ORDER
1. This is a Petition filed by Bharti Cellular Limited under Section 14(a)(i) of the Telecom Regulatory Authority of India Act, 1997 challenging the basis of computation of Licence fees demanded and realized by the Union of India in terms of the Licence Agreement under which the Petitioner has been providing cellular mobile telephone service Metro Telecom Circle.
2. The Petitioner Company holds a licence dated 29th November 1994 to provide cellular mobile telephone services for Delhi Metro area. Under the Licence Agreement the Petitioner is required to pay a fixed amount of licence fee per annum for the first 3 years of the Licence period. From the 4th year onwards the, Petitioner is required to pay the licence fee on per subscriber basis. The relevant portion of Clause 19 of the Licence Agreement which provides for payment of the licence fee reads as under:
“19.1 The License fee payable by Licensee for each service area shall be regulated as follows:-
4th Year and onwards @ Rs. 5 lakhs (Five lakhs) per 100 (one hundred) subscribers or part thereof; subject to the minimum shown below:-
Minimum License Fee for
(a) For purpose of charging the lump-sum Licence fee for the first three years, the year shall be reckoned as twelve months beginning with the date of commissioning of services or completion of 12 months from date of signing of the Licence Agreement whichever is earlier,
(b) The fourth year for purpose of charging the Licence fee shall be the period from the completion of the third year as defined above to the 31st day of March succeeding. The annual Licence Fee for the fourth year will therefore, be computed prorata with reference to the actual number of days. Therefore, the year for purpose of levy of Licence fee shall be the financial year i.e. 1st April to 31st March and part of the year as balance period, if any.”
3. The Petitioner has stated that while it had a provisional operational clearance from the Respondent on 29th August 1995 and an interface/service approval on 26th Sept. 1995, it could commence commercial services only from 15th November 1995. As such the Licence Agreement should be deemed to have begun from 15th November 1995. The Petitioner has therefore contended 15th November 1995 should be the commencement date of each quarter and that the fourth year of the Licence Agreement should be deemed to have commenced from 15th November 1998. The Respondent, however, treated 26th September 1995 (i.e., the date when provisional interface/service clearance was given) as the date of commencement of the licence agreement and computed the licence fee dues, interest liabilities, penal interest, liquidated damages etc. with reference to this date.
4. Another point of dispute between the Petitioner and the Respondent is related to the method of computing the number of subscribers for determining the licence fee payable from the 4th year onwards. According to the Petitioner, the methodology adopted by the respondent in this respect is arbitrary, incorrect and illegal. The Petitioner contends that the term “subscriber” or the purposes of determining the licence fee payable from the 4th year of the licence agreement can only mean those “subscribers” who have an activated cellular mobile telephone connection from the Petitioner which are currently activated and used by a person for which bills are issued by the Petitioner. The Respondent on the other hand has asserted that computing the number of subscribers on the basis of Home Location Registers (HLR), which are required to be maintained by all the Cellular Mobile Service Providers, is a more accurate and correct methodology.
5. There are two other points of dispute between the Petitioner and the Respondent. In terms of Condition No. 19-1(iii), (iv) and (v) of the Licence Agreement between the Petitioner and the Respondent the licence fee is payable in quarterly instalments in advance, at least 5 days prior to the quarter to which it relates for next 11 quarters (i.e., for the first three years). Necessary adjustment will be made after payments have been received for 12 quarters. Thereafter, quarterly payments shall be paid ten days in advance for quarters starting with effect from 1st April, 1st July, 1st October and 1st January. The Petitioner availed of the Migration package offered by the Respondent in July 1999 as per which a revenue-sharing regime in place of the prescribed licence fees became effective from 1st August 1999. It is the contention of the Petitioner that irrespective of the schedule of payments for licence fees laid down in the Licence Agreement, only revenue shares were payable from 1st August 1999 and that the old scales of licence fees along with interest on unpaid amounts could be made applicable only upto 31st July 1999. The Respondent on the other hand has taken into account the fact that advance payment for the quarter beginning with July (i.e., July, August and September) 1999 had become overdue by the time the revenue-sharing regime became effective on 1st August, 1999. As such, the Respondent has claimed that there was no illegality or arbitrariness in computing the advance payment stipulated for the entire quarter as due in the month of June itself and calculate both interest and penal interest on the overdue amount till the same was actually paid.
