M/s Santosh Associate Private Limited vs. Haryana State Industrial and Infrastructure Development Corporation Ltd.

In this case, a private contractor got into a payment dispute with a government corporation in Haryana. The contract had a clause saying that if the contractor wanted to start arbitration (an out-of-court dispute settlement process) for claims over Rs. 1 lakh, they had to first deposit 10% of their total claim as a refundable security deposit. When the contractor raised a claim of Rs. 1.77 crore, they were asked to deposit Rs. 17.70 lakh. Because they did not deposit this, their arbitration claim was dismissed. The contractor challenged this in the Supreme Court, arguing that requiring such a massive pre-deposit is unfair, one-sided, and violates their fundamental rights by blocking access to justice. They pointed out that a normal court case would cost much less in fees. The Supreme Court's two-judge bench observed that forcing a party to deposit a huge amount just to start arbitration can make the right to seek justice meaningless. It discourages people from resolving disputes. However, an earlier three-judge bench decision in the S.K. Jain case (2009) had allowed such refundable deposits. Due to court discipline, a smaller two-judge bench cannot cancel a larger bench's decision. Therefore, the judges requested the Chief Justice of India to set up a larger bench to finally decide if such pre-deposit clauses are legal and fair.

A contractor's payment dispute was dismissed because they failed to deposit 10% of their claim amount (Rs. 17.70 lakh) before starting the arbitration process, as required by the contract.

The Supreme Court referred the matter to the Chief Justice of India to set up a larger bench to decide if clauses requiring such pre-deposits are legal and fair.

Government contracts often contain heavy one-sided clauses that stop ordinary contractors from claiming their dues. This case will decide if citizens can be blocked from seeking justice through expensive pre-deposit clauses.