Delhi High Court
Bharat Sanchar Nigam Limited vs Plintron India Private Limited & Ors. on 3 September, 2024
Author: Sanjeev Narula
Bench: Sanjeev Narula
$~72
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 3rd September, 2024.
+ W.P.(C) 12240/2024, CM APPL. 50887/2024, CM APPL.
50888/2024
BHARAT SANCHAR NIGAM LIMITED .....Petitioner
Through: Ms. Madhavi Divan, Senior Advocate
with Mr. Sameer Choudhary,
Advocate with Mr. Tejvir Bhatia and
Ms. Vishaka Ahuja.
versus
PLINTRON INDIA PRIVATE LIMITED & ORS. .....Respondents
Through: Ms. Shirin Khajuria, Senior Advocate
with Mr. Sandeep Arya, Mr. Vikram
Singh, Ms. Swati Tiwari and Mr.
Deepak Sharma, Advocates for R-1.
Mr. Arjun Natarajan and Mr. K.
Pradhan, Advocates for R-3.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J. (Oral):
BRIEF FACTS:
1. The Petitioner- Bharat Sanchar Nigam Limited,1 a Telecom Service Provider, is a public sector company under the ownership of Government of India. BSNL entered into two agreements (1) Empanelment Agreement and (2) Commercial Agreement with Respondent No.1 - Plintron India Private Limited,2 which has a Unified Licence for a Virtual Network Operator.3 The 1 "BSNL"2
"Plintron"Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 1 of 13 Signing Date:06.09.2024 20:25:47
Empanelment Agreement executed on 23rd October, 20174 was valid for a period of five years and has come to an end by flux of time on 23rd October, 2022. The Commercial Agreement signed on 13th July, 20185 was based on Empanelment Agreement and was valid for two years which could further be extended for two years till the validity of Empanelment Agreement.
2. After the expiry of Empanelment Agreement, BSNL issued a notice dated 26th October, 2022 rejecting the Petitioner's request for extension of Empanelment Agreement and informing them that the Empanelment Agreement expired on 23rd October, 2022. This was followed by another communication dated 28th October, 2022 informing Respondent No.1 that the existing connectivity shall continue only for an extended period of one month till 30th November, 2022. Thus, one month's time was granted to Respondent No.1 for closing their services. In this background, Respondent No.1 invoked the jurisdiction of this Court in W.P.(C) 16448/2022 and sought the following reliefs:
3"VNO"4
"Empanelment Agreement"5
"Commercial Agreement"Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 2 of 13 Signing Date:06.09.2024 20:25:47
3. In the above background, this Court after hearing the counsel for the parties, on 1st December, 2022, passed the following order:
"10. Learned senior counsel for the petitioner submits that the respondent No.1 and respondent No. 2 were aware of the fact there is lack of proliferation of VNOs in mobile segment and VNOs have been facing difficulties in getting access facilities Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 3 of 13 Signing Date:06.09.2024 20:25:47 from the NSO.
11. Hence, the petitioner along with other VNOs have been constantly requesting the respondent no. 1 to make it mandatory for the NSOs to provide access to them and allow multi parenting for promoting VNOs on mobile segment. There was certain progress made in this regard.
12. Respondent no. 3 (TRAI) issued a recommendation dated 19.08.2021 for enabling unbundling of different layers through differential licensing under the term of the Section 11 (1) (A) of the TRAI Act, 1997. The respondent no. 3 in the said recommendation recommended for the broad framework in order to ensure transparency and accountability in the entire process for VNOs seeking and entering into an agreement with the Access Network Provider or the Unified License.
13. It is stated that by the learned counsel for respondent No.3 /TRAI that subsequent recommendations dated 06.09.2022 has only reiterated the earlier recommendation.
14. Learned counsel for the respondent No. 2 Mr. Bhatia appearing on advance notice vehemently oppose the present petition. According to Mr. Bhatia, the present writ petition is not maintainable as the effective remedy against the impugned orders would lie before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
15. Learned counsel further submits that the Empanelment Agreement between the parties has already expired on 23.10.2022 and there cannot be any automatic extension of the contract between the parties. No mandamus can be issued to the parties for extension of the agreement. Learned counsel for the respondent No. 2 further submits that vide letter dated 28.10.2022 sufficient time has been granted to the petitioner for closing their services. In rejoinder learned senior counsel for the petitioner submits that the petitioner will suffer irreparable loss and injury if the respondent No. 2 is allowed to disconnect existing connectivity.
16. The petitioner states that one month period was too short for smooth migration of the LOT and M2M customers from BSNL network and the interest of the customers will be jeopardized due to such sudden closure of the petitioner services. According to the petitioner, the act of the respondent is completely unfair, arbitrary and contrary to the interest of general public.Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 4 of 13 Signing Date:06.09.2024 20:25:47
17. Learned senior counsel for the petitioner also states that respondent No.1 has reserved the right to intervene in the matter if the interest of the consumer gets affected, however, respondent No.1 had failed to do so.
18. Issue notice to the respondents
19. Mr. Sandeep Kumar Mahapatra, Advocate, Mr. Tejveer Singh Bhatia, Advocate and Mr. Arjun Natarajan, Advocate accepts notice on behalf of respondent Nos. 1, 2 and 3 respectively. Counter affidavit be filed within four weeks. Rejoinder thereto, if any, be filed before the next date of hearing.
20. From the perusal of the documents placed on record it shows that respondent No. 1 is examining the possibility of putting a frame work to accommodate the VNOs. The licence granted by respondent No.1 is for 10 years and is valid till 2027, and in the meanwhile disconnection of the existing connectivity of the petitioner with respondent No.2 will effect the public at large and the same will lead to disconnection of their services. One month time period granted by the respondent No.2 was not sufficient. Petitioner has invested a large sum of money to carry out the present networking and in the larger public interest and in the interest of justice, the respondent No.2 is restrained from disconnecting the connectivity of the petitioner till the next date of hearing, letters dated 26.10.2022 & 28.10.2022 shall not be given effect to."
4. Eventually as noted in order dated 3rd January, 2024 Plintron withdrew the petition with liberty to approach the Telecom Settlement and Appellate Tribunal.6 However, the Court directed that the stay granted on 1st December, 2022 shall be extended for a period of one month to enable Plintron to approach the TDSAT. As a result of the aforenoted interim directions, the Empanelment Agreement, notwithstanding its expiry by flux of time, stood extended.
5. In the above background, Respondent No.1 invoked the jurisdiction of TDSAT wherein, on 1st February, 2024, BSNL was restrained from Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 5 of 13 Signing Date:06.09.2024 20:25:47 disconnecting the connectivity of Plintron till the next date of hearing and the communications dated 26th October, 2022 and 28th October, 2022 were directed not to be given effect to. This interim direction has been extended from time to time.
6. In the above background, the Petitioner has invoked the writ jurisdiction, impugning the orders dated 1st February, 2024, 8th February, 2024, 28th February, 2024 and 1st March, 2024.7
7. The challenge to the aforenoted orders is essentially relates to the interim stay granted by the TDSAT on the communications dated 26th October, 2022 and 28th October, 2022.
PETITIONER'S CONTENTIONS:
8. Ms. Madhavi Divan, Senior Counsel for Petitioner, contends as follows:
8.1. The Agreements (Empanelment Agreement and Commercial Agreement) with Plintron have expired, thus the Impugned orders granting a stay in favor of the Plintron, are not sustainable in the eyes of law.
Pertinently, the interim order dated 1st December,2022 passed by this Court in W.P.(C) 16448/2022, was on entirely different facts and circumstances where Plintron had been given only one month's time to notify the termination.
8.2 Furthermore, in light of the interim directions issued by this court, in W.P.(C) 16448/2022 on 1st December, 2022, the Petitioner served a six- months' notice to Respondent No. 1, as stipulated in Clause 1.4 of the Empanelment Agreement, through its letter dated 16th March, 2023. The said 6 "TDSAT"
7"Impugned orders"Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 6 of 13 Signing Date:06.09.2024 20:25:47
extended period has also lapsed and therefore there was absolutely no basis for extension of the Interim order by the TDSAT.
8.3 The Impugned order dated 1st March, 2024, passed by the TDSAT also directs the Petitioner to find a solution about the continuity of the agreements so that the stay capacity of BSNL can be used by MVNO Licensee and the revenue can be generated from the unutilized infrastructure of BSNL. This direction is also based on incorrect facts. Firstly, there is no existing agreement between the parties, and BSNL has no obligation to ensure continuity for Plintron. Additionally, BSNL's policy has undergone a change.
8.4. Besides, the interim directions issued by this Court and TDSAT are bleeding the Petitioner. It is no longer commercially viable for the Petitioner to continue providing the connectivity to the Plintron. BSNL after assessing the report taken from the field units and revenue model, has realized that during last five years, the revenue earned, from the Empanelment Agreement, was only approximately Rs. 3.23 lacs in comparison to the huge expenditure incurred on maintaining and providing the connectivity which is approximately Rs. 5 crores. The interim protection granted to Plintron, thus has the effect of destabilizing the financial well-being of BSNL. Therefore, the interim stay granted in favour of Plintron should be immediately vacated.
