Case: Bharat Sanchar Nigam Ltd.  Vs. Bpl Mobile Cellular Ltd.

2. Civil Appeal Nos. 6341-6342 of 2003, 1 of 2004, 537 of 2004 and 2015 of 2004 involve the question of payment of charges. Civil Appeal No. 6375 of 2003 involves the question as to the effect of pre-mature surrender of fifteen leased circuits of 2 MBPS which had been obtained by BPL from DOT during the period January 1997 to June 1998. Civil Appeal No. 3448 of 2006 involves a dispute in relation to minimum guarantee period for 2 MBPS leaded lines.3. Judgments were delivered by the Telecom Disputes Settlement and Appellate Tribunal, New Delhi (TDSAT) on various dates, viz., 1.04.2003, 17.02.2003, 8.09.2003 and 3.03.2006.4. Before, however, we consider the views taken by the Tribunal, we may notice the facts involved in each of the case separately.Civil Appeal Nos. 6341-42 of 2003DOT circulated a booklet "commercial information on leased circuits" clearly providing for that the rent and guarantee charges for leased circuits would be on capital cost basis and only after the guarantee period has expired, it would be on capital cost or flat rate whichever is higher. Clause 7.0 of the said booklet provides for rent and guarantee charges to the followingR & G Charges. R & G charges (per annum) will be levied on percentage basis of the capital-cost for cable/ system. After the expiry of R&G period standard flat rate rental or rental calculated on capital cost basis (whichever is higher) shall be levied. A specific hiring contract will be executed with the Guarantor (Subscriber).In contributory works the installation and maintenance charges are levied on percentage of capital cost of the Apparatus and Plant.""Contribution Works" has been defined in the Posts and Telegraphs Financial Handbook as under:"(xi) Contribution Works - This term is applied to works of construction or repair the cost of which is met, not out of funds of the Department, but out of funds supplied by private persons, local bodies, other Government Departments,herein are providers of cellular mobile services. They did not have the requisite infrastructure. DOT had the requisite infrastructure to provide interconnecting links/ circuits and other resources.Respondents entered into a licence agreement with the Government of India for operating/ providing cellular services in the State of Kerala. Similar agreement were entered into for inter-connection links in other parts of the country.Basically we are concerned with Clause 4.1 of the said agreement, which reads asresources required for operation of the services for extending them over the network of the DOT and MTNL and any other service provider licensed by the Authority will be mutually agreed between the parties and shall be listed. The resources may refer to include but not limited to physical junctions, PCM derived channels, private wires, leased lines, data circuits, other communication elements. The Licensee shall apply for and obtain from the DOT the determined resources. The operation and charge of the traffic passed through these resources shall be treated on the basis of the prevalent rules and the guidelines of the DOT on thepursuant to the instructions issued by the DOT, the respondents imported equipment worth Rs. 30 lakhs. The said equipments were to be installed. The DOT issued a letter on 2.08.1996 stating that such equipments could be installed and, furthermore, suggested that the required digital microwave equipment should be installed on "contribution work" basis. However, it is beyond any cavil of doubt that owing to resistance to the said move and resorting to strike by the employees of DOT, the respondents were not allowed to install the imported equipments in their premises. It is stated that the said equipments went waste.By a letter dated 27.09.1996, the DOT communicated that the charges for interconnection of cellular mobile telephone network would be calculated as per standard DOT terms. Although it had earlier been communicated that the respondent could put up its own equipment under contribution work basis, it was to be allowed to take the equipment on rent and guarantee basis. The rent and guarantee period was for ten years. Pursuant to and in furtherance of the said lease agreements, the DOT installed the required equipment and raised bills on the capital cost basis of the equipment. One of the sample bills, which had been raised being Bill dated 5.06.1998, is asof IndiaDepartment of TelecommunicationsThiruvananthapuram Telecom DistrictTelephone No. Consumer No. Bill No. PageBPL/ Cellular Mobile SVCBILL DATE BPL US West Cellular Communication Services Ltd.17.7.98 IVth floor, Co-Bank Towers, P.O. StampPalayam, TVMDUE DATE31.7.98PAY BY DATE RENTAL FROM: 7.2.98 TO: 6.2.995.8.98 CALLS FROM: TO:OPENING CLOSING METERED CREDIT DEBITFREEMETER RDG METER RDG CALLS CALLS CALLSCALLSRent for the 20 pr PCM cable RENTAL 1,05,315 providedFor extending one 2 MB stream fromHotel Sibra, MC Road to MC xgeMETEREDCALLSEgpt - 61525 TRUNK CALLSCable - 43790 OVERSEASCALLSPHONO GRAMSRent for end link at TVM. Pl. Note DEBITS TAXESthis is due from Feb. 98. Bill is GROSS AMT.raised only now Sd/- 27/7 CREDITSPayment approved Amount payable 