(The Judgment of the Court was delivered by PRABHA SRIDEVAN,J.,) The appeal has been filed against the order passed by the learned single Judge in O.P.No.644 of 2004 dated 18.4.2006.
2. The question raised in this appeal is whether the 1st respondent is entitled to the benefit of The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (Act 1993 in short).
3. The brief facts are that the respondent was awarded contract for strengthening MG bridges into BG girder at site. The currency of the contract was four months, which was extended. The dispute arose after completion of the contract and an Arbitral Tribunal was appointed to decide the dispute. The terms of reference include the following claims:
4. The Tribunal by order dated 7.11.2003 held that the respondent was entitled to the benefit of Act 1993. This Award was challenged under Sec.34 of the Arbitration and Conciliation Act 1996.
The learned Judge upheld the entitlement of the respondent to the benefit of Act 1993 and therefore, the Railways has filed this appeal.
5. According to the learned counsel for the appellant, the respondent has not shown that he is entitled to the benefit of the Act 1993. He must be a Small Scale Industrial Undertaking as defined in the Act to get the benefit.
6. The learned counsel referred to 2(a) of Act 1993 that "ancillary industrial undertaking" has the meaning assigned to it by clause (aa) of
Section 3 of the Industries (Development and Regulation) Act, 1951 (Act 1951 in short). The learned counsel also submitted that unless the respondent satisfied the criteria specified in Sec.11(1) of the Act, he will not be entitled to interest as per Act 1993.
7. The learned counsel for the appellant also submitted that the 1st respondent has not produced any material before the Tribunal or before the learned Single Judge to show that they satisfy the criteria. As per the contract between the parties Clause 16(3) provided no interest is payable on the earnest money and security deposit. The learned counsel referred to 2009 6 MLJ 85(SC) (Sayeed Ahmed and Co vs State of U.P and others).
8. The learned counsel for the respondent submitted that the respondent had produced the necessary documents including the Permanent Registration Certificate. He also submitted that Sec.11(B) of Act 1951 came into force only in 1984, whereas his registration is in the year 1978 and therefore, it will not be applicable to him. In any event, the learned counsel submitted that though they knew this was one of the claims, the appellant had not questioned their entitlement till now and for the first time in this appeal, they have raised this point and referred to 2009 7 SCC 372 (Thazhathe Purayil Sarabi and Others vs Union of India and another).
9. The definition of Small Scale Industrial undertaking is as follows:
2(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.)
10. The provisions of the Act shall have effect notwithstanding anything contained in any other law. Secs.5 and 10 of the Act read thus:
"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 interest) at the rate mentioned in
section 4 on the amount due to the supplier.
10. Overriding effect: The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
Therefore, this Act would prevail over any contract between the parties and any law for time being in force.
11. The definition for small scale industry is as follows:
"small scale industrial undertaking" means an industrial undertaking which in accordance with the requirements specified under subs section (1) of section 11B is entitled to be regarded as a small scale industrial undertaking for the purposes of this Act."
11-B of the Act reads as follows:
11-B Power of Central Government to specify the requirements which shall be complied with by small scale industrial undertaking._(1) The Central Government, may, with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemptions or other favourable treatment under this Act to enable them to maintain their visibility and strength so as to be effect in-
(a) promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and
(b) securing that the ownership and control of the material resources of the community are so distributed as best to sub-serve the common good specify having regard to the factors mentioned in the sub-section (2) by notified order, the requirements which shall be complied with by an industrial undertaking to enable it to be regarded, for the purposes of this Act, as an ancillary, or a small scale, industrial undertaking and different requirements may be so specified for different purposes or with respect to industrial undertakings engaged in the manufacture or production of different articles.
Provided that no industrial undertaking shall be regarded as an ancillary industrial undertaking unless it is, or is proposed to be engaged in----
(i) the manufacture of parts, components sub-assemblies, toolings or intermediates, or
(ii) rendering of services, or supplying or rendering, not more than fifty percent of its production or its total services, as the case may be, to other units for production of other articles (2) The factors referred to in sub-section (1) are the following namely:-
(a) the investment by the industrial undertaking in
(i)plant and machinery, or
(ii) land buildings, plant and machinery
(b) the nature of ownership of the industrial undertakings
(c) the smallness of the number of workers employed in the industrial undertakings
(d) the nature, cost and quality of the product of the industrial undertaking
(e) foreign exchange if any, required for the import of any plant or machinery by the industrial undertaking an
(f) such other relevant factors as may be prescribed.
