Snehadeep Structures Pvt. Ltd. Vs. Maharashtra Small Scale Industries Development Corporation Ltd. [Supreme Court, March 5, 2024]
Background and Facts
Snehadeep Structures Pvt. Ltd. (SSPL) entered into a contract with Maharashtra Small Scale Industries Development Corporation Ltd. (MSSIDCL) for the supply of pipelines. SSPL supplied the goods and submitted running bills, expecting payment within ten days as per the contract. MSSIDCL delayed payments, prompting SSPL to claim interest under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (“1993 Act”). Disputes over the delayed payments led to arbitration, where the arbitrator awarded SSPL Rs. 78 lakh plus interest. MSSIDCL challenged the award, arguing it was not a “buyer” under the 1993 Act and thus not liable for interest. The High Court upheld the arbitral award, leading to an appeal before the Supreme Court.
Legal Issues
Whether MSSIDCL qualified as a “buyer” under the 1993 Act and was liable to pay interest on delayed payments.
Whether the proviso to Section 3 of the 1993 Act applied to the agreement between the parties.
Supreme Court’s Analysis
The Court examined Sections 3, 4, and 5 of the 1993 Act, which mandate timely payment by buyers to small-scale suppliers and provide for interest on delayed payments.
MSSIDCL argued that its liability to pay SSPL arose only after it received payment from the Maharashtra State Electricity Board (MSEB), the ultimate purchaser. However, the Court found that the work and supply orders were issued by MSSIDCL to SSPL, making MSSIDCL the “buyer” in terms of the 1993 Act, regardless of its arrangement with MSEB.
The Court noted that contractual clauses or government notifications that attempt to shift the liability for payment or interest from MSSIDCL to MSEB could not override the statutory mandate of the 1993 Act.
The Supreme Court also reaffirmed that the arbitral award was justified, as the respondent’s liability as a buyer was established and the delay in payment was evident.
Judgment and Outcome
The Supreme Court dismissed SSPL’s appeal, thereby upholding the High Court’s decision and the arbitral award. The Court clarified that MSSIDCL, having placed the supply order, was a “buyer” under the 1993 Act and liable for interest on delayed payments to SSPL, despite any back-to-back arrangements with MSEB. The Court also emphasized that statutory protections for small-scale suppliers cannot be diluted by contractual terms or administrative arrangements.
Key Points:
MSSIDCL is a “buyer” under the 1993 Act and liable for interest on delayed payments to SSPL.
Contractual clauses cannot override statutory protections for small-scale suppliers.
The arbitral award in favor of SSPL was valid and properly upheld by the High Court and Supreme Court.
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