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TMI Blog2017 (5) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority or Tribunal would have power to grant stay as incidental or ancillary to its appellate jurisdiction subject to there being a strong prima facie case established to the satisfaction of the Appellate Authority that the very purpose of the appeal would be frustrated or rendered nugatory if such stay was not granted. Section 19 of the 2006 Act applies to an application for setting aside any decree, award or order, made either by the Council or any institution or centre providing dispute resolution services to which reference has been made by the Council. Thus, before the application under Section 19 is made, the matter in dispute between the parties as to the amount due, has already been adjudicated by an impartial forum envisaged in the 2006 Act by following the procedure prescribed in the 1996 Act. The application made under Section 19 of the 2006 Act, thus not being a stage of initial adjudication of the dispute consequent on a unilateral determination by one of the parties, unlike in the case of the Section 17(2) under the 2002 Act. The condition incorporated in Section 19 of the 2006 Act that no application for setting aside any decree, award or other order shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Act, 2006 (for short 'the 2006 Act') on the ground that the requirement of deposit of seventy-five per cent of the decretal amount as a pre-condition for entertaining an application/ appeal for setting aside the decree, award or any other order of the Micro and Small Enterprises Facilitation Council (for short 'the Council'), is onerous, oppressive and arbitrary. 3. The petitioner is a partnership firm dealing in the business of supply and fixing of electrical equipment for Electricity Boards of Punjab and other States. 4. Respondent No.3 filed a claim petition against the petitioners before the Council constituted under the 2006 Act for an amount of Rs. 1,37,71,374/- being interest on account of delayed payments in respect of various purchase orders of Three Phase Conventional Type Transformers of different ratings between 13.11.2007 and 5.3.2009. The Council vide its award dated 30.9.2014 allowed the claim petition. Award for an amount of Rs. 2,88,61,758/- along with future interest at three times the bank rate till the date of realization was passed against the petitioners. The petitioners filed CWP No.19189 of 2015 titled as 'M/s Mahesh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal could be entertained before the Debt Recovery Tribunal unless the borrower had deposited seventy-five per cent of the amount claimed in the notice under Section 13(2) thereof. 9. Ld. Counsel for the respondents, on the other hand, argued that the 2006 Act was the culmination of efforts spanning over two decades to introduce a mechanism to ensure timely realization and to protect the payments receivable by the Small Scale Industries. This is reflected in the Statement of Objects and Reasons of the Bill where among the objectives sought to be achieved by this Act are as follows: 2. In view of the above-mentioned circumstances, the Bill aims at facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises and seeks to- xxxxxxxx (f) make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimise the incidence of sickness among and enhancing the competitiveness of such enterprises, in accordance with the guidelines or instructions of the Reserve Bank of India. xxxxxxxxxx (k) make further improvements in the Interest on Delayed Payments to Small Scale and Ancillary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate/ revisional authority to reduce, waive or defer the payment, while some statutes do not contain such a provision. 13. The validity of such statutes has come up for consideration before the Courts on numerous occasions and it has been consistently held that as the right to appeal is a creature of the statute, it can be conditional or qualified. The requirement about the deposit of the amount claimed as a condition precedent to entertainment of an appeal does not nullify the right of appeal and cannot be considered to be unconstitutional. Simultaneously, it has been held that even in the absence of an express provision to that effect, the Appellate Authority or Tribunal would have power to grant stay as incidental or ancillary to its appellate jurisdiction subject to there being a strong prima facie case established to the satisfaction of the Appellate Authority that the very purpose of the appeal would be frustrated or rendered nugatory if such stay was not granted. 14. The case law on the subject was extensively reviewed by a Division Bench of this Court in Punjab State Power Corporation Limited vs. The State of Punjab and others, 2016(2) RCR(Civil) 559, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject matter of appeal. This Court framed the following questions for consideration: (a) Whether the State is empowered to enact Section 62(5) of the PVAT Act? (b) Whether the condition of 25% pre-deposit for hearing first appeal is onerous, harsh, unreasonable and, therefore, violative of Article 14 of the Constitution of India? (c) Whether the first appellate authority in its right to hear appeal has inherent powers to grant interim protection against imposition of such a condition for hearing of appeals on merits? Among the decisions relied on were Govt. of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720 and Har Devi Asnani v. State of Rajasthan, (2011) 14 SCC 160. 