S.19 MSME Act | Court Should Determine Whether Pre-Deposit Amount Is Actually Deposited By Appellant: Himachal Pradesh High Court

The Himachal Pradesh High Court on Monday directed the District Court, which stayed the execution of an arbitral award in exercise of its power under Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), to first determine whether Section 19 of the Act was complied with.

The provision requires the party challenging the award to make a pre-deposit to the tune of 75% of the award.

Justice Joytsna Rewal Dua said the District Court must see whether the pre-deposit amount is actually deposited.

"Learned District Judge in his impugned order has not discussed as to whether the amount actually deposited by the respondent satisfied the condition of deposit of 75% of the awarded amount or not. The impugned order simply stated that as per record, the respondent had deposited 75% of the awarded amount."

The case arose from an award issued by an arbitrator on October 30, 2021. The appellant (respondent herein) filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, and concurrently filed an application invoking Section 19 of the MSME Act, seeking a stay on the implementation and execution of the award.

The appellant claimed to have deposited 75% of the total awarded amount, asserting compliance with Section 19. However, the respondent (petitioner herein) contested this claim, arguing that the respondent's deposit fell short of the required 75%.

The District Judge after hearing the parties disposed of the application in favour of the respondent, observing “as per the record, the applicant has deposited 75% of the award amount in compliance of the said provision.”

The respondent challenged this decision, emphasizing that the court could not assume the adequacy of the deposit without proper examination.

The High Court noted that as per the present petitioner, the respondent had deposited an amount of Rs.3618716/- whereas it was required to deposit an amount of Rs.47,94,688/-.

In light of such conflicting claims, it set aside the impugned order and directed the District Court to re-examine the application under Section 19, taking into account the actual deposit made by the respondent.

Case Title: M/s Pratap Industries Products Vs

M/s Hindustan Construction Company Ltd

Citation: 2023 LiveLaw (HP) 45

Click Here To Read/Download Judgment