1,05,315Sd/- on or beforeL. HERBERT 5.8.98Head Network Surcharge 2000For delayedPaymentAmount payable 1,07,315if paid on or after6.8.98ArrearsSd/-ACCOUNTSthe Telecom Regulatory Authority of India (TRAI) issued a tariff order covering the situations where lease circuits were required to be provided. In the said tariff order, the tariffs were applicable with effect from 1.04.1994. Moreover, these rates were applicable only if the leased circuits are provided through utilization of spare capacity. It was further held that where lease circuits were not available, as in the present case, and the leased circuits had to be installed, the charges would be on rent and guarantee basis. The said tariff order was to have a prospective operation. As regards the prevailing tariffs, it was expressly provided that the tariffs specified in the tariff order would replace the existing tariff from the date of implementation, which was 1.04.1999. The said tariff order was issued under Section 11(2) of the TRAI Act, 1997. Indisputably, the amount charged by the DOT on an annual rental basis for the systems rented out to the respondents was higher than the rates prescribed in the tariff order.DOT issued a circular dated 13.04.1999 that the tariff order would not be applicable to old cases under rent and guarantee basis.On or about 7.05.1999, DOT informed the local office that the charges which should be billed against the respondents should be as per the standard DOT terms, i.e., either on capital cost basis or flat rate basis, whichever is higher. It is on the said premise, the bills were raised on flat rate basis, the effect whereof, as contended by the respondents, is that they were required to pay annual rent of Rs. 1,62,50,000/- as against the prevailing annual rent of Rs. 39,87,762/-. Such demands admittedly were raised only in the State of Kerala and nowhere else in the country. Such additional demands were raised on the service providers. A large number of correspondences passed between the parties. However, we may notice that by a letter dated 19.08.1999, DOT stated that a sum of Rs.5,77,025/- per annum should be paid by the respondents. A detailed calculation was also submitted therewith. The said computation was accepted by the respondents. However, according to the appellant, the demand was wrongly made at Rs.15,00,000/- per annum as against the said demand of Rs.5,77,025/-. Questioning the basis for making such demands, a writ petition was filed. However, ultimately the same was withdrawn.Respondents filed an application in terms of Section 14 of the TRAI Act before the TDSAT inter alia on the premise that the flat rate basis purported to be in terms of the internal circulars having no force of law, the same could not have been the basis for making the demands. It, inter alia, prayed for the followingSet aside the revised demand raised by the DOT/Respondents on flat rate basis instead of on capital cost basis as originally charged.(b) Direct the respondents to give retrospective effect to Annexure-X i.e. DOTs new Tariff Circular 4/99 dated 13.4.99 so as to make it applicable to leased circuits commissioned under R&G basis prior to 1.4.99 also;(c) Direct the respondents to pay damages for the loss sustained by the petitioner due to wasting of the NOKIA SDH Optimux equipment worth Rs. 30said applications have been allowed by reason of the impugned orders.Civil Appeal No. 6375 of 2003The lease agreement in this case allegedly was to be for a minimum period of three years. The dispute in this case relates to premature surrender of 15 leased circuits of 2 MBPS which had been obtained by the respondent from DOT during the period January 1997 to June 1998. Whereas the contention of the appellant is that the minimum period during which such lease agreement has to be entered into is three years, according to the respondent, such a stipulation was not known to them till 26.11.1998 and the same was not also indicated in the booklet of DOT, viz., Commercial Information on `Leased Circuits. It was furthermore contended that the internal circulars could not have the force of law.Civil Appeal Nos. 537 of 2004 and 2015 of 2004C.G. FAXEMAIL (P) Ltd. is an email provider. For its commercial services, it had secured leased data circuits. A meeting of Email Service Operations was held with the Chairman of Telecom Commission on 29.01.1996 to discuss various issues relating to email services, the minutes whereof were issued on 02.02.1996. The minutes relating to the relevant item reads asNo. 1E-Mail service providers are charged two times the rental of the point-to-point circuit which is exorbitant. It is not economically viable to provide the services at such high tariff of the leased circuits.DecisionIt was informed that a Committee headed by Sr. DDG(CS) is deliberating the tariff structure for CUG networks. The Committee has been asked to take care of the issue and give an early recommendation.Action:herein filed applications before TRAI as the rates which were being charged from them have been doubled, inter alia, on the premise that they come within the purview of close user group service. It came to the conclusion that the service provided by the respondents