Bharti Airtel Limited & Ors v. Union of India

judgment:

(a) The plea for amendment of the petition to urge the additional grounds on the ground of lack of jurisdiction is rejected and IA No.5441 of 2010 is dismissed.

(b) In any event, there is no merit in the contention of BML that the learned Arbitrator lacked inherent subject matter jurisdiction to deal with the dispute.

(c) The impugned Award is liable to be set aside on merits on the ground that it is opposed to the public policy of India under Section 34 (2) (b) (ii) of the 1996 Act. Consequential directions

¶75Although this Court finds that the impugned Award cannot be sustained in law on merits and is opposed to the public policy of India under Section 34 (2) (b) (ii) of the 1996 Act, it cannot possibly grant BCL the consequential reliefs of allowing its claims as that is beyond the scope of the powers of the Court under Section 34 of the 1996 Act........ ........

¶76Accordingly, the impugned Award dated 20th December 2002 is set aside leaving it open to BCL to resort to appropriate legal remedies as may be available to it in accordance with law......."

(VI) The respondent along with FAO(OS) No.87/2013 filed CM No.2445/2013 for stay and which was vide order dated 16th July, 2013 dismissed as under:

"CM 2445/13 (stay) Having regard to the circumstances, the rival contentions and also award made in this case, the Court is of the opinion that the request for stay of operation of the impugned order is not warranted."

¶11What emerges from the aforesaid is:

(a) that claim for adjudication in the arbitration between the parties was of the entitlement of the petitioner to refund of the amounts aforesaid deposited with the respondent UOI towards licence fee for the period 18th April, 1996 to 10th March, 1998, with interest;

(b) that the Arbitral Tribunal disallowed the aforesaid claim of the petitioner;

(c) that the petitioner preferred OMP No.77/2003 under Section 34 of the Arbitration Act with respect to the aforesaid arbitral award and by way of amendment of the said OMP No.77/2003 wanted to take the ground of the arbitral award not granting its claim being also bad

for the reason of the dispute which had been referred to arbitration being required to be decided by the TDSAT and not by way of arbitration but was not allowed to take the said ground after the time for applying under Section 34 of the Arbitration Act had lapsed;

(d) that however this Court in judgment dated 14th September, 2012 in OMP No.77/2003, even otherwise considered whether the arbitral award was liable to be set aside on the ground of the disputes subject matter of arbitration being not arbitrable but found the arbitral award to be not bad on this count;

(e) that however this Court vide judgment dated 14th September, 2012 in OMP No.77/2003 otherwise set aside the arbitral award on merits;

(f) that though the petitioner as a consequence thereof sought a direction in judgment dated 14th September, 2012 in OMP No.77/2003 for refund of the amount (as was claimed in arbitral proceedings) but the same was not granted for the reason of being beyond the competence of the Court exercising jurisdiction under Section 34 of the Arbitration Act;

(g) that though the respondent in FAO(OS) No.87/2013 preferred against the judgment aforesaid sought stay of operation of the judgment dated 14th September, 2012 but the same has not been granted.

¶12The questions which according to me arise for adjudication and on which outcome of this petition depends are:

(I) Whether there has been adjudication in the arbitral award dated 20th December, 2002 and in the judgment dated 14th September, 2012 in OMP No.77/2003 preferred thereagainst on the claim of the petitioner for refund of the licence fee for the period from 18th April, 1996 to 10th March, 1998 and what is the effect thereof;

(II) What is the effect of the pendency of FAO(OS) No.87/2013 against the judgment dated 14th September, 2012 and of the dismissal of the application for interim stay filed therein;

(III) If the above two questions were to be answered in favour of the petitioners, whether in exercise of jurisdiction under Article 226 of the Constitution of India the respondent can be directed to

refund the licence fee for the period from 18th April, 1996 to 10th March, 1998 to the petitioner.

¶13Having bestowed consideration, I am of the opinion that the respondent, after receiving payment of Rs.399.92 crores towards licence fee for the period 18th April, 1996 to 10th March, 1998 from the petitioner and which the petitioner was disputing, having referred the said dispute to arbitration in accordance with the Arbitration Agreement in the licence, cannot now urge that there has been no determination / adjudication in the arbitration proceedings of the said entitlement of the petitioner to refund of the said amount.

¶14I also entertain no doubt that the arbitral award unequivocally finds the petitioner not entitled to refund of the licence fee paid.

