Judgment:
S. B. Sinha
The petitioner is the successor in interest of Videsh Sanchar Nigam Limited which was a Public Sector Undertaking. It possessed an ILD license. It had a monopoly over ILD operations.
The Central Government took a policy decision to disinvest VSNL. The license held by it was terminated two years prior to its date of expiry. By way of a compensation package, the Central Government, while granting a license in favour of the said VSNL on or about 05.02.2004, with regard to International Long Distance Service inserted the following provisions therein :-
“5.3 provided that as part of the compensation package in lieu of likely losses on account of preponment of de-monopolisation, Government would reimburse a sum equivalent to entry fee and annual revenue share as license fee, net of taxes for a period of five years with effect from April 2001. In addition, Government will not insist upon performance bank guarantee of Rs. 400/- crores so long as VSNL retains Public Sector Undertaking (PSU) character.”
2. Pursuant to or in furtherance of the said provision, the modalities which were worked out was that the said VSNL would continue to pay the license fees but it would be reimbursed separately by the Union of India.
3. We may also notice some of the other relevant provisions of the said license :-
“6. Schedule of payment of Annual Licence Fee and other dues 6.5 Any delay in payment of Licence Fee, or any other dues payable under the LICENSE beyond the stipulated period will attract an interest at a rate which will be 5% above the Prime Lending Rate (PLR) of State Bank f India prevalent on the day the payment became due. The interest shall be compounded monthly and a part of the month shall be reckoned as a full month for the purposes of calculation of interest.
6.8 In case, the total amount paid on the self assessment of the licensee as quarterly licensees for the 4 (four ) quarters of the financial year, falls short by more than 10% of the payable Licence Fee, it shall attract a penalty of 50% of the entire amount of short payment. This amount of short payment along with the penalty shall be payable within 15 days of the date of signing the audit report on the annual accounts, failing which interest shall be further charged in terms of Condition 6.5. However, if such short payment is made good within 60 days from the last day of the financial year, no penalty shall be levied.
SET OFF CLAUSE
29.2 In the event any sum of money or claim becomes recoverable from or payable by LICENSEE to the LICENSOR either against this Licence Agreement or otherwise in any manner, such money or claim can be (without restricting any right of set off for counter claim given or employed by law) deducted or adjusted against any amount or sum of money than due which at any time thereafter may become due to the LICENSEE under this Licence Agreement or any other agreement or contract between the LICENSOR and the LICENSEE.”
4. The said license provided for payment of interest on delayed payment at the rate of prime lending rate of State Bank of India + 5 % being Clause 6.5 thereof. Clause 6.8 of the license thereof entitled the respondent to impose penalty of 150% on shortfall of license fees subject of course to the condition that such shortfall is in excess of 10% of the payable fees at the end of
financial year.
The amount of penalty also carried interest @ PLR + 5 %. Admittedly the license fees were being realized on Adjusted Gross Revenue basis as contained in Clause 36 of the license.
5. A dispute arose between the petitioner and the respondent in regard to three items of expenditure, namely :-
a. Income derived from non-telecom and non-licensed activities
b. TV uplinking income
c. Charges passed on to other service providers.
6. VSNL filed a petition before this Tribunal questioning the said charges as being not payable by way of Adjusted Gross Revenue which was marked as Petition No. 48 of 2005. By reason of a Judgment and Order dated 7th July, 2006, this Tribunal held that Adjusted Gross Revenue would relate only to the licensed activities of the licensees. On a question as to whether certain items of
income and expenditure would fall within the purview of the licensed activities of the licensee, the matter was referred to the TRAI for its consideration.
7. The TRAI submitted its report after giving an opportunity of hearing to the stake holers. The said report of the TRAI being dated 13.09.2006 submitted before this Tribunal again came up of for its consideration.
8. By a judgment and order dated 30th August, 2007 the report of the TRAI was accepted.
9. Respondent herein purchased the assets and liabilities of the said VSNL. It’s sister concern is Tata Tele Services Ltd., Maharashtra (TTSL). The petitioner herein was asked to pay a sum of Rs. 295 crores for the financial year 2002- 2003, 2003-2004 and 2004-2005 as TTSL wanted to have an UAS license.
