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2022 DIGILAW 256 (ALL)

Jai Prakash Associates Limited v. High Tech Tyre Retreaders Pvt. Ltd.

2022-02-25

J.J.MUNIR

body2022
JUDGMENT : 1. Against an award passed by the U.P. State M & S.E.F. Council, Kanpur exercising jurisdiction under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (Act No.27 of 2006) (for short, 'the Act of 2006), the petitioner has made an application to the District Judge under Section 19 of the Act last mentioned. The petitioner is a purchaser of goods supplied by respondent no.1 and a claim for the unpaid price to the tune of Rs.2,97,57,909/- was raised by the suppliers. This claim was referred to the arbitration of the U.P. State M & S.E.F. Council, Kanpur, who passed an award dated 04.10.2017. By the award aforesaid, the petitioner was ordered to pay a total sum of Rs.2,74,42,197/- together with interest in terms of Section 16 of the Act of 2006, till realization. 2. The petitioner has challenged the aforesaid award under Section 34 of the Arbitration Act read with Section 19 of the Act of 2006. Along with the application seeking to set aside the award, an application was made seeking exemption from deposit of the decretal amount. The learned District Judge has proceeded to reject the application seeking exemption on the ground that Section 19 postulates that application to set aside an award cannot be entertained unless 75% of the amount due under the award has been deposited. Section 19 of the Act of 2006 reads: "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. A perusal of Section 19 of the Act of 2006 makes it pellucid that the jurisdiction of the District Judge to entertain objections against an award postulates a deposit of 75% of the sum due under the award. The phraseology of the Statute is clear and leaves no option with the District Judge. The provision mandates that unless 75% of the money due under the award is deposited, the District Judge cannot assume jurisdiction and proceed to hear objections under Section 19. 4. Now, before this Court under Article 227, the petitioner has challenged the award dated 04.10.2017 passed by the U.P. State M & S.E.F. Council, Kanpur as also the order dated 17.12.2018 passed by the District Judge refusing to exempt the petitioner from making good the statutory deposit. 5. Mr. Rohan Gupta, learned Counsel for the petitioner has been at pains to say that there is illegality in the award that goes to the root of the matter and, therefore, this Court ought to exercise jurisdiction under Article 227 of the Constitution in order to do effective justice. 6. Mr. Mohit Kumar and Mr. Sumit Daga, learned Counsel for respondents submit that this petition is not maintainable because both the reliefs cannot be granted. In their submission, the award cannot be challenged before this Court, inasmuch as the petitioner has a remedy under the Statute before the District Judge. 7. Upon hearing the learned Counsel for parties, this Court finds that there are two parts to the challenge. The first is to the award dated 04.10.2017, about which it is evident that the petitioner has a statutory remedy under Section 19 of the Act of 2006. In fact, the petitioner has availed that remedy by preferring an application to the learned District Judge. This part of the challenge clearly is not maintainable in view of the available alternative remedy, already availed. 8. So far as the challenge to the order of the learned District Judge is concerned, this Court is of opinion that the District Judge has no discretion in the matter to exempt the petitioner from the statutory condition of pre-deposit of 75% of the sum of money due under the award. 8. So far as the challenge to the order of the learned District Judge is concerned, this Court is of opinion that the District Judge has no discretion in the matter to exempt the petitioner from the statutory condition of pre-deposit of 75% of the sum of money due under the award. In fact, the jurisdiction of the District Judge is dependent upon the condition of pre-deposit inasmuch as the words employed in the Statute are "shall be entertained by any court unless the appellant (not being a supplier) has deposited with it seventy-five per cent”. Therefore, in the absence of the requisite pre-deposit of 75%, the objections preferred by the petitioner cannot be considered. 9. At this stage, learned Counsel for the petitioner has invited the attention of the Court to the holding of their Lordships of the Supreme Court in Goodyear India Ltd. v. Norton Intech Rubbers Private Limited and Another, (2012) 6 SCC 345 . In the said case, it has been held: "11. Having considered the submissions made, both on behalf of the petitioner and on behalf of the respondents, we do not see any reason to interfere with the views expressed, both by the learned Single Judge, as also the Division Bench with regard to Section 19 of the 2006 Act. It may not be out of place to mention that the provisions of Section 19 of the 2006 Act, had been challenged before the Kerala High Court in Kerala SRTC v. Union of India[ (2010) 1 KLT 65 ] , where the same submissions were negated and, subsequently, the matter also came up to this Court, when the special leave petitions were dismissed, with leave to make the pre-deposit in the cases involved, within an extended period of ten weeks. We may also indicate that the expression “in the manner directed by such court” would, in our view, indicate the discretion given to the court to allow the pre-deposit to be made, if felt necessary, in instalments." 10. The aforesaid position of the law in no way whittles down condition of pre-deposit. All that is said there is that it is in the discretion of the Court to direct the pre-deposit mandated by the Statute to be made in the manner as the Court finds fit. The aforesaid position of the law in no way whittles down condition of pre-deposit. All that is said there is that it is in the discretion of the Court to direct the pre-deposit mandated by the Statute to be made in the manner as the Court finds fit. The decision in Goodyear India Ltd. indicates that the Statute gives freedom to the Court to direct the condition of pre-deposit to be complied with, if felt necessary, by a deposit in installments. 11. No doubt, while passing the impugned order, the learned District Judge has not examined the aforesaid possibility or passed orders bearing in mind the limited freedom that he has in directing in what way the condition of pre-deposit is complied with. 12. In this view of the matter, it is directed that the learned District Judge shall pass appropriate orders bearing in mind the totality of circumstances requiring the petitioner to comply with the requirement of pre-deposit in such manner as in the discretion of the Court may be found appropriate. It is made clear that in whatever way the condition of pre-deposit of 75% is complied with, the condition to the extent of deposit of 75% has to be complied with. While passing the orders regarding the manner in which the condition of pre-deposit is to be complied with, the learned District Judge shall take into account, if there is any money paid already under the award, which shall be adjusted. 13. It is further directed that subject to the petitioner complying with the terms of the pre-deposit as directed by the District Judge, the District Judge shall proceed with and decide the application under Section 19 of the Act of 2006 within a period of six months, after hearing both parties, in accordance with law. 14. This petition is disposed of in terms of the aforesaid orders. 15. Let a copy of this order be communicated to the learned District Judge, Kanpur Nagar by the Registrar (Compliance).