GUJARAT STATE DISASTER MANAGEMENT AUTHORITY versus M/S ASKA EQUIPMENTS LIMITED on 8 October 2021

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 26.09.2019 passed by the High Court of Uttarakhand atNainital in Writ Petition (MS) No. 2708/2019, by which the High Courthas dismissed the said writ petition and has confirmed the order passedby the learned Additional District Judge (Commercial), Dehradun inMiscellaneous Application No. 150 of 2018, whereby the appellant hereinwas directed to deposit 75% of the awarded amount in terms of Section19 of Micro, Small and Medium Enterprises Development Act, 2006(hereinafter referred to as the ‘MSME Act, 2006’), the appellant herein– original appellant/applicant has preferred the present appeal.

2. That the parties are governed by the provisions of the MSMEAct, 2006. A dispute arose between the parties regarding payment ofgoods which was taken by the appellant. The proceedings under Section A

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A18 of the MSME Act, 2006 commenced. The Facilitation Council passedan award dated 10.11.2017 in favour of the respondent herein and directedthe appellant to pay a sum of Rs. 105,053,387/- (Rs. Ten crores FiftyLakhs Fifty Three Thousand Three Hundred and Eighty Seven only).

3. Feeling aggrieved by the said award, the appellant preferred anBapplication before the learned Additional District Judge (Commercial),Dehradun under Section 34 of the Arbitration & Conciliation Act, 1996read with Section 19 of the MSME Act, 2006. As per Section 19 of theMSME Act, 2006, the appellant was required to deposit 75% of theamount awarded by the arbitrator. Several opportunities were given tothe appellant to deposit 75% of the awarded amount. An application forCwaiver of pre-deposit was preferred which came to be dismissed. Thatthereafter vide order dated 22.08.2019, the learned Additional DistrictJudge (Commercial), Dehradun granted a month’s time, as a lastopportunity, to the appellant to deposit the said amount.

4. Feeling aggrieved by the said order, the appellant hereinDpreferred writ petition before the High Court. By the impugned judgmentand order, the High Court has dismissed the said writ petition. Evenwhile dismissing the writ petition, the High Court granted further eightweeks’ time to the appellant to deposit 75% of the awarded amount.

5. Feeling aggrieved and dissatisfied with the impugned judgmentEand order passed by the High Court, the appellant herein – originalapplicant has preferred the present appeal.

6. Today, when the present appeal is taken up for further hearing,Shri Ajay Kumar, learned Advocate appearing on behalf of the appellanthas submitted that in the present case while issuing notice on 23.10.2019,Fthis Court directed the appellant to deposit a sum of Rs.2,50,00,000/-(Rs. Two crores Fifty lakhs) before the appellate authority and on suchdeposit the learned appellate Court was directed to take up the appealon file and proceed with the same. It is stated that pursuant to the saidorder, the appellant has deposited a sum of Rs. 2,50,00,000/- (Rs. TwoGCrores Fifty Lakhs) and thereafter the learned appellate authority -Additional District Judge (Commercial), Dehradun has heard the appeal/application under Section 34 of the Arbitration & Conciliation Act, 1996read with Section 19 of the MSME Act, 2006 and the order is to bepronounced on 12.10.2021. Therefore, it is prayed to dispose of thepresent appeal.H

7. Learned Advocate appearing on behalf of the respondent hassubmitted that, as such, it is mandatory to deposit 75% of the awardedamount as a pre-deposit at the time when the appeal/application underSection 34 of the Arbitration & Conciliation Act, 1996 read with Section19 of the MSME Act, 2006 is preferred. It is submitted that what isdirected to deposit vide ex-parte order dated 23.10.2019 is not even25% of the amount awarded. It is submitted that the question involvedin the present appeal is a pure question of law and therefore the samemay be decided by this Court even for future guidance.

