{"id":52,"date":"2026-07-18T03:20:41","date_gmt":"2026-07-18T03:20:41","guid":{"rendered":"https:\/\/praveensiinghhal.com\/blog\/?p=52"},"modified":"2026-07-18T03:21:04","modified_gmt":"2026-07-18T03:21:04","slug":"can-a-buyer-appeal-an-msme-facilitation-council-order-and-delay-payment-further","status":"publish","type":"post","link":"https:\/\/praveensiinghhal.com\/blog\/can-a-buyer-appeal-an-msme-facilitation-council-order-and-delay-payment-further\/","title":{"rendered":"Can a Buyer Appeal an MSME Facilitation Council Order and Delay Payment Further?"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"821\" height=\"1024\" src=\"https:\/\/praveensiinghhal.com\/blog\/wp-content\/uploads\/2026\/07\/Praveen-Photo-1-821x1024.png\" alt=\"\" class=\"wp-image-53\" srcset=\"https:\/\/praveensiinghhal.com\/blog\/wp-content\/uploads\/2026\/07\/Praveen-Photo-1-821x1024.png 821w, https:\/\/praveensiinghhal.com\/blog\/wp-content\/uploads\/2026\/07\/Praveen-Photo-1-240x300.png 240w, https:\/\/praveensiinghhal.com\/blog\/wp-content\/uploads\/2026\/07\/Praveen-Photo-1-768x958.png 768w, https:\/\/praveensiinghhal.com\/blog\/wp-content\/uploads\/2026\/07\/Praveen-Photo-1.png 1123w\" sizes=\"(max-width: 821px) 100vw, 821px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Quick answer<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, a buyer can challenge an award passed by a Micro and Small Enterprises Facilitation Council (\u201cMSEFC\u201d or \u201cFacilitation Council\u201d). However, the buyer does not ordinarily have an unrestricted right to appeal and reopen the entire dispute.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The usual remedy is an application under&nbsp;<strong>Section 34 of the Arbitration and Conciliation Act, 1996<\/strong>&nbsp;seeking to set aside the award on limited statutory grounds. Further, under&nbsp;<strong>Section 19 of the Micro, Small and Medium Enterprises Development Act, 2006 (\u201cMSMED Act\u201d)<\/strong>, a buyer seeking to set aside an MSEFC award must deposit&nbsp;<strong>75% of the amount awarded<\/strong>&nbsp;in the manner directed by the court.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The buyer must also separately seek a stay of enforcement. Merely filing a Section 34 application does not automatically stop the supplier from enforcing the award.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Therefore, a buyer may challenge the award and may cause some delay, but the law places substantial financial and procedural barriers against using such a challenge merely as a payment-delaying tactic.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Is it really an \u201cappeal\u201d against the MSEFC award?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Although business owners commonly call it an appeal, the first challenge to an MSEFC arbitral award is technically not a regular appeal.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Where conciliation under Section 18(2) of the MSMED Act fails, the Council may itself conduct arbitration or refer the dispute to an arbitration institution under Section 18(3). The Arbitration and Conciliation Act then applies as if the parties had entered into an arbitration agreement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Consequently, the resulting decision is ordinarily treated as an&nbsp;<strong>arbitral award<\/strong>. The buyer\u2019s primary remedy is an application under Section 34 of the Arbitration and Conciliation Act for setting aside that award.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This distinction is important because a Section 34 court does not ordinarily rehear the complete dispute as an appellate court. It does not reassess every invoice, email, delivery document or witness statement merely because the buyer disagrees with the Council\u2019s findings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An arbitral award can be set aside only on the limited grounds specified in Section 34.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These grounds may include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Incapacity of a party;<\/li>\n\n\n\n<li>Invalidity of the arbitration agreement or statutory reference;<\/li>\n\n\n\n<li>Lack of proper notice;<\/li>\n\n\n\n<li>Inability of a party to present its case;<\/li>\n\n\n\n<li>The award deciding matters beyond the scope of the reference;<\/li>\n\n\n\n<li>Improper constitution of the tribunal or arbitral procedure;<\/li>\n\n\n\n<li>The dispute being legally incapable of arbitration;<\/li>\n\n\n\n<li>Conflict with the public policy of India; or<\/li>\n\n\n\n<li>Patent illegality appearing on the face of a domestic award, subject to the limitations contained in Section 34.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer cannot normally secure the setting aside of an award merely by alleging that the Council should have interpreted a document differently or that another view of the evidence was possible.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">The rule that changes everything: 75% pre-deposit<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Section 19 of the MSMED Act provides that no application for setting aside a decree, award or other order passed by the Council\u2014or by an institution or centre to which the Council referred the matter\u2014shall be entertained by a court unless the challenger, not being the supplier, deposits&nbsp;<strong>75% of the amount in terms of the award<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The statutory language is significant. It is not merely a direction that may be imposed after the challenge is heard. It is a precondition for the court entertaining the buyer\u2019s challenge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if an MSEFC awards:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Principal amount: \u20b950 lakh; and<\/li>\n\n\n\n<li>Interest forming part of the award: \u20b930 lakh,<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">the awarded amount would ordinarily be \u20b980 lakh. The buyer may therefore be required to deposit \u20b960 lakh, being 75% of \u20b980 lakh, subject to the precise terms of the award and the court\u2019s directions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The deposit is generally calculated on the&nbsp;<strong>amount in terms of the award<\/strong>, not merely on the original unpaid invoice value. This is particularly important in MSME cases because the statutory interest may become substantial.