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CASE NO.: Appeal (civil)  1150 of 2006

PETITIONER: Union of India

RESPONDENT: M/s. Millenium Mumbai Broadcast Pvt. Ltd.

DATE OF JUDGMENT: 28/04/2006

BENCH: S.B. Sinha & P.P. Naolekar

JUDGMENT: J U D G M E N T

S.B. SINHA, J :

                Union of India is before us aggrieved by and dissatisfied with the  judgment and order of the Telecom Disputes Settlement & Appellate  Tribunal, New Delhi dated 3rd October, 2005 in Petition No.49(C) of 2005,  whereby and whereunder the application filed by the Respondent herein was  allowed.                 The basic fact of the matter is not in dispute.  A Notice inviting tender  was issued by the Government of India, Ministry of Information &  Broadcasting in the month of October, 1999 from the companies registered  in India for grant of licence to operate FM broadcasting service at Mumbai.   The Respondent herein was one of the successful bidders along with four  others.  It is not in dispute that in terms of the agreement, it was stipulated  that holders of 10 licences, which were planned for the city of Mumbai,  would co-locate the transmission infrastructure on a common transmitter  tower, as required in Clause 14 of the Licence Agreement, as also Article  7.1(i) of the Schedule (C) of the said Licence Agreement.  Pursuant to or in  furtherance of the said scheme, the cost of creating the common  infrastructure to transmit from a common transmission tower was to be  shared by the ten licensees in Mumbai.  It is admitted that five licensees who  were successful bidders in the auction process defaulted and did not sign the  agreements for grant of licences in Mumbai.  Having regard to the default on  the part of the said five bidders, the costs of co-locating on a common  transmission tower for the remaining five licensees was almost doubled.   The Appellant herein, thereafter, issued guidelines permitting the five  licensees in Mumbai to broadcast from interim independent facilities for an  interim period of 24 months, during which period the five licensees were  required to set up a common transmission tower.

       It is also not in dispute that the said guidelines were followed for two  years only, but, having regard to the difficulties faced by the said five  licensees to co-locate the transmission for broadcasting, they were permitted  to make their own arrangement to enable them to operationalize their  individual interim stations within a period of four months.  It stands admitted  that the Respondent herein paid licence fees and also furnished a Bank  Guarantee to the tune of Rs.9.75 crores.

       After the completion of the term of one year, a reminder was sent to  the Respondent on 6.3.2003 stating:

       "It will be recalled that vide letter  No.212/216/2001-B(D)/FM dated 31.12.2001 you had  been informed that in respect of Mumbai you are  permitted to set up permanent co-located facilities by 29th  December, 2003.

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       The deadline for setting up co-located facilities is  approaching.  You are requested to inform this Ministry  of the actions that have been taken by you in setting up  the co-located infrastructure in Mumbai and to shift your  operation from the interim set up.

       This is also to inform that the license fee for the  second year will become due on 29th April, 2003."   

In terms of the said licence, in the event of default on the part of the  licensee to pay the consideration therefor, i.e., furnishing lincence fee within  a period of seven days of the beginning of each year, the Bank Guarantee  furnished could have been encashed.  It is furthermore not in dispute that for  the second year of the licence, the Respondent was to pay a sum of 15%  more than the original licence fee.  Union of India by a letter dated 2.5.2003  reminded the Respondent as regard payment of licence fee for the second  year.  The Respondent herein responded to the said letter stating:

"Our Company is committed to FM Broadcasting  and on that basis we would like to reassure you that we  are arranging for payment of second year licence fee  amounting to Rs.11.2 crores at the earliest.  

We should be in a position to deposit the said  licence fee amount in full by May 16, 2003.  We are also  willing to pay interest for the delay of 9 days.

We request not to encash our bank guarantee  during this period i.e. May 17, 2003."  

 However, it stands admitted that the Respondent did not pay the  amount of licence fee by 16.5.2003, but, at the same time, the Appellant also  did not communicate to the Respondent as to whether its request to extend  the time for deposit of the said amount was accepted or not.

The Appellant, by an order dated 20.5.2003, revoked the licence  stating:

"In continuation of our earlier letter dated  2.5.2003, I am directed to inform you that you have  failed to pay the 2nd year’s licence fees within the  prescribed period, your licence stands revoked and  therefore you should stop broadcasting immediately."

