17 years after arbitral award, Delhi High Court revives MTNL–Motorola case on CDMA tech

The Delhi High Court has revived a long-pending dispute between Mahanagar Telephone Nigam Limited (MTNL) and Motorola and ordered a fresh hearing, 17 years after an arbitral tribunal directed MTNL to pay $8,768,505 (≈₹77.77 crore today) and ₹22,29,17,746 to Motorola [Mahanagar Telecom Nigam Limited Vs Motorola].

The development comes 8 years after a single-judge of the High Court had dismissed a challenge raised by MTNL under Section 34 of the Arbitration and Conciliation Act to the arbitral award.

A Division Bench of Justices Anil Kshetrapal and Harish Vaidyanathan Shankar set aside the previous decision and held that the 2017 judgment upholding the arbitral awards did not adjudicate crucial objections raised by MTNL and therefore, could not be sustained.

“The learned Single Judge, while dismissing the Section 34 petitions, did not undertake a meaningful adjudication by providing any reasons, despite recording the specific objections, necessitating our interference,” the Division Bench ruled.

The Bench emphasised that even within the narrow contours of Section 34, the Court is duty-bound to apply its mind to each challenge and offer a reasoned finding before affirming an arbitral award

The dispute dates back to MTNL’s 1999 tender for supply, installation and commissioning of a turnkey for CDMA technology.

Motorola emerged as the successful bidder. On January 11, 2000, MTNL issued a letter of intent followed by a purchase order 1 (PO1) on March 7, 2000 for the core supply.

As MTNL sought additional services, PO2 was issued on November 28, 2000,and subsequently, PO3 on August 9, 2002, after a fresh letter of intent in July 2002.

These purchase orders collectively governed the rollout of the network across multiple MTNL service areas.

Over the next several years, disputes arose regarding acceptance testing, in-building coverage requirements, and the performance of the CDMA system.

MTNL alleged failures in RF coverage, deficiencies in tools and spares, and non-compliance with tender specifications.

Motorola, however, maintained that the system met contractual standards, pointed to Qualcomm’s RF test results, and emphasised that MTNL continued to use 60 of the 81 base transceiver stations commercially, earning revenue from the network.

The arbitral tribunal eventually accepted Motorola’s position, noting that MTNL had neither rejected the equipment nor issued notices of breach, and that continued commercial use amounted to acceptance.

The arbitral tribunal delivered its award on August 26, 2008 and directed MTNL to release the outstanding payments in both USD and INR, with interest at 15% per annum from October 1, 2008 until realisation.

In 2015, the arbitrator issued an additional award directing release of Motorola’s bank guarantees. MTNL challenged both awards, but on March 31, 2017, a single-judge of the High Court dismissed its Section 34 petitions, prompting MTNL to file the present appeals.

In its judgment, the Division Bench noted that the single-judge had reproduced MTNL’s objections, including the non-arbitrability of PO2, the excessive 15% interest rate, and the treatment of oral evidence.

However, it had not returned findings on any of these issues. The Bench held that MTNL’s contention regarding PO2 was especially significant. PO2 did not contain an arbitration clause, unlike PO1 and PO3, and MTNL had consistently argued that it was a separate, non-arbitrable contract.

The Bench found it problematic that the arbitral award treated all three purchase orders as one composite arrangement and did not segregate claims.

Similarly, the objection to the award of 15 percent interest on both foreign-currency and rupee components remained unaddressed even though MTNL had challenged the rate as excessive and contrary to commercial reality. The Bench held that the absence of judicial reasoning amounted to a failure to exercise jurisdiction under Section 34.

It thus remitted the matter back to a single-judge for fresh consideration.

MTNL was represented by Senior Advocate Arun Bharadwaj with advocates Vikalp Mudgal and Arun Sanwal.

Motorola was represented by Senior Advocate PC Sen and advocates Nishant Joshi, Kunal Singh and Rashi Goswami

[Read Judgment]