Karnataka High Court
Iti Limited vs Alphion Corporation on 9 September, 2022
Bench: Suraj Govindaraj
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COM.S No. 1 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
®
DATED THIS THE 9TH DAY OF SEPTEMBER, 2022
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
COMMERCIAL SUIT NO. 1 OF 2022
BETWEEN:
ITI LIMITED
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED ADDRESS AT
ITI BHAWAN, DOORAVANINAGAR
BANGALORE-560016
REP. BY ITS AUTHORIZED SIGNATORY
MR. RAJA RAM PANDEY
... PETITIONER
(BY SRI. C.K.NANDAKUMAR, SR. COUNSEL FOR
SRI. RAGHURAM CADAMBI, SRI. SHYAM HARINDRA
SRI. AKHIL ANAND, NAMAN BAGGE
SRI. RISHI RAJ AND MS.MEDHA RAO, ADVOCATES)
Digitally signed by
POORNIMA
SHIVANNA AND:
Location: HIGH COURT
OF KARNATAKA
1. ALPHION CORPORATION
IN THE STATE OF DELAWARE
HAVING ITS CORPORATE HEADQUARTER
AT 196, PRINCETON HIGHSTOWN ROAD
PRINCETON JUNCTION, NJ 08550
UNITED STATES OF AMERICA
REP. BY ITS DIRECTOR
2. HON'BLE MR. JUSTICE AJIT PRAKASH SHAH (RETD.)
HAVING HIS ADDRESS AT
F15, HAUZ KHAS ENCLAVE
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COM.S No. 1 of 2022
NEW DELHI 110016
... RESPONDENTS
(BY SRI. SIDDHANT S. DARIRA, ADVOCATE FOR
SRI. ARUN GOVINDRAJ, ADVOCATE FOR R1;
SRI. MUDIT SHARMA, ADVCOATE AND
SRI. ASHOK KUMAR AGGARWAL, ADVOCATES FOR R1 (NOC))
THIS COMMERCIAL SUIT IS FILED UNDER SECTION 34 OF THE
ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO SET
ASIDE THE ARBITRAL AWARD DATED 07/10/2021 PASSED BY THE
SOLE ARBITRATOR, THE SECOND RESPONDENT HEREIN, IN
ENTIRETY AND ETC.
*****
THIS COMMERICAL SUIT COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 22.07.2022, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
ORDER
1. The Petitioner/Plaintiff is before this Court seeking
for the following reliefs:
WHEREFORE, in light of the above, it is most respectfully
prayed that this Hon'ble Court be pleased to:
A. Set aside the Arbitral Award dated 07.10.2021 passed
by the Sole Arbitrator, the Second Respondent herein,
in entirety;
B. Call for records of the arbitration proceeding from the
Second Respondent; and,
C. Grant such other orders or reliefs as this Hon'ble Court
deems just and equitable, including costs of the
proceedings.
COM.S No. 1 of 2022
2. The Respondent herein was the Claimant before the
Arbitral Tribunal. The Respondent had sought for the
following reliefs before the Tribunal:
109. In the above facts and circumstances, it is most
respectfully prayed that this Hon'ble Arbitral Tribunal
may graciously be pleased to pass:
a. an Award in favour of claimant directing the
respondent to pay the sum of INR
130,95,59,986.01 (Rupees One Hundred Thirty
Crores ninety five Lakhs fifty Nine Thousand nine
Hundred eighty six and Paise one only) towards
Annual Comprehensive Repair Charges for the
Tender Quantity and the Reservation Quantity Order
under Proforma Invoices and Invoices set out in
Paras 88 and 89 herein-before;
b. an Award directing the respondent to pay interest
@10% per annum from the due date till 14
December 2020 in the sum of INR 38,67,68,675.32
(Rupees Thirty Eight Crores sixty seven lakhs sixty
eight thousand six hundred and seventy five and
paise thirty two only);
c. an Award directing the respondent to pay pendente
lite and future interest @ 10% per annum from 14
December 2020 till the date of actual realization;
d. an Award of costs in favour of the claimant; and
e. such other reliefs as this Hon'ble Arbitral Tribunal
may deem fit and proper in the facts and
circumstances of the present case.
COM.S No. 1 of 2022
3. Alphion Corporation who is the Respondent herein
was the Claimant before the arbitral Tribunal and is
hereinafter referred to as Alphion and/or Claimant;
ITI Limited who is the plaintiff in this proceeding was
the respondent before the Arbitral Tribunal and is
hereinafter referred to as ITI Limited and/or
respondent.
4. Alphion claims to be a leading provider of Broadband
solutions for business and communities supporting
large Network Operators, Small and medium
Enterprises and community Networks with latest fiber
Optic and Broadband Access technologies which
develops, manufactures and sells Telecommunication
products and provides after-sale services. It is stated
that Alphion and ITI had entered into a Technical
Collaboration Agreement dated 26.10.2007
[hereinafter for brevity referred to as 'TCA']
whereunder the parties wanted to explore the
COM.S No. 1 of 2022
various business opportunities available in India to
supply the products listed in the TCA.
5. Alphion and ITI being interested in jointly pursuing
such business opportunities with a view to
manufacture, market and/or sell, install, commission
and maintain contract projects for Bharat Sanchar
Nigam Limited [BSNL], Mahanagar Telecom Nigam
Limited [MTNL] and other mutually agreeable
telecom services providers worldwide.
6. In terms of the TCA, Alphion and ITI were to
cooperate and coordinate with each other to market
the products, the term of the TCA being seven years.
It was the responsibility of Alphion to ensure that the
contract products complied with the applicable
tender/specification and it was the obligation of ITI
to assemble and manufacture the contracted projects
for the purpose of marketing and supplying the
same, as regards which a non-exclusive, non-
transferable, non-sublicensable license was issued by
COM.S No. 1 of 2022
Alphion to ITI. Apart therefrom there are various
terms and conditions which were agreed upon in the
TCA for the purpose of achieving the aforesaid
object.
7. The purpose of execution of the TCA apparently was
for the reason that ITI being a public sector
undertaking would have a Reservation Quota (RQ)
and a Tender Quantity (TQ) in respect of tenders
which are issued by other public sector undertakings
within the country.
8. Along with the TCA, a side letter dated 26.10.2007
also came to be executed whereby Alphion and ITI
agreed that they would jointly participate in all
negotiations, clarifications and other processes
relating to the orders that could be placed by the
customers in pursuance of the tender in which
Alphion and ITI would participate.
COM.S No. 1 of 2022
9. One of the Public sector undertaking viz., BSNL
issued tenders for Next Generation Playing Network
(GPON) equipment on 14.03.2008. Alphion and ITI in
furtherance of the TCA collaborated and participated
in the tender for GPON by submitting their bid. ITI
was declared as L3 bidder, but however, became
eligible for the Reservation Quota and Tender
Quantity since ITI was a Public sector undertaking
and the tender was floated by another public sector
undertaking - BSNL.
10. In the said tender, the successful tenderer was also
required to carry out repair of the equipment as
regards which a separate contract for maintenance
was to be executed. The quoted charges for AMC
were to be applicable post the expiry of the warranty
period under GPON contract. The Annual
Maintenance Contract (AMC) and Annual
Maintenance Charges were also made part of the
tender documents.
COM.S No. 1 of 2022
11. In furtherance of the contract entered into between
BSNL and ITI for the RQ and TQ, BSNL issued
advance purchase orders on 23.02.2009 and
8.04.2009 which were subsequently confirmed vide
Purchase Orders dated 11.50.2009 and 3.07.2009.
At this stage, a tripartite agreement came to be
entered into between Alphion, ITI and BSNL
whereunder TCA has acknowledged and Alphion and
ITI had agreed to comply with the Purchase Orders.
Apart therefrom, opening of an ESCROW account was
contemplated to which the amounts due from BSNL
was to be paid and thereafter to Alphion and ITI.
12. In furtherance of the Purchase Orders issued from
time to time, supplies were made and in furtherance
of the AMC agreement, maintenance of that
equipment was carried out.
13. Though there is no dispute as regards the supply or
the contract projects forming part of the tender,
there arose disputes as regards the payment of
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repair charges for the TQ and RQ order inasmuch as
though invoices were raised by Alphion, ITI did not
make payment of the same. Alphion claiming to be
entitled to 34.50% of the total invoice raised
excluding tax had raised demands on ITI to make
payment of the same. When the same was not paid
despite multiple reminders sent by Alphion to ITI,
Alphion invoked the arbitration clause for reference
of the dispute to arbitration.
14. ITI though agreed for the said appointment of an
arbitrator had stated that unfortunately ITI was
unable to make payment of the dues on account of
BSNL not making payment of monies. There is no
dispute between Alphion and ITI and the dispute is
with BSNL and as such recommended that the
dispute cannot be resolved without BSNL being a
party in the arbitration proceedings and had called
upon Alphion to appoint a sole arbitrator from the list
provided by Alphion as a joint nominee of Alphion
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and ITI with no financial burden to ITI making BSNL,
a party to the arbitration proceedings.
15. The arbitration proceedings were taken forward and
on the Arbitrator being appointed, claim petition was
filed seeking for the aforesaid prayers on the ground
that the amounts were due and payable by ITI to
Alphion.
16. ITI filed its statement of defence admitting execution
of the documents, admitting the dues liable to be
paid by ITI to Alphion, however contending that
BSNL had not been made a party to the arbitration
proceedings and since the agreements were
interconnected and several parties were involved in a
single commercial project executed under various
agreements, it was required of BSNL to be impleaded
as a party which would turn out to be helpful, legal
and beneficial to both the parties.
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17. There is no denial as such made by ITI to the claims
made by Alphion except to state that since BSNL had
not made payment of the amounts, ITI was unable to
make payment of the same to Alphion.
18. An application came to be filed by ITI to implead
BSNL as a party Respondent to the arbitration
proceedings, wherein it was contended that there
being a tripartite agreement between Alphion, ITI
and BSNL, Alphion being aware of the arrangement
between ITI and BSNL, it was required that BSNL be
made a party to the arbitral proceedings. ITI
contended that ITI has taken various effective steps
for realization of dues from BSNL, however the same
was not received and as such, impleadment of BSNL
was necessary to help the Arbitrator to arrive at
more a comprehensive decision which would be both
legal and beneficial to the parties and as such,
sought for addition of BSNL to the arbitration
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COM.S No. 1 of 2022
proceedings to ensure proper adjudication of the
matter.
19. The said application came to be objected to by
Alphion contending that the arbitral Tribunal has
been constituted by consent between Alphion and ITI
which does not include reference to a third party viz.
BSNL, the dispute being between Alphion and ITI, ITI
being liable to make payment of the due amounts,
BSNL was not a necessary party. It was further
contended that BSNL not being a party to any
arbitration agreement, it is only the parties to a
contract having an arbitration clause viz. Alphion and
ITI who could proceed with arbitration. A non-party
like BSNL could not be introduced as party to the
arbitral proceedings. It was further contended that
the scope of reference could not be enlarged by
bringing BSNL as a party.
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20. The first sitting of the arbitral Tribunal was held on
19.11.2020, during which calendar of events had
been fixed and practice directions issued.
21. The second sitting was held on 9.03.2021 after the
pleadings were complete and after the aforesaid
application to implead BSNL was filed. Arguments
were heard on the said application. The Tribunal was,
however, of the opinion that it was not necessary to
render any adjudication on the application since the
matter was set down for final arguments in April
2021 and that the decision on the said application
will be taken along with final decision. In the said
hearing, the points for determination were also
finalized and the matter adjourned to 19.04.2021 for
arguments of Alphion.
22. In the meanwhile, unfortunately the Arbitrator
appointed expired and a substitute arbitrator was
appointed. The substitute arbitrator took up the
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COM.S No. 1 of 2022
matter for hearing and passed the award, as also an
order on the application for joinder of BSNL.
23. The Tribunal came to the conclusion that BSNL is not
a party to the arbitration agreement, merely because
ITI had indicated that bringing on record BSNL would
help the Tribunal in arriving at a more
comprehensive decision was not a reason to bring on
record the said BSNL which is a third party who does
not have any beneficial interest in the underlying
commercial transaction and there being no privity of
contract between Alphion and ITI, as such the
application came to be rejected.
24. An Award was also rendered allowing the claim
petition and by way of the award, the Tribunal issued
following directions:
i) The Claimant is entitled to receive a sum of INR
130,95,59,986 (Rupees one hundred thirty crores
ninety five lakhs fifty nine thousand nine hundred
eighty six only);
ii) The Claimant is entitled to interest on the above
amount @ 10% per annum from the due date till
14.12.2020 in the sum of INR 38,67,68,675 (Rupees
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thirty eight crores sixty seven lakhs sixty eight
thousand six hundred and seventy give only);
iii) The above amounts shall carry pendente lite and
future interest @ 10% per annum from 15.12.2020 till
reaslisation; and
iv) The Claimant is entitled to INR 1,12,50,590 (Rupees
one crore twelve lakhs fifty thousand five hundred
ninety only) by way of costs of this Arbitration.
25. It is aggrieved by the same that ITI is before this
Court seeking for the aforesaid reliefs.
26. Sri.C.K.Nanda Kumar, learned Senior counsel
appearing for ITI submits as under:
26.1. That the award is without any reason and
violative of basic notions of justice, as also the
established precedents of the Hon'ble Apex
Court inasmuch as the award contains decision
on matters beyond the scope of submission to
arbitration and therefore, comes under mischief
of Section 34(2)(a)(iv) of the A&C Act.
26.2. The award is in conflict with the most basic
notions of morality, justice and violative of the
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COM.S No. 1 of 2022
fundamental public policy of India and
therefore, comes within the mischief of Section
34(2)(b)(ii) of the A&C Act.
26.3. The composition of the Tribunal is not in terms
of the agreement, the procedure for arbitration
prescribed and agreed upon has not been
followed and as such, the same falls foul of
Section 34(2)(a)(v) of the A & C Act.
26.4. The arbitral award deals with a claim relating to
amounts due on AMC which is different from
the TCA and therefore, the said disputes
relating to the payments due under the AMC
not being encompassed within the arbitration
clause contained in the TCA, the arbitral
Tribunal ought not to have considered the said
matter but ought to have dismissed the same
since the dispute resolved by the arbitral
Tribunal was not one which was contemplated
under the Arbitration clause.
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26.5. In this regard, he relies upon the decision of
the Hon'ble Apex Court in MSK Projects (I)
(JV) Ltd. v. State of Rajasthan, reported in
[(2011)10 SCC 573] more particularly para
15 thereof which is reproduced hereunder for
easy reference:
15. The issue regarding the jurisdiction of the
Arbitral Tribunal to decide an issue not referred to
is no more res integra. It is a settled legal
proposition that special tribunals like Arbitral
Tribunals and Labour Courts get jurisdiction to
proceed with the case only from the reference
made to them. Thus, it is not permissible for such
tribunals/authorities to travel beyond the terms of
reference. Powers cannot be exercised by the
Tribunal so as to enlarge materially the scope of
reference itself. If the dispute is within the scope
of the arbitration clause, it is no part of the
province of the court to enter into the merits of
the dispute on the issue not referred to it. If the
award goes beyond the reference or there is an
error apparent on the face of the award it would
certainly be open to the court to interfere with
such an award. (Vide Grid Corpn. of Orissa Ltd. v.
Balasore Technical School [(2000) 9 SCC 552 :
AIR 1999 SC 2262] and DDA v. R.S. Sharma and
Co. [(2008) 13 SCC 80] )
26.6. The Arbitral Tribunal did not have the
competence to decide on the amounts due
under the AMC and therefore is amenable to
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COM.S No. 1 of 2022
the challenge on the ground of competence-
competence. In this regard he relies upon the
decision of the High Court in Vidya Drolia v.
