Indus Towers Limited vs Videocon Telecommunications ...
2016 Latest Caselaw 5943 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

%                         Judgment Reserved on: 24th August, 2016
                     Judgment pronounced on: 14th September, 2016

+        O.M.P.(I) (COMM.) No.186/2016 & I.A. No.9018/2016

         INDUS TOWERS LIMITED                                  ..... Petitioner
                       Through              Mr.Sandeep Sethi & Mr.Dinesh
                                            Agnani, Sr. Advs. with
                                            Mr.Nishant Menon, Mr.Abhishek
                                            Birthray and Mr.Shafiq Ahmed,
                                            Advs.

                                   versus


         VIDEOCON TELECOMMUNICATIONS LIMITED FORMERLY
         KNOWN AS DATACOM SOLUTIONS LTD.
                                                 ..... Respondent
                       Through Mr.Akhil Sibal, Adv. with
                               Mr.Sndeep S. Ladda, Ms.Shikha
                               Sarin, Mr.Yashvardhan, Mr.Nakul
                               Mohta & Mr.Devender Singh
                               Advs. for the respondent.

                                            Mr.Amit Singh Chadha, Sr.Adv.
                                            with Mr.Anil Kumar Sangal,
                                            Mr.Siddharth Sangal & Mr.Sahil
                                            Mongia, Advs. for State Bank of
                                            India.

         CORAM:
         HON'BLE MR.JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. The petitioner has filed the present petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the "Act") seeking interim measure, inter alia, by way of an order or direction to the respondent to furnish a reasonable security in a sum

of Rs.1,05,41,58,898/-, until the inter se disputes of the petitioner and the respondent are referred to and adjudicated through arbitration as per the Arbitration Agreement between the parties.

2. The other prayer in the present petition is that the respondent be restrained by injunction from selling, alienating and/or transferring the spectrum and any of its assets/properties and rights, title and interest therein in four telecommunication circles, i.e. Gujarat, Haryana, U.P. (East), U.P. (West) as per the rejoinder now, directing the respondent to deposit or furnish security towards the outstanding dues of the petitioner which are to the tune of Rs.96.68 crores (approx.). The said prayer arises out of the fact that the respondent has on 2nd May, 2016 indicated its intention to exit from all the four telecommunication circles where the petitioner has been providing its services.

3. The petitioner is registered with the Department of Telecommunications, Ministry of Telecommunications and IT, Government of India ("DoT") for providing Passive Infrastructure and Allied Services. It has acquired and possesses certain telecommunications sites, infrastructure, and equipments in various licensed circles in India and is engaged, inter alia, in providing Passive Infrastructure and related operations and maintenance services to various telecommunication operators in India on shared basis.

4. The respondent is a telecommunication operator providing telecommunication services pursuant to the Unified Access Services Licenses (UASL) issued by DoT, to establish, install, operate and maintain Unified Access Services and other Value Added Services, in various Licensed Service Areas in India.

5. The petitioner and the respondent had entered into a Master Service Agreement ("MSA") dated 28th August, 2009 for providing Passive Telecom Infrastructure Facilities and Allied Services at several sites owned and acquired by the petitioner all over India. Under the agreement, the petitioner was providing the 'Passive Infrastructure Services' including the towers to the respondent on a sharing basis with other operators for service areas wherein the respondent was allowed to set up and operate cellular services for its subscribers as per the Unified Access Service License (UASL). The access to the site was made available to the respondent by the petitioner on non-exclusive basis as per clause 4.5 of the MSA.

6. After execution of the MSA dated 28th August, 2009, it was subsequently amended vide Addendum No.1 dated 24th April, 2010 and thereafter vide Addendum No.2 dated 24th August, 2011 (collectively referred to as "MSA").

The petitioner had also entered into a Master Services Agreement dated 30th October, 2009 with one of the group companies of the respondent, namely, Quadrant Teleservices Limited (hereinafter referred to as "Quadrant"), which was subsequently amended vide a Supplementary Agreement dated 6th September, 2010 (hereinafter collectively referred to as "Quadrant MSA").

7. The petitioner now submits that the respondent without fulfilling the conditions has transferred its spectrum to Bharti Airtel Limited on 24th May, 2016 in compliance with DoT spectrum trading guidelines dated 12th October, 2015.

8. The petitioner has referred the following clauses of the Master Service Agreement between the parties:

i) The parties had entered into an agreement dated 28th August, 2009 ("MSA") wherein the petitioner had agreed to provide passive infrastructure and allied services ("Services") to the respondent at several sites owned and acquired by the petitioner as per the law ("Sites").

ii) In consideration of the Services, Clause 6.1 of MSA provides that Indus shall charge and invoice the respondent for the charges in accordance with the Schedule 3. Further, Clause 6.2 of MSA provides that subject to Clause 6.4, all invoices raised by the petitioner shall be paid by the respondent within 20 days of the receipt of such invoices.

iii) As per Clause 6.4 of MSA, any dispute qua an obligation to pay part or all of an invoice submitted by the petitioner was required to be notified in writing with detailed reasons within 7 days of receipt of the concerned invoice. Further, the respondent was required to pay the full undisputed amount of the invoice in accordance with MSA.

iv) Pertinently, Clause 7.2 of MSA provides that all sums payable by a party under MSA shall be paid free and clear of any deductions, withholdings, set offs or counter claims etc.

v) Clause 19.1 of MSA provides that each Service Contract shall have a term that is mutually agreed by the parties, provided that no Service Contract shall have a term of

less than 5 years. In furtherance of MSA, the respondent had entered into Service Contracts in respect of each Site for a term of 10 years or more.

vi) Since the petitioner has made huge capital investments in acquiring and setting up of Sites, it was agreed between the parties that in the event that the respondent exits from any of the petitioner's Site prior to the term of the Service Contract, it shall pay the exit amounts as specified in Schedule 5.

vii) Regarding any dispute between the parties arising out of or in connection with MSA, Clause 21 provides for reference of the same to arbitration.

9. Pursuant to the execution of MSA and various Service Contracts, the petitioner had started rendering the services to the respondent in various telecommunication circles/Service Areas. However, sometime in 2013, the respondent indicated its intention to exit from the sites of the petitioner that were being utilized by the respondent in terms of MSA. The respondent cited business reasons for doing so. Due to its pre-mature exit from various sites of the petitioner, the respondent was contractually liable to pay the Exit Amount to the petitioner. Since the respondent was not willing to pay the Exit Amount as stipulated in the MSA, the disputes had arisen between the parties. The petitioner's case is that, pursuant to the Service Orders issued by the respondent, "Service Contracts" (as defined in Clause 1.1 of MSA) were executed between the parties hereto in respect of each Site for a term of 10 years or more. The petitioner submits that MSA does not provide for its term and the same is a continuing agreement. Clause 19.1 of MSA, however,

provides that each Service Contract shall have a term that is mutually agreed between the parties, provided that no Service Contract shall have a term of less than five (5) years.

10. The aforesaid disputes and differences were amicably resolved by the parties by way of a Tripartite Settlement Agreement dated 9th October, 2013, executed amongst the petitioner, the respondent and Quadrant wherein it was inter alia agreed amongst the parties that the respondent shall exit from 604 Sites retrospectively w.e.f. 1st November, 2012. Further, as per Clause 1.3 of the Settlement Agreement, the respondent and Quadrant jointly and severally committed to the petitioner that they shall take additional 2000 Sites cumulatively from the petitioner in Punjab.

11. The aforesaid Settlement Agreement was subsequently amended vide Supplementary Settlement Agreement dated 8th June, 2015 (hereinafter collectively referred to as the "Settlement Agreement").

12. Under the Settlement Agreement, Clause 1.4 provides that the respondent shall pay a sum of Rs.20 crores (Rs.1 lakh per Site) to the petitioner for the number of Sites in which the respondent/Quadrant may not require or fail to take the services of the petitioner. Accordingly, four post dated cheques for a sum of Rs.5 crores each were issued by the respondent to be encased proportionately by the petitioner in the event of the respondent and/or Quadrant's failure to meet their joint and several commitments as mentioned in Clause 1.3 of the Settlement Agreement. The remaining amount, if any, is required to be refunded by the petitioner.

