ITI LIMITED vs ALPHION CORPORATION
- Court
- Karnataka High Court
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COMAP No. 403 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 17 DAY OF OCTOBER, 2026
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE VENKATESH NAIK T
COMMERCIAL APPEAL NO.403 OF 2022
BETWEEN:
ITI LIMITED
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED ADDRESS AT:
ITI BHAWAN, DOORAVANINAGAR,
BENGALURU - 560 016,
REPRESENTED BY ITS AUTHORISED SIGNATORY,
SMT. R. VASANTHI, AGED ABOUT 54 YEARS,
GENERAL MANAGER OPERATIONS.
…APPELLANT
(BY SRI ARVIND KAMATH, ADDITIONAL SOLICITOR GENERAL OF INDIA,
ALONG WITH SRI RAGHURAM CADAMBI, ADVOCATE)
AND:
1.
ALPHION CORPORATION
IN THE STATE OF DELAWARE,
HAVING ITS CORPORATE HEADQUARTERS AT:
196, PRINCETON HIGHSTOWN ROAD,
PRINCETON JUNCTION, NJ 08550,
UNITED STATES OF AMERICA,
REPRESENTED BY ITS DIRECTOR.
2. HON'BLE MR. JUSTICE AJIT PRAKASH SHAH (RETD.)
HAVING HIS ADDRESS AT:
F-15, HAUZ KHAS ENCLAVE,
NEW DELHI - 110 016.
…RESPONDENTS
(BY SRI SAMRAT NIGAM, SENIOR COUNSEL, FOR
SRI ASHOK KUMAR AGARWAL, SMT. GAURIKA SOOD,
SRI SIDDHANT S. DARIRA AND SRI ARUN GOVINDRAJ,
ADVOCATES, FOR R-1)
Digitally signed
by
NAGARATHNA M
Location: High
Court of
Karnataka
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COMAP No. 403 of 2022
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
37(1)(C) OF THE ARBITRATION AND CONCILIATION ACT, 1996,
READ WITH SECTION 13(1A) OF THE COMMERCIAL COURTS ACT,
2015, PRAYING TO SET ASIDE THE ORDER DATED 09.09.2022 IN
COMMERCIAL SUIT NO.1 OF 2022 PASSED BY THE LEARNED SINGLE
JUDGE OF THIS HON'BLE COURT, AND CONSEQUENTLY, TO SET
ASIDE THE ARBITRAL AWARD DATED 07.10.2021 PASSED BY THE
ARBITRAL TRIBUNAL.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED ON 14.08.2026, COMING ON FOR PRONOUNCEMENT,
THIS DAY, VENKATESH NAIK T. J., PRONOUNCED THE
FOLLOWING:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE VENKATESH NAIK T
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE VENKATESH NAIK T.)
This appeal is filed by the appellant/Indian Telephone
Industries Limited (ITI) challenging the judgment passed
by the learned Single Judge in Commercial Suit No.1 of
2022 disposed on 09.09.2022, wherein the learned Single
Judge dismissed the commercial suit filed by the appellant
and confirmed the award passed by the Arbitrator.
2. The present proceedings arise out of the disputes
between Alphion Corporation/respondent No.1/claimant
and ITI Limited/appellant/plaintiff before the
Arbitral Tribunal. For the sake of convenience, Alphion
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COMAP No. 403 of 2022
Corporation and ITI Limited is referred to as Alphion and
ITI, respectively.
3. Alphion Corporation, a company engaged in the
development, manufacture and supply of
telecommunications products and in providing related
after-sales services, particularly in the field of fibre-optic
and broadband access technologies, entered into a
Technical Collaboration Agreement dated 26.10.2007
(TCA) with ITI with the objective of jointly exploring and
pursuing business opportunities in India. Under the TCA,
Alphion and ITI agreed to collaborate in the manufacture,
marketing, sale, installation, commissioning and
maintenance of specified telecommunications products,
including projects undertaken for public
telecommunications entities such as Bharat Sanchar
Nigam Limited (BSNL) and Mahanagar Telecom Nigam
Limited (MTNL) and other mutually agreed telecom service
providers worldwide. The arrangement contemplated joint
participation in tenders and procurement opportunities.
Alphion was principally responsible for ensuring that the
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COMAP No. 403 of 2022
products proposed to be supplied complied with the
applicable tender requirements and technical
specifications, whereas ITI was responsible for assembly
and manufacture of the products for their eventual
marketing and supply. For this purpose, Alphion granted
ITI non-exclusive, non-transferable and non-sublicensable
licence. Along with the TCA, a side letter dated
26.10.2007 was also executed, whereby Alphion and ITI
would jointly participate in negotiations, clarifications and
other processes arising from tenders in which they
participated. The arrangement was particularly significant
because ITI, being a public sector undertaking, was
eligible to avail itself of the Reservation Quota (RQ) and
Tender Quota (TQ) in respect of tenders, which are issued
by other public sector undertakings.
4. Pursuant to the aforesaid arrangements, BSNL
issued a tender dated 14.03.2008 for supply of equipment
relating to its Next Generation Passive Optical
Network/GPON project. In which, Alphion and ITI jointly
participated in accordance with the TCA. Although ITI was
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COMAP No. 403 of 2022
declared as the L3 bidder, by virtue of its status as a
public sector undertaking, it became entitled to participate
in the RQ and TQ. The tender also contemplated
maintenance and repair of the equipment after supply, for
which the successful bidder was required to undertake an
Annual Maintenance Contract (AMC), with AMC charges
becoming payable after expiry of the warranty period.
Pursuant to the tender process, BSNL issued Advance
Purchase Orders dated 23.02.2009 and 08.04.2009, which
were subsequently confirmed by Purchase Orders dated
11.05.2009 and 03.07.2009. In connection with these
orders, a tripartite agreement was entered into between
Alphion, ITI and BSNL, under which the TCA was
acknowledged and the parties agreed to comply with the
terms of the Purchase Orders. The arrangement also
contemplated an escrow mechanism, whereby payments
received from BSNL were to be deposited into an escrow
account and distributed between Alphion and ITI in
accordance with their respective entitlements. The
equipment was thereafter supplied and the maintenance
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COMAP No. 403 of 2022
obligations under the AMC were undertaken. There was no
substantial dispute regarding the actual supply of
equipment or execution of the project; the dispute
primarily concerned the repair and maintenance charges
attributable to the TQ and RQ orders inasmuch as though
invoices raised by Alphion, ITI did not make payment.
