- Indian Supreme Court strikes down pre-deposit requirement in arbitration agreement (M/S Icomm Tele v Punjab State Water Supply & Sewerage Board)
- What are the key implications of this decision?
- What was the background?
- Contractor’s submissions
- State Board’s submissions
- What did the Indian Supreme Court decide?
- Violation of Article 14
- Deterring a party from invoking arbitration is contrary to the object of de-clogging the court system
Arbitration analysis: The Indian Supreme Court (the Court) held as arbitrary and unconstitutional, an arbitration clause mandating a contractor of a State’s Water Supply and Sewerage Board (the State Board) to furnish a pre-deposit of 10% of the amount of its claim in arbitration at the time of invocation of arbitration. In doing so, the Court re-affirmed the primary purpose of arbitration as ‘de-clogging the Court system.’ The Court held that such a pre-deposit clause was itself a ‘clog’ on entering the arbitral process and would render the same impermissibly ‘ineffective and expensive.’ Siddharth Ratho, Senior Member and Moazzam Khan, head of the International Dispute Resolution Practice at Nishith Desai Associates consider the decision.
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