Delayed payment interest under the 1993 Act applies to post-commencement supplies despite earlier supply orders, SC clarifies.

The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 was held to apply to supplies made after its commencement even where the supply order or contract was earlier, because liability turns on acceptance, deemed acceptance and the appointed day, and the right to statutory interest arises on delayed post-commencement payment. The earlier contrary line of authority was treated as not governing this point. The connected earlier decision did not operate as res judicata because the precise entitlement issue had not been finally and directly decided. The claim for interest was within limitation, and the challenge to the review order was maintainable.

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Issues: (i) whether the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 operates retroactively so as to apply to supplies made after its commencement though the supply orders were placed earlier, and whether earlier contrary rulings are sub silentio or per incuriam; (ii) whether the earlier decision in the connected matter operates as res judicata; (iii) whether the claim for interest was barred by limitation; and (iv) whether the appeal against the order passed in review was maintainable.

Issue (i): whether the Act of 1993 operates retroactively so as to apply to supplies made after its commencement though the supply orders were placed earlier, and whether earlier contrary rulings are sub silentio or per incuriam

Analysis: The statutory scheme fixes liability by reference to the date of acceptance, deemed acceptance, and the appointed day, and not by reference to the date of the supply order or contract. The right to statutory interest arises when goods are supplied or services are rendered and payment is delayed beyond the prescribed period. The earlier line of cases treating the Act as inapplicable merely because the contract or supply order pre-dated commencement did not, in this view, correctly examine the statutory provisions and the legislative purpose. The Act was treated as conferring a vested statutory right on the supplier in respect of delayed payment after its commencement, and the contrary decisions were held not to govern this issue.

Conclusion: The issue was answered in favour of the appellants. The Act applies where supply occurred after commencement, even if the underlying order was earlier.

Issue (ii): whether the earlier decision in the connected matter operates as res judicata

Analysis: The earlier decision did not adjudicate the specific legal contention in issue in the present appeals in a manner that would bar reconsideration here. The precise question whether the appellants were entitled to claim statutory interest in the present factual setting was not finally and directly decided so as to attract the doctrine of res judicata.

Conclusion: The issue was answered in favour of the appellants. The earlier decision did not operate as res judicata.

Issue (iii): whether the claim for interest was barred by limitation

Analysis: On the facts, the last payment having been made on 05.03.1994 and the suit having been instituted on 10.01.1997, the claim was within time. The limitation period was held to run from the relevant payment date, and the suit was not time-barred.

Conclusion: The issue was answered in favour of the appellants. The suit was within limitation.

Issue (iv): whether the appeal against the order passed in review was maintainable

Analysis: In the circumstances considered, the challenge to the order passed in review was held to be maintainable in law.

Conclusion: The issue was answered in favour of the appellants. The appeal was maintainable.

Final Conclusion: The appeals succeeded on all decided issues, the impugned High Court judgment was displaced, and consequential refund relief followed in the connected matters. The contrary view expressed in the dissent did not alter the operative result.

Ratio Decidendi: A statutory scheme that fixes liability for delayed payment by reference to delivery, acceptance, and the appointed day confers a right that operates on post-commencement supplies even if the underlying contract was earlier, and such a right cannot be defeated merely by characterising the statute as prospective in respect of pre-existing supply orders.

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