10. By a letter dated 09.01.2008, the petitioner made payments of the said amount under protest and on commercial compulsions. The petitioner, however, by reason of the impugned bill, was directed to pay a sum of Rs.289,87,15,491; the details whereof are as under :-
| YEAR | YEAR PRINCIPAL TOTAL | INTEREST | PENALTY | INTEREST AND PENALTY | TOTAL RUPEES IN CRORES |
| 2002-03 | 2002-03 59167870 | 369627391 | Nil | Nil | 428795261 |
| 2003-04 | 255271828 | 201063970 | Nil | Nil | 456335798 |
| 2004-05 | 515035989 | 341293314 | 772553983 | 384701146 | 2013584432 |
| TOTAL | 2898715491 |
“(i) Refund of Rs. 115 .72 crores of penalty along with interest SBI PLR + 5% p.a, realised by respondents on 9 January 2008 along with interest amounting to Rs. 66.61 crores, total amount along with it is being Rs. 182.33 crores.
(ii) Refund of Rs. 27.24 crores, realised as excess interest by respondents on 9 January 2008, along with interest of SBI PLR + 5% p.a, total amount due as on 8 January 2011 with interest being Rs.15.67 crores, total amount realised being Rs. 42.91 crores.
(iii) Refund of Rs. 41.25 crores charge towards interest for the period 7 September 2005 till 30 August 2007, a period for which the respondent itself did not enforce its demands, along with applicable interest of SBI PLR + 5% p.a, along with interest of Rs. 23.87 crores total of Rs. 65.12 crores.” The claim of the petitioner as indicated heretobefore is, thus, in three parts, including the claim of refund of Rs. 289.87 crores.
12. The Assessment Year in question is 2004-05. Upon completion of assessment, the respondent claimed an additional license fee for a sum of Rs.82.94 crores. The amount of license fee so claimed from the petitioner is disputed. However, according to it respondent has additionally realized about 207 crores by way of interest, penalty and interest on such penalty.
13. Indisputably, questioning the said judgments and orders of this Tribunal in the Adjusted Gross Revenue matters, respondent has preferred appeals before the Supreme Court of India. The petitioner has also preferred appeals in so far as the prayer for refund was confined to the date of filing of the petition.
14. It may furthermore be noticed that the petitioner amongst others filed two petitions before this Tribunal questioning the validity or otherwise of Clause 6.8 of conditions of license which were marked as Petition No. 227 of 2007 and 228 of 2007. The said petitions were heard inter alia with the petition filed by BPL Mobile Cellular Ltd and Another being Petition No. 8 of 2003.
15. By a judgment and order dated 11.02.2010, the said provision was struck down.
16. We may also notice that a comment was also made therein on the conduct of respondent in the following terms :-
“all the petitioners were to receive a huge amount from the respondent. For all intent and purport, therefore, they were not defaulters. While imposing penalty on the petitioners, the respondent
was required to keep this aspect of the matter in mind.”
17. Opining that such a penal provision and interest thereon provide, in effect and substance for ‘in terrorem’ clause and, thus, illegal. So far as the petitioner is concerned, it was stated :-
“the learned counsel in this matter rightly contended that the provisions of the contract would clearly demonstrate that the penalty can be levied for delayed payment of the spectrum charges as the manner in which such payment was to be made if as prescribed by the DoT from time to time. There cannot be any doubt that in view of the order dated 16.04.2003 passed by the respondent, in case of any delay in payment of spectrum charges only penal interest was to be charged and not any penalty. Clauses 1.8 and 1.9 of the amended license are, therefore, required to be read conjointly. The order dated 16.04.2003 passed by DoT, together with clauses 1.8 and 1.9 would reveal that only in the event of delay in payment of license fee, the penal clause would be attracted and not otherwise.
Spectrum charges, thus, being not license fee within the meaning of the agreement, no penalty at the rate of 150% of the shortfall could be levied.”
