Partly allowed

Bharti Airtel Limited v. Dot

TDSAT18 Oct 2011TELECOM PETITION/404/2011

Case brief

AI extract

What is this about?

The CAT examined a showing cause notice imposing a Rs. 50 crore penalty on Bharti Airtel for alleged sub-licensing and revenue under-reporting. The Tribunal distinguished prior precedents, noted the lack of reasons for the maximum penalty, and directed a 50% interim deposit to stay the punitive order.

What did the court decide?

Petitioner directed to deposit Rs. 25 crores (50% of the claimed penalty) within two weeks to stay the full imposition.

Bharti Airtel Limited vs Dot — Banking and Recovery | TDSAT (2011)

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TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL

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NEW DELHI

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Dated 18.10.2011

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Petition No.404/2011

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M/s Bharti Airtel Ltd. … Petitioner Vs. Department of Telecommunication … Respondent

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BEFORE:

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HON’BLE MR. JUSTICE S.B. SINHA, CHAIRPERSON HON’BLE MR.P.K. RASTOGI, MEMBER

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For Petitioner : Mr.Gopal Jain and Mr.Kaushik Mishra, Advocates. For Respondent : Ms.Maneesha Dhir and Mr.K.P.S. Kohli, Advocates.

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O R D E R

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The petitioner was a CATS licensee, the license having been granted under the Indian Telegraph Act, 1885 since 29.11.1994.

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It migrated to UAS license regime from CMTS license regime.

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The said license dated 16.3.2005 contain inter alia the

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following clauses :-

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“ 6.1 The LICENSEE shall not, without the prior written consent as described below, of the LICENSOR, either directly or indirectly, assign or transfer this LICENCE in any manner whatsoever to a third party or enter into any agreement for sub-Licence and/or partnership relating to any subject matter of the LICENCE to any third party either in whole or in part i.e. no sub-leasing/partnership/third party interest shall be created. Provided that the LICENSEE can always employ or appoint agents and employees for provision of the service.

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9.1 The LICENSEE shall furnish to the Licensor/TRAI, on demand in the manner and as per the time frames such documents, accounts, estimates, returns, reports or other information in accordance with the rules/ orders as may be prescribed from time to time. The LICENSEE shall also submit information to TRAI as per any rider or direction or regulation issued from time to

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time under the provisions of TRAI Act, 1997 or an amended or modified statute.

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10.2 (i) The LICENSOR may, without prejudice to any other remedy available for the breach of any conditions of LICENCE, by a written notice of 60 Calendar days from the date of issue of such notice to the LICENCEE at its registered office, terminate this LICENCE under any of the following circumstances :

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a) fails to perform any obligation(s) under the LICENCE including timely payments of fee and other charges due to the LICENSOR;

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b) fails to rectify, within the time prescribed, any defect/deficiency/correction

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c) goes into liquidation or ordered to be wound up.

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d) is recommended by TRAI for termination of LICENCE for non-compliance of the terms and conditions of the LICENCE…..

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10.2(ii) The Licensor may also impose a financial penalty not exceeding Rs. 50 crores for violation of terms and conditions of licence agreement. This penalty is exclusive of Liquidated Damages as prescribed under clause 35 of this Licence Agreement.

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17.1 The LICENSEE will charge the tariffs for the SERVICE as per the Tariff orders / regulations / directions issued by TRAI from time to time. The LICENSEE shall also fulfill requirements regarding publication of tariffs, notifications and provision of information as directed by TRAI through its orders / regulations / directions issued from time to time as per the provisions of TRAI Act, 1997 as amended from time to time.

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30.4 It shall be the responsibility of the LICENSEE to issue or cause to be issued bills to its subscribers for use of the service. The LICENSEE shall maintain such records so as to produce itemized billing information. The billing system of the LICENSEE shall be able to generate the billing information, in adequate details, to ensure satisfaction to the customer about the genuineness of the bill. The directions of TRAI, from time to time, in this regard shall apply.