Durga Trading Corpn., reported in [(2021) 2
SCC 1], more particularly para 131 thereof
which is reproduced hereunder for easy
reference:
131. Section 34 of the Act is applicable at the
third stage post the award when an application is
filed for setting aside the award. Under Section
34, an award can be set aside : (i) if the
arbitration agreement is not valid as per law to
which the party is subject; (ii) if the award deals
with the disputes not contemplated by or not
falling within the submission to arbitration, or
contains a decision on the matter beyond the
scope of submission to arbitration; and (iii) when
the subject-matter of the dispute is not capable
of settlement by arbitration under the law for the
time being in force. Thus, the competence-
competence principle, in its negative effect,
leaves the door open for the parties to challenge
the findings of the Arbitral Tribunal on the three
issues. The negative effect does not provide
absolute authority, but only a priority to the
Arbitral Tribunal to rule the jurisdiction on the
three issues. The courts have a "second look" on
the three aspects under Section 34 of the
Arbitration Act. [ The nature and extent of power
of judicial review under Section 34 has not been
examined and answered in this reference.]
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COM.S No. 1 of 2022
26.7. The claim of Alphion of Arbitration was only
under the TCA and did not extend to the
subsequent agreements. The TCA being a stand
alone agreement, the AMC under the
maintenance agreement is not part of the TCA.
The TCA was executed on 26.10.2007 when the
tender itself had not been invited by BSNL,
hence, the question of AMC or otherwise being
part of the TCA would not arise.
26.8. The TCA is only a broad understanding of
cooperation between Alphion and ITI and
contemplates further agreements to be entered
into between the parties and as such, the
dispute between Alphion and BSNL as regards
the amounts payable cannot be covered under
the arbitration clause in the TCA. Clause 9.1 of
the TCA speaks of a maintenance agreement to
be entered into as per mutual agreement and
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COM.S No. 1 of 2022
as such, future maintenance agreement cannot
be part of the TCA.
26.9. The payment by ITI to Alphion is in terms of
the tripartite agreement and understanding
arrived at between Alphion, ITI and BSNL,
which requires BSNL to make payment of the
monies into the ESCROW account and
thereafter payments to be distributed. The
tripartite agreement being executed by Alphion,
there is privity of contract between Alphion and
BSNL and without BSNL making payment of
due amounts, the question of ITI making
payment to Alphion would not arise.
26.10. A "Modus Operandi" was executed on
31.07.2014 detailing the manner in which the
annual repair and maintenance services to be
rendered to the BSNL wherein it was clearly
stated that the AMC executed between ITI and
BSNL shall be applicable on a back to back
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COM.S No. 1 of 2022
basis to ITI and that the payment towards the
AMC repairs shall be paid in the ESCROW
account on a back to back basis.
26.11. On these grounds, learned counsel submits that
the obligation on part of ITI to make payment
of any monies would arise only when BSNL
makes payment of the monies. BSNL not
having made payment, question of ITI being
made liable to make payment of any monies
does not arise. This aspect has not been taking
into consideration by the arbitration Tribunal.
26.12. There is no dispute as regards any amount
payable under the TCA. The only dispute is as
regards the AMC which is not covered under the
TCA. The claim made by Alphion is an action in
tort and not a contractual claim and as such is
not covered under the arbitration agreement in
the TCA. In this regard he relies upon the
Judgment in Vidya Drolia's case (supra),
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more particularly para 21 thereof which is
reproduced hereunder for easy reference:
21. The term "agreement" is not defined in the
Arbitration Act, albeit it is defined in Section 10
of the Contract Act, 1872 (for short "the
Contract Act"), [ "10. What agreements are
contracts.--All agreements are contracts if they
are made by the free consent of parties
competent to contract, for a lawful consideration
and with a lawful object, and are not hereby
expressly declared to be void. Nothing herein
contained shall affect any law in force in India,
and not hereby expressly repealed, by which any
contract is required to be made in writing or in
the presence of witnesses, or any law relating to
the registration of documents."] as contracts
made by free consent of parties competent to
contract, for a lawful consideration and with a
lawful object, and are not thereby expressly
declared to be void. Section 10 of the Contract
Act also stipulates that aforesaid requirements
shall not affect any law in force in India (and not
expressly repealed) by which a contract is
required to be made in writing, in presence of
witnesses or any law relating to registration of
documents. Thus, an arbitration agreement
should satisfy the mandate of Section 10 of the
Contract Act, in addition to satisfying other
requirements stipulated in Section 7 of the
Arbitration Act.
26.13. Based on the above, he submits that there has
to be a legal relationship between the parties
from and out of which the claim arises. There
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being no legal relationship, the claim of Alphion
is only an action in tort and not a contractual
claim.
26.14. He relies upon the decision in Bougainvillea
Multiplex and Entertainment Center
Private Ltd. v. Shankar Rai, reported in
[2008 SCC Online Delhi 1182] more particularly
para 4 and 7 thereof which are reproduced
hereunder for easy reference:
4. The arbitration agreement entered into
between the parties is as under:
"(i) Any dispute and differences shall be referred
to the Sole Arbitrator to be appointed by the
Lessor under the Arbitration and Conciliation Act,
1996 amended upto date;
(ii) The venue of the arbitration will be NOIDA."
7. In the present case the facts as enunciated by
the respondent/plaintiff in the suit make it clear
that the plaintiff has not only claimed relief under
the agreement but has also filed a suit for
damages under tort and has claimed damages for
the losses suffered by him because of rise in the
cost of equipment he was to instal and loss of
business. The Term Sheet Agreement entered
into between the parties is only a sketchy
agreement which does not have detailed terms
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and conditions of the lease, neither it provides for
any obligation on the part of the petitioner in
respect of consequences of not handing over
possession to the lessee/respondent. It is settled
law that an Arbitrator is bound by the terms of
agreement between the parties and, therefore,
cannot travel beyond the agreement entered into
between the parties. Where a suit is filed by a
party for damages under tort and beyond the
terms and conditions of the contract, the matter
cannot be referred to the Arbitrator under the
terms of the agreement. Had the agreement
contained detailed provisions as to the
consequences of breach of contract on both the
sides, the Arbitrator would have jurisdiction to
entertain the claim in the suit.
26.15. Relying upon the above, he submits that where
claim for damages was under a tort and beyond
the terms of the contract, the same cannot be
referred to arbitration. The arbitral Tribunal has
travelled beyond the scope of the arbitration
inasmuch as the arbitrator has held that there
is no document or instrument which requires
payment by BSNL to ITI to be made as a
precondition to the payment. The arbitral
Tribunal has wrongly held the tripartite
agreement as only a security agreement.
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Similarly, arbitral Tribunal has erred by holding
the agreement of "Modus Operandi" to be a
security mechanism. The effect of both these
agreements has not been considered by the
Tribunal.
26.16. ITI has a right to challenge the award
irrespective of ITI having participated in the
appointment of an arbitrator. He distinguishes
between the scope of Section 16 and the scope
of Section 34(2)(a)(iv) of A&C Act and submits
that Section 16 is only a restrictive obligation in
respect of the existence or validity of an
arbitration agreement whereas, under Section
34(2)(a)(iv), the scope of arbitration and
submission would have to be looked into by the
Section 34 Court.
26.17. In this regard, he relied upon the decision of
the Hon'ble Apex Court in Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, reported in
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COM.S No. 1 of 2022
[(2019) 15 SCC 131] more particularly para
61 thereof which is reproduced hereunder for
easy reference:
61. The Court of Appeal of Singapore, in CRW Joint
Operation v. PT Perusahaan Gas Negara (Persero)
TBK [CRW Joint Operation v. PT Perusahaan Gas
Negara (Persero) TBK, 2011 SGCA 33] , held as
follows:
"25. The court's power to set aside an arbitral
award is limited to setting aside based on the
grounds provided under Article 34 of the Model
Law and Section 24 of the IAA. As declared by
this court in Soh Beng Tee & Co. (Pte) Ltd. v.
Fairmount Development (Pte) Ltd. [Soh Beng Tee
& Co. (Pte) Ltd. v. Fairmount Development (Pte)
Ltd., (2007) 3 SLR (R) 86] , SLR(R) para 59
("Soh Beng Tee"), the current legal framework
prescribes that the courts should not without
good reason interfere in the arbitral process. This
policy of minimal curial intervention by respecting
finality in the arbitral process acknowledges the
primacy which ought to be given to the dispute
resolution mechanism that the parties have
expressly chosen.
26. However, it has also been said (correctly) that
no State will permit a binding arbitral award to be
given or enforced within its territory without being
able to review the award, or, at least, without
allowing the parties an opportunity to address the
court if there has been a violation of due process or
other irregularities in the arbitral proceedings [see
Peter Binder, International Commercial Arbitration
and Conciliation in UNCITRAL Model Law Jurisdictions
(Sweet & Maxwell, 3rd Edn., 2010) at para 7-001].
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27. While the Singapore courts infrequently exercise
their power to set aside arbitral awards, they will
unhesitatingly do so if a statutorily prescribed
ground for setting aside an arbitral award is clearly
established. The relevant grounds in this regard can
be classified into three broad categories [see
generally Nigel Blackaby et al, Redfern and Hunter
on International Arbitration (Oxford University
Press, 5th Edn., 2009) ("Redfern and Hunter") at
paras 10.30-10.86]. First, an award may be
challenged on jurisdictional grounds (i.e. the non-
existence of a valid and binding arbitration clause,
or other grounds that go to the adjudicability of the
claim determined by the Arbitral Tribunal). Second,
an award may be challenged on procedural grounds
(e.g. failure to give proper notice of the
appointment of an arbitrator), and, third, the award
may be challenged on substantive grounds (e.g.
breach of the public policy of the place of
arbitration)."
***
31. It is useful, at this juncture, to set out some of
the legal principles underlying the application of
Article 34(2)(a)(iii) of the Model Law. First, Article
34(2)(a)(iii) is not concerned with the situation
where an Arbitral Tribunal did not have jurisdiction
to deal with the dispute which it purported to
determine. Rather, it applies where the Arbitral
Tribunal improperly decided matters that had not
been submitted to it or failed to decide matters that
had been submitted to it. In other words, Article
34(2)(a)(iii) addresses the situation where the
Arbitral Tribunal exceeded (or failed to exercise) the
authority that the parties granted to it (see Gary B.
Born, International Commercial Arbitration (Wolters
Kluwer, 2009) at Vol. 2, pp. 2606-07 and 2798-99).
This ground for setting aside an arbitral award
covers only an Arbitral Tribunal's substantive
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jurisdiction and does not extend to procedural
matters [see Robert Merkin & Johanna Hjalmarsson,
Singapore Arbitration Legislation Annotated
(Informa, 2009) ("Singapore Arbitration
Legislation") at p. 117].
32. Second, it must be noted that a failure by an
Arbitral Tribunal to deal with every issue referred to
it will not ordinarily render its arbitral award liable
to be set aside. The crucial question in every case is
whether there has been real or actual prejudice to
either (or both) of the parties to the dispute. In this
regard, the following passage in Redfern and Hunter
([27] supra at para 10.40) correctly summarises the
position:
The significance of the issues that were not dealt
with has to be considered in relation to the award as
a whole. For example, it is not difficult to envisage a
situation in which the issues that were overlooked
were of such importance that, if they had been dealt
with, the whole balance of the award would have
been altered and its effect would have been
different.
(emphasis added)
33. Third, it is trite that mere errors of law or even
fact are not sufficient to warrant setting aside an
arbitral award under Article 34(2)(a)(iii) of the
Model Law [see Sui Southern Gas Co. Ltd. v.
Habibullah Coastal Power Co. (Pte) Ltd. [Sui
Southern Gas Co. Ltd. v. Habibullah Coastal Power
Co. (Pte) Ltd., (2010) 3 SLR 1] , SLR paras 19-22].
In the House of Lords decision of Lesotho Highlands
Development Authority v. Impregilo SpA [Lesotho
Highlands Development Authority v. Impregilo SpA,
(2006) 1 AC 221 : (2005) 3 WLR 129 : (2005) 3 All
ER 789 (HL)] , which concerned an application to
set aside an arbitral award on the ground of the
Arbitral Tribunal's "exceeding its powers" [see
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Section 68(2)(b) of the Arbitration Act, 1996 (c 23)
(UK) ("the UK Arbitration Act")], Lord Steyn made
clear (at [24]-[25]) the vital distinction between the
erroneous exercise by an Arbitral Tribunal of an
available power vested in it (which would amount to
no more than a mere error of law) and the
purported exercise by the Arbitral Tribunal of a
power which it did not possess. Only in the latter
situation, his Lordship stated, would an arbitral
award be liable to be set aside under Section
68(2)(b) of the UK Arbitration Act on the ground
that the Arbitral Tribunal had exceeded its powers.
In a similar vein, Article 34(2)(a)(iii) of the Model
Law applies where an Arbitral Tribunal exceeds its
authority by deciding matters beyond its ambit of
reference or fails to exercise the authority conferred
on it by failing to decide the matters submitted to it,
which in turn prejudices either or both of the parties
to the dispute (see above at [31])."
(emphasis supplied)
26.18. The decision of the Appeal Court of Singapore
in CRW Joint Operation v. PT Perusahaan
Gas Negara (Persero) TBK [2011 SGCA 33]
more particularly para 31 thereof which is
reproduced hereunder for easy reference:
"31. It is useful, at this juncture, to set out some
of the legal principles underlying the application
of Article 34 (2)(a)(iii) of the Model Law. First,
Article 34 (2)(a)(iii) is not concerned with the
situation where an Arbitral Tribunal did not have
jurisdiction to deal with the dispute which it
purported to determine. Rather, it applies
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where the Arbitral Tribunal improperly
decided matters that had not been
submitted to it or failed to decide matters
that had been submitted to it. In other words,
Article 34 (2)(a)(iii) addresses the situation
where the Arbitral Tribunal exceeded (or
failed to exercise) the authority that the
parties granted to it (see Gary B. Born,
International Commercial Arbitration (Wolters
Kluwer, 2009) at Vol. 2, pp. 2606-07 and 2798-
99). This ground for setting aside an arbitral
award covers only an Arbitral Tribunal's
substantive jurisdiction and does not extend
to procedural matters [see Robert Merkin &
Johanna Hjalmarsson, Singapore Arbitration
Legislation Annotated (Informa, 2009)
("Singapore Arbitration Legislation") at p. 117].."
26.19. ITI having raised a contention of want of
jurisdiction on multiple times, this aspect ought
to have been considered by the Tribunal and
findings rendered thereon which has not been
so done making the award amenable for
challenge.
26.20. As regards public policy and the effect of
Section 34(2)(b)(ii) of the A&C Act, he submits
that the award is in contravention of the
fundamental policy of Indian law and conflicts
with the most basic notions for morality of
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justice. Since no such award could have been
passed which on the face of it conflicts with the
basic notions of morality. In this regard he
relied upon the decision of the Hon'ble Apex
Court in Associate Builders v. DDA, reported
in [(2015) 3 SCC 49] more particularly para
36 to 39 thereof which are reproduced
hereunder for easy reference:
Justice
36. The third ground of public policy is, if an
award is against justice or morality. These are
two different concepts in law. An award can be
said to be against justice only when it shocks the
conscience of the court. An illustration of this can
be given. A claimant is content with restricting his
claim, let us say to Rs 30 lakhs in a statement of
claim before the arbitrator and at no point does
he seek to claim anything more. The arbitral
award ultimately awards him Rs 45 lakhs without
any acceptable reason or justification. Obviously,
this would shock the conscience of the court and
the arbitral award would be liable to be set aside
on the ground that it is contrary to "justice".
Morality
37. The other ground is of "morality". Just as the
expression "public policy" also occurs in Section
23 of the Contract Act, 1872 so does the
expression "morality". Two illustrations to the
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said section are interesting for they explain to us
the scope of the expression "morality":
j) A, who is B's Mukhtar, promises to exercise his
influence, as such, with B in favour of C, and C
promises to pay 1000 rupees to A. The
agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B for
concubinage. The agreement is void, because it is
immoral, though the letting may not be
punishable under the Penal Code, 1860."
