ASSAM SMALL SCALE IND. DEV. CORPN. LTD. AND ORS. versus M/S J.D. PHARMACEUTICALS AND ANR.

Citation: [2005] SUPP. 4 S.C.R. 232 · Decided: 07-10-2005 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Case Partly allowed

Judgment (excerpt)

A 
ASSAM SMALL SCALE IND. DEV. CORPN. LTD. AND ORS. 
V. 
MIS J.D. PHARMACEUTICALS AND ANR. 
OCTOBER 7, 2005 
B 
[S.B. SINHA AND R.V. RA VEENDRAN, JJ.] 
Assam Preferential Stores Purchase A ct 1989, sections 2, 3,7 and 8-
lnterest on Delayed Payment of Small Scale and Ancillary Industrial 
C Undertakings Act 1993, sections 2,3,4 and 5. 
Small Scale Industries-Preferential stores purchase by Government-
Failure to pay the price-Respondent a small scale industry-Appel/ant, a 
State Corporation making purchases from the respondent as the agent of the 
State departments in terms of 1989 Act-Corporation failing to make payment 
D for the purchases made during 1991-1993-Trial Court decreeing the 
respondent's suit for purchase price with interest under 1993 Ac/-
Corporation's plea that only purchasing departments of State liable to pay the 
price of the supplies-Held, Corporation had to take 90% of the cost price as 
advance from the purchasing departments as per the Scheme and owed a duty 
to release that to the respondent on supply-Rest of 10% to be paid on 
E receiving payment from purchasing departments. 
Small Scale Industry-Preferential purchase-Interest on price money-
Appellant corporation making purchases from the respondent as agent of the 
state departments in terms of 1989 Act-Failure to make payment for purchases 
made during June 1991- June 1993-Total price of medicine supplied Rs. 
F 20,56,654 out of which only a sum of Rs. 46,512.80 paid-Respondent's claim 
for balance with interest under 1993 Act decreed by Trial Court-High Court 
dismissing appeal-Held, interest as per the 1993 Act could not be paid to the 
transactions made prior to coming into force of the said Act-Trial Court and 
High Court therefore manifestly erred in directing payment of interest at the 
G rate of 23%. 
Necessary Party-Appellant corporation placing order for making 
purchases from the respondent for various state departments-Corporation 
failing to make payment for the purchases-Respondent filing suit claiming · 
purchase money against Corporation-Corporation plea that state departments 
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ASSAM SMALL SCALE IND. DEV. CORPN. LTD.''· J.D. PHARMACEUTICALS 
23 J 
being the buyers and beneficiaries of the supply, State is a Necessary party- A 
Held, as there was no privity of contract between State and respondent, state 
not a necessary party. 
To patronize the products of small scale and cottage industries on 
preferential basis and to rationalize the procedure for purchase of stores 
required by the State Government companies and State Government B 
undertakings, the Assam Preferential Stores Purchase Act 1989 was 
enacted. The State also issued guidelines which were to be strictly adhered 
to by the state authorities. Said guidelines required that purchasing 
authorities shall pay advance to the extent of 90% of the value of the order 
placed with the corporation and pay to the corporation up to 5% as C 
commission over the price fixed by the corporation. The marketing 
assistance scheme appended as Annexure- A to the guidelines provided 
for quality control, pricing, registration of units as also indenting by the 
Corporation. Parliament enacted Interest on Delayed Payment to Small 
Scale and ancillary Industrial Undertaking Act 1993 which come into force 
on 23.09.1992. 
D 
Respondent was a SSI unit registered with the Corporation and 
fulfilled all the criteria laid down in the 1989 Act and the Scheme framed 
there under. Corporation placed orders for supply of medicines 
manufactured by Respondent for the period June 1991 to June 1993. Total 
price of medicines supplied by respondent in pursuance of supply orders E 
of the corporation were Rs. 20,56,654 out of which only a sum of Rs. 
46,112.80 was paid to Respondent. Respondent filed a suit claiming the 
amount together with the interest payable there on in terms of the 1993 
Act. Corporation, inter alia pleaded nonjoi_nder of purchasing authorities 
as necessary party. Trial Court passed a decree in favour of respondent p 
for Rs.20,10,141.33 with interest @ 23%. Appeal preferred by the 
corporation to the High Court was dismissed. Hence the present appeal. 
Partly allowing the appeal, the Court 
HELD: 1.1. The 1989 Act indisputably is a beneficient legislation. 
There was a purpose behind enacting it. It was primarily enacted so as to G 
enable the State to effectively perform a sovereign function namely health 
care. The Marketing Assistance Scheme being appe

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