Delhi High Court
Department Of ... vs Tata Teleservices Limited on 11 May, 2017
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.05.2017
+ O.M.P. (COMM) 90/2017
DEPARTMENT OF TELECOMMUNICATIONS ..... Petitioner
versus
TATA TELESERVICES LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Praveen Kumar Jain and Mr Naveen
Kumar Jain, Advocates with Ms Divya
A.B. (Deputy Administrator of the petitioner).
For the Respondent : Mr P. Chidambaram and Mr A.S. Chandhiok,
Senior Advocates with Mr Mansoor Ali Shoket,
Mr Kunal Singh and Ms Alvia Ahmed,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. Department of Telecommunications (hereafter 'DoT') has filed the
present petition under Section 34 of the Arbitration and Conciliation Act,
1996 (hereafter 'the Act') inter alia seeking to set aside the preliminary
award dated 13.10.2016 (hereafter 'the impugned award') made by the
arbitral tribunal constituted by the sole arbitrator, Justice Deepak Verma
(Retd.), Former Judge, Supreme Court of India.
2. By the impugned award, the arbitral tribunal determined that it
possesses the jurisdiction to decide certain issues referred to it as
preliminary issues. It also directed that Circulars dated 13.10.2010 and
06.07.2011 (hereafter collectively referred to as 'the Circulars') were not
binding upon the respondent, Tata Teleservices Ltd.
3. DoT is a department under the Ministry of Communications,
Government of India (hereafter 'GoI') and is inter alia responsible for
formulating developmental policies for the accelerated growth of
telecommunication services in India. It is also responsible for grant of
licences related to various telecom services including Unified Access
Service Internet and VSAT service. Tata Teleservices Ltd. (hereafter
'TTL'), a part of the Tata Group of Companies, is a public company
operating in the telecom sector.
4. In the year 1999, GoI formulated the 'New Telecom Policy'
(hereafter 'NTP') to provide access to basic telecom services to all at
reasonable prices. Pursuant thereto, the Universal Service Support Policy
(hereafter 'USSP') was framed, which envisaged providing basic telecom
services in the rural and remote areas at affordable prices. In furtherance of
the objective, the Universal Service Obligation Fund (hereafter 'USOF')
was established under the Indian Telegraph (Amendment) Act, 2003, with
effect from 01.04.2002 to provide financial support/ subsidy to enable
access to all types of telecom services including mobile and broadband
connectivity and for infrastructure creation in rural and remote areas.
5. GoI invited bids for installation of 'Direct Exchange Lines in Rural
Areas' (hereafter 'RDELs'). To support this initiative, the successful
bidders, known as 'Universal Service Providers' (hereafter 'USPs') were to
receive subsidy through the USOF. Selection of USPs for subsidy
disbursement towards provision of RDELs in specified Short Distance
Charging Areas (hereafter 'SDCAs') was on a reverse auction basis, that is,
bidding on least quoted subsidy support by a USP.
6. Out of the three USPs selected, TTL's bid was accepted across eight
different service areas namely Bihar, Haryana, Karnataka, MP, Punjab,
Rajasthan, UP (East) and UP (West). Eight different agreements for the
different service areas covering 172 SDCAs were signed between the
parties.
7. On 24.03.2005, parties entered into the 'Agreement for Subsidy
Disbursement Towards Provision of Rural Household Direct Exchange
Lines (RDELs) in Specified Short Distance Charging Areas (SDCAs)'
(hereafter 'the Agreement') for Bihar, valid for five years from 01.04.2005.
Clause 4, Part I given under Schedule II to the Agreement enabled the USP
to request for extension of time, if required.
8. On TTL's request, period of installation of RDELs was extended
thrice upto 31.03.2010. The provision of subsidy was also extended upto
31.03.2010 from the initial period of 01.04.2005 to 31.03.2007. For the
installation of RDELs in Bihar, subsidy was payable as follows:-
"a. Initial Period between 01.04.2005 to 31.03.2007:
i FLS - SDCA wise, which varied from Rs. 6,984/- to
Rs. 4,984 per RDEL.
ii EAS - SDCA wise, which varied from Rs. 2,250 to
Rs. 0 per RDEL per annum.
xxxx xxxx xxxx
1. Subsidy support provided on revised representative rates
being:
a. Front Loaded Subsidy - Rs. 1627/- per RDEL; and
b. Equated Annual Subsidy - Rs. 200/- per RDEL per
annum."
