.
23) In the case of Zile Singh v. State of Haryana - (2004) 8 SCC 1, this
Court observed that there were four relevant factors which needed to be
considered while considering whether a statute applied prospectively or
retrospectively:
“15.…Four factors are suggested as relevant: (i) general scope and
purview of the statute; (ii) the remedy sought to be applied; (iii)
the former state of the law; and (iv) what it was the legislature
contemplated….”
24) The general scope of the Act has been discussed above. The remedy
sought to be applied by the Act is made clear in the Statement of Objects
and Reasons, in which, it is stated that due to the delayed payments by
buyers to the small scale industries, their working capital was being
affected, causing great harm to the small scale industries in general.
This Act was passed by Parliament to impose a heavy interest on the
buyers who delayed the payments of the small scale industries, in order
to deter the buyers from delaying the payments after accepting the
supplies made by the suppliers. The policy statement of the Ministry of
Micro, Small and Medium Enterprises dated 6th August 1991, reads:
“3.4) A beginning has been made towards solving the problem of delayed
payments to small industries setting up of ‘factoring’ services
through Small Industries Development Bank of India (SIDBI). Network of
such services would be set up throughout the country and operated
through commercial banks. A suitable legislation will be introduced to
ensure prompt payment of small industries’ bills.”
25) Keeping in view the above object, the Act was enacted by the
Parliament. Before such enactment, it is required to examine rights of
the supplier qua the buyer prior to the commencement of the Act. In case
of delayed payment, the supplier, prior to the commencement of the Act,
was required to file a suit for the payment of the principal amount, and
could claim interest along with the principal amount. The supplier could
avail of the same under Section 34 of the Code of Civil Procedure, 1908
(hereinafter referred to as ‘the CPC’), Section 61 of Sale of Goods Act,
1930 and Section 3 of Interest Act, 1978.
26) In other words, the supplier whose payment was delayed by the buyer
prior to the commencement of the Act, could file a suit for payment of
the principal amount along with the interest. The supplier, thus, had the
vested right to claim the principal amount along with interest thereon in
case of a delay in payment by the buyer and it was the discretion of the
Court to award this interest. The Court has the discretion to award
interest along with the principal amount and the same is clear from the
use of the word ‘may’ in all the three provisions cited above. Section 34
of the CPC is the main provision under which interest could be awarded by
the Court and Section 61 of the Sale of Goods Act, 1930 is an offshoot of
Section 34 of the CPC. Section 3 of the Interest Act, 1978 also makes the
Interest Act subject to the provision of Section 34 of the CPC. Hence, we
can safely deduce that the interest awarded is a discretion exercised by
the Court, on the principal amount claimed, in case of a suit for
recovery of payment by the supplier if such payment is delayed by the
buyer.
27) With the commencement of the Act, a new vested right exists with the
supplier, that being, if there is delay in payment after the acceptance
of the goods by the buyer, the supplier can file a suit for claiming
interest at a higher rate, as prescribed by the Act. This position has
been approved by this Court in the case of Modern Industries (supra). If
a suit for interest simpliciter is maintainable as held by this Court in
Modern Industries (supra), then a new liability qua the buyer is created
with the commencement of the Act giving a vested right to the supplier in
case of delayed payment. In other words, if there is a delayed payment by
the buyer, then a right to claim a higher rate of interest as prescribed
by the Act accrues to the supplier.
28) The phrase ‘vested right’ has been defined by this Court in the case of
Bibi Sayeeda Vs. State of Bihar - (1996) 9 SCC 516 as:
“17. The word ‘vested’ is defined in Black's Law Dictionary (6th Edn.)
at p. 1563 as:
“Vested; fixed; accrued; settled; absolute; complete. Having the
character or given the rights of absolute ownership; not contingent;
not subject to be defeated by a condition precedent.”
Rights are ‘vested’ when right to enjoyment, present or prospective,
has become property of some particular person or persons as present
interest; mere expectancy of future benefits, or contingent interest
in property founded on anticipated continuance of existing laws, does
not constitute vested rights. In Webster's Comprehensive Dictionary,
(International Edn.) at p. 1397 ‘vested’ is defined as:
“[L]aw held by a tenure subject to no contingency; complete;
established by law as a permanent right; vested interests.””
29) A statute creating vested rights is a substantive statute. This Court,
in the case of Executive Engineer, Dhenkanal Minor Irrigation Division
Vs. N.C. Budharaj - (2001) 2 SCC 721, opined:
“23. … “Substantive law”, is that part of the law which creates,
defines and regulates rights in contrast to what is called adjective
or remedial law which provides the method of enforcing rights.
Decisions, including the one in Jena case while adverting to the
question of substantive law has chosen to indicate by way of
illustration laws such as Sale of Goods Act, 1930 [Section 61(2)],
Negotiable Instruments Act, 1881 (Section 80), etc. The provisions of
the Interest Act, 1839, which prescribe the general law of interest
and become applicable in the absence of any contractual or other
statutory provisions specially dealing with the subject, would also
answer the description of substantive law…”
30) In the case of Thirumalai Chemicals Limited Vs. Union of India - (2011)
6 SCC 739, this Court comparing substantial law with procedural law,
stated:
“23. Substantive law refers to a body of rules that creates, defines
and regulates rights and liabilities. Right conferred on a party to
prefer an appeal against an order is a substantive right conferred by
a statute which remains unaffected by subsequent changes in law,
unless modified expressly or by necessary implication. Procedural law
establishes a mechanism for determining those rights and liabilities
and a machinery for enforcing them. Right of appeal being a
substantive right always acts prospectively. It is trite law that
every statute is prospective unless it is expressly or by necessary
implication made to have retrospective operation.”
24. Right of appeal may be a substantive right but the procedure for
filing the appeal including the period of limitation cannot be called
a substantive right, and an aggrieved person cannot claim any vested
right claiming that he should be governed by the old provision
pertaining to period of limitation. Procedural law is retrospective
meaning thereby that it will apply even to acts or transactions under
the repealed Act.”
