Full Judgment Text
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CASE NO.:
Appeal (civil) 1150 of 2006
PETITIONER:
Union of India
RESPONDENT:
M/s. Millenium Mumbai Broadcast Pvt. Ltd.
DATE OF JUDGMENT: 28/04/2006
BENCH:
S.B. Sinha & P.P. Naolekar
JUDGMENT:
J U D G M E N T
S.B. SINHA, J :
Union of India is before us aggrieved by and dissatisfied with the
judgment and order of the Telecom Disputes Settlement & Appellate
Tribunal, New Delhi dated 3rd October, 2005 in Petition No.49(C) of 2005,
whereby and whereunder the application filed by the Respondent herein was
allowed.
The basic fact of the matter is not in dispute. A Notice inviting tender
was issued by the Government of India, Ministry of Information &
Broadcasting in the month of October, 1999 from the companies registered
in India for grant of licence to operate FM broadcasting service at Mumbai.
The Respondent herein was one of the successful bidders along with four
others. It is not in dispute that in terms of the agreement, it was stipulated
that holders of 10 licences, which were planned for the city of Mumbai,
would co-locate the transmission infrastructure on a common transmitter
tower, as required in Clause 14 of the Licence Agreement, as also Article
7.1(i) of the Schedule (C) of the said Licence Agreement. Pursuant to or in
furtherance of the said scheme, the cost of creating the common
infrastructure to transmit from a common transmission tower was to be
shared by the ten licensees in Mumbai. It is admitted that five licensees who
were successful bidders in the auction process defaulted and did not sign the
agreements for grant of licences in Mumbai. Having regard to the default on
the part of the said five bidders, the costs of co-locating on a common
transmission tower for the remaining five licensees was almost doubled.
The Appellant herein, thereafter, issued guidelines permitting the five
licensees in Mumbai to broadcast from interim independent facilities for an
interim period of 24 months, during which period the five licensees were
required to set up a common transmission tower.
It is also not in dispute that the said guidelines were followed for two
years only, but, having regard to the difficulties faced by the said five
licensees to co-locate the transmission for broadcasting, they were permitted
to make their own arrangement to enable them to operationalize their
individual interim stations within a period of four months. It stands admitted
that the Respondent herein paid licence fees and also furnished a Bank
Guarantee to the tune of Rs.9.75 crores.
After the completion of the term of one year, a reminder was sent to
the Respondent on 6.3.2003 stating:
"It will be recalled that vide letter
No.212/216/2001-B(D)/FM dated 31.12.2001 you had
been informed that in respect of Mumbai you are
permitted to set up permanent co-located facilities by 29th
December, 2003.
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The deadline for setting up co-located facilities is
approaching. You are requested to inform this Ministry
of the actions that have been taken by you in setting up
the co-located infrastructure in Mumbai and to shift your
operation from the interim set up.
This is also to inform that the license fee for the
second year will become due on 29th April, 2003."
In terms of the said licence, in the event of default on the part of the
licensee to pay the consideration therefor, i.e., furnishing lincence fee within
a period of seven days of the beginning of each year, the Bank Guarantee
furnished could have been encashed. It is furthermore not in dispute that for
the second year of the licence, the Respondent was to pay a sum of 15%
more than the original licence fee. Union of India by a letter dated 2.5.2003
reminded the Respondent as regard payment of licence fee for the second
year. The Respondent herein responded to the said letter stating:
"Our Company is committed to FM Broadcasting
and on that basis we would like to reassure you that we
are arranging for payment of second year licence fee
amounting to Rs.11.2 crores at the earliest.
We should be in a position to deposit the said
licence fee amount in full by May 16, 2003. We are also
willing to pay interest for the delay of 9 days.
We request not to encash our bank guarantee
during this period i.e. May 17, 2003."
However, it stands admitted that the Respondent did not pay the
amount of licence fee by 16.5.2003, but, at the same time, the Appellant also
did not communicate to the Respondent as to whether its request to extend
the time for deposit of the said amount was accepted or not.
The Appellant, by an order dated 20.5.2003, revoked the licence
stating:
"In continuation of our earlier letter dated
2.5.2003, I am directed to inform you that you have
failed to pay the 2nd year’s licence fees within the
prescribed period, your licence stands revoked and
therefore you should stop broadcasting immediately."
