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Judgment
The petitioner has filed the present petition under Article 226/227 of the Constitution of India challenging the order dated 22.03.2006 passed by the respondent No. 3 in Case No. I.F.C./169/04 filed by the respondent No.1, whereby the authority has directed the petitioner to pay the principal amount i.e. Rs. 66,192/- and also interest of Rs.17,856/- over the said amount to the respondent No.1 within 30 days from the date of the order.
In short, the facts of the case are that the petitioner is a Panchayat constituted under the Madhya Pradesh Panchayat Rajya Adhiniyam, 1993, a body corporate established under Section 11 of the Act.
The respondent No.1 is a proprietorship concern operating a registered small scale industry. Respondent No.2 is M.P. Small Scale Industries Corporation, which facilitates supply of materials by registered small-scale industries to government bodies, ensuring compliance with specifications and approved rates.
On 21.11.2002 (Annexure P/1), the petitioner placed an order to respondent No.2 for supply of furniture. The respondent No.2 forwarded the order to respondent No.1 for execution. The respondent No.1 supplied the furniture on 25.11.2002 and raised a bill - Annexures P/2.
On 30.11.2002 (Annexure P/3), the Technical Department of respondent No.2 issued an inspection report of the supplied items. The respondent No.1, in acknowledgment, stated that due to the short period of supply, minor defects are possible and assured to provide material of proper specifications in future.
On 09.12.2002 (Annexure P/4), the petitioner wrote a letter to respondent No.2 requesting for issuance of a certificate with regard to the items supplied after inspection to verify whether they are in accordance with the required specifications and standards so that proper payment could be made to the supplier, i.e., respondent No. 1.
Upon inspection, it was found that the items supplied by respondent No. 1 were not up to the mark and did not conform to the required specifications. Since sub-standard material had been supplied, respondent No. 2 instructed the respondent No. 1 to replace the defective/sub-standard items. Thereafter, on 5.2.2003, the respondent No. 1 supplied the material in accordance with the proper specifications, and a bill was raised by the respondent No. 1 to the petitioner.
The petitioner written a letter on 20.3.2003 (Annexure P/5) to respondent No. 2 requesting inspection of the material that had been replaced by the respondent No. 1.
Subsequently, on 10.6.2003 (Annexure P/6), a letter was received by the petitioner from the office of respondent No. 2 for making arrangements for the inspection of the re-supplied material, so that after approval, the unapproved material/items could be returned to respondent No. 1 and payment for the approved material could be made to respondent No.
The inspection report was finalized on 11.06.2003 (Annexure P/7). Thereafter, the petitioner issued payment of Rs. 69,347/- to respondent No.1 on 26.08.2003 (Annexure P/8) after full compliance with inspection requirements.
It is submitted that despite repeated instructions, respondent No.1 failed to remove the rejected/sub-standard items from the petitioner’s premises and the same was lying unused in the premises. On 20.11.2003 (Annexure P/9), the petitioner wrote a letter to the General Manager of respondent No.2 requesting action/warning against the respondent No.1 that if the items were not removed, a rent of Rs.5,000/- per month would charged for storage of unremoved materials.
It is submitted that in response to the letter dated 20.11.2003, the office of respondent No. 2 issued a letter dated 02.12.2003 (Annexure P/10) to respondent No. 1, directing to remove the rejected material from the petitioner’s office and warned that failure to do so would render respondent No.1 liable for appropriate action.
It is submitted that despite repeated reminders and clear warnings from respondent No. 2, the respondent No. 1 failed to remove the rejected material. Consequently, on 5.2.2004 (Annexure P/11), the petitioner wrote a letter to the General Manager of respondent No. 2, granting seven days’ time to remove the rejected material and also demanding rent at the rate of Rs. 5,000/- per month till removal of the items. Thereafter, on 19.3.2004, the respondent No. 2 again issued a letter to respondent No. 1, giving a clear warning that if the rejected material is not removed and any action is taken by the petitioner, the respondent No. 1 would be solely responsible for the consequences.
It is submitted that despite the aforesaid instructions and repeated requests, respondent No. 1 failed to remove the rejected material and instead sent a legal notice dated 03.02.2004 (Annexure P/12) through counsel demanding Rs. 78,674/- along with interest @ 18% per annum from 02.12.2002 till payment, alleging that the material lying with the petitioner was being used and was not being permitted to be removed.
It is submitted that thereafter respondent No. 2 referred the dispute to respondent No. 3. Pursuant thereto, a notice regarding the said reference, initiated at the instance of respondent No. 1, was received by the petitioner, calling upon him to submit a reply. Copy of the notice along with the reference in Proforma No. 11 is Annexure P/13. The petitioner submitted a detailed reply (Annexure P/14) to the said notice.
