Case: Union of India &amp; Another Vs. Association of Unified Telecom Service Providers of India &amp; Others

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 license fee and made a representation to the Government of India, Ministry of Telecommunications for relief against the high license fee for the survival of the telecom industry. The Government of India considered the representations and after a number of deliberations with the licensees offered a new package, known as theTelecom Policy 1999 -giving an option to the licensees to migrate from fixed license fee to revenue sharing fee. Accordingly, letters dated 22.07.1999 were sent to different licensees offering them a change over to NTP-99 regime, which inter aliaThe cut off date for change over to NTP-99 regime will be 01.08.1999.(ii) The licensee will be required to pay one time Entry Fee and License Fee as a percentage share of gross revenue under the license. The Entry Fee chargeable will be the license fee dues payable by existing licensees upto 31.07.1999, calculated upto this date duly adjusted consequent upon notional extension of effective date as in para (ix) below, as per the conditions of existing license.(iii) The license fee as percentage of gross revenue under the license shall be payable w.e.f. 01.08.1999. The Government will take a final decision about the quantum of the revenue share to be charged as license fee after obtaining recommendations of the Telecom Regulatory Authority of India (TRAI). In the meanwhile, Government have decided to fix 15% of the gross revenue of the Licensee as provisional license fee. The gross revenue for this purpose would be the total revenue of the licensee company excluding the PSTN related call charges paid to DOT/MTNL and service tax collected by the licensee on behalf of the Government from their subscribers. On receipt of TRAIs recommendation and Governments final decision, final adjustment of provisional dues will be effected depending upon the percentage of revenue share and the definition of revenue for this purpose as may be finally decided.After receipt of the letter dated 22.07.1999, some of the service providers applied and took new licenses which provided that the licensee will have to pay a certain percentage of the Gross Revenue as license fee annually. After the Government of India, Ministry of Telecommunications finally took the final decision on the definition of Adjusted Gross Revenue, the license agreement was amended and signed 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 extractedDefinition 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 other eligible/ entitled telecommunication service providers and;III. Service Tax on provision of service and Sales Tax actually paid to the Government if gross revenue had included as component of Sales Tax and Service Tax.In the year 2003, some of the licensees questioned the validity of the definition of Adjusted Gross Revenue in the license agreement before the Tribunal and contended that Adjusted Gross Revenue can only relate to the revenue directly arising out of telecom operations licensed under Section 4 of the Indian Telegraph Act, 1885 (for shortafter adjustment of expenses and write offs and revenues directly not attributable to the licensed telecom activities. They also contended that miscellaneous and other items including interest income, and dividend income, value of rebates, discounts, free calls and reimbursement from USO fund etc. ought not to be included in the Adjusted Gross Revenue for the purpose of computation of licenseUnion of India filed its reply before the Tribunal contending that the licensees having unconditionally accepted the migration package and having taken the benefit of the same are bound by the terms and conditions of the license agreement and cannot be permitted to resile from the same. In its order dated 07.07.2006, the Tribunal rejected the contentions of the Union of India and held that under Section 4 of the Telegraph Act, the Central Government can take percentage of the share of gross revenue of a licensee realised from activities of the licensee under the license and therefore revenue received by a licensee from activities beyond licensed activities would be outside the purview of Section 4 of the Telegraph Act. The Tribunal further held that Section 11 (1) (a) of the TRAI Act mandates the Central Government to seek recommendations from the Telecom Regulatory Authority (for short `the TRAI) on the license fee payable by the licensee and as no effective constitution had been made by the TRAI, the matter should be remanded to the TRAI and the TRAI can consider the matter and send its recommendations to the Tribunal. The Tribunal however made it clear that the TRAI will bear in mind the findings of the Tribunal that revenue of the licensee derived from non-license activities will not be included in the Adjusted Gross Revenue for the purpose of determining the license fee payable by the licensee.5. The Union of India, challenged the order dated 07.07.2006 of the Tribunal before this Court in Civil Appeal No. 84 of 2007 under 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 argue the matter de novo and the earlier order dated 07.07.2006 of the Tribunal had become final. In its fresh order dated 30.08.2007 (for short `the impugned order) the Tribunal held that its earlier order dated 07.07.2006 having become final, it cannot be re-opened after the dismissal of Civil Appeal No.84 of 2007 by this Court. The Tribunal held that its finding in the earlier order dated 07.07.2006 that Adjusted Gross Revenue will include only revenue arising from licensed activity and not revenue from activities outside the license cannot be re- agitated by the Union of India.7. Having held that Adjusted Gross Revenue will include only revenue arising from licensed activity, the Tribunal in the impugned order considered the recommendations of the TRAI regarding the heads of revenue to be included and the heads of revenue to be excluded from the Adjusted Gross Revenue and decided asThe Tribunal accepted the recommendation of the TRAI that income from dividend even though part of the revenue does not represent revenue from licensed activity and, therefore, cannot be included in the Adjusted Gross Revenue.