(3)A copy of every notified order proposed to be made under subsection (1) shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be compromised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the proposed notified order, or both Houses agree in making any modification in the proposed notified order shall not be made, or as the case may be, shall be be made only in such modified form as may be agreed upon by both the houses.
(4) Notwithstanding anything contained in sub-section (1) an industrial undertaking which, according to the law for the time being in force fell, immediately befor ethe commencement of the Industrial (Development and Regulation)Amendment Act 1984 under the definition of an ancillary, or small estate under industrial undertaking shall, after such commencements continue to be regarded as an ancillary of smalls scale industrial undertaking for the purpose of this Act until the definition aforesaid is altered or superseded by any modified order made under sub-section(a).
12. It is seen that since the Act is intended to grant certain benefits to certain kind of industries with a view to promote industrial economy and to ease the problem of unemployment, the Act also provided for investigation before grant of licence and the inclusion in the schedule is also a relevant consideration for the grant of the benefit.
13. In 2009 6 MLJ 85(SC) (Sayeed Ahmed and Co vs State of UP and Others, the Hon'ble Supreme Court held that whether the provision in the contract bars the employer from entertaining any claim for interest or bars the contractor from making any claim for interest, it amounts to a clear prohibition regarding interest. Here we have to deal with the effect of the Act on the contract and therefore, this decision cannot be applied.
14. In 2009 7 SCC 372 (Thazhathe Purayil Sarabi and Others vs Union of India and another), the Hon'ble Supreme Court has considered the beneficial aspect of its legislation which is a welfare measure. This decision dealt only with the question of whether the Act is prospective or retrospective.
15. The question whether the respondent would be entitled to the benefits of the Act has to be proved by production of documents. He will have to show whether the industry comes under that category which has been recognised as entitled to the benefit.
16. Therefore, it is not a pure question of law, it is a mixed question of Act and law. The appellant had an opportunity to call upon the respondents to produce all the documents to test whether the Interest as per Act 1993 would be applicable . But this opportunity was not availed of.
17. While dealing with claim No,2, which is the "Interest as per Central Act of 1993" the Tribunal after setting out the claimant's version, has referred to the appellant's version and this is:
"Respondent version:
The contractor has been paid for the works done well within the reasonable time,t here is no delay on the part of the Railways. As already brought out under Claim No.1, the deduction of Rs.4.05 lakhs towards departmental charges cannot be refunded. Hence the position of interest payable does not arise."
18. Therefore, the only objection was there was no delay and so there was no occasion to pay interest. It is only now that this particular question is raised. In fact even for this we find the answer in (2009) 7 SCC 673 (Shakti Tubes Ltd vs Stte of Bihar and Others). In paragraph-30, it is stated as follows:
"30. In order to appreciate the aforesaid contention, we have looked into the documents available on record and considered the same. On analysing the same we find that in none of the courts below any such issue was raised by the appellant-plaintiff. Neither was any issue framed by the courts below in 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, cannot 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."
19. Therefore, we leave the legal issue open for the Railways to agitate it an appropriate case. In this case, since they had not raised it at the initial stage and since it is mixed question of law and facts and since the monetary implication is also not huge, we do not think that we should interfere in the order passed by the learned Single Judge in O.P.No.644 of 2004 dated 18.4.2006.
20. Accordingly, the original side appeal is dismissed. No costs. Consequently, connected MP is closed.
(P.S.D.J.,) (M.S.N.J.) 25-11-2009 sr Index:yes/no Website:yes/no To The Sub Assistant Registrar Original Side, High Court,Chennai PRABHA SRIDEVAN,J., AND M. SATYANARAYANAN,J, sr O.S.A.No.310 of 2007 25-11-2009