• Furnishing Corporate Guarantee Letter from its parent company i.e. Videocon Industries Limited; and

• Furnishing security deposit of Rs.6,47,88,527/- to secure their joint and several commitment of 2000 Sites during the period from 1st January, 2013 to 30th June, 2015 extended to 31st December, 2015.

The Settlement Agreement also provides for the reference of any disputes or differences between the parties to arbitration, the relevant excerpts of which are reproduced as under:

"3. This Agreement shall be governed by and construed in accordance with the laws of India. Any disputes or differences arising out of or in connection with this Agreement shall be resolved in the manner provided in Clause 21 (Dispute Resolution Procedure) of Videocon MSA and Quadrant MSA, mutatis mutandis."

13. As far as the amount of Rs.20 crores is concerned, there is no denial on the part of the petitioner that disputes about the 604 sites were resolved including the demand of Exit Charges and in fact, the entire settlement amount was received by the petitioner.

14. The present dispute now is in respect of more than 900 sites provided during the period from 1st January, 2013 to 31st December, 2015 and now up to the period of 31st May, 2016.

15. The petitioner submits that it has been rendering Services to the respondent at 963 Sites in 4 telecommunication circles/ Service Areas i.e. 721 Sites in Gujarat, 237 Sites in Haryana, 2 Sites in UP (E) and 3 Sites in UP (W). Further, in terms of the MSA, the petitioner has been raising invoices upon the respondent from time to time towards the "Charges" (as defined in Clause 1.1 of MSA) for the Services rendered by it. However, the respondent was a

consistent defaulter in making the payments to the petitioner within the stipulated time.

16. The respondent, vide letter dated 27th November, 2015, had informed the petitioner that it would shut down its mobile operations in Gujarat Service Area w.e.f. 26th December, 2015 and had requested the petitioner to switch off the sites w.e.f. 26th December, 2015. By the said letter, the respondent had also requested the petitioner to immediately stop monthly billing for the sites mentioned in 'Annexure A' thereto and allow it to remove its telecommunication equipments, without imposition of exit penalty. Later, the petitioner had received another communication dated 11th December, 2015 from the respondent by which, the number of Sites mentioned in 'Annexure A' & 'Annexure B' to the respondent's letter dated 27th November, 2015 were modified.

17. In reply to the aforesaid letters, the petitioner, vide its letter dated 23rd December, 2015 inter alia had informed the respondent that it would assist the respondent in removing its active equipments from 695 Sites of Gujarat Service Area, provided that the respondent clears the outstanding dues to tune of Rs.26,16,37,962/- towards the pending invoices and also pays a sum of Rs.58,12,56,525/- towards Exit Amount as per the MSA.

The respondent did not respond to the petitioner letter dated 23rd December, 2015. However, vide its letter dated 23rd December, 2015, the respondent informed the petitioner that the date of closure of Services mentioned in its earlier letters dated 27th November, 2015 and 11th December, 2015 be read as 26th January, 2016 (midnight) instead of 26th December, 2015. Later, the proposed date of closure was again extended up to 31st March, 2016

(midnight) by the respondent by its letter dated 21st January, 2016. A copy of the respondent's letters dated 23rd December, 2015 and 21st January, 2016 are annexed as Annexure-E (Colly).

In response to the aforesaid communications of the respondent, the petitioner, vide its letter dated 28th January, 2016 had once again called upon the respondent to clear its outstanding charges of Rs.14,90,49,960/- as on 26th January, 2016 towards the pending invoices and also to pay a sum of Rs.9,66,99,121/- towards the Charges upto 31st March, 2016. By this letter, the petitioner had reiterated its demand for Exit Amount and requested the petitioner to pay a sum of Rs.54,76,90,619/- on that account. A copy of the petitioner's letter dated 28th January, 2016 is annexed as Annexure- F.

The respondent did not respond to the petitioner's letter dated 28th January, 2016 and rather, vide its letter dated 15th March, 2016, once again extended the proposed date of closure of Services from 31st March, 2016 to 31st May, 2016 (midnight).

18. On 30th March, 2016, one of the four cheques bearing No.015031 dated 31st December, 2015 for an amount of Rs.5,00,00,000/- which was issued by the respondent to the petitioner in terms of Clause 1.4 of the Settlement Agreement was dishonoured upon presentation with the remarks "payment stopped by the drawer''. The petitioner had, therefore, issued a legal notice to the respondent and its Directors under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.

19. In response thereto, the petitioner, vide its letter dated 27th April, 2016 had once again reiterated its demands for a sum of

Rs.21,30,35,371/- towards the outstanding Charges upto 31st May, 2016 along with the Exit Amount to the tune of Rs.52,88,76,332/- as per the MSA. Further, the petitioner had requested the respondent to immediately make payment against the unpaid invoices of Rs.14,93,30,651/- to avail the continued Services. The respondent did not make the payment as per the petitioner's demand.

20. The petitioner's case is that in view of defaults on part of the respondent in making the payment of undisputed outstanding dues against the pending invoices as well as its failure to discharge the agreed liability under MSA and the Settlement Agreement, disputes have once again arisen between the petitioner and the respondent. Accordingly, on 2nd May, 2016, the petitioner had invited the Chief Executive Officer of the respondent, Mr.Arvind Bali to its office in order to explore the possibility of amicable resolution of the inter se disputes of the parties. During the said meeting, Mr.Bali verbally indicated about the precarious financial condition of the respondent and confirmed that the respondent is in the process of selling its entire Spectrum in all the circles and hence the petitioner was surprised to learn from the respondent that it would be exiting from all the petitioner's Sites in all 4 circles, i.e. Gujarat, Haryana, U.P.(E) and U.P.(W) where it has been availing the petitioner's Services. During the aforesaid meeting, the petitioner was informed that the respondent is neither willing nor in a financial position to pay the Exit Amount. Further, no assurance was given on behalf of the respondent on settlement of outstanding and contractual dues payable by the respondent to the petitioner.

The petitioner further submits that by an email dated 4th May, 2016, the petitioner had requested the respondent to formally

confirm about the proposed exit/switch off dates in respect of the remaining three circles. However, the petitioner has not received any response to its email dated 4th May, 2016 from the respondent as on date even though, the respondent is continuously availing the services of the petitioner till date in all the four Telecommunication Circles/Service Areas.

21. In the aforesaid circumstances, considering 31st May, 2016 as the exit date for all the 963 Sites in the four telecommunication circles, the petitioner, vide its letter dated 6th May, 2016 inter alia had called upon the respondent to pay the following amounts to the petitioner under the MSA and the Settlement Agreement, before exiting from any of the sites:

S. No. Particulars Amount in INR

1. Outstanding amounts against the 25,23,12,771/-

unpaid invoices upto 31st May, 2016.

2. Billing for Energy Charges for the 2,04,01,154/-

month of April and May, 2016

3. Exit Charges for the 963 sites in 78,14,44,974/-

four (4) telecommunication circles as per Clause 19.2 read with paragraph 1 of Schedule 5 of the MSA upto 31st May, 2016.

Total: 1,05,41,58,898/-

22. Later on, in its rejoinder, the petitioner has sought the security in respect of approximately Rs.96.68 crores out of which Rs.78 crores is towards Exit Charges and approximately Rs.18.5 crores towards the alleged unpaid invoices and energy charges. The

petitioner's claim against the respondent is based on and has arisen out of the admitted liability of the respondent under the MSA and the Settlement Agreement. In any event, the respondent has never disputed its liability towards the payment of the outstanding due and/or other contractual amounts payable by it to the petitioner as is evident from various communications exchanged between the parties.

It is also averred that the respondent has huge liability running into hundreds of crores towards its vendors in the telecommunication industry including the petitioner. Thus, if the amount claimed by the petitioner is not secured and/or the respondent is not restrained from selling its spectrum and various assets/properties, it is likely that the petitioner would never be able to recover its dues even if it succeeds in the proposed arbitration. Thus, the interim measures of protection as prayed for in the present petition are imminent and is necessary pending the resolution of disputes between the parties.

