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2014 Supreme(Online)(TDSAT) 17
TELECOM DISPUTES SETTLEMENT AND APPELLATE TRIBUNAL
Aftab Alam, Chairperson, Kuldip Singh, Member
Etisalat DB Telecom (P) Ltd. – Appellant
Versus
Union of India – Respondent
Petition No.658 of 2012 | Petition No.659 of 2012 | Petition No.672 of 2012 | Petition No.722 of 2012 | Petition No.700 of 2012 | Petition No.701 of 2012 | Petition No.702 of 2012 | Petition No.703 of 2012 | Petition No.704 of 2012 | Petition No.705 of 2012 | Petition No.706 of 2012 | Petition No.707 of 2012 | Petition No.708 of 2012 | Petition No.709 of 2012 | Petition No.710 of 2012 | Petition No.711 of 2012 | Petition No.712 of 2012 | Petition No.713 of 2012 | Petition No.714 of 2012 | Petition No.715 of 2012 | Petition No.716 of 2012 | Petition No.717 of 2012 | Petition No.718 of 2012 | Petition No.719 of 2012
For the Appellants/Petitioners: Mr. Ashish Prasad, Mr. Mayank Grover, Mr. Meet Malhotra, Mr. Ravi S.S.Chauhan, Ms. Pallak Singh, Mr. Anant Ramadhyani, Mr. Prateek Dahiya
For the Respondents: Mr. Nitin Rai, Mr. Sidhartha Jha
Telecom operators must have performance bank guarantees released upon meeting roll-out obligations, irrespective of potential future claims by the Department of Telecommunications.
Headnote:(A) Indian Telegraph Act, 1885 - Performance bank guarantees - Petition filed for the release of performance bank guarantees by telecom service providers - DoT refuses release, citing possible future claims of liquidated damages - Tribunal holds that there are no grounds to withhold guarantees when roll-out obligations are met. (Paras 9 to 12)
(B) Legal principles established - The Tribunal clarifies that performance bank guarantees must be released upon fulfillment of roll-out obligations as stipulated in licenses, irrespective of future claims - Previous decisions of the Tribunal reaffirm this principle, establishing a clear directive to the DoT regarding release of guarantees. (Paras 12.1 to 12.3)
Facts of the case:
Telecom operators submitted petitions seeking release of performance bank guarantees, which the DoT withheld, claiming potential liquidated damages despite no current claims. The Tribunal noted a history of such issues brought previously before it where guarantees were ordered to be released upon meeting obligations.
Findings of Court:
The Tribunal found that the Union of India had no valid claims against petitioners in 19 out of 20 instances. Guarantees are to be returned, as operators have fulfilled the stipulated roll-out obligations.
Issues: The main issues revolved around whether the DoT could hold on to guarantees in the absence of current claims for liquidated damages and the fulfillment of roll-out obligations by the telecom operators.
Ratio Decidendi: The court found that once roll-out obligations are fulfilled, performance bank guarantees must be released without further claims justifying their retention by the DoT. This aligns with previous judgments.
Result: Petitions allowed with costs ordered for Unitech; costs not ordered for Etisalat due to distinct operational circumstances.
ORDER
By Aftab Alam , Chairperson -
M/s Unitech Wireless Pvt. Ltd. and M/s Etisalat D. B. Telecom Pvt. Ltd. have approached the Tribunal seeking a direction to the Central Government in the Department of Telecommunication (DoT) to release the “performance bank guarantees” submitted by them as stipulated in clause 21 of the Unified Access Service licences granted to them by the Union of India under section 4 of the Indian Telegraph Act , 1885. Unitech has filed twenty petitions (Petition nos.700 to 719 of 2012) in respect of the twenty different service areas/circles for which the performance bank guarantees were furnished by it. Etisalat has filed four petitions (Petition nos. 658, 659, 672 and 722 of 2012) in respect of the four different service areas/circles to which the bank guarantees sought to be released pertain.
The DoT does not deny that with the possible exception of one of the circles, namely West Bengal, it has no claim of any liquidated damages against Unitech for non-performance of the roll-out obligations under the terms of the licences in the rest of the nineteen circles for which the performance bank guarantees in question were given. Similarly, in case of Etisalat, the DoT admits that apart from Bihar circle it does not have any claim of liquidated damages against it for non- performance of the roll-out obligations in rest of the three circles for which the bank guarantees were taken from Etisalat. Nevertheless, the DoT refuses to release the bank guarantees in question and insists on holding on to those guarantees on the pretext of securitizing any demands that it might possibly have against the petitioners at some time in future.
It is not that the controversy regarding release of the performance bank guarantee is coming to the Tribunal for the first time. It earlier came to the Tribunal and in more than one case the Tribunal held against the DoT but the DoT still refuses to release the performance bank guarantees submitted by the petitioners and tries to justify its stand on the plea that a certain clause of the UAS licence was not properly considered in the earlier decisions of the Tribunal.
It needs to be mentioned here that all the UAS licences (twenty in case of Unitech and four in case of Etisalat) under which the performance bank guarantees were submitted by the two petitioners and the release of which is at issue, are held by the Supreme Court to have been issued illegally and were consequently quashed by judgment and order passed on 2 February 2012 in Centre for Public Interest Litigation & Ors. Vs. Union of India & Ors.,
In order to appreciate the controversy it is necessary to refer to the terms of the UAS licence. The UAS licence is granted on condition of furnishing two kinds of bank guarantees, one “the performance bank guarantee” and the other “the financial bank guarantee”. The performance bank guarantee is required to be submitted under sub-clause 1 and the financial bank guarantee is dealt with in the following sub-clauses of clause 21of the licence. Clause 21 of the UAS licence is as under.
21. BANK GUARANTEES:
21.1 Performance Bank Guarantee: Performance Bank Guarantee (PBG) in prescribed format shall be submitted for amount equal to Rs.20 crores (for category ‘A’ service area) before signing the Licence Agreement.
Further on completion of one year from the effective date of licence and after meeting the coverage criteria stipulated for first year, the PBG shall be reduced to Rs.10/5/1 crores for category ‘A’/’B’/’C’ service areas on self-certification provided by the Licensee.
Further on fulfilling the roll out obligations as stipulated in Clause 34, the balance PBG shall be released on receipt of test certificate/ test certificates issued by TEC
