Important Point – Arbitral award cannot be set aside only because Arbitrator did not refer to oral evidence.

These are two petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) filed by Mahanagar Telephone Nigam Limited (‘MTNL’).

2. OMP No. 11 of 2014 challenges an Award dated 26th August, 2013 passed by the sole Arbitrator whereas OMP No. 380 of 2015 challenges an additional Award dated 21st January, 2015 by the same learned Arbitrator.

Background facts

3. Both Awards were passed in the disputes between MTNL and the Respondent, M/s. Motorola Inc. (‘Motorola’), arising out of a Letter of Intent (‘LOI’) dated 11th January, 2000 for “50K lines of CDMA IS-95 A, WLL equipment project in MTNL Delhi telephone on Turnkey for survey, design and supply of equipment, installation, testing, commissioning, making over system to consignee, training, providing AMC etc, as per the details in Annexure-1 & Anexure-2 of the said LOI.”

4. Motorola was also required to supply spares sufficient for maintenance. The total value of the Purchase Order (‘PO’) was Rs. 50,66,40,322. The contract was to conclude with the issue of the Taken Over Certificate (‘TOC’) by MTNL.

5. In terms of the LOI, Motorola furnished a Performance Bank Guarantee (‘PBG’). MTNL issued a PO dated 7th March, 2000 (hereafter PO-1) to Motorola. In terms thereof, Motorola was required to supply the entire equipment including infrastructure and support equipment within 3½ months of the issue of the LOI. The entire installation and commissioning including acceptance testing was to be completed within 6 months i.e., by 10th July, 2000.

6. There was another PO dated 28th November, 2000 (hereinafter ‘PO-2’) placed by MTNL on Motorola India Pvt. Ltd. ('Motorola India') for the value of Rs. 38,38,000 for construction of additional fixture for Antennae for GSM (narrow-based ground tower). A third PO dated 9th August, 2002 (hereinafter ‘PO-3’) for extension of network for 1,50,000 lines with CDMA 2000 1X technology equipment for a value of Rs. 84,92,74,436 was placed by MTNL on Motorola.

MTNL's case

7. The case of MTNL is that Motorola could not meet its obligations under PO-1 dated 7th March, 2000 i.e., it could not install or complete the entire project within 7 months nor could it get the acceptance testing done for the 50,000 lines within 6 months of the issue of the LOI or even thereafter. MTNL states that it paid Motorola Rs. 26,81,01,873 against PO-1. Since the payments were linked to delivery, there was no question of making any balance payment.

8. MTNL claims that Motorola came up with suggestions and assurances to rectify the defects and MTNL was left with no choice but to agree to the said suggestions. This led, according to MTNL, to the issuance of PO-2 which was placed on Motorola India, a separate legal entity, for construction of the ground-based tower both, for CDMA and GSM infrastructure on an incremental cost basis. MTNL alleges that even PO-2 did not improve the situation as there was half-hearted and reluctant execution thereof by Motorola India.

9. MTNL states that Motorola came up with the proposal for migration and expansion of CDMA network; and that MTNL, anxious to safeguard its reputation and recover its earlier investments, agreed to the proposal which led to PO-3. It is stated that PO-1 dated 7th March, 2000 and PO-3 dated 9th August, 2002 were independent contracts entered into between the parties but on a turnkey basis.

10. MTNL alleges that even in respect of PO-3, Motorola failed to carry out successful installations and there was no acceptance testing. It is alleged that the equipment did not function in terms of the specifications. MTNL states that Motorola did not offer the Call Line Identification Presentation (‘CLIP’) feature and BSC or WAM capacity. MTNL claims to have been forced to scrap the entire system and had to deploy a state-of-art network by investing an additional sum of Rs. 105.84 crores so as to enable it to retain its customers and goodwill. It is alleged that Motorola also gradually withdrew its maintenance support res