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SUPREME COURT OF INDIA
ARUN MISHRA, S. ABDUL NAZEER, M.R. SHAH, JJ.
Union Of India – Appellant
Versus
Association Of Unified Telecom Service Providers Of India Etc. Etc. – Respondent
Civil Appeal Nos.6328-6399, 6183-6255, 5832-5852, 5909, 6009, 5996, 5957, 5997, 5998, 6011, 6002, 6010, 6012, 8493-8505, 5929, 5911, 5882, 5931, 5934, 5930, 6888-6895, 6003, 6004, 8506-8530, 8009-8017, 14624, 13550, 13705-13711, 13590, 13587, 13586, 13585, 13591, 13538, 13588, 13593, 13595-13596, 13584, 13574, 13681, 13581-13582, 13592, 13699, 13697, 13698,13680 of 2015 With Civil Appeal Nos. 344, 498, 497, 493, 6022-6044 of 2016 with Civil Appeal Nos. 8646-8648 of 2018, 8275 of 2019 @ Special Leave Petition (C) No.20219 of 2016
Decided on : 24-10-2019
(a) Draft Licence Agreement - Clause 19 - Gross revenue - Inclusive definition - Meaning given in clause 19 and the format - Have to prevail - No set off can be claimed for related items of expense etc. on any of the items mentioned therein, and on the miscellaneous revenue. (Para 44, 47)
(b) Telegraph Act, 1885 - Section 4 - Licence - In the nature of contract - Specific privileges of Central Government - Not affected by provisions of TRAI Act - TRAI can only make recommendations - Opinion of Central Government with regard to particular terms or conditions of licence shall prevail - Gross revenue is total revenue. (Para 50, 51)
(c) Draft Licence Agreement - Clauses 19, 20 and 22 r/w clause 5, AS 9 and section 211(3A) r/w section 211(3C), Companies Act 2013 - Issue of gross revenue decided in (2011) 10 SCC 543 - Issue already decided inter se parties - Cannot be re-agitated - Res judicata - Revenue to be reckoned as per Clause 19.1 and not AS 9 - Thus revenue from activities beyond the licence have to be included in adjusted gross revenue. (Para 62, 66)
(d) Gross Revenue - Whether includes revenue from non-licence activities - Court, in (2011) 10 SCC 543, holding that it includes - If licensees did not want revenue from non-licence activities to be included in gross revenue, it was open for the licensee to transfer these activities to any other firm or company - Parties bound by contractual definition - Tribunal’s decision to the contrary without jurisdiction and a nullity - Clause 19, Draft Licence Agreement. (Para 63)
(e) Draft Licence Agreement - Clause 19 and AS-9 - AS 9 relevant only for proper maintenance of figures of gross revenue, as ascertained - Adjusted gross revenue is then worked out after certain deductions - AS-9 cannot override definition of gross revenue. (Para 65)
(f) Interpretation of statute - Principles of Contra proferentem and noscitur a sociis - Do not apply where there is no ambiguity - Instantly no ambiguity or doubt in definition of gross revenue in the agreement - Contra proferentem and noscitur a sociis do not apply. (Para 74, 76)
(g) Administration of justice - Approbation and reprobation - Parties cannot be permitted to take inconsistent stands and approbate and reprobate. (Para 83)
(h) Contract - Once reduced to writing, becomes binding on the parties - Hence licensees are bound by the Licence Agreement - Further, licensees having availed benefits of migration regime under the licence, are bound to discharge their obligation thereunder - Licensees cannot deny validity or binding effect of contract. (Para 88, 89, 92)
(i) Doctrine - Of unconscionable bargaining - Not applicable in matters of commercial contracts. (Para 91)
(j) Draft Licence Agreement - Clause 19 and AS 9 - AS 9 is only for method of accounting - What has been defined in AS-9 is revenue, whereas, for licence fee, gross revenue is the revenue - When Clause 19 defines gross revenue, it cannot be said that revenue has not been defined in the licence agreement. (Para 107)
(k) Draft Licence Agreement - Clause 19 - Service tax liability - Not relevant to determine licence fee. (Para 113)
(l) Draft Licence Agreement - Clause 19 - All subscribers’ discounts form part of gross revenue - Allowing deduction for discounts will amount to rewriting the licence agreement - Not permissible. (Para 115, 116, 117, 122)
(m) Draft Licence Agreement - Clause 19 - Adjusted gross revenue - Includes miscellaneous revenue - Gains from foreign exchange fluctuations - Must be included in the AGR and on accrual basis - Once an amount becomes receivable, it has to be taken as part of gross revenue. (Para 128, 129)
(n) Draft Licence Agreement - Clause 19 - Adjusted gross revenue - Includes miscellaneous revenue - Gains from sale of shares - Every amount which is more than the book value of the current asset and comes to licensee company, has to be considered for calculation of gross revenue without netting off. (Para 131)
(o) Draft Licence Agreement - Clause 19 - Insurance claim - Claim received over and above the book value being cash inflow is accounted in profit and loss account - It has to form part of gross revenue. (Para 136)
(p) Draft Licence Agreement - Clause 19 - Negative balance - Billed and reflected on accrual basis irrespective of whether it is paid or not - Has to form part of gross revenue. (Para 139)
(q) Draft Licence Agreement - Clause 19 - Sharing of infrastructure facility - Explicitly mentioned in definition of gross revenue - Determination of gross revenue is not determination of profit - Entire amount received by the licensee on account of sharing of passive infrastructure forms part of gross revenue. (Para 145)
(r) Draft Licence Agreement - Clause 19 - Waiver of late fee - Late free explicitly included in definition of gross revenue - Has to be computed as part of gross revenue - Merely by waiver, it cannot be ousted from the purview of gross revenue once it becomes leviable. (Para 150)
(s) Draft Licence Agreement - Clause 19 - Gains from roaming charges and PSTN pass-through charges - Excluded from gross revenue only if operated by a separate legal entity and not a branch office. (Para 158)
