Delhi High Court
Viom Networks Limited vs Videocon Telecommunications Limited on 14 September, 2016
Author: Manmohan Singh
Bench: Manmohan Singh
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 24th May, 2016
Judgment pronounced on: 14th September, 2016
+ O.M.P.(I) (COMM.) 95/2016 and I.A. Nos.4946/2016,
4993/2016, 6255/2016, 9015/2016 and
CCP(O) No.44/2016
VIOM NETWORKS LIMITED ..... Petitioner
Through Mr.Sandeep Sethi, Sr. Adv. with
Mr.Amar Gupta, Mr.Manish Jha,
Mr.Divyam Agarwal &
Ms.Vandana Anand, Advs.
versus
VIDEOCON TELECOMMUNICATIONS LIMITED ..... Respondent
Through Mr.Akhil Sibal, Adv. with
Mr.Sndeep S. Ladda, Ms.Shikha
Sarin, Mr.Nakul Mohta,
Mr.Yashvardhan, Mr.Soumik
Ghosal & Mr.Devender Singh
Advs. for the respondent.
Mr.Arvind Bali, CEO,
Mr.Mansukhlal Panalal Surpuriya,
Mr.Subhash Shamsunder
Dayama, Directors and Mr.C.A.
Nagarkar, Company Secretary, in
person.
Mr.Amit Singh Chadha, Sr.Adv.
with Mr.Anil Kumar Sangal,
Mr.Siddharth Sangal & Mr.Sahil
Mongia, Advs. for State Bank of
India.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. The present petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, called "the Act"), OMP(I)(COMM.) No.95/2016 Page 1 of 71 pending arbitration, seeking interim protection by way of an ex-parte ad-interim order directing the respondent to furnish reasonable security in the sum of Rs.2,007,251,671/-. The petitioner was also seeking an ex parte ad-interim order restraining the respondent from selling, transferring or otherwise alienating or creating any third party interest in its spectrum in the States of Bihar, Gujarat, Haryana, Madhya Pradesh, UP (East) and UP (West) circle. The same has already been sold to a third party on 24th May, 2016 as admitted by the parties. The respondent even prior to the filing of the petition had informed the petitioner by way of communication that the respondent is discontinuing its mobile services with effect from 31st May, 2016, after selling its entire spectrum in all six circles to Bharti Airtel Limited Limited.
It is submitted by the petitioner that if the amount is not secured during the pendency of arbitral process, there is every possibility that the award which it may obtain would result in a paper decree or a decree which cannot be enforced on account of the financial inability of the respondent to satisfy the decree.
2. The petitioner-Company is a "Telecom Infrastructure Service Provider", who provides passive telecom infrastructure in the shape of mobile towers to its customers for providing the communication services to the public at large throughout India. The respondent is a Telecom Operator and is one of the customers of the petitioner.
3. The petitioner and the respondent have entered into two 'Passive Infrastructure Sharing Agreements'.
The petitioner submits that the respondent owes a whopping sum of approximately Rs.3,597,451,671/-. Out of the aforesaid OMP(I)(COMM.) No.95/2016 Page 2 of 71 amount, an amount of Rs.2,007,251,671/- is outstanding for the services provided by the petitioner under the Passive Infrastructure Sharing Agreements entered between the parties. A sum of Rs.159.02 crore is also outstanding on account of loss of revenue. The aforesaid sum of Rs.2,007,251,671/- includes an amount of Rs.79,10,09,084/- towards the Exit Fee claimed against the respondent. Despite of the petitioner having provided the aforesaid infrastructure services to the respondent, the outstanding dues have yet not been paid by the respondent. The respondent, who is in continuous default of its obligations under the Agreements, at all material times, has been acknowledging its liability to pay the outstanding amount without raising any defence whatsoever. Even if there are disputes in terms of the contract which are the subject matter of the arbitration proceeding, at least to the extent of the amount which are admittedly due and payable to the petitioner, and against which the respondent has no tenable defence at all under the Agreement, should be secured by an interim order in favour of the petitioner.
4. Details of the Agreements
(i) On 1st November, 2008, a Passive Infrastructure Sharing Agreement ("QTIL MSA") was entered into between Quippo Telecom Infrastructure Limited ("QTIL") and Datacom Solutions Private Ltd. (now Videocon Telecommunication Limited, the respondent herein) for providing the passive telecom infrastructure facilities and allied services all over India.
(ii) Thereafter, on 14th August 2009, Wireless-TT Info Services Limited ("WTTIL") entered into a Master Infrastructure Provisioning Agreement with the respondent for providing the passive telecom OMP(I)(COMM.) No.95/2016 Page 3 of 71 infrastructure facilities and services all over India including specific circle/s.
(iii) Second Agreement dated 5th November, 2009 was entered between 21st Century Infra Tele Limited (which was firstly renamed as Viom Infra Networks (Maharashtra Limited) ("TFCITL") and later on merged with the petitioner by a scheme of arrangement approved by this Court and the respondent herein ("TFCITL MSA").
(iv) In the year 2010, QTIL merged their passive infrastructure businesses with WTTIL vide a scheme of arrangement under Sections 391-394 of the Companies Act, 1956. Later on, the name of WTTIL was changed to Viom Networks Limited ("Viom"), the petitioner herein.
(v) On 22nd January, 2009, QTIL MSA was amended by way of an Addendum Agreement. On 20th May, 2010, WTTIL MSA and QTIL MSA were amended by way of an Addendum Agreement, by which HFCL Infotec Limited (HITL) was included as a party under the said MSA along with subsequent amendments.
(vi) Thereafter, the parties had decided to have a single Agreement between the petitioner and the respondent. But pending execution of single Agreement, the parties had decided to amend WTTIL MSA and QTIL MSA vide an addendum dated 27th December 2010 executed between the petitioner, respondent and QTL (erstwhile HFCL Infotec Limited) ("Addendum").
5. RELEVANT TERMS IN THE AGREEMENTS (WTTIL MSA AND QTTIL MSA) "IP Services" is defined under the WTTIL MSA as under:
OMP(I)(COMM.) No.95/2016 Page 4 of 71"IP Services (or Infrastructure Provisioning Services) shall mean WTTIL's provision of specific area/s on Site/s for Datacom's TE and the operation and maintenance services as defined in Clause 8, provided to Datacom by WTTIL, all in accordance with this Agreement and the Standard Site Specifications and the Technical Terms and Service Level Agreement, attached herein as Appendix A and Appendix D, respectively."
5.1 "Site" under WTTIL MSA is defined as "the Apparatus and the Land (GBT), Building or Structure (RIT). There are two types of sites under the Agreement, namely Anchor Site" and "Shared Site".
"Anchor Site" is defined as under:
"A Site which is acquired and built by WTTIL in accordance with Datacom's IP Service Order."
5.2 The Shared Site under the WTTIL MSA is defined as under:
"An existing Site of WTTIL that was offered to Datacom as a secondary tenant and on sharing basis."
6. It is alleged by the petitioner that the respondent in consideration of the services provided by the petitioner had agreed to pay the IP Fees and Actual Costs according to the terms and conditions of the WTTIL MSA. IP Fees is defined as "is the infrastructure provisioning fees payable by the Datacom to the service provider in consideration of the IP Services provided to Datacom, and the applicable discounts as detailed in Appendix "C". Actual Costs (for diesel and power agreed upon by the parties) including all the applicable taxes shall be reimbursed by the respondent on a monthly basis based on actual costs and in advance based on an estimated average of monthly costs per Site as listed in OMP(I)(COMM.) No.95/2016 Page 5 of 71 Appendix-C2 of the Agreement, or as may be agreed by the parties in writing at a later period and provided for in any specific Site Offer.
PAYMENT TERMS
7. The Payments terms are provided in Clause 5.8 of the WTTIL MSA, which reads as under:-
"5.8 All payments by Datacom to WTTIL, including the IP Fees and Actual Costs shall be in accordance with the following:
5.8.1 IP Fee and Actual Costs shall be paid by Datacom to WTTIL monthly in advance.
5.8.2 WTTIL shall issue a relevant invoice for the IP Fees and Actual Costs and shall deliver the same to Datacom by the 25th day of the previous month. In the event that the invoice is received after the 25th day of previous month by Datacom, then the payment shall be made in the next payment cycle which is 25th day of next month. 5.8.3 Subject to clause 5.8.2 the payment of the IP Fees and the Actual Costs shall be paid by Datacom within 15 days from the date of receipt of an invoice, with respect to the IP fees and Actual Costs for that month. In case Datacom fails to execute the monthly payment according to the agreed time, an interest of 1.5% over and above the applicable SBI PLR per annum shall apply proportionately for any period of default.
5.8.4 Further if Datacom fails to pay WTTIL any amount in an invoice other than a disputed amount, for a period of 90 days from the due date, WTTIL may choose to terminate the Agreement with respect to the applicable Site. To this effect WTTIL will give notice to Datacom in 60 days from the date of Invoice. Datacom shall inform WTTIL the disputed amount in an invoice within 7 days from the date of receipt of the invoice.
5.8.5 It is further agreed that the IP Fees and Actual Costs shall be paid by way of cheques or other agreed mode in favour of WTTIL.OMP(I)(COMM.) No.95/2016 Page 6 of 71
5.8.6 The IP Fees for each Site shall be adjusted upwards at every anniversary date by 2.5% (two point five percent) on the last paid IP fee."
LOCK-IN PERIOD
8. The Agreement executed between the parties was initially for 15 years and could be extended for an additional period of 5 years. However, since the petitioner has a business model based on Capital Expenditure ("CAPEX") and it is the petitioner who provides the entire initial investment on CAPEX basis for the construction of the tower site, it was agreed between the parties that there would be a lock in period which was defined as 7 years for the Anchor Sites and 5 years for the Shared Sites. In case the respondent was to exit during the lock-in period, the respondent was liable to pay the IP Fee for the residual period of the lock-in for the sites as provided in the said Agreement. The relevant Clause 10.5 of the WTTIL MSA dated 14th August, 2009 is reproduced herein below:-
"10.5. If Datacom wishes to exit the site before the completion of lock in period, Datacom will have to pay to WTTIL, the balance amount of IP Fees, remaining payable for the residual period of the lock-in period for such Site, unless the termination is due to default on the part of WTTIL. However, Datacom reserve the right to exit from 2% of the sites per circle per annum after achieving cumulative tenancies of 6200 on WTTIL sites on pan India basis without paying Lock-in charges."
9. The petitioner further admits that the Agreement executed between the parties also provided for the waiver of lock-in period in the event of termination of the Agreement in specific circumstances. However, such circumstances as provided in the said Agreement are neither applicable to the respondent nor have been pleaded in the OMP(I)(COMM.) No.95/2016 Page 7 of 71 reply by the respondent as per the case of the petitioner. It is stated on behalf of the petitioner that in terms of the Agreement, the petitioner was to provide the passive telecom infrastructure facilities and services to the respondent. The petitioner had duly fulfilled all its obligations under the aforesaid Agreements, but the respondent had consistently defaulted in its obligations and payments in terms of the Agreements. As on 15th November, 2011, the total recoverable outstanding from the respondent had accumulated to Rs.65.27 crore which was admitted by the respondent vide Memorandum of Understanding dated 12th December, 2011.
It is alleged that the respondent was in its defaults and instead of clearing the dues and honour the contractual obligations, it approached the petitioner in December, 2012 with a request to change certain terms and conditions of the MSAs and flexibility in payment of outstanding dues to the petitioner forthwith.
