JUDGMENT

Mr. Gurvinder Singh Gill, J. (Oral)

The petitioner assails order dated 7.8.2023 (Annexure P-7) vide which an application submitted by the respondent directing the claimant/petitioner to make a pre-deposit to the extent of 7.5% of the contract amount, has been accepted.

2. Learned counsel for the petitioner submits that the impugned order is against the spirit of judgment rendered by Hon'ble the Supreme Court in M/s ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and another, 2019(4) SCC 401 , wherein such like condition of pre-deposit has been held to be contrary to the spirit of arbitration. In the aforesaid case, the Hon'ble Apex Court struck down the clause of pre-deposit and the said clause was held to be ineffective and was severed from rest of the clauses. Para 23 of the said judgment reads as under:-

"23. The important principle established by this case is that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a "deposit-at-call" of 10% of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Indeed, a claim may be dismissed but need not be frivolous, as is obvious from the fact that where three arbitrators are appointed, there have been known to be majority and minority awards, making it clear that there may be two possible or even plausible views which would indicate that the claim is dismissed or allowed on merits and not because it is frivolous. Further, even where a claim is found to be justified and correct, the amount that is deposited need not be refunded to the successful claimant. 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 the learned arbitrator at only ten lakhs, only one tenth of the deposit made will be liable to be returned to the successful party. The party who has lost in the arbitration proceedings will be entitled to forfeit nine tenths of the deposit made despite the fact that the aforesaid party has an award against it. 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."

(emphasis supplied)

3. This Court has considered the aforesaid submissions.

4. Before proceeding further, it is apposite to refer to the arbitration clause pertaining to pre-deposit i.e. Clause 25-A(7), which reads as under:

"7. It is also a term of this arbitration agreement that where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable unless the contractor, furnishes to the full satisfaction of the Executive Engineer In charge of the work, a security deposit of a sum determined according to details given below and the sum so deposited shall, on the termination of the arbitration pro