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Karnataka High Court · body

2014 DIGILAW 732 (KAR)

HMT Watches Ltd. v. G. Suresh Kumar

2014-08-14

ASHOK B.HINCHIGERI

body2014
Judgment : 1. The petitioner has called into question the common order, dated 29.4.2014 (Annexure-F) passed by the Court of the Principal City Civil and Sessions Judge, Bangalore in A.S.Nos.63/2002, 64/2002, 65/2002, 69/2002, 70/2002, 71/2002, 81/2002 and 82/2002 in I.A.No.10. 2. The facts of the case in brief are that the respondent Nos.1 to 8 were all the employees of the petitioner Company. They availed of the voluntary retirement scheme pursuant to the understanding between themselves and their employer, the petitioner herein, by the agreements executed in June 1992. The respondent Nos.1 to 8 were required to supply the spares to the petitioner Company out of the raw materials supplied by the petitioner Company, on job work basis. The petitioner Company failed to place sufficient orders. On account of the non-giving of the assured load, the respondent Nos. 1 to 8 suffered the loss. On the ventilation of their grievances before the sole Arbitrator Hon'ble Mr. Justice K.Shivashankar Bhat, the award came to be passed on 29.7.2002. The learned Arbitrator quantified the loss suffered by the respondent Nos.1 to 8 and held that the petitioner is liable to pay each one of them the amount of loss with interest at 20% p.a. from 28.1.2000 till the date of payment. These awards are challenged by the petitioner and the respondent Nos.9 and 10 by filing the arbitration suit Nos.63/2002, 64/2002, 65/2002, 69/2002, 70/2002, 71/2002, 81/2002 and 82/2002, 3. In the said arbitration suit proceedings, the respondent Nos.1 to 8 raised the objection that the petitioner and the respondent Nos.9 and 10 are liable to deposit 75% of the award amount under the Interest of Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (hereinafter called 1993 Act'). They contended that the suit itself is not maintainable as the statutory requirement is not complied with. 4. The learned City Civil Judge, by his order, dated 8.6.2009 overruled the petitioner's objection by holding that the arbitration suits are not hit by the 1993 Act or by Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter called 2006 Act'). The said order was challenged by the respondent Nos.1 to 8 in W.P.Nos.31185-31188/2010 c/w W.P.Nos.31070/2010 and 31109- 31111/2010. This Court, by its order, dated 9.11.2010 disposed of the writ petitions giving the liberty to the respondent Nos.1 to 8 to file one more application for appropriate reliefs. The said order was challenged by the respondent Nos.1 to 8 in W.P.Nos.31185-31188/2010 c/w W.P.Nos.31070/2010 and 31109- 31111/2010. This Court, by its order, dated 9.11.2010 disposed of the writ petitions giving the liberty to the respondent Nos.1 to 8 to file one more application for appropriate reliefs. Pursuant thereto, the respondent Nos.1 to 8 filed I.A.No.10 in all the said arbitration suits invoking Section 9 of the Arbitration and Conciliation Act, 1996. In the said application, they sought a direction to the petitioner and the respondent Nos.9 and 10 to deposit 75% of the award amount as required under Section 7 of the 1993 Act and Section 19 of the 2006 Act or in the alternative to dismiss the suit for non-compliance with the said mandatory provisions. 5. The learned Civil Judge allowed the said I.A. by directing the petitioner to deposit 75% of the amounts awarded in each case within a period of two months. Aggrieved by this order, this petition is filed by the employer (petitioner herein, who is plaintiff No.1 in the arbitration suits). 6. Sri Joshua Hudson Samuel, the learned counsel for the petitioner submits that the respondent Nos.1 to 8 could have objected to the filing of the arbitration suits with regard to non-depositing of 75% of the award amount, as soon as those proceedings were instituted. But they have failed to exercise their right, if any, and thereby waived off their rights. They are estopped from claiming such a right, which they have waived off and that too after the repealment of 1993 Act. No action was taken by the respondent Nos.1 to 8 during the subsistence of the 1993 Act. On the contrary, in 2008 a contention was taken for the first time with reference to 1993 Act and 2006 Act. 7. Sri Samuel submits that all the amounts towards supplies made and the services rendered were already paid to the respondent Nos.1 to 8. The arbitration award is neither in respect of the amounts due, as contemplated under Section 6 of the 1993 Act nor in respect of the supplies of any goods and services rendered to the buyer, as contemplated under Section 3 of the said Act. On the other hand, the award was only in respect of the damages arising from the alleged breach of contract. On the other hand, the award was only in respect of the damages arising from the alleged breach of contract. It is his emphatic submission that the damages and compensation are not contemplated under Section 3 and 6 of the 1993 Act. He further submits that the respondent Nos.1 to 8 have waived their right under Section 4 of the Arbitration and Conciliation Act, 1996. 