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TMI Blog2011 (10) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities beyond the licensed activities cannot be included in the Adjusted Gross Revenue? Whether the licensee can challenge the computation of Adjusted Gross Revenue, and if so, at what stage and on what grounds? - CIVIL APPEAL NO. 5059 OF 2007 - - - Dated:- 11-10-2011 - R.V. Raveendran A.K. Patnaik, JJ. JUDGMENT A. K. PATNAIK, J. Civil Appeal Nos. 5059 of 2007, 179-180 of 2008, 311-314, 317-318 of 2008, 363 of 2008, 2065 of 008, 1229-1230 of 2008 and 3868 of 2009: These are appeals under Section 18 of the Telecom Regulatory Authority of India Act, 1997 (for short the TRAI Act ) against the common judgment and order dated 30.08.2007 of the Telecom Disputes Settlement and Appellate Tribunal, New Delhi (for short the Tribunal ) in Petition No. 7 of 2003. 2. The relevant facts very briefly are that with the introduction of the National Telecom Policy, 1994 liberalizing the Telecom Sector, telecom licenses were issued to different service providers. The licenses granted to the service providers stipulated a fixed license fee, which was payable by the service providers every year. During the period 1994 to 1999, the licensees defaulted in payment of licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the licensees and the amended license agreement was effective from 01.08.1999. Clause 19 of the amended license agreement, which defines Adjusted Gross Revenue, is extracted hereinbelow: 19. Definition of `Adjusted Gross Revenue': 19.1 Gross Revenue: The Gross Revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets [or any other terminal equipment etc.', revenue on account of interest, dividend, value added services, supplementary services, access or interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any setoff for related item of expense, etc. 19.2 For the purpose of arriving at the `Adjusted Gross Revenue [AGR]' the following shall be excluded from the Gross Revenue to arrive at the AGR: I. PSTN related call charges [Access Charges] actually paid to other eligible/ entitled telecommunication service providers within India; II. Roaming revenues actually passed on to othereligible/ entitled telecommunication service providers and; III. Service Tax on provision of service and Sales Tax actually paid to the Government if gross re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 18 of the TRAI Act. While this Civil Appeal was pending before this Court, the TRAI sent its recommendations on the incorporation of the Adjusted Gross Revenue which had been sought by the Tribunal by its order dated 07.07.2006. Accordingly, when Civil Appeal No. 84 of 2007 came up for hearing before this Court on 19.01.2007, this Court took the view that as the TRAI had already submitted its recommendations to the Tribunal, there was no reason to interfere and dismissed the appeal giving liberty to the Union of India to urge all the contentions raised in the Civil Appeal before the Tribunal. 6. When the Tribunal heard the parties on the recommendations of the TRAI, the Union of India contended that as this Court had given liberty to urge all the contentions raised in the Civil Appeal before the Tribunal, the Union of India was entitled to re-open the issue whether the validity of the definition of Adjusted Gross Revenue in the license agreement could be questioned before the Tribunal. The licensees, on the other hand, contended before the Tribunal that as the Civil Appeal of Union of India has been dismissed by this Court, the Union of India was not entitled to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gross Revenue. (v) The Tribunal did not fully accept the recommendation of the TRAI on reversal of provisions like bad debts, taxes and vendors' credits and held that all these reversals have to be excluded from the Adjusted Gross Revenue. (vi) The Tribunal also accepted the recommendation of the TRAI that rent from property owned by the licensee should be excluded from the Adjusted Gross Revenue, provided it is clearly established that the property is not in any way connected with establishing, maintaining and working of telecommunication. (vii) The Tribunal accepted the recommendation of the TRAI that income from renting and leasing of passive infrastructures like towers, dark fibre, etc. should be part of the Adjusted Gross Revenue as they are parts of the licensed activity of the licensee. (viii) The Tribunal accepted the recommendation of the TRAI that revenue from sale of tenders, directories, forms, forfeiture of deposits/earnest money in relation to telecom service should form part of the Adjusted Gross Revenue, but held that management fees, consultancy fees and training charges from telecom service should not form part of the Adjusted Gross Revenue as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India in the different Civil Appeals before us submitted that the Union of India had challenged the order dated 07.07.2006 of the Tribunal before this Court in Civil Appeal No.84 of 2007 