- 1 - COM.S No.1 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU ® DATED THIS THE9H DAY OF SEPTEMBER, 2022 BEFORE THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ COMMERCIAL SUIT No.1 OF2022BETWEEN: 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) AND:
1. ALPHION CORPORATION IN THE STATE OF DELAWARE HAVING ITS CORPORATE HEADQUARTER AT196 PRINCETON HIGHSTOWN ROAD PRINCETON JUNCTION, NJ08550UNITED STATES OF AMERICA REP. BY ITS DIRECTOR2 HON’BLE MR. JUSTICE AJIT PRAKASH SHAH (RETD.) HAVING HIS ADDRESS AT F15, HAUZ KHAS ENCLAVE - 2 - COM.S No.1 of 2022 NEW DELHI11001 … 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 SECTION34OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO SET ASIDE THE ARBITRAL AWARD DATED0710/2021 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 ON2207.2022, THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
ORDER1 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.-. 3 - 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 INR13095,59,986.01 (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 INR3867,68,675.32 (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.-. 4 - 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 - 5 - 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 - 6 - 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.-. 7 - 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.-. 8 - 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 - 9 - COM.S No.1 of 2022 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 - 10 - COM.S No.1 of 2022 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.-. 11 - COM.S No.1 of 2022 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 - 12 - 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.-. 13 - COM.S No.1 of 2022 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 - 14 - 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 INR13095,59,986 (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 INR3867,68,675 (Rupees - 15 - COM.S No.1 of 2022 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 INR112,50,590 (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 - 16 - 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.-. 17 - COM.S No.1 of 2022 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 SCC573 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 SCC552: AIR1999SC2262 and DDA v. R.S. Sharma and Co. [(2008) 13 SCC80 ) 26.6. The Arbitral Tribunal did not have the competence to decide on the amounts due under the AMC and therefore is amenable to - 18 - 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 SCC1, 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.]. - 19 - 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 - 20 - 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 - 21 - 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), - 22 - COM.S No.1 of 2022 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 - 23 - COM.S No.1 of 2022 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 - 24 - COM.S No.1 of 2022 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.-. 25 - COM.S No.1 of 2022 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 - 26 - COM.S No.1 of 2022 [(2019) 15 SCC131 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 SGCA33 , 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]..-. 27 - COM.S No.1 of 2022 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 - 28 - COM.S No.1 of 2022 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 SLR1 , 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 AC221: (2005) 3 WLR129: (2005) 3 All ER789(HL)]. , which concerned an application to set aside an arbitral award on the ground of the Arbitral Tribunal's “exceeding its powers” [see - 29 - COM.S No.1 of 2022 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 SGCA33 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 - 30 - COM.S No.1 of 2022 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 - 31 - COM.S No.1 of 2022 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 SCC49 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 - 32 - COM.S No.1 of 2022 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) SCR406: AIR1959SC781 , 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: - 33 - COM.S No.1 of 2022 ‘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 - 34 - COM.S No.1 of 2022 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.-. 35 - COM.S No.1 of 2022 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 SCC644 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 - 36 - COM.S No.1 of 2022 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.-. 37 - COM.S No.1 of 2022 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 - 38 - COM.S No.1 of 2022 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 - 39 - COM.S No.1 of 2022 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 - 40 - COM.S No.1 of 2022 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 - 41 - COM.S No.1 of 2022 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 - 42 - COM.S No.1 of 2022 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 LR880:
2010. EWHC29(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 D5:
2006. EWHC2530(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 LR880:
2010. EWHC29(Comm)]. , Bus LR p. 886, para
13) “(1) A and B make a contract in which they incorporate standard terms. These may be the - 43 - COM.S No.1 of 2022 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 - 44 - COM.S No.1 of 2022 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 SCC767 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 - 45 - COM.S No.1 of 2022 137 : (1983) 110 JDI899 , 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 : - 46 - 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 SCC641: (2013) 1 SCC (Civ) 689The Madras High Court has invoked the group of companies - 47 - COM.S No.1 of 2022 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 CTC464]. , 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 SCC678: (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, - 48 - COM.S No.1 of 2022 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 - 49 - COM.S No.1 of 2022 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 - 50 - COM.S No.1 of 2022 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.-. 51 - COM.S No.1 of 2022 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.-. 52 - COM.S No.1 of 2022 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 SCC233 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 KB623:
87. LJKB1223:
23. Comp Cas 399 (CA))]. it was held that: “Foreign law is a question of fact to an English - 53 - COM.S No.1 of 2022 court … the opinion of an expert on the fact, to be treated with respect, but not necessarily conclusive.” In Beatty v. Beatty [(1924) 1 KB807:
93. LJKB750:
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 AC289:
102. LJKB191:
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 SCC1 more particularly para 35 thereof which is reproduced hereunder for easy reference: - 54 - 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 - 55 - COM.S No.1 of 2022 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 LJ387(Del), it was observed in paras 18 and 19 as under: - 56 - COM.S No.1 of 2022 “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 SCC697 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 - 57 - COM.S No.1 of 2022 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 SCC93 and Rajasthan State Mines & Minerals Ltd. v. Eastern Engg. Enterprises, (1999) 9 SCC283.
