Delhi High Court
Indus Towers Ltd vs Unitech Wireless (Tamil Nadu) Pvt ... on 12 February, 2013
Author: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 12th February, 2013.
+ O.M.P. 78/2013
INDUS TOWERS LTD ..... Petitioner
Through: Mr. Arvind Nigam, Sr. Adv. with Ms.
Ruchi Agnihotri Mahajan, Ms.
Smarika Singh, Mr. Jai Mohan & Ms.
Shreya Sircar, Advs.
Versus
UNITECH WIRELESS (TAMIL NADU) PVT
LTD & ANR ..... Respondents
Through: Mr. Rajiv Nayyar, Sr. Adv. with Mr.
Ashish Bhan & Ms. Padmaja Kaul,
Advs. for R-1.
Mr. Sandeep Sethi, Sr. Adv. with Mr.
Ashish Dholakia & Mr. Ashish Bhan,
Advs. for R-2.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW
1. This petition under Section 9 of the Arbitration and Conciliation Act,
1996, pending arbitration, seeks interim protection for the petitioner by
restraining the respondent No.1 Unitech Wireless (Tamil Nadu) Private
Limited from removing its active infrastructure from the passive
infrastructure sites of the petitioner in the fourteen circles/service areas of
Mumbai, Kerala, Karnataka, Tamil Nadu, Rajasthan, Punjab, Kolkata, West
Bengal, Haryana, Andhra Pradesh, U.P. East, U.P. West, Maharashtra, Goa
and Gujarat and by further restraining the sale/transfer of business of the
respondent No.1 to the respondent No.2 Telewings Communication
Services Private Limited, till payment by the respondent No.1 of the dues of
Rs.207.73 crores of the petitioner.
2. The Counsels for the two respondents appeared on advance notice.
However, it appears that certain other petitions of similar nature are pending
before this Bench and for which reason this petition was also transferred to
this Bench.
3. The petition came up before me first on 5th February, 2013 when it
was sought to be posted on the same day when other similar petitions are
listed. However, the senior counsel for the petitioner urged for ad interim
relief as granted in the other petitions and which was vehemently opposed
by senior counsels for both the respondents who stated that they are
prepared to argue without filing replies and without prejudice to their
contention as to the arbitrability of the disputes and for consideration of
which question the other petitions have been posted. It may be noticed that
it is the contention of the respondents that the disputes as raised by the
petitioner are entertainable exclusively by the Telecom Disputes Settlement
and Appellate Tribunal (TDSAT) and are not arbitrable. In the
circumstances, the counsels were heard on merits.
4. The petitioner is carrying on business of providing passive
telecommunication infrastructure sites across India and passive
infrastructure services to various telecom operators. The petitioner was
providing such services to the respondent No.1 also which was providing
telecommunication services under license from the Government of India and
an agreement titled „Master Services Agreement‟ (MSA) dated 30th
September, 2009 was entered into between the petitioner and the respondent
No.1 for providing such services to the respondent No.1 in the fourteen
circles/service areas aforesaid. Under the said agreement, the respondent
No.1 placed its active infrastructure equipment on the petitioner‟s towers
built on as many as 4271 sites of the petitioner in the fourteen circles/service
areas aforesaid and was paying charges in terms of the MSA to the
petitioner.
5. The respondent No.1 vide its letter dated 31st December, 2012
informed the petitioner that in furtherance to the judgment of the Supreme
Court in Centre for Public Interest Litigation Vs. Union of India, the
licenses of respondent No.1 under which it was providing telecom services
stands quashed with effect from end of 18th January, 2013 and consequently
it was impossible for the respondent No.1 to carry on business of telecom
services after 18th January, 2013; that in the Spectrum Auction held by the
Government of India, the respondent No.2, an affiliate of Telenor, has been
declared successful in circles/service areas of Gujarat, Andhra Pradesh, U.P.
East, U.P. West, Maharashtra and Bihar and the two respondents had
executed a „Business Transfer Agreement‟ to transfer respondent No.1‟s
business to respondent No.2 and to assign all rights and obligations under
the MSA with the petitioner with respect to the said six circles/service areas.
The respondent No.1 thus invoked its rights of assignment under Clause 21
of the MSA and informed the petitioner that the respondent No.1 shall no
longer be liable for obligations or liabilities arising out of the said six
circles/service areas and such liabilities and obligations shall be of the
respondent No.2. Qua the remaining fourteen circles/service areas, the
respondent No.1 informed that it would be switching off its network in the
circles/service areas and will withdraw its active infrastructure installed at
the passive infrastructure sites of the petitioner.
6. The petitioner treated the said letter dated 31 st December, 2012 of the
respondent No.1 as a termination notice qua the eight remaining
circles/service areas in which it was providing passive infrastructure
services to the respondent No.1 and claims the Exit Compensation in the
sum of Rs.207.73 crores to have become due to it from the respondent No.1
under the MSA. The respondent No.1 of course denies its liability for the
said Exit Compensation to the petitioner and which according to the
petitioner has resulted in arbitrable disputes having arisen.
