JUDGMENT
D.K. Jain, J.
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not ? Yes By this petition under Section 9 of the
Arbitration and Conciliation Act, 1996 (for short the
Act), the petitioner, carrying on business of
cellular-mobile telephone services, seeks to restraint
the Department of Telecommunications (for short the
DoT) from terminating the public switched telephone
network (PSTN), connecting license for UP(East) circle,
allotted to them on 12 December 1995, pending
arbitration on the disputes/difference, which are
stated to have arisen between them. During the course
of hearing learned counsel for the petitioner had
stated that the petitioner was not pressing for the
second relief with regard to UP(West) circle, prayed
for in the petition.
2. The material facts, leading to the filing of
this petition, are:
The DoT issued tender dated 29 December 1994
for cellular mobile telephone services in different
regions in India, divided into telecom circles. The
bids submitted by the petitioner for the UP(West),
UP(East), Bihar and Orissa circles were accepted.
license agreements in respect of UP(West), UP(East) and
Orissa circles were signed on 12 December 1995 and the
same was the effective date of the licenses. However,
in the case of Bihar, the agreement was signed on 22
October 1996 but the effective date in this case was
also 12 December 1995, which was subsequently changed
to 23 August 1996. The period for payment of license
fee and time available for delivery of stipulated
coverage was to start from the effective date. The
petitioner submitted the required financial bank
guarantees to the DoT in respect of each of the
circles.
3. According to the petitioner the targeted
coverage could not be achieved within the expected
period of 12 months from the effective date and in fact
the implementation of the project itself was
considerably delayed on account of procedural delays at
various stages, including delays at the government
level in according sanctions, resulting in default by
the petitioner in making payment of the license fees
for all the four circles. The petitioner claims to
have made various representations, highlighting its
problems and reasons for defaults in payment of license
fee. However, on account of the said defaults,
petitioner’s licenses for UP(West), Bihar and Orissa
were terminated from 22 May 1999, which action of the
DoT was challenged by the petitioner in this Court by
filing a petition under Section 9 of the Act (OMP
157/99).
4. Since almost all the licensees had defaulted
in making payment of the license fees for one reason or
the other, the Government of India came out with a new
National Telecom Policy, 1999, effective from 1 April
1999. Under the new scheme the cellular operators were
required to pay one time entry fee and then a license
fee as a percentage share of gross revenue under the
license. The entry fee chargeable was to be the
license fee dues payable for existing licensees up to 31
July 1999 calculated up to this date duly adjusted
consequent upon notional extension of effective date.
Pursuant to the said new policy, the Government of
India, vide their letter dated 22 July 1999, offered
migration package to all the existing licensees under
which a licensee could opt for migration from National
Telecom Policy of 1994 to the new National Telecom
Policy of 1999 by fulfillling the terms and conditions
contained in the migration package.
5. The petitioner responded to the said offer
vide its letter dated 26 July 1999, by lodging protest
against the DoT’s partisan action in respect of the
effective date. They expressed their inability to make
commitment within the specified item and requested for
offer being kept open till clarification of the points
raised int heir letter.
6. However, presumably, Realizing that it may
be left alone in the old package, vide its letter dated
28 July 1999, pertaining to UP(East), telecom circle,
though ostensibly conveying its acceptance for
migration to the new package, the petitioner, in
continuation of the aforenoted reply dated 26 July
1999, conveyed their conditional acceptance to which
there was no response from the side of the respondent.
7. Perhaps, left with no choice, the petitioner
vide its letter dated 30 November 1999 conveyed its
unconditional acceptance to the migration package for
the existing license for UP(East) circle, on the terms
and conditions conveyed to it by the DoT vide their
aforementioned letter dated 22 July 1999. The DoT,
vide their letter dated 17 April 2000, permitted the
petitioner to migrate to the new package in respect of
all the four circles. Since some of the clauses in the
said letter have material bearing on the issue
involved, it would be necessary to reproduce the same:
“This has reference to your letter dated 30.11.1999
addressed to the Secretary, Department of
Telecommunications conveying your belated
unconditional acceptance of the offer of migration
package extended to you by Licensing Authority
vide letter No. 842-153/99VAS(Vo.V) dated 22.7.1999
and other correspondence as well as representations
in person in respect of Cellular Service license
for UP-East Telecom Circle.