5. Alphion raised invoices claiming amounts allegedly
due to it and asserted an entitlement of 34.50% of the
invoice value, excluding applicable taxes. According to
Alphion, despite repeated demands and reminders, ITI
failed to pay the amounts claimed, resulting in invocation
of the arbitration clause contained in the agreement
between the parties. ITI consented to the appointment of
an Arbitrator, but contended that it was unable to make
payment of the dues because BSNL had itself failed to
release the amounts allegedly payable to ITI. ITI further
contended that the dispute could not be effectively and
comprehensively adjudicated without the presence of
BSNL, particularly since the TCA, the tripartite
arrangement and the Purchase Orders formed part of one
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COMAP No. 403 of 2022
interconnected commercial transactions. ITI, therefore,
sought to bring BSNL within the arbitral proceedings and
proposed that the dispute be adjudicated by a sole
Arbitrator, while maintaining that it should not be saddled
with the financial liability in circumstances where the
corresponding amounts had not been released by BSNL.
6. The arbitration proceedings were taken forward
and on the Arbitrator being appointed, a claim petition was
filed on the ground that the amounts were due and
payable by ITI to Alphion. Alphion filed its statement of
claim seeking recovery of the amounts allegedly payable
by ITI. In its statement of defence, ITI admitted the
execution of the relevant agreements and substantially
acknowledged its liability towards Alphion, but explained
its inability to discharge the liability on the ground that,
BSNL had not released the corresponding amounts. ITI
thereafter filed an application seeking the
impleadment/joinder of BSNL as a party to the arbitration.
ITI relied upon the tripartite agreement involving Alphion,
ITI and BSNL and contended that the various agreements
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and transactions were interconnected and could not be
considered in isolation. According to ITI, BSNL's
participation was necessary for a complete and effective
determination of the dispute, particularly since the non-
payment by BSNL was the reason for ITI's inability to pay
Alphion. ITI also stated that it had taken steps to recover
the outstanding amounts from BSNL, but had been
unsuccessful. It was, therefore, contended that the
impleadment of BSNL would enable the Tribunal to
comprehensively examine the entire transactions and
determine the respective liabilities of the parties.
7. Alphion opposed the application for joinder
contending that the arbitration had been invoked pursuant
to the arbitration agreement between Alphion and ITI
alone and that BSNL was not a party to the arbitration
agreement forming the basis of the reference. Alphion
contended that the dispute referred to arbitration was
confined to the contractual obligations between Alphion
and ITI and that ITI could not avoid its payment
obligations by relying upon the alleged failure of BSNL to
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make payment. It was further argued that the scope of the
arbitral reference could not be enlarged by introducing
BSNL as a third party, when there was no arbitration
agreement between Alphion and BSNL. When arguments
were heard on ITI's application for joinder, the Tribunal did
not decide the application separately at that stage and
indicated that the issue could be considered along with the
final adjudication, particularly as the matter had already
been listed for final arguments. The Arbitral Tribunal
framed points for determination and the matter was
adjourned for final arguments and Arbitrator passed
impugned award as well as an order dealing with ITI's
application for joinder of BSNL.
8. The Tribunal ultimately rejected ITI's application
for impleadment/joinder of BSNL holding that BSNL was
not a party to the arbitration agreement on the basis of
which the reference had been made. The Tribunal held
that ITI's contention that BSNL's impleadment would assist
in arriving at a comprehensive and effective decision was,
by itself, insufficient to compel BSNL to participate in an
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arbitration to which it had not consented. The Tribunal
further held that merely because the transactions between
Alphion, ITI and BSNL were commercially connected or
arose out of related agreements, such connection did not
confer upon BSNL a right or obligation to participate in the
arbitration between Alphion and ITI. Consequently, the
arbitral proceedings were confined to the disputes arising
between Alphion and ITI. Aggrieved by the decision of the
Tribunal, ITI preferred Commercial Suit No.1 of 2022
before the learned Single Judge of this Court challenging
the award passed by the Tribunal. The learned Single
Judge dismissed the said commercial suit and upheld the
award passed by the Tribunal. Aggrieved by the dismissal
of Commercial Suit No.1 of 2022, ITI/the appellant has
preferred the present appeal.
9. We have heard Sri Arvind Kamath, learned
Additional Solicitor General of India, along with
Sri Raghuram Cadambi, learned counsel for the
appellant/ITI, and Sri Samrat Nigam, learned senior
counsel appearing for Sri Ashok Kumar Agarwal,
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Smt. Gaurika Sood, Sri Siddhant S. Darira and Sri Arun
Govindraj, learned counsel for respondent No.1/Alphion.
10. Sri Arvind Kamath, learned Additional Solicitor
General of India appearing for the appellant/ITI, has
vehemently contended that the learned Single Judge erred
in dismissing the commercial suit without examining the
objections raised by the appellant within the scope and
parameters of Section 34 of the Arbitration and
Conciliation Act, 1996 (for short, 'the Act'). He contended
that the learned Single Judge travelled beyond the award
and made independent observations regarding the nature
and composite character of the transactions, while failing
to adequately examine the fundamental objection of the
appellant that the Arbitral Tribunal had exceeded the
scope of the reference. Placing reliance on Vidya Drolia
and Others v. Durga Trading Corporation reported in
(2021) 2 SCC 1 , he submits that the jurisdictional
findings of the Arbitral Tribunal are not immune from
judicial scrutiny and that Section 34 of the Act enables a
Court to examine whether an award deals with disputes
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not contemplated by, or falling outside, the submission to
arbitration.
10(a). He further contended that the claim relating to
Comprehensive Repair Charges did not arise under the
Technical Collaboration Agreement (TCA), which
constituted the basis for invocation of arbitration between
the parties. The TCA neither provided for payment of
Comprehensive Repair Charges nor imposed any
independent obligation upon the appellant to recover such
amounts from BSNL. The said claim, in substance, arose
out of separate contractual arrangements, namely, the
Tender, Purchase Orders, AMC Agreements, Tripartite
Agreement and the subsequent Modus Operandi, all of
which involved BSNL. It is, therefore, submitted that the
Tribunal could not have adjudicated upon or fastened
liability in respect of obligations arising outside the
contract forming the subject-matter of the arbitral
reference. In this regard, reliance is placed on MSK
Projects India (JV) Limited v. State of Rajasthan and
Another reported in (2011) 10 SCC 573 , wherein the
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Hon'ble Apex Court has held that an Arbitral Tribunal
derives its jurisdiction from the reference and cannot
travel beyond its terms or enlarge the scope of the dispute
referred to it. He submits that while an error in construing
the terms of a contract may fall within the jurisdiction of
the Arbitrator, an adjudication concerning matters outside
the contract or the reference constitutes a jurisdictional
error. He, therefore, contended that the finding of the
Tribunal holding the appellant liable for failure to recover
the amounts from BSNL was beyond the scope of the TCA
and the reference to arbitration.