31) In the case of Shyam Sunder Vs. Ram Kumar - (2001) 8 SCC 24, a
Constitution Bench of this Court discussing the scope and ambit of a
declaratory law has observed:
“39. Lastly, it was contended on behalf of the appellants that the
amending Act whereby new Section 15 of the Act has been substituted is
declaratory and, therefore, has retroactive operation. Ordinarily when
an enactment declares the previous law, it requires to be given
retroactive effect. The function of a declaratory statute is to supply
an omission or to explain a previous statute and when such an Act is
passed, it comes into effect when the previous enactment was passed.
The legislative power to enact law includes the power to declare what
was the previous law and when such a declaratory Act is passed,
invariably it has been held to be retrospective. Mere absence of use
of the word “declaration” in an Act explaining what was the law before
may not appear to be a declaratory Act but if the court finds an Act
as declaratory or explanatory, it has to be construed as
retrospective. Conversely where a statute uses the word “declaratory”,
the words so used may not be sufficient to hold that the statute is a
declaratory Act as words may be used in order to bring into effect new
law.”
32) In Katikara Chintamani Dora Vs. Guntreddi Annamanaidu - (1974) 1 SCC
567, this Court held:
“50. It is well settled that ordinarily, when the substantive law is
altered during the pendency of an action, rights of the parties are
decided according to law, as it existed when the action was begun
unless the new statute shows a clear intention to vary such rights
(Maxwell on Interpretation, 12th Edn. 220). That is to say, “in the
absence of anything in the Act, to say that it is to have
retrospective operation, it cannot be so construed as to have the
effect of altering the law applicable to a claim in litigation at the
time when the Act is passed”.”
33) In Govind Das Vs. ITO - (1976) 1 SCC 906, this Court speaking through
P.N. Bhagwati. J., (as he then was) held:
“11. Now it is a well settled rule of interpretation hallowed by time
and sanctified by judicial decisions that, unless the terms of a
statute expressly so provide or necessarily require it, retrospective
operation should not be given to a statute so as to take away or
impair an existing right or create a new obligation or impose a new
liability otherwise than as regards matters of procedure. The general
rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd
Edn.) and reiterated in several decisions of this Court as well as
English courts is that
“all statutes other than those which are merely declaratory or which
relate only to matters of procedure or of evidence are prima facie
prospective”
and retrospective operation should not be given to a statute so as to
affect, alter or destroy an existing right or create a new liability
or obligation unless that effect cannot be avoided without doing
violence to the language of the enactment. If the enactment is
expressed in language which is fairly capable of either
interpretation, it ought to be construed as prospective only.”
34) In the case of Jose Da Costa Vs. Bascora Sadasiva Sinai Narcornium -
(1976) 2 SCC 917, this Court held:
31. Before ascertaining the effect of the enactments aforesaid passed
by the Central Legislature on pending suits or appeals, it would be
appropriate to bear in mind two well-established principles. The first
is that
“while provisions of a statute dealing merely with matters of
procedure may properly, unless that construction be textually
inadmissible, have retrospective effect attributed to them,
provisions which touch a right in existence at the passing of the
statute are not to be applied retrospectively in the absence of
express enactment or necessary intendment (see Delhi Cloth and
General Mills Co. Ltd. v. ITC.)
The second is that a right of appeal being a substantive right the
institution of a suit carries with it the implication that all
successive appeals available under the law then in force would be
preserved to the parties to the suit throughout the rest of the career
of the suit. There are two exceptions to the application of this rule
viz. (1) when by competent enactment such right of appeal is taken
away expressly or impliedly with retrospective effect and (2) when the
court to which appeal lay at the commencement of the suit stands
abolished (see Garikapati Veeraya v. N. Subbiah Choudhury and Colonial
Sugar Refining Co. Ltd. v. Irving).
35) In K. Kapen Chako Vs. Provident Investment Co. (P) Ltd - (1977) 1 SCC
593, this Court discussing the dicta of the English Courts on the aspect
of retrospectivity observed:
“37. A statute has to be looked into for the general scope and purview
of the statute and at the remedy sought to be applied. In that
connection the former state of the law is to be considered and also
the legislative changes contemplated by the statute. Words not
requiring retrospective operation so as to affect an existing
statutory provision pre-judicially ought not be so construed. It is a
well recognised rule that statute should be interpreted if possible so
as to respect vested rights. Where the effect would be to alter a
transaction already entered into, where it would be to make that valid
which was previously invalid, to make an instrument which had no
effect at all, and from which the party was at liberty to depart as
long as he pleased, binding, the prima facie construction of the Act
is that it is not to be retrospective. (See Gardner v. Lucas).
38. In Moon v. Durden a question arose as to whether Section 18 of the
Gaming Act, 1845 which came into effect in August 1845 was
retrospective so as to defeat an action which had been commenced in
June 1845. The relevant section provided that no suit shall be brought
or maintained for recovering any such sum of money alleged to have
been won upon a wager. It was held that it was not retrospective.
Parke, B. said:
“It seems a strong thing to hold that the legislature could have
meant that a party who under a contract made prior to the Act, had
as perfect a title to recover a sum of money as he had to any of his
personal property, should be totally deprived of it without
compensation.”
39. Again in Smithies v. National Union of Operative Plasterers
Section 4 of the Trade Disputes Act, 1906 which enacted that an action
for tort against a trade union shall not be entertained by any court
was held not to prevent the courts from hearing and giving judgment in
actions of that kind begun before the passing of the Act. It is a
general rule that when the legislature alters the rights of parties by
taking away or conferring any right of action, its enactments, unless
in express terms they apply to pending actions, do not affect them.