6. A consequential grievance of the Petitioner is that the Respondent did not raise its demand notes in time, the last one being as late on 6th March 2000. It was therefore both arbitrary and illegal to charge interest as well as penal interest on demand notes not raised in time. To this, the Respondent has stated that the schedule and manner of payment of licence fees is clearly laid down in the licence agreement and that there is no stipulation or requirement that the payments are to be made only when demand notes are raised. In fact, it is the contention of the Respondent that, it is the legal obligation of the Petitioner to make stipulated and contracted payments in time and in case of failure the necessary contracted consequences would have to follow.
7. The last grievance of the Petitioner relates tot hat unit call rate for the purpose of calculation of Licence Fee. The Petitioner has drawn attention to condition No. 19.1(f) of the Licence Agreement as per which the rate of Rs. 5 lakhs per 100 subscribers or part thereof was based on the unit call rate of Rs. 1.10. This rate was revised by the respondent to Rs. 6.023 lakhs per 100 subscribers or part thereof on 30th July 1998 based on the unit call rate of Rs. 1.40 prevalent at that time. The unit call rate was reduced to Rs. 1.20 from 1st May 1999. Hence the Petitioner requested the respondent that the basis of calculation of the licence fee from 1st May 1999 to 31st July 1999 (i.e., the last day of the fixed licence fee regime before Migration) should be on the basis of the then unit call rate prevalent, viz., Rs. 1.20. The Respondent on the other hand contended that a reading of the Clause 19.1(f) clearly indicates that the unit call rate could never be revised downwards.
8. Out of the above-mentioned points of dispute, the Petitioner gave up the point relating to the determination of the date of commencement of the services during the hearing of the Petition before the Tribunal. However, all other points of dispute were pressed for determination. The learned Counsel of the Petitioner argued during the hearing that it is crucial to arrive at a precise definition of the term “subscriber” in view of the fact that the licence agreement does not define the term. However, there is a general condition relating to the applicability of Indian Telegraph Act and Indian Telegraph Rules (Condition No. 22) in the Licence Agreement and there is a definition of the term “subscriber” in Indian Telegraph Rules which reads as under:
“Rule 2(pp): ‘Subscriber’ means a person to whom a telephone service has been provided by means of an installation under these Rules or under an Agreement”.
It was argued that all customers subscribing to the telephone services and having a connection could be defined as subscribers and such connections would have to be actually operative at a relevant point of time. In other words, deactivated subscribers cannot be included in the number of subscribers for the computation of licence fees. It was stated that Cellular Mobile Operators maintain data in respect of cellular services in two types of registers, viz., the Home Location Register (HLR) and the Visiting Location Register (VLR). The data in respect of the HLR contains details of all cellular mobile numbers which have been registered and allotted mobile connection whether or not the said connection is paying or not paying, is an actual home network subscriber or manual roamer belonging to a different network or is prepaid number lying as stock-in-trade with a dealer/distributor and not sold to an end-user. The VLR on the other hand contains details of all cellular mobile numbers which are currently activated and used by a person and which earn revenue for the Cellular Mobile Service Provider. It was the contention of the learned Counsel of the Petitioner that the data contained in the VLR is the relevant one for the purpose of computation of licence fee payable from the 4th year of the Licence Agreement. He further contended that to the extent there was no clear understanding or agreement between the Petitioner and the Respondent regarding the methodology to be adopted for computing the number of subscribers for the purpose of licence fee it could not be claimed that this issue was settled or closed due to the Migration Package.
9. It was argued by Mr. Vaidyanathan, learned counsel, of the Petitioner that the basic fallacy relating to the method of computing the number of subscribers through the Home Location Register, as was done by the Respondent, lay in the fact that HLR also included records of those who were not subscribers. As instances it was mentioned that the following categories or class of persons/users, whose details are recorded in the HLR, could not be considered as subscribers:
(a) Test Cards;
(b) Multi-IMSI (International Mobile Subscriber Identity) Cards;
(c) Stock-in-trade of pre-paid cards;
(d) Employees;
(e) Pre-paid Cards whose validity has expired but which are not yet removed from the HLR;
(f) Subscribers suspended due to administrative reasons but not removed from the HLR.