38. In"( Gherulal Parakh v. Mahadeodas Maiya
[1959 Supp (2) SCR 406 : AIR 1959 SC 781] ,
this Court explained the concept of "morality"
thus: (SCR pp. 445-46 : AIR pp. 797-98)
"Re. Point 3 -- Immorality: The argument under
this head is rather broadly stated by the learned
counsel for the appellant. The learned counsel
attempts to draw an analogy from the Hindu law
relating to the doctrine of pious obligation of sons
to discharge their father's debts and contends that
what the Hindu law considers to be immoral in that
context may appropriately be applied to a case
under Section 23 of the Contract Act. Neither any
authority is cited nor any legal basis is suggested
for importing the doctrine of Hindu law into the
domain of contracts. Section 23 of the Contract Act
is inspired by the common law of England and it
would be more useful to refer to the English law
than to the Hindu law texts dealing with a different
matter. Anson in his Law of Contracts states at p.
222 thus:
'The only aspect of immorality with which courts
of law have dealt is sexual immorality....'
Halsbury in his Laws of England, 3rd Edn., Vol. 8,
makes a similar statement, at p. 138:
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'A contract which is made upon an immoral
consideration or for an immoral purpose is
unenforceable, and there is no distinction in this
respect between immoral and illegal contracts.
The immorality here alluded to is sexual
immorality.'
In the Law of Contract by Cheshire and Fifoot,
3rd Edn., it is stated at p. 279:
'Although Lord Mansfield laid it down that a
contract contra bonos mores is illegal, the law in
this connection gives no extended meaning to
morality, but concerns itself only with what is
sexually reprehensible.'
In the book on the Indian Contract Act by Pollock
and Mulla it is stated at p. 157:
'The epithet "immoral" points, in legal usage, to
conduct or purposes which the State, though
disapproving them, is unable, or not advised, to
visit with direct punishment.'
The learned authors confined its operation to acts
which are considered to be immoral according to
the standards of immorality approved by courts.
The case law both in England and India confines
the operation of the doctrine to sexual
immorality. To cite only some instances:
settlements in consideration of concubinage,
contracts of sale or hire of things to be used in a
brothel or by a prostitute for purposes incidental
to her profession, agreements to pay money for
future illicit cohabitation, promises in regard to
marriage for consideration, or contracts
facilitating divorce are all held to be void on the
ground that the object is immoral.
The word 'immoral' is a very comprehensive
word. Ordinarily it takes in every aspect of
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personal conduct deviating from the standard
norms of life. It may also be said that what is
repugnant to good conscience is immoral. Its
varying content depends upon time, place and
the stage of civilisation of a particular society. In
short, no universal standard can be laid down and
any law based on such fluid concept defeats its
own purpose. The provisions of Section 23 of the
Contract Act indicate the legislative intention to
give it a restricted meaning. Its juxtaposition with
an equally illusive concept, public policy, indicates
that it is used in a restricted sense; otherwise
there would be overlapping of the two concepts.
In its wide sense what is immoral may be against
public policy, for public policy covers political,
social and economic ground of objection. Decided
cases and authoritative textbook writers,
therefore, confined it, with every justification,
only to sexual immorality. The other limitation
imposed on the word by the statute, namely, 'the
court regards it as immoral', brings out the idea
that it is also a branch of the common law like the
doctrine of public policy, and, therefore, should
be confined to the principles recognised and
settled by courts. Precedents confine the said
concept only to sexual immorality and no case
has been brought to our notice where it has been
applied to any head other than sexual immorality.
In the circumstances, we cannot evolve a new
head so as to bring in wagers within its fold."
39. This Court has confined morality to sexual
morality so far as Section 23 of the Contract Act,
1872 is concerned, which in the context of an
arbitral award would mean the enforcement of an
award say for specific performance of a contract
involving prostitution. "Morality" would, if it is to
go beyond sexual morality necessarily cover such
agreements as are not illegal but would not be
enforced given the prevailing mores of the day.
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However, interference on this ground would also
be only if something shocks the court's
conscience.
26.21. Renusagar Power Co. Ltd. v. General
Electric Co., reported in [1994 Suppl. 1 SCC
644] more particularly para 18 to 20 thereof
which are reproduced hereunder for easy
reference:
18. During the pendency of these appeals this
Court, by Order dated February 21, 1990 on I.A.
No. 1 of 1990 in Civil Appeal No. 71 of 1990,
stayed the operation of the judgment and decree
under appeal subject to Renusagar depositing in
the original side of the Bombay High Court, the
sums equivalent to one-half of the decretal
amount calculated as on date and furnishing
security to the satisfaction of the High Court in
respect of the decretal amount. General Electric
was permitted to withdraw the deposit upon
furnishment of security by way of bank guarantee
for the sum to be withdrawn in excess of Rupees
four crores to the satisfaction of the High Court.
In the said order it was also directed that interest
@ 10 per cent per annum would be payable by
Renusagar on the balance of the decretal amount
in the event of its failing in the appeal and
correspondingly General Electric would be liable
to pay interest at the same rate on amount
withdrawn by it in the event of the appeal
succeeding. In pursuance of this order,
Renusagar deposited, a sum of Rs
9,69,26,590.00 on March 20, 1990 which was
withdrawn by GEC after furnishing necessary
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bank guarantee. By another order dated
November 6, 1990 on I.A. No. 3 of 1990 in Civil
Appeal No. 71 of 1990, this Court directed
Renusagar to deposit a further sum of Rs 1 crore
and to furnish a bank guarantee for Rs 1.92
crores. In pursuance of the said order, Renusagar
deposited, on December 3, 1990, a sum of Rs 1
crore which amount has also been withdrawn by
General Electric. Thus, a total sum of Rs
10,69,26,590.00 has been deposited by
Renusagar and the same has been withdrawn by
General Electric.
19. Shri K.K. Venugopal, learned Senior Counsel
appearing for Renusagar, and Shri Shanti
Bhushan, learned Senior Counsel appearing for
General Electric, have made elaborate
submissions before us. The oral submissions have
been supplemented by written submissions.
20. During the course of his submissions, Shri
Venugopal did not pursue some of the objections
that were raised by Renusagar before the High
Court. But at the same time he has raised certain
objections which were not raised before the High
Court. Shri Venugopal has not disputed the
liability of Renusagar for US $ 2,130,785.52
awarded under item No. 1 towards regular
interest withheld by Renusagar and US $
119,053.00 awarded under item No. 5 towards
price of spare parts. The submissions of Shri
Venugopal are confined to the award of
compensatory damages under item Nos. 2, 4 and
6, delinquent interest under item No. 3 and costs
under item No. 7. The submissions of Shri
Venugopal broadly fall under two heads : (i)
enforceability of the award; and (ii) the rate of
exchange for conversion of the decretal amount
from U.S. dollars to Indian rupees.
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26.22. The Tribunal has not appreciated issue No.1 in
a proper manner inasmuch as before deciding
the said issue. The Tribunal ought to have
decided whether there was an obligation on
part of ITI to make payment of amounts
without BSNL making payment and thereafter
decide whether ITI has failed to comply with
any obligation. This aspect not having been
answered by the Tribunal, the question of
making ITI liable to make payment of the
monies would not arise when there was a
contractual privity between Alphion and the
BSNL under the tripartite agreement.
26.23. The arbitral Tribunal ought to have decided the
impleading application filed by the petitioner in
the first instance and not deferred the same. By
deferring the same, the Tribunal has denied
Alphion an opportunity to decide whether it
wanted to lead oral evidence or not. The
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request made by ITI to the Tribunal to consider
the application has not been considered by the
Tribunal. Even though the said application had
been filed along with statement of defence on
15.01.2021 order was passed on the said
application only at the time when the award
was rendered.
26.24. The deferral of consideration of the said
application has deprived ITI of an appeal under
Section 37 of the Act since ITI could have
challenged the order if passed against it under
the said provision. The deferment of the
consideration of the impleading application is in
violation of the principles of natural justice and
therefore in violation of public policy of India.
The Tribunal ought to have allowed the
application for impleading since there was a
common intention to arbitrate and the
connected agreements including the agreement
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executed with BSNL where deemed to be
incorporated by reference, thereby making
BSNL a necessary and proper party for
adjudication of the dispute. In this regard he
relies upon the decision of Madras High Court in
V.G. Santhosam and Others vs. Shanthi
Gnanasekaran and Others reported in
[(2020) SCC Online Madras 560] more
particularly para 40-42 thereof which are
reproduced hereunder for easy reference:
MAINTAINABILITY:
40. Regarding the maintainability of the Civil
Miscellaneous Petitions under Section 37, this
Court is of the opinion that there is no express
provision under the Act to entertain an impleading
petition by the Arbitrator. However, the Arbitrator
impliedly entertained the impleading petition
under Section 17(1)(ii)(e) of the Act, which states
that such other interim measure of protection as
may appear to the arbitral tribunal to be just and
convenient. This apart, impleading a person in the
main arbitration proceeding is an interim measure.
Even an independent interpretation with reference
to the impugned order passed by the Arbitrator,
the first respondent is made to participate in the
arbitral adjudications. Therefore, the said
impugned order, now under challenge, is to be
treated as an interim measure within the meaning
of Section 17(1)(ii)(e) of the Act. When the
impugned order is an interim measure, permitting
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a person to implead herself in the arbitration
proceedings, then Section 37 will come into force
and accordingly, the present Civil Miscellaneous
Appeals are maintainable under Section 37(2)(b)
of the Act.
41. The objections raised by the respondent is
that the present Civil Miscellaneous Appeals are
not maintainable and liable to be rejected in
limine. The Arbitrator left open all the issues for
adjudication and therefore, it is for the respondent
to place her documents, evidences and arguments
before the Arbitrator, enabling him to adjudicate
the rights and the issues. It is further contended
that the impugned order of impleading the first
respondent cannot be construed as an interim
measure within the meaning of Section 17 of the
Act and therefore, an appeal under Section
37(2)(b) is not maintainable.
42. No order of an Arbitrator can remain as
remediless. There is no express provision in the
Arbitration Act for the impleadment of the third
party. Thus, any such interim application filed for
impleadment by a third person is necessarily to be
treated as an application under Section
17(1)(ii)(e) of the Act. Once the impleadment is
allowed, then the right of appeal cannot be
denied. The Arbitrator allowed a third person to a
contracted Arbitration Agreement to participate in
the arbitral proceedings and such an order of
impleadment cannot be construed as a final order
in the arbitration proceedings. Therefore, an
appeal under Section 37(2)(b) of the Arbitration
Act, is entertainable by this Court and
consequently, the point of maintainability raised
by the first respondent is devoid of merits and
stands rejected.
26.25. Vistrat Real Estate v. Asian Hotels North
Limited, reported in [(2022) SCC Online
Delhi 1139], more particularly para 14 and 15
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thereof which are reproduced hereunder for
easy reference:
14. Therefore, once a valid arbitration agreement
exists between the parties, the issue whether the
petitioner is entitled to any relief in the absence
of a third party to the agreement or that third
party is required to be impleaded in the
proceedings, is covered by the Doctrine of
Competence-Competence and it will be for the
Arbitrator to decide the said issue. Thus, the
issue whether in the absence of a third party, the
petitioner can claim the refundable security
deposit would be for the learned Arbitrator to
determine.
15. In view of the discussion aforesaid, this Court
finds no merit in the objection taken by the
learned counsel for the respondent.
Consequently, Justice Usha Mehra, a former
Judge of this Court is requested to arbitrate the
disputes between the parties.
26.26. These aspects not having been taken into
consideration by the Tribunal while rejecting
the impleading application and the reasons not
being proper, orders on the said application is
required to be set-aside and the impleading
application be allowed.
26.27. He relies upon the decision in Giriraj Garg v.
Coal India Ltd., reported in [(2019)5 SCC
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192] more particularly para 5.3 and 5.6
thereof which are reproduced hereunder for
easy reference:
5.3. The arbitration agreement need not
necessarily be in the form of a clause in the
substantive contract itself. It could be an
independent agreement; or it could be
incorporated by reference either from a parent
agreement, or by reference to a standard form
contract.
5.6. The question of incorporation of an
arbitration clause from an earlier contract by
general reference into a later contract, came up
for consideration before the Queen's Bench
Division in Habas Sinai Ve Tibbi Gazlar Isthisal
Endustri AS v. Sometal SAL [Habas Sinai Ve Tibbi
Gazlar Isthisal Endustri AS v. Sometal SAL, 2010
Bus LR 880 : 2010 EWHC 29 (Comm)] . In this
case, the Court followed the judgment in Sea
Trade Maritime Corpn. [Sea Trade Maritime
Corpn. v. Hellenic Mutual War Risks Assn.
(Bermuda) Ltd. (No. 2) (The 'Athena'), 2007 Bus
LR D 5 : 2006 EWHC 2530 (Comm)] , and held
that a general reference to a contract containing
an arbitration clause is sufficient for incorporation
from a standard form contract. The Court
recognised the following broad categories in
which the parties attempt to incorporate an
arbitration clause: (Sometal SAL case [Habas
Sinai Ve Tibbi Gazlar Isthisal Endustri AS v.
Sometal SAL, 2010 Bus LR 880 : 2010 EWHC 29
(Comm)] , Bus LR p. 886, para 13)
"(1) A and B make a contract in which they
incorporate standard terms. These may be the
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standard terms of one party set out on the back
of an offer letter or an order, or contained in
another document to which reference is made; or
terms embodied in the rules of an organisation of
which A or B or both are members; or they may
be terms standard in a particular trade or
industry.
(2) A and B make a contract incorporating terms
previously agreed between A and B in another
contract or contracts to which they were both
parties.
(3) A and B make a contract incorporating terms
agreed between A (or B) and C. Common
examples are a bill of lading incorporating the
terms of a charter to which A is a party;
reinsurance contracts incorporating the terms of
an underlying insurance; excess insurance
contracts incorporating the terms of the primary
layer of insurance; and building or engineering
sub-contracts incorporating the terms of a main
contract or sub-sub-contracts incorporating the
terms of a sub-contract.
(4) A and B make a contract incorporating terms
agreed between C and D. Bills of lading,
reinsurance and insurance contracts and building
contracts may fall into this category."
26.28. Relying upon the above, he submits that there
is commonality of transactions between the
parties and there is a composite transaction
between the parties and therefore, there ought
to have been a composite reference of the
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disputes which would only happen on BSNL
being made party to the proceedings. Same not
having been done, the award is bad in law.
26.29. He relies upon the decision in Hon'ble Apex
Court in MTNL v. Canara Bank reported in
[(2020)12 SCC 767] more particularly para
10.3 to 10.8, 10.11 and 10.12 , 15 to 17 and
19-23 which are reproduced hereunder for easy
reference.
10.3. A non-signatory can be bound by an
arbitration agreement on the basis of the "group
of companies" doctrine, where the conduct of the
parties evidences a clear intention of the parties
to bind both the signatory as well as the non-
signatory parties. Courts and tribunals have
invoked this doctrine to join a non-signatory
member of the group, if they are satisfied that
the non-signatory company was by reference to
the common intention of the parties, a necessary
party to the contract.
10.4. The doctrine of "group of companies" had
its origins in the 1970s from French arbitration
practice. The "group of companies" doctrine
indicates the implied consent to an agreement to
arbitrate, in the context of modern multi-party
business transactions. It was first propounded in
Dow Chemical v. Isover-Saint-Gobain [Dow
Chemical v. Isover-Saint-Gobain, 1984 Rev Arb
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137 : (1983) 110 JDI 899] , where the Arbitral
Tribunal held that:
"... the arbitration clause expressly accepted by
certain of the companies of the group should
bind the other companies which, by virtue of
their role in the conclusion, performance, or
termination of the contracts containing said
clauses, and in accordance with the mutual
intention of all parties to the proceedings,
appear to have been veritable parties to these
contracts or to have been principally concerned
by them and the disputes to which they may
give rise."
