Introduction:

In the case of Bharat Sanchar Nigam Ltd Versus Vihaan Networks Ltd [FAO(OS)(COMM) 269/2023 & CM APPL. 63447/2023], decided on 28 April 2025, the Division Bench of the Delhi High Court comprising Justices Vibhu Bakhru and Tejas Karia dismissed an appeal filed by Bharat Sanchar Nigam Limited (BSNL) under Section 37 of the Arbitration and Conciliation Act, 1996. The appeal was filed against a judgment passed by a learned Single Judge, which had affirmed an arbitral award dated 16 June 2023. The arbitral tribunal had awarded a total of Rs. 43.52 crores (Rs. 33.69 crores plus Rs. 9.83 crores) with interest in favour of Vihaan Networks Limited (VNL), for the losses it suffered due to the withdrawal of an Advance Purchase Order (APO) issued by BSNL about a telecom infrastructure project in Arunachal Pradesh and parts of Assam.

Arguments of Both Sides:

BSNL, the appellant, challenged the arbitral award on the ground that the claims awarded under the heads of reimbursement of salary and associated costs were contrary to the terms of the tender, particularly Clause 26 of the General Instructions to Bidders (GIB), which granted BSNL the right to reject any bid without incurring liability or assigning reasons before a formal contract was concluded. They contended that there was no legally enforceable contract between the parties, and that the Respondent, Vihaan Networks Ltd, had undertaken preparatory work voluntarily and with full knowledge that the field test with live traffic (FTL) was without compensation. They also argued that Section 70 of the Indian Contract Act, 1872, which provides for compensation under the doctrine of quantum meruit, was inapplicable since BSNL had not enjoyed any benefit from the FTL work performed by the Respondent.

In response, Vihaan Networks Limited, the Respondent, argued that the work was done strictly under BSNL’s specific directions and after the issuance of an APO dated 21 March 2018, which was unconditionally accepted by the Respondent. They pointed out that they had also submitted a Performance Bank Guarantee (PBG) and incurred significant expenditures in reliance upon the APO. The Respondent submitted that even though the underlying agreement between BSNL and the Universal Services Obligation Fund (USOF) was terminated in February 2020 due to a policy shift favouring 4G over 2G technology, the fact remained that the APO had been acted upon in good faith. They asserted that BSNL had informed USOF about the field tests and acknowledged the substantial work done by VNL. Consequently, they argued that the principle of quantum meruit, rooted in Section 70 of the Indian Contract Act, rightfully applied in the circumstances and justified compensation.

Court’s Judgement:

The Division Bench of the Delhi High Court began its analysis by reiterating the settled legal position regarding the limited scope of appellate jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996. It emphasised that a court entertaining an appeal under Section 37 is not to reappreciate evidence or reassess the merits of the award. Rather, its duty is confined to determining whether the Single Judge exercised jurisdiction correctly under Section 34 of the Act, which itself limits interference to instances of patent illegality or perversity. The court noted that if the award reflects a plausible view supported by evidence, the appellate court should refrain from substituting its view.

The court then reviewed the sequence of events that led to the arbitration. It found that BSNL had issued a Notice Inviting Tender (NIT) on 13 April 2016 for establishing and maintaining a 2G GSM BSS network in difficult terrains of Arunachal Pradesh and parts of Assam. After successful pre-bid testing and negotiations, VNL was declared L1 and agreed to an 11% discount on all operational expenditure (OPEX) items. On 1 March 2018, BSNL specifically instructed VNL to commence preparatory works and provide unconditional acceptance for a three-month field test with live traffic (FTL), which VNL did on 15 March 2018. Based on this, the APO was issued and unconditionally accepted by VNL, who also provided the requisite PBG.

Despite VNL deploying resources in remote locations and initiating work, BSNL withdrew the APO almost four years later, on 10 February 2020, citing a shift in government policy and termination of the BSNL-USOF agreement. VNL subsequently invoked arbitration under Clause 36 of the APO. The arbitral tribunal observed that although there was no concluded enforceable contract, the Respondent had acted based on BSNL’s explicit directions and incurred substantial expenses. The tribunal concluded that under the principle of quantum meruit, VNL deserved compensation for the benefit conferred and losses suffered. While rejecting most of the claims, the tribunal allowed Claims III(A) and III(B) amounting to Rs. 33.69 crores and Rs. 9.83 crores respectively, with interest at 10% per annum from the date of invocation of arbitration until payment.

The Single Judge, while dismissing BSNL’s petition under Section 34, upheld the arbitral tribunal’s findings as being reasoned, based on evidence, and consistent with law. The Division Bench found no fault in this approach. It concurred with the Single Judge’s view that the arbitral tribunal had adequately appreciated the facts and evidence and had reached a plausible conclusion.

The court further observed that the application of Section 70 of the Contract Act by the tribunal was not only permissible but also correct under the circumstances. It reaffirmed that even in the absence of a formal contract, when a party performs work at the behest of another and incurs costs, they are entitled to reasonable compensation. The court cited the Delhi High Court judgment in MCD v. Ravi Kumar (2017), which similarly upheld quantum meruit compensation in the absence of a concluded contract.

The court rejected BSNL’s reliance on Clause 26 of the GIB, holding that the clause did not override the consequences of an APO having been issued and accepted, nor did it justify denying compensation for actions taken under specific instructions. It concluded that BSNL had derived benefit from the Respondent’s work and that it would be unjust enrichment to allow them to walk away without compensating the Respondent. The court held that there was no merit in the appeal, no error in the arbitral award, and no infirmity in the Single Judge’s reasoning under Section 34.

Accordingly, the appeal was dismissed, affirming the arbitral award and the Single Judge’s judgment.