Gauhati High Court
Charu Engineering Industries And Anr vs The State Of Assam And 3 Ors on 4 May, 2026
Author: Devashis Baruah
Bench: Devashis Baruah
Page No.# 1/18
GAHC010038962026
2026:GAU-AS:6056
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/1509/2026
CHARU ENGINEERING INDUSTRIES AND ANR
A REGISTERED PROPRIETORSHIP FIRM HAVING ITS REGISTERED OFFICE
AT THAKURIA NOVELTY, FOREST GATE, MOTHER TERESA ROAD,
NARENGI, GUWAHATI 781026
2: LAKSHMI RAM THAKURIA
PROPRIETOR OF CHARU ENGINEERING INDUSTRIES
R/O THAKURIA NOVELTY
FOREST GATE
MOTHER TERESA ROAD
NARENGI
GUWAHATI 78102
VERSUS
THE STATE OF ASSAM AND 3 ORS
REPRESENTED BY THE SECY. TO THE GOVT. OF ASSAM, PUBLIC HEALTH
ENGINEERING DEPTT., DISPUR, GUWAHATI 781003
2:PRINCIPAL SECY. GOVT. OF ASSAM
GOVT. OF ASSAM
FINANCE DEPTT.
DISPUR
GUWAHATI 781003
3:THE CHIEF ENGINEER
PUBLIC HEALTH ENGINEERING DEPTT.
GOVT. OF ASSAM
HENGARABARI
GUWAHATI 781003
4:THE EXECUTIVE ENGINEER
Page No.# 2/18
PHE STORES AND WORKSHOP DIVISION
BETKUCHI
GUWAHATI
BEFORE
HONOURABLE MR. JUSTICE DEVASHIS BARUAH
For the Petitioners(s) : Ms. M. Hazarika, Sr. Advocate
Mr. D. Khan, Advocate
For the Respondent(s) : Mr. P.N. Goswami, Sr. Advocate
Mr. B. Gogoi, Addl. A.G.
Mr. I. Kalita, Advocate
· Date on which Judgment was reserved : N/A
· Date of Pronouncement of Judgment : 04.05.2026
· Whether the pronouncement is of
the Operative Part of the Judgment : No
· Whether the full Judgment has been
Pronounced : Yes
JUDGMENT AND ORDER (ORAL)
Heard Ms. M. Hazarika, the learned Senior Counsel assisted by
Mr. D. Khan, the learned counsel appearing on behalf of the
petitioners. Mr. P.N. Goswami, the learned Senior Counsel assisted
by Mr. I. Kalita, the learned counsel appears on behalf of the PHE
Department of the Government of Assam and Mr. B. Gogoi, the
learned Additional Advocate General appears on behalf of the
Finance Department of the Government of Assam.
Page No.# 3/18
2. The present writ petition has been filed by the petitioners
seeking a direction upon the respondents to perform their statutory
duties and obligations under the Micro, Small and Medium
Enterprises Development Act, 2006 (for short, “the Act of 2006”)
and, in consequence thereof, to release the outstanding dues of
the petitioners along with interest thereon as per the provisions of
the said Act.
3. It is relevant to take note of that the petitioner No. 1 herein
claims to be a small enterprise within the meaning of the Act of
2006. Pursuant to certain work orders issued, the petitioners
supplied various UPVC pipes and thereupon claimed the dues. On
account of non-payment, the petitioners submitted a
representation and as the said representation was not considered,
a writ petition being WP(C) No. 3246/2018 was filed before this
Court. The learned Coordinate Bench of this Court vide order dated
23.05.2018 disposed of the said writ petition thereby directing the
Chief Engineer, PHE, to consider the petitioners’ representation
dated 17.01.2018 for payment of the outstanding dues with
interest within a period of 3 (three) months from the date of
receipt of the certified copy of the order. It is the further case of
the petitioners that in spite of the said order dated 23.05.2018 in
WP(C) No. 3246/2018, no steps were taken for disposal of the
Page No.# 4/18
representation and making payment to the petitioners. Resultantly,
the petitioners filed a contempt petition before this Court, which
was registered and numbered as Cont. Cas(C) No. 513/2018. It is
the further case of the petitioners that pursuant thereto, a
Memorandum of Understanding was entered into by and between
the petitioners and the PHE Department, Government of Assam,
wherein it was duly agreed that an amount of Rs. 49,99,098/-
would be the final payment towards the dues under the NRDWP
account.