In consideration of your above mentioned
unconditional acceptance, and as a special case,
migration to New Telecom Policy-1999 regime with
effect from 1.12.1999 is hereby offered to you
subject to fulfillment of the following conditions
in entirety in the given time frames:
(i) The cut off date for change over to NTP-99
regime will be 1.12.1999.
(ii) The licensee will be required to pay one time
entry fee and license Fee as a percentage share of
gross revenue under the license. The Entry Fee
chargeable will be the license fee dues payable by
existing licensee up to 30.11.1999, calculated up to
this date duly adjusted consequent upon notional
extension of effective date as para (vi) below, as
per the Conditions of existing license.
(iii) The license fee as a percentage of gross
revenue under the license shall be payable w.e.f.
1.12.1999. xxxxx.
(iv) You are requested to pay the following amounts
within 15 days of receipt of this letter.
(a) An amount of 40% or more of the license fee
dues, payable for the period up to, and outstanding
as on 30.11.1999, calculated as per para (vi)
below.
(b) Interest, on amount of license fee payable for
the period up to 30.11.1999, as per the existing
license agreement, calculated up to 31.3.2000 in
full and
(c) Liquidated damage charges of Rs. 100 lakhs (as
demanded earlier vide letter
No. 842-62(B)/95VAS/PT. dated 7.8.1998) along with
interest up to the date of payment in full.
The amounts computed in respect of (a) and (b) are
as follows:
————————————————————————————-
Service license fee 40% of Intt.
Area dues up to license calculated
30.11.99 as fee as in up to 31.3.00
per para (a) col. (2) as per para
above (b) above
————————————————————————————-
1 2 3 4
————————————————————————————
UP East Rs.1,22, 88,72,694 Rs.49,15,49, 0785 Rs.60,60,78,94
————————————————————————————-
(v) The balance due of license fee for the period
up to 30.11.1999 will have to be paid within 45 days
from the date of receipt of this offer letter,
along with interest calculated up to the actual date
of payment in full.
(vi) xxxxx
(vii) xxxxx
(viii) Migration to the NTP-99 regime on the
conditions mentioned in this letter will be
permitted on the premise that the conditions are
accepted as a package in its entirety and
simultaneously all legal proceedings in Courts,
Tribunals, Authority or in Arbitration instituted
by the licensee including its subscribers and COAI
(Cellular parroters Association of India) against
DoT or UOI shall be withdrawn immediately and a
copy of the application filed and Court’s order
thereon be provided to this office within 15 days
from date of receipt of letter. Further any
dispute with regard to the license agreement for
the period up to the actual date of fulfillment of
all the terms and conditions of this package, shall
not be raised at any future date. The acceptance
of this package will be deemed as a full and final
settlement of all existing disputes whatsoever
irrespective of whether they are related with the
present package or not.
(ix) xxxxx
(x) xxxxx
(xi) If either of the cellular operators in a given
Service Area does not accept the package, both the
operators will continue in the existing licensing
arrangement until the validity of the present
licenses.
(xii) xxxxx
(xiii) xxxxx
(xiv) xxxxx
(xv) xxxxx
3. xxxxx
4. An undertaking in the form of an affidavit in
the enclosed proforma by an authorised signatory of
the company of acceptance of the above terms and
conditions along with an authority in favor of
authorised signatory to convey the acceptance,
should reach the undersigned immediately and in any
case not later than 24.4.2000 (7 days from date of
letter). In case no response is received within
the stipulated period, it will be presumed that you
are not interested in migration to the new regime
and steps as envisaged in the said License
Agreement shall be taken under the terms and
conditions of the said license.
