Arbitration clauses with pre-deposit conditions and biased appointment mechanisms may be invalid under post-amendment law.

A dispute-resolution clause requiring prior deposit of the amount in dispute may be invalid if it fetters access to arbitration and operates with uncertainty as to what sum is truly disputed. An appointment clause allowing the same authority to name a sole arbitrator may also fail where the appointing authority is ineligible or gives rise to apprehension of bias, because its nominee is likewise disqualified. At the appointment stage, the court may examine both the existence and the validity of the arbitration agreement under Section 11(6A).

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Issues: Whether the dispute resolution clause requiring prior deposit of the disputed amount before reference to the committee was valid, and whether the clause providing for appointment of a sole arbitrator by the authority was enforceable in view of Section 12(5) of the Arbitration and Conciliation Act, 1996.

Analysis: The pre-deposit condition was held to be invalid because it fettered the right to invoke arbitration and was also uncertain in operation. The Court held that the clause was vague since a claimant could not know in advance what amount was truly disputed, and the mechanism did not work coherently where the parties' claims were not in the form contemplated by the clause. On the arbitration appointment clause, the Court applied the post-amendment law on arbitrator ineligibility and bias. It held that where the appointing authority itself is ineligible or prone to bias, its nominee is equally disqualified. The Court also held that under Section 11(6A), it could examine the existence and validity of the arbitration agreement at the appointment stage.

Conclusion: The clause requiring pre-deposit before dispute resolution was invalid, and the appointment mechanism for a sole arbitrator was non est. The application was allowed and an independent sole arbitrator was appointed to adjudicate the disputes.

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