Summary
An award creditor challenged permission to proceed with a Section 34 challenge without the MSMED Act’s 75% pre-deposit. Applying binding precedent, the Court held the deposit mandatory, while recognising that undue hardship may justify instalments. It overruled the contrary High Court view to that extent, set aside the waiver and required the debtor to deposit before the challenge could be entertained on merits. In default, execution could continue.
Issues
- Whether the 75% pre-deposit for the covered award challenge was mandatory or could be waived as merely directory.
Provisions considered
- Section 19, Micro, Small and Medium Enterprises Development Act, 2006The covered award challenge could not be entertained without the mandatory 75% deposit; hardship could affect payment by instalments, not erase the requirement. (¶ 4-6)
Held
- Gujarat State Disaster Management Authority v. Aska Equipments had settled that the 75% deposit must precede entertaining the Section 34 challenge governed by Section 19. The requirement was mandatory. (¶ 4)
- If depositing the full amount at once would cause demonstrated undue hardship, the court could permit instalments. That flexibility did not render the deposit directory or permit its complete waiver. (¶ 4)
- Mahesh Kumar Singla was specifically overruled insofar as it characterised the 75% deposit as directory. The High Court’s direction allowing this challenge to proceed without insisting on the deposit was unsustainable. (¶ 5-6)
Result
Appeal allowed. The High Court order was set aside. The debtor was directed to deposit 75% of the awarded amount before its Section 34 application could be entertained and decided on merits; absent deposit, execution proceedings could continue. No order as to costs.