The Allahabad High Court in an appeal filed under Section 34 of the Arbitration and Conciliation Act, held that the expression in the manner directed by such court would in its opinion indicate the discretion given to the Court to allow the pre-deposit to be made, if felt necessary, in installments also.
Brief Facts:
The present appeal was filed under Section 34 of the Arbitration and Conciliation Act, 1996, against an order passed by Commercial Court, Lucknow, dismissing the petition filed by the Appellant, for failure to pre-deposit 75% of the awarded amount as per the provisions of Section 19 of the Micro Small and Medium Enterprises Development Act, 2006. The Appellant dissatisfied with the arbitral award filed the petition before the Commercial Court and concurrently submitted an application seeking waiver of pre-deposit, which was dismissed. In response, the Appellant sought further time to deposit the amount, stating that there were ongoing loan/overdraft processes with a bank. However, the Commercial Court did not entertain this application and consequently passed the order dismissing the Section 34 petition due to non-deposit of the required amount. The present appeal was filed challenging this.
Contentions of the Applicant:
The learned counsel appearing on behalf of the appellant made submissions that the order passed by the Commercial Court on 19.02.2024 directing the deposit within a period of three weeks and on failure the proceeding shall stand dismissed and the order dated 12.03.2024 dismissing the same as a consequence of non-deposit are ex-facie incorrect and against settled law. It was emphasized that while passing the order dated 19.02.2024 granting three week's time, there was no occasion to order that in case of failure, the proceeding shall stand dismissed.
Contentions of the Respondent:
The learned counsel appearing on behalf of the respondent submitted that the filing of the application seeking waiver itself was contrary to the law laid down by the Hon'ble Supreme Court and the same has rightly been dismissed by the Commercial Court and sufficient time was granted for deposit of the amount and as in the first instance itself order was granted that on account of failure to deposit the amount, the proceedings would stand dismissed.
Observations of the court:
The court stated that there is no dispute on the legal preposition regarding the mandatory nature of provisions of Section 19 of the MSME Act of 2006 wherein the appellant was required to deposit 75 % of the awarded amount by way of pre-deposit for the Court to entertain the petition under Section 34 of the Act of 1996. However, the application seeking waiver was filed and therefore the same was rightly rejected by the Commercial Court on 19.02.2024, however, while passing the order dismissing the application seeking waiver, while granting time to deposit the amount, the further directions that on failure to deposit the said amount within the period indicated the proceedings shall stand dismissed by itself, in our firm opinion was wholly unwarranted.
The court stated that while passing the said order, the Commercial Court had deprived itself of exercising powers under Section 19 of the MSME Act, 2006, which empowers the Court to impose such conditions as it deems necessary and the said part of the provision has been interpreted by Hon'ble Supreme Court in the case of Good Year India Ltd., wherein it has been observed that the expression in the manner directed by such court would in its opinion indicate the discretion given to the Court to allow the predeposit to be made, if felt necessary, in instalments also.
The decision of the Court:
Considering that the appellant now intended to deposit the required 75% of the awarded amount within one week, the court allowed the appeal.
Case Title: M/S Docket Care Systems vs M/S Hariwill Electronics India Pvt. Ltd.
Coram: Hon’ble Mr. Chief Justice Arun Bhansali and Hon’ble Mr. Justice Jaspreet Singh
Case No.: APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 29 of 2024
Advocate for the Petitioner: Sri Sudeep Kumar, Sri Madhusudan Srivastava and Ms Radhika Varma
Advocate for the Respondent: Sri Suryansh Narula and Sri Amit Yadav
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