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TMI Blog2023 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st Floor, Safdarjung Enclave, Delhi - 110029. 3. The respondent is a wholly owned corporation of the Government of Uttarakhand having its registered office at Maharani Bagh, GMS Road, Dehradun, Uttarakhand, India and is engaged in the business of operating hydro power plants in the State of Uttarakhand. 4. The petitioner entered into a contract with the Uttarakhand Project Development and Construction Corporation Limited (hereinafter referred to as "UPDCC") for "Providing consultancy services and preparation of modified comprehensive and bankable Detailed Project Report of Arakot Tiuni Hydro Electric Project on river Pabar in district Uttarkashi of Uttarakhand" dated 25.10. 2019 (Tender Reference No. 01/DGM/UPDCC/2018-19) (hereinafter referred to as, 'the Contract' or 'the Project'). The Project was valued at Rs. 1,39,45,000/- (Rupees One Crore Thirty-Nine Lac Forty-Five Thousand only) (hereinafter referred to as the "Contract Value"). The petitioner was to commence work on the date of the execution of the Contract, i.e., 25.10.2019 and complete the work within 24 months, i.e., by 25.09.2021. 5. The Schedule A to Clause 5 of the Special Conditions of Contract (SCC) (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed and how it has been calculated. Xxx xxx xxx CLAUSE-55: ARBITRATION: (a) All question and disputes relating to the meaning of the specification design, drawing and instructions herein and as to the quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing, whatsoever in any way arising out of or relating to the contract, designs, drawings, specification, estimates instructions, orders or these condition or otherwise concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof, shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made the under and for the time being in force, shall apply to the arbitration proceedings. However, the Party initiating the arbitration claim shall have to deposit 7% of the arbitration claim in the shape of Fixed Deposit Receipt as security deposit. (b) On submission of claims the Arbitrator shall be appointed as per the following procedure: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is requested to intimate its confirmation for the aforementioned nominee or provide an alternative name for appointment of the Ld. Sole Arbitrator, who shall be appointed only by mutual consent after the Claimant's written approval. 28. The Respondent is requested to intimate its approval to the nominee proposed by the Claimant, within 15 (fifteen) days of the receipt of this Notice, failing which the Claimant will exercise all rights under applicable law for the commencement of arbitration proceedings." 9. It is the case of the petitioner that instead of appropriately responding to the aforesaid notice of arbitration, the respondent issued a letter dated 09.05.2022, terminating the Contract alleging non-compliance of work and nonfulfilment of the contractual obligation. 10. In such circumstances referred to above, the petitioner has preferred the present application for appointment of an arbitrator invoking Section 11(6) of the Act 1996. SUBMISSIONS ON BEHALF OF THE PETITIONER 11. Mr. Sidhant Goel, the learned counsel appearing for the petitioner submitted that the case on hand, is one of "international commercial arbitration" within the meaning of Section 2(f) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ighways Authority of India and Another v. Bumihiway DDB Ltd. (JV) and Others reported in (2006) 10 SCC 763 and Yashwith Constructions (P)Ltd. v. Simplex Concrete Piles India Ltd. and Another reported in (2006) 6 SCC 204. 18. He submitted that the respondent cannot be said to have failed to act as required under the prescribed procedure. He invited the attention of a three- Judge Bench of this Court to a decision in the case of S.K. Jain v. State of Haryana and Another reported in (2009) 4 SCC 357, wherein a similar clause requiring a security deposit of certain percentage of the claim amount was held to be valid. He argued that the reliance on the decision of this Court in the case of ICOMM Tele Limited (supra) by the petitioner is completely misconceived as the relevant arbitration clause therein was quite differently worded vis-a-vis the pre-deposit clause provided in the case of S.K. Jain (supra). 19. He submitted that in the absence of any clause to the contrary, the security deposit is refundable by virtue of being only a deposit for "security". The object of such a clause is to ensure that only valid and bona fide claims are made by the parties, and that the project is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to above, the learned counsel appearing for the respondent prayed that there being no merit in the petition, the same be rejected. ANAYLSIS 24. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following issues fall for the consideration of this Court: (i) Whether the dictum as laid down in ICOMM Tele Limited (supra) can be made applicable to the case in hand more particularly when Clause 55 of the General Conditions of Contract provides for a pre-deposit of 7% of the total claim for the purpose of invoking the arbitration clause? (ii) Whether there is any direct conflict between the decisions of this Court in S.K. Jain (supra) and ICOMM Tele Limited (supra)? (iii) Whether this Court while deciding a petition filed under Section 11(6) of the Act 1996 for appointment of a sole arbitrator can hold that the condition of pre-deposit stipulated in the arbitration clause as provided in the Contract is violative of the Article 14 of the Constitution of India being manifestly arbitrary? (iv) Whether the arbitration Clause No. 55 of the Contract empowering the Principal Secretary/Secretary (Irrigation), State of Ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23-10-2015) and even post the amendments vide Act 33 of 2019 (with effect from 9-8-2019), is no longer applicable. 154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted. 154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of "second look" on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act. 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxx xxx 138...On the other hand, issues relating to contract formation, existence, validity and non-arbitrability would be connected and intertwined with the issues underlying the merits of the respective disputes/claims. They would be factual and disputed and for the Arbitral Tribunal to decide. 