REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.8249 OF 2010 [Arising out of SLP [C] No.10600/2007]

Department of Telecommunications … Appellant

Vs.

Gujarat Co-operative Milk Marketing Federation Ltd. … Respondent

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted.

2. The respondent was the subscriber of telephone bearing No.40193, in  

Anand  Town  installed  at  the  residence  of  its  Managing  Director  (for  

convenience we will also refer to the Managing Director as the ‘subscriber’).  

The bi-monthly bills in regard to the said telephone were usually around  

Rs.8500.  The appellant  served on the  respondent  the  following two bills  

aggregating to Rs.454,652 :

Bill date Period of the bill Amount 1.4.1996 16.1.1996 to 15.3.1996 362,723/- 1.6.1996 16.3.1996 to 15.5.1996  91,929/-

The huge billing was on account of a large number of international calls  

known as ‘party calls’ or ‘sex talk calls’ to number 001-4152-085-234 and  

several calls to 001-4152-085-220/230/236/239.  

3. The respondent made a written complaint dated 25.4.1996 after the  

receipt  of  the  first  bill  stating  that  it  had  been  mischievously  and  

unscrupulously  billed for large number of  international  calls  made from  

some other numbers, but shown as having made from its number. It  also  

complained in the said letter that many a time, when the subscriber lifted the  

telephone  for  making  calls,  he  used  to  hear  some  ongoing  talk.  The  

Divisional  Engineer  of  the  appellant  after  verification  informed  the  

respondent  by  letter  dated  21.5.1996  that  the  bills  were  correct  for  the  

following reasons :

(a) Total line was underground and no portion of the line was exposed;  

(b) Absolute control to make a call or not to make a call, was with the  subscriber as the phone had dynamic lock facility.

(c) The telephone was working continuously and there was no complaint  of  the telephone being out  of  order.  (Note :  If  the  line  is  misused  externally, the telephone of the subscriber will be dead with no dial  tone).  

(d) The bills showed that the calls were made daily over a long period and  not on any particular single day.

(e) As the telephone was connected to an electronic exchange, there was  no chance of excess metering.

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4. The respondent filed an administrative appeal to the General Manager,  

Kheda Telecom District, Nandiad. However as  the  bills  amounts  were  not  

paid, the telephone was disconnected on 29.5.1996. A writ petition (SCA  

No.4188/1996) filed by the respondent was disposed of by the High Court  

by order dated 29.7.1997 directing the General Manager of the appellant to  

examine the appeal filed by the respondent in regard to the bills in question  

and render a reasoned order after giving a hearing to the respondent.  After  

hearing,  the  General  Manager,  Kheda Telecom District,  Nadiad made  an  

order  dated  12.2.1998  rejecting  the  appeal  and  confirming  the  demands  

under the two bills,  for the following reasons: (i) The subscriber had not  

made  use  of  the  STD/ISD dynamic  locking  facility  which  was available  

through a sophisticated electronic exchange; (ii) all rooms in the residence of  

the subscriber  had plug/socket  arrangements  and all  family  members  and  

visitors could use the parallel lines for making ISD calls (in particular ‘party  

line calls’) even without the knowledge of the subscriber; (iii) the possibility  

of  any external  misuse  was ruled out  as  the  Distribution Point  Box was  

located  within  the  campus  premises  of  the  respondent  which  was  under  

around the clock security of the security guards employed by the respondent  

and no part of the underground cable was exposed; (iv) significantly during  

the  disputed  period  not  even  a  single  complaint  was  booked  from  the  

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telephone; and though in the complaint dated 25.4.1996, it was stated for the  

first time that many a time when the subscriber lifted the phone to receive  

the call he heard someone talking on the line, no such complaint was ever  

made prior to 25.4.1996 to the department; and (v) the disputed ISD calls  

were  ‘party  line  international  sex  talk  calls’  which  originated  from  the  

subscriber’s telephone and having regard to the fact that these calls  were  

made in between the calls to other stations in India in such close proximity  

that there was no chance of possible misuse by any third party or staff of  

telecom department.     

