Does an arbitration clause requiring only the party invoking arbitration to furnish a pre-deposit of a percentage of the claim amount, before any determination of frivolousness, raise a serious question of arbitrariness under Article 14 of the Constitution?

On the reasoning in ICOMM Tele Ltd., a stipulation mandating a pre-deposit of ten per cent of the claim amount, prior to any determination of frivolousness, lacked a direct nexus with the object of curbing frivolous claims and was therefore arbitrary — but this stands in tension with the three-Judge Bench in S.K. Jain, which had earlier upheld a similarly structured deposit condition as the balancing factor to prevent frivolous and inflated claims.

Arbitration and Conciliation Act, 1996 — Section 37(2), Section 16, Section 18 — Article 14 of the Constitution of India — pre-deposit clause — arbitrariness — pre-deposit condition — frivolous claims — direct nexus — Held: A stipulation mandating a pre-deposit of a percentage of the claim amount as a precondition to invoking arbitration, imposed before any determination of frivolousness, lacks a direct nexus with the object of curbing frivolous claims and stands on the reasoning in ICOMM Tele Ltd. as arbitrary — a view that stands in tension with the three-Judge Bench in S.K. Jain, which upheld a similarly structured deposit as a legitimate balancing factor. (¶21–22) judicial discipline — precedent — Bench of lower strength — reference to larger Bench — Held further: A Bench of lower strength that doubts the correctness of a judgment of a Bench of larger strength cannot itself disagree with that view; it must request that the matter be placed before a Bench of greater strength through the Chief Justice of India. (¶25–26, ¶30–31) right to sue — Section 28, Indian Contract Act, 1872 — arbitration as exception, not substitute — Held further: The right to sue inheres in every individual save where expressly barred by statute; arbitration remains a statutory exception to litigation in courts, not its substitute, and a pre-deposit condition cannot be so onerous as to render the right to sue illusory or nugatory at the threshold. (¶27–29) reference to larger Bench — questions formulated — no final decision on merits — Held further: Without deciding the correctness of S.K. Jain itself, the Court formulated six questions on the validity of arbitration pre-deposit clauses and directed the Registry to place the appeal before the Chief Justice of India for listing before a larger Bench. (¶30–33)

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