139. We would not like to be too prescriptive, albeit observe that the court may for legitimate reasons, to prevent wastage of public and private resources, can exercise judicial discretion to conduct an intense yet summary prima facie review while remaining conscious that it is to assist the arbitration procedure and not usurp jurisdiction of the Arbitral Tribunal. Undertaking a detailed full review or a long-drawn review at the referral stage would obstruct and cause delay undermining the integrity and efficacy of arbitration as a dispute resolution mechanism. Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court's challenge is to find the right amount of and the context when it would examine the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondent that the dispute is ex facie non-arbitrable. The case put up by the respondent is that there is definitely an arbitrable dispute and the same should be referred to the arbitral tribunal, however, the petitioner should abide by Clause 55 of the Contract. 31. In the case on hand, we are concerned first with the validity of the arbitration clause which provides for 7% pre-deposit of the total claim for the purpose of invoking arbitration and secondly, the discretion vested with the Principal Secretary/Secretary (Irrigation) to appoint a sole arbitrator. RE: ISSUE NOS. 1 AND 2 32. Before, we proceed to answer the issues framed by us, we must look into few decisions referred to by us as aforesaid. S.K. JAIN V. STATE OF HARYANA 33. In S.K. Jain (supra), the challenge was to an order passed in a writ petition filed by the appellant, wherein it had prayed to quash a memo directing it to deposit 7% of the claimed amount before the arbitral tribunal. The civil appeal was dismissed by a three-Judge Bench of this Court and the memo was accordingly upheld. 34. In S.K. Jain (supra), the relevant arbitration clause reads as under: "25-A. (7) It is also a term of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) whatsoever, in any way arising out or relating to the contract, designs, drawings, specifications, estimates concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the City Engineer in writing for his decision, within a period of 30 days of such occurrence. Thereupon the City Engineer shall give his written instructions and/or decisions within a period of 60 days of such request. This period can be extended by mutual consent of the parties. Upon receipt of written instructions of decisions, the parties shall promptly proceed without delay to comply with such instructions or decisions. If the City Engineer fails to give his instructions or decisions in writing within a period of 60 days or mutually agreed time after being requested if the parties are aggrieved against the decision of the CE, the parties may within 30 days prefer an appeal of MPL Com who shall afford an opportunity to the parties of being heard and to offer evidence in support of his appeal. MPL Com will give his decision within 90 days. If any party is not satisfied with the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itrate the dispute, the party aggrieved may file an appeal to MPL Com, failing which, the Corporation shall constitute an Arbitration Board to resolve the disputes in the manner indicated in clause 29. However, before doing so, the party invoking arbitration clause is required to furnish security of a sum to be determined by the Corporation. 21. In this case, admittedly, the security has not been furnished by the respondent to the Corporation. We, in fact, asked Mr Sharma, appearing on behalf of the respondent to ascertain on the date of the hearing of the appeal, whether the security deposit was made or not. On instruction, Mr Sharma informed us that such security has not yet been deposited. Such being the position even today, we hold that the obligation of the Corporation to constitute an Arbitration Board to resolve disputes between the parties could not arise because of failure of the respondent to furnish security as envisaged in clause 29(d) of the contract. Therefore, we are of the opinion, that on account of nonfurnishing of security by the respondent, the question of constituting an Arbitration Board by the Corporation could not arise at all. Accordingly, we hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im in proportion to the amount awarded with reference to the amount claimed and the balance, if any, shall be forfeited and paid to the other party." (Emphasis supplied) 39. In 2008, the Punjab State Water Supply & Sewerage Board, Bhatinda issued notice inviting tender for extension and augmentation of water supply, sewerage scheme, pumping station and sewerage treatment plant for various towns mentioned therein on a turnkey basis. On 25.09.2008, the appellant company, which was involved in civil/electrical works in India, was awarded the said tender after having been found to be the best suited for the task. On 16.01.2009, a formal contract was entered into between the appellant and respondent No. 2 therein. 40. On 08.03.2017, the appellant approached the High Court of Punjab and Haryana challenging the validity of this part of the arbitration clause by filing Civil Writ Petition No. 4882 of 2017. The High Court merely followed its earlier judgment and dismissed the writ petition as well. The matter was carried to this Court. 41. The relevant observations made by this Court are as under: "12. In S.K. Jain v. State of Haryana [(2009) 4 SCC 357 : (2009) 2 SCC (Civ) 163], th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a "deposit-at-call" of 10 per cent of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10 per cent deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Indeed, a claim may be dismissed but need not be frivolous, as is obvious from the fact that where three arbitrators are appointed, there have been known to be majority and minority awards, making it clear that there may be two possible or even plausible views which would indicate that the claim is dismissed or allowed on merits and not because it is frivolous. Further, even where a claim is found to be justified and correct, the amount that is deposited need not be refunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrator within 30 days of receipt of the application, subject to fulfilling, the pre-requisites for appointment of the Arbitrator as laid hereunder:- i. The case shall be referred to the Sole Arbitrator as per AA1 delegation of powers in vogue subject to the condition that the Concessionaire shall