9. It is the case of DoT that a number of references were received by it
regarding serious discrepancies pertaining to RDELs installed under an
Agreement, therefore, DoT - after six months of the expiry of the term of
the Agreement - issued a Circular dated 13.10.2010 to all Sr. CCA/CCA/
Jt. CCA as also the three USPs for special verification of RDELs installed
in the last quarter of 2009-2010 under the RDEL scheme.
10. The special verification carried out by CCA, Bihar, indicated that the
percentage of eligible RDELs of TTL was only 3.58%. It is stated that as
the percentage of eligible RDELs was below 80%, the results of the
verification were extrapolated in terms of the Circular dated 06.07.2011 for
all the quarterly claims for the extended period of the Agreement, that is,
from Quarter ending (QE) 30.06.2007 to QE 31.03.2010. By a letter dated
08.09.2011, Jt. CCA, Bihar informed TTL that only 2.13% RDELs
qualified for subsidy. Thereafter, demand note dated 12.09.2011 was
issued to TTL to deposit the amount recoverable, that is, the disallowed
amount against the subsidy amount disbursed earlier, by the approval of
CCA, Bihar. This was followed by various reminders. Notice dated
18.07.2012 was also issued from USOF headquarter to deposit the
recoverable amount by 27.07.2012 to avoid invocation of the performance
bank guarantee.
11. On receipt of the aforesaid notice, by a letter dated 25.07.2012, TTL
invoked the arbitration clause. TTL also filed a petition under Section 9 of
the Act to stay the effect and operation of the demand notices issued to it
and to restrain DoT from invoking the bank guarantee furnished by it. This
court, by an order dated 27.07.2012 stayed the invocation of the bank
guarantee. The petition under Section 9 was disposed of on 22.11.2012.
12. Before the arbitral tribunal, DoT filed it statement of claims for
₹27,74,53,532/- along with interest and costs. TTL also filed it
counterclaims for an amount of₹84.12 lacs along with interest and costs.
On the basis of the pleadings, the arbitral tribunal framed eight issues,
which are set out below:
"1. Whether Claimant, under the provision of the
Agreement between parties, has rightly conducted
Special Verification of the RDELs provided by
Respondent in the areas defined under the Agreement,
even after disbursement of subsidy claimed?
2. Whether the Circulars dated 13-10-2010 and 06-07-
2011 are in terms of the Agreement entered into
between the parties?
3. If so, whether they are binding on the Respondent as
the same have been issued after the expiry of the
Agreement, and could they be given retrospective
effect?
4. Whether Claimant on the verification of last quarter
ending 31-03-2010, could have sought refund for the
entire period?
5. Whether Claimant has rightly issued Demand Notices
for recovery of subsidy amounts already disbursed to
the Respondent due to non-performance of the
Agreement by the Respondent?
6. Whether Claimant is entitled for the Relief(s) as
prayed for against the Respondent?
7. Whether Respondent is entitled for any Counter
Claim, with Interest?
8. Reliefs and Cost to both the parties?"
13. TTL requested that issue nos. 2 and 3 (as quoted above) be treated as
preliminary issues, being pure questions of law. TTL submitted that there
was no provision in the Agreement which permitted special verification to
be conducted or extrapolation of results and that too after the period of the
Agreement had expired. According to TTL, the Circulars could not be
applied retrospectively and only the provisions of the Agreement were to be
considered for releasing the funds. Once subsidy has been disbursed in
terms of the Agreement, no refund can be sought except for the limited
purpose of adjustment and that too not later than one year after the
disbursement of subsidy. It was stated that Sub-clause 18.13 of Schedule II
to the Agreement only provided for modification/ alteration for verification
of the claim statement and documents provided and not for any other
verification including physical / special verification.
14. Countering the same, DoT asserted that issue nos. 2 and 3 are central
to its claims and could be decided only after a proper trial. It claimed that
the question regarding accuracy of the Special Verification Report was a
question of fact and thus its correctness can only be ascertained by way of
trial and not by taking up the relevant issues as preliminary ones. DoT
submitted that verification, post-release of the subsidy amount as well as
extrapolation of the results was in consonance with Sub-clauses 18.9,
18.12, 18.13 and Clause 22 of Schedule II to the Agreement, making
recovery upon actual verification permissible. DoT further contended that
legality of the Circulars could not be questioned as they were issued as per
the relevant provisions of the Indian Telegraph Act, 1885 (hereafter 'the
Telegraph Act') and the Indian Telegraph Rules, 1951, (hereafter 'the
Telegraph Rules') and also under the relevant clauses of the Agreement.
