Case: M/s. Shakti Tubes Ltd Vs. State of Bihar &amp; Others

2. M/s. Shakti Tubes Ltd.-the appellant as plaintiff filed a suit which was registered as Money Suit No. 153 of 1997 praying for a decree for payment of Rs. 38,13,480/- with pendente lite and future interest compounding at monthly rest at the rate of 24% per annum on the aforesaid decreetal amount till realization with costs of the suit. The trial court decreed the said suit with costs in favour of the appellant-plaintiff and ordered for payment of interest compounding at monthly rest at 24% on the decreetal amount of Rs. 38,13,480/-3. Since the aforesaid decree was reversed by the High Court whereby the High Court while mentioning the decree for payment for Rs. 38,13,480/- reversed it to the extent of directing for payment of 9% interest per annum instead of 24% interest per annum, the present appeal is preferred by the appellant-plaintiff4. In order to effectively deal with the rival contentions raised by the parties herein it would be necessary to state a few facts leading to the filing of the aforesaid suit by the appellant-plaintiff before the trial court5. In the plaint filed by the appellant-plaintiff it was stated that the plaintiff is a company incorporated under the Indian Companies Act and registered as a Small Scale Industry in the Industries Department, Government of Bihar and that it entered into an agreement with the State of Bihar for supply of pipes at the rate of Rs. 174.95 paise. per metre subject to the terms and conditions mentioned in the tender paper. A supply order was placed by the respondent through Chief Engineers letter No. 8956 dated 16.07.1992 with the appellant-plaintiff for making supply of the aforesaid pipes. It was mentioned in the said letter that 90% of the total value of the material received was to be paid after receipt of the material and the balance 10% of the value was to be paid within one month of the receipt of the material, after full verification of the same. It was a stipulation in the said agreement entered into between the parties that the payment would be made at the escalated rate applicable for the quantity of pipes supplied after such escalation come into force and that even in such cases other terms of payment would remain the same. It was alleged in the plaint by the appellant-plaintiff that they supplied the pipes as the per agreement to the concerned consignees, who duly accepted the pipes as per measurement, but the payment was not made. After some time, the payment was made at the rate of Rs. 190.48 paise per metre instead of actual escalated rate of Rs. 199.04 P. per metre. A sum of Rs. 38,13,480/- thus remained payable to the appellant-plaintiff which was withheld illegally by the respondents in respect of the goods supplied6. Consequently, the appellant-plaintiff had to file a suit seeking for a decree for payment of the aforesaid amount of Rs. 38,13,480/- with interest compounding at monthly rest at the rate of 24% per annum on the aforesaid decreetal amount. The trial court passed a judgment and decree dated 31.05.1999 in terms of the prayer made in the plaint decreeing for a payment of Rs. 38,13,480/- along with interest compounding at monthly rest at the rate of 24% per annum on the aforesaid amount with effect form 01.06.1993 till realization7. The respondents herein being aggrieved by the aforesaid judgment and decree dated 31.05.1999 passed by the trial court filled an appeal in the High Court of Patna which was registered as First Appeal No. 8 of 2000. The only issue raised in the appeal before the High Court was with regard to the decree for payment of higher interest than what the plaintiff was actually entitled to. The High Court considered the contentions of the parties and by its judgment and order dated 20.02.2006 directed that instead of compound interest with monthly rest at the rate of 24% per annum, the appellant-plaintiff would be entitled to simple interest at the rate of 9% per annum with effect from 01.06.1993 till realization

Court's reasoning:
15. A careful perusal of the aforesaid judgment shows that the decision in the aforesaid case was rendered after clearly recording the fact that the Assam Small Scale Industries Development Corporation Ltd. (for short `the Corporation) placed orders for the supply of medicines manufactured by the respondents therein for the period June, 1991 to June, 1993. In the light of the said facts, it was recorded in paragraph 37 of the judgment that while the Act came into effect from 23rd September, 1992, the supply orders were placed only in respect of Serial Nos. 1 to 26 immediately and before coming into effect of the Act and rest of the supply orders namely, supply orders at Serial Nos. 27 to 71 were placed between 22.10.1992 to 19.06.1993 which were subsequent to the date when the Act came into force. In that context, it was clearly recorded in the judgment that the Act will have no application to the transactions that took place prior to the commencement of the Act. In the next sentence the Court made it clear as to what is referred to and understood by the expression transaction when it clearly stated that out of 71 transactions, Serial Nos. 1 to 26, i.e. supply orders between 05.06.1991 to 28.07.1992 being prior to 23rd September, 1992 when the Act came into force, higher interest as envisaged under Sections 4 and 5 of the Act cannot be paid and demanded in respect of the said supply orders/transactions. It was also made clear that the transactions at Serial Nos. 27 to 71 only i.e. supply orders between 22.10.1992 to 19.06.1993, would attract the provisions of the Act. Therefore, those supply orders which were issued by the Corporation between 22.10.1992 to 19.06.1993 were held to be the transactions which would be entitled to get the benefit of the provisions of the Act16. In our considered opinion, the ratio of the aforesaid decision 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 case17. 