REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 172 OF 2007

M/s. Shakti Tubes Ltd.                   ..Appellant

Versus

State of Bihar & Ors.                 ..Respondents

JUDGMENT  

Dr. Mukundakam Sharma, J.

1. This appeal is directed against the judgment and order dated 22.02.2006,  

passed by the Patna High Court whereby the High Court partly allowed the  

appeal  filed  by  the  State  of  Bihar  and others  who are  the  respondents  

herein.

2. M/s.  Shakti  Tubes Ltd.-the appellant  as plaintiff  filed a suit  which was  

registered  as  Money  Suit  No.  153  of  1997  praying  for  a  decree  for  

payment  of  Rs.  38,13,480/-  with  pendente  lite  and  future  interest  

compounding  at  monthly  rest  at  the  rate  of  24%  per  annum  on  the

aforesaid decreetal amount till realization with costs of the suit.  The trial  

court decreed the said suit with costs in favour of the appellant-plaintiff  

and ordered for payment of interest compounding at monthly rest at 24%  

on the decreetal amount of Rs. 38,13,480/-.

3. Since the aforesaid decree was reversed by the High Court whereby the  

High Court while mentioning the decree for payment for Rs. 38,13,480/-  

reversed it to the extent of directing for payment of 9% interest per annum  

instead of 24% interest per annum, the present appeal is preferred by the  

appellant-plaintiff.

4. In order to effectively deal with the rival contentions raised by the parties  

herein it would be necessary to state a few facts leading to the filing of the  

aforesaid suit by the appellant-plaintiff before the trial court.

5. In the plaint filed by the appellant-plaintiff it was stated that the plaintiff is  

a company incorporated under the Indian Companies Act and registered as  

a Small Scale Industry in the Industries Department, Government of Bihar  

and that it entered into an agreement with the State of Bihar for supply of  

pipes at the rate of Rs. 174.95 paise. per metre subject to the terms and  

conditions mentioned in the tender paper.  A supply order was placed by  

the respondent through Chief Engineer’s letter No. 8956 dated 16.07.1992  

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with the appellant-plaintiff for making supply of the aforesaid pipes.  It  

was mentioned in the said letter that 90% of the total value of the material  

received was to be paid after receipt of the material and the balance 10%  

of the value was to be paid within one month of the receipt of the material,  

after  full  verification  of  the  same.   It  was  a  stipulation  in  the  said  

agreement  entered  into  between the parties  that  the  payment  would  be  

made at the escalated rate applicable for the quantity of pipes supplied  

after such escalation come into force and that even in such cases other  

terms of payment would remain the same.  It was alleged in the plaint by  

the appellant-plaintiff that they supplied the pipes as the per agreement to  

the  concerned  consignees,  who  duly  accepted  the  pipes  as  per  

measurement,  but  the  payment  was  not  made.   After  some  time,  the  

payment was made at the rate of Rs. 190.48 paise per metre instead of  

actual escalated rate of Rs.  199.04 P. per metre.  A sum of Rs. 38,13,480/-  

thus  remained  payable  to  the  appellant-plaintiff  which  was  withheld  

illegally by the respondents in respect of the goods supplied.   

6. Consequently, the appellant-plaintiff had to file a suit seeking for a decree  

for  payment  of  the  aforesaid  amount  of  Rs.  38,13,480/-  with  interest  

compounding  at  monthly  rest  at  the  rate  of  24%  per  annum  on  the  

aforesaid decreetal amount.  The trial court passed a judgment and decree  

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dated 31.05.1999 in terms of the prayer made in the plaint decreeing for a  

payment of Rs. 38,13,480/- along with interest compounding at monthly  

rest at the rate of 24% per annum on the aforesaid amount with effect form  

01.06.1993 till realization.   

7. The respondents  herein being aggrieved by the aforesaid judgment  and  

decree dated 31.05.1999 passed by the trial court filled an appeal in the  

High Court of Patna which was registered as First Appeal No. 8 of 2000.  