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41.14 The complete list of subscribers shall be made available by the LICENSEE on their website (having password controlled access), so that authorized Intelligence Agencies are able to obtain the subscriber list at any time, as per their convenience with the help of the password. The list should be updated on regular basis. Hard copy as and when required by security agencies shall also be furnished. The LICENSEE shall ensure adequate verification of each and every customer before enrolling him as a subscriber; instructions issued by the licensor in this regard from time to time shall be scrupulously followed. The SIM Card used in the User terminal or hand-held subscriber terminal (where SIM card is not used) shall be registered against each subscriber for his bonafide use. The LICENSEE shall make it clear to the subscriber that the SIM card used in the user terminal registered against him is non-transferable and that he alone will be responsible for proper and bonafide personal use of the service.

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41.19(i) Utmost vigilance should be exercised in providing bulk telephone connections for a single user as well as for a single location. Provision of 10 or more connections may be taken as bulk connections for this purpose. Special verification of

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bonafide should be carried out for providing such bulk connections. Information about bulk connections shall be forwarded to VTM Cell of DoT, DDG (Security) DoT and any other officer authorized by Licensor from time to time as well as all Security Agencies on monthly basis.

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(v) Bulk users premises should be inspected by the service providers at regular intervals for satisfying themselves about bonafide use of such facilities. A record of such inspection should be maintained and preserved for minimum one year, for inspection / verification by the licensing authority or a designated officer of the authority.”

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We may at this stage notice that Clause 6.1 was also existing in the original 1994 license of the petitioner. Clause 19.1 was introduced in the year 1999. Clauses 6.1 and 30.4 existed in the original license. Clause 17.1 was inserted on 25.9.2001. Clause 41.4 was inserted on 12.8.2002. Clause 41.19 (i) and (v) were inserted on 26.3.2003; whereas Clause 10.2 (i) and (ii) were inserted on 25.11.2004.

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Admittedly, on 21.7.1999, the petitioner entered into an agreement with M/s Galaxy Rent -A-tel Pvt. Ltd. hereinafter called as GRTPL. A similar agreement was entered into by and between the petitioner and one M/s Delhi Super Trade Pvt. Ltd (Falcon Business Resources Pvt. Ltd) on 3.4.2000 (FBRPL). FRAT and FBRPL

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jointly would be referred to hereinafter as `the said Companies’. The said companies were said to have been taking bulk mobile connections from the petitioner and the renting out the same to individuals. An investigation was carried out by the VTM Unit, Delhi of the respondent. The respondent on or about 27.8.2009 issued a notice to the petitioner contending inter alia that it, in violation of the terms and conditions including Clauses 6.1, 9.1, 17.1, 30.4, 41.19 (i) & (v) and 41.14 of the license agreement, had not only illegally authorized the said companies to give on rent the SIM Cards and handsets to the customers who had actually been carrying out activities like a mobile service provider with fixation of their own CAF, bill and tariff plan, roaming rates, support services, bill collection, customer care, risk and credit management etc. relying on or on the basis of the said purported agreements. It was stated that the petitioner had issued 741 and 2047 bulk mobile connections to GRTPL and FBRPL, respectively. The petitioner states that it had terminated the said agreements in October, 2007.

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The VTM Cell directed the petitioner to stop the renting of domestic side SIM cards. However, from the data base of the petitioner submitted with VTM Cell for the month of May, 2008 it appeared that 10519 connections had been in operation in the name

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of the said companies which would show that they had continued to

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do the business of MT SIM cards.

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The IB had further found that out of 235 mobile numbers, 96 mobile numbers belonged to the petitioner and the same on analysis showed that 55 mobile numbers could not be traced and 2 mobile numbers had still been working in the name of the company M/s FELCAL; the remaining 39 mobile numbers working in the name of various Embassies.