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 16.07.1992 for supply of the pipes which date is admittedly prior to the date on which this Act came into effect18. Being faced with the aforesaid situation, the learned senior counsel appearing for thef sought to submit before us that the decision of this Court in Assam Small Scale Industries case (supra) refers to the expression transactions. According to him, the transactions would be complete only when thef made the supply and since the supply was made in the instant case after coming into force of the Act, thef would be entitled to the benefit of Section 4 and 5 of the Act19. 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, 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 other20. We have considered the aforesaid rival submissions. This Court in Assam Small Scale Industries case (supra) 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 paragraph 37 of the judgment which we had already extracted above21. 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 paragraph 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 the22. Consequently, we hold that the supply order having been placed herein prior to the coming into force of the Act, any supply made pursuant to the said supply orders would be governed not by the provisions of the Act but by the provisions of Section 34 of the CPC read with the provisions of the Interest on Delayed Payment to Small Scale Industries Act, 199323. At one stage the learned senior counsel appearing for thef submitted that the Act in question is a beneficial legislation and, therefore, a liberal interpretation and wider meaning is to be given to such a beneficial and welfare legislation so as to protect the interest of the supplier who is being kept on a higher pedestal by giving a higher benefit in the Act24. 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. 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 obligations16. 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 the case of 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 year25 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 itself27. Relying on the aforesaid provision of the Contract Act, the learned senior counsel submitted that the original contract was for the supply of 7 lakh metres of pipes which was curtailed and changed to the supply of 4 lakh metres of pipes with change in the date of supply with extension of date of supply till 30.04.1993 and supplies were completed within that extended time. In support of his submission he sought to rely upon a judgment of the Bombay High Court in Andheri Bridge View. Hsg. Society Ltd. v. Krishnakant Anandrao Deo and others reported in 1991 AIR Bombay 129 wherein it was held that a new contract would come in existence in terms of Section 62 of the Contract Act28. In order to appreciate the aforesaid contention, we have looked into the documents available on records and considered the same. On analyzing the same we find that in none of the courts below any such issue was raised by the. Neither any issue was framed by the courts below in respect of such a submission nor any ground to that effect was taken earlier. Even in the memorandum of appeal filed in this Court no such ground has been urged or mentioned. Therefore, the issue is being raised, for the first time, at the time of hearing of the case before us which, according to us, can not be permitted to be raised for the first time for the simple reason that the issue that is being urged now is not only a question of law but is a mixed question of law and facts as to whether there is a novation or alteration of contract. The said facts were required to be urged evidentially before the courts below. Unless such a factual foundation is available it is not possible to decide such a mixed question of law and facts. Therefore, such a mixed question of law and facts should not be allowed to be raised at the time of final hearing of appeal before this Court29. Even otherwise, we are of the considered view that there was neither any alteration of the contract nor any novation of the contract in the present case. The correspondence between the parties clearly disclosed that after the respondents issued the supply order, thef did not supply the pipes in terms of the supply order and it urged mainly for the increase in the price of the goods. Subsequently, they relied upon the price escalation clause and asked for increase in the price of pipes. The perusal of the records also disclosed that subsequently the Government thought it fit that thef may not be able to supply the prescribed quantity of goods which was earlier required by the Government and, therefore, they curtailed the quantity of the goods from 7 lakh metres of pipes to 4 lakh metres of pipes. In the process, the Government kept the contents of the supply order intact except a variation in the quantity to be supplied with extension of date of supply. However, the Government gave effect to the price escalation clause which was a part of the earlier supply order and also of the agreements which were entered into between the parties prior to the coming into force of the Act. Therefore, in our considered opinion the said contention, as raised by the learned senior counsel appearing for the, has no legal and factual basis30. In any event, it is not possible to decide the aforesaid issue in this case as full factual foundation for such an argument was not placed before us so as to enable us to know as to why the quantity to be supplied by the appellantplaintiff was curtailed by the Government and as to why thef was not supplying the goods despite the receipt of the supply orders for several months. It is also not clear from the records that whether there was any failure or negligence on the part of thef in not supplying the goods for a long period of time without any reasonable basis or whether there were laches on the part of the respondents in sorting out the transaction. These are some of the factual issues which are required to be gone into to answer finally such issue which was raised at the time of hearing of the appeal and which cannot be done in the absence of any evidence in that regard.