The Appellant, thereafter, invoked the Bank Guarantee and encashed
the same on 28.5.2003. The Respondent, questioning the validity of the said
order of revocation of licence, filed a writ petition before the Delhi High
Court, which was marked as WP(C)No.4195 of 2003. An interim order was
passed by the Delhi High Court on 2.7.2003 directing the Appellant herein
to permit the Respondent to broadcast until further orders and that from the
amount recovered through invocation of the Bank Guarantee, the Appellant
would be permitted to appropriate the sum towards licence fee for the period
of broadcasting as per the interim orders. The High Court also extended the
operation of the interim order on 3.9.2003, subject to the condition that the
Respondent herein deposits a sum of Rs.1 crore. Yet again, by an order
dated 15.3.2004, the Respondent herein was permitted to deposit a sum of
Rs.23 lacs by 26.3.2004 and furthermore furnish a Bank Guarantee for
another sum of Rs.23 lacs in favour of the Appellant herein to the
satisfaction of the Joint Registrar of the High Court. The said direction,
indisputably, was issued in the light of the submissions made by the
Appellant herein that out of the total sum of Rs.11,21,50,000/- towards the
second year’s licence fee, a sum of Rs.9.75 crore stood paid (by invoking the
bank Guarantee of the said amount) and another sum of Rs.1 crore had been
paid pursuant to the order dated 3.9.2003 passed by the High Court and as
such the balance sum of Rs.46 lacs had become due towards the licence fee
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for the second year which expired on 29.4.2004. Despite a demand notice
issued for payment of licence fee for the third year, the same was not done
and in fact, on 20.4.2004, the Respondent herein made a submission before
the High Court that it did not intend to make any broadcast w.e.f. 29th April,
2004.
We may notice that before the High Court, the Appellant herein
categorically stated that in the event the Respondent did not intend to make
any broadcast from 29th April, 2004, no deposit was required to be made. In
the interregnum, the Union of India came up with a new policy.
The Respondent filed an application before the Tribunal questioning
the validity or otherwise of the revocation of broadcasting licence by letter
dated 20.5.2003, inter alia, contending that the same was in violation of the
said Agreement and was, thus, liable to be set aside. It was furthermore
prayed that the Respondent be declared to be entitled to utilize the licence
agreement on such terms as are applicable to other similarly situated
licensees. It was also contended that as by reason of illegal revocation of
licence, the Respondent could not use thereafter the facilities to broadcast,
they are entitled to pro-rata rebate in licence fee from 28.5.2003 to 5.7.2003.
The Appellant herein, on the other hand, contended that as the
Respondent had defaulted in payment of licence fee for the second year as
per the terms and conditions thereof the licence has rightly been revoked.
The Tribunal, upon examining the relevant clauses of the licence,
opined that the action on the part of the Appellant revoking the licence of the
Respondent was illegal. It was observed:
"We are informed that during the interregnum the
Respondent/Government had come out with a new policy
which entitles the existing licence holders to migrate
from fixed licence fee regime to revenue sharing regime
which the petitioner submits the other Licensees similarly
situated have been permitted. If that be so, the petitioner
shall also be entitled to the said benefit of the change in
licence fee. However, since petitioner’s bank guarantee
has been appropriated towards non-payment of licence
fee for the period for which the licence fee was payable,
the petitioner shall now on demand from the respondents
furnish a bank guarantee as required under the terms and
conditions of the licence."
The licence agreement was entered into on 27.10.2000 between the
parties herein. The said licence had four Schedules. Schedule (C) appended
to the said agreement laid down the terms and conditions of the licence.
Clause 1 of the said agreement reads as under:
"1. Unless otherwise mentioned in the subject of
context appearing hereinafter all the Schedules i.e.
A B C & D, annexed hereto including the tender
documents, Letter of Intent and the guidelines
issued/or to be issued from time to time by the
licensor and the wireless Operational Licence to be
issued by the Wireless Planning & Coordination
Wing in the Ministry of Communications,
Government of India shall form part and parcel of
this Licence Agreement.
"Provided, however, in case of conflict between
the corresponding provisions of the aforesaid schedules
and this agreement, the terms set out in the main body of
this Agreement shall prevail. In this Agreement, words
and expressions shall have the same meaning as is
respectively assigned to them in the Schedule A."
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Clause 9 of the said Agreement reads as follows:
"The Licensor may at any time revoke the Licence
by giving a written notice of 30 days, to the Licensee
after affording a reasonable opportunity of hearing on the
breach of any of the terms and conditions herein
contained or in default of payment of any consideration
payable as provided hereunder."
