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2016 DIGILAW 544 (ALL)

PAPER & BOARD CONVERTORS v. UNION OF INDIA

2016-02-16

SUNEET KUMAR

body2016
JUDGMENT Hon’ble Suneet Kumar, J.—Heard learned counsel for the parties. 2. The applicant is registered with the National Small Industries Corporation as supplier of paper products to the Government Departments. The applicant was awarded contracts during 2005, 2008 and 2009 for supply of paper products, however, upon supply, the applicant was not paid the amount. Aggrieved, the applicant approached the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur under Section 18 of the Micro Small and Medium Enterprises Development Act, 2006 (Act 2006) by filing a claim petition which was registered as IFC No. 41 of 2011 (M/s Paper & Board Convertors v. Union of India). The Council on 18 June 2015 rendered an award. Aggrieved, the respondent assailed the award by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (Act 1996). On the application, report was submitted by the Munsrim that the respondent has not deposited 75% of the awarded sum as required under Section 19 of the Act 2006. 3. It appears that the respondent filed an objection to Munsrim report which was allowed by the impugned order dated 17 September 2015 relying upon a judgment of the Bombay High Court dated 5 February 2008 rendered in Maharashtra Small Scale Industry Development Corporation Ltd. v. Snehadeep Structure Pvt. Ltd. 4. The applicant is assailing the order dated 17 September 2015 passed by the District Judge, Kanpur Nagar. 5. Submission of learned counsel for the applicant is that the judgment relied upon by the Court below in the impugned order has been overruled by the Supreme Court, further, would submit that as per the provision of Section 19 of the Act 2006 the proceedings arising from Act 1996 in order to maintain an application under Section 34 of the Act 1996 compliance of Section 19 of Act 2006 is mandatory. In support of his submission, learned counsel for the applicant has placed reliance on a judgment rendered in Director Health Service & Family Welfare v. U.P. State Micro and Small Enterprises E.F. Council and another, Matter Under Article 227 No. 6690 of 2015. 6. In support of his submission, learned counsel for the applicant has placed reliance on a judgment rendered in Director Health Service & Family Welfare v. U.P. State Micro and Small Enterprises E.F. Council and another, Matter Under Article 227 No. 6690 of 2015. 6. This Court in U.P. Rajya Karmchari Kalyan Nigam v. District Judge, Kanpur Nagar and others, AIR 2013 (Alld) 77, while considering Section 7 of Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertaking Act 1993 (Act 1993), which would provide for a mandatory deposit of 75%, it was held that Section 34 of Arbitration Act would have to be read alongwith Section 7 of Act 1993, therefore, the requirement of mandatory deposit of 75% of the awarded amount is a condition precedent for entertaining the application for setting aside the award. 7. The Supreme Court in Snehadeep Structures Private Limited v. Maharashtra Small Scale Industries Development Corproation Limited, 2010 (3) SCC 34 , held that deposit of 75% of the award amount in terms of Section 7 is a condition precedent for hearing an application under Section 34 of Arbitration Act, the word “appeal” occurring in Section 7 of Act 1993 is referable to an “application” occurring in Section 34 of Arbitration Act and the word “award” occurring in Section 7 of Act 1993 would include arbitral award. The Court declined to accept any other interpretation as that would render the term “award” redundant and the requirement of pre-deposit a total nullity with respect to all cases where a small-scale undertaking preferred arbitral proceedings. It was further held that the Act governing small-scale industry is a special enactment in order to protect the industry and would have overriding effect. It may be pointed out that Act 1993 has since been repealed by Section 32 of Micro, Small Enterprises Act. 8. M/s B.H.P. Engineers Pvt. Ltd. New Delhi v. Director Industries, U.P. (Facilitation Council), Kanpur and others, 2009(6) ADJ 444 , was relied upon by the learned counsel for the applicant where this Court entertained the writ petition against an award rendered by the Council for the reason that the Council had not gone into the question or examined the plea of counter claim set up by the petitioner therein, however, the Court was of the opinion that the remedy available to the applicant against the award is under Section 34 of Arbitration Act. 9. 9. Finally the parties have placed reliance on Goodyear India Limited v. Norton Intech Rubbers Private Limited and another, 2012 (6) SCC 345 , in which the Court relying upon Snehadeep Structures (supra) set aside the order of High Court and held that the pre-deposit of 75% under Arbitration Act is a condition precedent for maintaining an application to set aside the award. 10. For the reasons stated hereinabove, the impugned order being unsustainable is accordingly set aside. The proceedings before the Court below would commence upon the respondent making deposit in terms of Section 19 of the Act. 11. Subject to the above, the petition is allowed. No cost. ———————