have to deposit the disputed amount with AA1 as condition precedent and the consent shall have to be obtained from the concessionaire for acceptance of the recommendations of Arbitrator before making reference to the Arbitrator for adjudication of dispute." (Emphasis supplied) 44. The relevant extract from the Judgment reads thus: "11...the conditions in clause 5.15 of the RFP, that require the petitioner to choose an Arbitrator from among a panel suggested by the respondent, as also the condition that requires the petitioner to make a pre-deposit of amounts as a condition for invoking the arbitration, would fall foul of the law declared by the Supreme court in the decisions reported as Perkins Eastman Architects DPC v. HSCC (India) Ltd. - [2019 SCC OnLine SC 1517] and ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board - [(2019) 4 SCC 401] respectively. I am not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f either party, including the termination of the contract by either party and correctness thereof at any stage whatsoever it shall be referred to arbitration of MD/Chief Engineer of HVPNL or his nominee not below the rank of Superintending Engineer subject to the following conditions:- xxx xxx xxx 7. In case the party invoking the arbitration is the contractor, the reference for arbitration shall be maintainable only after the contractor furnishes to the satisfaction of Engineering-In Charge a case security fee deposited @ 3% of the total amount claimed by him. The sum so deposited by the contractor shall on the termination of the arbitration proceedings be adjusted against the cost and any amount awarded against the contractor. The remaining amount shall be refunded to the contractor with-in one month from the date of the award." (Emphasis supplied) 47. The relevant observations from the Judgment are as under: "23. Resultantly, the issue of pre-deposit now arises. Counsel for the petitioner has heavily relied upon the judgment passed in M/s ICOMM Tele Ltd. (supra), which has been rightly distinguished by the learned counsel for the respondent ... 24. Thereafter, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls 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: Sr. No. Amount Claims Rate of Security Deposit i. For claims below Rs. 10,000/ 2% of amount claimed ii. For claims of Rs. 10,000/- & above but below Rs. 1,00,000/- 5% of amount claimed iii. For claims of Rs. 1,00,000/- and above 7.5% of amount claimed" (Emphasis supplied) 50. The relevant observations from the Judgment are as under: "All the questions and grounds sought to be raised by learned counsel for the petitioner are succinctly answered by the Hon'ble Supreme Court in M/s. ICOMM Tele Limited's case (supra) itself while discussing S.K. Jain's case (supra). It is obvious that a clear cut distinction has been made in respect to the type of pre-deposit clause. Discussion of the judgment of S.K. Jain's case (supra) makes it crystal clear that such like clauses, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnishes to the satisfaction of the 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 or whole sum 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 amount claimed ii) For claims of Rs. 10,000/- & above & below Rs. 1,00,000/- 5% of amount claimed iii) For claims of Rs. 1,00,000/- 7.5 % of amount claimed and above" 53. The relevant observations from the Judgment are as under: "A similar controversy was sought to be raised in CWP-21840- 2020 and other connected writ petitions, which have been dismissed on 08.04.2022. Question raised for adjudication in the said writ petitions was also whether the clause in question requiring a pre-deposit for invocation of Arbitration is unreasonable, unconscionable and liable to set aside. Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount in deposit till the announcement of the award. In the event of an award in favour of the claimant, the deposit shall be refunded to him in proportion to the amount awarded with respect to the amount claimed and the balance, if any, shall be forfeited and paid to the other party." (Emphasis supplied) 56. The relevant observations from the Judgment are as under: "10. From a perusal of the aforesaid two clauses (supra) i.e. one that has been assailed by the petitioner and the other that has been quashed by the Supreme Court in juxta position makes it absolutely clear that they are identical containing the same stipulations. The Supreme Court in the case of M/s Icomm Tele Ltd. (supra) after considering the validity of the said clause has held as under:- "28. For all these reasons, we strike down clause 25(viii) of the notice inviting tender. This clause being severable from the rest of clause 25 will not affect the remaining parts of Clause 25. The judgment of the High Court is set aside and the appeal allowed." 11. In the light of the aforesaid decision rendered by the Supreme Court in M/s Icomm Tele Ltd. (supra), which has considered absolutely an identical clause c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the Arbitrator appointed as aforesaid is or has been an employee of the Authority and the appointment of the Arbitrator will not be challenged; or be open to Question in any Court of Law, on this account." 59. The relevant observations from the Judgment are as under: "25. ... That part of Clause 33 of the agreement between the parties providing for constitution of a Dispute Resolution Committee with a stipulation that before availing of dispute resolution, the disputed amount has to be deposited, is invalid and contrary to law for more than one reason. The first and foremost is that it fetters the right of the petitioner, a party to the arbitration agreement to avail of arbitration which is a statutory right. [ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board reported in (2019) 4 SCC 401]. Secondly, it is most ambiguous. If the petitioner is making a claim which is then and there disputed by the respondent, why should the petitioner, being the claimant be asked to deposit the disputed amount? When the petitioner is making a claim against the respondent, it is unable, at that point of time, to know whether the whole claim or part of it would be admitted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst costs if any awarded by the arbitrator against the claimant party, and the balance remaining after such adjustment then be refunded to the party making the deposit. This clause is materially different from Clause 25(viii), which, as we have seen, makes it clear that in all cases the deposit is to be 10 per cent of the amount claimed and that refund can only be in proportion to the amount awarded with respect to the amount claimed, the balance being forfeited and paid to the other party, even though that other party may have lost the case. This being so, this judgment is wholly distinguishable and does not apply at all to the facts of the present case." (Emphasis supplied) 63. In para 16 of ICOMM Tele Limited (supra), the court ultimately considered whether Clause 25(viii) could be said to be arbitrary and violative of Article 14 of the Constitution of India. Para 16 reads thus: "16. Thus, it must be seen as to whether the aforesaid Clause 25(viii) can be said to be arbitrary or discriminatory and violative of Article 14 of the Constitution of India." 