1. Heard Sri Rajat Mittal, learned counsel for the petitioners and Sri Dharmendra Barthwal, learned counsel for the respondents.
2. In this case, the petitioner has assailed the order dated 24.09.2021 passed by the learned Additional District Judge, in a sense, that he seeks modification of the first part of the order dated 24.09.2021 whereby the learned Additional District Judge has imposed a condition to furnishing a bank guarantee against the amount to be released in favour of the petitioner. He further prays to quash the second part of the impugned order whereby the application for payment of interest component on the awarded amount to be paid by the respondents, herein, was rejected by the learned Additional District Judge.
3. Facts of the case are not much in dispute. In this case, the petitioner no. 1 is a private limited company incorporated under the Indian Companies Act. He supplied certain materials to the respondent no. 1. There is delay in payment of dues of the petitioners. He filed an application before Facilitation Council constituted under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as “the Act”, for brevity). The Council allowed the application and passed an award on 11.09.2020. Against such an award, the respondents filed an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Additional District Judge, Commercial Court, Dehradun, Uttarakhand, which was registered as Arbitration Case No. 65 of 2020. It is further case of the petitioners that as per Section 19 of the Act, 2006 before institution of such an appeal, the appellant, not being a supplier, has to deposit 75% of the awarded amount in terms of decree, award or, as the case may be, the other order in the manner prescribed by such Court, therefore, he has filed an application for a direction to the respondents to deposit 75% of the awarded amount along with interest.
4. It is also brought to the notice of this Court that respondent no. 1 while preferring the appeal has deposited 75% of the awarded amount, but as per respondents’ counsel deposition of interest on awarded amount is not required in this case. The arbitration case was taken up for hearing by the learned Additional District Judge and he directed to release 50% of the amount deposited in favour of the petitioner, subject to the condition that petitioner shall furnish a bank guarantee of the equivalent amount to be released.
5. The petitioners’ grievance is that the direction to furnish a bank guarantee will be harsh on it, as it is under financial stress. If petitioners deposits a bank guarantee of the equivalent amount to be released, it will frustrate the objective of the Act itself especially, the Section 19 of the Act.
6. The second part of the order is that the learned Additional District Judge rejected the petitioners’ application for payment interest accrued on 75% of the awarded amount upto that date.
7. Therefore, two questions arise in this writ application for consideration:-
i. Whether the petitioner is duty bound to furnish a bank guarantee; and
ii. Whether the respondents should also deposit the interest accrued on 75% of the awarded amount in terms of the decree passed by the Facilitation Council?
8. The learned counsel for the respondents has relied upon the judgments passed by Bombay High Court and Madras High Court in the case of “Maharashtra State Road Transport Corporation v. Super Fine Extrusions Pvt. Ltd. 2016 SCC Online Bom 9615” and “Unicon Engineers v. Chief Engineer/PTPS-I 2018 SCC Online Mad 13188”. He submits that it is necessary for the petitioners to furnish a bank guarantee in view of the fact that it is a financially stressed institution and the public money involved in the matter may be lost, if the bank guarantee is not there. He has also placed reliance on the judgment of the Hon’ble Supreme Court in the case of “M/s Annapurna Electronics Etc. v. M/s Crompton Greaves Ltd. and Ors. etc.” - Special Leave to Appeal No. 21680 of 2015 decided on 09.03.2016” wherein the petitioners were allowed to withdraw the amount deposited by the respondents after furnishing appropriate immovable property security to the satisfaction of the Registrar General of the Karnataka High Court.
9. In this case, it is clear that the provision of the Act has been enacted with a view to promote Micro, Small and Medium Enterprises and for that reason, the Parliament in its wisdom has enacted certain safeguards for the suppliers so that they do not face any financial hardships and do not lose commercial as well as financial viability because of delayed payment of dues, accrued to them.
10. In that view of the matter and taking a cue from the judgment of the Hon’ble Supreme Court in the aforesaid case, this Court directs to release 50% of the amount deposited before the learned Additional District Judge subject to condition that the petitioners shall furnish adequate immovable property surety of the equivalent amount of the aforesaid amount by executing the indemnity bond before this learned Additional District Judge. .
11. A close examination of the decree passed by the Council reveals that it has granted three reliefs to the petitioners, which reads as under:
A. Payment of remaining bills – Rs. 38,74,758/-.
B. As per provisions of Section 15 and 16 of the Act, 2006, amount of interest of Rs. 417392/-, at the rate of three time of Bank rate notified by RBI with monthly rests, till the date of payment.
C. Total sum mentioned at A and B amounting to Rs. 42,92,150/- be paid within 30 days.
Please Login To View The Full Judgment!
effective decree is that the respondents should deposit a sum of Rs. 42,92,150/-. 13. Writ petition is allowed. Respondents have already deposited 75% of the awarded amount which comes to Rs. 32,19,113/-. The Additional District Judge, Commercial, Dehradun shall release 50% of the total deposited amount within 21 days, hence. It is needless to say that the petitioners shall furnish immovable property surety in the shape of indemnity bond equivalent to the amount to be released as discussed above. There shall be no order as to costs. Urgent certified copy of this order be granted on proper application as per Rules.