5. Feeling aggrieved, the respondent again approached the High Court  

by filing another writ petition (SCA No.1416/1998). The said petition was  

disposed of on the ground of availability of alternative remedy of arbitration  

under section 7B of the Indian Telegraph Act, 1885 (‘Act’ for short). The  

respondent challenged the said order in a Letters Patent Appeal wherein by  

order  dated  21.10.1989  the  Division  Bench  directed  the  dispute  to  be  

referred to arbitration. In pursuance of it, the Central Government in exercise  

of power under section 7B of the Act appointed Mr. Vineet Bhatia, Deputy  

General  Manager,  Telecom East  and Arbitrator  for  Ahmedabad  Telecom  

district as Arbitrator for deciding the dispute.

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6. The Arbitrator after hearing made an award dated 4.5.2000 holding  

that the bills were proper and the respondent had to make complete payment  

of the said bills. The following summary of the reasoned award is extracted  

below:

“1.  Though  STD/ISD  dynamic  locking  facility  for  the  telephone  was  available, it was not used by the subscriber.

2. There was no possibility of external misuse from distribution point or  pillar or from the Main Distribution Frame, as these were under lock and  key or around the clock supervision.

3. Even though the subscriber stated that he used to hear some cross talk  on  the  line  during  the  period  of  the  disputed  bill,  no  complaint  was  registered with the Telephone Department. Therefore the said complaint  was apparently an afterthought made up after receiving the first bill for the  disputed period.

4.  All  the  rooms  in  the  house  of  subscriber  had  plug  and  socket  arrangement and there were two telephone instruments in the house and as  such calls could be made from anywhere in the house.  

5. The calls preceding/succeeding the disputed calls were admittedly made  by the subscriber. Hence no misuse by diversion was possible.

6. The disputed calls were ‘international party line calls’. For dialing these  numbers  there was no need to establish any prior relationship between  caller and the called numbers. As such there was no age/sex bar for dialing  these  numbers  and hence  could  have  been  done  by  any of  the  family  members of the subscriber. From the school details of his son, presented  by the subscriber vide his letter dated 3.5.2000, it was clear that his final  Pre-Board examinations for X Std. were concluded on 03.02.1996 and the  disputed calls started from the very next day. As such, the possibility of  these calls having made by the son of the subscriber cannot also be ruled  out.”

7. The said award was challenged by the respondent in a writ petition  

(SCA No.8734/2000). A learned Single Judge of the High Court allowed the  

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writ petition with costs of Rs.5000 and quashed the bills dated 1.4.1996 and  

1.6.1996 and the consequential demand notice dated 4.5.2000. The last para  

of the order of the learned Single Judge extracted below, demonstrates the  

manner in which he viewed the entire matter:

“This is a peculiar case showing the adamant attitude on the part of the  respondent authorities. The bill has been issued in the year 1996 and there  were about three round of litigations. The Arbitrator who was appointed  was subordinate to the General Manager who is bound to be influenced by  the decision of the General Manager or could not have taken a contrary  view to  the  order  of  his  superior.  Therefore,  before  the  argument  was  started,  an opportunity  was  given to  the  counsel  for  the  respondent  to  reconsider  their  decision.  However  the  officer  as  well  as  the  learned  counsel,  who  is  an  officer  of  the  Court,  has  not  accepted  the  said  suggestion. It was also open to the respondent to issue a revised bill as per  the decision of this court or at least average bills for the last six months. It  goes without saying that the adamant attitude of such litigants increases  the  unwanted  litigation.  Therefore,  the  respondent  shall  pay  a  sum  of  Rs.5,000/- (Rupees Five Thousand only) by way of costs.”

The findings recorded by the learned Single Judge in support of his order, in  

brief are:

(i) As  the  appeal  against  the  Bills  had  been  decided  by  the  General  

Manager,  Kheda  Telecom  District  on  12.2.1998  upholding  the  bills,  the  

Arbitrator should have been a person higher in rank to the General Manager.  

As the Arbitrator was of a lower rank of a Deputy General Manager, the  

decision of the Arbitrator was not valid in law and on this ground alone the  

writ  petition had to be allowed.  

(ii) The Arbitrator had decided the matter on inferences and presumptions  

without any evidence. Reference to the existence of parallel telephone lines  

and subscriber’s son being at home after examinations, to infer that he might  

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have misused the telephone was a finding which was without basis in the  

absence  of  evidence  that  the  subscriber’s  son  had  in  fact  misused  the  

telephone. Similarly, the assumption by the Arbitrator that any member of  

subscriber’s family could have used the phone for making ‘party line calls’  

was a casual presumption.