MEMORANDUM OF UNDERSTANDING AND SUPPLEMENTARY AGREEMENT:
10. It is pleaded in the petition that in order to resolve all the pending issues between the parties, and as a gesture of goodwill, the petitioner and respondent along with VINL, QTIL, and WTTIL had entered into a Memorandum of Understanding dated 12th December 2011 ("MOU"). Under the MOU, the parties had agreed to change a few of the Terms and Conditions of the aforesaid Agreements including the Payment Terms and the terms relating to Power and Fuel Costs. Under the said MOU, the respondent had categorically acknowledged its outstanding of approximately Rs.65.27 crore as on 15th November 2011 towards IP Fees. The respondent had agreed to clear the aforesaid dues in a manner agreed between the parties in OMP(I)(COMM.) No.95/2016 Page 8 of 71 the MOU. In the MOU, while amending some other terms of the Agreements, respondent under clause 3(iv) has also specifically agreed not to seek or request any further waiver of Lock-in charges on account of premature exit from the sites of the petitioner in future. Clause 3 (iv) of the MOU is reproduced herein below:-
"3(iv). VTL has agreed to not to seek or request for any further waiver whatsoever for any exit site in future, and for avoidance of any doubt any further such requests will strictly be under the purview of Exit Clause in the respective Agreement."
11. It is alleged by the petitioner that despite of having given the accommodation in the past, the respondent has yet again in breach of its express commitments sought to prematurely exit from 1107 Sites. In accordance with the terms of the MSAs, the petitioner had raised the Demand Notes towards the Lock-in Charges for Rs.86.06 crore. It is also submitted by the petitioner that despite of there being an admitted liability of at least a sum of Rs.86.06 crore, and having once agreed not to seek any waiver of the Lock-in Charges, the respondent had once again expressed its inability to clear the said liability and sought a waiver of the said amount in addition to the payment of outstanding dues in the instalments along with the waiver of interest.
12. It is also submitted that on respondent's request, the petitioner had agreed and executed a Supplementary Agreement ("SA") dated 12th September, 2013 for resolving the outstanding issues between the parties. In the SA, the respondent had categorically acknowledged an undisputed outstanding amount of Rs.70.88 crore under the Agreements on account of IP Fees and bills for power and fuel reimbursement. The respondent had agreed to OMP(I)(COMM.) No.95/2016 Page 9 of 71 make the part payment of the total outstanding amount to the petitioner on a monthly basis over a period of six months and had also agreed in a manner provided in the SA for clearing the other dues.
13. Under the SA, Lock-in Charges were raised by the petitioner on account of premature exit of respondent from 1107 sites. The total amount of Demand Notes raised under the Agreements by the petitioner in relation to Lock-in Charges was Rs.86.06 crore. Since the respondent, under the said Supplementary Agreement, had committed to provide 1200 new sharing tenancies on the existing sites of the petitioner within a period of 24 months from the date of signing of the Supplementary Agreement and the in Lock-in period was increased till 31st March, 2020, the petitioner, in consideration thereof, had agreed to waive off the claims for Lock-in Charges for 1107 sites.
14. The Supplementary Agreement as well as the aforesaid Agreements constitute the entire understanding between the parties (collectively referred to as an "Agreement" in the present petition). Relevant clauses of the SA are as follows:
"1.1 As on September 30, 2012, there is an agreed and undisputed outstanding amount of Rs.75.88 crore due under the Agreements on account of IP fees, other charges billed up to September 30, 2012 and partial bills for P&F reimbursement for the month of September, 2012. VIOM confirms that a payment of Rs.5.0 crore has been received by it against this outstanding amount from QTL post September 30, 2012. As on the date of this Supplementary Agreement, the total agreed and undisputed outstanding amount) due under the Agreements till 30th September, 2012, excluding the Lock-In-charges, is Rs.70.88 crore as described in Annexure 1 ("Outstanding Amount"). Balance Security deposit amounting to approx. Rs 0.22 crore for OMP(I)(COMM.) No.95/2016 Page 10 of 71 the exited sites as provided under clause 1.3 below shall be excluded / adjusted from the outstanding amount of Rs.70.88 crore.
1.2 The Parties acknowledge that for the period upto 30th September 2012, an additional sum of Rs.27.74 crore as described in Annexure 2 is under dispute under the Agreements between the Parties and is pending reconciliation/validation. The amount arrived at after the reconciliation has been completed, shall be referred to as the "Reconciled Amount". The Parties agree to arrive at the Reconciled Amount by 10th November, 2013 ("Stop Date"). If the Parties are unable to mutually agree on the reconciliation by the Stop Date, the Stop Date shall be mutually extended by a time period not exceeding 15 days from the Stop Date.
1.3 Under the Agreements, lock in charges have been raised by VIOM due to premature exit of VTL from 1107 sites, vide Demand note nos. (a) no. DN/VIOM/VTL/12- 13/0001 dated August 17, 2012 for Rs.34.65 crore;
(b) no. DN/VIOM/VTL/12-13/0002 dated November 26, 2012 for Rs.39.45 crore; (c) DN/VIOM/VTL/12-13/0003 dated December 31, 2012 for Rs.4.20 crore; (d) DN/VIOM/VTL/12-13/0004 dated December 31, 2012 for Rs.4.17 crore and (e) DN/VIOM/VTL/12-13/0005 dated February 15, 2013 for Rs.3.59 crore The total amount of demand notes raised under the Agreements by VIOM in relation to lock in charges is Rs.86.06 crore ("Lock-in-
Charges").
2. Tenancy Commitment 2.1 VTL and QTL commit to provide 1200 new sharing tenancies on the existing sites of VIOM within a period of 24 months from the date of signing of this Supplementary Agreement ("Tenancy Commitment").
2.2 With regard to lock in period for the sites (other than Exited Sites), subject to the terms & conditions of this Supplementary Agreement, the Parties further agree as under:
OMP(I)(COMM.) No.95/2016 Page 11 of 71(i) The Lock in period for all the VTL and QTL existing tenancies as on the date of signing of this Supplementary Agreement shall stand increased till 31st March 2020.
(ii) For the new sharing tenancies, the Lock in period shall be till 31st March 2020 or as per the Agreements whichever is later. However, Lock in period for new sharing tenancies shall be effective from the commencement date of the respective site.
2.3 In consideration of providing the Tenancy Commitment and increase in Lock in Period as detailed in Cl. 2.1 & 2.2 above, VIOM agrees to waive off claims for Lock-in-Charges (as specified under Cl. 1.3 above, equivalent to the balance IP Fees on a pro-rata basis payable for the residual Lock-in period for the exited sites as provided in Annexure 4 ("Exited Sites").
4. Interpretation.
4.1 This Supplementary Agreement shall come into force on the date of signing of this Supplementary Agreement and is supplemental to the Agreements executed between the Parties. The Supplementary Agreement as well as the Agreements constitute the entire understanding between the Parties. In the event of any inconsistency between the terms of the Supplementary Agreement and the Agreements, the terms of the Supplementary Agreement shall prevail. In the event of any inconsistency between the terms of the Agreements, the terms of the WTTIL MSA shall prevail."
15. It is further submitted by the petitioner that the respondent has yet again failed to abide by its commitments under the terms of the SA. Though, the respondent, in the SA, had specifically agreed to provide 1200 tenancies within 24 months from signing of the SA and in the period of two years ending on 11th September 2015, the respondent had given to the petitioner 171 tenancies only. Even OMP(I)(COMM.) No.95/2016 Page 12 of 71 after the execution of the aforesaid SA, the respondent had consistently defaulted on account of making the payments of monthly fee and other charges which resulted into a huge accumulated outstanding due from the respondent.
16. It is alleged on behalf of the petitioner that the respondent by way of media had informed the public that it is closing its business by selling its entire Spectrum in all the six circles to Bharti Airtel Limited Limited and had refused to pay the Exit Fee. Even, the petitioner had received a communication dated 27th November 2015 on 1st December 2015 from the respondent communicating that they will be shutting down their mobile operations in Gujarat service area with effect from the midnight of 26th December, 2015.
17. By the said communication, the respondent had requested the petitioner to switch off the 634 sites with effect from the midnight of 26th December, 2015. The respondent had further requested the petitioner to immediately stop the monthly billing for the aforesaid sites and allow the respondent to remove its telecommunication equipment, without imposition of any exit penalty.
18. The petitioner in reply to the aforesaid letter of 27th November 2015, vide its letter dated 7th December, 2015, had brought to the notice of the respondent that there is a consistent default not only towards the payment of monthly fee but also towards providing the committed tenancies, and therefore, the respondent's request to immediately stop monthly billing for the 634 sites as mentioned in its letter dated 27th November, 2015 and allowing the Company to remove its telecommunication equipment without payment of any exit penalty is not acceptable to the petitioner and the same is in the material breach of the Agreements between the parties. The OMP(I)(COMM.) No.95/2016 Page 13 of 71 petitioner, vide the said letter, had also called upon respondent to pay inter alia an amount of Rs.78.34 crore on account of Exit Fee and Rs.91.40 crore on account of outstanding monthly fee and other charges.
It is alleged by the petitioner that in reply to the aforesaid demand of the petitioner, the respondent vide its letter dated 22nd December, 2015 has stated that since the petitioner was not allowing the respondent to remove its telecommunication equipments, it shall not be liable for any payments of the monthly IP fee from the sites mentioned in its letter dated 27th November, 2015 followed by their e-mail dated 11th December 2015. Pertinently, the respondent did not deny the demand raised by the petitioner in its letter dated 7th December, 2015 which clearly shows that there is an admission on the part of the respondent of its liability under the Agreements towards the petitioner. On the other hand, the respondent, from time to time, by its various communications had informed the petitioner about the closure of services. The last letter in this regard was issued by the respondent on 15th March, 2016 informing that the date of closure of its services will be 31 st May, 2016 (midnight).
The petitioner submits that on 17th March, 2016, news of the respondent selling its entire spectrum to Bharti Airtel Limited had appeared in the newspapers. According to the Newspaper reports, the respondent had terminated its earlier Agreement with Idea Cellular for selling its spectrum in Gujarat and UP West circles, and has entered into a Definitive Agreement with Bharti Airtel Limited for the sale of its entire Spectrum in Bihar, Haryana, Madhya Pradesh, UP (East), UP (West) and Gujarat for an aggregate consideration of OMP(I)(COMM.) No.95/2016 Page 14 of 71 Rs.4428 crore). The aforesaid endeavour of the respondent to sell its Spectrum clearly showed its unequivocal intention to quit the business as a telecom operator.
As the respondent was consistently defaulting in making the payments under the Agreements and also exiting its main business of providing telecom services to its customers by selling of its entire Spectrum to Bharti Airtel Limited, it became clear that the respondent is not in a financial position to clear the outstanding; and any decree/award passed pursuant to the arbitration between the parties, will remain a paper decree/award, as the petitioner would not be able to enforce the same. In view of the respondent's imminent exit from the telecom business and its weak financial condition, the petitioner had filed the present petition for securing the amount claimed in the arbitration.
19. The respondent has discontinued its mobile services with effect from 24th May 2016, after selling its entire Spectrum in all the six circles to Bharti Airtel Limited. The communications between the parties have clearly show that the respondent is indebted to the petitioner and has never denied its liability towards the payment of the outstanding. Therefore, if the petitioner is not secured, pending arbitral process, there is every possibility that the award which it may obtain would result in a paper decree or a decree which cannot be enforced on account of financial inability of the respondent to satisfy the decree.
It is submitted by the petitioner that the respondent in none of its communications to the petitioner has denied or disputed its liability towards the petitioner. The denial, even if any, was vague and unsubstantiated.
OMP(I)(COMM.) No.95/2016 Page 15 of 71It is alleged that the respondent's total outstanding towards petitioner, as on 29th February 2016, was to the tune of Rs.3,59,74,51,671/-. Therefore, the present petition has been filed.
20. Reply to the petitioner's application under Section 9 of the Act has been filed by the respondent wherein the respondent inter alia, has raised the following main pleas alleging that the present petition is not maintainable:-
a) Lack of jurisdiction under Section 9 of the Act.
b) Petitioner is guilty of suppressio veri, suggestio falsi as it has indulged in concealment of several material facts which has direct bearing on the adjudication of present dispute:
(i) Claim is exaggerated to prejudice the Court.
Petitioner has ballooned the claim to include various amounts under different heads, which cannot be awarded or protected in law.
