REPORTABLE

   IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3305-3306 OF 2010 (Arising out of SLP(C) Nos. 26087-26088 of 2008)

M/s. Modern Industries          …Appellant

Versus   M/s. Steel Authority of India Ltd. & Ors.              …Respondents

JUDGEMENT

R.M. Lodha, J.

Leave granted.

2. Two main questions arise for consideration – first,  

as  to  the  meaning  of  the  expression,  ‘amount  due  from   a  

buyer, together with the amount of interest’ under sub-section

(1) of Section 6 of the Interest on Delayed Payments to Small  

Scale   and  Ancillary  Industrial  Undertakings  Act,  1993  (for  

short,  ‘1993  Act’)  and  then,  as  to  whether  the  Industry  

Facilitation  Council  (IFC)  cannot  go  beyond  the  scope  of  

interest on delayed payments upon the matter being referred to  

it by any party to dispute under sub-section (2) of Section 6.

3. M/s.  Modern  Industries,  Rourkela  (for  short,  

‘supplier’) got an order from the Steel Authority of India Limited  

– Rourkela Steel Plant (for short, ‘buyer’) on January 15, 1983  

for  manufacture  of  Right  Manipulator  Side Guard.  The order  

value was Rs. 8.19 lakhs.  Inter alia, the terms and conditions  

of  the  order  were  :  (i)  the  job  should  be  done  exactly  as  

specified in the drawings; (2) the alignment of bearing housings  

be made by the supplier  and for this purpose,  a spare shaft  

assembly would be issued against indemnity bond for checking  

the perfect  alignment  and free rotation of  the shaft  ;  (3)  the  

essentiality certificate would be issued by the buyer; (4) O.S.T./  

T.O.T. 5% to be paid extra and (5) 90 per cent payment to be  

made  against  the  proof  of  dispatch  (R/R)  and  inspection  

certificate, balance 10 per cent payment would be made within  

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thirty days after receipt of materials at site in good condition. It  

appears that initially buyer did not issue raw-materials but later  

on the buyer on May 28, 1985 agreed to supply the materials  

free  of  cost.  The  supplier  also  informed  the  buyer  that  the  

drawings were defective. According to the supplier, there was  

delay  in  supply  of  materials  and  removal  of  defects  from  

drawings.  The buyer ultimately extended the period of supplies  

till June 4, 1997.  It is admitted case of the parties that supplies  

were  made  within  extended  period.   The  buyer  ordered  for  

release of Rs. 6,07, 493/- as an interim payment but deducted  

the balance payment of Rs. 2,11,506/- out of Rs. 8.19 lakhs of  

the original order as the cost of the supply of materials.  The  

supplier,  accordingly,  raised  a  dispute  in  respect  of  balance  

payment together with interest on delayed payment before IFC  

under Section 6(2) of 1993 Act.

4. IFC took cognizance of the dispute referred to it by  

the supplier and issued notice to the buyer  on September 21,  

1999.  On October 23, 1999, nobody appeared for buyer before  

IFC.  However, IFC directed the buyer to settle the claims of the  

supplier within thirty days of receipt of the  communication and  

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gave an opportunity to submit their defence within ten days of  

receipt  of  the  said  communication  and  also  depute  a  duly  

authorized  officer  to  attend  the  proceedings.  Vide  its  letter  

dated December 20, 1999, the buyer objected to the jurisdiction  

of IFC in dealing with the matter. It appears that on February  

15,  2000,  a representative of  the buyer appeared before the  

IFC. On that date, the IFC again directed the buyer to settle the  

dispute amicably in the presence of Joint Director of Industries  

(Planning),  Rourkela  and  also  file  its  written  statement  

regarding its outcome on March 24, 2000. On March 24, 2000,  

the representative of the buyer was not present before IFC nor  

any written  statement  was  filed  as  directed  on February 15,  

2000.  In  the  circumstances,  IFC  passed  an  ex-parte  award  

against the buyer in the sum of Rs. 24,86,998/- with interest at  

the  rate  of  18  per  cent  being  one-and-half  times  of  Prime  

Lending Rate of the SBI compounded  with monthly rests.  IFC  

also directed that  the interest would be payable with effect from  

September  24,  1997 (the  date  of  last  delivery,  i.e.,  May 28,  

1997 plus maximum 120 days of credit period) till the date of  

full payment.

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5. The ex-parte award passed against the buyer was  

kept in abeyance by IFC on May 6, 2000 for one month at the  

instance  of  the  buyer  to  enable  it  to  discuss  and  settle  the  

matter  with  the  supplier.  However,  no  settlement  took  place  

between the parties and IFC on July 11, 2000 reiterated its ex-

parte award dated March 24, 2000.

6. Two writ  petitions  came to  be  filed  by  the  buyer  

before the High Court of Orissa.   In the first writ petition, ex-

parte award dated March 24, 2000 was challenged and in the  

other, award dated July 11, 2000  as well as ex-parte award  

dated March 24, 2000 was assailed.  In both writ petitions, the  

buyer  also challenged the validity of  the Interest  on Delayed  

Payments to Small Scale and Ancillary Industrial Undertakings  

(Amendment) Act 1998 (for short, ‘1998 Amendment Act’).

7. The  Division  Bench  of  the  High  Court  vide  its  

judgment dated February 18, 2008 allowed these writ petitions  

and quashed and set aside the awards dated March 24, 2000  

and July 11, 2000. It is from this judgment that present appeals  

by special leave have arisen.

