[MSMED Act] Pre-Deposit Of 75% Of Awarded Amount While Challenging Award Cannot Be Scuttled By Petition Under Article 227: J&K High Court

The Jammu and Kashmir High Court held that an award passed under the Micro, Small & Medium Enterprises Development Act (MSMED) cannot be challenged before the High Court, as the statutory remedy provided under the Act itself must be exhausted by the aggrieved party.

It also pointed out that the said statutory remedy requires the aggrieved party to deposit 75% of the award amount in the court before availing the said remedy, which cannot be scuttled by preferring a petition before the High Court.

The court said that the present petition filed by the petitioners is nothing but a misconceived exercise, possibly intended to bypass the mandate of depositing 75% of the award amount in case the appellate side seeks a remedy provided under the Arbitration & Conciliation Act.

A bench of Justice Rahul Bharti observed that this very act of invoking Article 227 by the petitioner can be said to be an exhibit of a time-frozen mindset of acting mechanically in the discharge of administrative duties.

The Union Parliament enacted the MSMED Act to instil and activate a due sense of urgency and efficiency in Public/Government Authorities, Departments, and Officials to act with due dispatch and drive in the timely clearance of due payments to goods and service suppliers, particularly when the suppliers are Micro, Small & Medium Enterprises. For such enterprises, the timely inflow of money is as essential to keeping their business cycle in motion as the inflow of water is to a stream to prevent it from drying up and becoming extinct, the court said.

The court relied upon the decision in "M/s India Glycols Limited and Another Vs Micro and Small Enterprises Facilitation Council, Medchal – Malkajgiri and Others" (2024 AIR SC 285), wherein the Supreme Court held that admitting the petition by the High Court would defeat the very purpose and object of the Act, which is necessary to protect Micro, Small & Medium Enterprises (MSE) from delayed payments and to ensure a quick dispute resolution mechanism.

BACKGROUND

The petitioners in this case sought the supervisory jurisdiction under Article 227 of the Constitution, challenging the award dated 30.11.2023 issued by the Micro & Small Enterprises Facilitation Council. The award directed the petitioners to release an amount of ₹10,59,460 and ₹1,42,94,633 on two different purchase orders. The respondents opposed the petition, citing the above Supreme Court judgment in M/s India Glycols Limited barring supervisory intervention by the High Court.

The court criticized the petitioners for bypassing statutory procedures by not seeking the appropriate statutory remedy, thereby acting contrary to the object and purpose for which the MSMED Act was formulated in the first place.

The court dismissed the petition with the clarification that if the petitioners file a statutory appeal against the impugned award, the time spent in the institution and pendency of this writ petition until its disposal will not be reckoned against them.

APPEARANCE

Ab. Rashid Malik, Sr. Advocate with

Mohd Younis Hafiz, Advocate For Petitioners

Karman Singh Johal, Advocate for Respondents

Case-Title: UT of Jammu & Kashmir & Anr vs M/s Gulati Metals & Alloys

Citation: 2025 LiveLaw (JKL) 34

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