Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Tel) 12177

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Moushumi Bhattacharya, J
Kendriya Bhandar – Appellant
Versus
Atlantis Agritech Private Limited – Respondent
CIVIL REVISION PETITION NO.503 OF 2026

Advocates:
For the Appellants/Petitioners: Avinash Desai, M. Pranav
For the Respondents: A. Venkatesh, Mohammed Omer Farooq

An entity classified as a 'Buyer' in commercial transactions cannot claim the 'Supplier' exemption under Section 19 of the MSMED Act, 2006, regarding the 75% pre-deposit mandate for challenging arbitral awards, and such mandatory deposit remains a condition precedent for maintaining the application.

Headnote:(A) MSMED Act, 2006 - Section 19 - Pre-deposit requirement - Exemption - ‘Supplier’ vs ‘Buyer’ - Statutory mandate and interpretation - Petitioner sought exemption from 75% pre-deposit requirement for challenging an Arbitral Award - Contention that petitioner is an MSME and thus exempt - Court held that only a ‘Supplier’ as defined in Section 2(n) is exempt - Petitioner clearly described as ‘Buyer’ in all transactional documents and arbitration proceedings - No privity of contract with proposed third-party payer - Retrospective registration as MSME does not grant retrospective benefit - Statutory mandate under Section 19 is non-negotiable and failure to comply renders applications ‘still-born’. (Paras 19, 20, 23, 30, 38, 55, 64)

Facts of the case:
The petitioner (Buyer/Stockist) challenged an Arbitral Award passed by the Facilitation Council directing payment of over Rs.98 Crores to respondent No.1 (Supplier). The petitioner requested the Court to exempt it from the mandatory 75% pre-deposit under Section 19 of the MSMED Act or to allow a third party (KPJ Tradings/Industries) to make the deposit. The Commercial Court rejected the plea, noting the petitioner is a ‘Buyer’.

Findings of Court:
The Court held the pre-deposit requirement is mandatory and the exemption is reserved exclusively for a ‘Supplier’. As the petitioner is a ‘Buyer’ and its MSME registration was obtained after supplies were completed, it is not entitled to exemption.

Issues: Whether the petitioner qualifies as a ‘Supplier’ under the MSMED Act to claim exemption from Section 19 pre-deposit requirements, and whether the liability can be shifted to a third party.

Ratio Decidendi: An entity characterized as a ‘Buyer’ in the underlying commercial transaction cannot claim the ‘Supplier’ exemption under Section 19 of the MSMED Act. The statute explicitly imposes a non-negotiable 75% pre-deposit mandate on all entities except the ‘Supplier’ to challenge an arbitral award; failure to comply renders the challenge application ‘still-born’.

Result: Civil Revision Petition dismissed.

Table of Content
1. mandatory nature of pre-deposit requirement under section 19 of msmed act. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9)
2. contentions regarding the 'supplier' definition and transactional privity. (Para 10 , 11 , 12 , 13 , 14)
3. statutory obligation of pre-deposit for entities excluding the supplier. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21)
4. defining 'supplier' and the legislative intent behind protective provisions. (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34)
5. contractual characterization of the party determines the statutory liability. (Para 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46)
6. misplaced reliance on precedents and the 'still-born' nature of non-compliant applications. (Para 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56)
7. finality of statutory mandates and dismissal of repetitive litigation attempts. (Para 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66)

ORDER

(Per Hon’ble Justice Moushumi Bhattacharya)

1. The Civil Revision Petition has been filed against an order dated 06.02.2026 passed by Commercial Court at Hyderabad dismissing an application filed by the petitioner for exemption the petitioner from the mandatory deposit requirement under section 19 of The Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). The petitioner made an alternative prayer for directing one KPJ Tradings/KPJ Industries Limited to deposit 75% of the awarded amount or to permit the petitioner to deposit Rs.1,00,000/- in instalments.

2. The petitioner sought the above reliefs in respect of the petitioner’s challenge to an Arbitral Award passed by the Micro and Small Enterprises Facilitation Council (“Facilitation Council”) on 07.08.2024 whereby the petitioner (respondent before the Facilitation Council) was directed to pay Rs.41,86,98,166/- along with interest of Rs.29,70,66,757/- along with future interest.

3. The total amount payable by the petitioner to the respondent No.1 under the Arbitral Award is Rs.98,78,88,428.94/- inclusive of interest as on 15.02.2026. The admitted position is that the petitioner has not paid a single rupee to the respondent No.1 till date.

4. By the impugned order, the Commercial Court dismissed the petitioner’s application on inter alia the basis that section 19 of the MSMED Act bars the Court from entertaining any application under section 34 of the 1996 Act until the petitioner deposits 75% of the awarded amount.

5. The Commercial Court also relied on an order passed by this Court (consisting of one of us – Justice Moushumi Bhattacharya) dated 02.05.2025 in CRP No.1591 of 2025 wherein the Court held that the Award-Debtor must comply with the statutory mandate of section 19 of the MSMED Act, 2006.

6. A Writ Petition filed by the petitioner challenging the Award was also dismissed by a learned Single Judge of the High Court of Gujarat on 18.11.2024. The petitioner’s Appeal challenging the said order was dismissed by the Division Bench of the High Court of Gujarat on 27.01.2025. The Supreme Court dismissed the petitioner’s SLP against the order of the Division Bench on 09.05.2025

7. It is also undisputed that this Division Bench, sitting in a different combination, had passed an ex parte order in favour of the petitioner in an earlier CRP (No.1591 of 2025) granting a limited stay of the Execution Proceedings filed by the respondent No.1 arising out of the Arbitral Award till the said respondent was served and had an opportunity to present its case, while making it clear that the order shall not prevent the petitioner from approaching the Trial Court to file an appropriate application for compliance with section 19 of the MSMED Act and for the Trial Court to entertain the same in accordance with law.

8. On 11.06.2025, after hearing learned Senior Counsel appearing for the petitioner as well as the respondent No.1, the Court directed the Commercial Court to number the section 34 petition filed by the petitioner and further that the peti

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2026 Supreme(Online)(Tel) 12177

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABADMoushumi Bhattacharya, JKendriya Bhandar – AppellantVersusAtlantis Agritech Private Limited – RespondentCIVIL REVISION PETITION NO.503 OF 2026

Cases Referred (4)

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Moushumi Bhattacharya, J
Kendriya Bhandar – Appellant
Versus
Atlantis Agritech Private Limited – Respondent
CIVIL REVISION PETITION NO.503 OF 2026