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8. 1993 Act was sequel to a policy statement on small  

scale  industries  made by the  Government  in  Parliament  that  

suitable legislation would be brought to ensure prompt payment  

of money by buyers to the small industrial units. It was felt that  

inadequate  working  capital  in  a  small  scale  and  ancillary  

industrial  undertaking  was  causing  an  endemic  problem and  

such undertakings were very much affected. The Small Scale  

Industries Board - an apex advisory body on policies relating to  

small  scale  industrial  units  -  also  expressed  its  views  that  

prompt  payments  of  money  by  buyers  should  be  statutorily  

ensured and mandatory provisions for payment of interest on  

the outstanding money, in case of default, should be made. It  

was felt that the buyers, if required under law to pay interest,  

would  refrain  from  withholding  payments  to  small  scale  and  

ancillary  industrial  undertakings.  With  these  objects  and  

reasons, initially an Ordinance, namely, the Interest on Delayed  

Payments to Small Scale and Ancillary Industrial Undertakings  

Ordinance,  1992  was  promulgated  by  the  President  on  

September 23, 1992 and then Bill was placed before both the  

Houses of  Parliament  and the said Bill  having been passed,  

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1993 Act was enacted. The Preamble to the 1993 Act reads,  

‘An Act to provide for and regulate the payment of interest on  

delayed  payments  to  small  scale  and  ancillary  industrial  

undertakings and for matters connected therewith or incidental  

thereto’.

9. By 1998 Amendment Act,  with effect  from August  

10, 1998, 1993 Act was amended whereby few new provisions  

were inserted and some existing provisions amended.

10. Section 2(c), (e) and (f) define “buyer”, “small scale  

industrial undertaking” and “supplier” as follows :

“S.2.-   Definitions.  –  In  this  Act,  unless  the  context  otherwise requires, –

(c) “buyer”  means  whoever  buys  any  goods  or  receives  any  services  from  a  supplier  for  consideration;

(e)    “Small  scale  industrial  undertaking”  has  the  meaning assigned to it by clause (j) of section  3  of  the  Industries  (Development  and  Regulation) Act, 1951 (65 of 1951);

(f) “supplier”  means  an  ancillary  industrial  undertaking  or  a  small  scale  industrial  undertaking  holding a  permanent  registration  certificate  issued  by  the  Directorate  of  Industries  of  a  State  (or  Union  territory  and  includes, –

(i) the  National  Small  Industries  Corporation,  being  a  company,  

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registered  under  the  Companies  Act,  1956 (1 of 1956);

(ii) the  Small  Industries  Development  Corporation  of  a  State  or  a  Union  territory,  by  whatever  name  called,  being  a  company  registered under  the  Companies Act, 1956 ( 1 of 1956).]”

11. Section 3 fastens liability on buyer to make payment  

for the goods supplied or the services rendered by the supplier  

to him within the time mentioned therein. It reads :

“S.3.-  Liability of buyer to make payment.—Where  any supplier supplies any goods or renders any services  to any buyer, the buyer shall make payment therefor on  or before the date agreed upon between him and the  supplier  in writing or,  where there is no agreement in  this behalf, before the appointed day:”

12. Section  4  imposes  a  liability  of  interest  upon  the  

buyer  on failure to  make payment  of  the amount  due to the  

supplier.  Originally in 1993 Act, Section 4 was as follows :

“S.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.

Explanation.—For  the  purposes  of  this  section,  “floor  rate for comparable lending” means the highest of the  

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minimum  lending  rates  charged  by  scheduled  banks  (not  being  co  operative  banks)  on  credit  limits  in  accordance  with  the  directions  given  or  issued  to  banking companies generally by the Reserve Bank of  India  under  the  Banking  Regulation  Act,  1949 (10 of  1949).”

After amendment in 1998, Section 4 reads :

“S.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  one- and-half  time of Prime Lending Rate charged by the  State Bank of India.

Explanation.—For the purposes of this section,  “Prime Lending Rate” means the Prime Lending Rate  of the State Bank of India which is available to the best  borrowers of the bank.”  

13. Section  5 imposes a  liability  on the buyer  to  pay  

compound interest. It reads :

“S.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  time  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.”   

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14. The mode of recovery of amount due is provided in  

Section 6.  Erstwhile Section 6 in 1993 Act read:  

“S.6-. Recovery  of  amount  due.—The  amount  due  from  a  buyer,  together  with  the  amount  of  interest  calculated in accordance with the provisions of Sections  4 and 5, shall be recoverable by the supplier from the  buyer by way of a suit or other proceedings under any  law for the time being in force.”

After amendment in 1998, Section 6 provides :

“S.6.-  Recovery  of  amount  due.—(1)   The amount  due from a buyer, together with the amount of interest  calculated in accordance with the provisions of sections  4 and 5, shall be recoverable by the supplier from the  buyer by way of a suit or other proceeding under any  law for the time being in force.

(2)  Notwithstanding anything contained in sub-section  (1), any party to a dispute may make a reference to the  Industry Facilitation Council for acting as an arbitrator or  conciliator in respect of the matters referred to in that  sub-section  and  the  provisions  of  the  Arbitration  and  Conciliation Act, 1996 (26 of 1996) shall apply to such  disputes  as  if  the  arbitration  or  conciliation  were  pursuant to an arbitration agreement referred to in sub- section (1) of section 7 of that Act.”   

