GUJARAT STATE DISASTER MANAGEMENT AUTHORITY versus M/S ASKA EQUIPMENTS LIMITED
[2021] 8 S.C.R. 720, Supreme Court of India, 2021
Outcome: Disposed off
Segment: Ratio
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
[2021] 8 S.C.R. 720
720
GUJARAT STATE DISASTER MANAGEMENT AUTHORITY
v.
M/S ASKA EQUIPMENTS LIMITED
(Civil Appeal No. 6252 of 2021)
OCTOBER 08, 2021
[M. R. SHAH AND A. S. BOPANNA, JJ.]
Micro, Small and Medium Enterprises Development Act, 2006
– s.19 – Goods taken by appellant – Dispute regarding payment of
– Award passed by Facilitation Council in favour of the respondent,
appellant directed to pay Rs. 105,053,387/- – Challenged by
appellant by filing application u/s.34, 1996 Act r/w s.19 – Directed
to deposit 75% of the awarded amount in terms of s.19 – Several
opportunities granted – Application for waiver, dismissed – Appellant
granted last opportunity to deposit the said amount – Challenged –
Writ petition dismissed – On appeal, held: Requirement of deposit
of 75% of the awarded amount as a pre-deposit is mandatory –
Both the courts below were justified in directing the appellant to
deposit 75% of the awarded amount as a pre-deposit – Arbitration
and Conciliation Act, 1996 – s.34.
Disposing of the appeal, the Court
HELD: 1.1 On a plain/fair reading of Section 19 of the
MSME Act, 2006, at the time/before entertaining the application
for setting aside the award made under Section 34 of the
Arbitration & Conciliation Act, the applicant/appellant has to
deposit 75% of the amount in terms of the award as a pre-deposit.
The requirement of deposit of 75% of the amount in terms of the
award as a pre-deposit 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 pre-deposit to be made in instalments.
Therefore, as such, both the High Court as well as the learned
Additional District Judge (Commercial), Dehradun were justified
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in directing the appellant to deposit 75% of the awarded amount
as a pre-deposit. However, while issuing notice in the present
proceedings on 23.10.2019, this Court directed the appellant to
deposit Rs. 2,50,00,000/- (Rupees Two Crores Fifty Lakhs) and
on such deposit the District and Sessions Judge, Dehradun was
directed to take up the appeal on file and proceed with the same.
It is reported that by now the application/appeal has been heard
and the order is to be pronounced on 12.10.2021. The
arrangement as per order dated 23.10.2019 is continued with till
final disposal of the appeal/application under Section 34 of the
Arbitration & Conciliation Act, 1996 read with Section 19 of the
MSME Act, 2006, which shall not be treated as a precedent.
[Paras 9.2, 11 and 12][724-D-F; 725-G-H; 727-B-C]
CIVIL APPELLATE JURISDICTION: Civil Appeal No.6252 of
2021
From the Judgment and Order dated 26.09.2019 of the High Court
of Uttarakhand at Nainital in Writ  Petition (MS) No.2708 of 2019.
Ajay Kumar, Pinakin Ravaal, Subrata Ray, Ashish Chaubey, Advs.
for the Appellant.
Jitender Chaudhary, Rajesh Singh, Advs. for the Respondent.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 26.09.2019 passed by the High Court of Uttarakhand at
Nainital in Writ Petition (MS) No. 2708/2019, by which the High Court
has dismissed the said writ petition and has confirmed the order passed
by the
learned Additional District Judge (Commercial), Dehradun in
Miscellaneous Application No. 150 of 2018, whereby the appellant herein
was directed to deposit 75% of the awarded amount in terms of Section
19 of Micro, Small and Medium Enterprises Development Act, 2006
(hereinafter referred to as the ‘MSME Act, 2006’), the appellant herein
– original appellant/applicant has preferred the present appeal.
2. That the parties are governed by the provisions of the MSME
Act, 2006.  A dispute arose between the parties regarding payment of
goods which was taken by the appellant. The proceedings under Section
GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v.  M/S
ASKA EQUIPMENTS LTD.
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SUPREME COURT REPORTS
[2021] 8 S.C.R.
18 of the MSME Act, 2006 commenced.  The Facilitation Council passed
an award dated 10.11.2017 in favour of the respondent herein and directed
the appellant to pay a sum of Rs. 105,053,387/- (Rs. Ten crores Fifty
Lakhs Fifty Three Thousand Three Hundred and Eighty Seven only).
3. Feeling aggrieved by the said award, the appellant preferred an
application before the learned Additional District Judge (Commercial),
Dehradun under Section 34 of the Arbitration & Conciliation Act, 1996
read with Section 19 of the MSME Act, 2006.  As per Section 19 of the
MSME Act, 2006, the appellant was required to deposit 75% of the
amount awarded by the arbitrator.  Several opportunities were given to
the appellant to deposit 75% of the awarded amount.  An application for
waiver of pre-deposit was preferred which came to be dismissed.  That
thereafter vide order dated 22.08.2019, the learned Additional District
Judge (Commercial), Dehradun granted a month’s time, as a last
opportunity, to the appellant to deposit the said amount.