But there is an exception to this rule, namely, where enactments
merely affect procedure and do not extend to rights of action. See Re
Joseph Suche & Co. Ltd. If the legislature forms a new procedure
alterations in the form of procedure are retrospective unless there is
some good reason or other why they should not be. In other words, if a
statute deals merely with the procedure in an action, and does not
affect the rights of the parties it will be held to apply prima facie
to all actions, pending as well as future.”
36) In the case of Dahiben Vs. Vasanji Kevalbhai - 1995 Supp. (2) SCC 295,
this Court held:
“12. As the amendment in question is not to a procedural law, it may
be stated that the settled principle of interpretation, where
substantive law is amended, is that the same does not operate
retrospectively unless it is either expressly provided or the same
follows by necessary implication. Lest it be thought that a vested
right cannot be taken away at all by retrospective legislation,
reference may be made to Rafiquennessa v. Lal Bahadur Chetri where it
was stated that even where vested rights are affected, legislature is
competent to take away the same by means of retrospective legislation;
and retrospectivity can be inferred even by necessary implication.”
37) In the case of Zile Singh Vs. State of Haryana - (2004) 8 SCC 1, this
Court examined the various authorities on statutory interpretation and
concluded:
“13. It is a cardinal principle of construction that every statute is
prima facie prospective unless it is expressly or by necessary
implication made to have a retrospective operation. But the rule in
general is applicable where the object of the statute is to affect
vested rights or to impose new burdens or to impair existing
obligations. Unless there are words in the statute sufficient to show
the intention of the legislature to affect existing rights, it is
deemed to be prospective only — “nova constitutio futuris formam
imponere debet non praeteritis” — a new law ought to regulate what is
to follow, not the past. (See Principles of Statutory Interpretation
by Justice G.P. Singh, 9th Edn., 2004 at p. 438.) It is not necessary
that an express provision be made to make a statute retrospective and
the presumption against retrospectivity may be rebutted by necessary
implication especially in a case where the new law is made to cure an
acknowledged evil for the benefit of the community as a whole (ibid.,
p. 440).
14. The presumption against retrospective operation is not applicable
to declaratory statutes…. In determining, therefore, the nature of the
Act, regard must be had to the substance rather than to the form. If a
new Act is “to explain” an earlier Act, it would be without object
unless construed retrospectively. An explanatory Act is generally
passed to supply an obvious omission or to clear up doubts as to the
meaning of the previous Act. It is well settled that if a statute is
curative or merely declaratory of the previous law retrospective
operation is generally intended…. An amending Act may be purely
declaratory to clear a meaning of a provision of the principal Act
which was already implicit. A clarificatory amendment of this nature
will have retrospective effect (ibid., pp. 468-69).”
38) In the case of State of Punjab Vs. Bhajan Kaur - (2008) 12 SCC 112,
this Court held:
“9. A statute is presumed to be prospective unless held to be
retrospective, either expressly or by necessary implication. A
substantive law is presumed to be prospective. It is one of the facets
of the rule of law.”
39) There is no doubt about the fact that the Act is a substantive law as
vested rights of entitlement to a higher rate of interest in case of
delayed payment accrues in favour of the supplier and a corresponding
liability is imposed on the buyer. This Court, time and again, has
observed that any substantive law shall operate prospectively unless
retrospective operation is clearly made out in the language of the
statute. Only a procedural or declaratory law operates retrospectively as
there is no vested right in procedure.
40) In the absence of any express legislative intendment of the
retrospective application of the Act, and by virtue of the fact that the
Act creates a new liability of a high rate of interest against the buyer,
the Act cannot be construed to have retrospective effect. Since the Act
envisages that the supplier has an accrued right to claim a higher rate
of interest in terms of the Act, the same can only said to accrue for
sale agreements after the date of commencement of the Act, i.e. 23rd
September 1992 and not any time prior.
Earlier Precedents
41) On a careful perusal of the judgment of this Court in Assam Small Scale
Industries, we find that even the question regarding the applicability of
the Act to contracts concluded prior to coming into force of the Act is
no longer res integra. This question is answered by this Court in the
case of Assam Small Scale Industries Development Corpn. Ltd. Vs. J.D.
Pharmaceuticals - (2005) 13 SCC 19 as under:
“37. We have held hereinbefore that clause 8 of the terms and
conditions relates 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 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 the penultimate para of
the trial court judgment), that is supply orders between 5-6-1991 to
28-7-1992, were prior to the date of the 1993 Act coming into force.
Only the transactions at Sl. Nos. 27 to 71 (that is supply orders
between 22-10-1992 to 19-6-1993), will attract the provisions of the
1993 Act.
38. The 1993 Act, thus, will have no application in relation to the
transactions entered into between June 1991 and 23-9-1992. The trial
court as also the High Court, therefore, committed a manifest error in
directing payment of interest at the rate of 23% up to June 1991 and
23.5% thereafter.”
42) In Shakti Tubes Ltd. Vs. State of Bihar - (2009) 7 SCC 673, this Court
approved the ratio in Assam Small Scale Industries, and held:
18. In our considered opinion, the ratio of the aforesaid decision in
Assam Small Scale Industries case is clearly applicable and would
squarely govern the facts of the present case as well. The said
decision was rendered by this Court after appreciating the entire
facts as also all the relevant laws on the issue and therefore, we do
not find any reason to take a different view than what was taken by
this Court in the aforesaid judgment. Thus, we respectfully agree with
the aforesaid decision of this Court which is found to be rightly
arrived at after appreciating all the facts and circumstances of the
case.
19. Now coming to the facts of the present case we find that there is
no dispute with regard to the fact that the supply order was placed
with the respondents on 16-7-1992 for supply of the pipes which date
is admittedly prior to the date on which this Act came into effect.