 15. Section  7  provides  that  no  appeal  against  any  

decree, award or other order will be entertained by any court or  

other authority unless the appellant (not being a supplier) has  

deposited with it seventy-five per cent of the amount in terms of  

the decree, award or, as the case may be, other order in the  

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manner directed by such court or, as the case may be, such  

authority.

16. Mr.  Prashant  Bhushan,  learned  counsel  for  the  

supplier urged that the IFC under Section 6(2) has jurisdiction  

to decide the dispute between supplier and buyer relating not  

only in respect of interest but also the principal amount payable  

by buyer to supplier. He submitted that the interpretation put by  

the High Court upon the provisions of 1993 Act is erroneous  

and  that  jurisdiction  of  IFC  in  resolving  the  dispute  under  

Section  6  (2)  is  not  only  confined  to  the  dispute  relating  to  

interest  but  would  also  be  available  where  there  is  dispute  

regarding the principal  amount  payable  by the  buyer  to  the  

supplier.  He submitted that the High Court  seriously erred in  

holding that  the requirement  of  ‘settled amount’  between the  

supplier and buyer is sine qua non for the applicability of 1993  

Act.  

17. On  the  other  hand,  Mr.  Ashwani  Kumar,  learned  

senior counsel for the buyer submitted that findings of the High  

Court  on  the  applicability  of  1993  Act  and  the  issue  of  

jurisdiction of  the IFC are meritorious in  law for  the reasons  

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given in the judgment. He submitted that the entire scheme and  

structure  of  1993  Act,  including  the  Preamble  and  the  

Statement  of  Objects  and  Reasons  when  construed  

harmoniously,   would  show  that  Section  6(2)  can  only  be  

invoked in cases of an existing determined, settled or admitted  

liability. He would submit that the use of word ‘due’ in Section 6  

indicates that penal interest provisions in Sections 4 and 5 of  

1993 Act  get attracted where the principal amount payable is  

not in dispute, is settled or admitted or has been found by a  

competent  forum to be ‘due’.   According to  him,  special  law  

does  not  intend  to  substitute  the  regular  procedure  for  

determining  a  disputed  liability  where  there  is  a  bona  fide  

dispute as to the amount due. He referred to the Blacks Law  

Dictionary, Stroud’s Judicial Dictionary of Words and Phrases  

and Aiyer’s Law Lexicon and also invited our attention to the  

decision of  this  Court  in  State of  Kerala and Others  v.  V.R.  

Kalliyanikutty and Another1 in support of his argument that the  

expression ‘amount due’ in Section 6 pre-supposes an existing  

determined, settled or admitted liability.  He would submit that  

the Preamble and the Statement of Objects and Reasons and  1 (1999) 3 SCC 657

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the headings of Section can be referred to in determining the  

applicability and scope of a statutory enactment.  In this regard,  

he relied  upon decisions of  this  Court  in  State of  Gujarat v.  

Mirzapur  Moti  Kureshi  Kassab  Jamat  and  Others2,  Bonam  

Satyavathi v. Addala Raghavulu3, Central Bank of India v. State  

of Kerala and Others4 and Eastern Coalfields Limited v. Sanjay  

Transport Agency and Another5.

18. Mr. Ashwani Kumar would also submit that 1993 Act  

even otherwise is  not  applicable  to  the  present  case as  the  

contract pertaining to which the buyer has been saddled with a  

monetary liability was executed on January 15, 1983 and that  

1993  Act  came into  effect  much  later.   He  relied  upon  two  

decisions of this Court, namely, Assam Small Scale Industries  

Development Corpn. Ltd. and Others v.  J.D. Pharmaceuticals  

and  Another6 and  Shakti  Tubes  Ltd.,  v.  State  of  Bihar  and  

Others7.

19. The  wholesome purpose  and  object  behind  1993  

Act as amended in 1998 is to ensure that buyer promptly pays  

2 (2005) 8 SCC 534 3 1994 (Suppl) 2 SCC 556 4  (2009) 4 SCC 94 5 (2009) 7 SCC 345 6 (2005) 13 SCC 19 7 (2009) 7 SCC 673

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the  amount  due towards the  goods supplied  or  the  services  

rendered  by  the  supplier.   It  also  provides  for  payment  of  

interest statutorily on the outstanding money in case of default.  

Section 3, accordingly, fastens liability upon the buyer to make  

payment for goods supplied or services rendered to the buyer  

on  or  before  the  date  agreed  upon  in  writing  or  before  the  

appointed  day  and  when  there  is  no  date  agreed  upon  in  

writing, the appointed day shall not exceed 120 days from the  

day of acceptance.   Section 4 fixes   the rate of interest at one-

and-half  time of  Prime Lending Rate  charged by the SBI in  

case of default by the buyer in making payment of the amount  

to the supplier.  The rate of interest fixed in Section 4 overrides  

any  agreement   between   the  buyer  and  supplier  to  the  

contrary.  Section  5  imposes  a  liability  on  the  buyer  to  pay  

compound interest at the rate mentioned in Section 4 on the  

amount  due to  the supplier.  Section 6 is  a crucial  provision.  

