Court sets aside lower court order, mandates respondent to disclose specific receivables and comply with 75% deposit requirement before challenging arbitral award
In a significant ruling dated September 2, 2026, the Telangana High Court (Division Bench comprising Justices Moushumi Bhattacharya and Renuka Yara) clarified the procedural obligations of judgment-debtors under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the Code of Civil Procedure, 1908 (CPC) during execution of an arbitral award.
The case involved Atlantis Agritech Private Limited (Petitioner), a supplier of agricultural machinery, against M/s. Kendriya Bhandar (Respondent No.1), which had failed to clear dues amounting to over Rs. 41 crore as per an arbitral award dated June 10, 2024. Following the award, the petitioner sought execution before the Commercial Court at Hyderabad, which directed the respondent to file an Affidavit of Disclosure of Assets in Form No.16A under Order XXI Rule 41(2) of the CPC. The affidavit was intended to detail movable and immovable assets, debts, and receivables to satisfy the award.
The respondent filed an affidavit on July 10, 2025, but the petitioner challenged its adequacy, highlighting vague disclosures especially regarding receivables due from ongoing or completed projects. The affidavit contained percentages of margins ('KB Margin') without translating them into specific monetary figures, rendering the disclosure insufficient. The petitioner sought further directions for a more detailed affidavit and production of relevant documents.
The Commercial Court, by order dated June 16, 2026, partly allowed the petitioner's application but declined the request for detailed disclosure of receivables and supporting documents. The petitioner filed a Civil Revision Petition challenging this order.
The Division Bench observed that Form No.16A requires specific particulars of assets and debts, not vague percentages. The court noted that the respondent had filed writ petitions seeking release of substantial amounts from State departments, indicating concrete receivables that should have been disclosed in monetary terms. The court found the partial disclosure and ambiguity as an attempt to obfuscate.
Critically, the court emphasized the mandatory requirement under Section 19 of the MSMED Act that the judgment-debtor must deposit 75% of the awarded amount before challenging the award or decree, including proceedings under Section 47 of the CPC. The respondent had not complied with this mandate despite multiple proceedings.
The court clarified that mere filing of objections under Section 47 CPC does not stay or suspend execution-related proceedings, including asset disclosure applications. Thus, the respondent could not delay disclosure pending adjudication of Section 47 objections.
The High Court set aside the impugned order refusing detailed disclosure and directed the respondent to file a fresh affidavit disclosing all assets, specifically quantifying receivables from ongoing and completed projects, within three weeks of receiving the order. The court also reiterated that compliance with the 75% deposit under Section 19 is a prerequisite for any challenge to the award.
This judgment reinforces the strict procedural safeguards for execution of MSMED awards, safeguarding the interests of micro, small, and medium enterprises by preventing unnecessary delays and ensuring transparency in asset disclosures by judgment-debtors.
Bottom Line:
Micro, Small and Medium Enterprises Development Act, 2006 - Judgment-Debtor must comply with Section 19 mandate of depositing 75% of awarded amount before raising objections under Section 47 of CPC in execution proceedings.
Statutory provision(s): Micro, Small and Medium Enterprises Development Act, 2006 Section 19, Code of Civil Procedure, 1908 Section 47, Order XXI Rule 41(2)