(iii) A complaint dated 25.4.1996 was made by the subscriber stating that  

the first bill  dated 1.4.1996 was excessive. Even assuming that there was  

misuse of the phone, in the house of the subscriber,  when the subscriber  

came to know about the misuse when the bill was received, he would have  

restricted or prevented the misuse. That means the next bill dated 1.6.1996  

should have been a normal bill. But the said bill was also excessive thereby  

demonstrating that the mischief calls continued even during the second bill  

period. This showed that there was a possibility of someone else misusing  

the number of the subscriber for making ISD calls.  

(iv) The complaint dated 25.4.1996 stating that the subscriber sometimes  

used to hear ongoing talk, when he lifted the phone for making calls, was not  

properly considered by the Arbitrator.

The Letters Patent Appeal filed by the appellant against the said order of the  

learned single Judge, has been dismissed by a Division Bench by a brief  

non-speaking order  dated 23.1.2007.  The said order  is  challenged in this  

appeal.  

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8. The scope  of  interference  in  writ  jurisdiction  in  regard  to  Arbitral  

awards  under  section  7B  of  the  Act  was  considered  by  this  Court  in  

M.L.Jaggi v. Mahanagar Telephones Nigam Ltd. [1996 (3) SCC 119] :

“It is seen that under Section 7-B, the award is conclusive when the citizen  complains that he was not correctly put to bill for the calls he had made  and disputed the demand for payment.  The statutory remedy opened to  him  is  one  provided  under  Section  7-B  of  the  Act.  By  necessary  implications, when the Arbitrator decides the dispute under Section 7-B,  he is enjoined to give reasons in support of his decision since it is final and  cannot be questioned in a court of law. The only obvious remedy available  to the aggrieved person against the award is judicial review under Article  226 of the  Constitution. If the reasons are not given, it would be difficult  for  the  High  Court  to  adjudge  as  to  under  what  circumstances  the  Arbitrator  came  to  his  conclusion  that  the  amount  demanded  by  the  Department is correct or the amount disputed by the citizen is unjustified.  The  reason  would  indicate  as  to  how the  mind  of  the  Arbitrator  was  applied to the dispute and how he arrived at the decision. The High Court,   though does not act in exercising judicial review as a court of appeal but   within narrow limits of judicial review it would consider the correctness   and  legality  of  the  award. No  doubt,  as  rightly  pointed  out  by  Mr.  V.R.Reddy,  Additional  Solicitor  General,  the  questions  are  technical  matters. But nonetheless, the reasons in support of his conclusion should  be given.”

            (emphasis supplied)

Though the learned Single Judge referred to the said decision, he has ignored  

the law laid down therein. The learned Single Judge has proceeded as if he  

was sitting in appeal over the award of Arbitrator. He also assumed, without  

any basis, that the Arbitrator had proceeded on presumptions and inferences,  

when in fact it is the learned Single Judge who made assumptions and drew  

inferences, not based on evidence. We may briefly refer to them.

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9. The learned Single  Judge held  that  the  Arbitrator  had  without  any  

evidence assumed that the son or other family members of subscriber must  

have used the telephone available on account of plug/socket arrangement in  

every  room  as  also  an  extra  telephone,  parallel  lines  for  making  the  

“international  party  calls”.  The  basis  for  the  billing  is  not  the  said  

assumption or inference. The basis is the clear evidence consisting of the  

records of Telecom and the meters which showed that the billed calls, that is,  

the international party line calls, were regularly being made from the said  

telephone. The inference drawn by the Arbitrator that the subscriber’s son or  

other family members must have made the calls from a parallel line by using  

the plug and socket facility available in various rooms, has to be read in the  

context of the assertion of the subscriber that he had not made any such  

party  calls.  The  Arbitrator  had  three  facts  before  him  :  (1)  that  the  

department records showing that the disputed international party calls were  

made from the telephone in question regularly; (2) that the subscriber had  

plug  and socket  facility  in  several  rooms with  an  extra  telephone  which  

could be used any time by any one in the house; and (3) that the subscriber  

had not made use of the STD/ISD dynamic lock facility, though available.  

