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SUPREME COURT STRIKES DOWN PRE DEPOSIT CLAUSE TO INVOKE ARBITRATION

Clause 25(viii) of the Arbitration and Conciliation Act of 2015 states that a party needs to deposit 10% of the amount claimed before initiating the arbitration.  This particular clause of pre-deposit has been struck down in a recent judgment in ICOMM Tele Ltd v Punjab State Water Supply and Sewerage Board and Anr.

The Punjab State Water Supply and Sewage Board in 2008 invited a tender for work on a sewage treatment plant and the same tender was awarded to ICOMM Tele. The contract between the ICOMM Tele and the board contained an arbitration provision that is clause 25(viii) which states that 10% of the amount claimed has to be deposited before invoking arbitration.

After some time when the dispute arose between the parties, ICOMM asked the board to waive off the 10% deposit fee as it sometimes amounts more than a court fee. When the Board gave no response, the appellant filed a writ petition in the High Court of Punjab and Haryana where it was dismissed. With the dismissal in High court, the same was appealed to the Supreme Court.

After going through the case and hearing both the sides, the Supreme Court came up with the point that this pre-requisite which asks the party to deposit 10%, discourages them to opt for alternative dispute resolution routes as a matter it results in increasing the number of litigation cases. This clause has been scrapped so the whole purpose of the Arbitration and Conciliation Act, 1996 is not defeated.

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