10.5. The group of companies doctrine has been
invoked by courts and tribunals in arbitrations,
where an arbitration agreement is entered into
by one of the companies in the group; and the
non-signatory affiliate, or sister, or parent
concern, is held to be bound by the arbitration
agreement, if the facts and circumstances of the
case demonstrate that it was the mutual
intention of all parties to bind both the
signatories and the non-signatory affiliates in the
group. The doctrine provides that a non-
signatory may be bound by an arbitration
agreement where the parent or holding
company, or a member of the group of
companies is a signatory to the arbitration
agreement and the non-signatory entity on the
group has been engaged in the negotiation or
performance of the commercial contract, or
made statements indicating its intention to be
bound by the contract, the non-signatory will
also be bound and benefitted by the relevant
contracts. [ Interim award in ICC Case No. 4131
of 1982, IX YB Comm Arb 131 (1984); Award in
ICC Case No. 5103 of 1988, 115 JDI (Clunet)
1206 (1988). See also Gary B. Born :
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COM.S No. 1 of 2022
International Commercial Arbitration, Vol. I,
2009, pp. 1170-1171.]
10.6. The circumstances in which the "group of
companies" doctrine could be invoked to bind the
non-signatory affiliate of a parent company, or
inclusion of a third party to an arbitration, if
there is a direct relationship between the party
which is a signatory to the arbitration
agreement; direct commonality of the subject-
matter; the composite nature of the transaction
between the parties. A "composite transaction"
refers to a transaction which is interlinked in
nature; or, where the performance of the
agreement may not be feasible without the aid,
execution, and performance of the
supplementary or the ancillary agreement, for
achieving the common object, and collectively
having a bearing on the dispute.
10.7. The group of companies doctrine has also
been invoked in cases where there is a tight
group structure with strong organisational and
financial links, so as to constitute a single
economic unit, or a single economic reality. In
such a situation, signatory and non-signatories
have been bound together under the arbitration
agreement. This will apply in particular when the
funds of one company are used to financially
support or restructure other members of the
group. [ ICC Case No. 4131 of 1982, ICC Case
No. 5103 of 1988.]
10.8. The "group of companies" doctrine has
been invoked and applied by this Court in Chloro
Controls (India) (P) Ltd. v. Severn Trent Water
Purification Inc. [Chloro Controls (India) (P) Ltd.
v. Severn Trent Water Purification Inc., (2013) 1
SCC 641 : (2013) 1 SCC (Civ) 689The Madras
High Court has invoked the group of companies
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doctrine in a foreign seated arbitration in SEI
Adhavan Power (P) Ltd. v. Jinneng Clean Energy
Technology Ltd., 2018 SCC OnLine Mad 13299 :
(2018) 4 CTC 464.] , with respect to an
international commercial agreement. Recently,
this Court in Ameet Lalchand Shah v. Rishabh
Enterprises [Ameet Lalchand Shah v. Rishabh
Enterprises, (2018) 15 SCC 678 : (2019) 1 SCC
(Civ) 308] , invoked the group of companies
doctrine in a domestic arbitration under Part I of
the 1996 Act.
10.11. It will be a futile effort to decide the
disputes only between MTNL and Canara Bank,
in the absence of CANFINA, since undisputedly,
the original transaction emanated from a
transaction between MTNL and CANFINA -- the
original purchaser of the bonds. The disputes
arose on the cancellation of the bonds by MTNL
on the ground that the entire consideration was
not paid. There is a clear and direct nexus
between the issuance of the bonds, its
subsequent transfer by CANFINA to Canara Bank,
and the cancellation by MTNL, which has led to
disputes between the three parties. Therefore,
CANFINA is undoubtedly a necessary and proper
party to the arbitration proceedings.
10.12. Given the tripartite nature of the
transaction, there can be a final resolution of the
disputes, only if all three parties are joined in the
arbitration proceedings, to finally resolve the
disputes which have been pending for over 26
years now. It is of relevance to note that CANFINA
has participated in the proceedings before the
High Court, and the Committee on Disputes.
CANFINA was also represented by its separate
counsel before the sole arbitrator. Canara Bank
in CWP No. 560 of 1995 filed before the Delhi
High Court, had joined CANFINA as Respondent 2,
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even though it was joined as a pro forma party.
CANFINA was represented by counsel in the writ
proceedings before the Delhi High Court. The
counsel for CANFINA was however not present on
two dates i.e. on 16-9-2011 [Canara Bank v.
MTNL, 2011 SCC OnLine Del 5705] and 21-10-
2011 [Canara Bank v. MTNL, 2011 SCC OnLine
Del 5704] , when the High Court recorded the
agreement between the parties for reference of
disputes to arbitration. MTNL had submitted
before the Delhi High Court that Canara Bank
should agree to take over the liabilities of
CANFINA before the arbitration could commence.
The High Court recorded that there was no
necessity of requiring Canara Bank to agree to
take over the liabilities of CANFINA, prior to the
arbitration proceedings. This issue would be
decided in the arbitration.
15. In my considered opinion also, the
agreement in question is essentially a tripartite
agreement between the parties, namely, MTNL,
Canara Bank and CANFINA. Indeed, this is clear
from the documents exchanged between the
parties, pleadings and orders of the Court.
16. It is also clear when one examines the
nature of the dispute. It is so inextricably linked
between the three parties that it can be
effectively decided only when all the three
parties are made parties to the arbitral
proceedings.
17. Once we examine the issue on facts in the
light of requirements of Sections 7(4)(b) and (c)
of the Act, we have no hesitation in coming to a
conclusion that the agreement in question is, in
fact, a tripartite agreement between the three
parties mentioned above. In my view, it satisfies
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the requirements of Sections 7(4)(b) and (c) of
the Act.
19. Somewhat similar question also arose in
international arbitrations as to when there are
more than two parties in a dispute then how
such dispute should be dealt with in the arbitral
proceedings -- whether it should be dealt with in
one arbitral proceedings between one set of
parties or it should be dealt with in separate or
parallel arbitration proceedings.
20. This question was succinctly dealt with by
the learned Authors, Alan Redfern and Martin
Hunter in their book on "International
Arbitration". (See Redfern and Hunter on
International Arbitration, 6th Edn., under the
heading "J" "Multiparty Arbitrations" (a) to (e)
2.212 to 2.247, pp. 141 to 153.)
21. The learned authors examined the
aforementioned question in the context of ICC
and AAA Rules, decisions rendered by English
Court of Appeal and the reports of ICC
Commission on multi-party arbitration. They
opined that subject to the terms of the
agreement and any rules framed in that behalf,
it is desirable that such disputes should be
resolved as far as possible in one arbitral
proceedings to avoid any inconsistent findings
and parallel arbitral proceedings.
22. Since the main object of the arbitral
proceedings is to decide the disputes
expeditiously and within a time-frame, this
object can be achieved only when the disputes
are resolved as far as possible in one arbitral
proceedings. In this case, this object can be
achieved only when all the three parties named
above are made party in one arbitral proceedings
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to enable the Arbitral Tribunal to finally decide
the dispute on merits in accordance with law.
23. As rightly observed by my learned Sister,
the undisputed facts brought on record, in clear
terms, entitle this Court to invoke the well-
known doctrine of "group of companies" and
apply its principle to the facts of this case so as
to enable the Arbitral Tribunal to determine the
rights of three parties named above. In my
considered view, one cannot dispute the legal
proposition the doctrine "group of companies"
has its application to arbitral proceedings and, in
appropriate cases, it can be so applied (see
Redfern and Hunter on International Arbitration,
6th Edn., 1.115 pp. 33, 2.42-2.51 pp. 85 to 88).
26.30. Relying upon the same he submits that a third
party could have always been impleaded as a
party to the arbitral proceedings. The only
reason on which basis the Tribunal has held ITI
liable to make payment is by holding that there
is no requirement for BSNL to have made
payment on a back-to-back basis for ITI to
make payment to Alphion.
26.31. The decision which has been relied upon by the
arbitral Tribunal in -Tata Advanced Materials
Ltd. V.s Tooltech Global Engineering Pvt.
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Ltd. Reported in [(2012) SCC Online Bom
1566] where there was no privity of contract
and as such the said decision would not be
applicable to the present case inasmuch as
where there is privity of contract, between
Alphion and BSNL, thus ITI could not have been
made liable to make payment of the due
amounts.
26.32. The arbitral Tribunal was constituted based on
a conditional consent of the petitioner. The
petitioner had strongly recommended that the
dispute between Alphion and ITI cannot be
resolved without BSNL being impleaded as a
party, the consent being conditional, the
arbitral Tribunal could only have been
constituted with BSNL being made a party.
BSNL not being made a party, the conditional
consent not having been satisfied, the arbitral
proceedings could not have proceeded.
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26.33. The Tribunal has taken into consideration the
decisions passed by foreign courts to decide on
Indian law which is impermissible. In this
regard, he relied upon the decision in Hari
Shanker Jain v. Sonia Gandhi reported in
[(2001)8 SCC 233] more particularly para 27
thereof which is reproduced hereunder for easy
reference:
27. Italian law is a foreign law so far as the
courts in India are concerned. Under Section
57(1) of the Indian Evidence Act, 1872, the court
shall take judicial notice of, inter alia, all laws in
force in the territory of India. Foreign laws are
not included therein. Sections 45 and 84 of the
Evidence Act permit proof being tendered and
opinion of experts being adduced in evidence in
proof of a point of foreign law. Under Order 6
Rule 2 of the Code of Civil Procedure, 1908, every
pleading shall contain a statement in concise form
of the material facts relied on by a party but not
the evidence nor the law of which a court may
take judicial notice. But the rule against pleading
law is restricted to that law only of which a court
is bound to take judicial notice. As the court does
not take judicial notice of foreign law, it should be
pleaded like any other fact, if a party wants to
rely on the same (see Mogha's Law of Pleadings,
13th Edn., p. 22). In Guaranty Trust Co. of New
York v. Hannay & Co. [(1918) 2 KB 623 : 87 LJKB
1223 : 23 Comp Cas 399 (CA))] it was held that:
"Foreign law is a question of fact to an English
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court ... the opinion of an expert on the fact, to be
treated with respect, but not necessarily
conclusive." In Beatty v. Beatty [(1924) 1 KB 807
: 93 LJKB 750 : 1924 All ER Rep 314 (CA)] it was
held that the American law in English courts must
be proved by the evidence of experts in that law.
In Lazard Bros. and Co. v. Midland Bank, Ltd.
[1933 AC 289 : 102 LJKB 191 : 1932 All ER Rep
571 (HL)] Their Lordships of the Privy Council
observed that what the Russian Soviet law is, is a
question of fact, of which the English court cannot
take judicial cognizance, even though the foreign
law has already been proved before it in another
case. The court must act upon the evidence
before it in that actual case. The statement of law
by Halsbury in Laws of England (3rd Edn., Vol.
15, para 610 at p. 335) is that the English courts
cannot take judicial notice of foreign law and
foreign laws are usually matters of evidence
requiring proof as questions of fact.
26.34. The award passed by the Tribunal is bereft of
material, lacks reasons and as such, is
unintelligible requiring the same to be set-
aside. In this regard, he relies upon the
decision in Dyna Technologies (P) Ltd. v.
Crompton Greaves Ltd., reported in [(2019)
20 SCC 1] more particularly para 35 thereof
which is reproduced hereunder for easy
reference:
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COM.S No. 1 of 2022
35. When we consider the requirement of a
reasoned order, three characteristics of a
reasoned order can be fathomed. They are:
proper, intelligible and adequate. If the
reasonings in the order are improper, they reveal
a flaw in the decision-making process. If the
challenge to an award is based on impropriety or
perversity in the reasoning, then it can be
challenged strictly on the grounds provided under
Section 34 of the Arbitration Act. If the challenge
to an award is based on the ground that the same
is unintelligible, the same would be equivalent of
providing no reasons at all. Coming to the last
aspect concerning the challenge on adequacy of
reasons, the Court while exercising jurisdiction
under Section 34 has to adjudicate the validity of
such an award based on the degree of
particularity of reasoning required having regard
to the nature of issues falling for consideration.
The degree of particularity cannot be stated in a
precise manner as the same would depend on the
complexity of the issue. Even if the Court comes
to a conclusion that there were gaps in the
reasoning for the conclusions reached by the
Tribunal, the Court needs to have regard to the
documents submitted by the parties and the
contentions raised before the Tribunal so that
awards with inadequate reasons are not set aside
in casual and cavalier manner. On the other
hand, ordinarily unintelligible awards are to be
set aside, subject to party autonomy to do away
with the reasoned award. Therefore, the courts
are required to be careful while distinguishing
between inadequacy of reasons in an award and
unintelligible awards.
26.35. The Tribunal has not appreciated the evidence
in a proper manner. There is no finding as
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regards the actual loss which has been caused
to Alphion before allowing the claim petition
and directing ITI to make payment of the
amounts stated therein. The Tribunal can only
act in terms of the applicable law and not in
equity. By doing so, the tribunal has violated
the mandate under section 28(2) of A&C Act
and in this regard, he relies upon the decision
of the Delhi High Court in Ramkrishna Singh
v. Rocks Buildcon Private Limited, reported
in [(2017) SCC Online Delhi 6471], more
particularly para 28 to 29 thereof which is
reproduced hereunder for easy reference:
28. Under Section 28(3) of the Act, the learned
Arbitrator was bound to render an Award
consistent with the clauses of the contract. Under
Section 28(2), the Arbitrator shall decide ex
aequo et bono only if the parties have expressly
authorised it to do so. Further, under Section
28(3) of the Act, there was an obligation on the
learned Arbitrator to take into account "the terms
of the contract and trade usages applicable to the
transaction." In M.S.T.C. Limited v. Jain Traders
(2011) 4 Comp LJ 387 (Del), it was observed in
paras 18 and 19 as under:
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"18. This distinction has been completely ignored
by the learned Arbitrator and he has, on the basis
of equitable considerations and his notions of
fairness, superimposed the concept of
proportionate refund in Clause 5.3, even though
the same is specifically excluded from Clause 5.3.
19. The Arbitrator is bound to implement the
contractual clauses and cannot go contrary to
them. He cannot decide on the basis of his
notions of equity and fairness, particularly in such
a manner that it goes contrary to the specific
contractual terms. Section 28(2) of the Act
provides that "The arbitral tribunal shall decide ex
aequo et bono or as amiable compositeur only if
the parties have expressly authorized it to do so".
(emphasis supplied). The phrase "ex aecquo et
bono" means "according to equity and
conscience" (see Black's Law Dictionary 6th
edition). In relation to the expression "Amiables
compositeurs" the Black's Law Dictionary refers to
"Amicable compounders" and states that
"amicable compounders are arbitrators authorized
to abate something of the strictness of the law in
favour of natural equity". The parties in this case
have not agreed that the Arbitrator may decide as
an amiable compositeur or on the basis of "justice
and fairness". Therefore, the learned Arbitrator
could not have disregarded the plain and
grammatical meaning of Clauses 5.3 and 5.4 of
the General Conditions of Contract to give way to
his own sense of equity, fairness or justice.
Reference in this regard may also be made to the
decision in Food Corporation of India v. Chandu
Construction, (2007) 4 SCC 697. The Supreme
Court in this decision held as follows:
"11. It is trite to say that the arbitrator being a
creature of the agreement between the parties,
he has to operate within the four corners of the
agreement and if he ignores the specific terms of
the contract, it would be a question of
jurisdictional error on the face of the award,
falling within the ambit of legal misconduct which
could be corrected by the court. We may,
however, hasten to add that if the arbitrator
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commits an error in the construction of contract,
that is an error within his jurisdiction. But, if he
wanders outside the contract and deals with
matters not allotted to him, he commits a
jurisdictional error (see Associated Engg. Co. v.