The only issue raised in the appeal before the High Court was with regard  

to the decree for payment of higher interest than what the plaintiff was  

actually  entitled to.   The High Court  considered the contentions  of  the  

parties  and  by  its  judgment  and  order  dated  20.02.2006  directed  that  

instead of  compound interest  with monthly rest  at  the rate  of  24% per  

annum, the appellant-plaintiff would be entitled to simple interest at the  

rate of 9% per annum with effect from 01.06.1993 till realization.   

8. Being aggrieved by the aforesaid judgment and order passed by the High  

Court,  the appellant-plaintiff  filed the present  appeal  before this  Court.  

The only issue that arises for our consideration in the present appeal is as  

to whether the appellant-plaintiff is entitled to a direction for payment of  

interest  compounding  at  monthly  rest  at  the  rate  of  24%  per  annum.  

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According to the appellant-plaintff, the said interest has been claimed by  

the  appellant-plaintiff  since  it  is  entitled  to  so  claim  in  terms  of  the  

provisions of the Interest on Delayed Payment to Small Scale Industries  

Act, 1993 (hereinafter referred to as ‘the Act’).

9. Mr.  G.C.  Bharuka,  learned  senior  counsel  appearing  for  the  appellant-

plaintiff drew our attention to the provisions of the Act and to the decision  

of  this  Court  in  Assam  Small  Scale  Industries  Development  

Corporation Ltd. & Ors. v. J.D. Pharmaceuticals & Anr. [2005 (13)  

SCC 19].  In support of his contention that the transaction in the instant  

case came to an end with the appellant-plaintiff supplying the goods after  

coming into force of the Act he has taken us through the relevant sections  

of  the  Act  as  also  the  Statements  of  Objects  and Reasons  of  the  Act.  

According to him, the appellant-plaintiff is entitled to be paid in terms of  

the  provisions  of  the  Act.   He contended  that  the  earlier  supply  order  

which  was  issued  on  16.07.1992  came  to  be  materially  altered  and  

substituted by a fresh supply order issued on 18.03.1993 by which date the  

aforesaid  Act  had  already  been  enforced  and,  therefore,  the  appellant-

plaintiff  was  entitled  to  claim interest  at  a  higher  rate  as  envisaged  in  

Sections 4 and 5 of the said Act.   

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10.Mr. Dinesh Dwivedi, learned senior counsel appearing for the respondents  

strongly  refuted  the  aforesaid  submissions  made  by  the  learned  senior  

counsel appearing for the appellant-plaintiff on the ground that the supply  

order was issued in the instant case on 16.07.1992 and, therefore, in terms  

of  and  in  line  with  the  decision  of  this  Court  in  Assam Small  Scale  

Industries  case  (supra)  the  appellant-plaintiff  was  entitled  to  be  paid  

interest  only  at  the  rate  of  9% per  annum and  not  at  a  higher  rate  as  

contended by the appellant-plaintiff.  He submitted that the argument that  

there was novation of the supply order dated 16.07.1992 having not been  

argued before any of the courts below nor any ground in that regard having  

been taken earlier in this appeal, the same cannot be raised now for the  

first time, at the time of final hearing.  He also submitted that there was  

neither  a  new  supply  order  created  by  the  parties  nor  was  there  any  

alteration of the earlier supply order, but in fact, the earlier supply order  

continued with some variation.   

11.Before proceeding to decide the case at hand it would be necessary to deal  

with the relevant provisions of the Act.  The Act came into force on 23rd  

September, 1992.  Section 2(b), 3, 4 and 5 are relevant for our purpose to  

enable us to answer the issue raised herein.  Therefore the same are being  

reproduced hereinbelow :  