and this Court while disposing of the Civil Appeal gave liberty to the Union of India to urge all the contentions raised in the Civil Appeal before the Tribunal. They submitted that the Tribunal was thus not correct in coming to the conclusion that Union of India could not re-open the issue decided in the order dated 07.07.2006 that revenue realised from activities beyond the licensed activities cannot form part of the Adjusted Gross Revenue when the said issue had been raised by the Union of India in the Civil Appeal before this Court. They further submitted that in any case the Union of India had taken a specific ground in ground No.4 of the Memorandum of Appeal in Civil Appeal No.84 of 2007 that the Tribunal had no jurisdiction or power to examine the correctness of the terms of the license which had been unconditionally accepted and acted upon the licensee. They submitted that it is well settled by decisions of this Court that the rule of res judicata or estoppel is not applicable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted vs. Union of India [(2010) 10 SCC 165] and in Bharti Cellular Limited vs. Union of India Ors. [(2010) 10 SCC 174] for the proposition that a person taking advantage under an instrument which both grants a benefit and imposes the burden, cannot take the benefit without discharging the burden. 11. Mr. Sorabjee and Mr. Dwivedi finally submitted that under Section 11(1)(a)(ii) of the TRAI Act, 1977, the TRAI makes recommendations, either suo motu or on a request from the licensor, on the terms and conditions of license to a service provider and the first proviso to Section 11(1) of the TRAI Act clearly states that such recommendations of the TRAI shall not be binding upon the Central Government. They submitted that the recommendations of the TRAI with regard to what heads of revenue should be included and what heads of revenue should be excluded from the Adjusted Gross Revenue, therefore, are not binding on the Central Government. They submitted that notwithstanding the aforesaid clear statutory provision the Tribunal has considered the recommendations of the TRAI and accepted most of these recommendations, notwithstanding the fact that the Central Government filed its objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government rejected the recommendation of the TRAI, it has to be based on logical and concrete reasoning. He submitted that the recommendations of the TRAI that only revenues arising out of the activities carried out under the license cannot be found fault with and, therefore, the revenue realized from non-telecom activities cannot form part of the Adjusted Gross Revenue. He submitted that the view taken by the Tribunal that the revenue realized from activities outside the license of the licensee cannot be included in the Adjusted Gross Revenue for the purpose of levy of license fee is absolutely correct. He submitted that under the proviso to Section 4 of the Telegraph Act, the Central Government has the power to determine the conditions including the payment for grant of license `as it thinks fit', but the expression `as it thinks fit' does not give a carte blanche to the Central Government to levy license fee on non-telecom activities. He cited State of U.P. v. Devi Dayal Singh [(2000) 3 SCC 5] in which Ruma Pal, J. writing the judgment for the Court, interpreted Section 2 of the Indian Tolls Act, 1851 which enables the State Government to levy toll at such rates ` ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e power of prospective overruling and, therefore, the impugned order of the Tribunal should relate back to the date of the license agreement. 16. Mr. Shyam Diwan, learned counsel appearing for the Reliance Communications Ltd. in Civil Appeal Nos.9946-9961 of 2010 submitted that the orders dated 07.07.2006 and 30.08.2007 are really declaratory in nature and are within the powers of the Tribunal and all licensees are entitled to benefit from the aforesaid orders of the Tribunal and this would ensure a level playing field for all the licensees. 17. Mr. Ramji Srinivasan, learned counsel appearing for the Association of Telecom Service Providers of India, submitted that the Union of India is not right in its contention that the Tribunal did not have the jurisdiction to pass the order dated 07.07.2006 holding that revenue realized from activities by the licensee which are beyond the licensed activities cannot form part of the Adjusted Gross Revenue for the purpose of license fee. He argued that Section 14 (a)(i) of the TRAI Act conferred power on the Tribunal to adjudicate any dispute between a licensor and a licensee and it is in exercise of this power conferred by Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He argued that the Tribunal rightly held in the order dated 07.07.2006 that the opinion of the renowned expert in accountancy not having been placed before the TRAI has vitiated the proceedings contemplated under Section 11(1)(a) of the TRAI Act, which mandates the Central Government to seek recommendations of the TRAI. 19. Mr. Srinivasan next submitted that the definition of Adjusted Gross Revenue in the license agreement so as to include in gross revenue items, which according to the Accounting Standard 9 (nine), do not come within the definition of revenue. He referred to the Format of Statement of Revenue and License Fee (Appendix-II to Annexure-II of the License Agreement) to show that the licensee is required to give information in a statement on various items which are not truly of a revenue nature and which fall totally outside the licensed activities of the telecom license. 