We have noticed hereinbefore that Schedule-C relates to terms and
conditions of licence, the relevant clauses whereof are:
1.2 The Licensee shall pay the Licence fee every year
in advance within seven days of the beginning of
the year failing which the Licensor reserves the
right to revoke the Licence and encash & forfeit
the Bank Guarantee furnished by the Licensee
without giving any notice. This is without any
prejudice to any other action that may be taken by
the Licensor under the terms and conditions of the
Licence."
xxx xxx xxx
12.1 Termination for default -
The Licensor can terminate the Licence of the
Licensee in case of:
i) Default in payment of the Licence Fees;
ii) Breach of any terms and conditions
contained in this Agreement
The Licensor may, without prejudice to any other
remedy for breach of the conditions of Licence
give a written notice to the Licensee at its
registered office 30 days in advance before
terminating this Licence.
In the event of termination/revocation of the
licence, the licensee will not be eligible to apply
directly or indirectly for any FM Radio Station
licence, in future.
xxx xxx xxx
16.1 A Bank Guarantee, equivalent to the first year
Licence Fee valid for 10 years from any Scheduled
Bank in the prescribed form shall be submitted
along with this Agreement by the Licensee. The
Licensee shall keep the bank guarantee renewed
till the expiry of the licence period.
16.2 The Licensor may encash the bank guarantee
without any notice in any of the following
conditions:
i) If the licensee fails to deposit the licence fee
within 7 days of the beginning of the each
year.
ii) If the licence stops the service without
giving one year’s notice under clause 12.3.
iii) If the licensee is declared or applies for
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being declared insolvent or bankrupt."
Mr. A. Sharan, learned Additional Solicitor General of India
appearing on behalf of the Appellant submitted that having regard to the
provisions contained in Clause 1.2 and Clause 12.1 of the terms of the
licence, it is evident that the condition precedent for grant of 30 days’ notice
as also an opportunity of hearing, were required to be complied with only in
the cases of breach of any of the terms and conditions of agreement and not
in relation to the default in payment of licence fee as Clause 12.1 dealt with
different situation.
It was also submitted that the right of the Appellant in terms of Clause
1.2 of the terms of licence contained in Schedule-C thereof provides first to
distinguish the powers of the Appellant, i.e., to revoke the licence and to
encash and forfeit the bank guarantee without giving any notice. According
to the learned Additional Solicitor General that revocation of the licence is
permissible without complying with the principles of natural justice. Clause
9 of the Agreement must be harmoniously read with the conditions of
licence and when so read, the same would show that issuance of 30 days’
notice and affording a reasonable opportunity of hearing relate to breach of
any of the terms and conditions of the licence, but, the said requirements are
not to be complied with in case where the licence is revoked for default in
payment of any consideration payable towards payment of licence fees.
It was further submitted that the Tribunal committed a manifest error
in so far as it issued a direction upon the Appellant to issue the said notice.
The licence granted in favour of the Respondent is a statutory one.
The terms and conditions thereof are governed by the statutory provisions.
It was initially granted for ten years. Clauses 14 and 15 of the said
agreement provide:
"14. The Licence for four metros
(Calcutta/Chennai/Delhi/Mumbai) shall form consortium
and enter into an agreement for using same power
transmitter, utilize common transmitter tower and share
certain common facilities as per the format of agreement
enclosed at Annexure II.
15. The Licensee shall own transmitter. Further the
Licensee himself will carry out the broadcast and shall
not sub-contract, assign or transfer the licence in any
manner to any third party. In case of such transfer or
assignment, the Licensor shall have the right to revoke
the Licence of the Licensee immediately.
However, the Licensee may with the prior
approval of Licensor enter into an agreement with a third
party so as to enable the latter to set up infrastructural
and hardware facilities such as tower, transmitter etc.
such permission shall not in any case be treated as
permission to provide the services under the Agreement
by such third party on behalf of the Licensee."
It is not in dispute that the said conditions could not be complied with
in view of the relocation of the same power transmitter, utilization of
common transmitter tower and sharing certain common facilities having not
been possible. It was in the aforementioned situation guidelines were issued
by the Appellant herein in deviation of the original terms of the licence that
the Respondent and the licensees similarly situated should make their own
arrangements for broadcasting of the events. Clause 1.2 of the agreement
provided for the mode and manner as regard construction of the said
agreement in case of any conflict between the corresponding provisions of
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the schedule and the body of the agreement.