10(b). He further contended that BSNL was a
necessary party for the complete and effective
adjudication of the dispute. The liability concerning
Comprehensive Repair Charges and the obligations arising
under the Tender, Purchase Orders and AMC arrangements
were directly connected with BSNL. The appellant had
consistently sought the impleadment of BSNL and had
made its consent to participate in the arbitral proceedings
conditional upon BSNL being impleaded. However, the
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application seeking impleadment was not effectively
decided until the conclusion of the arbitral proceedings,
thereby depriving the appellant of an effective opportunity
to establish its defence.
10(c). Placing reliance on Gaurav Dhanuka and
Another v. Surya Maintenance Agency Pvt Ltd and
Others reported in (2023) 7 HCC (Del) 53 , Ajay
Madhusudan Patel and Others v. Jyotindra S. Patel
and others reported in (2025) 2 SCC 147 and Chloro
Controls (India) (P) Ltd. v. Severn Trent Water
Purification Inc and Others reported in (2013) 1 SCC
641 , he submits that a non-signatory may, in appropriate
circumstances, be joined to arbitral proceedings, where
the agreements are inextricably interconnected, the
transactions are composite in nature, there exists direct
commonality of the subject-matter, and the non-signatory
has a direct and substantial involvement in the
performance of the underlying contractual arrangement.
Therefore, he contended that the various agreements in
the present case were required to be read together to
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ascertain the respective rights and obligations of the
parties and that, having itself observed that the
transactions formed part of a composite arrangement, the
learned Single Judge could not have sustained the
rejection of the appellant's application seeking
impleadment of BSNL without examining whether its
presence was necessary for a complete and effective
adjudication.
10(d). He further contended that the Arbitral
Tribunal, by holding the appellant liable for failure to
recover the amounts from BSNL, created an obligation
which was not traceable to the TCA or any other
contractual stipulation binding the appellant and the
respondent. The Tribunal effectively proceeded on the
basis of alleged negligence and equitable considerations,
though the parties had not authorised the Tribunal to
decide the dispute as amiable compositeurs or ex aequo et
bono (it means, a dispute is decided based on fairness,
equity and good conscience rather than a strict application
of rigid legal rules) under Section 28(2) of the Act.
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10(e). Placing reliance on Ssangyong Engineering
and Construction Company Limited v. National
Highways Authority of India (NHAI) reported in
(2019) 15 SCC 131 , he contended that an Arbitral
Tribunal cannot create a new contract between the parties
or impose an obligation which was never agreed upon. He
further contended that an alteration or addition to the
contractual bargain cannot be foisted upon an unwilling
party and that an award creating obligations dehors the
contract may amount to a violation of the fundamental
principles of justice.
10(f). Placing reliance on Patel Engineering
Limited v. North Eastern Electric Power Corporation
Limited reported in (2020) SCC OnLine SC 466 , he
contended that an award may be interfered with on the
ground of patent illegality where the view taken by the
Arbitrator is perverse, irrational, not a possible view, or
where the construction placed upon the contract is one
which no fair or reasonable person could have adopted.
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10(g). He further contended that the contractual
arrangement between the parties was on a back-to-back
basis under which payment to the respondent was
dependent upon the corresponding receipt of payment
from BSNL. In the absence of receipt of the relevant
amounts from BSNL, the appellant could not have been
independently held liable for the Comprehensive Repair
Charges. He contended that the Tribunal failed to
appreciate the commercial and contractual structure
governing the transactions and instead imposed an
independent liability upon the appellant contrary to the
agreed arrangement between the parties.
10(h). He further contended that the arbitral
proceedings were vitiated by placing reliance upon
principles of foreign law, particularly American law,
without such law having been pleaded or proved by the
evidence. Placing reliance on Hari Shanker Jain v. Sonia
Gandhi reported in (2001) 8 SCC 233 , he contended
that foreign law is not a matter of which Indian Courts
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take judicial notice and is required to be pleaded and
established as a question of fact through appropriate
evidence. Therefore, reliance upon unproved foreign law
by the Arbitral Tribunal was contrary to the statutory
requirement that the dispute be adjudicated in accordance
with the applicable substantive law and the fundamental
policy of Indian law.
10(i). He further contended that the learned Single
Judge made certain adverse observations regarding the
nature of the transactions, including observations
suggestive of fraud or impropriety, while nevertheless
sustaining the arbitral award. Such observations were
inconsistent with the conclusion reached by the learned
Single Judge and ought to have resulted in a closer
examination of the validity and sustainability of the arbitral
award.
10(j). He further contended that the appellant could
not be non-suited on the ground that the interlocutory
orders or jurisdictional objections of the Arbitral Tribunal
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were not independently challenged during the pendency of
the arbitration proceedings. Placing reliance on SBP & Co.
v. Patel Engineering Limited and Another reported in
(2005) 8 SCC 618 , he contended that, unless an
independent statutory remedy is available under Section
37 of the Act, a party aggrieved by an order passed during
the arbitral proceedings is required to await the final
award and may thereafter raise its grievances in
proceedings under Section 34 of the Act. The principles
emerging from Easy Trip Planners Ltd v. One97
Communications Limited reported in 2022 SCC OnLine
Del 2186 are also relied upon to contend that judicial
intervention during the pendency of arbitral proceedings is
confined to rare and exceptional circumstances and that
the statutory remedy available after passing of the award
cannot ordinarily be bypassed. Thus, he contended that
the objections concerning the rejection or non-
consideration of the impleadment application and the
jurisdiction of the Tribunal were rightly available to be
urged while challenging the final award under Section 34
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of the Act. He further contended that the learned Single
Judge failed to properly consider the written submissions,
contractual defences and jurisdictional objections
advanced by the appellant before the Arbitral Tribunal. He
contended that the objections relating to the scope of
reference, jurisdiction of the Tribunal, non-impleadment of
BSNL and the conditional nature of the appellant's consent
to arbitration went to the root of the matter and required
independent consideration. Insofar as any issue relating to
limitation arises, reliance is placed on S. Shivraj Reddy
(Died) through his Legal Heirs and Another v.
Raghuraj Reddy and Others reported in 2024 SCC
OnLine SC 963 and contended that, where a proceeding
is ex facie barred by limitation, the Court is under a
statutory obligation to consider such bar notwithstanding
the absence of a specific plea. On all these grounds, he
prays to allow the appeal.
11. Per contra , Sri Samrat Nigam, learned senior
counsel for respondent No.1/Alphion, has contended that,
the present appeal under Section 37 of the Act is not in
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the nature of an ordinary civil appeal and that the scope of
interference under Section 37 of the Act is narrower than
that under Section 34 of the Act. The learned Single
Judge, by a well-reasoned judgment, has upheld the
arbitral award and no ground is made out for interference
within the limited parameters of Section 37 of the Act. He
contended that the Court exercising jurisdiction under
Section 37 of the Act cannot re-appreciate the evidence or
examine the correctness of the view taken by the Arbitral
Tribunal, as if it were exercising ordinary appellate
jurisdiction. Where the view taken by the Arbitral Tribunal
is a possible view based on the material on record, the
same cannot be interfered with merely because another
view is possible. Reliance is placed on the judgments of
the Hon'ble Apex Court in Punjab State Civil Supplies
Corporation Limited and Another v. Sanman Rice
Mills and Others reported in 2024 SCC OnLine SC
2632 , Bombay Slum Redevelopment Corporation Pvt.
