Koshika Telecom Limited vs Union Of India (Uoi)
2002 Latest Caselaw 942 Del

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.