The Supreme Court (SC), dealing with the issue of whether a condition precedent of pre-deposit for initiation of arbitration is violative of Art. 14 of the Constitution & whether this arbitrariness can be looked into by the Referral Court under Section 11(6) of the Arbitration & Conciliation Act, 1996 (A&C Act), has held that “for an arbitration clause to be legally binding it has to be in consonance with the “operation of law” which includes the Grundnorm i.e. the Constitution.” Therefore, even if a party has consented to the pre-deposit clause at the time of execution of the agreement Referral Court is empowered, while acting under Section 11(6) of the A&C Act, to test the arbitration agreement on the ground of arbitrariness under Art.14.