Sub-section  (1)  thereof  provides  that  the  amount  due  from  

buyer together with amount of interest calculated in accordance  

with the provisions of Sections 4 and 5 shall be recoverable by  

supplier from the buyer by way of a suit or other proceeding  

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under any law for the time being in force. It thus provides for  

enforcement of right relating to recovery of amount due and the  

amount  of  interest  which  supplier  may  be  entitled  to  in  

accordance  with  Sections  4  and  5.  The  mode  of  such  

enforcement is by way of suit or any other proceeding under  

any law for the time being in force. Sub-section (2), however,  

overrides  the mode of  enforcement  of  right  provided  in  sub-

section  (1)  by  enabling  any  party  to  a  dispute  to  make  a  

reference to the IFC  for recovery of amount due together with  

amount of interest as provided in Sections 4 and 5. Once such  

dispute is referred, IFC acts as an arbitrator or conciliator and  

the  provisions  of  Arbitration  and  Conciliation  Act,  1996  get  

attracted  as  if  the  arbitration  and  conciliation  were  being  

conducted pursuant to an arbitration agreement referred to in  

sub-section  (1)  of  Section 7  of  that  Act.   A plain  reading of  

Section 6 would show that nature of dispute to be adjudicated  

by the IFC as an arbitrator or resolution thereof as a conciliator  

is in respect of the matters referred to in sub-section (1), i.e.,  

the  amount  due  from  a  buyer  together  with  the  amount  of  

interest  calculated  in  accordance  with  the  provisions  of  

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Sections 4 and 5.  

20. What exactly is the meaning of words ‘amount due  

from a buyer’  which are followed by the expression ‘together  

with the amount of interest’ under sub-section (1) of Section 6  

of 1993 Act?  Do these words  mean an admitted sum due?  Or  

do they  mean the amount claimed to be due?

21. The meaning of the word ‘due’ has been explained  

in Webster Comprehensive Dictionary, (International Edition) as  

follows :

“1. Owing and demandable; owed; especially, payable  because of the arrival of the time set or agreed upon.  2.  That should be rendered or given; justly claimable;  appropriate.”

22. Concise  Oxford  English  Dictionary  (10th Edition,  

Revised) explains ‘due’ as follows :  

“DUE  •………………˃(of  a  person)  at  a  point  where  something is owed or merited.  ˃required as a legal or  moral obligation.  2 proper; appropriate………… ………………… -ORIGIN  ME:  from  OFr.  deu ‘owed’,  based  on  L.  debitus ‘owed’, from debere ‘owe’ ”.  

23. In Black’s Law Dictionary (Eighth Edition), the word  

‘due’ is explained :

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“adj.  1.  Just,  proper,  regular,  and  reasonable  <due  care>  <due  notice>.  2.   Immediately  enforceable  <payment  is  due  on  delivery>.  3.  Owing  or  payable;  constituting a debt…..”

24. Wharton’s Law Lexicon (Fourteenth Edition) makes  

the following comment with regard to word ‘due’ :

“anything  owing.  That  which  one  contracts  to  pay  or  perform to another; that which law or justice requires to  be paid or done.”

25. P.  Ramanatha  Aiyar  in  ‘Law Lexicon’;  2nd Edition  

(Reprint 1997) explains the word ‘due’; as a noun : an existing  

obligation;  an  indebtedness;  a  simple  indebtedness  without  

reference to the time of payment : a debt ascertained and fixed  

though payable  in  future;  as an adjective :  capable  of  being  

justly  demanded;  claimed  as  of  right;  owing  and  unpaid,  

remaining unpaid; payable; regular; formal; according to rule or  

form.  

26. Jowitt’s Dictionary of English Law; 2nd Edition (Vol.  

1) defines ‘due’;  ‘anything owing, that which one contracts to  

pay or perform to another. As applied to a sum of money, ‘due’  

means either that it is owing or that it is payable; in other words,  

it may mean that the debt is payable at once or at a future time.  

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It is a question of construction which of these two meanings the  

word ‘due’ bears in a given case’.

27. In  Irish Land Commission v. Viscount  Massereene  

and  Ferrard8,   Gibson  J.  stated  that  word  ‘due’  may  mean  

immediately  payable  (its  common  signification),  or  a  debt  

contracted, but payable in future.  It  was also highlighted that  

the interpretation of  the word ‘due’ must be according to the  

reason and context of the statute.

28. In the case of Hibernian Bank v. Yourell9 , O’Connor  

M.R.  construed  the  word  ‘due’  in  Section  24(8)  of  the  

Conveyancing  and  Law  of  Property  Act,  1881  as  due  and  

legally recoverable.

29. The expression ‘amount due’ occurring in different  

statutes  has come up for  consideration  before  this  Court.  In  

Madan Mohan and Another v. Krishan Kumar Sood10, this Court  

while dealing with the expression ‘amount due’ occurring in the  

third proviso to clause (i)  of  sub-section (2) of Section 14 of  

H.P. Urban Rent Control  Act,  1987,  held that  the expression  

‘amount due’ in the context will mean the amount due on and  

8 (1904) 2 I.R. 1113 9 (1919) 1 I.R.  Ch. D. 310 10 1994 Supp (1) SCC 437

18

up to the date of the order of eviction; it will take into account  

not merely the arrears of rent which gave cause of action to file  

a  petition   for  eviction  but  will  include  the  rent  which  

accumulated  during  the  pendency  of  the  eviction  petition  as  

well.     

