The Delhi High Court, in a judgment dated April 28, 2025, delivered by Justices Vibhu Bakhru and Tejas Karia, dismissed an appeal filed by Bharat Sanchar Nigam Ltd (BSNL) under Section 37 of the Arbitration and Conciliation Act, 1996. The court upheld the arbitral award of ₹43.52 crores in favour of Vihaan Networks Ltd (VNL), reaffirming that the Respondent was rightly entitled to compensation under the principle of quantum meruit.
Background of the Dispute
The dispute arose from a Notice Inviting E-Tender (NIT) dated April 13, 2016, for the supply, installation, and maintenance of a 2G GSM BSS network in remote areas of Arunachal Pradesh and Assam. BSNL had floated the tender on behalf of the Universal Services Obligation Fund (USOF), a Department of Telecommunications body.
Vihaan Networks was declared the L1 bidder on April 25, 2017, and agreed to an 11% discount on OPEX items. BSNL issued an Advance Purchase Order (APO) on March 21, 2018, which VNL accepted unconditionally and also provided the required Performance Bank Guarantee.
However, BSNL later withdrew the APO on February 10, 2020, citing a policy change by USOF that terminated the underlying project. As a result, VNL invoked arbitration under Clause 36 of the APO, claiming damages for work already performed and losses incurred.
The Sole Arbitrator, in an award dated June 16, 2023, granted ₹33.69 crores and ₹9.83 crores under Claim III(A) and III(B), respectively, with 10% interest per annum, even while noting that no enforceable contract existed.
BSNL argued that:
"The award of ₹43.52 crores is perverse and contrary to contract terms, especially Clause 26 of the General Instructions to Bidders, which allows BSNL to reject any bid before final contract without liability."
BSNL also maintained that field testing done by VNL was voluntary and carried out without expectation of compensation, meaning there was no benefit accrued to BSNL.
It contended that invoking Section 70 of the Indian Contract Act (quantum meruit) was erroneous, as the expenditures were not for the benefit of BSNL but were self-incurred actions by the vendor.
VNL submitted that the field work and associated expenses were carried out based on direct instructions from BSNL and after issuance of the APO, making it binding. VNL referenced BSNL’s own letters to USOF, where BSNL:
"Acknowledged the substantial work done by VNL, including pre-deployment, installation of five live sites, and incurring ₹225–250 crores in project expenditure."
These communications established that BSNL had both recognized and benefited from the work performed by VNL, thus justifying reimbursement under Section 70 of the Contract Act.
The Court reiterated the limited scope of appellate interference under Section 37, stating:
"The appeal under Section 37 cannot go beyond the limits set by Section 34. If the arbitral award reflects a reasonable view based on evidence, it should not be disturbed."
The Court emphasized that the award, although acknowledging no concluded contract, rightly applied quantum meruit as BSNL had benefited from the preparatory work and deployment carried out by VNL.
"The view taken in the award is plausible and cannot be termed perverse or implausible. Therefore, no ground was made out to interfere under Section 34 or Section 37."
It also noted that the award’s quantification—only allowing 25% of salary-related claims and 50% of material costs—was reasonable and backed by documented evidence like salary slips, invoices, and payment records.
Case Title: Bharat Sanchar Nigam Ltd Versus Vihaan Networks Ltd
Case Number:FAO(OS) (COMM) 269/2023 CM APPL. 63447/2023
Judgment Date: 28/04/2025
For the Appellant : Mr Dinesh Agnani, Sr Advocate with Ms Leena Tuteja, Advocate.
For the Respondent : Mr Rajeev Nayyar, Sr Advocate with Mr Omar Ahmed, Mr Abhishek Singh, Mr Saad Shervani, Mr J Amal Joshy, Ms Aayushi Mishra, Mr K V Vibhu Prasad, Advocates.