4. Feeling aggrieved by the said order, the appellant herein
preferred writ petition before the High Court.  By the impugned judgment
and order, the High Court has dismissed the said writ petition.  Even
while dismissing the writ petition, the High Court granted further eight
weeks’ time to the appellant to deposit 75% of the awarded amount.
5. Feeling aggrieved and dissatisfied with the impugned judgment
and
order passed by the High Court, the appellant herein – original
applicant has preferred the present appeal.
6. Today, when the present appeal is taken up for further hearing,
Shri Ajay Kumar, learned Advocate appearing on behalf of the appellant
has submitted that in the present case while issuing notice on 23.10.2019,
this Court directed the appellant to deposit a sum of Rs.2,50,00,000/-
(Rs. Two crores Fifty lakhs) before the appellate authority and on such
deposit the learned appellate Court was directed to take up the appeal
on file and proceed with the same.  It is stated that pursuant to the said
order, the appellant has deposited a sum of Rs. 2,50,00,000/- (Rs. Two
Crores Fifty Lakhs) and thereafter the learned appellate authority -
Additional District Judge (Commercial), Dehradun has heard the appeal/
application under Section 34 of the Arbitration & Conciliation Act, 1996
read with Section 19 of the MSME Act, 2006 and the order is to be
pronounced on 12.10.2021.  Therefore, it is prayed to dispose of the
present appeal.
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7. Learned Advocate appearing on behalf of the respondent has
submitted that, as such, it is mandatory to deposit 75% of the awarded
amount as a pre-deposit at the time when the appeal/application under
Section 34 of the Arbitration & Conciliation Act, 1996 read with Section
19 of the MSME Act, 2006 is preferred.  It is submitted that what is
directed to deposit vide ex-parte order dated 23.10.2019 is not even
25% of the amount awarded.  It is submitted that the question involved
in the present appeal is a pure question of law and therefore the same
may be decided by this Court even for future guidance.
7.1 Learned counsel for the respondent has further submitted that,
as such, the issue involved in the present case is squarely covered against
the appellant in view of the decision of this Court in the case of Goodyear
India Limited v. Norton Intech Rubbers Private Limited, (2012) 6
SCC 345.  It is submitted that the very provision of MSME Act, 2006 –
Section 19 has been interpreted by this Court and it is observed and held
that requirement of deposit of 75% as a pre-deposit is mandatory.  It is
submitted that even the expression “in the manner directed by such court”
in Section 19 has been interpreted by this Court and it is held that the
expression “in the manner directed by such court” would indicate the
discretion given to the Court to allow the pre-deposit to be made, if felt
necessary, in instalments.  It is submitted that otherwise the deposit of
75% as a pre-deposit is mandatory and the appellate court would have
no discretion at all to deviate from the mandate under Section 19 of the
MSME Act, 2006.
8. Learned counsel appearing on behalf of the appellant is not in a
position to show any contrary decision to the decision of this Court in the
case of Goodyear India Limited (supra).  He is also not in a position to
satisfy whether the appellate court would have any discretion to deviate
from the requirement of deposit of 75% as a pre-deposit while preferring
the appeal/application under Section 34 of the Arbitration & Conciliation
Act read with Section 19 of the MSME Act, 2006.
9. We have heard the learned counsel for the respective parties
at length.
The short question posed for the consideration of this Court is,
whether in an appeal/application filed under Section 34 of the Arbitration
& Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006,
the appellate court would have any discretion to deviate from deposit of
75% of the awarded amount as a pre-deposit?
GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v.  M/S
ASKA EQUIPMENTS LTD. [M. R. SHAH, J.]
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9.1 Section 19 of the MSME Act, 2006 reads as under:
“19. Application for setting aside decree, award or order – No
application for setting aside any decree, award or other order
made either by the Council itself or by any institution or centre
providing alternate dispute resolution services to which a reference
is made by the Council, shall be entertained by any court unless
the appellant (not being a supplier) has deposited with it seventy-
five per cent of the amount in terms of the decree, award
or, as the case may be, the other order in the manner
directed by such court:
Provided that pending disposal of the application to set aside the
decree, award or order, the court shall order that such percentage
of the amount deposited shall be paid to the supplier, as it considers
reasonable under the circumstances of the case, subject to such
conditions as it deems necessary to impose.”
(bold words are ours)
9.2 On a plain/fair reading of Section 19 of the MSME Act, 2006,
reproduced hereinabove, at the time/before entertaining the application
for setting aside the award made under Section 34 of the Arbitration &
Conciliation Act, the applicant/appellant has to deposit 75% of the amount
in terms of the award as a pre-deposit.  The requirement of deposit of
75% of the amount in terms of the award as a pre-deposit 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 pre-deposit to be made in instalments.
