SC, in its decision dated March 11, 2019 in Icomm Tele Limited v. Punjab State Water Supply & Sewerage Board[1], had to judge the validity of an arbitration clause that provided for a deposit of 10% of the claim amount in a scheduled bank in the name of the arbitrator, as a condition for initiation of arbitration by a claimant, prescribed in tender documents of a State entity.

SC held that deterring a party from invoking the arbitration process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the courts, and would render the arbitral process ineffective and expensive. Accordingly, the impugned clause was held to be violative of Article 14 of the Constitution and was struck down to such extent. SC has also reiterated that terms of an invitation to tender are not open to judicial scrutiny, as they are in the realm of contract, unless they are arbitrary, discriminatory or actuated by malice.

[1] Icomm Tele Limited v. Punjab State Water Supply & Sewerage Board, Civil Appeal No. 2713 of 2019 (arising out of SLP (Civil) No. 3307 of 2018).