15. The arbitral tribunal accepted TTL's request to consider issue nos. 2
and 3 as preliminary issues as it was of the view that the decision in both
the aforesaid issues was based entirely on the interpretation of the
provisions of the Telegraph Act, the Telegraph Rules and the Agreement
between the parties, which did not necessitate any factual enquiry.
16. Thereafter, the arbitral tribunal noted that Part IV of the Agreement
provides for Financial Conditions, wherein Clause 17 of Schedule II to the
Agreement speaks of subsidy from USOF and Clause 18 of Schedule II
prescribes the schedule for disbursement of subsidy by the Administrator to
the USP. It considered Rule 527 of the Telegraph Rules which provides that
funds shall be released to the USP in a manner and at such intervals as may
be specified in the Agreement. The arbitral tribunal held that Rule 527 of
the Telegraph Rules made it evident that the procedure for releasing funds
was to be governed by the Agreement between the parties.
17. After examining Rule 524(iv) of the Telegraph Rules, which
provided for settlement of claims by the Administrator after due
verification, the arbitral tribunal held that neither post-facto verification of
the claims after disbursement of subsidy nor extrapolation of the results of
such verification was permissible in terms of Rule 524. In the light of the
above, the arbitral tribunal held that prescribing new methods for
allocating/disbursement of funds by issuing circulars in that regard is in
contravention of Rule 527 and thus, extrapolation which was not a part of
the Agreement between the parties, is not in consonance with Rules 527
and 524(iv).
18. In addition, it was noted that Clause 22 of Schedule II to the
Agreement provided the right to the Administrator to conduct enquiries,
however, the same did not confer a power to issue circulars after the expiry
of the Agreement. Similarly, it was held that Clause 18 of Schedule II to
the Agreement only provided for verification of the claim statement and the
documents provided for subsidy claim.
19. As the arbitral tribunal concluded that only the terms of the
Agreement could be referred to for release of funds, the Circulars were held
to have no effect in law and not binding on TTL.
20. In view of the above, issue of retrospective application of the
Circulars - issue no. 3 - also did not survive.
Submissions
21. Mr Jain, learned counsel appearing for DoT contended that the
arbitral tribunal had grossly erred in treating issue nos. 2 and 3 as
preliminary issues. He referred to Order XIV of the Code of Civil
Procedure, 1908 (hereafter 'the CPC') and submitted that only those issues
that relate to (a) the jurisdiction of the Court or (b) a bar to the suit created
by any law for the time being in force, can be considered as preliminary
issues. He submitted that the issues in question neither related to the
jurisdiction of the arbitral tribunal nor were related to any bar to the
proceedings. He further submitted that DoT ought to have been given a
chance to lead evidence before the said issues were taken up for decision.
22. Mr Jain also contended that the arbitral tribunal had grossly erred in
proceeding on the basis that the Agreement between the parties had expired
and, therefore, no instructions for verification of RDELs could be issued.
He referred to the decision of the Supreme Court in National Insurance
Company Limited v. Boghara Polyfab Private Limited: (2009) 1 SCC 267
and submitted that the contract can only be discharged by performance or
termination. He submitted that in the present case, the obligation related to
performance by TTL continued and, therefore, the Agreement was
subsisting and valid. He further contended that even after the expiry of the
term of the Agreement, TTL was obliged to maintain the RDELs in terms
of Clause 4 of Schedule II to the Agreement and, therefore, the
Administrator had the right to issue instructions regarding verification of
the subsidy claims. He also referred to Sub-clauses 18.12, 18.13 and 22.2 of
Schedule II to the Agreement in support of his contention that the
Administrator would have the right to alter any of the conditions of the
Agreement relating to verification and, thus, it was within his powers to
issue the Circulars.
23. Mr Jain contended, rather emphatically, that the impugned award is
opposed to public policy. He submitted that the object of the RDEL scheme
was to ensure basic telephonic service in rural areas and subsidy was
provided for the specific purpose of expanding telephonic services.
However, it was apparent that TTL had claimed excess subsidy and this
was opposed to public policy. He earnestly contended that the impugned
award was adverse to public interest and, therefore, contrary to public
policy.
24. Mr Jain also contended that the nomenclature of circulars given to
the letters dated 13.10.2010 and 06.07.2011 (the Circulars) is also
misleading. He submitted that the Circulars were merely instructions issued
to the staff and officers of DoT to carry out verification of RDELs and to
process the claims for subsidy in a particular manner. The Circulars were
merely letters and the Administrator could not be faulted for issuing the
same as it was within his right to issue such instructions to the officers and
staff of DoT.
