Dispute Between Service Providers Can’t Be Referred to Arbitration: Bombay High Court

The bench of Justice Bharati Dangre held that in cases where a special statute has ousted the jurisdiction of the Civil Court by constituting a judicial forum, the parties cannot waive their right to approach the specially created forum by opting for arbitration.

The applicant- World Phone Internet Services Pvt. Ltd. and the respondent-One OTT Intertainment Ltd., are internet service providers who entered into an MoU to establish a Joint Venture. After certain disputes arose between the parties, the applicant filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C 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.

Disputing the maintainability of the application, the respondent - One OTT Intertainment, submitted before the High Court that TRAI Act is a special statute to resolve the disputes arising under the Act, which bars the jurisdiction of the Civil Court. It added 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. It contended that in view of Section 14 of the TRAI Act, only the TDSAT had the jurisdiction to adjudicate the dispute between the parties.

The Court noted that the parties executed an MoU, aiming to leverage their strengths for providing state of the art internet services to subscribers. Perusing the MoU, the bench concluded that both the parties are unified licensees who are in the business of providing broad band internet services, and who have agreed to amalgamate their ventures.

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.

Further, the bench observed that in cases where a special statute has ousted the jurisdiction of the Civil Court by constituting a judicial forum, the parties cannot waive their right to approach the specially created forum by opting for arbitration.

Referring to the provisions of the TRAI Act and its statement of objects and reasons, the Court concluded that the TRAI Act is a self-contained Code, intended to deal with all disputes arising out of the Telecommunication Services provided in the country.

It further noted that under Section 14 of the TRAI Act, the TDSAT is empowered to adjudicate any dispute between two or more service providers, and that Section 15 bars the Civil Court from entertaining any matter which the TDSAT is empowered to adjudicate.

The applicant- World Phone Internet Services, argued before the Court that the dispute between the parties arose out of the respondent’s failure to honour the obligations contained in the MoU. It added that since the dispute between the parties arose out of an MoU, which worked out a business arrangement between them, containing no involvement of the TRAI Act, the parties must be referred to arbitration in view of the arbitration clause contained in the MoU.

The Court took note that the parties are license holders under the TRAI Act, who entered into an arrangement for providing internet services to the subscribers. After a dispute arose between the parties, the respondent suspended the internet services of the applicant’s subscribers/customers. The Court observed 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.

While noting that the applicant in its Section 9 application had sought to restrain the respondent from suspending the internet services of over 22,000 subscribers belonging to the applicant and to the Joint Venture established under the MOU, the Court concluded that the dispute between the parties had affected the customers. Thus, it could not be held that the dispute between the parties contained no involvement of the TRAI Act, the Court said.

The bench held that the TRAI Act 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. Since 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 applicant and the respondents, both being licensee, if they have arrived at an arrangement amongst themselves, they have obtained a lience for providing specified public telecommunication service, and in any case, if the disputes/differences which have arisen between them is likely to affect the customers and in fact, in the present case, this is what has precisely happened, I have no hesitancy to record that such type of dispute between two or more service providers would squarely fall within the ambit of section 14”, the Court said.

While holding 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, the Court dismissed the application.

Case Title: World Phone Internet Services Pvt. Ltd. versus One OTT Intertainment Ltd. In Centre

Citation: 2023 LiveLaw (Bom)1

Dated: 02.12.2022 (Bombay High Court)

Counsel for the Applicant: Mr. Manoj Harit a/w Aditya Vaibhav Singh, Pooja Harit, Hamza Lakdawala, Niket Harit

Counsel for the Respondent: Mr. Cyrus Ardeshir a/w Komal Khushalani, Shadab Jan, Prangana Barua and Mufaddal Paperwalla i/b M/s. Crawford Bayley & Co.

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