64. Thereafter, the Court proceeded to observe that Clause 25(viii) therein could not be said to be discriminatory as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Article 14 strikes at arbitrariness in executive/administrative action because any action that is arbitrary must necessarily involve the negation of equality. One need not confine the denial of equality to a comparative evaluation between two persons to arrive at a conclusion of discriminatory treatment. An action per se arbitrary itself denies equal of (sic) protection by law. The Constitution Bench pertinently observed in Ajay Hasia case [(1981) 2 SCR 79 : (1981) 1 SCC 722 : 1981 SCC (L&S) 258 : AIR 1981 SC 487 : (1981) 1 LLJ 103] and put the matter beyond controversy when it said "wherever therefore, there is arbitrariness in State action whether it be of the Legislature or of the executive or of an 'authority' under Article 12, Article 14 immediately springs into action and strikes down such State action". This view was further elaborated and affirmed in D.S. Nakara v. Union of India [(1983) 1 SCC 305 : 1983 SCC (L&S) 145 : (1983) UPSC 263 : AIR 1983 SC 130]. In Maneka Gandhi v. Union of India [ (1978) 2 SCR 621 : (1978) 1 SCC 248 : AIR 1978 SC 597] it was observed that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove." 68. We are of the view that Clauses 3 and 4 respectively as above relating to security deposit for performance and refund of the same has no nexus at all with the pre-deposit amount of 7% as stipulated in Clause 55 of the GCC. Such vague and ambiguous condition of 7% pre-deposit of the total claim makes the same more vulnerable to arbitrariness thereby violating Article 14 of the Constitution. Even otherwise, as explained in ICOMM Tele Limited (supra) if the claim of the petitioner herein is ultimately found to be frivolous the arbitral tribunal can always award costs in accordance with Section 31A of the Act 1996, which reads thus: "31A. Regime for costs.- (1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine- (a) whether costs are payable by one party to another; (b) the amount of such costs; and (c) when such costs are to be paid. Explanation.-For the purpose of this sub-section, "costs" means reasonable costs relating to- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings that appear vexatious can be handled by requiring security for costs and by suitable awards of costs. In England, courts have awarded full indemnity costs where a party improperly ignored arbitral jurisdiction (Hugh Beale, ed., Chitty on Contracts (33rd ed. 2018), vol. II, Specific Contracts, at para. 32-065; A. v. B. (No. 2), [2007] EWHC 54 (Comm.) : [2007] 1 All ER 633 (Comm.), at para. 15; Kyrgyz Mobil Tel Limited v. Fellowes International Holdings Limited, [2005] EWHC 1329 : 2005 WL 6514129 (Q.B.), at paras. 43-44). Further, if the party who successfully enforced an arbitration agreement were to bring an action, depending on the circumstances they might be able to recover damages for breach of contract, that contract being the agreement to arbitrate (Beale, at para. 32-052; West Tankers Inc. v. Allianz SpA, [2012] EWHC 854 (Comm.) : [2012] 2 All ER 395 (Comm.), at para. 77)." (Emphasis supplied) RE: ISSUE NO. 3 WHETHER THE VALIDITY OF THE PRE-DEPOSIT CONDITION AS CONTAINED IN CLAUSE 55 OF THE AGREEMENT CAN BE LOOKED INTO AND DECIDED ON THE ANVIL OF ARTICLE 14 OF THE CONSTITUTION IN A PETITION UNDER SECTION 11(6) OF THE ACT 1996? 70. The vociferous submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so." ( Emphasis supplied ) 74. In Perkins Eastman (supra), this Court held as under: "This application under Section 11(6) read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996 ("the Act") and under the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 ("the Scheme") prays for the following principal relief: "(a) appoint a sole arbitrator, in accordance with Clause 24 of the contract dated 22-5-2017 executed between the parties and the sole arbitrator so appointed may adjudicate the disputes and differences between the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only this, DMRC is also to nominate its arbitrator from the said list. Above all, the two arbitrators have also limited choice of picking upon the third arbitrator from the very same list i.e. from remaining three persons. This procedure has two adverse consequences. In the first place, the choice given to the opposite party is limited as it has to choose one out of the five names that are forwarded by the other side. There is no free choice to nominate a person out of the entire panel prepared by DMRC. Secondly, with the discretion given to DMRC to choose five persons, a room for suspicion is created in the mind of the other side that DMRC may have picked up its own favourites. Such a situation has to be countenanced. We are, therefore, of the opinion that sub-clauses (b) & (c) of Clause 9.2 of SCC need to be deleted and instead choice should be given to the parties to nominate any person from the entire panel of arbitrators. Likewise, the two arbitrators nominated by the parties should be given full freedom to choose the third arbitrator from the whole panel." (Emphasis supplied) 76. What is relevant to note in all the above referred decisions of this Court is the phrase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tha v Union of India reported in 1999 SCC OnLine All 270, the court held that 'According to the theory of the eminent jurist Kelson, in every country there is a hierarchy of laws, and the highest law is known as the grundnorm of law. In our country the grundnorm is the Constitution.' (ii) In another case of Abdur Sukur & Another v State of West Bengal & others reported in 2019 SCC Online Cal 5455, the court