TaxTMI 
TaxTMI 
2005 (10) TMI 494
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....overnment Institutions, Government companies and State Government undertakings, as would appear from the preamble thereof. Section 2(d) of the 1989 Act defines "State Board" to mean the Assam State Stores Purchase Board constituted under Section 3 of the 1989 Act. "Small Scale Industry" has been defined in Section 2(f) to mean 'an industrial unit in which the capital investment for plant and machinery does not exceed thirty five lakhs of rupees or any other amount as may be decided by the Central Government from time to time and located in the State of Assam'. "Registered Industry" has been defined in Section 2(l) to mean an industrial unit registered under the Directorate of Industries in accordance with provisions thereof. "Requiring Authority" has been defined in Section 2(r) to mean the State Governments Departments and their subordinate authorities, State Government Undertaking/ Corporation/ Statutory Bodies/ Autonomous Bodies. Section 2(s) defines "ASIDC" to mean the Assam Small Industries Development Corporation Limited (for short "the Corporation", the Appellant herein). Section 3 of the 1989 Act provides for constitution of the ....
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....ned departments. As per the said OM, purchasing authorities shall pay to the Corporation upto 5% as commission over the price fixed by the Corporation. The purchasing authorities shall pay advance to the extent of 90% of the value of the orders placed with the Corporation. Annexure A to the said guidelines is the marketing assistance scheme wherein 'drugs and pharmaceuticals and clinical equipments' had been identified as one of the items, supply of which to the Government departments is to be taken over by the Corporation. The said scheme provides for quality control, pricing, registration of units as also indenting by the Corporation. The clause relating to indenting of the goods reads as under: "The purchasing authorities will issue indent to the Corporation for the required products with 90% advance. The Corporation will immediately allot the work to the most suitable unit or units to complete supply within stipulated time. If the supply could not be completed in due to time by the Corporation, the purchasing authorities will deduct 1 = p.m. from bills. The stores will be dispatched by the units only after they are given dispatch instruction by the ASIDC. Normally....
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....conditions, or if any losses are otherwise incurred, the said penalty or loss is to be borne by the Principal by reimbursing the said amount to the Corporation within 15 days from the date of demand. The Principal shall also be responsible for losses by way of breakages, theft or pilferage etc. during the transit of goods. 6. The Principal authorizes the Corporation to raise bills of sale on their behalf, disclosing or without disclosing the name of the principal, and to collect payment thereon from the buyer(s). On collection of payment from the buyer(s). Payment to the principal will be effected by the Corporation deduction the service charges. Penalty due to delayed supplies, or other dues/advance, if any. The Corporation may release 90% value of the materials on delivery and acceptance of the material by the buyer after deduction of dues/advance payment if any subject to receipt of payment from buyer(s). The balance 10% less penalty due to the delayed supplies etc. or any other dues will be paid to the Principal on receipt of full payment from the Purchasing Department. 7. The Principal hereby agrees to the terms and condition in the Marketing Support Scheme of the Corpor....
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....ately after the expiry of the period of thirty days from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer from a supplier. Section 3 provides for the liability of buyer to make payment. Sections 4 and 5 thereof read as under: "4. Date from which and rate at which interest is payable.--Where any buyer fails to make payment of the amount to the supplier, as required under section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at such rate which is five per cent points above the floor rate for comparable lending. 5. Liability of buyer to pay compound interest.-- Notwithstanding anything contained in any agreement between a supplier and a buyer or in any law for the lime being in force, the buyer shall be liable to pay compound interest (with monthly rests) at the rate mentioned in section 4 on the amount due to the supplier." It is not in dispute that pursuant to the said....
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....ince the defendants has not received any payment from the Government Department against the value of the medicines supplied by the plaintiff firm, the required payment could not be released to the plaintiff firm." The Trial Judge by a judgment dated 1st August, 1998 passed a decree in favour of the Respondent herein in the following terms: "In the light of the above discussion and the decisions made therein, the plaintiffs suit is decreed for Rs. 2010141.33 on contest with cost. The plaintiffs shall be entitled to realize compound interest @ 23% with monthly rest in respect of the concerned bill amounts till the month of June, 1991 and at the rate of Rs. 23.5% with monthly rest w.e.f. 1.7.1991 till filing of the suit. The plaintiff shall be entitled to realize compound interest at the rate of Rs. 23.5% at monthly rest on the decretal amount from the date of filing the suit till the date of the decree and further interest at the said rate from the date of decree till realization." An appeal preferred thereagainst, by the Corporation before the High Court was dismissed. The Corporation is, thus, in appeal before us. Mr. R.F. Nariman, learned senior counsel appearing on be....
