Case: Star India Pvt. Ltd Vs. Sea T.V. Network Ltd.

Being aggrieved by the direction issued by the Telecom Disputes Settlement & Appellate Tribunal on 24.8.2005 ordering Star India Pvt. Ltd.to supply signals of its bouquet of channels by entering into an Agreement with Sea T.V. Network Ltd. (respondent No.1 herein) on such terms and conditions which are not unreasonable, Star India Pvt. Ltd. has come to this Court by way of this civilIndia Pvt. Ltd. is a company under the Companies Act, 1956. On 8.2.2005 Star India Pvt. Ltd. entered into Distributor Agreement with Moon Network Pvt. Ltd. (respondent No.2). M/s Moon Network Pvt. Ltd. under the Agreement was a distributor. Under the said Agreement there was a recital. Under that recital Star India Pvt. Ltd. had stated that it was an authorized distributor of the Satellite T.V. channels namely Star Plus, Star Movies, Star World, Star News, Star Gold etc. collectively referred to as New Channels Bouquet. Under the Agreement Moon Network Pvt. Ltd. a Multi-System Operator (for shortwas engaged in the business of transmission of TV channels through cables. Under the Agreement Moon Network Pvt. Ltd. was described as a distributor. Under the said Agreement Star India Pvt. Ltd. appointed Moon Network Pvt. Ltd. as the distributor on a sole and exclusive basis. The distributor was required to distribute the subscribed channels in the territory of Agra. Moon Network Pvt. Ltd. was thus appointed as the sole and exclusive distributor of the subscribed channels through the cable network owned by it and operated by it in the territory of Agra. It is interesting to note that under the Agreement, Star India Pvt. Ltd. excluded the distribution of the subscribed channels through DTH, CAS, Broadband or any medium other than through a ground cable network. The said Agreement came into effect from January 1, 2005. The Agreement is valid up to June 30, 2007, unless terminated in accordance therewith. Under the Agreement Moon Network Pvt. Ltd. could execute an affiliation agreement directly with its affiliate(s) in such form and manner to be approved by Star India Pvt. Ltd. Under the Agreement Moon Network Pvt. Ltd. could use publicity material given to it by Star India Pvt. Ltd. Under the Agreement Moon Network Pvt. Ltd. agreed to employ competent staff and/or independent contractors for the purpose of the contract. Under the Agreement Moon Network Pvt. Ltd. was recognized by Star India Pvt. Ltd. as a MSO engaged in the business of transmission of T.V. channels through ground cables. Under clause 6.3 of that Agreement it was clarified that Star India Pvt. Ltd. made no representations and/or warranties relating to continuity, content and the reception quality of the programmes on the subscribed channels and that Star India Pvt. Ltd. will not be responsible if a Delivery Failure is caused by factors not directly within the control of Star India Pvt. Ltd. Under the Agreement Star India Pvt. Ltd. agreed to deliver theto the distributor Moon Network Pvt.under the Agreement it was stipulated that Moon Network Pvt. Ltd. in turn would not re-sell or act as a dealer in respect of the said Decoders. Under clause 16 of the Agreement the parties agreed that Moon Network Pvt. Ltd. as a distributor will act as an independent contractor and that the Agreement shall not create principal-agent relationship between Star India Pvt. Ltd. and Moon Network Pvt. Ltd. That, neither party shall hold out to the rest of the world any suchsum up, Moon Network Pvt. Ltd. was appointed as an exclusive agent of Star India Pvt. Ltd. in the territory of Agra. At the same time the Agreement recognized the status of Moon Network Pvt. Ltd. as an MSO engaged in the business of transmission of TV channels through ground cables. This aspect is important since in the present controversy one of the main issue which arises for determination is the difference between,including re-transmission of signals, on one hand and the expressionon the other hand which expression finds place under the Telecommunication (Broadcasting and Cable Services) Interconnection Regulation, 2004 (hereinafter referred to ast this stage we may state that although the above Agreement dated 8.2.2005 remains in force up to 30.6.2007 for some unknown reasons Star India Pvt. Ltd. has entered into a distributor Agreement on 4.1.2006 under which Moon Network Pvt. Ltd. are appointed as distributor. In the present case we are only concerned with the interpretation of the Interconnection Regulation 2004, and therefore, we are not required to go into any other aspect. However, it is made clear that in such cases the Appellate Tribunal ought to have called for the Distributor Agreement, if any, and not decide conceptually they do not go by the facts of the individual cases. In the present case at one stage it was argued vehemently by the appellants that Star India Pvt. Ltd. had entered into an Agreement with Moon Network Pvt. Ltd. and that Moon Network Pvt. Ltd. was therefore exclusive agent for the territory of Agra. It was argued that Star India Pvt. Ltd. was required to appoint an agent in different territories looking to the economies of scale of operations carried out by Star India Pvt. Ltd. throughout India. However, when the Court perused the contents of the Agreement we find that the Agreement is a Distributor Agreement. As stated above the Agreement expressly stated that Moon Network Pvt. Ltd. was an independent contractor and that the relationship between the parties was on principle to principle basis and that there was no relationship of principal and agent, as contended by the appellants before the appellate Tribunal.