It was the contention of Mr. Vaidyanathan that there was no agreement between the Respondent and the Cellular Mobile Operators in general about the basis of the computation of the number of subscribers for the purpose of computing the licence fees from 4th year of the licence agreement and that the Cellular Operators Association of India (COAI) had several rounds of discussion with the Respondent to resolve this issue. However, as per the direction of the Respondent the Petitioner had submitted the figures of HLR and VLR for the months of April, May, June and July 1999 to the Respondent in September 1999. Figures for the period September 1998 to March 1999 could not be supplied as these were not readily available. The Respondent, however, extrapolated the figures given from the months of April to July 1999 to the months prior to April 1999 by working out the percentage difference between reported and/or verified VLR and HLR figures for the period between April to July 1999 and by using the highest of the said percentage difference as a multiplying factor to notionally increase the number of VLR figures prior to April 1999. It was further stated that the Petitioner had provided the required information relating to pre-April 1999 figures by an affidavit in March 2000, but these were ignored by the Respondent in computing its demand.
10. As regards the Unit Call Rate for the purpose of calculation of Licence Fee, the leaned Counsel of the Petitioner argued that, in terms of condition of 19.1(f) of the Licence Agreement, the rate of Rs. 5 lakhs per 100 subscribers or part thereof was base don the unit call rate of Rs. 1.10 and that the revision of rate thereafter had to be on the basis of the prevalent unit call rate from time to time. That is how the Respondent had revised the rate of Rs. 6.023 lakhs per 100 subscribers or parts thereof in July 1998 when the unit call rate was increased to Rs. 1.40. However the Respondent did not agree to reduce the Licence Fee from 1st May 1999 to 31st July 1999 when the unit call rate was reduced to Rs. 1.20 from 1st May 1999.
11. As regards the interest on Licence Fee, it was argued by the learned Counsel of the Petitioner that as the Petitioner had migrated to the revenue-sharing regime with effect from 1st August 1999, it was wrong on the part of the Respondent to calculate interests on an amount equal to the licence fee amount for the whole quarter of July-September 1999. It was further urged that the Respondent had wrongly calculated the interest for the whole of the calendar month for more than once within the same month inasmuch as whenever a payment of any amount was made in the middle of the month the interest was calculated for the originally due amount for whole of the month as also separate interest was calculated again for whole of the month for the remaining amount, i.e., after deducting the specifically paid amount from the originally payable amount.
12. The other grievance in this respect relates to charging of 3% penal interest with effect from 1st February 2000 upto 15th March 2000. The learned Counsel of the Petitioner pointed out that the Respondent had not informed any one among the Cellular Operators about any outstanding payment at any time after 15th August 1999 until 6th March 2000. Apart from that, the Licence Agreement did not provide any charging of 3% penal interest. As such, it was argued that the charging of 3% penal interest was arbitrary and illegal.
13. In his response Mr. Navin Chawla, learned counsel of the Respondent, strongly denied that the subscriber basis for calculation of licence fee was an open and undecided issue or that there was any confusion in this respect. He urged consideration of the fact that merely because the Respondent was entertaining the queries, clarifications and correspondence in this regard as a matter of civility and answering the same as a prudent and responsible Licensor it could not be construed that this issue was left open to the decided at a later date. He drew attention to the fact that the Respondent had made the position abundantly clear to all the Cellular Operators vide its letter dated 26th March 1999 which stated as under:
“The total figure of International Mobile Subscriber Identity(s) (IMSI) in the Home Location Register(s)(HLR) shall be taken daily. The print out of these readings shall a preserved by you or five years for scrutiny. At the end of each calendar month a monthly average of these readings shall be taken. Out of these readings, IMSI belonging to test and service numbers subject to maximum of 25 per one lakh subscribers or part thereof and on pro rata basis beyond one lakh subscribers per service area may be deleted. A list of such test and service IMSI-s shall be furnished. The total figure thus arrived for the particular month shall be duly certified by the authorized signatory of the Company….”.