Ltd. v. Samir Narain Bhojwani reported in (2024) 7
SCC 2018 , Associate Builders v. Delhi Development
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Authority reported in (2015) 3 SCC 49 , and M/s. Dyna
Technologies Pvt. Ltd. v. M/s. Crompton Greaves
Limited reported in (2019) 20 SCC 1 .
11(a). He further contended that the present
proceedings arise out of an International Commercial
Arbitration as respondent No.1-Alphion is incorporated and
based in the United States of America. Consequently, the
ground of patent illegality contemplated under Section
34(2A) of the Act is not available in respect of an
International Commercial Arbitration. The grounds urged
by the appellant, therefore, have to be examined within
the restricted parameters applicable to Section 34 of the
Act and, more particularly, Section 37 of the Act thereof.
He contended that most of the grounds urged in the
appeal are substantially a reiteration of the objections
already raised before the learned Single Judge in the
proceedings under Section 34 of the Act, which have been
considered and rejected by a detailed and reasoned
judgment.
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11(b). Insofar as the observations made by the
learned Single Judge regarding the manner in which the
appellant secured the tenders are concerned, the learned
senior counsel would submit that such observations have
no bearing upon the arbitral award or the actual
determination made by the Arbitral Tribunal and are, at
the highest, obiter observations. He contended that the
appellant had, in fact, benefited from the technical
expertise and collaboration of the respondent and that the
appellant did not possess the requisite technical capability
to independently fulfil the tender requirements.
11(c). He further contended that the appellant
cannot now challenge the jurisdiction of the Arbitral
Tribunal on the ground that the arbitration proceedings
were invoked under an incorrect agreement or that the
dispute fell outside the scope of the arbitration agreement.
The appellant did not raise any such objection before the
Arbitral Tribunal in the manner contemplated under
Section 16 of the Act. The notices invoking arbitration
clearly referred to Clause 19 of the Technical Collaboration
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Agreement and to the disputes relating to unpaid Annual
Maintenance Charges. The appellant, in its response, did
not dispute the applicability of the arbitration clause and,
on the contrary, agreed to the nominated arbitrators. The
appellant also participated in the arbitral proceedings and
consented to the substitution of the learned sole Arbitrator
upon the demise of the original Arbitrator, without raising
any objection to the jurisdiction of the Arbitral Tribunal.
Having failed to raise the jurisdictional objection at the
stage contemplated under Section 16 of the Act, the
appellant cannot be permitted to raise the same for the
first time in proceedings under Section 34 of the Act or in
the present appeal under Section 37 of the Act. Such
conduct amounts to waiver within the meaning of Section
4 of the Act. He places reliance on the judgment of the
Hon'ble Apex Court in M/s. Vidyawati Construction
Company v. Union of India , reported in (2025) 5 SCC
347 .
11(d). He further contended that the Technical
Collaboration Agreement was the principal or parent
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agreement between the parties and that the subsequent
agreements were executed in furtherance of the
arrangements contemplated there under. The Commercial
Understandings, Tripartite Agreement, Modus Operandi
Agreement and other subsequent agreements were
ancillary arrangements giving effect to the commercial
understanding between the parties. The arbitration clause
contained in the Technical Collaboration Agreement is of
wide amplitude and covers disputes arising out of or in
connection with the agreement, including disputes relating
to its existence, interpretation, performance and
termination. The dispute concerning payment of
Comprehensive Repair Charges, therefore, squarely arises
out of and in connection with the Technical Collaboration
Agreement. Reliance is placed on the judgment of the
Hon'ble Apex Court in Tarapore and Company v. Cochin
Shipyard Ltd ., Cochin and Another reported in (1984)
2 SCC 680 , in support of the wide construction of an
arbitration agreement. It is further contended that even a
claim described as one in tort would not, by itself, fall
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outside the scope of a sufficiently wide arbitration clause.
Reliance is placed on Gemini Bay Transcription Pvt.
Ltd. v. Integrated Sales Service Ltd and Another ,
reported in (2022) 1 SCC 753 .
11(e). He further contended that the Technical
Collaboration Agreement itself contains provisions relating
to payment as well as after-sales services and, therefore,
the obligation of the appellant to make payment to the
respondent for the services rendered arises from the said
agreement. The subsequent agreements merely prescribe
the modalities for facilitating such payment. The tender
documents, Purchase Orders and Annual Maintenance
Contracts were entered into between BSNL and the
appellant and did not create any contractual obligation on
the part of BSNL towards the respondent. The respondent
was neither the bidder nor a contracting party under the
tender and, therefore, its contractual claim was
enforceable against the appellant under the Technical
Collaboration Agreement.
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11(f). As regards the impleadment of BSNL, the
learned senior counsel further contended that BSNL was
not a necessary or proper party to the arbitration
proceedings. There was no arbitration agreement between
the respondent and BSNL. The Technical Collaboration
Agreement containing the arbitration clause was between
the appellant and the respondent. The tender and
subsequent contractual arrangements between BSNL and
the appellant could not create an arbitration agreement
between BSNL and the respondent. The Tripartite
Agreement did not alter the contractual relationship
between the appellant and the respondent, but merely
provided for an escrow mechanism. He further contended
that the Arbitral Tribunal had considered the application
seeking impleadment of BSNL and rejected the same by a
reasoned order. The said determination was not
challenged by the appellant in the proceedings under
Section 34 of the Act and had, therefore, attained finality.
The appellant cannot seek to challenge such determination
directly in an appeal under Section 37 of the Act. Even
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otherwise, BSNL could not have been compelled to
participate in the arbitration in the absence of an
arbitration agreement binding it to the respondent.
11(g). Learned senior counsel further contended that
the appellant's reliance upon Chloro Controls (India)
(P) Ltd v. Severn Trent Water Purification Inc. and
Others , reported in (2013) 1 SCC 641 , is not applicable
in the present case. The said decision recognises
exceptional circumstances in which a non-signatory may
be brought within the ambit of an arbitration agreement,
particularly where the non-signatory is intrinsically
connected with the performance of the agreement or is
otherwise bound by the arbitration arrangement. In the
present case, BSNL's performance was not necessary for
the performance of the appellant's contractual obligations
towards the respondent, or would BSNL be bound by the
arbitral award. BSNL was also not part of the same group
of companies as the appellant. Hence, no case was made
out for its impleadment. He further contended that the
appellant's consent to arbitration was unconditional.