30. A  three-Judge  Bench  of  this  Court  in  V.R.  

Kalliyanikutty1  had an occasion to interpret the words ‘amounts  

due’ used in Section 71 of Kerala Revenue Recovery Act, 1968.  

Section 71 of Kerala Act provided thus :

“S.71.-   Power  of  Government  to  declare  the  Act   applicable to any institution.—The Government may, by  notification in the Gazette, declare, if they are satisfied  that it is necessary to do so in public interest, that the  provisions of this Act shall be applicable to the recovery  of amounts due from any person or class of persons to  any  specified  institution  or  any  class  or  classes  of  institutions, and thereupon all the provisions of this Act  shall be applicable to such recovery.”

After  referring  to  Wharton  in  Law  Lexicon  and  Black’s  Law  

Dictionary, it was held that the words ‘amounts due’ in Section  

71  did  not  include  time  barred  debt.  This  Court,  however,  

highlighted that in every case the exact meaning of the word  

‘due’ will depend upon the context in which the word appears.

19

31. In  Maharashtra State Cooperative Bank Limited  v.  

The  Assistant  Provident  Fund  Commissioner  and  Others11,  

before a three-Judge Bench of this Court interpretation of the  

expression ‘any amount due from an employer’ used in Section  

11(2)  of  the  Employees  Provident  Fund  and  Miscellaneous  

Provisions Act, 1952 came up for consideration. Section 11(2)  

of the said Act is as follows:

“S.11.-  Priority of  payment  of  contributions over other  debts.—(l) Where any employer is adjudicated insolvent  or, being a company, an order for winding up is made,  the amount due—

(a) * * * *         *

(b) * * * *         *  

(2)  Without  prejudice  to  the  provisions  of  sub-section  (1), if any amount is due from an employer whether in  respect of the employee’s contribution (deducted from  the  wages  of  the  employee)  or  the  employer’s  contribution, the amount so due shall be deemed to be  the first charge on the assets of the establishment, and  shall,  notwithstanding anything contained in any other  law for the time being in force, be paid in priority to all  other debts.”

While interpreting the said expression ‘any amount due from an  

employer’, this Court referred to Section 11(1) besides the other  

11 (2009) 10 SCC 123

20

provisions of the said Act, namely, Sections 7A, 7Q, 14B and  

15(2)  and held that  the said expression cannot  be accorded  

restricted meaning confining it to the amount determined under  

Section 7(A) or the contribution payable under Section 8. This  

is what this Court said :

“67. The  expression  “any  amount  due  from  an  employer”  appearing  in  sub-section  (2)  of  Section  11  has to be interpreted keeping in view the object of the  Act  and  other  provisions  contained  therein  including  sub-section (1) of Section 11 and Sections 7-A, 7-Q, 14- B and 15(2) which provide for determination of the dues  payable by the employer, liability of the employer to pay  interest  in  case  the  payment  of  the  amount  due  is  delayed  and also  pay damages,  if  there  is  default  in  making contribution to the Fund. If any amount payable  by the employer becomes due and the same is not paid  within the stipulated time, then the employer is required  to pay interest in terms of the mandate of Section 7-Q.  Likewise,  default  on  the  employer’s  part  to  pay  any  contribution  to  the  Fund  can  visit  him  with  the  consequence of levy of damages.

68. As mentioned earlier, sub-section (2) was inserted  in Section 11 by Amendment Act 40 of 1973 with a view  to ensure that  payment  of  provident fund dues of the  workers  are  not  defeated  by  the  prior  claims  of  the  secured  and/or  of  the  unsecured  creditors.  While  enacting sub-section (2), the legislature was conscious  of the fact that in terms of existing Section 11 priority  has been given to the amount due from an employer in  relation  to  an  establishment  to  which  any  scheme or  fund is applicable including damages recoverable under  Section  14-B  and  accumulations  required  to  be  transferred  under  Section  15(2).  The  legislature  was  also  aware  that  in  case  of  delay  the  employer  is  statutorily responsible to pay interest in terms of Section  17.  Therefore,  there  is  no  plausible  reason to  give a  

21

restricted meaning to the expression “any amount due  from  the  employer”  and  confine  it  to  the  amount  determined  under  Section  7-A  or  the  contribution  payable under Section 8.

69. If interest payable by the employer under Section 7- Q and damages leviable under Section 14 (sic Section  14-B) are excluded from the ambit of expression “any  amount  due  from  an  employer”,  every  employer  will  conveniently  refrain  from  paying  contribution  to  the  Fund  and  other  dues  and  resist  the  efforts  of  the  authorities concerned to recover the dues as arrears of  land  revenue  by  contending  that  the  movable  or  immovable property of  the establishment is subject  to  other debts. Any such interpretation would frustrate the  object  of  introducing  the  deeming  provision  and  non  obstante  clause  in  Section  11(2).  Therefore,  it  is  not  possible to agree with the learned Senior Counsel for  the appellant Bank that the amount of interest payable  under Section 7-Q and damages leviable under Section  14-B  do  not  form  part  of  the  amount  due  from  an  employer for the purpose of Section 11(2) of the Act.”

