Mandatory notice and prospective interest statute application barred enforcement of decree against State instrumentality in execution.

Mandatory prior notice under Section 80 CPC was required before proceeding against the State instrumentality, and absence of such notice rendered the suit and decree unenforceable against it. The Court also held that the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 did not apply to a 1985 transaction, so compound interest could not be imposed on the appellant or extended beyond the statutory buyer. A post-decree Section 21 Limitation Act impleadment could not cure the defect after the trial court had become functus officio, making the execution order unsustainable. The impugned judgment and execution orders were set aside and recovery directed to be refunded.

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Issues: (i) Whether the suit and resultant decree against the appellant were vitiated for want of mandatory notice and absence of jurisdiction; (ii) whether the repealed interest-on-delayed-payments statute could be applied to a transaction of 1985 and whether compound interest could be fastened on the appellant; (iii) whether the post-decree order invoking limitation-related impleadment could be sustained in execution.

Issue (i): Whether the suit and resultant decree against the appellant were vitiated for want of mandatory notice and absence of jurisdiction.

Analysis: The appellant was treated as a State instrumentality and, once impleaded, the mandatory requirement of prior notice under Section 80 of the Code of Civil Procedure, 1908 was attracted. No such notice had been served before proceeding against the appellant. The pleadings also raised maintainability and jurisdictional objections, yet the trial court did not frame or decide the foundational issue of maintainability against the appellant. A decree passed in breach of a mandatory statutory bar, or without adjudicating a root jurisdictional objection, is a nullity and can be questioned in execution.

Conclusion: The suit against the appellant was not maintainable and the decree was unenforceable against it.

Issue (ii): Whether the repealed interest-on-delayed-payments statute could be applied to a transaction of 1985 and whether compound interest could be fastened on the appellant.

Analysis: The supply transaction arose in 1985, long before the commencement of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. The statutory scheme was held to operate prospectively and to fasten liability only on the buyer where supply or service occurred after the Act came into force. Since the transaction predated the statute, the award of compound interest under that enactment was impermissible. Liability also could not be extended to the appellant, who was not the buyer in the underlying transaction.

Conclusion: The repealed Act, 1993 was inapplicable and the compound-interest liability could not be imposed on the appellant.

Issue (iii): Whether the post-decree order invoking limitation-related impleadment could be sustained in execution.

Analysis: The application under Section 21 of the Limitation Act, 1963 was moved after the decree had already been passed. The trial court, having become functus officio, could not validly reopen the matter to alter the effect of impleadment after final disposal. The execution built upon that post-decree exercise was therefore not legally sustainable against the appellant.

Conclusion: The post-decree Section 21 application could not be sustained.

Final Conclusion: The impugned judgment and execution orders were set aside, the appellant was held not liable under the decree, and the amount recovered from it was directed to be refunded without interest.

Ratio Decidendi: A decree obtained against a State instrumentality without compliance with mandatory statutory notice, and founded on a transaction to which a later-enacted interest statute does not apply, is a nullity so far as that party is concerned and cannot be enforced in execution.

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