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

(a) "ancillary industrial undertaking" has the meaning assigned to  it by clause (aa) of section 3 of the Industries (Development and  Regulation) Act, 1951 (65 of 1951); (b) "appointed day" means  the day following immediately 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. Explanation.- For the purposes of this clause,- (i) "the  day of acceptance" means,- (a) the day of the actual delivery of  goods or the rendering of services; or (b) where any objection is  made in writing by the buyer regarding acceptance of goods or  services within thirty days from the day of the delivery of goods  or the rendering of services, the day on which such objection is  removed by the supplier;  (ii)  "the day of  deemed acceptance"  means,  where  no  objection  is  made  in  writing  by  the  buyer  regarding  acceptance  of  goods  or  services  within  thirty  days  from  the  day  of  the  delivery  of  goods  or  the  rendering  of  services, the day of the actual delivery of goods or the rendering  of  services;  (c)  "buyer"  means  whoever  buys  any  goods  or  receives  any  services  from  a  supplier  for  consideration;  (d)  "goods"  means  every  kind  of  movable  property  other  than  actionable  claims  and  money;  (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 1*[or Union territory and includes,- (i) the  National  Small  Industries  Corporation,  being  a  company,  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)].  

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  

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no  agreement  in  this  behalf,  before  the  appointed  day:  2*.[Provided that in no case the period agreed upon between the  supplier and the buyer in writing shall exceed one hundred and  twenty days from the day of acceptance or the day of deemed  acceptance.]  

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.  

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  interests) at the rate mentioned in section 4 on the amount due to  the supplier”

12. The appellant-plaintiff, relying on the aforesaid provisions of the Act,  

sought a decree for payment of interest  at the higher rate as mentioned in  

Section  4  which,  according  to  the  appellant-plaintiff,  was  payable  with  

compound interest as provided for under Section 5 of the Act.   

13. The  aforesaid  provisions  of  the  Act  came  to  be  considered  and  

interpreted  by  this  Court  in  Assam Small  Scale  Industries  case  (supra)  

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wherein  the  Supreme  Court  not  only  considered  the  ambit  and  scope  of  

Section 34 of the Civil Procedure Code, 1908 (for short ‘the CPC’) but also  

the ambit and scope of Sections 1, 3, 4, 5 and 10 of the Act.  After discussing  

the said provisions, the Supreme Court in paragraphs 37 and 38 recorded its  

findings and conclusions in the following manner:  

“Applicability of the 1993 Act 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.”

14. In order to appreciate the aforesaid findings we may also extract the  

contents of paragraph 14 of the said judgment wherein this Court referred to  

the  facts  of  the  case  leading  to  recording  of  the  aforesaid  findings  and  

conclusions:

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“14. It is not in dispute that pursuant to the said agreement, the  Corporation placed orders for supply of medicines manufactured  by the  respondent  herein  for the period of  June 1991 to June  1993. The total price of the medicines supplied by the respondent  in pursuance of the supply orders of the Corporation stood at  Rs 20,56,654.13 out of which only a sum of Rs 46,512.80 was  paid to the respondent.”

15. A careful perusal of the aforesaid judgment shows that the decision in  

the aforesaid case was rendered after clearly recording the fact that the Assam  

Small  Scale  Industries  Development  Corporation  Ltd.  (for  short  ‘the  

Corporation’) placed orders for the supply of medicines manufactured by the  

respondents therein for the period June, 1991 to June, 1993.  In the light of  

the said facts, it was recorded in paragraph 37 of the judgment that while the  

Act  came  into  effect  from 23rd September,  1992,  the  supply  orders  were  

placed only in respect of Serial Nos. 1 to 26 immediately and before coming  

into effect of the Act and rest of the supply orders namely, supply orders at  

Serial Nos. 27 to 71 were placed between 22.10.1992 to 19.06.1993 which  

were subsequent to the date when the Act came into force.  In that context, it  

was clearly recorded in the judgment that the Act will have no application to  

the transactions that took place prior to the commencement of the Act.  In the  

next sentence the Court made it clear as to what is referred to and understood  

by  the  expression  “transaction”  when  it  clearly  stated  that  out  of  71  

transactions,  Serial  Nos. 1 to 26, i.e.  supply orders between 05.06.1991 to  

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28.07.1992 being prior to 23rd September, 1992 when the Act came into force,  

higher interest as envisaged under Sections 4 and 5 of the Act cannot be paid  

and demanded in respect of the said supply orders/transactions.  It was also  

made clear that the transactions at Serial Nos. 27 to 71 only i.e. supply orders  

between 22.10.1992 to 19.06.1993, would attract the provisions of the Act.  

