Furnish Rs 10 crore bank guarantee: Delhi HC to RCom

The Delhi High Court has refused to interfere with the arbitral tribunal order asking Reliance Communications (RCom) to furnish a bank guarantee of Rs 10 crore for breaking an agreement with Bharti Infratel Limited. RCom had challenged the arbitral tribunal order in the high court.

Bharti Infratel Limited had filed a case against RCom after the latter exited from the Master Service Agreement signed between the two parties in 2010 and also demanded Rs 40 crore from Reliance as compensation.

During the hearing, RCom informed the court that as Reliance was holding a 2G license under the Telegraphs Act, it needed infrastructure for the use of such license and hence, it entered into an agreement with Bharti.

Terming the amount demanded by Bharti is imaginary, RCom argued that Supreme Court’s order to delink the spectrum and license had led to the termination of the Master Service Agreement by Reliance due to the ‘change of law’ and by ‘efflux of time’. The telecom operator also submitted that its license was expiring in December 2015.

Rejecting RCom’s arguments, the high court said that the amount claimed by Bharti Infratel was not speculative and based upon the terms of the contract.

“Despite being not granted any stay against the impugned order, the petitioner failed to comply with the directions passed by the impugned order and failed to furnish bank guarantee of Rs 10 crores of a nationalized bank for a period of one year within two weeks from the date of the order,” the high court ruled.

Claiming that the petitioner failed to raise objections within the time frame, the court observed that clause 18 of the agreement, which defines change of law, was intentionally kept blank to mean the contract could not be terminated on account of change of law.