Delhi High Court dismisses BSNL's appeal in ₹43.52 crore arbitration case

The Delhi High Court on Monday dismissed an appeal filed by the Bharat Sanchar Nigam Limited (BSNL) challenging a ₹43.52 crore arbitral award granted in favour of Vihaan Networks Limited (VNL) for work done in Arunachal Pradesh and Assam pursuant to an Advance Purchase Order (APO) that was later withdrawn..A Division Bench of Justices Vibhu Bakhru and Tejas Karia upheld the single-judge’s decision refusing to set aside the award, holding that BSNL failed to demonstrate any ground warranting 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, authored by Justice Karia, held..The dispute arose from a 2016 tender floated by BSNL for installing a 2G GSM network in remote villages of Arunachal Pradesh and Assam, under a project funded by the Universal Services Obligation Fund (USOF).VNL emerged as the lowest bidder (L1) and was issued an APO in March 2018. Pursuant to BSNL’s directions, VNL undertook preparatory work, including the deployment of resources and conducting field tests. However, following USOF’s decision to shift to 4G technology, BSNL withdrew the APO in February 2020.VNL invoked arbitration, claiming losses for the work executed. The Sole Arbitrator, by award dated June 16, 2023, granted ₹33.69 crore towards reimbursement of salaries and ₹9.83 crore towards costs of equipment purchases, along with interest at 10 per cent per annum.BSNL’s challenge under Section 34 of the Act was dismissed by a single-judge on October 3, 2023, leading to the present appeal..Senior Advocate Dinesh Agnani, appearing for BSNL, argued that the award was “wholly perverse and contrary to the settled law” since no enforceable contract existed between the parties.He contended that the Arbitrator’s reliance on quantum meruit under Section 70 of the Indian Contract Act, 1872, was misplaced as VNL had voluntarily carried out the field testing “without any financial ramifications.”It was further submitted that the award was based on unverified and unauthentic material/ evidence, and that the awarded amount is highly exorbitant and amounted to unjust enrichment at the cost of the public exchequer..Opposing the appeal, Senior Advocate Rajiv Nayyar submitted that BSNL had issued specific directions to VNL to commence work and had acknowledged the same in correspondence with USOF.Referring to BSNL’s letters to USOF, it was argued that it had communicated to USOF that VNL had incurred the liability of the total amount of about ₹225 to ₹250 crores for the project.It was further submitted that the Arbitrator had “copiously considered” the evidence and the award was a plausible view which should not be interfered with under Sections 34 or 37 of the Act..The Court reaffirmed the limited scope of its interference under Section 37, holding:“The appeal under Section 37 of the Act cannot travel beyond the restrictions laid down under Section 34 of the Act.”It noted that the Arbitrator had exercised discretion while awarding only 25 per cent of the claimed salary reimbursement and 50 per cent of the costs towards purchases, after considering documentary evidence such as salary slips, invoices, and payment proofs.It also BSNL’s arguments on quantum meruit.“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 held. It further endorsed the single-judge’s conclusion 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.”Finding no merit in BSNL’s claim that the awarded amount 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.”.The Court, therefore, dismissed the appeal along with all pending applications..Senior Advocate Agnani (for BSNL) was briefed by Advocate Leena Tuteja..Senior Advocate Nayar (for VNL) was briefed by Advocates Omar Ahmed, Abhishek Singh, Saad Shervani, J Amal Anand, Aayushi Mishra and KV Vibhu Prasad..[Read Judgment]