¶15However, the judgment dated 14th September, 2012 in OMP No.77/2003 though setting aside the aforesaid arbitral award, does not at the same time hold the petitioner entitled to refund of the licence fee paid for the period from 18th April, 1996 to 10th March, 1998. Though the arbitral award has been set aside, not on any technicalities but "on merits", but giving the ground of setting aside, of being against the public policy of India and not

the ground of erroneously finding the petitioner to be not entitled to refund when the petitioner in fact was entitled to refund.

¶16I have wondered whether the setting aside under Section 34 of the Arbitration Act of the arbitral award (not finding petitioner entitled to refund of licencee fee) amounts to, the petitioner being entitled to refund of the licence fee for the period from 18th April, 1996 to 10th March, 1998.

¶17In my view, once the parties go to arbitration on a question whether one party is entitled to the monies claimed from the other or not and the arbitral award not finding that party to be entitled to the monies claimed is set aside in exercise of powers under Section 34 of the Arbitration Act, the order of the Court has but to be read as finding the claimant party to be entitled to the monies claimed unless the arbitral award has been set aside on technical grounds as enumerated in Section 34(2)(a) or Section 34(2)(b)(i) of the Arbitration Act. To give any other meaning to the order of the Court in exercise of power under Section 34 of the Act would severely undermine / prejudice efficacy of arbitration and would lead to arbitration ceasing to be an alternative dispute resolution mechanism.

¶18It cannot be lost sight of that the Court, in exercise of power under Section 34 of the Arbitration Act, has not been empowered to set aside an

arbitral award on merits of the claim. The only ground besides the technical grounds enumerated in Section 34(2)(a) or Section 34(2)(b)(i) on which the Court has been empowered to set aside an arbitral award, is the ground of the arbitral award being in conflict with the public policy of India. The expression "public policy of India" has been held to mean fundamental policy of Indian law, justice and morality. Once the Court in exercise of power under Section 34 of the Arbitration Act has set aside an arbitral award rejecting a monetary claim, on the ground of the same being against the public policy of India, as the arbitral award in the present case has been set aside, the necessary corollary and inference, in my opinion is that the Court finds the award rejecting the monetary claim to be contrary to law and resultantly finds the monetary claim to have been proved/established. If it were to be held otherwise, and it were to be held that the order of the Court means nothing more than setting aside the arbitral award (rejecting the monetary claim), it would leave the claimant who applied under Section 34 and succeeded therein, inspite thereof, being left high and dry and without a relief. A litigant litigates not for academic purposes or to score a moral victory but to secure the relief claimed and benefit therefrom. If such a litigant who has secured setting aside "on merits" of the arbitral award

(rejecting his monetary claim) is told that he has to start another litigation either by way of suit or arbitration to secure his monetary claim, people will hesitate from incorporating arbitration clause in the agreements and / or from agreeing to arbitration for the fear of not getting effective relief at the end of the proceedings under the Arbitration Act. Further, it may then be an unending exercise. Even if such a litigant were to again commence arbitration (since the arbitration clause in the agreement/contract will continue to bind and suit would not be maintainable) and in that arbitration succeeds or fails but Section 34 application is again preferred with respect to the award and award again set aside, would such litigant then be required to commence another round, and so on. After all, in the present state of law with respect to Arbitration Act, particularly Section 34 thereof, it is possible that the arbitral tribunal (which is not bound by rules of Code of Civil Procedure, 1908) decides the claim before it on any one reason and the Court finding that reason to be contrary to public policy of India sets aside the award; when the parties again go to arbitration, the arbitral tribunal may again decide, even if for a different reason but the said award will again be subject to scrutiny under Section 34 of the Act. This way, the lis will never attain finality.

¶19It is for this reason that I say, that the order/judgment dated 14th September, 2012 of this Court setting aside "on merits" the arbitral award dated 20th December, 2002 (rejecting the monetary claim of the petitioner) has to be read as finding the petitioner entitled to the said monetary claim and the said question having attained finality subject of course to outcome of FAO(OS) No.87/2013 and does not require any further adjudication in any other proceeding.