In view of the aforementioned express stipulations contained in the
agreement, it is required to construe clause 9 of the agreement at the outset
independently. By reason of the said provision revocation of the licence
both for breach of terms and conditions as also for default in payment of any
consideration must precede 30 days’ written notice and a reasonable
opportunity of hearing.
How the said provision can be given effect to would depend on the
construction of terms and conditions of the licence. By reason of clause 1.2,
as contained in the Schedule-C appended thereto, the licensor had been
conferred with a power to revoke the licence as also encash and forfeit the
bank guarantee without any notice. The expression ’and’ occurring in
between the words ’right to revoke the licence’ and encash and ’forfeit the
bank guarantee’ must be read as two separate clauses. The same cannot be
read as conjunctive in view of the fact that it is admitted that the revocation
of licence is not permissible without service of 30 days’ notice. What was,
therefore, permissible is that the licensor in terms of the said condition of
licence may encash and forfeit the bank guarantee furnished by the licensee
without giving any notice. The same would evidently mean that for the
purpose of encashment and forfeiture of the bank guarantee, no separate
notice is required to be given in the event any cause of action arises therefor.
Clause 12.1 whereupon the learned Additional Solicitor General
placed strong reliance is not in two parts. It merely provides for two
different situations in terms whereof revocation of licence is permissible.
The licensor by reason thereof is required to give a 30 days’ written notice to
the licensee before terminating the licence. The words "without prejudice to
any other remedy for breach of the conditions of the licence" must be read in
the context of other provisions contained therein. Sub-clause (ii) of Clause
12.1, permits termination/revocation of licence on compliance of the
conditions stipulated therein; but the same would be without prejudice to any
other remedy for breach of the conditions of licence, which in turn would
mean that by reason thereof other remedies available to licensor, if any, are
not taken out from their application.
Clause 16.2 plays an important role as it enables the licensor to encash
the bank guarantee without any notice; but even for the said purpose the
conditions precedents mentioned therein were required to be fulfilled. On a
conjoint reading of the aforementioned provisions, it would, therefore,
appear that whereas for the purpose of revocation of the licence either on the
ground of default on the part of the licensee to pay the consideration in
respect of the licence or for breach of the conditions of licence, 30 days’
notice as also an opportunity of hearing was imperative. However, what
could be done without any notice, it will bear repetition to state, is
encashment of bank guarantee.
It may be true that the mode and manner of compliance of the
principle of natural justice had not been specifically stated, but the same
would not mean that it was necessary to be complied with at all.
However, the letter dated 06.03.2003 was merely a demand. It was
not a notice in the true sense of the term as consequences for non-payment
had not been stated therein. The said letter was issued only by way of
reminder.
We have noticed hereinbefore that only because the licensee makes a
default, the same would not mean that the licence should stand revoked
without any further notice. Once it is held upon construction of the relevant
provisions of the conditions of licence as also the terms thereof that 30 days’
notice was required to be given before a licence is revoked, it cannot be said
that the said letter dated 6.3.2003 satisfied the requirements thereof.
We may consider the matter from another angle. By reason of the
provisions contained in Clause 12.1 of the terms of the licence, not only the
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revocation of licence for breach of any conditions contained in any
agreement; but also prevention thereof on any other ground which would
include the default in payment of licence fee would result in the
consequence of debarring the licensee from applying directly or indirectly
for any FM Radio Station in future. The consequence of the revocation of
the said licence, therefore, is penal in nature. Such penal provision is
required to be strictly construed.
It is in that view of the matter, before the licensor exercises his right
to revoke the licence, a notice was required to be issued. It having not been
done, the conclusion is irresistible that the purported revocation of licence
was a nullity.
It is now a well-settled principle of law that a document must be
construed having regard to the terms and conditions as well as the nature
thereof.
{See Pearey Lal vs. Rameshwar Das [AIR 1963 SC 1703] and
Administrator of the Specified Undertaking of the Unit Trust of India &
Anr. vs. Garware Polyester Ltd. [2005 (10) SCC 682].}
We, therefore, with respect, entirely agree with the Tribunal.
So far as the contention of the learned Additional Solicitor General
that the direction issued by the Tribunal, as quoted supra, is contrary to
Section 14(1)(c) of the Specific Relief Act, 1963, is concerned, the same is
stated to be rejected. The provisions of the Specific Relief Act would not
apply to the contracts, which are governed by the statutory provisions.
