Madras High Court Affirms Fresh Arbitration In ₹2.5 Cr. Isha Foundation-BSNL Call Billing Dispute

The Madras High Court on 9 June dismissed Isha Foundation's appeal, upheld a Single Judge's order setting aside the arbitral award, and directed a fresh adjudication of its dispute with Bharat Sanchar Nigam Limited (BSNL).

A Division Bench of Justices P. Velmurugan and Govindarajan Thilakavadi held that an Arbitral Tribunal cannot reject Call Detail Records (CDRs) and decide a dispute involving abnormal call traffic without obtaining expert opinion where technical issues require investigation and analysis. The Bench held:

“... While so, the cause for abnormal call volume was necessarily to be investigated and analysed and it is not possible without an expert opinion. But, the Arbitral Tribunal proceeded to record its findings and held that it is too hard to suggest that all the disputed calls originated from ISHA's GSM PRI. The learned Arbitrator ought to have sought for expert opinion before arriving at such conclusion.”

Isha Foundation had availed BSNL's services since 2010 and ordinarily received monthly bills ranging from Rs. 20,000 to Rs. 22,000. In December 2018, BSNL raised a bill of Rs. 20,18,198 and, in January 2019, raised another bill of Rs. 2,30,29,264, attributing the sharp increase to a large volume of ISD calls.

BSNL invoked arbitration and claimed Rs. 2,50,47,462 along with interest at 24% per annum. The Arbitral Tribunal awarded only Rs. 44,000 with interest at 15% and rejected most of BSNL's claim.

Subsequently, BSNL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. On 12 August 2022, a Single Judge set aside the award and granted liberty for de novo arbitration. Isha Foundation then filed the present appeal under Section 37 of the Act.

The Foundation argued that the Arbitrator rightly drew an adverse inference against BSNL for refusing to refer the matter to the Telecom Enforcement Resource and Monitoring Cell (TERM) for expert examination. It also contended that BSNL's negligence, failure to monitor abnormal traffic, delayed billing and failure to act on complaints caused the excessive billing.

BSNL argued that the award suffered from serious defects and justified the Single Judge's interference. It contended that the Arbitrator ignored crucial evidence, including Isha Foundation's admission in a police complaint that its system had been hacked. BSNL further asserted that Isha Foundation allowed extension users to make ISD calls and disabled safety measures in its system, resulting in the abnormal call traffic.

The Court noted that BSNL had relied on CDRs to support its claim before the Tribunal. It also noted that Isha Foundation merely argued that the Tribunal had considered the CDRs and that the findings therefore warranted acceptance.

After examining the award, the Bench found that the Tribunal itself had concluded that the call volume was abnormal and required further investigation. Despite reaching that conclusion, the Tribunal decided the dispute without obtaining expert assistance.

The judges held that the Arbitrator wrongly drew an adverse inference from BSNL's refusal to seek expert opinion because such opinion was necessary to determine whether Isha Foundation had made the disputed calls. They also noted that the Tribunal failed to consider Isha Foundation's admission in the police complaint regarding the hacking of its system.

Further, the Division Bench held that the Tribunal could not determine the cause of the abnormal call volume without technical examination. Nevertheless, the Tribunal proceeded to record findings on its own. It clarified that Isha Foundation bore the burden of rebutting the CDRs and required expert evidence for that purpose.

It also noted that Section 26 of the Arbitration and Conciliation Act empowers an arbitral tribunal to appoint an independent expert. Yet, without obtaining expert opinion, the Tribunal concluded that the CDRs were incorrect. The Court found that conclusion patently erroneous.

Accordingly, the High Court upheld the Single Judge's order setting aside the award and directing de novo proceedings, and dismissed the appeal.

For Appellant: Mr. S Rajendra Kumar for M/s Norton and Grant