Micro, Small and Medium Enterprise Development Act, 2006 (MSMED Act) – s.19 – Parties governed by provisions of MSMED Act – Appellant preferred claim petition before Micro and Small Enterprises Facilitation Council constituted under the MSMED Act – On failure of conciliation, dispute referred to Arbitrator – Arbitrator, appointed through MSME Facilitation Council, passed award in favour of appellant – Appellant filed execution petition – Respondent No.1 filed application u/s.34 of the Arbitration Act for setting aside the arbitral award – Appellant submitted application u/s.19 of the MSMED Act for direction to respondent no.1-judgment debtor to deposit 75% of the arbitral award – Special Commercial Court allowed the application moved by appellant granting six weeks’ time to Respondent No.1 to deposit 75% of the arbitral award before its’ application u/s.34 of the Arbitration Act, could be entertained by the Court – Respondent No.1 filed appeal before High Court which permitted proceedings u/s.34 of the Arbitration Act to go on, without insisting for pre-deposit of 75% of the awarded amount – Whether pre-deposit of 75% of the awarded amount as per s.19 of the MSMED Act, while challenge to the award u/s.34 of the Arbitration Act is made mandatory or not – Held: Requirement of deposit of 75% of the amount in terms of the award as a predeposit as per s.19 of the MSMED Act, is mandatory – However, considering the hardship which may be projected before the appellate court and if the appellate court is satisfied that there shall be undue hardship caused to the appellant /applicant to deposit 75% of the awarded amount as a pre-deposit at a time, the court may allow the pre-deposit to be made in installments – Unless and until respondent No.1 deposits 75% of the awarded amount, its application u/s.34 of the Arbitration Act, challenging the award not to be entertained and decided on merits and, in that case, the execution proceedings to continue – Arbitration and Conciliation Act, 1996 – s.34.
Allowing the appeal, the Court
HELD:1.1. The requirement of deposit of 75% of the amount in terms of the award as a pre-deposit as per section 19 of the Micro, Small and Medium Enterprise Development Act, 2006, is mandatory. However, at the same time, considering the hardship which may be projected before the appellate court and if the appellate court is satisfied that there shall be undue hardship caused to the appellant /applicant to deposit 75% of the awarded amount as a pre-deposit at a time, the court may allow the predeposit to be made in installments. Therefore, pre-deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is a mandatory requirement. [Para 4][360-A-C]
1.2. The impugned order passed by the High Court permitting the proceedings under section 34 of the Arbitration and Conciliation Act, 1996 without insistence for making pre-deposit of 75% of the awarded amount is unsustainable. [Para 5][360-F]
Gujarat State Disaster Management Authority v. Aska Equipments Limited, (2022) 1 SCC 61 and Goodyear (India) Ltd. v. Norton Intech Rubbers (P) Ltd., (2012)
6 SCC 345 – relied on.
M/s Mahesh Kumar Singla and another v. Union of India and others [Decision of High Court in CWP No. 23368 of 2015] – partly overruled.
2. Respondent No.1 is directed to deposit 75% of the awarded amount before its application under section 34 of the Arbitration and Conciliation Act, 1996 challenging the award is entertained and considered on merits. Unless and until respondent No.1 deposits 75% of the awarded amount, its application under section 34 of the Arbitration and Conciliation Act, 1996, challenging the award shall not be entertained and decided on merits and, in that case, the execution proceedings may continue. [Para 6][361-A-C]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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