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2016 (11) TMI 1541 - HC - Indian LawsWhether mere filing of execution under Section 34 of the Act of 1996 for setting aside the award passed under the Act of 2006, the execution filed under Section 36 of the Act of 1996 would stand suspended or Section 19 of the Act of 2006 would prevail over the Act of 1996 and 75% of the deposit under Section 19 of the Act of 2006 is mandatory to make an application under Section 34 of the Act of 1996 maintainable? - Held that - the application u/s 34 of the Act of 1996 would be maintainable for setting aside the award passed by the Micro and Small Enterprises Facilitation Council constituted under Section 20 of the Act of 2006 but while filing an application, the appellant has to deposit 75% of the amount in terms of the award in the manner indicated by such court and as such, the application under Section 34 of the Act of 1996 challenging the award passed by the Facilitation Council has to be read along with Section 19 of the Act of 2006 and in order to make the application under Section 34 of the Act of 1996 maintainable and duly constituted, a mandatory deposit of 75% of awarded amount has to be made in the manner directed by the court trying that application. In the present case, the award was passed by the Facilitation Council on 12-3-2014, the respondent herein filed application for execution of award on 21-8-2014 and thereafter on 19-2-2015, application under Section 34 of the Act of 1996 was filed by the petitioner for setting aside the award in which the respondent herein objected that compliance of mandatory provision of Section 19 of the Act of 2006 has not been made therefore application u/s 34 of the Act of 1996 cannot be maintained - The trial Court has already held that the petitioner s application u/s 34 of the Act of 1996 is not maintainable for want of prerequisite deposit u/s 19 of the Act of 2006 as such, the award is clearly executable, as the petitioner s application u/s 34 of the Act of 1996 is not duly constituted and not liable to be entertained, and rightly held so by the trial Court and the petitioner s application has rightly been rejected by the trial Court. Whether in view of the objection filed u/s 22(3) of the SIC Act by the petitioner, the executing court has no jurisdiction to execute the award? - Held that - the petitioner s plea in regard to applicability of the SIC Act is not complete in itself, rather halfhearted, it has neither been established that the awarded amount has been included in the scheme approved by the BIFR nor it has been shown how the civil court has jurisdiction in view of Section 26 of the SIC Act - the learned executing court is absolutely justified in rejecting the objections raised by the petitioner herein in execution and no error of jurisdiction has been committed while rejecting those objections raised by way of applications. Petition dismissed.
Issues Involved:
1. Whether the execution of the award is suspended automatically upon filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 without the mandatory deposit under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006. 2. Whether the execution of the award is barred under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 due to the petitioner company's status as a sick industry. Issue-wise Detailed Analysis: Re. Question No. 1 The court examined the interplay between the Micro, Small and Medium Enterprises Development Act, 2006 (Act of 2006) and the Arbitration and Conciliation Act, 1996 (Act of 1996). The Act of 2006 mandates a 75% deposit of the award amount for any application to set aside an award under Section 34 of the Act of 1996 to be maintainable. This requirement is underscored by Section 19 of the Act of 2006, which states: "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 percent 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." The court highlighted that this deposit is mandatory and the court has the discretion only regarding the manner of deposit, which can be in installments if required. The Supreme Court's rulings in Snehadeep Structures Private Limited v. Maharashtra Small-Scale Industries Development Corporation Limited and Goodyear India Limited v. Norton Intech Rubbers Private Limited and another were cited, emphasizing that the deposit is a condition precedent for maintaining an application under Section 34 of the Act of 1996. Section 24 of the Act of 2006, a non obstante clause, gives the provisions of Sections 15 to 23 overriding effect over any other inconsistent law. Thus, the Act of 2006 prevails over the Act of 1996 in cases involving disputes under the former. Consequently, the application under Section 34 of the Act of 1996 challenging the award passed by the Facilitation Council must comply with the mandatory deposit requirement under Section 19 of the Act of 2006. The trial court's decision to reject the application for non-compliance with this requirement was upheld. Re. Question No. 2 The petitioner argued that the execution of the award is barred under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SIC Act) due to the company's status as a sick industry. The court referred to the Supreme Court's decision in Jay Engineering Works Ltd. v. Industry Facilitation Council and another, which held that Section 22 of the SIC Act applies once the awarded amount is included in the scheme approved by the Board. However, the petitioner failed to demonstrate that the awarded amount was included in any scheme approved by the Board for Industrial and Financial Reconstruction (BIFR). The court emphasized that the SIC Act is a self-contained code, and the jurisdiction of civil courts is expressly excluded under Section 26 of the SIC Act, as affirmed in Ghanshyam Sarda v. Shiv Shankar Trading Company and others. Given the petitioner's failure to substantiate the inclusion of the awarded amount in a BIFR-approved scheme, the court found the objection under the SIC Act to be incomplete and unsubstantiated. Therefore, the trial court's decision to reject the petitioner's objections in execution was deemed justified. Conclusion The court concluded that the execution of the award is not automatically suspended upon filing an application under Section 34 of the Act of 1996 without the mandatory deposit under Section 19 of the Act of 2006. Additionally, the execution of the award is not barred under the SIC Act due to the petitioner's failure to demonstrate the inclusion of the awarded amount in a BIFR-approved scheme. The writ petition was dismissed, affirming the trial court's decisions.
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