himachal pradesh high court

Himachal Pradesh High Court: A single bench comprising of Jyotsna Rewal Dua,* J., held that the District Judge should first examine whether the 75% of the award amount is actually deposited before allowing an application preferred under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMD Act).

Factual Matrix

In the instant matter, the Arbitrator issued an Arbitral Award dated 30-10-2021 in favour of the petitioner. The respondent challenged the award and concurrently filed an application under S. 19 of the MSME Act praying for a stay on the implementation and execution of the Arbitral Award. The District Judge vide order dated 21-12-2022 accepted the respondent’s Section 19 application on the ground that respondent deposited 75% of the award amount in compliance of the Section 19 of MSME Act. Aggrieved by the impugned order passed by the District Judge, the petitioner preferred a petition before this Court challenging the same.

Moot Point

Whether the deposit made by the respondent before the District Judge was in consonance with the requirement of Section 19 of MSME Act?

Law Point

Section 19 – Application for setting aside decree, award or order.

“No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent. of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such court:

Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.”

Court’s Observation

The Court relied on Tirupati Steels v. Shubh Industrial Component, (2022) 7 SCC 429, where it was held that it is mandatorily required to pre-deposit of 75% of the awarded amount under Section 19 of the MSME Act, however, at the same time, the pre-deposit may be allowed to be made in instalments owing to the hardship caused to the appellant/applicant.

“…pre-deposit of 75% of the awarded amount under Section 19 of the Act is a mandatory requirement. However, at the same time, considering the hardship which may be projected and the Court being satisfied the pre-deposit may be allowed to be made in installments.”

While accepting the contentions of the petitioner that the respondent did not deposit 75% of the awarded amount, the Court observed that that the District Judge in the impugned order simply stated that the respondent had deposited 75% of the awarded amount without discussing whether the amount actually deposited satisfied the condition of pre-deposit of 75% of the award.

Court’s Verdict

The Court set aside the impugned order dated 21-12-2022 and directed the District Court to decide the application moved by the respondent afresh in accordance with law. The Court further directed the District Court to not execute the impugned Arbitral Award dated 30-10-2021, till the respondent’s application is decided.

[Pratap Industries Products v. Hindustan Construction Co. Ltd., 2023 SCC OnLine HP 746, order dated 26-06-2023]

*Judgment by Justice Jyotsna Rewal Dua

Advocates who appeared in this case :

Mr. Atul Jhingan, Counsel for the Petitioner;

Mr. Janesh Gupta, Counsel for the Respondent.

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