Delhi HC Upholds Arbitral Award Limiting Payment To 25% For Cables Laid In Existing Ducts In BSNL Project

The Delhi High Court on Monday dismissed Sterlite Technologies Ltd.'s challenge to an arbitral award that limited its payment to 25% of the quoted service cost for optical fiber cables laid through other empty ducts already laid in the same multi-duct trench under a defence telecom project.

Justice Avneesh Jhingan held that Clause 28(iii) of the purchase order independently governed the issue, regardless of the dispute over the applicability of the tender clause dealing with government ducts.

“Clause 28 (iii) of the PO without reference to the clarification unambiguously stated that twenty-five percent of the quoted rate of service shall be paid for laying cable through the existing ducts,” the court said.

The dispute arose from a Bharat Sanchar Nigam Limited tender for construction of an Exclusive Optical National Long Distance backbone and optical access routes for a defence network. Sterlite Technologies Ltd was awarded Package A in Jammu & Kashmir involving laying about 9,495 kilometres of optical fibre cable.

The dispute concerned 547 kilometres of cable laid in trenches with multiple ducts, where more than one duct was installed in a single trench so that additional cables could be laid later without repeated excavation.

Before the tender was finalised, bidders raised a pre-bid query on how payment would be made for laying cables through “existing ducts.” I

In response, Bharat Sanchar Nigam Limited issued Clarification stating that 25% of the quoted service rate would be payable in such cases.

The substance of this clarification was reflected in Clause 27(iii) of the Advance Purchase Order, which Sterlite unconditionally accepted on July 1, 2014, following which the final Purchase Order containing Clause 28(iii) was issued.

For several years, Sterlite itself raised invoices for multi-duct cable work at the 25% service rate while separately seeking reimbursement for the cost of additional materials used for laying multiple ducts.

However, in a letter dated January 10, 2018, it changed its position and claimed full service cost, arguing that the tender clause regarding government ducts did not apply because the ducts in question had been laid by Sterlite itself.

After Bharat Sanchar Nigam Limited rejected the claim, Sterlite invoked arbitration in 2020.

By an award dated May 9, 2023, the arbitral tribunal rejected Sterlite's claim, holding that once a trench had already been excavated, ducts laid, and backfilled, later use of another empty duct in the same trench amounted to use of an “existing duct.”

The tribunal also found that no retrenching was involved for the disputed 547 kilometres.

Sterlite challenged the award before the High Court, arguing that the arbitrator had wrongly relied on the clarification linked to the tender clause dealing with government ducts, even though no such ducts were used in this case, and that the contract otherwise contemplated kilometer-based payment.

Bharat Sanchar Nigam Limited argued that Clause 28(iii) clearly capped payment at 25% for cables laid through existing ducts and pointed out that Sterlite had itself followed this interpretation for years.

Rejecting the challenge, the court held that even if the tender clause concerning government ducts did not apply, that would not help Sterlite because Clause 28(iii) of the purchase order independently settled the issue.

The court also noted Sterlite's own conduct in raising invoices at the 25% rate before changing its stand, though it clarified that this did not create an estoppel.

“The petitioner acted in consonance of clause 28(iii) of the PO and submitted invoices in compliance therewith. The only grievance raised was that the cost of additional material used in laying multiple ducts be also paid apart from 25% of service cost. It may be hastened to add that this does not operate as an estoppel against the petitioner; however it lends support to the conclusion arrived at by the arbitrator rendering it to be a plausible view,” the court said.

Reiterating the narrow scope of interference with arbitral awards, the court said it found no perversity or legal error warranting interference.

“The arbitrator has given meaning to the terms of the contract and there is no re-writing of the contract. The award passed by the arbitrator suffers from no factual or legal error much less perversity, the view of arbitrator is plausible and calls for no interference under Section 34 of the Act,” it held.

For Petitioner (Sterlite Technologies Ltd.): Advocates Amit Dhingra, Rohit Mahajan, Siddharth Agrawal.

For Respondent (Bharat Sanchar Nigam Limited): Senior Advocate Dinesh Agnani with Advocates Leena Tuteja, Ishita Kadyan.