SRK Metals and Plastics (Pvt.) Ltd. v. State of Assam and Ors.

What happened

The petitioner manufactures UPVC pipes and fittings and was awarded a work order for providing, fixing, testing and commissioning rain water harvesting systems. After the work was completed and a completion certificate issued, its contractual bills were not cleared, and it filed the petition for release of dues with interest under the Micro, Small and Medium Enterprises Development Act, 2006. During the petition the principal amount was paid, and the claim remaining was for interest under sections 15, 16 and 17 for the delay. The petitioner relied on Garg Poly Industries v. State of Assam, WP(C)/4631/2023, which set out a procedure for delayed payment of admitted bills, and Charu Technology (Pvt.) Ltd. v. State of Assam, WP(C)/3655/2018.

Questions before the court

• Is a supplier entitled to statutory interest under the MSMED Act when the principal has been paid during the pendency of the petition, and how should it be determined?

Why the court ruled this way

The Court set out sections 15 to 18: the buyer must pay by the agreed date, never exceeding 45 days from acceptance or deemed acceptance, failing which section 16 imposes compound interest with monthly rests at three times the bank rate, section 17 makes the buyer liable for the amount with interest, and section 18 provides reference to the Facilitation Council where there is a genuine dispute (paragraphs 9 to 14). Since the principal was admittedly paid, the surviving question was confined to interest on admitted dues (paragraph 15). Garg Poly Industries, followed in Charu Technology, had laid down the procedure for delayed payment of admitted bills (paragraphs 16 and 17). The claim for interest could not be disregarded merely because the principal was later paid, subject to verification of the relevant dates and the period of delay (paragraph 18).

Controlling point

The petitioner is entitled to have its claim for statutory interest verified and determined in accordance with the MSMED Act and the earlier decisions.

Order and next steps

The writ petition was disposed of with these directions: the petitioner is to submit its claim for interest under sections 16 and 17 with supporting documents within one month; the authorities are to verify the date of acceptance or deemed acceptance, the dates the principal became payable and was paid, and the delay, and determine the interest under sections 15 to 17; this is to be completed within two months of receiving the claim; the amount found payable is to be released within a reasonable period thereafter. The order proceeds on the basis that the principal dues were admitted and paid; if the authorities dispute the underlying liability or any other part of the amount claimed, the parties may use the section 18 remedy.

Practical implications

A small-enterprise supplier paid late should submit a dated interest computation with proof of acceptance and payment dates, and ask the authority to decide it within a fixed period, relying on Garg Poly Industries.

Limits of this ruling

• The order rests on admitted and paid principal; any genuine dispute about the underlying liability goes to the Facilitation Council under section 18, and the interest figure remains to be determined by the authorities.