Therefore when there was an assertion by the subscriber that he had not  

made  any  such  calls,  the  Arbitrator  merely  made  an  inference  from the  

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proved  facts  that  even  if  the  subscriber  had  not  made  the  calls,  it  was  

possible that his family members including his son (who had returned home  

a day prior to the commencement of ‘party calls’) could have made such  

calls by using the plugs and sockets arrangement and parallel lines in several  

rooms without  the knowledge of the subscriber.  The Arbitrator  was only  

dealing with a contention by the subscriber that he had not made any such  

calls and giving his reasons for rejecting such a contention.   

10. The learned Single Judge next inferred that even if such calls were  

being made earlier,  after  receiving the bill  dated 1.4.1996, the subscriber  

would have naturally restricted any such calls; and the fact that even after  

receipt of the first bill, there were such ‘party calls’ as was evident from the  

second bill,  made it  improbable that the subscriber’s phone was used for  

making such ‘party calls’ and therefore it had to be inferred that someone  

else  was  mischievously  using  the  said  telephone  connection  for  making  

unauthorised ISD calls. This inference is also contrary to facts. The first bill  

dated  1.4.1996  was  for  the  period  16.1.1996  to  15.3.1996.  Though  the  

second bill dated 1.6.1996 was subsequent to complaint dated 25.4.1996, the  

said bill related to the period 16.3.1996 to 15.5.1996, major portion of which  

was prior to 25.4.1996. Further, the second bill was only for Rs.91,929/- as  

against the first bill for Rs.3,62,723/-. The amount of the second bill and the  

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period for the second bill  demonstrates  that  after  receipt  of  first  bill  and  

complaint,  there  was in  fact  some kind of  control  and reduction in such  

phone  calls.  Therefore  the  inference  by  the  learned  Single  Judge  was  

absolutely baseless.

11. The finding of the learned Single Judge that the Arbitrator had not  

given importance to the complaint in the letter dated 25.4.1996 that he had  

heard cross talk on the line is also incorrect. The Arbitrator has dealt with  

this matter. The simplest explanation is the existence of plug-socket facility  

and parallel lines. If the parallel line was being used and the subscriber lifted  

the receiver, he would certainly hear the conversation or talk, which was not  

from any external source, but from the very same telephone.  

12. The last assumption by the learned Single Judge was with reference to  

an affidavit filed by the Telecom Department in some criminal proceeding  

against some departmental employee unconcerned with this case, admitting  

that  its  employee  had  tampered  with  the  instruments  for  making  

international  calls,  and as a result  the department had to grant  rebates to  

several subscribers. But that cannot be a ground for granting rebate in this  

case, as no irregularity was found in this case. The fact that in some case,  

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some  departmental  employee  had  committed  some  tampering,  is  not  a  

ground for inferring that there must have been tampering in this case. The  

High Court has inferred that the fault was with the department because it  

refused to  refer  the  matter  for  CBI  for  investigation.  The learned Single  

Judge has observed:  

“It  is also required to be noted that the petitioner had requested for an  investigation  into  the  matter  by  Central  Bureau  of  Investigation.  According to the petitioner, if such an investigation is resorted to, it would  unearth the mischief and it was further stated that the petitioner was ready  and wiling to bear the costs thereof. Even this was not accepted by the  respondent  authority,  which would indicate  that  the respondent  did not  want to go deep into the matter.”

Reference  to  CBI  is  not  a  condition  precedent  for  raising  a  bill,  merely  

because the subscriber demands it.  

13. There was thus no ground for the High Court to interfere with the  

findings  arrived  at  by  the  Arbitrator  in  exercising  the  power  of  judicial  

review. By assuming a non-existing appellate  jurisdiction and by making  

wrong assumptions and drawing wrong inferences, the learned Single Judge  

has interfered with a reasoned arbitral award.  

14. We may next deal with the conclusion of the learned Single Judge that  

the award was invalid because it was made by an Arbitrator who was junior  

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in rank, when compared to the officer who passed the appellate order dated  

12.2.1998.  It is a usual practice for the government departments to have the  

employees  of  the  department  (high  level  officers  unconnected  with  the  

contract) as Arbitrators. The mere fact that the Arbitrator is of a rank lower  

than the officer who rejected the claim of the subscriber would not invalidate  

the arbitration or can be a reason for imputing bias to the Arbitrator (see  

Secretary to Govt., Transport Department v. Munuswamy Mudaliar – 1988  

(Supp) SCC 651 and Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd.  

