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of <h1>Pre-deposit Rule Mandatory Before Arbitration Proceedings: Court Emphasizes Compliance with Legal Precedents</h1> <h3>M/s Tirupati Steels Versus M/s Shubh Industrial Component & Anr.</h3> The Court held that the pre-deposit requirement of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is mandatory. It ruled that the ... Proceeding under section 34 of the Arbitration Act, 1996 without insistence for making pre-deposit of 75% of the awarded amount - whether the pre-deposit of 75% of the awarded amount as per section 19 of the MSMED Act, 2006, while challenge to the award under section 34 of the Arbitration Act, 1996, is made mandatory or not? - HELD THAT:-The issue is now no longer res integra in view of the decision of this Court in the case of Gujarat State Disaster Management Authority Vs. Aska Equipments Limited [2021 (10) TMI 480 - SUPREME COURT]. While interpreting section 19 of the MSMED Act, 2006 and after taking into consideration the earlier decision of this Court in the case of GOODYEAR INDIA LIMITED VERSUS NORTON INTECH RUBBERS (P) LTD. AND ANR. [2012 (3) TMI 611 - SUPREME COURT], it is observed and held that the requirement of deposit of 75% of the amount in terms of the award as a predeposit as per section 19 of the MSMED Act, is mandatory. It is also observed that however, at the same time, considering the hardship which may be projected before the appellate court and if the appellate court is satisfied that there shall be undue hardship caused to the appellant/applicant to deposit 75% of the awarded amount as a pre-deposit at a time, the court may allow the pre-deposit to be made in instalments. Therefore, it is specifically observed and held that pre5 deposit of 75% of the awarded amount under section 19 of the MSMED Act, 2006 is a mandatory requirement. The impugned order passed by the High Court permitting the proceedings under section 34 of the Arbitration Act, 1996 without insistence for making pre-deposit of 75% of the awarded amount is unsustainable and the same deserves to be quashed and set aside - Appeal allowed - decided in favor of appellant. Issues:1. Interpretation of section 19 of the MSMED Act, 2006 regarding pre-deposit of 75% of the awarded amount.2. Whether the pre-deposit requirement under section 19 of the MSMED Act, 2006 is mandatory or not.3. Validity of the impugned order passed by the High Court allowing proceedings under section 34 of the Arbitration Act, 1996 without insisting on pre-deposit.4. Applicability of previous judgments and their impact on the present case.Analysis:1. The appellant, dissatisfied with the High Court's order directing the first appellate court to proceed under section 34 of the Arbitration Act, 1996 without insisting on pre-deposit of 75% of the awarded amount, appealed. The dispute arose from a claim petition under the MSMED Act, 2006, leading to an arbitral award in favor of the appellant. Respondent No.1 challenged the award under section 34 of the Arbitration Act, 1996, and the appellant sought pre-deposit under section 19 of the MSMED Act, 2006. The High Court's decision was influenced by a previous judgment regarding the nature of pre-deposit under the MSMED Act, 2006.2. The key question before the Court was the mandatory nature of the pre-deposit requirement under section 19 of the MSMED Act, 2006. Citing precedent, the Court held that the deposit of 75% of the awarded amount is mandatory. However, recognizing potential hardships, the Court allowed for the pre-deposit to be made in installments if undue hardship is demonstrated. The Court emphasized the mandatory nature of the pre-deposit, stating that it must be made before entertaining an application under section 34 of the Arbitration Act, 1996.3. The Court found the High Court's order unsustainable as it permitted proceedings under section 34 of the Arbitration Act, 1996 without insisting on the mandatory pre-deposit. The Court overruled the reliance on a previous judgment that held the pre-deposit requirement as directory, emphasizing that the pre-deposit under section 19 of the MSMED Act, 2006 is indeed mandatory. Consequently, the Court allowed the appeal, quashed the impugned order, and directed Respondent No. 1 to deposit 75% of the awarded amount before their application under section 34 is considered.4. The Court's decision clarified the legal position on the pre-deposit requirement under the MSMED Act, 2006, emphasizing its mandatory nature. The judgment also highlighted the importance of following legal precedents and overruled any conflicting interpretations. By providing clarity on the pre-deposit requirement, the Court ensured consistency in the application of the law and upheld the statutory intent behind the MSMED Act, 2006.
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