25. Mr P. Chidambaram and Mr A.S. Chandhiok, learned Senior
Advocates appearing for TTL, supported the impugned award and
submitted that there was no patently illegality or error in the impugned
award that would warrant any interference by this Court.
Reasoning and Conclusion
26. At the outset, it is necessary to refer to the contents of the Circulars
dated 13.10.2010 and 06.07.2011. Circular dated 13.10.2010 provides for
the procedure for a special verification of RDELs for the QE 31.03.2010
for the purpose of determining the subsidy payable. The said circular
indicates that a number of references had been received regarding
discrepancies pertaining to RDELs installed under an Agreement,
particularly during the fourth quarter of 2009-10 and, therefore, it was
decided that a sampling procedure be adopted to verify the same. The
Circular included instructions, including the sampling technique, for RDEL
verification, which were to be implemented by the officers and staff
entrusted with the said task.
27. The second Circular dated 06.07.2011 sets out the procedure for
settlement of claims. As per the said circular, the subsidy payable was to be
determined on the basis of the sampling results of the special verification
carried out for the QE 31.03.2010. The results of the special verification
were to be 'extrapolated and applied to all the quarterly claims of RDELs
for the extended period i.e. from QE 30.06.2007 to QE 31.03.2010', if the
results were below 80%.
28. TTL did not accept the aforesaid method of special verification and
is also aggrieved by the extrapolation of the sample results 'for the
extended period i.e. from QE 30.06.2007 to QE 31.03.2010'.
29. The principal controversy involved in this case is whether the arbitral
tribunal has grossly erred in holding that the said Circulars are not binding
on TTL.
30. The contention that the impugned award is opposed to public interest
and public policy is fundamentally flawed. Mr Jain had earnestly contended
that the object of RDEL scheme was laudable and in public interest and the
conduct of TTL in claiming excess subsidy without performing its
obligation was opposed to public interest and, therefore, the impugned
award was also opposed to public policy. This contention is premised on
the basis that TTL had breached its obligations under the Agreement and
the arbitral tribunal has countenanced such breach. Both the aforesaid
assumptions are wrong. First of all, there is no finding of the arbitral
tribunal to the effect that TTL has not breached the terms of the Agreement.
It was always open for DoT to establish that TTL had not performed its
obligations and had claimed excess subsidy, by leading evidence to that
effect. The arbitral tribunal has only held that the Circulars are not binding
on TTL as they have neither the force of law nor has TTL agreed to be
contractually bound by the said Circulars. The assumption that TTL has
breached its obligations under the Agreement is also pre-mature; TTL
disputes such assumption and no findings in this regard have been returned
by the arbitral tribunal as yet.
31. Mr Jain's contention that the arbitral tribunal had grossly erred in
deciding the issue nos. 2 and 3 as preliminary issues is also unmerited. The
arbitral tribunal is not precluded from making an award in regard to certain
issues prior to making a final award in regard to the remaining issues. The
procedure/ the manner in which the arbitral proceedings are to be
conducted is - subject to the agreement between the parties - at the
discretion of the arbitral tribunal provided of course that the parties are
given equal opportunity to represent their case. In the present case, the
arbitral tribunal had concluded that the issue nos. 2 and 3 did not require
determination of any facts, which required the parties to lead any evidence.
The arbitral tribunal was of the view that the question whether the Circulars
are binding on TTL could be adjudicated on the basis of the provisions of
the Telegraph Act, the Telegraph Rules and the provisions of the
Agreement.
32. Although, it was contended by Mr Jain that the issues in question
also required leading of evidence, he has been unable to point out any
factual question that was required to be determined in order to address the
issues in question - issue nos. 2 and 3 as framed by the arbitral tribunal.
Plainly, there is no controversy with regard to any fact that required
adjudication in order to address the issue whether the Circulars in question
would be binding on TTL. Thus, this Court finds no infirmity in the arbitral
tribunal adjudicating issue nos. 2 and 3 and making a preliminary award
prior to deciding other issues.
33. It is also relevant to refer to Section 2(1)(c) of the Act which
specifically provides that "arbitral award" includes an interim award.
