The acceptability of bank guarantee as a form of deposit under Section 19 of the Micro Small and Medium Enterprises Development Act, 2006.

( 1 ) HEARD learned counsel for the applicant and learned counsel for the opposite party who was appeared through caveat. Learned counsel for the opposite party has got no serious objection to dispensing with the copy of the formal order. Accordingly filing of formal order is dispensed with, revision is treated to be in order.

( 2 ) THIS revision is directed against order dated 30. 03. 2009 passed by District Judge, Kanpur in Misc. No. 36/70 of 2008 M/s Godrej and Boyce Manufacturing Co. Ltd. Vs. M/s Secur Industries Limited. The dispute relates to interpretation of Section 19 of Micro Small and Medium Enterprises Development Act, 2006 (27 of 2006 ). The said section is quoted below: 19. Application for setting aside decree, award or order - No application for setting aside any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council, shall be entertained by any Court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order in the manner directed by such Court: provided that pending disposal of the application to set aside the decree, award or order, the Court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case, subject to such conditions as it deems necessary to impose.

( 3 ) OPPOSITE party has filed the application before District Judge for setting aside award earlier passed in favour of the applicant. The opposite party on 11. 02. 2008 submitted a bank guarantee. Absolutely no objection was raised either by the Court or by the applicant. Out of the total amount of Rs. 12 cr. and odd regarding which bank guarantee was filed an amount of Rs. 4 cr. was directed to be paid to the applicant and the said amount was accordingly paid to the applicant in accordance with the above section. Bank guarantee was to expire on 10. 02. 2009. Accordingly, fresh bank guarantee was filed. However, at this stage applicant raised objections that terms of initial bank guarantee were such that it could not be renewed. This point is not tenable at all. Bank guarantee has in fact been renewed. The other argument of applicant before the Courts below was that in terms of Section 19 of the Act Bank guarantee was meaningless and only cash deposit should be accepted and unless cash deposit was made, main application could not be entertained by the Court below. The said argument was rejected by the Court below. Same argument has been raised in this revision by the learned counsel for the applicant. Learned counsel has placed reliance upon the following authorities: air 1991 Delhi (F. B.) Sri Shyam Kishore Vs. Municipal Corporation of Delhi and Ors. approved in AIR 1992 S. C. 2279 Sri Shyam Kishore Vs. Municipal Corporation of Delhi. AIR 2008 AP 123 M/s. Virgo Conductors Pvt Ltd and etc. Vs. M/s. A. P. Transmission Corporation Ltd. and Anr. 2004 U. P. T. C. 475 (S. C.) Ashok Leyland Ltd. Vs. State of Tamil Nadu and another.

( 4 ) LEARNED counsel for the respondent has argued that bank guarantee is as good as cash and in any case at the earlier occasion when bank guarantee was filed absolutely no objection was taken by the applicant hence at the time of renewal of bank guarantee no such objection can be taken. Learned counsel for the applicant has argued that it is a question of jurisdiction hence neither doctrine of resjudicata applies nor of waiver.

( 5 ) IN the aforesaid Supreme Court authority of Shyam Kishore it has been held that appeal can be admitted or entertained but only can not be heard or disposed of without pre deposit of disputed tax and that appellate authority can adjourn hearing on appeal for giving time to deposit tax. Accordingly, the question of deposit is not a question of initial jurisdiction. It

Click Here to Read the rest of this document