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The complete statutory provision can be read in the official text of the&nbsp;<a href=\"https:\/\/www.indiacode.nic.in\/bitstream\/123456789\/2013\/3\/A2006-27.pdf?utm_source=chatgpt.com\">MSMED Act, 2006 on India Code<\/a>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Is the 75% deposit mandatory?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes. The Supreme Court has treated the requirement under Section 19 as mandatory.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In&nbsp;<strong>Gujarat State Disaster Management Authority v. Aska Equipments Limited<\/strong>, the Supreme Court held that the pre-deposit of 75% of the awarded amount is mandatory before a Section 34 application filed by the buyer can be entertained.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the Court recognised some flexibility regarding the manner in which the amount is deposited. In an appropriate case, having regard to financial hardship and the facts presented, the court may permit the buyer to deposit the amount in instalments.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This does not mean that the court can simply waive the statutory deposit. There is a material difference between:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Allowing the mandatory amount to be deposited in a structured manner; and<\/li>\n\n\n\n<li>Dispensing with the requirement altogether.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The former may be permissible in appropriate circumstances. The latter would ordinarily defeat the express mandate of Section 19.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Therefore, a buyer should not assume that merely pleading financial difficulty, cash-flow problems or public-sector status will eliminate the deposit requirement.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Why did Parliament impose such a strict condition?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The delayed-payment provisions of the MSMED Act were enacted to address a recurring commercial problem: large buyers obtaining goods or services from micro and small enterprises and then withholding payment for prolonged periods.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A delayed payment does not affect every business equally. A large buyer may treat an unpaid invoice as a temporary working-capital advantage. For a micro or small supplier, the same unpaid invoice may affect salaries, taxes, raw-material purchases, bank repayments and its ability to fulfil other orders.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The MSMED Act consequently creates a special protective framework:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Section 15 fixes the permissible payment period.<\/li>\n\n\n\n<li>Section 16 imposes statutory compound interest for delayed payment.<\/li>\n\n\n\n<li>Section 17 makes the buyer liable for the principal amount together with statutory interest.<\/li>\n\n\n\n<li>Section 18 provides a specialised conciliation and arbitration mechanism through the MSEFC.<\/li>\n\n\n\n<li>Section 19 requires a 75% pre-deposit when a buyer seeks to set aside the award.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">The pre-deposit requirement changes the economics of post-award litigation. A buyer cannot ordinarily retain the entire awarded amount and simultaneously continue contesting the supplier\u2019s claim without placing substantial funds under the control of the court.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">What interest applies to delayed MSME payments?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Section 16 of the MSMED Act provides for&nbsp;<strong>compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This statutory liability applies notwithstanding anything contained in the contract or any other law. Therefore, a contractual clause providing for a lower rate of interest, or stating that no interest will be payable, may not protect the buyer against the statutory liability where the MSMED Act applies.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The interest generally begins from:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The appointed day, where no valid payment date has been agreed upon; or<\/li>\n\n\n\n<li>The date immediately following the agreed payment date.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Under Section 15, the agreed credit period cannot ordinarily exceed 45 days from the day of acceptance or deemed acceptance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Because the interest is compounded monthly and linked to three times the RBI bank rate, it may grow considerably during a prolonged dispute. The exact amount must nevertheless be calculated according to the dates, invoices, payment terms, part-payments and operative portion of the award.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Does filing the challenge automatically stay the award?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">No.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is one of the most important protections available to the supplier. Under Section 36 of the Arbitration and Conciliation Act, merely filing an application under Section 34 does not automatically make the award unenforceable.