M/S SANTOSH ASSOCIATE PRIVATE LIMITED VS. HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED - SLP(C) No. 31245/2025 - Diary Number 59205 / 2025 - 17-Aug-2026 (Uploaded On 17-08-2026 19:07:20)
2026 INSC 872
SLP (C) No. 31245 of 2025 Page 1 of 16
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2026
@ SLP (C) No. 31245 of 2025
M/S SANTOSH ASSOCIATE PRIV ATE LIMITED .…. APPELLANT
VERSUS
HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE
DEVELOPMENT CORPORATION LTD. ..…RESPONDENT
J U D G M E N T
MANMOHAN, J.
1. Leave granted.
2. The present Appeal has been filed challenging the judgment dated 12 th
September 2025 passed by the Commercial Court, Gurugram whereby the appeal
filed by the Appellant under Section 37(2) of the Arbitration & Conciliation Act,
1996 (‘the Act’) was dismissed. The Commercial Court affirmed the order dated
1st August 2025 passed by the Sole Arbitrator, who had allowed the Respondent’s
application under Section 16 of the Act and dismissed the Appellant’s claim in its
SLP (C) No. 31245 of 2025 Page 2 of 16
entirety for non -compliance with the contractual stipulation requiring a prior
security deposit of ten per cent (10%) of the claim amount.
F ACTUAL BACKGROUND
3. The Respondent invited e-tenders on 7th November 2016 for the execution
of storm water drainage systems and contingent works at Sector-35, Udyog Vihar,
Phase-VII, Gurugram. The Appellant participated in the bidding process and was
awarded the contract on 17th May 2017 for a total consideration of Rupees Five
Crore Fourteen Lakh Eleven Thousand Six Hundred and Thirty-Five Only
(₹5,14,11,635/-). The contract contained an arbitration clause, Clause 25-A(vii),
which mandated that a contractor, in the event of raising claims exceeding Rupees
One Lakh (₹1,00,000/-), must deposit ten per cent (10%) of the claim amount as
security prior to reference to arbitration. Clause 25 -A(vii) is reproduced
hereinbelow:
"It is also a term of this arbitration agreement that where the party invoking
arbitration is the contractor, no reference for arbitration shall be maintainable unless
the contactor furnishes to the satisfaction of the Executive Engineer In charge of the
work, a security deposit of a sum determined according to details given below and the
sum so deposited shall on the termination of the arbitration proceedings, be adjusted
against the cost, if any, awarded by the arbitrator against the claimant party, and the
balance remaining after such adjustment in the absence of any such cost being
awarded, the whole of the sum will be refunded to him within one month from the
date of the Award.”
Amount of Claims Rate of Security Deposit
i. For claims below Rs. 10,000/- 2% of the amount claimed
ii. For claims of Rs. 10,000/- 5% of the amount claimed
and above but below Rs. 1,00,000/-
iii. For claims of Rs.1,00,000 and above. 10% of the amount claimed….”
(emphasis supplied)
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4. During execution, the project encountered site-related challenges, resulting
in a significant reduction in scope. Consequently, the contract value was revised
to Rupees Two Crore Forty Lakh Ninety- Three Thousand and Fifty-Nine Only
(₹2,40,93,059/-) on 19th January 2021. Upon completion of the reduced scope,
disputes arose concerning final settlement of payments.
5. On 8 th August 2024, the High Court of Punjab and Haryana exercising
jurisdiction under Section 11(6) of the Act appointed Justice (Retd.) Surender
Gupta as Sole Arbitrator. At the threshold of proceedings, the Respondent filed
an application under Section 16 of the Act, contending that the reference was not
maintainable owing to the Appellant’s failure to furnish the mandatory ten per
cent (10%) deposit for claims exceeding Rupees One Lakh Only (₹1,00,000/).
6. The Sole Arbitrator upheld the Respondent’s objection and directed the
Appellant to deposit ten per cent (10%) of the claim amount within fifteen (15)
days. Upon refusal, the Appellant’s claim was dismissed in entirety.
7. Aggrieved by the same, the Appellant filed an appeal under Section 37(2)
of the Act before the Commercial Cou