Delhi High Court Dismisses BSNL's Appeal U/S 37 Of A & C Act, Upholds Arbitral Award Of Rs. 43.52 Crore

The Delhi High Court bench of Justices Vibhu Bakhru and Tejas Karia dismissed BSNL's appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) holding that the Single Judge correctly upheld the Arbitrator's finding that Vihaan Networks Limited carried out the work under the Advance Purchase Order, issued on BSNL's specific instructions, which was later withdrawn. Therefore, the Respondent was rightly compensated under the principle of quantum meruit for the losses incurred. Brief Facts: The present appeal has been filed by Bharat Sanchar Nigam Ltd (Appellant) under Section 37 of the Arbitration Act being aggrieved by the judgment dated 03.10.2023 passed by the learned Single Judge in OMP (COMM.) No. 405/2023. By the impugned judgment, the learned Single Judge dismissed the Appellant's petition under Section 34 of the Arbitration Act and upheld the arbitral award dated 16.06.2023, whereby Rs.33.69 crores plus Rs.9.83 crores along with interest was awarded in favour of the Respondent. The learned Single Judge held that, in view of the substantial evidence and the findings of the Arbitral Tribunal, there was no ground to interfere with the award under Section 34 of the Arbitration Act. The present dispute arose from a Notice Inviting E-Tender ("NIT") dated 13.04.2016 for survey, planning, supply, installation, testing, commissioning, integration with the existing core network, and Operation & Maintenance of a 2G GSM BSS Network in uncovered villages of Arunachal Pradesh and the districts of Karbi Anglong and Dima Hasao in Assam, including radio V-SAT backhaul. The tender was invited by the Appellant at the instance of the Universal Services Obligation Fund ("USOF"), Department of Telecommunications, Government of India. Pursuant to the NIT, the Respondent carried out pre-bid testing between 17.10.2016 and 24.03.2017 and was declared the successful L1 bidder on 25.04.2017. During price negotiations, the Respondent agreed to an 11% discount on all OPEX items. Given the remoteness and challenging terrain of the project sites near the China border, the Respondent undertook extensive pre-planning. On 01.03.2018, the Appellant directed the Respondent to commence preparatory actions and provide unconditional acceptance for a three-month field test with live traffic ("FTL"), which the Respondent accepted on 15.03.2018, requesting issuance of the Advance Purchase Order ("APO"). The APO was issued on 21.03.2018 and unconditionally accepted by the Respondent, who also submitted a Performance Bank Guarantee ("PBG"). The Respondent began deploying resources at the allocated sites. However, the Appellant ultimately withdrew the APO on 10.02.2020, after nearly four years, citing the termination of the underlying agreement between USOF and the Appellant due to a policy shift towards 4G technology. The Respondent invoked arbitration under Clause 36 of the APO, claiming losses. The Arbitral Tribunal, by an award dated 16.06.2023, held that there was no enforceable contract between the parties and that the withdrawal of the APO was not arbitrary. Except for Claim Nos. III(A) and III(B), the Tribunal rejected all other claims, awarding ₹33.69 crores and ₹9.83 crores respectively, with 10% interest per annum from the date of invocation of arbitration until payment. Contentions: The Appellant submitted that the award of claims for reimbursement of salary and costs is contrary to the tender terms, particularly Clause 26 of the General Instructions to Bidders (GIB), which allowed the Appellant to reject any bid at any time before the contract award without assigning reasons or incurring liability. It was further contended that the principle under Section 70 of the Contract Act is not applicable as the Respondent has not done anything for the Appellant. It was further submitted that the Respondent voluntarily and with all due knowledge agreed to carry out field test with live traffic for three months to satisfy the quality and coverage of equipment and service, without any financial compensation and that the Appellant has not enjoyed any benefit out of the said field test carried out by the Respondent. Per contra, the Respondent submitted that the Appellant had acknowledged and communicated to USOF that although the field testing was not envisaged under the Tender, the same had been completed by the Respondent at the instance of USOF. It was further submitted that further, the Appellant had communicated to USOF that Respondent had done significant work against the preparation and also that Appellant had issued APO to the Respondent which had been unconditionally accepted by Respondent making it a legal contract to enforce. It was further submitted that the work undertaken by the Respondent was pursuant to the APO and the Appellant had benefited from the expenditure incurred by ...

Delhi High Court Dismisses BSNL's Appeal U/S 37 Of A & C Act, Upholds Arbitral Award Of Rs. 43.52 Crore

Mohd Malik Chauhan

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