The Cellular Operators were also advised to take print-outs of the peak IMSI of all the VLR-s on the following day and preserve these for the next five years. Thus, it was argued, the methodology of computing the subscriber basis was clear and unambiguous. The learned Counsel of the Respondent also drew attention to the fact that in terms of condition 13.1 of Part III Schedule C of the Licence Agreement, the Petitioner defaulted in maintaining and supplying the prescribed documents and records which compelled the Respondent to set up a special team to inspect and verify the records to work out the correct subscriber base.
14. Mr.Navin Chawla stressed that the formula laid down in the letter dated 26th March 1999 too adequate care of the non-revenue paying subscribers. As regards removal of subscribers whose validity had expired or whose services have been barred temporarily, he contended that it was basically the administrative decision of the Petitioner to keep them active or remove them from the HLR. Similarly, licence fee was also payable against those subscribers who switched off their handsets for certain period as they remained valid subscribers paying rents, even though their data might not be available in the VLR for the period when the handsets were not active. It was pointed out by the learned Counsel that the Respondent clarified this position time and again in its meetings with Cellular Operators Association of India and other individual cellular operators and had constituted a Committee on 19th May 1999 to verify the records of HLR, VLR, Audited Records/reports, Chartered Accountants’ Certificates for Income Tax purposes, Service Tax records etc. to co-relate these and verify the monthly figures of the subscribers furnished by the Operators. The Petitioner was informed about the visit of the Committee in advance; however the Petitioner could not supply the HLR figures and records for the period prior to April 1999 when the Committee visited the office of the Petitioner on 8th December 1999. The learned Counsel of the Respondent pointed out during his argument that the Respondent adopted a transparent approach in dealing with this issue and did not subject the Petitioner to any discriminatory treatment. Thus the Committee had carried out identical exercises in respect of all the 8 Metro Cellular Licencees in 4 Metro Cities, i.e., Delhi, Mumbai, Kolkata and Chennai and verified the figures as available from records and reports. 7 Licensee companies could not furnish HLR figures for the period prior to April 1999 and the same methodology of extrapolation was adopted in respect of all. The learned Counsel of the respondent also drew attention to the fact that the Petitioner was changing its VLR figures from time to time in its communications to the Respondent.
15. As regards the payment of interest issue, it was stressed by the learned Counsel of the Respondent that the licence fee for the period July to September 1999 was payable by the Petitioner in advance on 21st June, 1999. The Petitioner defaulted in making such payment on time. Therefore the Petitioner was liable to pay interest on such over-due payment with effect from 21st June 1999 till such payment was made by the Petitioner or waived by the Respondent. The Migration Package dated 22nd July 1999 specifically provided that the License would have to pay all licence fees payable upto 31st July 1999. Thus, as on 31st July 1999 the interest was payable on the entire amount including that accrued on licence fee for the months of August and September 1999. The learned Counsel of the Respondent drew attention to the fact condition No. 19.1 of the Licence Agreement was specific on this point and that condition No. 19.8 of the Agreement also provided for charging of interest at the rate of 20% per annum compounded monthly for each month or part thereof.
16. As regards the charging of penal interest from 1st February 2000 to 15th March 2000, the learned Counsel of the Respondent stated that under the Migration Package all overdue amount as well as amount payable were to be paid on or before 31st January 2000, failing which the Licensor could have terminated the licence of the defaulters, including the Petitioner. As the petitioner and some other licensees had failed to make the prescribed payment by 31st January 2000 the Respondent decided to condone the default by charging simple interest @ 3% per month from 1st February 2000 till the actual date of payment. This was an act of grace by the Respondent which had otherwise the legal right to terminate the licence agreement on the ground of non-payment of dues by the stipulated date. The learned Counsel of the Respondent also stated that in terms of the licence agreement the licensee was expected to make all the payments by the due date and that there was no legal obligation or requirement on the part of the Respondent to raise demand notes as such. The demand notes were raised by the Respondent only because the Petitioner did not make the payments by the due date. however, this did not give any legal right whatsoever to the Petitioner who was supposed to clear all the dues latest by 31st January 2000 after which dat the licence was liable to be terminated, but was continued as an act of grace after charging simple interest @ 3% for the period from 1st February 2000 till the actual date of payment.
