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Section 19 of MSME Act – What is Section 19 of MSME Act?

Section 19 of MSME Act – What is Section 19 of MSME Act

MSME Law Notes by NB Associates

A Micro and Small enterprise can file an MSME claim against its buyer if the buyer fails to make payment of the dues within a period of 15 (Fifteen) days of the date of the delivery of the goods or services.

Such a claim can be filed before the concerned MSME facilitation council through the online portal MSME Samadhan.

We have already published an article on MSME claim/court procedure and you can visit it by clicking here.

So, the MSME claim is finally adjudicated in an Arbitration proceeding conducted either by MSME facilitation council or an arbitrator appointed.

A party aggrieved with any order, decree or award passed under this arbitration proceeding can file an Section 19 of MSME Act under section 19 of the MSME Act.

We are the leading Law firm / Lawyers providing comprehensive MSME legal consultancy to our clients.  We also help and legally assist our clients in the recovery of dues or outstanding.

Clients may contact us at the given number for any legal consultancy or through email id.

Contact no: 9811899279 | Email. mail@nbassociates.net

Section 19 of MSME Act – in nutshell

So what is Section 19 of MSME Act.

Section 19 is a provision under MSME Act, which provides for filing of an appeal against the order, decree or award passed under an arbitration proceeding initiated under section 18(3) of the MSME Act.

It also provides pre-condition of the deposit of 75 % of the award amount before entertaining any appeal.

So, any person aggrieved with any order, decree or award passed under the arbitration proceeding initiated under section 18(3) of the MSME Act can file an appeal under section 19 of the MSME Act.

Section 19 of MSME Act – the provision in MSMED Act

Section 19 of the MSMED Act provides for the filing of an application or petition to set aside a decree, award, or order made by the council itself or any alternative dispute resolution institution or centre referred to by the council.

According to Section 18(3) of the Act, the council has the option to either handle the dispute through arbitration itself or refer it to an alternative dispute resolution institution or centre.

Additionally, Section 18(3) states that the provisions of the Arbitration and Conciliation Act, 1996 apply to the dispute as if it were based on an arbitration agreement mentioned in Section 7(1) of that Act.

In accordance with the Arbitration and Conciliation Act, 1996, an objection or appeal against the arbitrator’s award can be filed under Section 34 of the Act.

Therefore, an application under Section 19 of the MSMED Act can be submitted under Section 34 of the Arbitration and Conciliation Act, 1996, in conjunction with Section 19 of the MSMED Act.

Section 19 of MSME Act – section 19 as it reads

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.

Section 19 of MSME Act – section 19 in nutshell

Section 19 of the MSMED Act stipulates that an application to challenge a decree, award, or order issued under Section 18(3) cannot be filed by the appellant (who is not a supplier) unless they have deposited 75% of the award amount with the court.

Therefore, unless 75% of the award amount is deposited with the court, no application under Section 19 of the MSME Act can be entertained by the court.

Furthermore, Section 19 of the MSMED Act grants the court the authority to direct the payment of the deposited amount to the supplier.

The court may issue such an order if it deems it reasonable given the circumstances, and the order may be subject to conditions determined by the court.

Section 19 of MSME Act – section 19 what it provides

Thus, section 19 of the MSMED Act provides the followings:

1.  An appeal against the order, decree or award under the proceeding started under section 18(3)  / Arbitration proceeding can be filed.

2. No such appeal can be entertained by court unless the appellant (not being supplier) deposit with such court a sum equivalent to 75 % of the award amount.

3. Such deposited amount can be released to the respondent / supplier on such terms as the court may deem fit.

Section 19 of MSME Act – Section 19 & section 34 of Arbitration and Conciliation Act

In an arbitration proceeding started under section 18(3) of the MSMED Act, the provision of Arbitration and Conciliation Act, 1996 applies to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section(1) of section 7 of that Act.

Section 18(3) reads as under:

18.Reference to Micro and Small Enterprises Facilitation Council.—

(1)

(2)

(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section(1) of section 7 of that Act.

Under the provisions of the Arbitration and Conciliation Act, 1996 an objection or appeal to the award passed by the arbitrator can be filed under section 34 of the Arbitration and Conciliation Act, 1996.

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