10. An identical question came to be considered by this Court in
the case of Goodyear India Limited (supra).  In paragraphs 10 & 11,
this Court observed and held as under:
“10. In his submissions, Mr Ramachandran has referred to the
various decisions, all of which, however, are in the context of
enactments in which discretion has been left to the appellate body
to either waive or reduce the amount of pre-deposit, which factor
is absent in the present case. In support of his contention, however,
he referred to and relied upon the decision of this Court
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in Snehadeep Structures (P) Ltd. v. Maharashtra Small-Scale
Industries Development Corpn. Ltd. (2010) 3 SCC 34 wherein
while considering the question as to whether an application under
Section 34 of the Arbitration and Conciliation Act, 1996, could be
treated to be an appeal, a question incidentally arose as to whether
if the same was to be treated as an appeal, would it be necessary
to comply with the provisions of Section 19 of the 2006 Act. Their
Lordships observed that the provision, no doubt, requires pre-deposit
to be made before an application under Section 34 of the
Arbitration Act is filed, but that they were not inclined to read that
provision into the provision in question. The facts of the said case
are different from the facts of this case and it would be difficult to
import the ratio of the decision in the above case into the facts of
this case.
11. Having considered the submissions made, both on behalf of
the petitioner and on behalf of the respondents, we do not see any
reason to interfere with the views expressed, both by the learned
Single Judge, as also the Division Bench with regard to Section
19 of the 2006 Act. It may not be out of place to mention that the
provisions of Section 19 of the 2006 Act, had been challenged
before the Kerala High Court in Kerala SRTC v. Union of
India [(2010) 1 KLT 65], where the same submissions were
negated and, subsequently, the matter also came up to this Court,
when the special leave petitions were
dismissed, with leave to
make the pre-deposit in the cases involved, within an extended
period of ten weeks. We may also indicate that the expression “in
the manner directed by such court” would, in our view, indicate
the discretion given to the court to allow the pre-deposit to be
made, if felt necessary, in instalments.”
11. In view of the above and considering the language used in
Section 19 of the MSME Act, 2006 and the object and purpose of
providing deposit of 75% of the awarded amount as a pre-deposit while
preferring the application/appeal for setting aside the award, it has to be
held that the requirement of deposit of 75% of the awarded amount as a
pre-deposit is mandatory. Therefore, as such, both the High Court as
well as the learned Additional District Judge (Commercial), Dehradun
were justified in directing the appellant to deposit 75% of the awarded
amount as a pre-deposit.
GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v.  M/S
ASKA EQUIPMENTS LTD. [M. R. SHAH, J.]
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However, at the same time, considering the fact that while issuing
notice in the present proceedings on 23.10.2019, this Court passed the
following order:
“Permission to file the special leave petition is granted.
In an appeal filed by the petitioner-Gujarat State Disaster
Management Authority, a Public Sector Undertaking of the State
of Gujarat, challenging the award passed under the Micro, Small
and Medium Enterprises Development Act, 2006 by the Facilitation
Council, pursuant to Section 19 of the said Act the petitioner-
Authority was directed to deposit 75% of the Award amount as
conditional pre-deposit for taking the appeal on file.
Being aggrieved by the direction for pre-deposit of the amount
the petitioner-Authority has preferred this special leave petition.
We have heard Mr. Huzefa Ahmadi, learned senior counsel
appearing for the petitioner-Authority, who has submitted that the
entire amount payable to the respondent-supplier has already been
paid to the respondent-supplier and hence there is no necessity to
make pre-deposit for filing the appeal. Arguments advanced by
learned senior counsel is on the merit of the matter.
Having regard to the facts and circumstances and considering
the fact that the petitioner-Authority is a Public Sector Undertaking,
in exercise of the discretion vested with the court under Section
of the said Act, we direct the petitioner-Authority to deposit
Rs.2,50,00,000/- before the
Appellate Authority within a period of
four weeks from today. On such deposit, the District and Sessions
Judge, Dehradun, is directed to take up the appeal on file and
proceed with the same.
Issue notice to the respondent.
On deposit of Rs.2,50,00,000/- (Rupees Two Crore Fifty Lakhs),
the same shall be invested in a fixed deposit in a nationalised bank
for a period of three months with auto renewal so that it may
enure to the benefit of the successful party and the disbursement
of the same shall await further orders from this Court.”
and directed the appellant to deposit Rs. 2,50,00,000/- (Rupees
Two Crores Fifty Lakhs) and on such deposit the District and Sessions
Judge, Dehradun was directed to take up the appeal on file and proceed
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with the same. It is reported that by now the application/appeal has been
heard and the order is to be pronounced on 12.10.2021, we continue
with the arrangement as per order dated 23.10.2019 in the appeal/
application under Section 34 of the Arbitration & Conciliation Act is
finally decided and disposed of. We hope and trust that the learned
Additional District Judge (Commercial), Dehradun shall pronounce the
order at the earliest and more particularly on 12.10.2021, the date on
which order is to be pronounced, as reported.
12. With the aforesaid, the question posed is answered against
the appellant in terms of the above and we dispose of the appeal laying
down the law in terms of the above, however, as observed hereinabove,
continue with the interim arrangement as per order dated 23.10.2019 till
final disposal of the appeal/application under Section 34 of the Arbitration
& Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006,
which shall not be treated as a precedent.
Divya Pandey
Appeal disposed of.
GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v.  M/S
ASKA EQUIPMENTS LTD. [M. R. SHAH, J.]