Delhi High Court Dismisses BSNL's Appeal Against Rs 43.52 Crore Arbitral Award

The Delhi High Court Today (April 28) rejected BSNL’s appeal, upholding a Rs 43.52 crore arbitral award in favor of Vihaan Networks, affirming the decision as legally sound.

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Delhi High Court Dismisses BSNL's Appeal Against Rs 43.52 Crore Arbitral Award

NEW DELHI: The Delhi High Court on Monday rejected an appeal filed by Bharat Sanchar Nigam Limited (BSNL) against a Rs 43.52 crore arbitral award in favor of Vihaan Networks Limited (VNL). This award was given for work done by VNL in Arunachal Pradesh and Assam under an Advance Purchase Order (APO) that BSNL later withdrew.

A Division Bench of Justices Vibhu Bakhru and Tejas Karia upheld the decision of a single judge who had previously dismissed BSNL’s challenge to the award. The bench held that BSNL could not show any valid reason for interference under Section 37 of the Arbitration and Conciliation Act, 1996.

“The impugned judgment has rightly come to the conclusion that no ground was made out to interfere with the award under Section 34 of the Act. Accordingly, there is no infirmity with the impugned judgment and the appeal deserves to be dismissed,”

-the judgment, written by Justice Karia, stated.

The dispute began with a 2016 tender issued by BSNL for setting up a 2G GSM network in remote areas of Arunachal Pradesh and Assam, which was funded by the Universal Services Obligation Fund (USOF). VNL was the lowest bidder (L1) and was issued an APO in March 2018.

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Following BSNL’s instructions, VNL began preparatory work, including deploying resources and conducting field tests.

However, BSNL withdrew the APO in February 2020 after USOF decided to switch to 4G technology.

VNL filed for arbitration, seeking compensation for the work completed. On June 16, 2023, the Sole Arbitrator ruled in favor of VNL, awarding Rs 33.69 crore as reimbursement for salaries and Rs 9.83 crore for equipment costs, along with interest at 10% per annum.

BSNL challenged the award under Section 34 of the Act, but this challenge was dismissed by a single judge on October 3, 2023, leading to the current appeal.

Senior Advocate Dinesh Agnani, representing BSNL, argued that the award was “wholly perverse and contrary to the settled law” since no enforceable contract existed between the parties. He further claimed that the Arbitrator’s reliance on quantum meruit under Section 70 of the Indian Contract Act, 1872, was wrong because VNL had voluntarily carried out the field testing “without any financial ramifications.”

Agnani also argued that the award was based on unverified and unauthentic evidence and that the amount granted was excessively high, leading to unjust enrichment at the expense of the public exchequer.

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On the other hand, Senior Advocate Rajiv Nayyar, representing VNL, argued that BSNL had specifically instructed VNL to start the work and had acknowledged this in communications with USOF. Nayyar referred to letters from BSNL to USOF, where BSNL stated that VNL had incurred a liability of about Rs 225 to Rs 250 crores for the project.

Nayyar further stated that the Arbitrator had “copiously considered” the evidence, and the award was a reasonable view that should not be interfered with under Sections 34 or 37 of the Act.

The Court reiterated the limited scope of interference under Section 37 of the Act, ruling that:

“The appeal under Section 37 of the Act cannot travel beyond the restrictions laid down under Section 34 of the Act.”

The Court noted that the Arbitrator had exercised discretion in awarding only 25% of the claimed salary reimbursement and 50% of the costs for purchases, based on supporting documentary evidence like salary slips, invoices, and payment proofs.

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It also addressed BSNL’s arguments about quantum meruit, holding that:

“The Respondent was entitled to the reimbursement of expenses incurred by it notwithstanding the absence of the concluded contract pursuant to Section 70 of the Contract Act which incorporates the doctrine of quantum meruit.”

The Court further upheld the single-judge’s conclusion, stating that:

“The view taken in the award is neither an impossible nor even an implausible view, nor can it be said to be based on no evidence.”

Rejecting BSNL’s claim that the amount awarded was excessive, the Court added that:

“The award has only allowed 25% of the amount claimed towards the claim for reimbursement of salary. Similarly, the award has only allowed 50% of the cost incurred by the Respondent towards purchases.”

In conclusion, the Court dismissed BSNL’s appeal and all pending applications.

Senior Advocate Dinesh Agnani (for BSNL) was briefed by Advocate Leena Tuteja. Senior Advocate Rajiv Nayyar (for VNL) was assisted by Advocates Omar Ahmed, Abhishek Singh, Saad Shervani, J Amal Joshy, Aayushi Mishra, and KV Vibhu Prasad.