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Though the appellant suggested that, the BSNL ought to
be impleaded, it nevertheless agreed to the appointment
of an Arbitrator and did not make its consent to arbitration
clause upon the impleadment of BSNL. Such a contention
was also not raised before the Arbitral Tribunal. Having
participated in the arbitral proceedings without protest,
the appellant cannot subsequently contend that the
Arbitral Tribunal lacked jurisdiction.
11(h). On the question of liability, the learned senior
counsel contended that the liability of the appellant to pay
the respondent was independent and was not contingent
upon receipt of payment from BSNL. There is no provision
in the agreement between the parties which make the
appellant's liability to pay the respondent conditional upon
its first receiving payment from BSNL. If the parties
intended to make receipt of payment from BSNL a
condition precedent, such a stipulation ought to have been
expressly incorporated in the agreement. He further
contended that the expression "back-to-back" occurring in
the Technical Collaboration Agreement cannot be
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COMAP No. 403 of 2022
construed as making the respondent's entitlement to
payment dependent upon actual receipt of payment by the
appellant from BSNL. The relevant provisions were
intended to regulate the manner in which the amounts
received from the customer were to be passed on to the
respondent, after accounting for the agreed margin of the
appellant, and also to secure the amounts received from
BSNL. The escrow mechanism similarly operated as a
security arrangement and did not extinguish or postpone
the independent contractual liability of the appellant.
11(i). He further contended that the contractual
arrangement specifically contemplated a margin in favour
of the appellant from the Comprehensive Repair Charges,
with the balance being payable to the respondent. The
Annual Maintenance arrangements were expressly
contemplated under the Technical Collaboration
Agreement and the respondent had duly performed its
obligations relating to repair and maintenance services.
Having obtained the benefit of the services rendered by
the respondent, the appellant cannot avoid its contractual
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liability merely by relying upon the alleged non-payment
by BSNL. He further contended that the appellant has not
placed any material to demonstrate that it had taken
effective steps against BSNL for recovery of the amounts
allegedly due from BSNL. Mere correspondence or
demands made to BSNL cannot absolve the appellant of its
contractual obligation towards the respondent. The Arbitral
Tribunal, after considering the contractual provisions and
the material on record, has rightly rejected the contention
that payment to the respondent was conditional upon
receipt of payment from BSNL.
11(j). He further contended that the interpretation of
the contractual provisions is primarily within the domain of
the Arbitral Tribunal. Once the Arbitral Tribunal has
considered the relevant contractual terms and arrived at a
possible interpretation, the Court exercising jurisdiction
under Sections 34 and 37 of the Act cannot substitute its
own interpretation merely because another interpretation
may also be possible. The findings of the Arbitral Tribunal
in the present case have also been affirmed by the learned
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COMAP No. 403 of 2022
Single Judge. Such concurrent findings further narrow the
scope of interference in an appeal under Section 37 of the
Act. Reliance is placed on National Highways Authority
of India v. Hindustan Construction Company Limited
reported in (2024) 6 SCC 809 and Rashtriya Ispat
Nigam Ltd. v. Dewan Chand Ram Saran , reported in
(2012) 5 SCC 306 .
11(k). He further contended that the quantification of
the amount awarded was not seriously disputed by the
appellant and that the claim was contractual in nature,
arising directly from the obligations undertaken between
the parties. The Arbitral Tribunal, upon consideration of
the contractual documents, pleadings and material on
record, awarded the amount payable to the respondent.
The findings do not suffer from perversity, patent
illegality, violation of the fundamental policy of Indian law
or any other ground warranting interference under Section
34 of the Act, much less under Section 37 of the Act.
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11(l). As regards limitation, the learned senior
counsel contended that the claim is well within limitation
and that the question of limitation in the present case
involves appreciation of various documents and facts and
is, therefore, a mixed question of law and fact. The claim
is saved by Sections 18 and 19 of the Limitation Act,
1963.
11(m). He further contended that the Modus
Operandi Agreement entered into between the parties
constituted an acknowledgment of the subsisting jural
relationship and the liability of the appellant towards the
respondent. Such acknowledgment gives rise to a fresh
period of limitation under Section 18 of the Limitation Act.
1963. Reliance is placed on Khan Bahadur Shapoor
Freedom Mazda v. Durga Prasad Chamaria and
Others , reported in 1961 SCC OnLine SC 147, and
Food Corporation of India v. Assam State
Cooperative Marketing & Consumer Federation Ltd
and Others , reported in (2004) 12 SCC 360 , wherein
the scope and effect of acknowledgment of liability under
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COMAP No. 403 of 2022
Section 18 of the Limitation Act, 1963, have been
considered. He further contended that correspondence
between the parties and BSNL relating to the Annual
Maintenance Charges continued thereafter and that the
appellant had also made part payments towards the
Annual Maintenance Charges. Such part payment attracts
Section 19 of the Limitation Act, 1963, and gives rise to a
fresh period of limitation. The arbitral proceedings having
been invoked within the prescribed period calculated from
the last such payment, the claim cannot be said to be
barred by limitation. He further contended that the
appellant had not raised the plea of limitation either before
the Arbitral Tribunal or in the proceedings under Section
34 of the Act. Determination of the question would require
consideration of several documents and factual
circumstances, and therefore, the same cannot be
examined for the first time in proceedings under Section
37 of the Act. Reliance is placed on National Highways
Authority of India v. Raghuram Suvarna and Another
reported in 2021 SCC OnLine Kar 15918, and Banarsi
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COMAP No. 403 of 2022
Das v. Kanshi Ram and Others reported in AIR 1963
SC 1165 .
11(n). Learned senior counsel further contended that
the appellant is, in substance, seeking a re-appreciation of
the evidence, re-examination of the contractual terms and
substitution of the findings recorded by the Arbitral
Tribunal with its own interpretation. Such an exercise is
impermissible under Section 34 of the Act and, with
greater force, in an appeal under Section 37 of the Act.
The Arbitral Tribunal has acted within the scope of the
arbitration agreement, considered the contractual
documents and the material placed before it, and recorded
cogent and reasoned findings. The learned Single Judge
has also independently considered the objections raised by
the appellant and has rightly declined to interfere with the
award. The award cannot be characterised as perverse,
contrary to public policy or violative of the fundamental
policy of Indian law merely because the Arbitral Tribunal
rejected the appellant's interpretation regarding the
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payment obligation or declined to implead BSNL. Hence,
he prays to dismiss the appeal.
12. We have carefully considered the submissions
advanced by the learned Additional Solicitor General of
India for the appellant and the learned senior counsel for
the respondent, the material placed before the Arbitral
Tribunal, the impugned award and the judgment passed
by the learned Single Judge.
13.The principal questions which arise for
consideration are whether the Arbitral Tribunal travelled
beyond the scope of the arbitration agreement; whether
the non-impleadment of BSNL vitiates the arbitral
proceedings; whether the Tribunal imposed an obligation
upon the appellant dehors the contractual arrangement;
and whether the award suffers from any infirmity
warranting interference under Sections 34 and 37 of the
Arbitration and Conciliation Act, 1996.
14. At the outset, it is imperative to bear in mind the
limited scope of this Court’s jurisdiction in an appeal under
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Section 37 of the Arbitration and Conciliation Act, 1996. In
view thereof, it is necessary to examine the scope and
ambit of Section 37 of the Act, which reads as follows:
"37. Appealable orders.
(1) [Notwithstanding anything contained in
any other law for the time being in
force, an appeal] shall lie from the
following orders (and from no others) to
the Court authorised by law to hear
appeals from original decrees of the
Court passing the order, namely:
[ (a) refusing to refer the parties to
arbitration under section 8;
(b) granting or refusing to grant any
measure under section 9;
(c) setting aside or refusing to set
aside an arbitral award under
section 34.]
(2) An appeal shall also lie to a Court from
an order of the arbitral tribunal,-
(a) accepting the plea referred to in
sub-section (2) or sub-section
(3) of section 16; or
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(b) granting or refusing to grant an
interim measure under section
17.
(3) No second appeal shall lie from an order
passed in appeal under this section, but
nothing in this section shall affect or
take away any right to appeal to the
Supreme Court."
15. The present proceedings are not an ordinary first
appeal in which this Court can re-appreciate the entire
evidence or substitute its own interpretation of the
contractual terms for that of the Arbitral Tribunal. The
Court is required to examine whether the learned Single
Judge has committed any error in declining to interfere
with the award within the parameters prescribed under
Section 34 of the Act. The jurisdiction under Section 37 of
the Act is consequently narrower, particularly where the
learned Single Judge and the Arbitral Tribunal have
concurrently taken a possible view on the contractual
dispute. The Hon'ble Apex Court has repeatedly
emphasised that an arbitral award is not liable to be
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COMAP No. 403 of 2022
interfered with merely because another interpretation of
the contract is possible. Hence, it is just and necessary to
analyse Section 34 of the Act, which reads as follows:
"34. Application for setting aside
arbitral award.-
(1) Recourse to a Court against an
arbitral award may be made only
by an application for setting aside
such award in accordance with
sub-section (2) and sub-section
(3).
(2) An arbitral award may be set aside
by the Court only if-
(a) the party making the application
[establishes on the basis of the
record of the arbitral tribunal
that]-
(i) a party was under some
incapacity; or
(ii) the arbitration agreement is
not valid under the law to
which the parties have
subjected it or, failing any
indication thereon, under
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COMAP No. 403 of 2022
the law for the time being in
force; or
(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
(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
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arbitration may be set
aside; or
(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
(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.
[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,-
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(i) the making of the award
was induced or affected by
fraud or corruption or was in
violation of section 75 or
section 81; or
(ii) it is in contravention with
the fundamental policy of
Indian law; or
(iii) it is in conflict with the
most basic notions of
morality or justice.
Explanation 2.- For the avoidance
of doubt, the test as to whether
there is a contravention with the
fundamental policy of Indian law
shall not entail a review on the
merits of the dispute.]
[ (2-A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be
set aside by the Court, if the Court
finds that the award is vitiated by
patent illegality appearing on the face
of the award:
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Provided that an award shall not
be set aside merely on the
ground of an erroneous
application of the law or by re-
appreciation of evidence.]
(3) An application for setting aside may
not be made after three months have
elapsed from the date on which the
party making that application had
received the arbitral award or, if a
request had been made under section
33, from the date on which that request
had been disposed of by the arbitral
tribunal:
Provided that if the Court is
satisfied that the applicant
was prevented by sufficient
cause from making the
application within the said
period of three months it may
entertain the application
within a further period of
thirty days, but not
thereafter.
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(4) On receipt of an application under
sub-section (1), the Court may,
where it is appropriate and it is so
requested by a party, adjourn the
proceedings for a period of time
determined by it in order to give
the arbitral tribunal an opportunity
to resume the arbitral proceedings
or to take such other action as in
the opinion of arbitral tribunal will
eliminate the grounds for setting
aside the arbitral award.
[ (5) An application under this
section shall be filed by a party
only after issuing a prior notice to
the other party and such
application shall be accompanied
by an affidavit by the applicant
endorsing compliance with the said
requirement.
(6) An application under this section
shall be disposed of expeditiously,
and in any event, within a period
of one year from the date on which
the notice referred to in sub-
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section (5) is served upon the
other party.]"
16. In the present case, the dispute between the
parties cannot be considered in isolation from the
Technical Collaboration Agreement dated 26.10.2007. The
said agreement constituted the principal commercial
arrangement under which the parties agreed to collaborate
for pursuing business opportunities, including
manufacture, supply, installation, commissioning and
maintenance of the products. The subsequent tender,
Purchase Orders, Annual Maintenance arrangements and
the tripartite arrangement were entered into in
furtherance of the commercial transactions contemplated
between the appellant and the respondent. The mere fact
that BSNL was a party to certain subsequent
arrangements does not, by itself, sever the contractual
relationship between the appellant and the respondent.
The Tribunal was, therefore, justified in examining the
subsequent arrangements for determining the rights and
obligations arising between the parties.
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17. The first contention of the appellant is that the
Tribunal travelled beyond the scope of the reference and
adjudicated a claim which did not arise under the
Technical Collaboration Agreement. Reliance has been
placed on the judgment of the Hon'ble Apex Court in
Vidya Drolia cited supra. The said decision does not
advance the case of the appellant. The principle that
questions of jurisdiction are amenable to judicial scrutiny
cannot be disputed. However, the existence of such power
of scrutiny does not mean that every interpretation placed
by the Arbitral Tribunal upon the arbitration agreement or
the underlying contract becomes open to reconsideration
by the Court. In the present case, the Tribunal was called
upon to determine the respondent's claim for payment
arising from the commercial arrangement between the
parties. It did not adjudicate an independent dispute
between the respondent and BSNL. The mere
consideration of the subsequent arrangements for
determining the appellant's liability cannot be equated
with assumption of jurisdiction over BSNL.
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18. The reliance placed on MSK Projects India (JV)
Limited cited supra is equally not applicable. The
proposition that the Arbitral Tribunal cannot travel beyond
the terms of the reference is well settled. However, the
question in the present case is whether the Tribunal, in
determining the appellant's liability under the contractual
arrangement, actually travelled beyond the reference. On
examination of the award, the answer must be in the
negative. The Tribunal was required to determine whether
the appellant was liable to make payment towards the
Comprehensive Repair Charges claimed by the
respondent. In deciding that question, the Tribunal
considered the Technical Collaboration Agreement and the
connected contractual documents. Such consideration of
related documents for interpreting and implementing the
principal agreement cannot be characterised as
adjudication of a dispute beyond the reference.
