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of <h1>Suit against State instrumentality dismissed for ignoring Section 80 CPC pre-suit rules and jurisdictional issues</h1> <h3>ODISHA STATE FINANCIAL CORPORATION Versus VIGYAN CHEMICAL INDUSTRIES AND OTHERS</h3> ODISHA STATE FINANCIAL CORPORATION Versus VIGYAN CHEMICAL INDUSTRIES AND OTHERS - 2025 INSC 928 ISSUES: Whether the suit filed against a State Financial Corporation without compliance with Section 80 of the Code of Civil Procedure (CPC) is maintainable.Whether the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 ('the Act, 1993') apply to transactions predating its commencement.Whether the trial court and appellate courts erred in allowing impleadment of the appellant and treating the suit as within limitation by application of Section 21 of the Limitation Act, 1963 post-decree.Whether the executing court can examine jurisdictional and maintainability objections, including the nullity of the decree, under Section 47 CPC.Whether the appellant, a State Financial Corporation, can be held liable for debts and interest arising from contracts to which it was not a party, especially in absence of privity of contract.Whether the bank guarantees furnished prior to decree operate as deposits under Order XXIV Rule 1 CPC to stop accrual of interest.Whether the computation of interest at 24% per annum, compounded monthly, and the consequent execution proceedings are legally sustainable.Whether the doctrine of sub silentio applies to prior judgments of this Court that decided only the limitation issue and are silent on other legal questions raised.Whether the execution proceedings and attachment orders against the appellant's assets are justified in light of the above legal principles. RULINGS / HOLDINGS: The suit against the appellant, a State Financial Corporation classified as 'State' under Article 12 of the Constitution, was not maintainable without strict compliance with Section 80 CPC; failure to issue requisite notice renders the suit barred and the decree a nullity.The Act, 1993 is prospective and applies only to supplies or services rendered after its commencement date (23.09.1992); it does not apply to transactions predating the Act, including the present supply made in 1985.The trial court lacked jurisdiction to entertain the post-decree application under Section 21 Limitation Act to relate the impleadment of the appellant back to the original suit date; such application is maintainable only in pending proceedings, not after decree.The executing court has limited but clear jurisdiction under Section 47 CPC to examine objections going to the nullity of the decree, including jurisdictional and maintainability issues, and may refuse execution if the decree is void ab initio.The appellant's liability is limited to the proceeds of the defaulting industrial unit realized under Section 29 of the S.F.C. Act, 1951; absence of privity of contract with the appellant precludes fastened liability beyond such proceeds.Bank guarantees furnished prior to the decree, even if encashed later under court direction, constitute deposits under Order XXIV Rule 1 CPC, thereby stopping the accrual of interest beyond the amount secured.The interest rate of 24% per annum compounded monthly awarded by the trial court and upheld by appellate courts is excessive and impermissible under Section 34 CPC, especially when based on the inapplicable Act, 1993.Prior judgments of this Court dealing solely with limitation issues are sub silentio on other legal questions such as jurisdiction, maintainability, and applicability of the Act, 1993, and hence are not binding precedents on those issues.The execution proceedings and attachment orders against the appellant's bank accounts and assets are without jurisdiction and legal authority, given the nullity of the decree and improper interest computation; the appellant is entitled to refund of amounts already paid without interest. RATIONALE: The Court applied the statutory framework of Section 80 CPC mandating prior notice before instituting suits against the State or its instrumentalities, holding such notice a mandatory precondition to jurisdiction. It relied on settled precedents affirming that non-compliance renders the suit non-maintainable and decree null.The Court examined the Act, 1993 and related judicial interpretations, including Shanti Conductors v. Assam State Electricity Board, overruling earlier contrary precedents, to hold that the Act applies only prospectively to supplies or services after its enforcement date, not to contracts or supplies predating it.The Court emphasized the limited scope of Section 21 Limitation Act applications post-decree, holding that the trial court was functus officio and lacked jurisdiction to entertain such applications after passing final decree.The Court clarified the scope of Section 47 CPC, citing precedents that executing courts may refuse execution if the decree is a nullity, including where jurisdiction or maintainability is lacking, thus empowering the executing court to examine such objections.Applying principles from the S.F.C. Act, 1951 and analogy to legal representative liability under Section 50 CPC, the Court held that the appellant's liability is limited to the proceeds of the defaulting concern's assets and cannot extend to its own properties absent privity of contract.The Court interpreted Order XXIV Rule 1 CPC and recent precedent Fertilizer Corporation of India Ltd. v. M/s. Coromandel Sacks Pvt. Ltd., to hold that bank guarantees furnished before decree constitute deposits stopping further interest accrual, regardless of when encashed under court order.The Court found the interest rate awarded excessive and contrary to Section 34 CPC, especially given the inapplicability of the Act, 1993, and the absence of a contractual basis for such interest against the appellant.The Court extensively applied the doctrine of sub silentio, citing multiple precedents, to hold that prior rulings addressing only limitation do not bind on other legal issues not argued or decided, permitting independent adjudication of such issues.Invoking Article 142 of the Constitution, the Court exercised its power to do complete justice, setting aside the decree and execution orders, and directing refund of amounts realized, to prevent manifest injustice and protect public interest in State instrumentalities.
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