On December 2, 2022, the Bombay High Court in the case of, World Phone Internet Services Private Limited v. One OTT Intertainment Limited In Centre, has confirmed the position that, if a dispute necessarily falls under the umbrella of a statute, then it must be adjudicated by the special forum created under the said statute and the parties cannot chose to be referred for arbitration, when a specific remedy is provided in form of a statutory appeal.

Brief facts:

World Phone Internet Services Private Limited (“Applicant”) filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), seeking a restraining order against, One OTT Intertainment Limited In Centre (“Respondent”), from suspending internet services of the customers of the Applicant and of the joint venture established between them under the Memorandum of Understanding dated June 19, 2021 (“MOU”) entered between them (“Application”).

The MOU referred to a strategic licensed partnership between the Applicant and Respondent to leverage each other’s strength to scale up the business in Pan- India and for exploring the possibilities for providing state of art internet services to the subscribers, at a charge not exceeding the maximum retail price. The MOU recorded the broad understanding of the initial working arrangement with a desired outcome of leading to a long-term commercial relationship.

The MOU also stipulated for an event of default and provided for the non-defaulting party the right to terminate the MOU. The MOU also provided for a dispute resolution mechanism and arbitration was a mode for resolution of disputes.

Certain disputes arose between the parties and the result of the dispute was suspension of internet services, including that of various organizations, and as per the Applicant, around 22,000 customers were put to serious prejudice, which inter alia resulted in frantic calls being received by the Applicant, demanding resumption of internet services which led to the Applicant to file the Application before the Bombay High Court seeking interim reliefs.

However, the Respondent raised a preliminary objection on the maintainability of the Application on the ground that since a special forum is created by the statute for determination of disputes arising between two or more service providers under the Telecom Regulatory Authority of India Act, 1997 (“TRAI Act”) in the form of Telecom Dispute Settlement and Appellate Tribunal (“TDSAT”) with the jurisdiction of the civil court specifically ousted, the arbitration proceedings would not lie despite the parties, concurring to refer their dispute for arbitration.

Issue:

Whether the dispute between the parties would fall under the purview of arbitration or under the umbrella of TDSAT?

Submissions on behalf of the Respondent:

The submissions made on behalf of the Respondent in the Application on maintainability are summarized below:

1. The Applicant is a unified licensee, and hence, is a “service provider” as defined in Section 2(e) of the TRAI Act.
2. Section 14 of the TRAI provides for establishment of Appellate Tribunal, which is permitted to adjudicate “any dispute” between two or more service providers, and the remedy available in such a case is to file appropriate proceedings before the TDSAT.
3. Reliance was placed upon the decision of the Hon’ble Apex Court in the case of Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1.

Submissions on behalf of the Applicant:

The submissions made on behalf of the Applicant are summarized below:

1. The MOU is indicative of a contract being entered into between two parties with no involvement of the TRAI Act, and ultimately both the parties are conferred with obligations and since the issue arises out of failure to honour them, the dispute is, inter se, without any involvement of the TRAI Act and therefore there is no exclusion of the proceedings under the Arbitration Act.
2. Under the MOU, the parties agreed to certain obligations which are to be discharged under the MOU and contemplated ‘event of default’. If the parties have amicably decided to resolve their disputes through arbitration and have decided to give binding effect and finality to the award of the arbitrator, there is no gain-say in submitting that the dispute is non-arbitrable and must be referred to TDSAT.
3. The dispute does not involve TRAI, but arises out of interest arrangement between the parties, worked out through the MOU, which specifically contain an arbitration clause, which provide for resolution of dispute through arbitration procedure and the intention of the parties must be honoured.
4. Reliance was placed inter alia upon decisions of the Delhi High Court in Viom Network Limited v. S Tel. Private Limited, 2013 (139) DRJ 641 and Vicom Networks Limited vs. Videocon Telecommunications Limited, 2016 SCC OnLine Del 5219.

Observations:

The High Court, inter-alia, observed that the TRAI Act defines the term “Licensor”, “Licensee”, “Service Provider” and the Applicant and Respondent have agreed to amalgamate their ventures. It was observed that they have obtained a license for providing specified public telecommunication service, and the disputes/differences between them is likely to affect the customers.

The High Court also observed that such type of dispute between two or more service providers would squarely fall within the ambit of section 14 of the TRAI Act and TDSAT is competent to adjudicate such disputes. Section 15 of the TRAI Act bars the Civil Court from entertaining any matter which the TDSAT is empowered to adjudicate.

The cumulative reading of the entire statute with special emphasis on provisions like sections 14 and 15, is indicative of it to be a self-contained code, intended to deal with all disputes arising out of telecommunication services provided in the country, which is clearly reflected through its statement of objects and reasons.

The Court reiterated that a matter can be referred to arbitration only on the existence of an Arbitration Clause and the ‘Arbitrability of the Dispute’. It added that though rights in personam are amenable to arbitration, disputes involving rights in rem are unsuitable for private arbitration.

The Hon’ble Court also observed that the dispute that have arisen in the matter is ultimately likely to affect the customers/subscribers of the internet services such that as per the averments made by the Applicant, internet services of over 22,000 customers were suspended, who were put to serious prejudice and harm.

Decision:

In view of above observations, the Court dismissed the Application and held that the dispute between the parties, who are both service providers, fell under the umbrella of TDSAT in view of section 14(a)(ii) of the TRAI Act. 

Please find attached a copy of the order.

This update has been contributed by Abeezar Faizullabhoy (Senior Partner) and Aashdin B. Chivalwala (Principal Associate).

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