4. The record reveals that the said contempt petition was
withdrawn by the petitioners in the year 2022 on the ground that
the petitioners would not like to pursue the said contempt
application in the present form. The records further reveal that
pursuant to the said Memorandum of Understanding so entered
into by and between the petitioners and the PHE Department,
various other work orders were issued in the years 2020 and 2021
for the supply of UPVC pipes and it is the case of the petitioners
that the petitioners duly made those supplies, however, no
payment was made in that regard. It is under such circumstances,
the petitioners submitted several representations since the year
2022.
Page No.# 5/18
5. It is also relevant to take note of that the PHE Department
invited various parties, including the petitioners, for an amicable
and equitable resolution to the disputes vide the communication
dated 29.05.2024. The record further reveals that on 17.03.2025,
the petitioners took up a stand that in view of non-payment of
dues, the petitioners had withdrawn itself from the Memorandum
of Understanding, which was informed to the Executive Engineer,
Store & Workshop Division, PHE Department, Government of
Assam. Thereupon, the petitioners continued to submit
representations, and as the representations fell into the deaf ears
of the respondents, the petitioners have approached this Court by
filing the present writ petition.
6. Ms. M. Hazarika, the learned Senior Counsel for the petitioners
submitted that as the petitioner No. 1 is a small enterprise within
the meaning of the Act of 2006, is entitled not only to the amount
for the supplies made, but also to interest in terms with Section 16
of the Act of 2006. In this regard, the learned Senior Counsel
referred to the judgment of this Court in the case of Garg Poly
Industries & Others Vs. State of Assam & Others , reported in 2026
(1) GLT (1) and submitted that the petitioners’ case would be
covered by the said judgment.
Page No.# 6/18
7. Mr. P.N. Goswami, the learned Senior Counsel for the PHE
Department submitted that the petitioners have an alternative and
efficacious remedy available before the MSME Facilitation Council
under Section 18 of the Act of 2006. The learned Senior Counsel
further submitted that the petitioners have made claims in respect
to certain amounts which have been already amicably settled in
terms with the Memorandum of Understanding, and there is no
challenge to the said Memorandum of Understanding. The learned
Senior Counsel further submitted that in terms with Section 18 of
the Act of 2006 not only there is a provision for arbitration, but
prior to that there is a proceeding for conciliation and while
carrying out such conciliation proceedings, the parties are given an
opportunity to settle their dues. The learned Senior Counsel
therefore submitted that this Court ought not to entertain the
present writ petition.
8. Ms. M. Hazarika, the learned Senior Counsel rejoining to her
earlier submission submitted that here is a case where the
respondents have not disputed the petitioners’ claim rather have
remained silent in spite of various representations being submitted.
The learned Senior Counsel further submitted that as there is no
dispute, the question of invoking the jurisdiction under Section 18
of the Act of 2006 do not arise in the present facts and
Page No.# 7/18
circumstances of the case.
9. This Court has given an anxious consideration to the
respective submissions and has also taken note of the judgment
passed by this Court in the case of Garg Poly Industries (supra),
wherein the very submission pertaining to alternative and
efficacious remedy under Section 18 of the Act of 2006 was duly
taken note of. Paragraph Nos. 74 to 84 of the said judgment being
relevant are reproduced herein under:
“74. On the other hand, Mr. RR Gogoi, the learned counsel appearing on behalf
of the respondents had submitted that issuance of work orders upon the
petitioners is one thing, but for payment of interest in terms with Section 16,
unless and until such disclosure is not made, the authorities cannot be said to
have known that the petitioners were entities registered under the Act of
2006, and, more particularly, when the work orders did not stipulate that the
works have been allotted to Enterprises registered under the Act of 2006.
75. This Court had duly perused the work orders which have been issued to
the petitioners in the three writ petitions. From a perusal of these work orders,
it is apparent that the supply orders were routed through the Assam Small
Industries Development Corporation Limited and because of that a 5%
commission had been paid to the said Corporation. It is also pertinent to
mention that these aspect have been stated in the pleadings of the writ
petitioners. However, the same have not been replied to. In that perspective,
this Court now finds it relevant to take note of Sections 15 and 16 of the Act of
2006, which imposes an obligation upon the buyer to make payment and
statutorily imposes an interest if the buyer fails to make payment within the
Page No.# 8/18time-frame stipulated. It being a statutory mandate, the respondents were
supposed to be well aware of the said provisions. All the work orders having
been routed through the Assam Small Industries Development Corporation
also gives a clear indication that these work orders were meant for small
industries only.
