Delhi HC Upholds Limited Judicial Interference In Arbitral Awards, Dismisses S.34 Plea Challenging Award Of ₹77.96 Crore In Telecom Dispute

The Delhi High Court bench of Justice Dinesh Kumar Sharma has observed that it is no longer res integra that while dealing with the objections under Section 34, a court does not sit in appeal over the arbitral award. The court observed that under Section 35(2)(a), an award can be set aside only if the petitioner establishes that the parties were under some incapacity or the arbitration agreement was not valid or the petitioner was not given the proper notice of the appointment of an arbitrator or the arbitral proceeding or was unable to present his case or if the dispute is not contemplated within the terms of the submissions to arbitration. Further, it was observed that an award can also be set aside if it conflicts with the public policy of India. The court stated that section 34(2)(a) of the A&C Act provides that an award in domestic arbitration can also be set aside if the court finds that the award is vitiated by patent illegality appearing on the face of the record. Thus, the grounds available for challenging and setting aside the award are limited. The intention of the legislature is to minimise the supervisory role of the courts. The court reiterated that the mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum. It observed that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. The court reiterated the following principles: The court, while hearing the challenge of an award under Section 34 of the A&C Act, does not sit in appeal over the award. The arbitrator is the final arbiter of the facts.The court cannot reappreciate the evidence or reinterpret contracts.The court cannot substitute its own view with the view taken by the arbitrator if the view is reasonable and plausible.The real test while deciding the petition under section 34 of the A&C Act is that if the court finds the award to be based on no evidence, patently illegal, irrational, or irrelevant factors, then only should the court interfere.Under the concept of 'patent illegality,' interference can only occur if there is a contravention of substantive law, failure to provide reasons, or misinterpretation of contractual terms. Brief Facts: Essar Commvision Limited (predecessor-in-interest of the petitioner) was awarded a BSO license in 1997 for the Punjab service area. This license was later converted to a Unified Access Service License (UASL). Various Master Service Agreements (MSAs) were executed between the Petitioner and other parties, including Respondent No. 1 (ATC Telecom), to providing telecom infrastructure facilities and services to Quadrant, a telecom operator in Punjab. In 2015, Quadrant Televntures Limited (Petitioner) requested the Department of Telecommunications (DoT) to allow it to use the GSM spectrum for a period of twenty years from the date of allocation of GSM spectrum. DoT refused to allow the use of GSM spectrum for the period. Aggrieved, the Petitioner filed a petition before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), challenging the refusal to extend the license. On 2.01.2017, the Petitioner informed Respondent No. 1 of the closure of its GSM services. Respondent No. 1 raised claims regarding unpaid invoices and an exit penalty. The Petitioner made a payment of ₹2.52 crore. Respondent No. 1 acknowledged it as the full and final settlement for all services rendered. On 6.09.2017, Respondent No. 1 filed a petition under Section 11 of the Arbitration & Conciliation Act. A Sole Arbitrator was appointed to resolve the dispute. On 25.05.2019, the Sole Arbitrator passed an award in favour of ATC Telecom, directing the Petitioner to pay ₹19.85 crore for unpaid invoices and ₹58.11 crore as exit penalties with interest. The Arbitrator held that the dispute was commercial in nature, arising from private agreements, and did not involve regulatory or statutory issues that required adjudication by the TDSAT. The arbitrator found Quadrant liable for both the unpaid invoices and the exit penalties. The Arbitrator dismissed the Petitioner's counterclaims and jurisdictional objections. The impugned award directed the Petitioner to pay a total of ₹77.96 crore for the Petitioner's failure to meet its financial obligations. The petition was filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award dated 25.05.2019, which allowed Respondent No. 1's claims and rejected the Petitioner's counter-claims. Contentions: Petitioner's Contentions: Sh. Akhil Sibal, Senior Counsel for the Petitioner submitted that the arbitrator lacked jurisdiction to adjudicate the dispute as the...

Delhi HC Upholds Limited Judicial Interference In Arbitral Awards, Dismisses S.34 Plea Challenging Award Of ₹77.96 Crore In Telecom Dispute

Tazeen Ahmed

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