RESPONDENT NO. 1'S CONTENTIONS:
9. Ms. Shirin Khajuria, Senior Counsel for Respondent No. 1, on the other hand, contends as follows:
9.1. Any orders passed by this Court would have the effect of rendering the petition before the TDSAT infructuous.Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 7 of 13 Signing Date:06.09.2024 20:25:47
9.2 The contract with BSNL, which is a public sector undertaking, has to be weighed on a different yardstick altogether as compared to any other commercial agreements. BSNL as an instrumentality of the State has a different set of obligations and must act reasonably and fairly. Therefore, the Petitioner must be obligated to provide the connectivity as long as the Respondent No. 1's Unified License for a Virtual Network Operator is valid, which expires in 2027. These factors were in fact taken note of and weighed with this Court while passing the interim directions in W.P.(C) 16448/2022, whereby BSNL was directed not to disconnect the existing connectivity of Plintron, as it would affect the public at large and lead to disconnection of their services.
9.3 Furthermore, Respondent No. 1 was led to believe that the Empanelment Agreement would be extended for the duration of the Unified License's validity. As a result, the principle of promissory estoppel would preclude BSNL from terminating the contract.
9.4. Pertinently, substantial financial difficulties may emerge on account of the discontinuity of the services. A petition was recently filed by Vodafone Idea Technology Solutions Ltd. (Telecom Petition no. 8/2024) wherein they had approached the TDSAT for a direction to activate 55,000 e-SIMs in the automobiles including ambulance, trucks and public sector transportation etc. This request was allowed through order dated 22nd March, 2024 whereby BSNL was asked to activate the said e-SIM cards already embedded in the vehicles. Subsequently, TDSAT noting the difficulties in implementation of the order dated 22nd March, 2024, directed that the e-
SIMs, which were already embedded in the vehicle, shall be activated by BSNL with the help of Plintron. This is an acknowledgement of the fact that Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 8 of 13 Signing Date:06.09.2024 20:25:47 the agreement with Plintron, must continue and therefore any directions of this Court, would have the effect of jeopardising the services being provided to the e-SIM card holders and their subscribers. Thus, the public interest of the end consumers must be weighed by this Court before granting any relief to the Petitioner.
9.5 Furthermore, Plintron has made a substantial investment of Rs. 55 crores under the Empanelment Agreement to establish the required network, and they would incur huge loses if BSNL discontinues it's services. ANALYSIS AND FINDINGS:
10. The core issue before this Court is whether the TDSAT has the jurisdiction to extend a contract that has expired by efflux of time, especially where the contractual terms are clear, and there is no mutual consent for such extension. In addressing this issue, the most fundamental fact to consider is that the Empanelment Agreement between BSNL and Plintron has undoubtedly expired. The Empanelment Agreement, initially executed for a period of five years, ended on 23rd October, 2022, and the Commercial Agreement, which was coterminous with the Empanelment Agreement, has also since expired. Given this position, the pertinent issue for consideration is whether TDSAT could, through an interim order, extend a contract that has expired by the efflux of time. The Court is of the firm view that the answer must be in the negative.
11. It is pertinent to emphasize the sanctity of contractual terms, a foundational principle of contract law. The principle that contracts are sacrosanct is well-established in Indian law, as reflected in Section 10 of the Indian Contract Act, 1872, which provides that agreements freely made by competent parties, for a lawful consideration and with a lawful object, are Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 9 of 13 Signing Date:06.09.2024 20:25:47 enforceable. Contracts represent the mutual agreement between parties, outlining their respective rights, duties, and obligations. The doctrine of freedom to contract mandates that when parties freely enter into a contract, they must be bound by its terms. The courts have no power to rewrite, modify, or extend the contractual obligations that have clearly expired by their terms. The Supreme Court has, in a catena of judgements, affirmed that the terms of a contract entered into between parties must be adhered to strictly, and courts cannot rewrite the terms of the contract and have to simply rely on the terms and conditions of the agreement as agreed between the parties.8
12. It is also well-settled that a contract that has expired by the efflux of time cannot be extended by judicial fiat. In National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.,9 the Supreme Court held that where the contract has expired by efflux of time, or has been terminated in accordance with its terms, a party cannot be compelled to continue its obligations beyond the contract period. Thus, neither the TDSAT nor this Court can extend the contractual period by an interim order. Any such extension would effectively amount to rewriting the contract, which is impermissible.