7. It is the case of the petitioner that the respondent No.1 cannot remove
its active infrastructure from the passive infrastructure sites of the petitioner
without clearing the dues of the petitioner of Rs.207.73 crores towards Exit
Compensation. It is further stated that the transfer of the assets and business
of the respondent No.1 to the respondent No.2 would reduce the security
available to the petitioner and the senior counsel for the petitioner has
argued that such transfer would reduce the respondent No.1 to a shell
company and from whom the petitioner would be unable to recover its
claims of Rs.207.73 crores.
8. The senior counsel for the respondent No.2 during the hearing stated
that the respondent No.2 was willing to continue the agreement with the
petitioner as assignee of the respondent No.1 qua six of the aforesaid
circles/service areas and also makes itself liable for any Exit Compensation
qua the remaining eight circles/service areas, if found payable to the
petitioner. The senior counsel for the respondent No.1 also confirmed the
same. The matter was adjourned to enable the senior counsel for the
petitioner to obtain instructions, whether the petitioner was willing to the
agreement qua the six circles/service areas with the respondent no.2 as
assignee of the respondent No.1 and whether the security offered by the
respondent No.2 was acceptable to the petitioner.
9. The senior counsel for the petitioner on 8th February, 2013 has argued
that though the petitioner is willing to continue to provide services to the
respondent No.2 in the six circles/service areas for which the respondent
No.2 has been granted license but the security offered by the respondent
No.2 by making itself also liable for the dues if any towards Exit
Compensation, of the petitioner, is not sufficient. The petitioner seeks
additional security as has been provided in order dated 21 st December, 2012
of the Division Bench in FAO(OS) No.613/2012 titled Unitech Wireless
(Tamil Nadu) Pvt. Ltd. Vs. Viom Networks Ltd. and FAO (OS)
No.614/2012 titled Telewings Communication Services Vs. Viom Networks
Ltd. It is informed that Viom Networks Ltd. is similarly situated as the
petitioner herein and was claiming dues of Rs.4000 crores and has been
provided security by directing Rs.500 crores out of the moneys payable by
the respondent No.2 to the respondent No.1 to be kept in an escrow account
in the form of an interest bearing fixed deposit. The senior counsel for the
petitioner contends that a similar security for appropriate amount out of the
claim of Rs.207.73 crores of the petitioner be also provided to the petitioner.
10. The senior counsels for the respondents have objected averring that
the agreement of the respondent No.1 with Viom Networks Ltd. was
different than the agreement with the petitioner.
11. Though arguments concerning maintainability of the claim of the
petitioner towards Exit Compensation in terms of the MSA have also been
raised but I do not deem it appropriate to even render any prima facie
opinion thereon, as the same, it is felt may prejudice the adjudication be it
before the Arbitral Tribunal or TDSAT, inasmuch as the question revolves
primarily around the interpretation to be given to the various clauses of the
MSA and even a prima facie opinion may be difficult to distinguish from a
final view on the matter and rendering which is not the jurisdiction of this
Court in exercise of powers under Section 9 of the Arbitration Act.
12. I have therefore considered the matter purely from the point whether
the petitioner has any right in law or under the MSA to retain the active
infrastructure of the respondent no.1 till its claims for Exist Compensation
are settled and whether the security offered by the respondent No.2, of
making itself liable for the said dues if any of the petitioner, is sufficient.
13. The active infrastructure, removal whereof from the passive sites of
the petitioner is sought to be injuncted till clearance of the dues of the
petitioner, admittedly belongs to the respondent No.1 and the petitioner has
no right/claim thereto. The petitioner is seeking to restrain removal of the
same only to recover its claims for Exit Compensation which are still to be
adjudicated, whether by the Arbitral Tribunal or by TDSAT. It has as such
been enquired from the petitioner whether under the MSA, the petitioner has
any right to retain the same in such a situation. Though initially the senior
counsel for the petitioner candidly admitted that there is no such right but
subsequently drew attention to Clause (vi) of Clause 6.3.3 of the MSA and
which is as under:
"Retain custody of any of the Sharing Operator Equipment at
the Site till the payment in full is made to Indus."
In the MSA, the petitioner is referred to as Indus and the respondent
no.1 as Sharing Operator.
14. However on closer perusal of Clause 6.3.3, it is found to be a part of
Clause 6 titled "Charges" and which pertains to the charges mentioned in
Schedule 3 to the MSA and which admittedly does not include Exit
Compensation. The right of retention of the active infrastructure equipment
of the respondent No.1 at the sites, is thus not relating to the Exit
Compensation. Clause 19.2 of the MSA pertaining to Exit Compensation,
does not give any such right to the petitioner of retention of the active
infrastructure equipment of the respondent No.1 till such claims of Exit
Compensation are settled.
15. In the absence of any contractual right of the petitioner to so retain the
equipment, such right has to be based in law only. As per the ordinary law
of the land, a creditor has no lien over the assets of the debtor and can only
invoke the principles of attachment before judgment. Of course, the senior
counsels for the respondents, relying on judgment dated 24th August, 2012
of the Division Bench of this Court in Co.Pet.No.458/2010 titled Tower
Vision India Pvt. Ltd. Vs. Procall Pvt. Ltd. also contends that there is no
debt even, till adjudicated.