does not come within the purview of close unit group service, statingDOT, vide their letter No.106-10/94-PHC dated 13.7.1995 had issued an order stating that the leased lines in respect of the networks set up by licensees of Value Added Services will continue to be charged at a rate, which was double the rate applicable for point to point leased circuits of all types. There is no doubt that E-mail services fall under the category of Value Added Services and as the rental charge for leased circuits provided to the network providers of valued added services had been fixed by the DOT in their order dated 13th July, 1995, we come to the conclusion that leased circuits for E-mail providers has been charged correctly as per the extant orders.While holding the view, however, we are constrained to take adverse notice of the fact that the respondents R-1 and R-2 did not refer to proper documents and that too even after repeated queries from thefound so, however, the members came across two circulars being dated 13.7.1995 and 22.11.1996 and placed the matters for further hearing. Relying on the said circulars, the TRAI heldthe hearing was over, we came across certain documents filed by the DOT in an earlier petition clearly indicating that value added network licensees, which included E- mail licensees, were to be provided leased circuits. We then decided to call for a rehearing on this issue and placed the documents on record. These documents are of July 13, 1995 and November, 21, 1996 bearing Nos.106-10/94-PHC and 116-4/95-PHC respectively. During the rehearing, the respondents accepted that the charging of double the rental for the leased circuits, provided to the E-mail network licensees, was based on the documents referred to above and not on the basis of their earlier interpretation of E-mail as being a CUG network. The petitioners argued that since the respondents had, in their rejoinder, interpreted E-mail as a CUG network, which according to them was wrong, the respondents cannot be allowed to claim double rental on grounds of another order which they failed to refer during the first hearing. The respondents, however, argued that even though they had earlier taken the stand that E-mail service was to be categorized a CUG network, they had also referred to various orders issued by the DOT and a close reading of the same would bring out the fact that the multiplication of rentals, provided for data circuits, had been in existence from 1989was opined that they fall in the category of Value Added Service. An appeal was preferred thereagainst before the Tribunal which has been allowed, opininggoing through the pleadings and the documents produced we have no doubts in our mind that the Respondents do not have much of a case. Admittedly under the terms and conditions of the licences held by them the Appellants are under an obligation to pay for the resources admitted as per the rates fixed by the Respondents. However, in the absence of a specific contract drawn up between both the parties to lay down specifically the resources to be obtained and the precise charges to be paid by them, one has to rely upon knowledge as may be available in public domain and on documents exchanged between the parties, viz., requests for making available certain resources and the demand notes subsequently raised by the provider of resources. It is an admitted fact, and it has not been contested by the Respondents, that the documents relied upon for charging double the rental were internal circulars which were not gazetted and hence not in public domain. The Commercial Information on Leased Circuits, which was a published documents of Dot made available to all the allottees of leased circuits and hence very much in public domain, did not contain any provision under which E-Mail Service Providers were to be charged double the normal rent. Even if it is assumed that the Appellants were aware of a particular circular issued in 1993 it cannot be stretched to argue that they were aware of all the internal circulars of DoT on this subject. We have verified from copies of the demand notes raised by the Respondents in response to the requests received from the Appellants that the initial demands were in conformity with the rates and tariff as indicated in the brochure "Commercial Information on LeasedAppeal No. 3448 of 2006Respondent herein requested DOT to provide land distance lease line on 12.8.1996 for one year. It was also stated that further period of extension will be intimated in advance. On or about 21st September, 1996, a request was made for extension of the said period for one year. Demand was made for one year only by a bill dated 26.11.1996 for Vijaywada to Hyderabad long distant charges and on 24.12.1996 for Vijaywada to Vishakhapatnam. The contract was, thus, concluded. The demands were duly paid by the respondent on 9.1.1997 and 26.12.2005. Various extensions were sought for only after expiry of one year. Those extensions were granted by DOT even on 14.9.1998. The details of infrastructure leased from DOT with their validity were sent. However, some leased lines were surrendered by the first respondent. Indisputably, for the first time on 