6. In case the conditions as above are not fully
complied within the stipulated time frame, action
shall be taken as per the advance notice of
termination of license agreement issued earlier
vide letter dated 15.4.1999, without any further
notice to you.”
8. The petitioner accepted the said offer vide its
letter dated 25 April 2000, by writing thus:
“We thank you for your letter
No. 842-320/2000VAS(Vol. II) dated April 17,
2000 which was received by us today.
As desired by you, we enclosing an
undertaking in the form of an Affidavit
regarding the acceptance of terms and
conditions of the restoration of our
licenses and Migration to new regime. The
necessary authority from the company in my
favor to furnish this Undertaking is also
enclosed.”
9. The requisite affidavit stating that the
company had unequivocally and unconditionally accepted
the modified terms and conditions as a package, as
contained in DoT’s letter dated 17 April 2000, was also
enclosed with the letter. Later, vide its letter dated
4 May 2000, while furnishing information with regard to
withdrawal of pending legal proceedings, which included
OMP 157/99, in terms of Clause 2(viii) of the agreement,
the petitioner reassured the DoT that it would be
performing all obligations required to be completed by
it as per the terms of aforesaid letter dated 17
April 2000.
10. It appears that thereafter the petitioner sent
three cheques in the sums of Rs. 124.82 lakhs, Rs. 115.02
lakhs and Rs. 40.17 lakhs towards provisional license
fees respectively for quarters April 2000-June 2000,
January 2000-March, 2000 and for the month of December
1999 under three separate covering letters, all dated 31
July 2000. But the same were returned un-encashed by
the DoT. The petitioner was informed vide DoT’s letter
dated 9 August 2000 that all the four packages stand
automatically withdrawn and cancelled on account of
petitioner’s failure to comply with the conditions of
the packages by the due date i.e. 24 July 2000, despite
its un-conditional and un-equivocal undertaking on
affidavit.
11. Again on 8 September 2000, the petitioner sent
two cheques in the total sum of Rs. 100 Crores as upfront
payment with a request to the DoT to condone the delay
in payment of balance amount. The said amount was
accepted and adjusted by the DoT as requested by the
petitioner vide their letter dated 26 September 2000,
but without prejudice. It appears that thereafter some
correspondence ensued between both the parties and,
perhaps, for the first time, vide its letter dated 1
February 2001, the petitioner raked up the issues with
regard to the uniform cut off date, license fee for the
terminated period on license etc. By their letter dated
23 February 2001, the DoT called upon the petition to
clear all its dues within thirty days of the issue of
the letter failing which action for recovery was
threatened. Changing its stand with regard to the
adjustment of Rs. 100 Crores paid on 8 September 2000,
vide its letter dated 3 September 2001, the petitioner
separated the license for UP(East), the circle with
which we are concerned in the present petition, and
informed the DoT that if the said entire amount is
adjusted against the dues of this circle, nothing would
be due to be paid to them. Interstignly, by adopting
31 July 1999 as the cut off date on its own accord the
petitioner asked for adjustment of 115.64 Crores against
its revenue share from 1 August 1999 to 30 June 2001.
By the impugned letter dated 19 September 2001, the DoT
finally asked the petitioner to clear all its
outstanding udes. Expecting termination of license for
the solitary live UP(East) circle, the petitioner filed
the present petition.
12. While issuing notice, by order dated 24
September 2001, the respondent DoT was restrained from
terminating the license agreement dated 12 December
1995, and PSTN connectivity in relation to UP(East)
circle on petitioner’s depositing a sum of Rs. 3 Crores
within three weeks from that date.
