ICOMM Tele Ltd Vs. Punjab State water Supply Board [2019 SCC 391]
Facts of the Case
The Punjab Water Supply sewage Board issued a tender for inviting extension and expansion of water supply, sewage system, and sewage treatment plant for the benefit and welfare of the nearby villagers. The appellant company was awarded the tender. A contractual agreement was entered between both the parties. The arbitration was defined under Clause 25(viii) of the notice inviting tender.
To avoid frivolous claims and make it an essential form of contract, the party invoking arbitration must specify the dispute based on the facts and circumstances and also stating the amount claimed and shall furnish a “deposit at call” for ten percent of the amount claimed.
The Appellant sent a letter with regards to the appointment of the arbitrator and sought for waiving the ten percent deposit fee. After no such response, the Appellant filed a writ petition, being a civil writ petition before the Punjab and Haryana High Court. The writ petition was dismissed by the High Court stating that the tender cannot be considered to be arbitrary or unreasonable. Later, the aggrieved party approached the Supreme Court.
The apex court referred to the judgment of the case General Motors Ltd Vs. Ashok Ramnik Lal Tolat and observed that
- Scope of Arbitration clause 25 (viii)
- The initial deposit fee for the Arbitration process
The judgment of the Case
An important aspect covered from the case is found that litigation is not allowed for frivolous, exemplary damage, or punitive damage. Therefore, a “deposit at call” of 10 percent of the amount has to be claimed. A 10% deposit is necessary to be made before determination that a claim made by the party invoking arbitration is frivolous. An important aspect to be considered in mind in deciding such a clause will be arbitrary in the sense which is biased, unjust, unfair which no reasonable man agrees to. A claim for the case is dismissed and may not be frivolous. As it is clear from the fact that when three arbitrators are appointed to settle the dispute there can be the majority and minority awards, making it obvious that there can be two or more possible or even plausible views which could lead to dismissal or allowed based on the merits and not because it is frivolous. Also, even when a claim is said to be correct and justified, the amount need not be refunded to the claimant. This would make the entire clause wholly arbitrary being not only unfair and misappropriate but also a biased and unjust decision to the claimant party who lost the arbitration and entitled to forfeit a part of the deposit that falls proportionately short in comparison to what is claimed and what is awarded.
Further, it was also observed that Arbitration is considered to be a settled law which an important dispute resolution mechanism for settling conflicts between two parties. Arbitration is encouraged due to the high pendency of cases in courts and also the high cost of Litigation. It can also be analyzed that a deposit of ten percent of the claim will be greater than the court fees for filing the case.
 (2015) 1 SCC 429