held that '...enshrined in the Constitution of India, which is the grundnorm of all Indian statutes.' (iii) In another case of Om Prakash Gupta v Hindustan Petroleum Corporation Ltd. & Anr. reported in 2009 SCC OnLine Raj 1381, it was again held that 'Since the limits have been defined by the Constitution, they are, in jurisprudential term, 'the grundnorm'.' (iv) In another case of Sunil v State of M. P. & Another reported in 2016 SCC OnLine MP 8551, it was again mentioned that, 'The Constitution of India is the grundnorm - the paramount law of the country. All other laws derive their origin and are supplementary and incidental to the principles laid down in the Constitution.' (v) In the case of Government of Andhra Pradesh & Ors vs Smt. P. Laxmi Devi reported in (2008) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reference to the contractual aspect of arbitration agreement is ingrained under Section 7 analysis. A mere agreement is not legally binding, unless it satisfies the core contractual requirements, concerning consent, consideration, legal relationship, etc." (Emphasis supplied) 84. The concept of "party autonomy" as pressed into service by the respondent cannot be stretched to an extent where it violates the fundamental rights under the Constitution. 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. It is the rule of law which is supreme and forms parts of the basic structure. The argument canvassed on behalf of the respondent that the petitioner having consented to the pre-deposit clause at the time of execution of the agreement, cannot turn around and tell the court in a Section 11(6) petition that the same is arbitrary and falling foul of Article 14 of the Constitution is without any merit. 85. It is a settled position of law that there can be no consent against the law and there can be no waiver of fundamental rights. The Constitution Bench of this Court speaking thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a mistake of law or otherwise, that he does not possess or will not enforce any particular fundamental right, cannot create an estoppel against him in that or any subsequent proceeding. Such a concession, if enforced, would defeat the purpose of the Constitution. Were the argument of estoppel valid, an all-powerful State could easily tempt an individual to forego his precious personal freedoms on promise of transitory, immediate benefits. Therefore, notwithstanding the fact that the petitioners had conceded in the Bombay High Court that they have no fundamental right to construct hutments on pavements and that they will not object to their demolition after October 15, 1981, they are entitled to assert that any such action on the part of public authorities will be in violation of their fundamental rights. How far the argument regarding the existence and scope of the right claimed by the petitioners is well-founded is another matter. But, the argument has to be examined despite the concession. 29. The plea of estoppel is closely connected with the plea of waiver, the object of both being to ensure bona fides in day-today transactions. In Basheshar Nath v. CIT [1959 Supp 1 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Explanation 2.-The disclosure shall be made by such person in the form specified in the Sixth Schedule.] (3) An arbitrator may be challenged only if- (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing." 89. The Amendment 2015 is also based on the recommendation of the Law Commission whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in government contracts which provide for arbitration by a serving employee of the department, are valid and enforceable. While the Supreme Court, in Indian Oil Corpn. Ltd. v. Raja Transport (P) Ltd. [Indian Oil Corpn. Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC 520 : (2009) 3 SCC (Civ) 460] , carved out a minor exception in situations when the arbitrator 'was the controlling or dealing authority in regard to the subject contract or if he is a direct subordinate (as contrasted from an officer of an inferior rank in some other department) to the officer whose decision is the subject-matter of the dispute' (SCC p. 533, para 34) and this exception was used by the Supreme Court in Denel (Proprietary) Ltd. v. Ministry of Defence [Denel (Proprietary) Ltd. v. Ministry of Defence, (2012) 2 SCC 759 : (2012) 2 SCC (Civ) 37 : AIR 2012 SC 817] and Bipromasz Bipron Trading Sa v. Bharat Electronics Ltd. [Bipromasz Bipron Trading Sa v. Bharat Electronics Ltd., (2012) 6 SCC 384 : (2012) 3 SCC (Civ) 702] , to appoint an independent arbitrator under Section 11, this is not enough. 57. The balance between procedural fairness and binding nature of these contracts, appears to have been tilt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IBA Guidelines on Conflicts of Interest in International Arbitration, and which would be treated as a "guide" to determine whether circumstances exist which give rise to such justifiable doubts. On the other hand, in terms of the proposed Section 12(5) of the Act and the Fifth Schedule which incorporates the categories from the red list of the IBA Guidelines (as above), the person proposed to be appointed as an arbitrator shall be ineligible to be so appointed, notwithstanding any prior agreement to the contrary. In the event such an ineligible person is purported to be appointed as an arbitrator, he shall be de jure deemed to be unable to perform his functions, in terms of the proposed Explanation to Section 14. Therefore, while the disclosure is required with respect to a broader list of categories (as set out in the Fourth Schedule, and as based on the red and orange lists of the IBA Guidelines), the ineligibility to be appointed as an arbitrator (and the consequent de jure inability to so act) follows from a smaller and more serious sub-set of situations (as set out in the Fifth Schedule, and as based on the red list of the IBA Guidelines). 