7.1 Learned counsel for the respondent has further submitted that,as such, the issue involved in the present case is squarely covered againstthe appellant in view of the decision of this Court in the case of GoodyearIndia Limited v. Norton Intech Rubbers Private Limited, (2012) 6SCC 345. It is submitted that the very provision of MSME Act, 2006 –Section 19 has been interpreted by this Court and it is observed and heldthat requirement of deposit of 75% as a pre-deposit is mandatory. It issubmitted that even the expression “in the manner directed by such court”in Section 19 has been interpreted by this Court and it is held that theexpression “in the manner directed by such court” would indicate thediscretion given to the Court to allow the pre-deposit to be made, if feltnecessary, in instalments. It is submitted that otherwise the deposit of75% as a pre-deposit is mandatory and the appellate court would haveno discretion at all to deviate from the mandate under Section 19 of theMSME Act, 2006.

8. Learned counsel appearing on behalf of the appellant is not in aposition to show any contrary decision to the decision of this Court in thecase of Goodyear India Limited (supra). He is also not in a position tosatisfy whether the appellate court would have any discretion to deviatefrom the requirement of deposit of 75% as a pre-deposit while preferringthe appeal/application under Section 34 of the Arbitration & ConciliationAct read with Section 19 of the MSME Act, 2006.

9. We have heard the learned counsel for the respective partiesat length.

The short question posed for the consideration of this Court is,whether in an appeal/application filed under Section 34 of the Arbitration& Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006,the appellate court would have any discretion to deviate from deposit of75% of the awarded amount as a pre-deposit?

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9.1 Section 19 of the MSME Act, 2006 reads as under:

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“19. Application for setting aside decree, award or order – Noapplication for setting aside any decree, award or other ordermade either by the Council itself or by any institution or centreproviding alternate dispute resolution services to which a referenceBis made by the Council, shall be entertained by any court unlessthe appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, awardor, as the case may be, the other order in the mannerdirected by such court:

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Provided that pending disposal of the application to set aside thedecree, award or order, the court shall order that such percentageof the amount deposited shall be paid to the supplier, as it considersreasonable under the circumstances of the case, subject to suchconditions as it deems necessary to impose.”

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(bold words are ours)

9.2 On a plain/fair reading of Section 19 of the MSME Act, 2006,reproduced hereinabove, at the time/before entertaining the applicationfor setting aside the award made under Section 34 of the Arbitration &Conciliation Act, the applicant/appellant has to deposit 75% of the amountEin terms of the award as a pre-deposit. The requirement of deposit of75% of the amount in terms of the award as a pre-deposit is mandatory.However, at the same time, considering the hardship which may beprojected before the appellate court and if the appellate court is satisfiedthat there shall be undue hardship caused to the appellant/applicant toFdeposit 75% of the awarded amount as a pre-deposit at a time, the courtmay allow the pre-deposit to be made in instalments.

10. An identical question came to be considered by this Court inthe case of Goodyear India Limited (supra). In paragraphs 10 & 11,this Court observed and held as under:

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“10. In his submissions, Mr Ramachandran has referred to thevarious decisions, all of which, however, are in the context ofenactments in which discretion has been left to the appellate bodyto either waive or reduce the amount of pre-deposit, which factoris absent in the present case. In support of his contention, however,he referred to and relied upon the decision of this Court H

GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v. M/SASKA EQUIPMENTS LTD. [M. R. SHAH, J.]

in Snehadeep Structures (P) Ltd. v. Maharashtra Small-ScaleIndustries Development Corpn. Ltd. (2010) 3 SCC 34 whereinwhile considering the question as to whether an application underSection 34 of the Arbitration and Conciliation Act, 1996, could betreated to be an appeal, a question incidentally arose as to whetherif the same was to be treated as an appeal, would it be necessaryto comply with the provisions of Section 19 of the 2006 Act. TheirLordships observed that the provision, no doubt, requires pre-depositto be made before an application under Section 34 of theArbitration Act is filed, but that they were not inclined to read thatprovision into the provision in question. The facts of the said caseare different from the facts of this case and it would be difficult toimport the ratio of the decision in the above case into the facts ofthis case.

