Koshika Telecom Ltd. vs Union Of India (Uoi)
2002 Latest Caselaw 1440 Del

ORDER

1. This appeal under Section 37 of the Arbitration & Conciliation Act, 1996 (in short 'the Act') is directed against the order of the learned Single Judge dated 31st May, 2002 thereby disposing an application under Section 9 of the Act filed by the appellant-Company for a restraint order/direction on the respondent-Department of Telecommunications (in short 'DOT') from terminating the public switched telephone network connecting license for U.P. (East and West circle) allotted to them on 12th December, 1995 pending arbitration of the disputes/differences which are stated to have arisen between the parties. However, it appears that during the course of hearing of the said application before the learned Single Judge, the appellant confined his prayer in regard to the connecting license for U.P. (East) Circle only.

2. The facts and circumstances leading to the disputes between the parties have been noted in detail by the learned Single Judge and it is not necessary for us to repeat the same once over again, except for taking note of the undisputable facts that the appellants have committed breach of the terms of the license by defaulting in making the payment of the license fee even pursuant to the migration package of 1999 agreed to between the parties. According to the DoT after adjustment of the amounts received from the appellant, a sum of Rs. 286.31 crores is due to them from the appellant including the interest and liquidated damages. However, after excluding the interest and liquidation damages, a sum of Rs. 66 crores is due. The learned Single Judge taking note of the above factual matrix and with a view to provide interim protection to the appellant from the resultant cancellation of their license and on balancing the equities between the parties worked out an arrangement and gave the following directions :-

"(i) The petitioner shall pay to the DoT on or before 15th July 2002 the full amount of license fee payable up to 31st May 2002 in terms of DoT's letter dated 17th April 2002, excluding, however, the interest and the amount payable towards liquidated damages, after adjusting a sum of Rs. 81.87 Crores, (Rs. 78.87 + 3 Crores in terms of order dated 24th September 2001), admittedly paid by the petitioner;

(ii) From 1 June 2002 onwards and till further orders by the Arbitration, the petitioner shall pay by the due date of 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 liquidated damage;

(iii) The interim stay order dated 24th 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.

3. We have heard Mr. Kapil Sibal, learned senior advocate representing the appellant licensee and Mr. Kriti Raval, learned Additional Solicitor General representing the respondent-DoT. Mr. Sibal, has strongly urged before us that the conditions imposed by the learned Single Judge and more particularly the condition No. 1 (supra) directing the appellant to pay the full amount of license fee payable up to 31st May, 2002 in terms of the DoT letter dated 17th April, 2000 is wholly unjustified on the face of the facts and circumstances of the case and is also not in consonance with the rights and contractual obligations of the parties and in any case it will operate harshly on the appellant because the appellant is not in a position to arrange for the payment of the amount as directed. In this connection, the foremost plea putforth by him is that the learned Single Judge has erred in ignoring that a large sum of money to the tune of Rs. 900 crores is due and payable by the respondent-DoT to the appellant on account of the termination of their operating licenses for three circles, namely, U.P. (West), Bihar and Orissa. The basis of this submission is that in terms of Clause 15.3 of the license agreement, the respondent DoT is under an obligation to either take over the assets of the petitioner/appellant itself or get its payment arranged from any new licensee. The learned Additional Solicitor General has, however, refuted the said contention of learned counsel for the appellant and has urged that the said condition merely confers a right on the licencing authority but casts no obligation on the authority for taking over the assets of the licensee. It is also submitted that the said conditions vests are enabling provision/power in the licencing authority for ensuring that the customers do not suffer due to termination of the license and in any case the two contentions which have been mentioned in condition 15.3 are not exhaustive and the licencing authority may take such measure to ensure the continuity of service as are deemed necessary. Clause 15.3 of the license of Agreement reads as under :-

"15.3 Whenever the license is terminated or not extended, the Authority shall in order to ensure the continuity of service take such steps as necessary including the following :-

i) direct the Department or Telecommunications to take over or

ii) issue license to another Indian Company for running the service.

The licensee shall facilitate taking over by DoT or the new licensee all The assets as are essential for the continuity of the service. The licensee shall receive from DOT or the new licensee as the case may be reasonable compensation, for the assets made over based on the current replacement value of the assets, their future earning capacity, and such like other relevant factors."

4. We do not wish to consider the interpretation of the above clause in depth, lest it may cause prejudice to either of the parties at the pending proceedings before the arbitral tribunal, but on a prima facie consideration of the matter we are not convinced by the arguments of Mr. Kapil Sibal that it is mandatory for the Licencing Authority in all eventualities to direct the respondent DoT to take over all the assets of a licensee whose license has been terminated or not renewed and to pay compensation for the assets. On the other hand the interpretation putforth by learned Additional Solicitor General appears to be more convincing and it is for the reasons that the conditions 1 or 2 are not exhaustive but are some of the steps which may be considered necessary by the authorities for ensuring the continuity of service. We are informed that so far as the U.P. (East) circle is concerned, three other licensees namely M/s. Aircell Digilink, Bharti Cellular Nigam Ltd and Escorts Telecommunications Limited are providing service in the said territory and therefore the continuity of service is ensured through these licensees. Therefore, it cannot be argued that any of the two steps envisaged in Clause 15.3 were pre-eminently required on the part of the licencing authority. In any case, the claim of the appellant for reasonable compensation for their assets in respect of the three territories i.e. U.P. (West), Bihar and Orissa is pending adjudication before the arbitral tribunal. We, therefore, see no merit in this contention of learned counsel for the appellant that no condition for payment of the due license fee could be imposed by the learned Single Judge on the face of Clause 15.3 of the agreement.

