We will discuss here can Bank guarantee or other security be accepted as 75% pre-deposit under section 19 MSME Act?
The question as to whether the court can accept a bank guarantee or other security as the fulfilment of a condition of pre-deposit under section 19 of the MSME Act came before the Uttarakhand High Court in the case of Uttarakhand Power Corporation Limited versus Mahavir Transmission Udyog Private Limited (Civil Writ number 721 of 2018 and Civil Writ number 723 of 2018).
Section 19 of the MSME Act provides that an application for setting aside of any decree, award or order passed in an arbitration proceeding can be filed. However, section 19 prescribes that the applicant/appellant has to pre-deposit 75% of the amount under decree, award or order.
The aforesaid condition is mandatory for entertaining an application under section 19 challenging decree, award or order as has been held by various judgements including those by the honourable Supreme Court.
Related : Whether the condition of a 75% deposit under sec 19 MSME act is mandatory?
This situation brings out the issue as to whether this 75% deposit is to be mandatorily deposited in cash or this can be in form of a bank guarantee or any other security.
In the case of Uttarakhand Power Corporation Limited versus Mahavir transmission Udyog Private Limited, the petitioner argued that it is the discretion of the court acting under section 19 and it is not mandatory that the party should deposit the amount of 75% cash. The petitioner further argued that it can be done also by way of a Bank guarantee or security.
The respondent however contended that section 19 is clear as it mandates the deposit of the amount in cash. The respondent cited the judgement of the honourable apex court in the matter of Gujrat India Ltd versus Norton Intech Rubbers Private Limited and another.
In that case, the court reached the following conclusions:
Under section 19 the court has no discretion in the matter of ordering a deposit of 75% of the amount, except by way of cash.
The court observed that :
1. This result is inevitable on a reading of section 19 itself.
2. It is settled law that the duty of the court is to give effect to the intention of the Legislature. The intention of the legislature is to be gathered from the words which are used in the provision. If the words used in the statutory provisions on a plain interpretation can be given effect, even if it may result in some injustice, it must be implemented. It is another matter that if the provisions of a statute are capable of two or more interpretations, the court may choose the interpretation which does not result in absurdity or injustice.
The court further observed that
1. this question is essentially not res Integra, as it has, in fact, been considered by the honourable apex court in the decision of Goodyear India Limited vs Norton Intech Rubbers Private Limited.
2. The object, which is sought to be achieved by the Act, cannot be overlooked.
The court further observed that:
1. this court cannot be oblivious to the object and purpose which is sought to be achieved, which is the promotion, development and enhancing the competitiveness of micro, small and medium enterprises.
2. Dissecting section 19 itself, the plain word used in section 19 is that 75% of the amounts in terms of the decree, award or orders as the case may be, has to be deposited.
3. From a plain reading of the words, it cannot admit of any dispute that the legislature had intended that it has to deposit the amount in terms of cash.
4. Quite clearly section 19 does not contemplate any power with the court to permit deposit of the amount by way of the bank guarantee or any other form of security.
5. Had the intention of the legislature been that the courts have freedom and discretion in the matter and can permit deposit of the amount by way of security or bank guarantee, nothing stopped the legislature from indicating its mind in the said direction.
6. This above view receives clear fortification from the words used in the proviso. The proviso clearly contemplates that the pending disposal of the application for setting aside decree, order or award, the court can order such percentage of the amount deposited to be paid to the supplier, as it considers it reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose. The percentage of the amount which is deposited can only be consistent with the reasoning that, under the main provision of section 19, the amount is available in cash.
7. If the argument is accepted that it can be by way of security, it would only not be contrary to the plain words used in the proviso; but, it would also defy the clear object of the act, which is to ensure that the unit in question, which is micro, small or medium enterprises, survives.
| Thus, it is clear that the pre-deposit under section 19 of the act has to be in the form of cash and not in the form of a bank guarantee or any other security. |
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Whether the condition of a 75% deposit under sec 19 MSME act is mandatory?