It is submitted that thereafter on 22.03.2006 (Annexure P/15), the respondent No.3 passed the impugned order (Annexure P/15), directing payment of Rs. 78,674/- along with interest per month, calculated as per the P.L.R. of the State Bank of India.
The petitioner has challenged the impugned order on the ground that respondent No.3 lacked jurisdiction to decide the dispute and the order is cryptic, non-speaking, and fails to assign reasons for rejecting the petitioner’s claim. The petitioner contends that all obligations under the order were duly performed and the dispute arose solely due to failure of respondent No.1 to remove the rejected items. The impugned order is therefore illegal, without jurisdiction and liable to be quashed.
It is contended by the counsel for the petitioner that the impugned order dated 22.03.2006 (Annexure P/15) was passed by respondent No.3 purportedly under Rule 6 of the Madhya Pradesh Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Rules, 1999 (For short, Rules, 1999). However, respondent No.3 had no jurisdiction and was not empowered to entertain or decide the dispute referred to it by respondent No.1.
It is contended that the Rules, 1999 were framed by the State Government in exercise of the power conferred by Sub-Section (3) of Section 7-B of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act, 1993 (No.32 of 1993). The Act was enacted for a specific purpose, namely, “to provide for and regulate the payment of interest on delayed payments to small scale and ancillary industrial undertakings and matters connected therewith or incidental thereto.” It is evident that the intention of the Act was limited solely to regulate interest on delayed payments and nothing beyond that.
It is submitted that the dispute decided by the respondent No.3 relates to rejected material for which no order was placed by the petitioner. The petitioner was not the buyer of the rejected material and respondent No.1 was not the supplier in respect of such material. Therefore, the dispute is entirely beyond the purview of the Act and the Rules, 1999.
It is submitted that the impugned order is non-speaking, cryptic, and illegal, as it does not assign any reason as to why the claim of respondent No.1 was accepted and the petitioner’s valid stand was ignored.
The respondent No.1 has filed reply contending that the respondent M/s Sigma Enterprises, engaged in the business of manufacturing and supplying steel, wooden, office, school, college and computer furniture as well as general supplies.
It is submitted that on 03.08.2001, the petitioner purchased furniture from the answering respondent (Dispatch No. 1012). However, the then Chief Executive Officer of Jila Panchayat Katni delayed the payment and sought illegal gratification, which was reported to the Lokayukt on 19.10.2001 (Annexure R/I-1).
It is submitted that on 21.11.2002, the petitioner requested supply of 33 items of furniture (Annexure P/1). Accordingly, the respondent No.2 issued a supply order to the answering respondent on 25.11.2002 (Annexure P/2). The required furniture was supplied and received by the petitioner on 02.12.2002 after approval from the Inspector (Mech.) Technical Department, M.P. Laghu Udyog Nigam Ltd., Jabalpur - Annexures R/I-2 & R/I-3. However, the petitioner did not make payment for the supplied furniture until 27.01.2003. The answering respondent then sent a letter on 27.01.2003 requesting payment along with interest @ 2% from the date of delivery (Annexure R/I-4).
Thereafter, the petitioner started using the supplied furniture including items initially rejected for quality issues. The answering respondent supplied replacement furniture and requested the petitioner to return the rejected items, which is apparent from the letter dated 05.02.2003(Annexure R/I-5).
It is submitted that despite repeated requests, the petitioner neither returned the rejected items nor paid for the selected items. The answering respondent sent letters on 06.02.2003, 17.02.2003, and 28.02.2003 demanding return of rejected items and payment for the accepted furniture (Annexures R/I-6, R/I-7 & R/I-8). However, the petitioner continued to use both accepted and rejected furniture until 20.11.2003. The answering respondent sent further letters dated 02.03.2003, 18.11.2003, and 20.11.2003 (Annexures R/I-9, R/I-10, R/I-11 & R/I-12) regarding return of rejected furniture along with bills .
It is submitted that thereafter the respondent requested inspection of the furniture by respondent No.2 on 21.04.2003 and 27.04.2003 (Annexures R/I-13 & R/I-14). The petitioner remained silent regarding payment or returning the rejected furniture. It is submitted that legal notices were issued through the counsel for recovery of Rs.78,674/- along with interest @ 18% per annum for the use of furniture, but the petitioner did not make the payment. Further letters were sent on 15.04.2004, 26.05.2004, and 11.08.2004 (Annexures R/I-15, R/I-16, R/I-17 & R/I-18) seeking payment and action against the petitioner for the misuse of furniture.
It is submitted that thereafter on 14.03.2006, the respondent personally verified that the rejected furniture was still in use at the petitioner’s premises and prepared a Panchnama with photographs documenting the same, copies whereof are filed as Annexures R/I-19 & R/I-20.
