A buyer cannot seek stay of an award made by the Facilitation Council unless the buyer first deposits 75% of the awarded amount under section 19 of the MSMED Act. The filing of an application under section 34 of the Arbitration Act, without the pre-deposit under section 19 of the MSMED Act, renders imperfect an application for stay of the award under section 36(2) of the Arbitration Act.

JUDGMENT :

Moushumi Bhattacharya, J.

1. This is an application for stay of an arbitral award passed by the West Bengal State Micro Small Enterprises Facilitation Council on 28th April, 2022. The impugned award was passed by the Council under section 18(3) of The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

2. The stay has been sought under section 36(2) of The Arbitration and Conciliation Act, 1996.

3. The petitioner seeks unconditional stay of the impugned award under the second proviso to section 36(3) of the 1996 Act; the ground taken is that the Council became de jure unable to perform its functions and consequently the award is without jurisdiction and void.

4. Learned counsel appearing for the petitioner submits that the mandate of the Council stood terminated on the expiry of the period prescribed under section 18(5) of the MSMED Act which requires that a reference made under that section shall be decided within 90 days from the date of making the reference. According to counsel, the reference was made on 4th December, 2017 while the award was passed on 28th April, 2022. Counsel also relies on section 29-A(1) of the 1996 Act which requires that the arbitral tribunal must make the award within 12 months from the date of completion of pleadings in the case of domestic arbitrations. Counsel submits that the impugned award fails on both counts as it was passed way beyond the windows prescribed under the MSMED as well as 1996 Acts. Counsel seeks unconditional stay of the impugned award on that ground. Counsel seeks to draw a distinction between the words “filed” in section 36(2) of the 1996 Act and “entertained” in section 19 of the MSMED Act to say that filing of the section 34 application will be sufficient for the Court to consider stay of an award under section 36(2) of the 1996 Act.

5. Learned counsel appearing for the respondent/award-holder (claimant-supplier in the arbitration) takes a preliminary objection to the maintainability of the application. According to counsel, the petitioner must first comply with the requirement of section 19 of the MSMED Act in the matter of depositing 75% of the awarded amount before applying for setting aside of the award. Counsel submits that this requirement would have overriding effect over all existing laws under section 24 of the MSMED Act. It is submitted that not having deposited 75% of the awarded amount, the petitioner cannot seek stay of the award since the application for stay would be “stillborn” within the meaning of section 19 of the MSMED Act.

6. The issues for adjudication are as follows:

A. Whether compliance of section 19 of the MSMED Act is mandatory for seeking stay of an award; and

B. Whether filing of an application under section 34 of the 1996 Act, without the pre-deposit under section 19 of the MSMED Act, makes the application for seeking stay of the award under section 36(2) of the 1996 Act, imperfect in the eye of law.

A. Whether compliance of section 19 of the MSMED Act is mandatory for seeking stay of an award

7. Section 19 of the MSMED Act, 2006, contains a mandate on a "Buyer" to deposit 75% of the amount of the decree or award or an order or such other percentage as may be directed by a Court, for setting aside any award made by the Facilitation Council. “Buyer” is defined in section 2(d) and the Facilitation Council under section 20 of the Act. There is no scope for any ambiguity in construing the mandate since the words in section 19 are peremptory in nature and pins a buyer down to the mandate if the buyer chooses to apply for setting aside the award made by the Council.

8. The only exception made in the section is for a supplier; there is no other exit route under the section for a buyer to seek setting aside of an award without the pre-deposit. The framing of the section also makes it clear that the 75% deposit is a condition prece