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This Article is written by Managing Partner Naveen Bhardwaj with assistance and research from the NB Associates team.
The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
NB Associates, Advocates & Solicitors provides comprehensive legal services related to MSME claims or recovery of dues or debt.
Can the court order a deposit of 75% under section 19 of the MSME Act in Instalments? That is the question we are going to discuss here.
Section 18 of the MSME Act provides the adjudication of the money claims of an MSME through an alternate dispute resolution mechanism i.e. arbitration. Such arbitration is called statutory arbitration.
Section 19 of the MSME Act provides that an application for setting aside decree, award or order of arbitration proceedings can be filed before an appellate court. Such an application is filed under the provisions of section 34 of the Arbitration and Conciliation Act read with section 19 of the MSME act, 2006.
Section 19 provides no such application for setting aside any decree, award or order to be entertained by any court unless the appellant has deposited 75% of the amount in terms of the decree, award or order in the manner decided by the appellate court.
There have been challenges to the provision of the deposit of 75% of the amount in various courts and it has always been held that this condition of pre-deposit is mandatory and there cannot be a deviation from the condition of 75% deposit.
Now the question is whether the use of the word “in the manner directed by the such court” gives the discretion to the appellate court to direct the deposit of 75% of the amount in instalments.
This question was settled by the honourable Supreme Court of India in the case of Gujarat State Disaster Management Authority vs M/S Aska Equipment Ltd (Civil appeal no.6252 of 2021)
The Supreme Court held that considering the hardship which may be projected before the appellate court if the appellate court is satisfied that there shall be undue hardship caused to the appellant/applicant to deposit 75% of the amount as a pre-deposit at a time, the court may allow the pre-deposit to be made instalments.
The Honourable Supreme Court in this case also cited its earlier decision in the Good Air India Ltd case wherein the court held that the expression “in the manner directed by the such court“ would, in our view, indicate the discretion given to the court to allow the pre-deposit to be made, if necessary, in instalments.
| Thus, on an application moved by the appellant /applicant, if the Appellate court finds that a hardship would be caused to the applicant/appellant, it can order the deposit of 75% of the amount in instalments. The important aspect is the pleading of the hardship, which may be the great probability of winning the appeal or the patent illegality of the decree, award or order in the arbitration proceeding. |
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Other related articles
Whether the condition of a 75% deposit under sec 19 MSME act is mandatory?
_________
MSME Articles >> Read more
MSME court Judgement >> Read here
________
Please note:
This Article is written by Managing Partner Naveen Bhardwaj with assistance and research from the NB Associates team.
The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
NB Associates, Advocates & Solicitors provides comprehensive legal services related to MSME claims or recovery of dues or debt.
Section 19 of the MSME Act, of 2006 relates to an application for setting aside a decree, award or order passed in an alternate dispute resolution process under a reference made by the facilitation council.
Thus, when a decree, award or order is passed in an arbitration proceeding pursuant to reference under section 18 of the MSME act and a party against whom such decree, award or order is passed files an application under section 19 for setting aside such decree award or order before the appellate court, as per section 19 of MSME Act, such an application is not to be entertained unless 75% of the amount in terms of such decree, award or order, as the case may be is deposited by the applicant.
There have been challenges to this provision in courts, where the contentions were raised that this provision is not mandatory and there can be deviation by the Appellate court.
The same issue came before the honourable Supreme Court recently in the case of Gujarat State Disaster Management Authority vs. M/s Aska Equipments Limited. [Read excerpts | Read full Judgement]
The appellate court directed the appellant to deposit 75% of the awarded amount. Despite several times given by the appellate court, the appellant did not deposit 75% of the awarded amount pursuant to the order, and ultimately the challenge came before the honourable Supreme Court.
Supreme Court observed that:
On a plain reading of section 19 of the MSME act, at the time/before entertaining the application for setting aside the award made under section 34 of the arbitration and conciliation act, the applicant/appellant has to deposit 75% of the amount in terms of the award as a pre-deposit.
