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Legal Case Shots

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Arbitration & Commercial LawSupreme Court of India

Snehadeep Structures Pvt. Ltd. vs. Maharashtra Small Scale Industries Development Corporation Ltd.

Not available · 2024 INSC 201Decided 5 Mar 2024
Not available
Justice Sanjiv Khanna

Background

Snehadeep Structures (a small-scale supplier, "SSPL") had supplied goods to Maharashtra Small Scale Industries Development Corporation ("MSSIDCL", the buyer) under a 1995 purchase order, which was ultimately meant for delivery to the Maharashtra State Electricity Board (MSEB). A dispute arose over interest on delayed payment under the 1993 Act, and an arbitrator had awarded compound interest in SSPL's favour. The Bombay High Court's Division Bench set aside that arbitral award, and SSPL appealed to the Supreme Court.

Decision Breakdown

The Court analysed Sections 2-5 of the 1993 Act, explaining that before a 1998 amendment, parties were free to contractually fix their own payment date, but the amendment introduced a proviso capping any agreed payment period at 120 days from the date of "acceptance" or "deemed acceptance" of the goods, beyond which statutory interest becomes payable regardless of contract terms. The 1995 purchase order here had tied MSSIDCL's payment obligation to when it itself received payment from MSEB (the ultimate consignee): a clause that could only be overridden by the 120-day proviso if that provision (effective only from 1998) applied to a contract predating it, and even then the exact "date of acceptance" needed to be determined factually. Finding no error warranting interference with the High Court's decision to set aside the arbitral award, the Supreme Court dismissed the appeal, while clarifying that MSEB need not be a party to any future proceedings and that MSSIDCL could pursue restitution under Section 144 CPC for amounts already paid to SSPL under the now-set-aside award.

Lesson Learnt

A contractual clause tying a buyer's payment obligation to receipt of funds from a third party can be overridden by statutory protections for small-scale suppliers only within the specific limits Parliament set (here, a 120-day cap from a defined acceptance date), and such statutory protections generally do not apply retrospectively to contracts predating the relevant amendment.

Snehadeep Structures Pvt. Ltd. vs. Maharashtra Small Scale Industries Development Corporation Ltd. – Legal Case Shots | LegalAware