Gujarat State Disaster … vs M/S Aska Equipments Ltd. on 8 October, 2021


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Supreme Court of India

Gujarat State Disaster … vs M/S Aska Equipments Ltd. on 8 October, 2021

Author: M.R. Shah

Bench: M.R. Shah, A.S. Bopanna

                                                              REPORTABLE
                                   IN THE SUPREME COURT OF INDIA
                                   CIVIL APPELLATE JURISDICTION
                                   CIVIL APPEAL NO. 6252 OF 2021


         Gujarat State Disaster Management
         Authority                                                 …Appellant

                                        Versus

         M/s Aska Equipments Limited                               …Respondent




                                              JUDGMENT

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment

and order dated 26.09.2019 passed by the High Court of Uttarakhand at

Nainital in Writ Petition (MS) No. 2708/2019, by which the High Court

has dismissed the said writ petition and has confirmed the order passed

by the learned Additional District Judge (Commercial), Dehradun in

Miscellaneous Application No. 150 of 2018, whereby the appellant

herein was directed to deposit 75% of the awarded amount in terms of
Signature Not Verified

Digitally signed by R
Natarajan

Section 19 of Micro, Small and Medium Enterprises Development Act,
Date: 2021.10.08
16:36:43 IST
Reason:

1
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 MSME Act,

2006. A dispute arose between the parties regarding payment of goods

which was taken by the appellant. The proceedings under Section 18 of

the MSME Act, 2006 commenced. 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/- (Rs. Ten crores Fifty

Lakhs Fifty Three Thousand Three Hundred and Eighty Seven only).

3. 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 Section 19 of the

MSME Act, 2006, the appellant was required to deposit 75% of the

amount awarded by the arbitrator. Several opportunities were given to

the appellant to deposit 75% of the awarded amount. An application for

waiver of pre-deposit was preferred which came to be dismissed. That

thereafter vide order dated 22.08.2019, the learned Additional District

Judge (Commercial), Dehradun granted a month’s time, as a last

opportunity, to the appellant to deposit the said amount.

4. Feeling aggrieved by the said order, the appellant herein preferred

writ petition before the High Court. By the impugned judgment and

2
order, the High Court has dismissed the said writ petition. Even while

dismissing the writ petition, the High Court granted further eight weeks’

time to the appellant to deposit 75% of the awarded amount.

5. Feeling aggrieved and dissatisfied with the impugned judgment

and order passed by the High Court, the appellant herein – original

applicant 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 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/- (Rs. Two crores Fifty lakhs) 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. It is stated that

pursuant to the said order, the appellant has deposited a sum of Rs.

2,50,00,000/- (Rs. Two Crores 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, 1996 read with Section 19 of the MSME Act, 2006 and

the order is to be pronounced on 12.10.2021. Therefore, it is prayed to

dispose of the present appeal.

7. Learned Advocate appearing on behalf of the respondent has

submitted that, as such, it is mandatory to deposit 75% of the awarded

3
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. It is submitted that 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 may

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 against

the appellant in view of the decision of this Court in the case of

Goodyear India Limited v. Norton Intech Rubbers Private Limited, (2012)

6 SCC 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

held that requirement of deposit of 75% as a pre-deposit is mandatory. It

is submitted 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

the expression “in the manner directed by such court” would indicate the

discretion given to the Court to allow the pre-deposit to be made, if felt

necessary, in instalments. It is submitted that otherwise the deposit of

75% as a pre-deposit is mandatory and the appellate court would have

no discretion at all to deviate from the mandate under Section 19 of the

MSME Act, 2006.

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8. Learned counsel appearing on behalf of the appellant is not in a

position to show any contrary decision to the decision of this Court in the

case of Goodyear India Limited (supra). He is also not in a position to

satisfy whether the appellate court would have any discretion to deviate

from the requirement of deposit of 75% as a pre-deposit while preferring

the appeal/application under Section 34 of the Arbitration & Conciliation

Act read with Section 19 of the MSME Act, 2006.

