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2015 Supreme(Kar) 391
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
N.KUMAR AND B.SREENIVASE GOWDA, JJ.
Crompton Greaves Ltd. – Petitioner
Vs.
Annapurna Electronics and Ors. – Respondents
WRIT PETITION No.49557/2013 (GMRES)
Decided On : 2.06.2015
Advocate Appeared:
For the Petitioner: Sri Udaya Holla, Senior Counsel a/w Sri Vivek Holla, Adv.
For the Respondents - Sri M.G.S.Kamal, Adv. for R1; R2 to R5 served.
Headnote:ARBITRATION AND CONCILIATION ACT, 1996 - Sections 34, 37: [N. Kumar & B. Sreenivase Gowda, JJ] Setting aside of Award - Dismissal of appeal on ground of non deposit of 75% of amount of award as envisaged under Section 19 of Micro, Small and Medium Enterprises Development Act, 2006 - Held, It does not fall within mischief of Section 34. Writ petition against is maintainable and not an appeal under Section 37 of 1996 Act. Micro, Small and Medium Enterprises Development Act (27 of 2006), S. 19. Arbitration & Conciliation Act, 1996.
MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006 - Section 19: [N. Kumar & B. Sreenivase Gowda, JJ] Application against decree, award or order - Requirement of deposit of 75% of amount due under award - Held, Once the requirement under Section 19 as to deposit of 75% of amount due in terms of the award is complied with it dates back to the date of application filed against award. If the application had been entertained after complying with the requirement of Section 19(1) of the Act, if for disposal of such application considerable time has been spent, the petitioners were not expected to pay 75% of the interest accrued from time to time to make the said application maintainable and therefore, the plea that the amount already deposited would not fulfill the requirement of Section 19(1) cannot be accepted.
Key Points: - The MSMED Act requires deposit of 75% of the amount due under the award for entertaining an application under Section 19; non-deposit leads to dismissal of the application under Section 34 (and affects maintainability) (!) (!) (!) (!) . - If the applicant complies with Section 19 deposit, the 75% amount relates back to the date of application; deposits made after initial denial may back-date for eligibility (!) (!) (!) . - Section 37(1)(b) provides that an appeal lies from an order setting aside or refusing to set aside an arbitral award; orders dealing with delay/condonation in Section 34 proceedings may not be appealable if not directly addressing setting aside on merits (!) (!) . - The court may restore or entertain a Section 34 application if the 75% MSMED deposit is later satisfied and the matter is decided on merits; writ petitions can be entertained where a separate remedy under Section 37 is not applicable or available (!) (!) (!) . - The judgment emphasizes that Section 34 applications require satisfaction of both subsections (2) and (3); mere satisfaction of one is not enough to constitute a valid application (!) (!) (!) (!) . - The court directed restoration of the Section 19(1) MSMED Act application and transfer to the Civil Court for merit disposition within three months; trial to proceed on merits undisturbed by prior observations (!) (!) (!) .
How to challenge an arbitration award under MSMED Act and Section 34 of the Arbitration Act?
What is the maintainability of a writ petition versus an appeal under Section 37 in the context of MSMED Act deposit requirements?
What are the consequences of non-deposit of 75% under Section 19 MSMED Act on applications under Section 34 Arbitration Act?
This Writ Petition is preferred challenging the order dated 20.09.2013 passed by the Principal City Civil and Sessions Judge at Bangalore in Arbitration Suit No.44/2008 dismissing the suit for noncompliance of the order dated 20.08.2013 passed in W.P. No.12465/2010 by this Court.
2. The petitioner is a Public Limited Company registered under the provisions of the Indian Companies Act, 1913. The petitioner is carrying on the business inter alia, of developing, manufacturing and marketing Telecom products. Respondent No.1 M/s. Annapurna Electronics, a proprietary firm situated at Bangalore, is carrying on the business inter alia of providing telecom related services and has its Offices at various strategic locations for the purposes of servicing of CDot Cards and test equipment procured from different officers of CDOT and reputed manufacturers. By an agreement dated 14th May, 2004 respondent No.1 agreed to provide services to the petitioner by way of providing its infrastructure and personnel to support the petitioner in execution of the Work Order dated 29th April, 2002 awarded by M/s. Bharath Sanchar Nigam Limited in favour of the petitioner. For the services so rendered, the petitioner was required to reimburse 76% of the revenue collected by respondent No.1. However, even before the BSNL Work Order could be executed in full, respondent No.1 stopped providing the necessary services. Thus disputes arose between the parties relating to their respective rights and obligations under the said agreement dated 14th May, 2004. The respondent claims that it is a “Supplier” under the provisions of the repealed Act called “the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Accordingly, the 1st respondent initiated proceedings under the provisions of Section 9 of the said repealed Act by approaching the Karnataka Industry Facilitation Council. The said Act was repealed from 2nd October, 2006 and substituted by Micro, Small and Medium Enterprises Development Act, 2006 (for short hereinafter referred to as the `MSMED’ Act).
3. In the said proceedings, the petitioner was called upon to file its written statement, which was duly filed. The petitioner raised a specific stand in the said objection that the 1st respondent was not covered either under repealed Act or under the new Act. However, overruling the said objection an award came to be passed on 14th July, 2008.
4. Aggrieved by the said award, the petitioner filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (for short hereinafter referred to as ‘the Arbitration Act’) before the Civil Court, which is numbered as Arbitration Suit No.44/2008. In the said Arbitration suit, the respondent No.1 filed an application under Section 19 of the MSMED Act praying that the Arbitration Suit is not maintainable in view of non deposit of 75% of the arbitral amount by the petitioner. The petitioner filed its reply to the above said Interim application. After hearing the said application, by an order dated 01.04.2010, the learned City Civil Judge, Bangalore City ordered that the petitioner shall deposit 75% of the award amount on or before 12th April, 2010 failing which, further orders would be passed to reject the Arbitration suit.
5. Aggrieved by the said order, the petitioner filed a writ petition before this Court in W.P. No.12465/2010. This Court by an order dated 16.04.2010, which was a consent order directed the petitioner herein to furnish a Bank guarantee to the tune of 75% of the award amount. The said order was challenged by the 1st respondent in Writ Appeal No.2432/2010. The Division Bench of this Court, by its order dated 29th July, 2010 setaside the order dated 16.04.2010 passed by the learned Single Judge and requested the learned Single Judge to reconsider the matter afresh in accordance with law. After reconsideration, by an order dated 20.08.2013, the learned Single Judge dismissed the writ petition.
6. Agai
