Holding

The decree against OSFC is a nullity because the trial court lacked jurisdiction, failed to issue required notice under Section 80 CPC, and erroneously applied the repealed 1993 Act, rendering the execution proceedings unenforceable.

Summary

The Odisha State Financial Corporation (OSFC) financed a bleaching powder unit that defaulted, leading to its possession of the unit and subsequent litigation. Respondent Vigyan Chemical Industries sued the defaulting borrower and later impleaded OSFC, claiming repayment with interest calculated under the repealed Interest on Delayed Payments Act, 1993. The trial court decreed a large sum with compound interest, and the High Court upheld the decree, dismissing OSFC's writ petition. The Supreme Court examined whether the trial court had jurisdiction, whether notice under Section 80 CPC was required, the applicability of the 1993 Act, and the doctrine of sub silentio, concluding that the decree was a nullity and could not be enforced against OSFC. Consequently, the Court set aside the lower courts' judgments, ordered the refund of amounts already paid, and allowed the appeal.

Issues considered

The trial court's jurisdiction to entertain the suit against OSFC without complying with Section 80 CPC notice requirements.
The maintainability of the suit against OSFC given the lack of privity of contract and statutory limitations.
The power of the court to modify the decree by entertaining an application under Section 21 of the Limitation Act, 1963.
The applicability of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 to a transaction predating the Act.
The effect of a judgment that is silent on critical issues (doctrine of sub silentio) and its binding precedent value.

Legislation cited

Code of Civil Procedure, 1908s. s.21, s. s.2(9), s. s.29, s. s.47, s. s.80
Commercial Courts Act, 2015s. s.12-A
Constitution of Indias. Article 12, s. Article 136, s. Article 141, s. Article 227
Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993s. s.3, s. s.4, s. s.5, s. s.6
Limitation Act, 1963s. s.21
Micro, Small and Medium Enterprises Development Act, 2006
Order XX Rule 4(2) CPC
State Financial Corporation Act, 1951s. s.29

Headnote

Issue for Consideration The High Court dismissed the writ petition filed by the appellant u/Art.227 of the Constitution of India, challenging the civil proceedings and the orders passed by the Courts below regarding the computation of interest on the decretal amount and the Headnotes† Doctrines/Principles – Doctrine of Sub silentio – When earlier judgment only adjudicated upon issue of limitation – Other critical issues were not adjudicated – Earlier judgment cannot be held to be a binding precedent on those undecided issues:

Subjects

Doctrine of Sub silentioComputation of interest on the decretal amountExecution proceedingsJurisdiction of the trial CourtNotice u/s.80 CPCMaintainability of the suitPower of the Court to modify the decreeSection 21 of the Limitation ActApplicability of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993Stage of execution u/s.47 CPCExecution, discharge, or satisfaction of the decreeJudgment to satisfy requirement u/Order XX, Rule 4(2)StateArticle 12Privity of contractIqnorantia facti doth excusatIgnorantia juris non excusatImpleadment of a party in a pending suitLitigation

Judgment

[2025] 9 S.C.R. 1 : 2025 INSC 928

Odisha State Financial Corporation
v.
Vigyan Chemical Industries and Others
(Civil Appeal No. 10047 of 2025)
05 August 2025
[J.B. Pardiwala and R. Mahadevan,* JJ.]

Issue for Consideration
The High Court dismissed the writ petition filed by the appellant
u/Art.227 of the Constitution of India, challenging the civil
proceedings and the orders passed by the Courts below regarding
the computation of interest on the decretal amount and the
consequential execution proceedings.

Headnotes†
Doctrines/Principles – Doctrine of Sub silentio – When earlier
judgment only adjudicated upon issue of limitation – Other
critical issues were not adjudicated – Earlier judgment cannot
be held to be a binding precedent on those undecided issues:
Held: It is a settled principle that a judgment is an authority only for
what it decides – When a judgment fails to address other issues
raised, it is said to be ‘sub silentio’, and cannot be held as a binding
precedent on those undecided issues – In the instant case, from
the records, it is very clear that in the earlier judgment of this Court
challenging the original decree, only the issue of limitation was
adjudicated – Critical issues such as (i) the jurisdiction of the trial
Court to entertain the suit against the appellant in the absence of a
notice u/s.80 CPC, (ii) the maintainability of the suit, (iii) the power
of the Court to modify the decree by entertaining an application
u/s.21 of the Limitation Act, 1963, and (iv) the applicability of
the Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993, were not adjudicated – This
is where the concept of ‘sub silentio’ assumes significance –
Therefore, it can safely be concluded that the judgment of this
Court in Civil Appeal No.2073/2010 is silent on the issues now
under consideration – When the judgment of a Court is silent on
questions of law either raised earlier but not decided, or raised in the

* Author
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subsequent proceedings, it is settled law that constitutional courts
are empowered to decide such questions of law independently
and the earlier judgment cannot be cited as a binding precedent
or conclusive. [Para 13]

Code of Civil Procedure, 1908 – s.47 – Whether the issues
that go to the root of jurisdiction and maintainablity can still
be raised at the stage of execution u/s.47 of CPC:
Held: It is settled legal position, applying the doctrine of sub silentio,
that a decision is not an authority on a point that has not been argued
or decided – In the instant case, the trial Court had not framed any
issues regarding the maintainability of the suit filed by respondent
no. 1 against the appellant, for the alleged default committed by
respondent no. 2, despite a plea in the written statement – Without
any issue having been framed on maintainability, the matter reached
up to this Court, and the decision was rendered solely on the issue
of limitation – Therefore, the issues that remained undecided, but
go to the root of jurisdiction and maintainability, can still be raised
at the stage of execution u/s.47 CPC. [Para 14]

Code of Civil Procedure, 1908 – s.47 – Scope of – Discussed:
Held: As per s.47, the Executing Court is empowered to examine
the questions relating to execution, discharge, or satisfaction of
the decree – It cannot go beyond the decree; but at the same
time, when a plea is raised that the decree is a nullity and hence,
unenforceable, the executing court is bound to examine and decide
such an application on its merits – The court must execute the
decree according to its tenor, and cannot entertain objections on
the ground that the decree is erroneous in law or on facts – Until
it is set aside by an appropriate proceeding in appeal or revision,
a decree, even if erroneous, remains binding on the parties –
A decree may, however, be challenged in execution proceedings,
if it is a nullity–for instance, if it is passed without bringing on
record the legal representative of a person who was dead at the
time the decree was passed, or where the cause of action was not
maintainable, or if it was passed against a ruling prince without
a certificate – Similarly, when the decree is made by a court that
has no inherent jurisdiction to pass it, an objection as to its validity
may be raised in an execution proceeding if the objection appears
on the face of the record. [Paras 15, 16]
[2025] 9 S.C.R. 3

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

Jurisdiction – Scope of:
Held: A decree passed without jurisdiction is null and void –
A court is said to lack jurisdiction if it has no territorial jurisdiction,
or if it has no pecuniary jurisdiction, or if its jurisdiction over the
subject matter is circumscribed by any law – Such laws may be
either substantive or procedural and may, by express provision
or necessary implication, take away the jurisdiction of a court to
deal with a matter, leaving no room for any judicial discretion –
These provisions may either impose a total bar on the court from
dealing with certain subject matters or impose any pre-conditions,
non-compliance with which may prevent the court from entertaining
the suit, even if it otherwise has jurisdiction over the subject matter –
A plea questioning the jurisdiction of the court can be raised at any
stage, including before the High Court or this Court, particularly
when it involves a pure question of law. [Para 20]

Code of Civil Procedure, 1908 – s.2(9) and Or. XX Rule 4 (2) –
Judgment to satisfy requirement u/Or.XX, Rule 4(2):
Held: A “Judgment”, as defined u/s.2(9) CPC, to be valid, must
satisfy the requirements u/Or.XX Rule 4(2) CPC – It should not
only trace, record, consider and decide all the points of disputes
but should also reflect the same – The decision must be based on
reasons reflected in the judgment – Once the issue of maintainability
is raised, or if the facts as pleaded by themselves create a cloud
over the jurisdiction of the court or the maintainability of the
proceedings, the same will have to be addressed, failing which
the judgment will be unsustainable and a nullity. [Para 21]

Code of Civil Procedure, 1908 – s.80 – When State, which
was not a party originally, was impleaded – Whether, in such
cases also, the plaintiff is duty bound to issue a notice as
contemplated u/s.80(1) CPC or obtain leave u/s.80(2) CPC
before an application for impleadment is taken out:
Held: In cases such as the one under consideration, the State, which
was not originally a party, could be impleaded and the plaint could
be amended by inclusion of pleadings, cause of action and relief
against the State – In such cases also, the plaintiff, immediately
upon becoming aware of the necessity to implead the State, is duty
bound to either issue a notice as contemplated u/s.80(1) CPC or
obtain leave u/s.80(2) CPC before an application for impleadment
4 [2025] 9 S.C.R.

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is taken out – Failure to do so will bar the civil court from exercising
jurisdiction against the State, and the court will have no option but
to dismiss the suit – This is so because when a state government
or its instrumentality is impleaded in a pending suit, a new or fresh
cause of action is introduced – Similarly, if the amendment sought
by the plaintiff introduces a new cause of action within the period
of limitation and with the court’s leave, a fresh notice u/s.80(1)
CPC must still be issued. [Para 26]

Code of Civil Procedure, 1908 – s.80 – Micro, Small And Medium
Enterprises Development Act, 2006 – s.18 – Commercial Courts
Act, 2015 – s.12-A – Appellant/4th defendant is a “State” within
the meaning of Art. 12 of the Constitution – Failure of issuing
notice u/s.80 of CPC – Effect of:
Held: The appellant/4th defendant is a “State” within the meaning
of Art.12 of the Constitution, the mandatory requirement of notice
u/s.80 has come into operation – A plain reading of s.80 along
with the settled position of law clearly enunciates that it is a duty
of the trial court to deal with that aspect of satisfaction of the
notice u/s.80 – Such preconditions to be satisfied before initiation
of a suit are recognized as mandatory in civil disputes where a
statute prescribes the same – A reference may be made to s.18
of the MSME Act, which provides for conciliation, or to s.12-A of
the Commercial Courts Act, 2015, which mandates pre-institution
mediation–failure of which would render the suit unsustainable
and liable to be rejected – The trial Court, in the present case,
failed to do so, thereby rendering the decree a nullity. [Para 30]

Small Scale and Ancillary Industrial Undertakings Act, 1993 –
Applicability of the interest on delayed payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993:
Held: The Act, 1993 came into force with effect from 23.09.1992
and remained in effect until it was repealed by the Micro, Small
and Medium Enterprises Development Act, 2006 – The Act, 1993
is clearly prospective in nature and governs the incidents of supply
and rendering service which happens after its enforcement, i.e.,
23.09.1992 – Further, it is the buyer who is liable to make the
payment after the supply of goods or rendering any service –
Thus, by virtue of s.3, both the incidents–i.e., the supply of goods
or services on the one hand, and the payment or default on the
[2025] 9 S.C.R. 5

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

other–must occur after the Act has come into force – The trial
Court committed a serious error in applying the provisions of the
repealed Act, 1993, to the present case, where the supply was
effected in 1985, and more particularly, a grave error in fastening
liability for interest and compound interest on the appellant, which
was not even a buyer in the transaction – Accordingly, the judgment
of the trial Court, to the extent of applying the repealed Act, 1993
and imposing liability on the appellant, is patently without authority
and is a nullity on that count – The High Court, in exercise of its
supervisory jurisdiction, also failed to examine and address these
vital aspects. [Paras 32, 32.2, 34]

State Financial Corporation Act, 1951 – Code of Civil Procedure,
1908 – s.80 – The appellant, State-owned Corporation, jointly
financed along with respondent no.3-IPICOL, to respondent
no. 2, for the establishment of a bleaching powder unit – On
29.07.1985, respondent no. 1 allegedly supplied raw materials
worth Rs.66,454.65 to respondent no. 2 – Owing to the
non-repayment of dues arising out of the financial assistance
provided by the appellant and respondent no.3, the appellant
took over possession of industrial unit of respondent no. 2 –
On 29.02.1988, respondent no.1, alleging that it had supplied
hydrated lime to respondent no. 2 in 1985, filed a recovery
suit in Civil Suit No.103 of 1988 before the Court of Civil
Judge (Sr. Division) – On 11.02.1993, respondent no.1 made
an application to implead the appellant as defendant no.4,
which was allowed – Whether the suit filed was maintainable:
Held: The appellant had filed a written statement denying liability
on multiple grounds, including: (i) U/s.29, no liability of respondent
no. 2 to third parties could be imposed on the appellant, (ii) There
was no privity of contract between the appellant and respondent
no. 1 as the appellant was not a party to the underlying transaction,
(iii) the suit against the appellant, was barred by limitation, (iv) the
suit was not maintainable, and (v) the trial Court lacked territorial
jurisdiction to entertain the suit – Without properly considering
the same, the trial Court decreed the suit in favour of respondent
no. 1 – Upon a perusal of the pleadings and the judgment, this
Court finds that the trial Court failed to frame any issues with
respect to maintainability, jurisdiction and limitation, nor did it
render any finding on the maintainability of the suit against the
appellant herein, there being a specific plea to that effect – The trial
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Court without analysing the scope and applicability of the S.F.C.
Act, 1951, the requirement of mandatory notice u/s.80 CPC, the
relevance of the repealed Act, 1993, and the specifically contested
issue of maintainability, proceeded to render findings only on the
limited issues – The judgment was passed without considering or
rendering any finding on the core legal issues in the case, thereby
vitiating the trial Court’s judgment on fundamental jurisdictional
grounds. [Paras 36, 37, 38]

State Financial Corporation Act, 1951 – s.29 – Code of Civil
Procedure, 1908 – Whether there was privity of contract
between the appellant and respondent no. 1:
Held: Admittedly, there was no contract between the appellant and
respondent no.1 – The appellant has been impleaded solely on the
ground that it took possession of the defaulting industrial concern
and exercised its rights under the S.F.C. Act, 1951 to realize its
dues – In the absence of any privity of contract, the liability of the
appellant is limited strictly to the extent contemplated under Section
29 of the S.F.C. Act, 1951 – The appellant therefore, cannot be
saddled with the entire liability arising from a transaction to which
it was not a party. It is necessary to understand the object behind
Section 29 – The liability of the appellant is restricted to the
defaulting concern’s funds in its hands, and under no stretch of law,
can be extended to its personal or corporate properties – In such
a situation, this Court fails to comprehend how the entire liability
has been fastened upon the appellant and how its properties and
bank accounts have been attached – This is clearly beyond the
jurisdiction of the trial Court or, for that matter, even the Executing
Court, which cannot proceed against the personal assets of the
appellant in such circumstances. [Paras 39, 40]

Small Scale and Ancillary Industrial Undertakings Act, 1993 –
State Financial Corporation Act, 1951 – Whether the appellant
is liable to pay any amount to respondent no.1 for alleged
default committed by respondent no.2, under decree:
Held: This Court is of the considered opinion that the suit itself
was not maintainable against the appellant and the provisions of
the repealed Act, 1993 were inapplicable to the present case –
Consequently, the execution proceedings to realize the principal
with exorbitant interest calculated under the repealed Act, 1993
[2025] 9 S.C.R. 7

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

are unsustainable, and the decree cannot be enforced against the
appellant – The trial Court, having already passed the decree, could
not have entertained an application u/s.21 of the Limitation Act,
1963, and the post-decree application filed by respondent no.1 was,
therefore, not maintainable – Nearly four decades have elapsed in
protracted litigation – Article 142 of the Constitution empowers this
Court to pass any order necessary for doing complete justice in
any cause or matter pending before it – Accordingly, it is held that
the appellant (OSFC) is not liable to pay any amount to respondent
no. 1 for the alleged default committed by respondent no. 2, under
the decree – In view of the same, the impugned judgment and
orders passed by the Courts below are hereby set aside. [Para 45]

Litigation – Failure to raise appropriate legal objections at
the appropriate stages – Absence of timely and effective
representation – Non-disclosure of material facts – Strong
disapproval of the manner in which the present litigation has
been conducted by the appellant Corporation and its counsel
before the lower courts:
Held: Public Institutions–particularly those entrusted with the
stewardship of public funds–are expected to conduct themselves
in legal proceedings with the highest standards of diligence,
responsibility, and accountability – The failure to raise appropriate
legal objections at the appropriate stages, coupled with the absence
of timely and effective representation, has not only burdened the
judicial system but has also exposed the corporation to unwarranted
and protracted liability – The present case is a stark example of
how a State-owned corporation has been unjustly and unsustainably
saddled with financial liability – Courts are duty bound to ensure
that public resources are not unjustly depleted due to judicial
oversight or misapplication of law – This responsibility extends
equally to Government counsel and officials involved in litigation –
It is incumbent upon them to ensure that all material facts are
disclosed, all legal defences are properly pleaded, and all relevant
documents are placed on record – Government counsel, as officers
of the Court, bear a dual responsibility: to protect the interest of
the State, and to assist the Court in achieving outcomes that are
just, lawful and equitable – It is also imperative for the State to
establish and maintain robust internal mechanisms for regular
monitoring and effective follow-up of pending litigation, ensuring
it is pursued to its logical conclusion. [Para 47]
8 [2025] 9 S.C.R.

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Limitation Act, 1963 – s.21 – Impleadment of a party in a
pending suit, when to take effect – Discussed:
Held: The impleadment of a party in a pending suit takes effect only
from the date on which such an application is allowed – However,
the proviso enables the court to direct that such impleadment shall
relate back to an earlier date, provided that the omission was due
to a mistake made in good faith – A mistake in good faith would be
applicable if the person claiming shelter under such plea is able
to prove that he has exercised all possible diligence and believed
an existing fact or law to be true or applicable, which is probable
but not correct – Essentially, such a mistake in good faith can only
denote an error in judgment, but cannot include a plea that he
was not aware of the law, as per the maxim “Iqnorantia facti doth
excusat; Ignorantia juris non excusat” which means, ignorance of
fact is an excuse, but ignorance of law is not excused – Further,
Section 21 is applicable only in pending proceedings and the
provision is to be pressed into service when the application for
impleading is decided and not later – The trial Court, while passing
an order for impleadment has to consider the proviso to Section 21,
the facts pleaded, and the evidence both documentary or oral,
and then decide, whether the legal requirement is satisfied to
hold that the suit is deemed to have been instituted against the
impleaded party with effect from an earlier date – It is also open to
the Court to consider the facts and upon satisfaction, to apply the
proviso – However, such an exercise must be done while deciding
the application and a further order is to be passed to that effect
immediately and not after the suit is decreed. [Para 41.1]

Case Law Cited
Synthetics and Chemicals Ltd and Others v. State of U.P. and
Others [1989] Supp. 1 SCR 623 : (1990) 1 SCC 109; Ajay Hasia
and Others v. Khalid Mujib Sehravardi and Others [1981] 2 SCR
79 : (1981) 1 SCC 722 : MANU/SC/0498/1980 – followed.
Municipal Corpn. of Delhi v. Gurnam Kaur [1988] Supp. 2 SCR
929 : (1989) 1 SCC 101; The State of U.P. v. Synthetics and
Chemicals Ltd. [1991] 3 SCR 64 : (1991) 4 SCC 139 : (1992)
87 STC 289 : 1991 SCC OnLine SC 17; In Most Rev. P.M.A.
Metropolitan v. Moran Mar Marthoma [1995] Supp. 1 SCR 542 :
(1995) Supp. 4 SCC 286; Arnit Das v. State of Bihar [2000] Supp.
1 SCR 69 : (2000) 5 SCC 488 : 2000 SCC (Cri) 962 : 2000 SCC
OnLine SC 936; State of W.B. v. Kesoram Industries Ltd. [2004] 1
[2025] 9 S.C.R. 9

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

SCR 564 : (2004) 10 SCC 201 : (2004) 266 ITR 721 : 2004 SCC
OnLine SC 70; (5-Judge Bench); Zee Telefilms Ltd. v. Union of
India [2005] 1 SCR 913 : (2005) 4 SCC 649 : 2005 SCC OnLine
SC 213; Delhi Airtech Services (P) Ltd v. State of U.P. [2011] 12
SCR 191 : (2011) 9 SCC 354 : (2011) 4 SCC (Civ) 673 : 2011
SCC OnLine SC 1115; NBCC (India) Ltd v. The State of West
Bengal and Ors. [2025] 1 SCR 610 : MANU/SC/0061/2025 : (2025)
3 SCC 440; Brakewel Automotive Components (India) (P) Ltd. v.
P.R. Selvam Alagappan [2017] 3 SCR 681 : (2017) 5 SCC 371 :
(2017) 3 SCC (Civ) 152 : 2017 SCC OnLine SC 265; Harshad
Chiman Lal Modi v. DLF Universal and Ors. [2005] Supp. 3 SCR
495 : (2005) 7 SCC 791 : MANU/SC/0710/2005; Jagmittar Sain
Bhagat v. Dir. Health Services, Haryana and Others [2013] 8 SCR
77 : MANU/SC/0703/2013 : (2013) 10 SCC 136; Shri Saurav Jain
and Another v. M/s A.B.P Design & Another [2021] 8 SCR 1020 :
MANU/SC/0509/2021 : (2022) 18 SCC 633; Masalti v. State of Uttar
Pradesh [1964] 8 SCR 133 : MANU/SC/0074/1964 : AIR 1965
SC 202; Bihari Chaudhari v. State of Bihar [1984] 3 SCR 309 :
AIR 1984 SC 1043 : (1984) 2 SCC 627; Gangappa Gurupadappa
Gugwad Gulbarga v. Rachawwa and Ors. [1971] 2 SCR 691 : AIR
1971 SC 442 : MANU/SC/0351/1970; Bishandayal and Sons v.
State of Orissa and Ors., AIR 2001 SC 544 : MANU/SC/0773/2000;
Shanti Conductors (P) Ltd v. Assam State Electricity Board and
Others [2019] 1 SCR 489 : MANU/SC/0068/2019 : (2019) 19
SCC 529 – relied on.
Celir LLP v. Mr. Sumati Prasad Bafna and Others [2024] 18 SCR
1618 : 2024 LiveLaw (SC) 991; R. Nagaraj (dead) through legal
heirs and Another v. Rajamani and Others, 2025 Livelaw SC 416;
Shaki Tubes Ltd v. State of Bihar [2009] 10 SCR 739 : (2009)
7 SCC 673; Fertilizer Corporation of India Ltd and Others v.
M/s Coromandel Sacks Pvt. Ltd. [2024] 5 SCR 321; Hira Lal
Patni v. Kali Nath [1962] 2 SCR 147 : 1961 SCC OnLine SC
42 : AIR 1962 SC 199 : (1961) 2 SCJ 592; Midnapore Peoples
Co-operative Bank Ltd and Others v. Chunilal Nanda and Others
[2006] Supp. 2 SCR 986 : (2006) 5 SCC 399 – referred to.