18. The petitioner, on or about 10.03.2010 i.e. immediately after pronouncement of the aforementioned judgment in Petition No. 227 and 228 of 2007, demanded refund of the said amount, stating :-
“The Hon’ble TDSAT now allowed TCL petitions challenging the penalty clause, namely petition number 227 and 228 of 2007 and striking down the penal clauses, the amount of Rs. 115.72 has to be refunded along with interest @SBI PLR plus 5 per cent, the interest chargeable as per Clause 6.5 in the ILD license from the date of payment i.e 9 January 2008. The total amount due therefore, as on date is Rs. 160.70 crores. IDC and without prejudice to the above, the penalty and interest on penalty was not chargeable even in terms of Clause 6.8 of the ILD license, which has since been struck down, as an amount of Rs. 38.67 crores was lying with the DoT for refund and which amount should have been set off against the licensee claimed, in terms of clause 29.2 of the license agreement. This amount which should have been set off against the demand of the DoT making the alleged shortfall claimed by DoT being less than 10% of the total licenses claimed and thereby not attracting the penalty clause. The amount of Rs. 115.72 crores (being penalty and interest on penalty), along with interest @ 15.25 % (SBI PLR plus 5%), the total amount is therefore due is Rs. 160.70 crores. You are therefore requested to remit the sum of Rs. 160.70 crores forthwith to TCL.”
19. The respondent by a letter dated 16.04.2010 rejected the said claim on the premise that Department was in the process of preferring appeals against the said judgments and orders.
20. We may notice that appeals were preferred by the respondent against the said judgments which were marked as C.A Nos. 6664-6669 of 2010. The matters came up before the Supreme Court of India only on 04.02.2011. On that date the Court, while admitting the said appeals, did not pass any order.
21. It may furthermore be mentioned that in terms of Clause 5.3 of the aforementioned license, sanction for refund of the amount of Rs. 79.32 crores towards reimbursement of license was found to be correct by the PandT officers.
22. The respondent in its reply has inter alia contended :-
1. The sum of Rs. 38.67 crores has already been refunded to petitioner in March, 2008. The said amount could not be set off as no decision could be taken till 09.01.2008 in terms of Clause 5.3 of the NLD license. It has been stated :-
“had any amount, quantified under 5.3 of NLD license, be available with the respondent, respondent would have adjusted the same against the additional license fee under ILD and would have called upon the petitioner to pay balance additional license fee (outstanding after adjustment)”
2. The amount of additional license fee having not been paid within the prescribed period, respondent was entitled to levy penalty and/or interest thereupon.
23. Submissions of Mr. Hazarika are threefold :-
1. The penal clause having been declared illegal by this Tribunal, no penalty could have been imposed, far less any interest thereupon.
2. If the alleged shortfall was calculated to be 51.50 crores out of which the amount of Rs 38.67 crores was to be refunded, the difference being only 12.83 crores, and the same being less than 10 % of the license fee paid by petitioner for the Assessment Year 2004-2005 being in fact 6.89%, even otherwise, no penalty could have been levied in terms of Clause 6.8 of the conditions of license and the amount of penalty and excess interest are also liable to be refunded.
24. Mr Ruchir Mishra, the learned counsel appearing on behalf of respondent, on the other hand, would contend:
1. The judgment and the order of this Tribunal dated 30th August 2007 in the AGR matter is not in issue in this petition and in that view of the matter, the reference thereto must be held to be wholly irrelevant.
2. No reliance for the purpose of considering the prayer of petitioner on the judgment and order of this tribunal dated 11.02.2010 should be placed as the matter is pending in appeal before the Supreme Court of India.
3. The provisions relating to ‘Set Off’ as contained in 29.2 of the licence being only an enabling one and in view of the fact that petitioner deposited the amount of additional fee in January, 2008 and the liability of respondent in terms of Clause 5.3 of the license having been determined on 31st March 2008, no case has been made out for invoking the said provision which even otherwise is not enforceable in a court of law.
25. We may, at the outset, notice the following table :-
A B C D E F Financia l years Amount reimbursed/reimbursable under NLD license
Amount of alleged Residua l shortfall Total licence fee % of shortfall l shortfall l in ILD
Dues (C-B) dues as claim by DoT Upto 2004- 2005 Rs. 38.67 crores Rs. 51.50 Crores Rs. 12.83 crores Rs. 183.89 crores 06.89 %
26. The petitioner by reason of communications dated 28.04.2008, 23.05.2008, 23.09.2009, 11.12.2009 and 05.01.2010 demanded refund of the amount of penalty for a sum of Rs. 115.72 crores.