Section 31(6) of the Act also expressly provides that the arbitral tribunal
may, at any time during the arbitral proceedings, make an interim arbitral
award on any matter with respect to which it may make a final arbitral
award. It is, therefore, apparent that an arbitral tribunal can make a
preliminary award in respect of any part of the subject matter of disputes
referred to it and such award would, for all intents and purposes, be an
arbitral award within the meaning of the Act. Thus, there is no merit in the
contention that the arbitral tribunal had erred in making the award on the
two issues in question.
34. As stated earlier, the main controversy is whether the arbitral tribunal
had erred in holding that the Circulars in question were not binding on
TTL.
35. The arbitral tribunal had noted that the Telegraph Act was amended
in 2003 (with effect from 01.04.2002) and Part IIA was inserted to provide
the statutory framework for the constitution of the USOF. Further, clause
(eea) was also inserted in sub-section (2) of Section 7 of the Telegraph Act
to empower the Central Government to make rules for administration of the
USOF. In exercise of such powers, the Telegraph Rules were amended to
include Part X for administration of the USOF.
36. Clause (a) of Rule 523 of the Telegraph Rules defines
"Administrator" to mean the Administrator of the Fund appointed by the
Central Government and Clause (b) of Rule 523 defines "Agreement" to
mean the agreement made between the Administrator and one and more of
the USPs for the purpose of implementation of the Universal Service
Obligation.
37. Rule 524 of the Telegraph Rules provides for the powers of the
Administrator and reads as under:-
"524. Administration of the Universal Service
Obligation Fund. -The Administrator shall have powers
to-
i. formulate bidding procedures including its terms
and conditions for the purposes of implementation
of Universal Service Obligation;
ii. evaluate the bids called for the purposes of
implementation of Universal Service Obligation;
iii. enter into Agreement with the Universal Service
Provider for the purposes of implementation of
Universal Service Obligation;
iv. settle the claim of Universal Service Provider after
due verification, and make disbursements
accordingly from the Fund;
v. specify relevant formats, procedure and records to
be maintained and furnished by the Universal
Service Provider;
vi. monitor the performance of the Universal Service
Provider as per the procedure specified by him
from time to time."
38. Rule 527 provides for the release of funds to USPs and is set out
below:-
"Rule 527 Release of Funds to Universal Service
Providers. - Fund shall be released to the Universal
Service Provider in a manner and at such intervals as
may be specified in the Agreement."
39. The arbitral tribunal considered the aforesaid Rules and concluded
that Rules 524 and 527 of the Telegraph Rules made it clear that the
disbursement of subsidy to the USP was to be done as per the provisions of
the Agreement, which was a part of the statutory scheme, in terms of Rule
527 of the Telegraph Rules. Thus, on a plain reading, the Agreement
between the parties would determine the procedure for release of
funds/subsidy. This conclusion is also not seriously disputed. On the
contrary, it was contended that the Circulars were in terms of the
Agreement between the parties.
40. In view of the above, the scope of controversy between the parties is
narrowed down to whether the Circulars are in terms of the Agreement
between the parties.
41. The term of the Agreement was five years as is plainly reflected
under Clause 2 of the Agreement which reads as: "This Agreement will
remain valid for 5 (Five) years from the effective date unless revoked
earlier for any reason whatsoever". Sub-clause 3.1 of Schedule II to the
Agreement also provides that "The Agreement shall be valid for a period of
FIVE years from the effective date unless revoked earlier for reasons as
specified elsewhere in the document". Thus, there is no denying the fact
that the term of the Agreement was limited and had come to an end on
31.03.2010. Although, there may be certain rights and obligations that
would survive the term of the Agreement, however, the contention that the
Agreement was valid and subsisting beyond the specified term, is
unpersuasive. The reliance placed by Mr Jain on the decision of the
Boghara Polyfab (supra) is also misplaced. Clearly, an agreement which is
of a specified term would expire with the efflux of time.
42. Mr Jain had relied on Sub-clause 4.1 of Schedule II to the Agreement
to contend that the impugned award insofar as it records that the term of the
Agreement had expired is erroneous. Sub-clause 4.1 of Schedule II reads as
under:-
"4.1 The Administrator may extend, if deemed expedient
in public interest, the validity of the Agreement for such
period and on such terms as may be mutually agreed
which shall be reviewed during the fifth year of the
Agreement. The decision of the Administrator shall be
final and binding in this regard on the USP. On expiry of
the Agreement period, the responsibility of operation
maintenance of the RDEL shall lie on the USP."