List of Acts
Micro, Small and Medium Enterprises Development Act, 2006;
Constitution of India; Code of Civil Procedure, 1908; Limitation
Act, 1963; State Financial Corporation Act, 1951; Commercial
Courts Act, 2015; Interest on Delayed Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993.
10 [2025] 9 S.C.R.

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List of Keywords
Doctrine of Sub silentio; Computation of interest on the decretal
amount; Execution proceedings; Jurisdiction of the trial Court;
Notice u/s.80 CPC; Maintainability of the suit; Power of the
Court to modify the decree; Section 21 of the Limitation Act;
Applicability of the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993; Stage of
execution u/s.47 of CPC; Execution, discharge, or satisfaction
of the decree; Judgment to satisfy requirement u/Order XX,
Rule 4(2); State; Article 12; Privity of contract; Iqnorantia facti
doth excusat; Ignorantia juris non excusat; Impleadment of a
party in a pending suit; Litigation.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10047
of 2025
From the Judgment and Order dated 22.11.2022 of the High Court
of Uttarakhand at Nainital in WPMS No. 2314 of 2022

Appearances for Parties
Advs. for the Appellant:
Ravi Prakash Mehrotra, Sr. Adv., Jogy Scaria, Ms. Aparna Mehrotra,
Apoorv Srivastava.
Advs. for the Respondents:
Gopal Sankaranarayanan, Sr. Adv., Jasbir Singh Malik, Ms. Rhythm
Bharadwaj, Shourya Das Gupta, Ms. Aditi Gupta, Varun Punia,
Shubhranshu Padhi, Jay Nirupama, D.grish Kumar, Pranav Giri,
Ekansh Sisodia.

Judgment / Order of the Supreme Court

Judgment

R. Mahadevan, J.

1. Leave granted.
2. The present appeal has been filed by the Odisha State Financial
Corporation, a government corporation in the State of Odisha, against
the final judgment and order dated 22.11.2022 passed by the High
[2025] 9 S.C.R. 11

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

Court of Uttarakhand at Nainital1 in Writ Petition (M/S) No. 2314 of
2022, whereby the High Court dismissed the writ petition filed by the
appellant under Article 227 of the Constitution of India, challenging
the civil proceedings and the orders passed by the Courts below
regarding the computation of interest on the decretal amount and
the consequential execution proceedings.

BRIEF FACTS
3. The appellant, which is a State Financial Corporation, along with
Industrial Promotion & Investment Corporation of Odisha2 jointly
financed an industrial unit, namely, M/s. Manorama Chemicals
Works Ltd., (Respondent No. 2 herein) on 22.11.1984 for setting
up a bleaching powder unit at Ganjam, Odisha. M/s.Vigyan
Chemical Industries Limited Dehradun (Respondent No.1 herein)
supplied raw materials worth Rs. 66,454.65 to Respondent No.
2 on 29.07.1985. Since Respondent No. 2 defaulted in repaying
the financial assistance received from the appellant and IPICOL,
possession of the industry of Respondent No.2 was taken over by
the appellant on 18.08.1987 under Section 29 of the State Financial
Corporation Act, 19513.
3.1. Thereafter, Respondent No. 1 filed Recovery Suit No.103 of
1988 against Respondent Nos. 2, 3, and 4 in the Court of
Second Additional Civil Judge (Senior Division), Dehradun4,
claiming Rs. 90,400/- with interest as the outstanding amount.
Respondent No. 1/Plaintiff also claimed pendente lite and future
interest at the rate of 24% per annum till realization of the
amount. The appellant was sought to be impleaded in the suit on
11.02.1993, which was allowed by the trial Court on 06.12.1994,
and the appellant was added as Defendant No. 4. The appellant
objected to its impleadment by filing a Miscellaneous Appeal
and thereafter, a Writ Petition, both of which ended in dismissal.
The trial Court was directed to adjudicate the suit expeditiously,
within one year, with the appellant as a party.

1 Hereinafter referred to as “the High Court”
2 For short, “IPICOL”
3 For short, “S.F.C. Act, 1951”
4 For short, “the trial Court”
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3.2. Respondent No. 1 / plaintiff also sought leave to amend and
add certain paragraphs, contending that under Section 29(5)
of the S.F.C. Act, 1951, the appellant / Defendant No. 4 is
liable for the claimed amount, as it had taken possession of
Respondent No. 2, and the said industrial concern was now to
be sued through Defendant No. 4. The amendment application
was allowed, and the appellant / Defendant No. 4 filed a written
statement, stating that due to default in repayment of the loan,
it had taken possession of industry of Respondent No.2 on
18.08.1987 under Section 29 of the S.F.C. Act, 1951 for the
purpose of realization of its dues and thereafter sold the unit
to one Shri T.R.K. Rao.
3.3. During the pendency of the suit, the appellant opened a bank
guarantee on 27.11.1998 for a sum of Rs.6,36,243/- with Union
Bank of India, Cuttack, undertaking to pay the said amount to the
trial Court, on demand. Similarly, another bank guarantee was
opened on 16.10.1999 for a sum of Rs.3,50,000/- with Union
Bank of India, Cuttack to be deposited with the trial Court on
demand with respect to Suit No.103/1988. The trial Court was
accordingly informed by the Union Bank of India regarding the
issuance of the bank guarantee for Rs.3,50,000/- to the credit
of the suit. The appellant also instructed its lawyer vide letter
dated 22.10.1999, to submit the said bank guarantee to the
trial Court.
3.4. The suit filed by Respondent No. 1/Plaintiff was partly decreed
on 20.08.2001 for an amount of Rs. 84,170/- with pendente lite
and future interest to be calculated at 24% per annum from
01.03.1988 to 23.09.1992 and at 2% compounded monthly from
23.09.1992 till payment. Challenging the same, the appellant
preferred Civil Appeal No. 182 of 2001. Respondent No.1 filed
cross objection challenging the partial dismissal of the suit.
Meanwhile, Respondent No. 1 also filed an application under
the Limitation Act, 1963, on 11.04.2005 to treat the suit against
the appellant as having been filed from 29.02.1988. By order
dated 05.11.2005, the appellant was added as a defendant
in the suit from 29.02.1988, and by order dated 22.03.2006,
the trial Court held that the suit had been filed within limitation
against the appellant. Thereafter, the appeal filed by the appellant
was dismissed, and the cross-objection filed by Respondent
[2025] 9 S.C.R. 13

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

No.1 was allowed, and consequently, the suit was decreed in
its entirety, by the Additional District Judge, Fast Track Court
No.VI, Dehradun5, by judgment dated 08.08.2006.
3.5. Aggrieved by the judgment dated 08.08.2006 in First Appeal
No.182 of 2001, concurring with the trial Court’s order
dated 22.03.2006 with the decision that the suit was filed
within limitation against the appellant, and the decree dated
20.08.2001 in Suit No.103/88, the appellant preferred Second
Appeal No.78 of 2006 before the High Court. By order dated
30.11.2006, the High Court stayed the judgment and decree,
subject to the condition that the appellant deposit the decretal
amount within 45 days. As stated earlier, two bank guarantees
for Rs.6,36,243/- and Rs.3,50,000/- had been opened by the
appellant on 27.11.1998 and 16.10.1999 respectively and were
offered as deposit.
3.6. Thereafter, by judgment, dated 07.05.2007 in Second Appeal
No.78 of 2006, the High Court dismissed the appeal, holding that
the suit was not barred by limitation. Aggrieved, the appellant
preferred SLP (Civil) CC No.10278/2007 (later Civil Appeal
No.2073/2010) before this Court. By order dated 10.03.2014,
this Court noted that the required bank guarantees, which
exceeded the decretal amount, had already been furnished
and accordingly, no further deposit was deemed necessary.
Ultimately, by judgment dated 23.11.2017, this Court dismissed
Civil Appeal No.2073/2010, thereby upholding the High Court’s
judgment on limitation.
3.7. On 01.08.2018, Respondent No. 1 filed Execution Case
No.107 of 2018 in the Court of the Civil Judge (Senior Division)
Dehradun6 for recovery of the decretal amount, stated to be
Rs.8,88,33,416.30 from the appellant’s bank accounts and
assets. Vide order dated 12.03.2020, the Execution Court
directed Union Bank of India, Cuttack, to remit the principal
amount along with interest accrued on TDR No.303/284391
and TDR No.303/284615 for payment to the decree holder.

5 For short, “the First Appellate Court”
6 For short, “the Execution Court”
14 [2025] 9 S.C.R.

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3.8. Pursuant to the order dated 12.03.2020 passed by the
Execution Court, Union Bank of India released the proceeds
of the two TDRs opened by the appellant in 1998 and 1999 –
Rs. 40,16,606/- and Rs. 18,00,299/-, respectively – totaling
Rs. 58,16,905/- to the Execution Court towards satisfaction of the
decree amount of Rs.90,400/- with accrued interest. Thereafter,
by orders dated 01.09.2021, the Execution Court attached the
appellant’s fixed and flexi deposits in Union Bank of India, Axis
Bank Limited and Odisha State Cooperative Bank in Cuttack,
amounting to approximately Rs. 22 Crores. Aggrieved by the said
orders of attachment dated 01.09.2021, the appellant filed Writ
Petition (Civil) No.28301/2021 before the High Court of Orissa,
which by order dated 16.09.2021, disposed of the writ petition
with liberty to the appellant to approach the appropriate forum.
3.9. Subsequently, on 07.10.2021, the Execution Court passed
two orders directing the appellant’s banks, Axis Bank Ltd., and
Odisha State Cooperative Bank at Cuttack to remit the total
value of the attached fixed deposits, along with interest, to the
Court of the Additional Civil Judge VI (Senior Division) Dehradun.
Aggrieved, the appellant filed Writ Petition (C) No.1226/2021
before this Court, wherein vide order dated 18.11.2021, it was
observed that the appellant is at liberty to pursue any other
remedy available under law.
3.10. Thereafter, the appellant filed Misc. Petition No. 156/21 under
Section 47 of the Code of Civil Procedure, 19087, seeking a
stay of execution proceedings of Execution Case No.107/2018.
The said petition was dismissed on 18.04.2022. Aggrieved,
the appellant preferred Civil Revision No.40/2022 before the
District Judge, Dehradun, along with an application for stay of
further proceedings in Execution Case No.107/2018. During
its pendency, the Execution Court, by order dated 05.08.2022,
directed the Odisha State Co-operative Bank to deposit the
decretal amount by 30.08.2022, failing which, coercive steps
would be taken against the appellant.
3.11. Aggrieved by the order dated 05.08.2022 passed in Execution
Case No.107/2018, the appellant preferred Writ Petition (C)

7 For short, “CPC”
[2025] 9 S.C.R. 15

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

No.2069/2022 before the High Court. By order dated 30.08.2022,
the High Court disposed of the writ petition with a direction to the
Revisional Court to consider the stay application on 02.09.2022.
However, on 02.09.2022, the Revisional Court dismissed Civil
Revision No.40/2022.
3.12. Consequently, the appellant approached the High Court by filing
Writ Petition No.2314/22 (M/S) for setting aside the order dated
02.09.2022 passed by the Revisional Court in Civil Revision
No.40/2022 and the order dated 18.04.2022 passed by the
Execution Court in Execution Case No.107/2018. However,
by the impugned judgment dated 22.11.2022, the High Court
dismissed the writ petition. Aggrieved thereby, the appellant has
approached this Court by way of the present appeal.

CONTENTIONS OF THE PARTIES
4. Mr. Ravi Prakash Mehrotra, learned Senior Counsel for the
appellant Corporation submitted that the High Court, in the facts
and circumstances of the present case, was not justified in declining
to exercise its supervisory jurisdiction under Article 227 of the
Constitution of India, even in the face of a manifest miscarriage of
justice and irretrievable harm caused to the appellant, on account of
the proceedings and orders passed by the Courts below in relation
to the decree and the consequent execution case, which constitute
a flagrant violation of the fundamental principles of law and have
resulted in grave injustice to the appellant.
4.1. Learned Senior Counsel further submitted that the Courts
below erred in computation of interest on the decretal amount,
particularly, in light of the fact that the appellant is facing coercive
measures at the instance of Respondent No.l, arising out of
the execution of a money decree of Rs.90,400/- passed on
20.08.2001, in respect of which the appellant had opened bank
guarantees prior to the decree, and the proceeds amounting
to Rs.58,16,905/- were released to Respondent No. 1 on
05.10.2020. However, based on an erroneous computation of
interest at 24% per annum, compounded monthly, the amount
sought is a staggering Rs. 8.89 Crores. The appellant, a
government corporation, is thus facing unwarranted attachment
proceedings, which gravely and adversely affect public interest.
16 [2025] 9 S.C.R.

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4.2. Learned Senior Counsel also contended that the High Court
was not justified in dismissing the writ petition on the ground
that the appellant had not furnished the bank guarantee to
secure the decretal amount. In reality, the proceeds of the bank
guarantees were released to the decree holder / Respondent
No.1 – not out of his own volition, but under Court’s direction.
Thus, it cannot be held that the bank guarantee was not a
deposit under Order XXIV Rule 1 CPC. The High Court erred
in holding that such a deposit must be voluntary and not under
compulsion. Despite furnishing bank guarantee in excess of the
decretal amount, the High Court adopted an unduly narrow view
of Section 47 CPC, while exercising jurisdiction under Article
227 of the Constitution.
4.3. Learned Senior Counsel further submitted that the execution
application filed by Respondent No. 1 was not maintainable
before the civil Court in view of Section 15(2) of the Commercial
Courts Act, 2015. Although this point may not have been
specifically pleaded before the lower courts, it was raised
before the High Court and hence, the same ought to have been
considered by the High Court.
4.4. Learned Senior Counsel emphasized that the High Court failed
to appreciate that the computation of interest on the decretal
amount was not only erroneous but also exorbitant. Interest
at the rate of 24% was impermissible under Section 34 CPC.
Furthermore, the appellant / Defendant No. 4 did not place any
orders for purchase; in fact, it had clearly pleaded in its written
statement that it had no connection with the underlying transaction
and hence, no liability can be fastened on them. It was also
contended that a specific plea regarding the excessive interest
was also taken. The High Court ought to have considered in the
petition under Article 227 that the appellant Corporation is now
facing unprecedented and unjustified attachment proceedings
and is saddled with a liability of Rs. 8.89 Crores – arising from
a decree of merely Rs.90,400/- – based on a suit instituted in
1988. The bank guarantees furnished in 1998 and 1999 (prior
to the decree), amounting to Rs.58,16,905/- were encashed
and improperly released to the decree holder. Hence, further
recovery, attachment, and coercive steps against the appellant
are unwarranted. Moreover, the continued accrual of interest is
[2025] 9 S.C.R. 17

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

wholly unjustified. In these circumstances, intervention by this
Court is warranted in the interest of justice to bring finality to
a matter that is prejudicial to the appellant and against public
interest.
4.5. Learned Senior Counsel placed reliance on the judgment of
this Court in Shaki Tubes Ltd v. State of Bihar8, to contend
that if the purchase / supply order predates the enactment
of the interest on Delayed Payments to Small Scale and
Ancillary Industrial Undertakings Act, 1993, then interest is
governed by Section 34 CPC and not the Delayed Payments
Act, which operates prospectively. In the present case, the
supply order – i.e., the sale of raw materials to Respondent
No.2 by Respondent No. 1 – was made in 1985 long before
the Act came into force i.e., on 23.09.1992. Therefore, the trial
Court’s decree dated 20.08.2001 awarding compound interest
at 2% per month from 23.09.1992 onward under the Delayed
Payments Act, was erroneous.
4.6. Learned Senior Counsel further pointed out that the amount being
claimed from the appellant is grossly exaggerated and irregularly
calculated. As a result, the appellant Corporation is now facing
attachment of all its bank accounts and assets, plunging it into
administrative disarray and financial chaos, including difficulty in
disbursing salaries. It is neither fair, just, nor legally sustainable
to subject a public sector corporation to such coercive measures.
Therefore, the Execution Court’s insistence on recovering nearly
Rs. 9 crores is neither warranted nor justified.
4.7. Learned Senior Counsel further submitted that the appellant
corporation had continuously contested the decree before the
appellate forums from 2001 to 2017. In contrast, Respondent
No. 1, the decree holder, neither invoked the bank guarantee
nor initiated execution proceedings for nearly 17 years, after
the decree was passed. According to the learned Senior
Counsel, the decree holder received Rs.58,16,905/- on
05.10.2020 and Rs.2,34,40,654/- on 07.01.2022, thereby totaling
Rs.2,92,57,559/- out of attachment and encashment of two bank
guarantees and one fixed deposit of the appellant corporation.

8 (2009) 7 SCC 673
18 [2025] 9 S.C.R.

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4.8. Furthermore, reliance was placed on the decision of this
Court in Fertilizer Corporation of India Ltd and others v.
M/s. Coromandel Sacks Pvt. Ltd 9, wherein this Court applied
the principle of harmonious construction to balance competing
interests and safeguard the rights of judgment debtors. In
that case, the Court emphasized the benefit available to the
judgment debtor under Order XXIV CPC, particularly, when the
bank guarantee was furnished before the decree was passed.
This principle contrasts with the interest calculation under the
Interest on Delayed Payments to Small Scale and Ancillary
Industrial Undertakings Act, 1993 which resulted in the mounting
of compound interest from 23.09.1992 onwards. The learned
Senior Counsel further contended that though a plea regarding
maintainability was raised, no finding was given and hence, the
decree is a nullity.
4.9. Accordingly, learned Senior Counsel prayed for setting aside the
judgment of the High Court and for allowing the present appeal.
5. Per contra, Mr. Gopal Sankaranarayanan, learned Senior Counsel
for the Respondent No. 1, while denying the claim of the appellant
Corporation and reiterating the stand taken in the counter affidavit
filed by them, inter alia, contended as under:
a) The present Petition for Special Leave to Appeal, invoking the
extraordinary jurisdiction of this Court under Article 136 of the
Constitution of India, is liable to be dismissed at the threshold
itself on ground of suppression of material information.
b) The High Court has declined to grant any relief to the appellant by
dismissing Writ Petition (M/S) No.2314 of 2022. The appellant -
Odisha State Financial Corporation has not approached this
Court with clean hands, having knowingly and repeatedly made
false and misleading statements and even filed a false affidavit
in earlier proceedings before this Court.
c) The present Special Leave Petition raises no question of
law, much less any substantial question of law, warranting
consideration by this Court. The so-called substantial questions

9 [2024] 5 SCR 321, (rendered on 26.04.2024)
[2025] 9 S.C.R. 19

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

of law framed by the appellant - Odisha State Financial
Corporation cannot be entertained by this Court.
d) Initially, the Original Suit was filed in the year 1988 and was
decreed in 2001. However, the Execution Application could be
filed only in 2018, due to the repeated challenges raised by
the appellant before various forums including the trial Court,
Appellate Courts at Dehradun, and the High Courts of Allahabad
and Uttarakhand, culminating in Civil Appeal No. 2073 of 2010
before this Court, which was finally dismissed by Judgment
dated 23.11.2017. In effect, 35 years have passed since the
filing of the original suit and 22 years since the date of decree.
It is deeply unfortunate that despite more than three decades
having elapsed, the decree holder has not been able to enjoy
the fruits of a decree passed in 2001.
e) The allegation of the appellant Corporation that it had furnished
a bank guarantee of Rs.3,50,000/- in 1999, (prior to decree) and
that the proceeds thereof along with another bank guarantee
for Rs.6,36,243/-, were released to Respondent No.1 on
05.10.2020, and further, that the interest has been erroneously
calculated at 24% per annum compounded monthly, is wholly
incorrect, false, unsubstantiated, and specifically denied.
f) The bank guarantee furnished by the appellant Corporation was
not voluntary, but given under compulsion and only pursuant
to repeated directions of the Court. Moreover, the said bank
guarantee had already expired in the year 2000. The amount
was not paid to the Respondent on 05.10.2020, but only on
23.02.2021 – twenty years after the decree and twenty-two
years after furnishing the bank guarantee. In fact, the first actual
payment came through attachment proceedings pursuant to
the orders of the Execution Court in 2020. The amount was
deposited by the bank directly into the Court through a demand
draft, which was then transferred to the Respondent. But the
appellant had made all efforts to avoid payment. Furthermore,
the rate of interest at 24% per annum compounded monthly
was awarded by the trial Court in its judgment dated 20.08.2001
and was rightly upheld by the Appellate Court in its judgment
dated 08.08.2006. However, the appellant has failed to submit
any calculation or interest sheet to establish its claim that
20 [2025] 9 S.C.R.

