55 of the General Conditions of Contract provides for a pre-deposit of 7% of the total claim for the purpose of invoking the arbitration clause; whether there is any direct conflict between the decisions of this Court in S.K. Jain’s case and ICOMM Tele Limited ’s case; whether this Court while deciding a petition filed u/s. 11(6) ofthe Arbitration andConciliation Act, 1996 for appointment of a sole arbitrator can hold that the condition of pre-deposit stipulated in the arbitration clause as provided in the Contract is violative of the Article 14 of the Constitution; and whether the arbitration Clause No. 55 of the Contract empowering the Principal Secretary/Secretary (Irrigation) to appoint an arbitrator of his choice is in conflict with the decision of this Court in Perkins Eastman’s case.
Arbitration and Conciliation Act, 1996 – Arbitration agreement – Arbitration clause – Invocation of – Clause 55 of the General Conditions of Contract providing for a pre-deposit of 7% of the total claim – Validity of:
Held: As regards 7% pre-deposit condition, nothing has been provided as to how this amount of 7% is to be ultimatelyadjusted at the end of the arbitral proceedings – Clauses 3 and 4 respectively relating to security deposit for performance and refund of the same, has no nexus at all with the pre-deposit amount of 7% as stipulated in Clause 55 of the GCC – Such vague and ambiguous condition of 7% pre-deposit of the total claim makes the same more vulnerable to arbitrariness thereby violating Article 14 of the Constitution – Thus, the Conditions contained in Clause 55 of the GCC, relating to 7% deposit of the total amount claimed should be ignored. [Para 66, 68]
Arbitration and Conciliation Act, 1996 – Arbitration agreement – Pre-deposit clause – S.K. Jain’s case and ICOMM Tele Limited ’s case where substantive challenges made to the pre-deposit clause , if any direct conflict between the said decisions of this Court: Held: There is no conflict between S.K. Jain’s case and ICOMM Tele Limited’s case, as the relevant arbitration clauses that fell for the consideration of this Court in both the cases stood completely on a different footing. [Para 61]
Arbitration and Conciliation Act, 1996 – s. 11(6) – Petition under, for appointment of arbitrator – Validity of the pre-deposit condition as contained in the arbitration clause – If it could be looked into and decided on the anvil of Article 14 of the C onstitution in the petition: Held: It cannot be said that this Court while considering an application u/s. 11(6) for the appointment of arbitrator should not testthe validity or reasonableness of the conditions stipulated in the arbitration clause on the touchstone or anvil of Article 14 of the Constitution – It would be too much to say that it is only the writ court in a petition u/Art. 226 that can consider whether a particular condition in the arbitration clause is arbitrary – Concept of “party autonomy” cannot be stretched to an extent where it violates the fundamental rights under the Constitution – For an arbitration clause to be legally binding it has to be in consonance with the “operation of law” which includes the Grundnorm-the Constitution – There can be no consent against the law and there can be no waiver of fundamental rights. [Para 70, 71, 84, 85] Arbitration and Conciliation Act, 1996 – s. 11(6) – Appointment of an arbitrator – Arbitration Clause of the Contract empowering the Principal Secretary/Secretary (Irrigation) to appoint an arbitrator of his choice, if covered by the decision of this Court in Perkins Eastman’s case: Held: If circumstances exist giving rise to justifiable doubts as to the independence and impartiality of the person nominated or if other VIDYUT NIGAM LTD.
circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else – On facts, the condition contained in Clause 55 of the GCC as regardsthe stipulation empowering the Principal Secretary (Irrigation) Government of Uttarakhand to appoint a sole arbitrator is ignored and proceed to appoint an independent arbitrator. [Para 87, 102]
s. 12(5) – Neutrality of Arbitrators:
Held: T erm “neutrality” used is relatable to impartiality and independence of the arbitrators,without any bias towards any of the parties – Sub-section (5) of s. 12 lays down that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject-matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator – In suchan eventuality, when the arbitration clause finds foul with the amended provisions, the appointment of an arbitrator would be beyond pale of the arbitration agreement, empowering the court to appoint such arbitrator(s) as may be permissible – That would be the effect of the non obstanteclause contained in s. 12(5) and the other party cannot insiston appointment of the arbitrator in terms of the arbitration agreement. [Para 90, 91] Jurisprudence – Kelson’s Pure Theory of Law on the basic norm – Application of “Grundnorm” in India:
