Himachal Pradesh High Court: Court Must Check Whether Pre-Deposit Amount is Actually Deposited by Appellant as per MSME Act

Himachal Pradesh High Court: Court Must Check Whether Pre-Deposit Amount is Actually Deposited by Appellant as per MSME Act

The Himachal Pradesh High Court by its single Judge Joytsna Rewal Dua ruled that it is the duty of District Court to first determine whether the pre-deposit amount is actually deposited as per Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act).

In the present case, an award was issued by an arbitrator on 30 October, 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) challenged this claim and brought on record that the respondent's deposit fell short of the required 75%.

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

The District Judge after hearing the parties disposed of the application in favor 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 contested this decision, stressing 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.

The Court observed, “Till the time, the application under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 is decided afresh, the respondent shall not execute the impugned award dated 30.10.2021.”

In light of such conflicting claims, the Court 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.