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It was directed :-

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“HENCE, for the reasons stated above as per the finding of TERM Cell, Delhi, M/s Bharti Airtel Ltd. for Delhi Service Area is requested to offer comments within 15 days from the date of issue of this letter. If no reply is received within above stated time limit, it will be presumed that M/s Bharti Airtel Ltd. has nothing to say and appropriate action as per the terms and condition of the License Agreement shall be taken. Furthermore, M/s Bharti Airtel Ltd. is also directed to immediately disconnect the bulk connections issued to M/s FBRPL and M/s GRTPL and also to others if any in similar cases except the mobile connections working with foreign missionaries posted at foreign embassies in India having complete CAFs in all respect of the Service Provider and having valid documents.”

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Alongwith the said notice, the details of the mobile numbers

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which are said to have been connected by the aforementioned companies had been furnished.

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The petitioner by its letter dated 7.9.2009, stated as under:-

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“….We had been charging our customers as per the tariffs published and filed with TRAI from time to time and at no point of time did we charge any customer apart from the applicable tariffs. The entire amount billed to our customers, including M/s Falcon Business Resources Pvt. Ltd. (FBRPL) and M/s Galaxy Rent-a-Tel Pvt. Ltd. (GRTPL) has been included in the AGR of the respective financial years and license fee thereon has duly been paid and, therefore, no loss has been caused to the Government in any manner, whatsoever. Further, at no stage did we pass on any right to provide the telecom services to M/s FBRPL and M/s GRTPL. The services to the customers, all along, continued to be provided by the Company and these agencies i.e. M/s FBRPL and M/s GRTPL were merely acting as a distribution channel for the issuance of SIM Cards under the agreements referred to in your letter dated 27.8.2009.

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The entire amount charged and collected by the Company from M/s FBRPL and M/s GRTPL having been taken into account as a part of the AGR, it cannot be said that any loss has been caused to the Government of India.

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It would be pertinent to mention that we have already terminated the agreements with M/s FBRPL and M/s GRTPL referred to your letter dated 27.8.2009 way back in the year 2007 vide

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letters dated 26.10.2007 copies whereof are provided at Annexure-1 for your reference.”

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The explanation of the petitioner is as under:-

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“…….It is reiterated, even at the cost of repetition that the Company has already terminated the above referred agreements with M/s FBRPL and M/s GRTPL, the Company has never permitted any renting of SIM cards. Since a number of SIM cards which had earlier been issued by M/s FBRPL and M/s GRTPL to various persons and entities, mostly embassies, who were interested in continuing with the subscription of services, the Company obtained requisite documents from the respective persons and entities and updated its database accordingly. Since it did not involve any SIM change and the continuity of services was not broken, the date of activation continued to remain the same in the database. It is submitted that in view of this position, it cannot be inferred that M/s FBRPL and M/s GRTPL continued to allow renting of domestic SIM cards. Since the list of the mobile numbers mentioned in para 14 of letter dated 27.8.209 has not been provided, we are not in a position to provide our specific comments as regards these numbers.

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As regards your directions issued vide letter No.369 dated 27.5.2009 to furnish details of amounts collected by M/s FBRPL and M/s GRTPL from the end users/subscribers and the amount received by M/s Bharti Airtel Ltd. from M/s FBRPL and M/s GRTPL towards 2047 and 741 bulk postpaid connections, it is submitted that we do not have any information/record as regards the amounts collected by M/s FBRPL and M/s GRTPL from the end user/subscriber. However, we have been able to retrieve the data as regards the amount charged by the Company

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to M/s FBRPL and M/s GRTPL from the computerized records on best effort basis and the amount for the period from April 2006 to January 2008 (till the effective date of termination of agreements with M/s FBRPL and M/s GRTPL) worked out as follows :

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Amount charged from M/s FBRPL : Rs.39,167,430.38 Amount charged from M/s GRTPL : Rs.6,729,196.66”

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It was furthermore stated:-

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“….As regards the connections still active in the name of M/s FBRPL and M/s GRTPL, these are connections subscribed by them from time to time for their own bonafide use and not for any renting purposes. The details of the connections still active in the name of M/s FBRPL and M/s GRTPL along with the date of respective subscription are being provided in Annexure-3 annexed herewith. We have the requisite subscription documents in respect of these numbers which could be produced for your kind perusal if desired.”