¶20However, having said, that I must mention that a Division Bench of this Court recently in Steel Authority of India Vs. Indian Council of Arbitration MANU/DE/0745/2016 was concerned with the challenge by way of writ petition to the appointment of an Arbitrator, after the earlier arbitral award between the parties was set aside and on the ground that what had already been the subject matter of arbitration could not again be the subject matter of arbitration. The challenge was dismissed holding that once the arbitral award was set aside, the dispute between the parities stood revived and such a course did not amount to repeated / multiple arbitrations. Reference, to reach this conclusion was made to Mcdermott International Inc Vs. Burn Standard Co. Ltd. (2006) 11 SCC 181 observing that in the event of arbitral award being set aside by the Court under Section 34, the

parties can again invoke arbitration clause on the basis of the same cause of action and to Section 43(4) of the Arbitration Act providing that "where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963), for the commencement of the proceeding (including arbitration) with respect to the dispute so submitted".

¶21Another Division Bench of this Court in Nussli Switzerland Vs. Organizing Committee, Commonwealth Games MANU/DE/2301/2014, also relying on Section 43(4) of the Arbitration Act held that a party which has its claim rejected, even if succeeds in the objections to the award, would at best have the award set aside and the Court has to leave the matter at that leaving it open to the party concerned to commence fresh proceedings including arbitration.

¶22Though I am bound by the dicta aforesaid of the Division Benches of this Court but respectfully add that sub-section (4) of Section 43 titled "Limitations" ought not to be read as a substantive provision governing the rights of a party to the arbitration and Section 34 proceedings arising therefrom and requiring them to re-arbitrate. The law/provision relating to

limitation has to be read, in my humble opinion, merely as laying down the limitation for commencing an action where under the substantive law there is a right or need to commence such an action and cannot be read as creating a right or requirement to commence an action or as prescribing the procedure to be followed i.e. of re-commencing litigation, whether by way of suit or arbitration when an arbitral award is set aside or as laying down the law as to the meaning and consequence of an order under Section 34 of setting aside of the arbitral award. That however still begs the question, why was Section 43(4) at all incorporated if the order of the Court in exercise of power under Section 34 of setting aside of an arbitral award were to mean and read as converse to what the Arbitral Tribunal had found. In my opinion, Section 43(4) was included in the Act to provide for the contingency of the arbitral award, under Section 34 being set aside on technical grounds enumerated in Section 34(2)(a) and Section 34(2)(b)(i) and without the court dealing with or pronouncing on the merits of the claim adjudicated by the Arbitral Tribunal. It is for this reason that Section 43(4) excludes the time mentioned therein in computation of limitation "for the commencement of the proceedings (including arbitration) with respect to the dispute" and not "for the commencement of arbitration." If the arbitral

award were to be set aside on the ground under Section 34(2)(a)(ii) or (iv) or Section 34(2)(b)(i), of the arbitration agreement being not valid or the arbitral award being with respect to a dispute not falling within the terms of submission to arbitration or the subject matter of the dispute being not capable of settlement by arbitration, the question of commencing another arbitration proceedings on the basis of same arbitration agreement would not arise and the aggrieved party will have to commence proceedings, say by way of a suit. However if the setting aside of the arbitral award under Section 34 is on the grounds enumerated in Clauses (i), (iii), (v) of Sub-Section (2)(a) thereof i.e. of the party to arbitration proceedings, being under some incapacity or having not been given proper notice of appointment of arbitral tribunal or of arbitral proceeding or of the composition of arbitral tribunal or the procedure adopted by arbitral tribunal being contrary to the agreement, the aggrieved party will have to commence fresh arbitration proceeding. However Section 43(4) cannot be read as requiring commencement of fresh proceeding even where arbitral award is set aside under Section 34(2)(b)(ii) i.e. on the ground of being in conflict with public policy of India i.e. of finding the award refusing or granting relief being contrary to law, if otherwise not required under the law. As aforesaid, a

provision in a statute with respect to limitation cannot be read as creating or extinguishing (save on ground of limitation) rights or requiring a thing to be done if not otherwise in law required to be done.

¶23The Arbitration Act only amends the law relating to arbitration which as aforesaid is a dispute resolution mechanism alternative to the Courts. It is not a substantive law governing the rights of the parties. Per Section 28(a) thereof, the disputes submitted to arbitration are to be decided in accordance with the substantive law for the time being in force in India. I have already hereinabove observed that the expression "public policy of India" in Section 34(2)(b)(ii) has also been held to inter alia mean fundamental policy of Indian law. Thus if the award is in conflict with public policy of India i.e. fundamental policy of Indian law, it constitutes a ground for setting aside thereof, again meaning that the award has to be in accordance with fundamental policy of Indian law. The rules i) of issue estoppel; ii) of res judicata and constructive res judicata; and, iii) prohibiting re-litigation, if I may respectfully say, constitute fundamental policy of Indian law and are not merely procedural rules. In accordance therewith, a claim which has been subject matter of arbitration and the arbitral award resulting wherefrom has been subjected to scrutiny of Court under Section 34 of the Arbitration