43. It is apparent from the above that the Administrator could extend the
Agreement. However, it is nobody's case that the Agreement had been
extended beyond 31.03.2010. Extension of Agreement in terms of Sub-
clause 4.1 of Schedule II to the Agreement would have other implications
and possibly confer TTL the right to claim further subsidy from DoT for
RDELs installed after 31.03.2010. The contention that TTL was obliged to
maintain the RDELs after the expiry of the Agreement and, therefore, the
term of the Agreement had not come to an end, is unmerited. The last
sentence of Sub-clause 4.1 of Schedule II (as quoted above) only indicates
that the obligation of TTL to maintain the RDELs would continue on expiry
of the Agreement. This clause does not indicate that the term of the
Agreement would span beyond the specified period as agreed.
44. Mr Jain had also referred to Sub-clause 18.13 of Schedule II to the
Agreement to contend that the Administrator would have the right to
amend the method of settling of the claims for subsidy at any time. Clause
18 provides for the schedule for disbursement of subsidy by the
Administrator to the USP. Clause 18 of Schedule II is set out below:-
"18.0 Schedule for disbursement of Subsidy by the
Administrator to the Universal Service
Provider
18.1 The Universal Service Provider shall be eligible
to submit the claim for front loaded subsidy at the end of
the quarter in which rural household DELs are installed
and made functional. The equated annual subsidy, where
payable shall be disbursed in four quarterly installments
during each financial year, with each quarter ending on
30th of June, 30th of September, 31st of December and 31st
of March. The claim for a part of the quarter will be
computed with reference to the actual number of days in
that quarter. Each installment shall be disbursed quarterly
in arrears generally within 30 days of receipt of a valid
claim for the RDELs maintained up to the close of
previous quarter.
18.2 The Universal Service Provider shall submit their
claim for quarterly Subsidy in a STATEMENT in the
prescribed form given in Attachments to Annexure 1
showing the computation of Subsidy for the quarter,
within 30 days of the end of the quarter. Claims received
after this date shall be rejected unless under exceptional
circumstances an extension up to 15 days is allowed by
the Administrator. The STATEMENT along with
Annexure I shall be furnished by USP even if the claim
for a quarter is NIL.
18.3 The SDCA wise subsidy claim should be
submitted as prescribed in hard copy in the formats of
Attachments to Annexure 1 which should be duly signed
by the Authorized signatory of the Company. In addition
to the hard copy, the USP should also submit the claim
on a CD ROM in MS EXCEL format for each Service
Area. The Authorized Signatory of the Company should
put his signature and Seal of the Company on the CD
ROM Disc.
18.4 The claim shall be duly certified with an Affidavit
as per Annexure I by a representative of the Universal
Service Provider duly authorized by a Board resolution
of the Universal Service Provider. In preparation of the
statement, the norms as per Attachments to Annexure I
shall be followed.
18.5 The aforesaid quarterly STATEMENTS of each
year shall be required to be audited by the Auditors of the
Universal Service Provider appointed under Section 224
of the Companies' Act, 1956. The report of the Auditors
should be in the prescribed form given in Annexure III to
be filed with the Administrator or designated authority as
specified within 7 (seven) calendar days of the date of
signing of the Audit Report but not later than 30th
September of the following year.
18.6 The RDEL that remain faulty for more than 7
days in a quarter, shall not be reckoned for the purpose of
disbursement of full equated quarterly subsidy from USF
and subsidy payable shall be reduced proportionately for
the total number of days the RDEL remains faulty during
the quarter. For those SSAs where equated annual
subsidy is ZERO, Rs.250/- (Two Hundred and Fifty
only) shall be taken as the equated annual subsidy rate at
which the deduction shall be calculated.
Provided further that if a RDEL remained faulty
for forty-five days or more during the quarter, no equated
quarterly subsidy for the entire quarter for that RDEL
shall be disbursed.
18.7 The Rural Household DELs (RDELs) that are
closed permanently either on account of surrenders, shifts
out of the local exchange area or non-payment by the
customers shall be eligible to receive only the equated
annual subsidy support from USOF from the date of
installation till the date on which they are closed.
18.8 All claims for Subsidy shall be accompanied by a
pre-receipted bill with revenue stamp. Disbursement of
Subsidy shall be by cheque through the Office of the
Administrator or Controller of Communication Accounts
of the respective Telecom Circulars or any other
designated Authority.
18.9 The Administrator shall pay the subsidy for a
quarter after making adjustments, if any, for the
payments made in the previous quarter.