27. It has also prayed for refund of interest by reason of respondent’s not resorting to the set off of penalty against the license fees claimed by petitioner for the financial year 2004-2005 on the premise that on its own volition the respondent had not enforced its demands for the period 07.09.2005 to 30.08.2007 as it had undertook to do the same in Petition No. 59 of 2005 as
would appear from the proceeding sheet dated 07.09.2005. It reads as under:-
“since respondents are not seeking to recover the amount involved, is MA has become infructuous. The same is disposed of.”
28. The excess amount of interest which is said to have charged by respondent of Rs. 34.12 crores in terms of Clause 6.5 on the principal amount of Rs. 51.50 crore is also the subject matter of the petition as petitioner contends that had the amount of Rs. 12.83 crores being set off on the basis of the amount due on the principal amount of Rs. 12.83 Crores, interest could have been charged only for a sum of Rs. 6.68 crores and thus the excess amount of interest of Rs. 27.24 out of Rs. 38.67 crores should be directed to be refunded on the basis of the following calculation :-
S.I No. Particulars Amount in crores A Additional license fees claimed by respondents for FY 2004-05 51.50 B Interest on 51.50 charged under Clause 6.5 34.12 C Amount due after set off of NLD refund 51.50 Less – 38.67 12.83 D Interest on 12.83 under clause 6.5 6.88
E Excess amount charged 27.24
The amounts claimed under this head are as follows :- (i) refund of excess interest Rs. 27.24 crores
(ii) interest in terms of clause 6.5 from 9.1.2008 till 10 May 2010 Rs. 11.56 crores
-------------------- Rs. 38.60 crores"
29. Excess amount allegedly has also been charged from 07.09.2005 to 30.08.2007, for which the petitioner claimed refund contending :-
Financial Year A Interest Charged B Interest as Per Clause 6.5 From 9 January 2008 Till 7 January 2011 Total amount Due (A+B) 2002-2003 10.20 5.99 16.19 2003-2004 10.79 6.21 17.01 2004-2005 20.26 11.66 31.92 Total 65.12
30. In short, the heads under which the petitioner claims refund are as under :-
S.I. No. Particulars Principal amount claimed Interest in terms of clause 6.5 Amount due
as on date 1 Penalty 115.72 crores 66.61 182.33 2 Refund of excess interest charge for not
setting off of NLD refund 27.24 crores 15.67 42.91 3 Interest charged for 41.25 crores 23.87 65.12 period 07.09.2005 to 30.08.2007 Total 184.21 crores 290.36
31. In this petition, this Tribunal is not concerned with the correctness or otherwise of the payment of additional license fee. That question would have to be determined on the basis of the judgment of the Supreme Court of India. The petitioner as noticed heretofore has proceeded on the basis that additional license fee was payable.
32. Indisputably, a policy decision has been taken by respondents herein that before the application for the grant of license of a sister concern be considered, all the dues of the licensees must be cleared. The petitioner contends that although the amount sought to be recovered by reason of this petition was not to be paid; it did so in terms of the aforementioned circular
letter being necessitated by a commercial compulsion.
33. So far as the amount of penalty and interest on the principal amount is concerned, we are of the view that Clause 6.8 having been declared illegal and no stay of the order of this Tribunal having been granted by the Supreme Court of India, respondent can be asked to refund the amount of penalty and interest thereupon.
34. Moreover in this petition, petitioner has raised an additional point namely, that even otherwise Clause 6.8 is not attracted having regard to the fact that respondent was bound to reimburse petitioner the amount of license fee paid for the year 2004-05.
35. In a case of this nature, although, the invocation of set off stricto sensu may not be proper, we are of the opinion that imposition of such a huge amount by way of penalty as also interest thereupon in the facts and circumstances of case appear to be totally unjustified.
36. The accounts of the parties, if the principles of good governance are invoked as also expectation of a reasonable conduct on the part of the ‘State’, would have been settled and the refund ought to have been effected in the same financial year. The license fee paid by the petitioner’s predecessor in interest to the respondent herein should have been reimbursed immediately.
For the said purpose of-course, certain processes were to be undertaken. Revenue and expenditure so far as the respondent is concerned may stand on different footings but the petitioner is not concerned with the internal mechanism of the Executive Government. The ‘State’ is not only obligated to carry out its functions its obligations under the license within a reasonable time but also cannot be permitted to take undue advantage thereof and levy penalty and interest on the amount of penalty despite the fact that on proper accounting, the default on the part of petitioner, if any, has not exceeded 10%.