16. In P. Laxmi Devi's case, Hon'ble the Supreme Court upheld the validity of Section 47-A of the Stamp Act, 1899, introduced by the Indian Stamp Act (A.P. Amendment Act 8 of 1998), as per which, a party was required to deposit fifty per cent of the deficit stamp duty before a reference could be made to the Collector. The observations of Hon'ble the Supreme Court are as under: 22. In this connection we may also mention that just as the reference under Section 47-A has been made subject to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al could be entertained. The Supreme Court held that the provision did not violate Article 14 of the Constitution. 27. In view of the above, we are clearly of the opinion that Section 47-A of the Stamp Act as amended by A.P. Act 8 of 1998 is constitutionally valid and the judgment of the High Court declaring it unconstitutional is not correct. 17. In Har Devi Asnani's case (supra), the constitutional validity of the proviso to Section 65(1) of the Rajasthan Stamp Act, 1998, which provided that no revision application shall be entertained unless it is accompanied by a satisfactory proof of the payment of fifty per cent of the recoverable amount was in issue. 18. The Hon'ble Court observing that it had been the consistent view that the right of appeal or right of revision is not an absolute right and it is a statutory right which can be circumscribed by the conditions in the the statute, upheld the validity of the provision. It was observed: 22. While coming to the aforesaid conclusions, this Court in P. Laxmi Devi case[(2008) 4 SCC 720] has relied on Anant Mills Co. Ltd. v. State of Gujarat [(1975) 2 SCC 175], Vijay Prakash D. Mehta v. Collector of Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the above enunciation, we proceed to examine Section 62(5) of the PVAT Act. A perusal of sub section (5) of Section 62 of the PVAT Act shows that pre-deposit of twenty five percent of the total amount of tax, interest and penalty is a condition precedent for hearing an appeal before the first appellate authority. Any challenge to the constitutional validity of this provision for pre-deposit before entertaining an appeal on the ground that onerous condition has been imposed and right to appeal has become illusory must be negatived and such a provision cannot be said to be ultra vires Article 14 of the Constitution of India. The object of the provision is to keep in balance the right of appeal conferred upon a person aggrieved with a demand of tax and the right of the revenue to speedy recovery of the tax. It is, thus, concluded that the State is empowered to enact Section 62(5) of the Act and the said provision is legal and valid. The condition of 25% pre-deposit for hearing first appeal is not onerous, harsh, unreasonable and violative of the provisions of Article 14 of the Constitution of India. It was held that the right to appeal is a statutory right and it can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assifying the dues as NPAs without participation/association of the borrower in the process. Such an onerous and oppressive condition should not be left operative in expectation of reasonable exercise of discretion by the authority concerned. Placed in a situation as indicated above, where it may not be possible for the borrower to raise any amount to make the deposit, his secured assets having already been taken possession of or sold, such a rider to approach the Tribunal at the first instance of proceedings, captioned as appeal, renders the remedy illusory and nugatory. xxxxxxxxxx 64. The condition of pre-deposit in the present case is bad rendering the remedy illusory on the grounds that: (i) it is imposed while approaching the adjudicating authority of the first instance, not in appeal, (ii) there is no determination of the amount due as yet, (iii) the secured assets or their management with transferable interest is already taken over and under control of the secured creditor, (iv) no special reason for double security in respect of an amount yet to be determined and settled, (v) 75% of the amount claimed by no means would be a meagre amount, and (vi) it will leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. As per subsection (5) of Section 18, every reference is required to be decided within ninety days from the date of making such reference. 23. As per Section 19, no application for setting aside any decree, award or other order made by the Council or any other institution to which it has been referred shall be entertained by any Court unless the appellant (not being a supplier) has deposited with such Court seventy-five per cent of the amount in terms of the decree, award or the order. 24. The composition of the Council is specified in Section 21 as per which, the Council shall consist of not less than three but not more than five members from among different categories namely; (i) Director of Industries, or any other officer not below the rank of such Director, in the Department of the State Government having administrative control of the Small Scale Industries or micro, small and medium enterprises; and (ii) one or more office bearers or representatives of associations of micro or small industry or enterprises in the State; and (iii) one or more representatives or banks or financial institutions lending to micro or small enterprises; or (iv) one or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. 4. Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. 5. Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference. 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, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference has been made by the Council. Thus, before the application under Section 19 is made, the matter in dispute between the parties as to the amount due, has already been adjudicated by an impartial forum envisaged in the 2006 Act by following the procedure prescribed in the 1996 Act. The application made under Section 19 of the 2006 Act, thus not being a stage of initial adjudication of the dispute consequent on a unilateral determination by one of the parties, unlike in the case of the Section 17(2) under the 2002 Act, the ratio of Mardia Chemicals Ltd's case (supra) is not attracted to this case. 26. Accordingly, we find no merit in the plea of the petitioners that the condition incorporated in Section 19 of the 2006 Act that no application for setting aside any decree, award or other order shall be entertained by any Court unless the appellant (not being a supplier) has deposited seventy- five percent of the amount in terms of the decree, award etc. is arbitrary, illegal and unconstitutional. 27. Regarding the question as to whether the requirement of predeposit for entertaining the appeal, is a mandatory requirement or it should be read as directory, with an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the departmental authorities on an assessee during the pendency of an appeal before it. After considering the matter, the Apex court held that the Appellate Tribunal has power to grant stay as incidental or ancillary to its appellate jurisdiction subject to there being a strong prima facie case and satisfaction that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal. ... xxx xxx xxx 30. Adverting to the second facet of the argument as to whether a statute is mandatory or directory, the same depends upon the intent of the legislature and not upon the language in which the intent is clothed. The issue has been considered by a Full Bench of this Court in CIT vs. Punjab Financial Corporation, (2002) 254 ITR 6 wherein it was noticed that the meaning and intention of the legislature must govern and these are to be ascertained not only from the phraseology of the provision but also by considering its nature, design and the consequences which would follow from construing it one way or the other. The use of the word shall in a statutory provision, though generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to those parts of the statute which contain machinery provisions--CIT v. National Taj Traders [1980] 121 ITR 535 (SC) (headnote). xxx xxx xxx 32. Before we record our conclusion on question No.(c), noticed hereinbefore, it would also be apposite to refer to a five Judges Full Bench of this Court in Ranjit Singh vs. State of Haryana and others, (2012) 2 RCR (Civil) 353 to which one of us (Ajay Kumar Mittal,J.) was a member which was dealing with similar provision i.e. Section 13B of the Punjab Village Common Lands (Regulation) 1961 wherein entertainment of appeal was subject to deposit of amount of penalty imposed under sub section (2) of Section 7 of the said Act with the Collector. This court after considering the entire case law on the point and by reading down the provision held that Section 13B of the said Act would be read down to incorporate within it the power in appellate authority to grant interim relief in an appropriate case by passing a speaking order even while normally insistence may be made on pre-deposit of the penalty. In such a case, the appellate authority would have to give reasons for granting interim relief of stay. 33. It is, thus, conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 titled as 'Maruti Suzuki India Limited versus Union of India and others' decided on October 27, 2016 had repelled the plea for quashing Section 45-AA of the Employees State Insurance Act, 1948 in so far as it imposes a condition of pre-deposit of twenty-five per cent of the demanded amount for entertaining the appeal on the ground of being unconstitutional. But it was held that the requirement of pre-deposit under Section 45-AA is not mandatory and the Appellate Authority is empowered to waive, either partially or completely, the requirement of pre-deposit in the same circumstances and conditions as explained in detail in the Punjab State Power Corporation Ltd.'s case (supra). 30. Goodyear India Ltd.'s case (supra) relied on by the Ld. Counsel for the respondents is of no help to them as in that case neither the vires of the Section 19 of the 2006 Act was questioned nor any argument based on the inherent power of the Court was raised as is clear from the following observations: 9. Of course, Mr. Ramachandran has submitted that no attempt has been made by the petitioner herein to challenge the vires of Section 19 of the 2006 Act. Mr. Ramachandran submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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