The requirement of a deposit of 75% of the amount in terms of the award as a pre-deposit is mandatory.
The Supreme Court also cited the case of Goodyear India Limited vs Norton Intech Rubbers Private Ltd. 2011 3 LW 626 wherein a similar proposition of law came before the honourable court and the court decided the issue on the same line.
The Apex Court observed that the impugned order passed by the High Court permitting the proceedings under section 34 of the Arbitration Act, 1996 without insistence for making a pre-deposit of 75% of the awarded amount was unsustainable and the same deserved to be quashed and set aside.
Thus, the Supreme Court has made it clear that the provision of section 19 of the MSME Act is mandatory in nature.
There cannot be any deviation as to the requirement of the deposit of 75% amount under a decree, award or order passed in an arbitration proceeding under section 18 of the MSME Act.
Whether mere notice of conciliation by the MSME facilitation council wipe out the legal defence of limitation?
Law of limitation prescribes money claims be filed within 3 years from the date of cause of action arose.
So, when a claim is filed before the MSME facilitation council, the facilitation council issues notice to the respondent for conciliation, and the respondent participates in such proceeding, questions arise as to :
1. Whether it would be open for the respondent to raise the issue of the claim being barred by limitation in such proceeding? or
2. As the facilitation council has issued notice to the respondent for conciliation, whether the respondent be precluded from raising the defence of limitation?, or
3. Whether by participating in such a conciliation proceeding, the respondent is precluded from raising the defence of limitation?
The Honourable Delhi High Court in the case i.e. Piya Bajwa vs Micro and Small Enterprises decided on 29th January 2021 in W.P No.1134/2021, answered to above questions.
Delhi High Court held that merely because notice for exploring conciliation has been issued does not mean that the legal defence of limitation would be wiped out in case the dispute is not resolved.
In this case, the petitioner received a letter from the facilitation council by which the petitioner was called to participate in a conciliation process and also file a reply.
Petitioner approached the Delhi High Court with apprehension that the council has taken a decision that the petitioner ought to release the outstanding dues.
The petitioner also contended that the claim is time-barred and a decision could not have been taken without hearing the petitioner.
The petitioner also contended that as the claim is time-barred therefore before initiating the conciliation process the question as to whether the claim is maintainable should be considered by the facilitation council. Without doing the same the conciliation process started would be premature.
The court held that:
The apprehension expressed by the petitioner that the petitioner may be forced to resolve the time-barred claim would be assuaged by clarifying that in the conciliation process, the petitioner would be entitled to place its case in an informal manner, along with recordings therein that the claim itself is time-barred. If conciliation fails, then the parties can avail of their remedies in accordance with law under section 18 of the MSME act.
The participation in the conciliation process shall be without prejudice to the rights and contentions of the parties concerned.
The Court also observed that
Exploring the conciliation or mediation prior to invoking arbitration or litigation is this scheme not only in MSME act but also in various other laws for example Section 89 of CPC laid enormous emphasis on exploring settlement where there existed an element of settlement which may be acceptable to the parties.
This process of pre-litigation mediation has statutory recognition in the commercial court’s act, 2015 where under section 12 A pre-institution meditation and settlement have been provided for.
The court held that merely because notice for exploring conciliation has been issued does not mean that the legal defence of limitation would be wiped out in the case the dispute is not resolved.
Conditions for mutual divorce in Special Marriage Act 1954
Section 28 of Special Marriage Act 1954 provides following grounds on which a petition for dissolution of marriage can be presented in court:
(1) Both husband and wife has been living separately for a period one year or more, and
(2) They have not been able to live together, and
(3) They have mutually agreed that the marriage should be dissolved.
The above are the explicit conditions which are provided under Section 28 of Special Marriage Act 1954. All the above grounds are mandatory before a petition for dissolution of marriage is present in court.
If any of the above grounds are missing from the petition for dissolution of marriage, the Court may reject such petition.