20. Being faced with the aforesaid situation, the learned Senior
Counsel appearing for the appellant-plaintiff sought to submit before
us that the decision of this Court in Assam Small Scale Industries
case refers to the expression “transactions”. According to him, the
transactions would be complete only when the appellant-plaintiff made
the supply and since the supply was made in the instant case after
coming into force of the Act, the appellant-plaintiff would be
entitled to the benefit of Sections 4 and 5 of the Act. Refuting the
aforesaid submission, the learned Senior Counsel appearing for the
respondents submitted that the aforesaid contention is completely
misplaced. He pointed out that if such a meaning, as sought to be
given by the learned Senior Counsel appearing for the appellant-
plaintiff, is accepted that would lead to giving benefit of the
provisions of the Act to unscrupulous suppliers who, in order to get
the benefit of the Act, would postpone the delivery of the goods on
one pretext or the other.
21. We have considered the aforesaid rival submissions. This Court in
Assam Small Scale Industries case has finally set at rest the issue
raised by stating that as to what is to be considered relevant is the
date of supply order placed by the respondents and when this Court
used the expression “transaction” it only meant a supply order. The
Court made it explicitly clear in para 37 of the judgment which we
have already extracted above. In our considered opinion there is no
ambiguity in the aforesaid judgment passed by this Court. The intent
and the purpose of the Act, as made in para 37 of the judgment, are
quite clear and apparent. When this Court said “transaction” it meant
initiation of the transaction i.e. placing of the supply orders and
not the completion of the transactions which would be completed only
when the payment is made. Therefore, the submission made by the
learned Senior Counsel appearing for the appellant-plaintiff fails.
43) The case of Assam Small Scale Industries has been followed in Rampur
Fertilizers Limited as well as Modern Industries (supra). Therefore, we
cannot agree with the submission that this Court in Assam Small Scale
Industries Development Corporation’s case did not specifically consider
and decide the issue of whether the Act would apply to such of those
contracts executed prior to the commencement of the Act but the supplies
being made after the commencement of the Act.
Binding precedent or sub-silentio
44) However, the learned Senior Counsel appearing for the suppliers, Shri
Rakesh Dwivedi, and Shri Sunil Gupta would contend that the decision of
this Court is not a binding precedent.
45) Shri Rakesh Dwivedi, learned Senior Counsel would submit that the
decisions of this Court in the case of Assam Small Scale Industries and
Shakti Tubes (supra) regarding the prospective operation of the Act were
not law declared under Article 141, as the point under consideration in
those cases were different from the issues raised in these appeals. He
would further submit that the question about operation of the Act for
contracts concluded prior to 23rd September 1992 was not even a question,
which came up for consideration before the Court and was not even argued
by the learned Counsel appearing in that matter, and hence would not form
a part of the ratio of the decision. He would further submit that the
question was answered without adequately considering the provisions of
the beneficial legislation and therefore, it cannot be treated as a
binding precedent.
46) Shri Sunil Gupta, learned Senior Counsel while adopting the argument
advanced by Shri Dwivedi on this issue, would submit that there are two
exceptions to the doctrine of precedent, namely, per incurium and sub
silentio. It was on the strength of the latter that Shri Gupta would
submit that the decisions of this Court in Assam Small Scale Industries
and Shakti Tubes (supra) cannot be considered as precedents. The learned
Senior Counsel would state that a decision would not apply as a precedent
when the Court has failed to consider the objects and purpose of the Act
in question and also certain previous judgments of this Court. He would
further contend that the aforesaid judgments suffer from the sub-silentio
principle being rendered without full and adequate arguments on the
issue. The learned Senior Counsel would also state that the Court did not
look at the issue from the viewpoint canvassed presently.
47) The learned Senior Counsel would rely on the decision of this Court in
Municipal Corporation, Delhi Vs. Gurnam Kaur - (1989) 1 SCC 101. This
Court has held:
“11. Pronouncements of law, which are not part of the ratio decidendi
are classed as obiter dicta and are not authoritative. With all
respect to the learned Judge who passed the order in Jamna Das case
and to the learned Judge who agreed with him, we cannot concede that
this Court is bound to follow it. It was delivered without argument,
without reference to the relevant provisions of the Act conferring
express power on the Municipal Corporation to direct removal of
encroachments from any public place like pavements or public streets,
and without any citation of authority. Accordingly, we do not propose
to uphold the decision of the High Court because, it seems to us that
it is wrong in principle and cannot be justified by the terms of the
relevant provisions. A decision should be treated as given per
incuriam when it is given in ignorance of the terms of a statute or of
a rule having the force of a statute. So far as the order shows, no
argument was addressed to the court on the question whether or not any
direction could properly be made compelling the Municipal Corporation
to construct a stall at the pitching site of a pavement squatter.
Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence,
12th Edn. explains the concept of sub silentio at p. 153 in these
words:
“A decision passes sub silentio, in the technical sense that has
come to be attached to that phrase, when the particular point of law
involved in the decision is not perceived by the court or present to
its mind. The court may consciously decide in favour of one party
because of point A, which it considers and pronounces upon. It may
be shown, however, that logically the court should not have decided
in favour of the particular party unless it also decided point B in
his favour; but point B was not argued or considered by the court.
In such circumstances, although point B was logically involved in
the facts and although the case had a specific outcome, the decision
is not an authority on point B. Point B is said to pass sub
silentio.”
12. In Gerard v. Worth of Paris Ltd. (k)., the only point argued was
on the question of priority of the claimant's debt, and, on this
argument being heard, the court granted the order. No consideration
was given to the question whether a garnishee order could properly be
made on an account standing in the name of the liquidator. When,
therefore, this very point was argued in a subsequent case before the
Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith Ltd.,
the court held itself not bound by its previous decision. Sir Wilfrid
Greene, M.R., said that he could not help thinking that the point now
raised had been deliberately passed sub silentio by counsel in order
that the point of substance might be decided. He went on to say that
the point had to be decided by the earlier court before it could make
the order which it did; nevertheless, since it was decided “without
argument, without reference to the crucial words of the rule, and
without any citation of authority”, it was not binding and would not
be followed. Precedents sub silentio and without argument are of no
moment. This rule has ever since been followed. One of the chief
reasons for the doctrine of precedent is that a matter that has once
been fully argued and decided should not be allowed to be reopened.