32. In Assam State Electricity Board and Ors. v. Shanti   

Conductors Pvt. Ltd. and Another12, inter-alia, the question that  

fell  for  consideration  before the Full  Bench of  Gauhati  High  

Court was as to whether the suit for recovery of a mere interest  

under 1993 Act is maintainable. The argument on behalf of the  

appellant therein was that no suit merely for the recovery of the  

interest under 1993 Act is maintainable under the provisions of  

Section 6.  It was contended that both principal sum and the  

12 (2002) 2 GLR 550

22

interest on delayed payment simultaneously must co-exist for  

maintaining a suit under Section 6 of the 1993 Act.   

33. The Full Bench held that the suit is maintainable for  

recovery of the outstanding principal amount, if any, along with  

the interest on delayed payments as calculated under Sections  

4 and 5 of the 1993 Act. It said :

“The opening words of  Section 6(1) "the amount due  from the buyer, together with the amount of interest....."  can  only  mean  that  the  principal  sum  due  from  the  buyer as well  as or along with the amount of interest  calculated  under  the  provisions  of  the  Act,  are  recoverable. The word 'together'  here would mean 'as  well  as'  or  'alongwith'.  This  cannot  mean  that  the  principal sum must be due on the date of the filing of the  suits.  The  suits  are  maintainable  for  recovery  of  the  outstanding,  principal  amount,  if  any,  along  with  the  amount  of  interest  on  the  delayed  payments  as  calculated under Sections 4 and 5 of the Act. We are  unable to agree with that if the principal sum is not due,  no suit would lie for the recovery of the interest on the  delayed payments, which might have already accrued. If  such  an  interpretation  is  given  the  very  object  of  enacting the Act would be frustrated. The Act had been  enforced  to  see  that  small  scale  industries  get  the  payment  regarding  supply  made  by  them  within  the  prescribed period and in case of delay in payments the  interest would be at a much higher rate (1 1/2 times of  lending rate charged by the State Bank of India). The  obligation of payment of higher interest under the Act is  mandatory. Sections 4 and 5 of the Act of 1993 contain  a  non-obstante  clause i.e.  "Notwithstanding  any  thing  contained in any agreement between the buyer and the  supplier".  In  other  words,  the  parties  to  the  contract  cannot even contract out of the provisions of the 1993  Act. Even if such provision that interest under the Act on  delay meant would not be chargeable is incorporated in  