Besides the grounds provided in Section 28 of Special Marriage Act 1954, there are some other conditions. These conditions court may weigh before granting decree of divorce by mutual consent. These are:
(1) Marriage is solemnised as per as per the provisions of Section 4 to 14 of the Special Marriage Act 1954.
(2) Parties to marriage i.e. husband and wife must have settled all their dispute or differences, if any
They must have entered in full and final understanding. Nothing should be left, which may be a reason of future contentions or litigation between the parties to marriage.
If any permanent alimony is to be given, the wife must have received all amount of alimony, or if the alimony is to be given in future dates or monthly the husband and wife must have entered into a written understanding in that respect.
(3) If Parties to marriage i.e. husband and wife has any child, they must have entered into an understanding as to how child to be raised. There must be a clear understanding of custody and finance of child education to be met.
Related read:
Conditions for mutual divorce in Hindu Law
Conditions for mutual divorce in Christian Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
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Email: mail@nbassociates.net
Conditions for mutual divorce in Hindu Law – Sec 13B
Section 13B provides following grounds on which a petition for dissolution of marriage can be presented in court:
(1) Both husband and wife has been living separately for a period one year or more, and
(2) They have not been able to live together, and
(3) They have mutually agreed that the marriage should be dissolved.
The above are the explicit conditions which are provided under section 13B of Hindu Marriage Act. All the above grounds are mandatory before a petition for dissolution of marriage is present in court.
If any of the above grounds are missing from the petition for dissolution of marriage, the Court may reject such petition.
Besides the grounds provided in Section 13B of Hindu Marriage act, there are some other conditions. These conditions court may weigh before granting decree of divorce by mutual consent. These are:
(1) Marriage is solemnised as per Hindu Laws.
(2) Parties to marriage i.e. husband and wife must have settled all their dispute or differences, if any
They must have entered in full and final understanding. Nothing should be left, which may be a reason of future contentions or litigation between the parties to marriage.
If any permanent alimony is to be given, the wife must have received all amount of alimony, or if the alimony is to be given in future dates or monthly the husband and wife must have entered into a written understanding in that respect.
(3) If Parties to marriage i.e. husband and wife has any child, they must have entered into an understanding as to how child to be raised. There must be a clear understanding of custody and finance of child education to be met.
Related read:
Conditions for mutual divorce in Special Marriage Act 1954
Conditions for mutual divorce in Christian Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
Call: 9811899279
Email: mail@nbassociates.net
Grounds of mutual divorce in Christian law – Section 10A of Divorce Act 1869
Section 10A of Divorce Act 1869 provides following grounds on which a petition for dissolution of marriage can be presented in court:
(1) Both husband and wife has been living separately for a period two year or more, and
(2) They have not been able to live together, and
(3) They have mutually agreed that the marriage should be dissolved.
The above are the explicit conditions which are provided under Section 10A of Divorce Act 1869. All the above grounds are mandatory before a petition for dissolution of marriage is present in court.
If any of the above grounds are missing from the petition for dissolution of marriage, the Court may reject such petition.
Besides the grounds provided in Section 10A of Divorce Act 1869, there are some other conditions. These conditions court may weigh before granting decree of divorce by mutual consent. These are:
(1) Marriage is solemnised as per the Christian laws / customs.
(2) Parties to marriage i.e. husband and wife must have settled all their dispute or differences, if any
They must have entered in full and final understanding. Nothing should be left, which may be a reason of future contentions or litigation between the parties to marriage.
If any permanent alimony is to be given, the wife must have received all amount of alimony, or if the alimony is to be given in future dates or monthly the husband and wife must have entered into a written understanding in that respect.
(3) If Parties to marriage i.e. husband and wife has any child, they must have entered into an understanding as to how child to be raised. There must be a clear understanding of custody and finance of child education to be met.