23. Reply to petitioner's application under Section 9 of the Act has been filed by the respondent who has stated that the said petition is not maintainable for the reason that it lacks jurisdiction and the petitioner is guilty of suppressio veri, suggestio falsi as it has indulged in concealment of several material facts. Despite of the cancellation of 2G Licenses, the respondent has continued to make payments till date and has made payments of about Rs.316.03 crores and the respondent's assets which are worth almost Rs.88.78 crores are in the petitioner's possession.

24. It is stated that the transfer of spectrum was necessary in order to reduce the loan/liabilities of around Rs.3717 crores and

interest liabilities of Rs.450 crores per year payable to Secured Creditors (Consortium of Banks). The transfer of spectrum is not the transfer of the entire assets of the respondent-Company. The said transfer is subject to the payment of all statuary dues and subject to fulfillment of various conditions precedent and subsequent obligations. The transfer was in larger interest of public. Even there is a first Charge of Secured Creditors (Consortium of Banks) on the entire assets of the respondent's including the Spectrum. Therefore, the petitioner cannot claim preference over the Secured Creditors. The petitioner has neither a prima facie case, nor balance of convenience lies in its favour, nor is any irreparable loss to be caused to it.

25. It is admitted in the reply by the respondent that through the transfer of sale of spectrum, net receivable amount is only Rs.2,066 crores, whereas the amount payable to the Banks and Financial Institutions is Rs.4,575.98 crores. This clearly shows that the respondent is in a huge financial crisis. Prima facie, it appears to the Court that after having sold the Spectrum, the respondent may not be able to satisfy all the liabilities of the Banks and the Financial Institutions as the respondent, in its reply is not able to explain about the source of revenue/income from where they will be able to bridge the huge gap of huge liabilities even after sale of its spectrum. The liabilities of the Banks and financial institutions would split be there. Therefore, at this Prima facie stage, it cannot be assessed or concluded that despite of having sold the Spectrum, the respondent has sufficient funds to clear the liabilities in case the award passed against the respondent as the respondent may not have any other substantial business to generate resources and

revenue for satisfying its various liabilities including the claim of the petitioner. Even the auditor's report of Videocon Industries does not clearly disclose that respondent may turn around on the basis of other businesses.

26. In the rejoinder submissions, it is contended by the petitioner that the petition is maintainable under Section 9 of the Act, as the issue of maintainability of such a petition in case of disputes between an Infrastructure Service Provider and a telecom operator is no more a res-integra, as this Court in the matter of Viom Networks Ltd. v. S-Tel & Ors. , AIR 2014 Del 31, had rejected the aforesaid contention of the respondent therein and held that the petition under Section 9 of the Act would be maintainable in respect of a dispute concerning an Infrastructure Service Provider and a telecom operator. The grounds taken in the reply by the respondent herein in support of their contention is that TDSAT will have the exclusive jurisdiction to decide the present dispute which were specifically dealt and rejected by this Court. The objection of the respondent S.Tel Pvt. Ltd. that Viom as Infrastructure Providers are service providers within the meaning of Section 2(1)(j) of the TRAI Act and that the disputes which have arisen between the Viom and S.Tel Pvt. Ltd. are within the jurisdiction of TDSAT, was rejected by this Court. While deciding the aforesaid case, this Court had also considered the decision of TDSAT in Reliance Infratel v. Etisalat DB Telecom Ltd., (2012) TDSAT 617. Therefore, the reliance of the respondent on the aforesaid judgment of TDSAT in Reliance Infratel (supra) is misplaced. The judgment of the TDSAT is not binding upon this Court. The issue of maintainability on the ground urged in the reply has already been examined and decided by this

Court in favour of the petitioner in the aforesaid case. It is further submitted that as far as this Court is concerned, this aforesaid judgment of this Court in Viom Networks (supra) will hold the field. In view of the aforesaid, it is submitted that the present petition is maintainable.

27. Before dealing with the rival submissions of the parties, it is necessary to first deal with the argument of the respondent for lack of jurisdiction of this Court to entertain the petition. It is argued on behalf of the respondent that the disputes raised by the petitioner are not arbitrable. Admittedly, the petitioner holds the IP-1 license/authorization granted by the DOT and the respondent holds the Unified License granted by DOT under Section 4 of the Telegraph Act. The petitioner and the respondent are providing telecommunication services and they are the Service Providers/Licensees as defined in Section 2(e) & (j) of the TRAI Act.

27.1 Section 14 of the said Act provides that TDSAT shall have the exclusive jurisdiction to adjudicate the disputes between the two Service Providers/Licensees, as the dispute raised by the petitioner pertains to MSAs entered into between the petitioner and the respondent in capacity of being Licensees/Service Providers. It is submitted that in view of Section 14 of TRAI Act, only TDSAT, which has been conferred exclusive jurisdiction, can adjudicate such disputes and it cannot be a subject matter of Arbitration. Therefore, the arbitration clause is also null and void.

28. The respondent has further relied upon the judgment passed by TDSAT in Reliance lnfratel (supra) to state that the decision passed by TDSAT in the aforesaid case is the correct law, and not the law pronounced by law decided by this Court in Viom Network

Ltd. (supra). On the strength of the TDSAT judgment, the contention has been made by the respondent to reconsider the judgment passed by this Court in Viom Network Ltd. (supra).

29. The issue of maintainability of a petition under Section 9 of the Act in case of disputes between an Infrastructure Service Provider and a telecom operator has been considered by this Court in the matter of Viom Networks Ltd. (supra), wherein the court had rejected the aforesaid contention of the respondent therein and held that the petition under Section 9 of the Act would be maintainable in respect of a dispute concerning an Infrastructure Service Provider and a Telecom Operator.

30. The judgment of Union of India v. Tata Teleservices, (2007) 7 SCC 517, cited by the respondent in support of its contention on maintainability is inapplicable in the present case. In the aforesaid case, the dispute was between the Central Government (licensor under the TRAI Act) and Tata Tele Services (to whom licenses were intended to be issued). In the said case, the question before the Supreme Court was as to whether a person would become a licensee under the Central Government only on the actual grant of a license and whether only a dispute arising after the grant of a license would come within the purview of the TRAI, Act. The Supreme Court, in those circumstances, had held that a dispute commencing with the acceptance of a tender leading to the possible issue of a license and disputes arising out of the grant of license even after the period has expired would all come within the purview of Section 14(a) of the TRAI Act. To put it differently, the Supreme Court has held that, the Section 14 takes within its sweep the disputes following the issue of a Letter of Intent pre grant of actual

license as also disputes arising out of a license granted between a quondam licensee and the licensor.

31. Another judgment of Andhra Pradesh High Court in Indus Towers Limited v. The Commercial Tax Officer, 2012 (4) ALT 755 cited by the respondent is also not applicable in the present facts as the issue in the said case was as to whether in the factual context of the Registration Certificate issued and the nature of the petitioner's business (an infrastructure provider category-1), the goods purchased by the petitioners/dealers (for the purposes of building, operating and maintaining passive telecom infrastructure and where on the towers erected and maintained but nonetheless continued to be owned by the petitioner - the passive infrastructure provider; goods which are indisputably integrally associated with the building and maintenance of the cell towers), are goods falling within the ambit of Section 8(1) read with the provisions of Section 8(3)(b) of the CST Act, and thus eligible only at the concessional rate of tax provided in Section 8(1). Similarly, the judgment of State of Punjab v. Raghunath Dass, AIR 1963 Punjab 76 cited by the respondent is also not applicable. In this case, the definition of licensee was examined in the context of the Punjab Excise Act. This decision is of no help to the respondent in support of its argument of non-maintainability of the present petition. The judgment of Delhi High Court in Home Solutions Retails Ltd. v. UOI, 182 (2011) DLT 548, is also not applicable in the present case as the issue before the High Court in that case was a challenge to Section 65(105)(zzzz) of the Finance Act, 1994 in as much as it purported to levy service tax on renting of the immovable property to be used for

commercial/business purposes. The facts and circumstances are materially different.

