An arbitration award directing refund of encashed Performance Bank Guarantee upheld; claims for set-off rejected due to insufficient notice and limitations.

JUDGMENT

Vibhu Bakhru, J. The petitioner (hereafter `BSNL') 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 28.06.2019 delivered by an Arbitral Tribunal constituted by a Sole Arbitrator (hereafter the `Arbitral Tribunal').

2. On 15.07.2010, BSNL had issued a Notice Inviting Tenders (NIT), being no. MM/NWP-CDMA/072010/000393, for purchase of 9,80,000 units of Integrated Fixed Wireless Terminal Devices (IFWT), CDMA Terminals. The respondent (hereafter `Teracom') participated in the said tender and was declared as the successful bidder.

3. Accordingly, BSNL issued an Advance Purchase Order (hereafter `APO') on 02.12.2010, in favour of Teracom for purchase of 3,75,000 units of WLL CDMA 2000 1x IFWTs. In terms of the APO, on 18.12.2010, Teracom furnished a Performance Bank Guarantee bearing number 21641LG025810 for an amount of Rs.2,12,97,000/-, which was valid for a period of three years.

4. On 02.02.2011, BSNL placed a Purchase Order bearing P.O no. CE/PO/009/2010-2011 (hereafter the `Contract') for procurement of 3,75,000 units of WLL CDMA 2000 1x IFWTs (L1, PKG-1) from the respondent, for a total value of Rs.42,59,29,581/-.

5. In terms of Article 11 of the Contract, the respondent was entitled to 80% of the total payment on supply of the IFWT equipment at site, and the balance 20% payment after one year of the equipment's satisfactory performance and on signing of the Annual Maintenance Contract (AMC) with the respective State Telecom Circles under BSNL along with submission of the Performance Bank Guarantee.

6. Admittedly, there was delay in payment of 80% of the total payment that was due under the Contract. By its letter dated 09.04.2012, Teracom informed BSNL that even though it had provided complete supply of the IFWT equipment, several State Telecom Circles of BSNL had failed to release 80% of the payment due to it.

7. Correspondence was exchanged between Teracom and various State Telecom Circles from May, 2014 till December, 2016. Teracom states that most State Telecom Circles had thereafter, released the payments, which were due to Teracom; however, an amount of Rs.1,52,91,987/- remained outstanding.

8. The Performance Bank Guarantee dated 18.12.2010 was initially for a term of three years but Teracom had extended the same from time to time, at the instance of BSNL. It was last extended till 30.09.2017. On 01.08.2017, BSNL, once again, called upon Teracom to extend the Performance Bank Guarantee till 30.09.2018. Teracom resisted the said request. Thereafter, by its letter dated 10.08.2017, Teracom stated it had met all its obligations under the Contract and requested that the Performance Bank Guarantee be released. BSNL did not do so and invoked the Performance Bank Guarantee on 09.01.2018.

9. In view of the disputes between the parties, Teracom issued a notice dated 27.01.2018 to the Chairman and Managing Director, BSNL, invoking the Arbitration Agreement and seeking reference of the disputes to arbitration.

10. Before the Arbitral Tribunal, Teracom raised the following claims:

"Claim no. 1: Entitlement to refund an amount of Rs.21,297,000.00 which is equivalent to PBG by the claimant in terms of APO dated 02-12-2010.

Claim no. 2: Payment towards outstanding dues of Rs.1.53 Crores towards the bills raised by the claimant.

Claim no. 3: Interest at the rate of 18% per annum on the claims of the claimant till the date of passing the award at the first instance. Further to treat the amount as Principal Sum awarded and grant further interest at the rate of