- (1.) LEAVE granted.
(2.) CHALLENGE in this appeal is to the order passed by a Division Bench of the Punjab and Haryana High Court dismissing the writ petition filed by the appellant under Section 226 of the Constitution of India, 1950 ( in short the `constitution' ). 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 before the Arbitral tribunal (hereinafter referred to as the `tribunal' ). Background facts in a nutshell are as follows: the appellant is a contractor, who was allotted work of constructing haryana Government office building in Sector 17, Chandigarh. On 4-3-1992 an agreement was entered into between the parties, which incorporated sub-clause (7) of clause 25-A providing for arbitration in case of any dispute. Some differences between the parties regarding payment in respect of allotted work had arisen which resulted in referring the dispute to the three members Tribunal. The appellant filed his claim before the Tribunal. The respondent-State filed its objection to the claim by principally submitting that the contractor has to comply with the mandatory requirements of sub-clause (7) of Clause 25-A of the agreement dated 4. 3. 1992 which obliged the appellant to deposit 7% of the total claim made. The amount so calculated comes to Rs. 1,81,14,845/ -. The Tribunal sustained the objection and after placing reliance on a judgment of this court in Municipal Corporation, Jabalpur v. M/s Rajesh Construction company (JT (2007 (5) SC 450) has opined as follows: "in view of the decision of the Supreme Court, referred to above, as suggested on behalf of the respondent, the claimant is directed to deposit Rs. 1,81,14,815/- i. e 7% of the amount claimed in the statement of claim with the respondent and further arbitration proceedings would proceed only thereafter. The claimant was to comply with the above condition in agreement before steps could be taken to start arbitration proceedings. Hence, at this stage Arbitrators cannot assume jurisdiction to proceed with the arbitration. While allowing objection petition filed under Section 16 of the Arbitration and conciliation Act, it is so ordered as above, accordingly. Challenge before the High Court was that the Arbitration and conciliation Act, 1996 (in short the `act') does not permit the parties to contract out of the provisions of the Act, and therefore the prescription under Sub-Clause (7) of Clause 25-A of the agreement was in conflict with the provisions of Section 31 (8) read with Section 38 of the Act. It was submitted that the costs involved cannot be more than Rs. 20 crores and, therefore, the demand of Rs. 1. 81 crores which is 7% of the total amount claimed is wholly arbitrary, unreasonable and capricious. The High Court did not find any substance in the plea and held that the challenge to the legality of Sub-Clause (7) of Clause 25-A of the agreement is without any substance. Accordingly, the writ petition was dismissed. It is submitted by learned counsel for the appellant that Sub-clause (7)of Clause 25-A incorporated in the agreement was a result of the unequal bargaining power of the parties and since the Government is not required to make the deposit, it is unconscionable and, therefore, the High Court has erroneously dismissed the writ petition. Additionally, it is submitted that the true effect of Sections 31 (8) and 38 of the Act has not been kept in view. It is also submitted that the contract is in conflict with Sections 23 and 28 of the Indian Contract Act, 1872 (in short the `contract Act' ).
(3.) LEARNED counsel for the respondents on the other hand supported the judgment of the High Court. It is to be noted that the plea relating to unequal bargaining power was made with great emphasis based on certain observations made by this court in Central Inland Water Transport Corporation Ltd. and Anr. v. Brojo nath Ganguly and Anr. (1986 (3) SCC 156 ). The said decision does not in any way assist the appellant, because at para 89 it has been clearly stated that the concept of unequal bargaining power has no application in case of commercial contracts.;