32. The objection of the respondent about the maintainability of the present petition was also urged by the respondent in Viom Networks Ltd. (supra) which was duly examined and rejected by this Court. In this matter also, this Court has considered the decision of TDSAT in Reliance Infratel (supra) in para 28. Therefore, the reliance of the respondent on the aforesaid judgment of TDSAT in Reliance Infratel (supra) is misplaced. Even otherwise, the judgment of the TDSAT is not binding upon this Court. As far as this Court is concerned, the judgment of this Court in Viom Networks (supra) will hold the field though I have been informed by the parties that an appeal against the said judgment is subjudice. Once after considering the similar objections, learned Single Judge has taken the view that this Court has jurisdiction, I am not inclined to take a different view although, I am informed that the appeal is pending against the order passed by the learned Single Judge. Both sides have confirmed that the operation of the order has not been stayed. Thus, at this stage, in my view, the said order is also applicable in the facts of the present matter also.

33. Let me now deal with the rival submissions of the parties itemwise on merit. In para 2 of its rejoinder, the petitioner has sought the security in respect of approximately Rs.96.68 crores. Out of this, an amount of approximately Rs.78 crores is purportedly payable towards the Exit Charges. A further amount of approximately Rs.18.5 crores is stated to be payable towards the unpaid invoices and the energy charges.

34. On both the heads, it is the case of the petitioner that the respondent was availing the Services of the petitioner in terms of MSA, but it was irregular in making the timely payments against the invoices raised by the petitioner in accordance with Schedule 3 of MSA and had committed defaults in making of the payments. The respondent by communications dated 27th November, 2015, 11th December, 2015, 21st January, 2016, 23rd December, 2015 and 15th March, 2016 had informed the petitioner about its decision to shut down its mobile operations in Gujarat Service Area only. Further, the respondent had requested the petitioner to switch off the Sites in the Gujarat Service Area from where it had intended to exit w.e.f. 31st May, 2016 (midnight) and to immediately stop monthly billing for the same.

In response to the respondent's aforesaid communications, the petitioner vide communications dated 23rd December, 2015, 28th January, 2016 and 27th April, 2016 had repeatedly requested the respondent to make the payment against the outstanding invoices. Further, in view of the respondent's early exit from the Sites in Gujarat Service Area, the petitioner had also requested for the payment of Exit Amount in accordance with Schedule 5 of MSA. It was only during the meeting of 2nd May, 2016 held with the CEO of the respondent, it was revealed to the petitioner for the first time that the respondent was, in fact, planning to exit from 963 Sites in all the four telecom circles namely Gujarat, Haryana, U.P. (East) and U.P. (West) wherein it was availing the services from the petitioner. In view thereof, the petitioner vide email dated 4th May, 2016 had sought the confirmation from the petitioner and vide letter dated 6th May, 2016 had called upon the respondent to pay the outstanding

amount as well as the Exit Amount in respect of all the exit Sites. The respondent had neither disputed its obligation to pay the invoiced amounts in terms of Clause 6.4 of MSA nor did it responded to any of the communications sent by the petitioner requesting for the payment of outstanding amount and Exit Amount.

UNPAID INVOICES

35. As far as the claim of the petitioner of Rs.18.5 crores which is payable towards the unpaid invoices and the energy charges is concerned, during the course of arguments, in response to the additional affidavit filed on 20th August, 2016 by the respondent, the petitioner has admitted that an amount of Rs.13.73 crores, as reflected at page 5 of the said affidavit, is lying with the petitioner by way of security deposit for the rental and energy charges. As such, after deducting the security amount from the alleged outstanding invoices for energy and rental, even taking the case of the petitioner at its highest, the alleged outstanding amount under this head would come to Rs.4.8 crores.

36. The contention of Mr.Akhil Sibal, learned counsel appearing on behalf of the respondent is that the petitioner has failed to identify the invoices according to the petitioner which have remained unpaid. He has referred to pages 231-237 of the documents filed along with the petition wherein the petitioner has provided the details of invoices amounting to approx. Rs.61.5 crores. The petitioner is not specifically pointing out which of such invoices remain outstanding, and which of them have been paid. The calculation of the alleged outstanding amount is purportedly set out by the petitioner at page 230, which reflects an adjustment of "Unapplied Payments" and "Unapplied Credit note" in the amount of approximately Rs.36

crores. No particulars of such purported adjustment, other than what is set out at page 230, have been provided by the petitioner.

37. The list of invoices at page Nos. 231-237 of the documents reflects the various anomalies. In its letter dated 6th May, 2016, in para 8, the petitioner purports to set out the outstanding dues in 4 circles. A bare perusal of the circles reflected in the said list of invoices would establish that the said list is not confined to the 4 circles of Haryana, Gujarat, U.P. (East) and U.P. (West), but further includes Kerala, Tamil Nadu, Mumbai, Maharashtra, Goa, Punjab, West Bengal and Chennai, none of which fall within the aforesaid 4 circles covered by the MSA between the petitioner and the respondent, wherein the passive infrastructure services were availed subsequent to the cancellation of license dated 2nd February, 2012 by the Supreme Court. Additionally, various invoices in respect of U.P. (West) and U.P. (East) circles as reflected at page Nos. 231 and 232 relate to a period of service for those two circles prior to the Settlement Agreement entered into between the parties on 9 th October, 2013 in terms of which 604 sites, including various sites in U.P. (East) and U.P. (West) circles were agreed to be exited, as reflected at page Nos. 67-80 of the petition, which form part of Annexure 1 to the Settlement Agreement (to be read with clause 1.2 at page 63 of the said Agreement). These invoices have wrongfully been included as allegedly outstanding invoices despite of the specific clauses in the Settlement Agreement, namely, clauses 1.8 and 1.9 to the effect that any and all outstanding amounts in respect of the exited sites stand fully and finally settled. Further, admittedly, all the payments have been agreed to be made in terms of the aforesaid Settlement Agreement stand duly discharged.

38. It appears from the above, that the petitioner's calculation of the alleged outstanding liability towards invoices and energy charges is based on an internal calculation, details of which have not been disclosed to this Court and the calculation is un-supported by any material particulars.

39. Without having come to the final conclusion about the paid or unpaid amount, I am of the view that the petitioner has prima-facie not been able to clearly identify the invoices against which the Court straightaway can come to the conclusion that a particular sum is payable. The same is yet to be crystallized. Therefore, in order to crystallize the figures, it is directed that both the parties within two weeks shall jointly appoint a Chartered Accountant who after the meeting of both parties' representatives and examining the invoices shall identify the figures about the unpaid invoices in terms of the Agreement so that in case any amount is payable, the same shall be paid by the respondent within two weeks once the report is submitted, as counsel for the respondent does not dispute that in case actual payment on the basis of subject matter of sites is due, the petitioner would be entitled to receive the same.

EXIT AMOUNT

40. The petitioner's claim for Exit Amount is Rs.78 crores.

41. It is the case of the petitioner that in order to acquire and establish the passive infrastructure, the petitioner has made substantial capital investment which it is entitled to recover by providing the infrastructure services to various telecom operators. In view thereof, after several rounds of discussions and negotiations, the parties had agreed under MSA that in the event when the

respondent decides to exit from a site prior to the expiry of the term of the respective Service Contract, it shall be liable to pay to the petitioner Exit Amount as per the agreed formula towards unamortized investment. The obligation to pay the Exit Amount triggered from the unilateral and voluntary act of the respondent. The petitioner further submits that the judgments referred and relied upon by the respondent during the oral arguments are not applicable in the facts and circumstances of the present matter. It is submitted on behalf of the petitioner's counsel that the respondent's contention that "the petitioner is not entitled to Exit Amount unless actual loss is proved" as per section 74 of the Indian Contract Act is wrong, misleading and contrary to the judicial pronouncements.

42. The main contention of the respondent is that the question qua interpretation of the MSA, nature of Exit Amount and any losses suffered by the petitioner are to be looked into by the Arbitral Tribunal and the petitioner has already invoked the Arbitration Agreement during the pendency of the subject petition and such questions cannot be gone into in a petition under Section 9, which is governed by the principles of equity, prima facie case and balance of convenience.