The weight accorded to dicta varies with the type of dictum. Mere
casual expressions carry no weight at all. Not every passing
expression of a judge, however eminent, can be treated as an ex
cathedra statement, having the weight of authority.”
48) In the case of State of U.P. Vs. Synthetics and Chemicals Ltd. - (1991)
4 SCC 139, His Lordship R.M. Sahai. J., in his concurring judgment set
out the principles of per incurium and sub silentio has held thus:
“40. ‘Incuria’ literally means ‘carelessness’. In practice per
incuriam appears to mean per ignoratium. English courts have developed
this principle in relaxation of the rule of stare decisis. The
‘quotable in law’ is avoided and ignored if it is rendered, ‘in
ignoratium of a statute or other binding authority’. (Young v. Bristol
Aeroplane Co. Ltd.). Same has been accepted, approved and adopted by
this Court while interpreting Article 141 of the Constitution which
embodies the doctrine of precedents as a matter of law. In Jaisri Sahu
v. Rajdewan Dubey this Court while pointing out the procedure to be
followed when conflicting decisions are placed before a bench
extracted a passage from Halsbury's Laws of England incorporating one
of the exceptions when the decision of an appellate court is not
binding.
41. Does this principle extend and apply to a conclusion of law, which
was neither raised nor preceded by any consideration. In other words
can such conclusions be considered as declaration of law? Here again
the English courts and jurists have carved out an exception to the
rule of precedents. It has been explained as rule of sub-silentio. “A
decision passes sub-silentio, in the technical sense that has come to
be attached to that phrase, when the particular point of law involved
in the decision is not perceived by the court or present to its mind.”
(Salmond on Jurisprudence 12th Edn., p. 153). In Lancaster Motor
Company (London) Ltd. v. Bremith Ltd. the Court did not feel bound by
earlier decision as it was rendered ‘without any argument, without
reference to the crucial words of the rule and without any citation of
the authority’. It was approved by this Court in Municipal Corporation
of Delhi v. Gurnam Kaur. The bench held that, ‘precedents sub-silentio
and without argument are of no moment’. The courts thus have taken
recourse to this principle for relieving from injustice perpetrated by
unjust precedents. A decision which is not express and is not founded
on reasons nor it proceeds on consideration of issue cannot be deemed
to be a law declared to have a binding effect as is contemplated by
Article 141. Uniformity and consistency are core of judicial
discipline. But that which escapes in the judgment without any
occasion is not ratio decidendi. In B. Shama Rao v. Union Territory of
Pondicherry it was observed, ‘it is trite to say that a decision is
binding not because of its conclusions but in regard to its ratio and
the principles, laid down therein’. Any declaration or conclusion
arrived without application of mind or preceded without any reason
cannot be deemed to be declaration of law or authority of a general
nature binding as a precedent. Restraint in dissenting or overruling
is for sake of stability and uniformity but rigidity beyond reasonable
limits is inimical to the growth of law.”
49) In the case of Arnit Das Vs. State of Bihar - (2000) 5 SCC 488, this
Court held:
“20. A decision not expressed, not accompanied by reasons and not
proceeding on a conscious consideration of an issue cannot be deemed
to be a law declared to have a binding effect as is contemplated by
Article 141. That which has escaped in the judgment is not the ratio
decidendi. This is the rule of sub silentio, in the technical sense
when a particular point of law was not consciously determined. (See
State of U.P. v. Synthetics & Chemicals Ltd. SCC, para 41.)”
50) In the case of Tika Ram Vs. State of Uttar Pradesh - (2009) 10 SCC 689,
it was held:
“104. We do not think that the law laid down in these cases would
apply to the present situation. In all these cases, it has been
basically held that a Supreme Court decision does not become a
precedent unless a question is directly raised and considered therein,
so also it does not become a law declared unless the question is
actually decided upon. We need not take stock of all these cases and
we indeed have no quarrel with the propositions settled therein.…”
51) Though the submissions made by Shri Rakesh Dwivedi and Shri Sunil
Gupta, learned Senior Counsel seems attractive in the first blush, we are
of the view, they lack merit. In the case of Assam Small Scale Industries
(supra), the question of retrospective operation of the Act or whether
past contracts were governed by the Act, was argued by the learned Senior
Counsel appearing for the respondent. In the said judgment this Court has
observed:
“19……. The 1993 Act, it was submitted, being also a beneficent
statute, the same should be construed liberally. The Act, Mr Chowdhury
would argue, will thus, have a retrospective effect.”
52) Further, in the case of Shakti Tubes Ltd. (supra), this issue was
canvassed by the learned Counsel, due to which, this Court referred to
the precedent in the case of Assam Small Scale Industries (supra). The
argument on this point has been noted thus:
“9. According to the appellant-plaintiff, the said interest has been
claimed by the appellant-plaintiff since it is entitled to so claim in
terms of the provisions of the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993 (hereinafter
referred to as “the Act”). Mr G.C. Bharuka, learned Senior Counsel
appearing for the appellant-plaintiff drew our attention to the
provisions of the Act and to the decision of this Court in Assam Small
Scale Industries Development Corpn. Ltd. v. J.D. Pharmaceuticals. In
support of his contention that the transaction in the instant case
came to an end with the appellant-plaintiff supplying the goods after
coming into force of the Act he has taken us through the relevant
sections of the Act as also the Statements of Objects and Reasons of
the Act. According to him, the appellant-plaintiff is entitled to be
paid in terms of the provisions of the Act.
10. Mr Bharuka contended that the earlier supply order which was
issued on 16-7-1992 came to be materially altered and substituted by a
fresh supply order issued on 18-3-1993 by which date the aforesaid Act
had already been enforced and therefore, the appellant-plaintiff was
entitled to claim interest at a higher rate as envisaged in Sections 4
and 5 of the said Act.