60. The Commission, however, fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson whose relationship with the parties or counsel or the subject-matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. In such an eventuality i.e. when the arbitration clause finds foul with the amended provisions extracted above, the appointment of an arbitrator would be beyond pale of the arbitration agreement, empowering the court to appoint such arbitrator(s) as may be permissible. That would be the effect of the non obstante clause contained in sub-section (5) of Section 12 and the other party cannot insist on appointment of the arbitrator in terms of the arbitration agreement. (See: Voestalpine Schienen GMBH (supra)) 92. There are a plethora of judgments of this Court even prior to the amendment of Section 12, where courts have appointed the arbitrators, giving a go-by to the agreed arbitration clause in certain contingencies and situations, having regard to the provisions of unamended Section 11(8) of the Act which, inter alia, provided that while appointing the arbitrator, Chief Justice, or the person or the institution designated by him, shall have regard to the other condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at followed soon thereafter in Union of India v. Bharat Battery Mfg. Co. (P) Ltd. [(2007) 7 SCC 684] wherein following a three-Judge Bench decision in Punj Lloyd Ltd. v. Petronet MHB Ltd. [(2006) 2 SCC 638], it was held that once an aggrieved party files an application under Section 11(6) of the Act to the High Court, the opposite party would lose its right of appointment of the arbitrator(s) as per the terms of the contract. The implication that the Court would be free to deviate from the terms of the contract is obvious. 7. The apparent dichotomy in ACE Pipeline [(2007) 5 SCC 304]and Bharat Battery Mfg. Co. (P) Ltd. [(2007) 7 SCC 684] was reconciled by a three-Judge Bench of this Court in Northern Railway Admn., Ministry of Railway v. Patel Engg. Co. Ltd. [(2008) 10 SCC 240], wherein the jurisdiction of the High Court under Section 11(6) of the Act was sought to be emphasised by taking into account the expression 'to take the necessary measure' appearing in sub-section (6) of Section 11 and by further laying down that the said expression has to be read along with the requirement of subsection (8) of Section 11 of the Act. The position was further clarified in Indian Oil Corpn. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [(2008) 10 SCC 240] not to be mandatory, but only embodying a requirement of keeping the same in view at the time of exercise of jurisdiction under Section 11(6) of the Act." (emphasis in original) 14. Speedy conclusion of arbitration proceedings hardly needs to be emphasised. It would be of some interest to note that in England also, Modern Arbitration Law on the lines of UNCITRAL Model Law, came to be enacted in the same year as the Indian law which is known as the English Arbitration Act, 1996 and it became effective from 31-1-1997. It is treated as the most extensive statutory reform of the English arbitration law. Commenting upon the structure of this Act, Mustill and Boyd in their Commercial Arbitration, 2001 companion volume to the 2nd Edn., have commented that this Act is founded on four pillars. These pillars are described as: (a) The first pillar: Three general principles. (b) The second pillar: The general duty of the Tribunal. (c) The third pillar: The general duty of the parties. (d) The fourth pillar: Mandatory and semi-mandatory provisions. Insofar as the first pillar is concerned, it contains three general principles on which the entire edifice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re has been deviated from in those cases where one of the parties have committed default by not acting in accordance with the procedure prescribed. Many such instances where this course of action is taken and the Court appoint the arbitrator when the persona designata has failed to act, are taken note of in paras 6 and 7 of Tripple Engg. Works [North Eastern Railway v. Tripple Engg. Works, (2014) 9 SCC 288 : (2014) 5 SCC (Civ) 30]. We are conscious of the fact that these were the cases where appointment of the independent arbitrator made by the Court in exercise of powers under Section 11 of account of "default procedure". We are, in the present case, concerned with the constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal has failed to perform. However, the above principle of default procedure is extended by this Court in such cases as well as is clear from the judgment in Singh Builders Syndicate [Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523 : (2009) 2 SCC (Civ) 246]. 17. In the case of contracts between government corporations/State-owned companies with private parties/contractors, the terms of the agreement are usually drawn by the gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m ineligible to conduct the arbitration. The genesis behind this rational is that even when an arbitrator is appointed in terms of contract and by the parties to the contract, he is independent of the parties. Functions and duties require him to rise above the partisan interest of the parties and not to act in, or so as to further, the particular interest of either parties. After all, the arbitrator has adjudicatory role to perform and, therefore, he must be independent of parties as well as impartial. The United Kingdom Supreme Court has beautifully highlighted this aspect in Hashwani v. Jivraj [(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words: (WLR p. 1889, para 45) "45. ... the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties." 21. Similarly, Cour de Cassation, France, in a judgment delivered in 1972 in Consorts Ury [Fouchard, Gaillard, Goldman on Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other autonomous or public sector undertakings, would be eligible to act as an arbitrator even when he is not even remotely connected with the party in question, like DMRC in this case. The amended provision puts an embargo on a person to act as an arbitrator, who is the employee of the party to the dispute. It also deprives a person to act as an arbitrator if he had been the consultant or the advisor or had any past or present business relationship with DMRC. No such case is made out by the petitioner. 25. Section 12 has been amended with the objective to induce neutrality of arbitrators viz. their independence and impartiality. The amended provision is enacted to identify the "circumstances" which give rise to "justifiable doubts" about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Likewise, the Seventh Schedule mentions those circumstances which would attract the provisions of subsection (5) of Section 12 and nullify any prior agreement to the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally applied to protect young heirs and the "poor and ignorant" from one-sided agreements, unconscionability evolved to cover any contract with the combination of inequality of bargaining power and improvidence (Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at p. 521; see also pp. 520- 24; Bradley E. Crawford, "Restitution - Unconscionable Transaction - Undue Advantage Taken of Inequality Between Parties" (1966) 44 Can. Bar Rev. 142, at p. 143). This development has been described as "one of the signal accomplishments of modern contract law, representing a renaissance in the doctrinal treatment of contractual fairness" (Peter Benson, Justice in Transactions : A Theory of Contract Law (2019), at p. 165; see also Angela Swan, Jakub Adamski and Annie Y. Na, Canadian Contract Law (4th ed. 2018), at p. 925). 