IMPORTANT POINT
Clause 6.4.6 of the Interconnect Agreement is not penal but a pre-estimate of reasonable compensation for the loss foreseen at the time of entering into the agreement.

JUDGMENT

S.H. Kapadia, CJI

1. Whether clause 6.4.6 of the Interconnect Agreement between Bharat Sanchar Nigam Limited (BSNL) and M/s. Reliance Infocomm Limited is penal or a pre-estimate of damages is the question which arises for determination in this civil appeal?

Facts

2. On 18th March, 1997, Reliance had entered into BSO Interconnect Agreement with Department of Telecommunications (DoT) for interconnection of their networks within their respective circles. In October, 2000, with its establishment, the BSNL took over from DoT the aforementioned BSO Agreement. In November, 2003, the BSO regime was replaced by Unified Access Services regime which granted the licence to service providers for both basic and mobile telephony services as part of a single unified licence. Reliance was allowed to operate as a Unified Access Service provider from November 14, 2003 though it was formally granted the Unified Access Service Licence on 21st September, 2004 with effect from 14th November, 2003. By an addenda dated 28th February, 2006, the agreement was formally amended with retrospective effect from 14th November, 2003. The Agreement deals with local calls, national long distance calls (NLDC) and international long distance calls (ILD). Calls of each trunk group are connected through dedicated ports and are chargeable at rates different from other trunk groups. Hence, depending on the number of calls handled by a particular port, charges are levied by BSNL on Reliance, at the rate of the existing call charges payable for that particular trunk group.

3. On 24th June, 2003, the DoT issued a circular specifying that Calling Line Identification (CLI) cannot be tampered with under any circumstances and also gave directions to service providers on how to prevent such tampering. By its circular dated 28th January, 2004, the above circular of DoT coupled with IUC Regulations dated 29 th October, 2003 issued by Telecom Regulatory Authority of India (TRAI) was made effective.

4. In September, 2004, BSNL received several complaints from its subscribers in Gujarat that they were receiving ILD calls with local CLI Numbers. On the basis of these reports, BSNL made its own enquiries by calling the local CLI number, i.e., 0281-3041000. This was on 5th October, 2004, 6th October, 2004 and 7th October, 2004. Each time the number was called the response from the other end was that the number did not exist. Therefore, on 8th October, 2004, BSNL reported the matter to Reliance at which time Reliance had sent its report to DoT regarding the same. In the said report to DoT, Reliance stated that the wrong routing of ILD calls was being done by one of its subscribers, viz., M/s. Raj Enterprises (who was given 60 calls circuits). The series of numbers allotted to Raj Enterprises was from 2813041000 - 2813041199, i.e., 200 numbers.

5. On 13th October, 2004, BSNL gave notice to Reliance saying that Reliance is having POIs at various Exchanges in Vadodra; that on monitoring incoming traffic to BSNL as indicated in CDRs at the above POIs, it was found that there were numerous calls with CLI as 281 3041000; that, such calls have been received from 4th September, 2004 and, therefore, BSNL will charge at Rs. 5.65 per minute for all incoming calls at POI of Reliance from July, 2004. It may be noted that Rs. 5.65 per minute is the rate of incoming ISD calls at TAX POI of Reliance (the word ‘TAX’ stands for Trunk Automatic Exchange).

6. On 25th October, 2004, BSNL issues its circular to all its officers by which continuation of unauthorized diversion in routing of ILD calls is brought to their notice with specific reference to the case of Reliance. In the circular, it is highlighted that although Reliance claims that tampering of CLI has been stopped w.e.f. 16th September, 2004, it is found that international calls have been delivered on the local POI of Reliance, at trunk group meant for intra circle terminating traffic, at various SDCC tandem exchanges, with CLI of Relia