(ii) The petitioner has deliberately suppressed and concealed a fact despite of the cancellation of 2G licenses, the respondent has continued to make payments and till date has made substantial payments of about Rs.578.71 crore.
(iii) Despite various communications, the petitioner has suppressed and concealed the fact that the counter- claim of Rs.59.3 crore is raised by the respondent against the petitioner because of disruption of services.
(iv) The petitioner has also suppressed the fact that the respondent's assets worth Rs.121.28 crore are in the petitioner's possession.
OMP(I)(COMM.) No.95/2016 Page 16 of 71It is stated that there was a need to transfer the spectrum to reduce the loan/liabilities of around Rs.3717 crore and interest liabilities of Rs.450 crore per year payable to the Secured Creditors (Consortium of Banks) which will enable the respondent to efficiently focus on more profitable Non-Spectrum Telecom Businesses.
The said transfer of spectrum is in larger public interest enshrined in TRAI report and DOT guidelines. First charge of secured creditors (Consortium of Banks) on entire assets of the respondent's includes the Spectrum. The petitioner, therefore, cannot claim the preference over the Secured Creditors.
21. The respondent further submits that the disputes raised by the petitioner are not arbitrable. Admittedly, the petitioner hold IP-1 license/authorization granted by the DOT and the respondent holds the Unified License granted by DOT under Section 4 of the Indian Telegraph Act, 1885. The petitioner and the respondent are providing telecommunication services and they are the Service Providers/Licensees. The dispute raised by the petitioner pertains to MSAs entered into between the petitioner and the respondent in capacity of being Licensees/Service Providers. Thus, only TDSAT, which has been conferred the exclusive jurisdiction, can adjudicate such disputes and it cannot be a subject matter of arbitration. Therefore, the arbitration clause is also null and void.
22. It is alleged on behalf of the respondent that the petitioner has raised an imaginary claim of Rs.2,00,72,51,671/- against the respondent under the following main heads:
(i) Exit Fee: This cannot be granted and/or protected as per the settled law by this Court as well as by the Supreme OMP(I)(COMM.) No.95/2016 Page 17 of 71 Court. Moreover, in the facts and circumstances of the present case, the clause for claiming exit fee is not even attracted.
(ii) IP Fee: The petitioner has not disclosed that the payments have been made and the respondent has through various communications written to it about various deliberate disruptions in service and uptime, has informed the petitioner about the actual losses/counter-claim to the tune of Rs.59.3 crore. The petitioner has also not disclosed that the respondent's assets worth Rs.121.28 crore are in the possession of the petitioner.
(iii) Municipal Corporation Tax: This is not payable as per the Agreements.
(iv) Interest: Payment of interest does not arise since nothing is due and payable to the petitioner.
23. It is submitted on behalf of the respondent that the petitioner has suppressed the fact that the various movable and immovable assets of the respondent worth Rs.121.28 crore as on 29th February, 2016 are in the custody of the petitioner itself. The petitioner is retaining this equipment as security for repayment of dues even though it has no such right under the Agreements. The petitioner is already secured. Therefore, the apprehension of the petitioner that after the transfer of Spectrum by the respondent to any other entity, the respondent would have no significant assets against which the petitioner can enforce its claims, is baseless and unfounded, thus, disentitling it from seeking any relief(s) under Section 9 of the Act.
The respondent further submits that, as on 31st March, 2016 there is an outstanding of around Rs.3037 crore towards the OMP(I)(COMM.) No.95/2016 Page 18 of 71 Secured Loan to the Consortium Banks. Apart from the aforesaid loan, an exposure towards Bank Guarantees of around Rs.680 crore from the Consortium of Banks is also there. As such the total charge of the Secured Creditor is around Rs.3717 crore on all the assets of the respondent-Company. The respondent has also been incurring an additional interest cost of Rs.450 crore per year on the availed loan. The Spectrum related telecom businesses of the respondent have been accumulating losses compared to the non-spectrum related telecom business. If the same is continued for years after years then the respondent might not be in a position to repay its loans of Secured Creditors (Consortium of Banks) and discharge other liabilities. Therefore, in order to reduce the financial exposure and the heavy cost, the respondent is incurring in paying interest on the outstanding. Respondent has a bona fide intention of utilizing the proceeds from the sale of Spectrum to repay its Secured Creditors.
24. The respondent has further submitted that on account of cancellation of 2G licenses by the Supreme Court, the profitability of the respondent's GSM business was seriously impacted. In spite of which the respondent has made an earnest and bonafide attempt to continue its services and has been regularly paying the dues of all the parties including the petitioner. However, the respondent has taken a business decision to close the GSM operation pursuant to the Spectrum transfer and focus its resources on non-spectrum base telecom operations and NLD & ILD operations, which are extremely profitable ventures that yield 2/3rd of the respondent's current revenue that runs into 1000s of crore. In order to avoid further losses and to repay its loans to the banks, the respondent has agreed to transfer the 'right to use' of the entire spectrum in favour OMP(I)(COMM.) No.95/2016 Page 19 of 71 of Bharti Airtel Limited Limited for consideration of Rs.4,428 crore less the deferred payment liability and all taxes (except service tax) and 50% of stamp duty.
25. It is submitted that the respondent is neither shutting down its entire business nor transferring all its assets or winding up the Company. There is even no transfer of shares of the respondent to any third party. Therefore, even after the transfer of Spectrum by the respondent, it will continue other businesses and will continue to fulfill its obligations towards the other parties and the respondent's license will remain valid for the full duration of its tenure i.e. up to 2033 and it can provide the telecommunication services.
26. The following telecommunication services can be provided by the respondent even without the Spectrum:
a. International Long Distance Services (ILD) - This is licensed from DOT and the respondent is bringing traffic of overseas operators/callers into India and handing over to the domestic consumers through other operators.
b. National Long Distance Services (NLD) - This is under the license from DOT and the respondent is carrying STD traffic from one circle to the other circle of its own GSM business and of other operators. It also carries inbound international traffic.
c. Hubbing/Trading of International Traffic - This business is being done under International Long Distance (ILD) license. Respondent carries traffic from one country to the other country and earn margins.OMP(I)(COMM.) No.95/2016 Page 20 of 71
d. Infrastructure Provider (Tower Leasing) - This business is being done under UL (AS) license. Respondent has more than 150 towers, which are being leased to other operators.
27. All the above businesses are non-spectrum based and are under various licenses/registrations/approvals from relevant authorities. Also, the respondent is in advance stage of diversifying into other non-spectrum based business to leverage its assets and capabilities already built over time, such as:
a) Virtual Operator Network - The respondent can buy in bulk minutes from other operators and provide to over more than 5 million loyal customers acquired in the 6 GSM service areas.
b) Wallet Services/Payment Gateway - Respondent is starting the business under white labeling i.e. taking the distribution of others but selling under the Videocon brand.
c) Digital Marketing - Respondent is aggressively growing in the area. Digital Marketing is an umbrella term for the targeted, measureable and interactive marketing of products or services using the digital technologies to reach and convert business leads into the customers and increase sales through it.
d) IT Solutions/System Integration - Under this, the respondent can provide IT solutions to customers.
e) Call Centre Operations - Respondent can operate domestic and international call centre under this vertical.
f) Bulk SMS (Both domestic and international) - Under this, vertical, the respondent can leverage its assets brand and OMP(I)(COMM.) No.95/2016 Page 21 of 71 relations of generating domestic and international business under the application to person and machine to machine in areas such as Ticket Information/Transaction Notifications/ Various Alerts /Banking Transactions etc.
g) E-Recharge Distribution of other operators - Under this, vertical VTL, the respondent can leverage its own and sister concerns distribution network to buy and sell E-
recharge/Top up of GSM operators and D2H operators recharge.
h) Respondent has over a period of time developed world class:
i. Mobile Switching Centre (MSC),
ii. Media Gateway(MGW) ,
iii. ILD switch,
iv. Data centre (Servers and Software)
It is stated that these abovementioned assets and resources will help the respondent to grow and have a regular business and profit streams even after the Spectrum is transferred. The respondent is expected to have the gross revenue of more than Rs.1000 crore plus, from the above business during 2015-16 (Excluding the GSM operations). Respondent further submits that more than 2/3rd of the revenue will continue to be there even after the sale of the Spectrum. These assets/resources/customers and brand will help the respondent in gaining growth and market share and will be converted into profit streams.
Thus, any legitimate claim of the petitioner, if allowed in its favour by the Arbitral Tribunal, can be satisfied by the respondent.
OMP(I)(COMM.) No.95/2016 Page 22 of 71Hence, the present petition is not maintainable and is devoid of merits as such is liable to be dismissed.
28. Pertaining to the recovery of a sum of amount by the petitioner, the objection is raised by the respondent that the petitioner cannot claim a primacy over Banks and Financial Institutions for repayment of dues which is not permissible. The Supreme Court has held in Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311 that the interest of banks and financial institutions must receive primacy over interest of individual. The relevant portion of judgment is extracted here under:-
"66. .... As discussed earlier as well, it may be observed that though the transaction may have the character of a private contract yet the question of great importance behind such transactions as a whole having far-reaching effect on the economy of the country cannot be ignored, purely restricting it to individual transactions, more particularly when financing is through banks and financial institutions utilizing the money of the people in general, namely, the depositors in the banks and public money at the disposal of the financial institutions. Therefore, wherever public interest to such a large extent is involved and it may become necessary to achieve an object which serves the public purposes, individual rights may have to give way. Public interest has always been considered to be above the private interest. Interest of an individual may, to some extent, be affected but it cannot have the potential of taking over the public interest having an impact on the socio-economic drive of the country. The two aspects are intertwined which are difficult to be separated. There have been many instances where existing rights of the individuals have been affected by legislative measures taken in public interest. Certain decisions which have been relied on behalf of the respondents, on the point are V. Ramaswami Aiyengar v. T.N. V. Kailasa Thevar [AIR 1951 SC 189: 1951 SCR 292]. In that case by enacting the Madras Agriculturalists' Relief Act, relief was given to the debtors who were agriculturists as a class, by scaling down OMP(I)(COMM.) No.95/2016 Page 23 of 71 their debts. The validity of the Act was upheld though it affected the individual interest of creditors. ...."
29. The respondent submits that the physical assets and equipment of respondent are pledged with Banks as security. The petitioner is seeking a first charge on the assets and the proceeds from the transfer of Spectrum which is legally not permissible as Banks have a prior right. It is submitted on behalf of the respondent that the amount claimed by the petitioner is neither admitted nor substantiated. The respondent has a substantial counter-claim against the petitioner. The respondent has made all the payments under the Agreements.
30. Both parties have made their rival submissions. They have also filed their written submissions.
As far as the application being I.A. No.4946/2016 is concerned, the said application has been filed by the respondent for condonation of delay in filing the reply. There is no opposition to the prayer made in the application. The same is accordingly allowed and the delay in filing the reply is condoned. The application is disposed of.
As regards the applications being I.A. Nos.6255/2016, 9015/2016 and CCP(O) No.44/2016, this Court on the last date of hearing has already put up these applications on 5th October, 2016.
31. The petitioner has also called upon the respondent to pay the following amounts, which were due as on 30th November, 2015 within one week from the date of receipt of the letter:
OMP(I)(COMM.) No.95/2016 Page 24 of 71(a) Rs.159.02 crore plus applicable taxes, on account of loss of revenue to the petitioner due to breach of the MSA by the respondent;
(b) Lock-in charges/ Exit fee of Rs.78.34 crore plus applicable taxes on account of premature exit from sites in Gujarat;
(c) Outstanding monthly fee and other charges, amounting to Rs.91.40 crore;
(d) Rs.30.34 crore on account of waiver of interest. The petitioner allowed the respondent, based on a loss, which the petitioner had suffered due to the deferred payments by respondent of petitioner's old outstanding dues;
(e) Payment of Interest amount of Rs.21.60 crore, accrued till April, 2013, which the petitioner did not insist based on the respondent's request to honour the terms of SA;
(f) Interest @ 18% p.a. from the date on which the sums were due till the date of actual payment.
