The MSMED Act, 2006 gives small suppliers a hard-edged protection: a buyer who wants to challenge a Facilitation Council award must first deposit seventy-five per cent of the awarded amount. In M/s Mohindra Tubes Ltd. v. Public Health Engineering Department and connected appeals (AO-COM 13 of 2026, AO-COM 20 of 2026 and FMAT (ARBAWARD) 19 of 2025, decided 28 September 2026), the Commercial Appellate Division of the Calcutta High Court — Justices Debangsu Basak and Aryak Dutt — held that this requirement under Section 19 is mandatory and jurisdictional: a Section 34 petition dismissed for default before the deposit was made cannot be restored without the deposit being made at the same time.
Three appeals, one question
The Bench heard three connected appeals from proceedings challenging awards of the West Bengal Micro, Small and Medium Enterprises Facilitation Council. In the first two, a supplier of pipes had obtained an award dated 17 January 2023 against the Public Health Engineering Department; the buyer’s Section 34 challenge was filed, and later dismissed for default, without the 75% deposit — and then restored, still without deposit. In the third, a court had set aside a Council award of 13 July 2023 in favour of another supplier without the buyer ever making the mandatory deposit.
The common question: is Section 19 a formality that can be worked around by restoration applications and interim indulgence, or a condition on the court’s very power to hear the challenge?
The holding
The Bench answered firmly for the supplier side. “Compliance with Section 19 of the Act of 2006 is mandatory”, the Court held, describing the deposit as a jurisdictional fact that must exist before the court can exercise powers under Section 34. It followed that a petition “dismissed for default before compliance with Section 19… cannot be restored without simultaneous compliance”. All three appeals succeeded, and the orders that had let the challenges proceed without deposit were set aside.
File Section 34 → let it be dismissed for default → apply for restoration → resist deposit citing hardship, fraud allegations, or the amended Section 36.
No deposit, no entertainment — at filing, at restoration, at any stage. The special MSMED regime overrides the general 1996 Act through Section 24.
Why the rule is strict
Section 19 exists because the MSMED Act’s promise of quick payment would otherwise die in the challenge stage: a buyer could hold the money for years while a Section 34 petition ambled along. The deposit reverses the economics — the supplier can even seek release of part of it during the proceedings. Reading the requirement as jurisdictional closes the last loophole: procedural resurrection of a non-compliant petition.
The Bench also addressed two recurring buyer arguments. First, that the amended Section 36 of the 1996 Act (no automatic stay of awards) changes the picture — it does not, because the 2006 Act is special law with overriding effect. Second, that allegations of fraud excuse the deposit — they do not; the deposit conditions the court’s jurisdiction regardless of the grounds of challenge.
Practice notes
For suppliers: docket every buyer challenge for a Section 19 objection on day one; oppose restoration applications that arrive without the deposit; and apply for release of a portion of any deposit made — the provision contemplates it, and working capital is the point of the Act.
For buyers: budget for the deposit before deciding to challenge an MSEFC award. If the award is genuinely unsustainable, the deposit is recoverable at the end; if the challenge is a delaying device, this judgment has priced it out.
Delhi follows the same statutory scheme: challenges to Delhi MSEFC awards routinely fail at the threshold for want of the Section 19 deposit, and execution courts decline to stay recovery without it. The Calcutta Bench’s jurisdictional framing gives that practice added doctrinal support.
Frequently Asked Questions
What is the 75% pre-deposit under Section 19 of the MSMED Act?
When a buyer applies to set aside a Facilitation Council award or decree under Section 34 of the Arbitration and Conciliation Act, 1996, Section 19 of the MSMED Act requires it to deposit 75% of the awarded amount with the court first. The application cannot be entertained without it. Courts may release part of the deposit to the supplier during the challenge.
Can a buyer file the Section 34 petition first and deposit later?
The Calcutta High Court has now held that compliance is a jurisdictional prerequisite: a petition filed without the deposit cannot be entertained, and if it is dismissed for default before compliance, it cannot be restored unless the deposit accompanies the restoration. The requirement cannot be circumvented through procedural devices.
Does the amended Section 36 of the Arbitration Act dilute Section 19?
No. The Bench held that the MSMED Act is special legislation with overriding effect under Section 24, so the 2006 Act prevails over the general scheme of the 1996 Act. The automatic-stay changes to Section 36 do not relieve a buyer of the Section 19 deposit when challenging an MSEFC award.
What should a supplier do if the buyer's challenge is pending without deposit?
Raise the Section 19 objection at the earliest, in writing, and press for dismissal or for a direction to deposit. After this decision, orders entertaining or restoring challenges without the deposit are themselves appealable, and suppliers can also seek release of a portion of any deposit made, given their working-capital needs.