13.10.1998, the DOT intimated the respondent that the minimum guarantee period was three years. For the said purpose, reliance was placed on internal circulars/letters dated 23.6.1995. Bills were raised only on 20.10.1998.Civil Appeal No. 1 of 2004This case also involves the question of payment of charges as in the case of Civil Appeal No. 6341-42 of 2003. We, therefore, need not deal with the facts of this case.5. The main judgment was delivered by the TDSAT in Petition Nos. 13 and 16 of 2001. It was"The main issue agitated before the Tribunal was whether there were clearly understood contractual terms existing between the Petitioners and the Respondent for computation and calculation of annual rents payable by the Petitioners to the Respondent for facilities availed of by the Petitioners."(ii) "An appraisal of the averments and arguments preferred by both the parties does not support the contention of the Respondents that the Petitioners were fully aware of the internal circulars and orders of DoT regarding the manner of calculation of rental for leased circuits under the Rent and Guarantee Scheme."(iii) "The Telecommunication Manual and various other related office circulars and orders are basically for internal and official use and unless the relevant contents thereof are specifically made known to parties through agreements and/or contracts it cannot be presumed that these are generally known to them. We have no evidence on record to indicate that the Respondent had informed the Petitioners in categorical terms that in terms of the departmental rules and regulations in force, the basis of calculation of annual rentals on R&G basis would be either capital cost or flat rate, whichever is higher."(iv) "If the department itself was oblivious of the procedural rules it had framed for its own functioning it was somewhat optimistic to presume at a later stage that the Petitioners knew of them."(v) "We also see considerable merit in the argument of the Petitioners that non-statutory office orders and rules cannot be superimposed on the statutory undertakings given by the Petitioners as a part of the licensing conditions under the Indian Telegraph Act and Rules framed thereunder."(vi) "For the enforcement of such non-statutory office orders and rules and make these binding, it would be necessary to draw up specific contracts giving in clear and unambiguous details all the terms and conditions and the responsibilities and obligations of both the contracting parties."(vii) "As a result of what we have discussed above we hold that the action of the Respondent in revising the demands after a period of two years in respect of what were practically existing concluded contracts between the Petitioners and the Respondent was neither legal nor proper. The Respondent would recompute the impugned Demand Notes on the basis of existing concluded contracts at pre-revised rates.On the findings in the said case, the TDSAT in other cases also opined that internal circulars would have no effect on the term of the concluded contract.7. Indisputably, the matter relating to laying down of the telegraph lines and providing phone connections including mobile is governed by the provisions of the Indian Telegraph Act, 1885. The said Act was enacted to amend the law relating to telegraphs in India. Section 7(2)(ee) thereof reads as underthe charges in respect of any application for providing any telegraph line, appliance or apparatus.Indisputably, in exercise of its power conferred upon it under Section 7 of the Indian Telegraph Act, the Central Government framed rules known as the Indian Telegraph Rules. Rule 434 provides for annual rental charges for private wires and non-exchange lines which prescribes a minimum period of hire of three years. The relevant portion of Rule 434 reads asIX.Charges for Private WiresAnnual Rental1.(a) Internal Private Wires .... Rs. 400(b) External private wires .... Rs. Fifteen hundred (with or without relay set) per kilometer chargeable distance per annum per pair.Provided that in the case of private wires exceeding five kilometers of chargeable distance, the minimum period of hire shall be 3 years and the security for the service shall be regulated under Rule 445 and obtained from the subscriber before the provision of the service.2. Omitted.3. The chargeable distance of External Private Wires shall be 1.25 times of the radial distance between the two points to be connected.4. Rental for Private Wires given on casual basis for short periods shall be levied on pro rata basis at one and a half time the rates of rentals prescribed in Sub-section 1 above. The minimum period of hire should be oneX.Charges for Non-Exchange LinesAnnual rental1. Annual rental per pair .... Rs. Fifteen hundred per Kilometer of chargeable distance.Provided that in the case of non-exchange lines exceeding five kilometers of chargeable distance, the minimum period of hire shall be 3 years and the security for the service shall be regulated under Rule 445 and obtained from the subscriber before the provision of the service.2. Omitted.3. Omitted.NOTE 1. - The chargeable distance shall be 1.25 times of the radial distance.NOTE 2. - The above rentals will apply in case of Non-Exchange lines or Private wires falling within the local area of a Telephone system, even if they exceed sixteen kilometers in length by the shortest practicable route [see also Rule 494 (1) and the note475-A, 478, 498 of the Indian Telegraph Rule reads as: Notice of surrender of leased Telegraph/ Speech Circuits: Before surrendering the leased Telegraph/ Speech circuits and terminal equipments, the party concerned shall give notice to the controlling/ billing authority to not less than thirty days.478. Quoting of rentals.