It is contended by the counsel for the respondent that the petitioner has been using the rejected furniture for over five years without payment and consequently the respondent filed an application before the respondent No.3 for recovery. After due consideration of the record, the respondent No.3 has passed the impugned order dated 22.03.2006 (Annexure P/15) in favor of the answering respondent. Therefore, the petition filed by the petitioner is baseless, devoid of merit and is liable to be dismissed.
From the perusal of the impugned order, it is evident that the authority after hearing both the parties has held that the respondent Unit submitted the original bills along with photographs and a Panchnama showing that the additional items were being used by the respondent unit. Accordingly, the authority held that the extra furniture supplied by the respondent-Unit, which had been rejected by the petitioner, were nonetheless being used by the petitioner. The respondent-Unit repeatedly requested the return of the said items; however, the petitioner failed to return the said items. Therefore, the authority concluded that since the respondent department was using the additional furniture supplied by the respondent-Unit, hence the petitioner was liable to make payment for the same. Accordingly, the authority directed that the petitioner shall pay an amount of Rs. 66,192/- towards the cost of the additional furniture along with interest of Rs. 17,866/- over the said amount.
Having heard learned counsel for the parties and upon perusal of the record, it is found that the primary issue for consideration is whether respondent No. 3 had the jurisdiction to adjudicate the dispute in question under the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 and the Rules framed thereunder. From a plain reading of the relevant provisions of Act and the Rules, it is evident that the statutory scheme is confined to regulating and ensuring payment and interest on delayed payments arising out of the transactions between a buyer and a supplier. The jurisdiction of the authority under the said enactment is, therefore, limited to disputes pertaining to delayed payments for goods duly supplied and accepted.
Sections 3 to 7 of the Act, 1993 provide as under:
"3. Liability of buyer to make payment
Where any supplier supplies any goods or renders any service to any buyer, the buyer shall make payment therefor on or before the date agreed upon between him and the supplier in writing or, where there is no agreement in this behalf, before the appointed day: [PROVIDED that in no case the period agreed upon between the supplier and the buyer in writing shall exceed one hundred and twenty days from the day of acceptance or the day of deemed acceptance.]
[4. date from which the rate at which interest is payable
Where any buyer fails to make payment of the amount to the supplier, as required under section 3, the buyer shall, notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay interest to the supplier on that amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at one-and-hflf time of Prime Lending Rate charged by the State Bank of India.
Explanation : For the purpose of this section "Prime Lending Rate" means the Prime Lending Rate of the State Bank of India which is available to the best borrowers of the bank.]
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.
6. Recovery of amount due
[(1)] The amount due from a buyer, together with the amount of interest calculated in accordance with the provisions of sections 4 and 5, shall be recoverable by the supplier from the buyer by way of a suit or other proceeding under any law for the time being in force.
[(2) Notwithstanding anything contained in sub-section (1), any party to a dispute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of the matters referred to in that sub-section and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such disputes as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in sub-section (1) of section 7 of that Act.]
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."
In the present case, the dispute pertains to certain items, which were admittedly rejected by the petitioner on the ground that they did not conform the prescribed specifications. The material on record further indicates that the said rejected items were replaced by respondent No. 1 and payment for the accepted goods was duly made by the petitioner after inspection and approval. The claim raised by the respondent No. 1, subsequently allowed by the respondent No. 3, relates to the alleged use and non-return of the rejected material. Such a dispute, in the considered opinion of this Court, does not fall within the ambit of “delayed payment” for goods supplied, but rather pertains to a separate and independent claim arising out of alleged unauthorized use or non-return of goods.
The question, which has been raised by the respondent No.1 in respect of non-maintainability of the petition for not depositing 75% of the amount for setting aside the award passed by the Council, it is found by this Court that such regulation of maintainability is only in respect of setting aside an award, however, as it is observed by this Court in the foregoing paragraphs that the application under the Act and Rules was not maintainable for recovery of the amount as well as interest thereon, therefore, any petition filed seeking quashment of order passed in such application which was without jurisdiction is found to be maintainable.
In view of the above, this Court is of the opinion that respondent No. 3 acted beyond its statutory jurisdiction in entertaining and deciding the said dispute. The impugned order, therefore, suffers from inherent lack of jurisdiction.
Further, a perusal of the impugned order reveals that the same is cryptic and non-speaking in nature. It fails to consider the specific defence raised by the petitioner and does not assign cogent reasons for arriving at the conclusion that the petitioner is liable to make payment for the rejected items. It is a settled principle of law that any order of quasi-judicial authority must contain reasons, and failure to do so, renders the order unsustainable in law.
Accordingly, for the reasons stated hereinabove, the impugned order dated 22.03.2006 (Annexure P/15) passed by respondent No. 3 cannot be sustained and is hereby quashed.
The petition is accordingly allowed. No order as to costs.