It is furthermore not in dispute that the Respondent or the licensees
similarly situated had suffered a huge monetary loss. They made
representations for change of the licence fee structure. Admittedly,
responding to the said representations the Union of India appointed a
committee known as ’Dr. Amit Mitra Committee’. The said committee
submitted its report on 18.11.2003 recommending that fee structure
applicable to Phase-I licensees be done away with and in its stead and place
a new regime called the ’revenue sharing regime’ be brought in, in terms
whereof the licensees would be required to pay licence fees @ 4% of the
revenue generated. In terms of the said policy decision, all Phase-I licensee
would be permitted to migrate to the new revenue sharing system in Phase-
II.
The Telecom Regulatory Authority of India released a consultation
paper on or about 14.04.2004 on the basis of the recommendations of the
said committee.
It is stated that on the relevant date, namely 20.04.2004, none of the
Phase-I licensees in Mumbai had co-located on a common transmission
tower nor had the Appellant granted any extension or assurance that permit
the licensees would be permitted to continue broadcasting from independent
individual station/facilities. Whereas the Respondent herein has expressed
its desire not to make any broadcast on the expiry of the terms of the licence,
other licensees allegedly continued to do the same, although the tenure of
licence expired, it is in that situation, the Respondent took the stand that it
should be treated alike the other four licensees, who are continuing to
broadcast despite the fact that no further extension had been granted even to
them by the Union of India, although they had paid the revenue therefor.
Our attention, in this connection, has been drawn to the provisions as
regard migration for Phase-I to Phase-II, as laid down in the policy decision,
which is as under:
"1. Licensees of Phase-I, who have actually
operationalized their channels would be given the option
to Migrate to Phase 2 Policy Regime. They will have to
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exercise their initial option by the prescribed date to
automatically migrate to Phase 2 Policy regime in
accordance with the terms and conditions of migration or
continue under Phase-I or surrender their licences with
one month’s notice."
This Court at this stage is not concerned with the question as to
whether the Respondent has fulfilled the said conditions or not; but
admittedly, the Tribunal proceeded on the basis that the licence having not
been validly revoked, the same continued to be operative.
The Tribunal, in terms of Section 14 of the Telecom Regulatory
Authority of India Act, 1997, has a wide power. The Respondent in their
application, inter alia, prayed for the following reliefs :
"Pass an order directing the TRAI and the
respondent to provide an appropriate migration option to
the Petitioner to migrate to new license terms keeping in
mind that the Petitioner has invested large sums of
money in the radio broadcasting business, has paid a sum
appx. Rs. 21 crores since 29.4.2002 to the respondent and
has not been able to broadcast sicne 29.4.2004 due to the
arbitrary implementation by the respondent of the
Cabinet order communicated to the Petitioner vide
guidelines dated 31.12.2001."
The Appellate Tribunal only directed the Appellant to treat the
Respondent to be entitled to the benefit of the change in the policy decision
as regard payment of different mode of licence as the other existing licence
holders, indisputably, have been given an option to migrate from the fixed
licence fee regime to the revenue sharing regime.
We may, however, notice that indisputably the Respondent had paid
the entire licence fee in respect of the second year. It is interesting to note
that before the Delhi High Court itself, the Appellant raised the following
contention, which was recorded by the High Court in its order dated
12.04.2005:
"Learned counsel for the Respondent on
instructions from Shri L.P. Singh, Assistant Engineer of
the respondent states that respondent No.3 is not aware of
the fact that the petitioner had stopped broadcast of his
FM Channel and in these circumstances the notice dated
19.4.04 read with Corrigendum dated 21.4.04 had been
issued upon the petitioner raising a demand for the period
subsequent to the cessation of the broadcast by the
petitioner. It is submitted on behalf of the respondent
that the petitioner having stopped the broadcast would
not be liable to pay the charges demanded in these
communications. In these circumstances, nothing
survives in this application and the same is accordingly
disposed of."
Having noticed that the Respondent had complied with its interim
order by depositing the requisite amount, the High Court allowed the
Appellant to withdraw the said sum of Rs.23 lacs and also encash the bank
guarantee furnished by the Appellant for another sum of Rs.23 lacs, the High
Court directed:
"\005The petitioner shall not be liable for any further
amount on account of the FM Broadcast which is the
subject matter of the writ petition."
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We, therefore, are of the opinion that the Tribunal did not exceed its
jurisdiction in issuing the impugned directions.
For the reasons aforementioned, we are of the opinion that no case has
been made out for our interference with the impugned judgment of the
Appellate Tribunal.
This appeal is dismissed accordingly. No costs.