High Court of Delhi

Suisse A La Mode (P) (Ltd) vs. Kapoor Enterprises

MANU/DE/1864/2021

02.09.2021

Commercial

Court has no discretion to vary the amount required to be deposited before entertaining the application under Section 34 of Arbitration Act

In facts of the present case, the parties were engaged in commercial business transactions relating to purchase of readymade denims and shirts by the Petitioner from the Respondent. Disputes arose between the two sides. The Respondent company filed a claim for Rs.60,49,930.11 along with pendente-lite and future interest, as per the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act").

The learned Arbitrator passed an Award for Rs.84, 13, 888 with compound interest in favour of the respondent. This Award was challenged by the petitioner before the learned Commercial Court by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act). Along with the Objections, the Petitioner also sought stay of the Award by moving an application under Section 36 (2) & (3) of the A&C Act. Vide the impugned order, the learned Commercial Court directed the Petitioner to deposit 75 per cent of the awarded amount within a period of 15 days subject to which the application under Section 36(2) and (3) of the Arbitration Act was allowed.

There is no doubt that, the provisions of the MSMED Act are intended to provide a quick redressal mechanism to micro and small enterprises by giving them an option to approach the Micro and Small Enterprises Facilitation Council for resolution of any dispute. It is clear from document that, an application was sent by Kapoor Enterprises, the Respondent, to the Haryana Micro and Small Enterprises Facilitation Council, against the present Petitioner under the provisions of Section 18 (1) of the MSMED Act. Prima facie, therefore, all actions which emanate from and are a consequence of that application and taken by the Micro and Small Enterprises Facilitation Council of Haryana are necessarily to be construed as one under the MSMED Act.

It is apparent that, the petitioner knew that the action was being initiated and taken under the MSMED Act under Section 18 (2), the Micro and Small Enterprises Facilitation Council has the powers to conduct conciliation by itself. The Haryana Micro and Small Enterprises Facilitation Council had informed the Petitioner through document P-12 that it was exercising its powers to conciliate by suggesting to the Petitioner to pay the dues as claimed by the respondent. If the petitioner had any counter suggestion to make, it would have been reasonable to expect Haryana Micro and Small Enterprises Facilitation Council to have proceeded further under Section 65-81 of the Arbitration Act. But, on the contrary, the petitioner rejected the suggestion and threatened legal action. In these circumstances, the reference to arbitration under Section 18 (3) of the MSMED Act, being well within the power of the Haryana Micro and Small Enterprises Facilitation Council, cannot be faulted.

Since objections to an Award are to be filed under Section 34 of the Arbitration Act, Section 19 of the MSMED Act qualifies the filing of such objections by providing that no such application under Section 34 of the Arbitration Act shall be entertained by any court unless the applicant had deposited with it 75 per cent of the amount in terms of the Award. As held by the Supreme Court in Goodyear India Ltd. v. Norton Intech Rubbers (P) Ltd., the Court has no discretion to vary the amount required to be deposited before the Court can entertain an application under Section 34 of the Arbitration Act. At best, it can direct payment in instalments.

The learned Commercial Court has only followed this decision, to hold that the Court lacked discretion to reduce the pre-deposit under Section 19 MSMED Act. In the circumstances, there is no error in the impugned order calling for interference by this Court in exercise of its powers under Article 227 of the Constitution of India. Petition dismissed.

Tags : Pre-deposit Direction Legality

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