Reliance Communications v Bharti Infratel: Delhi High Court Orders Rs 10 Crore Bank Guarantee
The Delhi High Court declined to interfere with an arbitral tribunal's interim protection order requiring Reliance Communications Ltd. to furnish a bank guarantee of Rs 10 crore in its dispute with Bharti Infratel Ltd. The Court also issued directions concerning compliance and disclosure of assets.
Case: Reliance Communications Ltd. v. Bharti Infratel Ltd.
Court: High Court of Delhi
Judge: Justice Yogesh Khanna
Proceeding: Arb. A. (Comm.) 47 of 2017 and connected proceedings
Decision date: 15 January 2018
Relevant law: Arbitration and Conciliation Act, 1996, Sections 9, 17 and 37
Background of the commercial dispute
Reliance Communications Ltd. (RCL) and Bharti Infratel Ltd. (BIL) entered into a Master Service Agreement on 13 April 2010. In December 2015, RCL exited certain BIL sites after expiry of its 2G licences. BIL demanded an exit amount of Rs 39,22,48,384 by letter dated 10 January 2016, followed by a legal notice dated 10 February 2016. RCL disputed liability, maintaining that termination or surrender resulted from circumstances beyond its control.
On 14 September 2016, RCL announced a proposed merger of its wireless business with Aircel Ltd. BIL sought interim relief from the Delhi High Court on 21 December 2016 through OMP (I) (COMM) 497/2016 under Section 9 of the Arbitration and Conciliation Act, 1996. The matter was subsequently placed before the arbitral tribunal for consideration under Section 17. RCL later announced that the proposed merger had lapsed.
Interim order of the arbitral tribunal
The arbitral tribunal consisted of Justice (Retd.) Rekha Sharma as presiding arbitrator, Justice (Retd.) Usha Mehra and Justice (Retd.) S. N. Aggarwal. On 12 October 2017, it directed RCL to furnish a bank guarantee of Rs 10 crore within two weeks and to auction equipment removed from the disputed BIL sites within 60 days. RCL challenged the interim order under Section 37 of the Act.
Decision of the Delhi High Court
Justice Yogesh Khanna dismissed RCL's appeal. The Court considered the need to secure the amount in dispute and the tribunal's objective of preventing equipment from depreciating in value. It referred to Unitech Wireless (Tamil Nadu) Private Limited v. Viom Networks Limited, FAO (OS) 613/2012, decided on 21 December 2012, concerning security for a portion of the disputed amount.
The Court found no sufficient reason to interfere with the tribunal's discretionary interim directions merely because another view might also have been possible. On BIL's connected appeal, it directed RCL to furnish the bank guarantee within three days or file an affidavit disclosing readily saleable movable and immovable assets in Form 16A, Appendix E, within two weeks. It also directed listing of OMP (ENF.) (COMM.) 143/2017 for further directions on 9 May 2018.
Important distinction: This was an order concerning interim measures and security during arbitration. It was not a final adjudication of the underlying contractual liability or a final arbitral award on the merits.
Legal provisions explained
Section 9: Interim measures by a court
Section 9 of the Arbitration and Conciliation Act, 1996 enables a party to seek specified interim protective measures from a court before or during arbitration, or after the award but before enforcement in accordance with Section 36. Measures may include preservation or sale of goods, securing the amount in dispute, injunctions and other appropriate protections. Under Section 9(3), once an arbitral tribunal has been constituted, the court ordinarily should not entertain an application unless circumstances make the Section 17 remedy inefficacious.
Section 17: Interim measures by the arbitral tribunal
Section 17 empowers an arbitral tribunal to grant interim measures during arbitral proceedings, including protection or preservation of property, securing disputed amounts and interim injunctions. Under Section 17(2), orders made by the tribunal under Section 17(1) are enforceable under the Code of Civil Procedure, 1908 in the same manner as court orders, subject to the statutory framework.
Section 37: Appeals against specified arbitration orders
Section 37 provides a limited statutory right of appeal against certain orders under the Act, including an arbitral tribunal's grant or refusal of interim measures under Section 17. It does not provide an unrestricted appeal on the merits of every interlocutory ruling, and appellate intervention depends on the circumstances and applicable principles.
Section 36: Enforcement of arbitral awards
Section 36 governs enforcement of final arbitral awards as decrees, subject to the statutory requirements and any stay. It is distinct from enforcement of interim tribunal orders under Section 17(2).
Why this judgment matters
The ruling illustrates judicial support for effective interim protection in commercial arbitration. Where a tribunal directs security to protect a disputed claim, an appellate court will consider the statutory basis, relevant facts and discretionary nature of the order rather than rehearing the dispute as though it were deciding the final claim. It also highlights that a direction to furnish a bank guarantee does not itself establish liability for the amount claimed.
Current law and official resources
The Arbitration and Conciliation Act, 1996 remains the principal Indian statute governing arbitration, as amended. The analysis above describes the provisions relevant to this 2018 ruling; application to a current dispute requires consideration of subsequent statutory amendments and binding decisions.
- India Code: Arbitration and Conciliation Act, 1996
- Delhi High Court official website
- Supreme Court of India official website
Read the Delhi High Court order dated 15 January 2018
The original judgment document linked in the earlier article is retained below.