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The buyer must file a separate application seeking a stay. The court may grant a stay subject to conditions it considers appropriate.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The 75% deposit under Section 19 and the stay requirement under Section 36 perform related but distinct functions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Section 19 pre-deposit:<\/strong>\u00a0A condition for entertaining the buyer\u2019s application to set aside the MSEFC award.<\/li>\n\n\n\n<li><strong>Section 36 stay:<\/strong>\u00a0An order temporarily restricting enforcement of the award.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer should not assume that making the 75% deposit automatically stays execution. Equally, a supplier should not assume that the filing of a Section 34 petition prevents it from commencing enforcement proceedings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Unless the competent court has actually stayed enforcement, the supplier may proceed to enforce the award in accordance with law.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Can the supplier receive the deposited amount during the challenge?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Potentially, yes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The proviso to Section 19 states that, pending disposal of the setting-aside application, the court shall order that such percentage of the deposited amount be paid to the supplier as it considers reasonable under the circumstances, subject to such conditions as the court considers necessary.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The release of the deposited amount is therefore not automatically fixed at 75%. The court determines:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What percentage should be released;<\/li>\n\n\n\n<li>Whether security should be furnished;<\/li>\n\n\n\n<li>Whether a bank guarantee or undertaking is required;<\/li>\n\n\n\n<li>Whether the supplier\u2019s financial position is relevant;<\/li>\n\n\n\n<li>Whether restitution can be secured if the buyer ultimately succeeds; and<\/li>\n\n\n\n<li>Whether any other protective condition is necessary.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A supplier should file a properly supported application seeking release rather than assume that the registry or court will automatically transfer the money.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The supplier may explain how the delayed payment has affected its business, why release is required and what reasonable security, if any, can be offered.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Can a buyer bypass the deposit by filing a writ petition?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer may attempt to invoke the writ jurisdiction of a High Court under Articles 226 or 227 of the Constitution. However, a writ petition should not be treated as an ordinary substitute for a Section 34 challenge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In&nbsp;<strong>India Glycols Limited v. Micro and Small Enterprises Facilitation Council<\/strong>, the Supreme Court emphasised the statutory remedy under Section 34 and disapproved the use of writ proceedings to bypass the mechanism established by the MSMED Act, including the pre-deposit requirement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the legal position requires a qualification.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In&nbsp;<strong>Tamil Nadu Cements Corporation Limited v. MSEFC<\/strong>, decided on 22 January 2025, the Supreme Court examined whether writ jurisdiction can be completely excluded even in exceptional cases. The Court referred important questions to a larger Bench, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Whether a writ petition against an MSEFC order or award is absolutely barred;<\/li>\n\n\n\n<li>If it is not absolutely barred, in what exceptional circumstances it may be entertained; and<\/li>\n\n\n\n<li>Whether members of the Council who conducted conciliation may thereafter act as arbitrators.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The official reference judgment is available from the&nbsp;<a href=\"https:\/\/api.sci.gov.in\/supremecourt\/2023\/3776\/3776_2023_1_1501_58592_Judgement_22-Jan-2025.pdf?utm_source=chatgpt.com\">Supreme Court of India<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Therefore, as of July 2026, it would be too broad to say that a writ petition can never be entertained under any circumstances. Constitutional writ jurisdiction cannot simply be erased by ordinary legislation. Nevertheless, courts ordinarily decline to exercise it when an effective statutory remedy is available.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Exceptional situations may potentially involve:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Complete absence of jurisdiction;<\/li>\n\n\n\n<li>A fundamental breach of natural justice;<\/li>\n\n\n\n<li>An order that is not an arbitral award in the eyes of law;<\/li>\n\n\n\n<li>A challenge to the constitutional validity of a statutory provision; or<\/li>\n\n\n\n<li>Other extraordinary circumstances warranting constitutional intervention.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer cannot ordinarily convert a disagreement on facts, contractual interpretation or calculation into a writ petition merely to escape Section 19.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Until the larger Bench conclusively settles the referred questions, both suppliers and buyers should obtain advice based on the precise nature of the Council\u2019s order and the latest binding precedent.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">How much time does the buyer have to challenge the award?