Delhi High Court
Department Of ... vs Tata Telesrvices Limited on 17 April, 2018
$~32
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 17.4.2018
+ FAO(OS) (COMM) 68/2018, CM APPLN 14793-14794/2018 & and
CAV 325/2018
DEPARTMENT OF TELECOMMUNICATIONS ..... Appellant
Through Mr.Vinod Diwakar, CGSC.
versus
TATA TELESERVICES LIMITED ..... Respondent
Through Mr.A.S.Chandhiok, Sr. Adv. with
Mr.Mansoor Ali, Mr.Nitin Kala,
Mr.Jibran Tak, Ms.Chandhi Gher and
Ms.Ramya Kutty, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT (Open Court)
1 The Department of Telecommunications‟ appeal is against the
judgment of the learned Single Judge rejecting its objections under
Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter
called "Act") to the Award of 13th October, 2016 (hereafter called
"impugned award") made by sole Arbitrator (hereafter called "the
Tribunal"). Pursuant to the „New Telecom Policy‟ formulated in 1999
„Universal Service Support Policy‟ (USSP) was framed to provide
CS(OS)(COMM) 68/2018 Page 1 of 8
access to basic telecom services to all at affordable and reasonable
prices. Under USSP basic rural telephoning at affordable price was
visualized and to achieve its further objectives Universal Service
Obligation Fund (USOL) was established under the Indian Telecom
(Amendment) Act, 2003. This was with a view to provide financial
support and subsidy to all kinds of telecom services including mobile
telephoning and broadband connectivity. Responding to tender
invitation for the Rural Household Direct Exchange Line (RDEL) the
respondent, i.e. Tata Teleservices Limited offered its bids as a
Universal Service Provider. After its bid was accepted, it was entitled
to claim subsidy disbursement for providing RDEL specified in Short
Distance Charging Area. The Tata Teleservices entered into contract
with respect to eight different service areas, i.e. different States. This
resulted in eight separate sets of agreement covering 12.172 Short
Distance Charging areas (SDCAs). Consequently, on 24.3.2005
parties entered into an agreement for subsidy disbursement (hereafter
referred to as the "subsidy agreement") for Bihar, valid from
01.04.2007 to 31.03.2008. At the request of the Director, Tata
Teleservices the period of installation i.e. the contract of the parties
was extended three times i.e. last dated 31.3.2010. Correspondingly
the provision for subsidy was extended up to 31.3.2010. The different
rates of subsidy were envisaged in the agreement. The Department of
Telecommunication (DoT) alleged that serious discrepancies
pertaining to RDEL instalments were received and consequently
issued two circulars dated 13.10.2010 and 06.07.2011 with respect to
verification of the subsidies‟ disbursement. It alleged that on a
CS(OS)(COMM) 68/2018 Page 2 of 8
special verification conducted by the Controller of Communication
Accounts (CCA) for Bihar it emerged that only 3.58% of the RDEL
claimed to have service of Tata Teleservices. This resulted in
extrapolation of such results, in accordance with law in the latter
circular dated 06.07.2011. A demand notice was therefore issued, by
the DoT incorporating the Tata Teleservices to deposit the amounts
allegedly paid in excess. Tata Teleservices declined to apply.
2 The dispute was referred to arbitration in terms of the
agreement. DoT filed its statement of claims asking that it was
entitled to a sum of Rs.27,74,53,532/- with interest and costs. Tata
Teleservices filed a counter claim for Rs.84.1 lakhs along with interest
and costs. After pleadings were competed, the Tribunal framed eight
issues. During the proceedings, the DoT contended that issue nos.2
and 3 due to the binding nature of the circulars dated 13.10.2010 and
06.07.2011, could be tried as preliminary issue. The parties agreed.
3 The DoT contended that the circulars were valid and in
accordance with law and notwithstanding that they were made to
operate retrospectively. The terms of the agreement enable the
administrator to issue them. Tata Teleservices naturally argued to the
contrary contending that the terms of the agreement bound the parties
and that any subsequent alteration - being based upon circulars or any
other external event could not guide or operate or control operation of
the contract. It was also contended that in terms of the agreement
itself, the procedure for verification eluded to refer to statutory rules
which incorporated and could not subsequently be altered.
CS(OS)(COMM) 68/2018 Page 3 of 8
4 The Tribunal by an elaborate preliminary award rejected the
DoT‟s contention and held that the circulars relied upon could not
control the contract. This preliminary award was challenged under
Section 34 of the Act by the DoT. The impugned judgment rejected
DoT‟s petition under Section 34 of the Act. The review petition
preferred by the DoT too was rejected on the ground of delay.
5 It was urged by Mr.Vinod Diwakar, learned counsel for the
DoT, that the preliminary award which is by way of an interim award,
was in error in rejecting the DoT‟s contention with respect to the
binding nature of the two circulars. It was submitted that having
regard to the larger public interest, the administrator sought recourse
to his conceded powers under Clause 18 of the agreement and issued
the circulars which were applicable specifically to the contract in
question and put in place a more intensive method for verification.
Urging that the Tribunal and the Single Judge erred in law in holding
otherwise, learned counsel relied upon the terms of the agreement and
the circulars. He also sought to underscore his arguments by relying
upon the documents produced before the Tribunal to suggest that the
claims were made on fictional basis and were not grounded on actual
services rendered.