(t) Draft Licence Agreement - Clause 19 - Non-refundable Deposits - Are revenue received in advance from the subscribers - Hence they form part of revenue even if they are used for discount etc. in the bills. (Para 162)
(u) Draft Licence Agreement - Clause 19 - Licence fee demand where spectrum is not granted - In absence of grant of spectrum licence activity does not come into play and no revenue is generated - Demand for sharing of revenue from such non-licensed activities would be an unreasonable and unconscionable. (Para 163)
(v) Draft Licence Agreement - Clause 19 - Interest income and dividend income - Expressly included in the definition of gross revenue. (Para 164)
(w) Draft Licence Agreement - Clause 19 - Bad debts written off - If deducted - Cannot be added on recovery at a later date - TDSAT rightly including it in gross revenue - However it should not be added again on recovery later on. (Para 165, 166)
(x) Draft Licence Agreement - Clause 19 - Liability written off - Liability is treated as expense - It cannot be discounted for determination of licence fee - However on being written off at a later date it cannot be included in gross revenue again. (Para 168, 170)
(y) Draft Licence Agreement - Clause 19 - Interest income from inter-corporate loan - Interest received by holding company from the subsidiaries companies on the loan given to them - Has to be included in the revenue of the holding company for purpose of licence fee. (Para 172, 173)
(z) Draft Licence Agreement - Clause 19 - Income from IP registration under the CUG licence - Has to be included in gross revenue of the licensee. (Para 174)
(aa) Draft Licence Agreement - Clause 19 - Income from management support and consultancy - Has to be included in gross revenue. (Para 175)
(ab) State Financial Corporations Act, 1951 - Section 32 r/w section 34 CPC - Rate of interest payable on principal amount under the court’s order passed u/s 32, Act 1951 - Not a decree - Provisions of section 34 CPC not attracted - Liability to pay contractual rate of interest cannot be disowned. (Para 190)
(ac) Draft Licence Agreement - Clause 20 - Interest and penalty - Interest can be levied and compounded under contractual stipulation - Instantly, Licence agreement stipulating interest, penalty, and interest on penalty on default of payment of licence fee - Instantly imposition upheld. (Para 197, 198)
Facts of the case:
In the appeals, the question involved is with respect to the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers.
Finding of the Court:
Definition of gross revenue is unambiguous.
Result: Appeals of licensees dismissed and those filed by DOT allowed.
JUDGMENT :
ARUN MISHRA, J.
1. In the appeals, the question involved is with respect to the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. The case has a chequered history and the scenario projected is that even after the licensees agreeing with the revenue sharing regime under the Telecom Policy of 1999 for the last two decades, definition of gross revenue has been litigated upon, though the intendment was to keep it free from the same and various disputes. Notwithstanding the fact that disputes have been raised, and despite the fact what is the meaning to be given to gross revenue, was agreed upon between the parties. The telecom sector was liberalized under the National Telecom Policy, 1994 and various licenses were issued to companies under Section 4 of the Indian Telegraph Act, 1885. The licences granted to the service providers stipulated a fixed licence fee, which was payable by the service providers every year.
2. However, as the said fixed license fee was very high and the telecom service providers consistently defaulted in making the payments, the telecom service providers made a representation to the Government of India for relief against the steep license fee. The said representation was considered and keeping the interest of the country, and the telecom sector in mind, a new package, known as "the National Telecom Policy, 1999 Regime" giving an option to the licensees to migrate from fixed licence fee to revenue sharing fee was made applicable in the year 1999. The National Telecom Policy, 1999 was devised after holding detailed deliberations and consultations with the telecom service providers and the telecom industry. Clause III of the migration package reads as under:
“(iii) The Licence fee as a percentage of gross revenue under the license shall be payable w.e.f. 1.8.1999. The Government will take a final decision to charge the quantum of the revenue share as licence fee after obtaining recommendations of the Telecom Regulatory Authority of India (TRAI). Meanwhile, the Government decided to fix 15% of the gross revenue of the licensee as a 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 TRAI's recommendation and Government's final decision, the 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."
3. As mentioned, in the new Telecom Policy, 1999, the purpose and objects for the shift to "Revenue Sharing Regime," which, as such, was more beneficial to the telecom service providers were:
• Make available telephone on demand by the year 2002 and sustain it after that to achieve a teledensity of 7 by the year 2005 and 15 by the year 2010.
• Encourage the development of telecom in rural areas making it more affordable by suitable tariff structure and making rural communication mandatory for all fixed service providers.
• Increase rural teledensity from the current level of 0.4 to 4 by the year 2010 and provide reliable transmission media in all rural areas.
• Achieve telecom coverage of all villages in the country and provide reliable media to all exchanges by the year 2002.
• Provide Internet access to all district headquarters by the year 2000.
• Provide highspeed data and multimedia capability using technologies including ISDN to all towns with a population higher than 2 lakh by the year 2002.
4. Considering the objectives and targets of the new Telecom Policy, 1999, it appears that:
i. The Central Government gave a liberalised mode of payment by "revenue sharing" regime, which w
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