55. Unconscionability is widely accepted in Canadian contract law, but some questions remain about the content of the doctrine, and it has been applied inconsistently by the lower courts (see, among others, Morrison v. Coast Finance Ltd., (1965) 55 DLR 710 (2d) (B.C.C.A.); Harry v. Kreutziger, (1978) 9 B.C.L.R. 166 (C.A.), at p. 177, per Lambert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bargaining skill. [Emphasis added; p. 148] 58. Courts have never been required to take the ideal assumptions of contract theory as "infallible empirical proposition[s]". Equitable doctrines have long allowed judges to "respond to the individual requirements of particular circumstances .... humaniz[ing] and contextualiz[ing] the law's otherwise antiseptic nature" (Leonard I. Rotman, "The 'Fusion' of Law and Equity? : A Canadian Perspective on the Substantive, Jurisdictional, or Non-Fusion of Legal and Equitable Matters" (2016) 2 C.J.C.C.L. 497, at pp. 503-4). Courts, as a result, do not ignore serious flaws in the contracting process that challenge the traditional paradigms of the common law of contract, such as faith in the capacity of the contracting parties to protect their own interests. The elderly person with cognitive impairment who sells assets for a fraction of their value (Ayres v. Hazelgrove, Q.B. England, February 9, 1984); the ship captain stranded at sea who pays an extortionate price for rescue (The Mark Lane, [L.R.] 15 P.D. 135); the vulnerable couple who signs an improvident mortgage with no understanding of its terms or financial implications (Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contracts (7th ed. 2017), at p. 378). Xxx xxx xxx 70. The classic example of a "necessity" case is a rescue at sea scenario (see The Medina, [L.R.] 1 P.D. 272). The circumstances under which such agreements are made indicate the weaker party did not freely enter into the contract, as it was the product of his "extreme need ... to relieve the straits in which he finds himself" (Bundy, at p. 339). Other situations of dependence also fit this mould, including those where a party is vulnerable due to financial desperation, or where there is "a special relationship in which trust and confidence has been reposed in the other party" (Norberg, at p. 250, quoting Christine Boyle and David R. Percy, Contracts : Cases and Commentaries (4th ed. 1989), at pp. 637-38). Unequal bargaining power can be established in these scenarios even if duress and undue influence have not been demonstrated (see Norberg, at pp. 247-48; see also McInnes, at p. 543). 71. The second common example of an inequality of bargaining power is where, as a practical matter, only one party could understand and appreciate the full import of the contractual terms, creating a type of "cognitive asymmetry" (see Smith, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l certainty. Freedom of contract remains the general rule. It is precisely because the law's ordinary assumptions about the bargaining process do not apply that relief against an improvident bargain is justified. 87. Respecting the doctrine of unconscionability has implications for boiler plate or standard form contracts. As Karl N. Llewellyn, the primary drafter of the Uniform Commercial Code, explained: Instead of thinking about "assent" to boiler-plate clauses, we can recognize that so far as concerns the specific, there is no assent at all. What has in fact been assented to, specifically, are the few dickered terms, and the broad type of the transaction, and but one thing more. That one thing more is a blanket assent (not a specific assent) to any not unreasonable or indecent terms the seller may have on his form, which do not alter or eviscerate the reasonable meaning of the dickered terms. The fine print which has not been read has no business to cut under the reasonable meaning of those dickered terms which constitute the dominant and only real expression of agreement, but much of it commonly belongs in. There has been an arm's-length deal, with dickered ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's reasonable expectations by depriving them of remedies. This is precisely the kind of situation in which the unconscionability doctrine is meant to apply. 90. This development of the law of unconscionability in connection with standard form contracts is not radical. On the contrary, it is a modern application of the doctrine to situations where "the normative rationale for contract enforcement ... [is] stretched beyond the breaking point" (Radin, at p. 179). The link between standard form contracts and unconscionability has been suggested in judicial decisions, textbooks, and academic articles for years (see, e.g., Douez, at para. 114; Davidson v. Three Spruces Realty Ltd., (1977) 79 DLR 481 (3d) (B.C.S.C.); Hunter, at p. 513; Swan, Adamski and Na, at pp. 992-93; McCamus, at p. 444; Jean Braucher, "Unconscionability in the Age of Sophisticated Mass-Market Framing Strategies and the Modern Administrative State" (2007) 45 Can. Bus. L.J. 382, at p. 396). It has also been present in the American jurisprudence for more than half a century (see Williams v. Walker-Thomas Furniture Company, 350 F.2d 445 (1965), at pp. 449-50). 