11. Having considered the submissions made, both on behalf ofthe petitioner and on behalf of the respondents, we do not see anyreason to interfere with the views expressed, both by the learnedSingle Judge, as also the Division Bench with regard to Section19 of the 2006 Act. It may not be out of place to mention that theprovisions of Section 19 of the 2006 Act, had been challengedbefore the Kerala High Court in Kerala SRTC v. Union ofIndia [(2010) 1 KLT 65], where the same submissions werenegated and, subsequently, the matter also came up to this Court,when the special leave petitions were dismissed, with leave tomake the pre-deposit in the cases involved, within an extendedperiod of ten weeks. We may also indicate that the expression “inthe manner directed by such court” would, in our view, indicatethe discretion given to the court to allow the pre-deposit to bemade, if felt necessary, in instalments.”

11. In view of the above and considering the language used inSection 19 of the MSME Act, 2006 and the object and purpose ofproviding deposit of 75% of the awarded amount as a pre-deposit whilepreferring the application/appeal for setting aside the award, it has to beheld that the requirement of deposit of 75% of the awarded amount as apre-deposit is mandatory. Therefore, as such, both the High Court aswell as the learned Additional District Judge (Commercial), Dehradunwere justified in directing the appellant to deposit 75% of the awardedamount as a pre-deposit.

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AHowever, at the same time, considering the fact that while issuingnotice in the present proceedings on 23.10.2019, this Court passed thefollowing order:

“Permission to file the special leave petition is granted.

In an appeal filed by the petitioner-Gujarat State DisasterBManagement Authority, a Public Sector Undertaking of the Stateof Gujarat, challenging the award passed under the Micro, Smalland Medium Enterprises Development Act, 2006 by the FacilitationCouncil, pursuant to Section 19 of the said Act the petitioner-Authority was directed to deposit 75% of the Award amount asCconditional pre-deposit for taking the appeal on file.

Being aggrieved by the direction for pre-deposit of the amountthe petitioner-Authority has preferred this special leave petition.

Issues

We have heard Mr. Huzefa Ahmadi, learned senior counselappearing for the petitioner-Authority, who has submitted that theDentire amount payable to the respondent-supplier has already beenpaid to the respondent-supplier and hence there is no necessity tomake pre-deposit for filing the appeal. Arguments advanced bylearned senior counsel is on the merit of the matter.

Having regard to the facts and circumstances and consideringEthe fact that the petitioner-Authority is a Public Sector Undertaking,in exercise of the discretion vested with the court under Sectionof the said Act, we direct the petitioner-Authority to depositRs.2,50,00,000/- before the Appellate Authority within a period offour weeks from today. On such deposit, the District and SessionsFJudge, Dehradun, is directed to take up the appeal on file andproceed with the same.

Issue notice to the respondent.

On deposit of Rs.2,50,00,000/- (Rupees Two Crore Fifty Lakhs),the same shall be invested in a fixed deposit in a nationalised bankGfor a period of three months with auto renewal so that it mayenure to the benefit of the successful party and the disbursementof the same shall await further orders from this Court.”

and directed the appellant to deposit Rs. 2,50,00,000/- (RupeesTwo Crores Fifty Lakhs) and on such deposit the District and SessionsHJudge, Dehradun was directed to take up the appeal on file and proceed GUJARAT STATE DISASTER MANAGEMENT AUTHORITY v. M/SASKA EQUIPMENTS LTD. [M. R. SHAH, J.]

with the same. It is reported that by now the application/appeal has beenheard and the order is to be pronounced on 12.10.2021, we continuewith the arrangement as per order dated 23.10.2019 in the appeal/application under Section 34 of the Arbitration & Conciliation Act isfinally decided and disposed of. We hope and trust that the learnedAdditional District Judge (Commercial), Dehradun shall pronounce theorder at the earliest and more particularly on 12.10.2021, the date onwhich order is to be pronounced, as reported.

12. With the aforesaid, the question posed is answered againstthe appellant in terms of the above and we dispose of the appeal layingdown the law in terms of the above, however, as observed hereinabove,continue with the interim arrangement as per order dated 23.10.2019 tillfinal disposal of the appeal/application under Section 34 of the Arbitration& Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006,which shall not be treated as a precedent.

Divya Pandey

Appeal disposed of.

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