Govt. of A.P., (1991) 4 SCC 93; and Rajasthan
State Mines & Minerals Ltd. v. Eastern Engg.
Enterprises, (1999) 9 SCC 283).
12. In this context, a reference can usefully be
made to the observations of this Court in Alopi
Parshad & Sons Ltd. v. Union of India, AIR 1960
SC 588, wherein it was observed that the
Contract Act does not enable a party to a contract
to ignore the express covenants thereof, and to
claim payment of consideration for performance
of the contract at rates different from the
stipulated rates, on some vague plea of equity.
The Court went on to say that in India, in the
codified law of contracts, there is nothing which
justifies the view that a change of circumstances,
"completely outside the contemplation of parties"
at the time when the contract was entered into
will justify a court, while holding the parties
bound by the contract, in departing from the
express terms thereof. Similarly, in Naihati Jute
Mills Ltd. v. Khyaliram Jagannath, AIR 1968 SC
522, this Court had observed that where there is
an express term, the court cannot find, on
construction of the contract, an implied term
inconsistent with such express term.
13. In Continental Construction Co. Ltd. v. State
of M.P., (1988) 3 SCC 82, it was emphasised that
not being a conciliator, an arbitrator cannot
ignore the law or misapply it in order to do what
he thinks is just and reasonable. He is a tribunal
selected by the parties to decide their disputes
according to law and so is bound to follow and
apply the law, and if he does not, he can be set
right by the court provided his error appears on
the face of the award.
14. In Bharat Coking Coal Ltd. v. Annapurna
Construction, (2003) 8 SCC 154, while inter alia,
observing that the arbitrator cannot act
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arbitrarily, irrationally, capriciously or
independent of the contract, it was observed,
thus : (SCC pp. 161-62, para 22)
"22. There lies a clear distinction between an
error within the jurisdiction and error in excess of
jurisdiction. Thus, the role of the arbitrator is to
arbitrate within the terms of the contract. He has
no power apart from what the parties have given
him under the contract. If he has travelled
beyond the contract, he would be acting without
jurisdiction, whereas if he has remained inside
the parameters of the contract, his award cannot
be questioned on the ground that it contains an
error apparent on the face of the record."
15. Therefore, it needs little emphasis that an
arbitrator derives his authority from the contract
and if he acts in disregard of the contract, he acts
without jurisdiction. A deliberate departure from
contract amounts to not only manifest disregard
of his authority or a misconduct on his part, but it
may tantamount to a mala fide action (also see
Associated Engg. Co. v. Govt. of A.P., (1991) 4
SCC 93)."
29. In that view of the matter, the Court is of the
opinion that in the present case, the impugned
Award cannot be sustained as it is opposed to the
fundamental policy of Indian law inasmuch as it
does not abide by the mandate of Section 28(3)
of the Act.
26.36. Based on the above, he submits that the award
is required to be set-aside.
27. Sri.Mudit Sharma, learned counsel appearing for
Alphion would submit as under:
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27.1. The award passed by the Tribunal is proper and
correct, all the aspects which have to be
considered by the Tribunal are so considered
and the Tribunal found that ITI was liable to
make payment of the claimed amounts and as
such, directed ITI to make payment of the
same.
27.2. Alphion had not participated in the tender, it is
only ITI who had participated in the tender and
was declared successful bidder, in furtherance
of which it was the primary obligation of ITI to
comply with the tender.
27.3. The tripartite agreement was only executed as
an ESCROW mechanism and the same does not
create any particular right or privity among the
parties. The purchase orders were issued by
BSNL to ITI and ITI accepted the same, there is
no such acceptance by Alphion since Alphion
was only to render services under the TCA.
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27.4. The AMC is also entered into between ITI and
BSNL under which Alphion was called upon to
render certain services towards which Alphion
has to receive certain amounts. It is in
furtherance of the same that ITI had issued
purchase orders on Alphion from time to time,
in furtherance of which Alphion rendered its
services. Alphion had repeatedly followed up
with ITI to make payments towards which ITI
had indicated that BSNL had not made
payments, hence, Alphion had called upon ITI
to follow up with BSNL and get the payments,
despite which ITI did not take any action,
finally constraining Alphion to initiate arbitral
proceedings.
27.5. ITI had agreed for the appointment of
Sri.S.S.Nijjar, former Judge of Supreme Court
as sole arbitrator and subsequent to his demise
the appointment of the substitute arbitrator
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Sri.A.P.Shah, former Chief Judge, Delhi High
Court.
27.6. ITI having consented to the appointment of an
arbitrator, cannot now contend that the consent
is conditional or otherwise, as such the Tribunal
has rightly rejected such a claim.
27.7. ITI having admitted that it was due to various
amounts of monies to Alphion and there being
no dispute raised in the pleadings filed, per
contra, in the pleadings there being complete
acceptance of the claims of Alphion, the
question of ITI now claiming otherwise in these
proceedings under Section 34 would not at all
arise nor is it permissible.
27.8. ITI having agreed to the arbitration but only
having recommended that BSNL be made a
party and having gone ahead with the arbitral
proceedings cannot now contend that any
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prejudice has been caused on account of the
application being dismissed, more so since ITI
went ahead and argued the matter on merits
knowing fully well that no orders had been
passed on the impleading application.
27.9. The arbitral Tribunal has taken into
consideration the relevant aspects, the finding
of the Tribunal is proper and correct. On the
basis of the evidence on record in the form of
documents, the same cannot be re-appreciated
by this Court in a Section 34 proceedings. The
construction of the arbitrator of the contract in
a particular manner cannot be a ground for
challenge and in this regard, he relies upon the
decision in Associate Builders v. DDA
reported in (2015) 3 SCC 49] more
particularly, para 33, 42.3 and 56 thereof which
are reproduced hereunder for easy reference:
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33. It must clearly be understood that when a court
is applying the "public policy" test to an
arbitration award, it does not act as a court of
appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on
facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity
and quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award based
on little evidence or on evidence which does not
measure up in quality to a trained legal mind
would not be held to be invalid on this score [
Very often an arbitrator is a lay person not
necessarily trained in law. Lord Mansfield, a
famous English Judge, once advised a high
military officer in Jamaica who needed to act as a
Judge as follows:"General, you have a sound
head, and a good heart; take courage and you
will do very well, in your occupation, in a court of
equity. My advice is, to make your decrees as
your head and your heart dictate, to hear both
sides patiently, to decide with firmness in the
best manner you can; but be careful not to assign
your reasons, since your determination may be
substantially right, although your reasons may be
very bad, or essentially wrong".It is very
important to bear this in mind when awards of lay
arbitrators are challenged.] . Once it is found that
the arbitrators approach is not arbitrary or
capricious, then he is the last word on facts. In
P.R. Shah, Shares & Stock Brokers (P) Ltd. v.
B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594 :
(2012) 1 SCC (Civ) 342] , this Court held: (SCC
pp. 601-02, para 21)
"21. A court does not sit in appeal over the award of
an Arbitral Tribunal by reassessing or
reappreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has
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examined the facts and held that both the second
respondent and the appellant are liable. The case
as put forward by the first respondent has been
accepted. Even the minority view was that the
second respondent was liable as claimed by the
first respondent, but the appellant was not liable
only on the ground that the arbitrators appointed
by the Stock Exchange under Bye-law 248, in a
claim against a non-member, had no jurisdiction
to decide a claim against another member. The
finding of the majority is that the appellant did
the transaction in the name of the second
respondent and is therefore, liable along with the
second respondent. Therefore, in the absence of
any ground under Section 34(2) of the Act, it is
not possible to re-examine the facts to find out
whether a different decision can be arrived at."
42.3. (c) Equally, the third subhead of patent
illegality is really a contravention of Section 28(3)
of the Arbitration Act, which reads as under:
"28.Rules applicable to substance of dispute.--
(1)-(2)***
(3) In all cases, the Arbitral Tribunal shall decide in
accordance with the terms of the contract and
shall take into account the usages of the trade
applicable to the transaction."
This last contravention must be understood with a
caveat. An Arbitral Tribunal must decide in
accordance with the terms of the contract, but if
an arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the
award can be set aside on this ground.
Construction of the terms of a contract is
primarily for an arbitrator to decide unless the
arbitrator construes the contract in such a way
that it could be said to be something that no fair-
minded or reasonable person could do.
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56. Here again, the Division Bench has interfered
wrongly with the arbitral award on several
counts. It had no business to enter into a pure
question of fact to set aside the arbitrator for
having applied a formula of 20 months instead of
25 months. Though this would inure in favour of
the appellant, it is clear that the appellant did not
file any cross-objection on this score. Also, it is
extremely curious that the Division Bench found
that an adjustment would have to be made with
claims awarded under Claims 2, 3 and 4 which
are entirely separate and independent claims and
have nothing to do with Claims 12 and 13. The
formula then applied by the Division Bench was
that it would itself do "rough and ready justice".
We are at a complete loss to understand how this
can be done by any court under the jurisdiction
exercised under Section 34 of the Arbitration Act.
As has been held above, the expression "justice"
when it comes to setting aside an award under
the public policy ground can only mean that an
award shocks the conscience of the court. It
cannot possibly include what the court thinks is
unjust on the facts of a case for which it then
seeks to substitute its view for the arbitrator's
view and does what it considers to be "justice".
With great respect to the Division Bench, the
whole approach to setting aside arbitral awards is
incorrect. The Division Bench has lost sight of the
fact that it is not a first appellate court and
cannot interfere with errors of fact.
27.10. The counsel for ITI has argued matters before this
Court which had not been argued before the
Tribunal. No such new argument can be taken up in
the course of Section 34 proceedings. In this regard
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he relies upon the decision of the Hon'ble Apex
Court in Gas Authority of India Ltd. v. Keti
Construction (I) Ltd., reported in [(2007)5 SCC
38], more particularly, para 24 and 25 thereof
which are reproduced hereunder for easy reference:
24. The whole object and scheme of the Act is to
secure an expeditious resolution of disputes.
Therefore, where a party raises a plea that the
Arbitral Tribunal has not been properly
constituted or has no jurisdiction, it must do so at
the threshold before the Arbitral Tribunal so that
remedial measures may be immediately taken
and time and expense involved in hearing of the
matter before the Arbitral Tribunal which may
ultimately be found to be either not properly
constituted or lacking in jurisdiction, in
proceedings for setting aside the award, may be
avoided. The commentary on Model Law clearly
illustrates the aforesaid legal position.
25. Where a party has received notice and he
does not raise a plea of lack of jurisdiction before
the Arbitral Tribunal, he must make out a strong
case why he did not do so if he chooses to move
a petition for setting aside the award under
Section 34(2)(a)(v) of the Act on the ground that
the composition of the Arbitral Tribunal was not in
accordance with the agreement of the parties. If
plea of jurisdiction is not taken before the
arbitrator as provided in Section 16 of the Act,
such a plea cannot be permitted to be raised in
proceedings under Section 34 of the Act for
setting aside the award, unless good reasons are
shown.
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27.11. It was always the case of ITI that they would
recover the monies from BSNL and make
payment of the due amounts to Alphion and it
was always held out that Alphion's interest
would not be jeopardized, however despite
waiting for a long period of time, ITI did not
take any action and therefore, was constrained
to initiate arbitral proceedings.
27.12. ITI though filed an application for impleading
BSNL, ITI consented to and acquiesced in and
continued its participation in the arbitral
proceedings, there was no request ever made
for consideration of the application under
Section 16 of A&C Act filed.
27.13. It is only after the award was rendered that the
present contention is taken by the petitioner
which is malafide.
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27.14. Admittedly there being AMC having been
entered into under which Alphion had rendered
services, it was the duty and obligation on part
of ITI to make payment of the due amounts
thereof and it had been agreed that ITI would
receive 2.5% of the billed amount on
maintenance and balance must be paid to
Alphion.
27.15. There being no agreement that ITI would have
to make payment of the monies to Alphion only
upon receipt of monies from BSNL, the
argument put across now that until BSNL pays
ITI cannot make payment is bereft of merits.
The view expressed by the Tribunal being a
plausible view and being a proper view, just
because ITI has a different perspective, the
same cannot be set-aside on that ground.
27.16. As regards the foreign Judgments relied upon
by the Tribunal, he submits that it is only the
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principles in the said Judgment which have
been taken into consideration. The said
Judgments do not lay down a law which is
contrary to that under the Indian law and as
such, reliance on the said Judgments would not
render the award bad in law.
27.17. There being no claim made against BSNL, there
is no requirement of BSNL being made a party
to the arbitral proceedings. If at all ITI wanted
to initiate any action against BSNL, ITI was
always free to do so. ITI not having done so,
cannot now claim that no payment could be
made to Alphion until BSNL makes payment to
ITI. It was always open for ITI to have initiated
action against BSNL, arbitration or otherwise if
it chose fit.
27.18. As regards the conditional consent for
appointment of an arbitrator, he submits that
there was no such conditional consent. What
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was stated was only a recommendation that
BSNL be made a party. ITI had never stated
that it was not agreeable for arbitration unless
BSNL is made a party. A recommendation and
conditional consent are two different aspects,
the same cannot be equated and the
recommendation cannot be said to be a
conditional consent. Once the hearing on the
application had been deferred, ITI did not take
any steps nor move the Arbitrator for
consideration of the said application and orders
be passed before the arguments were
advanced, hence the question of any prejudice
having been caused to ITI on account of the
same would not at all arise.
27.19. On the above basis, he submits that the
petition requires to be dismissed.
28. In rejoinder Sri.C.K.Nanda Kumar, learned counsel
submits that,
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28.1. The award as passed shocks the conscience and
as such is required to be set-aside by once
again relying upon the decisions earlier relied
upon during the course of arguments.
28.2. Reliance is placed on the decision in Dyna
Technologies (P) Ltd. v. Crompton Greaves
Ltd., reported in [(2019) 20 SCC 1] to
contend that the award without reasons would
not be sustainable and is required to be set-
aside. The relevant paragraphs, more
particularly, para 24, 26 and 35 thereof are
reproduced hereunder for easy reference:
24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award only
on the grounds provided therein or as interpreted
by various courts. We need to be cognizant of the
fact that arbitral awards should not be interfered
with in a casual and cavalier manner, unless the
court comes to a conclusion that the perversity of
the award goes to the root of the matter without
there being a possibility of alternative
interpretation which may sustain the arbitral
award. Section 34 is different in its approach and
cannot be equated with a normal appellate
jurisdiction. The mandate under Section 34 is to
respect the finality of the arbitral award and the
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party autonomy to get their dispute adjudicated
by an alternative forum as provided under the
law. If the courts were to interfere with the
arbitral award in the usual course on factual
aspects, then the commercial wisdom behind
opting for alternate dispute resolution would
stand frustrated.
26. Having established the basic jurisprudence
behind Section 34 of the Arbitration Act, we must
focus on the analysis of the case. The primary
contention of the learned counsel appearing on
behalf of the appellant is that the award by the
learned Tribunal was perverse for want of
reasons. The necessity of providing reasons has
been provided under Section 31 of the Arbitration
Act, which reads as under:
"31. Form and contents of arbitral award.--
(1)-(2) * * *
(3) The arbitral award shall state the reasons
upon which it is based, unless--
(a) the parties have agreed that no reasons are
to be given, or
(b) the award is an arbitral award on agreed
terms under Section 30."
(emphasis supplied)
35. When we consider the requirement of a
reasoned order, three characteristics of a
reasoned order can be fathomed. They are:
proper, intelligible and adequate. If the
reasonings in the order are improper, they reveal
a flaw in the decision-making process. If the
challenge to an award is based on impropriety or
perversity in the reasoning, then it can be
challenged strictly on the grounds provided under
Section 34 of the Arbitration Act. If the challenge
to an award is based on the ground that the same
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is unintelligible, the same would be equivalent of
providing no reasons at all. Coming to the last
aspect concerning the challenge on adequacy of
reasons, the Court while exercising jurisdiction
under Section 34 has to adjudicate the validity of
such an award based on the degree of
particularity of reasoning required having regard
to the nature of issues falling for consideration.
