P.K. Rastogi, Member

1. The Petitioners have filed these Petitions challenging, inter alia, the application of different accounting systems by Department of Telecommunications (DOT) in the same financial year in respect of deductions from Gross Revenue of two items, i.e. access charges and roaming charges to other operators for levying of licence fees.

2. The Petitioners are Cellular Operators engaged in the business of providing, inter alia, Cellular Mobile Telephone Services in their respective Service Areas under the Licences granted to them by DOT under the first Proviso to Section 4 of the Indian Telegraph Act, 1885.

3. The Petitioners have submitted that in different quarters of financial year 2004-05 and 2005-06, DOT has allowed such deductions in such a manner that in one quarter the deduction of these items is on accrual basis and in another quarter in the same financial year, the deduction of the same items is on actually paid basis. Further in some particular / same quarter(s), the deduction of one item i.e. IUC Charges in that quarter is on accrual basis and the deduction of the other item i.e. Roaming Charges in the same quarter is on actually paid basis. The adoption of different accounting system by DOT have resulted in gross overcharging of license fee by the DOT to the Petitioners.

4. The demand notes for the year 2004-05 and for 2005-06 by DOT to different circles of Vodafone Essar Limited are being disputed in these petitions. The Petitioner has given the details of these demand notes as shown below:

S. No.

Petitioner Company

Circle

Date of Demand Note(s) for Year 2004-2005

Date of Demand Note(s) for Year 2005-2006

1

Vodafone Essar Limited

Mumbai |

13.08.2007,

13.08.2007,

26.04.2007

26.04.2007

2

Vodafone Essar Cellular Limited

Tamil Nadu, Kerala, Maharashtra

13.08.2007,

13.08.2007,

29.06.2007

29.06.2007

3

Vodafone Essar Digilink Limited

UP (East), Rajasthan, Haryana

13.08.2007,

20.08.2007,

29.06.2007

06.07.2007

4

Vodafone Essar Gujarat Limited

Gujarat

05.09.2007

05.09.2007

5

Vodafone Essar South Limited

Karnataka, Chennai, Punjab and Andhra Pradesh

20.08.2007

20.08.2007

UP (West) and West Bengal

17.08.2007

17.08.2007

5. Since, the facts are similar in case of all the Petitioners herein, we are taking up the facts of Mumbai Circle, i.e. Petition No. 192 of 2010 for detailed discussions.

6. According to the Petitioner the facts of the case of Mumbai Circle, for the financial year 2004-2005, are as follows:

The Petitioner submitted its annual audited accounts and Auditors Reports on Statement of Revenue and License Fee each dated 29.06.2005 for the Quarters ending 30.06.2004, 30.09.2004, 31.12.2004 and 31.03.2005 under cover of its letter dated 11.07.2005. The Petitioner claimed a deduction of Rs. 1,619,980,171/-towards IUC charges and Rs. 1,436,469,908/-towards roaming charges to other operators as accrued during the year 2004 - 05 and as paid in the same quarter or subsequently. In Para 4 of Annexure 1 to each of the Auditors Report on Statement of Revenue and License Fee for the respective quarter, it was clarified that PSTN related call charges passed on to basic, cellular and long distance services providers and roaming revenue passed on to CMSPs and GMPCS providers were considered on accrual basis.

The DOT vide its letter dated 04.07.2006 informed the Petitioner that:

The Auditors Report on the Statement of Revenue and License Fee for the various quarters of the Financial Year 2004-05 (Report dated June 20, 2005) has been perused. The report says, "Note 3 on the notes to the statement regarding PSTN call related charges passed on to basic, cellular and long distance service providers and roaming revenue passed on to CMSPs and GMPCS providers having being considered on accrual basis....

The Petitioner in its letter of 14.03.2007 addressed to DOT once again reiterated that the deductions claimed so far as per the Petitioners existing submissions for 2004-2005 and 2005-2006 were of the amounts which had actually been paid, even though in some cases, these amounts were paid in the subsequent years.