76. Considering the above, it is, therefore, the opinion of this Court that the
third reason so assigned cannot also be sustained in law.
77. This Court, therefore, is of the opinion that the grounds and reasons
assigned in the impugned orders dated 27.04.2023 in all the three writ
petitions cannot be sustained in law, the same are required to be interfered.
78. Now, let this Court take up another aspect of the matter as regards
availability of alternative and efficacious remedy as taken by the respondent
authorities. It is seen from a perusal of the affidavits-in-opposition that the
respondent authorities have taken the plea that instead of initiating
proceedings under Articles 226 of the Constitution, the petitioners or any
aggrieved person having not been paid the amounts in terms with Sections 15
and 16, a reference can be made to the Micro and Small Enterprise Facilitation
Council and, therefore, these writ petitions ought not to be entertained. It is
the opinion of this Court that the said submission is misconceived, taking into
account the orders dated 27.04.2023 question the very entity of the
petitionerss as MSM Enterprises and the registration under the Act of 2006. In
the opinion of this Court, this very aspect could not have been decided by the
Micro and Small Enterprises Facilitation Council and, therefore, the plea that
there was an alternative and efficacious remedy cannot be applied.
79. Having opined so it is also very pertinent to take note of Sections 15 and
16 of the Act of 2006, which are reproduced hereinunder:
Page No.# 9/18
“15.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:
Provided that in no case the period agreed upon between the
supplier and the buyer in writing shall exceed forty-five days from the day
of acceptance or the day of deemed acceptance.
16. 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 15, 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 compound interest with
monthly rests 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 three times of the bank rate notified by the Reserve Bank.”
80. A perusal of the above-quoted Section 15 of the Act of 2006 statutorily
imposes an obligation upon the buyer to make payment on or before the date
agreed upon between the buyer and the supplier in writing or where there is
no agreement in that behalf before the appointed day. The term “appointed
day‟ has been defined in Section 2(b) of the Act of 2006, meaning the day
following immediately after the expiry of the period of 15(fifteen) days from
the date of acceptance or the day of deemed acceptance of any goods or any
services by a buyer from a supplier. Section 2(b) of the Act of 2006 being
relevant is reproduced hereinunder:
“2(b). “appointed day” means the day following immediately after the
Page No.# 10/18expiry of the period of fifteen days from the day of acceptance or the day
of deemed acceptance of any goods or any services by a buyer from a
supplier”.
81. The proviso to Section 15 further stipulates that under no circumstances,
the period agreed upon between the supplier and the buyer in writing shall
exceed 45 (forty-five) days from the date of acceptance or the day of deemed
acceptance. The proviso is relevant taking into account that irrespective of any
agreement/contract between the parties, the statutory injunction holds the
field and thereby confines the period not to exceed 45(forty-five) days from
the date of acceptance or the day of deemed acceptance.
82. Now let this Court take note of Section 16. There are two aspects of
interest in Section 16: first, that it is to be calculated from the appointed day
and secondly, the liability to pay compound interest with monthly rests. In this
regard, this Court finds it very relevant to take note of a judgment of the
learned Calcutta High Court in the case of V.K. Patel and O Vs. Simplex
Infrastructure Ltd. reported in 2024 SCC Online Cal.6617, wherein the learned
Calcutta High Court explained the very concept as to how the calculation is to
be made in terms of Section 16. Paragraph No. 20 to Paragraph No. 31 of the
said judgment being relevant are reproduced hereinunder:
“20. To ascertain such issue, the very concept of compound interest
versus simple interest is to be explored, since compound interest is the
chosen mode in Section 16. Importantly, it has also been stipulated in
Section 16 of the MSME Act that the compound interest shall be with
“monthly rests”. Thus, the interest is to be compounded at the end of
each month after the appointed day. 21. The very concept of compound
interest is variable progression, as opposed to simple interest which, by
its very definition, always has to be at a fixed rate as on the date of
Page No.# 11/18commencement of calculation. In case of simple interest, the interest is
calculated at the fixed rate which prevailed at the juncture of
commencement of calculations till the date of payment, on the principal.
