S.K. JAIN. versus STATE OF HARYANA AND ANR.

Citation: [2009] 2 S.C.R. 1080 · Decided: 23-02-2009 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2009f2 S.C.R. 1080 
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S.K. JAIN. 
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STATE OF HARYANA AND ANR. 
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Civil appeal No .. 1156 of 2009 
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FEBRUARY 23, 2009· 
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(DR. ARIJIT PASAYAT, V.S. SIRPURKAR AND ASOK 
) 
. KUMAR GANGULY, :JJ) 
Arbitration and Conciliation Act, 1996 : 
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ss. 31 (8) and 38 - Arbitration agreement requiring the 
contractor to deposit, as security, 7% of amount claimed ....;, 
HELD: Provisions of ss. 31(8) and 38 would operate in absence 
of agreement with regard to cost, but cannot be pressed into 
service to get over the agreement - High Court rightly held 
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that contractor was required to make the deposit. 
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The respondent-Government allotted to the appellant 
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contractor the work of constructing its office building.The 
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dispute having arisen between the parties, the appellant 
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inv.pked the arbitration clause of the agreement. The 
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E respondent raised objection to maintainability· of 
arbitration proceedings for failure of the appellant to 
deposit 7% of the amount claimed, in terms of the 
arbitration clause. The arbitration tribunal sustained the 
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objection. The appellant approached the High Court 
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contending that the arbitration clause with a requirement 
of security deposit on the part of the contractor was in 
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conflict with the provisions. of ss. 31 (8) and 38 of the 
Arbitration and Conciliation Act, 1996. The High Court 
dismissed the writ petition. 
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In the appeal filed by the contractor, it was contended 
for the appellant that the relevant arbitration clause of the 
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agreement requiring the contractor to make the deposit 
was a result of unequal bargaining power of the parties 
and since the Government was not to make the deposit, it 
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1080 
S.K. JAIN V. STATE ·OF HARYANA AND ANR. 
1081 
was unconscionable and as such the High Court erred in A 
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dismissing the writ petition. It was alternatively contended 
that. there ought to be a cap as regards the quantum of 
the deposit. 
Dismissing the appeal, the Court 
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HELD : 1.1 A bare perusal of ss.31 (8) and 38 of the 
Arbitration and Conciliation Act, 1996 clearly shows that 
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the provision is to operate in the absence of agreement 
with regard to cost. It cannot be pressed into service to 
get over the arbitration clause of the agreement. [para 10) c 
[1088-G] 
Assistant Excise Commissioner and ors. Vs. Issac Peter 
and Ors. 1994(4) sec 104 - relied on. 
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Central Inland Water Transport Corporation Ltd. And Anr. D 
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Vs. Brojo Nath Ganguly and Anr. (1986) 3 SCC 156 - held 
inapplicable. 
Central Bank of India Ltd. Vs. Hartfor Fire Insurance Co. 
Ltd. AIR 1965SC1288; and General Assurance Society Ltd. 
Vs. Chandmull Jain and Anr. AIR 1966 SC 1644 - referred to. E 
1.2 The requirement of deposit is rightly structured 
on ~he basis of .the quantum involved. Higher the claim, 
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the higher is the amount of fee chargeable .. There is a logic 
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in it. It is the balancing factor to prevent frivolous and 
inflated claims. [para 12] [1091-F] 
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Case Law Reference 
(1986) 3 sec 156 
held inapplicable para 6 
AIR 1965 SC 1288 
referred to 
para 7 
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.or f, 
AIR 1966 SC 1644 
referred to 
para 8 · 
1994(4) sec 104 
relied on 
para 11 
CIVllL APPELLATE JURISDICTION : Civil Appeal No. 
1156 of 2009 
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1082 
SUPREME COURT REPORTS 
[2009] 2 S.C.R. 
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From the Judgement and Order dated 17.08.2007 of the 
High Court of Punjab & Haryana in Civil Writ Petition No. 12719 
.,., 
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of 2007. 
Puneet Bali, Rohit Sharma, Jagjit Singh Chhabra, for the 
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Appellant. 
An up. G. Chaudhary, June Chaudhary, Manjit Singh, 
Harikesh Singh, T.V. George, for the Respondents. 
The Judgement of the Court was delivered by 
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DR. ARIJIT PASAYAT, J. 
1. Leave granted. 
2. Challenge in this appeal is to the order passed by a 
Division Bench of the Punjab and Haryana High Court 
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dismissing the writ petition filed by the appellant under Section 
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226 of the Constitution of India, 1950 (in short the 'Constitution'). 
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Prayer was to quash the Memo No.428 dated 10.1.2007 
directing the appellant to deposit the amount of about Rs.1.81 
crores which. is ·7% of the total amount claimed by the appellant 
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before the Arbiral Tribunal (hereinafter referred to as the 
'Tribunal'). 
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3. Background facts in a nutshell are as follows: 
·The appellant is a contractor; who was allotted work of 
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constructing Haryana Go_vernment office building in Sector 17, 
Chandigarh. On 4-3-1992 an

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