TaxTMI 
TaxTMI 
2017 (5) TMI 771
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....etal amount as a pre-condition for entertaining an application/ appeal for setting aside the decree, award or any other order of the Micro and Small Enterprises Facilitation Council (for short 'the Council'), is onerous, oppressive and arbitrary. 3. The petitioner is a partnership firm dealing in the business of supply and fixing of electrical equipment for Electricity Boards of Punjab and other States. 4. Respondent No.3 filed a claim petition against the petitioners before the Council constituted under the 2006 Act for an amount of Rs. 1,37,71,374/- being interest on account of delayed payments in respect of various purchase orders of Three Phase Conventional Type Transformers of different ratings between 13.11.2007 and 5.3.2009. The Council vide its award dated 30.9.2014 allowed the claim petition. Award for an amount of Rs. 2,88,61,758/- along with future interest at three times the bank rate till the date of realization was passed against the petitioners. The petitioners filed CWP No.19189 of 2015 titled as 'M/s Mahesh Kumar Singla and another Vs. Punjab Transformers and Electronics Ltd. and others' challenging the award being illegal and void....
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....unt claimed in the notice under Section 13(2) thereof. 9. Ld. Counsel for the respondents, on the other hand, argued that the 2006 Act was the culmination of efforts spanning over two decades to introduce a mechanism to ensure timely realization and to protect the payments receivable by the Small Scale Industries. This is reflected in the Statement of Objects and Reasons of the Bill where among the objectives sought to be achieved by this Act are as follows: "2. In view of the above-mentioned circumstances, the Bill aims at facilitating the promotion and development and enhancing the competitiveness of small and medium enterprises and seeks to- xxxxxxxx (f) make provisions for ensuring timely and smooth flow of credit to small and medium enterprises to minimise the incidence of sickness among and enhancing the competitiveness of such enterprises, in accordance with the guidelines or instructions of the Reserve Bank of India. xxxxxxxxxx (k) make further improvements in the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 and making that enactment a part of the proposed legislation and to repeal that enactment." The effo....
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....ch statutes has come up for consideration before the Courts on numerous occasions and it has been consistently held that as the right to appeal is a creature of the statute, it can be conditional or qualified. The requirement about the deposit of the amount claimed as a condition precedent to entertainment of an appeal does not nullify the right of appeal and cannot be considered to be unconstitutional. Simultaneously, it has been held that even in the absence of an express provision to that effect, the Appellate Authority or Tribunal would have power to grant stay as incidental or ancillary to its appellate jurisdiction subject to there being a strong prima facie case established to the satisfaction of the Appellate Authority that the very purpose of the appeal would be frustrated or rendered nugatory if such stay was not granted. 14. The case law on the subject was extensively reviewed by a Division Bench of this Court in Punjab State Power Corporation Limited vs. The State of Punjab and others, 2016(2) RCR(Civil) 559, where the validity of Section 62(5) of the Punjab Value Added Tax Act, 2005 (for short "VAT Act") which provided that no appeal shall be entertained, unless suc....
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.... condition of 25% pre-deposit for hearing first appeal is onerous, harsh, unreasonable and, therefore, violative of Article 14 of the Constitution of India? (c) Whether the first appellate authority in its right to hear appeal has inherent powers to grant interim protection against imposition of such a condition for hearing of appeals on merits?" Among the decisions relied on were Govt. of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720 and Har Devi Asnani v. State of Rajasthan, (2011) 14 SCC 160. 16. In P. Laxmi Devi's case, Hon'ble the Supreme Court upheld the validity of Section 47-A of the Stamp Act, 1899, introduced by the Indian Stamp Act (A.P. Amendment Act 8 of 1998), as per which, a party was required to deposit fifty per cent of the deficit stamp duty before a reference could be made to the Collector. The observations of Hon'ble the Supreme Court are as under: "22. In this connection we may also mention that just as the reference under Section 47-A has been made subject to deposit of 50% of the deficit duty, similarly there are provisions in various statutes in which the right to appeal has been given subject to some conditions. The constitutional validity of....
