Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2941 OF 2022
M/s Tirupati Steels ..Appellant (S)
Versus
M/s Shubh Industrial Component & Anr. ..Respondent (S)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with impugned order
dated 09.04.2019 passed by the Division Bench of the
High Court of Punjab and Haryana at Chandigarh in
Commercial Appeal Case No. FAOCOM/4/2019 (O&M), by
which in the proceedings under section 37 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as the Act, 1996) which was filed under section 19 of
the Micro, Small and Medium Enterprise Development Act,
Signature Not Verified
Digitally signed by
DEEPAK SINGH
Date: 2022.04.19
17:39:57 IST
Reason:
2006 (hereinafter referred to as the ‘MSMED Act, 2006’),
1
the Division Bench of the High Court has directed the first
appellate court to proceed under section 34 of the
Arbitration Act, 1996 without insistence for making pre
deposit of 75% of the awarded amount, the judgment
creditor has preferred the present appeal.
2. The parties are governed by the provisions of the MSMED
Act, 2006. The appellant herein preferred a claim petition
before the Micro and Small Enterprises Facilitation
Council constituted under the MSMED Act, 2006 for
recovery of Rs. 1,40,13,053/ and interest amounting to
Rs. 1,32,20,100/ which comes to a total amounting to Rs.
2,72,33,153/. On the failure of conciliation, the dispute
was referred to the Arbitrator. The Arbitrator, appointed
through the MSME Facilitation Council at Chandigarh,
passed an award in favour of the appellant vide award
dated 16.07.2018. Thereafter, the appellant herein filed
the execution petition before the District and Sessions
Judge, Faridabad. Respondent No.1 herein filed an
application under section 34 of the Arbitration Act, 1996
for setting aside the arbitral award before the Special
2
Commercial Court, Gurugram. That the appellant herein
submitted an application under section 19 of the MSMED
Act, 2006 directing respondent No. 1 herein – judgment
debtor to deposit 75% of the arbitral award. The learned
Additional District Judge cum Special Commercial Court,
Gurugram allowed the said application moved by the
appellant herein granting six weeks’ time to the
Respondent No.1 herein to deposit 75% of the arbitral
award before the application filed under section 34 of the
Arbitration Act, 1996 could be entertained by the Court.
Feeling aggrieved with the order passed by the Special
Commercial Court, Gurugram directing the judgment
debtor – respondent No. 1 herein to deposit 75% of the
arbitral award and on that condition the petition under
section 34 of the Arbitration Act, 1996 was to be
entertained, which order was passed on considering
section 19 of the Arbitration Act, 1996, respondent No. 1
filed the commercial appeal being FAOCOM/4/2019
before the High Court. By the impugned order, considering
the decision of the Division Bench of the High Court
rendered in CWP No. 23368 of 2015 (M/s Mahesh Kumar
3
Singla and another Vs. Union of India and others), by
which, the Division Bench, while upholding the vires of
section 19 of the MSMED Act, 2006, held that the pre
deposit of 75% of the arbitral award under section 19 of
the MSMED Act, 2006 is directory and not mandatory, has
permitted the proceedings under section 34 of the
Arbitration Act, 1996 to continue without insistence on
making a predeposit of 75% of the awarded amount.
Feeling aggrieved and dissatisfied with the impugned order
passed by the Division Bench of the High Court permitting
the proceedings under section 34 of the Arbitration Act,
1996, to go on without insistence for making predeposit of
75% of the awarded amount, the appellant herein –
original judgment creditor has preferred the present
appeal.
3. We have heard learned counsel appearing on behalf of the
respective parties at length.
4. The question which is posed for consideration of this Court
is, whether, the predeposit of 75% of the awarded amount
4
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, is now no longer res integra in
view of the decision of this Court in the case of 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
5
deposit of 75% of the awarded amount under section 19 of
the MSMED Act, 2006 is a mandatory requirement. In
para 13 of the aforesaid judgment, it is observed and held
as under:
“13. On a plain/fair reading of Section 19 of the
MSME Act, 2006, reproduced hereinabove, at the
time/before entertaining the application for setting
aside the award made under Section 34 of the
Arbitration and Conciliation Act, the appellant
applicant has to deposit 75% of the amount in terms of
the award as a predeposit. The requirement of deposit
of 75% of the amount in terms of the award as a pre
deposit is mandatory. 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 appellantapplicant to deposit 75% of the awarded
amount as a predeposit at a time, the court may allow
the predeposit to be made in instalments.”
5. In view of the aforesaid decision of this Court, the
impugned 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. As observed hereinabove,
while passing the impugned order, the Division Bench of
the High Court has relied upon an earlier decision of the
Division Bench in the case of M/s Mahesh Kumar Singla
6
(supra) which has taken a contrary view. Therefore, the
decision of the Division Bench in the case of
M/s Mahesh
Kumar Singla (supra), which has been relied upon by the
Division Bench of the High Court while passing the
impugned order, is held to be not good law and is
specifically overruled to the extent that it holds that pre
deposit of 75% of the awarded amount under section 19 of
the MSMED Act, 2006, is directory and not a mandatory
requirement.
6. In view of the above discussion and for the reasons stated
above, the present appeal is allowed. The impugned order
passed by the High Court is hereby quashed and set aside.
Respondent No. 1 is directed 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.
It is observed and held that unless and until
respondent No. 1 deposits the 75% of the awarded
amount, its application under section 34 of the Arbitration
7
Act, 1996, challenging the award shall not be entertained
and decided on merits and, in that case, the execution
proceedings may continue. The present appeal is
accordingly allowed. There shall be no order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(B.V. NAGARATHNA)
New Delhi,
April 19, 2022.
8