UNITED TELECOMS LIMITED Vs. MAHANAGAR TELEPHONE NIGAM LIMITED

JUDGEMENT

(1.) This petition under Section 34 of the Arbitration and Conciliation Act, 1996 ('Act') by United Telecoms Limited is directed against the Award dated 28 th November 2008 passed by the learned Sole Arbitrator in the arbitration proceedings between it and the Respondent Mahanagar Telephone Nigam Limited ('MTNL').

(2.) In response to a tender for procurement of CDMA WLL terminals of 2000-IX Technology for Delhi and Mumbai floated by the MTNL, the Petitioner submitted its bid which was found to be lowest. As a consequence, the MTNL issued a Letter of Intent ('LOI')/Advance Purchase Order ('APO') dated 27 th February 2004 in favour of the Petitioner for supply of 50,000 terminals ('handsets'). In terms of Clause 4 of the General (Commercial) Conditions of Contract ['GCC'] applicable to the APO, the Petitioner was required to furnish a performance security to MTNL for an amount equal to 5% of the value of purchase order (PO) within 14 days from the date of issue of APO. Under Clause 4.2 of the GCC, "the proceeds of the performance security shall be payable to the purchaser as compensation for any loss resulting from the supplier's failure to complete its obligations under the contract." Under Clause 4.3 of the GCC appended to the bid document, the performance bond "shall be in the form of bank guarantee ('BG') issued by a scheduled bank and in the form provided in Section IX of this bid document".

(3.) Accordingly, the Petitioner furnished MTNL a performance bank guarantee ('PBG') dated 1 st March 2004, the relevant portions of which read as under: