Delhi High Court Dismisses Reliance Communications' Petition, Upholds Arbitrator's Calculation Based On Total Call Seconds

Delhi High Court Dismisses Reliance Communications' Petition, Upholds Arbitrator's Calculation Based On Total Call Seconds

Justice C. Hari Shankar of the Delhi High Court dismissed a petition filed by Reliance Communications under Section 34 of the Arbitration and Conciliation Act, 1996, concluding that the arbitrator correctly calculated call durations by dividing the total number of call seconds by 60 to determine the number of call minutes. The court noted that the company is not entitled to a full minute's charge if the call lasted only part of a minute.

The Unique Identification Authority of India (UIDAI) issued a Request for Proposal (RFP) for service providers to supply toll-free number services and related services for its contact centers. Reliance Communications' bid was accepted, and a Standard Contract Form was signed. Reliance Communications began providing services and invoicing UIDAI based on call detail records.

Reliance Communications claimed that UIDAI failed to pay according to the contract terms and made unauthorized deductions from the payable amount, leading to arbitral proceedings and a subsequent award. Reliance Communications challenged the award in the High Court, disputing the payment calculation method for services rendered. The company argued that, according to Clauses 1 and 3.6.2 of the RFP, it should be paid based on the cost per "Connect Minute" for toll-free numbers and associated services, which includes all statutory taxes and incidental expenses. Reliance Communications contended that it should be paid for each minute or part thereof during which a call was connected. For instance, if five calls lasted 20, 30, 40, 60, and 60 seconds, it argued they should be compensated for five full minutes.

The arbitrator, however, adopted a different billing practice, summing the total number of call seconds in a month, dividing this total by 60 to get the number of minutes, and then multiplying this quotient by ₹0.65, the contracted rate per minute. Reliance Communications argued this practice contradicted the contract terms and was not aligned with the established practice of charging based on a "per second pulse rate," set at 60 seconds.

The High Court observed that it does not interfere with the Arbitral Tribunal's interpretation of contractual covenants unless the interpretation is clearly contrary to the contract itself. The court held that the arbitrator’s interpretation was the only reasonable one that aligned with the contractual covenants. It was noted that this interpretation was both reasonable and adherent to the contractual clauses.

The court noted that none of the contractual documents, including the LoI, RFP, and Standard Contract Form, entitled Reliance Communications to be paid for a whole minute if the call lasted only part of a minute. Therefore, the arbitrator correctly divided the total number of call seconds by 60 to determine the number of call minutes.

The court held that if Reliance Communications' contentions were accepted, the company would be entitled to bill for 5 call minutes despite the total call seconds being 210, amounting to 3.5 call minutes. This would contradict the formula of ₹0.65 per connected minute provided in the LoI.

The High Court noted that the word "connect" in the formula in the LoI referred to ₹0.65 per connect minute, not ₹0.65 per minute. A "connect minute" includes only the part of the minute during which the connection was active. If the connection lasted for half a minute, billing could not be for one full minute.

Furthermore, the High Court noted that when contractual covenants are unambiguous, there is no need for the arbitral tribunal to consider trade practices. Section 28(3) requires the Arbitral Tribunal to consider the terms of the contract and trade usages, with primary importance given to the contract's terms.

Therefore, the High Court dismissed the petition.