Vide its letter dated 26.04.2007, DOT raised a Demand Note on the basis of the details submitted by the Petitioner to them. Since the payments demanded under the said letter dated 26.04.2007 were not made by the Petitioner, vide its letter dated 13.08.2007, DOT raised another Demand Note in which the only addition in the demand was on account of interest for alleged delayed payment.

Vide its letter dated 24.08.2007, the Petitioner wrote to DOT stating, inter-alia, that in its view the additional demand of Rs. 3,28,08,391/-was arbitrary and incorrect and requested DOT to provide the reasons for additions in the AGR as mentioned in DOTs computation sheet.

However, the Petitioner was constrained to make the payment of the said amount without prejudice and under protest under cover of its letter dated 27.08.2007 because the Petitioner was poised to get a Letter of Intent for UAS License in Madhya Pradesh Circle issued to its sister concern.

7. The Petitioner submitted that the perusal of the said Impugned Demand Notes dated 26.04.2007 and 13.08.2007 for Financial Year 2004-05 and dated 26.04.2007 and 13.08.2007 for Financial Year 2005-06 showed that the DOT has allowed deductions for IUC Charges and Roaming Charges paid to other Operators in different quarters of the financial year on actually paid basis or accrual basis, whichever is lower.

Further, in some particular / same quarter(s), the deduction of one item i.e. IUC Charges in that quarter is on accrual basis and the deduction of the other item i.e. Roaming Charges in the same quarter is on actually paid basis.

8. The Petitioner further submitted that the question as to what should be the mode of accounting for the purposes of crediting and debiting revenue income and expenditure by a Cellular Operator was the subject matter of the Petition No. 325 of 2007 - Vodafone Essar Mobile Services Limited v. DOT and vide its judgment dated 04.03.2010, this Tribunal held, inter alia, that accounts should be adjusted on accrual basis.

9. Keeping in view of the judgment of this Tribunal in the case of the aforementioned Petitioner, the Petitioners requested for granting, inter alia , following reliefs:

(a) Direct the Respondents to apply and implement one system of accounting i.e. accrual basis during the whole of the financial year for computation of AGR for both License Fee and WPC Charges;

(b) Direct the Respondents to rework / re-compute the impugned Demands / Demand Notes by following only one system of accounting for the whole of the financial year i.e. accrual basis;

(c) Direct the Respondents to refund / adjust all the excess amounts wrongfully charged by DOT together with interest wrongfully levied by DOT together with further interest thereon at the same rate as DOT charges interest from the Petitioners per annum computed from the date of the Petitioners having made the excess payment towards IUC Charges and Roaming Charges under the said impugned Demand Notes, until the date of actual refund / adjustment;

(d) Direct the Respondent to extend the benefit of TDSATs judgment dated 04.03.2010 in Petition No. 325 of 2007 to the Petitioners herein also.

10. On the other hand, the Respondent submitted that in terms of the provisions of the License Agreement, deductions from gross revenue can be claimed on the basis of PSTN call related charges and roaming charges actually passed on to other service providers. The Respondent was willing to apply one accounting system for deduction of amounts from gross revenue. The Respondent is fully willing to accept and permit deduction on the basis of actually paid amounts, the Petitioner is however deliberately and intentionally not providing the details for applying the said accounting system.

11. In response to computation shown in tables by the Petitioner, the Respondent submitted that the computation has been made by the Petitioner only on actual basis. The Petitioner did not provide the details of payment in respect of those quarters for which he has sought more deductions than the deductions allowed by the DOT as per the audited AGR statements submitted by the Petitioner. It is not clear from the details of payment that whether benefit has already been taken or not on account of the deductions being claimed. It is also not clear from the details that the charges actually paid during that quarter pertain to the same quarter or previous quarters.

12. The Respondent further pointed out that the Petitioner has asked for refund of certain amounts paid by it which are covered by period of limitation. For Mumbai circle, the demand notes raised on 26.04.2007 for both the years 2004-2005 and 2005-2006 are barred by limitation period as these petitions are filed on 23.06.2010 only.