32. However, the petitioner has sought the following reliefs in the present petition. The same are reproduced below:-
"a) pass an ex-parte ad interim order directing the Respondent to furnish reasonable security in the sum of Rs. 2,007,251,671 in the form of deposit of same before this Hon'ble Court being undisputed claim of the Petitioner, to secure the claim of the Petitioner in the arbitration proceedings; or in the alternative;
b) pass an ex-parte ad-interim order pending the commencement of and during the arbitration proceedings;
the making of the award therein and the implementation thereof, directing the Respondent to furnish security commensurate with the total claim amount of the Petitioner in the form of a Bank Guarantee for a sum of OMP(I)(COMM.) No.95/2016 Page 25 of 71 Rs.2,007,251,671, or any other suitable security which the Court deems fit;
c) Pending furnishing of security, pass an ex-parte ad- interim order restraining the respondent from selling, transferring or otherwise alienating or creating any third party interest in its spectrum in the State of State of Bihar, Gujarat, Haryana, Madhya Pradesh, UP (East) and UP (West) Circle;
d) Alternatively, if it is contended and found that the aforesaid spectrum has already been sold and Respondent has received the same consideration therefore, it be directed to deposit the amount equivalent to the claim of the Petitioner in an interest bearing escrow account pending the arbitration proceeding between the parties;
e) pass an ad-interim ex-parte injunction pending furnishing the security in the form of a) or b) above, restraining the Respondent from whether directly or indirectly from selling, disposing or creating any third party interest in all its movable or immovable assets including cash reserves in bank accounts and the active infrastructure equipment installed at the sites of the Petitioner as aforesaid;
e) confirm the order passed in terms of prayers (a) to
(d) after notice to the Respondent, and
f) pass any such other or further orders in favour of the Petitioner as may be deemed fit and proper in the facts and circumstances of the present case."
33. It is evident that in the prayer the petitioner has not included the claim of Rs.159.02 crore plus taxes on account of the loss of revenue to the petitioner due to breach of MSA by the respondent.
34. In the rejoinder submissions, it is contended by the petitioner that the petition is maintainable under Section 9 of the Act, as the issue of maintainability of such a petition in case of disputes OMP(I)(COMM.) No.95/2016 Page 26 of 71 between an Infrastructure Service Provider and a telecom operator is no more a res-integra, as this Court in the matter of Viom Networks Ltd. v. S-Tel & Ors., AIR 2014 Del 31, rejected the aforesaid contention of the respondent therein and held that the petition under Section 9 of the Act would be maintainable in respect of a dispute concerning an Infrastructure Service Provider and a telecom operator. The grounds taken in the reply by the respondent herein in support of their contention that TDSAT will have the exclusive jurisdiction to decide the present dispute were specifically dealt and rejected by this Court. The objection of the respondent S.Tel Pvt. Ltd. that Viom as Infrastructure Providers are service providers within the meaning of Section 2(1)(j) of the TRAI Act and that the disputes which have arisen between the Viom Networks and S.Tel Pvt. Ltd. are within the jurisdiction of TDSAT, was rejected by this Court. While deciding the aforesaid case, this Court had also considered the decision of TDSAT in the case of Reliance Infratel v. Etisalat DB Telecom Ltd., (2012) TDSAT 617. Therefore, the reliance of the respondent on the aforesaid judgment of TDSAT in Reliance Infratel matter is misplaced. The judgment of the TDSAT is not binding upon this Court. The issue of maintainability on the ground urged in the reply has already been examined and decided by this Court in favour of the petitioner in the aforesaid case. It is submitted that as far as this Court is concerned, the aforesaid judgment of this Court in Viom Networks matter will hold the field. In view of the aforesaid, it is submitted that the present petition is maintainable.
35. Before dealing with the rival submissions of the parties, it is necessary to first deal with the argument of the respondent for lack OMP(I)(COMM.) No.95/2016 Page 27 of 71 of jurisdiction of this Court to entertain the petition. It is argued on behalf of the respondent that the disputes raised by the petitioner are not arbitrable. Admittedly, the petitioner holds IP-1 license/ authorization granted by the DOT and the respondent holds Unified License granted by DOT under Section 4 of the Telegraph Act. The petitioner and the respondent are providing telecommunication services and they are the service providers/licensees as defined in Section 2(e) and (j) of the TRAI Act.
Section 14 of the said Act provides that TDSAT shall have the exclusive jurisdiction to adjudicate the disputes between the two service providers/licensees. The dispute raised by the petitioner pertains to MSAs entered into between the petitioner and the respondent in capacity of being licensees/service providers. It is submitted that in view of Section 14 of TRAI Act, only TDSAT, which has been conferred exclusive jurisdiction, can adjudicate such disputes and it cannot be a subject matter of Arbitration. Therefore, the arbitration clause is also null and void.
36. The respondent has further relied upon the judgment passed by TDSAT in Reliance lnfratel (supra) to state that the decision passed by TDSAT in the aforesaid case is the correct law, and not the law pronounced by this Court in Viom Network Ltd. (supra). On the strength of the TDSAT judgment, the contention has been made by the respondent to reconsider the judgment passed by this Court in Viom Network's matter.
37. The issue of maintainability of a petition under Section 9 of the Act in case of disputes between an Infrastructure Service Provider and a telecom operator has been considered by this Court in the matter of Viom Networks Ltd. (supra), wherein the court had OMP(I)(COMM.) No.95/2016 Page 28 of 71 rejected the aforesaid contention of the respondent therein and held that the petition under Section 9 of the Act would be maintainable in respect of a dispute concerning an Infrastructure Service Provider and a Telecom Operator.
38. The judgment of Union of India v. Tata Teleservices, (2007) 7 SCC 517 cited by the respondent in support of its contention, on maintainability, is inapplicable in the present case. In the aforesaid case, the dispute was between the Central Government (licensor under the TRAI Act) and Tata Tele Services (to whom licenses were intended to be issued). In the said case, the question before the Supreme Court was as to whether a person would become a licensee under the Central Government only on the actual grant of a license and whether only a dispute arising after the grant of a license would come within the purview of the TRAI, Act. The Supreme Court, in those circumstances, has held that a dispute commencing with the acceptance of a tender leading to the possible issue of a license and disputes arising out of the grant of license even after the period has expired would all come within the purview of Section 14(a) of the TRAI Act. To put it differently, the Supreme Court has held that Section 14 takes within its sweep the disputes following the issue of a Letter of Intent pre grant of actual license as also disputes arising out of a license granted between a quondam licensee and the licensor.
39. Another judgment of Andhra Pradesh High Court in Indus Towers Limited v. The Commercial Tax Officer, 2012(4) ALT 755 cited by the respondent is also not applicable in the present facts as the issue in the said case was as to whether in the factual context of the Registration Certificate issued and the nature of the OMP(I)(COMM.) No.95/2016 Page 29 of 71 petitioner's business (an infrastructure provider category-1), the goods purchased by the petitioners/dealers (for the purposes of building, operating and maintaining passive telecom infrastructure and where on the towers erected and maintained but nonetheless continued to be owned by the petitioner - the passive infrastructure provider; goods which are indisputably integrally associated with the building and maintenance of the cell towers), are goods falling within the ambit of Section 8(1) read with the provisions of Section 8(3)(b) of the CST Act, and thus eligible only at the concessional rate of tax provided in Section 8 (1). Similarly, the judgment of State of Punjab v. Raghunath Dass, AIR 1963 Punjab 76 cited by the respondent is also not applicable. In this case, the definition of licensee was examined in the context of the Punjab Excise Act. This decision is of no help to the respondent in support of its argument of non-maintainability of the present petition. The judgment of Delhi High Court in Home Solutions Retails Ltd. v. UOI, 182 (2011) DLT 548, is also not applicable in the present case as the issue before the High Court in that case was a challenge to Section 65(105)(zzzz) of the Finance Act, 1994 in as much as it purported to levy service tax on renting of the immovable property to be used for commercial/business purposes. The facts and circumstances are materially different.
40. The objection of the respondent about the maintainability of the present petition was also urged by the respondent in Viom Networks Ltd. (supra) which was duly examined and rejected by this Court. In this matter also, this Court has considered the decision of TDSAT in Reliance Infratel (supra) matter in para 28. Therefore, the reliance of the respondent on the aforesaid judgment of TDSAT OMP(I)(COMM.) No.95/2016 Page 30 of 71 in Reliance Infratel (supra) matter is misplaced. Even otherwise, the judgment of the TDSAT is not binding upon this Court. As far as this Court is concerned, the judgment of this Court in Viom Networks (supra) will hold the field though I have been informed by the parties that an appeal against the said judgment is subjudice. Once after considering the similar objections, learned Single Judge has taken the view that this Court has jurisdiction, I am not inclined to take a different view although, I am informed that appeal is pending against the order passed by the learned Single Judge. Both sides have confirmed that the operation of the order has not been stayed. Thus, at this stage, in my view, the said order is also applicable in the facts of the present matter also.
EXIT AMOUNT
41. On the date of filing of the petition, the petitioner has claimed Lock-in Charges/Exit Fee of Rs.78.34 crore plus applicable taxes on account of premature exit from sites in Gujarat. Counsel for the petitioner in support of his submission has referred the relevant part of the Supplementary Agreement which shall be discussed the later part of my order.
42. It is contended by the respondent that the petitioner's claim of Rs.79 crore (approximately) on account of Exit Fee is premature and untenable inasmuch as the respondent has not yet terminated the Passive Infrastructure Agreement and as per the same, the Exit Fee is payable, if at all, only upon the termination and not before. As the petitioner has stated in its application that the justification for claiming Exit Fee for the Lock-in period is to recover the initial CAPEX incurred by it in developing the tower sites for which the Passive Infrastructure Agreement had provided for the Lock-in OMP(I)(COMM.) No.95/2016 Page 31 of 71 period of 7 years for Anchor Sites and 5 years for Shared Sites. The petitioner has suppressed the fact from this Court that for majority of the sites, the lock in period (5 years & 7 years) has already lapsed and, therefore, no amount is payable by the respondent to the petitioner on this count. The detail of sites wherein the Lock-in period has been completed is as hereunder:
Circle Status No. of sites
Gujarat Lock-in period competed 547
as per MSA
Lock-in Period Pending 91
Total 638
43. It is contended by the respondent that the petitioner has relied upon the Clauses of Supplementary Agreement dated 12th September, 2013 to state that lock-in period was extended upto 2020. Respondent has further submitted that the said Agreement was in the nature of an additional benefit conferred upon the petitioner by the respondent. The extended lock in period does not reflect a genuine pre-estimate of the damages especially in view of the fact that under the original Passive Infrastructure Agreement, the lock in period has already come to an end.
In its background, it is submitted that the Lock-in charges claimed by petitioner is in the nature of a penalty. In fact, even as per petitioner's own understanding, it is a penalty inasmuch as in letter dated 29th January, 2016 which was sent by the petitioner to respondent, it was mentioned that the lock in charges as 'Exit Penalty' is to be paid by the respondent.
OMP(I)(COMM.) No.95/2016 Page 32 of 7144. It is alleged by the respondent that in respect of several sites, the respondent has paid IP charges way beyond the Lock-in period and thereby had transferred an additional benefit of upto Rs.53 crore to the petitioner. The details of such sites are as hereunder:
Circle No. of sites Total Benefit
given in Crore
(Approx.)
Haryana 547 21.16
Gujarat 547 16.78
MP&CG 493 14.41
Bihar 7 0.33
UPE 4 0.19
UPW 3 0.15
Grand Total 1601 53.01
45. Under the SA, lock-in Charges were raised by petitioner on account of premature exit of respondent from 1107 sites. The total amount of demand notes raised under the Agreement by the petitioner in relation to lock-in charges was Rs.86.06 Crore. Since the respondent, under the said Supplementary Agreement, committed to provide 1200 new sharing tenancies on the existing sites of petitioner within a period of 24 months from the date of signing of the Supplementary Agreement and increase in Lock-in period till 31st March, 2020, petitioner, in consideration thereof, agreed to waive off claims for lock-in charges for 1107 sites.