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A Section 34 application must ordinarily be filed within&nbsp;<strong>three months<\/strong>&nbsp;from the date on which the party received the signed award.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the buyer makes a proper request under Section 33 of the Arbitration and Conciliation Act for correction, interpretation or an additional award, limitation may be calculated with reference to the disposal of that request.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The court may allow a further period of up to 30 days if sufficient cause prevented the applicant from filing within the initial three months. The statutory language\u2014\u201cbut not thereafter\u201d\u2014is strict.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Accordingly, the practical outer limit is ordinarily three months plus 30 days, subject to the facts governing receipt of the award and any legally valid Section 33 proceedings.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer cannot preserve its remedy indefinitely by sending representations to the Council, requesting reconsideration or continuing correspondence with the supplier. Once limitation expires, a delayed Section 34 challenge may become non-maintainable.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For the supplier, evidence proving the date on which the buyer received the award can become extremely important.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Can the buyer challenge every finding made by the Council?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">No. The scope of Section 34 is intentionally narrow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The court is not supposed to sit as a regular appellate court over the MSEFC\u2019s findings. It does not ordinarily reappreciate evidence or substitute its commercial interpretation merely because another conclusion was possible.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the buyer may still have a serious challenge where, for example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It was never served with the proceedings;<\/li>\n\n\n\n<li>It was denied a meaningful opportunity to file its defence;<\/li>\n\n\n\n<li>The Council passed a payment direction without following the mandatory conciliation and arbitration process;<\/li>\n\n\n\n<li>The entity claiming protection was not legally a \u201csupplier\u201d for the relevant transaction;<\/li>\n\n\n\n<li>The Council lacked territorial or subject-matter jurisdiction;<\/li>\n\n\n\n<li>The award travelled beyond the dispute referred to arbitration;<\/li>\n\n\n\n<li>Mandatory arbitral procedure was fundamentally violated; or<\/li>\n\n\n\n<li>The award suffers from patent illegality within the statutory meaning.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The success of a challenge depends upon the record. Procedural objections should, wherever possible, be raised before the MSEFC or arbitral tribunal itself. A buyer that participates without objection may later face arguments relating to waiver.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">What if the buyer neither pays nor challenges the award?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If the period for challenging the award expires and no stay exists, the supplier may proceed to enforce the award under Section 36 of the Arbitration and Conciliation Act.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The award is enforced in the same manner as if it were a decree of the court.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Depending upon the facts and the court\u2019s orders, enforcement measures may include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Attachment of bank accounts;<\/li>\n\n\n\n<li>Attachment and sale of movable or immovable property;<\/li>\n\n\n\n<li>Garnishee proceedings against persons who owe money to the buyer;<\/li>\n\n\n\n<li>Disclosure of assets;<\/li>\n\n\n\n<li>Examination of responsible officers in appropriate cases; and<\/li>\n\n\n\n<li>Other lawful execution measures.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Where the buyer has filed a Section 34 application but has not obtained a stay, the supplier should consider continuing or initiating enforcement rather than waiting passively for the challenge to conclude.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the correct executing court, territorial jurisdiction, identification of assets and legal status of the buyer must be examined carefully.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Can a further appeal be filed after the Section 34 decision?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, but only within the statutory framework.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An order setting aside or refusing to set aside an arbitral award may be appealable under Section 37 of the Arbitration and Conciliation Act. A further appeal to the Supreme Court may also be attempted through a Special Leave Petition under Article 136 of the Constitution.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Nevertheless, every additional proceeding does not automatically stay enforcement. The buyer must obtain appropriate interim protection from the competent court.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Further proceedings also do not transform the narrow judicial review of an arbitral award into a complete rehearing of the original commercial dispute.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Does the 75% deposit mean that the supplier has won 75% permanently?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">No.