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the computation is erroneous and has merely raised vague,
baseless, and misleading allegations before this Court.
g) The High Court of Uttarakhand granted ample opportunity to
the appellant Corporation to establish its case and after due
deliberation and application of law, passed the well-reasoned
judgment on 22.11.2022, which is self-explanatory, and the
High Court rightly dismissed the writ petition.
h) Order XX1 Rule 1 CPC mandates that payment or deposit made
by the judgment debtor in satisfaction of the decree must be
voluntary. The bank guarantee deposited by the appellant, as
security under an attachment order passed under Order XXXVIII
Rule 5 CPC, was conditional and would have been available to
the decree holder only if the suit was decreed. Such a deposit
cannot be construed as one under Order XXIV Rule 1 CPC.
The High Court, after properly applying its mind and considering
the facts and law applicable to the case, rightly rejected the
appellant’s plea on this issue.
i) The appellant has attempted to mislead this Court by selectively
stating that it had filed I. A. No.141994/2021 in M. A. No. 1832/
2021 in Civil Appeal No.2073/2010, but the same was dismissed
as withdrawn with costs, upon the appellant’s request.
j) As far as the order dated 10.03.2014 passed in Civil Appeal No.
2073/2010 is concerned, it was merely an interim order passed
by this Court in Civil Appeal No.2073/2010 and is deceptively
being misused and misrepresented by the appellant, without
even stating that the said order clearly stood overruled by the
subsequent judgment passed in the said civil appeal, which
has been deviously concealed by the appellant. The order
dated 10.03.2014 was passed by this Court in I.A. No.6 in Civil
Appeal No.2073 of 2010 which was filed by Respondent No.
1 requesting this Court to direct the appellant to deposit the
decretal amount.
k) The appellant’s objections under Section 47 CPC and the
accompanying stay application were rightly dismissed by the
Executing Court at Dehradun through a reasoned order dated
18.04.2022 in Execution Case No. 107/2018. Subsequent
legal remedies were also dismissed – by the High Court on
[2025] 9 S.C.R. 21

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

30.08.2022 in WP (Civil) No. 2069/2022, by the Revisional Court
on 02.09.2022 in Civil Revision No.40/2022 and finally by the
High Court of Uttarakhand on 22.11.2022 in WP (M/S) 2314/2022
– the Judgment now impugned in this Special Leave Petition.
All these judicial forums have rightly rejected the appellant’s
objections, and hence, no interference is warranted by this Court.
5.1 Thus, the learned Senior Counsel submitted that the decree
dated 20.08.2001 passed in the suit has attained finality in
2017, and Respondent No.1 is entitled to the interest awarded
in terms of the Interest on Delayed Payments to Small scale
and Ancillary Industrial Undertakings Act, 1993, which comes to
Rs.35,94,02,420.75 as on 10.02.2025. However, the appellant
has acted without bona fides and has attempted to obstruct
execution of the decree by initiating and pursuing frivolous
proceedings. Therefore, this appeal deserves to be dismissed.
6. Mr. Shubhranshu Padhi, learned Counsel for Respondent No. 3 -
IPICOL, while adopting and supporting the arguments advanced by
the learned Senior Counsel for the appellant, inter alia, contended
as under:
6.1. Both the appellant (OSFC) and Respondent No. 3 (IPICOL) are
Public Sector Undertakings that extended financial assistance
to the original borrower, Respondent No. 2 and hence the suit
itself is not maintainable.
6.2. Respondent No. 1 filed Civil Suit No.103/88 before the trial
Court, alleging that it had supplied raw materials (Hydrated
Lime worth Rs.66,454/-) to Respondent No. 2. At that time,
Respondent No. 1 sought to proceed against the appellant and
Respondent No. 3, instead of pursuing the Directors/Promoters
of the original borrower, to whom the supplies were actually
made. There exists no privity of contract or any commercial
dealings between Respondent No. 1 and either the appellant or
Respondent No. 3. The appellant and Respondent No.3 being
State Financial Corporations, cannot be burdened with such
unjust and excessive liability, as it would result in gross injustice
and impose a significant financial strain on the public Exchequer.
6.3. Respondent No. 1 filed Execution Case No. 107/2018 before
the Civil Judge (Senior Division), Dehradun, 17 years after the
22 [2025] 9 S.C.R.

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decree was passed. Despite the passage of time, Respondent
No. 1 is now claiming exorbitant interest, inflating the original
decretal amount of Rs.90,400/- to an unreasonable sum of
Rs.35,94,02,420.75 as on 10.02.2025, as per the calculation chart
provided by Respondent No.1. As elucidated by the appellant,
although the original claimed debt was Rs.90,400/-, Respondent
No. 1 has already received the following payments: Rs.58,16,905/-
on 05.10.2020 and Rs.2,34,40,654/- on 07.01.2022, thereby
totaling Rs.2,92,57,559/-. Furthermore, Respondent No. 3
(IPICOL) had not even taken over Respondent No. 2 under
Section 29 of the S.F.C Act, 1951, yet it is being wrongfully
saddled with excessive liabilities claimed by Respondent No.1.
6.4. Therefore, this is a fit case for this Court to pass appropriate
orders to deliver substantial justice to the concerned parties.
The impugned judgment deserves to be set aside, and the
present appeal filed by the appellant ought to be allowed.
Consequently, both the appellant (OSFC) and Respondent No.
3 (IPICOL) ought to be fully discharged from liability as claimed
by Respondent No. 1.

DISCUSSION & FINDINGS
7. We have heard the learned Senior Counsel appearing for the parties
and perused the materials available on record.
8. It is not in dispute that the appellant is a State Financial Corporation
having its office at Cuttack, Odisha, and had extended financial
assistance to Respondent No. 2, for the purpose of setting up a
bleaching powder unit. Respondent No.1 had, in the course of
business, supplied raw materials worth Rs.66,454.65 to the said unit.
Due to persistent default in repayment of the loan by Respondent
No.2, the appellant in exercise of its statutory powers under section
29 of the S.F.C. Act, 1951, took over possession of the industrial
unit of Respondent No. 2 in the year 1987 for realization of its dues.
Subsequently, on 29.02.1988, Respondent No. 1 filed Civil Suit No.
103/1988 before the trial Court seeking recovery of Rs.90,400/- with
interest from the said unit. Initially, the appellant was not made a
party to the suit, nor was any relief claimed against it.
8.1. Thereafter, the appellant was impleaded as a defendant in the
said suit on 06.02.1994 by Respondent No. 1, nearly, six years
[2025] 9 S.C.R. 23

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

after the date of institution of the suit. Despite the objections
raised by the appellant regarding its impleadment, liability and
maintainability, the suit was decreed against the appellant on
20.08.2001 for an amount of Rs. 90,400/- with simple interest
at 24% per annum from 01.03.1988 to 23.09.1992, and 2%
monthly compound interest from 23.09.1992 until payment, in
light of the enforcement of the Interest on Delayed Payments
to Small Scale and Ancillary Industrial Undertakings Act, 1993.
The appellant challenged the said decree by filing Civil Appeal
No. 182/2001 both on merits and on the ground of limitation
regarding its impleadment, however, the said appeal was
dismissed by the First Appellate Court, on 08.08.2006.
8.2. Challenging the dismissal of the appeal, the appellant filed
Second Appeal No.78/2006 before the High Court. The original
decree dated 20.08.2001 and the judgment dated 08.08.2006 in
the First Appeal were stayed by the High Court on 30.11.2006,
and the stay remained in force until the dismissal of the Second
Appeal on 07.05.2007. Thereafter, the appellant preferred Civil
Appeal No. 2073/2010 before this Court, which came to be
dismissed by judgment dated 23.11.2017, with the decision
limited to the question of limitation.
8.3. After a period of 17 years from the date of the decree,
Respondent No.1 / Decree Holder filed Execution Case No.
107/18 claiming an amount of Rs.8,88,33,416.30, before the Civil
Judge, Dehradun (Uttarakhand). The appellant filed objections
under Section 47 CPC, which were dismissed on 18.04.2022.
The Civil Revision filed by the appellant before the Additional
District Judge, was dismissed on 02.09.2022 and Writ Petition
No. 2314/22 preferred by the appellant was also dismissed by
the impugned judgment dated 22.11.2022. Aggrieved thereby,
the appellant has filed the instant appeal.
9. On 01.02.2023, when the matter was taken up for consideration, the
counsel appearing for the respondents stated that no further steps
shall be taken in the execution proceedings till the disposal of this
appeal, which was recorded by this Court in its proceedings.
10. It is the case of the appellant that it had opened a bank guarantee
on 16.10.1999 with Union Bank of India, Cuttack, as directed by the
court, for Rs.3.5 lakhs payable to the trial Court, on demand. This was
24 [2025] 9 S.C.R.

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within the knowledge of Respondent No.1. The said bank guarantee
was extended from time to time, and was eventually attached and
encashed on 16.12.2020 along with another bank guarantee furnished
by the appellant for Rs.6,36,243/-, thereby totaling Rs.58,16,905/-
received by Respondent No. 1. According to the appellant, the
opening of the said bank guarantee on 16.10.1999 – prior to the
passing of the decree – was intended to cover the decretal amount
and is squarely covered by the provisions of Order XXIV Rules 1 – 3
CPC, which aim to ensure that interest stops accruing once a deposit
has been made. Therefore, the appellant contends that due to the
opening and subsequent encashment of the bank guarantee, the
claim for accrual of interest itself is bad in law.
11. The appellant further contends that the decree holder, Respondent
No. 1 did not make any attempt to encash the said bank guarantee
immediately after the suit was decreed, or initiate execution
proceedings for over 17 years, thereby allowing the interest to
accumulate unduly. On the other hand, the appellant had pursued
remedies in good faith under the belief that interest would freeze
once a deposit was made under Order XXIV Rule 3 CPC. The
respondent’s delay in executing the decree unjustly enabled them
to claim exorbitant interest, thereby facilitating unjust enrichment.
Such delay should not impose an undue interest burden on
the appellant. Notably, Respondent No.1 has already received
Rs.58,16,905/- on 05.10.2020 and Rs.2,34,40,654/- on 07.01.2022,
thereby totaling Rs.2,92,57,559/- through bank guarantees and
fixed deposits furnished by the appellant. As such, it is unjust,
unfair, and legally untenable to subject the appellant Corporation to
coercive measures, which are inappropriate and gravely prejudicial
to the public interest.
12. Undoubtedly, Respondent No. 1 instituted a money suit for recovery
of dues from Respondent No. 2 on account of default in payment
for the supply of goods. Initially, the appellant was not a party to the
suit. Subsequently, Respondent No. 1 impleaded the appellant, a
State Financial Corporation, which took action under Section 29 of
the S.F.C Act, 1951 against Respondent No. 2. The suit was decreed
on 20.08.2001. Thereafter, Respondent No. 1 filed an application
under Section 21 of the Limitation Act, 1963 before the trial Court,
pending appeal. The trial Court allowed the application holding that
the suit against the appellant was deemed to be initiated from the
[2025] 9 S.C.R. 25

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

original date of filing the suit. By a subsequent order, it was held by
the trial Court that the suit was not barred by limitation as against
the appellant. The finding of the appellate court and the High Court
on limitation alone, was upheld by this Court on 23.11.2017 in Civil
Appeal No.2073/2010. It is pertinent to mention here that this Court
confined its decision only to the issue of limitation and remained
silent on all other material questions raised.

Doctrine of ‘Sub silentio’
13. It is a settled principle that a judgment is an authority only for
what it decides. When a judgment fails to address other issues
raised, it is said to be ‘sub silentio’, and cannot be held as a
binding precedent on those undecided issues. From the records,
it is very clear that in the earlier judgment of this Court challenging
the original decree, only the issue of limitation was adjudicated.
Critical issues such as (i) the jurisdiction of the trial Court to
entertain the suit against the appellant in the absence of a notice
under Section 80 CPC, (ii) the maintainability of the suit, (iii)
the power of the Court to modify the decree by entertaining an
application under Section 21 of the Limitation Act, 1963, and (iv)
the applicability of the Interest on Delayed Payments to Small
Scale and Ancillary Industrial Undertakings Act, 1993, were not
adjudicated. This is where the concept of ‘sub silentio’ assumes
significance. It refers to a situation, where a rule or principle on
a particular point of law is applied or passed upon by a court
silently, without any consideration of the applicable law or without
argument, and the judgment is rendered on another question of law
or fact. According to the Black’s Law Dictionary, “the precedents
that pass sub silentio are of little or no authority”. Literally, it
means ‘in silence’ and is used to refer to something that is not
expressly stated. Therefore, it can safely be concluded that the
judgment of this Court in Civil Appeal No.2073/2010 is silent on
the issues now under consideration. When the judgment of a Court
is silent on questions of law either raised earlier but not decided,
or raised in the subsequent proceedings, it is settled law that
constitutional courts are empowered to decide such questions of
law independently and the earlier judgment cannot be cited as a
binding precedent or conclusive. It will be useful to refer to the
following judgments of this Court on this aspect.
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13.1. In Municipal Corpn. of Delhi v. Gurnam Kaur 10, while
considering the exercise of power by the Commissioner of
the Delhi Corporation to remove encroachments, this Court
referred to an earlier decision relied upon by the High Court
(in the matter of pavement dwellers) and observed that the
earlier decision did not consciously deal with the legal issue
of right to encroach upon public streets. Therefore, it lacked
precedential value as that point was decided sub silentio. The
following paragraphs are relevant in this regard:
“11. Pronouncements of law, which are not part of
the ratio decidendi are classed as obiter dicta and
are not authoritative. With all respect to the learned
Judge who passed the order in Jamna Das’s case [
Writ Petitions Nos. 981-82 of 1984] and to the learned
Judge who agreed with him, we cannot concede that
this Court is bound to follow it. It was delivered without
argument, without reference to the relevant provisions
of the Act conferring express power on the Municipal
Corporation to direct removal of encroachments from
any public place like pavements or public streets, and
without any citation of authority. Accordingly, we do
not propose to uphold the decision of the High Court
because, it seems to us that it is wrong in principle
and cannot be justified by the terms of the relevant
provisions. A decision should be treated as given per
incuriam when it is given in ignorance of the terms of
a statute or of a rule having the force of a statute. So
far as the order shows, no argument was addressed to
the court on the question whether or not any direction
could properly be made compelling the Municipal
Corporation to construct a stall at the pitching site of
a pavement squatter. Professor P.J. Fitzgerald, editor
of the Salmond on Jurisprudence, 12th Edn. explains
the concept of sub silentio at p. 153 in these words:
A decision passes sub silentio, in the technical sense
that has come to be attached to that phrase, when

10 (1989) 1 SCC 101
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the particular point of law involved in the decision
is not perceived by the court or present to its mind.
The court may consciously decide in favour of one
party because of point A, which it considers and
pronounces upon. It may be shown, however, that
logically the court should not have decided in favour
of the particular party unless it also decided point B in
his favour; but point B was not argued or considered
by the court. In such circumstances, although point
B was logically involved in the facts and although
the case had a specific outcome, the decision is not
an authority on point B. Point B is said to pass sub
silentio.
12. In Gerard v. Worth of Paris Ltd. (k). [(1936) 2
All ER 905 (CA)], the only point argued was on the
question of priority of the claimant’s debt, and, on this
argument being heard, the court granted the order.
No consideration was given to the question whether
a garnishee order could properly be made on an
account standing in the name of the liquidator. When,
therefore, this very point was argued in a subsequent
case before the Court of Appeal in Lancaster Motor
Co. (London) Ltd. v. Bremith Ltd. [(1941) 1 KB
675], the court held itself not bound by its previous
decision. Sir Wilfrid Greene, M.R., said that he could
not help thinking that the point now raised had been
deliberately passed sub silentio by counsel in order
that the point of substance might be decided. He
went on to say that the point had to be decided by
the earlier court before it could make the order which
it did; nevertheless, since it was decided “without
argument, without reference to the crucial words of
the rule, and without any citation of authority”, it was
not binding and would not be followed. Precedents
sub silentio and without argument are of no moment.
This rule has ever since been followed. One of the
chief reasons for the doctrine of precedent is that a
matter that has once been fully argued and decided
should not be allowed to be reopened. The weight
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accorded to dicta varies with the type of dictum. Mere
casual expressions carry no weight at all. Not every
passing expression of a judge, however eminent, can
be treated as an ex cathedra statement, having the
weight of authority.”
13.2. In the State of U.P. v. Synthetics and Chemicals Ltd.11 the
challenge was to the amendment made to sub-section (1) of
Section 3 of the United Provinces Sales of Motor Spirit, Diesel
Oil and Alcohol Taxation Act, 1939 by the Uttar Pradesh Sales
of Motor Spirit, Diesel Oil and Alcohol Taxation (Amendment)
Act, 1976, for the purpose of levying purchase tax on industrial
alcohol. Relying upon the decision of a Constitution Bench of
this Court in Synthetics and Chemicals Ltd and others v.
State of U.P. and others12, the respondents / opposite parties
contended that the State Legislature was incompetent to
levy tax on industrial alcohol, because of the operation of
the Ethyl Alcohol (Price Control) Orders made by the Central
Government under Section 18G of the Industries (Development
and Regulation) Act, 1951. The appellant / State, however,
contended that the power of the State to levy taxes on the sale
or purchase of goods was not the subject of consideration in
the decision relied upon by the respondents. The High Court
allowed the writ petition and declared the U.P. Act 8 of 1976 to
be null and void. This Court was of the view that the decision
in Synthetics is not an authority for the proposition canvassed
by the assessee, and that the Court had not – and could not
have – intended to hold that the Price Control Orders made
by the Central Government under the IDR Act imposed a fetter
on the legislative power of the State under Entry 54 of List II
to levy taxes on the sale or purchase of goods. The reference
to sales tax in paragraph 86 of that judgment was found to
be merely accidental or per incuriam, and therefore, had no
bearing on the validity of the impugned levy. This Court further
noted that the abrupt observation in Synthetics was without a
preceding discussion and was inconsistent with the reasoning
adopted in earlier decisions, from which no dissent had been