13. In the affidavit filed in opposition, the
petition is opposed on the preliminary objection that
the petitioner having accepted the migration package
un-conditionally and un-equivocally, it was estopped
from raising the disputes again by means of this
petition, which according to the specific condition of
the migration package were to stand settled and no such
dispute, prior to the cut off date of migration could be
raised. On merits, while refuting petitioner’s
allegation on delay on the part of the Government of
India in granting various sanctions or that the
petitioner was being discriminated against, it is stated
that more then 400 Crores is due from the petitioner
towards license fee, liquidated damages and interest
calculated against all four licenses. Insofar as
license for UP(East) is concerned, after adjustment of
the amounts paid, a sum of Rs. 273.4288656 plus revenue
sharing from 1 December 1999 onwards is stated to be due
from the petitioner under the aforementioned heads under
the new migration package. In the additional affidavit
filed on behalf of the DoT, it is also pointed out that
the other cellular operators in UP(East) namely,
M/s. Aricell Digilink has accepted the migration package
with the cut off date as 1 August 1999.
14. I have heard Mr. Kapil Sibal, learned senior
counsel for the petitioner and Mr. Harish Salve, learned
Solicitor General of India on behalf of the DoT at
considerable length.
15. It is submitted by Mr. Kapil Sibal, leaned
senior counsel, that: (i) on account of delays on the
part of various Government agencies in FIPB approval,
frequency authorization as also frequency allogcation,
the petitioner was justified in asking for extension in
the effective date of license, particularly when similar
changes were permitted to various other licensees; (ii)
since the petitioner had opted for payment of license
fee under the 1994 package in four years, although it
had the option to pay the same in 10 years, it would be
harsh, unreasonable and discriminatory to the petitioner
if the license fee payable under the new package is not
normalised vis-a-vis the operators who had opted for 10
years period, inasmuch as in the case of the petitioner
it would pay the entire license fee (payable in ten
years) as entry fee for migration to the new policy
whereas other operators who had opted to pay the license
fee over a period of 10 years would pay barely 30% of
the license fee as entry fee; (iii) a large sum of
money is due and payable by the DoT to the petitioner as
on the termination of three licenses for UP(West), Bihar
and Orissa on 22 May 1999, under Clause 15 of the
license agreement, the respondent is obliged to take
over the goods, services and assets of the petitioner
and pay compensation in terms of Clause 15.3 thereof, to
be calculated on the basis of “current replacement value
of the asset, their future earning capacity and such
like other relevant factors”, which works out to
Rs. 984.02 Crores and (iv) since the petitioner has
challenged the terms of the package itself as arbitrary
and un-constitutional, it cannot be non-suited on the
ground that having accepted the migration package
unconditionally it is estopped from raising any dispute
relating to the period prior to the new package. In
support of the proposition that the fundamental rights
cannot be waived, reliance is placed on the decisions of
the Supreme Court in the cases of Daryao and Ors. v.
The State of UP and Ors. and
Basheshar Nath v. CIT 1959 Supp. (1) 528. It is
asserted that though changes in effective dates have
been permitted by the DoT to some other operators, like
Hexicon, Modicon, Sreenivas Cellcon, and the disputes
pertaining to the period prior to the migration package
are still being entertained by the DoT (Bharati Mobile
Limited) but the same relief is being denied to the
petitioner, which is clearly discriminatory and
arbitrary. It is vehemently urged by Mr. Sibal that
since the parties are being referred to arbitration on
the disputes raised by the petitioner, a prima facie
case is made out in favor of the petitioner for grant
of interim relief and if the same is not granted at this
stage and petitioner’s operations in the only active
circle UP (East) would come to a grinding halt and it
will suffer irreparable injury, particularly when the
DoT has not so far taken any final decision with regard
to the take-over and payment of compensation in respect
of licenses terminated as far back as on 22 May 1999.
16. The learned Solicitor General, on the other
hand, while reiterating the aforenoted stand of the
respondent that having accepted the migration package
unconditionally, which the petitioner was not otherwise
bound to opt for and in fact it was offered to them as a
special case, it is not open to the petitioner to now
rake up certain points. It is pointed out that except
for the initial signing amount none of the Installments
of license fee under the new package has been paid by
the petitioner in time. It is also urged that if the
petitioner wants to operate under the new package, he
cannot be permitted to challenge some of the terms and
conditions of the same package. The petitioner is to
either accept the package as it is or to leave it.