17. As regards the revision in the Unit Call Rate, it was the contention of the learned Counsel of the Respondent that condition 19.1 (f) of the Licence Agreement clearly visualized that the revision in the unit call rate would have an impact on the rate of licence fee only if there was an upward revision. In the instant case the subscriber base of Licence Fee became relevant on 26th September 1998 (i.e., the 4th year from 26th September 1995 when the Licence Agreement became operative) when the unit call rate was Rs. 1.40. This being an upward revision, the rate was revised. It was argued that, apart from the fact that no downward revision in the unit call rate having any impact on the rate of licence fee was envisaged in the licence agreement, the relevant criteria for any revision was the date on which the revision was to come into effect. Here the revision was effected on 26th September 1998; the subsequent downward revision of unit call rate with effect from 1st May 1999 was of no consequence to the rate prescribed for the licence fee under condition 19.1(f) of the Licence Agreement.
18. We have gone through the documents and averments made by the learned Counsels of the Petitioner and Respondent. Since the Petitioner gave up, during the hearing in the Tribunal, the prayer relating to the determination of the date of commissioning of services as per the Licence Agreement, it is not necessary for us to give any finding. Issues left to be determined are as under:
(a) Whether the methodology adopted by the Respondent for arriving at the number of subscribers from the 4th year of the Licence Agreement was in order;
(b) Whether the Respondent could charge interest on the licence fee payable by the Petitioner as demanded by the Respondent in letters dated 10th August 1999 and 6th March 2000;
(c) Whether the Petitioner is entitled to the benefit of reduction in the unit call rate with effect from 1st May 1999 for calculating the per subscriber licence fee;
(d) Whether the respondent can levy penal interest on the licence fee from 1st February 2000 till the actual date of payment.
19. As regards (a) of the above paragraph, we have seen that the Licence Agreement between the Petitioner and the respondent has not defined the term “subscriber” used in the Agreement. However, on 26th March 1999 the Respondent did clarify to the Petitioner and other cellular operators that the basis for calculating the number of subscribers for licence fee shall be the total figure of IMSI in the Home Location Register. A representation made by the Petitioner in this respect on 1st April 1999 was ejected by the Respondent on 23rd April 1999. The Petitioner was offered a Migration (SIC) on 22nd July 1999 which inter alia contained a clause that no dispute relating to (SIC) Agreement for the period upto 31st July 1999 shall be raised at any further date and the Petitioner gave its unconditional acceptance to the entire Migration Package on 27th July 1999. We therefore find merit in the argument of the learned Counsel of the respondent that this issue, which was raised by the Petitioner prior to the Migration Package, could not be raised in the post-migration regime after the Petitioner accepted the Migration Package unconditionally and started availing of the consequential benefits. The formula devised by the Respondent to compute the number of subscribers for the purpose of licence fee from 4th year onwards can certainly be questioned and there can be several arguments for or against the formula. However, the facts that this issue historically was a pre-migration dispute and that this was inextricably linked up with the Licence Agreement can not be questioned. Nor can it be questioned that the Petitioner had given its unconditional acceptance to the Migration Package which did have a specific clause that pre-migration disputes pertaining to the Licence Agreement could not be raised subsequently. We have to therefore hold that there was no legal infirmity in the methodology adopted by the Respondent in computing the number of subscribers from the 4th year of the Licence Agreement for the purpose of licence fee. We have noted that the Respondent had clarified the methodology it intended to follow and had continued to deal with representations made in this respect during the post-migration period also. However, we do not see any tacit admission of the existence of an unresolved dispute in this respect as the Respondent continued to affirm its position as stated earlier on 26th March 1999, i.e., much prior to the Migration Package offered on 22nd July 1999.