11 (1991) 4 SCC 139 : (1992) 87 STC 289 : 1991 SCC OnLine SC 17
12 (1990) 1 SCC 109
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expressed on that point. Accordingly, this Court applied the
concept of ‘sub silentio’ and declined to uphold the order of
the High Court. The relevant paragraph is extracted below for
ready reference:
“41. Does this principle extend and apply to a
conclusion of law, which was neither raised nor
preceded by any consideration. In other words can
such conclusions be considered as declaration of
law? Here again the English courts and jurists have
carved out an exception to the rule of precedents.
It has been explained as rule of sub-silentio. “A
decision passed sub-silentio, in the technical sense
that has come to be attached to that phrase, when
the particular point of law involved in the decision
is not perceived by the court or present to its
mind.” (Salmond on Jurisprudence 12th Edn., p.
153). In Lancaster Motor Company (London) Ltd.
v. Bremith Ltd. [(1941) 1 KB 675, 677 : (1941) 2
All ER 11] the Court did not feel bound by earlier
decision as it was rendered ‘without any argument,
without reference to the crucial words of the rule
and without any citation of the authority’. It was
approved by this Court in Municipal Corporation
of Delhi v. Gurnam Kaur [(1989) 1 SCC 101]. The
bench held that, ‘precedents sub-silentio and without
argument are of no moment’. The courts thus
have taken recourse to this principle for relieving
from injustice perpetrated by unjust precedents. A
decision which is not express and is not founded
on reasons nor it proceeds on consideration of
issue cannot be deemed to be a law declared to
have a binding effect as is contemplated by Article
141. Uniformity and consistency are core of judicial
discipline. But that which escapes in the judgment
without any occasion is not ratio decidendi. In B.
Shama Rao v. Union Territory of Pondicherry [AIR
1967 SC 1480 : (1967) 2 SCR 650 : 20 STC 215]
it was observed, ‘it is trite to say that a decision is
binding not because of its conclusions but in regard
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to its ratio and the principles, laid down therein’. Any
declaration or conclusion arrived without application
of mind or preceded without any reason cannot be
deemed to be declaration of law or authority of a
general nature binding as a precedent. Restraint in
dissenting or overruling is for sake of stability and
uniformity but rigidity beyond reasonable limits is
inimical to the growth of law.”
13.3. In Most Rev. P.M.A. Metropolitan v. Moran Mar Marthoma13,
this Court was dealing with whether an earlier decision could be
treated as a binding precedent, and in that context, it examined
the doctrine of sub silentio, which refers to a situation where a
point of law passes unnoticed or is not consciously decided in
a judgment. The following paragraph is relevant:
“57. Even assuming, although there appears no
doubt, that the finding recorded by the High Court in
its earlier judgment on the authenticity of the canon
survived, there is yet another reason to disregard it.
If the excommunication of Dionysius was invalid for
violation of principles of natural justice, as was found
by the Bench reviewing the order, then the findings
on earlier issues were rendered unnecessary and
it is fairly settled that the finding on an issue in the
earlier suit to operate as res judicata should not
have been only directly and substantially in issue
but it should have been necessary to be decided
as well. For instance, when a decision is taken in
appeal the rule is that it is the appellate decision
and not the decision of the trial court that operates
as res judicata. Consequently where a suit is
decided both on merits and on technical grounds
by the trial court, and the appellate court maintains
it on technical ground of limitation or suit being not
properly constituted then the decision rendered on
merits by the trial court ceases to have finality. In
Abdullah Ashgar Ali Khan v. Ganesh Dass [AIR 1917

13 (1995) Supp. 4 SCC 286
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Odisha State Financial Corporation v.
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PC 201: 45 Cal 442 : 19 Bom LR 972] the Court
while considering the expression, “heard and finally
decided” in Section 10 of the British Baluchistan
Regulation IX of 1896 held that where the suit was
dismissed by two courts on merits but the decree
was maintained in second appeal because the
suit was not properly constituted then the finality
on merits stood destroyed. In Sheosagar Singh v.
Sitaram Singh [ILR (1897) 24 Cal 616 : 24 IA 50 :
1 CWN 297] where parentage of defendant was
decided in his favour by the trial court but the High
Court maintained the order as the suit was defective
the claim of the defendant in the latter suit that
the finding on parentage operated as res judicata
was repelled and it was held that the question of
parentage had not been heard and finally decided
in the suit of 1885. The appeal in that suit had put
an end to any finality in the decision of the first
court, and had not led to a decision on the merits.
58. The rationale of these decisions is founded on
the principle that if the suit was disposed of in appeal
not on merits but for want of jurisdiction or for being
barred by time or for being defectively constituted
then the finality of the findings recorded by the trial
court on merits stands destroyed as the suit having
been found to be bad for technical reasons it becomes
operative from the date the decision was given by the
trial court thus rendering any adjudication on merits
impliedly unnecessary. On the same rationale, once
the Royal Court of Appeal allowed the review petition
and dismissed the appeal as the excommunication
of Dionysius was contrary to principles of natural
justice and he had not become heretic then the
finding on authenticity of the canon etc. rendered
in the original order was rendered unnecessary.
Therefore, the finding recorded on the authenticity of
the canon and power of the Patriarch etc. recorded
in the earlier order could not operate as res judicata
in subsequent proceedings.”
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13.4. In Arnit Das v. State of Bihar 14, while dealing with the
determination of the age of an accused under the Juvenile
Justice Act, 1986, for the purpose of trial, this Court clarified that
the earlier ruling in Arnit Das (1) was rendered sub silentio, as
the relevant provision of law had not been brought to the court’s
attention. Accordingly, the Court overruled the said decision and
held that the relevant date for determining whether an accused is
a juvenile is the date of the offence, not the date of production.
The following paragraphs are pertinent in this regard:
“19. Generally speaking these cases are authorities for
the propositions that: (i) the technicality of the accused
having not claimed the benefit of the provisions of
the Juvenile Justice Act at the earliest opportunity or
before any of the courts below should not, keeping
in view the intendment of the legislation, come in the
way of the benefit being extended to the accused-
appellant even if the plea was raised for the first
time before this Court; (ii) a hypertechnical approach
should not be adopted while appreciating the evidence
adduced on behalf of the accused in support of the
plea that he was a juvenile and if two views may be
possible on the same evidence, the court should lean
in favour of holding the accused to be a juvenile in
borderline cases; and (iii) the provisions of the Act
are mandatory and while implementing the provisions
of the Act, those charged with responsibilities of
implementation should show sensitivity and concern
for a juvenile. However, in none of the cases the
specific issue — by reference to which date (the
date of the offence or the date of production of the
person before the competent authority), the court shall
determine whether the person was a juvenile or not,
was neither raised nor decided.
20. A decision not expressed, not accompanied
by reasons and not proceeding on a conscious
consideration of an issue cannot be deemed to

14 (2000) 5 SCC 488 : 2000 SCC (Cri) 962 : 2000 SCC OnLine SC 936
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Odisha State Financial Corporation v.
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be a law declared to have a binding effect as is
contemplated by Article 141. That which has escaped
in the judgment is not the ratio decidendi. This is the
rule of sub silentio, in the technical sense when a
particular point of law was not consciously determined.
(See State of U.P. v. Synthetics & Chemicals Ltd.
[(1991) 4 SCC 139, para 41] SCC, para 41.)”
13.5. In the State of W.B. v. Kesoram Industries Ltd.15, this Court
made an important and elaborate observation on the doctrine
of sub silentio while discussing the binding nature of precedents
under Article 141 of the Constitution. The central issue was
whether the cess levied by the State of West Bengal on coal-
bearing land was in the nature of a tax on land (Entry 49 of
List II – State List) or a tax on mineral rights (Entry 50 of List
II or Entry 54 of List I – Union List). While addressing this,
the Court reinforced that courts should exercise caution in
blindly following precedents, and that only reasoned decisions
involving conscious deliberation on the issues raised can be
treated as law declared by this Court. The relevant paragraphs
are extracted below:
“485. In Goodricke Group [1995 Supp (1) SCC 707]
it has, thus, wrongly been recorded that generally
speaking no tea estate markets green tea leaves.
The writ petitioners have stated that there are about
fifty bought-leaf factories in West Bengal. Bought-leaf
factories function within a statutory scheme viz. the
Tea (Marketing) Control Order, 2003.
486. Furthermore, once it is found that the definition
of “tea” both in the Tea Act, 1953 and the impugned
Acts is the same, the Court cannot keep the effect
of Sections 25 and 30 of the Tea Act, 1953 out of
its consideration for the purpose of ascertaining the
true scope and purport thereof.
487. It is relevant to note that in Goodricke Group
[1995 Supp (1) SCC 707] no opinion was expressed

15 (2004) 10 SCC 201: (2004) 266 ITR 721: 2004 SCC OnLine SC 70 (5-Judge Bench)
34 [2025] 9 S.C.R.

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on Section 25 of the Act or the notification dated 30-
10-1986 issued thereunder. Once it is conceded that
green tea leaves would come within the purview of the
definition of “tea”, it is inconceivable as to how impost
of excise duty on tea in terms of sub-section (2) of
Section 25 of the Tea Act will have no bearing on the
subject. By reason of sub-section (2) of Section 25,
additional excise duty is levied. Excise duty in terms
of the Central Excise Act, it is trite, can not only be
levied on finished products but also the products at
intermediary stages.
488. Unfortunately, in Goodricke case [1995 Supp
(1) SCC 707] the learned Judges did not consider
the matter from this angle.
489.Goodricke [1995 Supp (1) SCC 707] also runs
counter to India Cement [(1990) 1 SCC 12 : 1989
Supp (1) SCR 692 : AIR 1990 SC 85] as also
Kannadasan [(1996) 5 SCC 670]. Effect of the
expression “immovable property” in the Cess Act,
1880 was also not brought to its notice and had
the same been done, there would not have been
a conclusion that tea estate would be treated as a
unit as therefrom the standing crops and structures
were required to be excluded. Goodricke Group case
[1995 Supp (1) SCC 707] does not, therefore, lay
down a good law and should be overruled.
Summary of our findings
…
(viii) Tax on lands and buildings in terms of Entry 49
of List II of the Seventh Schedule of the Constitution
of India can be levied on land as a unit and not
otherwise.
(ix) As green tea leaves are marketable, the decision
in Goodricke Group [1995 Supp (1) SCC 707] having
mainly been rendered on the premise that green
tea leaves are not marketable must be held to have
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passed sub silentio and, thus, does not lay down
correct legal position.
(x) In view of the definitions of “land” and “immovable
property” contained in the Bengal Cess Act, 1880, as
no road cess or public works cess can be imposed
on standing crops or any kind of structures, houses,
shops or other buildings which would include factories
and workshops for processing tea, no levy by way
of cess can be imposed by reason of the impugned
Acts either on the mining leasehold or the tea
estate containing standing crops as also houses
and buildings.”
13.6. In Zee Telefilms Ltd. v. Union of India16, the question for
consideration was whether the Board of Control for Cricket in
India (BCCI) is a “State” within the meaning of Article 12 of the
Constitution, and therefore amenable to writ jurisdiction under
Article 32. Ruling that a prior judgment cannot be treated as
binding on a point of law that was not consciously examined or
discussed, the Constitutional Bench of this Court clarified that
BCCI cannot be held to be a “State” for the purpose of Article
12. The following paragraph is pertinent in this connection:
“256. It is further well settled that a decision is not
an authority for a proposition which did not fall for
its consideration. It is also a trite law that a point not
raised before a court would not be an authority on
the said question. In A-One Granites v. State of U.P.
[(2001) 3 SCC 537] it is stated as follows: (SCC p.
543, para 11)
“11. This question was considered by the Court
of Appeal in Lancaster Motor Co. (London) Ltd. v.
Bremith Ltd. [(1941) 1 KB 675 : (1941) 2 All ER 11
(CA)] and it was laid down that when no consideration
was given to the question, the decision cannot be
said to be binding and precedents sub silentio and
without arguments are of no moment.”

16 (2005) 4 SCC 649 : 2005 SCC OnLine SC 213
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13.7. In Delhi Airtech Services (P) Ltd v. State of U.P.17, this Court
directly addressed the doctrine of sub silentio while clarifying
the limits of binding precedent, to the effect that when a point
does not fall for decision of a court but incidentally arises
for its consideration and is not necessary to be decided for
the ultimate decision of the case, such a decision does not
form part of the ratio, but is treated as a decision passed sub
silentio. It may also be noted that a point in respect of which
no argument was advanced, no citation or authority was cited,
and no discussion or adjudication is made, is not binding and
would not be followed. The relevant paragraphs read as under:
“42. It has been held in the decision of this Court in
MCD v. Gurnam Kaur [(1989) 1 SCC 101 : AIR 1989
SC 38] that when a point does not fall for decision
of a court but incidentally arises for its consideration
and is not necessary to be decided for the ultimate
decision of the case, such a decision does not form
a part of the ratio of the case but the same is treated
as a decision passed sub silentio.
43. The concept of “sub silentio” has been explained
by Salmond on Jurisprudence, 12th Edn. as follows:
(Gurnam Kaur case [(1989) 1 SCC 101 : AIR 1989
SC 38], SCC pp. 110-11, para 11)
“11. …‘A decision passes sub silentio, in the technical
sense that has come to be attached to that phrase,
when the particular point of law involved in the
decision is not perceived by the Court or present to
its mind. The Court may consciously decide in favour
of one party because of Point A, which it considers
and pronounces upon. It may be shown, however,
that logically the court should not have decided in
favour of the particular party unless it also decided
Point B in his favour; but Point B was not argued
or considered by the Court. In such circumstances,
although Point B was logically involved in the facts
and although the case had a specific outcome, the

17 (2011) 9 SCC 354 : (2011) 4 SCC (Civ) 673 : 2011 SCC OnLine SC 1115
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Odisha State Financial Corporation v.
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decision is not an authority on Point B. Point B is said
to pass sub silentio.’” (AIR p. 43, para 11)
44. The aforesaid passage has been quoted with
approval by the three-Judge Bench in Gurnam Kaur
[(1989) 1 SCC 101 : AIR 1989 SC 38]. This Court
in Gurnam Kaur [(1989) 1 SCC 101 : AIR 1989 SC
38], in order to illustrate the aforesaid proposition
further relied on the decision of the English Court in
Gerard v. Worth of Paris Ltd. [(1936) 2 All ER 905
(CA)] In Gerard [(1936) 2 All ER 905 (CA)], the only
point argued was on the question of priority of the
claimant’s debt. The Court found that no consideration
was given to the question whether a garnishee order
could be passed. Therefore, a point in respect of
which no argument was advanced and no citation
of authority was made is not binding and would not
be followed. This Court held that such decisions,
which are treated having been passed sub silentio
and without argument, are of no moment. The Court
further explained the position by saying that one of
the chief reasons behind the doctrine of precedent
is that once a matter is fully argued and decided
the same should not be reopened and mere casual
expressions carry no weight.”
13.8. In a recent decision in NBCC (India) Ltd v. The State of West
Bengal and Ors18, this Court addressed the issue of sub silentio
in its discussion on how and when its own earlier judgments
serve as binding precedent. The following paragraphs are
relevant in this regard:
“27. A decision where the issue was neither raised
nor preceded by any consideration, in State of
U.P. v. Synthetics and Chemicals Ltd. MANU/
SC/0616/1991 : 1991:INSC:159 : (1991) 4 SCC
139 this Court held, “the Court did not feel bound
by earlier decision as it was rendered without any
argument, without reference to the crucial words of

18 MANU/SC/0061/2025 : 2025 3 SCC 440
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the Rule and without any citation of the authority”.
Further, approving the decision of this Court in
Municipal Corporation of Delhi v. Gurnam Kaur MANU/
SC/0323/1988 : 1988:INSC:267 : (1989) 1 SCC 101
which held that “precedents sub-silentio and without
argument are of no moment” this Court held that, “a
decision which is not express and is not founded on
reasons nor it proceeds on consideration of issue
cannot be deemed to be a law declared to have a
binding effect as is contemplated by Article 141”. The
same approach was adopted in Arnit Das v. State
of Bihar MANU/SC/0376/2000 : (2000) 5 SCC 488
where it was held that “a decision not expressed,
not accompanied by reasons and not proceeding
on a conscious consideration of an issue cannot be
deemed to be a law declared to have a binding effect
as is contemplated by Article 141. That which has
escaped in the judgment is not the ratio decidendi.
This is the Rule of sub- silentio, in the technical sense
when a particular point of law was not consciously
determined”.
28. In this context, it is also important to note that, as
an institution, our Supreme Court performs the twin
functions of decision-making and precedent-making.
A substantial portion of our jurisdiction under Article
136 is reflective of regular appellate disposition of
decision making. Every judgment or order made by
this Court in disposing of these appeals is not intended
to be a binding precedent under Article 141. Though
the arrival of a dispute for this Court’s consideration,
either for decision-making or precedent-making is
at the same tarmac, every judgment or order which
departs from this Court lands at the doorstep of
the High Courts and the subordinate courts as a
binding precedent. We are aware of the difficulties
that High Courts and the subordinate courts face in
determining whether the judgment is in the process
of decision-making or precedent-making, particularly
when we have also declared that even an obiter of
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Odisha State Financial Corporation v.
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this Court must be treated as a binding precedent
for the High Courts and the courts below. In the
process of decision making, this Court takes care
to indicate the instances where the decision of the
Supreme Court is not to be treated as precedent. It is
therefore necessary to be cautious in our dispensation
and state whether a particular decision is to resolve
the dispute between the parties and provide finality
or whether the judgment is intended to and in fact
declares the law under Article 141.”
14. Thus, it is settled legal position, applying the doctrine of sub silentio,
that a decision is not an authority on a point that has not been argued
or decided. In the instant case, the trial Court had not framed any
issues regarding the maintainability of the suit filed by Respondent
No. 1 against the appellant, for the alleged default committed by
Respondent No. 2, despite a plea in the written statement. Without
any issue having been framed on maintainability, the matter reached
up to this Court, and the decision was rendered solely on the issue
of limitation. Therefore, the issues that remained undecided, but go
to the root of jurisdiction and maintainability, can still be raised at
the stage of execution under Section 47 CPC.

Scope of Section 47 CPC
15. Before analysing the facts, it must be acknowledged that the present
appeal arises out of a challenge to the order of the High Court
under Article 227, whereby the High Court refused to set aside
the dismissal of the application filed under Section 47 CPC. The
scope of interference at the stage of execution is limited to certain
exceptions. As per Section 47, the Executing Court is empowered to
examine the questions relating to execution, discharge, or satisfaction
of the decree. It cannot go beyond the decree; but at the same
time, when a plea is raised that the decree is a nullity and hence,
unenforceable, the executing court is bound to examine and decide
such an application on its merits.
16. It is a settled position of law that a court executing a decree cannot go
behind the decree passed between the parties or their representatives,
unless the decree is a nullity. The court must execute the decree
according to its tenor, and cannot entertain objections on the ground
40 [2025] 9 S.C.R.

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that the decree is erroneous in law or on facts. Until it is set aside
by an appropriate proceeding in appeal or revision, a decree, even
if erroneous, remains binding on the parties. A decree may, however,
be challenged in execution proceedings, if it is a nullity – for instance,
if it is passed without bringing on record the legal representative of a
person who was dead at the time the decree was passed, or where
the cause of action was not maintainable, or if it was passed against
a ruling prince without a certificate. An objection in that behalf may
be raised in the execution proceedings. Similarly, when the decree
is made by a court that has no inherent jurisdiction to pass it, an
objection as to its validity may be raised in an execution proceeding
if the objection appears on the face of the record.
17. While dealing with the scope of interference of the Executing Court
in modifying a decree or award, this Court in Brakewel Automotive
Components (India) (P) Ltd. v. P.R. Selvam Alagappan19, held as
follows:
“23. Though this view has echoed time out of number
in similar pronouncements of this Court, in Dhurandhar
Prasad Singh v. Jai Prakash University [Dhurandhar Prasad
Singh v. Jai Prakash University, (2001) 6 SCC 534 : AIR
2001 SC 2552], while dwelling on the scope of Section
47 of the Code, it was ruled that the powers of the court
thereunder are quite different and much narrower than
those in appeal/revision or review. It was reiterated that
the exercise of power under Section 47 of the Code is
microscopic and lies in a very narrow inspection hole and
an executing court can allow objection to the executability
of the decree if it is found that the same is void ab initio
and is a nullity, apart from the ground that it is not capable
of execution under the law, either because the same was
passed in ignorance of such provision of law or the law
was promulgated making a decree unexecutable after its
passing.”
18. The validity of a decree can be challenged in execution proceedings
on the ground that the Court which passed the decree, was lacking
in inherent jurisdiction in the sense that it could not have seized

19 (2017) 5 SCC 371 : (2017) 3 SCC (Civ) 152 : 2017 SCC OnLine SC 265 at page 379
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of the case because the subject-matter was wholly foreign to its
jurisdiction, or that the defendant was dead at the time the suit was
instituted or the decree was passed, or on some such other ground
which would have the effect of rendering the court entirely lacking
in jurisdiction over the subject-matter of the suit or over the parties
to it. [Vide: Hira Lal Patni v. Kali Nath20]
19. From the above pronouncements of this Court, it is amply clear
that at the stage of execution proceedings, objections regarding
the maintainability of the suit as well as the jurisdiction of the trial
Court can be raised for consideration, and the executing court is
well within its powers to deal with such objections in accordance
with law, if such objections, from the face of the records, do not
require adjudication by trial. However, in the case on hand, the
objections raised by the appellant regarding the maintainability and
the execution proceedings have been rejected by the Executing
Court at the threshold, without going into the contentions. This court
in a recent judgment in Celir LLP v. Mr. Sumati Prasad Bafna and
others21, while dealing with a contempt petition and underscoring
the importance of bringing finality to concluded litigations, applying
the Henderson’s rule, refused to accept the contentions against the
original order, holding that a defence, which ought to have been
raised, if not raised, is deemed to have been raised and overruled.
The said judgment arises in a contempt matter, where the law that
a court hearing the contempt case can neither expand the scope
of original order nor modify it is well settled [See: Midnapore
Peoples Co-operative Bank Ltd and others v. Chunilal Nanda
and others22]. However, the case on hand is completely different,
and the scope of interference by the execution court is to be
understood in the light of the power conferred upon it by Section
47 and the settled position that the executing court can refuse to
execute the decree if it is a nullity. In addition to the settled position
that a decree obtained by fraud or against the wrong person is a
nullity, there are other circumstances which can render a decree
to be a nullity.