Therefore, those supply orders which were issued by the Corporation between  

22.10.1992 to 19.06.1993 were held to be the transactions which would be  

entitled to get the benefit of the provisions of the Act.   

16. In our considered opinion, the ratio of the aforesaid decision 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.

17. Now coming to the facts of the present case we find that there is no  

dispute  with  regard  to  the  fact  that  the  supply  order  was  placed  with  the  

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respondents on 16.07.1992 for supply of the pipes which date is admittedly  

prior to the date on which this Act came into effect.   

18. Being  faced  with  the  aforesaid  situation,  the  learned  senior  counsel  

appearing  for  the  appellant-plaintiff  sought  to  submit  before  us  that  the  

decision of this Court in Assam Small Scale Industries case (supra) refers  

to the expression “transactions”.  According to him, the transactions would be  

complete  only  when the appellant-plaintiff  made the  supply  and since  the  

supply was made in the instant case after coming into force of the Act, the  

appellant-plaintiff would be entitled to the benefit of Section 4 and 5 of the  

Act.

19. Refuting the aforesaid submission, the learned senior counsel appearing  

for  the  respondents  submitted  that  the  aforesaid  contention  is  completely  

misplaced.  He pointed out that if such a meaning, as sought to be given by  

the learned senior counsel appearing for the appellant-plaintiff,  is accepted  

that would lead to giving benefit of the provisions of the Act to unscrupulous  

suppliers  who,  in order  to  get  the  benefit  of  the  Act,  would postpone the  

delivery of the goods on one pretext or the other.

20. We have considered the  aforesaid  rival  submissions.   This  Court  in  

Assam Small Scale Industries case (supra)  has finally set at rest the issue  

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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  paragraph  37  of  the  judgment  which  we  had  already  

extracted above.

21. 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 paragraph 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 orders would be governed not by the provisions of the Act but by  

the  provisions  of  Section  34  of  the  CPC read  with  the  provisions  of  the  

Interest on Delayed Payment to Small Scale Industries Act, 1993.  

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23. At one stage the learned senior counsel  appearing for the appellant-

plaintiff submitted that the Act in question is a beneficial legislation  

and, therefore, a liberal interpretation and wider meaning is to be given  

to such a beneficial and welfare legislation so as to protect the interest  

of  the  supplier  who is  being kept  on a  higher  pedestal  by  giving a  

higher benefit in the Act.   

24. Generally, an Act should always be regarded as prospective in nature  

unless the legislature has clearly intended the provisions of the said Act to be  

made  applicable  with  retrospective  effect.  It  is  a  cardinal  principle  of  

construction that every statute is prima facie prospective unless it is expressly  

or  by  necessary  implication  made  to  have  a  retrospective  operation.  The  

aforesaid rule in general is applicable where the object of the statute is to  

affect  vested  rights  or  to  impose  new  burdens  or  to  impair  existing  

obligations.  Unless  there  are  words  in  the  statute  sufficient  to  show  the  

intention  of  the  legislature  to  affect  existing  rights,  it  is  deemed  to  be  

prospective  only  — “nova constitutio  futuris  formam imponere  debet  non  

praeteritis” — a new law ought to regulate what is to follow, not the past.  

(See  Principles of Statutory Interpretation by Justice G.P. Singh, 9th Edn.,  

2004 at p.  438.). It is not necessary that an express provision be made to  

make a statute retrospective and the presumption against retrospectivity may  

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be rebutted by necessary implication especially in a case where the new law is  

made to cure an acknowledged evil for the benefit  of the community as a  

whole (ibid., p. 440). In the case of Zile Singh v. State of Haryana, (2004) 8  

SCC 1, at page 9, this Court observed as follows:  

