9911796707
TMI Blog2019 (3) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... s obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Further, it is also settled law that arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation. Any requirement as to deposit would certainly amount to a clog on this process. Also, it is easy to visualize that often a deposit of 10% of a huge claim would be even greater than court fees that may be charged for filing a suit in a civil court. Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Civil Writ Petition No. 4882 of 2017. The High Court in the impugned judgment merely followed its earlier judgment and dismissed this writ petition as well. 5. Learned counsel appearing on behalf of the appellant has argued that the arbitration clause contained in the tender condition amounts to a contract of adhesion, and since there is unfair bargaining strength between respondent No. 2 and the appellant, this clause ought to be struck down following the judgment in Central Inland Water Transport Corpn. v. Brojo Nath Ganguly, (1986) 3 SCC 156. He has also argued that arbitration being an alternative dispute resolution process, a 10% deposit would amount to a clog on entering the aforesaid process. Further, claims may ultimately be found to be untenable but need not be frivolous. Also, frivolous claims can be compensated by heavy costs. Further, even in the event that the award is in favour of the claimant, what can be refunded to him is only in proportion to the amount awarded and the rest is to be forfeited. This would also be a further arbitrary and highhanded action on the part of respondent No. 2. 6. Learned counsel appearing on behalf of the respondents has argued tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract is a commercial transaction (see paragraph 89 of the said judgment). In this view of the matter, the argument of the appellant based on this judgment must fail. 12. In S.K. Jain v. State of Haryana, (2009) 4 SCC 357, this Court dealt with an arbitration clause in an agreement which read as follows:- "11. Sub-clause (7) of Clause 25-A of the agreement reads as follows: "25-A. (7) It is also a term of this contract agreement that where the party invoking arbitration is the contractor, no reference for arbitration shall be maintainable unless the contractor furnishes to the satisfaction of the Executive Engineer in charge of the work, a security deposit of a sum determined according to details given below and the sum so deposited shall, on the termination of the arbitration proceedings be adjusted against the costs, if any, awarded by the arbitrator against the claimant party and the balance remaining after such adjustment in the absence of any such costs being awarded, the whole of the sum will be refunded to him within one month from the date of the award- Amount of claim Rate of security deposit 1 For claims below ₹ 10,000 2% of amount claimed 2 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has held that even within the contractual sphere, the requirement of Article 14 to act fairly, justly and reasonably by persons who are "state" authorities or instrumentalities continues. Thus, this Court held: "23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent… xxx xxx xxx 27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition: (a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable. xxx xxx xxx 53. From the above, it is clear that when an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he denial of equality to a comparative evaluation between two persons to arrive at a conclusion of discriminatory treatment. An action per se arbitrary itself denies equal of protection by law. The Constitution Bench pertinently observed in Ajay Hasia's case [[1981] 2 S.C.R. 79] and put the matter beyond controversy when it said 'wherever therefore, there is arbitrariness in State action whether it be of the legislature or of the executive or of an "authority" under Article 12, Article 14 immediately springs into action and strikes down such State action.' This view was further elaborated and affirmed in D.S. Nakara v. Union of India [[1983] 1 SCC 305]. In Maneka Gandhi v. Union of India [[1978] 2 S.C.R. 621] it was observed that Art. 14 strikes at arbitrariness in State action and ensure fairness and equality of treatment. It is thus too late in the day to contend that an executive action shown to be arbitrary is not either judicially reviewable or within the reach of Article 14." 19. We have thus to see whether clause 25(viii) can be said to be arbitrary and violative of Article 14 of the Constitution of India. 20. The first important thing to notice is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come to pass. Hence it is not merely a matter of discretion but a duty and obligation cast upon all courts to ensure that the legal system is not exploited by those who use the forms of the law to defeat or delay justice. We commend all courts to deal with frivolous filings in the same manner." (Emphasis supplied) 21. It is therefore always open to the party who has succeeded before the arbitrator to invoke this principle and it is open to the arbitrator to dismiss a claim as frivolous on imposition of exemplary costs. 22. We may also notice this Court's judgment in General Motors (I) (P) Ltd. v. Ashok Ramnik Lal Tolat, (2015) 1 SCC 429, that punitive damages follow when a court is approached with a frivolous litigation. This court held:- "16. We proceed to deal with the issue of correctness of finding recorded by the National Commission for awarding punitive damages. Before doing so, we may notice that the respondent complainant appearing in person, in his written submissions has raised various questions, including the question that the appellant should be asked to account for the proceeds of the vehicles sold by it. Admittedly, the vehicle in question has been ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wholly arbitrary, being not only excessive or disproportionate but leading to the wholly unjust result of a party who has lost an arbitration being entitled to forfeit such part of the deposit as falls proportionately short of the amount awarded as compared to what is claimed. 24. Further, it is also settled law that arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation. Any requirement as to deposit would certainly amount to a clog on this process. Also, it is easy to visualize that often a deposit of 10% of a huge claim would be even greater than court fees that may be charged for filing a suit in a civil court. This Court in State of J&K v. Dev Dutt Pandit, (1999) 7 SCC 339, has held:- "23. Arbitration is considered to be an important alternative disputes redressal process which is to be encouraged because of high pendency of cases in the courts and cost of litigation. Arbitration has to be looked up to with all earnestness so that the litigant public has faith in the speedy process of resolving their disputes by this process. What happened in the present case is certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding arbitration, legislature came up with legislation which is known as Arbitration and Conciliation Act, 1996. In order to make arbitration process more effective, the legislature restricted the role of courts in case where matter is subject to the arbitration. Section 5 of the Act specifically restricted the interference of the courts to some extent. In other words, it is only in exceptional circumstances, as provided by this Act, the court is entitled to intervene in the dispute which is the subjectmatter of arbitration. Such intervention may be before, at or after the arbitration proceeding, as the case may be. In short, court shall not intervene with the subject-matter of arbitration unless injustice is caused to either of the parties." 27. Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective and expensive. 28. For all these reasons, we strike down clause 25(viii) of the notice inviting tender. This clause being severable from the rest of clause 25 will not affect the remai ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
