The demand for rental after acceptance of line surrender is illegal as it novated the original agreement.

ORDER

By Aftab Alam, Chairperson –

The Petitioner, Bharti Airtel Limited (Bharti, hereinafter) has filed this petition challenging the demand of Rs.9,09,88,497/- by the respondent, Bharat Sanchar Nigam Limited (BSNL, hereinafter) as three years’ rent for 36 leased lines, laid out by BSNL for the dedicated use by Bharti and given it on lease. The demand is contained in the letter dated 15 January 2014 which was followed by letter dated 26 March 2014 containing the threat that all the Bharti POIs, Point of interconnect. with BSNL would be disconnected in case payment of the impugned demand was not made by 15.00 hours on 31 March 2014. Bharti seeks quashing, inter-alia of the aforesaid two letters. According to Bharti, though it was committed to having the lease renewed annually for a minimum period of five years, BSNL had accepted the surrender of 36 lines, on certain terms and conditions, at the expiry of two years and hence, the demand of rent for the next three years was wholly unreasonable and untenable.

The facts of the case are quite simple and may be stated thus. On Bharti’s request, BSNL leased out to it 74 dedicated lines of 2 Mbps each under agreement dated 2 May 2002. The terms and conditions stipulated in the agreement are as under:

“1. The licensee shall submit a commitment letter to BSNL to keep all the leased lines for a minimum period of 5 years.

2. BSNL while collecting the required leased line charges as per the existing guidelines of BSNL Corporate Office, New Delhi shall raise demand note for 2 years charges and the licensee shall pay the amount.

3. The charges collected by BSNL towards the second year will be kept as Security Deposit and this Deposit shall not carry any interest.

4. The licensee is required to renew the leased lines every year and for making the renewal payment by the licensee, the terms and conditions stipulated under chapter 7(Interconnect billing system) of the Interconnect agreement shall hold good.

5. In case the licensee fails to renew the leased lines or fails to make the renewal payment, the security deposit paid under clause 3 above shall be forfeited and this shall be without prejudice to any other action that shall be taken against the failure indicated above by BSNL.”

Clause 1 of the agreement terms required Bharti to submit a commitment letter to keep all the leased lines for a minimum period of five years which Bharti duly submitted. Clause 5 provided that in case Bharti failed to renew the leased lines or to make the renewal payment, the security deposit under clause 3 would be forfeited. It needs to be clarified here that leased lines had fixed annual rental, payable every year in advance. At the time of commissioning, BSNL raised demand notes in advance and Bharti paid the rental for two years. The annual rent for the second year was kept by BSNL as security. At the beginning of the second year, BSNL issued demand note for annual rent for the second year and the security deposit was kept as security for the rent for the third year, and so on. However, within two years of the commissioning of the leased lines in question, Bharti was able to up- grade it’s inter -connect device in the Synchronous Digital Hierarchy by entering into an arrangement with BSNL to set up an STM-1, A 2 Mbps line, that is, E1 has 32 time slots, each capable of carrying one voice channel. In practice, it carries 30 voice channels, as two time slots are used for synchronization and signalling (TS0 & TS15); an STM-1 (Synchronous Transport Module Level 1) can carry 63 E1s or more than 1800 voice channels.. Resultantly a number of the 74 lines leased out by Bharti became redundant and it requested for their surrender, writing in its letter dated 25 November 2003 as under:

“We would therefore like to shift the entire interconnectivity at the various POI locations from a combination of leased lines ( 33 E1s at 12 POI locations