The Appellant, thereafter, invoked the Bank Guarantee and encashed  the same on 28.5.2003.  The Respondent, questioning the validity of the said  order of revocation of licence, filed a writ petition before the Delhi High  Court, which was marked as WP(C)No.4195 of 2003.  An interim order was  passed by the Delhi High Court on 2.7.2003 directing the Appellant herein  to permit the Respondent to broadcast until further orders and that from the  amount recovered through invocation of the Bank Guarantee, the Appellant  would be permitted to appropriate the sum towards licence fee for the period  of broadcasting as per the interim orders.  The High Court also extended the  operation of the interim order on 3.9.2003, subject to the condition that the  Respondent herein deposits a sum of Rs.1 crore.  Yet again, by an order  dated 15.3.2004, the Respondent herein was permitted to deposit a sum of  Rs.23 lacs by 26.3.2004 and furthermore furnish a Bank Guarantee for  another sum of Rs.23 lacs in favour of the Appellant herein to the  satisfaction of the Joint Registrar of the High Court.  The said direction,  indisputably, was issued in the light of the submissions made by the  Appellant herein that out of the total sum of Rs.11,21,50,000/- towards the  second year’s licence fee, a sum of Rs.9.75 crore stood paid (by invoking the  bank Guarantee of the said amount) and another sum of Rs.1 crore had been  paid pursuant to the order dated 3.9.2003 passed by the High Court and as  such the balance sum of Rs.46 lacs had become due towards the licence fee

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for the second year which  expired on 29.4.2004.  Despite a demand notice  issued for payment of licence fee for the third year, the same was not done  and in fact, on 20.4.2004, the Respondent herein made a submission before  the High Court that it did not intend to make any broadcast w.e.f. 29th April,  2004.   We may notice that before the High Court, the Appellant herein  categorically stated that in the event the Respondent did not intend to make  any broadcast from 29th April, 2004, no deposit was required to be made.  In  the interregnum, the Union of India came up with a new policy.   

The Respondent filed an application before the Tribunal questioning  the validity or otherwise of the revocation of broadcasting licence by letter  dated 20.5.2003, inter alia, contending that the same was in violation of the  said Agreement and was, thus, liable to be set aside.  It was furthermore  prayed that the Respondent be declared to be entitled to utilize the licence  agreement on such terms as are applicable to other similarly situated  licensees.  It was also contended that as by reason of illegal revocation of  licence, the Respondent could not use thereafter the facilities to broadcast,  they are entitled to pro-rata rebate in licence fee from 28.5.2003 to 5.7.2003.   

The Appellant herein, on the other hand, contended that as the  Respondent had defaulted in payment of licence fee for the second year as  per the terms and conditions thereof the licence has rightly been revoked.

The Tribunal, upon examining the relevant clauses of the licence,  opined that the action on the part of the Appellant revoking the licence of the  Respondent was illegal.  It was observed:

"We are informed that during the interregnum the  Respondent/Government had come out with a new policy  which entitles the existing licence holders to migrate  from fixed licence fee regime to revenue sharing regime  which the petitioner submits the other Licensees similarly  situated have been permitted.  If that be so, the petitioner  shall also be entitled to the said benefit of the change in  licence fee.  However, since petitioner’s bank guarantee  has been appropriated towards non-payment of licence  fee for the period for which the licence fee was payable,  the petitioner shall now on demand from the respondents  furnish a bank guarantee as required under the terms and  conditions of the licence."

The licence agreement was entered into on 27.10.2000 between the  parties herein.  The said licence had four Schedules.  Schedule (C) appended  to the said agreement laid down the terms and conditions of the licence.  

Clause 1 of the said agreement reads as under:

"1.     Unless otherwise mentioned in the subject of  context appearing hereinafter all the Schedules i.e.  A B C & D, annexed hereto including the tender  documents, Letter of Intent and the guidelines  issued/or to be issued from time to time by the  licensor and the wireless Operational Licence to be  issued by the Wireless Planning & Coordination  Wing in the Ministry of Communications,  Government of India shall form part and parcel of  this Licence Agreement.

"Provided, however, in case of conflict between  the corresponding provisions of the aforesaid schedules  and this agreement, the terms set out in the main body of  this Agreement shall prevail.  In this Agreement, words  and expressions shall have the same meaning as is  respectively assigned to them in the Schedule A."

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Clause 9 of the said Agreement reads as follows:

"The Licensor may at any time revoke the Licence  by giving a written notice of 30 days, to the Licensee  after affording a reasonable opportunity of hearing on the  breach of any of the terms and conditions herein  contained or in default of payment of any consideration  payable as provided hereunder."

