On Tuesday, The Himachal Pradesh High Court passed a judgment disposing of the order passed by the lower court. The bench comprising Justice Jyotsna Rewal Dua decided on the issue of whether “the deposit made by the respondent before the learned District Judge aligned with the requirement of Section 19 of the Act or not”. Answering in negative, the court noted that the requirement is not met and therefore the case is disposed of. Along with the disposal, the court also stayed the execution of the impugned order dated 30th Oct 2021. The court, inter alia, held that the requirement of Section 19 of the Micro, Small and Medium Enterprise Development Act, 2006 is a mandatory requirement. And the court must ascertain whether the parties have complied with the requirement of a 75% deposit.
In furtherance to this, the court also cited the case of M/s Tirupati Steels v. M/s Shubh Industrial Component & Ors. Where the apex court had held that the deposit of 75% of the award is a mandatory condition under section 18 of the MSME Act. Further, the court also noted, in that case, that the submission of such an amount can cause hardship. And observed that the court may permit the pre-deposit to be made in instalments if the court determines that doing so will not put the appellant or applicant through undue hardship. This determination will be made after taking into account any hardship that may be projected before the appellate court.
The court further noted that The challenged ruling, issued by the court, allowing the arbitration proceedings under Section 34 of the 1996 Arbitration Act to proceed without requiring a pre-deposit of 75% of the awarded amount is unjustifiable and should be reversed.
Background
Originally, the case is based on an arbitral award passed on 30th Oct 2021. To this award, an objection was preferred under Section 34 of the Arbitration Act and Section 19 of the MSMEAct. The proceedings were instituted to stay the execution of the award. Section 19 of the MSME Act provides for a requirement that before entertaining any application for setting aside an order or award, it is required that the appellant has deposited 75% amount of the decree or award.
To this requirement, the petitioner had asserted that the amount has been deposited and the same was contested by the respondents. Overlooking such a mandatory requirement, the district judge passed an order without ascertaining whether the amount had action been deposited or not. The order mentioned that “as per record, the respondent has deposited 75% of the awarded amount”.
Judgment
Aggrieved by the order, the respondents approached the high court claiming that the district judge passed an order without deciding whether the amount has been deposed or not. Noting, the amount deposited and ascertaining the requirement of the deposit, the bench observed that the impugned order has not discussed whether the amount has been deposited. Therefore, the matter is relegated to the district judge for a fresh decision under Section 19 of the MSME Act.
Along with the order the district judge Shimla was directed to decide the application afresh and follow the law. Further, the respondents were directed not to execute the award till the decision has been rendered.
