Arbitral award set aside for flawed contract interpretation and overlooked evidence; belated jurisdictional challenge was rejected.

A belated challenge to the arbitrator's subject-matter jurisdiction was rejected because the objection had not been raised before the tribunal under Section 16 or in the original Section 34 petition, and the later TRAI regime did not retrospectively oust arbitration already commenced. The award was, however, set aside on merits because the no-objection letter was construed on an erroneous and incomplete reading of the correspondence, the tribunal overlooked material evidence, and its findings on novation, licence fee, and interest could not stand. The court held that an award based on legally unsustainable contract construction and ignored evidence is vulnerable to challenge as contrary to public policy.

---

---

Issues: (i) Whether the belated amendment to raise a challenge that the arbitrator lacked subject matter jurisdiction was maintainable, and whether the arbitral forum lacked jurisdiction in view of the TRAI regime; (ii) Whether the award could be sustained on merits, particularly on the construction of the no-objection letter, novation, and liability for licence fee and interest.

Issue (i): Whether the belated amendment to raise a challenge that the arbitrator lacked subject matter jurisdiction was maintainable, and whether the arbitral forum lacked jurisdiction in view of the TRAI regime?

Analysis: The challenge to jurisdiction was not raised before the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996, nor in the original petition under Section 34. A party is required to raise jurisdictional objections at the earliest opportunity, and permitting a new jurisdictional ground after several years would defeat the time discipline built into the arbitral framework. On the merits, the dispute had entered arbitration before the insertion of Chapter IV in the Telecom Regulatory Authority of India Act, 1997 by the amendment of 2000. The statutory transfer provisions dealt with pending applications before the Authority and pending appeals before the High Court, but not arbitral proceedings already commenced. The special tribunal regime therefore did not retrospectively oust the arbitral tribunal's authority in this case.

Conclusion: The amendment was rightly rejected, and the plea of lack of inherent subject matter jurisdiction failed.

Issue (ii): Whether the award could be sustained on merits, particularly on the construction of the no-objection letter, novation, and liability for licence fee and interest?

Analysis: The award was found to rest on an erroneous reading of the correspondence. The no-objection letter did not require the subsidiary to remain a 100% subsidiary at all times; its conditions had to be read harmoniously, and the record showed repeated confirmation that the subsidiary remained wholly owned while permission was sought for variations under the stated conditions. The arbitrator had overlooked material correspondence and incorrectly treated the communications as offers and counter-offers in a manner unsupported by the record. The findings on absence of novation followed from those flawed premises. Once those core findings were unsustainable, the consequential rulings on licence fee and interest could not stand. The award was therefore opposed to the public policy of India and liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.

Conclusion: The award could not be sustained on merits and was liable to be set aside.

Final Conclusion: The petition succeeded, the arbitral award was quashed, and the petitioner was left to pursue any other remedy available in law.

Ratio Decidendi: A court may set aside an arbitral award where the tribunal's core findings rest on a legally unsustainable construction of the contract and overlooked material evidence, and a belated jurisdictional objection not raised before the tribunal will not be entertained where the arbitration had already commenced before a later statutory tribunal regime came into force.

---