“It shall be essential, a party invoking Arbitration shall specify amount claimed and shall furnish a ‘deposit-at-call’ for 10% of amount claimed. In event of an award in favour, deposit shall be refunded to him in proportion to amount awarded w.r.t. amount claimed and balance, if any, shall be forfeited and paid to other party.”

“It is well settled, terms of an invitation to tender are not open to judicial scrutiny, as they are in the realm of contract, unless they are arbitrary, discriminatory or actuated by malice. A.L. Kalra v. Project & Equipment Corporation of India Limited, [1984] 3 SCR 646 turned down a submission, arbitrariness is only a facet of discrimination. Arbitrariness is a separate and distinct facet of Article 14.

Deterring a party to an Arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage Arbitration, contrary to object of de-clogging Courts. Take for example a claim based on a termination of a contract being illegal and consequent damages thereto. If the claim succeeds and the termination is set aside as being illegal and a damages claim of One Crore is finally granted by Learned Arbitrator at only Ten Lakhs, only one-tenth of the deposit made will be liable to be returned to the successful party and the party who has lost will be entitled to forfeit nine-tenths of the deposit.

This would render the entire clause wholly arbitrary, being not only excessive or disproportionate but leading to the wholly unjust result of a party who has lost an Arbitration being entitled to forfeit such part of the deposit as falls proportionately short of the amount awarded as compared to what is claimed.”

– Hon’ble Justice R.F. Nariman, M/s. ICOMM Tele Ltd. v. Punjab State Water Supply & Sewerage Board, [Civil Appeal No. 2713 of 2019].

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A pre-deposit condition in an Arbitration Clause being arbitrary is violative of Article 14 [ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board, (2019) 4 SCC 401]. Court went on to say, a frivolous claim can always be dismissed with exemplary costs. We may refer to and rely upon a Nine-Judge Bench of Supreme Court of Canada in Uber Technologies Inc. v. David Heller, 2020 SCC OnLine CAN SC 13: “Courts have many ways of preventing misuse of Court processes for improper ends.”

Nothing has been provided to show how a 7% pre-deposit condition, as in case on hand, is to be ultimately adjusted at end of Arbitral Proceedings.

– Hon’ble Justice J.B. Pardiwala, Lombardi Engineering Limited v. Uttarakhand Jal Vidyut Nigam Limited, [Arbitration Petition No. 43 of 2022] decided on 06.11.2023.