The requirement for a mandatory pre-deposit under Section 19 of the MSME Act is critical for adjudication, and courts should facilitate compliance to ensure effective resolution of disputes.

JUDGMENT :

Rohit Ranjan Agarwal, J.

1. The claimant-respondent M/s Jindal Concrete Udhyog had supplied pipe etc. to the provincial division of Public Works Department, Mathura. A reference under Section 18 of Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter called as “Act of 2006”) was moved by the claimant-respondent claiming a sum of Rs.2,78,480/- as principal amount and Rs.3,58,096 as interest till date of filing of claim petition, totalling Rs.6,36,576.63, and further claimed interest at the rate of 18% on the amount from the date of filing of claim petition before U.P. State Micro and Small Enterprises Facilitation Council, Kanpur, which was registered as Claim Petition No.28 of 2008, till date of actual recovery.

2. After contest from the State side, final award was made on03.08.2011 making a final award of Rs.2,78,480/- as principal andRs.7,47,795.86 as interest upto 14.12.2010 totalling Rs.10,26,275.86 in favour of the claimant.

3. The State filed application under Section 34(1)(3) of Arbitration and Conciliation Act, 1996 (hereinafter called as “Act of 1996”) challenging the award before the District Judge, Mathura. An application under Section 9 read with Section 34(4) of Act of 1996 was also filed by the State on 15.09.2011. The claimant filed objection on 18.10.2011 objecting that 75% of the awarded amount was not deposited, hence, proceedings were not maintainable in view of Section 19 of the Act of 2006. On 08.11.2012, an application was moved by the State seeking further time for making deposit. The said application was rejected on 8.11.2012 on the ground that earlier, on3.10.2012, time had already been granted to the State to comply the mandatory provisions of Section 19 of the Act of 2006 but it failed to do so and thus, the application seeking extension of time as well as objections under Section 34 were rejected.

4. On 30.9.2014, funds were sanctioned by the State Government which led to filing of a recall application by the State on 16.12.2014 for recalling its order dated 08.11.2012 and permitting to deposit 75% of the awarded amount. An application under Section 5 of Limitation Act was also filed for condoning the delay in making recall application. The claimant-respondent contested the recall application as well as delay condonation application and filed its objection. By the order impugned dated 23.02.2017, the application for condonation of delay has been rejected, hence, this writ petition.

5. Learned State counsel submitted that dispute relates to supply made by the claimant-respondent for the period between 2002 to2004. Act of 2006 came into force on 02.10.2006 and thus the goods supplied prior to enforcement of Act of 2006 cannot be claimed in proceedings under Section 18 of Act of 2006. He then contended that the word ‘entertained’ as implied under Section 19 of Act of 2006 means, ‘when effective adjudication is done’. According to him, only the application under Section 34 of Act of 1996 was filed for setting aside the award, which has to be read in consonance with Section 19, and, pre-deposit of 75% of the awarded amount would be prior to entertainment of the application filed under Section 34. In the instant case, the Court below was not justified in refusing to grant extension of time for making pre-deposit. It was only on 30.10.2012 that the time was granted and as the pre-deposit could not be made, the Court, on the very next date i.e. 08.11.2012, proceeded to reject the application seeking extension of time along with application under Section 34 of the Act of 1996. He has relied upon decisions rendered in Goodyear India Limited vs. Norton Intech Rubbers Private Limited and Anr. (2012) 6 SCC 345 ; Snehadeep Structures Private Limited vs. Maharashtra Small Scale Industries Development Corporation Limited (2010) 3 SCC 34 ; Gujarat State Disaster Management Authority vs. Aska Equipments Limited (2022) 1 SCC 61 ; Appeal under Section 37 of Arbitration and Conciliation Act 19