| Headnote |
Indian Telegraph Act, 1885 – Licence Agreement granted by the Govt. of India to the Telecom Service Providers – Definition of gross revenue– Telecom sector liberalized in 1994– Licenses issued to the service providers stipulated fixed licence fee payable every year – Since, fixed license fee was very high an option was given to the licensees to migrate from fixed licence fee to revenue sharing fee in 1999 – 15% Adjusted Gross Revenue (AGR) was fixed as license fee which was reduced to 8% in 2013 – Service providers ensured that they do not pay the licence fee based on even an agreed “AGR”– Department raised demands – In 2003, telecom operators filed petition before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) challenging the same – Eventually, TDSAT by order dated. 30.08.2007 inter alia held that AGR would include only the revenue from licence activities – Challenged before Supreme Court in Union of India and another v. Association of Unified Telecom Service Providers of India reported as [2011] 14 SCR 657 wherein appeals by the Union of India were allowed and the order dated. 30.08.2007 was set aside – Telecom operators again approached TDSAT challenging the demands – TDSAT by the impugned order considered the specific head of items to be included/excluded under the definition of AGR – Held: Contractual definition of gross revenue is binding – Gross amount, as per the definition, is the gross revenue, without set-off, is to be taken into consideration including the discounts given – Licensees made futile attempt to submit that the revenue to be considered would be derived from the activities under the licence; whereas the aforesaid 2011 judgment between the parties holding that the revenue from activities beyond the licence have to be included in adjusted gross revenue, is binding – Submission is also that the contract recognises the applicability of accounting standards – It is only to maintain books of accounts – When the financial terms in the agreement are clear in the form of definition of gross revenue governed by Clause 19.1 of the agreement, the definition of Accounting Standard-9 (AS-9) cannot supersede it which is a general one – Stand of Department of Telecommunications (DoT) is apparent that the gross revenue has been clearly defined in the agreement – Further, all discounts and commission etc. form part of the gross revenue for the purpose of payment of licence fee– Forex gain is also to be accounted for as part of gross revenue – Further, stand of TDSAT is approved in regard to assets/scrap, shares etc. – However, artificial bifurcation of insurance claim made by the TDSAT cannot be accepted and is contrary to contractual definition of gross revenue – Finding of TDSAT to the extent it is contrary to revenue, set aside– Further, amount of negative balance is a part of revenue and cannot be deducted from the gross revenue to be worked out as per the definition of gross revenue u/AS-9– Finding of TDSAT set aside – Also, the entire amount received by the licensee on account of sharing of passive infrastructure has to be counted in the gross revenue while working out AGR – Contrary finding recorded by TDSAT, set aside – Late fee is also included explicitly in the definition of gross revenue and as such, it has to be computed as its part – Finding of TDSAT, set aside – With respect to gains from roaming charges and PSTN pass-through charges, the finding recorded by TDSAT, to the extent it is contrary to the DOT, based upon certain conditions, is set aside– Further, definition of gross revenue is wide enough to cover non-refundable deposits – Finding recorded by the TDSAT concerning non-refundable deposits not being part of the revenue, set aside – With respect to licence fee demand where spectrum is not granted, the finding recorded by TDSAT in the case of Videocon & S. Tel is agreed with – Interest and dividend earned from the licensing and non-licensing activities also have to form part of gross revenue for determination of licence fee – Further, in respect of the bad-debts written off, the findings by TDSAT are appropriate – Interest income from intercorporate loan has to be included in the gross revenue for working out the licence fee – Also, DOT has rightly included the income of the licensee from IP registration under the CUG licence – TDSAT has also rightly held in the case of Bharti Airtel that the revenue from Cable Landing Station has to be included in the gross revenue – Further, all the submissions raised on merits again have been examined, uninfluenced by the plea of res judicata/constructive res judicata and no merit is found in the submissions raised – Interest and penalty have rightly been levied – National Telecom Policy, 1994 – National Telecom Policy, 1999 – Telecom Regulatory Authority of India Act, 1997 – ss.11(1)(a), 14(a)(i) r/w 14(A)(1), 18 – Companies Act, 1956 – ss. 3, 211(3A)-(3C) – Interpretation of Statutes – noscitur a sociis; ejusdem generis – Principle of constructive res judicata – Constitution of India – Arts. 14 and 39 – Service Tax Act, 1994 – s.67 – Income Tax Act, 1961 – s.80 IA (2a).Telecommunication Laws – National Telecom Policy, 1999 – Objectives of – Discussed. Indian Telegraph Act, 1885 – s.4 – Telecom Service Providers granted Licence Agreement by the Govt. of India – Definition under, of Gross Revenue – Plea of licensees that revenue has not been defined under license and thus, insisted on the fair valuation method relying on J.K Industries Ltd. case – Held: Submission raised on fair valuation method based on the decision in J.K. Industries case cannot be accepted as the decision is on consideration of different accounting standard which adopts fair valuation method i.e., Ind AS-18 and not relevant for the AS-9 accounting standard – Companies Act, 1956 – ss. 211(3A) & (3C) – Chartered Accountants Act, 1949. Companies Act, 1956 – ss. 211(3A) & (3C) – Accounting standards recommended by the Institute of Chartered Accountants of India constituted – Relevance of and fundamental difference between AS-9 and AS-18 – Discussed – Chartered Accountants Act, 1949. Telecom Regulatory Authority of India Act, 1997 – ss.11(1)(a) – Recommendations from the TRAI on the licence fee payable by the licensees – Consideration of, by the Central Government – Discussed. Companies Act, 1956 – s. 211 – Obligation under, of the companies – Held: s.211 deals with the obligation of the company to comply with accounting standards – In case they do not comply, it has to be disclosed in its profit and loss account, the deviation, reasons for such deviation, and financial effect.Doctrines/Principles – Rule of Contra proferentum – Commercial Contracts – Telecom Service Providers granted Licence Agreement by the Govt. of India – Plea of licenses that all receipts would not form part of Adjusted Gross Revenue (AGR) and that revenue from non-licensed activities was not part of AGR at all and that the contra proferentum rule requires clauses 19.1 and 19.2 of the license agreement to be interpreted against the maker and prefer the interpretation which is favourable to the licensees – Held: Rule of contra proferentem does not apply to the present case as there is no ambiguity or doubt in the definition of gross revenue in the agreement.Doctrines/Principles – Doctrine of unconscionable bargaining – Telecom sector – Applicability of in commercial contracts – Licences granted to the service providers stipulated a fixed licence fee payable by the service providers every year – Migration from fixed licence fee to revenue sharing fee – Held: After the introduction of the migration package policy, 1999, there is an exponential growth of the telecom sector – Terms and conditions cannot be said to be oppressive as submitted on behalf of the licensees – It cannot be said that DOT was in a dominant position, or possessed wholly disproportionate and unequal bargaining power– In the matter of commercial contracts, the doctrine of unconscionable bargaining is not applicable – Once benefit has been drawn, the licensees cannot deny validity or binding effect of contract. |