Court's reasoning:
12. Firstly, we do not find any error in the judgment which has held that in providing signals to a distributor through an agent who is also in turn a distributor is per se discriminatory. We agree with the contention of Mr. Rohtagi learned senior counsel that in the case of overlap of functions to be performed by each entity under the Interconnection Regulations like a Distributor, MSO, agent/intermediary, one has to go by the facts of each case and the terms of Agreement between the broadcaster and his agent cum distributor. Every contract under the Interconnection Regulations has two aspects. One concerns the commercial side whereas the other concerns the technical side. There is no difficulty for the commercial side. If the broadcaster appoints an agent on the commercial side to collect the statistics of the number of subscribers or for distribution of Decoders there is no dispute. On the commercial side when an agent is appointed by the broadcaster that agent need not be from the Operation Network. Such an agent normally is not a technical service provider. The difficulty arises when the broadcaster as in the present case appoints or enters into an agreement with a distributor, who in turn is an MSO and who in turn has his own business because in such a case such anis also a competitor of the MSO who seeks signals from the broadcaster. We are living in a competitive world today. If under the Interconnection Regulations an MSO is entitled to receive signals directly from a broadcaster, if directed to approach his competitor MSO then discrimination comes in. The reason is obvious. The exclusive agent of a broadcaster has his own subscriber base. His base is different from another MSO in the same territory. If that another MSO has to depend on the Feed to be provided by the exclusive agent of the broadcaster then the very object of the Interconnection Regulation stands defeated.13. We are satisfied that even technically the quality of signals receivable through the Decoders is different from the quality of signals receivable through cable feed. In the present case the broadcaster has appointed Moon Network as its Distributor for the territory of Agra. In the present case the Agreement provides that Moon Network Pvt. Ltd. will operate on principle to principle basis and will not be an agent of Star India Pvt. Ltd. (Broadcaster). In that Agreement it is expressly provided that Moon Network Pvt. Ltd. would not be entitled to use any other medium except ground cable. Under the Distribution Agreement the Broadcaster has appointed the Moon Network Pvt. Ltd. as the sole and exclusive distributor of the subscribed channels. It is important to note that under the Interconnection Regulations exclusivity of contracts stands eliminated.14. Notwithstanding such regulations the broadcaster in the present case has appointed Moon Network Pvt. Ltd., who is also an MSO, as the sole and exclusive distributor of the subscribed channels through the cable network owned and operated by Moon Network Pvt. Ltd. in the territory of Agra. (See clause 1.1). This is where the difficulty comes in The object of Interconnection Regulation is to eliminate monopoly. If Sea T.V. respondent No.1 carries on business in competition with Moon Network Pvt. Ltd. and if it is to depend on the Feed provided by its competitor and if the quality of the signals available through that Feed is poorer than the quality of the signals available through Decoders, then the Tribunal is right in holding that the above arrangement is per se discriminatory. It is important to bear in mind that Sea T.V. Network and Moon Network Pvt. Ltd. are in turn MSOs. When Moon Network Pvt. Ltd. is appointed as sole and exclusive distributor with a direction to distribute the signals through the infrastructure of Moon Network Pvt. Ltd. then the quality of the signals receivable by Sea T.V. Network may not be the same as the quality of signals through Decoders. In this connection fudging of data (voice and picture) is possible. Even the speed ofto Sea T.V. Network could get affected.15. In such cases it is the subscribers of Sea T.V. Network who would be adversely affected. The picture quality would be affected. The reason for this is also obvious. Let us say that Moon Network Pvt. Ltd. receives about 1000 signals from the broadcaster. Out of 1000 signals it is open to Moon Network Pvt. Ltd. to distribute the majority thereof to its own subscribers and the balance could be transferred through the cable to Sea T.V. Network. The quality of the signals receivable by Moon Network Pvt. Ltd. directly from the broadcasters would certainly be better than the quality, speed etc. of the signals receivable by Sea T.V. Network. It is for this reason that Sea T.V. Network refused to take signals through the feed. Therefore apart from competition, the business of Sea T.V. Network to the above extent is also likely to be affected because of the poor quality of signals through the feed. In such an event the subscriber base of Sea T.V. Network would shift and become part of the subscriber base of Moon Network Pvt. Ltd. in Agra.16. Secondly, keeping in mind what is stated above, we may examine the scope of the said Interconnection Regulations. There is a basic difference between making available T.V. channels andof T.V. channels. We have quoted the definition and provisos from Interconnection Regulation. Under clause 2(b) an agent is a person authorized by a broadcaster to make available T.V. channels to a distributor of T.V. channels. In that definition we have a broadcaster, an agent of the broadcaster and a distributor. Under the Agreement between Star India Pvt. Ltd. and Moon Network Pvt. Ltd. (which Agreement was not placed before the Tribunal) Moon Network Pvt. Ltd. is a distributor of T.V. channels. It is not an agent. In fact, the contract indicates that the relationship between Star India Pvt. Ltd. and Moon Network Pvt. Ltd. is not based onrelationship.17. In other words the Star India Pvt. Ltd. has given distribution rights exclusively to Moon Network Pvt. Ltd. for the territory of Agra. This was never disclosed to the Tribunal. Before the Tribunal it was argued that Moon Network Pvt. Ltd. was the agent of Star India Pvt. Ltd. It is for this reason that Sea T.V. Network is asked to approach Moon Network Pvt. Ltd. as a distributor. It is for this reason that Sea T.V. Network is made to depend for the signals on the feed to be provided by Moon Network Pvt. Ltd. Further under clause 2(j) the wordof TV channels is defined to mean, any person whoT.V. channels through electromagnetic waves through cable. When signals are provided through Decoders the matter comes under the expressionin terms of clause 2(b)of the Interconnection Regulations. Clause 2(b) is applicable because the broadcaster makes available the T.V. channels to its distributor namely Moon Network Pvt. Ltd. On the other hand between Moon Network Pvt. Ltd. and Sea T.V. Network clause 2(j) would apply because after receiving signals through the cable from the broadcaster the distributor (Moon Network Pvt. Ltd.)the T.V. channels through the Feed to Sea T.V. Network.18. Therefore, there is vital distinction between what is received by anfrom the broadcaster and what is subsequentlytor to other MSOs/Cable Operators like Sea T.V. Network. In our view the Tribunal, has therefore, correctly drawn a distinction between what is called asavailable of T.V.on of T.V. channels under the above two clauses. Keeping in mind the above distinction it is clear that although a broadcaster is free to appoint its agent under the proviso to clause 3.3 such an agent cannot be a competitor or part of the network, particularly when under the contract between the broadcaster and the designateddistributor exclusivity is provided for in the sense that the signals of the broadcaster shall go through the cable network owned and operated by such andistributor which in the present case happens to be Moon Network Pvt. Ltd.