Delhi High Court: In a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) by Reliance Communications Limited (‘Reliance’) to impugn an award passed by a Sole Arbitrator dated 23-02-2017, a Single Judge Bench of C. Hari Shankar, J. found that there was no merit in the two grounds that were advanced to challenge the impugned award and upheld the same.
Background
The Central Government issued licenses to Reliance under the proviso to Section 4 of the Telegraph Act, 1885 authorizing Reliance to provide telecommunication services at various service areas of the country as well as national and international long-distance services within India.
In 2012, the Unique Identification Authority of India (‘UIDAI’) (respondent), issued a Request for Proposal (‘RFP’) asking service providers to provide services of toll-free number and allied services for contract centres of UIDAI.
Reliance’s bid was accepted by UIDAI on 12-03-2013. A standard contract form was executed between both parties on 22-03-2013. As per the terms, Reliance started providing services to UIDAI and raising monthly invoices based on its call detail records. The standard contract form provided for resolution of disputes by arbitration.
Reliance alleged that UIDAI had not made payments as per the contract and made illegal deductions from the amount payable. Reliance initiated arbitral proceedings which resulted in the impugned award dated 23-02-2017.
Reliance challenged the impugned award on two grounds. The first ground of challenge dealt with the manner in which Reliance was entitled to be paid by UIDAI for the services provided by it.
UIDAI had adopted a practice by which, at the end of the month, the total number of billed seconds is added up and first divided by 60, and the quotient is then multiplied by Rs. 0.65. On the other hand, Reliance contended that it was entitled to be paid for the number of minutes during any part of which a call had been connected.
The second ground of challenge related to certain deductions by UIDAI from the billed amounts, under the Service Level Agreement which was a part of the standard contract form executed between Reliance and UIDAI. UIDAI made certain deductions from invoices of Reliance on the ground that it had failed to meet its average monthly network availability target of 99.95%.
Analysis and Decision
Dealing with the first ground of challenge, the Court stated that the dispute was entirely within the realm of interpretation of the contract and that there were many decisions to the effect that the High Court, while exercising its jurisdiction under Section 34 of the Act, does not interfere with the manner in which the Arbitral Tribunal interprets contractual covenants unless the interpretation is contrary to the contract itself.
The Court stated that there was no scope for interpretation with the findings of the Arbitrator insofar as the manner in which the petitioner was to be billed was concerned. The Court stated that not only was the interpretation advanced by the Arbitrator reasonable but also in sync with the contractual clauses.
Further, the Court stated that to apply the formula for the rate specified in the contract, the number of minutes for which the call took place had to be ascertained. The Court stated that there was no provision in any of the contractual documents that entitled Reliance to be paid for a whole minute, even if the call was only for part thereof.
The Court stated that UIDAI had correctly divided the total number of seconds for which the calls took place by 60 which worked out the number of called minutes. The Court stated that UIDAI had also correctly contended that the rate prescribed in the LoI was Rs. 0.65 per ‘connect’ minute and not Rs. 0.65 per minute.
The Court stated that the word ‘connect’ could not be treated as a mere superfluity since commercial contracts are expected to be carefully drafted, without any superfluous expressions. Further, the Court stated that where contractual covenants unambiguously indicate one way, no real occasion arises for the Arbitral Tribunal to rule otherwise.
Further, the Court stated that it was trite that parties are to be bound by the terms of the contract executed between them, especially where the contract is commercial. The Court also stated that the definition of ‘connect minutes’ contained in the RFP dated 09-02-2016 may also be regarded as clarificatory of how the expression ‘connect minutes’ is to be understood in the case of the RFP and the LoI.
Therefore, the Court held that Reliance had not made a case to justify the invocation of Section 28(3) of the Act and that the first ground of challenge to the impugned award failed.
While dealing with the second ground of challenge, the Court stated that none of the judgments cited supported the contention that the Arbitral Tribunal had no power of remand. The Court stated that the decision on whether to remand or not was purely one of discretion.
The Court stated that the scope of interference with arbitral awards under section 34 of the Act has now become heavily circumscribed. It was also said that the Court could only step in when, in a case, the award is vitiated for one or more of the reasons envisaged by the Section. The Court stated that Section 34(2) permits the setting aside of an arbitral award if the award is vitiated by patent illegality appearing on the face of the award.
The Court stated that the Arbitrator had not dealt with the issue on merits but had chosen to remand it for fresh consideration, holding that the decision had necessarily to be preceded by a show cause notice and compliance with the principles of natural justice, which had not been done. The Court stated that the decision was rendered ad invitum, as the plea of violation of the principles of natural justice was specifically urged by Reliance.
The Court stated that having urged the ground, Reliance could not complain that having accepted the ground, the arbitrator ought to have granted its claim, instead of remanding the matter. Further, the Court stated that ordinarily, once a plea of violation of principles of natural justice is accepted by a judicial authority, the matter is then directed to be considered de novo in compliance with the principles of natural justice.
The Court stated that it could not be said that the exercise of discretion was perverse or arbitrary, and no question of interference with the decision, within the parameters of Section 34 of the Act could be said to arise.
Thus, the Court, while dismissing the petition, upheld the impugned award in its entirety and also held that both the grounds to challenge the impugned order were found to be devoid of merit and had failed.
[Reliance Communications Limited v. Unique Identification Authority of India, 2024 SCC OnLine Del 4795, Decide on 15-07-2024]
Advocates who appeared in this case :
For Petitioner — Advocate Abhimanyu Mahajan, Advocate Anwesha Padhi, Advocate Vipul Singh, Advocate Sushant Kandwal, Advocate Chaitanya Safaya, Advocate Anubha Goel, Advocate Mayank Joshi
For Respondent — Advocate Purushottam Sharma Tripathi, Advocate Amit, Advocate Prakhar Singh
Buy Arbitration and Conciliation Act, 1996 HERE