We have noticed hereinbefore that Schedule-C relates to terms and  conditions of licence, the relevant clauses whereof are:

1.2     The Licensee shall pay the Licence fee every year  in advance within seven days of the beginning of  the year failing which the Licensor reserves the  right to revoke the Licence and encash & forfeit  the Bank Guarantee furnished by the Licensee  without giving any notice.  This is without any  prejudice to any other action that may be taken by  the Licensor under the terms and conditions of the  Licence."

xxx                     xxx                     xxx

12.1    Termination for default -

       The Licensor can terminate the Licence of the  Licensee in case of:

i)      Default in payment of the Licence Fees;

ii)     Breach of any terms and conditions  contained in this Agreement

The Licensor may, without prejudice to any other  remedy for breach of the conditions of Licence  give a written notice to the Licensee at its  registered office 30 days in advance before  terminating this Licence.

In the event of termination/revocation of the  licence, the licensee will not be eligible to apply  directly or indirectly for any FM Radio Station  licence, in future.

xxx                     xxx                     xxx

16.1    A Bank Guarantee, equivalent to the first year  Licence Fee valid for 10 years from any Scheduled  Bank in the prescribed form shall be submitted  along with this Agreement by the Licensee.  The  Licensee shall keep the bank guarantee renewed  till the expiry of the licence period. 16.2    The Licensor may encash the bank guarantee  without any notice in any of the following  conditions:

i)      If the licensee fails to deposit the licence fee  within 7 days of the beginning of the each  year. ii)     If the licence stops the service without  giving one year’s notice under clause 12.3.

iii)    If the licensee is declared or applies for

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being declared insolvent or bankrupt."   

  Mr. A. Sharan, learned Additional Solicitor General of India  appearing on behalf of the Appellant submitted that having regard to the  provisions contained in Clause 1.2 and Clause 12.1 of the terms of the  licence, it is evident that the condition precedent for grant of 30 days’ notice  as also an opportunity of hearing, were required to be complied with only in  the cases of breach of any of the terms and conditions of agreement and not  in relation to the default in payment of licence fee as Clause 12.1 dealt with  different situation.    It was also submitted that the right of the Appellant in terms of Clause  1.2 of the terms of licence contained in Schedule-C thereof provides first to  distinguish the powers of the Appellant, i.e., to revoke the licence and to  encash and forfeit the bank guarantee without giving any notice.  According  to the learned Additional Solicitor General that revocation of the licence is  permissible without complying with the principles of natural justice.  Clause  9 of the Agreement must be harmoniously read with the conditions of  licence and when so read, the same would show that issuance of 30 days’  notice and affording a reasonable opportunity of hearing relate to breach of  any of the terms and conditions of the licence, but, the said requirements are  not to be complied with in case where the licence is revoked for default in  payment of any consideration payable towards payment of licence fees.

It was further submitted that the Tribunal committed a manifest error  in so far as it issued a direction upon the Appellant to issue the said notice.         

The licence granted in favour of the Respondent is a statutory one.   The terms and conditions thereof are governed by the statutory provisions.   It was initially granted for ten years.  Clauses 14 and 15 of the said  agreement provide:

"14.    The Licence for four metros  (Calcutta/Chennai/Delhi/Mumbai) shall form consortium  and enter into an agreement for using same power  transmitter, utilize common transmitter tower and share  certain common facilities as per the format of agreement  enclosed at Annexure II.

15.     The Licensee shall own transmitter.  Further the  Licensee himself will carry out the broadcast and shall  not sub-contract, assign or transfer the licence in any  manner to any third party.   In case of such transfer or  assignment, the Licensor shall have the right to revoke  the Licence of the Licensee immediately.

       However, the Licensee may with the prior  approval of Licensor enter into an agreement with a third  party so as to enable the latter to set up infrastructural  and hardware facilities such as tower, transmitter etc.  such permission shall not in any case be treated as  permission to provide the services under the Agreement  by such third party on behalf of the Licensee."

       It is not in dispute that the said conditions could not be complied with  in view of the relocation of the same power transmitter, utilization of  common transmitter tower and sharing certain common facilities having not  been possible.  It was in the aforementioned situation guidelines were issued  by the Appellant herein in deviation of the original terms of the licence that  the Respondent and the licensees similarly situated should make their own  arrangements for broadcasting of the events.  Clause 1.2 of the agreement  provided for the mode and manner as regard construction of the said  agreement in case of any conflict between the corresponding provisions of

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the schedule and the body of the agreement.  

