*THE HONOURABLE Dr. JUSTICE G. YETHIRAJULU +Writ Petition No.18552 of 2002 % Dated: 30-06-2008. # Bharat Sanchar Nigam Limited (A Govt. of India Enterprise), rep. by its Principal General Manager, Suryalok Complex, Hyderabad. … Petitioner $ M/s.G.V.K.Hotels & Resorts Ltd., A company incorporated under the provisions of the Companies Act, 1956 having its regd. Office at Kohinoor, Road No.1, Banjara Hills, Hyderabad, rep. By its G.P.a. Holder Mr.Veer Vijay Singh, S/o late Takur, Occ:General manager, (Presently called as Taj GVK Hotels & Resorts Ltd.,) and another … Respondents ! Counsel for petitioner: Mrs. R.S. Murthy ^ Counsel for respondents : Mr.G.Anandam < GIST: >HEAD NOTE: ? Cases referred: 1) 2001 (3) SCC 397 2) AIR 1989 SC1263 3) (2007) 7 SCC 679 4) (1994) 6 SCC 485 5) (1994) 4 SCC 665 6) AIR 1975 SC 1259 THE HON’BLE Dr. JUSTICE G.YETHIRAJULU W.P.No.18552 of 2002 ORDER: This is a Writ Petition filed by the petitioner seeking to declare that the award passed by the Arbitrator on 24-06-2002 as illegal and void. 2. The petitioner is Bharat Sanchar Nigam Limited, Hyderabad. The petitioner filed the present writ petition questioning the award passed by the Arbitrator appointed under Section 7-B of the Indian Telegraph Act. 3. The averments of the affidavit filed in support of the writ petition are briefly as follows: The first respondent is a company incorporated under the Companies Act in the name of M/s.G.V.K. Hotels Limited and a telephone connection bearing No.220618 (3390618) was provided on 28-06-1986 to the premises Door No.6-3-249/10, Road No.1, Banjara Hills, Hyderabad-34. The said telephone number was transferred in the name of M/s.Novapan Industries Limited. Due to subsequent changes, the name of the company is at present M/s.Taj GVK Hotels & Resorts Limited and the telephone number 3390618 was installed on 10-09-1994 as outgoing junction No.22 in the private exchange of the said Hotel with 48 lines. M/s.Novapan Industries Limited through their letter dated 01-06-1998 complained about malfunctioning of Telephone No.3390618 and requested for safe custody after discussion. The said telephone was kept under safe custody from 22- 06-1998 onwards. The complaint about malfunctioning was investigated and the investigation revealed that there was no defect in the equipment at all. Accordingly, the petitioner conveyed the same to the first respondent through a letter dated 31-08-1998. The said letter was duly acknowledged by the first respondent, but did not file any objections to their letter dated 31-08-1998. The bill dated 11-07-1998 was issued for an amount of Rs.13,73,929/- for the billing period from 25-04-1998 to 25-06-1998 towards all the calls made from 26-04-1998 to 22-06-1998 in the Hotel premises when the telephone was functioning as outgoing junction No.22 with 48 lines covering about 300 rooms in the hotel premises. Since the first respondent did not clear the bill despite remainders, a notice dated 28-02-2001 was issued requesting the first respondent to make the payment on or before 05-03-2001, failing which the petitioner will be constrained to withdraw the services of all the 48 telephones in terms of Rule 443 of the Indian Telegraph Rules, 1951. The first respondent without settling the bill, approached the High Court through Writ Petition No.3786 of 2001 praying for direction not to enforce the payment of the above bill until the matter is investigated into. The Hon’ble High Court through order dated 08-03-2001 directed the petitioner not to disconnect the telephone bearing No.3390618 and 48 working telephone lines standing in the name of the first respondent subject to depositing of Rs.5,00,000/- and the matter be adjudicated by an arbitrator under Section 7-B of the Indian Telegraph Act. There was a specific direction by the High Court that the Arbitrator shall go into the validity of the bill dated 11-07-1998 and decide the objections of the petitioner. The petitioner has appointed a departmental arbitrator in the rank of Deputy General Manager through the order dated 24-07- 2001 and the Arbitrator passed an award on 24-06-2002 holding that the first respondent is liable to pay Rs.1,00,000/- instead of Rs.13.74 lakhs and directed the petitioner to issue revised bill for Rs.1,00,000/- The petitioner further contended that the first respondent heavily relied on the past billing and future billing without justifying the circumstances under which the calls emanated while telephone was in working condition. The first respondent failed to adduce any evidence regarding the telephone call charges collected from their customers. On the other hand, the first respondent asserted that the calls reflected in the detailed billing were not made from their hotel and alleged tampering of telephone line by the unscrupulous persons in connivance with the departmental personnel. The petitioner further contended that the arbitrator without deciding about the validity of the bill date dated 11-07-1998, ordered the petitioner to give proper rebate for misuse of the line and directed to issue bill for Rs.1,00,000/-. Therefore, the present writ petition has been filed challenging the order of the Arbitrator. 