8. The learned counsel submits that the 1993 Act has no application for the case on hand for another reason too. The agreement between the petitioner and the respondent Nos.1 to 8 were all entered into prior to the commencement of the 1993 Act. He relies on the Apex Court's judgment in the case of PURBANCHAL CABLES AND CONDUCTORS PRIVATE LIMITED v. ASSAM STATE ELECTRICITY BOARD AND OTHERS reported in (2012) 7 SCC 462 for advancing the submission that the suppliers are not entitled to get the benefit under 1993 Act for the supply contracts executed prior to the commencement of 1993 Act even if the supplies are effected and the payments are made after the coming into force of 1993 Act. Paragraph Nos.51 and 52 of the said decision are extracted hereinbelow: "51. There is no doubt about the fact that the Act is a substantive law as vested rights of entitlement to a higher rate of interest in case of delayed payment accrues in favour of the supplier and a corresponding liability is imposed on the buyer. This Court, time and again, has observed that any substantive law shall operate prospectively unless retrospective operation is clearly made out in the language of the statute. Only a procedural or declaratory law operates retrospectively as there is no vested right in procedure. 52. In the absence of any express legislative intendment of the retrospective application of the Act, and by virtue of the fact that the Act creates a new liability of a high rate of interest against the buyer, the Act cannot be construed to have retrospective effect. Since the Act envisages that the supplier has an accrued right to claim a higher rate of interest in terms of the act, the same can only be said to accrue for sale agreements after the date of commencement of the Act i.e. 23-9-1992 and not any time prior." 9. Since the Act envisages that the supplier has an accrued right to claim a higher rate of interest in terms of the act, the same can only be said to accrue for sale agreements after the date of commencement of the Act i.e. 23-9-1992 and not any time prior." 9. Without prejudice to the aforesaid contention, the learned counsel submits that in the instant case, the supply orders were placed, supplies and payments were made prior to the commencement of the 1993 Act. He relies on the Hon'ble Supreme Court's judgment in the case of ASSAM SMALL SCALE INDUSTRIES DEVELOPMENT CORPORATION LTD. AND OTHERS v. J.D.PHARMACEUTICALS AND ANOTHER reported in (2005) 13 SCC 19 , wherein it is held that the 1993 Act will not apply to the transactions, which took place prior to 23.9.1992, the date of the commencement of the said Act. 10. Nextly, he sought to draw support from the Hon'ble Supreme Court's judgment in the case of SHAKTI TUBES LTD. v. STATE OF BIHAR AND OTHERS reported in (2009) 7 SCC 673 and contends that for the purpose of examining the applicability of 1993 Act, a transaction means placing of supply orders; the supply pursuant to the said supply order would not be governed by the provisions of 1993 Act but by the provisions of Section 34 of CPC. In the instant case, the transactions in question were for a period of eight years under clause 8 of the agreement and the payments were contemplated under Clause 9 of the agreement. The agreement for providing the raw materials by the petitioner and the delivery of finished components by the respondent Nos.1 to 8 was entered into prior to the commencement of 1993 Act. As the transaction stood completed, the 1993 Act has no application for the case on hand. 11. The learned counsel submits that the respondent Nos.1 to 8 had conceded that 2006 Act is not applicable. However, the Court below commits the palpable error by granting the interim relief under 2006 Act. 12. The learned counsel submits that there is no basis for coming to the conclusion that the petitioner is a buyer and the respondent Nos.1 to 8 are the suppliers and small scale industries. 13. However, the Court below commits the palpable error by granting the interim relief under 2006 Act. 12. The learned counsel submits that there is no basis for coming to the conclusion that the petitioner is a buyer and the respondent Nos.1 to 8 are the suppliers and small scale industries. 13. The learned counsel relying on this Court's order, dated 13.9.2012 passed in W.P.Nos.22370-371/2010 and other connected petitions submits that the proceedings under the 2006 Act are governed by the provisions of the said Act; they would be independent of the Arbitration and Conciliation Act, 1996. 14. Sri M.Narayana Bhat, the learned counsel for the respondent Nos.1 to 8 submits that the transaction in question took place after the 1993 Act came into force. He submits that in the case of Assam Small Scale Industries (supra), the Apex Court has taken the considered view that the supply orders issued after commencement of the 1993 Act will attract the provisions of the said Act. He also read out paragraph No.80 from the Apex Court's judgment in the case or Purbanchal Cables (supra). It is extracted hereinbelow: "80. In Ambika Prasad Mishra v. State of U.P., His Lordship V.R. Krishna Iyer. J., speaking for the Constitution Bench held: "6. It is wise to remember that fatal flaws silenced by earlier rulings cannot survive after death because a decision does not lose its authority 'merely because it was badly argued, inadequately considered and fallaciously reasoned.' In light of this dictum, and the factum that no case has been made out for reconsideration by the learned Senior Counsel appearing for the suppliers, we do not see any reason much or less good reason to doubt the correctness of the decision in Assam Small Scale Industries or Shakti Tubes. When there are four decisions of this Court with regard to the applicability of the Act for contracts entered into prior to the commencement of the Act, and when the plea for reconsideration has been expressly rejected in the past, we are of the view, it would be against the spirit of the doctrine of stare decisis for us to take any view in divergence with same." 15. Sri Bhat submits that the status of the respondent Nos.1 to 8 as suppliers and small scale industries was not disputed by the petitioner either in the proceedings before the Arbitrator or in the proceedings before the learned Single Judge. He brings to my notice the averments in paragraph No.10 of the affidavit filed in support of the I.A. No.10 for depositing 75% of the amounts. The contents read as follows: "10. I further state that I am also a supplier as defined under Sec.2(f) of the Interest of Delayed Payments to Small Scale & Ancillary Industrial Undertakings Act, 1993, hereinafter refereed to as the 1993 Act' for short. My unit is a small scale industry as defined under Sec.3(e) of the 1993 Act. The Plaintiff is a buyer as defined under Sec.2(c) of the said Act. I further state that I have produced a document before the Arbitrator in which it has been disclosed that my unit is a small scale industry as defined under Section 2(e) of 1993 Act." 16. He submits that these averments were never disputed by the petitioner. He also submits that the petitioner had not raised any objection over the respondent Nos.1 to 8 not making the application for the depositing of the amounts along with their objections/written statement to the arbitration suits. He submits that the documents G and Q produced before the learned Arbitrator reveal that the respondent Nos.1 to 8 are the small scale industries. He submits that the respondent Nos.1 to 8 fall within the definition of supplier as given in Section 2(f) of 1993 Act. 17. Sri Bhat submits that two months' time granted by the learned Civil Judge for depositing 75% of the award amount expired on 29.6.2014. Thereafter, that is on 1.7.2014 these petitions are filed. 18. The learned counsel submits that the mandatory requirements of the statutes are to be complied with. As on the date of filing the arbitration suits, the 1993 Act was in force requiring the petitioner and the respondent Nos.9 and 10 to deposit 75% of the award amounts. This requirement is saved under Section 32(2) of the 2006 Act. 19. That the respondent Nos.1 to 8 have waived off their right is not one of the objections raised by the petitioner before the Trial Court. It was not even argued orally before the Trial Court, so submits Sri Bhat. 20. This requirement is saved under Section 32(2) of the 2006 Act. 19. That the respondent Nos.1 to 8 have waived off their right is not one of the objections raised by the petitioner before the Trial Court. It was not even argued orally before the Trial Court, so submits Sri Bhat. 20. He submits that the amount due is not what is admitted by the buyer. It is the amount awarded in the adjudicatory proceedings. He relies on the Apex Court's judgment in the case of RUSTOM CAVASJEE COOPER v. UNION OF INDIA reported in 1970(1) SCC 248 to advance his contention that compensation is anything that is given to make things equal in value; anything given as an equivalent to make amends for loss or damages. He also relies on the Hon'ble Supreme Court's decision in the case of PRATIBHA PROCESSORS AND OTHERS v. UNION OF INDIA AND OTHERS reported in (1996) 11 SCC 101 , wherein it is held that the interest is compensatory in character and is imposed on an assessee, who has withheld the payment of any tax as and when it is due and payable. 