The degree of particularity cannot be stated in a
precise manner as the same would depend on the
complexity of the issue. Even if the Court comes
to a conclusion that there were gaps in the
reasoning for the conclusions reached by the
Tribunal, the Court needs to have regard to the
documents submitted by the parties and the
contentions raised before the Tribunal so that
awards with inadequate reasons are not set aside
in casual and cavalier manner. On the other
hand, ordinarily unintelligible awards are to be
set aside, subject to party autonomy to do away
with the reasoned award. Therefore, the courts
are required to be careful while distinguishing
between inadequacy of reasons in an award and
unintelligible awards.
28.3. Reliance is placed upon the decision in
McDermott International Inc. v. Burn
Standard Co. Ltd., reported in [(2006)11
SCC 181 more particularly, para 58 to 61, 111
and 112 thereof which are reproduced
hereunder for easy reference:
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58. In Renusagar Power Co. Ltd. v. General
Electric Co. [1994 Supp (1) SCC 644] this Court
laid down that the arbitral award can be set aside
if it is contrary to (a) fundamental policy of Indian
law; (b) the interests of India; or (c) justice or
morality. A narrower meaning to the expression
"public policy" was given therein by confining
judicial review of the arbitral award only on the
aforementioned three grounds. An apparent shift
can, however, be noticed from the decision of this
Court in ONGC Ltd. v. Saw Pipes Ltd. [(2003) 5
SCC 705] (for short "ONGC"). This Court therein
referred to an earlier decision of this Court in
Central Inland Water Transport Corpn. Ltd. v.
Brojo Nath Ganguly [(1986) 3 SCC 156 : 1986
SCC (L&S) 429 : (1986) 1 ATC 103] wherein the
applicability of the expression "public policy" on
the touchstone of Section 23 of the Indian
Contract Act and Article 14 of the Constitution of
India came to be considered. This Court therein
was dealing with unequal bargaining power of the
workmen and the employer and came to the
conclusion that any term of the agreement which
is patently arbitrary and/or otherwise arrived at
because of the unequal bargaining power would
not only be ultra vires Article 14 of the
Constitution of India but also hit by Section 23 of
the Indian Contract Act. In ONGC [(2003) 5 SCC
705] this Court, apart from the three grounds
stated in Renusagar [1994 Supp (1) SCC 644] ,
added another ground thereto for exercise of the
court's jurisdiction in setting aside the award if it
is patently arbitrary.
59. Such patent illegality, however, must go to
the root of the matter. The public policy violation,
indisputably, should be so unfair and
unreasonable as to shock the conscience of the
court. Where the arbitrator, however, has gone
contrary to or beyond the expressed law of the
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contract or granted relief in the matter not in
dispute would come within the purview of Section
34 of the Act. However, we would consider the
applicability of the aforementioned principles
while noticing the merits of the matter.
60. What would constitute public policy is a
matter dependant upon the nature of transaction
and nature of statute. For the said purpose, the
pleadings of the parties and the materials brought
on record would be relevant to enable the court
to judge what is in public good or public interest,
and what would otherwise be injurious to the
public good at the relevant point, as
contradistinguished from the policy of a particular
Government. (See State of Rajasthan v. Basant
Nahata [(2005) 12 SCC 77] .)
61. In ONGC [(2003) 5 SCC 705] this Court
observed: (SCC pp. 727-28, para 31)
"31. Therefore, in our view, the phrase 'public
policy of India' used in Section 34 in context is
required to be given a wider meaning. It can be
stated that the concept of public policy connotes
some matter which concerns public good and the
public interest. What is for public good or in
public interest or what would be injurious or
harmful to the public good or public interest has
varied from time to time. However, the award
which is, on the face of it, patently in violation of
statutory provisions cannot be said to be in public
interest. Such award/judgment/decision is likely
to adversely affect the administration of justice.
Hence, in our view in addition to narrower
meaning given to the term 'public policy' in
Renusagar case [1994 Supp (1) SCC 644] it is
required to be held that the award could be set
aside if it is patently illegal. The result would be--
award could be set aside if it is contrary to:
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(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if
the illegality is of trivial nature it cannot be held
that award is against the public policy. Award
could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the
court. Such award is opposed to public policy and
is required to be adjudged void."
111. In State of U.P. v. Allied Constructions
[(2003) 7 SCC 396] this Court held: (SCC p. 398,
para 4)
"4. Any award made by an arbitrator can be set
aside only if one or the other term specified in
Sections 30 and 33 of the Arbitration Act, 1940 is
attracted. It is not a case where it can be said
that the arbitrator has misconducted the
proceedings. It was within his jurisdiction to
interpret clause 47 of the agreement having
regard to the fact-situation obtaining therein. It is
submitted that an award made by an arbitrator
may be wrong either on law or on fact and error
of law on the face of it could not nullify an award.
The award is a speaking one. The arbitrator has
assigned sufficient and cogent reasons in support
thereof. Interpretation of a contract, it is trite, is
a matter for the arbitrator to determine (see
Sudarsan Trading Co. v. Govt. of Kerala [(1989)
2 SCC 38] ). Section 30 of the Arbitration Act,
1940 providing for setting aside an award is
restrictive in its operation. Unless one or the
other condition contained in Section 30 is
satisfied, an award cannot be set aside. The
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arbitrator is a Judge chosen by the parties and his
decision is final. The court is precluded from
reappraising the evidence. Even in a case where
the award contains reasons, the interference
therewith would still be not available within the
jurisdiction of the court unless, of course, the
reasons are totally perverse or the judgment is
based on a wrong proposition of law. An error
apparent on the face of the records would not
imply closer scrutiny of the merits of documents
and materials on record. Once it is found that the
view of the arbitrator is a plausible one, the court
will refrain itself from interfering (see U.P. SEB v.
Searsole Chemicals Ltd. [(2001) 3 SCC 397] and
Ispat Engg. & Foundry Works v. Steel Authority of
India Ltd. [(2001) 6 SCC 347] )."
112. It is trite that the terms of the contract can
be express or implied. The conduct of the parties
would also be a relevant factor in the matter of
construction of a contract. The construction of the
contract agreement is within the jurisdiction of
the arbitrators having regard to the wide nature,
scope and ambit of the arbitration agreement and
they cannot be said to have misdirected
themselves in passing the award by taking into
consideration the conduct of the parties. It is also
trite that correspondences exchanged by the
parties are required to be taken into
consideration for the purpose of construction of a
contract. Interpretation of a contract is a matter
for the arbitrator to determine, even if it gives
rise to determination of a question of law. (See
Pure Helium India (P) Ltd. v. ONGC [(2003) 8
SCC 593] and D.D. Sharma v. Union of India
[(2004) 5 SCC 325] .)
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28.4. To contend that the correspondence between
the parties had to be taken into consideration
while interpreting the intention of the parties.
28.5. He submits that the decisions relied upon by
the counsel for ITI are not applicable to the
facts at hand and he reiterates that the present
petition is required to be allowed and arbitral
award required to be set-aside.
29. Heard Sri.C.K.Nanda Kumar, learned Senior counsel for
the petitioner and Sri.Mudit Sharma, learned counsel for
ITI. Perused papers.
30. The points that would arise for determination of this
Court are:
1. Whether the award comes under the
mischief of Section 34(2)(A)(iv) of the
A&C Act on account of the order dealing
with disputes not contemplated or not
falling within the terms of submissions?
2. Whether the award in question comes
within the mischief of Section 32(2)(B)(ii)
of the A&C Act on account of the award
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being in conflict with the Public Policy of
India?
3. Whether the impugned award is in
violation of the fundamental Public Policy
of India and is required to be set-aside
under Section 34(2)(b)(ii) Explanation
(1)(ii) of the A&C Act?
4. Whether the award falls foul of Section
34(2)(a)(v) of the A&C Act on account of
the composition of the arbitral Tribunal
and or arbitral procedure not being in
accordance with terms of the Arbitration
Agreement?
5. Whether the arbitral award is in
contravention of Section 34(2)(a)(iii) of
the A&C Act?
6. Whether the arbitral award suffers from
lack of reasons and is in violation of
Section 31 of the A&C Act?
7. Whether the arbitral award is in violation
of Section 28(2) of A&C Act on the ground
that the arbitral Tribunal has applied
principles of equity?
8. Whether the arbitral award falls foul of
Section 28(1)(b) of A&C Act requiring it to
be set-aside?
9. What order?
31. I answer the above points as under:
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32. ANSWER TO POINT NO.1: Whether the award
comes under the mischief of Section
34(2)(a)(iv) of the A&C Act on account of the
order dealing with disputes not contemplated
or not falling within the terms of submissions?
32.1. Section 34(2)(a)(iv) is reproduced hereunder
for easy reference:
34(2)(a)(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated from those
not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to
arbitration may be set aside; or
32.2. The contention of Sri.C.K.Nanda Kumar,
learned Senior counsel appearing for ITI is that
arbitral proceedings being initiated by invoking
the arbitration clause under the TCA, the
disputes under the AMC could not have been
referred to arbitration and/or dealt with by the
Arbitrator. In this regard he relied upon various
citations which have been referred and the
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relevant paragraphs have been reproduced
hereinabove.
32.3. The further contention of learned Senior
counsel is that the claim of Alphion is an action
in tort and not a contractual claim and
therefore, is required to be set-aside.
32.4. I am unable to accept the aforesaid submission
of Sri.C.K.Nanda Kumar, learned Senior counsel
for the simple reason that at the time when
Alphion invoked the arbitration clause and
issued notice, there was no such contention
which had been taken up.
32.5. Admittedly, the claims of Alphion was as
regards the amounts due under AMC. If at all
the same is a genuine contention, it ought to
have been raised in the reply to the invocation
notice. To the contrary, ITI agreed to the said
invocation, agreed to the reference, as also
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agreed to the Arbitrators nominated by the
Alphion except to state that it would be
advisable for proceedings to be initiated against
BSNL by both Alphion and ITI.
32.6. Apart from this, statement made in the reply,
there is no other contention taken as regards
arbitrability or otherwise as regards the dispute
being covered within the arbitration clause
invoked by Alphion.
32.7. Even in the defence statement which was filed
before the Arbitrator, no such contention was
raised. The only contentions raised in the
defence statement were that BSNL was
required to be made a party since it would be
helpful, legal and beneficial to both the parties.
It was categorically stated that ITI had never
repudiated from the payment of dues of annual
comprehensive repair charges but on all
occasions it had made several attempts for the
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release of payment from BSNL and
communicated that payments would be made
as soon as it is released.
32.8. In the teeth of such categorical statements
having been made by ITI in its defence
statement, it does not now lie for ITI to contend
that arbitral award deals with the dispute not
contemplated by or not falling within the terms
of the submissions to arbitration. Admittedly
when the defence statement was filed in reply
to the claim statement filed by Alphion, ITI was
well aware of the claims made by Alphion, the
basis of the claims and the reliefs which had
been sought for by Aplhion.
32.9. I am of the considered view that the
submissions now made are completely
malafide, bereft of merits and have been only
made to somehow overcome the finding of the
arbitral tribunal which are not sustainable.
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32.10. ITI having contended that BSNL being required
to be made a party and further that ITI and
Alphion should jointly prosecute the claim
against BSNL, it cannot now be contended that
the claim and/or arbitral proceedings did not
deal with the disputes contemplated under the
arbitration clause.
32.11. If that were to be so, ITI would or could have
stated so, not having done that, such a stand
cannot be taken in the Section 34 proceedings.
32.12. The decision in MSK Projects (supra) referred
to by the senior counsel for ITI, in my
considered opinion, would not be applicable to
the present case inasmuch as in that case, the
scope was enlarged and in this case, having
come to a conclusion that there is no such
enlargement, the said decision will not have
any bearing.
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32.13. The decision in Vidya Drolia's case (supra)
would also not be applicable since at no point of
time had ITI taken the contention that the
claim was not one which was contemplated
under the arbitration clause.
32.14. The contention that because BSNL is not made
a party, the award would fall foul of Section
34(2)(a)(iv) is not appreciable inasmuch as
there is no serious attempt made by ITI to
make BSNL a party, the arbitration proceeded
with on the basis of the consent given by ITI.
Though Sri. C.K.Nanda Kumar, learned Senior
counsel submits that the consent was
conditional, I am of the considered opinion that
there is no conditional consent as alleged or
otherwise. The consent for arbitration is
complete. The recommendation to make BSNL
a party cannot make the consent conditional.
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32.15. At no point of time had ITI contended that the
disputes and or the releifs claimed were not
contractual but were tortious. These are all new
arguments which are being taken up by learned
Senior counsel before this Court for the first
time.
32.16. The contention that fundamental principles of
justice is breached in the award since the
contract has been altered by relying upon the
decision in Ssangyong Engg's case (supra)
and as such, the basic notion of justice have
been breached, in my considered opinion does
not stand a test of reason since firstly there has
to be a unilateral addition or alteration. The
alteration being claimed is as regards BSNL not
being made a party. There being no unilateral
addition or alteration, there cannot be a
contention raised that there is breach of
fundamental notion of justice as contended by
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Sri.C.K.Nanda Kumar, learned Senior counsel.
Similar is the situation as regards the decision
in Sical Terminals Private Limited's case.
32.17. As regards Santhosham's case, Vistrat Real
Estate and Chloro Control's case, which
have been relied upon to contend that BSNL
could have been made a party to the
proceedings and not making BSNL a party has
deprived valuable rights of ITI and if an order
had been passed on the application at the
earliest, ITI could have questioned the same
under Section 37 of the A&C Act.
32.18. If at all ITI was aggrieved by the deferment of
orders on the impleading application, the same
ought to have been made known by ITI to the
arbitral Tribunal. There being a categorical
order passed by the Tribunal stating that 'I
have considered the submissions at length
and find that it is not necessary to render
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an adjudication on the same at this
stage..... the decision on the application
shall be taken along with a final decision"
and the matter was posted for final arguments
would establish that ITI was aware that the
decision on the application would be passed
along with the final award. ITI not having
objected to the same at that stage and/or
sought for recalling of the order and or not
having made a request to the learned Arbitrator
to pass orders on the impleading application,
ITI cannot now be heard to say in the Section
34 proceedings that the right of ITI under
Section 37 of the A&C Act has been deprived.
32.19. The conduct of ITI shows that ITI went ahead
with the final arguments and even during the
final arguments did not raise any issue as
regards the pendency of the impleading
application. Having not done so, it is untenable
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for ITI to raise the issue now to contend that
the learned Arbitrator by passing an order on
the impleading application along with the main
has deprived ITI of the rights under Section 37
of A&C Act. The right, if any, was required to be
exercised by ITI at that stage and not now and
the manner in which the contentions have been
advanced as if to state that the Arbitrator was
at fault is liable to be and is deprecated.
32.20. Though there are several citations which have
been sought to be relied upon by Sri.C.K.Nanda
Kumar, learned Senior counsel for ITI before
this Court on the aspect of impleading viz.,
ONGC, Vistrat Real Estate and Chloro
Control's case, apart from Chloro Control's
case none of the decisions have been relied
upon by ITI before the arbitral Tribunal. Be that
as it may, ONGC's Case dealt with the aspect
of Section 16 relating to constitution of the
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Tribunal which in my considered opinion would
have no bearing in the present case since there
is no dispute as such as regards the
constitution of the Tribunal.
