1. The Petitioner, a licensee under the Indian Telegraph Act, 1885, by this petition has inter-alia prayed for a direction upon the Respondent herein to release the Performance Bank Guarantee in respect of Andhra Pradesh, Gujarat, Karnataka, Kerala, Punjab, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West), Maharashtra, Haryana and Tamil Nadu Telecom Circles on the premise that its Phase II roll out obligations in terms of the Conditions of Licence stand fulfilled.

2. We may notice Clause 21.1 of the Conditions of Licence dealing with the requirements to furnish the Performance Bank Guarantee at the outset:

21.1 Performance Bank Guarantee:

Performance Bank Guarantee (PBG) in prescribed format shall be submitted for amount equal to Rs.10 crores (for category B service areas) 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 in respect of coverage.

21.2 Financial Bank Guarantee:

The LICENSEE shall submit a Financial Bank Guarantee (FBG), valid for one year, from any Scheduled Bank or Public Financial Institution duly authorized to issue such Bank Guarantee, in the prescribed Performa annexed. Initially, the financial bank guarantee shall be for an amount of Rs.25 Crore (for category B service area) which shall be submitted before signing the Licence agreement. Subsequently, the amount of FBG shall be equivalent to the estimated sum payable equivalent to license fee for two quarters and other dues not otherwise securitised and any additional amount as deemed fit by the Licensor. The amount of FBG shall be subject to periodic review by the Licensor and shall be renewed from time to time till final clearance of all dues.

21.3 The Fees, charges and royalties for the use of spectrum and also for possession of Wireless Telegraphy equipment shall be separately securitised by furnishing FBG of an amount equivalent to the estimated sum payable annually in the proforma annexed, to WPC, valid for a period of one year, renewable from time to time till final clearance of all such dues.

21.4 Initially, the Bank Guarantees shall be valid for a period of one year and shall be renewed from time to time. The LICENSEE, on its own, shall extend the validity period of the Bank Guarantees for similar terms at least one month prior to date of its expiry without any demand or notice from the LICENSOR on year to year basis. Any failure to do so, shall amount to violation of the terms of the LICENCE and entitle the LICENSOR to encash the Bank Guarantees and to convert into a cash security without any reference to the LICENSEE at his risk and cost. No interest or compensation whatsoever shall be payable by the LICENSOR on such encashment.

21.5 Without prejudice to its rights of any other remedy, LICENSOR may encash Bank Guarantee (FBG as well as PBG) in case of any breach in terms & conditions of the LICENCE by the LICENSEE.

3. Clause 34 of the said licence conditions provides for roll out obligations on the part of the licensee.

Clause 35 provides for imposition of liquidated damages on the failure of the licensee to comply with its roll out obligations.

4. Indisputably, the said conditions of licences were amended on or about 10.02.2009, in relation whereto a circular letter dated 10.02.2009 was issued; the relevant clauses whereof read as under:

(iii) In non-metro service areas, the licensee shall ensure that in first phase of roll out obligation at least 10% of DHQs where startup spectrum has been allocated are covered within one year of such spectrum. The date of allocation of frequency shall be considered for computing a final date of roll-out obligation.

(vi) Coverage of a DHQ town shall mean that at least 90% of the area bounded by the Municipal limits shall get the required street level coverage.

(vii) The date of application for SACFA or date of allocation of frequency, whichever is later, shall be taken into account for the purpose of calculating average delay in SACFA clearance.

(viii) The Licensee is permitted to cover any other town in the District in lieu of the District Headquarters.

5. According to the Petitioner, he has complied with the said obligations. In support of the said contention, the following chart has been placed before us:

Circle (Category)

Bank

Initial Date of expiry of PBG

Date of renewal of PBG

Date of expiry of renewed PBG

Amount of PBG (In Rs. Crores)

Andhra Pradesh (A)

Punjab National Bank

9.1.2011

29.11.2010

9.1.2012

20

Maharashtra (A)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

20

Tamil Nadu (A)

State Bank of India

9.1.2011

2.12.2012

9.1.2012

20

UP (West) (B)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

10

Gujarat (A)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

20

UP (East) (B)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

10

Haryana (B)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

10

Karnataka (A)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

20

Rajasthan (B)

State Bank of India

9.1.2011

2.12.2010

9.1.2012

10

Punjab (B)

Bank of Baroda

9.1.2011

6.12.2010

9.1.2012

10

Kerala (B)

Bank of Baroda

9.1.2011

6.12.2010

9.1.2012

10

6. It may, however, be noticed that demands were made by the Petitioner for return of the following bank guarantees by letters dated 26.5.2011, 27.5.2011, 23.8.2011 and 11.10.2011.