18.10 Final adjustment, if any in respect of excess, or
shortage in the Subsidy disbursed shall be made in the
following year based on the quarterly Statements duly
certified by the Auditors of the Universal Service
Provider.
18.11 In case the Universal Service Provider is found to
have claimed and received in excess of 10% of the
Subsidy due to them for a financial year, the entire
amount in excess shall be recovered along with interest
from the date of disbursement at the Prime Lending Rate
(PLR) of State Bank of India prevalent on the day the
disbursement was made. The interest shall be
compounded monthly and a part of the month shall be
reckoned as a full month for the purposes of calculation
of interest. (Month for this purpose shall be taken as an
English calendar month). No further subsidy shall be
disbursed until final adjustment of the excess payment.
No interest shall be payable for any short payment made
to the USP by the Administrator.
18.12 The records of the Universal Service Provider
shall be subject to such scrutiny as may be prescribed by
the Administrator so as to facilitate independent
verification of the Subsidy claimed.
18.13 The Administrator, to ensure proper and correct
verification of Subsidy paid, can if deemed necessary
modify, alter or substitute and amend whatever is stated
herein."
45. As is apparent from the above and also from the heading of Clause
18, the provisions contained in Clause 18 relate to the schedule for
disbursement of subsidy to the USP.
46. Sub-clause 18.1 of Clause 18 of Schedule II to the Agreement
provides that USPs shall be eligible to submit the claim for front loaded
subsidy at the end of the quarter in which RDELs are installed and made
functional. The equated annual subsidy would be payable and disbursed in
four quarterly instalments during each financial year. Sub-clause 18.2
requires the USP to submit the claim for quarterly subsidy in a statement in
the prescribed form within 30 days of the end of each quarter. Sub-clause
18.3 requires the SDCA wise subsidy claim to be submitted as prescribed
in hard copy in the format as attached with the Agreement, in addition to
submitting the claim in a CD ROM in MS Excel format for each service
area. Sub-clause 18.4 requires the claim to be duly certified with an
affidavit as per the norms as annexed. Sub-clause 18.5 requires that the
quarterly statements of each year be audited by the auditors of the USP and
to be submitted in the form as prescribed in Annexure III within 7 calendar
days of signing of the audit report but not later than 30th September of the
following year. Sub-clause 18.7 provides that RDELs that are closed
permanently either on account of surrender, shifts out of the local exchange
area or non-payment by customers shall be eligible to receive only equated
annual subsidy from USOF from the date of installation till the date on
which they are closed.
47. Sub-clause 18.9 expressly provides that the Administrator would pay
subsidy for the quarter after making adjustments for payments made in the
previous quarter. Sub-clause 18.10 also provides that final adjustments, if
any, in respect of excess or shortage in subsidy disbursed shall be made in
the following year, based on the quarterly statements, certified by the
auditors of the USPs. Sub-clause 18.11 provides that in case USP is found
to have claimed and received in excess of 10% of the subsidy due to them
for a financial year, the excess amount shall be recovered along with
interest. Sub-clause 18.12 expressly provides that the records of USP would
be subject to scrutiny as may be prescribed by the Administrator to
facilitate independent verification of the subsidy claimed. Sub-clause 18.13
enjoins the Administrator to ensure proper and correct verification of
subsidy paid and if deemed necessary, to modify, alter and substitute
whatever is stated therein. Thus, indisputably, the duty to ensure proper and
correct verification of subsidy payable and also the power to modify the
contents of Clause 18 as specified in Sub-clause 18.13 was provided in the
context of the schedule of disbursement, the manner of making the claim as
well as verification for disbursement.
48. Indisputably, in terms of the aforesaid clause, subsidy for several
quarters has been disbursed to TTL on TTL making the claims in the
manner as prescribed. Clearly, the machinery in Clause 18 had been
implemented in respect of subsidy distribution for the past quarters; the
term of the Agreement had ended and therefore, it stands to reason that the
machinery provisions of Clause 18 having been exhausted (to the extent
implemented), the question of now amending the same did not arise.
Clearly, there was no scope in this machinery for providing a special
procedure for sample checking of RDELs and extrapolating the results of
the same for the previous quarters for which subsidy has already been
disbursed. The power of the Administrator to ensure proper and correct
verification of subsidy in terms of Sub-clause 18.13 is to be read in the
context of the other sub-clauses of Clause 18 and in the context of the
schedule of disbursement as prescribed therein. Plainly, the powers under
Sub-clause 18.13 cannot be extended to enable the Administrator to devise
its own procedure for verification after the term of the Agreement has
expired and to apply the same retrospectively to recalculate the subsidy
already distributed.