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According to the petitioner, it by a letter dated 26.10.2007 terminated the agreement of the said companies. Yet again on 18.1.2010, the respondent issued a notice in terms of Clause 10.1

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and 10.2 of the license agreement, stating :-

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“….During the course of investigation by VTM Cell, Delhi, it has been informed by M/s BAL that Plan-599 was given to M/s FBRPL and M/s GRTPL

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who had further rented out the SIM Cards to the individuals at tariffs different from the Plan-599. The details of Plan-599 is as under :-

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Monthly fixed charges : 599 Local (Airtel to all mobiles) 50 P/Min (Airtel to others) Rs 1/Min STD (Airtel to Airtel mobiles) Rs 2 (Airtel to others) Rs.2.40 ISD Group-I Rs.6.40 Group-II Rs.9.20 ROW Rs 40.00 SMS Local Rs 1 National Rs 2 International Rs 5

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Pulse Communication and Management Services was providing web-services for promoting the rental business of M/s GRTPL. As per the communication received from PCM, M/s GRTPL was charging the amount of Rs.150/- per day for renting of SIM Cards with STD/ISD facility and an amount of Rs.175/- per day for SIM Cards with roaming facility in the year 2000. The other call charges given in the offer letter by Galaxy are as under :-

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Rs. 9 per minute for local calls

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Roaming as per Airtel actual billing + DoT

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Tax

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10% service Charges on calls + 30% service charges on roaming calls.

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This clearly indicates that tariff plans (filed in TRAI) conveyed by M/s BAL were not the one the rental companies were charging from the customers. Similarly M/s FBRPL was also renting

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out SIM Cards to individual at tariffs different from the Plan-599.

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Hence, M/s BAL has violated the provision of the agreement which inter alia states that “The LICENSEE will charge the tariffs for the SERVICE as per the Tariff orders/regulations/directions issued by TRAI from time to time. The LICENSEE shall also fulfill requirements regarding publication of tariffs, notifications and provision of information as directed by TRAI through its orders/regulations/directions issued from time to time as per the provisions of TRAI Act, 1997 as amended from time to time.

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AND WHEREAS as per UAS License Agreement condition 41.19(v), “Bulk users premises should be inspected by the service providers at regular intervals for satisfying themselves about bonafide use of such facilities. A record of such inspection should be maintained and preserved for minimum one year, for inspection/verification by the licensing authority or a designated officer of the authority”. As the bonafide usage of these mobile connections given in the name of M/s FBRPL and M/s GRTPL were not checked by M/s BAL. Hence, this is a violation of DoT instructions as above.

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As it is evident from the tariff plan given to rental company by M/s BAL, M/s FBRPL and M/s GRTPL were directly collecting the money from the subscribers which was higher than what it comes out to be from tariff plan 599 of M/s. BAL. The details of amount on the purchase of bulk SIM Cards from M/s. BAL and the revenue earned by M/s FBRPL on the renting of the SIM Cards to the individuals is as under :-

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Year 1.04.2001 31.03.2002 1.04.2002 31.03.2003	to to	Amount collected on Purchase of SIM Cards from M/s. BAL I R 11978196.92 13515638.27	Revenue on Sale of SIM Cards on rental to the individuals 20796623.58 28487842.16
1042003	to	(n s.) 1237836523	2707517237
1.04.2000 31.03.2001 .. 31.03.2004	to	2280697.65 .	4617707.98 .

