Section 19 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 19 is a pre-condition on challenging a Facilitation Council decree, award or order. No court may entertain an application to set it aside unless the appellant, not being a supplier, has deposited seventy-five per cent of the amount in terms of the decree, award or order, in the manner the court directs. A proviso lets the court release part of the deposit to the supplier while the challenge is pending.
A court shall not entertain an application for setting aside any decree, award or other order made by the Council, or by an institution or centre to which the Council referred the matter, unless the appellant (not being a supplier) has deposited seventy-five per cent of the amount in terms of the decree, award or order, in the manner directed by the court. Pending disposal, the court shall order that such percentage of the deposit be paid to the supplier as it considers reasonable, subject to conditions.
The text, broken down
| Element | Text |
|---|---|
| What is challenged | "any decree, award or other order made either by the Council itself or by any institution or centre providing alternate dispute resolution services to which a reference is made by the Council" |
| Bar | "No application for setting aside ... shall be entertained by any court" |
| Condition | "unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or, as the case may be, the other order" |
| Manner | "in the manner directed by such court" |
| Proviso | "pending disposal of the application ... the court shall order that such percentage of the amount deposited shall be paid to the supplier, as it considers reasonable under the circumstances of the case subject to such conditions as it deems necessary to impose" |
Who must deposit
The deposit duty falls on "the appellant (not being a supplier)". In practice this is the buyer, whenever the buyer applies to set the award aside. The parenthesis excludes a supplier from the deposit condition. So if the supplier is the party unhappy with the award, for instance because it is too low, the section does not make the deposit a pre-condition for the supplier's application.
The word "supplier" here has its section 2(n) meaning: see the definitions article.
What the deposit is measured against
The deposit is "seventy-five per cent of the amount in terms of the decree, award or ... other order". It is computed on the amount the order carries, which ordinarily includes the principal and the interest as awarded under section 16. The Act's text does not break it down further; if the award includes costs, read the order to see the amount "in terms of" it.
The deposit is made "with it", meaning with the court, and "in the manner directed by such court". The Act does not specify the form, for example a bank guarantee or cash. The court directs the manner.
The proviso: part release to the supplier
While the application is pending, the court "shall order" that "such percentage of the amount deposited shall be paid to the supplier" as it considers reasonable in the circumstances, subject to conditions it considers necessary. Notice that:
- the direction is mandatory ("shall order") but the percentage is for the court;
- the percentage applies to the amount deposited, not to the whole award;
- the court may impose conditions.
The Act does not give a fixed proportion of release.
How it fits with section 18
Section 18 sets the forum and the ninety day period. Section 19 applies after an award or order is made. The Act does not say which court hears the application; the text refers simply to "any court". The jurisdiction and procedure for setting aside depend on the 1996 Act and the court's own rules, which this article does not review. For the steps before the award, see section 18 arbitration.
If a buyer is considering a challenge, or a supplier is defending an award, the deposit is a point that should be planned for early. Our legal dispute resolution service can assist.
What section 19 does not say
- It does not say the 75 per cent is refundable or forfeitable at the end of the case.
- It does not fix a period within which the deposit must be made. The 1996 Act carries its own time limit for setting aside applications; this article does not go into it.
- It does not name the court.
- It does not address the case where the award is entirely in the buyer's favour. The deposit is measured against "the amount in terms of" the order.
- It does not define the word "appellant", although the provision speaks of an "application for setting aside".
Practical examples
Example 1: buyer challenges. The Council's award directs the buyer to pay Rs 20,00,000 with interest. The buyer wants to apply to set it aside. The court will not entertain the application unless the buyer has deposited seventy-five per cent of the amount in terms of the award, in the manner the court directs.
Example 2: supplier challenges. The supplier thinks the interest awarded is too low and applies to set aside part of the award. The deposit condition is for "the appellant (not being a supplier)", so it does not apply to the supplier's application.
Example 3: part release. The buyer has deposited its share. While the application is pending, the supplier asks the court to release part of it. The proviso requires the court to order payment of a reasonable percentage to the supplier, on such conditions as it sees fit.
Common mistakes
- Filing the application first and planning to deposit later. The bar is on the court entertaining the application.
- Assuming the percentage is on the principal only.
- Assuming the supplier also has to deposit.
- Assuming the deposit is stayed or waived by the pendency of other proceedings; the Act's text has no such exception.
Need help with an award or a challenge?
Whether you are a buyer weighing a challenge or a supplier defending an award, the deposit and the timetable need early planning. Our legal dispute resolution team can go through the order with you and explain your options.
Key takeaways
- A court will not entertain an application to set aside a Council award unless the non-supplier appellant deposits 75 per cent.
- The supplier is carved out by the words "not being a supplier".
- The deposit is made with the court, in the manner the court directs.
- Pending disposal, the court orders a reasonable percentage of the deposit paid to the supplier.
- The Act does not name the court or set the release percentage.
Read next
- Section 18 of the MSMED Act, 2006: Arbitration, jurisdiction and the ninety day limit
- Sections 20 and 21 of the MSMED Act, 2006: Establishment and composition of the Council
- MSME Facilitation Council (MSEFC): Dispute Resolution Process
- MSME Payment Protection: the 45 Day Rule, Sections 15 to 24
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.