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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

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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)

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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.

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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

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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.

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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

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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

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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

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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

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“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.

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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

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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

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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

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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, the Act has  

overriding effect over  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

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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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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.”

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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.”

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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

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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.”

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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.)”

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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

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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,

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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

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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.”

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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

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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.”

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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

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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

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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

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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

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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

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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

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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

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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