The pre-deposit of 75% of the awarded amount under section 19 of the MSMED Act is mandatory, but the court may allow the pre-deposit to be made in instalments if undue hardship is projected.

JUDGMENT :

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. FAO-COM/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’) 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 pre-deposit 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 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 FAO-COM/ 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 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 pre-deposit 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 pre-deposit 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 pre-deposit 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 pre-deposit of 75% of the awarded amount 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.