LCO Liable for Dues and Depreciated STB Value Despite Migration to Competing MSO

The Petitioners—Hathway Cable & Datacom Limited (an MSO registered under Section 3 of the Cable Television Networks (Regulation) Act, 1995) and its wholly-owned subsidiary Hathway Digital Private Limited, to which the cable business was assigned w.e.f. 01.04.2017—filed a petition under Sections 14 and 14A of the TRAI Act, 1997.

Respondent No. 1 (R-1), a Local Cable Operator in Shahdara, Delhi, entered into an Interconnect Term Sheet with the Petitioner, under which it was liable to pay monthly subscription charges; the long-form agreement was never executed, leaving the Term Sheet operative.

The Petitioner supplied approximately 600 Set Top Boxes (STBs) to R-1 for installation at subscribers' premises.

R-1 was a chronic defaulter, accumulating outstanding subscription dues of Rs. 18,60,680/-.

The Petitioner learnt that R-1 had migrated to the network of Respondent No. 2 (R-2), a competing MSO, without clearing dues or returning the STBs owned by the Petitioner.

A legal notice dated 27.06.2017 demanding payment and return of STBs went unanswered.

R-2 contested the petition, pleading absence of privity of contract with the Petitioner and denying collusion.

R-1, despite sufficient service, did not appear and was proceeded against ex-parte vide orders dated 18.04.2018 and 08.05.2018.

Evidence was led by affidavit (with a Section 65B, Indian Evidence Act certificate) on behalf of the Petitioner and by R-2.

1. Whether the Respondents are liable to pay to the Petitioner Rs. 18,60,680/- along with interest @ 18% per annum towards outstanding subscription dues?

2. Whether the Respondents are liable to return 600 STBs or, in the alternative, pay Rs. 7,50,000/- @ Rs. 1,250/- per STB?

3. Whether R-1 migrated to the network of R-2, and if so, whether such migration was as per due process of law?

4. Whether R-2 has any obligation towards the Petitioner in the absence of any written agreement between the parties?

The Tribunal exercised jurisdiction under Sections 14 and 14A of the TRAI Act, 1997.

The proceeding is civil in nature, governed by the standard of preponderance of probabilities rather than proof beyond reasonable doubt.

On burden and onus of proof, the Tribunal relied upon Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971 (onus lies on the party asserting a fact) and Section 102 of the Indian Evidence Act; Premlata v. Arhant Kumar Jain, AIR 1976 SC 626; Lakshman v. Venkateswarloo, AIR 1949 PC 278 (burden of proof on pleadings never shifts, though onus may); State of J&K v. Hindustan Forest Co., (2006) 12 SCC 198 (plaintiff must stand on its own evidence, not the defendant's weakness); M. Krishnan v. Vijay Singh, 2001 CrLJ 4705; and Raghvamma v. A. Cherry Chamma, AIR 1964 SC 136 (distinction between burden and onus of proof).

The Tribunal applied the doctrine of privity of contract, holding that no obligation can be imposed on a stranger to the contract.

The Tribunal followed its own settled precedents awarding simple interest @ 9% per annum (rather than the contractual or claimed 18%) having regard to the financial realities of the cable television business.

The Tribunal followed precedents awarding the depreciated value of STBs in lieu of their return or full cost.

On Issue No. 4, the Tribunal held that since the Interconnect Term Sheet subsisted only between the Petitioner and R-1, and there was no written agreement between the Petitioner and R-2, there was no privity of contract qua R-2; significantly, the Petitioner's counsel fairly conceded that no relief was being claimed against R-2, rendering R-2 neither a proper nor necessary party to the monetary claims.

On Issue No. 1, the Tribunal found the Petitioner's case fully proved through the un-rebutted affidavit of PW-1 and exhibited documents—the Interconnect Sheet (Ex. PW-1/1), invoices (Ex. PW-1/2), Statement of Account (Ex. PW-1/3), and the legal notice (Ex. PW-1/4)—which stood uncontroverted because R-1 chose to remain ex-parte; the claim of Rs. 18,60,680/- was therefore established on a preponderance of probabilities.

Consistently with its precedents, the Tribunal scaled the claimed 18% interest down to simple interest @ 9% per annum pendente lite and future.

On Issue No. 2, while the supply and non-return of 600 STBs stood proved and unrebutted, the Tribunal reasoned that electronic equipment supplied over eight years ago could not be deemed to be in good and working condition, and granting the undepreciated claim of Rs. 1,250/- per STB would be unjust; it therefore awarded the depreciated value of Rs. 1,000/- per STB, totalling Rs. 6,00,000/- with 9% simple interest.

On Issue No. 3, the migration of R-1 to R-2's network stood proved by the uncontroverted affidavit of the Petitioner and was corroborated by R-2's own admission of a subsisting business relationship with R-1.

Issue No. 4 was decided in favour of Respondent No. 2, against whom no relief was granted for want of privity of contract.

Issue Nos. 1, 2 and 3 were decided in favour of the Petitioner as against R-1, subject to the modifications on the rate of interest and the depreciated STB valuation.

R-1 was directed to pay: (i) Rs. 18,60,680/- (as on 20.06.2017) towards outstanding subscription dues, together with pendente lite and future simple interest @ 9% per annum from the date of the petition until actual payment, within two months of the judgment; and (ii) Rs. 6,00,000/- being the depreciated value (@ Rs. 1,000/- per STB) of the 600 STBs, likewise with 9% simple interest pendente lite and future, within two months.