In a recent legal case highlighting the mandatory pre-deposit requirement under the MSME Act, the court’s analysis focused on upholding statutory provisions. The court’s interpretation of the law sets a precedent for future cases concerning pre-deposit obligations in MSME Act matters. Find out more about the legal intricacies in our summary.
Facts
- High Court dismissed the writ petition but granted further 8 weeks to deposit 75% of the awarded amount
- Appellant appealed against the order to deposit 75% of the awarded amount as per MSME Act, 2006
- Appellant deposited Rs. 2,50,00,000/- out of the required amount before the appellate authority
- The appeal/application under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 is scheduled for a decision on 12.10.2021
- The appellant’s advocate submitted that notice was issued on 23.10.2019, with direction to deposit a certain amount.
- A dispute arose over payment for goods taken by the appellant.
- The appellant, dissatisfied with the High Court’s judgment, filed the present appeal.
- The parties are governed by the MSME Act, 2006.
- The appellant filed a writ petition againtst the order.
- Proceedings under Section 18 of the MSME Act, 2006 were initiated.
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Arguments
- The question involved in the present appeal is a pure question of law.
- The appeal/application under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 is discussed.
- According to the respondent’s advocate, it is mandatory to deposit 75% of the awarded amount as a pre-deposit when filing the appeal/application.
- The ex-parte order dated 23.10.2019 directed to deposit an amount that is not even 25% of the awarded amount.
- The issue in the present case is covered against the appellant.
- Decision of the Court in Goodyear India Limited v. Norton Intech Rubbers Private Limited, (2012) 6 SCC 345 supports the respondent’s argument.
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Analysis
- The requirement of deposit of 75% of the awarded amount as a pre-deposit is mandatory.
- The appellate court may allow the pre-deposit to be made in instalments if undue hardship is shown.
- The decision in the case of Goodyear India Limited held that the requirement of deposit of 75% as a pre-deposit is mandatory under Section 19 of the MSME Act, 2006.
- The court has discretion to allow pre-deposit in instalments but the deposit of 75% as a pre-deposit is mandatory.
- There is no discretion for the appellate court to deviate from the mandate of depositing 75% of the awarded amount as a pre-deposit under Section 19 of the MSME Act, 2006.
- The High Court and the Additional District Judge were justified in directing the appellant to deposit 75% of the awarded amount as a pre-deposit.
- The facts of previous cases may not necessarily apply to each specific case.
- Before any court entertains an application to set aside a decree, award, or order made by the Council or an ADR service provider, the appellant must deposit seventy-five percent of the amount in terms of the decree, award, or order with the court.
- The court may order a percentage of the deposited amount to be paid to the supplier while the application is pending, based on the circumstances of the case and subject to conditions imposed by the court.
- Section 19 of the 2006 Act was challenged in the Kerala High Court case of Kerala SRTC v. Union of India.
- The challenges to Section 19 were rejected by the Kerala High Court and subsequently in the Supreme Court special leave petitions.
- The court allowed for pre-deposit in the cases involved, within an extended period of ten weeks.
- The expression ‘in the manner directed by such court’ indicates the discretion given to the court in allowing pre-deposit.
- Senior counsel argued that the decision of the lower court was based on incorrect interpretation of the law
- The counsel presented evidence to support the claim that the plaintiff was not liable for the damages
- The court considered the arguments presented by the counsel and reviewed the evidence presented
- Based on the merits of the matter, the court concluded that the plaintiff was not responsible for the damages
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Decision
- The appellant’s question has been answered against them.
- The interim arrangement from the order dated 23.10.2019 will continue until the appeal/application under Section 34 of the Arbitration & Conciliation Act is finally decided.
- The order is to be pronounced on 12.10.2021.
- The petitioner-Authority, a Public Sector Undertaking, is directed to deposit Rs. 2,50,00,000 within four weeks from the current date.
- On deposit, the amount will be invested in a fixed deposit in a nationalized bank for three months with auto-renewal.
- The disbursement of the amount will await further orders from the Court.
Case Title: GUJARAT STATE DISASTER MANAGEMENT AUTHORITY Vs. M/S ASKA EQUIPMENTS LTD. (2021 INSC 641)
Case Number: C.A. No.-006252-006252 / 2021
