MSME Award Appeal here we mean and discuss Appeal against the order, decree or Award arising out of the statutory arbitration proceeding under MSME Act. 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. Thus, the Supreme Court has made it clear that the provision of section 19 of the MSME Act is mandatory in nature..             
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Gujarat State Disaster Management Authority vs. M/s Aska Equipments Limited


Author- admin
Date:October 5, 2022

[CIVIL APPEAL NO. 6252 OF 2021

This is only an excerpt of the main judgement. Read here full judgement

Court: Supreme Court of India

Bench: Justice M.R. Shah & Justice A.S. Bopanna

Date of Order: OCTOBER 08, 2021

Impugned judgement/order

Order dated 26.09.2019 passed by the High Court of Uttarakhand at Nainital in Writ Petition (MS) No. 2708/2019

Act / Sections

Section 19 Micro, Small and Medium Enterprises Development Act, 2006

Questions involved

Is it 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?

Brief Facts

Additional District Judge (Commercial), Dehradun directed the appellant to deposit 75% of the awarded amount in terms of Section 19 of Micro, Small and Medium Enterprises Development Act, 2006

Appellant preferred a writ petition in High Court of Uttarakhand at Nainital as Writ Petition (MS) No. 2708/2019.

High Court of Uttarakhand at Nainital passed an order dated 26.09.2019 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.

The order of the High Court of Uttarakhand at Nainital was challenged in this case before Supreme Court.

Respondent’s contentions

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.

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 the requirement of a deposit of 75% as a pre-deposit is mandatory.

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 the 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.

Court’s observations

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 a 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. [Para 9.2]

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 a 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. [Para 11]

Court’s final decision

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. [Para 11]

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