46. In view of aforesaid reasons, I am of the view that the reasonable compensation under Section 74 of the Contract Act can be secured but it is to be determined as to what extent, the order to OMP(I)(COMM.) No.95/2016 Page 33 of 71 secure the amount be passed in view of the law applicable in the facts and circumstances of the present case.
47. In terms of Section 74 of the Contract Act 1872, where the contract stipulates an amount that is payable by way of liquidated damages/ penalty, only reasonable compensation upto the maximum of the amount stipulated in contract is recoverable. In other words, Section 74 is disabling inasmuch as notwithstanding any such amount stipulated in the contract, the Claimant is only entitled to reasonable compensation for the loss it has suffered and for which compensation cannot exceed the amount prescribed in the contract.
48. In this regard, the respondent has placed the reliance on the following judgments:-
(i) In Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136, the Supreme Court has observed the following:-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre- estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not OMP(I)(COMM.) No.95/2016 Page 34 of 71 exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
43.4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
43.5. The sum spoken of may already be paid or be payable in future.
43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application".
44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract by the appellant.
Further, we cannot accept the view of the Division OMP(I)(COMM.) No.95/2016 Page 35 of 71 Bench that the fact that DDA made a profit from re-auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages--namely, that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall." (Emphasis supplied)
(ii) In Tower Vision India Pvt. Limited v. Procall P. Ltd., (2014) 183 Comp. Cases 364 (Delhi), this Court has observed that:
"13. .........This provision makes it clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. The underlying principle enshrined in this section that a mere breach of contract by a defaulting party would not entitle other side to claim damages unless the said party has in fact suffered damages because of such breach. Loss or damage which is actually suffered as a result of breach has to be proved and the plaintiff is to be compensated to the extent of actual loss or damage suffered. When there is a breach of contract, the party who commits the breach does not eo instant, i.e. at the instant incur any pecuniary obligation nor does the party complaining of the breach becomes entitled to a debt due from the other party..."
"24. ......Even if there is a stipulation by way of liquidated damages , a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him and what is stipulated in the contract is the outer limit beyond which he cannot claim. Unless this kind of determination is done by the Court, it does not result into "debt". (Emphasis supplied)
(iii) In the recent judgment dated 8th July, 2016 passed in Indus Tower Limited v. Sistema Shyam OMP(I)(COMM.) No.95/2016 Page 36 of 71 Teleservices Limited, O.M.P. (I) (Comm.) No.103 of 2016, it was held as under:-
"81. From the entire gamut, prima facie it appears that the liability of Exit Charges cannot be treated as pre-estimated damages. The said charges are payable in the event of termination of a service contract under specific grounds as stipulated in Schedule 5 Part 2 read with clause 18.2 of MSA. After the trial, if the case is made out, then the petitioner might be entitled for compensation."
(iv) Vishal Engineering & Builders v. Indian Oil Corporation Limited, 2012(1) Arb. LR 253 (Delhi) (DB) [Paras 19,20,22,23,24,37&39] "12. .....Section 74 of the Contract Act stipulates that in case of such a broken contract if a sum is named in the contract as the amount to be paid in case of such breach, whether or not actual damage or loss is proved to have been caused thereby, the aggrieved party is entitled to receive from the opposite party who has broken the contract, a reasonable compensation not exceeding the amount so named.
37. .....Merely because there is a clause of liquidated damages that does not mean that the amount of liquidated damages has to be recovered even when no loss has been caused. The respondent had to establish that loss was caused."
49. Mr.Sandeep Sethi, learned Senior counsel appearing on behalf of the petitioner has placed the reliance in this regard on ONGC Ltd. (supra), particularly paras 64 to 68 which read as under:-
"64. It is apparent from the aforesaid reasoning recorded by the Arbitral Tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand case wherein it is specifically held OMP(I)(COMM.) No.95/2016 Page 37 of 71 that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration: if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in- trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. The question which would arise for consideration is -- whether by such breach the party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be OMP(I)(COMM.) No.95/2016 Page 38 of 71 purchased for manufacturing yarn, consideration would be different.........................
............... 66. In Maula Bux case the Court has specifically held that it is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the court is competent to award reasonable compensation in a case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. The Court has also specifically held that in case of breach of some contracts it may be impossible for the court to assess compensation arising from breach.
67. Take for illustration construction of a road or a bridge. If there is delay in completing the construction of road or bridge within the stipulated time, then it would be difficult to prove how much loss is suffered by the society/State. Similarly, in the present case, delay took place in deployment of rigs and on that basis actual production of gas from platform B-121 had to be changed................ In our view, in such a contract, it would be difficult to prove exact loss or damage which the parties suffer because of the breach thereof. In such a situation, if the parties have pre-estimated such loss after clear understanding, it would be totally unjustified to arrive at the conclusion that the party who has committed breach of the contract is not liable to pay compensation. It would be against the specific provisions of Sections 73 and 74 of the Indian Contract Act. There was nothing on record that compensation contemplated by the parties was in any way unreasonable. It has been specifically mentioned that it was an agreed genuine pre-estimate of damages duly agreed by the parties. It was also mentioned that the liquidated damages are not by way of penalty............... There was no reason for the Tribunal not to rely upon the clear and unambiguous terms of agreement stipulating pre-estimate damages because of delay in supply of goods............................
68. From the aforesaid discussions, it can be held that:OMP(I)(COMM.) No.95/2016 Page 39 of 71
(1) Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same.
(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provided in Section 73 of the Contract Act.
(3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of a contract.
(4) In some contracts, it would be impossible for the court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, the court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation............"
50. In reply to the said citation of Saw Pipes (supra), it is submitted by the respondent that the aforesaid judgment would not help the case of the petitioner since it is entitled without any proof of damages/loss to the exit charges as stipulated in the contract, inasmuch as the relevant clause at issue in the aforesaid judgment expressly stipulated that the amount in question is a genuine pre- estimate of damages as understood by the parties. The present case is not a case where the issue of public utility is involved or it is also not a case where it is difficult to assess the compensation.
OMP(I)(COMM.) No.95/2016 Page 40 of 71Therefore, the petitioner is to prove the damages regarding the exit charges. Further, this Court in Indus Tower Limited (supra) has held that exit charges cannot be treated as damages as stipulated in Schedule 5 Part II with the clause of MSA.
51. It is correctly argued that no such stipulation is present in the instant contract between the parties. In Kailash Nath (supra) which considers various judgments on the point and also by a Division Bench of this Court in Vishal Engineers (supra), it is only where damages cannot be assessed and/or are impossible to prove, and the contract in question contains a stipulation to pay a specified amount by way of a genuine pre-estimate of damages, that such amount would be payable without proof of the extent of actual loss/damage. The Supreme Court in Saw Pipes (supra) has contemplated the onus shifting to the defendant to establish the absence of loss/damage and not otherwise. It is rightly observed in the said judgment that where the contract in question is one relating to a public utility and for instance the loss/damage to the public on account of delay in due execution, the loss on account of the breach is not amenable to precise quantification and assessment.
52. One instance of the application of the principle as articulated in ONGC's case, which in no manner deviates or indeed could have deviated from the settled position in law under Section 74 as enunciated by previous larger and co-ordinate Benches, is the decision of the Supreme Court in Construction and Design Services v. Delhi Development Authority, (2015) 14 SCC 263 which is related to a public utility and had contained an express finding to the effect that the contractor had failed to execute the work (construction of sewerage pumping station) (para 14). It is in OMP(I)(COMM.) No.95/2016 Page 41 of 71 this context that the Supreme Court held that if the entire amount stipulated is a genuine pre-estimate of damages, actual loss need not be proved (para 16). The Court further premised this conclusion on a finding that the evidence of precise amount of loss may not be possible (para 17).
53. The dicta of the Constitutional Bench of the Supreme Court rendered in Fateh Chand v. Balkishan Das, AIR 1963 SC 1405, is quoted often in judgments dealing with the issue of liquidated damages. In the said judgment, the Supreme Court held as under:
"The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby, it merely dispenses with the proof of 'actual loss or damages'; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted....."
54. It is because a party who suffered breach is entitled to compensation. In State of Kerala & Ors. v. United Shippers and Dredgers, AIR 1982 Kerala 281, a Division Bench of Kerala High Court was confronted with the question "Whether even in the absence of legal injury resulting from the breach of contract, claim for compensation will lie in the light of Section 74 of the Contract Act." Considering the question, the Kerala High Court held:
"Compensation is something that constitutes an equivalent or recompense; making things equivalent; satisfying or making amends". This is how the word compensation has been explained in Biswas's Encyclopaedic Law Dictionary and in Jowitt's Dictionary of English Law. Black's Law Dictionary explains compensation as 'indemnification; payment of damages; making amends; making whole;OMP(I)(COMM.) No.95/2016 Page 42 of 71
giving an equivalent or substitute of equal value; that which is necessary to restore an injured party to his former position. 'Compensation signifies restoration of position or making things equivalent or recompense. Necessarily, something must have happened as a result of the breach of contract which requires an act of recompense or restoration'. If the breach has not resulted in any harm, loss or damage to the other party, the question of recompensing him or restoring him to something which he has lost would not arise. That is the reason why Section 73 of the Act states 'compensation for any loss or damage caused to him thereby' however grievous or serious an act of breach may be, if it does not lead to any loss or damage caused to the other party Section 73 will not give rise to right of compensation."
"14. ............The interpretation canvassed by the appellant would go against the legislative purpose in using the word compensation in all the three Sections viz;Ss. 73, 74 & 75 of Chapter VI of the Act. One cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof. Facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damages. Section 74 of the Act exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided of course he establishes the basic requirement for award of compensation viz the fact that he had suffered some loss or damage. The proof of this basic requirement is not dispensed with by Section 74 of the Act."
"18. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 & 75 of the Act. Section 74 is only supplementary to Section 73 of the act and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract OMP(I)(COMM.) No.95/2016 Page 43 of 71 has to be dealt with on the basis of Section 73 of the Act. In a particular case where the contract itself stipulates for payment of sum of money on the breach of contract or contains any other stipulation for penalty, the principle additionally propounded by Section 74 also will have to be applied and that is why irrespective of the amount stipulated in the contract, the party suffering from the breach is entitled only to reasonable compensation, which, shall not exceed the amount so stipulated in the contract. Whether it be a contract which stipulate sum of money as being payable on breach of contract or whether it contains any other penal clause, or whether it is a contract which does not contain any such clause, the party complaining of breach of contract cannot successfully claim compensation unless he makes out loss or damage referable to such breach. The best measure of reasonable compensation would of course be the extent of actual loss or damage sustained. ..........................If quantification of loss or damage not possible, the party who has suffered on account of the breach is not without remedy. He can still request the court to assess reasonable compensation on the materials available and award the same to him.................. in a case where a party complaining of breach of contract has not suffered any legal injury in the sense of sustaining loss or damage. There is nothing to compensate him for; there is nothing to recompense, satisfy or make amends. Therefore he will not be entitled to compensation".
55. This position was accepted and reiterated by a learned Single Judge of this Court in Indian Oil Corporation v. Lloyds Steel Industries Ltd., 2007 (4) Arb.L.R. 84 (Del) and a Division Bench of this Court in Vishal Engineers (supra). The judgments of Lloyds Steel and Vishal Engineers have also considered the judgment of the Supreme Court in Saw Pipes (supra) and have explained its implication. In Llodys Steel (supra), this Court has held as under:
OMP(I)(COMM.) No.95/2016 Page 44 of 71"51. Notwithstanding the above, the petitioner still wants damages to be recovered from the respondent on the spacious plea that liquidated damages mentioned in the contract are pre-determined damages and, therefore, in view of provisions of Section 74 of the Indian Contract Act, the petitioner was entitled to these damages and it was necessary for the petitioner to prove these damages. The legal position, as explained by the Supreme Court in ONGC v. Saw Pipes (supra), which has already explained above, is not in doubt. However, it is only when there is a loss suffered and once that is proved, it is not for the arbitrator or the Court to examine the actual extent of the loss suffered once there is a pre-estimation thereof. Moreover, the compensation, as stipulated in the contract, has to be reasonable. In a particular case where the defaulting party is able to demonstrate that delay/default has not resulted in any loss being suffered by the other party, then that party cannot claim the damages only because in the contract there is a stipulation regarding liquidated damages.