20 1961 SCC OnLine SC 42 : (1962) 2 SCR 147 : AIR 1962 SC 199 : (1961) 2 SCJ 592
21 2024 LiveLaw (SC) 991
22 (2006) 5 SCC 399
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Jurisdiction
20. A decree passed without jurisdiction is null and void. A court is said
to lack jurisdiction if it has no territorial jurisdiction, or if it has no
pecuniary jurisdiction, or if its jurisdiction over the subject matter is
circumscribed by any law. Such laws may be either substantive or
procedural and may, by express provision or necessary implication,
take away the jurisdiction of a court to deal with a matter, leaving no
room for any judicial discretion. These provisions may either impose
a total bar on the court from dealing with certain subject matters or
impose any pre-conditions, non-compliance with which may prevent
the court from entertaining the suit, even if it otherwise has jurisdiction
over the subject matter. A plea questioning the jurisdiction of the
court can be raised at any stage, including before the High Court
or this Court, particularly when it involves a pure question of law.
21. A “Judgment”, as defined under Section 2(9) CPC, to be valid, must
satisfy the requirements under Order XX Rule 4 (2) CPC. It should
not only trace, record, consider and decide all the points of disputes
but should also reflect the same. The decision must be based on
reasons reflected in the judgment. Once the issue of maintainability
is raised, or if the facts as pleaded by themselves create a cloud over
the jurisdiction of the court or the maintainability of the proceedings,
the same will have to be addressed, failing which the judgment will
be unsustainable and a nullity. It will be useful to refer to the following
judgments that discuss the effect of a “Judgment” rendered without
jurisdiction. In Harshad Chiman Lal Modi v. DLF Universal and
Ors.23, this Court addressed the question of territorial jurisdiction
in the context of a suit for specific performance of a real estate
agreement and observed as under:
“27. Ms. Malhotra, then contended that Section 21 of the
Code, requires that the objection to the jurisdiction must
be taken by the party at the earliest possible opportunity
and in any case where the issues are settled at or before
settlement of such issues. In the instant case, the suit was
filed by the plaintiff in 1988 and written statement was filed
by the defendants in 1989 wherein jurisdiction of the court
was ‘admitted’. On the basis of the pleadings of the parties,

23 (2005) 7 SCC 791 : MANU/SC/0710/2005
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issues were framed by the court in February, 1997. In
view of the admission of jurisdiction of court, no issue as
to jurisdiction of the court was framed. It was only in 1998
that an application for amendment of written statement
was filed raising a plea as to absence of jurisdiction of
the court. Both the courts were wholly wrong in allowing
the amendment and in ignoring Section 21 of the Code.
Our attention in this connection was invited by the learned
counsel to Hira Lal v. Kali Nath MANU/SC/0041/1961 :
[1962]2 SCR 747 and Bahrein Petroleum Co. v. Pappu
MANU/SC/0012/1965 : (1966) II LLJ 144 SC.
28. We are unable to uphold the contention.
The jurisdiction of a court may be classified into several
categories. The important categories are (i) Territorial or local
jurisdiction; (ii) Pecuniary jurisdiction; and (iii) Jurisdiction
over the subject matter. So far as territorial and pecuniary
jurisdictions are concerned, objection to such jurisdiction
has to be taken at the earliest possible opportunity and in
any case at or before settlement of issues. The law is well
settled on the point that if such objection is not taken at the
earliest, it cannot be allowed to be taken at a subsequent
stage. Jurisdiction as to subject matter, however, is totally
distinct and stands on a different footing. Where a court has
no jurisdiction over the subject matter of the suit by reason
of any limitation imposed by statute, charter or commission,
it cannot take up the cause or matter. An order passed by
a court having no jurisdiction is nullity.
29. In Halsbury’s Laws of England, (4th edn.), Reissue,
Vol. 10; para 317; it is stated;
“317. Consent and waiver. Where, by reason of any
limitation imposed by statute, charter or commission,
a court is without jurisdiction to entertain any particular
claim or matter, neither the acquiescence nor the
express consent of the parties can confer jurisdiction
upon the court, nor can consent give a court jurisdiction
if a condition which goes to the jurisdiction has not
been performed or fulfilled. Where the court has
jurisdiction over the particular subject matter of the
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claim or the particular parties and the only objection
is whether, in the circumstances of the case, the
court ought to exercise jurisdiction, the parties may
agree to give jurisdiction in their particular case; or a
defendant by entering an appearance without protest,
or by taking steps in the proceedings, may waive his
right to object to the court taking cognizance of the
proceedings. No appearance or answer, however, can
give jurisdiction to a limited court, nor can a private
individual impose on a judge the jurisdiction or duty to
adjudicate on a matter. A statute limiting the jurisdiction
of a court may contain provisions enabling the parties
to extend the jurisdiction by consent.”
30. In Bahrein Petroleum Co., this Court also held that
neither consent nor waiver nor acquiescence can confer
jurisdiction upon a court, otherwise incompetent to try the
suit. It is well-settled and needs no authority that ‘where
a court takes upon itself to exercise a jurisdiction it does
not possess, its decision amounts to nothing.’ A decree
passed by a court having no jurisdiction is non-est and its
validity can be set up whenever it is sought to be enforced
as a foundation for a right, even at the stage of execution
or in collateral proceedings. A decree passed by a court
without jurisdiction is a coram non judice.
31. In Kiran Singh v. Chaman Paswan MANU/SC/0116/1954 :
[1955] 1 SCR 117, this Court declared;
“It is a fundamental principle well established that a
decree passed by a court without jurisdiction is a nullity
and that its invalidity could be set up whenever and it is
sought to be enforced or relied upon, even at the stage
of execution and even in collateral proceedings. A defect
of jurisdiction strikes at the very authority of the court to
pass any decree, and such a defect cannot be cured even
by consent of parties.”
21.1. In Jagmittar Sain Bhagat v. Dir. Health Services, Haryana
and Others24, this Court dealt with the issue of jurisdiction in

24 MANU/SC/0703/2013 : 2013 10 SCC 136
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the context of a government servant seeking retiral benefits
under the Consumer Protection Act, 1986 and held that a decree
passed without statutory jurisdiction is null and void, and this
defect can be challenged at any stage including execution. The
relevant paragraphs are extracted below:
“7. Indisputably, it is a settled legal proposition that
conferment of jurisdiction is a legislative function
and it can neither be conferred with the consent
of the parties nor by a superior Court, and if the
Court passes a decree having no jurisdiction over
the matter, it would amount to nullity as the matter
goes to the roots of the cause. Such an issue can
be raised at any stage of the proceedings. The
finding of a Court or Tribunal becomes irrelevant
and unenforceable/in executable once the forum is
found to have no jurisdiction. Similarly, if a Court/
Tribunal inherently lacks jurisdiction, acquiescence of
party equally should not be permitted to perpetuate
and perpetrate, defeating the legislative animation.
The Court cannot derive jurisdiction apart from the
Statute. In such eventuality the doctrine of waiver
also does not apply. (Vide: United Commercial Bank
Ltd. v. Their Workmen MANU/SC/0067/1951 : AIR
1951 SC 230; Smt. Nai Bahu v. Lal Ramnarayan and
Ors. MANU/SC/0367/1977 : AIR 1978 SC 22; Natraj
Studios (P) Ltd. v. Navrang Studios and Anr. MANU/
SC/0477/1981 : AIR 1981 SC 537; and Kondiba
Dagadu Kadam v. Savitribai Sopan Gujar and Ors.
MANU/SC/0278/1999 : AIR 1999 SC 2213).
8. In Sushil Kumar Mehta v. Gobind Ram Bohra
(Dead) thr. L.Rs. MANU/SC/0593/1989 : (1990) 1
SCC 193, this Court, after placing reliance on large
number of its earlier judgments particularly in Premier
Automobiles Ltd. v. K.S. Wadke and Ors. MANU/
SC/0369/1975 : (1976) 1 SCC 496; Kiran Singh v.
Chaman Paswan MANU/SC/0116/1954 : AIR 1954
SC 340; and Chandrika Misir and Anr. v. Bhaiyalal
MANU/SC/0328/1973 : AIR 1973 SC 2391 held,
that a decree without jurisdiction is a nullity. It is a
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coram non judice; when a special statute gives a
right and also provides for a forum for adjudication
of rights, remedy has to be sought only under the
provisions of that Act and the Common Law Court
has no jurisdiction; where an Act creates an obligation
and enforces the performance in specified manner,
“performance cannot be forced in any other manner.”
9. Law does not permit any court/tribunal/authority/
forum to usurp jurisdiction on any ground whatsoever,
in case, such an authority does not have jurisdiction
on the subject matter. For the reason that it is not an
objection as to the place of suing; “it is an objection
going to the nullity of the order on the ground of want
of jurisdiction”. Thus, for assumption of jurisdiction by
a court or a tribunal, existence of jurisdictional fact is
a condition precedent. But once such jurisdictional
fact is found to exist, the court or tribunal has power
to decide on the adjudicatory facts or facts in issue.
(Vide: Setrucharlu Ramabhadra Raju Bahadur v.
Maharaja of Jeypore MANU/PR/0093/1919 : AIR 1919
PC 150; State of Gujarat v. Rajesh Kumar Chimanlal
Barot and Anr. MANU/SC/0672/1996 : AIR 1996 SC
2664; Harshad Chiman Lal Modi v. D.L.F. Universal
Ltd. and Anr. MANU/SC/0710/2005 : AIR 2005 SC
4446; and Carona Ltd. v. Parvathy Swaminathan and
Sons MANU/SC/3938/2007 : AIR 2008 SC 187).”
21.2. In Shri Saurav Jain and another v. M/s. A.B.P Design &
another25, this Court discussed the issue of territorial jurisdiction
in respect of a property dispute involving cancellation of a sale
deed and possession and held as under:
“29. With regard to new grounds being raised before
this Court in a special leave petition Under Article
136, we note that Under Order 21 Rule 3(c) of the
Supreme Court Rules 2013, SLPs are to be confined
to the pleadings before the court whose order is
challenged. However, with the leave of the Court,

25 MANU/SC/0509/2021 : 2022 18 SCC 633
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additional grounds can be urged at the time of the
hearing.
30.This Court in Bharat Kala Bhandar (P) Ltd. v.
Municipal Committee MANU/SC/0267/1965 : AIR
1966 SC 249 dealt with a civil appeal where a
contention had not been raised in the suit or in the
grounds of appeal before the High Court, and was
advanced before this Court for the first time. Although
the Court noted that the scope of the appeal cannot
be broadened at the instance of the parties, if a plea
raises a question of considerable importance, it can be
entertained by this Court. In a similar vein, this Court in
Vasant Kumar Radhakisan Vora v. Board of Trustees
of the Port of Bombay MANU/SC/0005/1991 : (1991)
1 SCC 761, noted that pure questions of law which
go to the root of the jurisdiction in a case can be
raised for the first time in an appeal under Article
136 of the Constitution.
31. In Chandrika Misir v. Bhaiya Lal MANU/
SC/0328/1973 : (1973) 2 SCC 474, this Court was
hearing a special leave petition concerning the
possession of parties over the suit property which was
the subject of the U.P. Zamindari Abolition and Land
Reforms Act (Act 1 of 1951). While adjudicating on
whether the suit was barred by limitation, Justice DG
Palekar, speaking for a two Judge bench, observed
that the civil court did not have jurisdiction to entertain
the suit at all. Although the plea of bar on jurisdiction
had not been raised in the courts below, the Court
held that:
“6. It is from this order that the present appeal
has been filed by special leave. It is to be noticed
that the suit had been filed in a civil court for
possession and the Limitation Act will be the Act
which will govern such a suit. It is not the case
that U.P. Act 1 of 1951 authorises the filing of
the suit in a civil court and prescribes a period
of limitation for granting the relief of possession
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superseding the one prescribed by the Limitation
Act. It was, therefore, perfectly arguable that if
the suit is one properly entertainable by the civil
court the period of limitation must be governed
by the provisions of the Limitation Act and no
other. In that case there would have been no
alternative but to pass a decree for possession
in favour of the Plaintiffs. But the unfortunate
part of the whole case is that the civil court
had no jurisdiction at all to entertain the suit.
It is true that such a contention with regard
to the jurisdiction had not been raised by
the Defendant in the trial court but where
the court is inherently lacking in jurisdiction
the plea may be raised at any stage, and, it
is conceded by Mr. Yogeshwar Prasad, even
in execution proceedings on the ground that
the decree was a nullity. If one reads Sections
209 and 331 of the U.P. Act 1 of 1951 together
one finds that a suit like the one before us has
to be filed before a Special Court created under
the Act within a period of limitation specially
prescribed under the Rules made under the Act
and the jurisdiction of the ordinary civil court is
absolutely barred.”
22. In Most Rev. P.M.A. Metropolitan v. Moran Mar Marthoma 26 as
well, a three Judge Bench of this Court entertained an objection as
to maintainability of the suit under Section 9 of the Code of Civil
Procedure, despite the plea not having been raised before the courts
below. The Court observed that the plea of a bar or lack of jurisdiction
can be entertained at any stage, since an order or decree passed
without jurisdiction is non est in law.
23. The position of law has been consistently applied even in criminal
proceedings under Article 136 of the Constitution. In Masalti v. State
of Uttar Pradesh27, the confirmation of the death sentence of a

26 MANU/SC/0407/1995 : 1995 Supp (4) SCC 286
27 MANU/SC/0074/1964 : AIR 1965 SC 202
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number of accused persons by the High Court was under challenge
before this Court. Chief Justice Gajendragadkar, speaking for a four
judge Bench of this Court, observed that:
“11. We are not prepared to accept Mr. Sawhney’s argument
that even if this point was not raised by the Appellants
before the High Court, they are entitled to ask us to consider
that point having regard to the fact that 10 persons have
been ordered to be hanged. It may be conceded that
if a point of fact which plainly arises on the record,
or a point of law which is relevant and material and
can be argued without any further evidence being
taken, was urged before the trial court and after it
was rejected by it was not repeated before the High
Court, it may, in a proper case, be permissible to the
Appellants to ask this Court to consider that point in
an appeal Under Article 136 of the Constitution; after
all in criminal proceedings of this character where
sentences of death are imposed on the Appellants, it
may not be appropriate to refuse to consider relevant
and material pleas of fact and law only on the ground
that they were not urged before the High Court. If it is
shown that the pleas were actually urged before the High
Court and had not been considered by it, then, of course,
the party is entitled as a matter of right to obtain a decision
on those pleas from this Court. But even otherwise no
hard and fast Rule can be laid down prohibiting such pleas
being raised in appeals under Article 136.”
24. Based on this settled legal position, we find it just to allow the
appellant to raise the ground of jurisdiction before us. Consideration
of the question would not require any additional evidence, since it
involves a pure question of law and strikes at the heart of the matter.
We shall now turn to the merits of this argument.

Section 80 CPC
25. As seen from the above judgments, a defect in jurisdiction vitiates
the decree and renders it unenforceable. The Civil Procedure Code,
though considered to be procedural law, encompasses within it,
certain provisions that take away or circumscribe the right to sue,
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which are deemed to be substantive. One such provision is Section
80 CPC which reads as follows:
“Section 80 – Notice. (1)[Save as otherwise provided in
sub-section (2), no suits [shall be instituted] against the
Government (including the Government of the State of
Jammu and Kashmir)] or against a public officer in respect
of any act purporting to be done by such public officer
in his official capacity, until the expiration of two months
next after notice in writing has been [delivered to, or left
at the office of]
(a) in the case of a suit against the Central Government,
[except where it relates to a railway] a Secretary to that
Government;
[(b)] in the case of a suit against the Central Government
where it relates to railway, the General Manager of that
railway;
[(bb) in the case of a suit against the Government of
the State of Jammu and Kashmir, the Chief Secretary to
that Government or any other officer authorized by that
Government in this behalf;]
(c) in the case of a suit against [any other State
Government], a Secretary to that Government or the
Collector of the district;
and, in the case of a public officer, delivered to him or
left at his office, stating the cause of action, the name,
description and place of residence of the plaintiff and
the relief which he claims; and the plaint shall contain a
statement that such notice has been so delivered or left.
(2) A suit to obtain an urgent or immediate relief against
the Government (including the Government of the State
of Jammu and Kashmir) or any public officer in respect
of any act purporting to be done by such public officer
in his official capacity, may be instituted, with the leave
of the Court, without serving any notice as required by
sub-section (I); but the Court shall not grant relief in the
suit, whether interim or otherwise, except after giving to
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the Government or public officer, as the case may be, a
reasonable opportunity of showing cause in respect of the
relief prayed for in the suit:
Provided that the Court shall, if it is satisfied, after hearing
the parties, that no urgent or immediate relief need be
granted in the suit, return the plaint for presentation to it
after complying with the requirements of sub-section (1).
(3) No suit instituted against the Government or against
a public officer in respect of any act purporting to be
done by such public officer in his official capacity shall
be dismissed merely by reason of any error or defect in
the notice referred to in sub-section (1), if in such notice
(a) the name, description and the residence of the plaintiff
had been so given as to enable the appropriate authority
or the public officer to identify the person serving the notice
and such notice had been delivered or left at the office of
the appropriate authority specified in sub-section (1), and
(b) the cause of action and the relief claimed by the plaintiff
had been substantially indicated.”
25.1. A plain reading of the above provision makes it explicit that
no suit can be instituted against the State, an instrumentality
of the State, or a public officer acting in his official capacity,
without issuance of a notice under Section 80 CPC. It is not
to be forgotten that when a notice is to be given, it must also
be given on the appropriate party. The object of this section is
to ensure that public funds and judicial time are not wasted on
unwarranted litigation. The requirement of notice provides the
Government an opportunity to examine the claim, reconsider its
position, and potentially resolve the dispute out of Court, thereby
avoiding unnecessary proceedings. There is an express bar on
a civil court from entertaining a suit against the government or
its instrumentalities, without compliance with the said provision.
Section 80 (2) further provides that notice under Section 80(1)
may be dispensed with, but only with the leave of the court.
This Court has consistently held that the requirement of notice
under Section 80 is mandatory and must be strictly complied
with. Failure to do so renders the suit liable to be dismissed
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at the threshold. The absence of such notice is treated as a
formal defect, and the Court is duty bound to reject the plaint
under Order VII Rule 11(d) CPC, if it discloses non-compliance
with Section 80 CPC.
26. In cases such as the one under consideration, the State, which
was not originally a party, could be impleaded and the plaint could
be amended by inclusion of pleadings, cause of action and relief
against the State. In such cases also, the plaintiff, immediately upon
becoming aware of the necessity to implead the State, is duty bound
to either issue a notice as contemplated under Section 80(1) CPC
or obtain leave under Section 80(2) CPC before an application for
impleadment is taken out. Failure to do so will bar the civil court
from exercising jurisdiction against the State, and the court will have
no option but to dismiss the suit. This is so because when a state
government or its instrumentality is impleaded in a pending suit, a
new or fresh cause of action is introduced. Similarly, if the amendment
sought by the plaintiff introduces a new cause of action within the
period of limitation and with the court’s leave, a fresh notice under
Section 80(1) CPC must still be issued. This Court in Gangappa
Gurupadappa Gugwad Gulbarga v. Rachawwa and Ors.28 held in
the following terms that it is the duty of the court to reject the plaint
if a notice under Section 80 is not issued:
“No doubt it would be open to a court not to decide all
the issues which may arise on the pleadings before it
if it finds that the plaint on the face of it is barred by
any law. If for instance the plaintiff’s cause of action is
against a Government and the plaint does not show
that notice under Section 80 of the CPC claiming relief
was served in terms of the said section, it would be
the duty of the court to reject the plaint recording an
order to that effect with reason for the order. In such a
case the court should not embark upon a trial of all the
issues involved and such rejection would not preclude
the plaintiff from presenting a fresh plaint in respect of
the same cause of action.”

28 AIR 1971 SC 442 : MANU/SC/0351/1970
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27. In Bihari Chaudhari v. State of Bihar29, this Court, considering the
object of Section 80 CPC and various other judgments, held as under:
“3. We are concerned in this case with Section 80 C.P.C.
as it stood prior to its amendment, by Act 104 of 1976
(Even under the amended provision, the position remains
unaltered insofar as a suit of this nature is concerned). We
shall extract the Section as it stood at the material time:
“80. No suit shall be instituted against the
Government (including the Government of the
State of Jammu and Kashmir) or against a
public officer in respect of any act purporting
to be done by such public officer in his official
capacity, until the expiration of two months next
after notice an writing has been delivered to, or
left at the office of-
(a) in the case of a suit against the Central
Government, except where it relates to a railway,
a Secretary to that Government ;
(b) in the case of a suit against the Central
Government where it relates to a railway, the
General Manager of that railway ;
(c) in the case of a suit against the Government
of the State of Jammu and Kashmir, the
Secretary to that Government or any other officer
authorised by that Government in this behalf ;
(d) in the case of a suit against any other
Government, a Secretary to that Government
or the Collector of the district;
* * * and, in the case of a public officer, delivered
to him or left at his office, stating the cause
of action, the name, description and place of
residence of the plaintiff and relief which he
claims; and plaint shall contain a statement
that such notice has been so delivered or left.”

