S. Ravindra Bhat, J. - (1.)The Department of Telecommunications' appeal is against the judgment of the learned Single Judge rejecting its objections under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter called "Act") to the Award of 13th October, 2016 (hereafter called "impugned award") made by sole Arbitrator (hereafter called "the Tribunal"). Pursuant to the "New Telecom Policy" formulated in 1999 "Universal Service Support Policy" (USSP) was framed to provide access to basic telecom services to all at affordable and reasonable prices. Under USSP basic rural telephoning at affordable price was visualized and to achieve its further objectives Universal Service Obligation Fund (USOL) was established under the Indian Telecom (Amendment) Act, 2003. This was with a view to provide financial support and subsidy to all kinds of telecom services including mobile telephoning and broadband connectivity. Responding to tender invitation for the Rural Household Direct Exchange Line (RDEL) the respondent, i.e. Tata Teleservices Limited offered its bids as a Universal Service Provider. After its bid was accepted, it was entitled to claim subsidy disbursement for providing RDEL specified in Short Distance Charging Area. The Tata Teleservices entered into contract with respect to eight different service areas, i.e. different States. This resulted in eight separate sets of agreement covering 12.172 Short Distance Charging areas (SDCAs). Consequently, on 24.3.2005 parties entered into an agreement for subsidy disbursement (hereafter referred to as the "subsidy agreement") for Bihar, valid from 01.04.2007 to 31.03.2008. At the request of the Director, Tata Teleservices the period of installation i.e. the contract of the parties was extended three times i.e. last dated 31.3.2010. Correspondingly the provision for subsidy was extended up to 31.3.2010. The different rates of subsidy were envisaged in the agreement. The Department of Telecommunication (DoT) alleged that serious discrepancies pertaining to RDEL instalments were received and consequently issued two circulars dated 13.10.2010 and 06.07.2011 with respect to verification of the subsidies' disbursement. It alleged that on a special verification conducted by the Controller of Communication Accounts (CCA) for Bihar it emerged that only 3.58% of the RDEL claimed to have service of Tata Teleservices. This resulted in extrapolation of such results, in accordance with law in the latter circular dated 06.07.2011. A demand notice was therefore issued, by the DoT incorporating the Tata Teleservices to deposit the amounts allegedly paid in excess. Tata Teleservices declined to apply.
(2.)The dispute was referred to arbitration in terms of the agreement. DoT filed its statement of claims asking that it was entitled to a sum of Rs.27,74,53,532/- with interest and costs. Tata Teleservices filed a counter claim for Rs.84.1 lakhs along with interest and costs. After pleadings were competed, the Tribunal framed eight issues. During the proceedings, the DoT contended that issue nos.2 and 3 due to the binding nature of the circulars dated 13.10.2010 and 06.07.2011, could be tried as preliminary issue. The parties agreed.
(3.)The DoT contended that the circulars were valid and in accordance with law and notwithstanding that they were made to operate retrospectively. The terms of the agreement enable the administrator to issue them. Tata Teleservices naturally argued to the contrary contending that the terms of the agreement bound the parties and that any subsequent alteration being based upon circulars or any other external event could not guide or operate or control operation of the contract. It was also contended that in terms of the agreement itself, the procedure for verification eluded to refer to statutory rules which incorporated and could not subsequently be altered.