A) ABSTRACT / HEADNOTE

This judgment addresses the interplay between Sections 3, 4, and 5 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (the 1993 Act). The primary issue was whether the Maharashtra Small Scale Industries Development Corporation Ltd. (MSSIDCL) qualified as a “buyer” under the Act, thus rendering it liable to pay interest on delayed payments to Snehadeep Structures Pvt. Ltd. (SSPL). The case also explored the retrospective application of the proviso to Section 3, introduced by the 1998 Amendment. The Court upheld the High Court’s judgment, which had set aside an arbitral award favoring SSPL, ruling that MSSIDCL was not liable for interest under the disputed circumstances.

Keywords: Delayed payments, Buyer, Supplier, Interest liability, Retrospective effect.

B) CASE DETAILS

i) Judgment Cause Title:
Snehadeep Structures Pvt. Limited v. Maharashtra Small Scale Industries Development Corporation Ltd.

ii) Case Number:
Civil Appeal No. 3856 of 2024

iii) Judgment Date:
March 5, 2024

iv) Court:
Supreme Court of India

v) Quorum:
Justice Sanjiv Khanna and Justice Dipankar Datta

vi) Author:
Unspecified in the judgment text

vii) Citation:
[2024] 3 S.C.R. 454; 2024 INSC 201

viii) Legal Provisions Involved:

• Sections 2(b), 2(c), 2(f), 3, 4, and 5 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.
• Arbitration and Conciliation Act, 1996.

ix) Judgments Overruled by the Case:
None specified.

x) Case is Related to:
Contract Law, Arbitration, and Statutory Interpretation.

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The appeal arose from a High Court ruling that set aside an arbitral award favoring SSPL. SSPL supplied goods to MSSIDCL under a contract dated March 30, 1995. The core dispute revolved around MSSIDCL’s liability under the 1993 Act for interest on delayed payments. MSSIDCL contended that it was not a “buyer” under the Act, arguing that its obligations depended on payments from the Maharashtra State Electricity Board (MSEB), the consignee. The introduction of the proviso to Section 3 by the 1998 Amendment added complexity, limiting contractual flexibility concerning payment timelines.

D) FACTS OF THE CASE

1. The Agreement: SSPL agreed to supply goods to MSSIDCL under terms stating payment would occur only after MSEB accepted and paid MSSIDCL.
2. Delayed Payments: Payments from MSSIDCL were delayed, prompting SSPL to invoke the 1993 Act to claim interest.
3. Arbitration: An arbitrator awarded interest to SSPL under the 1993 Act, applying the 120-day payment limit introduced by the 1998 Amendment.
4. High Court Ruling: The award was challenged and set aside by the Bombay High Court, which held that MSSIDCL was not liable as per the Act.

E) LEGAL ISSUES RAISED

1. Was MSSIDCL a “buyer” under the 1993 Act?
2. Did the proviso to Section 3 apply retrospectively to the 1995 contract?
3. Could SSPL claim interest on delayed payments under Sections 4 and 5 of the 1993 Act?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for SSPL argued:

1. Statutory Interpretation: The proviso to Section 3 introduced by the 1998 Amendment applied to ongoing obligations under pre-existing contracts.
2. MSSIDCL’s Role: MSSIDCL qualified as a “buyer” under Section 2(c) of the 1993 Act, creating a direct obligation to pay interest.
3. Interest Liability: Section 4 imposed an automatic liability for delayed payments, irrespective of any contractual terms.
4. Fairness: Denying interest would defeat the legislative intent of the 1993 Act, designed to protect small-scale suppliers.

G) RESPONDENT’S ARGUMENTS

The counsels for MSSIDCL countered:

1. Nature of Relationship: MSSIDCL acted as an intermediary, not a “buyer,” as defined under Section 2(c).
2. Contractual Stipulation: The payment terms explicitly tied MSSIDCL’s obligation to payments received from MSEB, insulating MSSIDCL from liability.
3. Non-Retrospective Application: The 1998 Amendment could not retroactively alter the terms of a contract executed in 1995.
4. Unfair Burden: Imposing interest liability on MSSIDCL disregarded the principle of privity and the limited agency role it played in the transaction.

H) RELATED LEGAL PROVISIONS

1. Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993:

   • Section 2(b), 2(c), 2(f): Definitions of “appointed day,” “buyer,” and “supplier.”
   • Sections 3, 4, and 5: Payment obligations, interest liability, and compound interest.

2. Arbitration and Conciliation Act, 1996:

   • Section 43(4): Restitutionary powers of courts upon setting aside arbitral awards.

I) JUDGMENT

a. Ratio Decidendi

1. Proviso Application: The proviso to Section 3 applied prospectively from 1998 and could not affect contracts executed before its enforcement.
2. Buyer Definition: MSSIDCL did not qualify as a “buyer” under the 1993 Act. The privity of contract tied MSSIDCL’s liability to payments from MSEB.
3. Interest Liability: No liability under Section 5 for interest accrued before the 1998 Amendment.

b. Obiter Dicta
The Court observed that the legislative amendments clarified ambiguities but did not override existing contractual obligations retrospectively.

c. Guidelines

1. Suppliers must assess privity of contract before invoking the 1993 Act.
2. Amendments to statutes will generally not have retrospective effects unless expressly stated.

J) CONCLUSION & COMMENTS

The Supreme Court upheld the High Court’s judgment, emphasizing contractual freedom and rejecting retroactive application of legislative amendments. The judgment reinforces the principle of privity in commercial transactions while balancing statutory protections.

K) REFERENCES

1. Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.
2. Arbitration and Conciliation Act, 1996.
3. Bombay High Court Judgment in AN No. 203 of 2017.
4. Relevant policy documents and notifications by the Ministry of Industry, Department of SSI.