“Scope of Section 37 Is ‘Very Limited’: Delhi High Court Upholds ₹43.52 Crore Arbitral Award to Vihaan Networks Against BSNL, Citing Quantum Meruit-Based Compensation”
Safiya Malik
The Division Bench of the Delhi High Court comprising Justice Vibhu Bakru and Justice Tejas Karia upheld the arbitral award in favour of Vihaan Networks Ltd. The judgment dismissed the appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 by Bharat Sanchar Nigam Ltd (BSNL), challenging a Single Judge’s order which had upheld an arbitral award granting reimbursement of approximately ₹43.52 crores to Vihaan Networks under the doctrine of quantum meruit. The court recorded that the impugned award and judgment did not merit interference, as the findings were based on plausible interpretation of evidence and principles of Section 70 of the Indian Contract Act, 1872.
The case pertained to a tender floated on 13 April 2016 by BSNL, acting as the implementing agency for the Universal Services Obligation Fund (USOF), Department of Telecommunication, Government of India. The bid invited proposals for the survey, planning, supply, installation, testing, commissioning, integration, and operation & maintenance of a 2G GSM BSS Network in uncovered villages of Arunachal Pradesh and districts in Assam.
Vihaan Networks Ltd. was declared the successful L1 bidder and agreed to an 11% discount on OPEX items. Due to the remoteness and insurgency-hit nature of the project locations, pre-bid preparations and pre-planning were acknowledged to be significant.
By letter dated 1 March 2018, BSNL directed Vihaan to undertake a three-month Field Test with Live Traffic (FTL). Vihaan unconditionally agreed and sought issuance of the Advance Purchase Order (APO), which was issued on 21 March 2018 and unconditionally accepted. Subsequently, Vihaan deployed resources and commenced activities, including installation and staffing.
On 10 February 2020, BSNL withdrew the APO, citing the USOF's decision (dated 4 December 2019) to terminate its agreement with BSNL in view of plans to re-tender on 4G technology. Arbitration was invoked under Clause 36 of the APO. The Arbitral Tribunal, while rejecting most claims, allowed Claim III(A) for ₹33.69 crores (reimbursement of salaries) and Claim III(B) for ₹9.83 crores (equipment and material costs), awarding interest at 10% per annum from the date of invocation to the date of payment.
BSNL challenged the award under Section 34 of the Act, which was dismissed at the admission stage. BSNL then filed an appeal under Section 37.
Senior Counsel Mr. Dinesh Agnani for BSNL argued that the APO was not a binding contract and the award was perverse and contrary to Clause 26 of the tender, which allowed bid rejection without liability. He also submitted that the claims were based on actions voluntarily undertaken by Vihaan, with no benefit accruing to BSNL.
In response, Senior Counsel Mr. Rajeev Nayyar appearing for Vihaan, relied on BSNL’s communications with USOF acknowledging that Vihaan had completed substantial work, including site installation, subscriber activation, and incurred costs of ₹225-250 crores. Letters issued by BSNL between 2017 and 2020 confirmed Vihaan’s performance and recommended project continuation.
The Single Judge had upheld the award, accepting the Tribunal’s application of Section 70 of the Contract Act, which provides for compensation where services are lawfully rendered to another party who enjoys the benefit.
The Division Bench recorded that, "the scope of Appeal under Section 37 of the Act is very limited and this Court cannot undertake independent assessment of the evidence and merits of the award." It further stated that "if the view taken in the award after consideration of the evidence and material placed on record is a possible and a reasonable view, the petition under Section 34 of the Act ought to be dismissed."
The court agreed with the Tribunal's reasoning that "in absence of a concluded contract in existence, the Respondent had undertaken some work... as directed by the Appellant," and that "the Appellant cannot take the plea that the said expenditure was not for the benefit of the Appellant."
In respect of the award for salary reimbursements, the court noted that the Tribunal had reviewed supporting documents such as "appointment/transfer letters, salary slips, and proof of payment," and allowed only 25% of the claim. Likewise, for materials and equipment, only 50% of the incurred cost was awarded after consideration of "invoices, vouchers, goods receipt notes, payment advice, and custom clearance documents."
The judgment also noted that no specific questions were put to CW1 during cross-examination regarding these documents.
Referring to BSNL’s communications to USOF, the court stated that they "clearly show that the Appellant had acknowledged the expenditure incurred by the Respondent." The bench confirmed that the award's reliance on Section 70 was supported by existing jurisprudence and was not perverse.
On the issue of quantum, the court stated: "the award has only allowed 25% of the amount claimed towards the claim for reimbursement of salary. Similarly, the award has only allowed 50% of the cost incurred by the Respondent towards purchases, advances, and other amounts incurred by the Respondent in connection with the work."
The Division Bench concluded: “In view of the same, the impugned judgment has rightly come to the conclusion that no ground was made out to interfere with the award under Section 34 of the Act. Accordingly, there is no infirmity with the impugned judgment and the appeal deserves to be dismissed.”
"Accordingly, the appeal is hereby dismissed along with all pending applications. No order as to cost."
Advocates Representing the Parties
For the Appellant (BSNL): Mr. Dinesh Agnani, Senior Advocate, Ms. Leena Tuteja, Advocate
For the Respondent (Vihaan Networks Ltd): Mr. Rajeev Nayyar, Senior Advocate, Mr. Omar Ahmed, Mr. Abhishek Singh, Mr. Saad Shervani, Mr. J Amal Joshy, Ms. Aayushi Mishra, Mr. K V Vibhu Prasad, Advocates
Case Title: Bharat Sanchar Nigam Ltd vs Vihaan Networks Ltd
Neutral Citation: 2025: DHC:2972-DB
Case Number: FAO(OS) (COMM) 269/2023
Bench: Justice Vibhu Bakru , Justice Tejas Karia
[Read/Download order]
