M/s Tirupati Steels vs M/s Shubh Industrial Component & Anr.

M/s Tirupati Steels vs M/s Shubh Industrial Component & Anr.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2941 OF 2022
M/s Tirupati Steels           ..Appellant (S)
Versus
M/s Shubh Industrial Component & Anr.            ..Respondent (S)
J U D G M E N T 
M. R. Shah, J.
1. Feeling   aggrieved   and   dissatisfied   with   impugned   order
dated 09.04.2019 passed by the Division Bench of the
High   Court   of   Punjab   and   Haryana   at   Chandigarh   in
Commercial Appeal Case No. FAO­COM/4/2019 (O&M), by
which   in   the   proceedings   under   section   37   of   the
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as the Act, 1996) which was filed under section 19 of
the Micro, Small and Medium Enterprise Development Act,
2006 (hereinafter referred to as the ‘MSMED Act, 2006’),
1
the Division Bench of the High Court has directed the first
appellate   court   to   proceed   under   section   34   of   the
Arbitration Act, 1996 without insistence for making predeposit   of   75%   of   the   awarded   amount,   the   judgment
creditor has preferred the present appeal.    
2. The parties are governed by the provisions of the MSMED
Act, 2006. The appellant herein preferred a claim petition
before   the   Micro   and   Small   Enterprises   Facilitation
Council   constituted   under   the   MSMED   Act,   2006   for
recovery of Rs. 1,40,13,053/­ and interest amounting to
Rs. 1,32,20,100/­ which comes to a total amounting to Rs.
2,72,33,153/­. On the failure of conciliation, the dispute
was referred to the Arbitrator. The Arbitrator, appointed
through   the   MSME   Facilitation   Council   at   Chandigarh,
passed an award in favour of the appellant vide award
dated 16.07.2018. Thereafter, the appellant herein filed
the   execution   petition   before   the   District   and   Sessions
Judge,   Faridabad.   Respondent   No.1   herein   filed   an
application under section 34 of the Arbitration Act, 1996
for   setting   aside   the   arbitral   award   before   the   Special
2
Commercial Court, Gurugram. That the appellant herein
submitted an application under section 19 of the MSMED
Act, 2006 directing respondent No. 1 herein – judgment
debtor to deposit 75% of the arbitral award. The learned
Additional District Judge cum Special Commercial Court,
Gurugram   allowed   the   said   application   moved   by   the
appellant   herein   granting   six   weeks’   time   to   the
Respondent   No.1   herein   to   deposit   75%   of   the   arbitral
award before the application filed under section 34 of the
Arbitration Act, 1996 could be entertained by the Court.
Feeling aggrieved with the order passed by the Special
Commercial   Court,   Gurugram   directing   the   judgment
debtor – respondent No. 1 herein to deposit 75% of the
arbitral award and on that condition the petition under
section   34   of   the   Arbitration   Act,   1996   was   to   be
entertained,   which   order   was   passed   on   considering
section 19 of the Arbitration Act, 1996, respondent No. 1
filed   the   commercial   appeal   being   FAO­COM/4/2019
before the High Court. By the impugned order, considering
the   decision   of   the   Division   Bench   of   the   High   Court
rendered in CWP No. 23368 of 2015 (M/s Mahesh Kumar
3
Singla and another Vs. Union of India and others),  by
which, the Division Bench, while upholding the vires of
section 19 of the MSMED Act, 2006, held that the predeposit of 75% of the arbitral award under section 19 of
the MSMED Act, 2006 is directory and not mandatory, has
permitted   the   proceedings   under   section   34   of   the
Arbitration Act, 1996 to continue without insistence on
making   a   pre­deposit   of   75%   of   the   awarded   amount.
Feeling aggrieved and dissatisfied with the impugned order
passed by the Division Bench of the High Court permitting
the proceedings under section 34 of the Arbitration Act,
1996, to go on without insistence for making pre­deposit of
75%   of   the   awarded   amount,   the   appellant   herein   –
original   judgment   creditor   has   preferred   the   present
appeal.   
3. We have heard learned counsel appearing on behalf of the
respective parties at length. 
4. The question which is posed for consideration of this Court
is, whether, the pre­deposit of 75% of the awarded amount
4
as per section 19 of the MSMED Act, 2006, while challenge
to the award under section 34 of the Arbitration Act, 1996,
is made mandatory or not, is now no longer res integra in
view of the decision of this Court in the case of  Gujarat
State   Disaster   Management   Authority   Vs.   Aska
Equipments   Limited;   (2022)   1   SCC   61.   While
interpreting section 19 of the MSMED Act, 2006 and after
taking into consideration the earlier decision of this Court
in the case of  Goodyear   (India)  Ltd.  Vs.  Norton  Intech
Rubbers   (P)  Ltd.;   (2012)  6 SCC 345,  it is observed and
held that the requirement of deposit of 75% of the amount
in terms of the award as a pre­deposit as per section 19 of
the MSMED Act, is mandatory. It is also observed that
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 pre­deposit at a time, the
court may allow the pre­deposit to be made in instalments.
Therefore, it is specifically observed and held that pre5
deposit of 75% of the awarded amount under section 19 of
the MSMED Act, 2006 is a mandatory requirement. In
para 13 of the aforesaid judgment, it is observed and held
as under:­          
“13. 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   and   Conciliation   Act,   the   appellantapplicant has to deposit 75% of the amount in terms of
the award as a pre­deposit. The requirement of deposit
of 75% of the amount in terms of the award as a predeposit   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 appellant­applicant to deposit 75% of the awarded
amount as a pre­deposit at a time, the court may allow
the pre­deposit to be made in instalments.”
5. In   view   of   the   aforesaid   decision   of   this   Court,   the
impugned order passed by the High Court permitting the
proceedings under section 34 of the Arbitration Act, 1996
without insistence for making pre­deposit of 75% of the
awarded amount is unsustainable and the same deserves
to be quashed and set aside. As observed hereinabove,
while passing the impugned order, the Division Bench of
the High Court has relied upon an earlier decision of the
Division Bench in the case of M/s Mahesh Kumar Singla
6
(supra) which has taken a contrary view. Therefore, the
decision of the Division Bench in the case of M/s Mahesh
Kumar Singla (supra), which has been relied upon by the
Division   Bench   of   the   High   Court   while   passing   the
impugned   order,   is   held   to   be   not   good   law   and   is
specifically overruled to the extent that it holds that predeposit of 75% of the awarded amount under section 19 of
the MSMED Act, 2006, is directory and not a mandatory
requirement.
6. In view of the above discussion and for the reasons stated
above, the present appeal is allowed. The impugned order
passed by the High Court is hereby quashed and set aside.
Respondent   No.   1   is   directed   to   deposit   75%   of   the
awarded amount before its application under section 34 of
the   Arbitration   Act,   1996   challenging   the   award   is
entertained and considered on merits.
It   is   observed   and   held   that   unless   and   until
respondent   No.   1   deposits   the   75%   of   the   awarded
amount, its application under section 34 of the Arbitration
7
Act, 1996, challenging the award shall not be entertained
and decided on merits and, in that case, the execution
proceedings   may   continue.   The   present   appeal   is
accordingly allowed. There shall be no order as to costs.     
…………………………………J.
                (M. R. SHAH)
…………………………………J.
 (B.V. NAGARATHNA)
New Delhi, 
April 19, 2022.
8

Comments

Popular posts from this blog

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर