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2022 Supreme(Kar) 341

IN THE HIGH COURT OF KARNATAKA AT BENGALURU
SURAJ GOVINDARAJ, J.
ITI Limited A Company Incorporated Under The Companies Act – Appellant
Versus
Alphion Corporation In The State Of Delaware – Respondent
Commercial Suit No. 1 of 2022
Decided on : 09-09-2022

Advocate Appeared:
For the Appellant :SRI. C.K.NANDAKUMAR, FOR SRI. RAGHURAM CADAMBI, SRI. SHYAM HARINDRA SRI. AKHIL ANAND, NAMAN BAGGE SRI. RISHI RAJ AND MS.MEDHA RAO, ADVOCATES
For the Respondent:SRI. SIDDHANT S. DARIRA, ADVOCATE FOR SRI. ARUN GOVINDRAJ, SRI. MUDIT SHARMA, ADVCOATE AND SRI. ASHOK KUMAR AGGARWAL, ADVOCATES FOR R1 (NOC))

Point of Law: Section 28(1)(b) of A&C Act is reproduced as Rules applicable to substance of dispute Where the place of arbitration is situate in India.

Headnote:

Companies Act - A&C Act - Section 34(2)(a)(iv), (iii), (2)(b)(ii), (2)(a)(v), 7, 37, 17(1)(ii)(e), 7(4)(b), (c), 28(3), (1)(b), 31, A, 37 - Contract Act, 1872 - Section 10 and 23 - Indian Evidence Act, 1872 - Section 57(1), 45 and 84 - Code of Civil Procedure, 1908 - Order 6 Rule 2 - Constitution of India, 1950 - Article 14 - Tender - Arbitrator - Make Payment of Dues - Whether there was an obligation on part of ITI to make payment of amounts without BSNL making payment - Whether ITI has failed to comply with any obligation - 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 - Whether award comes under mischief of Section 34(2)(A)(iv) of A&C Act on account of order dealing with disputes not contemplated or not falling within terms of submissions - Whether award in question comes within mischief of Section 32(2)(B)(ii) of A&C Act on account of award being in conflict with Public Policy of India - Whether impugned award is in violation of fundamental Public Policy of India and is required to be set-aside under Section 34(2)(b)(ii) Explanation (1)(ii) of A&C Act - Whether award falls foul of Section 34(2)(a)(v) of A&C Act on account of composition of arbitral Tribunal and or arbitral procedure not being in accordance with terms of Arbitration Agreement - Whether arbitral award is in contravention of Section 34(2)(a)(iii) of A&C Act - Whether arbitral award suffers from lack of reasons and is in violation of Section 31 of A&C Act - Whether arbitral award is in violation of Section 28(2) of A&C Act on ground that arbitral Tribunal has applied principles of equity. [Para 38]

Finding of the Court: 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, amount of such cost and when such costs are to be paid - In terms of explanation to Section 31A(1) cost shall mean reasonable cost relating to proceedings - For 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 conduct of parties, whether party has succeeded partly in case, whether party has made frivolous counter claim leading to delay in disposal, etc - In present case, conduct of ITI has already been dealt with hereinabove - Many of submissions which have been made and contentions which have been raised have been deprecated - All contentions which have been raised by ITI have been rejected – Court is of considered opinion that present proceedings are frivolous in nature - Most of arguments being on basis of BSNL being a party or not which is an hogwash - Considering conduct of ITI, considering that ITI has failed in proceedings, considering that frivolous contentions have been raised, Court is of considered opinion that reasonable costs pertaining present proceedings are required to be awarded to Alphion - Considering number of time that matter has been taken up by this Court, nominal cost of Rs.5,00,000/-is awarded to Alphion - ITI is directed to make payment of same within a period of four weeks from today and file necessary acknowledgement with registry of this Court - No grounds have been made out under section 34 of A&C Act.

Result: Suit dismissed.

ORDER :

1. The Petitioner/Plaintiff is before this Court seeking for the following reliefs:

WHEREFORE, in light of the above, it is most respectfully prayed that this Hon'ble Court be pleased to:

A. Set aside the Arbitral Award dated 07.10.2021 passed by the Sole Arbitrator, the Second Respondent herein, in entirety;

B. Call for records of the arbitration proceeding from the Second Respondent; and,

C. Grant such other orders or reliefs as this Hon'ble Court deems just and equitable, including costs of the proceedings.

2. The Respondent herein was the Claimant before the Arbitral Tribunal. The Respondent had sought for the following reliefs before the Tribunal:

109. In the above facts and circumstances, it is most respectfully prayed that this Hon'ble Arbitral Tribunal may graciously be pleased to pass:

    a. an Award in favour of claimant directing the respondent to pay the sum of INR 130,95,59,986.01 (Rupees One Hundred Thirty Crores ninety five Lakhs fifty Nine Thousand nine Hundred eighty six and Paise one only) towards Annual Comprehensive Repair Charges for the Tender Quantity and the Reservation Quantity Order under Proforma Invoices and Invoices set out in Paras 88 and 89 herein-before;

b. an Award directing the respondent to pay interest @10% per annum from the due date till 14 December 2020 in the sum of INR 38,67,68,675.32 (Rupees Thirty Eight Crores sixty seven lakhs sixty eight thousand six hundred and seventy five and paise thirty two only);

c. an Award directing the respondent to pay pendente lite and future interest @ 10% per annum from 14 December 2020 till the date of actual realization;

d. an Award of costs in favour of the claimant; and

e. such other reliefs as this Hon'ble Arbitral Tribunal may deem fit and proper in the facts and circumstances of the present case.

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 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, nontransferable, non-sublicensable license was issued by 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

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