23

purpose and object of 1993 Act and its provisions,  

particularly  Sections  3,  4  and  5  in  mind.   This  

expression  does  not  deserve  to  be  given  a  

restricted meaning as that would defeat the whole  

purpose and object of 1993 Act.  Sub-section (1) of  

Section 6 provides that the amount due from buyer  

together  with  amount  of  interest  calculated  in  

accordance with the provisions of Sections 4 and 5  

shall be recoverable by the supplier from the buyer  

by way of suit or other proceeding under any law for  

the time being in force.  If  the argument  of  senior  

counsel for the buyer is accepted, that would mean  

that  where  the buyer  has raised some dispute  in  

respect of goods supplied or services rendered by  

the  supplier  or  disputed  his  liability  to  make  

payment then the supplier shall have to first pursue  

his  remedy  for  recovery  of  amount  due  towards  

goods supplied or services rendered under regular  

procedure and after the  amount due is adjudicated,  

initiate  action  for  recovery  of  amount  of  interest  

25

which  he  may  be  entitled  to  in  accordance  with  

Sections 4 and 5 by pursuing remedy under sub-

section (2) of Section 6.  We are afraid the scheme  

of Section 6 of 1993 Act read with Sections 3,4 and  

5  does  not  envisage  multiple  proceedings  as  

canvassed.  Rather, whole idea of Section 6 is to  

provide  single window  to the supplier for redressal  

of  his  grievance  where  the  buyer  has  not  made  

payment for goods supplied or services rendered in  

its  entirety  or  part  of  it  or  such payment  has not  

been made within time prescribed in Section 3 for  

whatever reason and/or for recovery of interest as  

per Sections 4 and 5 for such default. It is for this  

reason that  sub-section  (1)  of  Section  6 provides  

that ‘amount due from the buyer together with the  

amount of interest calculated in accordance with the  

provisions of Sections 4 and 5’ shall be recoverable  

by the supplier from buyer by way of a suit or other  

legal proceeding. Sub-section (2) of Section 6 talks  

of a dispute being referred to IFC in respect of the  

26

matters  referred  to  in  sub-section  (1),  i.e.   the  

dispute  concerning  amount  due  from  a  buyer  for  

goods supplied or services rendered by the supplier  

to  buyer  and  the  amount  of  interest  to  which  

supplier has become entitled under Sections 4 and  

5.  It  is  true  that  word  ‘together’  ordinarily  means  

conjointly  or  simultaneously  but  this  ordinary  

meaning put upon the said word may not be apt in  

the  context  of  Section  6.  Can it  be  said  that  the  

action contemplated in Section 6 by way of suit or  

any other legal proceeding under sub-section (1) or  

by making reference to IFC under sub-section (2) is  

maintainable  only  if  it  is  for  recovery  of  principal  

sum along with interest as per Sections 4 and 5 and  

not  for  interest  alone?  The  answer  has  to  be  in  

negative.  We  approve  the  view  of  Gauhati  High  

Court in  Assam State Electricity Board12 that word  

‘together’ in Section 6(1) would mean ‘alongwith’ or  

‘as  well  as’.  Seen thus,  the  action  under  Section  

6(2)  could be maintained for  recovery of  principal  

27

amount  and  interest  or  only  for  interest  where  

liability is admitted or has been disputed in respect  

of  goods  supplied  or  services  rendered.  In  our  

opinion,  under  Section  6(2)  action  by  way  of  

reference to IFC cannot be restricted to a claim for  

recovery of interest due under Sections 4 and 5 only  

in  cases  of  an  existing  determined,  settled  or  

admitted liability. IFC has competence to determine  

the  amount  due  for  goods  supplied  or  services  

rendered in cases where the liability is disputed by  

the  buyer.  Construction  put  upon Section  6(2)  by  

learned  senior  counsel  for  the  buyer  does  not  

deserve  to  be  accepted  as  it  will  not  be  in  

conformity with the intention, object and purpose of  

1993 Act. Preamble to 1993 Act, upon which strong  

reliance has been placed by learned senior counsel,  

does  not  persuade  us  to  hold  otherwise.  It  is  so  

because Preamble may not exactly correspond with  

the  enactment;  the  enactment  may  go  beyond  

Preamble.  

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35. In  Secur  Industries  Ltd.  v.  Godrej  &  Boyce  

Mfg. Co. Limited and Another13, this Court observed  

that  sub-section  (2)  of  Section  6  expressly  

incorporates  the  provisions  of  the  Arbitration  and  

Conciliation Act, 1996 and it further creates a legal  

fiction whereby disputes referred to IFC  are to be  

deemed  to  have  been  made  pursuant  to  an  

arbitration agreement as defined in sub-section (1)  

of Section 7 of that Act. There is, thus, no reason as  

to  why  IFC,  which  acts  as  an  Arbitrator  or  

Conciliator  under  the provisions of  Arbitration and  

Conciliation Act, 1996, cannot deal with the dispute  

concerning principal amount due to the supplier for  

the goods supplied or services rendered.             

36. The High Court,  in  the impugned order,  however,  

held  that  expression  ‘amount  due  from  a  buyer’  would  be  

amount admitted to be due in its plain and natural meaning and  

when  admitted  due  amount  is  not  paid  by  the  buyer,  the  

provisions of Sections 3 to 6 along with other provisions of 1993  

13 (2004) 3 SCC 447

29

Act would be applicable. In the opinion of High Court since the  

buyer has alleged breach of contract by the supplier, there was  

no amount admitted to be due or settled amount and, therefore,  

there was no question of  delayed  payment and reference of  

the dispute to the IFC under sub-section(2) of Section 6 was  

without jurisdiction. The High Court in the impugned order held  

thus :

“16. Therefore, the said matter before the IFC would  be limited to the amount due from the buyer together  with  amount of  interest  calculated only in accordance  with  the  provisions  of  Sections  4  and  5  of  the  Act.  Section  4  applies  only  when  Section  3  is  applied.  Therefore, the ultimate focus in the Act is on Section 3  as  already discussed  above.  Section  3  speaks about  the settled amount and not the amount which may be  calculated according to the calculations of the supplier  disputed  by  the  buyer  or  where  there  is  dispute  regarding delayed supply causing loss to the buyer or  defective supply of the materials. Therefore “the amount  due from a buyer would be interpreted in its plain and  natural  manner  i.e.  amount  admitted  to  be  due”  and  when  it  is  not  paid  by  the  buyer,  the  provisions  of  Section 3 to 6 along with  other  provisions of  the Act  would be applicable.

17. In the instant  case,  the buyer  i.e.  the petitioner  has  alleged  that  the  supply  was  not  made  by  the  opposite  party  No.  2  in  time  and  there  was  delay  in  supply of materials which caused loss to the petitioner  and by the time of supply of materials, technology has  already  been  changed.  Therefore,  in  nutshell,  the  petitioner  has  alleged  breach of  contract  by  opposite  party  No.  2  and  therefore,  in  case  of  allegation  of  breach of contract, it cannot be said that there is any  amount admitted to be due or settled amount. Hence,  

30

there is no question of delayed payment and referring  the  dispute  to  the  IFC  under  the  provisions  of  Sub- section 2 of the Section 6, to our mind, would be without  jurisdiction.”

37. We find  it  difficult  to  accept  the  reasoning  of  the  

High Court. The interpretation put by the High Court upon the  

expression  ‘amount  due  from the  buyer’  is  fallacious  for  the  

reasons indicated above which we need not respect.

38. Now, the submission of  learned senior counsel for  

the buyer with regard to the applicability of the 1993 Act to the  

present case may be considered. His argument is that 1993 Act  

is not applicable to the present case as contract was entered  

into  on January 15,  1983 and 1993 Act  came into  effect  on  

September 23,  1992.   The argument  does not  appeal  us for  

more than one reason. In the first place, this contention was not  

raised before the High Court; it is canvassed before us for the  

first time. Secondly,  and more importantly, from the available  

material,  it  transpires  that  although  the  initial  contract  was  

entered  into  between the  parties  in  January  1983  but  it  got  

altered from time to time in view of negotiations between the  

parties about supply of raw-materials by the buyer free of cost;  

31

the defect in drawings and assignment of additional works  and  

last of such alteration was  on April 29, 1995.