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, AIR1960SC588 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, AIR1968SC522 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 SCC82 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 SCC154 while inter alia, observing that the arbitrator cannot act - 58 - COM.S No.1 of 2022 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 SCC93.
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: - 59 - COM.S No.1 of 2022 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.-. 60 - COM.S No.1 of 2022 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 - 61 - COM.S No.1 of 2022 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 - 62 - COM.S No.1 of 2022 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 SCC49 more particularly, para 33, 42.3 and 56 thereof which are reproduced hereunder for easy reference: - 63 - COM.S No.1 of 2022 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 SCC594: (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 - 64 - COM.S No.1 of 2022 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.-. 65 - COM.S No.1 of 2022 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 - 66 - COM.S No.1 of 2022 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 SCC38, 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.-. 67 - COM.S No.1 of 2022 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.-. 68 - COM.S No.1 of 2022 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 - 69 - COM.S No.1 of 2022 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 - 70 - COM.S No.1 of 2022 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, - 71 - COM.S No.1 of 2022 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 SCC1 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 - 72 - COM.S No.1 of 2022 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 - 73 - COM.S No.1 of 2022 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 SCC181more particularly, para 58 to 61, 111 and 112 thereof which are reproduced hereunder for easy reference: - 74 - COM.S No.1 of 2022 58. In Renusagar Power Co. Ltd. v. General Electric Co. [1994 Supp (1) SCC644 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 SCC705 (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 SCC156:
1986. SCC (L&S) 429 : (1986) 1 ATC103 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 SCC705 this Court, apart from the three grounds stated in Renusagar [1994 Supp (1) SCC644 , 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 - 75 - COM.S No.1 of 2022 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 SCC77 .) 61. In ONGC [(2003) 5 SCC705 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) SCC644 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: - 76 - COM.S No.1 of 2022 (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 SCC396 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 SCC38 ). 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 - 77 - COM.S No.1 of 2022 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 SCC397 and Ispat Engg. & Foundry Works v. Steel Authority of India Ltd. [(2001) 6 SCC347 ).
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 SCC593 and D.D. Sharma v. Union of India [(2004) 5 SCC325 .) - 78 - COM.S No.1 of 2022 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 - 79 - COM.S No.1 of 2022 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: - 80 - COM.S No.1 of 2022 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 - 81 - COM.S No.1 of 2022 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 - 82 - COM.S No.1 of 2022 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 - 83 - COM.S No.1 of 2022 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.-. 84 - COM.S No.1 of 2022 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.-. 85 - COM.S No.1 of 2022 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.-. 86 - COM.S No.1 of 2022 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 - 87 - COM.S No.1 of 2022 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 - 88 - COM.S No.1 of 2022 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 - 89 - COM.S No.1 of 2022 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 - 90 - COM.S No.1 of 2022 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 - 91 - COM.S No.1 of 2022 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 - 92 - COM.S No.1 of 2022 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.-. 93 - COM.S No.1 of 2022 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.-. 94 - COM.S No.1 of 2022 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 - 95 - COM.S No.1 of 2022 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: - 96 - COM.S No.1 of 2022 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. 1[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).-. 97 - COM.S No.1 of 2022 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 - 98 - COM.S No.1 of 2022 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 - 99 - COM.S No.1 of 2022 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 - 100 - COM.S No.1 of 2022 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 - 101 - COM.S No.1 of 2022 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) - 102 - COM.S No.1 of 2022 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 - 103 - COM.S No.1 of 2022 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, - 104 - COM.S No.1 of 2022 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, - 105 - COM.S No.1 of 2022 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.-. 106 - COM.S No.1 of 2022 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 - 107 - COM.S No.1 of 2022 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 - 108 - COM.S No.1 of 2022 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.-. 109 - COM.S No.1 of 2022 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.-. 110 - COM.S No.1 of 2022 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 - 111 - COM.S No.1 of 2022 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 - 112 - COM.S No.1 of 2022 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 - 113 - COM.S No.1 of 2022 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.-. 114 - COM.S No.1 of 2022 (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. 1[(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 - 115 - COM.S No.1 of 2022 Technology –v- Crompton Greeves Limited reported in [(2019) 20 SCC1 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.-. 116 - COM.S No.1 of 2022 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 - 117 - COM.S No.1 of 2022 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.-. 118 - COM.S No.1 of 2022 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 - 119 - COM.S No.1 of 2022 ‘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.-. 120 - COM.S No.1 of 2022 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: - 121 - COM.S No.1 of 2022 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 - 122 - COM.S No.1 of 2022 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 - 123 - COM.S No.1 of 2022 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.-. 124 - COM.S No.1 of 2022 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.-. 125 - COM.S No.1 of 2022 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 - 126 - COM.S No.1 of 2022 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 - 127 - COM.S No.1 of 2022 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: - 128 - COM.S No.1 of 2022 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 - 129 - COM.S No.1 of 2022 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 - 130 - COM.S No.1 of 2022 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, - 131 - COM.S No.1 of 2022 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.-. 132 - COM.S No.1 of 2022 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: - 133 - COM.S No.1 of 2022
ORDERi. 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 ln List No.:
1. Sl No.:
2.