Case Note & Summary
The Supreme Court dismissed an appeal by Snehadeep Structures Pvt. Limited (SSPL) against the judgment of the Division Bench of the High Court, which had set aside an arbitral award dated 30.06.2003. The dispute arose from a supply/purchase order dated 30.03.1995 issued by Maharashtra Small Scale Industries Development Corporation Ltd. (MSSIDCL) to SSPL for the supply of goods to the Maharashtra State Electricity Board (MSEB). The contract stipulated that payment would be made only after MSSIDCL received payment from MSEB. SSPL claimed interest on delayed payments under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The arbitrator awarded interest, but the High Court set aside the award. The Supreme Court examined Sections 3, 4, and 5 of the 1993 Act, along with the proviso to Section 3 inserted by Act No. 23 of 1998 with effect from 10.08.1998. The Court held that the proviso, which caps the payment period at 120 days from acceptance, does not apply retrospectively to contracts entered into before its enactment. The contractual clause in the 1995 order, making payment contingent on receipt from MSEB, remained valid for supplies prior to the amendment. The Court also clarified that the non-obstante clause in Section 4 only overrides contractual prohibitions on interest, not the agreed date of payment. Since the award was set aside, Section 43(4) of the Arbitration and Conciliation Act, 1996 would apply, allowing fresh proceedings. The Court further noted that MSEB need not be a party, but factual determination of acceptance dates with reference to MSEB is required for any future interest claims. The appeal was dismissed with no order as to costs.
Headnote
A) Interest on Delayed Payments - Retrospective Application of Proviso - Section 3, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 - The proviso to Section 3, which restricts the agreed payment period to 120 days from acceptance, was enacted on 10.08.1998 and does not apply to contracts entered into before that date. The contractual clause in the supply order dated 30.03.1995, which made payment contingent on receipt from the consignee, remains valid for supplies prior to the amendment. (Paras 5-11) B) Interest on Delayed Payments - Non-Obstante Clause - Section 4, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 - The non-obstante clause in Section 4 only overrides contractual clauses that bar or prohibit interest; it does not override the agreed date of payment. Interest liability arises only if payment is not made as per Section 3. (Para 6) C) Arbitration and Conciliation Act, 1996 - Setting Aside of Arbitral Award - Section 43(4) - Where an arbitral award is set aside, the provisions of Section 43(4) of the Arbitration and Conciliation Act, 1996 come into operation, allowing a fresh period of limitation for initiating new proceedings. (Para 13) D) Interest on Delayed Payments - Determination of Acceptance Date - Sections 2(b), 3, 4, 5, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 - For computing interest, the day of acceptance or deemed acceptance must be ascertained with reference to the consignee (MSEB), to whom goods were supplied by SSPL. The liability to pay interest under Sections 3 to 5 requires factual determination of these dates. (Paras 12, 14)
Issue of Consideration
Whether the proviso to Section 3 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, inserted with effect from 10.08.1998, applies to a contract entered into on 30.03.1995, and whether the High Court was correct in setting aside the arbitral award.
Final Decision
The Supreme Court dismissed the appeal, finding no ground to interfere with the High Court's judgment setting aside the arbitral award. The Court clarified that Section 43(4) of the Arbitration and Conciliation Act, 1996 would apply, and MSEB need not be a party to any fresh proceedings, but factual determination of acceptance dates is required for interest claims.
Law Points
- Interest on delayed payments
- retrospective application of statutory amendment
- contractual payment terms
- proviso to Section 3 of 1993 Act
- non-obstante clause limited to interest prohibition
- day of acceptance
- deemed acceptance
- appointed day