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1.04.2004 31.03.2005	to	17462888.07	32950041.58
1.04.2005 31.03.2006	to	18879840.05	27949398.75
1.04.2006 31.03.2007	to	21039839.91	32843011.34
1.04.2007 31.03.2008	to	18803273.39	24423979.04
1.04.2008 July 2008	to	1917352.85	1999581.65
TOTAL		118256092.34	201143358.45

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It is evident from above that the money being collected by M/s FBRPL from end users was more than the amount reimbursed to M/s BAL on the account of purchase of bulk SIM Cards. Similar is the case with M/s GRTPL. This has caused losses to the Government of India by not taking into account the money collected by M/s FBRPL and M/s GRTPL from customers as the part of their AGR which is earned by the M/s FBRPL and M/s GRTPL based on their invoice generated to the hirer.”

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It was directed:-

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“Accordingly, M/s Bharti Airtel Limited is directed to show-cause to explain within 21 working days from issue of this notice as to why appropriate action according to condition 10.2(i) & (ii) of License Agreement should not be initiated against the company for violation of terms and conditions of License Agreement. If no reply is received within the above stated time – limit it shall be presumed that M/s Bharti Airtel Limited has nothing to say in the matter and appropriate action may be initiated against the company as per terms and conditions of the License

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Agreement, M/s Bharti Airtel Limited is also directed to take into account of the money collected by M/s FBRPL and M/s GRTPL from the customers based on their invoices generated as the part of the Company’s AGR and intimate the details to the DoT.”

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Cause was shown by the petitioner on 9.2.2010 inter alia

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stating:-

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“16. With respect to unnumbered paragraph 8, it is agreed that there was an agreement which was entered into by the Company with M/s Falcon Business Resources Pvt. Ltd. (GRTPL). However it is denied that the SIMs were rented to the subscribers as per the interpretation of the term “Rent” as being conceived by DoT. In fact the SIMs were passed/supplied to the customer through M/s FBRPL & M/s GRTPL as is being done for any other Distributor and as per the industry practice. The record of the customers to whom the SIMs were being issued by M/s FBRPL & M/s GRTPL was being maintained by the said agencies as mandated under the respective agreements entered into with them. They were issuing the SIMs and adding value to the services by supplying handsets as well as and charging a composite amount towards, interalia, “rent” of the handset. Thus the term “rent” has to be read and construed qua the handsets being supplied by these companies for usage by the customer and apart from this there was no other material difference between the transaction in question and the process of issuance of SIM to any other subscriber. As regards the alleged issue of bulk connection, the contention and ratiocination rebutting the fact as given above in paragraph number 14 may be read with this paragraph.

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……..It is also submitted that Bharti Airtel Limited was charging the customers, including M/s FBRPL and M/s GRTPL as per the tariffs published and filed with TRAI from time to time and at no point of time did Bharti Airtel Limited charged any customer more than the applicable/permissible tariffs. It is pertinent to bring to your notice that these Distributors/Agencies also provided handset to the subscribers on hire basis and rental was charged for the same from the customers. Hence, the difference reflecting in the tariff filed with TRAI and the amount charged from the subscriber was owing to composite transaction of service as well as usage charges for handsets.

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The contents of unnumbered paragraphs number 17 & 18 are denied being false and incorrect. The figures mentioned in unnumbered para 17 of the notice under reply are denied for want of knowledge and in the absence of adequate detailing and source of the said figures…”

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The impugned letter dated 19.9.2011 was issued imposing a

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penalty of Rs.50 crores stating :-

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“21. Accordingly M/s Bharti Aitel Limited was issued show-cause notice on 18.01.2010 to explain within 21 working days from date of issue of this notice as to why appropriate action according to condition 10.2(i) & (ii) of the UAS License agreement should not be initiated against the company for violation of terms and conditions of the License agreement. And/M/s Bharti Airtel Limited was also directed to take into account of the money collected by M/s FBRPL and GRTPL from the customers based on their invoices generated as the part of the company’s AGR and intimate the details to the DoT.