22. As opposed thereto, the premise of compound interest is staggered
progression in the sense that the interest has to be calculated at defined
intervals, in the present case, at monthly intervals, which are known as
“rests”. Hence, for example, if the principal is Rs. 100/- and the initial rate
of interest on the appointed day is 10%, after the end of the first month,
the total amount would be Rs. 100 + 10% thereof that is Rs. 10/-, which
equals Rs. 110/-.
23. The said sum of Rs. 110/-, which is the initial principal plus interest
for the first month, forms the basis of calculation or principal for the
second month. Thus, calculated, the principal for the second month
would be Rs. 110/-, which would be the base amount on which further
interest would be calculated.
24. Hence, although the commencement of calculation is tied to the
appointed day, the point of incidence of the bank rates for calculation of
interest becomes the end point of each month, which are also known as
monthly “rests” as stipulated in Section 16 itself. Hence, by its very
nature, compound interest has to be imposed at staggered intervals.
25. Since the point of incidence of the rate of interest is the rate
prevailing at the end of each month, which is the monthly rest, the rate
prevailing on such date must be the premise of calculation. For instance,
if the initial rate of interest prevailing on the appointed day was “x%”, the
calculation for the first month would be equal to Principal (P) + “x% of
principal”. Again, at the beginning of the second month the rate of
Page No.# 12/18interest becomes “y”, the second month‟s calculation would be equal to
(P + x% of P) + y% of (P+ x% of P), which would again form the base
amount for calculation of the third month. The only difference between a
normal calculation of compound interest and that under Section 16 is that
the rate will be three times the bank rate as notified by the RBI in case of
the latter.
26. Section 16 mentions the appointed day merely as the starting point of
calculation but does not provide that the rate of interest should also be
inextricably linked to the said date; rather, the language used is “three
times the bank rate notified by the Reserve Bank”.
27. The argument of the petitioners, that if the rates are variable, the
appointed day has to be calculated at the end of each month, is not
acceptable, since there is no such possibility if the variable rates are
taken into consideration. The appointed day merely provides the starting
point of calculation. Thereafter, the calculation will progress at compound
rate with monthly rests, meaning thereby that the rate prevailing at each
monthly rest should be taken into account for incidence of interest for the
said month. In Section 16, the term “rests” has been interchangeably
used with “intervals”.
28. The very character of compound interest makes it fluid and variable.
If the rate of calculation of interest is fixed at the date of inception of
calculation, the same would be a counter-intuitive, artificial and arbitrary
superimposition on the normal mode of calculation as given in the
statute, since Section 16 provides that the compound interest will be
calculated with „monthly rests‟, at which points the prevailing bank rate
of interest is to be taken into account.
Page No.# 13/18
29. Just as in the case of the simple interest if suddenly varied rates are
imposed it would be arbitrary since the mode of calculation is continuous,
similarly, in case of compound interest, which is to be calculated on a
staggered basis, fixation of the rate prevailing at the inception would also
be arbitrary.
30. The very premise of compound interest with monthly rests is that the
calculation of further interest is made at the end of every month at the
rates prevailing then. In a Section 16 scenario, the rate at which interest
is to be imposed at each monthly rest is three times the bank rate
notified by the RBI prevalent at that juncture.
31. Hence, by its very definition, compound interest at monthly rest is
variable and cannot be static, frozen at the appointed day.”
83. It is the opinion of this Court that the interpretations so given to Section
16 of the Act of 2006 by the learned Calcutta High Court as quoted
hereinabove have lucidly laid down the principles for calculation of the interest
and this Court duly agrees to the same.
84. The above analysis shows that the petitioners herein in the batch of three
writ petitions would be entitled to the benefits under Sections 15, 16 and 17 of
the Act of 2006. Be that as it may, what would be the interest component on
the admitted dues has to be worked out as per the principles laid down as
discussed above. The materials before this Court only refers to the work
orders and the date on which these work orders were issued. Questions of
facts arise pertaining to as to when the supplies were made; when the
supplies were accepted; whether it was accepted or it was a deemed
acceptance; what is the rate declared by the RBI during the relevant period,
more particularly, taking into account that the interest payable is to be
Page No.# 14/18
compounded with monthly rests; cannot be decided by this Court. It would
require exercise to be carried out by the petitioners and looked into by the
respondent PHED.”