--(1) The rental for the exclusive use of the circuits shall be quoted at the rates then in force.(2) Where the circuits are provided by utilizing the installations, existing at the time of the application, flat rate of rentals based on radial distance shall be charged for a period of not less than three months (hereinafter referred to in this Part as the minimum guarantee period.XXX XXX XXX498. Part-time use.--(1) A telephone circuit, if available as spare, may be leased to Newspaper Establishments or News Agencies for part-time use between 7 p.m. and 7 a.m.(2) The charges for the circuit provided for under sub-rule (1) shall be one half of the charges specified in clause (a) of sub-rule (1) of Rule 496.(3) Junction line between Private Exchange or Private Branch Exchanges shall not be leased on part-time basis.DOT had issued a circular letter dated 18.2.1991Revision of percentage of rental in Rent and Guarantee cases - Rule 144 of P&T Manual, Vol. XII, Part - I may kindly be referred to wherein rental for cables laid down in rent and guarantee basis to be charged at 18% of the capital cost or at the standard rates applicable to private wire, whichever is higher.The period of guarantee has been mentioned as 10 years. This percentage of rental probably consist of 10% depreciation (considering recovery of the cost of cable in 10 years), 7% interest and 1% maintenance. Now Rates Section increased the rate of interest from 7 to 10% applicable with effect from 1-4-1990. It is necessary that R & G rental must be revised to prevent loss of revenue to the Department...Indisputably, DOT had issued office order bearing No. 1/96 dated 30.01.1996 wherein it was inter aliaquestion of fixing the tariff for 34 Mbps Data circuits on Digital Media was under consideration by the Telecom Commission for some time. It has now been decided to fix the following tariff for 34 Mbps data circuits on Digital Media. These tariff will be applicable for both the national circuits and national leg of internationalthe said circular letter, as regards tariff, it wasThese rates will be applicable only if the circuits are provided with existing assets of the Department. In cases where new construction or installation is involved for whole or part of the circuits the rental will be calculated either on special rates taking into account the cost of construction and other relevant factors or on flat rate basis whichever is higher.V. The terminal equipment will be on R&G basis, if provided by the Department.VI. The above rates will apply only if the entire 34 MBs stream is lead into DOT equipment. If separate streams of 64 KBps/ 2MBps/ 8 MBps are taken, the tariff applicable as for 84 KBps or 2 MBs or 8 MBs as the case may be for each system willsaid circular letter is not a part of the Telecommunication Manual which has been used only for official use. A copy corrected upto April, 1986 is available on records. They are loosely called as Rules although they do not have any statutory force.11. Rule 237 of the Telecommunication Manual reads asThere may be cases where telephone facilities are requisitioned and the cost of such installations is abnormal such as the opening of a telephone connection for a police station at the instance of the State Government in a remote locality, requisition of non-exchange lines outside the local area, trunk lines, PBX etc. by the Defence authorities, requisition of Public Telephones, PBXs etc. by private bodies for their own needs etc. In such cases, standard flat rates may be economical and with a view to ensure that the department gets a fair minimum return for the capital invested, rent is fixed on capital cost basis. In such cases guarantee is taken from the party that he will retain the facilities for a specified period at a specified rate of rental. In all such cases, standard flat rates are also calculated and whichever rate is higher is quoted to the party unless it is definitely laid down that standard flat rate should be charged.Yet again, an internal circular appears to have been issued on 3.11.1993 wherein it was laidThe above rate will be applicable only if the circuits provided with the existing long distance system of the equipment. In cases where new construction or installation involved for the whole or part of the circuit (including lead), the rental will be calculated either on special rate into account the cost of construction and other relevant factors, or on flat rate basis as above, whichever is higher.Besides the aforementioned, some commercial information on lease circuits has also been published in terms of Clause 7.0 of the booklet, as noticed hereinbefore.