Act, cannot again be the subject matter of arbitration or suit or other legal proceeding unless the arbitral award has been set aside on technical grounds as aforesaid. In my view the said fundamental policy of Indian law has not been affected or was intended to be affected by the Arbitration Act. Applying the said principles to the facts of the present case it has but to be held that the judgment / order dated 14th September, 2012 of this Court has to be held to be finding the petitioner entitled to refund and which refund can be ordered in writ jurisdiction subject of course to outcome of FAO(OS) No.87/2013 and cannot be now subject matter of fresh arbitration or suit.

¶24As far as reliance placed by the Division Benches of this Court on Mcdermott International Inc. supra is concerned, though I am of the view that Mcdermott International Inc. cannot be said to be as precedent on the proposition, the question having not arisen therein for consideration, but my view, though canvassed by the counsel for the petitioner in Steel Authority of India supra, did not find favour with the Division Bench.

¶25I am further of the opinion as aforesaid, and strongly feel, that to so leave a party, whose claim has been rejected by the Arbitral Tribunal and who succeeds in having the arbitral award set aside "on merits" in a petition under Section 34 of the Arbitration Act, in a lurch would make a mockery of

arbitration, defeating the very purpose thereof as an alternative dispute resolution process and make the same lengthy and costly. Supreme Court recently in Lal Shah Baba Dargah Trust Vs. Magnum Developers 2015 SCC Online SC 1319 reiterated Mangin Vs. IRC (1971) 1 ALL ER 179

(PC) laying down that the object of construction of statute being to ascertain the will of the legislature, it may be presumed that neither injustice nor absurdity was intended. Similarly, in Jogendra Yadav Vs. State of Bihar

(2015) 9 SCC 244 it has been reiterated that rule of purposive interpretation requires construction of a statute in such a manner so as to see that the object of the statute is fulfilled which in turn will lead the beneficiary under the statutory scheme to fulfill its constitutional obligation. I am however bound by the judgments earlier mentioned of the Division Bench and have no option but to follow the same.

¶26I thus answer the first of the aforesaid questions by holding that there has been adjudication in the arbitral award dated 20th December, 2002 and in the judgment dated 14th September, 2012 in OMP No.77/2003 on the claim of the petitioner for refund of licence fee but the effect of the judgment dated 14th September, 2012 in OMP No.77/2003 is not of the petitioners being

entitled to the refund of the licence fee for the period from 18th April, 1996 to 18th March, 1998, howsoever strange the said result may sound.

¶27Though the petition is liable to be dismissed for the aforesaid reason alone but for the sake of completeness, the other questions framed above may also be answered.

¶28The pendency of FAO(OS) No.87/2013 against the judgment dated 14th September, 2012 in OMP No.77/2003 in my view does not act as automatic stay of the judgment appealed, specially after the application for interim stay therein has been dismissed.

¶29Reference in this regard may also be made to Decore India Pvt. Ltd. Vs. National Building Construction Corporation Ltd. 142 (2007) DLT 21 where a Division Bench of this Court held that if the execution of the decree followed by award is to be delayed by treating the pendency of appeal as automatic stay then the new legislation i.e. Arbitration Act, instead of being an efficient and speedy remedy would be reduced to a remedy worse than what we already had that is civil suits and the deep routed procedural delays till passing of the decree and even thereafter.

¶30As far as the third question framed above is concerned, if the question No.(I) aforesaid were to be answered in favour of the petitioners then

according to me, the respondent could not have been permitted to retain the monies which would have been due from it by taking technical pleas. I have in DLF Limited Vs. Punjab National Bank 180 (2011) DLT 435 dealt in detail on the aspect of the State being required to be a model litigant, not expected to take technical pleas encouraging litigation. Supreme Court subsequently also in Punjab State Power Corporation Ltd. Vs. Atma Singh Grewal MANU/SC/1393/2013 has deprecated the dependency on the part of the government and the Public Sector Undertakings to file frivolous appeals and expressed its anguish thereon and reminded the government its policy to be a responsible litigation. Reference in this regard can also be made to Special Land Acquisition Officer Vs. Karigowda (2010) 5 SCC 708, Urban Improvement Trust, Bikaner Vs. Mohan Lal (2010) 1 SCC 512, Vithalbhai Pvt. Ltd. Vs. Union Bank of India (2005) 4 SCC 315 and Virender Sharma Vs. Director Enforcement Directorate MANU/DE/0546/2012 (DB).