13. In rejoinder to the Respondents plea, the Petitioner submitted that vide its judgment dated 04.03.2010 in Petition No. 325 of 2007 - Vodafone Essar Mobile Services Limited [group company] v. DOT and Another, this Tribunal allowed the petition and directed the Respondent to adjust accounts on accrual basis. In view thereof, there was no need for the Petitioner to provide figures on actual basis in the Petition. However, if this Tribunal desires, the Petitioner will provide figures on actual basis also.

14. Facts of the petitions are not in dispute. The questions to be determined in these petitions are whether the principle laid down by this Tribunal in its judgment dated 4.3.2010 in Petition No. 325 of 2007 are applicable to these petitions and whether any demand notes are beyond the limitation.

15. We may notice that the issues raised in these petitions were raised in Petition No. 325 of 2007 also. The main issue in the petition was the mode of accounting for the purpose of crediting and debiting revenue income and expenditure by a cellular operator. The same matter of principles are involved in the present petitions. The Petitioners in these petitions as in Petition No. 325 of 2007 filed table to show that claims made by DOT in its impugned demand notes were wrongful. The core question which arises for consideration in the present petitions is as to whether the Respondent should be directed to take into account the "accrual basis" of accounting for the purpose of reckoning the expenditure. The same question arose in Petition No. 325 of 2007.

16. This Tribunal in that petition judgment dated 4.3.2010, held inter alia , that account should be held on accrual basis. We may notice the observation and findings of this Tribunal in its judgment dated 4.3.2010:

For the reasons afore-mentioned, this Petition is allowed, and the Respondent is directed to adjust accounts on accrual basis.

Regarding interest amount to be adjusted for the amount paid by the Petitioner to the Respondent, this Tribunal held in that petition:

The question however which arises further for consideration is whether we should direct payment of interest. Mr. Vaidyanathan has referred to two decisions of this Tribunal to contend that even in the matter of interest, the reciprocity should be maintained.

In this Tribunals Order dated 11.11.2005 in Petition No. 48 of 2004, this Tribunal have accepted the argument of reciprocity in the matter of payment of interest, and in line with our general approach in all such matters, we would not like old cases to be reopened as the benefit of refund/payments on this account will not be passed on to the consumers, nor can the tariffs which have taken into account all these payments be altered retrospectively. The Petitioners have pointed out that large amounts of bills are not paid in time by the Respondents and when paid after considerable delay there is no payment of interest whereas an interest of 24% per annum compounded quarterly is charged from them on their dues. We direct that this should be on reciprocal basis. Both parties are directed to enter into agreement regarding the rate of interest which will be applicable for both the parties on reciprocal basis.

We are, however, of the opinion that in the facts and circumstances of this case, interest of justice would be subserved if the amount required to be refunded by the Respondent be directed to be paid with interest @ 12% p.a. from the date of filing of this Petitioner till realization. We say so as the Petitioner has filed this application only in 2007. We may also notice that except this Petitioner and another, no other operator has accepted the basis of accounting. Furthermore, the issue was a contentious one.

17. In our judgment dated 7.5.2010 in Petition No. 284 of 2007, it was observed:

It is, furthermore, well settled that a State within the meaning of Article 12 of the Constitution of India must act fairly and reasonably. Any decision taken by it, if is found to be violative of the constitutional scheme of equality as enshrined under Article 14 of the constitution of India or the level playing field as also the statutory provisions, shall also be coram non judice. (See Star India Ltd. v. Sea TV : 2007 (4) SCC 656 ).

There cannot, however, be any doubt or dispute that ordinarily the benefit granted to a class of litigants should be extended to all who fall within the said class. If in the case some of the licensees of AGR is to be calculated on one basis, the said principle should not be denied to be applied in the case of the others. This Tribunal in the aforementioned case laid down a principle, namely that the Government of India can not levy any charges in respect of the items which were beyond the purview of the licensed activities. It is one thing to say that the said decision would come w.e.f. the date of filing of the respective applications by the concerned licensees but only on the basis thereof it is difficult for us to arrive at a decision that the benefit thereof would not be available to the other licensees, irrespective of the fact as to whether they were members of any association or not.

The Respondent is State within the meaning of the provision of Article 12 of the Constitution of India. It is, therefore, constitutionally obligated to give effect to the equality clause contained in Article 14 of the constitution. Applying the said principle, there cannot be any doubt or dispute that effect of a judgment, subject of-course to just exceptions, should be given equally in favour of persons similarly situated.