52. No doubt, the parties to a contract may agree at the time of contracting that, in the event of breach, the party in default shall pay a stipulated sum of money to the other. However, the stipulated sum has to be a genuine pre- estimate of damages likely to flow from the breach and is termed as 'liquidated damages'. If it is not a genuine pre-estimate of the loss, but a amount intended to secure performance of the contract, it may be a penalty............
x x x x
55. It is clear from the above that Section 74 does not confer a special benefit upon any party, like the petitioner in this case. In a particular case where there is a clause of liquidated damages the Court will award to the party aggrieved only reasonable compensation which would not exceed an amount of liquidated damages stipulated in the contract. It would not, however, follow there from that even when no loss is suffered, the amount stipulated as liquidated damages is to be awarded. Such a clause would operate when loss is suffered but it may normally be OMP(I)(COMM.) No.95/2016 Page 45 of 71 difficult to estimate the damages and, therefore, the genesis of providing such a clause is that the damages are pre-estimated. Thus, discretion of the Court in the matter of reducing the amount of damages agreed upon is left unqualified by any specific limitation. The guiding principle is 'reasonable compensation'. In order to see what would be the reasonable compensation in a given case, the Court can adjudge the said compensation in that case. For this purpose, as held in Fateh Chand (supra) it is the duty of the Court to award compensation according to settled principles. Settled principles warrant not to award a compensation where no loss is suffered, as one cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof; facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damage. Section 74 exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided the basic requirement for award of 'compensation', viz. the fact that he has suffered some loss or damage is established. The proof of this basic requirement is not dispensed with by Section 74. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 and 74. Section 74 is only supplementary to Section 73, and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of Section 73. The words in Section 74 'Whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian legislature from the complicated principles of English Common Law, and also to emphasize that reasonable compensation can be granted even in a case where extent of actual loss or damage is incapable of proof or not OMP(I)(COMM.) No.95/2016 Page 46 of 71 proved. That is why Section 74 deliberately states that what is to be awarded is reasonable compensation. In a case when the party complaining of breach of the contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy, or make amends. Therefore, he will not be entitled to compensation See State of Kerala v. United Shippers and Dredgers Ltd. . Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal injury has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed."
56. In the present case, there is no pleading by the petitioner that the purported loss in the instant case is not capable of quantification or the present case is the case of public utility, rather in the rejoinder, it was pleaded that it is the subject matter of the Arbitral Tribunal. Thus, the principles laid down in Saw Pipes (supra) are not applicable in the facts of the present case, nor the said judgment would help the case of the petitioner.
57. No doubt, it is the admitted position that in the clause 3(iv) of the MOU, that the respondent had agreed to not seek or request for further waiver whatsoever for any Exist sought in future. It is also true that as per the petitioner, the respondent had prematurely OMP(I)(COMM.) No.95/2016 Page 47 of 71 exited from 1107 sites and has raised the demand towards the Lock- in charges for Rs.86.06 crore, mainly, on the reason that the respondent as per MOU had agreed not to seek any waiver of the Lock-in charges. However, it is also the admitted position that after the said circumstances, the demand was raised by the petitioner, on 12th September, 2013 again in the Supplementary Agreement which was executed between the parties for resolving the outstanding issues between the parties. In the said Agreement, the respondent had acknowledged and undisputed the outstanding amount of Rs.70.88 crore on account of IP Fees, bills for power and fuel reimbursement and the respondent had agreed to clear the outstanding amount on a monthly basis over a period of six months.
58. As far as the lock-in charges of Rs.86.06 crore which were demanded from the respondent is concerned, in the said Supplementary Agreement, the respondent had agreed and committed to provide 1200 new sharing tenancies on the existing sites of the petitioner within a period of 24 months from the date of signing of the said Agreement and the Lock-in period was increased till 31st March, 2020. It is the admitted position that against the said consideration, the petitioner had agreed to waive of the claim for Lock-in charges for 1107 sites. Hence, it is clear from the same that by virtue of the Supplementary Agreement, the Lock-in charges for the sum of Rs.86.06 crore were again waived of subject to the condition that the respondent will provide 1200 new sharing tenancies on the existing site and the complaint of the petitioner is that the same have not been provided by the respondent within the stipulated period of 24 months. The respondent had only provided OMP(I)(COMM.) No.95/2016 Page 48 of 71 171 tenancies during the period of 2 years ending on 30th September, 2015.
59. The said argument of the petitioner was denied by the respondent. The contention of Mr.Sibal is that the intention of the petitioner was to waive the lock-in charges subject to certain conditions i.e. providing of 1200 tenancies within 24 months and as per the averments of the petitioner, it has merely provided 171 tenancies, is a disputed question of fact and the same has to be determined by the Arbitral Tribunal.
60. The respondent does not deny that in the SA, the respondent had acknowledged the said liability and had further committed to provide 1200 new sharing tenancies on the existing sites of the petitioner within a period of 24 months from the date of signing of the Agreement and the Lock-in period was increased till 31st March, 2020. There is a specific averment of the petitioner that the respondent by 30th September, 2015, i.e. within two years had provided only 171 new tenancies. There is no averment or argument on behalf of the respondent that they were able to provide 1200 new sharing tenancies on the existing sites of the petitioner within a period of 24 months from the date of signing of the Agreement. Thus, some amount has to be secured so that in case any reasonable compensation is awarded to the petitioner, it may recover the same.
61. The Spectrum has been transferred and the service is closed. It is true and also admitted by the petitioner that the said fact can be ascertained by the Arbitral Tribunal, for which the steps are taken.
OMP(I)(COMM.) No.95/2016 Page 49 of 7162. The question before this Court at present is as to whether till such time, the compensation is ascertained or the claim of the petitioner is rejected, whether in view of the peculiar facts and circumstances, any amount should be secured or not. The issue before this Court is also that in case, the Arbitral Tribunal awards the compensation in favour of the petitioner, it is to be assessed as to under those circumstances, the respondent would be in a position to pay the said amount or the award would be merely a paper decree.
63. The respondent's contention is that the petitioner has failed to satisfy the requirement of Order XXXVIII Rule 5 CPC and that there is no averment in the subject petition qua the respondent's intention to obstruct or delay the execution of Arbitral Award is without any merits.
64. In many paragraphs of the petition, the petitioner has categorically stated about the mala fide and fraudulent intention of the respondent. In view of the respondent's admitted precarious financial position and its inability to pay its debts, it does not matter whether the respondent has the 'intent' to obstruct or delay the execution of the award in case it is passed in the petitioner's favour. The record of the case, documents filed and the overall conduct of the parties can be looked into by this Court to determine whether the guidelines of Order XXXVIII Rule 5 of CPC are satisfied or not.
65. In the present case, it is evident from the act on the part of the respondent that its sole intention was to transfer the sale consideration to the Consortium of Banks in utter disregard to the directions issued by this Court. The fact which satisfies the test laid down under Order XXXVIII Rule 5 CPC.
OMP(I)(COMM.) No.95/2016 Page 50 of 7166. In number of cases, the Courts have held that the strict provisions of Order XXXVIII Rule 5 of CPC cannot be bodily lifted and imported into Section 9(ii)(b) of the Act. The rigours of every procedural provision in CPC cannot be put into place to defeat the grant of relief, which would sub-serve the paramount interests of justice.
The following case laws can be relied upon:
(i) Steel Authority of India Ltd. v. AMCI Pty Ltd. & Anr., passed by this Court on 1st September, 2011 in OMP No.417 of 2011;
(ii) Gatx India Pvt. Ltd. Vs. Arshia Rail Infrastructure Ltd., passed by this Court on 20th August, 2014 in OMP No.1132/2013.
67. There is an empty promise of the respondent that it would be able to honour the award, which may eventually be passed against it, through its non-spectrum based business, is a feeble attempt on the part of the respondent to establish before this Court, its ability to discharge its liability in future. On one hand, the respondent had tried to show its financial condition to somehow justify the sale of Spectrum. On the other hand, it pleads in its defence that it shall be able to honour its liabilities and as such, no order or direction is warranted against it under Section 9. The respondent's plea is totally baseless. Even going by the respondent's figures of profits generated through its non-spectrum based business for the last three years, it is clear that the same would not be sufficient to discharge the huge financial liabilities of the respondent running into crores. Nothing cogent is there to assure that the respondent would be able to discharge all its financial liabilities in future. It is an OMP(I)(COMM.) No.95/2016 Page 51 of 71 admitted position that the respondent has been suffering from financial condition and is indebted to its Secured Creditors to the tune of Rs.4,485.06 crore. Besides this, the respondent had suppressed that it has availed the finance of Rs.7,500 crore from Videocon India Limited, i.e. its parent Company, which it is obliged to refund. The fact that the respondent is apparently running into heavy losses; its assets other than the Spectrum are charged in favour of Secured Creditors/Lenders and that there are other higher priority obligations, such as, repayment of money to its parent- Company, prima facie indicates that it would not be possible for the respondent to honour its debts and financial obligations.
68. All the more reason, as it is a matter of fact that in the present petition and connected petitions filed by some other companies against the respondent being OMP (I) (COMM) No.105/2016 and OMP (I) (COMM) No.107/2016, vide order dated 1 st April, 2016, this Court had directed the respondent that in case the Spectrum is sold/transferred, the respondent would deposit the amount so claimed in the petitions with the Registrar General of this Court.
69. While the final arguments were being heard in the subject petition on 24th May, 2016, the respondent had already sold/transferred the Spectrum without depositing the claimed amount in utter disregard to the direction issued by this Court vide order dated 1st April, 2016. Therefore, by order dated 26th May, 2016, this Court had recorded the conduct of the respondent during the proceedings and in view thereof, had directed the respondent to deposit the claimed amount with the Registrar General of this Court.
70. Despite of the full knowledge of the conditions imposed by the Court for sale/transfer of Spectrum, the respondent in connivance OMP(I)(COMM.) No.95/2016 Page 52 of 71 with the State Bank of India had deliberately transferred the entire sale consideration directly into the designated account maintained by SBI in an attempt to take the same out of reach of this Court.
71. The said orders dated 1st April, 2016 and 26th May, 2016 were challenged before the Division Bench wherein with the consent of the parties, it was agreed that without deposit let the judgment be pronounced in the matter subject to certain conditions.
72. In view of the conduct of the respondent, the balance has to be drawn between the parties, as this Court even apprehends that if the award is passed in favour of the petitioner, the petitioner may not be able to recover the awarded amount in view of the conduct of the respondent and poor condition of the Company at present. Even otherwise, the respondent has lost the trust of the Court, once the directions passed on 1st April, 2016 are breached.
73. Thus, the conduct of the respondent speaks for itself, therefore, the Court is satisfied with the requirement of the provisions under Order XXXVIII Rule 5 CPC necessitating the grant of part relief.
74. I do not find any force in the submissions of the respondent that no amount can be secured, as there is a first charge of Secured Creditors on the entire assets and even the petitioner cannot claim preference over Secured Creditors. There is no cogent and clear evidence placed on record to prove that there is first charge of Secured Creditors, i.e. Consortium of Banks. Even, it is a matter of surprise that the Consortium of Banks was fully aware of the pendency of various petitions from March, 2016 as well as the interim orders passed, however, the bank did not take any steps for OMP(I)(COMM.) No.95/2016 Page 53 of 71 the last many years in order to recover the amount due. They have woken up only when the petitions were filed and few documents were produced.
