1. A license under the Telegraph Act is a grant of exclusive privilege and a statutory contract, not an ordinary commercial contract. The Central Government retains the right to impose conditions and penalties to ensure public interest and security.
2. Under Section 74 of the Indian Contract Act, 1872, a penalty clause in a license under Section 4 of the Telegraph Act is not treated as an illegal penalty if it operates as a deprivation of privilege or a reasonable compensation for breach of conditions affecting national security. Such clauses are not subject to strict assessment of actual quantum of damages if the breach is of an exceptional nature.
3. The Central Government, while parting with its exclusive right, can attach appropriate conditions and consider payments as it thinks fit to regulate the activity. The license is not arbitrary and the right to impose penalties is inherent in the statutory power.
4. The petitioner's practice of generating fake CLI numbers and routing international calls domestically to evade ADC payments and mislead security agencies constitutes a serious breach of license conditions. This conduct puts national security in jeopardy and is not merely a commercial dispute between operators or a financial dispute regarding interconnection charges.
5. The word 'also' in Clause 10.2(ii) of the license does not make a TRAI recommendation a mandatory condition precedent for imposing a penalty. The power to impose penalties is independent of the power to terminate.
6. The Division Bench found no merit in the contention that the specific performance arbitration clause barred the DoT from imposing penalties or that the order was without jurisdiction. The security aspect of telecom licenses requires strict adherence to conditions, and the order was dismissed.