4. The first respondent filed counter-affidavit with the following contentions in brief: There are no valid or substantial grounds warranting interference by this Court. The scope of judicial review is not available in this case, as the learned Arbitrator has considered every material placed by the petitioner and the respondent. The second respondent recorded sufficient reasons in support of his findings after taking into consideration the contentions raised by both parties, therefore, the award of the Arbitrator is not liable to be reopened. The Arbitrator has applied his mind to the evidence and terms and conditions of the contract, including various circulars issued by the department and there is no scope for reappraisal of the matter by the Court as if it were an appeal and unless the view of the Arbitrator is vitiated by a manifest error on the face of the record or is wholly improbable or perverse, it is not subject to interference of this Hon’ble Court. The petitioner failed to make out any case before the Arbitrator. It is further mentioned that there is no material placed by the petitioner that there was thorough investigation over the complaint dated 01-06-1998 and no material was placed evidencing investigation in the case. The respondent proved its case by adducing sufficient evidence before the Arbitrator in support of its plea that the disputed bill is unjustified and incorrect. When there was misuse of telephone line, the first respondent cannot be penalized, therefore, the Arbitrator accepted the said contention and directed to revise the bill. The observation of the learned Arbitrator that it is a case of misuse and customer should not be forced to pay such a huge amount for a small fault of not using the dynamic locking facility is justified and correct. The first respondent, therefore, requested to dismiss the petition. 5. In the light of the contentions raised by both parties, the point for consideration is: “Whether the Arbitrator is justified in setting aside the bill dated 11-07-1998 for Rs.13,73,929/- and whether there are sufficient grounds to direct revision of the bill for Rs.1,00,000/-?” 6. It is an undisputed fact that the first respondent is an authorized customer of telephone No. 3390618. It is also an undisputed fact that this number was an outgoing junction No.22 in the private exchange of the hotel with 48 lines. The petitioner contended that there was no fault either in the exchange or in the equipment and the details of the numbers, duration and the dates on which the telephone calls were made were recorded and the learned Arbitrator without considering the detailed information available on record, came to an erroneous conclusion that it is not just to impose such a huge amount on a private customer for the misuse of the telephone by somebody else. It is the specific contention of the first respondent that on account of the negligence of the first respondent in utilizing the dynamic locking facility and in case of misuse of the telephone by somebody else with the collusion of the departmental officials, the first respondent should not be forced to pay such a huge amount. 7. In the light of the contentions, it has to be verified from the record whether the award passed by the Arbitrator is arbitrary or vitiated by manifest error on the face of the record or it is improbable or perverse. 8. The petitioner-first respondent herein raised the following contentions before the Arbitrator: (i) Since the date of inception, the hotel has been holding 48 telephones for the purpose of operation of its business and from the date of inception, there is not a single occasion wherein the telephone bills of the department were disputed. (ii) The bill dated 11-07-1998 for Rs.13.74 lakhs is abnormal. (iii) A complaint was made on 01-06-1998 informing the department that the telephone in question is out of order since few months prior to that date, but they were receiving exorbitant meter reading on the line, therefore, a request was made to the petitioner to take the above line under safe custody for sixty days till the investigation is completed. (iv) The telephone was out of order for quite some time and during the period only normal bills were received on 11-09-1997, 11-11-1997 and 11-01-2008 towards nominal rental charges. (v) When there was no response for the earlier complaint, the petitioner again gave another complaint to look into the disputed bill. (vi) The first respondent received reply from the Department on 31-08-1998 stating that after complete examination of the external and internal plant it could not reveal any malfunctioning in the disputed telephone and directed the ROP to settle the outstanding bills. (vii) The petitioner failed to give any information about the inspections carried out and there was no details given about the findings of the inspection or name of the inspecting official, therefore, the petitioner felt that no inspection has been done and only routine reply has been given. (viii) The average bill of the telephone line during the previous six months was not more than Rs.10,000/- and total billing of all the 48 lines have never been more than Rs.14,00,000/-. Hence, the bill of Rs.13.74 lakhs on a single line is abnormal and unbelievable. (ix) 98% of the calls recorded in the detailed bills pertained to ISD calls without much time gap, such a situation never occurred in the hotel where there are so many lines connected to the PABX. There was no special occasion in the hotel to have such a huge calls on a single line. (x) The calls during the disputed period was not made by the subscriber, but they may be due to malfunctioning of the equipment or misuse of the phone by the unscrupulous people in connivance with the department, therefore they are not liable to pay the amount covered by the bill and the petitioner is entitled to 100% rebate. 