The mandatory deposit requirement under Section 19 of the MSMED Act must be fulfilled before entertaining applications to set aside arbitration awards, ensuring fairness to MSMEs and compliance with statutory mandates.

JUDGMENT :

SANJEEB K. PANIGRAHI, J.

1. The present Writ Petition has been filed under Articles 226 and 227 of the Constitution of India assailing the order dated 4.11.2025 passed by the Senior Civil Judge-cum-Commercial Court, Rourkela, in Arbitration Petition No. 10 of 2024. By the impugned order, the Commercial Court revisited and recalled the earlier order dated 21.4.2025, whereby the petitioner’s application under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award of the Micro & Small Enterprises Facilitation Council, Rourkela, had been admitted and further directed the deposit of 75% of the award amount.

I. FACTUAL MATRIX OF THE CASE:

2. The brief facts of the case are as follows:

(i) The petitioner, M/s. Aryan Ispat & Power Private Limited, is engaged in industrial operations and was involved in commercial dealings with Opposite Party No. 2, who claims to have supplied iron ore to the petitioner over a period spanning 2019 to 2021.

(ii) According to Opposite Party No. 2, disputes arose in relation to unpaid dues allegedly arising out of these transactions. On 29.10.2021, Opposite Party No. 2 invoked the jurisdiction of the Micro & Small Enterprises Facilitation Council (MSEFC), Rourkela, by filing a claim for recovery of an aggregate amount of Rs.3,94,35,891/-, comprising Rs.3,19,67,533/- towards principal and Rs.74,68,358/- towards interest.

(iii) This claim was registered as MSEFC Case No. 87 of 2021 and was taken up by the Council on various dates.

(iv) While the reference before the MSEFC was pending, Opposite Party No. 2 initiated parallel proceedings on the same underlying claim before the National Company Law Tribunal (NCLT), New Delhi. On 24.2.2022, Opposite Party No. 2, through its proprietor, filed an application under the Insolvency and Bankruptcy Code, 2016, which was registered as I.B. No. 193 (ND)/2022, alleging default by the petitioner in payment of operational debt. The insolvency application came up for consideration on 6.1.2023, on which date the proceedings were disposed of in view of the submission that the petitioner had paid the claimed amount. Consequent thereto, the application was withdrawn by Opposite Party No. 2.

(v) After disposal of the insolvency proceedings, the reference before the MSEFC continued. During the pendency of the MSEFC proceedings, it emerged from the record that the proprietor of Opposite Party No. 2 was also a member of the MSEFC, Rourkela, during a substantial part of the period when the reference was being heard. The proceedings before the Council continued over multiple sittings. It is reflected in the order sheet that the said proprietor formally recused himself from participation in the Council only on 28.6.2023, shortly before the culmination of the proceedings and passing of the award.

(vi) Subsequently, the MSEFC passed an award dated 28.6.2024 against the petitioner in MSEFC Case No. 87 of 2021. Aggrieved by the said award, the petitioner invoked the statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996, by filing an application before the competent District Court seeking setting aside of the award.

(vii) The application was admitted by the District Judge by order dated 21.4.2025, and thereafter the matter was transferred to the Court of the Senior Civil Judge-cum-Commercial Court, Rourkela, for adjudication in accordance with law.

(viii) After the admission of the Section 34 application, Opposite Party No. 2 filed an application dated 18.9.2025 seeking recall of the order of admission dated 21.4.2025 for giving direction to the petitioner to make deposit of 75% of the awarded a