Safiya Malik

The High Court of Delhi Division Bench of Justices Anil Kshetrapal and Harish Vaidyanathan Shankar held that the arbitral award secured by Motorola requires fresh examination, as it allowed MTNL’s appeal under Section 37 of the Arbitration and Conciliation Act, 1996. The Court set aside the 2017 order of the Single Judge, which had affirmed the award of about USD 8.7 million in Motorola’s favour, and directed that the objections be reconsidered. The dispute concerns long-running disagreements over the performance and acceptance of telecom equipment supplied under multiple purchase orders. By reviving the 17-year-old contest, the Court clarified that the Single Judge must reassess MTNL’s challenge strictly within the narrow parameters governing judicial intervention in arbitral awards.

The dispute arose out of three purchase orders issued by MTNL to Motorola for supply, installation and commissioning of telecom equipment under a tender process. Motorola supplied the equipment and asserted that the systems met the required RF coverage criteria, relying on test results examined by Qualcomm, which MTNL did not dispute. MTNL continued to commercially use the supplied equipment from 2001 onwards and generated revenue from the network, without issuing any notice of breach, levying liquidated damages, or terminating the purchase orders, including PO-1, PO-2 and PO-3.

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During arbitral proceedings, the Arbitrator considered pleadings, documentary evidence, oral evidence and affidavits. The Arbitrator held that oral evidence did not materially advance either party’s case and that the dispute was document-based. MTNL argued that PO-2 lacked an arbitration clause and was a standalone contract, that Motorola failed to meet tender requirements relating to CLIP, IP and RF, that the system was turnkey in nature, and that interest awarded was excessive. MTNL also disputed the Arbitrator’s reliance on Qualcomm’s report and contended that TOC could not be deemed to have been issued.

Motorola countered that all purchase orders stemmed from one tender, that the system had been accepted and used for years, and that MTNL’s pleas regarding SOGA were unsustainable because commercial use constituted acceptance under Sections 40 and 42 of the Sale of Goods Act.

Statutory provisions invoked before the Court and the Arbitrator included Sections 19, 34, and 37 of the Arbitration and Conciliation Act, 1996, and Sections 21, 40, and 42 of the Sale of Goods Act, 1930.

The Court recorded that the scope of interference under Section 37 is “narrowly circumscribed and must be exercised with the utmost restraint” and that appellate courts cannot re-appraise facts or sit as regular courts of appeal.

The Court stated that “the appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act” and that interference is permissible only where the Section 34 court “has exceeded or failed to exercise the power so conferred.” It recorded that the Single Judge was required to meaningfully adjudicate each objection raised.

On examining the impugned judgment, the Bench observed that while certain submissions were noted, “only the issue relating to appreciation of oral evidence received any substantive consideration.” The Court recorded that other objections—particularly those concerning PO2’s arbitrability and interest on both foreign currency and rupee components—“were not addressed by the learned Single Judge through any specific analysis or reasoned adjudication at all.”

The Bench referred to Ajay Singh v. KAL Airways, stating that an Award is perverse “if it were to fail to deal with contentions which may potentially impact its very foundation” and that a Section 34 judgment must reflect “meaningful consideration and evaluation of the Award itself.”

The Court recorded that the issue of PO2 was “substantial, well-founded, and deserving of detailed judicial scrutiny.” It observed that the claims under PO1, PO2, and PO3 had been treated cumulatively, and thus, “in the event PO2 is held to be non-arbitrable… it would not be possible to sever or sustain any part of the Award independently.”

It stated that due to “the inextricable interlinkage of claims,” the doctrine of severability “would stand excluded.” Accordingly, the Court held that the Single Judge’s failure to examine such objections amounted to “a material error in the exercise of jurisdiction under Section 34.”

The Court further observed that under Section 34, while the jurisdiction is limited, the Court must apply its mind: “once a party raises a valid challenge… the Court is under a duty to apply its judicial mind and return cogent reasons.”

Finally, the Court stated that the Single Judge’s order “cannot be sustained insofar as it fails to address certain central objections,” leading to the necessity of restoring the Section 34 petitions for reconsideration.

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The Court directed that “the Impugned Judgment is set aside” and that “the petitions under Section 34 [OMP No.11/2014 and OMP No.380/2015] are restored to the file of the learned Single Judge for fresh consideration. The parties shall not be permitted to expand the scope of their arguments beyond the matters forming part of the pleadings and the record before the learned Single Judge.”

The Court directed the Single Judge to “consider and decide the Petition afresh, in accordance with law, after affording both parties a fair and adequate opportunity of hearing.” The appeals were disposed of with the direction that they be listed before the Roster Bench on 20.11.2025, with “No Order as to costs.”

Advocates Representing The Parties

For the Petitioners: Mr. Arun Bharadwaj, Senior Advocate with Mr. Vikalp Mudgal and Mr. Arun Sanwal, Advocates.

For the Respondents: Mr. P. C. Sen, Senior Advocate with Mr. Nishant Joshi, Mr. Kunal Singh and Ms. Rashi Goswami, Advocates.

Case Title: Mahanagar Telephone Nigam Limited v. Motorola Inc.
Neutral Citation: 2025: DHC:9910-DB
Case Number: FAO(OS) 169/2017 & FAO(OS) 171/2017
Bench: Justice Anil Kshetrapal, Justice Harish Vaidyanathan Shankar