Delhi High Court Revives Motorola's 17-Year-Old Dispute With MTNL Over Arbitral Award Amounting To $8,768,505

The Bench of Justices Anil Kshetrapal and Harish Vaidyanathan Shankar set aside the judgment passed by a Single Judge of the Court in 2017 whereby the arbitral award was upheld. The Court remanding the matter for reconsideration by the Single Judge.

Facts

The Appellant, Mahanagar Telecom Nigam Limited (“MTNL”) issued a tender on 16.03.1999, inviting offers from reputed manufacturers and suppliers of CDMA. The Respondent, M/s Motorola Inc. (“Motorola”) emerged as the successful bidder. Three purchase orders were issued – PO1 dated 07.03.2000, PO2 dated 28.11.2000, PO3- 09.08.2002. Subsequently, disputes arose between the parties regarding performance, testing, coverage and payments.

Motorola invoked arbitration seeking release of outstanding payments along with interest vide notice invoking arbitration dated 29.09.2008. The arbitrator passed the award dated 26.08.2013 in favour of Motorola, awarding it USD 8,768,505 + Rs 22,29,17,746 + 15% interest + costs. By way of additional award dated 21.01.2015, MTNL was directed to release Motorola's Bank Guarantees.

Being aggrieved by the awards, MTNL challenged them before Single Judge of this Court. By way of a common judgement dated 31.03.2017, the Single Judge dismissed both the petitions under Section 34, ACA holding that there was no patent illegality warranting interference and imposed costs of Rs. 20,000 on the Appellant (“Impugned Judgment”).

Contentions

The Senior Counsel for MTNL submitted that PO2 contained no arbitration clause, hence disputes under PO2 could not be arbitrated. It was further contended that Arbitral Award was rendered in favour of Motorola Inc which was not a signatory and was U.S. based entity and since there was no privity of contract with it, award in its favour was invalid. Another plea taken by MTNL was that the liability should have been computed in INR as of the date of award; U.S. Dollar had appreciated manifold since the date of arbitral award. Computing the liability in USD + 15% interest was excessive and perverse.

The Senior Counsel for Motorola submitted that interreference by Court at the stage of Section 37 appeal was extremely limited. It was contended what MTNL was seeking re-appreciation of evidence which is not permissible within the scope of an appeal under Section 37, ACA. The Senior Counsel also argued that all the POs flowed from a single tender. PO2 was not an independent contract rather in the nature of incremental work order to PO1 requested by MTNL itself.

Observations

The Court reiterated the well settled principles defining the contours of its power under Section 37, ACA. It observed that interference was not only permissible but mandated when under Section 34, the Court adjudicating a petition either failed to exercise the jurisdiction vested in it by law or went beyond the limits of its authority. The arbitral award in the instant case was to be factually examined on these parameters.

Analysing the arbitral award at length, the Court observed that several grievances of MTNL though expressly raised were not addressed by the Single Judge. This included the nature of PO2 as an independent contract and the legality of awarding interest at the rate of 15% p.a. on both foreign currency and rupee components. The arbitral award contained no specific analysis or reasoned adjudication on these issues at all.

The Court discussed precedents and observed that once a party raises a valid challenge to the award, the Court under Section 34 is under a duty to apply its judicial mind. It is required to give cogent reasons while deciding either to uphold or reject objections. Objections cannot be dismissed cursorily without considering merits properly. The Court highlighted that an award would be vitiated by perversity if it fails to deal with contentions which shake the very foundations of award.

Thus, the Court found that the Impugned Judgment delivered by the Single Judge was erroneous as it failed to address certain central objections particularly the issue of non-arbitrability of PO2 which may render the arbitral unsustainable in law. Consequently, the Impugned Judgment was set aside and the Section 34 petitions were restored for fresh consideration by Single Judge.

Case Title – MTNL v M/s Motorola Inc.

Citation: 2025 LiveLaw (Del) 1514

Case No. – FAO(OS) 169/2017 and CM APPL. 20733/2017

Appearance-

For Appellant – Mr. Arun Bharadwaj, Senior Advocate with Mr. Vikalp Mudgal and Mr. Arun Sanwal, Advocates.

For Respondent – Mr. P. C. Sen, Senior Advocate with Mr. Nishant Joshi, Mr. Kunal Singh and Ms. Rashi Goswami, Advocates.

Date – 13.11.2025

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