20. As regards the issue referred to in paragraph 14(b) above, the Migration Package (SIC) July 1999 undoubtedly provides that the Licensee shall pay all licence fees payable upto 31st July 1999 (duly adjusted after giving six months notional extension in cases where applicable) and the interest payable as on 31st July 1999. Condition No. 19.1(e)(iii)(iv) & (v) also lays down that licence fee is to be paid in quarterly instalments in advance, at least 15 days prior to the quarter to which it relates for next 11 quarters and that necessary adjustments will be made after payments has been received for 12 quarters (for the first three years), after which quarterly payments shall be paid ten days in advance for quarters starting with effect from 1st April, 1st July, 1st October and 1st January. Therefore, the licence fee for the period July to September 1999 was payable by the Petitioner on 21st June 1999. The fact that the Petitioner had defaulted in making such payment on time is also not in dispute. The question is whether the Migration Package which came into effect from 1st August 1999 and changed the licence fee regime to a revenue-sharing arrangement with effect from that date materially affected the situation relating to what was actually “due” at that point of time. The learned Counsel of the Respondent argued that since the quarterly payment was to be made in advance by 21st June 1999 its non-payment in time had caused loss of interest to the Respondent, even though in terms of the Migration Package no licence fee was payable after 1st August 1999 and only sharing of revenue was involved. We are unable to accept this contention. It is not the case of the Respondent that the Petitioner had neither paid the licence fees for all outstanding quarterly payments and for the month of July 1999 nor the fees amounting to revenue-sharing from 1st August 1999 onwards. Quite obviously the Respondent was not entitled to recover both advance quarterly licence fee for July-September 1999 and revenue-sharing fees for August 1999 and September 1999 in terms of the Migration Package. What was undoubtedly its right was to recover licence fees for all the earlier unpaid amounts upto and for the month of July 1999 as well as interest, in case of default for that amount till the date of actual payment. The Respondent was also eligible to charge interest in case the Petitioner defaulted in making payment of revenue-sharing fees from 1st August 1999 in terms of the schedule laid down in the Migration Package, read with the Licence Agreement. To the extent of what has been stated above has been done, the action of the respondent is contrary to law and the demand in this respect needs to be reworked by the Respondent.
21. We now come to the issue referred to in paragraph 14(c) relating to the Unit Call Rate. It would be useful in this context to see again condition 19.1(f) which reads as under:
“19.1(f) : The rate of Rs. five lakhs per hundred subscribers or part thereof is base don the unit call rate of Rs. 1.10. Fourth year onwards, as defined in Clause 19.1(d), the rate of Rs. five lakhs will be revised based on the unit call rte. The revision will be limited to 75% of the overall increase in the unit rate during the period preceding such revision”.
The learned Counsel of the Respondent argued that a literal as well as constructive reading of this clause leaves no doubt that no downward revision of the rate was envisaged, nor was any downward revision within the scope of this clause. There is merit in this argument. Even though there is no specific exclusion of downward revision in this clause it is significant that the limiting of the revision is confined to increase in the unit call rate and not to both increase and decrease. No evidence has been led by the Petitioner to show that this issue was ever raised by the Petitioner with the Respondent at any stage either before or after the licence was issued in 1994. In any event, if this issue was related to the Licence Agreement it was clearly barred by the Migration Package. We therefore hold that there was no infirmity in the action of the Respondent in denying the benefit of the reduction in the unit call rate from 1st May 1999.
22. As regards the issue referred to in paragraph 14(d) we have already held that the respondent was entitled to recover all outstanding licence dues (including for the month of July 1999) upto 31st July 1999 with interest as may be due and for all defaulted payments after 1st August 1999 in terms of the schedule of payment stipulated in the Migration Package. To the extent these payments were not made by the stipulated dead-line, i.e., upto 31st January 2000, it was open to the Respondent to charge simple interest on the overdue amount and keep the licence valid instead of terminating the same on ground of default. We find no illegality or arbitrariness in the action of the Respondent in this respect. The dues and interest thereon however would have to be reworked by the Respondent after taking into account our observations on paragraph 20 above.
23. As a result of what we have discussed above, we hold that the action of the Respondent in treating the licence fees of August 1999 and September 1999 as unpaid dues when in fact in terms of the Migration Package the regime had changed into a revenue-sharing arrangement from 1st August 1999 was not correct. Consequently the interest amount computed on the basis of non-payment of licence fees for August and September 1999 was also not correct. The Respondent should rework the dues along with interest only upto the end of July 1999 and also in terms of what has been stated in paragraph 22 above. The excess amount recovered may be adjusted against prospective dues in terms of the Migration Package. To this extent only the Petition is allowed. In the circumstances, there should be no orders as to costs.
24. We find no merit in the other prayers of the Petitioner which are dismissed.