43. It is correct that the petitioner in paras 41-42 of its rejoinder has pleaded that the respondent is bound to honour the agreed term of each Service Contract and in the event of its prior termination, it is liable to pay the amount as per the stipulated calculation and it was also expressly pleaded in the same paragraphs that the said Exit Charges are a genuine estimate of the losses to be suffered by the petitioner in the event when the respondent decides to exit prior to the period committed in the Service Contract. In its rejoinder, the

petitioner has pleaded that as far as the question of quantification of loss is concerned, the same can be ascertained only after the closure of Service Contract and it would be dealt with by the Arbitral Tribunal.

44. Mr.Sibal submits that it is now not open for the petitioner to advance an interpretation of the contract in oral arguments as per the rejoinder which is contractually contrary to its pleaded case. Even clause 13 of the MSA clearly stipulates that the intention of the parties is that neither party shall make liable to the other for indirect or consequential loss or penal or punitive damages of whatever nature whether or not reasonably foreseeable, or contemplated by the parties at the effective date.

45. It is argued by Mr.Sibal that the contract stipulates the payment of Exit Charges on premature termination by the respondent, prior to the mutually agreed term of the contract. Clause 19.1 of MSA contemplates a mutually agreed term not less than 5 years, and the payment of Exit Charges in the event of termination or exit the Sites prior to the agreed term, negates any argument that the said exit charges were payable as part of the consideration/price for due performance of the contract. There can be no consideration/price payable for a period during which admittedly no services are availed by the respondent and further, such charges cannot be levied in due performance of the contract when they are payable in the event of termination of the said contract. The interpretation given by the counsel for the petitioner which is contrary to the pleaded case of the petitioner, if is accepted, it would lead to legal and factual absurdity.

46. Mr.Sibal has refuted the argument of the petitioner that the contract between the parties is in the nature of a contingent contract in terms of Section 31 of the Contract Act by contending that the Exit Charges are payable in the event of premature termination by the respondent, thus amounting to a contingent contract. He says that the said argument is without any force. In case Section 31 is read, it negates any such contention inasmuch as the event/contingency giving rise to a contractual obligation to do or not to do something is stipulated to be "collateral to such contract". He submits that on the one hand, the petitioner argues that the Exit Charges are part of the consideration/price for due performance of the contract, and on the other hand, the petitioner describes the obligation to pay the Exit Charges as being contingent upon an event collateral to such contract (Section 31). He refers to the illustration to Section 31 which under-scores the interpretation of the respondent as set out above and undermines the interpretation of the petitioner. Further, Section 32 of the Contract Act, makes it clear that the contingent contracts cannot be enforced by law unless and until the event collateral to such contract as described in Section 31 has happened. It is not the case of the petitioner that the contract between the parties was un-enforceable and did not give rise to any contractual obligations until premature termination by the respondent. Indeed, any such contention in the facts of this case would lead to legal absurdity.

47. He stated that once the petitioner has pleaded in its rejoinder in paras 46-47 that quantification of loss can be ascertained only after closure of services on 31st May, 2016. This aspect would be dealt with by the Arbitral Tribunal, therefore, prima facie the basis

for quantifying the loss, rather, security for the entire purported Exit Charges as sought in the present petition is uncalled for.

48. In the rejoinder arguments, Mr.Sandeep Sethi, learned Senior counsel appearing on behalf of the petitioner contended that in view of the peculiar circumstances, Section 74 has no application to the Exit Charges payable by the respondent in terms of the contract inasmuch as the said charges are payable for the due performance of the contract between the parties and not for the breach thereof. As such, the petitioner was stated to be entitled to recover the Exit Charges as stipulated in the contract, without proof of any loss or damage, since such charges were merely a part of the consideration/price for the services provided.

49. On behalf of the petitioner, it is also submitted that the parties while entering into the agreement had clearly made the provisions for the payment of fee in case of premature exit by the respondent from the sites. At the time when the parties had entered into MSAs as well as the Supplementary Agreement, they were aware that if the respondent exits prematurely, the petitioner will suffer loss, and in view thereof, a method to calculate that loss was provided in the Agreement itself. Therefore, to say that it is in the nature of penalty or not a genuine pre-estimate of damage is clearly untenable.

50. It is argued that merely using the word 'penalty' by the respondent in the communication will not make the exit fee in the nature of penalty. In support thereof, the judgments are referred by the respondent in its reply, to the extent that the exit fee is in the nature of penalty and it is inapplicable in the facts of the present case. In the present case, the exit-fee envisaged in the Agreements, is a genuine pre-estimate of damage suffered by the petitioner in

case the respondent prematurely exists the petitioner's sites. The genuine nature of damage is apparent from the fact that the respondent had itself agreed in the Settlement Agreement to pay the same in case of prematurely exiting the sites.

51. In support of arguments, the petitioner has referred the decision of the Supreme Court in ONGC v. Saw Pipes, AIR 2003 SC 2629 have while interpreting Sections 73 and 74 of the Contract Act held that the party who is alleging that stipulated amount is not reasonable compensation, has to prove the same. The relevant excerpt of the judgment is as follows:

"46. From the aforesaid Sections, it can be held that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss which naturally arise in the usual course of things from such breach. These sections further contemplate that if parties knew when they made the contract that a particular loss is likely to result from such breach, they can agree for payment of such compensation. In such a case, there may not be any necessity of leading evidence for proving damages, unless the Court arrives at the conclusion that no loss is likely to occur because of such breach. Further, in case where Court arrives at the conclusion that the term contemplating damages is by way of penalty, the Court may grant reasonable compensation not exceeding the amount so named in the contract on proof of damages. However, when the terms of the contract are clear and unambiguous then its meaning is to be gathered only from the words used therein. In a case where agreement is executed by experts in the field, it would be difficult to hold that the intention of the parties was different from the language used therein. In such a case, it is for the party who contends that stipulated amount is not reasonable compensation, to prove the same."

(Emphasis supplied)

It is also submitted by him that the Exit Charges as stipulated by the contract are premised on the sites in question which are admittedly shared sites, being shared by upto 4 tenants. This is evident from clause 2 of Schedule 3 to the MSA at page 41 read with Schedule 5 at page 56 of petition.

52. In the additional affidavit filed on behalf of the respondent on 20th August, 2016, it was revealed that a number of sites used by the respondent had more than of 4 tenants. Even in the rejoinder of the petitioner, it is evident from the petitioner's own document that a number of sites had more than 4 tenants. The MSA however, stipulates a particular rate for the calculation of the Exit Charges based on a sharing of the sites by upto 4 tenants and not more.

It is submitted by Mr.Sibal that the a sum of approximately Rs.78 crores as claimed by the petitioner by way of exit charges is a disputed amount and ought not to be secured at this stage without such a claim being adjudicated upon and any purported loss/damages being assessed and crystallized into a liability.

53. As far as this aspect is concerned, I do not wish to express any opinion at this stage, as all these aspects are to be considered by the Arbitral Tribunal. At this stage, the consideration is whether the petitioner is able to make out a case of securing the amount of Exit Charges or not and if any case is made, then to what extent the amount should be secured; further as to whether it is a case of genuine pre-estimated damages. If the answer is in affirmative, then how much amount can be secured till the time the award is rendered by the Arbitral Tribunal.

54. In terms of Section 74 of the Contract Act 1872, where the contract stipulates an amount that is payable by way of liquidated damages/penalty, only reasonable compensation upto the maximum of the amount stipulated in contract is recoverable. In other words, Section 74 is disabling inasmuch as notwithstanding any such amount stipulated in the contract, the Claimant is only entitled to reasonable compensation for the loss it has suffered and for which compensation cannot exceed the amount prescribed in the contract.

55. In this regard, the respondent has placed the reliance on the following judgments:-

(i) In Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136, the Supreme Court has observed the following:-

"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:

43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre- estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.

43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.

43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.

43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.

43.5. The sum spoken of may already be paid or be payable in future.

43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.

