Section 19 Of MSME Act - Requirement Of Pre-Deposit Of 75% Of Awarded Amount Is Mandatory: Supreme Court

An appeal was preferred against the judgment of the Uttarakhand High Court at Nainital which had upheld the order passed by the Additional District Judge (Commercial) Dehradun whereby the Appellant was directed to deposit 75% of the amount awarded under Section 19 of MSME Act.

In this case, a dispute had arisen between the parties regarding the payment of goods. In a proceeding under Section 18 of the MSME Act, the Facilitation Council had passed an award in favor of the Respondent and directed the Appellant to pay a sum of Rs. 105,053,387/-.

Aggrieved, the Appellant filed an application before the Additional District Judge for setting aside the award under Section 34 of Arbitration and Conciliation Act wherein Appellant was directed to pre-deposit 75% of the awarded amount by virtue of Section 19 of the MSME Act.

The Appellant contended before the Court that while issuing a notice, the Apex Court had directed the Appellant to deposit Rs.2,50,00,000/- before the appellate authority, upon which the Appellate Court was directed to decide the appeal. It was further argued that the Appellant had deposited the said amount and the Appellate authority had already pronounced its order. The Appellant prayed for the disposal of the present appeal.

The Respondent contended it was mandatory to pre-deposit 75% of the awarded amount when the application is made in terms of Section 34 of the Arbitration and Conciliation Act read with Section 19 of MSME Act and pleaded for consideration of the question of law for future guidance.

The issue which was dealt with by the Court was – Whether in an appeal/application filed under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006, the appellate court would have any discretion to deviate from the deposit of 75% of the awarded amount as a pre-deposit?

The Apex Court after analyzing Section 19 and the judgment of the Court in the matter of Goodyear India Limited v. Norton Intech Rubbers Private Limited, opined that while making an application under Section 34 to set aside an award, it is mandatory for the applicant to pre-deposit 75% of the awarded amount to proceed with his application.

The Bench noted that both the High Court as well as the Additional District Judge (Commercial) Dehradun were justified in directing the Appellant to deposit 75% of the awarded amount as pre-deposit.

In the light of these observations, the Court disposed of the Appeal by laying the law down regarding pre-deposit of award amount while preferring an application under Section 34 of the Arbitration and Conciliation Act read with Section 19 of MSME Act.