20. Mr. Srinivasan submitted that since the Tribunal in the impugned order confined the relief to the licensees who had approached the Tribunal and that too with effect from the date the licensees approached the Tribunal, the Association of Telecom Service Providers of India filed a Review Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and therefore that in these appeals this Court cannot re-open the issues which had been closed by the order dated 19.01.2007 passed in Civil Appeal No.84 of 2007. In support of the submission, he relied on the decisions of this Court in Kunhay Ahmed Ors. v. State of Kerala Anr. [(2000) 6 SCC 359], Supreme Court Employees' Welfare Association v. Union of India Anr. [(1989) 4 SCC 187] and State of Manipur v. Thingujam Brojen Meetei [(1996) 9 SCC 29]. He also relied on the decision of this Court in Medley Pharmaceuticals Limited v.Commissioner of Central Excise and Customs [(2011) 2 SCC 601] for the proposition that dismissal of an appeal under Article 136 of the Constitution after grant of leave by a non-speaking order attracted the doctrine of merger. 24. We have considered the submissions of learned counsel for the parties and we find that in Cellular Operators Association of India Ors. v. Union of India Ors. (supra) this Court considered the scope of the appeal under Section 18 of the TRAI Act and held that an appeal under Section 18 of the TRAI Act before this Court has to be confined to only substantial questions of law which arise out of the order of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while dismissing the appeal, the Court has given liberty to the appellant, namely, Union of India, to urge the contentions raised in Civil Appeal No.84 of 2007. 26. In Civil Appeal No.84 of 2007, the Union of India has urged 22 Grounds and Ground Nos.1 to 6 of the Memorandum of Appeal are extracted hereibelow : 1.Because the judgment and order dated 7.7.2006 passed by the Hon'ble TDSAT is wrong, erroneous, contrary to law and deserves to be set aside. 2.Because the Hon'ble TDSAT failed to appreciate that the migration package accepted and acted upon by the respondents herein itself provided for definition of Gross Revenue and Adjusted Gross Revenue. 3.Because the Hon'ble TDSAT failed to appreciate that the license unconditionally accepted the migration package, exploited the licenses on the terms and conditions mentioned therein and thereafter challenged the definition of Adjusted Gross Revenue. 4.Because the Hon'ble TDSAT failed to appreciate that it had no jurisdiction or power to examine the correctness of terms of the license which had been unconditionally accepted and acted upon by the licensee. 5.Because the Hon'ble TDSAT failed to apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct: Section 2(e) licensee means any person licensed under sub-Section (1) of Section 4 of the Indian Telegraph Act, 1885 (13 of 1885) for providing specified public telecommunication services; 2 (ea) licensor means the Central Government or the telegraph authority who grants a license under Section 4 of the Indian Telegraph Act, 1885 (13 of 1885); 2 (k) telecommunication service means service of any description (including electronic mail, voice mail, data services, audio tax services, video tax services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means but shall not include broadcasting services: [provided that the Central Government may notify other service to be telecommunication service including broadcasting services.] 11(1). Functions of Authority.--(1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the functions of the Authority shall be to-- (a) make recommendations, either suo motu or on a request from the lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act. Provided that the recommendations of the Authority specified in clause (a) of this sub-section shall not be binding upon the Central Government. Provided further that the Central Government shall seek the recommendations of the Authority in respect of matters specified in sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of new license to be issued to a service provider and the Authority shall forward its recommendations within a period of sixty days from the date on which that Government sought the recommendations: Provided also that the Authority may request the Central Government to furnish such information or documents as may be necessary for the purpose of making recommendations under sub-clauses (i) and (ii) of clause (a) of this