43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application".

44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract by the appellant. Further, we cannot accept the view of the Division Bench that the fact that DDA made a profit from re-auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages--namely, that compensation can only be given for damage or loss suffered. If damage or

loss is not suffered, the law does not provide for a windfall." (Emphasis supplied)

(ii) In Tower Vision India Pvt. Limited v. Procall P. Ltd., (2014) 183 Comp. Cases 364 (Delhi), this Court has observed that:

"13. .........This provision makes it clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. The underlying principle enshrined in this section that a mere breach of contract by a defaulting party would not entitle other side to claim damages unless the said party has in fact suffered damages because of such breach. Loss or damage which is actually suffered as a result of breach has to be proved and the plaintiff is to be compensated to the extent of actual loss or damage suffered. When there is a breach of contract, the party who commits the breach does not eo instant, i.e. at the instant incur any pecuniary obligation nor does the party complaining of the breach becomes entitled to a debt due from the other party..."

"24. ......Even if there is a stipulation by way of liquidated damages , a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him and what is stipulated in the contract is the outer limit beyond which he cannot claim. Unless this kind of determination is done by the Court, it does not result into "debt". (Emphasis supplied)

(iii) In the recent judgment dated 8th July, 2016 passed in Indus Tower Limited v. Sistema Shyam Teleservices Limited, O.M.P. (I) (Comm.) No.103 of 2016, it was held as under:-

"81. From the entire gamut, prima facie it appears that the liability of Exit Charges cannot be treated as pre-estimated damages. The said charges are payable in the event of termination of a service contract under specific grounds as stipulated in Schedule 5 Part 2 read with clause 18.2 of MSA. After the trial, if the case is made out, then the petitioner might be entitled for compensation."

(iv) Vishal Engineering & Builders v. Indian Oil Corporation Limited, 2012(1) Arb. LR 253 (Delhi) (DB) [Paras 19,20,22,23,24,37&39]

"12. .....Section 74 of the Contract Act stipulates that in case of such a broken contract if a sum is named in the contract as the amount to be paid in case of such breach, whether or not actual damage or loss is proved to have been caused thereby, the aggrieved party is entitled to receive from the opposite party who has broken the contract, a reasonable compensation not exceeding the amount so named.

37. .....Merely because there is a clause of liquidated damages that does not mean that the amount of liquidated damages has to be recovered even when no loss has been caused. The respondent had to establish that loss was caused."

56. Mr.Sandeep Sethi, learned Senior counsel appearing on behalf of the petitioner has placed the reliance in this regard on ONGC Ltd. (supra), particularly paras 64 to 68 which read as under:-

"64. It is apparent from the aforesaid reasoning recorded by the Arbitral Tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand case wherein it is specifically held that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be

reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration: if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in- trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. The question which would arise for consideration is -- whether by such breach the party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be purchased for manufacturing yarn, consideration would be different.........................

............... 66. In Maula Bux case the Court has specifically held that it is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the court is competent to award reasonable compensation in a case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. The Court has also specifically held that in case of breach of some contracts it may be impossible for the court to assess compensation arising from breach.

67. Take for illustration construction of a road or a bridge. If there is delay in completing the construction of road or bridge within the stipulated time, then it would be difficult to prove how much loss is suffered by the society/State. Similarly, in the present case, delay took place in deployment of rigs and on that basis actual production of gas from platform B-121 had to be changed................ In our view, in such a contract, it would be difficult to prove exact loss or damage which the parties suffer because of the breach thereof. In such a situation, if the parties have pre-estimated such loss after clear understanding, it would be totally unjustified to arrive at the conclusion that the party who has committed breach of the contract is not liable to pay compensation. It would be against the specific provisions of Sections 73 and 74 of the Indian Contract Act. There was nothing on record that compensation contemplated by the parties was in any way unreasonable. It has been specifically mentioned that it was an agreed genuine pre-estimate of damages duly agreed by the parties. It was also mentioned that the liquidated damages are not by way of penalty............... There was no reason for the Tribunal not to rely upon the clear and unambiguous terms of agreement stipulating pre-estimate damages because of delay in supply of goods............................

68. From the aforesaid discussions, it can be held that:

(1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same.

(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act.

(3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of a contract.

(4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation............"

57. In reply to the said citation of Saw Pipes (supra), it is submitted by the respondent that the aforesaid judgment would not help the case of the petitioner since it is entitled without any proof of damages/loss to the exit charges as stipulated in the contract, inasmuch as the relevant clause at issue in the aforesaid judgment expressly stipulated that the amount in question is a genuine pre- estimate of damages as understood by the parties. The present case is not a case where the issue of public utility is involved or it is also not a case where it is difficult to assess the compensation. Therefore, the petitioner is to prove the damages regarding the exit charges. Further, this Court in Indus Tower Limited (supra) has

held that exit charges cannot be treated as damages as stipulated in Schedule 5 Part II with the clause of MSA.

58. It is correctly argued that no such stipulation is present in the instant contract between the parties. In Kailash Nath (supra) which considers various judgments on the point and also by a Division Bench of this Court in Vishal Engineers (supra), it is only where damages cannot be assessed and/or are impossible to prove, and the contract in question contains a stipulation to pay a specified amount by way of a genuine pre-estimate of damages, that such amount would be payable without proof of the extent of actual loss/damage. The Supreme Court in Saw Pipes (supra) has contemplated the onus shifting to the defendant to establish the absence of loss/damage and not otherwise. It is rightly observed in the said judgment that where the contract in question is one relating to a public utility and for instance the loss/damage to the public on account of delay in due execution, the loss on account of the breach is not amenable to precise quantification and assessment.

59. One instance of the application of the principle as articulated in ONGC's case, which in no manner deviates or indeed could have deviated from the settled position in law under Section 74 as enunciated by previous larger and co-ordinate Benches, is the decision of the Supreme Court in Construction and Design Services v. Delhi Development Authority, (2015) 14 SCC 263 which is related to a public utility and had contained an express finding to the effect that the contractor had failed to execute the work (construction of sewerage pumping station) (para 14). It is in this context that the Supreme Court held that if the entire amount stipulated is a genuine pre-estimate of damages, actual loss need

not be proved (para 16). The Court further premised this conclusion on a finding that the evidence of precise amount of loss may not be possible (para 17).

60. The dicta of the Constitutional Bench of the Supreme Court rendered in Fateh Chand v. Balkishan Das, AIR 1963 SC 1405, is quoted often in judgments dealing with the issue of liquidated damages. In the said judgment, the Supreme Court held as under:

"The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby, it merely dispenses with the proof of 'actual loss or damages'; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted....."

61. A party, who has suffered breach, is entitled to compensation. In State of Kerala & Ors. v. United Shippers and Dredgers, AIR 1982 Kerala 281, a Division Bench of Kerala High Court was confronted with the question "Whether even in the absence of legal injury resulting from the breach of contract, claim for compensation will lie in the light of Section 74 of the Contract Act." Considering the question, the Kerala High Court held:

"Compensation is something that constitutes an equivalent or recompense; making things equivalent; satisfying or making amends". This is how the word compensation has been explained in Biswas's Encyclopaedic Law Dictionary and in Jowitt's Dictionary of English Law. Black's Law Dictionary explains compensation as 'indemnification; payment of damages; making amends; making whole; giving an equivalent or substitute of equal value; that which is necessary to restore an injured party to his former position. 'Compensation' signifies restoration of position or making things equivalent or recompense. Necessarily,

something must have happened as a result of the breach of contract which requires an act of recompense or restoration. If the breach has not resulted in any harm, loss or damage to the other party, the question of recompensing him or restoring to him something which he has lost would not arise. That is the reason why Section 73 of the Act states 'compensation for any loss or damage caused to him thereby'. However grievous or serious an act of breach may be, if it does not lead to any loss or damage caused to the other party Section 73 will not give rise to a right of compensation."