5. It was next contended by learned counsel for the appellant that the appellant had paid a sum of Rs. 100 crores to the respondent on 8.9.2000 which was liable to be adjusted against the only operating license, namely, U.P. (East) Circle, but the appellant has wrongly and arbitrarily adjusted the said amount towards the license fee payable in respect of all the four licenses and without complying with the condition putforth by the appellant that the respondent should facilitate execution of four tripartite agreements. It is also pointed out that the respondent even failed to consider the request of the appellant for adjusting the amount of Rs. 100 crores firstly towards U.P. (West) circle and lastly towards U.P. (East) circle. In case the respondent had adjusted the amount of Rs. 100 crores towards the license fee payable in respect of U.P. (East) Circle, then at best an amount of Rs. 10 crores approximately would be due. In this regard, we have been taken through certain correspondence exchanged between the parties and we on a consideration of the same are of the view that there is no escape from the conclusion that the appellant has defaulted in making the payment of license fee for all the four licenses and therefore the respondent-DoT was within its rights to adjust the amount towards the license fee payable in respect of all the four licenses because initially the appellant itself indicated that the amount of Rs. 100 crores was meant to be adjusted qua all the four licenses, of course, with the condition of the respondent-DoT executing four tripartite agreements. We do not see anything wrong on the part of the respondent in adjusting this amount of Rs. 100 crores towards the dues in respect of all the four licenses and the appellant cannot be allowed to take a sumer-salt at this stage and seek adjustment of Rs. 75 crores towards the continuing license of U.P. (East) alone.

6. Yet another ground pressed on behalf of the appellant is that the appellant has been discriminated against at the hands of the respondent DoT inas much as the migration package offered to the existing licensees in terms of the new telecom policy 1999, has not been equally applied to all the licensees. The appellant has not been shown any consideration/advantage of the position that it had opted to pay the license fee in the first four years instead of 10 years as opted by various other licensees. It was also pointed out that the appellant was offered migration to new telecom policy by means of a letter dated 22.7.99 and required to convey its acceptance by 28th July, 1999, however, as the appellant had certain reservations and wanted certain clarifications/modifications. The appellant conveyed its final decision on 30.11.99, but the respondent did not convey its acceptance and the appellant was unduly required to pay the license fee from 1st August, 1999 to November, 1999. However, in the cases of other licensees i.e. Aircell Digilink and Bharti Telecommunications, the respondent made a departure. We are not impressed with the arguments putforth by learned counsel for the appellant in this behalf and we are of the view that once the appellant had accepted the migration package under the new telecome policy unconditionally they are bound to give effect to the same and cannot be allowed to raise an objection in this behalf.

7. Mr. Kapil Sibal, learned counsel for the appellant lastly urged before us that the condition in regard to the payment of balance license fee in respect of the license for U.P. (East) Circle amounting to more than Rs. 80 crores will operate harshly on the appellant as it may not be able to arrange this huge amount in compliance of the said direction and that non-compliance of the said direction might lead to termination of their license of U.P. (East) Circle resulting into irreparable loss and injury to the appellant and harassment and inconvenience to the customers receiving the appellant's service in that circle. Such a situation would not be conducive or beneficial to the respondent either.

8. We have given our anxious consideration to this submission and are also mindful of the difficulties which might be faced by the appellant but it is the appellant who alone is responsible for creating a situation in which they are placed today because they had defaulted in making the payment of the license fee as and when it become due and has allowed the arrears to be accumulated thereby entailing interest and liquidated damages to the tune of more than Rs. 100 crores. The learned Single Judge has in our opinion taken a reasonable view of the matter by directing the appellant only to deposit principal amount of license fee which has become due uptill 31-5-2002 with the stipulation that the amount paid by the appellant towards 10% increase of the gross revenues shall be adjusted by the DOT against their demand towards interest and liquidated damages amounting to more that Rupees hundred crores. So far as the hardship or inconvenience to the customers of U.P. (East) circle is concerned suffice it would be to notice that as on date, three other licenses viz. M/s. Aircell Digilink, Bharti Cellular Nigam Ltd and Escorts Telecommunications Limited are providing service in this circle and, therefore, continuity of the service is ensured to the customers and, therefore, there is no question of any harassment or inconvenience faced by them.

9. Thus having considered the totality of the fact and circumstances of the case, we are of the opinion that conditions imposed by the learned Single Judge cannot be said to be unjustified or harsh by any standard, rather the same appear to be eminently justified. Even otherwise it is well-settled that the discretion exercised by the learned trial court in the matter of grant or refusal of an injunction is not to be lightly interfered in appeal, unless the exercise of such discretion is shown to be wholly unjust or arbitrary which position does not exists in the present case. In the result we find no merits in the present appeal and the same is accordingly dismissed. The appellant is allowed two weeks' time from today to comply with the order dated 31st May, 2002 passed by the learned Single Judge.