IMPORTANT POINT
Compensation for breach of contract is governed by terms of the contract.

JUDGMENT

R.F. Nariman, J.

The present appeal arises out of a dispute under the Telecom Regulatory Authority of India Act, 1997. The relief sought through a petition before the Telecom Disputes Settlement and Appellate Tribunal, New Delhi ["TDSAT"] by the respondent, Tata Communication Ltd. against the appellant, Mahanagar Telephone Nigam Ltd., is for a recovery of a sum of INR 1,10,57,268/- plus interest thereon. The question that arose between the parties is whether the appellant was justified in adjusting this amount from the dues payable to the respondent by deduction from the bills raised by the respondent. Since the Purchase Order dated 01.10.2008 forms the basis for the claim, it is important to set out clauses 4 and 8 of the said Purchase Order as under:

"4. SCOPE OF ORDER

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iv. Termination of the bandwidth on STM-1 would be done at the MTNL sites/locations in Delhi (Kidwai Bhawan and Nehru Place) and Mumbai (Fountain Head & Prabha Devi) respectively as per the requirement with redundancy in last mile connectivity. For this bandwidth termination purpose, optical/electrical converter, cable and any other hardware/software etc. required, if any, would be arranged by the bidder free of cost."

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"8. DELIVERY SCHEDULE

(i) The physical connectivity for bandwidth should be completed within two months from the date of place of Purchase Order."

The TDSAT, on considering this Purchase Order, held:

"25. At this stage, it falls for consideration as to what relief the petitioner is entitled to on the basis of strength of its own case. For this purpose, it is useful to note at the outset that the petitioner was required to provide the last mile connectivity as per paragraph 4(iv) of the P.O. within two months. It is also not in dispute that petitioner did not provide the required connectivity not only by December 2008 but even by time when it chose to terminate the contract on 11.01.2011. The defence pleaded and argued on behalf of petitioner is that it was neither given access to the buildings/premises of the respondents nor the permission for affecting the last mile connectivity. This stand was sought to be justified by placing reliance on Emails written by the petitioner on 01.06.2010 which is more than a year after grant of permission by Delhi and Mumbai units around March and April 2009. On going through the communication dated 01.06.2010, it is evident that the plea that respondents did not allow entry to the petitioner into their premises in Mumbai has been raised quite belatedly and does not appear to be correct and convincing. Hence, we find petitioner's case to be weak and unacceptable in so far as it puts the blame totally upon the respondent for its inability or failure to provide the last mile connectivity. No doubt there was some delay by the respondents at the initial stage but that alone cannot justify or absolve petitioner's total failure.

26. If we had reliable materials to find out the exact cost of providing the last mile connectivity at each of the two premises in Mumbai and Delhi, we would have reduced that much amount from the claim of the petitioner and allowed the rest. That would have served the interest of justice and prevented unjust enrichment of the petitioner. However, in absence of such reliable materials as to actual costs which the petitioner has saved by non-compliance with the requirements of paragraph 4(iv) of the P.O., we have looked closely at the case of both the parties and we find that at best the respondents could have invoked clause 16 and more particularly, clause 16.2 which provide for liquidated damages in certain eventualities like failure to deliver the stores/services or to install and commission the project in whole or in part. The admitted default on the part of the petitioner can safely be treated as failure or delay affecting the installation/commissioning of a part of the project requiring last mile connectivity. In such a case, as perclause 16.2(b) of the Agreement (P.O