sub-section and that Government shall supply such information within a period of seven days from receipt of such request: Provided also that the Central Government may issue a license to a service provider if no rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, enables the Central Government to part with this exclusive privilege in favour of any other person by granting a license in his favour on such conditions and in consideration of such payments as it thinks fit. As the Central Government owns the exclusive privilege of carrying on telecommunication activities and as the Central Government alone has the right to part with this privilege in favour of any person by granting a license in his favour on such conditions and in consideration of such terms as it thinks fit, a license granted under proviso to sub-section (1) of Section 4 of the Telegraph Act is in the nature of a contract between the Central Government and the licensee. A Constitution Bench of this Court in State of Punjab Anr. v. Devans Modern Breweries Ltd. Ors. (supra), relying on Har Shankar's case and Panna Lal v. State of Rajasthan [(1975) 2 SCC 633], has held in para 121 at page 106 that issuance of liquor license constitutes a contract between the parties. Thus, once a license is issued under proviso to sub-section (1) of Section 4 of the Telegraph Act, the license becomes a contract between the licensor and the licensee. Consequently, the terms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid by the licensee for the license, the TRAI has been conferred with the statutory power to make recommendations on the terms and conditions of the license to a service provider and the Central Government was bound to seek the recommendations of the TRAI on such terms and conditions at different stages, but the recommendations of the TRAI are not binding on the Central Government and the final decision on the terms and conditions of a license to a service provider rested with the Central Government. The legal consequence is that if there is a difference between the TRAI and the Central Government with regard to a particular term or condition of a license, as in the present case, the recommendations of the TRAI will not prevail and instead the decision of the Central Government will be final and binding. 32. In contrast to this recommendatory nature of the functions of the TRAI under clause (a) of sub-section (1) of Section 11 of the TRAI Act, the functions of the TRAI under clause (b) of sub-section (1) of Section 11 of the TRAI Act are not recommendatory. This will be clear from the very language of clause (b) of sub-section (1) of Section 11 of the TRAI Act which states ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word `means' in Sections 2(e) and 2(ea) of the TRAI Act indicates that the definitions of licensee and licensor in Sections 2(e) and 2(ea) of the TRAI Act are exhaustive and therefore would not have any other meaning. As Justice G.P. Singh puts it in his book `Principles of Statutory Interpretation' 12th Edition at pages 179-180: when a word is defined to `mean' such and such, the definition is prima facie restrictive and exhaustive .... . A dispute between a licensor and a licensee referred to in Section 14(a)(i) of the TRAI Act, therefore, is a dispute after a person has been granted a license by the Central Government or the Telegraph Authority under sub- section (1) of Section 4 of the Telegraph Act and has become a licensee and not a dispute before a person becomes a licensee under the proviso to sub-section (1) of Section 4 of the Telegraph Act. In other words, the Tribunal can adjudicate the dispute between a licensor and a licensee only after a person had entered into a license agreement and become a licensee and the word any in Section 14(a) of the TRAI Act cannot widen the jurisdiction of the Tribunal to decide a dispute between a licensor and a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms regarding payment which had been decided upon by the Central Government as a consideration for parting with its rights of exclusive privilege in respect of telecommunication activities and having accepted the license and availed the exclusive privilege of the Central Government to carry on telecommunication activities, the licensees could not have approached the Tribunal for an alteration of the definition of Adjusted Gross Revenue in the license agreement. 35. Regarding the recommendations of the TRAI under Section 11(1)(a)(i) of the TRAI Act, we find that the Tribunal in its order dated 07.07.2006 has held that the opinion of the renowned expert in the accountancy that any other definition of Adjusted Gross Revenue would lead to reduction of license fee liability by way of accounting jugglery was not placed before the TRAI and as a result there was no proper and effective consultation with the TRAI and the weightage that was due to the recommendations of the TRAI was not given effect to. In our considered opinion, if the Tribunal found that there was no effective consultation with the TRAI on the opinion of the expert on accountancy, the Tribunal could have at best, if it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. 