       In view of the aforementioned express stipulations contained in the  agreement, it is required to construe clause 9 of the agreement at the outset  independently.  By reason of the said provision revocation of the licence  both for breach of terms and conditions as also for default in payment of any  consideration must precede 30 days’ written notice and a reasonable  opportunity of hearing.          

       How the said provision can be given effect to would depend on the  construction of terms and conditions of the licence.  By reason of clause 1.2,  as contained in the Schedule-C appended thereto, the licensor had been  conferred with a power to revoke the licence as also encash and forfeit the  bank guarantee without any notice.  The expression ’and’ occurring in  between the words ’right to revoke the licence’ and encash and ’forfeit the  bank guarantee’ must be read as two separate clauses.  The same cannot be  read as conjunctive in view of the fact that it is admitted that the revocation  of licence is not permissible without service of 30 days’ notice.  What was,  therefore, permissible is that the licensor in terms of the said condition of  licence may encash and forfeit the bank guarantee furnished by the licensee  without giving any notice.  The same would evidently mean that for the  purpose of encashment and forfeiture of the bank guarantee, no separate  notice is required to be given in the event any cause of action arises therefor.   

Clause 12.1 whereupon the learned Additional Solicitor General  placed strong reliance is not in two parts.  It merely provides for two  different situations in terms whereof revocation of licence is permissible.  The licensor by reason thereof is required to give a 30 days’ written notice to  the licensee before terminating the licence.  The words "without prejudice to  any other remedy for breach of the conditions of the licence" must be read in  the context of other provisions contained therein.      Sub-clause (ii) of Clause  12.1, permits termination/revocation of licence on compliance of the  conditions stipulated therein; but the same would be without prejudice to any  other remedy for breach of the conditions of licence, which in turn would  mean that by reason thereof other remedies available to licensor, if any, are  not taken out from their application.                  Clause 16.2 plays an important role as it enables the licensor to encash  the bank guarantee without any notice; but even for the said purpose the  conditions precedents mentioned therein were required to be fulfilled.  On a  conjoint reading of the aforementioned provisions, it would, therefore,  appear that whereas for the purpose of revocation of the licence either on the  ground of default on the part of the licensee to pay the consideration in  respect of the licence or for breach of the conditions of licence, 30 days’  notice as also an opportunity of hearing was imperative.  However, what  could be done without any notice, it will bear repetition to state, is  encashment of bank guarantee.   

       It may be true that the mode and manner of compliance of the  principle of natural justice had not been specifically stated, but the same  would not mean that it was necessary to be complied with at all.  

       However, the letter dated 06.03.2003 was merely a demand.  It was  not a notice in the true sense of the term as consequences for non-payment  had not been stated therein.  The said letter was issued only by way of  reminder.         We have noticed hereinbefore that only because the licensee makes a  default, the same would not mean that the licence should stand revoked  without any further notice.  Once it is held upon construction of the relevant  provisions of the conditions of licence as also the terms thereof that 30 days’  notice was required to be given before a licence is revoked, it cannot be said  that the said letter dated 6.3.2003 satisfied the requirements thereof.

       We may consider the matter from another angle.  By reason of the  provisions contained in Clause 12.1 of the terms of the licence, not only the

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revocation of licence for breach of any conditions contained in any  agreement; but also prevention thereof on any other ground which would  include the default in payment of licence fee would result in the  consequence of debarring the licensee from applying directly or indirectly  for any FM Radio Station in future.  The consequence of the revocation of  the said licence, therefore, is penal in nature.  Such penal provision is  required to be strictly construed.

       It is in that view of the matter, before the licensor exercises his right  to revoke the licence, a notice was required to be issued.  It having not been  done, the conclusion is irresistible that the purported revocation of licence  was a nullity.                     It is now a well-settled principle of law that a document must be  construed having regard to the terms and conditions as well as the nature  thereof.   

       {See Pearey Lal vs. Rameshwar Das [AIR 1963 SC 1703] and    Administrator of the Specified Undertaking of the Unit Trust of India &  Anr. vs. Garware Polyester Ltd. [2005 (10) SCC 682].}

       We, therefore, with respect, entirely agree with the Tribunal.   

       So far as the contention of the learned Additional Solicitor General  that the direction issued by the Tribunal, as quoted supra, is contrary to  Section 14(1)(c) of the Specific Relief Act, 1963, is concerned, the same is  stated to be rejected.  The provisions of the Specific Relief Act would not  apply to the contracts, which are governed by the statutory provisions.  