9. We have heard the learned counsel for the respective parties at

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 of

75% of the awarded amount as a pre-deposit?

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

“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.”
(bold words are ours)

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9.2 On a plain/fair reading of Section 19 of the MSME Act, 2006,

reproduced hereinabove, at the time/before entertaining the application

for setting aside the award made under Section 34 of the Arbitration &

Conciliation Act, the applicant/appellant has to deposit 75% of the

amount in terms of the award as a pre-deposit. The requirement of

deposit of 75% of the amount in terms of the award as a pre-deposit is

mandatory. However, at the same time, considering the hardship which

may be projected before the appellate court and if the appellate court is

satisfied that there shall be undue hardship caused to the

appellant/applicant to deposit 75% of the awarded amount as a pre-

deposit at a time, the court may allow the pre-deposit to be made in

instalments.

10. An identical question came to be considered by this Court in the

case of Goodyear India Limited (supra). In paragraphs 10 & 11, this

Court observed and held as under:

“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 pre-deposit, 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. (2010) 3 SCC 34 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 pre-deposit 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

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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.

11. 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
[(2010) 1 KLT 65], 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
pre-deposit 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 pre-deposit to be made, if felt necessary, in
instalments.”

11. In view of the above and considering the language used in Section

19 of the MSME Act, 2006 and the object and purpose of providing

deposit of 75% of the awarded amount as a pre-deposit while preferring

the application/appeal for setting aside the award, it has to be held that

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 directing the appellant to deposit 75% of the awarded amount

as a pre-deposit.

However, at the same time, considering the fact that while issuing

notice in the present proceedings on 23.10.2019, this Court passed the

following order:

“Permission to file the special leave petition is granted.

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In an appeal filed by the petitioner-Gujarat State Disaster Management
Authority, a Public Sector Undertaking of the State of Gujarat, challenging
the award passed under the Micro, Small and Medium Enterprises
Development Act
, 2006 by the Facilitation Council, pursuant to Section 19
of the said Act the petitioner-Authority was directed to deposit 75% of the
Award amount as conditional pre-deposit for taking the appeal on file.

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

We have heard Mr. Huzefa Ahmadi, learned senior counsel appearing for
the petitioner-Authority, who has submitted that the entire amount payable
to the respondent-supplier has already been paid to the respondent-
supplier and hence there is no necessity to make pre-deposit for filing the
appeal. Arguments advanced by learned senior counsel is on the merit of
the matter.

Having regard to the facts and circumstances and considering the fact that
the petitioner-Authority is a Public Sector Undertaking, in exercise of the
discretion vested with the court under Section of the said Act, we direct the
petitioner-Authority to deposit Rs.2,50,00,000/- before the Appellate
Authority within a period of four weeks from today. On such deposit, the
District and Sessions Judge, Dehradun, is directed to take up the appeal
on file and proceed 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 bank for a period of
three months with auto renewal so that it may enure to the benefit of the
successful party and the disbursement of the same shall await further
orders from this Court.”

and directed the appellant to deposit Rs. 2,50,00,000/- (Rupees Two

Crores Fifty Lakhs) and on such deposit the District and Sessions Judge,

Dehradun was directed to take up the appeal on file and proceed with

the same. It is reported that by now the application/appeal has been

heard and the order is to be pronounced on 12.10.2021, we continue

with the arrangement as per order dated 23.10.2019 in the

appeal/application under Section 34 of the Arbitration & Conciliation Act

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is finally decided and disposed of. We hope and trust that the learned

Additional District Judge (Commercial), Dehradun shall pronounce the

order at the earliest and more particularly on 12.10.2021, the date on

which order is to be pronounced, as reported.

12. With the aforesaid, 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.

………………………………….J.

                                          [M.R. SHAH]


NEW DELHI;                                ………………………………….J.
OCTOBER 08, 2021.                         [A.S. BOPANNA]




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