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The reply received from Bharti Airtel Limited vide letter no.DoT/2009/212 dated 09 February 2010 against Show Cause Notice dated 18.01.2010 have been examined and the same has been found unsatisfactory as M/s Bharti Airtel Limited have not been able to establish compliance to license conditions questioned in the show cause notice dated 18.01.2010. Hence as per the UAS License agreement condition 10.2 (ii), a penalty of Rupees Fifty crores (Rs.50 crores) is hereby imposed on M/s Bharti Airtel Limited for violation of license conditions mentioned in above paras. Now therefore, M/s Bharti Airtel Limited is directed to deposit the penalty amount immediately and in any case within 15 days of the date of this notice by means of demand draft/banker’s cheque drawn on any scheduled bank in favour of PAO, Department of Telecom Headquarters, New Delhi 110001 in the Pay and Accounts Office of the Department of Telecommunications at New Delhi.”

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This notice is issued without prejudice to any other remedy available to the Licensor and also to any other actions for the breach of any of the conditions of the said UAS License Agreement signed with the company.”

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Submissions of the petitioner in support of its prayer for the

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interim relief for restraining the respondent from acting upon and giving effect to the impugned demand notice dated 19.9.2011 are as under :-

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(i) No reason has been assigned as to why

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the maximum penalty stipulated under Clause

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10.2 (ii) was imposed.

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(ii) The agreement with the said companies

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having been entered into the year 1999 and 2000, the amended clauses of the license agreement would have no application to this case.

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(iii) The Hon’ble Minister having called upon the Departments to evaluate the merit of each violation for the purpose of determining the quantum of the penalty having not been followed, the interim order cannot be sustained.

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(iv) The period of 21 days provided to the petitioner for showing cause was not a reasonable. The impugned notice suffers from non-application of mind and an impugned order has been passed, it pre-determined motion.

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Ms.Maneesha Dhir, learned counsel appearing on behalf of the respondent, on the other hand, urged :-

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(a) The petitioner having regard to the facts and

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circumstances of this case must be held to have

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violated the conditions of license mentioned in the impugned order as it : (i) failed to disclose the true and correct annual gross revenue; (ii) allowed the companies to have their own tariff plans; (iii) refused to furnish all correct informations and data to the respondent; (iv) violated the security conditions.

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(b) The effective date of the license being 29.11.1994, all the amendments in the license must be held to be applicable in the case of the petitioner.

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notices have been served upon the petitioner.

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(d) The petitioner in its reply having failed to explain the charges made against it, must be held to have not been able to answer the same.

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(e) The impugned order dated 19.9.2011, must be read as a whole and not the paragraphs 21 and 22 alone.

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For the purpose of determining the question as to whether an

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interim order as has been prayed for by the petitioner should be granted or not, this Tribunal is required to consider as to whether the petitioner has made out a prima facie, case and as to whether balance of convenience and irreparable injury is in favour of grant of an order of injunction has been prayed for.

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We have noticed heretobefore the basic facts which are not denied or disputed.

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The fact that Clause 6.1 contained was even in 1994 license is not in dispute. Mr.Jain has drawn our attention to the proviso appended thereto to contend that the petitioner was entitled to employ or appoint agents and employees for the provision of the service.

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The proviso appended to Clause 6.1, however, having hardly curved out an exception must be given a restricted meaning.

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It must be read alongwith the main provision in terms whereof the licensee either directly or indirectly is prohibited from assigning or transferring the license to a third party or entering into an agreement of sub-license.

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The UAS license agreement was entered into by and between the parties hereto on or about 16.3.2005.

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The petitioner was, thus, bound to comply with the terms thereof at least from that date if not earlier, as even from the year the 1994, the license conditions have been amended from time to time in the manner as noticed heretobefore.