7. Pursuant to our order dated 23.11.2011, the Respondent herein has filed a short reply, inter-alia, contending:

(i) Having regard to the recommendations of the Telecom Regulatory Authority of India (TRAI) dated 14.7.2011, the Petitioner comes within the purview of Category B-2 of the categories mentioned in the aforementioned letter;

(ii) A show cause notice had been issued to the Petitioner as to why its licence shall not be cancelled;

(iii) The Test Certificates purported to have been issued by the TERM Cell are required to be verified and action thereupon is required to be taken to ascertain as to whether the licence conditions have been satisfied or not.

8. Mr. Ramji Srinivasan, learned senior counsel appearing on behalf of the Petitioner, would contend that language of Clause 21.1 being explicit and clear and moreover, the issues raised by the Respondent herein being covered by a judgment of this Tribunal dated 28.9.2011 passed in Petition No. 314 of 2011 Siestema Shyam Teleservices Ltd. Vs. Union of India, the Respondent should be directed to return the Performance Bank Guarantees furnished by the Petitioner.

9. Ms. Maneesha Dhir, learned counsel appearing on behalf of the Respondent, on the other hand, would contend :

(i) The judgment of this Tribunal in Siestema Shyam Teleservices Ltd. having not considered the effect of Clause 21.5 of the Conditions of Licence and having regard to the fact that in this case a show cause notice had been issued, no interim order need be passed in favour of the Petitioner;

(ii) The recommendations of the TRAI being based on legal opinion of two eminent jurists (former Judges of the Supreme Court of India) to the effect that the roll out obligations cannot be said to be complete unless services are started to be rendered, the effect of the certificates issued by the TERM Cell may have to be considered afresh.

10. From the aforementioned table, it is evident that the Petitioner in respect of the 11 circles mentioned therein, has carried out its 50 percent roll out obligations i.e. the Phase II thereof well within a period of three years from the date of supply of spectrum, as envisaged under Clause 34 and 35 of the Licence Agreement as amended on 10.02.2009.

The Petitioner has annexed the certificates issued by the TERM Cells establishing completion of 50 percent of the roll out obligations.

We may notice only one of them being dated 14.7.2010 issued by the Director, Telecom Enforcement, Resource & Monitoring Cell, A.P. and Assistant Director General, Telecom Enforcement, Resource & Monitoring Cell in respect of the Andhra Pradesh Circle. The said certificate relates to the town of Palakole and West Godavari District of Andhra Pradesh.

A Service Test Result & Registration by TERM was submitted on 04.06.2010 and 17.06.2010. The requisite tests had been conducted by the TERM Cell of Andhra Pradesh Coverage, mentioning therein:

Based on the RF drive test carried out as per Test Schedule mentioned above, Street Level Radio Coverage provided in the municipal limits of the area under test is 98.02%.

11. A copy of the said certificate has been sent to DDG, AS-II (DoT), New Delhi and DDG (Security), New Delhi.

The said certificate being dated 14.07.2010, it is difficult to comprehend as to why the verification thereof, if any, could not be carried out so far. In terms of the provisions of the licence, as amended, the roll out obligations are to be carried out by the licensee only in terms thereof. The certificates, as noticed heretobefore, have been issued by the competent delegated authority.

12. Clause 21.1 of the Conditions of Licence, on a plain reading, imposes a contractual obligation on the Respondent herein.

Release of 50 percent of the Financial Bank Guarantees on self-certification of completion of the 10 percent of the covered area within one year from the date of allocation of start-up spectrum and release of the Performance Bank Guarantees on receipt of Test Certificate(s) issued by TEC/TERM Cell in respect of coverage on contractual mandates.

13. A contractual obligation created in terms of the said Licence Agreement on the part of DoT, cannot be refused to be performed on any ground, whatsoever. If the Respondent is to insist on the Petitioners compliance with the conditions of licence, there cannot be any doubt or dispute whatsoever that the Respondent must also be held to be bound by the terms thereof.

14. Moreover, the issues raised by the Respondent herein are by and large covered by the decision of this Tribunal dated 28.9.2011 in Siestema Shyam Teleservices Ltd. (Supra), wherein upon noticing that the Bank Guarantees issued by the Banks refer principally to Clause 34 of the LIcence, was held as under:

For the purpose of disposal of this petition, I would assume that the petitioner has failed to comply with its roll out obligations as envisaged in Clause 34.2. The consequences therefor have been laid down in Clause 35 as also paragraph 13 (xiii) of the aforementioned circular letter dated 10.2.2009.

