Mandatory pre-deposit for MSMED award challenges under arbitration law must be made before a Section 34 challenge is heard.

Section 19 of the MSMED Act requires a 75% pre-deposit as a mandatory condition precedent before a challenge to an MSMED award can be entertained under Section 34 of the Arbitration and Conciliation Act, 1996. Binding precedent was followed to confirm that the requirement is not directory, although the court may allow the deposit to be made in instalments where undue hardship is shown. An order permitting the Section 34 challenge to proceed without compliance was set aside, and the award-debtor had to satisfy the deposit condition before the challenge could be heard on merits.

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Issues: Whether, while entertaining an application under Section 34 of the Arbitration and Conciliation Act, 1996 to challenge an award under the Micro, Small and Medium Enterprise Development Act, 2006, the deposit of 75% of the awarded amount under Section 19 of the MSMED Act is mandatory.

Analysis: The requirement under Section 19 of the MSMED Act operates as a condition precedent for entertaining the challenge to the award. The Court noted that the governing question had already been answered by binding precedent, which held that deposit of 75% of the awarded amount is mandatory. The Court also reiterated that where undue hardship is shown, the appellate court may permit such pre-deposit to be made in instalments, but the statutory requirement itself does not become directory.

Conclusion: The pre-deposit of 75% of the awarded amount under Section 19 of the MSMED Act is mandatory, and the challenge under Section 34 of the Arbitration and Conciliation Act, 1996 cannot be entertained without compliance.

Final Conclusion: The order permitting the Section 34 proceedings to continue without the statutory pre-deposit was set aside, and the award-debtor was required to comply with the deposit condition before its challenge could be heard on merits.

Ratio Decidendi: The statutory pre-deposit required for a challenge to an MSMED award is a mandatory condition for entertaining the challenge, though the court may grant instalments in cases of undue hardship.

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