29 AIR 1984 SC 1043 : 1984 (2) SCC 627
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The effect of the Section is clearly to impose a bar against
the institution of a suit against the Government or a public
officer in respect of any act purported to be done by him
in his official capacity until the expiration of two months
after notice in writing has been delivered to or left at the
office of the Secretary to Government or Collector of
the concerned district and in the case of a public officer
delivered to him or left at his office, stating the particulars
enumerated in the last part of Sub-section (1) of the Section.
When we examine the scheme of the Section it becomes
obvious that the Section has been enacted as a measure
of public policy with the object of ensuring that before a
suit is instituted against the Government or a public officer,
the Government or the officer concerned is afforded an
opportunity to scrutinise the claim in respect of which
the suit is proposed to be filed and if it be found to be
a just claim, to take immediate action and thereby avoid
unnecessary litigation and save public time and money
by settling the claim without driving the person, who has
issued the notice, to institute the suit involving considerable
expenditure and delay. The Government, unlike private
parties, is expected to consider the matter covered by the
notice in a most objective manner, after obtaining such
legal advice as they may think fit, and take a decision in
public interest within the period of two months allowed by
the Section as to whether the claim is just and reasonable
and the contemplated suit should, therefore, be avoided by
speedy negotiations and settlement or whether the claim
should be resisted by fighting out the suit if and when it is
instituted. There is clearly a public purpose underlying the
mandatory provision contained in the Section insisting on
the issuance of a notice setting out the particulars of the
proposed suit and giving two months time to Government
or a public officer before a suit can be instituted against
them. The object of the Section is the advancement of
justice and the securing of public good by avoidance of
unnecessary litigation.
5. When the language used in the Statute is clear and
unambiguous, it is the plain duty of the Court to give effect
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to it and considerations of hardship will not be a legitimate
ground for not faithfully implementing the mandate of the
legislature.
6. The Judicial Committee of the Privy Council had occasion
to consider the scope and effect of Section 80 C.P.C. in
an almost similar situation in Bhagchand Dagadusa and
Ors. v. Secretary of State for India in Council and Ors. 54
I.A. 338 In that case, though a notice had been issued by
the plaintiffs under Section 80 C.P.C. on 26th June 1922,
the suit was instituted before the expiry of the period of
two months from the said date. It was contended before
the Privy Council, relying on some early decisions of High
Court of Bombay, that because one of the reliefs claimed
in the suit was the grant of a perpetual injunction and the
claim for the said relief would have become infructuous
if the plaintiffs were to wait for the statutory period of
two months prescribed in Section 80 C.P.C. before they
filed the suit, the rigour of the Section should be relaxed
by implication of a suitable exception or a qualification
in respect of a suit for emergent relief, such as one for
injunction. That contention did not find favour with the
Privy Council and it was held that Section 80 is express,
explicit and mandatory aid it admits no implications or
exceptions. The Judicial Committee observed:
To argue as appellants did, that the plaintiffs had a right
urgently calling for a remedy, while Section 80 is mere
procedure, is fallacious, for Section 80 imposes a statutory
and unqualified obligation upon the Court.
7. This decision was subsequently followed by the Judicial
Committee in Vellayan v. Madras Province. 74 I.A. 223 The
dictum laid down by the Judicial Committee in Bhagchand
Dogadusa v. Secretary of State for India. 54 I.A. 333 was
cited with approval and followed by a Bench of five Judges
of this Court in Sawai Singhai Nirmal Chand v. Union of
India. [1966] (1) SCR 956
8. It must now be regarded as settled law that a suit
against the Government or a public officer, to which the
requirement of a prior notice under Section 80 C.P.C. is
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attracted, cannot be validly instituted until the expiration
of the period of two months next after the notice in writing
has been delivered to the authorities concerned in the
manner prescribed for in the Section and if filed before
the expiry of the said period, the suit has to be dismissed
as not maintainable.”
28. This Court in Bishandayal and Sons v. State of Orissa and Ors30
again reiterated the settled position and has held as under:
“16. There can be no dispute to the proposition that a
notice under Section 80 can be waived. But the question
is whether merely because in the amended written
statement such a plea is not taken it amounts to waiver.
This contention was argued before the Appellate Court.
Even otherwise we find that in the suit itself Issue No. 4
had been raised as to whether or not there was a valid
and appropriate notice under Section 80. Such a point
having been taken in the original written statement and
an issue having been raised, it was not necessary that
in the amended written statement such a plea be again
taken. On behalf of the Respondents, reliance has been
placed on the case of Gangappa Gurupadappa Gugwad v.
Rachawwa and Ors. Reported in MANU/SC/0351/1970:
[1971] 2 SCR 691, wherein it has been held that where
the plaintiffs cause of action is against a Government and
the plaint does not show that notice under Section 80 was
served, it would be duty of the Court to reject the plaint. In
this case the original notice was only in respect of a claim
under the plaint as it originally stood. That claim was on
the basis that there was a concluded contract and that
the Appellants had already acquired rights in the mill and
the lands. As has been fairly conceded those reliefs were
not maintainable and were given up before the Appellate
Court. The amended plaint was on an entirely new cause
of action. It was based on facts and events which took
place after the filing of the original plant(sic). It was a
fresh case. Now the claim was for specific performance

30 AIR 2001 SC 544 : MANU/SC/0773/2000
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of the agreement alleged to have been entered into on
29th December, 1978. Admittedly no notice under Section
80 CPC was given for this case. As there was an Issue
pertaining to Notice under Section 80, the trial court should
have dealt with this aspect. The trial court failed to do so.
It was then pressed before the Appellate Court. In our
view the finding in the impugned Judgment that the suit
based on this claim was not maintainable is correct and
requires no interference. If a new cause of action is being
introduced a fresh notice under Section 80 CPC would be
required to be given. The same not having been given,
the suit on this cause of action was not maintainable.”
29. In the present case, the appellant/4th defendant has not pleaded
directly that no notice under Section 80 was issued, but the plea
of maintainability of the suit was raised. It is not in dispute that the
appellant/4th defendant is an instrumentality of the Odisha State,
created in pursuance of a requirement under the specific enactment
of the parliament, State Financial Corporations Act, 1951, requiring
every State to facilitate and encourage industrial development by
creating institutions to fund the Micro, Small, and Medium Scale
Enterprises. A reading of the provisions clearly indicate that not only
is the appellant/4th defendant, a mandatory creation under a statute
but also is substantially controlled by the State to perform a public
duty of great importance, the object of which is to promote regional,
social and economical empowerment, which in turn is expected to
contribute at national level. Therefore, we are of the opinion that
the appellant/4th defendant satisfies the following tests laid down by
the Constitutional Bench of this Court in Ajay Hasia and Others v.
Khalid Mujib Sehravardi and others31 to be classified as a “State”
as defined under Article 12 of the Constitution of India. The relevant
paragraphs are extracted below for ready reference:
“8. We may point out that this very question as to when
a corporation can be regarded as an ‘authority’ within
the meaning of Article 12 arose for consideration before
this Court in R.D. Shetty v. The International Airport
Authority of India and Ors. [1979] 1 S.C.R.1042. There, in

31 (1981) 1 SCC 722 : MANU/SC/0498/1980
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a unanimous judgment of three Judges delivered by one
of us (Bhagwati, J) this Court pointed out :
“So far as India is concerned, the genesis of the emergence
of corporations as instrumentalities or agencies of
Government is to be found in the Government of India
Resolution on Industrial Policy dated 6th April, 1948
where it was stated inter alia that “management of State
enterprises will as a rule be through the medium of public
corporation under the statutory control of the Central
Government who will assume such powers as may be
necessary to ensure this.”
It was in pursuance of the policy envisaged in this
and subsequent resolutions on Industrial policy that
corporations were created by Government for setting up
and management of public enterprises and carrying out
other public functions. Ordinarily these functions could
have been carried out by Government departmentally
through its service personnel but the instrumentality or
agency of the corporation was resorted to in these cases
having regard to the nature of the task to be performed.
The corporations acting as instrumentality or agency of
Government would obviously be subject to the same
limitations in the field of constitutional and administrative
law as Government itself, though in the eye of the law,
they would be distinct and independent legal entities. If
Government acting through its officers is subject to certain
constitutional and public law limitations, it must follow a
fortiori that Government acting through instrumentality or
agency of corporations should equally be subject to the
same limitations. The Court then addressed itself to the
question as to how to determine whether a corporation is
acting as an instrumentality or agency of the Government
and dealing with that question, observed:
“A corporation may be created in one of two ways. It may
be either established by statute or incorporated under a
law such as the Companies Act 1956 or the Societies
Registration Act 1860. Where a Corporation is wholly
controlled by Government not only in its policy making but
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also in carrying out the functions entrusted to it by the law
establishing it or by the Charter of its incorporation, there
can be no doubt that it would be an instrumentality or
agency of Government. But ordinarily where a corporation
is established by statute, it is autonomous in its working,
subject only to a provision, often times made, that it shall
be bound by any directions that may be issued from time
to time by Government in respect of policy matters. So
also a corporation incorporated under law is managed
by a board of directors or committee of management in
accordance with the provisions of the statute under which it
is incorporated. When does such a corporation become an
instrumentality or agency of Government? Is the holding of
the entire share capital of the Corporation by Government
enough or is it necessary that in addition there should be a
certain amount of direct control exercised by Government
and, if so what should be the nature of such control?
Should the functions which the Corporation is charged to
carry out possess any particular characteristic or feature,
or is the nature of the functions immaterial? Now, one thing
is clear that if the entire share capital of the corporation
is held by Government, it would go a long way towards
indicating that the corporation is an instrumentality or
agency of Government. But, as is quite often the case, a
corporation established by statute may have no shares or
shareholders, in which case it would be a relevant factor
to consider whether the administration is in the hands of
a board of directors appointed by Government though this
consideration also may not be determinative, because
even where the directors are appointed by Government,
they may be completely free from governmental control
in the discharge of their functions. What then are tests to
determine whether a corporation established by statute or
incorporated under law is an instrumentality or agency of
Government? It is not possible to formulate an inclusive
or exhaustive test which would adequately answer this
question. There is no cut and dried formula, which would
provide the correct division of corporations into those
which are instrumentalities or agencies of Government
and those which are not”
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The Court then proceeded to indicate the different tests,
apart from ownership of the entire share capital:
“...if extensive and unusual financial assistance is
given and the purpose of the Government in giving
such assistance coincides with the purpose for which
the corporation is expected to’ use the assistance and
such purpose is of public character, it may be a relevant
circumstance supporting an inference that the corporation
is an instrumentality or agency of Government.... It may
therefore be possible to say that where the financial
assistance of the State is so much as to meet almost
entire expenditure of the corporation, it would afford
some indication of the corporation being impregnated
with governmental character.... But a finding of State
financial support plus an unusual degree of control over the
management and policies might lead one to characterise
an operation as State action - Vide Sukhdev v. Bhagatram
MANU/SC/0667/1975 : (1975) ILLJ 399 SC. So also the
existence of deep and pervasive State control may afford
an indication that the Corporation is a State agency or
instrumentality. It may also be a relevant factor to consider
whether the corporation enjoys monopoly status which
is State conferred or State protected. There can be little
doubt that State conferred or State protected monopoly
status would be highly relevant in assessing the aggregate
weight of the corporation’s ties to the State.”
There is also another factor which may be regarded
as having a bearing on this issue and it is whether the
operation of the corporation is an important public function.
It has been held in the United States in a number of
cases that the concept of private action must yield to a
conception of State action where public functions are being
performed. Vide Arthur S. Miller: “The Constitutional Law
of the Security State” (Stanford Law Review 620 at 664).
“It may be noted that besides the so-called traditional
functions, the modern state operates as multitude of
public enterprises and discharges a host of other public
functions. If the functions of the corporation are of public
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importance and closely related to governmental functions,
it would be a relevant factor in classifying the corporation
as an instrumentality or agency of Government. This is
precisely what was pointed out by Mathew, J., in Sukhdev v.
Bhagatram (supra) where the learned Judge said that
“institutions engaged in matters of high public interest of
performing public functions are by virtue of the nature of
the functions performed government agencies. Activities
which are too fundamental to the society are by definition
too important not to be considered government functions.”
The court however proceeded to point out with reference
to the last functional test:
“...the decisions show that even this test of public or
governmental character of the function is not easy of
application and does not invariably lead to the correct
inference because the range of governmental activity is
broad and varied and merely because an activity may be
such as may legitimately be carried on by Government,
it does not mean that a corporation, which is otherwise
a private entity, would be an instrumentality or agency of
Government by reason of carrying on such activity. In fact,
it is difficult to distinguish between governmental functions
and non-governmental functions. Perhaps the distinction
between governmental and non-governmental functions
is not valid any more in a social welfare State where the
laissez faire is an outmoded concept and Herbert Spencer’s
social statics has no place. The contrast is rather between
governmental activities which are private and private
activities which are governmental. [Mathew, J. Sukhdev v.
Bhagatram (supra) at p. 652]. But the public nature of the
function, if impregnated with governmental character or
“tied or entwined with Government” or fortified by some
other additional factor, may render the corporation an
instrumentality or agency of Government. Specifically, if a
department of Government is transferred to a corporation,
it would be a strong factor supportive of the inference.”
These observations of the court in the International Airport
Authority’s case (supra) have our full approval.
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9. The tests for determining as to when a corporation can be
said to be a instrumentality or agency of Government may
now be called out from the judgment in the International
Airport Authority’s case. These tests are not conclusive
or clinching, but they are merely indicative indicia which
have to be used with care and caution, because while
stressing the necessity of a wide meaning to be placed
on the expression “other authorities”, it must be realised
that it should not be stretched so far as to bring in
every autonomous body which has some nexus with the
Government within the sweep of the expression. A wide
enlargement of the meaning must be tempered by a wise
limitation. We may summarise the relevant tests gathered
from the decision in the International Airport Authority’s
case as follows :
(1) One thing is clear that if the entire share capital of the
corporation is held by Government it would go a long way
towards indicating that the corporation is an instrumentality
or agency of Government.
(2) Where the financial assistance of the State is so much
as to meet almost entire expenditure of the corporation,
it would afford some indication of the corporation being
impregnated with governmental character.
(3) It may also be a relevant factor...
whether the corporation enjoys monopoly status which is
the State conferred or State protected.
(4) Existence of deep and pervasive State control may
afford an indication that the Corporation is a State agency
or instrumentality.
(5) If the functions of the corporation of public importance
and closely related to governmental functions, it would
be a relevant factor in classifying the corporation as an
instrumentality or agency of Government.
(6) Specifically, if a department of Government is transferred
to a corporation, it would be a strong factor supportive of
this inference of the corporation being an instrumentality
or agency of Government. If on a consideration of these
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relevant factors it is found that the corporation is an
instrumentality or agency of government, it would, as
pointed out in the International Airport Authority’s case, be
an ‘authority’ and, therefore, ‘State’ within the meaning of
the expression in Article 12.”
30. Therefore, with the above conclusion that the appellant/4th defendant
is a “State” within the meaning of Article 12 of the Constitution, the
mandatory requirement of notice under Section 80 has come into
operation. A plain reading of Section 80 along with the settled position
of law clearly enunciates that it is a duty of the trial court to deal
with that aspect of satisfaction of the notice under Section 80. Such
preconditions to be satisfied before initiation of a suit are recognized
as mandatory in civil disputes where a statute prescribes the same.
A reference may be made to Section 18 of the MSME Act, which
provides for conciliation, or to Section 12-A of the Commercial Courts
Act, 2015, which mandates pre-institution mediation – failure of which
would render the suit unsustainable and liable to be rejected. The
trial Court, in the present case, failed to do so, thereby rendering the
decree a nullity. For a moment, we pause to state that the plaintiff,
in our view, cannot by any stretch be considered to be ignorant or
illiterate, as it is a registered partnership firm and the pleadings or
the documents marked also cannot be come to their aid to condone
the lapse as there is nothing on record to show that any notice was
issued to the appellant/4th defendant, which has gone into the root
of the jurisdiction of the trial court to entertain the suit against the
appellant/4th defendant.

Applicability of the Interest on Delayed Payments to Small Scale
and Ancillary Industrial Undertakings Act, 1993
31. The trial Court is bound to decide all the issues framed. While doing
so, it goes without saying that all the applicable legal provisions must
be duly analysed. It is to be noted that Issue No.8 as framed by
the trial court was: “whether the plaintiff is a small-scale unit, if yes,
then its effect?”. This issue was taken up for consideration along
with Issue No.5, which reads: “whether the plaintiff is entitled to
receive interest, if yes, then at what rate?”. However, while deciding
these issues, the trial Court failed to render any categorical finding
on whether the plaintiff was, in fact, a small-scale industry, and if
so, whether the provisions of the now-repealed Interest on Delayed
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Payments to Small Scale and Ancillary Industrial Undertakings Act,
199332 (which came into force only after the suit was filed) would at all
be applicable – more particularly against the appellant/4th defendant.
Therefore, it has become imperative for this Court to examine the
applicability of the Act, 1993.
32. The Act, 1993 came into force with effect from 23.09.1992 and
remained in effect until it was repealed by the Micro, Small and
Medium Enterprises Development Act, 2006. The Act, 1993 is a
special legislation. In order to determine whether the Act, 1993 applies
to the present case, it is necessary to examine certain provisions of
the Act, in light of the factual matrix on record. Section 2 of the Act
defines various terms used therein, the relevant definitions of which,
are extracted below, for the purpose of the present adjudication:
2(b) “appointed day” means the day following immediately
after the expiry of the period of thirty days from the day
of acceptance or the day of deemed acceptance of any
goods or any services by a buyer from a supplier;
2 (c) “buyer” means whoever buys any goods or receives
any services from a supplier for consideration;
2 (f) “supplier” means an ancillary industrial undertaking
or a small scale industrial undertaking holding a permanent
registration certificate issued by the Directorate of Industries
of a State or [Union territory and includes- [ Substituted
by Act 23 of 1998, Section 2, for “ Union territory” (w.e.f.
10.8.1998).]
32.1. Sections 3 to 6 of the Act, 1993 deal with the key aspects of
supply, liability for delayed payment, interest (including compound
interest), and recovery mechanisms. These provisions form the
substantive core of the Act and read as under:
Section 3. Liability of buyer to make payment.- Where
any supplier supplies any goods or renders any services
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:

32 For short, “the Act, 1993”
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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.
Section 4. Date from which and 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 half time of prime Lending
Rate charged by the State Bank of India.
Explanation.- For the purposes 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.
Section 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 interests) at the rate mentioned in
Section 4 on the amount due to the supplier.
Section 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
dispute as if the arbitration or conciliation were pursuant
to an arbitration agreement referred to in Sub-section (1)
of Section 7 of that Act.”
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32.2. A reading of the above provisions would indicate that under
Section 3, there is a statutory liability on the buyer to make
payment for the supplies received by him. The statutory liability
comes into operation when any supplier supplies any goods 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. The term ‘Appointed day’ as defined in Section
2(b) means the day following immediately after the expiry of
thirty days from the day of acceptance or the day of deemed
acceptance of any goods or services by a buyer from a supplier.
Thus, statutory liability to make payment falls on the buyer from
the 31st day after the supply, if no specific agreement exists
between the parties. It is relevant to note here that the liability
to make payment accrues “where any supplier supplies any
goods or renders any services to any buyer,” and the incident
of liability is either the supply of goods, rendering any service,
or both. The Act, 1993, without any shadow of doubt, is clearly
prospective in nature and governs the incidents of supply and
rendering service which happens after its enforcement, i.e.,
23.09.1992. Further, it is the buyer who is liable to make the
payment after the supply of goods or rendering any service.
Thus, by virtue of Section 3, both the incidents – i.e., the supply
of goods or services on the one hand, and the payment or
default on the other – must occur after the Act has come into
force. Only in cases where the supply or service is rendered
after the enforcement of the Act, the liability of payment shall
accrue and the Act can be pressed into service by a supplier.
The provisions also clearly indicate that the liability is only on
the buyer, and any amounts including interest under Section
4 or compounded interest under Section 5 can be demanded
only from the buyer, if the incidents referred to in Section 3
occur after the Act has come into force and not for any supply
or service rendered prior to 23.09.1992.
33. In Shanti Conductors (P) Ltd v. Assam State Electricity Board
and others33, a three-Judge Bench of this Court had an occasion
to consider the scope of the repealed Act, 1993, its applicability

