In the case of MSSIDCL v. SSPL, a dispute arose regarding the payment of compound interest beyond 120 days from acceptance. The Division Bench decision clarified that the buyer is liable for such interest, regardless of any agreement or law. Stay tuned for more details on this compound interest dispute.
Analysis
- The proviso to Section 3 of the 1993 Act restricts the contractual rights of parties to agree on the date of payment and sets the upper limit for payment at 120 days from acceptance.
- Section 4 states that the buyer must pay interest if they fail to pay the supplier as required by Section 3.
- The non-obstante part of Section 4 only pertains to contractual clauses barring liability for interest payments, not the date of payment.
- In case of late payments exceeding 120 days from acceptance, interest is payable for the period beyond 120 days.
- The award by the sole arbitrator, which included compound interest on the interest element, was set aside by the Division Bench of the High Court.
- The provisions of Section 43(4) of the Arbitration and Conciliation Act, 1996 would apply after the award’s set aside.
- Payments totaling over Rs.1.30 crores have been made by MSSIDCL to SSPL.
- Buyer liable to pay compound interest on amount due to supplier, regardless of any agreement or law.
- Interest rate determined as one-and-half times of Prime Lending Rate charged by State Bank of India.
- Definition clauses (b), (c), and (f) to Section 2 provided for clarity on terms used in the context.
- Appointed day defined as the day following the expiry of thirty days from acceptance of goods or services.
- Buyer defined as the party buying goods or receiving services from a supplier for consideration.
- Supplier defined as an ancillary or small scale industrial undertaking with a permanent registration certificate.
- The proviso to Section 3 and the amendment to Section 2(f) added National Small Industries Corporation and Small Industries Development Corporation to the definition of ‘supplier’.
- Buyer and supplier could agree upon the date of payment and the rate at which interest is payable before the enactment of the proviso.
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Decision
- Pending application(s) to be disposed of.
- MSSIDCL can file an application under Section 144 of the Code of Civil Procedure, 1908 for restitution or execution if needed.
- No order as to costs given.
- MSSIDCL can enforce security if SSPL fails to pay or refund the amount.
- The appeal is dismissed.
Also Read: Analysis of Agency Relationships in Taxation
Case Title: SNEHADEEP STRUCTURES PVT. LTD. Vs. MAHARASHTRA SMALL SCALE INDUSTRIES DEVELOPMENT CORPORATION LTD. (2024 INSC 201)
Case Number: C.A. No.-003856-003856 / 2024
