Supreme Court Upholds Mandatory Pre-Deposit for MSMED Act Appeals Despite Writ Invocation

The Supreme Court upheld the mandatory pre-deposit requirement under the MSMED Act for appeals, even when the party invoked the writ jurisdiction of the High Court under Article 226 of the Constitution.

The Supreme Court Bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan reviewed an appeal and connected interlocutory applications, holding that when a statutory remedy under Section 19 of the MSMED Act, 2006 is available, a party cannot circumvent the mandatory pre-deposit requirement by invoking writ jurisdiction under Article 226 of the Constitution. The Court affirmed that a High Court is legally justified in imposing a pre-deposit condition while entertaining such a writ petition, particularly when the underlying award is in the nature of a money decree.

The Supreme Court dealt with a civil appeal arising from an interim order passed by the Bombay High Court, Nagpur Bench, directing the appellant to deposit 75% of the awarded amount under Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006, as a condition for stay. The award had been passed by the Micro and Small Enterprises Facilitation Council, Nagpur, in favour of the third respondent. Instead of availing the statutory remedy under the 2006 Act, the appellant had approached the High Court under Article 226 of the Constitution, challenging the award and disputing the jurisdiction of the Facilitation Council, arguing that the third respondent was not an MSME.

The High Court did not dismiss the writ petition on the ground of alternative remedy, but granted interim relief only upon deposit of 75% of the awarded amount. When the matter was brought before the Supreme Court, it had earlier, on 28th September 2012, stayed the High Court’s order subject to the appellant depositing or securing 60% of the principal award amount via a bank guarantee in favour of the Registrar, Bombay High Court, Nagpur Bench.

Upon final hearing, the Supreme Court found no infirmity in the High Court’s interim direction. It observed that the appellant had opted for the writ jurisdiction to bypass the pre-deposit requirement under Section 19 of the 2006 Act. The Court clarified that since the award was in the nature of a money decree, the condition imposed by the High Court was neither unreasonable nor erroneous.

The Supreme Court further noted that the High Court had already reserved its judgment in the writ petition as of November 2024. Consequently, the Supreme Court directed the encashment of the bank guarantee submitted by the appellant and ordered the transfer of the proceeds to the High Court. It also directed that the amount be kept in an interest-bearing fixed deposit with a nationalised bank until the High Court decided on its disbursement.

Accordingly, the appeal was dismissed with directions to the Registry to forward a copy of the order to the Registrar (Judicial) of the Bombay High Court, Nagpur Bench, for necessary action.

Mr. Rajesh J, Advocate and Mr. Dcosta Ivo Manuel Simon, AOR, represented the Appellant.

For the Respondent/ Defendant: Mr. Ankur Talwar, Advocate, Mr. Rajat Nair, Advocate, Mrs. Sairica Raju, Advocate, Mr. Ashutosh Gadhe, Advocate, Mr. Shreeyash U Lalit, Advocate, Mr. Amrish Kumar, AOR, Mr. Gaurav Pachnanda, Sr. Advocate, Ms. Shreya Bansal, Advocate, Ms. Nikita Jaitly, Advocate, Ms. Khushbu Chhajad, Advocate, Mr. Sourav Singh, Advocate and Mr. R. Ilam Paridi, AOR, appeared for the Respondent.

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