¶31Else, the other contentions of the respondent, of the writ petition being not maintainable in a contractual matter or for enforcing monetary claim, are not found to have any merit therein. The said principles are not an absolute bar to the maintainability of a writ petition and if the answer to the question No.(I) above had been in favour of the petitioners, the conduct of the

respondent would have been utterly unreasonable and arbitrary and a writ would have followed, directing the respondent to refund the monies.

¶32The petition thus fails and is dismissed; however no costs.

RAJIV SAHAI ENDLAW, J. MAY 11, 2016 "gsr/bs"..

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of decision: 11th May, 2016 + W.P.(C) No.6773/2013 & CM No.14692/2013 (for stay) BHARTI AIRTEL LIMITED & ORS ..... Petitioners Through: Mr. Gopal Jain, Sr. Adv. with Mr. Harsh Kaushik, Mr. Abhay Chattopadhyay and Ms. Chinmayee Chandra, Advs. Versus UNION OF INDIA .... Respondent Through: Mr. Gaurav Sarin, Sr. Panel Counsel with Mr. Vidur Mohan, Ms. Charul Sarin and Mr. Ajitesh K. Kir, Advs. CORAM:- HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW 1. The petition (i) impugns the decision dated 26th December, 2012 of the respondent Department of Telecommunications (DoT) of the Union of India (UOI) refusing to refund the amount deposited by the petitioner no.1 Bharti Airtel Ltd. (petitioners no.2 and 3 are its shareholders and the word "petitioner" hereafter will mean Bharti Airtel Ltd. only); ii) seeks a direction to the respondent UOI to comply with the understanding and obligations recorded in the petitioner"s letters dated 1st August, 2001, 6th November, 2012 and 10th December, 2012; iii) seeks mandamus directing the respondent UOI to refund the sum of Rs.399.92 crores to the petitioner; iv) seeks mandamus directing the respondent UOI to also pay interest on the said amount of Rs.399.92 crores i.e. a total sum of Rs.2495.87 crores to the petitioners with future interest till the date of refund; and, v) alternatively seeks permission for the petitioner to adjust the amount so refundable by the respondent in the future licence fee payments due to the respondent UOI from the petitioner. 2. Notice of the petition was issued and a counter affidavit has been filed by the respondent UOI and to which a rejoinder has been filed by the petitioner. The counsels were heard on 8th October, 2015 and 4th November, 2015 when judgment was reserved. 3. It is the case of the petitioner: (i) that the petitioner was granted a licence dated 26th December, 1995 under Section 4(1)(b) of the Telegraph Act, 1885, to establish, maintain and work telegraph in the Punjab Telecom Circle; (ii) that for reasons attributable to the respondent UOI, the licence of the petitioner was de-facto suspended from 18th April, 1996 to 10th March, 1998 (though the petitioner has made detailed pleadings in this regard but the need to refer thereto, for the reasons hereinafter appearing, for the purpose of the present petition is not felt); (iii) that the petitioner thus did not pay the licence fee payable by it for the period 18th April, 1996 to 10th March, 1998; (iv) that the respondent UOI however insisted upon payment of licence fee for the aforesaid period together with interest and penal interest thereon and upon non payment thereof by the petitioner, terminated the said licence on 15th July, 1999; (v) that though the petitioner represented to the respondent UOI to refer the dispute aforesaid to arbitration in accordance with the terms therefor in the licence, but to no avail; (vi) that on the contrary, the respondent UOI, to arm-twist the petitioner, denied release of eight Basic Service Licences, eight Cellular Licences and one National Long Distance Licence to the associate companies of the petitioner; (vii) that the petitioner was thus constrained to deposit the entire licence fee along with interest and penal interest for the aforesaid period with the respondent UOI as "on account payment", strictly without prejudice to its rights and contentions and with a clear understanding that in the event of the dispute being decided in favour of the petitioner, the respondent UOI will forthwith refund the said amount along with interest for the period the same was retained by the respondent UOI; the said understanding is reflected in the letter dated 1st August, 2001 of the petitioner; (viii) that in accordance with the aforesaid understanding, a reference dated 27th September, 2001 was made for arbitration; (ix) that the petitioner in the said arbitration made a claim for refund of the amount deposited along with interest at the sa