33 MANU/SC/0068/2019 : (2019) 19 SCC 529
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with regard to the date of contract, date of supply, liability to make
payments and the conflicting judgments of the Division Bench of this
Court, and ultimately, held as under:
“27. From the submissions of the learned Counsel for the
parties and pleadings on record we need to answer the
following questions in these appeals:
(1) Whether Act, 1993 is not applicable when the contract
for supply was entered between the parties prior to
enforcement of the Act i.e. 23.09.1992?
(2) Whether in the event it is found that Act is applicable
also with regard to contract entered prior to Act, 1993 in
pursuance of which contract, supplies were made after
the enforcement of Act, 1993, the Act, 1993 can be said
to have retrospective operation?
(3) Whether money suit by M/s. Shanti Conductors was
barred by limitation?
(4) Whether judgment of this Court in Purbanchal
Cables dated 31.08.2016 by which appeal of M/s. Shanti
Conductors was also dismissed is binding between the
parties i.e. M/s. Shanti Conductors and Assam Electricity
Board and the Appellant cannot be allowed to question
the said judgment in these appeals?
(5) Whether the suit filed by the Appellants for recovery of
only interest when admittedly entire principal amount was
paid prior to filing of the suit can be said to be maintainable?
(6) Whether appeal filed by M/s. Trusses and Towers Pvt.
Ltd. challenging the review judgment dated 19.03.2003
cannot be entertained since no liberty was granted by
this Court in SLP(C) No. 12217 of 2001 when the SLP
filed against the main judgment of the High court dated
05.04.2001 was dismissed as withdrawn?
(7) Whether the High court while considering the Review
petition No. 75 of 2001 M/s. Trusses & Towers Pvt. Ltd.
even after expressing that Act, 1993 is not applicable could
have allowed 9% interest to the Plaintiff?”
…..
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37. The liability to make payment under Section 3 and the
liability to pay interest under Section 4 is not dependent
on date of agreement between the parties to make supply.
When the question of supply and payment are incidents
contemplated under the Act which have to take place after
the enforcement of the Act the day of agreement between
the parties has no relevance insofar as statutory liability
under the Act is concerned.
38. There are several two-Judge Benches judgments
of this Court where provisions of Act, 1993 especially
Sections 3 and 4 have been interpreted. We now refer to
judgments of this Court which have considered the above
provisions. The first judgment which has been noticed is
Assam Small Scale Industries Development Corporation
Ltd. and Ors. v. J.D. Pharmaceuticals and another (2005)
13 SCC 19. This Court in the said judgment laid down that
Act, 1993 will not apply to transactions which took place
prior to enforcement of the Act. Following was laid down
in paragraphs 37 and 38:
“37. We have held hereinbefore that Clause 8 of
the terms and conditions relate to the payments
of balance 10%. It is not in dispute that the
Plaintiff had demanded both the principal amount
as also the interest from the Corporation.
Section 3 of the 1993 Act imposes a statutory
liability upon the buyer to make payment for the
supplies of any goods either on or before the
agreed date or where there is no agreement
before the appointed day. Only when payments
are not made in terms of Section 3, Section /4
would apply. The 1993 Act came into effect
with effect from 23.9.1992 and will not apply to
transactions which took place prior to that date.
We find that out of the 71 suit transactions, sl.
Nos. 1 to 26 (referred to in penultimate para of
the Trial Court Judgment), that is supply orders
between 5.6.1991 to 28.7.1992, were prior to
the date of 1993 Act coming into force. Only the
transactions at sl. No. 27 to 71 (that is supply
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orders between 22.10.1992 to 19.6.1993). will
attract the provisions of the 1993 Act.
38. The 1993 Act, thus, will have no application in
relation to the transactions entered into between
June, 1991 and 23.9.1992. The Trial Court as
also the High Court, therefore, committed a
manifest error in directing payment of interest
at the rate of 23% upto June, 1991 and 23.5%
thereafter.”
39. The word ‘transaction’ used in the above judgment
has to include the supply, in the event word ‘transaction’
is understood as supply there cannot be any quarrel with
the proposition that Act will not apply with regard to supply
made prior to the Act.
40. The next judgment of this Court is Shakti Tubes
Ltd. v. State of Bihar and Others, (2009) 7 SCC 673. In
the said case, Shakti Tubes had filed a suit for payment
of interest. In the above case, supply orders were placed
by the State of Bihar on 16.07.1992, reliance on Act, 1993
was placed by the appellant. It was also noticed in the
said case that earlier supply order dated 16.07.1992 was
materially altered and substituted by a fresh supply order
issued on 18.03.1993. Referring to the judgment of this
Court in Assam Small Scale Industries case, two-Judge
Bench held that ratio of the aforesaid decision is clearly
applicable. In paragraphs 17, 18 and 19 following was
laid down:
“17. In the light of the said facts in Assam Small Scale
Industries case, it was recorded in paragraph 37 of
the judgment that while the Act came into effect from
23rd September, 1992, the supply orders were placed
only in respect of Serial Nos. 1 to 26 immediately
and before coming into effect of the Act and rest of
the supply orders namely, supply orders at Serial
Nos. 27 to 71 were placed between 22.10.1992 to
19.06.1993 which were subsequent to the date when
the Act came into force. In that context, it was clearly
recorded in the judgment that the Act will have no
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application to the transactions that took place prior to
the commencement of the Act. In the next sentence
the Court made it clear as to what is referred to and
understood by the expression “transaction” when
it clearly stated that out of 71 transactions, Serial
Nos. 1 to 26, i.e. supply orders between 05.06.1991
to 28.07.1992 being prior to 23rd September, 1992
when the Act came into force, higher interest as
envisaged Under Sections 4 and 5 of the Act cannot
be paid and demanded in respect of the said supply
orders/transactions. It was also made clear that the
transactions at Serial Nos. 27 to 71 only i.e. supply
orders between 22.10.1992 to 19.06.1993, would
attract the provisions of the Act. therefore, those
supply orders which were issued by the Corporation
between 22.10.1992 to 19.06.1993 were held to be
the transactions which would be entitled to get the
benefit of the provisions of the Act.
18. In our considered opinion, the ratio of the aforesaid
decision in Assam Small Scale Industries case is
clearly applicable and would squarely govern the
facts of the present case as well. The said decision
was rendered by this Court after appreciating the
entire facts as also all the relevant laws on the issue
and, therefore, we do not find any reason to take a
different view than what was taken by this Court in
the aforesaid judgment. Thus, we respectfully agree
with the aforesaid decision of this Court which is found
to be rightly arrived at after appreciating all the facts
and circumstances of the case.
19. Now coming to the facts of the present case we
find that there is no dispute with regard to the fact that
the supply order was placed with the Respondents
on 16.07.1992 for supply of the pipes which date is
admittedly prior to the date on which this Act came
into effect.”
41. The Bench further referring to earlier judgment of this
Court in Assam Small Scale Industries observed that the
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use of the expression ‘transaction’ was only for supply
order. In paragraph 21, following was laid down:
“21. We have considered the aforesaid rival
submissions. This Court in Assam Small Scale
Industries case has finally set at rest the
issue raised by stating that as to what is to
be considered relevant is the date of supply
order placed by the Respondents and when
this Court used the expression “transaction” it
only mea.nt a supply order. The Court made it
explicitly clear in paragraph 37 of the judgment
which we had already extracted above. In our
considered opinion there is no ambiguity in the
aforesaid judgment passed by this Court. The
intent and the purpose of the Act, as made in
paragraph 37 of the judgment, are quite clear
and apparent. When this Court said “transaction”
it meant initiation of the transaction i.e. placing
of the supply orders and not the completion
of the transactions which would be completed
only when the payment is made therefore, the
submission made by the learned senior Counsel
appearing for the Appellant-Plaintiff fails.”
42. The Court further held that there was neither any
alteration of the contract nor novation of the contract in
paragraph 31, which is to the following effect:
“31. Even otherwise, we are of the considered
view that there was neither any alteration of
the contract nor any novation of the contract
in the present case. The correspondence
between the parties clearly disclosed that after
the Respondents issued the supply order, the
Appellant-Plaintiff did not supply the pipes in
terms of the supply order and it urged mainly
for the increase in the price of the goods.
Subsequently, they relied upon the price
escalation Clause and asked for increase in
the price of pipes.”
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43. Next judgment we notice is Modern Industries v. Steel
Authority of India Limited, (2010) 5 SCC 44. Noticing
the purpose and object of the Act, 1993, following was
observed in paragraph 23:
“23. The wholesome purpose and object behind
1993 Act as amended in 1998 is to ensure that
buyer promptly pays the amount due towards
the goods supplied or the services rendered
by the supplier. It also provides for payment of
interest statutorily on the outstanding money in
case of default. Section 3, accordingly, fastens
liability upon the buyer to make payment for
goods supplied or services rendered to the buyer
on or before the date agreed upon in writing
or before the appointed day and when there is
no date agreed upon in writing, the appointed
day shall not exceed 120 days from the day of
acceptance.”
44. The Court had also considered one of the submissions
that the suit for recovery of mere interest under Act, 1993
is not maintainable. The Bench answered the issue by
holding that the suit even for interest is also maintainable.
Following was laid down in paragraphs 45 - 46:
“45. It is true that word ‘together’ ordinarily
means conjointly or simultaneously but this
ordinary meaning put upon the said word may
not be apt in the context of Section 6. Can it
be said that the action contemplated in Section
6 by way of suit or any other legal proceeding
Under Sub-section (1) or by making reference
to IFC Under Sub-section (2) is maintainable
only if it is for recovery of principal sum along
with interest as per Sections 4 and 5 and not
for interest alone? The answer has to be in
negative.
46. We approve the view of Gauhati High Court
in Assam State Electricity Board (2002) 2 GLR
550 that word ‘together’ in Section 6(1) would
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mean ‘alongwith’ or ‘as well as’. Seen thus, the
action Under Section 6(2) could be maintained
for recovery of principal amount and interest or
only for interest where liability is admitted or has
been disputed in respect of goods supplied or
services rendered. In our opinion, under Section
6(2) action by way of reference to IFC cannot
be restricted to a claim for recovery of interest
due Under Sections 4 and 5 only in cases of an
existing determined, settled or admitted liability.
IFC has competence to determine the amount
due for goods supplied or services rendered
in cases where the liability is disputed by the
buyer. Construction put upon Section 6(2) by
learned senior Counsel for the buyer does
not deserve to be accepted as it will not be in
conformity with the intention, object and purpose
of 1993 Act. Preamble to 1993 Act, upon which
strong reliance has been placed by learned
senior Counsel, does not persuade us to hold
otherwise. It is so because Preamble may not
exactly correspond with the enactment; the
enactment may go beyond Preamble.”
45. In the above case also the contract was entered on
15.01.1993 but the contract was subsequently altered. Last
alteration being on 29.04.1995 hence the Bench repelled
the submission that Act, 1993 was not applicable.
46. Now we come to the judgment of this Court in
Purbanchal Cables and Conductors Private Limited (supra),
which is a judgment on which reliance has been placed
by the High Court while allowing the appeal of the Board.
Learned Counsel for the Board has also placed heavy
reliance on the said judgment.
47. In the above case, Board placed order dated 31.03.1992
for delivery of goods on 16.09.1992. Further, supplies were
made between 25.9.1992 and 30.03.1993. Entire supply
was completed on 12.10.1993 entire payment was received
by October, 1993. The supplier instituted money suit for
payment of interest on delayed payment under Act, 1993.
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The issues to be answered have been noted in paragraph
10 of the judgment which is to the following effect:
“10. The issues that are required to be answered
by us in these appeals are whether a suit
for interest along is maintainable under the
provisions of the Act, and whether the Act
would be applicable to contracts that have
been concluded prior to the commencement
of the Act. In other words, we are required to
examine whether the Act would apply to those
contracts which were entered into prior to the
commencement of the Act but supplies were
effected after the Act came into force.”
48. On the question of maintainability of the suit for
interest, the Bench held that the supplier may file suit
only for a higher rate of interest on delayed payment
made by the buyer from the commencement of the Act.
The Bench held that Act, 1993, being a substantive law
it shall operate prospectively. In paragraph 51, following
has been laid down:
“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.”
49. The Court further held that Act, 1993 shall be
applicable only for sale agreements after the date of the
commencement of the Act and not any time prior. Following
was laid down in paragraph 52:
“52. In the absence of any express legislative
intendment of the retrospective application of the
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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.”
50. The Bench also expressly rejected the submission of the
learned Counsel appearing for the supplier that the earlier
judgments of this Court in Assam Small Scale Industries
and Shakti Tubes need consideration. On question of
limitation of the suit, no final opinion was expressed. The
appeals were ultimately dismissed by the Bench.

Issue No. 1
51. The judgment of this Court in Purbanchal Cables
and Conductors Pvt. Ltd., relying on Assam Small Scale
Industries and Shakti Tubes had laid down that Act, 1993
cannot be made applicable with regard to sale agreements
which were entered into prior to the enforcement of the
Act and Act can be invoked only for the sale agreements
which were entered after the enforcement of the Act.
Although attempt was made in Purbanchal Cables to get
judgment in Assam Small Scale Industries and Shakti
Tubes reconsidered, but Coordinate Bench in Purbanchal
Cables has refused to permit any such reconsideration.
The matter now having been referred to this three-Judge
Bench, we have to consider and answer as to whether the
above interpretation of Act, 1993 as given is in consonance
with the statutory scheme.
52. We have noticed above that the incidence of applicability
of the liability under the Act is supply of goods or rendering
of service. In event the supply of goods and rendering of
services is subsequent to Act, can liability to pay interest on
delayed payment be denied on the ground that agreement
in pursuance of which supplies were made were entered
prior to enforcement of the Act? Entering into an agreement
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being not expressly or impliedly referred to in the statutory
scheme as an incident for fastening of the liability, making
the date of agreement as date for imposition of liability
does not conform to the statutory scheme. This can be
illustrated by taking an example. There are two small scale
industries who received orders for supply of materials. ‘A’
received such orders prior to the enforcement of the Act
and ‘B’ received the order after the enforcement of the
Act. Both supplied the goods subsequent to enforcement
of the Act and became entitled to receive payment after
the supply, on or before the day agreed upon between the
supplier and buyer or before the appointed day. Payments
were not made both to A and B as required by Section 3.
Can the buyer who has received supplies from supplier
A escape from his statutory liability to make payment of
interest Under Section 3 read with Section 4? The answer
has to be No. Two suppliers who supply goods after
the enforcement of the Act, become entitled to receive
payment after the enforcement of the Act one supplier
cannot be denied the benefit of the statutory protection on
the pretext that agreement in his case was entered prior
to enforcement of the Act. When the date of agreement
is not referred as material or incidence for fastening the
liability, by no judicial interpretation the said date can be
treated as a date for fastening of the liability. The Act, 1993
being beneficial legislation enacted to protect small scale
industries and statutorily ensure by mandatory provision for
payment of interest on the outstanding money, accepting
the interpretation as put by learned Counsel for the Board
that the day of agreement has to be subsequent to the
enforcement of the Act, the entire beneficial protection
of the Act shall be defeated. The existence of statutory
liability depends on the statutory factors as enumerated
in Section 3 and Section 4 of the Act, 1993. Factor for
liability to make payment Under Section 3 being the
supplier supplies any goods or renders services to the
buyer, the liability of buyer cannot be denied on the ground
that agreement entered between the parties for supply
was prior to Act, 1993. To hold that liability of buyer for
payment shall arise only when agreement for supply was
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entered subsequent to enforcement of the Act, it shall be
adding words to Section 3 which is not permissible under
principles of statutory construction. We, thus, are of the
view that judgments in Purbanchal Cables and Conductors
(supra), Assam Small Scale Industries and Shakti Tubes
which held that Act, 1993 shall be applicable only when the
agreement to sale/contract was entered prior/subsequent to
the enforcement of the Act, does not lay down the correct
law. We accept the submission of learned Counsel for the
Appellants that even if agreement of sale is entered prior
to enforcement of the Act, liability to make payment Under
Section 3 and liability to make payment of interest Under
Section 4 shall arise if supplies are made subsequent to
the enforcement of the Act.

Issue No. 2
53. In all the judgments of this Court referred above, it
has been held that Act, 1993 is not retrospective. It is not
even contended before us by any of the parties that the
Act, 1993 is retrospective in operation. Judgments of this
Court as noticed above rightly hold that Act, 1993 is not
retrospective.
54. The opinion of Justice Gowda dated 31.08.2016
although holds that Act is not retrospective but he holds
the Act retroactive. The word retroactive has been defined
in Black’s Law Dictionary in the following words:
Retroactive. adj. (17C) (Of a statute, ruling, etc.) extending
in scope or effect to matters that have occurred in the past. -
Also termed retrospective. Cf. Prospective (1). - retroact, vb.
55. Two-Judge Bench of this Court in State Bank’s Staff
Union (Madras Circle) v. Union of India and Ors.,
MANU/SC/0564/2005 : (2005) 7 SCC 584, had occasion
to examine the concept of retroactive and retrospective.
In paragraphs 20 and 21 of the judgment following has
been laid down:
“20. Judicial Dictionary (13th Edn.) K.J. Aiyar,
Butterworth, p. 857, states that the word
“retrospective” when used, with reference to an
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enactment may mean (i) affecting an existing
contract; or (ii) reopening up of past, closed and
completed transaction; or (iii) affecting accrued
rights and remedies; or (iv) affecting procedure.
Words and Phrases, Permanent Edn., Vol.
37-A, pp. 224-25, defines a “retrospective or
retroactive law” as one which takes away or
impairs vested or accrued rights acquired under
existing laws. A retroactive law takes away or
impairs vested rights acquired under existing
laws, or creates a new obligation, imposes a
new duty, or attaches a new disability, in respect
to transaction or considerations already past.
21. In Advanced Law Lexicon by P. Ramanath
Aiyar (3 rd Edition, 2005) the expressions
«retroactive» and «retrospective» have been
defined as follows at page 4124 Vol. 4)
Retroactive-Acting backward; affecting what
is past. (Of a statute, ruling, etc.) extending in
scope or effect to matters that have occurred in
the past. - Also termed retrospective. (Black, 7th
Edn. 1999) ‘Retroactivity’ is a term often used by
lawyers but rarely defined. On analysis it soon
becomes apparent, moreover, that it is used to
cover at least two distinct concepts. The first,
which may be called ‘true retroactivity’, consists
in the application of a new Rule of law to an act
or transaction which was completed before the
Rule was promulgated. The second concept,
which will be referred to as ‘quasi-retroactivity’,
occurs when a new Rule of law is applied to an
act or transaction in the process of completion....
The foundation of these concepts is the
distinction between completed and pending
transactions....”
(T.C. Hartley, The Foundations of European
Community Law 129 (1981).
***
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Retrospective-Looking back; contemplating
what is past.
Having operation from a past time.
‘Retrospective’ is somewhat ambiguous and
that good deal of confusion has been caused
by the fact that it is used in more senses than
one. In general however the Courts regards
as retrospective any statute which operates
on cases or facts coming into existence
before its commencement in the sense that it
affects even if for the future only the character
or consequences of transactions previously
entered into or of other past conduct. Thus,
a statute is not retrospective merely because
it affects existing rights; nor is it retrospective
merely because a part of the requisite for its
action is drawn from a time and antecedents to
its passing. (Vol. 44 Halsbury’s Laws of England,
Fourth Edition, page 570 para 921)”
56. Further in Jay Mahakali Rolling Mills v. Union of India
and Ors. MANU/SC/3133/2007 : 2007 (12) SCC 198,
explaining the retroactive and retrospective following has
been laid down:
“8. “Retrospective” means looking backward,
contemplating what is past, having reference
to a statute or things existing before the statute
in question. Retrospective law means a law
which looks backward or contemplates the
past; one, which is made to affect acts or facts
occurring, or rights occurring, before it comes
into force. Retroactive statute means a statute,
which creates a new obligation on transactions
or considerations or destroys or impairs vested
rights.”
57. Retroactivity in the context of the statute consists
application of new Rule of law to an Act or transaction which
has been completed before the Rule was promulgated.
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58. In the present case the liability of buyer to make
payment and day from which payment and interest become
payable Under Section 3 and 4 does not relate on any
event which took place prior to Act, 1993, it is not even
necessary for us to say that Act, 1993 is retroactive in
operation. The Act, 1993 is clearly prospective in operation
and it is not necessary to term it as retroactive in operation.
We, thus, do not subscribe to the opinion dated 31.08.2016
of one of the Hon’ble Judges holding that the Act, 1993
as retroactive.”
33.1. The ratio laid down by this Court in Shanti Conductors case
(supra) can be summarised as under:
A. The date of contract is irrelevant and what is relevant is the
incident of supply or rendering of services as contemplated
under Section 3 after the Act, 1993 has come into force, and
only if the incidents occur after 23.09.1992, the provisions
can be applied thereby overruling the ratio laid down by
this Court in Purbanchal Cables & Conductors, Assam
Small Scale Industries and Shakti Tubes Ltd., that the
Act, 1993 shall be applicable only when the agreement
to sale/contract was entered into subsequent to the
enforcement of the Act.
B. That the Act, 1993 is prospective – it is neither retrospective
nor retroactive – and hence, the provisions of the Act
cannot be invoked or relied upon for supplies effected
prior to its enforcement.
C. The payment of interest under Section 4, or compounded
interest under Section 5, is mandatory and applies dehors
the terms of the agreement between the parties, and
upon failure of the buyer to make payment within the time
stipulated, statutory interest is automatic.
D. The liability to pay under the Act is only on the buyer and
cannot be fastened on any other person for a transaction
covered under the Act,
E. The liability to pay interest or compound interest arises
only if the supply or service occurs after the enforcement
date of the Act, 1993.
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34. Juxtaposing the above ratio with the facts of the present case,
we are of the considered view that the trial Court committed a
serious error in applying the provisions of the repealed Act, 1993,
to the present case, where the supply was effected in 1985, and
more particularly, a grave error in fastening liability for interest and
compound interest on the appellant, which was not even a buyer in
the transaction. Accordingly, the judgment of the trial Court, to the
extent of applying the repealed Act, 1993 and imposing liability on
the appellant, is patently without authority and is a nullity on that
count. The High Court, in exercise of its supervisory jurisdiction, also
failed to examine and address these vital aspects.
35. As pointed out earlier, the trial Court failed to return any finding on
the applicability of the repealed Act, 1993, despite the fact that an
issue on the payment of interest had been framed. Under Order XX
Rule 5 CPC, it is incumbent upon the trial Court to pronounce its
judgment on all issues framed. In the present case, the trial Court
failed to discharge this obligation and, instead, directly proceeded
to apply the provisions of an enactment that was not in force, either
at the time of the transaction or at the time of institution of the suit.
The failure to discuss and give any finding on the issue has rendered
the judgment to be a nullity. This constitutes a fundamental legal
error, which, in our view, has vitiated the decree and renders it
unenforceable against the appellant.