37. In Delhi Science Forum and Others v. Union of India (supra) after the National Telecom Policy, 1994 was announced for inducting the private sector into basic telephone services and notice was published inviting tenders from private parties and tenders were submitted for different circles, but before licenses could be granted by the Central Government, writ petitions were filed in different High Courts as well as in this Court and all the writ petitions filed before different High Courts were transferred to this Court and heard together. The Writ Petitioners questioned the validity and propriety of the new telecom policy saying that it shall endanger the national security of the country and shall not serve the economic interest of the nation. This Court while upholding the new Telecom Policy held that the proviso to sub-section (1) of Section 4 of the Telegraph Act enables the Central Government to grant license to private bodies, but such power should be exercised on well-settled principles and norms which can satisfy the test of Article 14 of the Constitution. Thus, this is not a case like the present one, in which the licensees having accepted the terms of the license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decisions in Har Shankar Ors. vs. The Deputy Excise Taxation Commissioner Others (supra), Government of A.P. vs. M/s Anabeshahi Wine Distilleries Pvt. Ltd (supra), Assistant Excise Commissioner Anr. vs. Issac Peter Ors. (supra), State of Orissa Ors. vs. Narain Prasad Ors. (supra), State of M.P. Ors. vs. KCT Drinks Ltd. (supra), State of Punjab Anr. vs. Devans Modern Breweries Ltd. Ors. (supra), Shyam Telelink Limited vs. Union of India (supra) and in Bharti Cellular Limited vs. Union of India Ors. (supra), that this Court has consistently taken a view that once a licensee has accepted the terms and conditions of a license, he cannot question the validity of the terms and conditions of the license before the Court. We, therefore, hold that the TRAI and the Tribunal had no jurisdiction to decide on the validity of the definition of Adjusted Gross Revenue in the license agreement and to exclude certain items of revenue which were included in the definition of Adjusted Gross Revenue in the license agreement between the licensor and the licensee. 41. The next substantial question of law which we have to decide is whether as a result of Union of India not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be placed before it by either side. In this process it is not necessary for the TRAI to hold fresh consultative proceeding unless it thinks necessary. During this proceeding before the TRAI the petitioners shall place before it their contentions in regard to the various components of AGR which they have challenged before this Tribunal and the TRAI after hearing the Government on this issue also, send its recommendations to this Tribunal preferably within three months of the receipt of this order. Further, while considering the issue now remitted to the TRAI, the TRAI will bear in mind our finding in regard to the inclusion in gross revenue of the licensee revenue derived from non-licensed activities...... Thus, the Tribunal in its order dated 07.07.2006 has not just decided a dispute on the interpretation of Adjusted Gross Revenue in the license, but has decided on the validity of the definition of Adjusted Gross Revenue in the license. As we have already held, the Tribunal had no jurisdiction to decide on the validity of the terms and conditions of the license including the definition of Adjusted Gross Revenue incorporated in the license agreement. Hence, the order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue in the licenses given to them and the Tribunal has finally decided in its order dated 30.08.2007 as to what items of revenue would be part of Adjusted Gross Revenue and what items of revenue would not be part of Adjusted Gross Revenue without going into the facts and materials relating to the demand on a particular licensee. 43. In the result, we allow these appeals and set aside the impugned order dated 30.08.2007 of the Tribunal. There shall be no order as to costs. CIVIL APPEAL Nos. 2479 of 2008, 1552 of 2009, 7049 of 2010, 7062 of 2010, 7063-7064 of 2010, 7443 of 2010, 7446 of 2010, 7126 of 2010, 7444 of 2010, 7445 of 2010, 9646-9661 of 2010, 2030 of 2011, 2031 of 2011, 2270 of 2011, 3245 of 2011, 5450-5451 of 2011, CIVIL APPEALS ARISING OUT OF SLP (C) Nos. 1786-1787 OF 2009 AND CIVIL APPEALS ARISING OUT OF SLP (C) Nos. 6641-6642 OF 2010: Leave granted in Special Leave Petitions. 2. In these appeals, different orders of the Tribunal have been impugned. The orders of the Tribunal, which have been impugned, are based on the order dated 30.08.2007 of the Tribunal which we have set aside. The orders impugned in these appeals are, therefore, set aside and the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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