9. The contentions raised by the petitioner herein before the Arbitrator are briefly as follows: (i) There might be less usage of telephones for some time and more usage for some other time, therefore, the usage pattern of the lines cannot be protected and it may vary as per the requirement of the business. (ii) The telephone was in working condition and the STD/ISD details clearly indicate the utilization of the line and proves that the exchange equipment and meter were in proper working condition. (iii) The Department has not received any complaint during the disputed period from the first respondent, only after receiving the complaint from the first respondent in June, 2008, the line was kept under safe custody without much delay. (iv) The telephone worked in Electronic Exchange which is having STD/ISD locking facility. Locking the STD facility is the responsibility of the customer and the secrete code will be known to the customer only for opening or closing the STD/ISD. (v) The fortnightly meter reading and the list of STD/ISD calls made during the disputed period were all given to the first respondent on the request. (vi) The procedure of taking report from the field was done as per the departmental procedure and later the customer was replied basing on the above submissions made by both parties. 10. The learned Arbitrator made the following observations and conclusions while passing the award: (i) Calling pattern of different lines have been varying and the maximum billing on any line has been around Rs.1,00,000/-. (ii) Maximum billing on all the 48 lines put together in any billing cycle has been Rs.15 lakhs only. (iii) Usage of lines are distributed, hence a bill of 13.75 lakhs in a billing cycle on a single line is abnormal and can be due to misuse of the particular line. (iv) Chances of malfunctioning of the exchange equipment is ruled out as there is STD/ISD details of the calls made on the line. (v) There is no written complaint from the customer till 01st June, 1998 and there is no record of any fault on the line in the fault card maintained by the department as well. (vi) The telephone line was working from an Electronic Exchange, having STD/ISD locking facility and using of this facility is the responsibility of the customer to avoid any misuse. (vii) The procedure for excess billing case has been more or less correctly followed. But the copy of outdoor inspection could not be provided to the arbitrator. (viii) The initiative and corrective action by the department seems to be lacking in case of action to be taken for spurt in the FNMR. Had some prompt action been taken, the extent of misusing of the line could have been limited. (ix) The customer should have made his own efforts to protect the misuse of telephone through dynamic locking arrangement and should have made complaint to the department, if lines were faulty. (x) Initiative from department side also have been lacking in taking action on spurt being noticed or acting immediately on the receipt of the complaint. (xi) It is a stabilized case of misuse of line and customer should not be forced to pay such a huge amount for a small fault of not using dynamic locking and not making several written complaints and hence proper rebate need be given. (xii) The average usage of line by the customer also cannot be ruled out, hence need to be charged equal to the maximum bill on any other line. (xiii) The customer need to be given proper rebate for the misuse of line and should only be charged equal to the maximum bill on any other line by the customer in that year. Hence, the customer is to be billed on Rs.1,00,000/- instead of Rs.13.74 lakhs. 11. Now it has to be decided from the submissions made by both parties and observations of the Arbitrator whether the award is to be interfered with or not? 12. The learned counsel for the respondent submitted the following decisions in support of his contentions that the High Court has limited power to interfere with the arbitration award. 13. I n U.P. STATE ELECTRICITY BOARD v. SEARSOLE CHEMICALS LTD. [1], the Supreme Court held as follows: “Where the Arbitrators have applied their mind to the pleadings, the evidence adduced before them and the terms of the contract, there is no scope for the Court, including the Supreme Court to reappraise the matter as if this were an appeal, and it is clear that where two views are possible, the view taken by the Arbitrators would prevail.” 14. I n FOOD CORPN. OF INDIA v. JOGINDERPAL MOHINDERPAL[2], the Supreme Court held as follows: “An arbitrator’s award may be set aside for error of law appearing on the face of it. Though this jurisdiction is not to be lightly exercised, the award can also be set aside if, inter alia, the arbitrator has misconducting himself or the proceedings. It is difficult to give an exhaustive definition as to what may amount to a misconduct on the part of the Arbitrator. It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence.” The Court has further held that the Court cannot sit in appeal over views of the Arbitrator by re-examining and re-assessing the materials. 15. In MARKFED VANASPATI & ALLIED INDUSTRIES v. UNION OF INDIA [3], the Supreme Court held as follows: “Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving a hearing. The endeavour of the Court should be to honour and support the award as far as possible. Scope of interference in a non-speaking award is extremely limited. The Court cannot probe into the mental process of the Arbitrator. The Court should endeavour to support a non-speaking arbitration award provided it has adhered to the parties’ agreement and was not invalidated due to arbitrator’s misconduct.” 