The Leaflet | Does Article 14 Belong in Arbitration? The Pre-Deposit Reference in Santosh Associate

LAST MONTH, the Division Bench of Justices Manoj Misra and Manmohan of the Supreme Court pronounced its judgment in Santosh Associate (P) Ltd. v. Haryana SIIDC Ltd. (2026) in which it made reference to a larger bench the question of whether an arbitration clause that requires a refundable pre-deposit to be made by a claimant as a precondition to arbitration is legally valid. The reference was necessitated by the fact that the Division Bench expressed disagreement with a decision of a full bench (3 judges) of the Supreme Court in S.K. Jain v. State of Haryana (2009), where a similar clause was upheld as valid. The reference is a welcome development inasmuch as it will clear the ambiguity around such pre deposit clauses. However, the earlier line of cases which test the validity of such pre-deposit clauses against constitutional standards in what should be a purely an Arbitration Act and/or private law issue, raises important questions that a larger bench would do well to address. 

There is no doubt that the grant of tenders by public authorities can be scrutinised by courts, as it is essentially a public and sovereign function of the State. However, it would be better if the State were treated as any other private party once a public works contract is entered into, and its performance and the disputes arising from it come to be adjudicated, much like SK Jain held.