11. Mr Dinesh Dwivedi, learned Senior Counsel appearing for the
respondents strongly refuted the aforesaid submissions made by the
learned Senior Counsel appearing for the appellant-plaintiff on the
ground that the supply order was issued in the instant case on 16-7-
1992 and therefore, in terms of and in line with the decision of this
Court in Assam Small Scale Industries case the appellant-plaintiff was
entitled to be paid interest only at the rate of 9% per annum and not
at a higher rate as contended by the appellant-plaintiff.”
53) This Court, in Shakti Tubes Ltd. (supra) expressly rejected the
argument of the learned Senior Counsel appearing for the appellant in
that case, that the Act should be given retrospective effect because it
was a beneficial legislation, in paragraphs 24 to 26, which have been set
out below:
“24. Generally, an Act should always be regarded as prospective in
nature unless the legislature has clearly intended the provisions of
the said Act to be made applicable with retrospective effect.
“13. It is a cardinal principle of construction that every statute
is prima facie prospective unless it is expressly or by necessary
implication made to have a retrospective operation. [The aforesaid]
rule in general is applicable where the object of the statute is to
affect vested rights or to impose new burdens or to impair existing
obligations. Unless there are words in the statute sufficient to
show the intention of the legislature to affect existing rights, it
is deemed to be prospective only—nova constitutio futuris formam
imponere debet non praeteritis—a new law ought to regulate what is
to follow, not the past. (See Principles of Statutory Interpretation
by Justice G.P. Singh, 9th Edn., 2004 at p. 438.) It is not
necessary that an express provision be made to make a statute
retrospective and the presumption against retrospectivity may be
rebutted by necessary implication especially in a case where the new
law is made to cure an acknowledged evil for the benefit of the
community as a whole (ibid., p. 440).”
25. In Zile Singh Vs. State of Haryana (supra), SCC at p. 9, this
Court observed as follows: (SCC pp. 9-10, paras 15-16)
“15. Though retrospectivity is not to be presumed and rather there
is presumption against retrospectivity, according to Craies (Statute
Law, 7th Edn.), it is open for the legislature to enact laws having
retrospective operation. This can be achieved by express enactment
or by necessary implication from the language employed. If it is a
necessary implication from the language employed that the
legislature intended a particular section to have a retrospective
operation, the courts will give it such an operation. In the absence
of a retrospective operation having been expressly given, the courts
may be called upon to construe the provisions and answer the
question whether the legislature had sufficiently expressed that
intention giving the statute retrospectivity. Four factors are
suggested as relevant: (i) general scope and purview of the statute;
(ii) the remedy sought to be applied; (iii) the former state of the
law; and (iv) what it was the legislature contemplated. (p. 388) The
rule against retrospectivity does not extend to protect from the
effect of a repeal, a privilege which did not amount to accrued
right. (p. 392)
16. Where a statute is passed for the purpose of supplying an
obvious omission in a former statute or to ‘explain’ a former
statute, the subsequent statute has relation back to the time when
the prior Act was passed. The rule against retrospectivity is
inapplicable to such legislations as are explanatory and declaratory
in nature. A classic illustration is Attorney General v. Pougett
(Price at p. 392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a
duty was imposed upon hides of 9s 4d, but the Act omitted to state
that it was to be 9s 4d per cwt., and to remedy this omission
another Customs Act (53 Geo. 3, c. 105) was passed later in the same
year. Between the passing of these two Acts some hides were
exported, and it was contended that they were not liable to pay the
duty of 9s 4d per cwt., but Thomson, C.B., in giving judgment for
the Attorney General, said: (ER p. 134)
‘The duty in this instance was, in fact, imposed by the first
Act; but the gross mistake of the omission of the weight, for
which the sum expressed was to have been payable, occasioned the
amendment made by the subsequent Act: but that had reference to
the former statute as soon as it passed, and they must be taken
together as if they were one and the same Act;’ (Price at p.
392)”
26. There is no dispute with regard to the fact that the Act in
question is a welfare legislation which was enacted to protect the
interest of the suppliers especially suppliers of the nature of a
small-scale industry. But, at the same time, the intention and the
purpose of the Act cannot be lost sight of and the Act in question
cannot be given a retrospective effect so long as such an intention is
not clearly made out and derived from the Act itself.”
54) In the case of Rampur Fertilizers Limited (supra), this Court again
examined the entire scheme of the Act before following the dicta of this
Court in the case of Assam Small Scale Industries (supra). Even in Modern
Industries (supra), this Court did not differ from the dicta of this
Court in Assam Small Scale Industries and Shakti Tubes (supra).
Binding value of a precedent
55) In the case of Waman Rao Vs. Union of India - (1981) 2 SCC 362, His
Lordship Y.V. Chandrachud. C.J., speaking for the Constitution Bench,
held:
“40. It is also true to say that for the application of the rule of
stare decisis, it is not necessary that the earlier decision or
decisions of longstanding should have considered and either accepted
or rejected the particular argument which is advanced in the case on
hand. Were it so, the previous decisions could more easily be treated
as binding by applying the law of precedent and it will be unnecessary
to take resort to the principle of stare decisis. It is, therefore,
sufficient for invoking the rule of stare decisis that a certain
decision was arrived at on a question which arose or was argued, no
matter on what reason the decision rests or what is the basis of the
decision. In other words, for the purpose of applying the rule of
stare decisis, it is unnecessary to enquire or determine as to what
was the rationale of the earlier decision which is said to operate as
stare decisis.”
56) In Union of India Vs. Raghubir Singh - (1989) 2 SCC 754, this Court
held:
“8. Taking note of the hierarchical character of the judicial system
in India, it is of paramount importance that the law declared by this
Court should be certain, clear and consistent. It is commonly known
that most decisions of the courts are of significance not merely
because they constitute an adjudication on the rights of the parties
and resolve the dispute between them, but also because in doing so
they embody a declaration of law operating as a binding principle in
future cases. In this latter aspect lies their particular value in
developing the jurisprudence of the law.