16. It is essential to refer to another line of Judgments in support of the contention of the petitioner that the Arbitrator misconducted himself in passing the award while receiving the amount of Rs.1,00,000/- without any basis from the record. I n STATE OF RAJASTHAN v. PURI CONSTRUCTION COMPANY LIMITED [4], Sri G.N.Ray, J, speaking for the Supreme Court made the following observations: “Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible view points, the interference with award based on erroneous finding of fact is permissible.” The line of approach made by the Supreme Court in this regard can be seen from the following: “it does not appear to us that the findings made by the arbitrators are without any basis whatsoever and are not referable to documents relied upon and such findings are so patently unjust or perverse that no reasonable man could have arrived at such findings.” In U.O.I. v. JAIN ASSOCIATES [5], the Supreme Court observed that the non-application of mind to the crucial questions is an instance of legal misconduct and the award is liable to be set aside on that ground. In Law of Arbitration, by Justice Bachawat, a former Judge of the Supreme Court at page No.316 stated as follows: “An arbitrator is not a conciliator. His duty is to decide the question submitted to him according to the legal rights of the parties and not according to what he may consider fair and reasonable.” Russel on Arbitration, 20th Edition at page 318 also lays the same principle. In K.P. POULOSE v. STATE OF KERALA [6], the Supreme Court held as follows: The misconduct under Section 30(a) does not connote a moral lapse. It comprises legal misconduct which is complete if the arbitrator, on the face of the award, arrives at an inconsistent conclusion even on his own finding, by ignoring material documents which would throw abundant light on the controversy and help in arriving at a just and fair decision. It is in this sense that the arbitrator has misconducted the proceedings in the case. In that case the omission to consider the material documents to resolve the controversy was held to suffer from manifest error apparent ex facie. The award was accordingly quashed.” In DANDASI SAHU v. STATE OF ORISSA, the Supreme Court held as follows: “The arbitrator need not give any reasons. The award could be impeached only in limited circumstances as provided under S.16 and 30 of the Act. If the award is disproportionately high having regard to the original claim made and the totality of the circumstances it would certainly be a case of non-application of mind amounting to legal misconduct and it is not possible to set aside only invalid part while retaining the valid part. In other words the doctrine of severability was held inapplicable in such a situation. It is, therefore, clear that the word ‘misconduct’ in Section 30 (a) does not necessarily comprehend or include misconduct of fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result or the like circumstances which tend to show non- application of the mind to the material facts placed before the arbitrator or umpire. In truth it points to fact that the arbitrator or umpire had not applied his mind and not adjudicated upon the matter, although the award professes to determine them. Such situation would amount to misconduct. In other words, if the arbitrator or umpire is found to have not applied his mind to the matters in controversy and yet, has adjudicated upon those matters in law, there can be no adjudication made on them.” 17. In the light of the above legal position, it has to be examined whether the reasons given by the Arbitrator were in support of the conclusions and whether he misconducted himself in passing the Award by ignoring the material available on record. Some of the observations made by the arbitrator are as follows: (i) Chances of malfunctioning of exchange equipment is ruled out as there is STD-ISD details of the calls made on the line. (ii) There is no written complaint from the customer till 01st June, 1998 and there is no record of any fault on the line in the fault card maintained by the department. (iii) The line was working from an electronic exchange having STD/ISD locking facility. Using of this facility is the responsibility of the customer to avoid any misuse. (iv) The procedure for excess billing case has been correctly followed. (v) The customer should have made his own efforts to protect the misuse of telephone through dynamic locking arrangement and also making complaint to department if lines were faulty. (vi) It is a stabilized case of misuse of line and customer should not be forced to have such a huge amount for a small fault of not using dynamic locking and not making several written complaints. Therefore, the Arbitrator concluded that it is a case for proper rebate and the general average use of line by the customer cannot be ruled out. Hence, need to be charged equal to the maximum bill of any other line. So, the order is not basing on the observations made by the arbitrator, but it is on the sole ground of sympathy by observing that the customer shall not be forced to pay huge amount for a small fault of not using dynamic locking and the customer need to be given proper rebate for the misuse of the line. 18. It is an undisputed fact that the telephone line is provided with STD/ISD facility from electronic exchange with dynamic locking system. There is no scope for the departmental people manipulating the calls, because it is not manually operated. The first respondent admits that since it is a hotel, some body might have misused the telephone. Though the first respondent was provided with 48 lines to his hotel, conspicuously he did not mention as to where the disputed phone is installed, whether it is at the reception counter or in the office of the management or in one of the rooms of the customers. The record of the calls clearly indicate that calls were repeatedly made to various telephones at various times and dates and it is the responsibility of the first respondent to take all reasonable steps either to prevent the misuse of phone or collect necessary charges from the customers for utilizing the telephone. Usually, every hotel will maintain a register of calls made by each customer, but the first respondent failed to produce such register to verify whether any of the calls mentioned in the list were made by any of the customers. It is peculiar to note that