37. The respondent in its reply very clearly stated that the amount of reimbursement of license fee could not be cleared by the auditors by January, 2008.
38. It, however, was to make reimbursement on the basis of the certificate issued by the statutory auditors of petitioner.
39. The petitioner has claimed the amount in question in terms of the license and the same was found to be payable by respondent on 23.01.2008, stating :-
“Sub: Re-imbursement claim of revenue share paid under NLD license during financial year 2002-03, 2003-04, 2004- 05 and 2005-06-Audit examination I am directed to convey that the amount of Rs. 79.32 crores worked out by DoT towards reimbursement of licensee fee to VSNL was found correct by the PandT Auditors.”
40. The petitioner, as far back as on 4th May 2007, claimed reimbursement stating :-
“2. Concurrently, perhaps while your letter under reference had been in the process of issuance, Mr Satheesh Ranade, company secretary and Mr Rajeev Dhar, CI-O, VSNL, had an occasion to meet the member (finance) and DDG (SU), DoT on 19 April 2007. Both member (finance) and DDG (SU), on enquiry on this long-standing subject, informed about this letter having been issued and also clarified that what in fact was required was a certificate from the statutory auditors of VSNL, verifying the amount of claim to be reimbursed by DoT. This, as informed by member (finance) and DDG (SU), was required so as to enable DoT to take further actions and respond to MoF duly. Accordingly, the requisite certificate issued by VSNL’s statutory auditors verifying the amount of claim is forwarded with this letter.
3. We would also like to submit that DoT has already completed the assessment for the relevant years (2002-03 to 2005-06) for which the claim pertains, based on audited statement of revenue and license fee submitted by VSNL. Additional demands raised by DoT pursuant to the said assessments have been duly paid by VSNL. The relevant facts pertaining to amounts of licence fee payments made by VSNL are also directly verifiable from the assessment order(s) issued by
DoT itself. We believe that VSNL has duly complied with its obligations under NLD license w.r.t payments of licence fee and provided all documentary evidences and clarification towards its claim under the said license, of the refund amount due. With a certificate from the statutory auditors, we now request you to kindly process the matter urgently so as to arrange for release of long pending dues to VSNL, with appropriate interest, based on the principle of reciprocity, at the
earliest and oblige.”
41. It annexed with the said letter a copy of the auditor’s certificate which is in the following terms :-
“We have examined the attached Statement of NLD Refund Claim Due from DoT (the “statement”) of the VIDESH SANCHAR NIGAM LTD (“the company”) which has been prepared by the company. Based on our examination and according to the information
and explanations given to us, we certify that the amount reimbursable (net of tax) in respect of NLD refund claim, as shown in the attached statement, has been correctly computed based on
amounts which have been extracted from the books of account of the company.
The certificate has been issued at the request of the management of the company for the limited purpose of submission to Ministry of Communications and IT, Department of Telecommunications (SU Cell) and should not be used for any other purpose.”
42. A statement of NLD refund claimed to be due from DoT was also annexed. Another demand was made again on 27.07.2007 inter alia, stating :-
“4. It may kindly be appreciated that despite our persistent followup with all concerned officials on this issue for over two years (details of various communications provided in Annexure A) as well several meetings with senior officials in SU, FEB, LF and LR sections of DoT and despite firm assurances by the concerned officials within DoT, VSNL has not yet received any reimbursement of the amounts totalling to Rs. 802,832,522/-, plus appropriate interest. 5. We would also like to submit that DoT has already completed the assessment for the relevant years (2002-03 to 2005- 06) for NLD license for which the claim pertains, based on audited statement of revenue and license fee submitted by VSNL. Additional demands raised by DoT pursuant to the said assessments have been duly paid by VSNL. The relevant facts pertaining to amounts of
licence fee payments made by VSNL are also directly be viable from the assessment order (s) issued by DoT itself.
7. It may be appreciated that VSNL continues to incur huge opportunity cost of funds lying with the government, for an unduly long period of time. The matter has also been viewed critically by
auditors and we are likely to face adverse queries from investors in India and abroad (ADR holders), on the matter.
