M/s Tirupati Steels vs M/s Shubh Industrial Component & Anr.
Case Number: Civil Appeal No. 2941 OF 2022
Judges Name: Hon’ble Judges M. R. Shah J, B.V. Nagarathna J
Order dated: 19.04.2022
Facts of the Case:
- This is an appeal filed by the M/s Tirupathi Steels (‘Appellant’) against M/s. Shubh Industrial Component and Others (‘Respondents’). The Appellant filed a claim before the Micro and Small Enterprises Facilitation Council constituted under the Micro, Small and Medium Enterprises Development Act, 2006 (‘MSME Act’) for Rs. 2,72,33,153/-. Upon failure of conciliation, the dispute was referred to Arbitration and the learned Arbitrator was appointed by the MSME Facilitation Council. The learned Arbitrator passed an Award in favour of the Appellant.
- The Appellant filed an execution petition before the District and Sessions Judge, Faridabad. The Respondent No.1 preferred an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) before the Special Commercial Court, Gurugram. The Appellant moved an application under Section 19 of the MSME Act, 2006 to direct the Respondent No.1 to deposit 75% of the Arbitral Award which was allowed by the Additional District Judge cum Special Commercial Court, Gurugram. The Respondent No.1 filed an appeal before the Hon’ble High Court of Punjab and Haryana at Chandigarh challenging the order directing them to 75% before the Appeal under Section 34 of the Act would be entertained, which was allowed.
- The Appellant has now challenged the decision of the Hon’ble High Court before the Hon’ble Supreme Court.
Supreme Court observed/held as follows:
- The Court noted that the question as to whether a pre-deposit of 75% of the awarded amount as per Section 19 of the MSME Act is necessary for challenging the award under Section 34 of the Act, is settled in the case of Gujarat State Disaster Management Authority Vs. Aska Equipments Limited, wherein it was held to be mandatory.
- It was observed that while interpreting Section 19 of the MSME Act in the case of Goodyear (India) Ltd. Vs. Norton Intech Rubbers (P) Ltd, it was held that the deposit of 75% is mandatory, but considering the hardship that may be projected and if the Appellate Court is satisfied that there may be hardship to the Appellant, then the deposit of 75% can be allowed to be made in instalments.
- The decision of the Hon’ble High Court in the case of M/s Mahesh Kumar Singla and another Vs. Union of India and others, has been overruled to the extent that the 75% deposit is directory and not mandatory.
- Thus, the Hon’ble Supreme Court quashed and set aside the order of the Hon’ble High Court and directed the Respondent No.1 to deposit 75% of the awarded amount before its Application under Section 34 of the Act can be entertained.
The Hon’ble Supreme Court allowed the appeal.