Maintainability of Suit
36. The appellant is a State-owned Corporation incorporated and
registered under the S.F.C. Act, 1951. On 22.11.1984, the appellant
had jointly financed, along with Respondent No.3 - IPICOL, to
Respondent No. 2, for the establishment of a bleaching powder
unit at Ganjam, Orisha. A pari passu agreement was executed
among the appellant, Respondent No. 2 and Respondent No. 3.
On 29.07.1985, Respondent No. 1 allegedly supplied raw materials
worth Rs.66,454.65 to Respondent No. 2. Owing to the non-
repayment of dues arising out of the financial assistance provided
by the appellant and Respondent No.3, the appellant took over
possession of industrial unit of Respondent No. 2, on 18.08.1987
under Section 29 of the S.F.C. Act, 1951, without encumbrances,
as specifically permitted under the Act. Upon a thorough analysis
of the records, we find that once the appellant took over the affairs
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of Respondent No. 2 to realise its dues, all debts and liabilities of
Respondent No. 2 automatically fell on the appellant to satisfy those
claims only out of the balance sale proceeds, if any, after satisfying
its dues as contemplated under Section 29. However, it is claimed
that the appellant sold the property in the open market for recovery
of the loan amount and thereafter, paid the remaining balance to
Respondent No.3 - IPICOL pursuant to a contract between them. On
29.02.1988, Respondent No.1, alleging that it had supplied hydrated
lime to Respondent No. 2 in 1985, filed a recovery suit in Civil
Suit No.103 of 1988 before the Court of Civil Judge (Sr. Division),
Dehradun. Initially, the appellant was not a party to the suit. On
11.02.1993, Respondent No.1 made an application to implead the
appellant as Defendant No.4 and the trial Court erroneously allowed
the same on 06.12.1994. The appellant filed a written statement
denying liability on multiple grounds, including: (i) Under Section 29,
no liability of Respondent No. 2 to third parties could be imposed
on the appellant, (ii) There was no privity of contract between the
appellant and Respondent No. 1 as the appellant was not a party
to the underlying transaction, (iii) the suit against the appellant, was
barred by limitation, (iv) the suit was not maintainable, and (v) the
trial Court lacked territorial jurisdiction to entertain the suit. Without
properly considering the same, the trial Court decreed the suit in
favour of Respondent No. 1.
37. Upon a perusal of the pleadings and the judgment, this Court
finds that the trial Court failed to frame any issues with respect
to maintainability, jurisdiction and limitation, nor did it render any
finding on the maintainability of the suit against the appellant herein,
there being a specific plea to that effect. In a recent judgment in
R. Nagaraj (dead) through legal heirs and another v. Rajamani and
others34, this Court held that although it is not necessary to frame a
separate issue on each point, a finding on a disputed question, while
deciding a connected issue is sufficient. However, in the present case,
the trial Court, though framed Issue No. 9 concerning the liability
of the appellant / 4th defendant, failed to return any finding on the
foundational question of maintainability of the suit, which goes to
the root of jurisdiction.

34 2025 Livelaw SC 416
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38. It is further evident that initially, the original suit No.103/88 was partly
decreed for Rs.84,170/- along with pending and future interest at
24% per annum from 01.03.1988 to 23.09.1992, and thereafter at 2%
compounded monthly from 23.09.1992 until realization. The finding
of the trial Court on Issue No.9 is of critical importance and, in fact,
gave rise to multiple rounds of litigation. The trial Court however,
without analysing the scope and applicability of the S.F.C. Act, 1951,
the requirement of mandatory notice under Section 80 CPC, the
relevance of the repealed Act, 1993, and the specifically contested
issue of maintainability, proceeded to render findings only on the
limited issues. The judgment was passed without considering or
rendering any finding on the core legal issues in the case, thereby
vitiating the trial Court’s judgment on fundamental jurisdictional
grounds.

Privity of Contract
39. Admittedly, there was no contract between the appellant and
Respondent No. 1. The appellant has been impleaded solely on the
ground that it took possession of the defaulting industrial concern and
exercised its rights under the S.F.C. Act, 1951 to realize its dues. In
the absence of any privity of contract, the liability of the appellant is
limited strictly to the extent contemplated under Section 29 of the
S.F.C. Act, 1951. The appellant therefore, cannot be saddled with
the entire liability arising from a transaction to which it was not a
party. It is necessary to understand the object behind Section 29.
40. The object of Section 29 of the State Financial Corporation Act,
1951, is to empower State Financial Corporations to enforce their
rights, without recourse to a suit, against the securities alone, for
the recovery of their dues. In other words, the appellant is a class
of secured creditor conferred with special rights under Section 29
to realise its dues by enforcing the security without approaching the
Court. The liability of such a creditor is limited only to the extent of
the money available in its hands after adjustment of its dues. It is not
in dispute that the appellant held such money merely as a “trustee”
akin to a legal representative in possession of the estate’s proceeds.
It is pertinent to note that a financial corporation, or for that matter, the
appellant took possession of the defaulting industrial concern only for
the limited purpose of realizing its dues and cannot be treated as an
owner in the broader legal sense. Once the assets are sold by auction,
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the financial corporation is entitled to adjust the sale proceeds toward
its expenses, the principal, and interest due. Any balance remaining
must be distributed among the other creditors. Section 50 CPC deals
with the liability of a legal representative upon the death of a judgment
debtor, and under Section 50(2), such liability is limited only to the
estate of the deceased in the representative’s hands and cannot be
stretched to the personal properties standing in the name of the legal
representatives. It is well settled that if the legal heirs of a deceased
judgment debtor do not receive any estate, they cannot even be
termed “legal representatives” within the meaning of the law, since that
status arises solely from the receipt of the deceased’s estate. Similar
provisions limiting the liability of legal heirs or representatives only to
the extent of the value of the properties received by them after the
death of the deceased, are also found in statutes dealing with direct
and indirect taxes. Similarly, the liability of a financial corporation is
limited only to the extent of the money received from the management
or sale of assets of the defaulting concern and lying in its hand after
settlement of its dues and creditors’ claims. No claim can be extended
to the personal assets or properties of such a corporation. It is needless
to state that once the defaulting concern is sold or rehabilitated, the
financial corporation’s control over it ceases. Hence, the liability of
the appellant is restricted to the defaulting concern’s funds in its
hands, and under no stretch of law, can be extended to its personal
or corporate properties. In such a situation, we fail to comprehend
how the entire liability has been fastened upon the appellant and how
its properties and bank accounts have been attached. This is clearly
beyond the jurisdiction of the trial Court or, for that matter, even the
Executing Court, which cannot proceed against the personal assets
of the appellant in such circumstances.
41. As already stated, the suit was decreed on 20.08.2001. During the
pendency of the appeal, it came to light that the trial Court had neither
framed any issue on limitation nor adjudicated upon it. The appellate
Court accordingly remanded the matter to the trial Court to frame
and adjudicate upon the said issue. It was only after the appellant
raised this plea, Respondent No. 1/ plaintiff filed an application under
Section 21 of the Limitation Act, 1963. On 05.11.2005, the trial Court
erroneously held that the impleadment of the appellant would relate
back to the date of institution of the suit i.e., 29.02.1988, despite
the fact that the decree had already been passed. Thereafter, the
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trial Court passed an order on 22.03.2006 negating the plea of
limitation. It is evident that the application under Section 21 was
filed only post-decree in an attempt to evade judicial scrutiny of the
limitation issue in the appeal proceedings, even though the suit was
already barred by limitation against the appellant. We are unable
to understand as to how the trial Court can usurp the jurisdiction,
when the original order of impleadment without any finding with
regard to application of the proviso to Section 21 was affirmed upto
the High Court. Unfortunately, the trial Court failed to appreciate and
consider this crucial aspect. It is a trite law that once a final decree
has been passed, the trial Court becomes functus officio, except for
limited purposes under Section 114 read with Order XLVII (review),
Section 144 (restitution), or Section 152 (amendment for clerical or
arithmetical errors) of the CPC, which cannot be applied to the facts
of the present case. The trial Court, therefore, has no jurisdiction to
reopen a case or alter a part of the order so as to affect the rights
and liabilities of the parties once the suit has been disposed of.
41.1. Under Section 21 of the Limitation Act, 1963, the impleadment
of a party in a pending suit takes effect only from the date on
which such an application is allowed. However, the proviso
enables the court to direct that such impleadment shall relate
back to an earlier date, provided that the omission was due to
a mistake made in good faith. A mistake in good faith would
be applicable if the person claiming shelter under such plea is
able to prove that he has exercised all possible diligence and
believed an existing fact or law to be true or applicable, which
is probable but not correct. Essentially, such a mistake in good
faith can only denote an error in judgment, but cannot include
a plea that he was not aware of the law, as per the maxim
“Iqnorantia facti doth excusat; Ignorantia juris non excusat” which
means, ignorance of fact is an excuse, but ignorance of law
is not excused. For a person to claim that the mistake in good
faith in law is applicable to his case, it not only presupposes
that he was aware of the law, but has to prove that he after
due diligence exercisable by a man of reasonable knowledge
believed that he was not entitled to sue or any relief, which later
turned out to be incorrect. As stated earlier, the trial Court upon
a decree being passed, had become functus officio. Section 21
is applicable only in pending proceedings and the provision is
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to be pressed into service when the application for impleading
is decided and not later. The trial Court, while passing an order
for impleadment has to consider the proviso to Section 21, the
facts pleaded, and the evidence both documentary or oral,
and then decide, whether the legal requirement is satisfied to
hold that the suit is deemed to have been instituted against
the impleaded party with effect from an earlier date. It is also
open to the Court to consider the facts and upon satisfaction,
to apply the proviso. However, such an exercise must be done
while deciding the application and a further order is to be passed
to that effect immediately and not after the suit is decreed. In
the present case, the records reveal that the application under
section 21 was filed only in 2005 – after the decree had already
been passed. Such an application was not maintainable, and
the Court had no jurisdiction to entertain it post-decree. Although
the appeal filed by the appellant was dismissed by order dated
23.11.2017 in Civil Appeal No. 2073/2010, this Court in that
round, did not go into the question of the maintainability or the
proper stage for invoking Section 21 of the Limitation Act, 1963.
42. Yet another contention raised by the learned Senior Counsel for the
appellant is that the decree cannot be enforced against the appellant,
as amounts far in excess of the decretal sum have already been
realized from it. Presently, the appellant – a Public Sector Undertaking
under the State of Odisha – is facing execution proceedings and
has been saddled with a liability of Rs. 8.89 Crores, arising from a
decree for Rs. 90,400/- with interest, in a suit instituted in 1988 by
Respondent No.1 to recover sums allegedly due from a transaction in
which the appellant was never a party. At this juncture, it is pertinent
to note that during the pendency of the suit proceedings, the appellant
had furnished two bank guarantees – one for Rs.6.36 lakhs in
1998 and another for Rs.3.50 lakhs in 1999 – both drawn on Union
Bank of India, Cuttack, and both provided even prior to the decree
dated 20.08.2001. This Court, in its order dated 10.03.2014 in Civil
Appeal No. 2073 of 2010, specifically recorded that the appellant
had already deposited an amount in excess of the decretal liability
through the said bank guarantees, which had been periodically
renewed and accordingly, there was no need to direct any further
deposit. Thereafter, pursuant to the orders of the Executing Court,
the proceeds of the bank guarantees – totaling Rs.58,16,905/- (i.e.,
[2025] 9 S.C.R. 87

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

Rs.40,16,606/- + Rs.18,00,299/-) – were also improperly released
to Respondent No.1 during the course of execution.
43. In the instant case, the supply order in question – namely, the raw
materials purchased by Respondent No. 2 from Respondent No. 1/
Decree Holder, amounting to Rs.66,454.65, for which the suit was
filed in 1988 – was made in the year 1985, well before the coming
into force of the Act, 1993, i.e., with effect from 23.09.1992. The
suit was decreed only on 20.8.2001. Accordingly, the trial Court
ought not to have awarded 2% monthly compound interest from
23.09.1992 onwards on the decretal amount, as the transaction
predates the applicability of the said Act. We have already held that
the provisions of the repealed Act, 1993 are inapplicable to the facts
of the present case against any of the defendants, as the supply
in question occurred prior to 23.09.1992. Therefore, not only the
maintainability of the suit against the appellant, the imposition and
recovery of compound interest is also without any legal authority.
The appellant specifically raised an objection regarding the award of
interest in its application under Section 47 CPC. However, the trial
Court summarily rejected the said application on the ground that the
appeals against the original decree were already dismissed, and the
High Court also erroneously dismissed the writ petition, holding that
the plea regarding interest had been raised for the first time before it.
43.1. Insofar as the rate of interest awarded by the trial Court is
concerned, it is clearly excessive and exorbitant, and as held
by us, contrary to law. Hence, the order of the Executing
Court attaching the fixed deposits and flexi accounts of the
appellant with Axis Bank, Union Bank of India and Odisha State
Co-operative Bank, is without jurisdiction and legal authority.
Furthermore, the bank guarantees furnished by the appellant
were also encashed and paid to the decree holder, resulting in
huge loss to the appellant, on the basis of an improper claim
agitated before the courts below. It is also relevant to note here
that there was no privity of contract between the parties regarding
the rate of interest payable. Once it is held that compound
interest cannot be levied under the repealed Act, 1993, the
natural sequitur is that the calculation of interest and the
consequential recovery are improper. The record discloses that
Respondent No.1/ Decree Holder has received Rs.58,16,905/- on
05.10.2020 and Rs.2,34,40,654/- on 07.01.2022, thereby totaling
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Rs.2,92,57,559/- through the attachment and encashment of
bank guarantees and fixed deposit of the appellant. It is further
evident that the bank guarantees were not furnished voluntarily
but only in compliance with the orders of the trial Court. All
these factors have not been taken into consideration by the
courts below at any point of time.
44. We have already held that the mandatory requirement under
Section 80 CPC, was not complied with by Respondent No. 1 before
instituting the suit against the appellant, seeking recovery of money
for the default alleged to have been committed by Respondent No. 2.
On that ground alone, the suit filed against the appellant was not
maintainable, and there is a clear bar on the jurisdiction of the trial
Court. Though the suit was filed in the year 1988 and execution
proceedings were initiated at a later point in time, nearly four decades
have been spent litigating the dispute before the Courts. Even though
Respondent No. 1/ Decree Holder was successful in every round of
litigation up to this Court, the initiation of the suit against the appellant
is illegal and a nullity, and hence, cannot be enforced. As observed
earlier, the trial Court and the High Court failed to address the core
issues that go to the root of its jurisdiction. A State Corporation was
made to face one litigation after another for the financial assistance
extended by it to a private company, which subsequently defaulted.
Although the said company was taken over for the limited purpose
of realization of its dues and even after it has lost its control, the
losses to the appellant have continued, ultimately leading to the filing
of the present appeal before us.

CONCLUSION
45. For the sake of clarity and academic interest, we have elaborately
analysed the issues involved in all their facets. However, we are
of the considered opinion that the suit itself was not maintainable
against the appellant and the provisions of the repealed Act, 1993
were inapplicable to the present case. Consequently, the execution
proceedings to realize the principal with exorbitant interest calculated
under the repealed Act, 1993 are unsustainable, and the decree
cannot be enforced against the appellant. The trial Court, having
already passed the decree, could not have entertained an application
under Section 21 of the Limitation Act, 1963, and the post-decree
application filed by Respondent No.1 was, therefore, not maintainable.
[2025] 9 S.C.R. 89

Odisha State Financial Corporation v.
Vigyan Chemical Industries and Others

Nearly four decades have elapsed in protracted litigation, and we
are inclined to bring the matter to a quietus. Article 142 of the
Constitution empowers this Court to pass any order necessary for
doing complete justice in any cause or matter pending before it.
Accordingly, we hold that the appellant (OSFC) is not liable to pay
any amount to Respondent No. 1 for the alleged default committed
by Respondent No. 2, under the decree. In view of the same, the
impugned judgment and orders passed by the Courts below are
hereby set aside.
46. It is not in dispute that Respondent No.1 has already received a
total sum of Rs.2,92,57,559/-, comprising Rs.58,16,905/- from the
encashment of bank guarantees and Rs.2,34,40,654/- from the
attachment of fixed deposits furnished by the appellant. Having held
that the suit instituted against the appellant was not maintainable
and that the resultant decree is unenforceable in law, we are of the
considered view that the appellant is entitled to a refund of the entire
amount of Rs.2,92,57,559/-, received by Respondent No. 1. However,
taking into account the peculiar facts and circumstances of the case,
the said amount shall be refunded without any interest. Accordingly,
Respondent No. 1 is directed to refund the sum of Rs.2,92,57,559/-
to the appellant, without interest, within a period of three months
from the date of this judgment. In the event of failure to refund the
aforesaid amount within the stipulated period, the appellant shall
be at liberty to initiate appropriate proceedings against Respondent
No. 1 for recovery of the same along with simple interest at the rate
of 6% per annum in accordance with law, after the expiry of the said
three-month period.
47. Before parting, we deem it necessary to record our strong disapproval
of the manner in which the present litigation has been conducted by
the appellant Corporation and its counsel before the lower courts.
Public Institutions – particularly those entrusted with the stewardship
of public funds – are expected to conduct themselves in legal
proceedings with the highest standards of diligence, responsibility,
and accountability. The failure to raise appropriate legal objections
at the appropriate stages, coupled with the absence of timely and
effective representation, has not only burdened the judicial system
but has also exposed the corporation to unwarranted and protracted
liability. The present case is a stark example of how a State-owned
corporation has been unjustly and unsustainably saddled with financial
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liability. The Courts below – without a proper appreciation of the
factual matrix or applicable legal principles – have passed orders
culminating in execution proceedings that contravene foundational
tenets of law and disregard essential procedural safeguards.
Such outcomes not only lead to manifest injustice but also set a
deleterious precedent. It is well settled that procedural compliance
is not a mere formality; it is a substantive safeguard designed to
protect the interests of State instrumentalities and ultimately, the
public exchequer. In the present case, several crores of rupees
belonging to a State Financial Corporation are at stake. Courts are
duty-bound to ensure that public resources are not unjustly depleted
due to judicial oversight or misapplication of law. This responsibility
extends equally to Government counsel and officials involved in
litigation. It is incumbent upon them to ensure that all material facts
are disclosed, all legal defences are properly pleaded, and all relevant
documents are placed on record. Government counsel, as officers
of the Court, bear a dual responsibility: to protect the interest of the
State, and to assist the Court in achieving outcomes that are just,
lawful and equitable. It is also imperative for the State to establish
and maintain robust internal mechanisms for regular monitoring and
effective follow-up of pending litigation, ensuring it is pursued to its
logical conclusion. As has been repeatedly emphasized, while the
State and its instrumentalities enjoy all rights available to any litigant,
they must exercise these rights in a manner consistent with public
interest and the ends of justice. Accordingly, in order to uphold the
rule of law and safeguard the primacy of fairness and justice, this
Court is compelled to intervene, even at the stage of execution, to
scrutinize the decree and rectify the legal infirmities that undermine
its very foundation.
48. In the upshot, the Civil Appeal is allowed with the above directions.
The parties shall bear their own costs.
49. Pending Application(s), if any, shall stand disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Ankit Gyan