Court Has To Assign Reasons While Releasing Amount U/S 19 MSMED Act: Telangana HC
The Telangana High Court observed that the Court while dealing with a prayer to release the amount under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 has to assign reasons for releasing such percentage of amount.
The Court was hearing a petition under Article 227 of the Constitution of India challenging the validity of an order by which the Commercial Court permitted the respondent to withdraw a sum of ₹50.85 lakh deposited by the petitioner.
The bench of Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti observed, “the Court while dealing with a prayer to release the amount has to assign reasons for releasing such percentage of the amount as it considers reasonable subject to such conditions as it may deem necessary to impose.”
Senior Advocate J. Prabhakar appeared for the Petitioner and Advocate Dida Vijaya Kumar appeared for the Respondent.
Brief Facts-
The petitioner National Small Industries Corporation Limited, a Government of India Enterprise promoting Micro, Small, and Medium Enterprises, entered into an agreement with respondent M/s Brahma Teja Paper Products under the tender marketing scheme. A dispute arose and was adjudicated by the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006, which passed an award in favour of the respondent. The petitioner challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996, and deposited ₹50.23L kept in a fixed deposit. The Commercial Court, by ex parte order called for the FDR with interest and later permitted the respondent to withdraw the amount. The Civil Revision Petition challenges that decision.
The Court perused Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 which deals with “Applications for setting aside decree, award or order” and observed, “it is evident that the Court is empowered to permit the release of such percentage of amount deposited to the supplier as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose.”
The Court noted that the petition under Section 36 of the Arbitration and Conciliation Act, 1996 seeking a stay of the award was also pending. Therefore, according to the Court, the propriety demands that the Commercial Court ought to have dealt with both applications together.
The Court further noted that the Commercial Court has not assigned any reason for releasing the whole amount by the petitioner in favour of the respondent.
Consequently, the Court set aside the impugned order.
Finally, the Court disposed of the Civil Revision Petition.
Cause Title: The National Small Industries Corporation Limited v. M/s Brahma Teja Paper Products