Held: In the context of the Arbitration Agreement, the layers of the Grundnorm as per Kelsen’s theory would be in the following hierarchy-Constitution of India; Arbitration and Conciliation Act, 1996 & any other Central/State Law; and Arbitration Agreement entered into by the parties in light of s. 7 of the Arbitration and Conciliation Act, 1996 – Thus, the Arbitration Agreement has to comply with the requirements of the following and cannot fall foul of s. 7 of the Arbitration and Conciliation Act; any other provisions of the Arbitration and Conciliation Act, 1996 & Central/State Law; and the Constitution of India – Arbitration and Conciliation Act, 1996 – Constitution of India .[Paras 78,81,82]
Doctrines/Principles – Doctrine of unconscionability – Discussed. [Para 95-101]
LIST OF CITATIONS AND OTHER REFERENCES
Perkins Eastman Architects DPC and Another v. HSCC (India) Limited (2020) 20 SCC 760; ICOMM Tele Limited v. Punjab State Water Supply and Sewerage Board and Another (2019) 4 SCC 401: [2019] 2 SCR 984; Iron & Steel Co. Ltd. v. Tiwari Road Lines (2007) 5 SCC 703: [2007] 6 SCR 156; National Highways Authority of India and Another v. Bumihiway DDB Ltd. (JV) and Others (2006) 10 SCC 763: [2006] 6 Suppl. SCR 586; Yash with Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Another (2006) 6 SCC 204: [2006] 3 Suppl. SCR 96; S.K. Jain v. State of Haryana and Another (2009) 4 SCC 357: [2009] 2 SCR 1080; State of West Bengal and Others v. Associated Contractors (2015) 1 SCC 32: [2014] 10 SCR 426; Duro Felguera, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729: [2017] 10 SCR 285; Vidya Drolia and Others v. Durga Trading Corporation (2021) 2 SCC 1: [2020] 11 SCR 1001; Pravin Electricals Private Limited v. Galaxy Infra and Engineering Private Limited (2021) 5 SCC 671: [2021]
1 SCR 1162; Sanjiv Prakash v. Seema Kukreja and Others (2021) 9 SCC 732; Indian Oil Corporation Limited v. NCC Limited (2023) 2 SCC 539; Bharat Sanchar Nigam Limited and Another v. Nortel Networks India Private Limited (2021) 5 SCC 738: [2021] 2 SCR 644; Secunderabad Cantonment Board v. B. Ramachandraiah and Sons (2021) 5 SCC 705: [2021] 3 SCR 68; B and T AG v. Ministry of Defence 2023 SCC OnLine SC 657; Municipal Corpn., Jabalpur And Others V. Rajesh Construction Co. (2007) 5 SCC 344: [2007] 5 SCR 137; Lite Bite Foods Pvt. Ltd. v. Airports Authority of India reported in 2020 SCC OnLine Ker 4736, The Assan Co-Op. L & C Society v. Haryana Vidyut Prasaran Nigam Ltd., ARB-127-2019 (Section
11 Petition); CWP-13539-2021 (Civil Writ Petition); Garg and Company v. State of Haryana & Ors., CWP Nos. 21840 of 2020, 21857 of 2020 and 21858 of 2020 (O&M); Brij Gopal Construction Co. Pvt. Ltd. v. Haryana Shehri Vikas Pradhikaran, CWP-14587-2022 (O&M); Bathinda Railway Transhipment Cooperative L&C Society Ltd. v. Punjab Mandi Board & Ors., Civil Writ Petition No. 28981 of 2019 (O&M); Amazing India Contractors Pvt. Ltd. v. Airport Authority of India and Others reported in 2023 SCC OnLine Cal 1704, C.O. 66 of 2022; A.L. Kalra v. Project and Equipment Corporation of India Ltd. (1984) 3 SCC 316: [1984] 3 SCR 646; TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377: [2017] 7 SCR 409; Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited VIDYUT NIGAM LTD.
(2017) 4 SCC 665: [2017] 1 SCR 798; Squadron Leader H. S. Kulshrestha v Union of India 1999 SCC OnLine All 270; Abdur Sukur & Another v State of West Bengal & others 2019 SCC Online Cal 5455; Om Prakash Gupta v Hindustan Petroleum Corporation Ltd. & Anr. 2009 SCC OnLine Raj 1381; Sunil v State of M. P. & Another reported in 2016 SCC OnLine MP 8551; Government of Andhra Pradesh & Ors vs Smt. P. Laxmi Devi (2008)
4 SCC 720: [2008] 3 SCR 330; Olga Tellis and Others v. Bombay Municipal Corporation and Others (1985) 3 SCC 545: [1985] 2 Suppl. SCR 51; Datar Switchgears Ltd. v. Tata Finance Ltd (2000) 8 SCC 151; Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638; Union of India v. Bharat Battery Mfg. Co. (P) Ltd. (2007) 7 SCC 684: [2007] 8 SCR 993; Deep Trading Co. v. Indian Oil Corpn. (2013) 4 SCC 35: [2013] 2 SCR 470; Union of India v. Singh Builders Syndicate (2009) 4 SCC 523: [2009] 3 SCR 563; North Eastern Railway v. Tripple Engg. Works (2014) 9 SCC 288: [2014] 6 SCR 1143; Union of India and Others v. Uttar Pradesh State Bridge Corporation Limited (2015) 2 SCC 52: [2014] 13 SCR 1180 - referred to. Uber Technologies Inc., Uber Canada, Inc., Uber B.V. and Rasier Operations B.V. v. David Heller 2020 SCC OnLine Can SC 13; Patterson v. ITT Consumer Financial Corporation reported in 18 Cal. Rptr. 2d 563 (Cal. Ct. App. 1993); Vegter v. Forecast Financial Corporation reported in 2007 WL 4178947 – referred to.
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