32.21. The reference to Chloro Control's case (supra)
and contending that there is direct relationship
of BSNL to the signatory of arbitration clause is
also bereft of merits inasmuch as in Chloro
Control's case, a person who is not a party to
the arbitration agreement was sought to be
made a party on the ground of group of
companies doctrine inasmuch as the said
person would also be bound by any order that
may be passed in the arbitral proceedings. In
the present case BSNL does not come within
the purview of 'Group of companies' doctrine
inasmuch as BSNL is not a part of ITI or
Alphion. BSNL has a completely independent
existence. Apart therefrom even according to
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ITI, BSNL was required to be made party
respondent with ITI and Alphion being the
claimants, so as to impose the liability on BSNL
knowing fully well that the order passed against
ITI would not bind BSNL. Thus, looked at from
any angle, BSNL not coming within the purview
of 'Group of companies' and or not being bound
by any award which may be passed, the
principles laid down in Chloro Control's case,
in my considered opinion would not be
applicable to the present facts.
32.22. The dispute essentially being between Alphion
and ITI and the claim made by Alphion on ITI,
the tripartite agreement also would have no
relevance since the obligation to make payment
has not been denied but has been admitted.
Though it is contended that there is a
composite agreement on basis of the tripartite
agreement, it is a matter of fact and record that
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ITI has not taken any steps against BSNL.
There are no separate arbitral proceedings
initiated by ITI against BSNL. ITI has continued
to keep quiet and not do anything but only to
blame BSNL for not having made payment of
the monies and calling upon Alphion to take
action against BSNL. Thus if at all, ITI should
have acted on its own arguments and initiated
proceedings against BSNL on the basis of the
alleged composite agreement and thereby seek
for composite reference which has not been
done.
32.23. ITI cannot seek to improve upon its case before
this Court without having taken up those
contentions before the arbitral Tribunal. Any
arbitral award cannot be sought to be set-aside
on the ground that the contentions which had
not been raised before it were not considered
by the arbitral Tribunal.
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32.24. Similar is the situation as regards the decision
in Bougainvillea Multiplex's case (supra)
since the claim which has been made is on
account of the dues under the agreement and
not a tortious liability of damages. The dues are
quantified in terms of the amounts agreed upon
between the parties. When the claim of Alphion
is based on such a quantified claim in terms of
the agreement, it cannot be said to be tortious.
The contention raised now by the learned
Senior counsel for the petitioner is completely
bereft of merits.
32.25. An arbitration agreement is a contract between
the parties and it is for the parties to state as to
what are the disputes that could be covered
under the arbitration clause and what are the
disputes which cannot be covered and then for
the arbitral tribunal to render a finding on it.
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32.26. In the acceptance letter though contended to
be conditional acceptance, there was no dispute
raised as regards the arbitration clause not
being applicable to the claim of Alphion as
regards the amounts due under the AMC.
Infact, it was suggested that the claim made by
Alphion could be made against BSNL with
Alphion and ITI being the claimants, such a
suggestion made by ITI to my mind would
indicate that even according to ITI the disputes
were governed by and could be resolved by
way of Arbitration. Thus, the argument now
being advanced for the first time in Section 34
proceedings cannot be countenanced either in
law or fact.
32.27. Hence, I answer Point No.1 by holding that
the arbitral award does not deal with a
dispute not contemplated by or not falling
within the terms of submission to
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arbitration nor does it contain decisions on
matters beyond the scope of submission to
arbitration.
33. ANSWER TO POINT NO.2: Whether the award in
question comes within the mischief of Section
32(2)(B)(ii) of the A&C Act on account of the
award being in conflict with the Public Policy of
India?
AND
Whether the impugned award is in violation of
the fundamental Public Policy of India and is
required to be set-aside under Section
34(2)(b)(ii) Explanation (1)(ii) of the A&C
Act?
33.1. Section 34(2)(b)(ii) of the A&C Act is
reproduced hereunder for easy reference:
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of
[
settlement by arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
33.2. Section 34(2)(b)(ii) Explanation (1)(ii) of the
A&C Act is reproduced hereunder for easy
reference:
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34. Application for setting aside arbitral award.--
(1) xxxx
(2) An arbitral award may be set aside by the Court
only if--
(a) xxx
(b) the Court finds that--
(i) xxxx
(ii) the arbitral award is in conflict with the
public policy of India.
[Explanation 1.--For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy
of India, only if,--
(i) xxx
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) xxx
33.3. The submissions of the learned Senior counsel
for ITI is that the award shocks the conscience
of the Court and that the award is against the
basic notions of justice and morality and as
such is in conflict with Public Policy of India. In
this regard he relies upon the decision of the
Hon'ble Apex Court in Associate Builders
(supra).
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33.4. The reason why he contends the award to be
contrary to the Public Policy of India is that the
Tribunal has without deciding the impleading
application and having deferred the
consideration of the same passed the award
and along with the award, passed an order on
the said application. This, he submits has
deprived BSNL of a right to appeal under
Section 37 of the A&C Act and as such, the
same is contrary to Public Policy.
33.5. The above being the gist of long submissions
made by Sri.C.K.Nanada Kumar, learned Senior
counsel, the same would have to be assessed
on the basis of the documents on record and
the award passed.
33.6. Admittedly, when Alphion invoked the
arbitration clause, ITI in its reply recommended
that BSNL is required to be made a party to the
arbitration, with ITI and Alphion being
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claimants and BSNL being a respondent. There
is no other statement made by ITI in the said
letter in reply dated 21.10.2020 which has been
addressed on behalf of ITI by the Deputy
General Manager (Purchase).
33.7. Even when a claim was made by Alphion under
a contract and arbitral proceedings were to be
initiated, the only contention of ITI was that it
would join the arbitration so long as no financial
burden is cast on ITI. In the very same letter, it
was categorically stated that ITI is taking all
possible steps to recover the amount due
towards comprehensive repair charges under
RQ and TQ along with interest as on date from
BSNL. It had further stated that there is no
dispute between Alphion and ITI but the actual
dispute is with BSNL.
33.8. In the defence statement filed except for
stating that it would be helpful, legal and
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beneficial to both the parties to make BSNL a
party, there is no other statement indicating
that ITI will not participate in the proceedings
without BSNL being made as a party. In fact,
ITI participated in the said proceedings and
filed an application for impleading BSNL. In the
said impleading application the only contention
raised is that impleadment of BSNL as a party
in the arbitration proceedings will help the
arbitrator to arrive at a more comprehensive
decision which is both legal and beneficial to
the parties.
33.9. When the learned Arbitrator after hearing the
application, deferred the consideration of the
application, there was no objection which was
raised by ITI. Even when arguments were taken
up on the main matter no objections were
taken up by ITI, ITI addressed its arguments
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and the matter proceeded for passing of an
award, which was so passed.
33.10. The conduct on part of ITI through out
categorically indicates that there was no
particular insistence on part of ITI to make
BSNL a party. ITI having acquiesced to the
arbitral proceedings, the same continued
without BSNL, having been made a party. Thus
the submission now raised that the arbitrator
has violated the principles of public policy and
that the same shocks the conscience is an issue
raised only after having failed in the matter.
33.11. Having participated in the proceedings and
having submitted arguments on the main
matter, ITI cannot be heard to say that the
rights of ITI under Section 37 of A&C Act have
been deprived on account of the arbitral
Tribunal not having passed an order on the said
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application making the award fall foul of Section
34(2)(B)(ii) of the A&C Act.
33.12. If anything it is the conduct of ITI in having
participated in the arbitral proceedings and now
blaming the arbitrator is what shocks my
conscience and the same is against the basic
notion of justice.
33.13. The decisions which have been relied upon by
the counsel for ITI lay down the principles of
law as regards which there can be no quarrel, it
is the applicability which has to be seen in the
facts and circumstances.
33.14. As aforesaid the grounds which have been
raised to invoke Section 34(2)(b)(ii) of the A&C
Act not being sustainable.
33.15. Hence, I answer Point Nos.2 and 3 holding
that the award in question does not come
within the mischief of Section 32(2)(b)(ii)
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and Explanation (1)(ii) thereof nor is the
award in conflict with the Public Policy of
India.
34. ANSWER TO POINT No.4: Whether the award
falls foul of Section 34(2)(a)(v) of the A&C Act
on account of the composition of the arbitral
Tribunal and or arbitral procedure not being in
accordance with terms of the Arbitration
Agreement?
34.1. Section 34(2)(a)(v) of the A&C Act is
reproduced hereunder for easy reference:
34. Application for setting aside arbitral award.--
(1) xxxx
(2) An arbitral award may be set aside by the Court only
if--
(a) the party making the application furnishes proof
that--
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was in
conflict with a provision of this Part from which the
parties cannot derogate, or, failing such agreement, was
not in accordance with this Part; or
34.2. The contention of Sri.C.K.Nanda Kumar,
learned Senior counsel as regards this ground is
also that since BSNL had not been made a
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party, the same would fall foul of Section
34(2)(a)(v) A&C Act.
34.3. Section 34(2)(a)(v) of A&C Act will be
applicable only in the event of composition of
arbitral Tribunal or arbitral procedure not being
in accordance with the agreement.
34.4. Section 34(2)(a)(v) of the A&C Act extracted
hereinabove relates to composition of the
arbitral Tribunal, thereby meaning the
Arbitrators. 'Arbitral Tribunal' being defined
under Section 2(1)(d) which is reproduced
hereunder for easy reference:
2(1)(d) "arbitral tribunal" means a sole
arbitrator or a panel of arbitrators;
34.5. The attempt of ITI now is to enlarge the
meaning of arbitral Tribunal to include parties
to the arbitration by contending that the
composition of the arbitral Tribunal is improper.
Applying the first principles and the definitions,
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it is clear that a party to an arbitration cannot
have any relevance insofar as composition of
the arbitral Tribunal is concerned and as such,
this argument is unsustainable and is liable to
be rejected.
34.6. The contention that since BSNL was not made a
party, the composition of arbitral Tribunal is not
in accordance with the agreement between the
parties is not sustainable, since there is no
agreement between the parties to make BSNL
as a party to the arbitral proceedings. The
aspect of impleadment of BSNL has been dealt
with in the answer to the above point and is not
required to be repeated once again. Suffice it to
say that Section 34(2)(a)(v) of A&C Act deals
with the composition of arbitral Tribunal and
not as regards the parties to the arbitration.
34.7. ITI having consented to the appointment of the
Arbitrator and thereafter substitute Arbitrator,
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the composition of the arbitral Tribunal per se is
not in question nor could it be questioned.
34.8. The second part of the submission made on the
basis of the above provision is that arbitral
procedure which has been followed is not in
accordance with the agreement of the parties
and this argument is also based on BSNL not
being made a party. Learned Senior counsel for
ITI has been unable to establish as to which
part of the arbitral procedure agreed between
the parties provided for BSNL to be a party and
how the arraigning or not arraigning BSNL
would have an impact on the arbitral
procedure.
34.9. The contention is that the Tribunal proceeded to
pass the award without making BSNL a party
which is in violation to Arbitral procedure.
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34.10. If at all ITI was aggrieved by the deferment of
orders on the impleading application, the same
ought to have been made known by ITI to the
arbitral tribunal. There being a categorical order
passed by the Tribunal stating that 'I have
considered the submissions at length and
find that it is not necessary to render an
adjudication on the same at this stage.....
the decision on the application shall be
taken along with a final decision" and the
matter was posted for final arguments would
establish that ITI was aware that the decision
on the application would be passed along with
the final award. ITI not having objected to the
same at that stage and/or sought for recalling
of the order and or not having made a request
to the learned Arbitrator to pass orders on the
impleading application, ITI cannot now be
heard to say in the Section 34 proceedings that
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the right of ITI under Section 37 of the A&C Act
has been deprived.
34.11. The conduct of ITI shows that ITI went ahead
with the final arguments and even during the
final arguments did not raise any issue as
regards the pendency of the impleading
application. Having not done so, it is untenable
for ITI to raise the issue now to contend that
the learned Arbitrator by passing an order on
the impleading application along with the main
has deprived ITI of the rights under Section 37
of A&C Act. The right, if any, was required to be
exercised by ITI at that stage and not now and
the manner in which the contentions have been
advanced as if to state that the Arbitrator was
at fault is liable to be and is deprecated.
34.12. The contention of Sri.C.K.Nanda Kumar,
learned counsel appearing for ITI is that there
was a conditional consent for appointment of an
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arbitrator and therefore, the consent of ITI for
arbitration is only as a co-claimant along with
Alphion against BSNL and without impleading
BSNL the proceedings could not go on and on
that basis, it is contended that the composition
of the arbitral Tribunal without BSNL is bad in
law.
34.13. There is also no allegation and/or averment
made as regards procedure followed by the
Tribunal not being in accordance with the
agreement of the parties, as such, Section
34(2)(a)(v) of the A&C Act dealing with only
composition of arbitral Tribunal and/or arbitral
procedure, there being no grounds which have
been raised by ITI which come within the
purview of the said provision, I am of the
considered opinion that no grounds have been
made out by the petitioner so as to invoke
34(2)(a)(v) of the A&C Act.
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34.14. The arbitral procedure is basically a procedure
which is required to be followed by the arbitral
Tribunal. The procedure to be followed is
detailed in CHAPTER-V of the A&C Act which
deals with conduct of arbitral proceedings. The
relevant provision being Section 19 thereof
which is reproduced hereunder for easy
reference:
19. Determination of rules of procedure.--(1) The
arbitral tribunal shall not be bound by the Code of
Civil Procedure, 1908 (5 of 1908) or the Indian
Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree
on the procedure to be followed by the arbitral
tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section
(2), the arbitral tribunal may, subject to this Part,
conduct the proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal under sub-
section (3) includes the power to determine the
admissibility, relevance, materiality and weight of any
evidence.
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34.15. Learned Senior counsel for ITI has not been
able to place on record or establish any
violation of the procedure under Section 19,
which would bring into effect Section
34(2)(a)(v) of the A&C Act. None of the other
provisions under Chapter-V viz., Section 20
relating to Place of arbitration, Section 21-
Commencement of arbitral proceedings, Section
22 relating to Language, Section 23 relating to
Statement of claim and defence, Section 24
relating to hearings and written proceedings,
Section 26 relating to Expert appointment by
arbitral Tribunal and Section 27 relating to
Court assistance in taking evidence, are
contended to be violated. Hence, the question
of any arbitral procedure followed by arbitral
Tribunal being not in accordance with the
agreement of the parties is only an hogwash
and a convoluted argument sought to be
addressed before this Court which also is liable
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to be deprecated and as such deprecated and
rejected.
34.16. I answer point No 4 by holding that the
award does not fall foul of Section
34(2)(A)(v) of the A&C Act, there is
nothing wrong in the composition of the
arbitral Tribunal nor is the arbitral
procedure followed by the arbitrator in
violation of the terms of the Arbitration
Agreement.
35. ANSWER TO POINT NO.5: Whether the arbitral
award is in contravention of Section
34(2)(a)(iii) of the A&C Act?
35.1. Section 34(2)(a)(iii) of the A&C Act is
reproduced hereunder for easy reference:
34(2)(a) (iii) the party making the application was not
given proper notice of the appointment of an arbitrator
or of the arbitral proceedings or was otherwise unable to
present his case; or
35.2. The contention of the learned Senior counsel for
ITI is that the deferment of the order on the
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impleading application would bring the award
under the mischief of Section 34(2)(a)(iii) of
the A&C Act. A perusal of 34(2)(a)(iii) of the
A&C Act extracted hereinabove would only
indicate that the same would apply when a
party making the application was not given
proper notice of the appointment of an
arbitrator or of the arbitral proceedings or
otherwise unable to present his case.
35.3. It is not the contention of ITI that it did not
receive any notice of appointment, it is also not
the case of ITI that it did not receive any notice
of the arbitral proceedings nor is it the case of
ITI that it was unable to present its case.
35.4. In fact, ITI has consented to the appointment
of Arbitrator, participated in the arbitral
proceedings, filed its defence statement and
addressed arguments, thus, the contention
which is now sought to be addressed before this
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Court placing reliance on Section 34(2)(a)(iii) is
completely malafide and as such, is rejected.
