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Gujarat State Disaster Management Authority v. M/S Aska Equipments Limited

Civil Appeal · 2021 INSC 641Decided 8 Oct 2021
Civil Appeal No. 6252 of 2021
Justice M.R. Shah · Justice A.S. Bopanna

Background

A dispute arose between a public-sector disaster management authority and a private equipment supplier over payment for goods supplied, governed by the Micro, Small and Medium Enterprises Development Act, 2006. The Facilitation Council passed an arbitral award directing the Authority to pay over Rs. 10.5 crore to the supplier. When the Authority tried to challenge this award in court, it was required to first deposit 75% of the awarded amount, a mandatory pre-condition under the MSME Act. The Authority sought to avoid or reduce this deposit, and after losing before the trial court and High Court, appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that depositing 75% of the awarded amount before a court will even entertain a challenge to an MSME arbitral award is mandatory under Section 19 of the MSME Act, confirming its earlier ruling in Goodyear India Ltd. v. Norton Intech Rubbers. The only flexibility courts have is to allow this 75% to be paid in instalments if genuine hardship is shown: they cannot waive or reduce the percentage itself. Since the Authority had already deposited a reduced interim amount under an earlier Supreme Court order and the appellate authority was about to decide the underlying dispute, the Court let that interim arrangement continue but disposed of the appeal by confirming the law and clarifying it should not be treated as a precedent for lowering the mandatory deposit in other cases.

Lesson Learnt

If you want to challenge an award passed under the MSME Act, you must be prepared to deposit 75% of the awarded sum upfront: courts have no power to excuse or reduce this amount, only to spread it over instalments in deserving cases.

Official source (sci.gov.in)View Judgment (PDF)

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