“15. Though retrospectivity  is  not  to  be  presumed  and  rather  there is presumption against retrospectivity, according to Craies  (Statute  Law,  7th Edn.),  it  is  open for the legislature  to enact  laws  having  retrospective  operation.  This  can  be  achieved  by  express enactment or by necessary implication from the language  employed.  If  it  is  a  necessary  implication  from the  language  employed  that  the  legislature  intended  a  particular  section  to  have a retrospective  operation,  the courts  will  give it  such an  operation.  In  the  absence  of  a  retrospective  operation  having  been expressly given, the courts may be called upon to construe  the provisions and answer the question whether the legislature  had  sufficiently  expressed  that  intention  giving  the  statute  retrospectivity. Four factors are suggested as relevant: (i) general  scope and purview of the statute; (ii) the remedy sought to be  applied; (iii) the former state of the law; and (iv) what it was the  legislature contemplated. (p. 388) The rule against retrospectivity  does not extend to protect from the effect of a repeal, a privilege  which did not amount to accrued right. (p. 392)

16. Where a statute is  passed for the purpose of supplying an  obvious omission in a former statute or to “explain” a former  statute, the subsequent statute has relation back to the time when  the  prior  Act  was  passed.  The  rule  against  retrospectivity  is  inapplicable  to  such  legislations  as  are  explanatory  and  declaratory in nature. A classic illustration is the case of Attorney  General v. Pougett (Price at p. 392). By a Customs Act of 1873  (53 Geo. 3, c. 33) a duty was imposed upon hides of 9s 4d, but  the Act omitted to state that it was to be 9s 4d per cwt., and to  remedy this omission another Customs Act (53 Geo. 3, c. 105)  

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was passed later in the same year. Between the passing of these  two Acts some hides were exported, and it was contended that  they  were  not  liable  to  pay  the  duty  of  9s  4d  per  cwt.,  but  Thomson,  C.B.,  in  giving judgment  for  the  Attorney General,  said: (ER p. 134)

“The duty in this instance was, in fact, imposed by the first Act;  but the gross mistake of the omission of the weight, for which  the  sum expressed  was  to  have  been  payable,  occasioned  the  amendment made by the subsequent Act: but that had reference  to the former statute as soon as it passed, and they must be taken  together as if they were one and the same Act;” (Price at p. 392)”

25 There is no dispute with regard to the fact that the Act in question is a  

welfare legislation which was enacted to protect the interest of the suppliers  

especially suppliers of the nature of a small scale industry.  But, at the same  

time, the intention and the purpose of the Act cannot be lost sight of and the  

Act  in  question cannot  be given a  retrospective  effect  so long as such an  

intention is not clearly made out and derived from the Act itself.   

26 It was next submitted by the learned senior counsel appearing for the  

appellant-plaintiff  that  there  was  a  novation  and alteration  of  the  contract  

giving rise to a new contract between the parties due to alteration of terms and  

conditions of the contract and, therefore, Section 62 of the Indian Contract  

Act (for short ‘the Contract Act’) was applicable to the present case.  Section  

62 of the Contract Act is reproduced hereinbelow:  

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“Effect of novation, rescission and alteration of contract. 62. If the parties to a contract agree to substitute a new contract  for it, or to rescind or alter it, the original contract need not be  performed.

Illustrations :

(a) A owes money to B under a contract. It is agreed between  A,  B  and  C  that  B  shall  thenceforth  accept  C  as  his  debtor,  instead of A. The old debt of A to B is at an end, a new debt  from C to B has been contracted.

(b) A owes B 10,000 rupees. A enters into an agreement with  B, and gives B a mortgage of his (A's) estate for 5,000 rupees in  place of the debt of 10,000 rupees. This is a new contract and  extinguishes the old.

(c) A owes B 1,000 rupees under a contract, B owes C 1,000  rupees. B orders A to credit C with 1,000 rupees in his books, but  C  does  not  assent  to  the  arrangement.  B  still  owes  C  1,000  rupees, and no new contract has been entered into.”

27. Relying  on the  aforesaid  provision  of  the  Contract  Act,  the  learned  

senior counsel submitted that the original contract was for the supply of 7  

lakh metres of pipes which was curtailed and changed to the supply of 4 lakh  

metres of pipes with change in the date of supply with extension of date of  

supply till 30.04.1993 and supplies were completed within that extended time.  

In  support  of  his  submission  he  sought  to  rely  upon  a  judgment  of  the  

Bombay High Court in  Andheri  Bridge View Co-op. Hsg. Society Ltd.   

