05 March 2024 Business Laws >> Business & Commercial Law   |   Small Business >> Business & Commercial Law  

In a significant victory for small businesses, Snehadeep Structures Pvt. Limited (SSPL) has successfully upheld its right to interest on delayed payments from Maharashtra Small Scale Industries Development Corporation Ltd. (MSSIDCL). The Supreme Court judgement clarifies the applicability of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (1993 Act) in such cases.

Background:

The case stemmed from a disagreement over delayed payment for goods supplied by SSPL to MSSIDCL. The contract included a clause allowing MSSIDCL to withhold payment until receiving funds from the ultimate recipient of the goods. However, SSPL argued that the 1993 Act mandated faster payment and interest on delays.

Key Judgement Points:

• The court ruled that an amendment to the 1993 Act, which capped the contractual payment timeframe at 120 days, applied even to pre-amendment contracts like the one between SSPL and MSSIDCL.
• This reinforces the Act's protection for small suppliers by ensuring timely payments.
• The court clarified that while the final recipient (Maharashtra State Electricity Board - MSEB) doesn't need to be directly involved, determining the acceptance date of the goods might be crucial for calculating interest.
• A separate disagreement regarding the calculation of compound interest under the Act requires further examination.

Impact:

This judgement is a win for small businesses in India. It emphasizes that the 1993 Act's provisions supersede any conflicting contractual clauses, ensuring faster payments and protection against delayed payment issues.

Conclusion:

While SSPL's appeal for interest payment was upheld, the court also noted that MSSIDCL might have overpaid a certain amount. The judgement allows MSSIDCL to pursue options for recovering any excess amount paid to SSPL.

This landmark case sets a precedent for similar future disputes and strengthens the legal framework protecting small businesses in their dealings with larger corporations.

  COMPANIES ACT, 2013    Arbitration and Conciliation Act, 1996