Gujarat State Disaster Management Authority vs M/s Aska Equipments Ltd

Manoj K. Tiwari, J

Gujarat State Disaster Management Authority has filed this petition challenging the order dated 22.08.2019 passed by learned Additional District Judge (Commercial), Dehradun in Miscellaneous Case No. 150 of 2019, whereby petitioner was granted last opportunity till 23.09.2019 to deposit 75% of the awarded amount in terms of Section 19 of Micro, Small and Medium Enterprises Development Act, 2006 with the stipulation that in case of failure to deposit 75% amount within the given time, the Misc. Case filed by the petitioner shall be dismissed at the admission stage.

M/s Aska Equipments Ltd. (respondent herein) is a small enterprise and is entitled to benefit of Micro, Small and Medium Enterprises Development Act, 2006. Respondent comes within the definition of supplier as given in Section 2 (n) of the aforesaid Act. Petitioner had placed orders for supply of certain goods with the respondent and respondent had supplied goods pursuant to such orders. Some dispute arose between them regarding payment for goods supplied, which was taken by the respondent to Facilitation Council under Section 18 of the aforesaid Act. The Facilitation Council, after issuing notice to the petitioner, decided the claim in favour of the respondent vide award dated 10.11.2017 and directed the petitioner to pay a sum of Rs. 10,50,53,387/- to the respondent.

Feeling aggrieved by the said award, petitioner filed an application dated 08.01.2018 under Section 34 of Arbitration and Conciliation Act, 1996 read with Section 19 of MSME Act, 2006 for setting aside the award. Learned Additional District Judge (Commercial), Dehradun granted several opportunities to the petitioner to deposit 75% of the amount awarded by the Arbitrator. Since petitioner did not deposit 75% of the amount in terms of Section 19 of MSME Act, 2006, therefore, vide order dated 22.08.2019, learned Additional District Judge (Commercial), Dehradun granted a month's time, as last opportunity, to the petitioner to deposit the said amount. Feeling aggrieved by the said order, petitioner has approached this Court.

Heard learned counsel for the parties and perused the record.

Section 19 of MSME Act, 2006, which is relevant for the present case, is extracted below:-

"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, shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or; as the case may be, the other order in the manner directed by such court:

Provided that pending disposal of the application to set aside the decree, award or order, the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose."

A plain reading of Section 19 of MSME Act, 2006 indicates that an application for setting aside an award made under Section 34 of Arbitration and Conciliation Act cannot be entertained by any court, unless the applicant has deposited with it 75% of the amount in terms of the award.

Hon'ble Supreme Court in the case of Goodyear India Ltd. Vs Norton Intech Rubbers Pvt. Ltd. & another reported in (2012) 6 SCC 345 has held that court has no discretion to either waive or reduce the amount of 75% of award as a predeposit for filing of the appeal. Paras 10 and 11 of the said judgment are extracted below:-

"10. In his submissions, Mr. Ramachandran has referred to the various decisions, all of which, however, are in the context of enactments in which discretion has been left to the appellate body to either waive or reduce the amount of predeposit, which factor is absent in the present case. In support of his contention, however, he referred to and relied upon the decision of this Court in Snehadeep Structures (P) Ltd. v. Maharashtra Small-Scale Industries Development Corpn. Ltd. wherein while considering the question as to whether an application under Section 34 of the Arbitration and Conciliation Act, 1996, could be treated to be an appeal, a question incidentally arose as to whether if the same was to be treated as an appeal, would it be necessary to comply with the provisions of Section 19 of the 2006 Act. Their Lordships observed that the provision, no doubt, requires predeposit to be made before an application under Section 34 of the Arbitration Act is filed, but that they were not inclined to read that provision into the provision in question. The facts of the said case are different from the facts of this case and it would be difficult to import the ratio of the decision in the above case into the facts of this case.

Having considered the submissions made, both on behalf of the petitioner and on behalf of the respondents, we do not see any reason to interfere with the views expressed, both by the learned Single Judge, as also the Division Bench with regard to Section 19 of the 2006 Act. It may not be out of place to mention that the provisions of Section 19 of the 2006 Act, had been challenged before the Kerala High Court in Kerala SRTC v. Union of India, where the same submissions were negated and, subsequently, the matter also came up to this Court, when the special leave petitions were dismissed, with leave to make the predeposit in the cases involved, within an extended period of ten weeks. We may also indicate that the expression "in the manner directed by such court" would, in our view, indicate the discretion given to the court to allow the predeposit to be made, if felt necessary, in instalments."

Learned counsel for the petitioner submits that the award given by the Facilitation Council is without jurisdiction and nullity, as the respondent has admitted in his claim filed before the Facilitation Council that he had not supplied certain goods, therefore, the Facilitation Council could not have entertained the dispute in view of Sections 15 & 17 of MSME Act, 2006.

The question whether the award given by Facilitation Council is a nullity or not cannot be gone into at this stage. This aspect can be dealt with only by learned Additional District Judge (Commercial), Dehradun in proceedings under Section 34 of Arbitration and Conciliation Act read with Section 19 of MSME Act, 2006. The condition of deposit of 75% of the amount awarded is not relaxable although the District Judge may permit the same to be deposited in installments in appropriate cases. Since every person, other than the supplier, who intends to challenge the award given by Facilitation Council under Section 18 of the Act is required to deposit 75% of the awarded amount, therefore, learned Additional District Judge was justified in directing the petitioner to deposit the amount in terms of Section 19 of the Act. Thus, there is no scope for interference with the impugned order.

Consequently, the writ petition fails and is dismissed.

After the judgment was dictated, learned counsel for the petitioner submitted that time given by Additional District Judge (Commercial), Dehradun for depositing 75% of the amount may be extended for further twelve weeks. Sri S.K. Jain, learned Senior Advocate appearing for the respondent submits that he will have no objection if further eight weeks are given to petitioner for depositing the amount.

In such view of the matter, further eight weeks' time is granted to the petitioner to deposit 75% of the awarded amount. It is made clear that no further time shall be granted to the petitioner for the purpose.