Partnership firm wins waiver appeal under MSME Act, must deposit 75% awarded amount within 4 weeks

The High Court of Madhya Pradesh partially allowed the petition filed by a partnership firm challenging the rejection of a waiver application under section 19 of the Micro, Small and Medium Enterprises Development Act, 2006. The Court upheld the mandatory requirement of depositing 75% of the awarded amount and ordered the petitioner to comply within four weeks. Furthermore, the Court directed the disbursement of 50% of the amount to the respondent and the investment of the remaining 25% in a Fix Deposit pending the final decision, with the respondent providing solvent surety for withdrawal.

---

---

Issues involved: Petition challenging rejection of waiver application u/s 19 of Act of 2006 and interpretation of provisions of the Act.

The judgment by the High Court of Madhya Pradesh pertains to a petition filed by a partnership firm aggrieved by an award passed by the Facilitation Council under section 33 of the Arbitration and Conciliation Act, 1996, seeking exemption from depositing 75% of the awarded amount u/s 19 of the Micro, Small and Medium Enterprises Development Act, 2006. The petitioner contended that the rejection of the waiver application was on incorrect premises, especially since an application u/s 34 of the Act of 1996 was pending before the trial Court. The petitioner argued for the waiver of the deposit requirement or, alternatively, for restrictions on the respondent's ability to withdraw the deposited amount. On the other hand, the respondent argued against granting the waiver, citing the provisions of section 19 of the Act of 2006. The Court noted the objectives of the Act of 2006 to support small enterprises and ensure timely credit flow, emphasizing the mandatory nature of depositing 75% of the awarded amount as directed by the Court.

The Court analyzed section 19 of the Act of 2006, which mandates the deposit of 75% of the awarded amount pending any appeal against an award or order. The proviso to this section empowers the Court to determine the disbursement of the deposited amount to the supplier under reasonable conditions. The Court clarified that the requirement of depositing 75% of the amount, as directed by the Court, is mandatory and cannot be diluted. In line with this, the Court ordered the petitioner to deposit the specified amount within four weeks via Bank Draft. Additionally, the Court directed the disbursement of 50% of the amount to the respondent, with the remaining 25% to be invested in a Fix Deposit pending the final decision in the case. The respondent was required to provide solvent surety for withdrawing their share of the deposited amount.

In conclusion, the Court partially allowed the writ petition, modifying the order to align with the provisions of section 19 of the Act of 2006. No costs were imposed in this matter.

---