Delhi High Court
Centre For Development Of ... vs Xalted Information Systems Pvt. ... on 30 March, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Order delivered on: 30th March, 2016
+ ARB. P. No.334/2015
CENTRE FOR DEVELOPMENT OF TELEMATICE ..... Petitioner
Through Mr.Gaurav Sarin, Adv. with Mr.Mukul
Chandra & Mr.Ajitesh, Advs.
versus
XALTED INFORMATION SYSTEMS PVT. LTD. & ANR
..... Respondents
Through Mr.Samir Malik, Adv. with Ms.Pooja
Nuwal, Adv. along with Mr.A.C.
Narang, Representative, in person.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J. (ORAL)
1. The petitioner has filed the present petition under Section 11 of the
Arbitration and Conciliation Act, 1996 for appointment of three Arbitrators to
adjudicate the disputes which have arisen between the parties in respect of the
Memorandum of Understanding (MOU) dated 7th June, 2006 and
subsequently, Addendum to MOU dated 20th March, 2009.
2. Brief facts of the case are that the petitioner is a Society registered
under the provisions of Societies Registration Act and an autonomous body
administered by the Ministry of Communication and Information Technology,
Department of Telecommunications, Government of India. The petitioner
acts as Telecom Technology Centre of the Government of India and is
involved in development of total telecommunication solutions for our national
needs including Fixed Line PSTN system, Advance Intelligent Network
Solutions, Access Network Products, SDH, WDM Systems, Satellite
Communication Systems, Network Management System etc. The petitioner
was established in August, 1984 as an autonomous body. It has been vested
with full authority and total flexibility to develop state of the art
telecommunication technology to meet the needs of the Indian
telecommunication network.
3. The respondent No.1 is a Private Limited Company and claims to be
engaged in development/ deployment of state of the art software for fraud
detection and prevention, interconnect billing, lawful interception services
etc., besides development of SDH Transport and Broad Band Access systems.
Respondent No.2 is the Chairman & CEO of respondent No.1 Company.
4. The allegations made in the petition are that the petitioner over the
situations of deceit, fraud, unlawful economic and criminal activities
perpetrated nationally and internationally through telecom and data networks
and also with a view to meet the requirements of security agencies for fraud
detection, prevention and lawful interception had held extensive discussions
with the respondents. The respondent No.2, particularly represented to the
petitioner that respondent No.1 was "working with both MTNL and BSNL and
has been entrusted access to Telephone Exchanges local, national, and
international long distance to securely handle daily millions of CDRs and
various telcos interconnect operations. Xalted claims to have well proven
software solution, domain knowledge in lawful interception and has
successfully implemented this in a dynamic environment abroad handling
daily billions of CDRs meeting stringent technical and operational
requirements. Further, Xalted also claims that it has its in-house developed
software solution for Fraud Management and significant domain knowledge
of various dimensions of Frauds and reportedly have implemented a
nationwide Fraud Management System in BSNL GSM network."
Believing the assurances and representation of the respondents to be
true, the petitioner entered into a Memorandum of Understanding dated 7th
June, 2006 with respondent No.1 to pool the developmental resources to
jointly enhance existing platform, design and develop state of the art platforms
and services for use in telecom and data networks by national security
agencies for lawful interception, fraud prevention, provide secure telecom
systems and also market jointly products and solutions abroad for providing
world class products, solutions and services to meet the above requirements
for a mutually agreed term of 7 years. The said MOU outlined the
responsibility of activities to be carried out by each party, framework for
MOU monitoring, implementation, methodology, IPR etc.
5. Pursuant to the MOU, Scope of Work and the mutual obligations of the
parties were specifically recorded/provided for, vide Addendum to the MOU
dated 20th March, 2009. The Addendum defines the scope of work, price,
payment terms, delivery schedule, roles and responsibilities etc. The project
was to be completed by 31st December, 2009. (MOU and Addendum are
hereinafter collectively called as "Contract"). The copies of the same have
been filed.
6. It is stated in the petition that in discharge of its obligations under the
Addendum and to show its bonafide and seriousness for the project, petitioner
made an upfront payment of 25% i.e. Rs.12.25 crores to respondent No.1 as
per Clause C (a) thereof and to this effect, respondent No.1 provided a
Corporate Guarantee in favour of the petitioner to be valid as per its Clause
2.1.1, until the implementation of the project by 31 st December, 2009. The
copies of the A/c payee cheque evidencing payment of Rs.12.25 crores and
Corporate Guarantee provided by respondent No.1 in favour of the petitioner
have been filed. Despite the petitioner's earnestness in discharging its part of
the contractual obligations, the respondents miserably failed and neglected in
fulfilling their contractual obligations.