35.5. I answer point no.5 by holding that the
award is not in contravention of section
34(2)(a)(iii) of A&C Act. The petitioner
has been given proper notice of the
appointment of an arbitrator as also the
arbitral proceedings and has in fact
participated in the proceedings.
36. ANSWER TO POINT NO.6: Whether the arbitral
award suffers from lack of reasons and is in
violation of Section 31 of the A&C Act?
36.1. Section 31 of the A&C Act is reproduced
hereunder for easy reference:
31. Form and contents of arbitral award.--(1) An
arbitral award shall be made in writing and shall be
signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral
proceedings with more than one arbitrator, the
signatures of the majority of all the members of the
arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.
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(3) The arbitral award shall state the reasons upon
which it is based, unless--
(a) the parties have agreed that no reasons are to be
given, or
(b) the award is an arbitral award on agreed terms
under section 30.
(4) The arbitral award shall state its date and the
place of arbitration as determined in accordance with
section 20 and the award shall be deemed to have
been made at that place.
(5) After the arbitral award is made, a signed copy
shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the
arbitral proceedings, make an interim arbitral award
on any matter with respect to which it may make a
final arbitral award.
(7) (a) Unless otherwise agreed by the parties, where
and in so far as an arbitral award is for the payment
of money, the arbitral tribunal may include in the sum
for which the award is made interest, at such rate as
it deems reasonable, on the whole or any part of the
money, for the whole or any part of the period
between the date on which the cause of action arose
and the date on which the award is made.
[(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry
interest at the rate of two per cent. higher than the
current rate of interest prevalent on the date of
award, from the date of award to the date of payment
36.2. The contention of the learned Senior counsel for
ITI by relying upon the decision in Diana
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Technology -v- Crompton Greeves Limited
reported in [(2019) 20 SCC 1] is that award
does not provide for reasons and as such, is
liable to be set-aside.
36.3. This argument is premised on the award being
silent as regards rejection of impleading
application, basis of quantification of the
amounts and further that the claim of Alphion
was based on tort and not on contract.
36.4. In my considered opinion that rejection of
impleadment application was not required to be
mentioned in the award, since the same was a
separate application which is dealt with
separately. It is only if the application had been
allowed that it had to find place in the award.
Rejection of impleading application would have
no effect on the award as such.
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36.5. As regards the quantification of the amounts
due, there was never any dispute raised by ITI
as regards quantification of the amounts. The
only contention raised being that BSNL was to
make payment of the monies. The agreement,
services rendered under the agreement and the
amounts due under the agreement had not
been disputed. Thus, in my opinion, there was
no need for the Tribunal to deal with the
quantification of the amounts in detail when
there is an admission on part of ITI that the
amounts are due. As regards the contention
that the claim of Alphion was based on tort, the
same has been dealt hereinabove and I have
come to the conclusion that the amount is
contractual and not tortious, thus, this would
not have any bearing.
36.6. I answer point No.6 by holding that the
learned arbitrator has considered all
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relevant points, appreciated the evidence
on record and has given reasons for each
of his findings. Hence, the award does not
fall foul of section 31 of the A&C Act.
37. ANSWER TO POINT NO.7: Whether the arbitral
award is in violation of Section 28(2) of A&C
Act on the ground that the arbitral Tribunal has
applied principles of equity?
37.1. Section 28(2) of A&C Act is reproduced
hereunder for easy reference:
28.Rules applicable to substance of dispute.--
(1) xxx
(2) The arbitral tribunal shall decide ex aequoet bono or
as amiable compositeur only if the parties have
expressly authorised it to do so.
37.2. The contention of Sri.C.K.Nanda Kumar,
learned Senior counsel appearing for ITI is that
since an award has been passed on a tortious
claim, the Tribunal has exercised its powers in
equity which is prohibited under Section 28(2)
of A&C Act unless the parties have agreed
otherwise.
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37.3. It is true that there is prohibition of arbitral
Tribunal to apply equity or act equitably. An
Arbitral Tribunal being a creation under a
contract, the Tribunal is strictly required to act
under contractual documentation and there
would be no principles of equity which could be
applied unless agreed to between the parties.
This restriction in my considered opinion would
not be a complete restriction or embargo
inasmuch as while deciding aspects, for
example relating to a specific performance
claim before an arbitral Tribunal, all the
considerations mentioned under the Specific
Relief Act, 1963 which would include equitable
consideration would have to be applied to by
the arbitral Tribunal.
37.4. Ramnath Iyers 'Law Lexicon' - II edition defines
"ex aequoet bono" to be according to what is just
and good. The same Law Lexicon defines
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'amicable compositeur' to be arbitrators
authorized to abate something or strictness of
law in favour of natural equity.
37.5. Thus, the restriction which has been imposed
under Section 28(2) of A&C Act would depend
on the kind of proceedings which are filed
before the arbitral Tribunal since the A&C Act
also mandates that the law applicable to such
proceedings as in force in India is required to
be applied. In the example above, the Specific
Relief Act, 1963 contemplating consideration of
equity while granting or refusing specific
performance, such consideration of equity
would not fall foul of Section 28(2) of the A& C
Act. In my considered opinion there is no
blanket embargo under Section 28(2) of A&C
Act so as to prevent the arbitral Tribunal to
consider matters in equity.
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37.6. Be that as it may, in the present matter, the
Tribunal has not considered or applied any
principles of equity. The Tribunal has
considered the amount which was claimed by
Alphion to be due by ITI which had been
admitted by ITI and as such, the Tribunal
directed ITI to make payment of such amounts.
The same being completely contractual and no
principles of equity having been applied even
this argument raised by learned Senior counsel
for ITI under Section 28(2) of A&C Act will have
to be rejected and as such, is rejected.
37.7. I answer point no.7 by holding that the
arbitral award is not in violation of Section
28(2) of the A&C Act.
38. ANSWER TO POINT NO.8: Whether the arbitral
award fall foul of Section 28(1)(b) of A&C Act
requiring it to be set-aside ?
38.1. Section 28(1)(b) of A&C Act is reproduced as
under:
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28. Rules applicable to substance of dispute.--
(1) Where the place of arbitration is situate in
India,--
xxxx
(b) in international commercial arbitration,--
(i) the arbitral tribunal shall decide the dispute in
accordance with the rules of law designated by the
parties as applicable to the substance of the
dispute;
(ii) any designation by the parties of the law or
legal system of a given country shall be construed,
unless otherwise expressed, as directly referring
to the substantive law of that country and not to
its conflict of laws rules;
(iii) failing any designation of the law under clause
(a) by the parties, the arbitral tribunal shall apply
the rules of law it considers to be appropriate
given all the circumstances surrounding the
dispute
38.2. The contention of Sri.C.K.Nanda Kumar,
learned Senior counsel for ITI is that the
learned Arbitrator relied on foreign law in the
interpretation of back to back provisions of the
TCA, that is by referring to American
Judgments, inasmuch as five Judgments of the
American courts have been referred to. He
submits that the arbitral Tribunal was to decide
the dispute as per the law designated by the
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parties, in this case being Indian Law and as
such, foreign Judgments could not have been
referred to or relied upon by the learned
Arbitrator.
38.3. A perusal of the award indicates that the
Tribunal relied upon the decision in National
Projects Construction Corporation v.
Harvinder Singh and Co., reported in [(2018)
SCC Online Delhi 9573], more particularly
para 24 and 25 are reproduced hereunder for
easy reference:
24. We are in entire agreement with learned
Sole Arbitrator, as well as with the learned
Single Judge, that there was no privity of
contract between the respondent and CONCOR.
The various clauses, on which Mr. Bhambhani
relies, merely stipulate that, out of the payment
received by the appellant from CONCOR, the
appellant was entitled to deduct its profit and
commission, before making payment to the
respondent. These clauses cannot be
interpreted in such a way, as to disentitle the
respondent to payment for work rendered by it,
as instructed of the appellant and in accordance
with the agreement between the appellant and
the respondent, merely because the appellant
did not receive payment from CONCOR. Any
such interpretation would be grossly unjust,
inequitable and against public policy, as it would
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amount to holding that the services rendered,
and work done, by the respondent for the
appellant, in terms of a bilateral contract duly
drawn up between them, would have to be
treated as rendered gratis, without any
payment therefor. Such an interpretation,
needless to say, cannot be adopted or accepted,
by any court of law. The appellant may
conceivably have its rights against CONCOR,
which it would have to prosecute separately;
the grievances of the appellant against CONCOR
cannot, however, be allowed to spill over and
engulf the respondent, leaving the respondent
effectively in the lurch.
25. It is an axiomatic principle of law that work
duly done, as per contract, is required to be
recompensed. There is no gainsaying this legal
position.
38.4. The contention is that the Tribunal has taken
into consideration decisions rendered by the
foreign Courts to decide Indian law which is not
permissible since the agreement between
Alphion and ITI is governed by the Indian law.
38.5. A perusal of the award as also the decisions
which have been relied upon would indicate
that those decisions are general in nature and
do not deal with any application of the law
applicable in that country which has been made
applicable in India to the Arbitral proceedings.
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38.6. The Tribunal has come to the conclusion that
there was no agreement between the parties
for ITI to contend that it will make payments
when paid by BSNL. This being a general
principle, the reference to certain foreign
decisions, in my considered opinion, would not
make any difference.
38.7. The contention of ITI being that since BSNL has
not paid monies, ITI would not make payment
of monies to Alphion under the contract entered
into by Aphion with ITI. The said submission
and/or contention is completely malafide
inasmuch as ITI has neither produced before
the arbitral Tribunal nor before this Court any
material to show any action taken by ITI
against BSNL for recovery of the monies due,
but, however has been promising to make
payment of monies to Alphion on receipt of
monies by BSNL.
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38.8. The manner in which ITI has been delaying the
matter and protracting the matter would
categorically indicate that ITI had never had
any interest in either proceeding against BSNL
or making payment of monies to Alphion. Thus,
there being no contract between ITI and
Alphion which provided for payment to be made
when ITI receives payment, I am of the
considered opinion that 'pay when paid',
argument which had been raised by ITI being
unsustainable, the Tribunal has rightly rejected
the same and application of the general
principles of law by referring to certain
decisions of a foreign Court, in my considered
view, would not be in violation of the law
applicable to the arbitration viz., Indian Law.
38.9. In fact by relying upon the decision of the
Hon'ble Delhi High Court in Harvinder Singh's
case (supra), the learned Arbitrator has came
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to a conclusion that a contractor would have to
be paid for the work rendered by it, and merely
because the employer did not receive the
monies, the payment to the contractor cannot
be denied.
38.10. It is this principle which the learned Arbitrator
has applied to deny the contention of ITI that
ITI will be liable to pay only when paid. While
doing so, learned Arbitrator has also relied
upon certain decisions of the American Courts
which have dealt with similar concept of 'pay
when paid'.
38.11. In my considered opinion reliance placed by the
learned Arbitrator on the said decisions per se
would not amount to applying the American
law. The principles having been expounded by
the Hon'ble Delhi High Court in Harvinder
Singh's case (supra), the reference to the
American Judgments is also in furtherance of
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the decision of the Judgment of the High Court
of Delhi. It is not that a particular statute in
force in America is applied in India. It is only
the principles which have been explained by
American Courts which have been relied upon
by the learned Arbitrator and therefore, the
same would not fall foul of Section 28(1)(b) of
the A&C Act.
38.12. I answer point no.8 by holding that
Arbitral Tribunal has decided the matter in
accordance with Rules designated and as
per the Indian law applicable. The
Tribunal has not applied any substantial
law of any other country to the present
matter and as such the award does not fall
foul of section 28(1)(b) of the A&C Act.
39. OBSERVATION:
39.1. On the basis of the arguments which have been
advanced and dealt with hereinabove, I am left
with no option but to make these observations:
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39.2. Apparently Technical Collaboration Agreement
was entered into between Alphion and ITI so as
to harness the business opportunities for
supplying of technological products to Bharat
Sanchar Nigam Limited and Mahanagar
Telephone Nigam Limited, as also other
mutually agreeable telecom service providers.
39.3. This TCA having been entered into on
26.07.2007, a bid document had been issued
by BSNL on 14.03.2008 as regards
procurement of Next Generation Play Network
(GPON) equipment. The products, subject
matter of the bid documents and the product
subject matter of the TCA dated 26.10.2007 are
very much similar if not identical.
39.4. ITI had the advantage of being a public sector
undertaking to take the benefit of Reservation
Quota (RQ) and Tender Quota (TQ). This TQ
and RQ being only applicable to a public sector
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undertaking like ITI and not to Alphion,
premised on the TCA, ITI submitted its bid and
was issued work order, the supply towards
which was made by Alphion and the amounts
were shared between ITI and Alphion.
39.5. In my considered opinion, the RQ and TQ which
is made available is only to encourage a public
sector undertaking. This encouragement has
been misused by ITI and Alphion with Alphion
indulging in a backdoor entry by entering into a
TCA with ITI. Without Alphion, ITI could not
have bid, without ITI, Alphion would not have
got RQ and TQ. This is a matter which is
required to be considered by the concerned
authorities and necessary action taken.
40. Costs:
40.1. The arguments advanced by ITI in the present
matter before this Court had never been
advanced before the Tribunal. ITI participated
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in the said proceedings without any demur.
The contention raised in the present
proceedings under Section 34 being a hogwash
and only to try and delay the execution of the
award.
[[
40.2. The arbitral proceedings, more so commercial
arbitral proceedings are required to be
completed within time and effect to the award
given expeditiously.
40.3. In terms of Section 31-A of the A&C Act in
relation to any arbitral proceedings or a
proceeding under any of the provisions of the
Act pertaining to Arbitration, the Court or
Arbitral Tribunal can notwithstanding anything
contained in the Code of Civil Procedure, 1908,
shall have the discretion to determine the
costs.
40.4. The reference to Court in Section 31A of A&C
Act would also be the Court considering a
matter under Section 34 of the A&C Act. Thus,
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this Court would be covered under Section 31A
of the A&C Act.
40.5. A discretion has been vested in this court under
said Section 31A of A&C Act to determine as to
whether costs are to be payable, the amount of
such cost and when such costs are to be paid.
40.6. In terms of explanation to Section 31A(1) cost
shall mean reasonable cost relating to the
proceedings. For the purpose of determining
cost, this Court is required to have due regard
to in terms of Subsection (3) of Section 31A of
A&C Act the conduct of the parties, whether the
party has succeeded partly in the case, whether
the party has made frivolous counter claim
leading to delay in the disposal, etc.
40.7. In the present case, the conduct of ITI has
already been dealt with hereinabove. Many of
the submissions which have been made and
contentions which have been raised have been
deprecated. All the contentions which have
been raised by ITI have been rejected.
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40.8. I am of the considered opinion that the present
proceedings are frivolous in nature. Most of the
arguments being on the basis of BSNL being a
party or not which is an hogwash. Considering
the conduct of ITI, considering that ITI has
failed in the proceedings, considering that
frivolous contentions have been raised, I am of
the considered opinion that reasonable costs
pertaining the present proceedings are required
to be awarded to Alphion. Considering the
number of time that the matter has been taken
up by this Court, nominal cost of Rs.5,00,000/-
(Rupees Five lakhs only) is awarded to Alphion.
ITI is directed to make payment of the same
within a period of four weeks from today i.e.,
on or before 7.10.2022 and file necessary
acknowledgement with the registry of this
Court.
41. ANSWER TO POINT NO.9: What order?
41.1. Hence, I pass the following:
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ORDER
i. No grounds have been made out under section
34 of the A&C Act, the suit stands dismissed.
ii. ITI is directed to make payment of cost of
Rs.5,00,000/- [Rupees Five lakhs only] to
Alphion within a period of four weeks from
today i.e., on or before 7.10.2022, the order
having been pronounced in the presence of
learned Senior counsel for ITI.
iii. Corporate Guarantee which has been directed
to be furnished while granting order of stay are
transferred to the proceedings in AP EFA
No.2/2022.
Sd/-
JUDGE
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