21. Nextly, he read out paragraph No.38 from the Hon'ble Supreme Court's decision in the case of ORGANO CHEMICAL INDUSTRIES AND ANOTHER v. UNION OF INDIA AND OTHERS reported in (1979) 4 SCC 573 . It is as follows: "38. What do we mean by 'damages'? The expression 'damages' is neither vague nor over-wide. It has more than one signification but the precise import in a given context is not difficult to discern. A plurality of variants stemming out of a core concept is seen in such words as actual damages, civil damages, compensatory damages, consequential damages, contingent damages, continuing damages, double damages, excessive damages, exemplary damages, general damages, irreparable damages, pecuniary damages, prospective damages, special damages, speculative damages, substantial damages, unliquidated damages. But the essentials are (a) detriment to one by the wrong-doing of another (b) reparation awarded to the injured through legal remedies and (c) its quantum being determined by the dual components of pecuniary compensation for the loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the law. But the essentials are (a) detriment to one by the wrong-doing of another (b) reparation awarded to the injured through legal remedies and (c) its quantum being determined by the dual components of pecuniary compensation for the loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the law. For instance, 'exemplary damages' are damages on an increased scale, awarded to the plaintiff over and above what will barely compensate him for his property loss, where the wrong done to him was aggravated by circumstances of violence, oppression, malice, fraud, or wanton and wicked conduct on the part of the defendant, and are intended to solace the plaintiff for mental anguish, laceration of his feelings, shame, degradation, or other aggravations of the original wrong, or else to punish the defendant for his evil behavior or to make an example of him, for which reason they are also called "punitive" or "punitory" damages or "vindictive" damages, and (vulgarly) "smart- money". It is sufficient for our present purpose to state that the power conferred to award damages is delimited by the content and contour of the concept itself and if the Court finds the Commissioner travelling beyond, the blow will fall. Sec.14-B is good for these reasons." 22. The learned counsel raises the argument with reference to Section 7 of the 1993 Act that no appeal against any decree, award or other order shall be entertained by any Court or other authority unless the appellant has deposited 75% of the amounts. 23. The submissions of the learned counsel have received my thoughtful consideration. In the first place, the two allied questions falling for my consideration would be whether the plaintiff/petitioner is liable to pay the interest on the amount awarded by way of damages? Whether the liability to pay the interest is confined only to the value of the goods supplied and/or value of the services rendered? To answer these questions, advertence has to be made to the provisions contained in Section 7 of the 1993 Act. It reads as follows: "7. Appeal. Whether the liability to pay the interest is confined only to the value of the goods supplied and/or value of the services rendered? To answer these questions, advertence has to be made to the provisions contained in Section 7 of the 1993 Act. It reads as follows: "7. Appeal. - No appeal against any decree, award or other order shall 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 manner directed by such court or, as the case may be, such authority." 24. The plain reading of the afore-extracted provisions reveals that depositing 75% of the amount has to be in terms of the decree, award or any other order. Section 7 of 1993 Act does not exclude the payment of interest on the amounts awarded by way of damages. 25. Further, in exercise of its wisdom, the legislature has prescribed 75% of the amounts in terms of decree, award or order. The courts are not required to substitute their wisdom for the wisdom of the legislature. The courts can neither add to nor subtract any provision from the statute. The perusal of the statement of objects and reasons of 1993 Act reveals that it was enacted to ensure prompt payment of money by the buyers to small industrial units. It was felt that prompt payment of money by the buyer should be statutorily ensured and mandatory provision for the payment of interest on the outstanding money, in the case of default, should be made. The object of 1993 Act was to refrain the buyers from withholding payments to small scale and ancillary industrial units. 26. The allied questions are thus liable to be answered against the petitioner. 27. The second question that falls for my consideration is whether the requirement under Section 7 of the 1993 Act stands saved under 2006 Act. To answer this question, advertence has to made to the provisions contained in Section 32 of the 2006 Act. They read as follows: "32. Repeal of Act.