"14. ............The interpretation canvassed by the appellant would go against the legislative purpose in using the word compensation in all the three sections viz.; Ss. 73, 74 & 75 of Chapter VI of the Act. One cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof. Facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damages. Section 74 of the Act exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided of course he establishes the basic requirement for award of compensation viz the fact that he had suffered some loss or damage. The proof of this basic requirement is not dispensed with by Section 74 of the Act."

"18. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from sections 73 & 75 of the Act. Section 74 is only supplementary to section 73 of the act and it does not make any departure from the principle behind section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of section 73 of the Act. In a particular case where the contract itself stipulates for payment of sum of money on the breach of contract or contains any other stipulation for penalty, the

principle additionally propounded by Section 74 also will have to be applied and that is why irrespective of the amount stipulated in the contract, the party suffering from the breach is entitled only to reasonable compensation, which, shall not exceed the amount so stipulated in the contract. Whether it be a contract which stipulate sum of money as being payable on breach of contract or whether it contains any other penal clause, or whether it is a contract which does not contain any such clause, the party complaining of breach of contract cannot successfully claim compensation unless he makes out loss or damage referable to such breach. The best measure of reasonable compensation would of course be the extent of actual loss or damage sustained. ..........................If quantification of loss or damage is not possible, the party who has suffered on account of the breach is not without remedy. He can still request the Court to assess reasonable compensation on the materials available and award the same to him.................. In a case where the party complaining of breach of contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy or make amends. Therefore he will not be entitled to compensation."

62. This position was accepted and reiterated by a learned Single Judge of this Court in Indian Oil Corporation v. Lloyds Steel Industries Ltd., 2007 (4) Arb.L.R. 84 (Del) and a Division Bench of this Court in Vishal Engineers (supra). The judgments of Lloyds Steel and Vishal Engineers also considered the judgment of the Supreme Court in Saw Pipes (supra) and has explained its implication. In Llodys Steel (supra), this Court has held as under:

"51. Notwithstanding the above, the petitioner still wants damages to be recovered from the respondent on the spacious plea that liquidated damages mentioned in the contract are pre-determined damages and, therefore, in

view of provisions of Section 74 of the Indian Contract Act, the petitioner was entitled to these damages and it was necessary for the petitioner to prove these damages. The legal position, as explained by the Supreme Court in ONGC v. Saw Pipes (supra), which has already explained above, is not in doubt. However, it is only when there is a loss suffered and once that is proved, it is not for the arbitrator or the Court to examine the actual extent of the loss suffered once there is a pre-estimation thereof. Moreover, the compensation, as stipulated in the contract, has to be reasonable. In a particular case where the defaulting party is able to demonstrate that delay/default has not resulted in any loss being suffered by the other party, then that party cannot claim the damages only because in the contract there is a stipulation regarding liquidated damages.

52. No doubt, the parties to a contract may agree at the time of contracting that, in the event of breach, the party in default shall pay a stipulated sum of money to the other. However, the stipulated sum has to be a genuine pre- estimate of damages likely to flow from the breach and is termed as 'liquidated damages'. If it is not a genuine pre-estimate of the loss, but a amount intended to secure performance of the contract, it may be a penalty............

x x x x

55. It is clear from the above that Section 74 does not confer a special benefit upon any party, like the petitioner in this case. In a particular case where there is a clause of liquidated damages the Court will award to the party aggrieved only reasonable compensation which would not exceed an amount of liquidated damages stipulated in the contract. It would not, however, follow there from that even when no loss is suffered, the amount stipulated as liquidated damages is to be awarded. Such a clause would operate when loss is suffered but it may normally be difficult to estimate the damages and, therefore, the genesis of providing such a clause is that the damages are pre-estimated. Thus, discretion of the Court in the matter of reducing the amount of damages agreed upon is left

unqualified by any specific limitation. The guiding principle is 'reasonable compensation'. In order to see what would be the reasonable compensation in a given case, the Court can adjudge the said compensation in that case. For this purpose, as held in Fateh Chand (supra) it is the duty of the Court to award compensation according to settled principles. Settled principles warrant not to award a compensation where no loss is suffered, as one cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof; facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damage. Section 74 exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided the basic requirement for award of 'compensation', viz. the fact that he has suffered some loss or damage is established. The proof of this basic requirement is not dispensed with by Section 74. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 and 74. Section 74 is only supplementary to Section 73, and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of Section 73. The words in Section 74 'Whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian legislature from the complicated principles of English Common Law, and also to emphasize that reasonable compensation can be granted even in a case where extent of actual loss or damage is incapable of proof or not proved. That is why Section 74 deliberately states that what is to be awarded is reasonable compensation. In a case when the party complaining of breach of the contract has not suffered legal injury in the sense of

sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy, or make amends. Therefore, he will not be entitled to compensation See State of Kerala v. United Shippers and Dredgers Ltd. . Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal injury has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed."

63. In the present case, there is no pleading by the petitioner that the purported loss is not capable of quantification or the present case is the case of public utility, rather in the rejoinder, it was pleaded that it is the subject matter of the Arbitral Tribunal. Thus, the principles laid down in Saw Pipes (supra) are not applicable in the facts of the present case, nor the said judgment would help the case of the petitioner.

64. However, the respondent cannot deny the fact that the parties agreed between them in MSA that in the event when the respondent exists from any site to the terms of the Service Contract, it shall pay an amount as specified in the schedule. It is also correct that no case of public utility is pleaded and the present case is not that one where it is virtually not possible to assess the pre-estimated genuine damage.

Under such situation, it is also not denied by the respondent that in case it is proved, the petitioner may be entitled to reasonable compensation. Therefore, I am of the view that at the best, if it is proved before the Arbitral Tribunal, the petitioner may get the reasonable compensation.

65. The spectrum has been transferred and the service is closed. It is true and also admitted by the petitioner that the said fact can be ascertained by the Arbitral Tribunal, for which the steps are taken.

66. The question before this Court at present is as to whether till such time, the compensation is ascertained or the claim of the petitioner is rejected, whether in view of the peculiar facts and circumstances, any amount should be secured or not. The issue before this Court is also that in case, the Arbitral Tribunal awards compensation in favour of the petitioner, it is to be assessed as to under those circumstances, the respondent would be in a position to pay the said amount or the Award would be merely a paper decree.

67. I do not find any force in the submissions of the respondent that no amount can be secured, as there is a first charge of Secured Creditors on the entire assets and even the petitioner cannot claim the preference over the Secured Creditors. There is no cogent and clear evidence placed on record to prove that there is first charge of Secured Creditors, i.e. Consortium of Banks. No deeds or registered documents were filed.

68. The respondent's contention that the petitioner has failed to satisfy the requirements of the Order XXXVIII Rule 5 CPC and that there is no averment in the subject petition qua the respondent's

intention to obstruct or delay the execution of Arbitral Award are without any merits.

69. In paragraphs 12, 13 & 14 of the petition, the petitioner has categorically stated about the mala fide and fraudulent intention of the respondent. In view of the respondent's admitted precarious financial position and its inability to pay its debts, it does not matter whether the respondent has the 'intent' to obstruct or delay the execution of the award, in case it is passed in the petitioner's favour. The record of the case, documents filed and the overall conduct of the parties can be looked into by this Court to determine whether the guidelines of Order XXXVIII Rule 5 of CPC are satisfied or not.

70. In the present case, it is evident from the act on the part of the respondent, that its sole intention was to transfer the sale consideration to the Consortium of Banks in utter disregard to the directions issued by this Court, the fact which satisfies the test laid down under Order XXXVIII Rule 5 CPC.

71. The said conduct of the respondent speaks for itself and the apprehension of the petitioner is correct.

72. In number of cases, the Courts have held that the strict provisions of Order XXXVIII Rule 5 of CPC cannot be bodily lifted and imported into Section 9(ii)(b) of the Act. The rigours of every procedural provision in CPC cannot be put into place to defeat the grant of relief, which would sub-serve the paramount interests of justice.

73. The following case laws can be relied upon:

(i) Steel Authority of India Ltd. v. AMCI Pty Ltd. & Anr., passed by this Court on 1st September, 2011 in OMP No.417 of 2011;

(ii) Gatx India Pvt. Ltd. Vs. Arshia Rail Infrastructure Ltd., passed by this Court on 20th August, 2014 in OMP No.1132/2013.