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....p Act as amended by A.P. Act 8 of 1998 is constitutionally valid and the judgment of the High Court declaring it unconstitutional is not correct." 17. In Har Devi Asnani's case (supra), the constitutional validity of the proviso to Section 65(1) of the Rajasthan Stamp Act, 1998, which provided that no revision application shall be entertained unless it is accompanied by a satisfactory proof of the payment of fifty per cent of the recoverable amount was in issue. 18. The Hon'ble Court observing that it had been the consistent view that the right of appeal or right of revision is not an absolute right and it is a statutory right which can be circumscribed by the conditions in the the statute, upheld the validity of the provision. It was observed: "22. While coming to the aforesaid conclusions, this Court in P. Laxmi Devi case[(2008) 4 SCC 720] has relied on Anant Mills Co. Ltd. v. State of Gujarat [(1975) 2 SCC 175], Vijay Prakash D. Mehta v. Collector of Customs [(1988) 4 SCC 402] and Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [(1999) 4 SCC 468] in which this Court has taken a consistent view that the right of appeal or right of re....
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....t of tax, interest and penalty is a condition precedent for hearing an appeal before the first appellate authority. Any challenge to the constitutional validity of this provision for pre-deposit before entertaining an appeal on the ground that onerous condition has been imposed and right to appeal has become illusory must be negatived and such a provision cannot be said to be ultra vires Article 14 of the Constitution of India. The object of the provision is to keep in balance the right of appeal conferred upon a person aggrieved with a demand of tax and the right of the revenue to speedy recovery of the tax. It is, thus, concluded that the State is empowered to enact Section 62(5) of the Act and the said provision is legal and valid. The condition of 25% pre-deposit for hearing first appeal is not onerous, harsh, unreasonable and violative of the provisions of Article 14 of the Constitution of India." It was held that the right to appeal is a statutory right and it can be circumscribed by the conditions in the grant. While granting this right, the legislature can impose conditions for its exercise. There is no constitutional or legal impediment to imposition of a condition for dep....
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....the authority concerned. Placed in a situation as indicated above, where it may not be possible for the borrower to raise any amount to make the deposit, his secured assets having already been taken possession of or sold, such a rider to approach the Tribunal at the first instance of proceedings, captioned as appeal, renders the remedy illusory and nugatory. xxxxxxxxxx 64. The condition of pre-deposit in the present case is bad rendering the remedy illusory on the grounds that: (i) it is imposed while approaching the adjudicating authority of the first instance, not in appeal, (ii) there is no determination of the amount due as yet, (iii) the secured assets or their management with transferable interest is already taken over and under control of the secured creditor, (iv) no special reason for double security in respect of an amount yet to be determined and settled, (v) 75% of the amount claimed by no means would be a meagre amount, and (vi) it will leave the borrower in a position where it would not be possible for him to raise any funds to make deposit of 75% of the undetermined demand. Such conditions are not alone onerous and oppressive but also unreasonable and arbitrary....
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.... or other order made by the Council or any other institution to which it has been referred shall be entertained by any Court unless the appellant (not being a supplier) has deposited with such Court seventy-five per cent of the amount in terms of the decree, award or the order. 24. The composition of the Council is specified in Section 21 as per which, the Council shall consist of not less than three but not more than five members from among different categories namely; (i) Director of Industries, or any other officer not below the rank of such Director, in the Department of the State Government having administrative control of the Small Scale Industries or micro, small and medium enterprises; and (ii) one or more office bearers or representatives of associations of micro or small industry or enterprises in the State; and (iii) one or more representatives or banks or financial institutions lending to micro or small enterprises; or (iv) one or more persons having special knowledge in the field of industry, finance, law, trade or commerce. The relevant Sections are reproduced below: "Section 15. Liability of buyer to make payment.- Where any supplier, supplies an....
