The court upheld the award of pro-rata spectrum charges to BSNL, emphasizing the importance of fulfilling contractual obligations and the applicability of specific clauses in the Franchisee Agreements.

JUDGMENT

Vibhu Bakhru, J. - M/s Starnet Communications Pvt. Ltd. (hereafter 'Starnet') has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the A&C Act') impugning an Arbitral Award dated 10.10.2019 (hereafter 'the impugned award') passed by an Arbitral Tribunal comprising of a Sole Arbitrator (hereafter 'the Arbitral Tribunal').

2. The impugned award was rendered in the context of disputes that had arisen between Starnet and the respondent (hereafter 'BSNL') in connection with the Franchisee Agreements dated 29.10.2010 entered into between the parties in respect of the Chennai Licensing Service Area (hereafter 'Chennai LSA') and the Himachal Pradesh Licensing Service Area (hereafter 'Himachal Pradesh LSA'). The Arbitral Tribunal rejected all claims made by Starnet as well as the counter claims made by BSNL, which were in the nature of damages. However, the Arbitral Tribunal had awarded a sum of Rs. 68.86 lacs in favour of BSNL being the pro-rata amount of spectrum charges paid by BSNL in respect of the Himachal Pradesh LSA for the period during which the Franchisee Agreement was in operation. The Arbitral Tribunal had also awarded interest at the rate of 10% per annum for the period 28.02.2018 till the date of payment.

3. Mr Swamy, learned counsel appearing for Starnet had confined the challenge to the impugned award to the extent that the Arbitral Tribunal had awarded a sum of Rs. 68.86 lacs, in favour of BSNL. He did not assail the decision of the Arbitral Tribunal to reject the claims made by Starnet. He submitted that in terms of Clause 17 of the Franchisee Agreements, neither party was entitled to claim any expenditure and therefore, the award entered in favour of BSNL was contrary to the terms of the Franchisee Agreement. He submitted that the Arbitral Tribunal had rejected all claims in respect of damages by referring to Clause 17 of the Franchisee Agreements, however, it had erred in not appreciating that the said clause also excluded any claim on account of expenditure.

4. He further submitted that the parties had entered into the Franchisee Agreements for the two LSAs. However, the Department of Telecommunications, Government of India (hereafter 'DoT') had not granted the necessary security clearance and thus, these agreements were a non-starter. He submitted that in the circumstances, Starnet could not be called upon to bear any expenses regarding the spectrum charges. He pointed out that the Arbitral Tribunal had awarded the amount on an erroneous finding that Starnet was in control of the spectrum. He stated that the spectrum continued to be in the control of BSNL as BSNL was the service provider. Starnet could not, at any point of time, exercise any control or use the allocated spectrum. According to Mr. Swamy, the said finding vitiates the impugned award and the same is liable to be set aside under Section 34(2 A) of the A&C Act.

5. In view of the above, the limited question to be addressed is whether the award of pro-rata spectrum charges in respect of the Himachal Pradesh LSA in favour of BSNL, is patently illegal.

Factual Context

6. Starnet is a company registered under the Companies Act, 1956 having its registered office at Kolkata. BSNL is a Government Company and is a leading telecommunication service provider in India. It provides fixed line services, cellular services and broad-band internet services throughout India except in metropolitan cities of Delhi and Mumbai.

7. BSNL issued a Notice Inviting Tender (hereafter the 'NIT') dated 07.09.2009 inviting Expression of Interest (EOI) to deploy Worldwide Interoperability for Microwave Access (WiMAX) based on ccIEEE-802-16e-2005, Wave 2 certified Broad Band Network in BSNL Licensed Areas on non-exclusive, revenue sharing franchisee basis.

8. DoT had allocated a spectrum in the frequency band of 2635 to 2655 MHZ to BSNL. BSNL proposed to use the said spectrum for providing services to its consumers. The Franchisee