Union of India Vs. M/S. Millenium Mumbai
Broadcast Pvt. Ltd [2006] Insc 246 (28 April 2006)
S.B.
Sinha & P.P. Naolekar 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.
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
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:
-
"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." 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:
-
Default in
payment of the Licence Fees;
-
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:
-
If the licensee
fails to deposit the licence fee within 7 days of the beginning of the each
year.
-
If the licence
stops the service without giving one year's notice under clause 12.3.
-
If the licensee
is declared or applies for 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:
-
"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.
-
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 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 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
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:
"The
petitioner shall not be liable for any further amount on account of the FM
Broadcast which is the subject matter of the writ petition." 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.
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