91. Applying the unconscionability doctrine to stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... potential costs of travel, accommodation, legal representation or lost wages. The costs are disproportionate to the size of an arbitration award that could reasonably have been foreseen when the contract was entered into. The arbitration agreement also designates the law of the Netherlands as the governing law and Amsterdam as the "place" of the arbitration. This gives Mr. Heller and other Uber drivers in Ontario the clear impression that they have little choice but to travel at their own expense to the Netherlands to individually pursue claims against Uber through mandatory mediation and arbitration in Uber's home jurisdiction. Any representations to the arbitrator, including about the location of the hearing, can only be made after the fees have been paid. 95. The arbitration clause, in effect, modifies every other substantive right in the contract such that all rights that Mr. Heller enjoys are subject to the apparent precondition that he travel to Amsterdam,7 initiate an arbitration by paying the required fees and receive an arbitral award that establishes a violation of this right. It is only once these preconditions are met that Mr. Heller can get a court order to enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predictable and ordered society in which to conduct their affairs" (Reference re Secession of Quebec, [1998] 2 SCR 217, at para. 70). Such a guarantee is meaningless without access to an independent judiciary that can vindicate legal rights. The rule of law, accordingly, requires that citizens have access to a venue where they can hold one another to account (Jonsson v. Lymer, 2020 ABCA 167, at para. 10 (CanLII)). Indeed, "[t]here cannot be a rule of law without access, otherwise the rule of law is replaced by a rule of men and women who decide who shall and who shall not have access to justice" (B.C.G.E.U. v. British Columbia (Attorney General), [1988] 2 SCR 214, at p. 230). Unless private parties can enforce their legal rights and publicly adjudicate their disputes, "the rule of law is threatened and the development of the common law undermined" (Hryniak v. Mauldin, 2014 SCC 7 : [2014] 1 SCR 87, at para. 26). Access to civil justice is paramount to the public legitimacy of the law and the legitimacy of the judiciary as the institution of the state that expounds and applies the law. 112. Access to civil justice is a precondition not only to a functioning democracy but also to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this right of recourse to the court can, depending upon how powerfully it operates to discourage litigation, amount to a denial of this right just as complete as an express contractual prohibition against litigation. [pp. 548- 49] xxx xxx xxx 117. Uber's position requires this Court to accept that the change in judicial posture following the enactment of modern arbitration legislation leaves no room for the operation of public policy. But curial respect for arbitration, and for parties' choices to refer disputes to arbitration, is premised upon two considerations. First, the purpose of arbitration is to ensure that contracting parties have access to "a 'good and accessible method of seeking resolution for many kinds of disputes' that 'can be more expedient and less costly than going to court'" (Wellman, at para. 83, quoting Legislative Assembly of Ontario, March 27, 1991, at p. 245). Second, courts have accepted arbitration as an acceptable alternative to civil litigation because it can provide a resolution according to law. As this Court observed in Sport Maska Inc. v. Zittrer, [1988] 1 SCR 564, at p. 581: The legislator left ... various procedures for settling di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... listically unattainable, it amounts to no dispute resolution mechanism at all. As our colleague Justice Brown notes, under the arbitration clause, "Mr. Heller, and only Mr. Heller, would experience undue hardship in attempting to advance a claim against Uber, regardless of the claim's legal merit" (para. 136). The arbitration clause is the only way Mr. Heller can vindicate his rights under the contract, but arbitration is out of reach for him and other drivers in his position. His contractual rights are, as a result, illusory. 98. Based on both the disadvantages faced by Mr. Heller in his ability to protect his bargaining interests and on the unfair terms that resulted, the arbitration clause is unconscionable and therefore invalid." (Emphasis supplied) 100. The courts in the United States of America have also deliberated upon the doctrine of unconscionability on numerous occasions. The Court of Appeal of California in the case of Patterson v. ITT Consumer Financial Corporation reported in 18 Cal. Rptr. 2d 563 (Cal. Ct. App. 1993), had the occasion to consider whether the requirement for the claimants to pay a filing fee along with hearing fees for the purpose of resolv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it." (Neal v. State Farm Ins. Cos. (1961) 188 Cal.App.2d 690, 694 [10 Cal.Rptr. 781].) 4. The record before us indicates that plaintiffs are individuals of modest means, some self-employed or temporarily jobless, who borrowed relatively small amounts of money, often in response to advertising promising "guaranteed loans." The loan agreement which they signed included a preprinted form containing an arbitration clause either as the final paragraph on a page entitled "Agreement for Dispute Resolution" or at midpage on a sheet of text, but set apart by the use of boldface type. On both versions of the form the provision was clearly titled "Arbitration." None of the preprinted clauses had been modified in any manner, which suggests that they were nonnegotiable. Several of the borrowers stated that they believed they would not have been able to obtain a bank loan. In these circumstances we think it indisputable that the contract was one of adhesion. ITT argues that arbitration has become such a common means of dispute resolution that it must be considered within the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edurally and substantively unconscionable. Pichey v. Ameritech Interactive Media Servs., Inc., 421 F. Supp. 2d 1038, 1044-45 (W.D. Mich. 2006) (Bell, C.J.). The inquiries for finding procedural and substantive unconscionability have been phrased as: "(1) What is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?; (2) Is the challenged term substantively reasonable?" Id. at 1045 (quoting Allen v. Mich. Bell. Tel. Co., 18 Mich. App. 632, 637, 171 N.W.2d 689 (1969)). As to procedural unconscionability, the Court finds that this was a contract of adhesion. The terms of the contract were not negotiated and Plaintiff had relatively little economic strength in the transaction. As to substantive unconscionability, the arbitration clause is unreasonable insofar as it requires Plaintiff to travel to Okaloosa County, Florida for the arbitration. In many circumstances requiring a consumer to travel a substantial distance to arbitrate a claim has been found to be unreasonable. DeOrnellas v. Aspen Square Mgmt., Inc., 295 F. Supp. 2d 753, 765-66 (E.D. Mich. 2003); Garrett v. Hooters-Toledo, 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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