Decided by Bombay High Court | Commercial Arbitration Application(L) NO.34646 of 2022
World Phone Internet Services Pvt. Ltd (“Applicant”) and One OTT Entertainment Ltd. (“Respondent”), are internet service providers who entered into an MoU to establish a Joint Venture, in order to scale up their business pan India and for exploring the possibilities for providing state-of-the-art internet services to their subscribers.
Due to certain disputes which arose in performance of the MoU, the Respondent had raised allegations of breach of terms of MoU and demanded payment from the Applicant for such violations. Applicant claimed to have made the payment of the raised demand under duress to the Respondent, however the Respondent continued to make threat of termination of MoU, consequentially causing loss to the Applicant.
The Applicant filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) before the Bombay High Court, seeking to restrain the respondent from suspending the internet services of the subscribers belonging to the applicant and to the Joint Venture established by the parties.
The Respondent submitted that Telecom Regulatory Authority of India (“TRAI”) Act is a special statute to resolve the disputes arising under the provisions of the Act, which bars the jurisdiction of the Civil Court. It was Respondent’s contention that since the applicant is a unified licensee, it fell under the category of a “service provider”, as defined in Section 2(1)(j) of the TRAI Act. Thus, only the TDSAT had the jurisdiction to adjudicate the dispute between the Applicant and the Respondent. The Respondent referred to the ruling by the Supreme Court in the case of Vidya Drolia and others vs. Durga Trading Corporation (2021) 2 SCC 1, which laid down that dispute is non arbitrable when subject matter of dispute is expressly or by necessary implication non-arbitrable as per the mandate of a statute.
The Applicant countered before the Court that the instant dispute arose out of the Respondent’s failure to honour the obligations contained in the MoU. It was Applicant’s contention that since the dispute between the parties arose out of a private business arrangement i.e. the MoU and had no involvement of the TRAI Act, the parties must be permitted to use the arbitration clause contained in the MoU.
The High Court observed that due to the dispute between the parties and as per the submission made by the applicant, internet services of over 22,000 customers were suspended, who were put to serious prejudice and harm. The Court further considered the scope and objectives of the TRAI Act which aims to regulate the telecommunication services and ensure an effective inter relationship between the service providers, as well as to protect the interests of the consumers.
Having noted that the dispute between the parties had impacted the services provided to the customers/subscribers, the Court ruled that the dispute between the parties squarely fell within the ambit of Section 14 of the TRAI Act. The court observed that since TRAI Act is squarely applicable to the dispute, it would thus fall under the umbrella of Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”) in view of Section 14(a)(ii) of the TRAI Act. The Court accordingly dismissed the section 9 application.
The Bombay High Court has ruled that disputes between telecom service providers are not amenable to arbitration. The court reached this conclusion on adjudication of the Section 9 Application filed by World Phone Internet Services Pvt. Ltd.