If Mr. Mishras submissions are to be accepted, no occasion would arise for reduction of the amount of the performance bank guarantee and ultimate release thereof. It cannot, therefore, be given effect. Performance bank guarantees would, therefore, have to be kept alive for the entire term of the license i.e.20 years.

This Tribunal in this case would assume that failure on the part of the licensee to abide by its obligation in Clause 34.1 may entail civil consequences but the amount due therefor were required to be calculated.

Such dues, if any, may fall within the purview of the financial bank guarantee as contemplated under Clause 21.2 of the license and not 21.1.

The petitioner, thus, has seriously been prejudiced. It had to make arrangement for payment of a large amount to secure the Bank Guarantees.

The allegation that the petitioner has been discriminated against also has not been denied or disputed.

14. Despite the aforementioned Judgment and Order, the Respondent had neither considered the ratio thereof nor assigned any reason in its Reply as to why the matter had been kept pending for such a long time, although on a plain reading of Clause 21.1 it is evident that a duty has been cast on the Respondent to return the Bank Guarantees furnished on issuance of the certificate by the TERM Cell.

15. It is moreover not in dispute that the Performance Bank Guarantees furnished by the Petitioner are going to expire on 09.01.2012 and in terms of Clause 21.4 of the Conditions of Licence, the process for renewal thereof was required to commence by 09.12.2011.

16. In the aforementioned context, we may notice the purported recommendations made by the TRAI on 14.07.2011. It now stands admitted that the TRAI made a suo-motto recommendation on or about 18.11.2010 and 22.12.2010. The Respondent did not accept the said recommendations. In exercise of its power conferred on it under Section 11 (5) of the TRAI Act, 1997, the matter was referred back to the TRAI by the Respondent herein on 25.6.2011.

On a perusal of the aforementioned letter dated 14.07.2011, it appears that the TRAI had obtained legal opinion of two former Judges of the Supreme Court of India. It was opined that mere registration of the licence with the TERM Cell does not by itself amount to rendering of services to the subscribers, nor would it amount to fulfillment of the licensees roll out obligations under the Conditions of Licence.

17. The Petitioners case has been put in Category B-II by the TRAI.

It was stated:

Licensees, who have complied with the roll out obligations but with delay up to 52 weeks and:

1 Where the rollout of network (in terms of BTS/subscribers) was satisfactory; there were 48 such cases and Liquidated damages were recommended to be imposed as per licence conditions;

2 Where the rollout of network (in terms of BTS/subscribers) was not satisfactory. There were 30 such cases and liquidated damages were recommended to be imposed as per licence conditions. It was also recommended that cancellation of licenses needs to be seriously considered in view of non-utilisation of spectrum and resultant loss of revenue to exchequer. This may however require legal examination.

(Emphasis supplied)

18. With respect, the Regulator was, thus, not in a position to arrive at its own conclusion with regard to the legal position. Evidently, the Respondent even it accepts the said recommendations, would be bound to obtain a legal opinion once over again.

19. The Petitioner, in its rejoinder, has stated as under:

d. The contention of the petitioner with regard to compliance with the terms of Clause 21.1 of the UASL read with the Amendment notification dated 10.2.2009 (Annexure P-4 at page 227 of the petition) has to be adjudicated having regard to the situation as it obtains as on date and past actions of the petitioner cannot be judged by any subsequent amendments.

e. In any case, as the situation stands today, the matter is at the stage of consideration of recommendations of TRAI by the respondent and in the meantime, issues of redress of continuing violations by respondent of an existing condition in the UASL has arisen. Unless and until the recommendations of the TRAI are accepted by the respondent, and consequential amendments are retrospectively made by the respondent to the UASL in line with the TRAI recommendations, a recommendatory view of the TRAI cannot form the basis for any action to be taken by the Respondent contrary to Clause 21.1 of the UASL read with the Amendment Notification dated 10.2.2009 as it obtains today. The petitioner is advised to state that any such attempt to retrospectively alter terms and conditions of UASL even in regard to concluded facts would be illegal and any such amendments, if sought to be made, can only be prospectively. The petitioner reserves all its rights in law to take such action in respect of any action taken by the respondent in this behalf, as it may be advised.

f. Without prejudice to the above, even a cursory reading of the TRAI recommendation dated 14.7.2011 would reveal that by a letter dated 15.6.2011, the respondent has referred back to the TRAI the recommendations of TRAI dated 18.11.2010 and 22.12.2010 for reconsideration of TRAIs views/ recommendations. The respondent ought to have and should now be directed by this Honble Tribunal to produce the letter dated 15.6.2011.

g. The case of the petitioner, as per the TRAI recommendations, falls in Category B2 in respect of which the TRAI has recommended that the respondent may seek legal opinion once again on the cancellation of these issues. Paragraph 5 of the annexure to the TRAI recommendation dated 14.7.2011 sets out the stand already taken by the respondent.

