The requirement of depositing 75% of the awarded amount under Section 19 of the MSMED Act is mandatory for parties challenging an arbitration award, independent of their claims regarding involvement in the contract.

JUDGMENT

Mr. Gurvinder Singh Gill, J.

The petitioners assail order dated 30.8.2023 (Annexure P-1) passed by learned Additional District Judge, Chandigarh vide which an application moved by the petitioners, seeking exemption from compliance of requirement of depositing 75% of the award amount in terms of section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (in short hereinafter referred to as 'the MSMED Act, 2006'), has been declined.

2. Admittedly, respondent No. 3 - M/s Servista Facility Solutions, having Sh. Gagan Gauri as its sole proprietor, had entered into a contract with respondent No. 4 - M/s Pro Facilities Services Pvt. Ltd. on 15.4.2017, as per which respondent no. 3 was to provide security services to respondent no. 4. A dispute having arisen, respondent No. 3 sought recovery of outstanding amount of Rs. 1,14,35,652/- and an interest amount of Rs. 1,24,80,648/- from respondent No. 4 by invoking provisions of Section 16 and 18 of the MSMED Act, 2006. The Council constituted under the MSMED Act, 2006 issued notice to respondent No. 4 who did not file any response despite several opportunities having been afforded. The claimant informed the Council that as a matter of fact respondent No. 4 - Company had appointed dummy Directors and was actually being run by Shri Sunil Nihal Dugal and Ms. Madhubala Dugal i.e. by petitioners No. 2 and 3 and their companies. The Council issued notices to the aforesaid Mr. Sunil Nihal Dugal and Ms. Madhubala Dugal and to their companies and upon securing their presence made efforts to get the matter amicably resolved but to no avail. The stand taken by the petitioners in the said proceedings was that they were not party to the agreement and had nothing to do with the said agreement entered into by the contracting company i.e. respondent no.4 company.

3. The conciliation proceedings having failed, the matter was referred to the impanelled Arbitrator, who issued notices to all the parties where only the claimant i.e. respondent no. 3 put in appearance but the others i.e. the petitioners did not appear. However, the petitioners sent a letter dated 4.3.2021 for deletion of their names from the array of parties. The petitioners (arrayed as respondents in said proceedings) were ultimately proceeded against ex-parte. The impanelled Arbitrator conducted the proceedings and submitted his recommendation/opinion to the Council pursuant to which award dated 25.6.2021 (Annexure P-43) came to be passed by the Council in favour of respondent No. 3 and against the petitioners. The operative portion of the award is reproduced herein-under :-

"10. Thus in view of the above discussion and documents, this Court holds that:

I. The Claimant is entitled to get an amount of Rs.1,14,35,652/- from the Respondents as due principal amount and is awarded accordingly.

II. The Claimant is also entitled to receive an amount of Rs.1,24,80,648/- as interest from the Respondents on the above principal amount till 10.09.2020 as per provisions of section 6 of the Act and is awarded accordingly.

III. The Claimant is also entitled for pendente lite and future interest on total amount of Rs.2,39,16,300/- from 16.09.2020 till the realization of the whole amount from the Responde