- (1) The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (32 of 1993) is hereby repealed. To answer this question, advertence has to made to the provisions contained in Section 32 of the 2006 Act. They read as follows: "32. Repeal of Act.- (1) The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (32 of 1993) is hereby repealed. (2) Notwithstanding such repeal, anything done or any action taken under the Act so repealed under sub-section (1) shall be deemed to have been done or taken under the corresponding provisions of this Act." 28. The saving clause is used to preserve from destroying certain rights, remedies or privileges already existing. 'Saving' means that it saves all the rights the party previously had and not that it gives him any new rights. Saving clauses are introduced into Acts, which repeal the earlier Act, to safeguard the rights which, but for the savings, would be lost. Savings may have the effect that repealed enactments are not altogether dead. 29. The entire 2006 Act does not contain any contradictory intention to the effect that the requirement under its predecessor Act is extinguished. Its saving relates to an existing legal right. A saving is liberally construed as it does not intend to confer any legal right which did not exist already. It is therefore trite that where an Act repeals an enactment, the repeal does not affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment. I therefore answer the second question in the affirmative. 30. The third question that falls for my consideration is whether the transactions in question attract the provisions of 1993 Act? The agreement themselves may have been entered into between April and August 1992 and the 1993 Act has come into force from 23.9.1992. The learned Arbitrator has allowed the claims of the respondent Nos.1 to 8 only from 1.5.1996 when the 1993 Act was very much in force. In the case of Assam Small Scale Industries (supra), it was held that the supply orders given between 22.10.1992 and 19.6.1993 would attract the provisions of 1993 Act. 31. In the case of Purbanchal Cables (supra), it is held that if there is a delayed payment by the buyer, then the right to claim the higher rate of interest as prescribed by the Act accrues to the supplier. I therefore answer the third question in the affirmative. 32. 31. In the case of Purbanchal Cables (supra), it is held that if there is a delayed payment by the buyer, then the right to claim the higher rate of interest as prescribed by the Act accrues to the supplier. I therefore answer the third question in the affirmative. 32. The fourth question that falls for my consideration is whether the respondent Nos.1 to 8 have waived off their right to demand the depositing of 75% of the award amounts? This question does not call for any elaborate reasoning or analysis. In view of the two statutes - 1993 Act and 2006 Act, and the schemes thereunder, the question of the respondent Nos.1 to 8 waiving off their right does not arise. There is no estoppel against the operation of the statute. 33. The last question that falls for my consideration is whether the respondent Nos.1 to 8 are the suppliers and the small scale industries so as to entitle themselves to the benefit under the Acts in question. That the respondent Nos.1 to 8 are suppliers and that they are small scale industries are specifically averred in paragraph No.10 of the affidavit filed in support of I.A.No.10. The entire paragraph No.10 is extracted supra. In its statement of objections, the petitioner has not disputed the status of the respondent Nos.1 to 8. 34. Furthermore, the claim of the respondent Nos.1 to 8 that they are the suppliers and the small scale industries is also not disputed by the petitioner in the proceedings before the learned Arbitrator. As rightly noticed by the learned City Civil Judge, in the project report produced before the learned Arbitrator, the respondent Nos. 1 to 8 are described as small scale industries. The objection as to the status of the respondent Nos.1 to 8 is being raised for the first time in the writ proceedings and that too without there being any basis for the same. Therefore, I am not inclined to interfere in the matter on the petitioner's foundationless argument that the respondent Nos.1 to 8 are not the suppliers and not the small scale industries. 35. Thus, even if the whole matter is examined afresh, I find it difficult to arrive at a conclusion different from the one arrived at by the learned City Civil Judge. I therefore dismiss these petitions. 35. Thus, even if the whole matter is examined afresh, I find it difficult to arrive at a conclusion different from the one arrived at by the learned City Civil Judge. I therefore dismiss these petitions. However, I deem it necessary and just to grant two more months' time, from today, to the petitioner to deposit 75% of the award amounts in each of the suits - A.S.Nos.63/2002, 64/2002, 65/2002, 69/2002, 70/2002, 71/2002, 81/2002 and 82/2002. 36. No order as to costs.