2021 (10) TMI 480 - SC - Indian Laws

Requirement of pre-deposit - Direction to deposit 75% of the awarded amount in terms of Section 19 of Micro, Small and Medium Enterprises Development Act, 2006 - question of law or question of fact - HELD THAT - On a plain/fair reading of Section 19 of the MSME Act, 2006 at the time/before entertaining the application for setting aside the award made under Section 34 of the Arbitration Conciliation Act, the applicant/appellant has to deposit 75% of the amount in terms of the award as a pre-deposit. 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 appellant/applicant to deposit 75% of the awarded amount as a predeposit at a time, the court may allow the pre-deposit to be made in instalments. Considering the language used in Section 19 of the MSME Act, 2006 and the object and purpose of providing deposit of 75% of the awarded amount as a pre-deposit while preferring the application/appeal for setting aside the award, it has to be held that the requirement of deposit of 75% of the awarded amount as a predeposit is mandatory. Therefore, as such, both the High Court as well as the learned Additional District Judge (Commercial), Dehradun were justified in directing the appellant to deposit 75% of the awarded amount as a pre-deposit. The question posed is answered against the appellant.

Summary

Issues:
1. Interpretation of Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 regarding pre-deposit requirements in appeals under Section 34 of the Arbitration & Conciliation Act, 1996.

Analysis:
The judgment deals with the interpretation of Section 19 of the MSME Act, 2006 concerning the mandatory pre-deposit of 75% of the awarded amount in appeals under Section 34 of the Arbitration & Conciliation Act, 1996. The appellant, dissatisfied with the High Court's decision to uphold the pre-deposit requirement, appealed to the Supreme Court.

The Court observed that Section 19 of the MSME Act, 2006 mandates the appellant to deposit 75% of the awarded amount as a pre-deposit before entertaining an application for setting aside the award under Section 34 of the Arbitration Act. The provision is considered mandatory, but the appellate court may allow the pre-deposit to be made in instalments if undue hardship is shown.

Referring to the case of Goodyear India Limited, the Court emphasized that the requirement of depositing 75% of the awarded amount as a pre-deposit is mandatory, with no discretion for the appellate court to deviate from this mandate. The Court highlighted that the provision allows the court to permit the pre-deposit to be made in instalments in cases of demonstrated hardship.

In light of the above interpretation and the specific circumstances of the case, where the appellant had already deposited a partial amount as per the Court's order, the Court decided to continue with the interim arrangement until the final disposal of the appeal/application under Section 34 of the Arbitration Act. The Court directed the lower court to proceed with the appeal and pronounced the order on the scheduled date.

In conclusion, the Court answered the question against the appellant, affirming the mandatory nature of the pre-deposit requirement under Section 19 of the MSME Act, 2006. The judgment laid down the law on this issue, maintaining the interim arrangement until the final disposal of the appeal/application, which was not to be treated as a precedent for future cases.