(ii) The Tribunal accepted the recommendation of the TRAI that interest earned on investment of savings made by a licensee after meeting all liabilities including liability on account of the share of the Government in the gross revenue cannot be included in the Adjusted Gross Revenue, but, interest on investment of funds received by a licensee by way of deposits from customers on account of security against charges and on account of concessions given in the charges payable for using the telecom services have to be included in the Adjusted Gross Revenue as these are related to telecom service, which is part of the licensed activity.(iii) The Tribunal did not fully accept the recommendation of the TRAI on capital gains and held that sale of assets of a licensee such as immovable properties, securities, warrants or debt instruments are not part of the licensed activity and, therefore, capital gains earned by a licensee on such sale of assets cannot form part of the Adjusted Gross Revenue.(iv) The Tribunal accepted the recommendation of the TRAI that gains from Foreign Exchange rates fluctuations are also not part of the licensed activity of telecom service providers and, therefore, cannot constitute part of the Adjusted 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 these activities do not require a license.(ix) The Tribunal held that payments received on behalf of third party should not form part of the Adjusted Gross Revenue and did not accept the recommendation of the TRAI in this regard.(x) The Tribunal did not accept the recommendation of the TRAI that the revenue from TV up-linking and Internet service should form part of the Adjusted Gross Revenue as these activities are covered under a separate license.(xi) The Tribunal accepted the recommendation of the TRAI that sale of handsets or telephone equipment bundled with telecom service should be part of the Adjusted Gross Revenue because such sale comes within the licensed activity.(xii) The Tribunal accepted the recommendation of the TRAI that receipts from USO Fund will not form part of the Adjusted Gross Revenue.(xiii) The Tribunal accepted the recommendation of the TRAI that revenue receipts on account of ADC (Access Deficit Charge) should form part of the Adjusted Gross Revenue.(xiv) The Tribunal accepted the recommendation of the TRAI that costs on account of port charges, interconnection set-up charges, leased lines sharing of infrastructure, roaming signaling charges and content charges should form part of the Adjusted Gross Revenue.(xv) The Tribunal did not accept the recommendation of the TRAI that bad debts, waivers and discounts should form part of the Adjusted Gross Revenue and held that such losses incurred by a licensee should be excluded from the Adjusted Gross Revenue.(xvi) The Tribunal accepted the recommendation of the TRAI that service tax payable by the licensee should be included or excluded from the Adjusted Gross Revenue on accrual basis and also accepted the recommendation of the TRAI that interconnection usage should also be included or excluded from the Adjusted Gross Revenue on accrual basis.(xvii) The Tribunal did not accept the recommendation of the TRAI that its recommendations with regard to items, which are to be included or excluded from the gross revenue, should be effective from a prospective date and instead held that the findings of the Tribunal with regard to items, which are included or excluded from the Adjusted Gross Revenue, will be effective from the date the licensee approached the Tribunal.

Court's reasoning:
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 had the jurisdiction to decide the dispute, directed the TRAI to consider the opinion of the expert on accountancy and send its recommendations to the Central Government and directed the Central Government to consider such fresh recommendations of the TRAI as provided in the provisos to section 11(1) of the TRAI Act. Instead the Tribunal has considered the recommendations of the TRAI and passed the fresh impugned order dated 30.08.2007 contrary to the very provisions of Section 11(1)(a) of the TRAI Act and the provisos thereto. At any rate, as the Central Government has already considered the fresh recommendations of the TRAI and has not accepted the same and is not agreeable to alter the definition of Adjusted Gross Revenue, the decision of the Central Government on the point was final under the first proviso and the fifth proviso to Section 11(1) of the TRAI Act, 1997.36. We may now deal with the authorities relied upon by the Tribunal and learned counsel for the parties. In Cellular Operators Association of India & Ors. v. Union of India & Ors. (supra), the Cellular Operators Association of India approached the Tribunal under Section 14 of the TRAI Act challenging the decisions of the Government permitting the fixed service providers to offer WLL with limited mobility and the recommendations of the TRAI in this regard. The Tribunal dismissed the application and the Cellular Operators filed an appeal under Section 18 of the TRAI Act before this Court. This Court held that WLL with limited mobility as recommended by the TRAI could be permitted if the question of level playing field of the Cellular Operators was duly considered and they were duly compensated but the Tribunal had not considered the relevant materials on this issue and had only arrived at a bald conclusion that the Cellular Operators have already been compensated in various ways. With these findings, this Court set aside the decision of the Tribunal and remitted the matter to the Tribunal for reconsideration with special emphasis on the question of level playing field on the basis of the materials already on record. In this decision, this Court was not called upon to consider whether a licensee having accepted the terms of the license could challenge before the Tribunal the validity of a clause in the terms of license and whether the Tribunal would have jurisdiction to decide such a challenge.