Related read:
Conditions for mutual divorce in Special Marriage Act 1954
Conditions for mutual divorce in Hindu Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
Call: 9811899279
Email: mail@nbassociates.net
Conditions for mutual divorce in Parsi Law : Sec 32B of PMDA
Section 32B of Parsi Marriage and Divorce Act 1936 provides following grounds on which a petition for dissolution of marriage can be presented in court:
(1) Both husband and wife has been living separately for a period one year or more, and
(2) They have not been able to live together, and
(3) They have mutually agreed that the marriage should be dissolved.
The above are the explicit conditions which are provided under Section 32B of Parsi Marriage and Divorce Act 1936.
All the above grounds are mandatory before a petition for dissolution of marriage is present in court.
If any of the above grounds are missing from the petition for dissolution of marriage, the Court may reject such petition.
Besides the grounds provided in Section 32B of Parsi Marriage and Divorce Act 1936, there are some other conditions. These conditions court may weigh before granting decree of divorce by mutual consent. These are:
(1) Marriage is solemnised as per provisions of Parsi Marriage and Divorce Act 1936.
(2) Parties to marriage i.e. husband and wife must have settled all their dispute or differences, if any
They must have entered in full and final understanding. Nothing should be left, which may be a reason of future contentions or litigation between the parties to marriage.
If any permanent alimony is to be given, the wife must have received all amount of alimony, or if the alimony is to be given in future dates or monthly the husband and wife must have entered into a written understanding in that respect.
(3) If Parties to marriage i.e. husband and wife has any child, they must have entered into an understanding as to how child to be raised. There must be a clear understanding of custody and finance of child education to be met.
Related read:
Conditions for mutual divorce in Special Marriage Act 1954
Conditions for mutual divorce in Christian Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
Call: 9811899279
Email: mail@nbassociates.net
Mutual Divorce Process under Hindu Law : Section 13B of Hindu Marriage Act 1955
Followings are steps of Mutual divorce process under Section 13B as in Hindu Marriage Act 1955
First – Parties to marriage i.e. husband and wife filing the joint petition for divorce by mutual consent in the court of law.
Second – Court makes inquires and takes statement of Parties.
Third – Court passes and order. Gives parties cooling off period minimum of six months.
Fourth – Parties present a second motion. This second motion must be presented after six months of court’s first order and before the expiry of eighteen months.
Fifth – Court hears both the parties. Court makes inquiries for its satisfaction as to the marriage was solemnised and that the averments made in the petition are true.
Sixth – One being satisfied and taking statement of the parties, Court passes a decree of dissolution of marriage.
Related read:
Conditions for mutual divorce in Special Marriage Act 1954
Conditions for mutual divorce in Christian Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
Call: 9811899279
Email: mail@nbassociates.net
Mutual divorce process under Section 28 Special Marriage Act 1954
Followings are steps of Divorce by mutual consent process under Section 28 as in Special Marriage Act 1954
First – Parties to marriage i.e. husband and wife filing the joint petition for divorce by mutual consent in the court of law.
Second – Court makes inquires and takes statement of Parties.
Third – Court passes and order. Gives parties cooling off period minimum of six months.
Fourth – Parties present a second motion. This second motion must be presented after six months of court’s first order and before the expiry of eighteen months.
Fifth – Court hears both the parties. Court makes inquiries for its satisfaction as to the marriage was solemnised and that the averments made in the petition are true.
Sixth – One being satisfied and taking statement of the parties, Court passes a decree of dissolution of marriage.
Related read:
Conditions for mutual divorce in Special Marriage Act 1954
Conditions for mutual divorce in Christian Law
Conditions for mutual divorce in Parsi Law
Mutual Divorce Process under Hindu Law
Mutual divorce process under Special Marriage Act 1954
Mutual Divorce Process in Christian law
Mutual Divorce Process in Parsi Law
Mutual divorce laws – Mutual divorce laws in India
Note: This article is posted by the team of NB Associates. The content(s) of this Article cannot be copied or reproduced without the express written consent of NB Associates.
Free online mutual divorce legal consultation
Free online mutual divorce case evaluation
If you have any other queries or questions related to Divorce by mutual consent you can contact us with the following details :
Call: 9811899279
Email: mail@nbassociates.net
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