7. The dispute has arisen between petitioner and respondents with respect
to the obligation of the parties, activities performed thereunder and
interpretation of the terms of Contract. Clause 10 of MOU dated 7th June,
2006 provides a mechanism for settlement of such disputes through
arbitration. The said clause is reproduced here as under:-
"Governing Law, Dispute Resolution and Jurisdiction
a. Any controversy arising out of, or in relation to, this
MOU, the interpretation thereof, the activities performed
hereunder shall be referred to ED (C-DOT) and Chairman,
Xalted who shall mutually resolve such issues.
b. This MOU shall be governed by, and be construed in
accordance with provisions of the Indian Arbitration and
Conciliation Act 1996. Any claim, dispute or arising out of or in
relation to this MOU, the interpretation thereof the activities
performed hereunder or the breach thereof, which cannot,
within a period of thirty (30) days from receipt of notice by the
Defaulting Party, be satisfactorily resolved by mutual
understanding between the Parties, shall be finally settled
through arbitration.
Failing resolution of the dispute within the above period of
thirty (30) days, either Party may commence arbitration
proceedings in order to resolve the dispute.
The venue of arbitration shall be Delhi and the arbitration
proceedings shall be conducted in the English language.
The Parties agree that the arbitration award shall be final and
binding on the Parties.
The disputes between the parties will be governed by Laws of
India.
The Parties submit to be jurisdiction of the Courts at Delhi."
8. The petitioner submits that they have exhausted all possible methods of
resolving the outstanding disputes with the respondents through discussions,
personal meetings etc. The petitioner served notice dated 31st March, 2014 to
resolve all the pending issues and gave an opportunity to the respondents to
resolve the same amicably as per Clause 10(b) of the MOU dated 7th June,
2006. Pursuant to that notice, the petitioner held three conciliation meetings
with the respondents on 16th June, 2014, 7th July, 2014 and 17th July, 2014, but
they also could not yield the desired result. Prior to these conciliation
meetings, petitioner also tried to resolve the outstanding issues with the
respondents through various earlier correspondences. The petitioner also held
meeting on 30th January, 2013 with the respondents, voicing its concerns
arising out of non-performance of their contractual obligations, but no
remedial step/action has been taken from the respondent's side in resolving the
outstanding disputes.
9. The petitioner sent a legal notice dated 15th September, 2014 through its
Advocate to the respondents invoking the Arbitration Clause in the Contract
so that issues/ disputes between the parties can be adjudicated in accordance
with and in terms of the procedure prescribed under the Arbitration and
Conciliation Act, 1996. By way of the said legal notice, the petitioner also
nominated Mr. R.K.Bhatnagar, former Advisor (T), Department of Telecom
as the Arbitrator to adjudicate upon the disputes that have so arisen and thus,
called upon the respondents to agree on him within a period of 30 days from
the date of receipt thereof.
10. In response to the said legal notice, the respondents through their
Advocate sent a reply dated 14th October, 2014 to the petitioner's Advocate
raising certain pleas.
11. When the matter was listed before Court, learned counsel for the
respondents has not denied the fact that there is a dispute between the parties.
The agreement contains the arbitration clause. Notice for invocation was
received. It is admitted that the agreement is silent about the number of
Arbitrators of the Arbitral Tribunal.
12. As per Section 10 of the Arbitration and Conciliation Act, 1996, (1) the
parties are free to determine the number of arbitrators, provided that such
number shall not be an even number. (2) Failing the determination referred to
in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. Both
parties left to the Court and did not object if the sole Arbitrator is appointed to
adjudicate the disputes between the parties and it would be appropriate if an
expert be appointed.
13. In view of the nature of the present dispute, it is a fit case where the
sole Arbitrator be appointed to adjudicate the disputes between the parties.
14. Hon'ble Mr. Justice Anil Kumar, Retired Judge of this Court (Mobile
No.9818000140) is appointed as sole Arbitrator to adjudicate the disputes
arising out of the agreement in question between the parties as mentioned in
the present petition.
15. The parties are also allowed to file their respective claims and counter-
claims before the Arbitrator.
16. The Arbitrator shall ensure the compliance of the provisions of
Arbitration and Conciliation (Amendment) Act, 2015 before commencing the
arbitration.
17. The Arbitrator shall also file an affidavit of "no conflict of interest".
The fees of the learned Arbitrator shall be in terms of the Schedule of the
Arbitration and Conciliation (Amendment) Act, 2015.
18. The petition is accordingly disposed of.
19. Copy of this order be given dasti to the learned counsel for the parties
and a copy thereof be communicated to the learned Arbitrator forthwith.
(MANMOHAN SINGH)
JUDGE
MARCH 30, 2016