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.... shall be subservient thereto and, thus, to the extent the same is inconsistent with the Scheme, the later will prevail. In view of the provisions contained in the 1989 Act and the scheme, it will appear that the Corporation exercises a total control - from quality to pricing to indenting and, thus, the expressions used in the agreement as principal and agent will have no bearing. An agent as is commonly understood cannot have a control over the principal. As its agreement was with the Corporation, and the orders were all placed by the Corporation and as it had no privity with the departments of the State who received delivery of the goods, the Corporation is liable to pay the price with interest. In view of the fact that the Respondent had no privity of contract with different departments of the government, they were not necessary parties. Reliance in this behalf has been placed on Balvant N. Viswamitra and Others Vs. Yadav Sadashiv Mule (Dead) Through LRS. And Others [(2004) 8 SCC 706]. In view of the statute and the scheme as also the guidelines issued, the question of the Respondent waiving its right thereunder does not arise. The 1993 Act, it was submitted, being also a ben....
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....ded with each order of supply stipulate that payment would be made subject to receipt of the fund from the indenting department. But, the scheme, guidelines, the agreement as also the terms and conditions for supply of stores, if read as a whole, the only meaning which can be attributed thereto would be in relation to the 10% of the amount which the Corporation was to realize from the supplying authorities upon submission of bill by the manufacturer. The said term has nothing to do with payment of 90% advance in accordance with the provision of the Scheme. Clause 8 of the terms and conditions of order of supply refers to a stage when after execution of the order a bill is submitted and payment thereof, i.e., 10% of the balance amount only would be subject to the receipt of the fund from the indenting department. So read, Clause 8 may not be held to be opposed to public policy but it cannot be read in isolation. It cannot be read in such a manner so as to destroy or defeat the very purpose for which the Act or the Scheme was enacted. It cannot be read as laying down a term which would run contrary to the guidelines. The expressions 'principal' and 'agent' us....
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.... it is necessary to look to the substance of the matter rather than its form. Use of a terminology may not be sufficient to lead to a conclusion that the parties to the contract in fact intended that the said status would be conferred. In The Bhopal Sugar Industries Ltd. Vs. Sales Tax Officer, Bhopal [(1977) 3 SCC 147], a 3-Judge Bench of this Court referred to the dicta laid down by this Court in Sri Tirumala Venkateswara Timber and Bamboo Firm Vs. Commercial Tax Officer, Rajahmundry [(1968) 2 SCR 476] wherein the law has been laid down in the following terms:- "As a matter of law there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and....
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....ufacturers subject, of course, to the payment of its commission which would be a substantial amount. Under the scheme, the purchasing authorities had a duty to pay 90% of the price before the Corporation makes an indent and, thus, the latter had a statutory duty to realize the same before an indent is made, as also the remaining 10% when supplies are completed. If the payment was to be made by the Corporation to the Respondent both under the contract as also in terms of the statutory provision, it cannot now turn round and contend that it was not part of its duty and leave the matter at that. It was obligated having regard to the statutory scheme on the part of the Corporation to realize the price for the consideration of the goods supplied. It was not constituted merely to act as a conduit pipe. It was bound to perform its statutory duties envisaged under the 1989 Act. Furthermore, it is one thing to say that the Respondent delivered goods without receiving 90% of the indented amount but it is another thing to say that it has waived its right. No case of waiver of statutory duty has been made out. Nothing has been pointed before us that the Respondent gave up its claim to recei....
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....ary party is one without whom no order can be made effectively; a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding." (emphasis supplied)" We respectfully adopt the same. The Corporation for all intent and purport having undertaken the liability of the purchasing authorities would also be liable for all consequences arising from non-payment of the price of the goods supplied. We may summarise the effect of the 1989 Act, the marketing support scheme of the Corporation, the O.M. dated 28.3.1988 referred to in Section 7(1)(iii) of the 1989 Act, and the agreement between the Corporation and the respondent, as follows : i) The Corporation had to collect 90% of the value of the orders placed by the purchasing departments, in advance, and release the said 90% to the respondent on supply. This obligation is a statutory obligation having regard to the provisions of Section 7(1)(c) of the 1989 Act read with Clause 4 of the O.M. dated 28.3.1988 and the clause relating to 'indenting' contained in the Marketing Assistance Scheme. This would mean that....
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....e find that out of the 71 suit transactions, sl. Nos.1 to 26 (referred to in 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 1993 Act coming into force. Only the transactions at sl. no. 27 to 71 (that is supply orders between 22.10.1992 to 19.6.1993). will attract the provisions of the 1993 Act. 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% upto June, 1991 and 23.5% thereafter.. Mr. Choudhary has placed reliance upon a Full Bench decision of Guwahati High Court in Assam State Electricity Board & Ors. Vs. M/s. Shanti Conductors (P) Ltd. & Anr. [2002 (1) GLT 547] which having regard to the non-obstane clause contained in Sections 4, 5 and 10 of the 1993 Act opined that interest payable thereunder shall embrace within its fold even the contracts which might have been entered into prior to the enforcement of the Act stating: "However, in such a case interest on the delayed payment which is made a....