16. The senior counsel for the petitioner in this regard has argued that the
respondent No.2 itself has a huge financial exposure and the petitioner may
not be able to recover its dues from the respondent no.2 also.
17. We are however not otherwise concerned with the financial health of
the respondent no.2. Our concern is only to the extent of the respondent
no.2 acquiring custody/possession of the active infrastructure equipment of
the respondent no.1, which the petitioner wants to retain to satisfy its claims.
The senior counsel for the respondent No.2 on enquiry states that the active
infrastructure equipment of the respondent No.1 pertaining to the six circles
qua which the respondent no.2 has acquired licence, will be used for
continuing to provide telecom services which the respondent no .1 was
earlier providing. He further states that the active infrastructure equipment
pertaining to the sites (of the petitioner) qua which the respondent no.2 does
not have a licence, will be removed from the sites of the petitioner but will
be utilized by the respondent No.2 in the six sites for which it has been
granted license, and will not be sold. It is re-emphasised that the respondent
no.1 was entitled to assign its rights under the MSA and has so assigned in
favour of the respondent no.2 and the respondent no.2 is entitled to continue
the MSA with the petitioner, for the six circles/service areas for which it has
been granted licence. On enquiry whether the respondent No.2 is willing to
give an undertaking not to encumber the said active infrastructure
equipment assigned by the respondent no.1 to it, till the settlement of the
claims of the petitioner, the senior counsel for the respondent No.2 states
that the respondent No.2, for the purposes of its business may be required to
raise loans/finances against the said equipment.
18. I am of the considered view that the petitioner will not have any better
security for its dues under the injunction as claimed, than what is offered by
the respondent No.2. The equipment of the respondent No.1 is a specialized
one and it is not as if the petitioner, even if granted an injunction, would be
entitled to immediately dispose of the same or use the same for any other
purpose. Granting of an injunction as sought would lead to the said
equipment lying idle and depreciating in value and may after some time be
of no value whatsoever. The petitioner in that case would not have any right
to make a claim against the respondent No.2 also. According to the
petitioner itself, the possibility of recovery from the respondent No.1 does
not exist.
19. On the contrary, the respondent No.2 which has been granted license
qua six circles/service areas can reasonably be expected to be financially
viable. The Government of India is not expected to grant a license to an
entity without satisfying itself as to its credibility and financial soundness.
The argument of the senior counsel for the petitioner, that the offer of the
respondent No.2 to make itself liable for the dues if any of the petitioner
towards Exit Compensation (of all the fourteen circles/service areas and not
merely six circles/service areas) is not sufficient / satisfactory security for
the petitioner, is thus not found to be a reasonable one and intended only to
create an obstacle in the transaction between the respondent no.1 and the
respondent no.2, to compel them to settle the claim of the petitioner of Exit
Compensation.
20. Though the senior counsel for the petitioner has argued that the
petitioner is entitled to the same treatment as given by the Division Bench to
Viom Networks Ltd. but in my view, such conditions imposed in one case
while granting interim relief do not constitute a precedent qua another case.
It is the contention of the respondents that the provisions for assignability as
exist in the subject MSA and owing whereto there is no termination and / or
liability of Exit Compensation, did not exist in the agreement of the
respondent No.1 with Viom Networks Ltd. It is thus felt that the petitioner
will not be worse of, by the respondent No.2 being made liable for the dues
if any of the respondent No.1 to the petitioner, then it would have been with
the grant of injunction claimed.
21. This Court also cannot lose sight of the fact that such telecom
equipment cannot be allowed to be wasted during the time of adjudication
of the disputes and any injunction if granted may jeopardise the functioning
of the respondent No.2 and / or license granted to it. The balance of
convenience is also thus in providing security to the petitioner for
satisfaction of its claims, of the respondent No.2, rather than of the active
infrastructure equipment.
22. The petition is thus disposed of with the following directions:
(i) the removal of the active infrastructure equipment of the
respondent No.1 from the passive infrastructure sites of the petitioner,
will ipso facto make the respondent No.2 jointly and severally liable
to the petitioner for the dues if any found payable to the petitioner
towards Exit Compensation;
(ii) the respondent No.2 shall not sell or transfer the said
equipment and shall retain the same in its own custody and
possession. The respondent No.2 shall however be entitled to
encumber the said equipment only for obtaining financial facilities;
(iii) the petitioner shall have an option to continue to provide
services to the respondent No.2 as being earlier provided to the
respondent No.1 for the six circles/service areas for which the
respondent No.2 has already been granted the license and for any
other circles/service areas for which the respondent No.2 may in the
near future be granted a license and the petitioner will intimate to the
respondent No.2 its willingness in this regard within three days of this
order.
The petition, in so far as for other reliefs, is dismissed.
No costs.
Dasti.
RAJIV SAHAI ENDLAW, J
FEBRUARY 12, 2013
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