49. Sub-clauses 22.1 and 22.2 of Schedule II to the Agreement, which
were also referred to by Mr Jain, are set out below:-
"22.1 The Administrator or his authorized
representative shall have the right to inspect the sites
used for extending the Service and in particular but not
limited to access to leased lines, junctions, terminating
interfaces, hardware/software, memories of
semiconductor, magnetic and optical varieties, wired or
wireless options, distribution frames, and conduct the
performance test including entering into dialogue with
the system through Input/output devices or terminals.
The Universal Service Provider will provide the
necessary facilities at own cost for monitoring of the
system, as required by the Administrator or its
authorized representative(s). The Inspection will
ordinarily be carried out after reasonable notice except
in circumstances where giving such a notice will defeat
the very purpose of the inspection.
22.2 Wherever considered appropriate Administrator
may conduct any inquiry either suo-moto or on a
complaint to determine whether there has been any
breach in compliance of terms & conditions of the
Agreement by the Universal Service Provider and
during such inquiry the Universal Service Provider
shall extend all reasonable facilities without any
hindrance."
50. A plain reading of Sub-clause 22.1 also indicates that the
Administrator would have the right to carry out inspections of sites and
services as indicated in Sub-clause 22.1 and the USPs were obliged to
provide all necessary facilities for the said purpose as required by the
Administrator. However, this clause is also of no assistance to DoT as there
is no denial of any inspection sought by the Administrator.
51. Sub-clause 22.2 of Schedule II expressly provides that the
Administrator may conduct any enquiry either suo moto or on a complaint
to determine whether there is any breach in compliance with the terms and
conditions of the agreement. Thus, it is always open for the Administrator
to conduct any enquiry as may be necessary. However, this does not
necessarily mean that the results of any enquiry carried out by the
Administrator would be binding on the USPs. Further, the USPs are also
not obliged to accept any inference drawn by the Administrator from the
enquiries conducted. In the present case, DoT is insisting that not only the
results of the special verification conducted on a sample basis but also the
inference that the results can be extrapolated to determine the quarterly
claims for RDELs 'for the extended period i.e. from QE 30.06.2007 to QE
31.03.2010', be accepted by TTL. This Court is not persuaded to accept the
interpretation of Sub-clauses 22.1 and 22.2 as canvassed on behalf of DoT.
At any stretch, rejection of such interpretation by the arbitral tribunal
cannot be held to be patently illegal or perverse as contended on behalf of
DoT.
52. The arbitral tribunal had considered the provisions of the Agreement
as well as the Telegraph Rules and concluded as under :-
"8.2.36 The Tribunal is of the considered opinion that
Claimant by way of issuing Circulars cannot
amend the Agreement or add new clauses. Such
Circulars are bad in law. It is pertinent to note that
Section 7 of the Act was inserted to prescribe
Rules to set the manner in which the funds may be
administered. Thus the legislative intent here is
clear that the administration of Fund should be as
per the Rules and in no other manner. Rule 527
clearly states that the funds to be released to the
USP should be as per the terms of the Agreement,
therefore till the time there is an amendment in the
Rules, only the Contract Agreement is to be seen
for releasing the funds.
8.2.37 After perusing the Governing Law, it is found that
there is no power granted to the Claimant to
unilaterally amend the provisions of the Contract
by issuing Circulars. Such amendment/
modification after the expiry of the Agreement is
invalid."
53. This Court does not find the aforesaid view to be either patently
illegal or unreasonable (on the touchstone of the wednesbury principle). In
these proceedings, this Court is not called upon to act as a Court of first
appeal and to re-examine the rival contentions on merits of the dispute.
The parties have agreed that the decision of the arbitral tribunal would be
binding and, therefore, they have to accept the same unless they are able to
establish that the award can be set aside on any of the grounds as set out
under Section 34(2) of the Act. DoT has sought to place its case within the
scope of Section 34(2)(b)(ii) of the Act. However, this Court is unable to
accept that the decision of the arbitral tribunal offends the fundamental
policy of Indian Law or public policy.
54. This Court also does not find any infirmity with the decision of the
arbitral tribunal and the Circulars cannot be applied retrospectively.
55. Thus, no interference with the impugned award is called for and the
present petition is dismissed. The parties are left to bear their own costs.
VIBHU BAKHRU, J
MAY 11, 2017
RK