Insofar as the claim of the petitioner with regard to
the normalisation of the license fee is concerned, it is
contended that there is no element of unequal treatment
to the petitioner because the other operator, who had
initially opted for payment in ten years, was also asked
to pay on the basis of four years period due to
petitioner’s bid being ranked H. 1 in terms of tender
evaluation. It is asserted that at the time of
migration the other operator was offered similar payment
schedule as was offered to the petitioner, which the
other party has accepted and made payment in terms
thereof. Regarding petitioner’s claim for compensation
under Clause 15.3 of the license agreement, it is
submitted that the DoT is under no obligation to take
over the equipment or the goods of the petitioner. It
is urged that the stipulation in Clause 15 for take over
was primarily meant for the benefit of the consumers, to
ensure that services to them were not interrupted.
17. Having given my thoughtful consideration to the
rival submissions, I am of he view that strictly
speaking, having accepted the new package in terms of
its letter dated 25 April 2000 unequivocally and
unconditionally, the petitioner was bound to comply with
all the terms and conditions of the package and make
full payment of license fee in terms thereof. When the
parties enter into a contract, the terms of the contract
have to be respected by all concerned. Therefore, at
the first blush, it is difficult to say that the
petitioner has technically and in the traditional sense
made out a straight prima facie case for grant of
interim relief at this stage. But the prime question
that arises for consideration is that when the parties
have already been referred to arbitration for resolution
of the disputes pertaining to the same contract and the
whole matter is at large before the arbitrator, whether
it would be proper to give some breathing time to the
petitioner to discharge its liabilities towards the DoT
under the agreement by operating its services or decline
interim relief, resulting in stoppage of its operations
and leaving the DoT to take recourse to proceedings for
recovery of its dues after the award is given, which
incidentally is likely to take time.
18. The choice, though difficult, can be two fold;
one, to reject the relief sought for and leave the
parties to the outcome in arbitration; the other, to
grant graded relief to the petitioner by putting it on
terms to show its bona fides, by starting the process of
payment of dues right now.
19. Without going into the merits of the respective
stands of both the parties before me, lest it may cause
prejudice to either of the sides, and balancing the
equities between them and bearing in mind them the fact that
admittedly on the one hand the petitioner has made huge
investments for providing the cellular services and
termination of the license at this stage would cause
irreparable injury to it and at the same item a
substantial amount towards the license fee is due from
it to the DoT, I am of the view that, in the
circumstances, pending arbitration, following interim
arrangement would be just and fair to both the parties:
(i) The petitioner shall pay to the DoT on or
before 15 July 2002 the full amount of
license fee payable up to 31 May 2002 in
terms of DoT’s letter dated 17 April
2000, excluding, however, the interest
and the amount payable towards liquidated
damages, after adjusting a sum of
Rs. 81.87 Crores, (Rs. 78.7 + 3 Crores in
terms of order dated 24 September 2001),
admittedly paid by the petitioner;
(ii) From 1 June 2002 onwards and till further
orders by the Arbitrator, the petitioner
shall pay by the due date a license fee @
20% as against current rate of 10% of the
gross revenue, payable in terms of Clause
(iii) of the said letter. The excess
amount of 10% shall be adjusted by the
DoT against the pending demand towards
interest and liquidate damage;
(iii) The interim stay order dated 24 September
2001 will continue till the award is made
by the arbitrator, however, subject to
payments in terms of (i) and (ii)
hereinabove by the specified date/within
time; and
(iv) In case of default in any of the
payments, the interim order shall stand
vacated and the respondent-DoT will be
free to enforce its rights under the
contract.
The petition stands disposed of in the
above terms, with no order as to costs.