The Delhi High Court has reopened a long-running dispute between Mahanagar Telephone Nigam Limited (MTNL) and Motorola, ordering a fresh hearing after 17 years since an arbitral tribunal directed MTNL to pay substantial sums to Motorola. The revived litigation stems from a 1999 tender floated by MTNL for a turnkey project involving CDMA IS-95A wireless local loop technology, under which Motorola was selected. MTNL issued a Letter of Intent in January 2000 and later placed three purchase orders (PO1 in March 2000, PO2 in November 2000, and PO3 in August 2002) governing the supply, installation, testing, commissioning, and handover of the network.
Over the years, tensions arose between the parties regarding the performance of the CDMA system, particularly about RF coverage, spare parts, and compliance with the technical specifications in the tender. MTNL claimed that Motorola failed to meet its obligations, alleging deficiencies in the equipment and in-building coverage. Motorola countered by pointing to Qualcomm-conducted RF tests, asserting that its system complied with contractual parameters, and emphasizing that MTNL had continued to use a significant portion of the base transceiver stations commercially, thereby acknowledging acceptance.
Arbitration followed, and in August 2008 the sole arbitrator issued an award in favor of Motorola, directing MTNL to pay US $8,768,505 and INR 22,29,17,746, with interest at 15% per annum from October 1, 2008 until payment. Later, in January 2015, an additional award was passed requiring MTNL to release Motorola’s bank guarantees. MTNL challenged both awards under Section 34 of the Arbitration and Conciliation Act, but in March 2017, a single-judge bench of the High Court upheld them. The High Court found no patent illegality or perversity in the arbitral tribunal’s findings, including its reliance on documentary evidence over oral testimony, its assessment of quantum, and its conclusion that MTNL had accepted the equipment.
However, in the recent decision, a Division Bench of the High Court, comprising Justices Anil Kshetrapal and Harish Vaidyanathan Shankar, overturned the 2017 order and remanded the matter for a fresh hearing. The bench held that the single judge had failed to meaningfully adjudicate the serious objections raised by MTNL. Despite recording those objections, the court did not engage with them or provide reasoned analysis. Among the objections highlighted was the claim that PO2 did not contain an arbitration clause and thus was not arbitrable, unlike PO1 and PO3. MTNL contended that the arbitral award improperly treated all three purchase orders as part of a single composite contract, without segregating liabilities or addressing the separate contractual nature of PO2.
Another major challenge urged by MTNL was directed against the 15% per annum interest rate awarded on both the foreign currency and rupee components. The Division Bench noted that MTNL had questioned the applicability of this rate in light of commercial realities, but the earlier ruling did not examine this argument. The court also observed that MTNL had raised concerns over the treatment of oral evidence, arguing that the arbitrator’s refusal to rely on it had prejudiced its case. Yet, the single-judge decision had not addressed these contentions.
Finding this lack of judicial reasoning to be a failure of jurisdiction under Section 34, the Bench emphasized that even within the limited scope of review afforded by that section, a court must apply its mind carefully to every challenge. It noted that MTNL’s objections were not peripheral but central to its case, and by ignoring them, the earlier judgment deprived MTNL of a fair hearing. Given these lapses, the Bench directed that the matter be heard afresh by a single-judge court.
On the historical side, the origins of this dispute lie in MTNL’s CDMA rollout plans at the turn of the millennium. The supply contracts covered not just the core equipment but also commissioning, testing, training, and maintenance, with Motorola entering into performance-related commitments. As implementation progressed, the parties differed on the extent to which the system met the tender terms. Qualcomm’s neutral RF coverage tests reportedly showed compliance, yet MTNL withheld final sign-off, raising contentions about unfulfilled obligations.
After arbitration was initiated by Motorola, MTNL counterclaimed for significant amounts, alleging poor performance and seeking refunds for payments made. However, the tribunal held that MTNL had not terminated the contracts and had not imposed liquidated damages; instead, it had continued using the supplied equipment commercially, which the tribunal interpreted as acceptance. Based on those factual findings, the tribunal awarded sums to Motorola and directed return of its bank guarantees in the additional award.
With the Division Bench now remanding the matter for a fresh hearing, the dispute re-enters a critical phase. The court’s order underscores that even after long years, an arbitral award — especially one involving complex contractual and technical issues — must withstand reasoned judicial scrutiny, and that objections of substance must be addressed rather than glossed over.
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