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v. Krishnakant Anandrao Deo and others reported in 1991 AIR Bombay  

129 wherein it was held that a new contract would come in existence in terms  

of  Section 62 of  the  Contract  Act.   In the said judgment,  the High Court  

observed as follows in para 13:

“13. Now, even if the parties have referred to an agreement as  being not a new one but an old one with certain modifications,  that would carry no weight if the law on the point is something  contrary to what is understood by the parties. For example, we  know that when there is a change in the constitution of a firm  then the firm is a new partnership notwithstanding the fact that  the parties may refer to it as the old partnership with a changed  constitution. So also I would say that where there are material or  substantial changes which go to the root of the agreement then  this has to be regarded in law as a new agreement. What would  be the position if the parties agree to sell property A and at a later  stage they agree that not property A but property B should be  sold? Clearly this would be a new agreement notwithstanding the  fact that all other terms regarding rate for payment etc. may also  be similar. So also payment of price or the rate of payment is a  material part of the agreement for sale. Both the subject-matter  and the rate of payment are material parts of any agreement for  sale  and  change  in  either  of  these  terms  brings  about  a  new  agreement.  In  our  case  therefore  the  correspondence  of  1983  brought about an entirely new agreement -- between new parties,  new property (so far a F.S.I. is concerned), and new rates.”

28. In order to appreciate the aforesaid contention, we have looked into the  

documents available on records and considered the same.  On analyzing the  

same we find that in none of the courts below any such issue was raised by  

the appellant-plaintiff.  Neither any issue was framed by the courts below in  

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respect of such a submission nor any ground to that effect was taken earlier.  

Even in the memorandum of appeal filed in this Court no such ground has  

been urged or mentioned.  Therefore, the issue is being raised, for the first  

time, at the time of hearing of the case before us which, according to us, can  

not be permitted to be raised for the first time for the simple reason that the  

issue that is being urged now is not only a question of law but is a mixed  

question of law and facts as to whether there is a novation or alteration of  

contract.   The said facts  were required to be urged evidentially before the  

courts below.  Unless such a factual foundation is available it is not possible  

to decide such a mixed question of law and facts.  Therefore, such a mixed  

question of law and facts should not be allowed to be raised at the time of  

final hearing of appeal before this Court.   

29. 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.  The perusal of the records also  

disclosed that subsequently the Government thought it fit that the appellant-

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plaintiff may not be able to supply the prescribed quantity of goods which  

was  earlier  required  by  the  Government  and,  therefore,  they  curtailed  the  

quantity of the goods from 7 lakh metres of pipes to 4 lakh metres of pipes.  

In the process, the Government kept the contents of the supply order intact  

except  a variation in the quantity to be supplied with extention of date of  

supply.  However, the Government gave effect to the price escalation clause  

which was a part of the earlier supply order and also of the agreements which  

were entered into between the parties prior to the coming into force of the  

Act.  Therefore, in our considered opinion the said contention, as raised by  

the learned senior counsel appearing for the appellant-plaintiff, has no legal  

and factual basis.   

30. In any event, it is not possible to decide the aforesaid issue in this case  

as full factual foundation for such an argument was not placed before us so as  

to enable us to know as to why the quantity to be supplied by the appellant-

plaintiff  was  curtailed  by  the  Government  and  as  to  why  the  appellant-

plaintiff was not supplying the goods despite the receipt of the supply orders  

for several months.  It is also not clear from the records that whether there  

was  any failure  or  negligence  on the  part  of  the  appellant-plaintiff  in  not  

supplying the goods for a long period of time without any reasonable basis or  

whether there were laches on the part of the respondents in sorting out the  

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transaction.  These are some of the factual issues which are required to be  

gone into to answer finally such issue which was raised at the time of hearing  

of the appeal and which cannot be done in the absence of any evidence in that  

regard.

31. Therefore, in our considered opinion, the present appeal is held to be  

without any merit and is dismissed accordingly.  However, in the facts and  

circumstances of the case we leave the parties to bear their own costs.  

  ...............………………………J.         [Dr. Mukundakam Sharma]

   …................………………..J.              [Dr. B.S. Chauhan]

New Delhi, July 7, 2009

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