39. That 1993 Act is prospective in operation is settled  

by two decisions of this Court. In Assam Small Scale Industries  

Development Corporation Ltd. and Others6, this Court held :

“37. We have held  hereinbefore  that  clause  8  of  the  terms and conditions relates to the payments of balance  10%. It is not in dispute that the plaintiff had demanded  both the principal amount as also the interest from the  Corporation.  Section  3  of  the  1993  Act  imposes  a  statutory liability upon the buyer to make payment for  the supplies of any goods either on or before the agreed  date  or  where  there  is  no  agreement  before  the  appointed day. Only when payments are not made in  terms of Section 3, Section 4 would apply. The 1993 Act  came into effect from 23-9-1992 and will  not apply to  transactions which took place prior to that date. We find  that  out  of  the 71  suit  transactions,  Sl.  Nos.  1  to  26  (referred  to  in  the  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  the  1993  Act  coming into force. Only the transactions at Sl. Nos. 27  to 71 (that is supply orders between 22-10-1992 to 19- 6-1993), will attract the provisions of the 1993 Act.

38. 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% up to June 1991  and 23.5% thereafter.”

40. Assam  Small  Scale  Industries  Development  

Corporation Ltd. and Others6 has been followed recently by this  

32

Court in the case of  Shakti Tubes Limited7 .  In  Shakti Tubes  

Limited7, this Court said :

“18. In our considered opinion, the ratio of the aforesaid  decision  in  Assam  Small  Scale  Industries  case,(2005)13 SCC 19,  is clearly applicable and would  squarely govern the facts of the present case as well.  The  said  decision  was  rendered  by  this  Court  after  appreciating the entire facts as also all the relevant laws  on the issue and therefore, we do not find any reason to  take a different view than what was taken by this Court  in the aforesaid judgment. Thus, we respectfully agree  with the aforesaid decision of this Court which is found  to be rightly arrived at after appreciating all the facts and  circumstances of the case.

21.   We  have  considered  the  aforesaid  rival  submissions.  This  Court  in  Assam  Small  Scale  Industries case,(2005)13 SCC 19 has finally set at rest  the  issue raised by stating  that  as  to  what  is  to  be  considered relevant is the date of supply order placed  by  the  respondents  and  when  this  Court  used  the  expression “transaction” it only meant a supply order.  The  Court  made it  explicitly  clear  in  para  37  of  the  judgment which we have already extracted above. In  our  considered  opinion  there  is  no  ambiguity  in  the  aforesaid  judgment  passed by this  Court.  The intent  and the purpose of the Act, as made in para 37 of the  judgment,  are  quite  clear  and  apparent.  When  this  Court  said  “transaction”  it  meant  initiation  of  the  transaction i.e. placing of the supply orders and not the  completion  of  the  transactions  which  would  be  completed only when the payment is made. Therefore,  the submission made by the learned Senior Counsel  appearing for the appellant-plaintiff fails.

22.   Consequently,  we  hold  that  the  supply  order  having been placed herein prior to the coming into force  of the Act, any supply made pursuant to the said supply  

33

orders would be governed not by the provisions of the  Act but by the provisions of Section 34 CPC.

31. Even otherwise,  we  are of  the considered view  that there was neither any alteration of the contract nor  any novation of the contract in the present case. The  correspondence between  the parties  clearly  disclosed  that after the respondents issued the supply order, the  appellant-plaintiff  did not  supply the pipes in terms of  the supply order and it urged mainly for the increase in  the price of the goods. Subsequently, they relied upon  the price escalation clause and asked for increase in the  price of pipes.”

41. These two decisions, however, do not help the case  

of the buyer for what we have indicated above viz., that in the  

present case the original contract got altered  from time to time  

and it was last altered on April 29, 1995. By that time, 1993 Act  

had already come into force.  

42. Lastly,  it was submitted by learned senior counsel  

for  the  respondents  that  IFC’s  award was  delivered ex-parte  

and no reasons have been given in support thereof; the award  

does not reflect any application of mind. He would submit that if  

appeals are allowed and award is sustained that would cause  

grave prejudice to the buyer inasmuch as the original contract  

was for a sum of Rs. 8.19 lakhs, out of which Rs. 6.07 lakhs  

have already been paid in July, 1997 and goods worth balance  

34

amount were given to the supplier and yet buyer is saddled with  

the liability for an amount of Rs. 24,86,998/- with interest at the  

rate  of  18  per  cent  compounded  with  monthly  rests  from  

September 24, 1997 which may run into crores of rupees. The  

situation  in  which  the  buyer  has  been  placed   is  their  own  

creation.  They chose not to contest the claim of the supplier  

before IFC on merits.  No written statement was filed despite  

opportunity granted by IFC.  The buyer did not challenge nor  

disputed  diverse  claims  made  by  the  supplier  (including  

additional work) before IFC.   Even before the High Court, no  

submission seems to have been made on merits of the award  

at all.  In the circumstances, the buyer does not deserve any  

indulgence  from  this  Court.    Pertinently,  though  1993  Act  

provides a statutory remedy of appeal against the award but the  

buyer  did  not  avail  of  the  statutory  remedy  and  instead  

challenged  the  award  passed  by  IFC  before  High  Court  in  

extraordinary jurisdiction under Article 226 of the Constitution  

bypassing  statutory  remedy  which,  in  our  view,  was  not  

justified.

35

43. The  result  is  that  appeals  are  allowed  and  

impugned judgment  dated February  18,  2008 passed by the  

High Court is set aside. Parties shall bear their own costs.

………….……………..J            (R. V. Raveendran)

…..…….……………..J                  (R. M. Lodha)

New Delhi April 15, 2010.   

36