9. The doctrine of binding precedent has the merit of promoting a
certainty and consistency in judicial decisions, and enables an
organic development of the law, besides providing assurance to the
individual as to the consequence of transactions forming part of his
daily affairs. And, therefore, the need for a clear and consistent
enunciation of legal principle in the decisions of a court.”
57) In Krishena Kumar Vs. Union of India - (1990) 4 SCC 207, this Court
observed:
“33. Stare decisis et non quieta movere. To adhere to precedent and
not to unsettle things which are settled. But it applies to litigated
facts and necessarily decided questions. Apart from Article 141 of the
Constitution of India, the policy of courts is to stand by precedent
and not to disturb settled point. When court has once laid down a
principle of law as applicable to certain state of facts, it will
adhere to that principle, and apply it to all future cases where facts
are substantially the same. A deliberate and solemn decision of court
made after argument on question of law fairly arising in the case, and
necessary to its determination, is an authority, or binding precedent
in the same court, or in other courts of equal or lower rank in
subsequent cases where the very point is again in controversy unless
there are occasions when departure is rendered necessary to vindicate
plain, obvious principles of law and remedy continued injustice. It
should be invariably applied and should not ordinarily be departed
from where decision is of long standing and rights have been acquired
under it, unless considerations of public policy demand it.”
58) In the case of Mishri Lal Vs. Dhirendra Nath - (1999) 4 SCC 11, this
Court held:
“13.…It is further to be noted that Meharban Singh case came to be
decided as early as 1970 and has been followed for the last three
decades in the State of Madhya Pradesh and innumerable number of
matters have been dealt with on the basis thereof and in the event, a
different view is expressed today, so far as this specific legislation
is concerned, it would unsettle the situation in the State of Madhya
Pradesh and it is on this score also that reliance on the doctrine of
“stare decisis” may be apposite. While it is true that the doctrine
has no statutory sanction and the same is based on a rule of
convenience and expediency and as also on “public policy” but in our
view, the doctrine should and ought always to be strictly adhered to
by the courts of law to subserve the ends of justice.”
59) In Central Board of Dawoodi Bohra Community Vs. State of Maharashtra,
(2005) 2 SCC 673, a Constitution Bench of this Court held:
“8. In Raghubir Singh case Chief Justice Pathak pointed out that in
order to promote consistency and certainty in the law laid down by the
superior court the ideal condition would be that the entire court
should sit in all cases to decided questions of law, as is done by the
Supreme Court of United States. Yet, His Lordship noticed, that having
regard to the volume of work demanding the attention of the Supreme
Court of India, it has been found necessary as a general rule of
practice and convenience that the Court should sit in divisions of
consisting of Judges whose numbers may be determined by the exigencies
of judicial need, by the nature of the case including any statutory
mandate relating thereto and by such other considerations which the
Chief Justice, in whom such authority devolves by convention, may find
most appropriate. The Constitution Bench reaffirmed the doctrine of
binding precedents as it has been merit of promoting certainty and
consistency in judicial decisions and enables an organic development
of the law, besides providing assurance to the individual as to the
consequence of transactions forming part of his daily affairs.”
60) In the case of Shanker Raju Vs. Union of India - (2011) 2 SCC 132, this
Court observed:
“10. It is settled principle of law that a judgment, which has held
the field for a long time, should not be unsettled. The doctrine of
stare decisis is expressed in the maxim stare decisis et non quieta
movere, which means “to stand by decisions and not to disturb what is
settled”. Lord Coke aptly described this in his classic English
version as “those things which have been so often adjudged ought to
rest in peace”. The underlying logic of this doctrine is to maintain
consistency and avoid uncertainty. The guiding philosophy is that a
view which has held the field for a long time should not be disturbed
only because another view is possible….”
61) In the case of Fida Hussain Vs. Moradabad Development Authority -
(2011) 12 SCC 615, this Court held:
“15. Having carefully considered the submissions of the learned Senior
Counsel Shri Varma, we are of the view that the judgment in Gafar case
does not require reconsideration by this Court. In Gafar case this
Court had meticulously examined all the legal contentions canvassed by
the parties to the lis and had come to the conclusion that the High
Court has not committed any error which warrants interference. In the
present appeals, the challenge is for the compensation assessed for
the lands notified and acquired under the same notification pertaining
to the same villages. Therefore, it would not be proper for us to take
a different view, on the ground that what was considered by this Court
was on a different fact situation. This view of ours is fortified by
the judgment of this Court in Ballabhadas Mathurdas Lakhani v.
Municipal Committee, Malkapur, wherein it was held that a decision of
this Court is binding when the same question is raised again before
this Court, and reconsideration cannot be pleaded on the ground that
relevant provisions, etc., were not considered by the Court in the
former case.”
62) Judicial discipline demands that a decision of a Division Bench of two
Judges should be followed by another Division Bench of two Judges and
this has been stated time and again by this Court. In Raghubir Singh
(supra), a Constitution Bench of this Court speaking through Chief
Justice R.S. Pathak, held:
“28. We are of the opinion that a pronouncement of law by a Division
Bench of this Court is binding on a Division Bench of the same or a
smaller number of Judges, and in order that such decision be binding,
it is not necessary that it should be a decision rendered by the Full
Court or a Constitution Bench of the Court….”
63) In Union of India Vs. Paras Laminates (P) Ltd. - (1990) 4 SCC 453 this
Court has observed:
“9. It is true that a bench of two members must not lightly disregard
the decision of another bench of the same Tribunal on an identical
question. This is particularly true when the earlier decision is
rendered by a larger bench. The rationale of this rule is the need for
continuity, certainty and predictability in the administration of
justice. Persons affected by decisions of Tribunals or courts have a
right to expect that those exercising judicial functions will follow
the reason or ground of the judicial decision in the earlier cases on
identical matters. Classification of particular goods adopted in
earlier decisions must not be lightly disregarded in subsequent
decisions, lest such judicial inconsistency should shake public
confidence in the administration of justice….”