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 have challenged the definition of Adjusted Gross Revenue incorporated in the terms of the license.38. In State of U.P. v. Devi Dayal Singh (supra), a truck owner, Devi Dayal Singh, challenged the right of the State Government to recover by way of toll under Section 2 of the Tolls Act, 1851, an amount for the actual construction of the bridge. This Court held that Section 2 of the Tolls Act, 1851 which enables the State Government to levy toll at such rates `as it thinks fit and the only restriction is latent in the worditself. This was therefore not a case of dispute between the Government and the contractor where the contractor had challenged a stipulation of the contract. In the present case, on the other hand, the licensees had accepted the terms of the license and after having taken the benefits of the license is now trying to wriggle out from the terms of the license and in particular the definition of the Adjusted Gross Revenue.39. In Union of India v. Tata Teleservices (Mahrashtra) Ltd. (supra) cited by Mr. Srinivasan, a letter of intent was issued to Tata Teleservices and this was accepted by Tata Teleservices but ultimately the contract did not come into being and the license was not actually granted. The Union of India suffered a considerable loss because Tata Teleservices had walked out of the obligation undertaken by the acceptance of the letter of intent. The Additional Solicitor General appearing for the Union of India submitted that such a dispute would also come within the purview of Section 14 of the TRAI Act, going by the definition of licensee and the meaning given to it in the notice inviting tenders. The Tribunal held that expressionoccurring in Section 14 (a)(i) of the TRAI Act would not exclude a person who had been given a letter of intent and who had accepted the letter of intent but was trying to negotiate some further terms of common interest before a formal contract was entered into and the work was to be started. This was thus a case where this Court treated a person who had accepted the letter of intent of the licensor as a licensee, although a formal contract had not entered into. In this case this Court has not held that a licensee could dispute the validity of a term or condition which was incorporated in the license agreement.40. On the other hand, we find from the long line 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 filing an appeal against the order dated 07.07.2006 in favour of some of licensees, the order dated 07.07.2006 had not become binding on the Union of India with regard to issues which had been decided by the Tribunal in the said order dated 07.07.2006. According to the learned counsel for the licensees in whose favour order dated 07.07.2006 has been passed and against whom no appeal was filed by the Union of India challenging the order dated 07.07.2006, the order dated 07.07.2006 of the Tribunal could not be re-opened because of the principle of res judicata. In the opening paragraph of the order dated 07.07.2006, the Tribunal has stated:this batch of petitions the Association of Unified Telecom Service Providers of India, Cellular Operators Association of India and some individual Telecommunication Service Providers are questioning the validity of the definition of Adjusted Gross Revenue (AGR) in the licenses given to various telecom servicein the operative part of the order dated 07.07.2006, the Tribunal has directed as follows:from the principal question whether the State Government can include the gross income of the licensee from non-licensed activity in the AGR; the petitioners have also challenged individually the various components of AGR as enumerated in the licence. In view of the fact we have come to the conclusion that there has not been an effective consultation with the TRAI which is mandatory under the TRAI Act, we think we should not further delve into the exercise of finding out which component of the AGR, as defined by the Government in the conditions of licence, deserves to be retained and which component which the petitioners contend is not derived from the licensed revenue of the licensee should be excluded at this stage. We think it more appropriate that the matter should be remanded to the TRAI which is the 3rd Respondent herein, before whom the Government should produce the material relied by it while rejecting TRAIs recommendation so that TRAI can consider the same and send its conclusions to this Tribunal and thereafter, this Tribunal will have the benefit of a comprehensive recommendation of the TRAI after considering the materials relied upon by the Government. While forming its conclusions the TRAI shall hear the Government as well as the licensees and consider the materials that 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-licensedThus, 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 dated 07.07.2006 of the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply. In Chandrabhai K. Bhoir and Others vs. Krishna Arjun Bhoir and Others (supra) this Court relying on Chief Justice of A.P. vs. L.V.A. Dixitulu [(1979) 2 SCC 34,  Union of India vs. Pramod Gupta [(2005) 12 SCC 1] and National Institute of Technology vs. Niraj Kumar Singh [(2007) 2 SCC 481] hasorder passed without jurisdiction would be a nullity. It will be a coram non judice and non est in the eye of the law. Principle of res judicata would not apply to suchaccordingly hold that the order dated 07.07.2006 of the Tribunal was not binding on the Union of India even in those cases in which the Union of India did not file any appeal against the order dated 07.07.2006 before this Court.The last substantial question of law which we have to decide is whether the licensee can challenge the computation of Adjusted Gross Revenue and if so at what stage and on what grounds. Section 14 (a)(i) of the TRAI Act, as we have seen, provides that the Tribunal can adjudicate any dispute between the licensor and the licensee. One such dispute can be that the computation of Adjusted Gross Revenue made by the licensor and the demand raised on the basis of such computation is not in accordance with the license agreement. This dispute however can be raised by the licensee, after the license agreement has been entered into and the appropriate stage when the dispute can be raised is when a particular demand is raised on the licensee by the licensor. When such a dispute is raised against a particular demand, the Tribunal will have to go into the facts and materials on the basis of which the demand is raised and decide whether the demand is in accordance with the license agreement and in particular the definition of Adjusted Gross Revenue in the license agreement and can also interpret the terms and conditions of the license agreement. We, however, find from the order dated 07.07.2006 that instead of challenging any demands made on them, the licensees have questioned the validity of the definition of Adjusted Gross Revenue 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.