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....e as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act. 4. Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. 5. Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference. Section 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....
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....the 1996 Act. The application made under Section 19 of the 2006 Act, thus not being a stage of initial adjudication of the dispute consequent on a unilateral determination by one of the parties, unlike in the case of the Section 17(2) under the 2002 Act, the ratio of Mardia Chemicals Ltd's case (supra) is not attracted to this case. 26. Accordingly, we find no merit in the plea of the petitioners that the condition incorporated in Section 19 of the 2006 Act that no application for setting aside any decree, award or other order shall be entertained by any Court unless the appellant (not being a supplier) has deposited seventy- five percent of the amount in terms of the decree, award etc. is arbitrary, illegal and unconstitutional. 27. Regarding the question as to whether the requirement of predeposit for entertaining the appeal, is a mandatory requirement or it should be read as directory, with an inherent power in the appellate authority to waive or reduce the amount where considered necessary, in Punjab State Power Corporation Ltd.'s case (supra) it was observed as under: "25. Now question (c) remains to be answered. With regard to the said question whether the fi....
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....g prima facie case and satisfaction that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal. ... ... ... xxx xxx xxx 30. Adverting to the second facet of the argument as to whether a statute is mandatory or directory, the same depends upon the intent of the legislature and not upon the language in which the intent is clothed. The issue has been considered by a Full Bench of this Court in CIT vs. Punjab Financial Corporation, (2002) 254 ITR 6 wherein it was noticed that the meaning and intention of the legislature must govern and these are to be ascertained not only from the phraseology of the provision but also by considering its nature, design and the consequences which would follow from construing it one way or the other. The use of the word "shall" in a statutory provision, though generally taken in a mandatory sense does not necessarily mean that in every case it shall have that effect, that is to say, unless the words of the statute are punctiliously followed, the proceeding or the outcome of the proceeding would be invalid. On the other hand, it is not always correct....
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....Bench of this Court in Ranjit Singh vs. State of Haryana and others, (2012) 2 RCR (Civil) 353 to which one of us (Ajay Kumar Mittal,J.) was a member which was dealing with similar provision i.e. Section 13B of the Punjab Village Common Lands (Regulation) 1961 wherein entertainment of appeal was subject to deposit of amount of penalty imposed under sub section (2) of Section 7 of the said Act with the Collector. This court after considering the entire case law on the point and by reading down the provision held that Section 13B of the said Act would be read down to incorporate within it the power in appellate authority to grant interim relief in an appropriate case by passing a speaking order even while normally insistence may be made on pre-deposit of the penalty. In such a case, the appellate authority would have to give reasons for granting interim relief of stay. 33. It is, thus, concluded that even when no express power has been conferred on the first appellate authority to pass an order of interim injunction/protection, in our opinion, by necessary implication and intendment in view of various pronouncements and legal proposition expounded above and in the interest of justi....
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....ount for entertaining the appeal on the ground of being unconstitutional. But it was held that the requirement of pre-deposit under Section 45-AA is not mandatory and the Appellate Authority is empowered to waive, either partially or completely, the requirement of pre-deposit in the same circumstances and conditions as explained in detail in the Punjab State Power Corporation Ltd.'s case (supra). 30. Goodyear India Ltd.'s case (supra) relied on by the Ld. Counsel for the respondents is of no help to them as in that case neither the vires of the Section 19 of the 2006 Act was questioned nor any argument based on the inherent power of the Court was raised as is clear from the following observations: "9. Of course, Mr. Ramachandran has submitted that no attempt has been made by the petitioner herein to challenge the vires of Section 19 of the 2006 Act. Mr. Ramachandran submitted that he was only interested in having the provisions of Section 19 interpreted in a manner whereby a litigant was not put to unnecessary hardship." 31. Consequently, while upholding the validity of Section 19 of the 2006 Act, it has to be held that the requirement of pre-deposit thereunder is ....