75. Thus, under these circumstances, the respondent shall secure a sum of Rs.17.20 crore (i.e. 20% of the amount claimed) by depositing the same within two weeks, with the Registrar General of this Court by way of Bank Guarantee subject to his satisfaction, for the period of two years at present, which shall be extended from time to time until the award is published by the Arbitral Tribunal. The said deposit shall be treated as without prejudice. As far as other claims of the parties are concerned, the same can be raised before the Arbitral Tribunal which shall be decided by the Tribunal as per their own merits and without any influence of this order.
COUNTER-CLAIM
76. The respondent has raised the issue of counter-claim of Rs.59.3 Crore (actual and direct loss) against it because of losses suffered by the respondent due to the petitioner's negligence in fulfilling its obligation to provide uninterrupted operations of passive sites for Haryana Service Area. During the months of April to July 2015, the respondent had faced complete network outage in the Haryana service area due to deliberate incidents of disconnection of telecom sites by the petitioner.
It is submitted that the SLR maintained in Haryana Service Area was continuously lower than as committed by the petitioner in the year 2015 and 2016. Some of the correspondences exchanged between the petitioner and the respondent depicting therein the OMP(I)(COMM.) No.95/2016 Page 54 of 71 outages in the entire Haryana Service Area continuously from 2015 till date are mentioned as below:
a. Zero coverage in Sarona- By emails dated 16th February, 17th February, 2015, 19th February, 2015, the respondent had informed the petitioner regarding the Zero coverage in Sarona as the tower got collapsed and there was a delay on the part of the petitioner to erect a new tower.
b. Fire incident/Sites Switched off by Technicians in Biwani - Complaint made by the respondent regarding fire incident in Fatehgarh, Bhiwani and the feeder cable and BTS was burnt leading to loss of revenue, faith of customer and course CAPEX part. The respondent had complained about 24-25 sites being switched off by the technicians (O&M) of the petitioner in Bhiwani area by emails dated 10th April, 2015 and 11th April, 2015. In reply to the email dated 10th April, 2015, the petitioner vide email dated 12th April, 2015 had admitted that there is a disruption of service at their end.
c. Outages in Hisar: The respondent had reported the incident of power off and fibre cut at 4 Sites in Hisar by the technicians of the respondent resulting therein a complete shutdown of 145 sites , which resulted in a major disruption of mobile connectivity provided by the respondent to its subscribers.
d. Theft at Sandhir Site: The respondent had informed the petitioner that the miscreants has removed the BTS and switched of the site.OMP(I)(COMM.) No.95/2016 Page 55 of 71
e. Material damage in Kaithal- The respondent had complained about the damage to equipments such as feeder cable by the unknown person leading to complete disruption in 27 linked sites.
f. Outage at Udyog Marg- Email sent to the petitioner complaining about the due to DG and disconnections of all jumpers by unknown persons.
g. Continuous Outages causing disruption of services in Haryana Service Area Outages of 19940 minutes in Rohtak for 19440 minutes- The respondent had complained about the repeated outages in Haryana Service area and had further sought the action plan about the same. The respondent had informed the petitioner that there is an outage of 19440 minutes for month of January, 2016 in Rohtak.
h. Repeated Outages at Haryana Service Area as recent as on 16th April, 2016- A gross breach has been committed by the petitioner in providing its uninterrupted passive services on existing sites especially in Haryana Service Area. In fact, recently on 16th April, 2016, almost 40 sites in Sirsa and Rohtak area were shut down due to the temperature issue at TX Pop site and disruption by owners respectively. The respondent has complained about the recent outages to the petitioner in Sirsa Area due to temperature issue at TX pop site which has adversely affected the services of the petitioner and had further requested the petitioner to immediately rectify the same.
However, the petitioner has chosen to be silent about the OMP(I)(COMM.) No.95/2016 Page 56 of 71 bulk outages and did not give any assurances that the bulk outages in Sirsa and Rohtak will be examined and rectified. Other incidents of repeated bulk outages in Rohtak cluster due to interference by owners as latest on 16th April, 2016 has been pointed out by the respondent to the petitioner.
77. It is alleged by the respondent that the petitioner vide letter dated 4th June, 2015 had informed the respondent regarding the outages due to deliberate disconnection by the petitioner. In-spite of the respondent continuously showing its concern regarding the complete disruption of services in Haryana Service Area, it again had suffered a network outage in Haryana service area due to the petitioner's negligence. Because of the network outage, the respondent has raised a demand of Rs.59.3 crore based on the actual loss suffered by the respondent due to the continuous default of the petitioner in providing the uninterrupted service at sites of Haryana Service Area. Further, due to said outage the respondent had suffered EBITA (earnings before interest taxes depreciation and amortization) losses and had further risked its investments to the tune of Rs.350 crore. Till date, the petitioner has not compensated the respondent for the said loss occurred due to the reasons attributable to them. It is stated on behalf of the respondent that in fact, in April-May, 2015 there was a total shutdown of the telecom operations of the respondent during peak hours lasting for more than 20 hours thereby causing a huge ruckus and resulting in total pandemonium among the Videocon customers and adversely impacting the entire channel partner community. The outages resulted in the respondent's business being affected adversely and causing huge direct financial losses.
OMP(I)(COMM.) No.95/2016 Page 57 of 71Perusal of the aforesaid correspondences exchanged between the parties categorically establishes the fact that the petitioner has been providing deficient services to the respondent and thus, the respondent has claimed damages from the petitioner to the tune of Rs.59.3 crore. It is stated that the correspondences referred to above are merely a tip of the iceberg and the respondent has been facing deficient and defective services rendered by the petitioner all this while in-fact also in the month of April, 2016 and the same has already been stated. The respondent reserves its right to raise the claims on account of continuous outages in Haryana Service Area for the further period of time. It is stated that the respondent's claims against the petitioner is wholly justified and substantiated as the petitioner has failed to provide the efficient and defect-free services to the respondent, for which the petitioner is liable to compensate the respondent under the MSA.
78. Therefore, it is canvassed that the respondent has a substantial counter claim against the petitioner and thus, the reliefs claimed by the petitioner in the nature of interim measures enshrined in Section 9 of the Act cannot be granted in favour of the petitioner and against the respondent.
79. It is alleged that under the Agreements, it is the petitioner's obligation to provide the security operation and maintenance of the site.
80. As far as the counter-claim raised by the respondent is concerned, no doubt, the same can be raised before the Arbitral Tribunal. In case the respondent has suffered the loss on account of the alleged outages in Haryana Circle, the counter-claim raised by the respondent in the present petition has no basis. The said OMP(I)(COMM.) No.95/2016 Page 58 of 71 amount cannot be adjusted towards other heads. Prima-facie, it also appears that in earlier correspondences exchanged between the parties, reference of the counter-claim was not mentioned by the respondent. Thus, the plea of the counter-claim of Rs.59.3 crore cannot be accepted in the present petition filed by the petitioner. However, liberty is granted to the respondent to raise the said plea before the Arbitral Tribunal which may be decided as per its own merits.
81. With regard to another plea raised by the respondent that the petitioner has, in its possession, the assets of the respondent worth Rs.121.28 crore, the learned counsel for the petitioner has denied the value of assets as alleged by the respondent. He says that it is merely an after-thought plea. The petitioner is not interested to keep those assets. His client has no objection if the same are removed by the respondent. In fact, he says that the said assets are burden upon the petitioner which are worthless for the petitioner. If that is the position of the petitioner, the plea of adjustment of amount of any nature towards assets cannot be passed. The respondent may take the necessary steps as per law as suggested on behalf of the petitioner.
IP FEE
82. The respondent has admitted that it had entered into Supplementary Agreement dated 12th September, 2013, however, it is alleged that certain terms and conditions of the said Agreement are unfair and unreasonable. Under the said Agreement, the parties had agreed to a payment schedule for -
a) repayment of the outstanding (settlement pay outs) OMP(I)(COMM.) No.95/2016 Page 59 of 71
b) payment of future IP Fees and power and fuel charges The respondent has in its reply to the petition disputed its liability. Prior to the filing of the reply, the respondent had never disputed their liability. Even in the reply, the respondent has only taken a vague plea of non-reconciliation of outstanding invoices. There is no specific pleading in the reply that nothing is payable or outstanding.
83. The respondent has admitted that as per the Supplementary Agreement the following amounts were identified:
• Rs. 70.88 crore as per clause 1.1 of the Supplementary Agreement being total agreed and undisputed outstanding upto 30th September, 2012.
• Rs.27.74 crore as per clause 1.2 read with Annexure-II for the period upto 30th September, 2012 which is under dispute and is pending reconciliation validation. • Rs.46.29 crore is subject to reconciliation from 1st October, 2012 to 30th June, 2013 as per clause 1.5 read with Annexure-III.
84. It is not denied by the respondent that as per Supplementary Agreement, an amount of Rs.70.88 crore is an admitted amount and the same was payable by the respondent for which the payment has already been made to the tune of Rs.90.6 crore under the Supplementary Agreement. In fact, the respondent has paid an excess amount towards Rs.27.7 crore which was payable subject to reconciliation.
The details of the payment made by the respondent to the petitioner regarding monthly installment as provided by the OMP(I)(COMM.) No.95/2016 Page 60 of 71 respondent in convenience compilation at page 79 are read as under:-
Period Amount of Paid against Clearance for
Clear O/s old O/s deposit
in Cr.
July, 13 2.00 14-Aug-13
Aug., 13 2.00 14-Aug-13
Sep., 13 2.00 04-Sep-13
Oct., 13 2.00 07-Oct-13
Nov., 13 2.00 07-Nov-13
Dec., 13 2.00 07-Dec-13
Jan., 14 2.98 07-Jan-14
Feb., 14 3.00 07-Feb-14
Mar., 14 3.01 07-Mar-14
April, 14 2.99 07-Apr-14
May, 14 3.00 07-May-14
June, 14 3.00 07-June-14
July, 14 2.99 17-Jul-14
Aug., 14 3.01 07-Aug-14
Sep., 14 3.00 07-Sep-14
Oct., 14 3.01 06-Oct-14
Nov., 14 2.99 06-Nov-14
Dec., 14 3.01 08-Dec-14
Jan., 15 3.09 05-Jan-15
Feb., 15 3.00 07-Feb-15
Mar., 15 3.03 07-Mar-15
April, 15 2.92 06-Apr-15
May, 15 3.00 05-May-15
June, 15 3.01 02-June-15
OMP(I)(COMM.) No.95/2016 Page 61 of 71
July, 15 3.00 07-Jul-15
Aug., 15 2.88 08-Aug-15
Sep., 15 3.12 08-Sep-15
Oct., 15 3.00 07-Oct-15
Nov., 15 3.00 05-Nov-15
Dec., 15 -
Jan., 16 3.00 07-Jan-16
Feb., 16 3.00 05-Feb-16
For Dec., 15 3.00 20-Feb-16
Total 90.06
85. The petitioner submits that for the period September, 2015 to February, 2016, the petitioner has raised bills for an amount of Rs.63.5 crore (excluding interest and Municipal charges). Whereas the respondent has till date paid only an amount of Rs.18.8 crore, the details of which are provided in the additional affidavit filed by the petitioner on 10th May, 2016. Therefore, there is still a shortfall of Rs.44.6 crore for the aforesaid period.
86. The petitioner has filed the additional affidavit, but the fact remains that the petitioner has not disclosed the details of the payments made by the respondent to the petitioner regarding the monthly installment of Rs.3 crore, the details of which are already referred in earlier paras. The petitioner has relied upon page 260 of the documents filed along with the reply wherein it was contended by the respondent that as of today, the total outstanding is not more than Rs.30 crore and since the respondent has claimed the sum of approx. Rs.57 crore, the prayer in terms of the relief sought in the present petition cannot be granted. Learned counsel for the petitioner in reply to the averments made by the respondent submits OMP(I)(COMM.) No.95/2016 Page 62 of 71 that the entire payment has been received and has admitted that the respondent till date has paid only an amount of Rs.18.8 crore, the details of which are given in the additional affidavit filed by the petitioner on 10th May, 2016. According to the petitioner, there is a shortfall of Rs.46 crore up to the said period.
