Pre Deposit Of 75% Of Awarded Amount As Per Section 19 MSMED Act Is Mandatory To Challenge The Award : Supreme Court

The Supreme Court observed that the pre deposit of 75% of the awarded amount as per section 19 of the Micro, Small and Medium Enterprise Development Act, 2006, is mandatory to challenge the award under section 34 of the Arbitration and Conciliation Act, 1996.

In this case, the Division Bench of the Punjab and Haryana High Court directed the Single bench to proceed under section 34 of the Arbitration Act, 1996 without insistence for making predeposit of 75% of the awarded amount.

The issue therefore raised in appeal before the Apex Court was whether the pre ­deposit of 75% of the awarded amount as per section 19 of the MSMED Act, 2006, while challenge to the award under section 34 of the Arbitration Act, 1996, is made mandatory or not.

The court noted that this issue has been answered in a recent judgment in Gujarat State Disaster Management Authority Vs. Aska Equipments Limited; (2022) 1 SCC 61.

"While interpreting section 19 of the MSMED Act, 2006 and after taking into consideration the earlier decision of this Court in the case of Goodyear (India) Ltd. Vs. Norton Intech Rubbers (P) Ltd.; (2012) 6 SCC 345, it is observed and held that the requirement of deposit of 75% of the amount in terms of the award as a pre­deposit as per section 19 of the MSMED Act, is mandatory. It is also observed that 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 pre­deposit at a time, the court may allow the pre­deposit to be made in instalments. Therefore, it is specifically observed and held that pre deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is a mandatory requirement."

The court therefore directed the respondent to deposit 75% of the awarded amount before its application under section 34 of the Arbitration Act, 1996 challenging the award is entertained and considered on merits.

Case details

Tirupati Steels vs Shubh Industrial Component | 2022 LiveLaw (SC) 383 | CA 2941 OF 2022 | 19 April 2022

Coram: Justice MR Shah and BV Nagarathna

Headnotes

Micro, Small and Medium Enterprise Development Act, 2006 ; Section 19 - Arbitration and Conciliation Act, 1996 ; Section 34 - Pre deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is a mandatory requirement to challenge the award under section 34 of the Arbitration and Conciliation Act. [Referred to Gujarat State Disaster Management Authority Vs. Aska Equipments Limited; (2022) 1 SCC 61 ] (Para 4)

Summary: Appeal against Punjab & Haryana HC order which allowed to proceed under section 34 of the Arbitration Act, 1996 without insistence for making predeposit of 75% of the awarded amount - Order passed by the High Court permitting the proceedings under section 34 of the Arbitration Act, 1996 without insistence for making pre­deposit of 75% of the awarded amount is unsustainable and the same deserves to be quashed and set aside.

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