Court's reasoning:
22. For the purpose of determining the questions involved in the present appeals, we may ignore the fact that pursuant to or in furtherance of the negotiations held by and between the parties, the respondents imported equipments but, for one reason or the other, as noticed hereinbefore, the same could not be installed. However, the DOT in its letter dated 30.09.1996 categorically stated that it could put up its own equipments under contribution work basis, which would mean that the charges would be on the basis of capital cost. In view of the aforementioned representations made by the DOT, the respondents had agreed to take the equipment on rent and guarantee basis which was itself calculated on capital costs.23. We are, furthermore, not concerned with the tariff order issued by TRAI. What, however, may be noticed is that even the tariff order provides for a lower tariff than the agreed rate.25. In view of the aforementioned law laid down by this Court, there cannot be any doubt whatsoever that the circular letters cannot ipso facto be given effect to unless they become part of the contract. We will assume that some of the respondents knew thereabout. We will assume that in one of the meetings, they referred to the said circulars. But, that would not mean that they are bound thereby. Apart from the fact that a finding of fact has been arrived at by the TDSAT that the said circular letters were not within the knowledge of the respondents herein, even assuming that they were so, they would not prevail over the public documents which are the brochures, commercial information and the tariffs.26. If the parties were ad idem as regards terms of the contract, any change in the tariff could not have been made unilaterally. Any novation in the contract was required to be done on the same terms as are required for entering into a valid and concluded contract. Such an exercise having not been resorted to, we are of the opinion that no interference with the impugned judgment is called for.27. For invoking clauses 4.1 and 19.5 of the licence agreement, we may notice that the word `prescribed is not defined. It has not been defined even in the Indian Telegraph Act. It has not been defined in the licence. The said provision unlike clause 18.14 does not use the words `from time to time. A contract entered into by the parties, it will bear a repetition to state, must be certain. It must conform to the provisions of the Indian Contract Act. Ordinarily, the word `prescribed would mean prescribed by Rules. Section 7(2)(ee) of the Indian Telegraph Act provides for the Rule making power for the purpose of laying down the tariff. We may not be understood to be laying down a law that in absence of any statutory rule framed under the Indian Telegraph Act, no contract can be entered into. In absence of any statutory Rule governing the field, the parties would be at liberty to enter into any contract containing such terms and conditions as regards the rate or the period stipulating such terms as the case may be. The matter might have been different if the parties had entered into an agreement with their eyes wide open that the circular letter shall form part of the contract. They might have also been held bound if they accepted the new rates or the periods either expressly or sub silentio. When on the basis of terms of the contract, different rates can be prescribed, the same must be expressly stated. When the word `prescribed is not defined, the same, in our opinion, would mean that prescribed in accordance with law and not otherwise.The respondent had two options. They were asked to choose one. Thus, a representation was made that they would be entitled to obtain lease the equipments (resources) at an R&G basis. Payments have been made on that basis. The question which would arise for consideration is as to whether the basis of making a demand itself can be changed. The answer to the said question, in our opinion, must be rendered in negative.In the instant case, the resources to be leased out were subject to agreement. The terms were to be mutually agreed upon. The terms of contract, in terms of Section 8 of the Contract Act, fructified into a concluded contract. Once a concluded contract was arrived at, the parties were bound thereby. If they were to alter or modify the terms thereof, it was required to be done either by express agreement or by necessary implication which would negate the application of the doctrine of `acceptance sub silentio. But, there is nothing on record to show that such a course of action was taken. The respondents at no point of time were made known either about the internal circulars or about the letters issued from time to time not only changing the tariff but also the basis thereof.31. We will assume that the contention of the learned Additional Solicitor General that the internal circulars are issued for their application by the local officers. If they have committed a mistake, the same could be rectified.A finding of fact has been arrived at by TDSAT that the said circular letters are not applicable. Rule 434 was not applicable. Appeal to this Court, in terms of Section 18 of the Act is maintainable only on a substantial question of law.