6 The Arbitrator in the relevant para of the award, noticed that
Section 9B and Section 7(2)(eea) of the Indian Telegraph Act - after
its amendment, enable the Central Government to formulate rules for
administration of the Universal Service Obligation Funds i.e. the
funds. Pursuant to this power, the Rule 527 was framed specifically
CS(OS)(COMM) 68/2018 Page 4 of 8
in regard to the issue of verification. The Tribunal also took note of
the other rules and held as follows:
"8.2.2 The Telegraph Act, 1951 was amended in the year
2003 (with effect from 01.4.2002) to insert Part IIA which
dealt with "Universal Service Obligation Fund". This part
has four sections viz. 9A, 9B,9C and 9D wherein 9A
established USOF and 9D provided for administration and
utilization of Fund under Section 7 of the Act, Central
Government is empowered to make Rules for the conduct of
Telegraph. Section 72(2)(eea) was inserted to provide
power to the Central Government to makes Rules for
administration of the Fund. In exercise of power conferred
under section 7(2)(eea), Central Government amended the
Indian Telegraph Rules, 1951 and inserted Part X to lay
down Rules for administration of Fund.
...................
8.2.4 Scope of the agreement is defined in Schedule II
(Terms and Condition, Part I, Central Conditions), wherein,
Clause 2 provides that USP shall provide, operate and
maintain all such RDELs in the SDCAs in a Service Area for
which the agreement is entered into.
8.25. Scheme of the Project/Agreement is mentioned in the
Part II of the Agreement, which provides Technical
Conditions wherein, Clause 16 provides for Quality of
Service parameters to be maintained by the USP and also
provides powers of the Administrator to carry out
performance test, inspection etc. under Clauses 16.2, 16.3,
16.4 and 16.6.
..................
8.2.7 Claimant contended that all actions under Clauses
18.13, 20.1 and 22 were initiated in accordance with the
Clause 22.1 of the Agreement. Clause 22.1 provides rights
to the Administrator or his Authorized Representative to
inspect the sites after giving due notice except in the case
where, providing notice would defeat the whole purpose of
inspection.
..................
8.2.29 Clause 22 of the Agreement provides the right to
Administrator to inspect and conduct inquiries. But the said
right is part of the Agreement with a term ending on
31.03.2010. Therefore, no Circulars could be issued after
the expiry of the Agreement. Clause 22 does not give a right
to the Claimant to extend the terms and conditions of the
Agreement beyond its term.
........................
8.2.30 The agreement vide Clause 6 provides that "....except
in case of conflict and inconsistency on any issue relating to
this agreement the terms set out in the body of this
agreement with schedule annex thereto shall prevail." Thus,
the right and liabilities of the parties herein are guided by
the provisions of the Agreement, which also has the mandate
of the Act and the Rules.
8.2.31 There are no such specific Statutory Rules which
support the issuance of Circulars and that in absence of any
such Rules, the Terms and Conditions with respect to the
Fund cannot be regulated by the Circulars. Furthermore,
none of the Rules provide for anything as contained in the
Circular and hence, the same would not be applicable to the
case.
8.2.32 In the light of Rule 524(iv) & (v), Clause(s) 18.1,
18.2, 18.9, 18.10 and 18.11, 18.12, 18.13 and 20.3,
contention of the Claimant that for timely release of subsidy,
"due verification" was carried out only on the basis of
documents and the Affidavit submitted by the USP and as
such they have the power to conduct Special Verification. It
can be understood from such contention that Claimant did
not verify the Claims as mandated under various clauses of
the Agreement and now contends that their inaction entitles
them to re-write the expired Agreement and extend it beyond
its term. The final adjustment has already been made as
provided under the Agreement.
8.2.33 Further, object of Clause 18.13 of the Agreement is to
ensure proper and correct verification. The mandate
contained is applicable to alteration/modification provisions
in Clause 18. It was stated that as per Clause 18
modification/alteration could only be for verification of
claim statement and documents provided by the Claimant for
subsidy claim.
7 In the light of the above conclusions which were preceded by
extensive discussion of the parties‟ submissions and analysis of the
terms of the agreement, entered into between them, the Tribunal
rejected the DoT‟s argument that the verification was proper and
justified.
8 This Court is of the view that a plain reading of the award and
the impugned judgment too show that the basic submissions of the
DoT was that the terms of the circulars in effect superseded the written
agreement. The Tribunal expressly held that the agreement
incorporates the powers, the terms and the procedure prescribed in
Rules 524 and 527 framed under the Indian Telegraphs Act. These
findings are based on a careful reading of the agreement and the
working out of it by the parties during the contractual period. As such
no illegality much less patent illegality can be attributed to this
conclusion. The Tribunal further concluded that the procedure of
"extrapolation" - upon which the claims rested, was alien and not
agreed to by the parties. Now it is not the DoT‟s case that the
circulars superseded the rules nor did they express override them.
Such being the case, the Tribunal‟s award, in this case is justified
because the rules are essentially part of law, being delegated
legislation. It is axiomatic that provisions of law can only be
supplemented by administrative instructions and not supplanted by
them. The arguments of the DoT were therefore untenable.
In rejecting this, the Tribunal acted within its jurisdiction and cannot
be accused of committing illegality. Equally, the learned Single Judge
did not commit any error which calls for interference. The appeal, in
the light of the above discussion, is unmerited, it is accordingly
dismissed. Pending applications too are disposed of.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
APRIL 17, 2018/ndn