10. From a perusal of the above quoted paragraphs, it would be
seen that in terms with Section 16 of the Act of 2006, two aspects
are required to be taken note of. First, the interest is to be
calculated from the appointed date and secondly, the liability to
pay compound interest with monthly rests. It is also very pertinent
to take note of that when the Act stipulates that the interest is to
be calculated by compounding with monthly rests, there is a
requirement of making calculation of the amount payable by
compounding it with monthly rests.
11. This Court has duly taken note of the representations which
have been enclosed to the present writ petition as Annexure-13 to
the writ petition which would not show as to how and what rate
the interest applied. This Court also finds it very pertinent to take
note of that at paragraph No. 82 of the judgment passed in the
case of Garg Poly Industries (supra), this Court had duly taken note
of the judgment of the learned Calcutta High Court in the case of
V.K. Patel & Others Vs. Simplex Infrastructure Ltd. reported in
2024 SCC OnLine Cal. 6617, wherein the principles for calculation
of the interest have been specifically mentioned. This Court has
Page No.# 15/18
also agreed to the principles set out by the learned Calcutta High
Court in the case of V.K. Patel (supra).
12. It is under such circumstances, the opinion of this Court that if
a claim is being made by the petitioners in respect to the supplies
so made along with the interest and in terms with the Act of 2006,
the petitioners are required to provide the calculation of the
interest in the manner stipulated in Section 16 of the Act of 2006.
Additionally, the aspects pertaining to, as to when, the supply was
affected, when the supply was accepted, and whether the supply
was made in terms with the work orders which have been issued
are questions of facts which cannot be adjudicated in the present
proceedings. Rather, the respondents would be able to do so upon
materials placed by the petitioners.
13. Considering the above, the instant writ petition stands
disposed of with the following observations and directions:
(i) The petitioners are granted liberty to carry out the exercise
of calculating the interest component in terms with Section 16
of the Act of 2006, keeping in mind the interpretation so
given by the learned Calcutta High Court in the case of V.K.
Patel (supra), the relevant portion which have been already
Page No.# 16/18quoted herein above. For the purpose of calculation, the
petitioners would also have to place necessary materials as to
when work orders were issued; when supplies were made;
when supplies were accepted etc. On the basis of the above,
the petitioners are granted liberty to submit a detailed
representation making their claim before the Special Chief
Secretary to the Government of Assam, PHE Department,
within a period of 60 (sixty) days from today.
(ii) The Special Chief Secretary to the Government of Assam,
PHE Department, shall thereupon carry out necessary
verification on the claims submitted by the petitioners. The
said Authority shall duly consider as to whether the
petitioners’ claims are in accordance with the work orders
issued and whether the petitioners had supplied the materials.
Additionally, when such materials were supplied and accepted
by the Respondent Authorities. This Court also observes that
the Respondent Authorities while carrying out the verification
would be at liberty to ascertain the status of the petitioner
No. 1 as a “Small Enterprise” under the Act of 2006 inasmuch
as the said issue is not decided in the present proceedings by
this Court. This Court further observes and directs that upon
due satisfaction and after verification, the respondents shall
Page No.# 17/18
make payment to the petitioners as per the entitlement. The
said exercise be completed within a period of 4 (four) months
from the date of submission of the representation by the
petitioners as per the liberty given hereinabove.
(iii) It is further observed and directed that in the
circumstance, the Respondent Authorities are of the view that
the petitioners herein are not entitled to the amount so
claimed or part thereof for any reasons permissible under law,
the petitioners be duly informed by a Speaking Order within a
period of 4 (four) months from the date the petitioners submit
their representation as per the liberty granted herein above.
(iv) It is further observed that in the circumstance the parties
are not in agreement with the resolution in the manner stated
hereinabove, disputes would arise thereby either of the
parties would be at liberty to approach the MSME Facilitation
Council for redressal of the disputes as per Section 18 of the
Act of 2006.
(v) This Court further observes and directs that during this
period, i.e. from today till the expiry of 4 (four) months from
the date of submission of the representation by the
Page No.# 18/18
petitioners, the interest for the said period shall remain
freezed. It is however observed that in the circumstance the
parties do not agree on the inter se claims resulting into
disputes, the above observation as regards the freezing of the
interest for the period above mentioned shall have no
application.
JUDGE
Digitally signed by Satyam Sharma
Date: 2026.05.05 05:49:21 +05’30’
Comparing Assistant