64) Shri Vijay Hansaria, learned Senior Counsel contends that a case for
referring the matter to a larger Bench though is pleaded by the learned
Senior Counsel, Shri Rakesh Dwivedi, this Court ought to test the same by
the parameters laid down by this Court in the case of CIT Vs. Saheli
Leasing and Industries Limited - (2010) 6 SCC 384 to find out whether the
matter deserves to be referred to a larger Bench. In Saheli Leasing, this
Court held:
“29…(x) In order to enable the Court to refer any case to a larger
Bench for reconsideration, it is necessary to point out that
particular provision of law having a bearing over the issue involved
was not taken note of or these is an error apparent on its face or
that a particular earlier decision was not noticed, which has direct
bearing or has taken a contrary view….”
65) The Constitution Bench of this Court in the case of Keshav Mills Co.
Ltd. Vs. CIT - (1965) 2 SCR 908 crystallized the position with regard to
what the Court should do when a plea for consideration of an earlier
judgment is made. It was held:
“…When it is urged that the view already taken by this Court should be
reviewed and revised, it may not necessarily be an adequate reason for
such review and revision to hold that though the earlier view is a
reasonably possible view, the alternative view which is pressed on the
subsequent occasion is more reasonable. In reviving and revising its
earlier decision, this Court should ask itself whether in the
interests of the public good or for any other valid and compulsive
reasons it is necessary that the earlier decision should be revised.
When this Court decided questions of law, its decisions are, under
Art. 141, binding on courts within the territory of India, and so, it
must be the constant endeavour and concern of this Court to introduce
and maintain an element of certainty and continuity in the
interpretation of law in the country. Frequent exercise by this Court
of its power to review its earlier decisions on the ground that the
view pressed before it later appears to the Court to be more
reasonable, may incidentally tend to make law uncertain and introduce
confusion which must be consistently avoided. This is not to say if on
a subsequent occasion, the Court is satisfied that its earlier
decision was clearly erroneous, it should hesitate the correct the
error; but before a previous decision is pronounced to plainly
erroneous the Court must be satisfied with fair amount of unanimity
amongst its members that a revision of the said view is fully
justified. It is not possible or desirable, and in any case it would
be inexpedient to lay down any principles which should govern the
approach of the Court in dealing with the question of reviewing and
revising its earlier decisions. It would always depend on several
relevant considerations:- What is the nature of the infirmity or error
on which a plea for a review and revision of the earlier view is
based? On the earlier occasion, did some patent aspects of the
question remain unnoticed, or was the attention of the Court not drawn
to any relevant and material statutory provision, or was any previous
decision of this Court bearing on the point not noticed? Is the Court
hearing such plea fairly unanimous there is such an error in the
earlier view? What would be the impact of the error on the general
administration of law or public good? Has the earlier decision been
followed on subsequent occasions either by this Court or by High
Courts? And, would the reversal of the earlier decision lead to public
inconvenience, hardship or mischief? These and other relevant
considerations must be carefully borne in mind whenever this Court is
called upon to exercise its jurisdiction to review and revise its
earlier decisions….”
66) We are in full agreement with the view expressed in Keshav Mills case
(supra). The learned Senior Counsel Shri Rakesh Dwivedi has not been able
to make out a case for reconsideration of the decision of this Court in
Assam Small Scale Industries (supra). In fact, a plea for reconsideration
of the same was rejected by a Division Bench of this Court in Shakti
Tubes (supra). We are unable to agree with the argument of Shri Dwivedi
and Shri Gupta that the provisions of the Act were not considered in its
entirety. In fact, the entire scheme of the Act has been considered in
the case of Rampur Fertilizers (supra) and specific answer to the issue
under consideration was answered.
67) In the case of Ambika Prasad Mishra Vs. State of U.P. - (1980) 3 SCC
719, His Lordship V.R. Krishna Iyer. J., speaking for the Constitution
Bench held:
“6. It is wise to remember that fatal flaws silenced by earlier
rulings cannot survive after death because a decision does not lose
its authority “merely because it was badly argued, inadequately
considered and fallaciously reasoned.”…”
68) In light of this dictum, and the factum that no case has been made out
for reconsideration by the learned Senior Counsel appearing for the
suppliers, we do not see any reason much or less good reason to doubt the
correctness of the decision in Assam Small Scale Industries or Shakti
Tubes (supra). When there are four decisions of this Court with regard to
the applicability of the Act for contracts entered into prior to the
commencement of the Act, and when the plea for reconsideration has been
expressly rejected in the past, we are of the view, it would be against
the spirit of the doctrine of stare decisis for us to take any view in
divergence with same.
69) Lastly, learned Senior Counsel for suppliers also contended that the
extension of date of supply order, from time to time by Board, amounts to
a novation of contract or supply order in terms of Section 62 of the
Indian Contracts Act and, therefore, the new contract or supply order
would be governed by the Act. In our opinion, the ground or issue of
novation of Contract is a mixed question of fact and law and it is being
raised, for the first time, at the time of hearing of the case before us
which cannot be permitted to be raised. The said fact of novation or
alteration of contract is required to be urged evidentially and
scrutinised by the courts below. In absence of such factual findings, it
is not possible to decide such a mixed question of law and facts. In
Shakti Tubes Ltd. (supra), the issue of novation of contract was raised
before this Court for the first time at the time of hearing. This Court
declined to entertain such ground as being a mixed question of law and
fact. This Court further observed that even on the merits of the case
the escalation of price, reduction of the quantity of the supply order
and extension of date of supply does not amount to novation or alteration
in the supply order.
Conclusion
70) The result is appeals fail and accordingly, they are dismissed. No
order as to costs.
…………………………………J.
[H.L. DATTU]
…………………………………J.
[ANIL R. DAVE]
New Delhi,
July 10 , 2012