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The respondent had not only issued notice(s) to the petitioner but it had also asked the said companies to provide informations. The FBRPL was asked to furnish the necessary informations by a notice dated 21.8.2009 by the respondent. Expressing its security

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concern as also the revenue loss it stated as under :-

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“8. AND WHEREAS it is observed that FBRPL is acting like a mobile service provider with their virtual mobile network which is being facilitated by M/s Bharti Cellular Ltd. as FBRPL is having their own CAF, Bill, Tariff Plan, bills collection, risk and credit management etc. all under the purported agreement with M/s Bharti Cellular Ltd.

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The undersigned is directed to request M/s FBRPL to furnish comments within 15 days of the issue of this letter on the above observations and provide proper complete compliance to the letter nos.VTMD-2007-36 dated 22^nd August,

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2007, along with the details and supporting documents. Besides information requested above, furnish detail of amount collected by M/s Falcon Business Resource Private Ltd. (FBRPL) from end users/subscribers and the amount reimbursed to M/s Bharti Cellular Ltd (BCL) by M/s Falcon Business Resource Private ltd. (FBRPL) on the account of 2047 and 105 bulk postpaid connections/SIM cards of M/s Bharti Cellular Ltd used for rental use since the date of signing the agreement between M/s Falcon Business Resource Private Ltd. and M/s Bharti Cellular Ltd. i.e. 3^rd April 2000.”

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Whereas the petitioner by its letter dated 24.8.2009 contended that the revenue earned through the said companies had been included in its return, the concerned companies refused to divulge any information on the plea of having entered into a contract with the petitioner herein. The petitioner as noticed heretobefore refused to divulge the requisite information stating that it had no knowledge about the revenue earned by the said companies.

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The petitioner, prima facie, in this case was made aware of the result of the investigations carried out by the VTM, Delhi and the IB. The respondent in its notices to show cause divulged its analysis of the effect and purport of the agreement dated 19.7.1999.

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Prima facie, it appears that despite the contentions raised by the petitioner that it had terminated the contract in October, 2007, the respondent pointed out that even in the year 2008-2009, the said companies had been granting new connections. It had furthermore been contended that the said companies used their own customers application forms, their own tariff and subscriber base information to the petitioner and thus they did not follow the instructions of the DoT so far as subscriber verification is concerned.

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It has not been denied or disputed that the said companies had been collecting money from a number of customers to whom bulk connections have been given.

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Respondent, thus, prima facie, must be held to have suffered some revenue loss.

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Mr.Jain would submit that from the impugned notices as also the order dated 19.9.20011 it would appear that the revenue loss from 1.4.2005 to July, 2008, if any, would be only a few crores of rupees and the respondent at best suffered a loss of Rs.50 lakhs. We are not concerned as to the amount of revenue loss at this stage. We are concerned with the fact as to whether the petitioner

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prima facie has violated the conditions of the license. It has not been denied or disputed that the respondent is entitled to revenue on AGR basis. The revenue on SIM cards on rentals realized from the individual customers, prima face, would have been the relevant consideration vis-a-vis the amount collected on the purchase of SIM cards of the petitioner. The contentions raised in paragraphs 17 and 18 of the impugned order point out that the said companies have indulged in activities which were not authorized.

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The respondents have also complied with the principles of natural justice by issuing notices dated 21.8.2009 and 18.1.2010.

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The respondent has clearly contended that new connections have been given in the year 2008-2009. We would assume that the petitioner has no information/ record as regards the amount collected by the said companies but it could have sought for the same from the said companies. The petitioner in terms of the license agreement was bound to raise bills.

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It could not have allowed the said companies to raise the bills evidently the petitioner has not maintained record.

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The show cause notices contained the relevant extract of the

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agreement and/or analysis thereof by the VTM Cell itself. According to the respondent, even the provisions of Clauses 41.19 (i) and (v) were violated in regard to the grant of connections to the bulk users.

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Mr.Jain has relied upon a decision of the Supreme Court of India in the case of State of Bihar and Ors vs Industrial Corporation (P) Ltd. and Ors. reported in (2003) 11 SCC 465 to contend that the principles of natural justice are required to be carried out.