87. It is further stated on behalf of respondent that the calculations chart filed by it would show that the outstanding for the period till June, 2013 + July, 2013, till March 2015 + April 2015, till July 2015 amounting to Rs. 63.25 crore. It is submitted on behalf of respondent that the payments of Rs 20.27 crore have been made against the July 2013 outstanding. Therefore, the total amount payable till July 2015 is Rs. 60.25 crore - Rs. 20.27 crore = Rs. 42.98 crore as per the chart.
88. On this aspect, it is stated by the respondent that the amount of Rs.42.98 further needs to be reconciled for the fact that the power and fixed charges needs to be revised and the benefits of the same shall be adjusted in the aforesaid amount. A discount of up to Rs.50 Lakhs a month on existing FEM with effect from April 2014 amounting to Rs.12 crore is to be considered while calculating the IP fee to be payable by the respondent as discussed in minutes of meeting dated 2nd July, 2015 and 29th December, 2015 between the petitioner and the respondent.
89. The respondent's counsel does not dispute that the actual IP Fee due if any is to be payable to the petitioner, however, his only submission is that the petitioner has not disclosed the correct figure.
90. No doubt, reconciliation exercise has to be gone into but it is also correct that the admitted liability cannot be secured in the OMP(I)(COMM.) No.95/2016 Page 63 of 71 petition filed under Section 9 of the Act without prejudice, as the arbitration proceeding would take couple of years.
91. Considering the entire gamut of the matter on this issue, at present, only the sum of Rs.30 crore is ordered to be secured.
92. The said amount shall be deposited by the respondent without prejudice, within two weeks with the Registrar General of this Court by way of Bank Guarantee, subject to his satisfaction, and the respondent shall keep the Bank Guarantee alive till the Award is published by the Arbitral Tribunal.
93. For the remaining amount, the petitioner would be entitled to raise its claim before the Arbitral Tribunal who would decide the same on merits and without any influence of my order. The respondent would also to raise its defence/claim before the Arbitral Tribunal. Therefore, at this stage, I am only inclined to secure the part amount claimed by the petitioner. The Arbitral Tribunal would decide the submissions of both the parties on the basis of the evidence.
Municipal Corporation Tax
94. With regard to Municipal Corporation Tax of Rs.3,15,26,701/-, it is submitted by the respondent that as per the reconciliation exercise which was undertaken and signed by both the parties on 6 th November, 2015 shows that the MCD dues are disputed. The said amount is disputed because the respondent is not liable to pay the municipal charges under the Agreements between the parties.
95. It is stated that the reliance on clause-(e) of Appendix C of the WTIL Agreement is completely misplaced and misleading. The said onetime fee is applicable to Anchor Sites. Firstly, the respondent OMP(I)(COMM.) No.95/2016 Page 64 of 71 does not use any Anchor Site. Secondly, the same amount is payable only after the receipt of adequate documentary proof. There are no pleadings or calculations at all made by the petitioner on how much amount was claimed by the local authorities as municipal corporation tax and what was the proportionate share of the respondent as all the sites were shared sites.
96. The action of Municipal Corporation of Gujarat to levy the MCD Tax on Telecom Towers has been stuck down by the Gujarat High Court on the premise that Section 145 A of the GPMC Act are ultra vires to the Constitution (GTL Infrastructure Limited Versus State of Gujarat- Special Civil Application No. 4064 of 2012 by judgment dated 25th April, 2013).
97. The Gujarat Municipal Corporation has challenged the said judgment in SLP (C) No.19675-19678 of 2013 before the Supreme Court and has further observed in its order dated 9th July, 2013 that the demand on MCD tax shall not be enforced against the respondent (passive infrastructure provider) till the disposal of the appeal.
98. In view of the controversy raised by both the parties about the Municipal Corporation Tax, the response given by the respondent at this stage is plausible. It is a disputed question of fact. Therefore, the petitioner's contention to secure the said amount cannot be allowed at this stage. The petitioner is granted liberty to raise the same before the Arbitral Tribunal.
99. With regard to payment of interest amounting to Rs.23,59,20,665/- as claimed by the petitioner, it is stated that the heading "Interest billed for the period till 2015" and then the OMP(I)(COMM.) No.95/2016 Page 65 of 71 breakup has been given as per two heads: Upto June 13 and July 2013 to Feb 2016. The interest in any event would be chargeable on loss for deferred payment which is disputed.
It is stated that during the reconciliation of accounts between the parties on 6th November, 2015, the interest charged is disputed. The same has been suppressed rather it has been erroneously pleaded that it is an admitted amount.
100. Thus, it is denied by the respondent that the statement of the petitioner in the petition that the alleged outstanding amounts are undisputed and admitted is not disputed. The demands raised in the petitioner's letter dated 7th December, 2015 has been duly replied and the claims in the petitioner's letter have been disputed by the respondent dated 22nd December, 2015. It is further stated by the respondent that "at the outset we refute, deny, and dispute every allegation and averment in your letters". It also reiterated that Videocon is in due compliance with its obligation under the MSA and Supplementary Agreement.
101. In view of the defence taken by the respondent in the reply, it appears to the Court that this is also a disputed question of fact. The amount cannot be secured in the present petition. However, the petitioner would be entitled to raise the same before the Arbitral Tribunal who after furnishing the evidence by the parties will decide the said head on merits without influence of my order.
102. As already discussed, the respondent has to secure the following amounts:-
(i) Towards Exit Amount - the sum of Rs.17.20 crore
(ii) Towards IP Fee - the sum of Rs.30 crore OMP(I)(COMM.) No.95/2016 Page 66 of 71 The above said total amount shall be deposited by the respondent within two weeks, with the Registrar General of this Court by way of Bank Guarantee subject to his satisfaction, for the period of two years at present, which shall be extended from time to time until the Award is published by the Arbitral Tribunal. The said deposit shall be treated as without prejudice.
103. In view of the directions issued by the Court vide order dated 1st April, 2016, it was the responsibility of all the Directors of the respondent-Company to ensure compliance of the same. Therefore, they are personally responsible for the purpose of compliance of the order in view of their past conduct. The reliance is placed on the judgment passed by the Supreme Court in the case of DDA v. Skipper Construction Company (P) Ltd. and another, (1996) 4 SCC 622. In this case, the issue was related to the adoption of the device of incorporation by certain individuals for committing illegalities and to defraud people. The Court reiterated the proposition that where the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The Court held as under:
"The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are mere cloaks behind which lurks Tejwant Singh and/or members of his family....."OMP(I)(COMM.) No.95/2016 Page 67 of 71
104. It is further clarified that if the respondent will not comply with the order for any reason as mentioned by it during the course of hearing, the petitioner under those circumstances is granted liberty to move an application to recover and deposit the said amount from the personal assets of the Directors, in view of the peculiar facts of the present case. In this regard, reference is also made to the judgment passed by the Supreme Court in the case of State of UP v. Renusagar Power Company, AIR 1988 SC 1737, wherein the Court has dealt with the nexus between the parent and the subsidiary companies. In this case, the Supreme Court had lifted the corporate veil to hold that Hindalco, the holding company and Renusagar Power Company, its subsidiary, should be treated as one concern and the Power Plant of Renusagar must be treated as the own source of generation of Hindalco and on that basis, Hindalco would be liable to pay the electricity duty.
105. As far as the application being I.A. No.4993/2016 filed by the applicant-Bank is concerned, similar application was filed in O.M.P. (I) (COMM.) Nos.105/2016 & 107/2016 wherein I have considered the said application and discussed the same. The relevant extracts of the order passed therein are reproduced here below:-
"Pertaining to I.A. No.4995/2016, the said application has been filed under Order 1 Rule 10 CPC for intervention on behalf of applicant-State Bank of India, as Facility Agent, for and on behalf of 18-Banks' Consortium, to become a party and to receive the Spectrum amount. The prayer of this application is strongly opposed by the petitioner, by stating that the application itself is not maintainable. The basis of this application rests on the alleged fact that the Spectrum of the respondent has been charged to the applicant-Banks. No deed of mortgage has been annexed to the application to prove the existence of any such charge. On the contrary, the clause cited from the alleged OMP(I)(COMM.) No.95/2016 Page 68 of 71 indenture of mortgage specifically states that the subject matter of the charge would exclude the UASL (the Unified Access Spectrum License), which at the relevant time included the Spectrum currently sold by the respondent to Bharti Airtel Limited).
It is settled law that airwaves constitute public property and must be utilized for advancing public good. No individual has a right to utilize them at his choice and for the purposes of profit [Secretary, Ministry of I&B v. Cricket Association of Bengal, 1995(2) SCC 161, para 201(b)]. Therefore, any charge sought to be created over the spectrum by the respondent must be approved by the Government. In this regard, paragraph 8 of the minutes of the meeting dated 9th September, 2015 and page 4 of the minutes of the meeting dated 19th December, 2015 between the respondent and the applicant-Banks clearly states that the assignment of the Spectrum license in favour of the applicant-banks was yet to be completed as the permission of the Department of Telecommunications for the same was awaited. Therefore, the Banker's application grossly fails to establish that the spectrum is charged in favour of the applicant-Banks.
Under illustration (g) to Section 114 of the Indian Evidence Act, 1872, if evidence which could be produced is withheld, the Court may presume that such evidence is unfavourable to the person withholding it. The applicant-Bankers are withholding the indenture of mortgage, and their refusal to produce the same despite the same being pointed out during the hearings, the Court must presume that the mortgage does not extend to the spectrum. The applicant- bankers have not taken any steps for enforcement of the alleged security at the appropriate forum for the last many years. Even assuming that the spectrum has been charged in favour of the applicant banks, it must be noted that the priority of payments enjoyed by the Secured Creditors is only relevant when paying off the debts of a Limited Company in liquidation.
The application is otherwise not maintainable as the applicant-Banks are not a party to the Arbitration Agreement in the MSA. The term 'party' as used in Section OMP(I)(COMM.) No.95/2016 Page 69 of 71 9 of the Arbitration Act is defined as a 'party to the Arbitration Agreement'.
It has been held in many judgments that Section 9 of the Arbitration Act only contemplates issuance of interim measures by the Court at the instance of a party to an Arbitration Agreement with regard to the subject-matter of the Arbitration Agreement and a third party cannot be subjected to proceedings under Section 9 of the Arbitration Act (Shoney Sanil v. Coastal Foundations, AIR 2006 Ker 206 para 6; Deutsche Postbank Home Fin. Ltd v. Taduri Sridhar, (2011) 1 SCC 320 para 12; and S.N. Prasad v. Monnet Finance Ltd., (2011) 1 SCC 320 Para
19).
The spectrum has also been sold. I have been informed that the amount is deposited in an escrow account. In the light of the above, the application of the applicant-Banks is dismissed, as the same is not maintainable."
106. In view of the same, the present application is also disposed of.
107. In the connected petition being O.M.P. (I) (COMM.) No.105/2016 against the same respondent, in para 93 thereof, the following orders are passed:-
"93. In the meanwhile, the respondent or its agent is directed not to withdraw at least a sum of Rs.41.34 crore from the funds lying in the Escrow account. This order is being passed because of the reason that after the transfer of spectrum by the respondent in favour of Bharti in clandestine manner within the knowledge of SBI, they have not disclosed the details of the Escrow account despite of query raised by the Court from time to time. They had not only failed to file the reply in time but also avoided to give the details required by the Court."
108. In the present case also, the respondent or its agent are restrained from withdrawing a sum of Rs.47.20 crore from the OMP(I)(COMM.) No.95/2016 Page 70 of 71 Escrow account where the money, if any transferred, after transferring of the spectrum in breach of the Court orders.
109. The present petition is accordingly disposed of.
110. The findings arrived at are tentative and the same shall have no bearing in the arbitration proceedings which may be decided without any influence of this order.
111. Dasti, under the signatures of the Court Master.
(MANMOHAN SINGH) JUDGE SEPTEMBER 14, 2016 OMP(I)(COMM.) No.95/2016 Page 71 of 71