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The requirement of deposit of 75% of the amount in terms of the award as a pre-deposit is mandatory: Supreme Court

The Hon’ble Court answered the question posed, 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, through the learned bench lead by Justice M.R Shah in the case of Gujarat State Disaster Management Authority v. M/s Aska Equipments Limited (CIVIL APPEAL NO. 6252 OF 2021)

The brief facts of the case are that a dispute arose between the parties regarding payment of goods which was taken by the appellant. The Facilitation Council passed an award dated 10.11.2017 in favour of the respondent herein and directed the appellant to pay a sum of Rs. 105,053,387/-. Feeling aggrieved by the said award, the appellant preferred an application before the learned Additional District Judge (Commercial), Dehradun under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006. As per which the appellant was required to deposit 75% of the amount awarded by the arbitrator. Feeling aggrieved by the said order, the appellant herein preferred, writ petition before the High Court. By the impugned judgment and order, the High Court has dismissed the said writ petition. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, the appellant herein – original applicant preferred the present appeal.

Shri Ajay Kumar, learned Advocate appearing on behalf of the appellant has submitted that in the present case while issuing notice on 23.10.2019, this Court directed the appellant to deposit a sum of Rs.2,50,00,000/- before the appellate authority and on such deposit the learned appellate Court was directed to take up the appeal on file and proceed with the same. Pursuant to the said order, the appellant has deposited the said amount and thereafter the learned appellate authority has heard the appeal/application. Therefore, it is prayed to dispose of the present appeal.

Learned Advocate appearing on behalf of the respondent has submitted that, as such, it is mandatory to deposit 75% of the awarded amount as a pre-deposit at the time when the appeal/application under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 is preferred. What is directed to deposit vide ex-parte order dated 23.10.2019 is not even 25% of the amount awarded. It is submitted that the question involved in the present appeal is a pure question of law and therefore the same maybe decided by this Court even for future guidance.

After hearing the learned counsel for the respective parties at length, a plain reading of Section 19 of the MSME Act, 2006 and referring to the case of Goodyear India Limited v. Norton Intech Rubbers Private Limited, (2012) 6 SCC 345 the Hon’ble Court held, “The requirement of deposit of 75% of the awarded amount as a pre deposit is mandatory. Therefore, as such, both the High Court as well as the learned Additional District Judge (Commercial), Dehradun were justified in their respective decision. The question posed is answered against the appellant in terms of the above and we dispose of the appeal laying down the law in terms of the above, however, as observed hereinabove, continue with the interim arrangement as per order dated 23.10.2019 till final 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.”

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Judgment reviewed by Vandana Ragwani

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