19. The reliance on Gaurav Dhanuka and Ajay
Madhusudan Patel cited supra also cannot assist the
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appellant. The appellant seeks to rely upon these decisions
to contend that a non-signatory can, in appropriate
circumstances, be joined where the agreements are
interconnected and form part of a composite transaction.
However, the question before this Court is not merely
whether the agreements are commercially connected. The
material question is whether BSNL was a necessary party
for determination of the contractual claim between Alphion
and ITI. The answer is clearly in the negative. The Tribunal
could determine the appellant's liability towards the
respondent without adjudicating upon any independent
right or liability of BSNL. Consequently, the mere
commercial connection between the agreements does not
make BSNL a necessary party.
20. The appellant next relies on Chloro Controls
(India) (P) Ltd. cited supra to contend that BSNL ought
to have been impleaded as a non-signatory to the
arbitration. There is no quarrel with the proposition that,
in exceptional circumstances, a non-signatory may be
brought within an arbitration agreement where the facts
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and circumstances establish a sufficiently close
relationship with the contractual arrangement and the
intention of the parties so warrants. However, the said
principle cannot be applied mechanically merely because
different agreements arise out of the same commercial
transactions. In the present case, the respondent seeks
enforcement of its contractual claim against the appellant
alone. BSNL is neither sought to be made liable under the
award nor the Tribunal is required to adjudicate any
independent claim against BSNL. There was also no
arbitration agreement between the respondent and BSNL.
Therefore, the exceptional circumstances contemplated in
Chloro Controls (India) (P) Ltd. cited supra are not
established in the present case.
21. It is also significant that the Tribunal had
considered the application seeking impleadment of BSNL
and rejected the same. The appellant did not establish
before the learned Single Judge that the said
determination resulted in any prejudice which affected the
ultimate adjudication of the claim. The appellant
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participated in the arbitral proceedings and allowed the
Tribunal to adjudicate the dispute. The contention that
BSNL's presence was indispensable therefore appears to
be an attempt to convert a dispute concerning the
interpretation and performance of the contract into a
jurisdictional objection.
22. The appellant has further relied on Ssangyong
Engineering and Construction Co. Ltd. and Patel
Engineering Limited cited supra to contend that the
Tribunal could not create a new contractual obligation and
that an award suffering from patent illegality or perversity
could be interfered with. The principles stated in those
decisions are undoubtedly well settled. However, they
have no application to the facts of the present case in the
manner suggested by the appellant. The award in question
is one arising out of an International Commercial
Arbitration. Section 34(2A) of the Act provides the
additional ground of patent illegality appearing on the face
of the award, expressly applies to arbitrations other than
International Commercial Arbitrations. The Hon'ble Apex
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Court in Patel Engineering Limited cited supra itself has
recognised that the ground of patent illegality under
Section 34(2A) of the Act is not available in an
International Commercial Arbitration. Even otherwise, the
Tribunal has not created a new contract between the
parties. It has interpreted the contractual documents and
determined whether the appellant was liable to make
payment to the respondent for the services rendered. The
respondent's claim was not founded upon a purely
equitable obligation imposed by the Tribunal. The Tribunal
considered the Technical Collaboration Agreement, the
subsequent arrangements and the conduct of the parties
and came to the conclusion that the appellant's liability
was not made conditional upon actual receipt of payment
from BSNL. Such interpretation of the contract falls within
the domain of the Arbitral Tribunal. Merely because the
appellant advances a different interpretation of the
expression “back-to-back” cannot constitute a ground for
setting aside the award.
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23. The contention that the appellant's liability was
conditional upon receipt of payment from BSNL also
cannot be accepted. If receipt of payment from BSNL was
intended to constitute a condition precedent to the
appellant's liability towards the respondent, such a
condition ought to have been clearly incorporated in the
contractual arrangement. The Tribunal, upon examining
the relevant documents, has found that no such condition
existed. The appellant has not demonstrated that the said
interpretation is one which no reasonable or fair-minded
person could have adopted. Therefore, the finding cannot
be characterised as perverse or irrational.
24. The further reliance on Hari Shanker Jain cited
supra is also of no assistance. The said decision lays down
the principle that foreign law is a matter of fact and
ordinarily has to be pleaded and proved. However, the
appellant has not demonstrated that the impugned award
was founded upon an unproved proposition of foreign law
which materially affected the adjudication of the
contractual claim. In the absence of demonstrating such
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prejudice or a finding based exclusively upon an unproved
rule of foreign law, the general proposition stated in the
said decision cannot be invoked to invalidate the award.
25. The contention that the Tribunal proceeded on
the basis of principles of American law without proper
pleading or proof, therefore, does not furnish a ground for
interference. The appellant has to establish that the
alleged reliance upon foreign law has resulted in an award
contrary to the applicable substantive law or has
materially affected the ultimate conclusion. Mere reference
to principles of foreign law, without demonstrating its
decisive and impermissible application to the contractual
liability between the parties, is insufficient.
26. The reliance on SBP & Co., and Easy Trip
Planners Ltd. cited supra also does not advance the
appellant's case. Those decisions principally recognise the
legislative policy of minimal judicial intervention during the
pendency of arbitral proceedings and the availability of an
appropriate remedy against the arbitral award after its
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COMAP No. 403 of 2022
conclusion. Easy Trip Planners Ltd. cited supra
reiterates that, in circumstances specifically contemplated
under Section 37 of the Act, an aggrieved party ordinarily
has to await the final award and raise its grievance in
proceedings under Section 34 of the Act. The said
proposition, however, does not mean that every objection
relating to an interlocutory order must necessarily result in
setting aside the final award. The appellant was required
to demonstrate that the alleged non-consideration of its
application for impleadment of BSNL caused such
fundamental prejudice as to vitiate the award. No such
prejudice has been demonstrated. The Tribunal ultimately
considered the question and rejected the application for
impleadment. The appellant, therefore, cannot succeed
merely by relying on the procedural proposition that such
an objection could be raised after the final award.
27. We also find no merit in the contention that the
learned Single Judge's observations regarding the manner
in which the appellant secured the tender would render
the judgment unsustainable. Even assuming that certain
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observations made by the learned Single Judge were
unnecessary or went beyond what was required for
deciding the commercial suit/petition under Section 34 of
the Act, such observations would not by themselves
constitute a ground to set aside the arbitral award. What is
material are the operative conclusion and the reasons
upon which the learned Single Judge declined to interfere
with the award. The impugned observations, even if
treated as obiter, do not affect the validity of the ultimate
decision.
