The court emphasized the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, and highlighted the importance of evidence and reasoning in arbitral awards.

Judgment

Sanjeev Narula, J. (Oral). - The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 [hereinafter the Act] has been filed seeking setting aside of the Arbitral Award dated 16th October, 2020 [hereinafter 'impugned award'], whereby the learned Sole Arbitrator has allowed the claims of STPL (being the Claimant therein) and disallowed the counterclaims of BSL.

BRIEF FACTS:

2. The facts giving rise to the present petition are summarized as follows:

The Contract:

2.1. In 2015, BSL was awarded a tender floated by the Directorate of System Applications, Directorate General of Signals, General Staff Branch, Integrated Head Quarter of Ministry of Defence (Army), New Delhi [hereinafter DSA] for annual maintenance of LVSAT Ph-II terminals (satellite equipment).

2.2. BSL entered into an Annual Maintenance Contract dated 21st December, 2015 [hereinafter, AMC] (notarized on 8th June, 2016) with STPL, which was engaged in the work of repair of satellite communications, for providing maintenance services to DSA for the LVSAT equipment throughout India, as mentioned in Appendix A of the AMC. Thereunder, BSL was to make payments amounting to Rs. 5,20,00,000/- over a period of two years.

The Dispute:

2.3. STPL contends that they have duly provided the maintenance services to BSL in terms of the AMC, yet, they have failed to receive payment toward their invoices detailed hereinafter. The payment was to be made in advance on quarterly basis, in terms of clause 5.2 of the AMC. BSL did not adhere to said payment terms, and despite several communications, failed to release the payment. On 6th July, 2018, STPL raised a partial pro forma invoice for the period of 01st January, 2018 to 30th June, 2018. BSL paid Rs. 50 lakhs and also issued a postdated cheque ('PDC') dated 5th August, 2018 for Rs. 90,00,000/-towards their admitted liability. Later, STPL issued another partial proforma invoice dated 01st August, 2018 for Rs. 94,14,844/-. Subsequently, the PDC was dishonoured on presentation.

2.4. STPL also contends that it received an email from BSL stating that it has received a payment of Rs. 1,99,21,970/- from DSA for the services rendered by STPL under the AMC, and also confirmed that they would make the payment to STPL against the same. However, this promise was never fulfilled. The PDC referred above, on the request and assurance of BSL, was presented again on 28th September, 2018, but was again returned unpaid, this time for the reason "payment stopped by drawer".

2.5. Thereafter, STPL issued a legal notice dated 8th October, 2018 calling upon BSL to make payment of Rs. 90,00,000/-. BSL addressed a reply to the notice on 11th November, 2018 whereby all the claims made by STPL were refuted vehemently. Despite having received the payment from DSA, BSL failed to make the payment. Their conduct makes it evident that they have no intention to make the payment of admitted liability. In this backdrop, STPL invoked arbitration, and inter-alia, sought payment of its outstanding dues.

2.6. BSL controverts the above claims, alleging that STPL has failed to abide by the terms of AMC and defaulted in service. The work done by the STPL was not upto the standard accepted by DSA. STPL's services have not been satisfactory, and due to their inefficiency, DSC has imposed liquid damages upon BSL. Although clause 5.2 of the AMC provides for the payment to be made in advance, but the parties mutually entered into an oral understanding that BSL will make payment to STPL only when it receives the same from the end user (i.e. DSA). It was further claimed that STPL confirmed the above understanding vide letter dated 03rd February, 2018.

2.7. The AMC concluded in June 2018, and thereafter BSL sent a letter dated 8th September, 2018, intimating STPL of its failure to rectify faulty equipment, specifying a list of faulty links and spares that need