       It is furthermore not in dispute that the Respondent or the licensees  similarly situated had suffered a huge monetary loss.  They made  representations for change of the licence fee structure.  Admittedly,  responding to the said representations the Union of India appointed a  committee known as ’Dr. Amit Mitra Committee’.  The said committee  submitted its report on 18.11.2003 recommending that fee structure  applicable to Phase-I licensees be done away with and in its stead and place    a new regime called the ’revenue sharing regime’ be brought in, in terms  whereof the licensees would be required to pay licence fees @ 4% of the  revenue generated.  In terms of the said policy decision, all Phase-I licensee  would be permitted to migrate to the new revenue sharing system in Phase- II.    

The Telecom Regulatory Authority of India released a consultation  paper on or about 14.04.2004 on the basis of the recommendations of the  said committee.

It is stated that on the relevant date, namely 20.04.2004, none of the  Phase-I licensees in Mumbai had co-located on a common transmission  tower nor had the Appellant granted any extension or assurance that permit  the licensees would be permitted to continue broadcasting from independent  individual station/facilities.  Whereas the Respondent herein has expressed  its desire not to make any broadcast on the expiry of the terms of the licence,  other licensees allegedly continued to do the same, although the tenure of  licence expired, it is in that situation, the Respondent took the stand that it  should be treated alike the other four licensees, who are continuing to  broadcast despite the fact that no further extension had been granted even to  them by the Union of India, although they had paid the revenue therefor.  

Our attention, in this connection, has been drawn to the provisions as  regard migration for Phase-I to Phase-II, as laid down in the policy decision,  which is as under:

"1.     Licensees of Phase-I, who have actually  operationalized their channels would be given the option  to Migrate to Phase 2 Policy Regime.  They will have to

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exercise their initial option by the prescribed date to  automatically migrate to Phase 2 Policy regime in  accordance with the terms and conditions of migration or  continue under Phase-I or surrender their licences with  one month’s notice."    

       This Court at this stage is not concerned with the question as to  whether the Respondent has fulfilled the said conditions or not; but  admittedly, the Tribunal proceeded on the basis that the licence having not  been validly revoked, the same continued to be operative.   

       The Tribunal, in terms of Section 14 of the Telecom Regulatory  Authority of India Act, 1997, has a wide power.  The Respondent in their  application, inter alia, prayed for the following reliefs :

       "Pass an order directing the TRAI and the  respondent to provide an appropriate migration option to  the Petitioner to migrate to new license terms keeping in  mind that the Petitioner has invested large sums of  money in the radio broadcasting business, has paid a sum  appx. Rs. 21 crores since 29.4.2002 to the respondent and  has not been able to broadcast sicne 29.4.2004 due to the  arbitrary implementation by the respondent of the  Cabinet order communicated to the Petitioner vide  guidelines dated 31.12.2001."    

       The Appellate Tribunal only directed the Appellant to treat the  Respondent to be entitled to the benefit of the change in the policy decision  as regard payment of different mode of licence as the other existing licence  holders, indisputably, have been given an option to migrate from the fixed  licence fee regime to the revenue sharing regime.

       We may, however, notice that indisputably the Respondent had paid  the entire licence fee in respect of the second year.  It is interesting to note  that before the Delhi High Court itself, the Appellant raised the following  contention, which was recorded by the High Court in its order dated  12.04.2005:

       "Learned counsel for the Respondent on  instructions from Shri L.P. Singh, Assistant Engineer of  the respondent states that respondent No.3 is not aware of  the fact that the petitioner had stopped broadcast of his  FM Channel and in these circumstances the notice dated  19.4.04 read with Corrigendum dated 21.4.04 had been  issued upon the petitioner raising a demand for the period  subsequent to the cessation of the broadcast by the  petitioner.  It is submitted on behalf of the respondent  that the petitioner having stopped the broadcast would  not be liable to pay the charges demanded in these  communications.  In these circumstances, nothing  survives in this application and the same is accordingly  disposed of."

       Having noticed that the Respondent had complied with its interim  order by depositing the requisite amount, the High Court allowed the  Appellant to withdraw the said sum of Rs.23 lacs and also encash the bank  guarantee furnished by the Appellant for another sum of Rs.23 lacs, the High  Court directed: "\005The petitioner shall not be liable for any further  amount on account of the FM Broadcast which is the  subject matter of the writ petition."

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We, therefore, are of the opinion that the Tribunal did not exceed its  jurisdiction in issuing the impugned directions.

       For the reasons aforementioned, we are of the opinion that no case has  been made out for our interference with the impugned judgment of the  Appellate Tribunal.  

This appeal is dismissed accordingly.  No costs.