13. Moreover, the argument that BSNL, being a public sector undertaking, is subject to a different standard of fairness and reasonableness does not alter the contractual obligations. It is true that public sector enterprises, as state instrumentalities, are required to act reasonably, fairly, and in the public interest. However, while a public authority must act fairly, 8 Venkataraman Krishnamurthy and Anr vs Lodha Crown Buildmart Pvt. Ltd (2024) 4 SCC 230; Rajasthan State Industrial Development & Investment Corporation vs. Diamond & Gem Development Corporation Ltd. (2013) 5 SCC 470; Shree Ambica Medical Stores vs. Surat People's Coop. Bank Ltd (2020) 13 SCC 564 Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 10 of 13 Signing Date:06.09.2024 20:25:47 it does not imply that it must be compelled to continue a commercial contract against its interest or in derogation of its terms. Fairness must be balanced against the sanctity of the contract, particularly where the contract has expired, and there is no statutory or equitable basis to impose further obligations. The doctrine of freedom to contract, coupled with the sanctity of contractual terms, mandates that BSNL cannot be foisted with obligations beyond those expressly agreed upon, merely because it is a public sector enterprise.
14. Additionally, the principle of 'promissory estoppel' is equally inapplicable in the present case. The doctrine of promissory estoppel, as laid down in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh,10 requires that there must be a clear and unequivocal promise by one party on which the other party has relied to its detriment. In this case, no such unequivocal promise has been made by BSNL to extend the contract beyond its stipulated term. The contract clearly provided for a fixed duration, which all parties were fully aware of. Plintron, as a contracting party, was thus fully aware of the terms of the agreement, including its duration. The mere expectation or hope of an extension, without a concrete promise or contractual provision to that effect, does not invoke the principle of promissory estoppel. Furthermore, promissory estoppel cannot create a new contractual relationship or extend an existing one beyond its terms, particularly where the underlying contract has expired.
15. As to the claim that substantial investments were made by Plintron, it is well within the knowledge of all parties that such investments are subject 9 (2009) 1 SCC 267 10 (1979) 2 SCC 409 Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 11 of 13 Signing Date:06.09.2024 20:25:47 to commercial risks, including the possibility that the contract might not be extended or renewed. Merely making significant investments does not give rise to a legitimate expectation of indefinite continuation of contractual relations, especially in the absence of any express provision in the contract or statutory mandate.
16. Moreover, the argument advanced by Respondent No. 1 that the Empanelment Agreement should continue in view of public interest considerations also fails to impress this Court. Public interest cannot be a ground to compel a party to continue with a contract that is no longer financially viable or legally binding. Public interest is undoubtedly a relevant consideration in matters involving state entities, but it cannot override clear contractual terms and public interest cannot be invoked to defeat the substantive rights of a party under a validly executed contract. In the present case, BSNL, after assessing the financial viability of the agreement, has found that the revenue generated from the expired Empanelment Agreement is minimal compared to the substantial expenses incurred in maintaining connectivity. Therefore, the continuation of the expired agreement is detrimental to BSNL's financial health and operational efficiency. The interim protection granted by TDSAT, compelling BSNL to continue its obligations, effectively forces a 'public sector' enterprise to sustain a commercially unviable operation without any legal basis.
17. The Court has also reviewed the facts and circumstances in which the interim order dated 1st December, 2022 was granted in W.P.(C) 16448/2022, directing BSNL not to disconnect services to Plintron. The interim direction was issued keeping in mind the public interest and welfare. However, it must be understood that the same was an interim direction and substantial Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 12 of 13 Signing Date:06.09.2024 20:25:47 time has been provided to Respondent No.1 to make the requisite transition since then. In fact, subsequently, through communication dated 16th March, 2023, BSNL had provided a six-month notice to Plintron, extending the period, to ensure an orderly transition. These extended timelines have also expired, and there is no further basis for compelling BSNL to continue providing services under the expired agreements.
18. Accordingly, the Impugned orders, passed by the TDSAT, restraining BSNL from disconnecting the connectivity of Respondent No. 1 are unsustainable and are hereby set aside. The contractual terms are clear, and neither this Court nor TDSAT can extend the obligations of BSNL beyond the stipulated duration of the contract.
19. Considering the potential impact on subscribers and to ensure an orderly transition, a grace period of two months is granted to Respondent No. 1 to migrate its subscribers to other networks. This period should be sufficient to minimize disruption to end users while respecting the contractual rights of BSNL.
20. With these directions, the present petition is disposed of, along with all pending applications.
SANJEEV NARULA, J SEPTEMBER 3, 2024 as Signature Not Verified Digitally Signed By:NITIN KAIN W.P.(C) 12240/2024 Page 13 of 13 Signing Date:06.09.2024 20:25:47