Point of Law: Arbitration - Commercial Transaction - Arbitral Award - Since objections to an Award are to be filed under S. 34 of A&C Act, S. 19 of MSMED Act qualifies filing of such objections by providing that no such application under Section 34 of A&C Act shall be entertained by any court unless applicant had deposited with it 75 per cent of amount in terms of Award.

JUDGMENT :

1. This petition under Article 227 of the Constitution of India has been filed by M/s. Suisse A LA Mode (P) Ltd. being aggrieved by the order dated 20th February, 2021 passed by the Commercial Court, South East District, Saket Courts, Delhi, directing the petitioner to make a deposit of 75 per cent of the amount awarded by the Arbitrator.

2. The brief facts as are relevant for the disposal of the present petition are that the parties were engaged in commercial business transactions relating to purchase of readymade denims and shirts by the petitioner from the respondent. Disputes arose between the two sides. The respondent company filed a claim for Rs.60,49,930.11/- along with pendente-lite and future interest, as per the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”, for short).

3. The learned Arbitrator passed an Award for Rs.84,13,888/- with compound interest @ 12.75 per cent with effect from 1st September, 2020 till actual date of realization, in favour of the respondent. This Award was challenged by the petitioner before the learned Commercial Court by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“A&C Act”, for short). Along with the Objections, the petitioner also sought stay of the Award by moving an application under Section 36 (2) & (3) of the A&C Act.

4. Vide the impugned order, the learned Commercial Court directed the petitioner to deposit 75 per cent of the awarded amount within a period of 15 days subject to which the application under Section 36(2) and (3) of the A&C Act was allowed.

5. Mr. Sunil K. Mittal, learned counsel for the petitioner has submitted that as the arbitration was not conducted in accordance with the provisions of the MSMED Act, therefore, the learned Commercial Court erred in applying Section 19 of the said Act to the objections filed by the petitioner against the Award and directing the deposit. According to the learned counsel for the petitioner, it was unjust for the Commercial Court to enforce Section 19 of the MSMED Act, when throughout, there has been no adherence to the procedure prescribed under Section 18 of the MSMED Act. It was urged by the learned counsel for the petitioner that when a claim was filed before the Micro and Small Enterprises Facilitation Council, it was required under the MSMED Act to refer the matter to Conciliation which was to be conducted in terms of Sections 65-81 of the A&C Act.

6. In the present case, no written statement was called for from the parties. Merely on the basis of the reply sent by the petitioner to the intimation sent by the Haryana Micro and Small Enterprises Facilitation Council, the matter was referred to Arbitration. The Arbitrator, without any evidence before him passed the impugned Award. In the circumstances, the learned Commercial Court had to deal with the objections filed as an ordinary matter under Section 34 of the A&C Act with no reference to MSMED Act, particularly, Section 19 thereof. Hence, it was prayed that the impugned order be set aside.

7. Mr. Manish Vashisht, learned senior counsel for the respondent, on the other hand, submitted that in the reply to the intimation of the Haryana Micro and Small Enterprises Facilitation Council, the petitioner had disputed its liability to make any payment and disclosed no inclination for reconciliation. As this intention was evidenced in the reply placed on this record as document P-10, that the matter was not referred to Conciliation under Section 65 of the A&C Act was immaterial. Unlike the provisions of the A&C Act, the MSMED Act makes it imperative for a pre-deposit before an Award could be challenged. The learned senior counsel also submitted that interlocutory orders could not be challenged under Article 227 of the Constitution and the petition was liable to be dismissed on this very short ground.

8. There is no doubt that, the provisions of the MSMED Act are intended to provide a quick redressal mechanism to micro