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The ratio of the said decision has no application to the facts of the said case.

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It was not a case where contractual obligations were sought to

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be imposed as therein statutory authorities were exercising their statutory powers.

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Reliance has also been placed upon an interlocutory order of this Tribunal in M/s Idea Cellular vs. DoT petition No.143/2011,

¶153

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¶154

wherein inter alia it was held :-

¶155

“14. An admission so as to bind the party who would suffer a penalty must be clear and specific.

¶156

When an administrative action resulting in civil or evil consequences is sought to be taken on the basis of the admission alone pursuant to or in furtherance whereof an inference of breach of the conditions of the licence is required to be drawn, the same must be held to be applicable wherein the licensee has clearly accepted the breach.

¶157

More significantly, any or every breach of the condition of licence ipso-facto may not attract the penal clause. The respondent herein has been conferred a discretionary jurisdiction in this behalf, as is evident from the fact that the word ‘may’ has been used.

¶158

In terms of the said provision, not only no penalty may be imposed, the quantum thereof may also depend on the extent of default committed by the licensee. In a given case, the licensor may also apply the doctrine of proportionality. It is not a case where the principles of Section 58 of the Indian Evidence Act would be applicable. It is also not a case where the purported admission on the part of the petitioner, prima facie, is judicial in nature.

¶159

We are of the view that for the imposition of penalty of a sum of Rs.50 crores on the petitioner, prima facie the principles of natural justice were required to be complied with. The effect of non-compliance of principles of natural justice is well known. The order would be a nullity. It cannot be given effect to, subject to just exceptions.”

¶160

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¶161

In that case no show cause notice was issued. Reliance was placed by the respondent therein on the purported admission made by the petitioner therein. Only in that view of the matter this Tribunal referred to the principles laid down in State of Bihar vs. Industrial Corporation (supra) for the purpose of considering as to whether the principles of natural justice were required to be complied with.

¶162

Mr.Jain would urge that a proper adjudication was necessary having regard to the nature of dispute. It is true that an adjudication may be necessary in a case of penalty and/or for the purpose of an administrative order but in a case of contract, qua contract what is required to be considered is as to whether prima facie there has been violation of conditions of license. If, prima facie, it is found that the petitioner has violated the conditions of license wherefor it had been given an adequate opportunity of showing cause, ordinarily the Tribunal may not interfere therewith.

¶163

Moreover, grant of an injunction ordinarily would mean that the respondent would be restrained even from enforcing the bank guarantees unless otherwise directed. The bank guarantees are

¶164

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¶165

furnished so as to secure performance of conditions of the license. If there is a violation of condition of license, bank guarantee may be invoked to that extent.

¶166

We, however, find some force in the submission of Mr.Jain that no reason has been assigned with regard to imposition of the maximum amount penalty of Rs.50 crores.

¶167

The respondent ought to have assigned some reasons with regard thereto.

¶168

We must, however, place on record that while saying so we are not placing any reliance upon the newspaper reports suggesting

¶169

that the Hon’ble Minister has desired framing of guidelines in that behalf by the respondent. Such newspaper reports prima facie are not admissible in evidence.

¶170

Having, thus, considered the matter we are of the opinion that interest of justice would be subserved if without prejudice to its rights and contentions in the main matter, the petitioner is directed to deposit 50% of the amount, namely, a sum of Rs.25 crores.

¶171

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¶172

Such deposit should be made within a period of two weeks

¶173

from date. The interim prayer made by the petitioner is, thus,

¶174

disposed of.

¶175

(S.B. Sinha) Chairperson

¶176

(P.K. Rastogi) Member

¶177

October 18, 2011 `ns’

¶178

Page 28 of 28

Bharti Airtel Limited v. Dot

Case brief

What is this about?

What did the court decide?

Bharti Airtel Limited v. Dot

Case brief

What is this about?

What did the court decide?

What the court decided

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