74. The remedy is available to the petitioner under Section 9 of the Act. Relief under Section 9 cannot be refused on the ground of existence of Secured Creditors. There is no embargo under the law for passing the orders for securing the amounts and if such an extraneous issue is taken into consideration, it will sub-serve the purpose of the provisions of Section 9. While deciding the petition under Section 9 of the Act, the Court must have due regard to the entire gamut of the matters in these types of cases where the party has no respect for the Court's order, and reasonable amount is to be protected, otherwise, the respondent will act in the same manner if the award is passed in favour of the petitioner.

75. The respondent's contention that it would be able to honour the award which may eventually be passed against it through its non-spectrum based business, is a feeble attempt on the part of the respondent to establish before this Court its ability to discharge its liability in future. On one hand, the respondent has harped on its financial condition to somehow justify the sale of spectrum. On the other hand, it pleads in its defence that it shall be able to honour its liabilities and as such, no order or direction is warranted against it under Section 9. The respondent's plea is totally baseless. Even going by the respondent's figures of profits generated through its non-spectrum based business for the last three years, it is clear that

the same would not be sufficient to discharge the huge financial liabilities of the respondent running into crores. Nothing cogent is there to assure that the respondent would be able to discharge all its financial liabilities in future. It is an admitted position that the respondent has been suffering from critical financial condition and is indebted to its secured creditors to the tune of Rs.4,485.06 crores. Besides this, the respondent has suppressed the fact that it has availed the finance of Rs.7,500 crores from Videocon Industries Limited, i.e. its parent company, which it is obliged to refund. The fact that the respondent is apparently running into heavy losses; its assets other than the spectrum are charged in favour of Cecured Creditors/Lenders and that there are other higher priority obligations, such as, repayment of money to its parent-Company, prima facie indicates that it would not be possible for the respondent to honour its debts and financial obligations.

76. As far as the assets and equipments of the respondent are concerned, the petitioner has no objection if the same be removed immediately as according to the petitioner, there is no value left with them. The appropriate orders have been passed by this Court in this regard. As per clause 12.6 of Schedule 3 of the MSA, the said security deposit is not refundable if any undisputed outstanding sum is due and payable by the respondent on any account whatsoever. In any case, as per clause 6.3.2 read with clause 6.3.3 (iv) of the MSA, the petitioner is entitled to adjust from the security deposit all such sums of money as may be due and payable by the respondent.

77. It is a matter of fact that in similar petitions filed by some other companies against the respondent being OMP (I) (COMM) No.95/2016, OMP (I) (COMM) No.105/2016 and OMP (I) (COMM)

No.107/2016, vide order dated 1st April, 2016, this Court had directed the respondent that in case the Spectrum is sold/transferred, the respondent would deposit the amount so claimed in the petitions with the Registrar General of this Court.

78. The present petition was filed on 12th May, 2016 and was listed before this Court on 16th May, 2016, when the petitioner had pressed for the interim orders. Counsel for the respondent submitted that since interim directions are already passed in the aforesaid identical petitions, the same orders had to be read in the present case. Accordingly, it was understood that the conditions and directions passed in the aforesaid three petitions would also operate in present petition.

79. While the final arguments were being heard in the subject petition on 24th May, 2016, the respondent had sold/transferred the spectrum without depositing the claimed amount in utter disregard to the directions issued by this Court vide order dated 1st April, 2016. Therefore, by order dated 26th May, 2016, this Court had recorded the conduct of the respondent during the proceedings and in view thereof, had directed the respondent to deposit the claimed amount with the Registrar General of this Court.

80. Despite of the full knowledge of the conditions imposed by the Court for sale/transfer of spectrum, the respondent has transferred the entire sale consideration directly into designated account maintained by SBI in an attempt to take the same out of the reach of this Court.

81. The said orders dated 1st April, 2016 and 26th May, 2016 were challenged before the Division Bench wherein with the consent of the

parties, it was agreed that without the deposits, let the judgment be pronounced in the matter subject to certain conditions.

82. In view of the conduct of the respondent, the balance has to be drawn between the parties, as this Court even apprehends that if the award is passed in favour of the petitioner, the petitioner may not be able to recover the awarded amount in view of the conduct of the respondent and condition of the Company. As a matter of fact, the respondent has lost the faith of the Court, as despite of conditional order, the Spectrum was sold to Bharti Airtel Ltd. who was also fully aware about the interim directions, but they chose to violate the orders. Thus, the Court is fully satisfied with the requirement of the provisions under Order XXXVIII Rule 5 CPC necessitating grant of part relief.

83. As I have discussed earlier, if it is proved, the petitioner may be entitled to reasonable compensation. Without prejudice and without going into the merits of the case, as the claim of the petitioner is for a sum of Rs.78 crores, taking the face value of the said claim, the respondent is directed to deposit a sum of Rs.15.60 crores (i.e. 20% of the amount claimed) within two weeks, with the Registrar General of this Court by way of Bank Guarantee to the satisfaction of the Registrar General, for the period of two years at present and the same shall be extended from time to time until the award is published by the Arbitral Tribunal. The said deposit shall be treated as without prejudice. As far as other claims for remaining amount are concerned, the same can be raised before the Arbitral Tribunal which shall be decided by the Tribunal as per their own merits and without any influence of this order.

84. In view of the directions issued by the Court vide order dated 1st April, 2016, it was the responsibility of all the Directors of the respondent-Company to ensure the compliance of the order as they are personally responsible. In this regard, reliance is placed on the judgment passed by the Supreme Court in the case of DDA v. Skipper Construction Company (P) Ltd. and another, (1996) 4 SCC 622. In this case, the issue was related to the adoption of the device of incorporation by certain individuals for committing illegalities and to defraud people. The Court reiterated the proposition that where the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass the appropriate orders to do justice between the parties concerned. The Court held as under:

"The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are mere cloaks behind which lurks Tejwant Singh and/or members of his family....."

85. It is further clarified that if the respondent will not comply with the order for any reason as mentioned by it during the course of hearing, the petitioner under those circumstances is granted liberty to move an application to recover and deposit the said amount from the personal assets of the Directors, in view of the peculiar facts of the present case. In this regard, reference is also made to the judgment passed by the Supreme Court in the case of State of UP v. Renusagar Power Company, AIR 1988 SC 1737, wherein the

Court has dealt with the nexus between the parent and the subsidiary companies. In this case, the Supreme Court had lifted the corporate veil to hold that Hindalco, the holding company and Renusagar Power Company, its subsidiary, should be treated as one concern and the Power Plant of Renusagar must be treated as the own source of generation of Hindalco and on that basis, Hindalco would be liable to pay the electricity duty.

86. As far as the pending application being I.A. No.9018/2016 is concerned, the date is already given by the Court.

87. In the connected petition being O.M.P. (I) (COMM.) No.105/2016 against the same respondent, in para 93 thereof, the following orders are passed:-

"93. In the meanwhile, the respondent or its agent is directed not to withdraw at least a sum of Rs.41.34 crores from the funds lying in the Escrow account. This order is being passed because of the reason that after the transfer of spectrum by the respondent in favour of Bharti in clandestine manner within the knowledge of SBI, they have not disclosed the details of the Escrow account despite of query raised by the Court from time to time. They had not only failed to file the reply in time but also avoided to give the details required by the Court."

88. In the present case, in order to ensure the compliance, the respondent or its agent are restrained from withdrawing a sum of Rs.15.60 crores from the Escrow account where the money after transferring of the spectrum in breach of the Court orders is lying. Once the direction issued in para 83 is complied with by the respondent, the restraint order passed in I.A. No.9018/2016 in O.M.P. (I) (COMM.) No.105/2016 shall become non-operative.

89. The present petition is accordingly disposed of.

90. The findings arrived at are tentative and the same shall have no bearing in the arbitration proceedings which may be decided without any influence of this order.

91. Dasti under the signatures of the Court Master.

(MANMOHAN SINGH) JUDGE SEPTEMBER 14, 2016