The requirement of deposit of 75% of the amount in terms of the award as a pre-deposit is mandatory: Supreme Court

IN THE CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6252 OF 2021 Gujarat State Disaster Management M s Aska Equipments Limited JUDGMENT M.R. SHAH J 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 PetitionNo. 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 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 the appellant herein original appellant applicant has preferred the present appeal 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 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 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 Dehradun granted a month’s time as a last opportunity to the appellant to deposit the said amount 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 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 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 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 and thereafter the learned appellate authority Additional District JudgeDehradun 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 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 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 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 10. An identical question came to be considered by this Court in the case of Goodyear India LimitedLtd. v. Maharashtra Small Scale Industries Development Corpn. Ltd.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 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 India1 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 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 Dehradun were justified in directing the appellant to deposit 75% of the awarded amount However at the same time considering the fact that while issuing notice in the present proceedings on 23.10.2019 this Court passed the as a pre deposit “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 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 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 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 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 NEW DELHI OCTOBER 08 2021

Summary: The Hon’ble Court answered the question posed, whether in an appeal/application filed under Section 34 of the Arbitration &amp; Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006, the appellate court would have any discretion to deviate from deposit of75% of the awarded amount as a pre-deposit, through the learned bench lead by Justice M.R Shah in the case of Gujarat State Disaster Management Authority v. M/s Aska Equipments Limited (CIVIL APPEAL NO. 6252 OF 2021) The brief facts of the case are that a dispute arose between the parties regarding payment of goods which was taken by the appellant. 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/-. 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 &amp; Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006. As per which the appellant was required to deposit 75% of the amount awarded by the arbitrator. 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. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, the appellant herein – original applicant preferred the present appeal. 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/- 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. Pursuant to the said order, the appellant has deposited the said amount and thereafter the learned appellate authority has heard the appeal/application. Therefore, it is prayed to dispose of the present appeal. 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 &amp; Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 is preferred. 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 maybe decided by this Court even for future guidance. After hearing the learned counsel for the respective parties at length, a plain reading of Section 19 of the MSME Act, 2006 and referring to the case of Goodyear India Limited v. Norton Intech Rubbers Private Limited, (2012) 6 SCC 345 the Hon’ble Court held, “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 their respective decision. 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 &amp; Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006, which shall not be treated as a precedent.”