20. It was furthermore contended that from the records and in particular, the recommendations made by the TRAI, it would appear that the DoT had already taken a legal opinion, which runs contrary to the legal opinion obtained by the TRAI.

In paragraph 15 of its recommendations, the TRAI stated:

...It may be noted that the fact that these licensees are technically compliant with the roll out obligations has already been recognized by the TRAI while making the recommendations in November 2010.

21. Having so stated, it proceeded to opine:

(A) t the same time, the number of subscribers/BTS being very small, the very purpose of assigning spectrum to these licensees, either in terms of coverage (and therefore social utility) or contribution to Government exchequer (or economic value), has not been realized. It is for this reason that, in November 2010, the Authority had recommended that the option of cancelling these licenses needs to be seriously considered by way of a legal examination.

16. In view of the above, the Authority reiterates its earlier recommendation that in respect of 30 licenses listed under A2 and B2 categories, DoT may seek legal opinion on the issue of cancellation of these licenses.

k. It is in this light that the TRAI then proceeds to recommend that the Government needs to address itself immediately to the issue of modifying the license conditions in respect of the roll-out obligations.

22. Recommendations of the TRAI, even if accepted, ordinarily will have only a prospective effect.

In any event, at this stage, we cannot raise any inference that contrary to the normal legal presumption that all executive acts are prospective in nature, a retrospective effect shall be given to an amendment to the Conditions of Licence.

23. The Respondent, thus, is aware that if the recommendations are to be accepted, further steps are required to be taken pursuant thereto.

24. For such a long time, the Respondent having not accepted the recommendations of the TRAI, it would be hazardous to guess as to what would it do in future.

25. In that view of the matter, it is rather curious that the Respondent has sought to hide behind the recommendations made by the TRAI, although it is itself not sure as to whether even in future it is going to accept the same or not.

26. In law, once the procedure laid down under Sub-Section 5 of Section 11 of the 1997 Act had been complied with, the Central Government is not bound to accept the recommendations of the TRAI.

27. We would, however, assume that the process of cancellation of licence has been initiated. Even if that be so, return of the Bank Guarantees, having regard to the nature of guarantees furnished by the concerned Bank, at this stage, cannot be refused. The Respondent could encash the Bank Guarantee only in the event the Petitioner is found to have not met its roll out obligations.

28. Keeping in view the facts and circumstances of the case, apparently the petitioner could ask for reduction of the bank guarantee on completion of first phase of its roll out obligations and/or payment of the liquidated damages imposed on it.

If it has not been done, at least at this stage, they having filed certificates of the competent authority long time back, we see no reason as to why the Respondent shall not be directed to comply with its obligations in terms of Clause 21.1 of the Conditions of Licence.

29. In Petition No.59 of 2011 Idea Cellular Ltd. Vs. Union of India, this Tribunal has noticed that issuance of certificates by themselves, without there being an allegation of fraud or undue influence which would vitiate the same, is required to be accepted by the DoT.

More significantly, there is no reason as to why such an order could not be passed for a long time.

We are, however, prima facie of the opinion that rendition of actual services may not be necessary in view of the Amendment to the Conditions of Licence in terms of the circular letter dated 10.02.2009.

30. So far as balance of convenience and irreparable injury is concerned, we may notice that the Petitioner has categorically stated the prejudice it would suffer, if it is directed to renew the Bank Guarantees. Such prejudice has also been noticed by us in the case of Sistema Shyam Teleservices Ltd. (Supra).

31. For the reasons aforementioned, prima facie we are satisfied that the Petitioner is entitled to return of the Performance Bank Guarantees.

We, therefore, are of the opinion that interest of justice would be sub-served if an order of injunction in mandatory form is issued in favour of the Petitioner directing the Respondent herein to return the Performance Bank Guarantees subject to the condition that in the event this Petition is ultimately dismissed, the Tribunal shall adjust the equities between the parties and/or pass such order or orders which would take into consideration the interest of the Respondent.

We, however, direct that the Petitioner shall furnish an undertaking supported by an affidavit that it would, in the event this petition is dismissed or this order is otherwise modified or varied, shall furnish appropriate Bank Guarantees. The Bank Guarantees must be furnished with effect from the date of expiry of the earlier bank guarantees. This order, however, it goes without saying being interim in nature, only a prima facie view has been taken by us and thus, it would be without prejudice to the rights and contentions of the parties and subject to any other or further order that may be passed by this Tribunal.

33. With the aforementioned directions and observations, the prayer for interim order is disposed of.