The ratio of the decision in the AGR matter relates to the principles discussed by us hereinbefore. It was required to be given full effect to, by the Respondent not only having regard to constitutional scheme, but also having regard to different facets to the doctrine of "good governance". A State cannot unduly enrich itself. It cannot act arbitrarily. Non-discriminatory action amongst the persons similarly situated is the avowed object of the constitutional framework.

18. As the facts and circumstances in the present petitions and the previous petition are similar, we are of the opinion that the same principle have to applied in these petitions also.

19. In Petition No. 325 of 2007, we had made, inter alia , the following observations:

During the pendency of this petition, representations were made by the mobile operators on several occasions. We may notice that on 12.9.2008. the Tribunal recorded that the parties had been trying to resolve the dispute. On 15.9.2008, the first of such meeting was held. The Petitioner provided for summary of the issues. The DOT filed its affidavit on 4.12.2008 stating that details and proof of payment would be required from the year 1999 onwards so as to enable it to verify as to whether the Petitioner had acquired any double benefit on the same demand or not. This Tribunal in its order dated 12.2.2009 recorded the Petitioners plea that a uniform basis should be adopted both in terms of revenue as well as payment which was considered not to be unreasonably a fair request. This Tribunal directed the Petitioner to furnish the details of claim made on accrual basis as well as the payment actually made for the years 2004-05, 2005-06 and 2006-07. The Petitioners were asked to hand over their respective accounts so that the parties could jointly verify the same and come to a joint conclusion as to whether on accrual basis, a loss has been caused to the Government. On the request of the Respondent, the Petitioner submitted all the requisite details for the years 2004-05, 2005-06 and 2006-07 under cover of its letter dated 9.3.2009. Accordingly, a meeting was held by and between the parties on 23.3.2009. The Respondent yet again called upon the Petitioner to forward proof of payments, to which it was pointed out that all the details had been furnished and prior to the filing of this petition no proof of payment had been asked for. However, copies of the bank statement and ledger accounts of the operators as proof of payments was furnished, stating that actual payment made to the operators could be verified from the bank statement and ledgers. Meetings were again held on 23.6.2009, 24.6.2009, 25.6.2009, 27.6.2009 and 29.6.2009. A joint statement was also signed which has been appended as Annexure K to the composite affidavit. A copy of the said joint statement had been produced before us, from a perusal whereof it appears that upon verification, it was found that the Petitioner had paid all the amount including the service tax and, thus, there was no question of any double payment by the Respondent.

20. Therefore, following the said decision we would like to direct that in these petitions also the Petitioner will furnish the details of the claim made on accrual basis as well as payment actually made for the years in question. The Petitioner will handover their respective accounts and parties will jointly verify the same in accordance with aforementioned directions. The principle of reconciliation will be to see that the accounting of revenue and expenditure will be on accrual basis but if the expenditure shown on accrual basis is not actually paid in that or subsequent years, the Respondent will be entitled for not allowing that amount which is not actually paid from the expenditure.

21. Regarding, the contention of the Respondent about the limitation period for the refund of the excess amount, if any, the Petitioner submitted that the Petitioners understanding was and is that this Honble Tribunals said judgment dated 04.03.2010, which lays down the principle that uniform system of accounting i.e. accrual system must be followed by DOT, is a judgment in rem and, therefore, equally applies to all persons similarly situate under Article 14 of the Constitution of India. Therefore, the benefit of the said judgment is available to the Petitioners herein also even without approaching this Honble Tribunal. However, the Petitioners herein have now approached this Honble Tribunal by way of abundant caution.

22. We are of the opinion that the said judgment is not applicable to these cases. The Petitioners should have filed the petitions within the limitation period of three years from the date of demand raised by the Respondent. We hold that the demand notes raised by the Respondent before 23.06.2007 will be excluded from the exercise to be undertaken by the Petitioner and the Respondent.

23. These petitions are, therefore, allowed in part in terms of the aforementioned observations and directions.

24. In the facts and circumstances of the case, there shall be no order as to costs.