Allahabad High Court Dismisses Petition Challenging MSEFC Award, Upholds 75% Pre-Deposit Requirement

Allahabad, Jun 24 (KNN) In a significant ruling, the Allahabad High Court has dismissed a writ petition challenging an award passed by the Zonal Micro and Small Enterprises Facilitation Council (MSEFC), Meerut Zone.

The petition, filed by Tamil Nadu Generation And Distribution Corporation Limited (TANGEDCO) and others, was rejected due to the petitioners' refusal to make the mandatory 75 per cent pre-deposit as required under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006.

The Court held that even in cases where principles of natural justice have been violated, parties cannot bypass the alternate remedy available under Section 34 of the Arbitration and Conciliation Act, 1996.

The bench, comprising Justice Manoj Kumar Gupta and Justice Kshitij Shailendra, emphasised that the 75 per cent pre-deposit requirement is mandatory and applies even to government entities.

While acknowledging the alleged violation of natural justice principles, the Court stated it would have entertained the petition if TANGEDCO agreed to deposit 75 per cent of the awarded amount.

The case stemmed from a dispute between TANGEDCO and a registered firm over a failed tender execution. The MSEFC had awarded a sum of Rs. 1,49,48,762 in favor of the firm, prompting TANGEDCO to approach the High Court under Article 226 of the Constitution of India.

In its ruling, the Court cited the Supreme Court's decision in M/s India Clycols Limited and another Vs. Micro and Small Enterprises Facilitation Council, which prohibits invoking High Court jurisdiction under Article 226/227 to bypass the statutory pre-deposit requirement.

This ruling reinforces the importance of adhering to statutory requirements in challenging arbitration awards, particularly in cases involving MSMEs.

The decision is likely to have far-reaching implications for government entities and corporations dealing with MSME-related disputes, emphasising the need to comply with pre-deposit requirements before seeking judicial intervention.

(KNN Bureau)