– 2009 (8) SCC 520). In Indian Oil Corpn.  Ltd. (supra) this court held thus :  

“The fact that the named Arbitrator is an employee of one of the parties is  not ipso facto a ground to raise a presumption of bias or partiality of lack  of independence on his part.

There can however be a justifiable apprehension about the independence  or  impartiality  of  an  Employee-Arbitrator,  if  such  person  was  the   controlling or dealing authority in regard to the subject contract or if he  is a direct subordinate (as contrasted from an officer of an inferior rank   in some other department)  to  the officer  whose decision is  the subject   matter  of  the  dispute.  Where  however  the  named  Arbitrator  though  a  senior officer of the government/statutory body/government company, had  nothing  to  do  with  execution  of  the  subject  contract,  there  can  be  no  justification for anyone doubting his independence or impartiality, in the  absence  of  any  specific  evidence.  Therefore,  senior  officer/s  (usually  heads  of  department  or  equivalent)  of  a  government/statutory  corporation/public sector undertaking, not associated with the contract, are  considered  to  be  independent  and  impartial  and  are  not  barred  from  functioning as Arbitrators merely because their employer is a party to the  contract.”

(emphasis supplied)

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In this case, the Arbitrator had neither dealt with the matter at any point of  

time nor was he a subordinate of the appellate authority in the concerned  

telecom district  who decided the  matter.  The bills  related  to  a  telephone  

installed at the premises in Anand/Nadiad falling within the jurisdiction of  

the  General  Manager  Telecom  Kheda  Telecom  District,  Nadiad  and  the  

appellate  order  dated  12.2.1998  was  passed  by  the  General  Manager  of  

Kheda Telecom District, Nadiad. The Arbitrator was working as a Deputy  

General Manager (T) East & Arbitrator Ahmedabad Telecom District, not  

under the General Manager who passed the appellate order but in a different  

telecom district. Therefore, there was no justification for the learned Single  

Judge to hold that the award was invalid merely because the Arbitrator was  

of a rank lower than that of the officer who passed the appellate order. It  

should also be noted that the appeal was decided by the General Manager,  

Kheda Telecom district in pursuance of a direction of the High Court. Again  

in a subsequent proceeding the High court directed that the matter should be  

referred  to  arbitration  under  section  7B  of  the  Act  and  accordingly  the  

dispute was referred to arbitration and the departmental officer functioning  

as Arbitrator decided the matter. There is nothing irregular or erroneous in  

the said procedure.

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15. The  last  para  discloses  the  learned  Single  Judge  had  virtually  

prejudged the matter and was prejudiced against the appellant.  The learned  

Single  Judge  allowed  himself  to  be  swayed  by  the  following  irrelevant  

factors  in deciding against  the appellant:  (i)  the respondent had come up  

before the High Court thrice; and (ii) the department counsel did not agree  

with  the  suggestion  of  the  learned  Single  Judge  to  reconsider  the  bill  

amounts by issuing a revised bill on the basis of the average of the bills for  

last six months. The learned Single Judge proceeded on the basis that the  

attitude of the department was adamant and it was indulging in unnecessary  

litigation.  The  department  was  simply  pursuing  a  legitimate  claim.  The  

matter  had  been  decided  by  a  statutory  Arbitrator.  Therefore  if  the  

department decided not to give up or reduce its claim that cannot be held  

against the department. The order shows that the learned Single Judge had  

tried  virtually  to  force  the  department  to  agree  for  suggestions  which  

obviously the officers and the counsel for the department could not agree.  

Such  attitude  on  the  part  of  the  High  Court  requires  to  be  discouraged.  

Unfortunately the division bench did not examine any of these aspects and  

merely affirmed the decision of the learned Single Judge.

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16.  We therefore  allow this appeal,  set  aside the order  of  the learned  

Single Judge and the Division Bench and dismiss the writ petition filed by  

the respondent challenging the bills.

……………………….J. (R V Raveendran)

New Delhi; ………………………J. September 24, 2010. (Dalveer Bhandari)    

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