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The pre-deposit protects the statutory process, but it is not the final adjudication of the challenge. If the buyer succeeds in setting aside the award, the treatment of the deposited or released amount will depend upon the court\u2019s directions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Where money has been released to the supplier subject to security or an undertaking, the supplier may be required to restore it if the award is ultimately set aside.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Therefore, a supplier receiving money during the challenge should:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Read the release order carefully;<\/li>\n\n\n\n<li>Comply strictly with all security conditions;<\/li>\n\n\n\n<li>Maintain records of the amount received;<\/li>\n\n\n\n<li>Avoid violating any undertaking given to the court; and<\/li>\n\n\n\n<li>Remain prepared for restitution if the buyer ultimately succeeds.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Can an appeal still delay payment?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, some delay remains possible. Court proceedings require filing, service, arguments and adjudication. Questions concerning limitation, jurisdiction, stay, deposit and release may themselves be contested.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It would therefore be incorrect to promise that an MSEFC award produces immediate payment in every case.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the buyer\u2019s ability to use litigation as a cost-free delaying device is substantially restricted because:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Section 34 challenge is available only on limited grounds;<\/li>\n\n\n\n<li>The buyer must ordinarily deposit 75% of the awarded amount;<\/li>\n\n\n\n<li>Filing the challenge does not create an automatic stay;<\/li>\n\n\n\n<li>The supplier may seek release of part of the deposit;<\/li>\n\n\n\n<li>The supplier may enforce the award unless enforcement is stayed; and<\/li>\n\n\n\n<li>The MSMED Act imposes substantial compound interest for delayed payment.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The buyer may delay the final conclusion, but it cannot ordinarily continue enjoying unrestricted use of the entire awarded amount while doing so.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Practical steps for the supplier after receiving an MSEFC award<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A supplier should act promptly after the award instead of waiting for the buyer\u2019s next move.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Obtain a signed and complete copy<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Ensure that the complete award, including annexures, calculations and the operative directions, has been received.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Calculate the amount payable<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Prepare an updated calculation covering:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Principal awarded;<\/li>\n\n\n\n<li>Interest awarded up to the award date;<\/li>\n\n\n\n<li>Post-award interest, if applicable;<\/li>\n\n\n\n<li>Part-payments or credits; and<\/li>\n\n\n\n<li>Costs awarded.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The award\u2019s operative portion must govern the calculation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Preserve proof of delivery<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Keep evidence showing when the award was delivered to both parties. This may determine the limitation period under Section 34.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Check whether a challenge and stay application have been filed<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Do not rely only on statements made by the buyer. Verify the court record and determine whether any enforceable stay order exists.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Oppose any unconditional stay<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Place the MSMED Act\u2019s protective object, Section 19 requirement and continuing financial prejudice before the court.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Seek release of the deposit<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">File an application under the proviso to Section 19 for release of a reasonable portion of the deposited amount.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">7. Begin enforcement when legally permissible<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If there is no stay, identify attachable assets, bank accounts, receivables and the competent enforcement court.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">8. Consider settlement strategically<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A settlement after the award may be commercially beneficial, but it should record the complete liability, payment schedule, consequences of default, treatment of statutory interest and status of pending proceedings.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Is the 75% calculated only on the principal amount?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Ordinarily, no. Section 19 refers to 75% of the amount in terms of the decree, award or order. Where the award includes quantified interest, the deposit is generally linked to the total awarded amount and not merely the original invoice principal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Can the court waive or reduce the deposit?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The statutory requirement is mandatory. A court may, in an appropriate case, regulate the manner or schedule of deposit, including instalments, but ordinarily cannot eliminate the statutory requirement merely because it causes financial hardship.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Is the full 75% automatically released to the supplier?