Petition challenging Clause 33(7) pre-deposit requirement for arbitration dismissed, no waiver found despite arbitrator appointment

The HC dismissed the petition challenging Clause 33(7) requiring pre-deposit for arbitration. The contractor argued the clause was unreasonable and that appointment of arbitrator without pre-deposit constituted waiver. The court distinguished this case from ICOMM Tele Limited, noting Clause 33(7) provided for refund/adjustment of deposit after award, unlike the arbitrary forfeiture clause struck down in ICOMM. The court held the Chief Administrator's appointment direction explicitly required compliance with security deposit provisions, rejecting the waiver argument and finding no illegality in the arbitrator's order.

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Issues Involved:
1. Validity of Clause 33(7) of the Agreement requiring a pre-deposit for invoking arbitration.
2. Applicability of Supreme Court judgments on the pre-deposit clause.
3. Argument of unequal bargaining power in commercial contracts.
4. Waiver of pre-deposit condition by the Chief Administrator while appointing the Arbitrator.

Issue-wise Detailed Analysis:

1. Validity of Clause 33(7) of the Agreement:
The primary issue in these writ petitions is whether Clause 33(7) of the Agreement, which mandates a pre-deposit for invoking arbitration, is "unreasonable, unconscionable and liable to be set aside." The clause specifies that the contractor must furnish a security deposit based on the claim amount, which will be adjusted against the arbitration costs or refunded after the arbitration award. The petitioner argued that this clause is arbitrary and contrary to the Arbitration Act, as it deters parties from invoking arbitration due to the high pre-deposit amounts.

2. Applicability of Supreme Court Judgments:
The petitioner cited the Supreme Court's judgment in M/s ICOMM Tele Limited vs. Punjab State Water Supply and Sewerage Board, where a similar pre-deposit clause was deemed arbitrary and violative of Article 14 of the Constitution. The petitioner argued that this judgment should apply to the present case, making Clause 33(7) invalid. However, the respondents and the Arbitrator relied on another Supreme Court judgment in S.K. Jain vs. State of Haryana, which upheld a similar pre-deposit clause, distinguishing it from the clause in M/s ICOMM Tele Limited’s case. The High Court noted that the clause in S.K. Jain's case provided for adjustment and refund of the deposit, unlike the clause in M/s ICOMM Tele Limited’s case, which led to forfeiture of the deposit.

3. Argument of Unequal Bargaining Power:
The petitioner contended that the contract was a "contract of adhesion" where they had no bargaining power, making the pre-deposit clause unfair. The High Court referred to the Supreme Court's observation in S.K. Jain's case, which stated that the concept of unequal bargaining power does not apply to commercial contracts. The court also cited the judgment in Central Inland Water Transport Corporation Ltd. vs. Brojo Nath Ganguly, which supported this view.

4. Waiver of Pre-deposit Condition by Chief Administrator:
The petitioner argued that the Chief Administrator's appointment of the Arbitrator without insisting on a pre-deposit amounted to a waiver of the pre-deposit condition. The High Court rejected this argument, noting that the Arbitrator's appointment letter explicitly required compliance with the arbitration agreement, including the pre-deposit clause.

Conclusion:
The High Court dismissed the writ petitions, upholding the validity of Clause 33(7) of the Agreement. The court found no merit in the petitioner's arguments, emphasizing that the pre-deposit clause in the present case was materially different from the one struck down in M/s ICOMM Tele Limited’s case. The court concluded that it was bound by the Supreme Court's judgment in S.K. Jain's case, which upheld similar pre-deposit clauses in commercial contracts. The petitions were dismissed with no order as to costs.

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