28. The contention regarding limitation, as noticed
from the submissions, also cannot be permitted to reopen
the entire arbitral adjudication at the stage of the present
appeal. The respondent has contended that the question of
limitation is a mixed question of law and fact and has
relied upon acknowledgment and part payment under
Sections 18 and 19 of the Limitation Act, 1963. It is
further pointed out that the appellant did not raise the
plea of limitation either before the Arbitral Tribunal or
before the learned Single Judge. The appellant has not
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demonstrated that the claim was ex facie barred so as to
warrant interference for the first time in a proceeding
under Section 37 of the Act.
29. On the contrary, the authorities relied upon by
the respondent support the approach adopted by the
learned Single Judge. The conduct of the appellant is also
relevant. The appellant agreed to the appointment of the
arbitrator and participated in the arbitral proceedings. It
did not establish that its consent to arbitration was legally
made conditional upon the impleadment of BSNL. Having
participated in the proceedings, it cannot, merely because
the award has gone against it, seek to recast its earlier
conduct as an absence of consent to arbitration. The
respondent has rightly relied upon Section 4 of the Act and
the principle of waiver in support of this contention. The
judgment in M/s. Vidyawati Construction Company
cited supra also emphasises the importance of timely
invocation of jurisdictional objections under the statutory
scheme.
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30. The respondent's reliance on Tarapore and
Company cited supra also reinforces the principle that an
arbitration clause of wide amplitude is to be given its
proper contractual meaning and that a party which has
participated in arbitration cannot lightly seek to defeat the
arbitral process by subsequently questioning the
jurisdiction which it had accepted. The decision arose
under the Arbitration Act, 1940, and therefore cannot be
mechanically applied to the present statutory framework;
nevertheless, the principle concerning the effect of the
parties conduct and the scope of the arbitration agreement
is relevant.
31. Likewise, Gemini Bay Transcription Pvt. Ltd.
cited supra does not support the appellant's attempt to
restrict the arbitration clause by artificially separating the
contractual obligations arising out of the same commercial
arrangement. The question has to be determined by
reference to the language of the arbitration agreement
and the substance of the dispute. In the present case, the
respondent's claim is fundamentally a claim for payment
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arising out of the contractual relationship between the
appellant and the respondent and not a claim seeking
recovery from BSNL.
32. National Highways Authority of India v.
Hindustan Construction Company Ltd . cited supra is
consistent with the limited scope of judicial review over
the arbitral award. The Court exercising jurisdiction under
Sections 34 and 37 of the Act is not sitting in appeal over
every finding recorded by the Tribunal. Unless the award
falls within the statutory grounds for interference, the
autonomy of the arbitral process has to be respected.
33. In Rashtriya Ispat Nigam Ltd. cited supra , the
Hon’ble Apex Court emphasised that interpretation of
contractual terms is primarily within the province of the
Arbitral Tribunal and that the Court should not substitute
its own interpretation where the interpretation adopted by
the Tribunal is a possible one. The same principle assumes
greater significance in the present case because the
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learned Single Judge has already examined the objections
raised against the award and declined to interfere.
34. We are, therefore, unable to accept the
submission that the Tribunal exceeded its jurisdiction
merely because while determining the respondent's claim
against the appellant, it considered the tender, Purchase
Orders, Annual Maintenance arrangements and the
Tripartite Agreement. These documents formed part of the
factual and contractual background of the dispute.
Consideration of such documents does not amount to
assuming jurisdiction over BSNL. The ultimate
determination was confined to the rights and liabilities of
Alphion and ITI.
35. Equally, the appellant has not demonstrated that
the award is contrary to the fundamental policy of Indian
law, in conflict with the most basic notions of morality or
justice, or otherwise falls within any of the limited grounds
available for interference under Section 34 of the Act. The
challenge substantially seeks reconsideration of the
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contractual interpretation adopted by the Tribunal and re-
appreciation of the material on record. Such an exercise is
impermissible.
36. The distinction between a permissible
jurisdictional challenge and an impermissible challenge to
the merits of an award must be maintained. Where an
Arbitral Tribunal adjudicates a dispute which the parties
agreed to refer and interprets the contractual documents
placed before it, an error, if any, in interpretation does not
by itself justify judicial substitution of the Tribunal's view.
In the present case, the appellant has not established that
the Tribunal decided a dispute wholly outside the
arbitration agreement. At the best, the appellant seeks
another interpretation of the contractual arrangement.
That is not sufficient for interference under Sections 34
and 37 of the Act.
37. We also find considerable force in the submission
of the learned senior counsel for the respondent that the
present appeal is essentially an attempt to re-argue the
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objections already considered by the learned Single Judge.
The learned Single Judge has declined to interfere with the
award after examining the objections raised by the
appellant. The appellant has not demonstrated any patent
jurisdictional error or perversity in the reasoning of the
learned Single Judge warranting exercise of the appellate
jurisdiction under Section 37 of the Act.
38. Thus, upon an overall consideration of the
matter, we hold that:
i. The dispute adjudicated by the Arbitral Tribunal
arose out of the contractual relationship between the
appellant and the respondent and was within the
scope of the arbitration agreement;
ii. BSNL was neither a necessary nor an indispensable
party for determination of the contractual claim
between the appellant and the respondent;
iii. The Tribunal's interpretation that the appellant's
liability towards the respondent was not conditional
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upon actual receipt of payment from BSNL
constitutes at least a possible view of the contractual
arrangement, and
iv. The appellant has failed to establish that the award
suffers from any ground contemplated under Section
34 of the Act warranting interference, and in the
absence of any such ground, the jurisdiction of this
Court under Section 37 of the Act does not permit
re-appreciation of the evidence or substitution of the
Tribunal's interpretation with another possible
interpretation.
39. For the aforesaid reasons, we find no error in the
judgment passed by the learned Single Judge refusing to
interfere with the arbitral award. The appellant has failed
to demonstrate that the award suffers from any
jurisdictional error, violation of the fundamental policy of
Indian law or any other infirmity recognised under Section
34 of the Arbitration and Conciliation Act, 1996. The
grounds urged in the present appeal essentially seek a re-
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COMAP No. 403 of 2022
appreciation of the contractual documents and substitution
of the view taken by the Arbitral Tribunal, which is
impermissible within the limited scope of Section 37 of the
Act. The appeal is devoid of merit and is liable to be
dismissed. Accordingly, we proceed to pass the following
O R D E R
i. Commercial appeal is dismissed .
ii. The judgment dated 09.09.2022 passed by the
learned Single Judge in Commercial Suit No.1
of 2022 is affirmed. The arbitral award is
consequently upheld.
iii. No order as to costs.
In view of the dismissal of the appeal, pending
interlocutory applications, if any, shall stand dismissed.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(VENKATESH NAIK T)
JUDGE
KVK