9. We firmly believe that VSNL has duly complied with its obligation under its NLD license w.r.t payments of license fee and provided all documentary evidences and clarification towards its
claim under the said license, towards the refund amount due. We request you to kindly intervene and expedite the matter urgently so as to arrange for release of long pending dues to VSNL, with interest as worked out, based on the principle of reciprocity at the earliest and oblige.”
43. If the respondent was to claim interest in a situation of this nature, the petitioner would also be entitled to claim interest of the same amount at the same rate. The statute does not contemplate any unjust enrichment. Equities, it is well known, should be adjusted between the parties. The doctrines of level playing field, ‘restitution’ as also ‘parity’, so far as treating the persons equally,
being on an equal footing is concerned, should be applied. 44. In Clariant International Ltd. v. Securities and Exchange Board of India reported in (2004) 8 SCC 524, it was stated :-
“34. In a given case where the liability arises during pendency of a litigation, doctrine of restitution can be invoked. In South Eastern Coalfields Ltd. v. State of M.P it was observed: (SCC pp. 662-63, para 26)
“In law, the term ‘restitution’ is used in three senses: (i) return or restoration of some specific thing to its rightful owner or status; (ii) compensation for benefits derived from a wrong done to another; and (iii) compensation or reparation for the loss caused to another. (See Black’s Law Dictionary, 7th Edn., p. 1315.) The Law of Contracts by John D. Calamari and Joseph M. Perillo has been quoted by Black to say that ‘restitution’ is an ambiguous term, sometimes referring to the disgorging of something which has been taken and at times referring to compensation for injury done:
‘Often, the result under either meaning of the term would be the same. ... Unjust impoverishment as well as unjust enrichment is a ground for restitution. If the defendant is guilty of a non-tortious
misrepresentation, the measure of recovery is not rigid but, as in other cases of restitution, such factors as relative fault, the agreedupon risks, and the fairness of alternative risk allocations not
agreed upon and not attributable to the fault of either party need to be weighed.’ ”
It was also observed :-
“56. While compensating a person, the court should see that he is not unjustly enriched. Interest is directed to be paid on the default of the acquirer occasioning loss suffered by an investor of his money. The question of paying interest by way of compensation to persons who had not suffered any loss, thus, would not arise.” 45. We, however, are not in a position to accept the submission of Mr Hazarika that as respondent agreed not to take coercive steps to realize the amount in the earlier round of litigation before us, it would not be entitled to interest for the period during which the order of stay was in force.
46. Interest would have been payable otherwise even if an order of injunction was granted. It is not a case where the principle of ‘Estoppel by Election’ can be pressed into service.
47. The respondent, keeping in view the peculiar facts and circumstances of this case, might have taken a fair stand but the same would not mean that as a proposition of law, it would not be entitled to claim any interest for the period from the date of passing of the said order till the disposal of the petition.
48. We may now deal with the contention of Mr. Mishra that no order need be passed by us as an appeal before the Supreme Court of India is pending.
49. Filing of an appeal as is well-known, does not amount to grant of an automatic stay. The respondent was expected to refund the amount suo moto, unless it obtained any order of stay from the appellate court as provided for inOrder XLI, Rules 1 and 5 of the Code of Civil Procedure. The petitioner was
required to file this petition as despite demand, the amount in question was not refunded only on the premise that an appeal against this Tribunal’s order dated 11.02.2010 was contemplated.
50. We have noticed heretobefore that the Supreme Court of India did not grant any order of stay. We, therefore, are of the opinion that there is no legal
impediment in implementing the said order by issuing an appropriate direction.
51. It is not in dispute that in terms of the aforementioned judgement, a sum of Rs. 115.72 crores became payable. The petitioner would also be entitled to reasonable the case, should be at the same rate which had been realised by respondent namely, SBI PLR + 5% amounting to Rs. 6 6.61 crores.
For the aforementioned purpose, petitioner was not obligated to claim refund in the earlier round of litigation. There cannot, however, be any doubt or dispute that this judgment shall be subject to the result of the appeal pending before the Supreme Court of India.
52. The petitioner, in the facts and circumstances of this case shall also be entitled to the refund of Rs.27.24 crores which has been realised by way of excess interest. We, however, are of the opinion that no interest on the said sum should be directed to be paid.
53. This petition is allowed in part and to the extent mentioned hereinbefore, but in the facts and circumstances of this case there would be no order as to costs.