{"id":298911,"date":"2023-08-09T09:00:15","date_gmt":"2023-08-09T03:30:15","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=298911"},"modified":"2023-08-10T17:11:17","modified_gmt":"2023-08-10T11:41:17","slug":"compliance-s19-msmed-act-is-a-pre-requisite-for-seeking-stay-arbitral-award-calcutta-hc","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/08\/09\/compliance-s19-msmed-act-is-a-pre-requisite-for-seeking-stay-arbitral-award-calcutta-hc\/","title":{"rendered":"Compliance of Section 19 of MSMED Act is a pre-requisite for seeking Stay on Arbitral Award: Calcutta High Court"},"content":{"rendered":"
\n

Calcutta High Court:<\/b> A single-judge bench comprising of Moushumi Bhattacharya,*<\/b> J., held that compliance with Section 19<\/a> of the Micro, Small and Medium Enterprises Development Act, 2006<\/a> (MSMED Act) is mandatory for seeking a stay of an award and dismissed the petitioner’s application for stay on arbitral award.<\/p>\n

“The petitioner must first comply with Section 19<\/a> of the MSMED Act<\/a> to breathe life into the application.”<\/b><\/p>\n

Brief Facts<\/b><\/p>\n

In the instant matter, the West Bengal State Micro Small Enterprises Facilitation Council vide order dated 28-04-2022 passed an arbitral award. The petitioner filed the present application seeking an unconditional stay of the impugned award under the second proviso to Section 36(3)<\/a> of the Arbitration and Conciliation Act, 1996<\/a> (1996 Act). The petitioner argued that the Council became de jure unable to perform its functions, rendering the award without jurisdiction and void, as the reference was made on 04-12-2017, and the award was passed on 28-04-2022, beyond the prescribed time limits under the MSMED Act<\/a> and the 1996 Act<\/a>.<\/p>\n

Moot Point<\/b><\/p>\n

    \n
  1. \n

    Whether compliance with Section 19<\/a> of the MSMED Act<\/a> is mandatory for seeking a stay of an award?<\/p>\n<\/li>\n

  2. \n

    Whether filing an application under Section 34<\/a> of the 1996 Act<\/a> without the pre-deposit under Section 19 of the MSMED Act makes the application for seeking a stay of the award under Section 36(2)<\/a> of the 1996 Act<\/a> imperfect in the eye of the law?<\/p>\n<\/li>\n<\/ol>\n

    Parties’ Contentions<\/b><\/p>\n

    The respondent takes a preliminary objection to the maintainability of the application and contended that the petitioner must first comply with the requirement of Section 19<\/a> of the MSMED Act<\/a>, which mandates depositing 75% of the awarded amount before applying to set aside the award. The respondent further asserts that failure to make the pre-deposit renders the application for stay “stillborn” under Section 19<\/a> of the MSMED Act<\/a>.<\/p>\n

    On the other hand, the petitioner contended that the Court can consider the application for stay of the award based on the mere “filing” of an application under Section 34<\/a> of the 1996 Act<\/a>, as the words “file” and “entertain” in Section 36(2)<\/a> and Section 19<\/a> of the MSMED Act<\/a> respectively create a distinction between the two proceedings.<\/p>\n

    Court’s Findings<\/b><\/p>\n

    The Court observed that Section 19 requires the buyer to deposit 75% of the awarded amount an such a pre-deposit is a condition precedent for a buyer to seek setting aside of an award under the MSMED Act<\/a>, and without it, the application for stay would be stillborn. The Court held that compliance with section 19<\/a> of the MSMED Act<\/a> is indeed mandatory for seeking a stay of an award.<\/p>\n

    The Court also clarifies that the filing of a Section 34 application for setting aside the award under Section 36(2)<\/a> of the 1996 Act<\/a> must be a valid application, complying with the limitation period prescribed under Section 34(3)<\/a> of the 1996 Act<\/a>. The Court further stated that without the pre-deposit under Section 19<\/a> of the MSMED Act<\/a>, Section 34 application remains invalid and cannot serve as the basis for an application for stay of the award under Section 36(2)<\/a> of the 1996 Act<\/a>.<\/p>\n

    “Since the petitioner has admittedly not made the pre-deposit under section 19<\/a> of the MSMED Act<\/a>, the Section 34 application filed by the petitioner remains eclipsed in the eye of law as the foundation for a prayer for stay of the arbitral award under Section 36(2)<\/a> of the 1996 Act<\/a>. Therefore, the present application for stay of the impugned award filed under section 36(2)<\/a> of the 1996 Act<\/a> cannot be entertained as the said application is foisted on a stillborn section 34 application.”<\/b><\/p>\n

    Court’s Verdict<\/b><\/p>\n

    The Court dismissed the application for stay as the same is not maintainable due to the lack of compliance with Section 19<\/a> of the MSMED Act<\/a>. The Court also de-tagged the application for setting aside the award from the present application.<\/p>\n

    [Board of Major Port Authority for the Shyama Prasad Mookerjee Port, Kolkata v. Marine Craft Engineers (P) Ltd., 2023 SCC OnLine Cal 2200<\/a>, order dated 31-07-2023<\/span>]<\/p>\n

    *Judgment by Justice Moushumi Bhattacharya<\/span><\/strong><\/p>\n\n

    Advocates who appeared in this case :<\/p>\n

    Mr. Kishore Datta, Sr. Adv., Mr. Ashok Kr. Jena, Counsel for the State;<\/p>\n

    Mr. Sabyasachi Chowdhury, Mr. S. E. Huda, Mr. Arjun Mookherjee, Mr. Shounak Mukhopadhyay, Mr. Shreyan Bhattacharyya, Ms. Anwesha Guha Ray, Mr. Abhijit Guha Ray, Counsel for the Respondent.<\/p>\n

    Buy Arbitration and Conciliation Act, 1996   HERE<\/a><\/h3>\n

    \"arbitration<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    The Calcutta High Court held that failure to comply with procedural requirements under Section 19 of the MSMED Act renders application for stay of Arbitral Award as not maintainable.<\/i><\/p>\n","protected":false},"author":67514,"featured_media":290502,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[60132,2633,2689,57782,51198,23694],"class_list":["post-298911","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-application-for-stay","tag-arbitral_award","tag-Calcutta_High_Court","tag-justice-moushumi-bhattacharya","tag-msmed-act","tag-section-19"],"yoast_head":"\nCompliance of Section 19 of MSMED Act is a pre-requisite for seeking Stay on Arbitral Award: Calcutta High Court | SCC Blog<\/title>\n<meta name=\"description\" content=\"Calcutta High Court 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