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. The court decides what percentage should be released and may impose conditions such as security or an undertaking.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Does depositing 75% automatically stay the award?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. The buyer must obtain a separate stay under Section 36 of the Arbitration and Conciliation Act.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Does filing a Section 34 application automatically stay enforcement?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No. There is no automatic stay merely because a setting-aside application has been filed.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Can the buyer file a writ petition to avoid the deposit?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A writ petition is not ordinarily an alternative to Section 34 and cannot routinely be used to bypass Section 19. Exceptional writ jurisdiction remains the subject of an important larger-Bench reference before the Supreme Court, so the position must be evaluated according to the nature of the impugned order and current precedent.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How long does the buyer have to challenge the award?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Ordinarily three months from receipt of the signed award, with a possible additional 30 days where sufficient cause is established\u2014but not thereafter.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What if the buyer neither pays nor challenges?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The supplier may enforce the award as a decree under Section 36, including by seeking attachment of the buyer\u2019s bank accounts and other assets, subject to procedural and jurisdictional requirements.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Does statutory interest continue during the challenge?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">This depends on the terms of the award, applicable statutory provisions, deposits, part-payments and court orders. A buyer should not assume that filing a challenge freezes all further interest.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Does the protection apply to every MSME?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The delayed-payment mechanism under Sections 15 to 19 is specifically framed for eligible&nbsp;<strong>micro and small enterprise suppliers<\/strong>. A medium enterprise does not automatically receive the same MSEFC delayed-payment protection merely because it is generally classified as an MSME.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Final takeaway<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A buyer can challenge an MSEFC award, but the challenge is neither a free appeal nor an automatic suspension of payment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The buyer must ordinarily:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>File a Section 34 application within the strict limitation period;<\/li>\n\n\n\n<li>Establish one or more limited statutory grounds for setting aside the award;<\/li>\n\n\n\n<li>Deposit 75% of the amount in terms of the award under Section 19 of the MSMED Act; and<\/li>\n\n\n\n<li>Obtain a separate order staying enforcement.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">For the supplier, the award represents a major shift in bargaining strength. The buyer may continue litigating, but it ordinarily cannot retain the entire awarded amount without consequence. The supplier may seek release of part of the deposit and may proceed with enforcement unless a valid stay has been granted.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The correct strategy after an MSEFC award is therefore not merely to wait for the challenge to end. It is to monitor limitation, oppose stay, enforce the award and seek release of the statutory deposit at the earliest legally permissible stage.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>About the author:<\/strong>&nbsp;Advocate Praveen Siinghhal is a Delhi-based lawyer with 25+ years of experience in MSME payment recovery, commercial disputes and business legal protection. He advises MSMEs and business owners on unpaid dues, legal notices, MSME Facilitation Council claims and recovery strategy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Disclaimer:<\/strong>&nbsp;This article is for general information only and is not legal advice. Laws, RBI bank rate, tax treatment, portal procedures and case law may change from time to time. Please verify the current position or consult a professional before acting on any specific claim.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Quick answer Yes, a buyer can challenge an award passed by a Micro and Small Enterprises Facilitation Council (\u201cMSEFC\u201d or \u201cFacilitation Council\u201d). However, the buyer does not ordinarily have an unrestricted right to appeal and reopen the entire dispute. The usual remedy is an application under&nbsp;Section 34 of the Arbitration and Conciliation Act, 1996&nbsp;seeking to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-52","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/posts\/52","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/comments?post=52"}],"version-history":[{"count":2,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/posts\/52\/revisions"}],"predecessor-version":[{"id":55,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/posts\/52\/revisions\/55"}],"wp:attachment":[{"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/media?parent=52"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/categories?post=52"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/praveensiinghhal.com\/blog\/wp-json\/wp\/v2\/tags?post=52"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}