IMPORTANT POINT
Arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation.

JUDGMENT

R.F. Nariman. J.

Leave granted.

2. In 2008, the Punjab State Water Supply & Sewerage Board, Bhatinda issued notice inviting tender for extension and augmentation of water supply, sewerage scheme, pumping station and sewerage treatment plant for various towns mentioned therein on a turnkey basis. On 25.9.2008, the appellant company, which is involved in civil/electrical works in India, was awarded the said tender after having been found to be the best suited for the task. On 16.1.2009, a formal contract was entered into between the appellant and respondent No. 2. It may be mentioned that the notice inviting tender formed part and parcel of the formal agreement. Contained in the notice inviting tender is a detailed arbitration clause. In this matter, we are concerned with clause 25(viii) which is set out as follows:-

"viii. It shall be an essential term of this contract that in order to avoid frivolous claims the party invoking arbitration shall specify the dispute based on facts and calculations stating the amount claimed under each claim and shall furnish a "deposit-at-call" for ten percent of the amount claimed, on a schedule bank in the name of the Arbitrator by his official designation who shall keep the amount in deposit till the announcement of the award. In the event of an award in favour of the claimant, the deposit shall be refunded to him in proportion to the amount awarded w.r.t the amount claimed and the balance, if any, shall be forfeited and paid to the other party."

3. The appellant had entered into similar contracts with respondent No. 2 which contained the same arbitration clause. It had therefore addressed letters to respondent No. 2 with regard to appointment of arbitrator in those matters and sought for waiving the 10% deposit fee. After having received no response, the appellant had filed a writ petition, being Civil Writ Petition No. 18917 of 2016, before the High Court of Punjab and Haryana. This writ petition was dismissed by a judgment dated 14.9.2016 stating that such tender condition can in no way be said to be arbitrary or unreasonable.

4. On 8.3.2017, the appellant approached the High Court of Punjab and Haryana challenging the validity of this part of the arbitration clause by filing Civil Writ Petition No. 4882 of 2017. The High Court in the impugned judgment merely followed its earlier judgment and dismissed this writ petition as well.

5. Learned counsel appearing on behalf of the appellant has argued that the arbitration clause contained in the tender condition amounts to a contract of adhesion, and since there is unfair bargaining strength between respondent No. 2 and the appellant, this clause ought to be struck down following the judgment in Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156. He has also argued that arbitration being an alternative dispute resolution process, a 10% deposit would amount to a clog on entering the aforesaid process. Further, claims may ultimately be found to be untenable but need not be frivolous. Also, frivolous claims can be compensated by heavy costs. Further, even in the event that the award is in favour of the claimant, what can be refunded to him is only in proportion to the amount awarded and the rest is to be forfeited. This would also be a further arbitrary and highhanded action on the part of respondent No. 2.

6. Learned counsel appearing on behalf of the respondents has argued that there is no infraction of Article 14 in the present case. It is clear that clause 25(viii) would apply to both the parties equally, and as this is so, the said sub-clause cannot be struck down as being discriminatory. Further, the principle contained in Central Inland Water Transport Corpn. (supra) cannot possibly be applied to commercial contracts. Also, in similar cases, this Court has not entertained this kind of a challenge.

7. Having hear