2008 (5) TMI 648 - SC - Indian Laws

Whether internal circulars issued by the Department of Telecommunications (DOT) applicable on the contracts entered into by and between the parties hereto in respect of as regards inter-connection links provided by it?

Issues Involved:
1. Effect of internal circulars issued by the Department of Telecommunications (DOT) on contracts.
2. Payment of charges for leased circuits.
3. Premature surrender of leased circuits.
4. Dispute regarding the minimum guarantee period for leased lines.
5. Tariff rates applicable to email service providers.

Issue-wise Detailed Analysis:

1. Effect of Internal Circulars Issued by DOT on Contracts:
The core question was whether internal circulars issued by DOT could affect the terms of contracts between the parties. The Tribunal (TDSAT) held that internal circulars, not being statutory, cannot alter the terms of concluded contracts unless explicitly incorporated into the contract. The Supreme Court upheld this view, stating that internal circulars, published for official use, do not have the force of law and cannot unilaterally change contractual terms.

2. Payment of Charges for Leased Circuits:
Several appeals involved disputes over the payment of charges for leased circuits. The respondents (service providers) argued that the charges should be based on capital cost as per the initial agreement, while DOT demanded higher charges based on internal circulars. The Supreme Court noted that the respondents had agreed to a rent and guarantee (R&G) basis calculated on capital costs. The Court found that DOT's demand for higher charges based on internal circulars was unjustified as these circulars were not part of the contract and were not known to the respondents.

3. Premature Surrender of Leased Circuits:
One appeal involved the premature surrender of 15 leased circuits. DOT contended that the minimum lease period was three years, while the respondents claimed they were unaware of this stipulation. The Tribunal found that the minimum period was not clearly communicated to the respondents and that internal circulars could not impose such terms unilaterally. The Supreme Court upheld this finding, emphasizing that contractual terms must be clearly stated and agreed upon by both parties.

4. Dispute Regarding the Minimum Guarantee Period for Leased Lines:
Another appeal involved a dispute over the minimum guarantee period for leased lines. The Tribunal held that the minimum guarantee period of three years, as per Rule 434 of the Indian Telegraph Rules, did not apply to the contracts in question. The Supreme Court agreed, noting that the contracts were for one year, and any change in terms required mutual agreement. The Court also observed that the internal circulars cited by DOT were not applicable to the specific contracts.

5. Tariff Rates Applicable to Email Service Providers:
In cases involving email service providers, the Tribunal found that DOT had incorrectly charged double the rental rates based on an internal circular. The Tribunal ruled that email services did not fall under the category of close user group services and should not be charged double. The Supreme Court upheld this decision, stating that internal circulars could not override the terms of the contract or the published tariffs.

Conclusion:
The Supreme Court dismissed the appeals, affirming that internal circulars issued by DOT do not have the force of law and cannot alter the terms of concluded contracts unless explicitly incorporated. The Court emphasized the necessity of clear and mutual agreement on contractual terms and found that DOT's demands based on internal circulars were unjustified. The appeals did not raise any substantial question of law warranting interference, and the judgments of the Tribunal were upheld.

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