Telecom Disputes Settlement Tribunal
Imcl And Ors vs Media Pro Enterprise India Pvt. Ltd., ... on 24 December, 2014
TELECOM DISPUTES SETTLEMENT & APPELLATE TRIBUNAL
NEW DELHI
Dated 24th December, 2014
Petition No.253 (C) of 2013
IMCL & Ors. ...Petitioners
Vs.
Media Pro Enterprise India Pvt. Ltd. ...Respondent
BEFORE:
HON'BLE MR. JUSTICE AFTAB ALAM, CHAIRPERSON
HON'BLE MR. KULDIP SINGH, MEMBER
For Petitioner Nos. 1-4 : Ms. Vandana D. Jaisingh, Advocate
Ms. Kanupriya Gupta, Advocate
Mr. Sandeep Arya, Manager (Legal)
For Respondent : Mr. Tejveer Singh Bhatia, Advocate
Mr. Upender Thakur, Advocate
Mr. Rohan Swarup, Advocate
Singh & Singh Law Firm LLP
ORDER
Kuldip Singh:
The dispute in the present case pertains to the rates charged by the respondent as subscription fee for its signals for DAS phase II areas. Page 1 of 17 Petitioner No.1 is a company registered under the Companies Act, 1956 and is engaged in the business of Multi System Operator (MSO). Respondent is an authorized distributor of signals of Star and Zee Group of channels. Petitioners No. 2 to 4 are joint ventures of petitioner no.1. Petitioner no. 1 retransmits cable television signals to its link operators as well as to its direct consumers in various territories across the country.
2. On 06.02.2013, Petitioner No.1 entered into a Memorandum of Understanding with the respondent for re-transmission of the respondent's channels from its network for a period of twelve months commencing from 01.7.2012. As per this Memorandum of Understanding, the term of the same was from 01.7.2012 to 30.6.2013 or till the mandatory implementation of DAS phase II, as notified by Ministry of Information & Broadcasting. Para 2 of the said Memorandum of Understanding relating to the term is as under :-
"2. The term of this MoU shall commence from 1st July, 2012 and shall be valid upto 30th June, 2013 ("Term").
For the sake of clarify, the Term of this MoU for the headends falling within the ambit of mandatory implementation of DAS Phase II as notified by Ministry of Information & Broadcasting ("MIB") shall commence from 1st July, 2012 and shall be valid upto mandatory implementation of DAS Phase II or 30th June, 2013, whichever is earlier."
Page 2 of 17
3. On 01.4.2013, the respondent wrote to petitioner No.1 that his areas of Nasik-Thane have come under the DAS regime with effect from 01.4.2013 and asked it to execute a mutually negotiated agreement for DAS-II areas by 15.4.2013 in terms of its Reference Interconnect Offer (RIO) and in case the petitioner failed to do so, it would lead to de-activation of its signals.
Petitioner No.1 had, however, filed its objections to the RIO of the respondent in June 2012 and since the same had not been disposed of by TRAI till that date, was not willing to sign the RIO based agreement. Perceiving threat of disconnection of its signals, it filed a Writ Petition No. 2505 of 2013 before the Hon. High Court of Delhi under Article 226 of the Constitution of India, as the Tribunal was not functional at that time.
4. The parties agreed before the Delhi High Court for a protem arrangement on 18.4.2013 as per which, petitioner No.1 was to sign the DAS agreement by 25.4.2013 and deposit in Court 50% of the amount of the difference between what was being paid at that time and what was being demanded by the respondent under the new regime, within ten days and to deposit balance 50% by way of bank guarantee in favour of the Registrar General of the Court within two weeks. (copy of order is available as Annexure-P-1 on pages 29-31 of the Paper Book).
Page 3 of 17
In pursuance of this order dated 18.04.2013 Petitioner No.1 had to execute the Memorandum of Understanding with respondent before 25.04.2013. The proposed Memorandum of Understanding drafted by the respondent was sent to petitioner No.1 for execution via email dated 04.04.2013. The said Memorandum of Understanding was for the areas of Ahmadabad, Surat, Vadodara, Kalyan-Dombivali, New Mumbai, Thane, Nagpur, Pune, Nasik, Solapur, Bangalore, and Mysore as stated in the Schedule B of the draft. Three of these areas did not belong directly to petitioner No.1. For the area of Kalyan-Dombivali Petitioner No.1 had a joint venture with petitioner No.2, for the area of Pune Petitioner No.1 had a joint venture with Petitioner No.3 and Petitioner No.4 The area of Solapur did not belong to these petitioners but to a partnership firm M/S Bhima Riddhi Digital Services who was petitioner No. 5 in the same petition. Since some facts of that case are different, the same is not considered in the present order. In order to comply with the order dated 18.04.2013 all the petitioners have executed their respective Memoranda of Understanding for their respective areas as mentioned above with respondent on 24.04.2013 under protest and without prejudice to their rights and contentions.
After the Tribunal resumed functioning, petitioner No.1 was allowed by the Hon. High Court of Delhi on 08.8.2013 to withdraw its Writ Petition and approach the Tribunal and the present petition was filed on 21.8.2013.
5. As per the above MOU dated 24.4.2013, the petitioners had to pay a fixed monthly fee as given in the Schedule "B" of the MOU. This fee was Page 4 of 17 different for different areas and was for a benchmark number of subscribers. If in a particular month the number of subscribers increased beyond the benchmark figure, the petitioner operating in that area had to pay Rs. 35 per subscriber for such excess number of subscribers. This was in addition to the fixed fee for that area. The relevant Clause 5 of the MOU and the Schedule "B" for all the areas is as under:
"5. License Fee:
The monthly license Fee for the channels for the subscribed from the list of Pay Channels listed in Schedule A hereof, for the Territory, payable by IMCL to Media Pro for the grant of rights hereunder for the Term, shall be based on the terms set forth below ("License Fee") as under:-
(i) A fixed monthly license fee for the Territory as detailed city wise in Schedule B hereof. ("Fixed Monthly Fee"). The Fixed Monthly Fee shall be paid on or before 30th day of the concerned month ("Due Date") subject to the receipt of a tax complaint invoice specifying the service tax registration number and Permanent Account Number of Media Pro for the relevant month. For example the Monthly Fee for April 2013 shall be paid on or before 30th April 2013.
(ii) If during a particular month the number of subscribers served by the Platform in each of the cities is in excess of the subscriber numbers mentioned in Schedule B hereof, ("Benchmark Subscribers"), IMCL shall in addition to the Fixed Monthly Fee pay an additional License Fee for every Subscriber in excess of Benchmark Subscribers which shall be Cost Per Subscriber ("CPS") of Rs.35/- per subscriber per month multiplied by the Monthly Average Subscriber Level ("Additional Monthly Fee")."Page 5 of 17
"Schedule B"
The monthly license fee for the channels for the subscribed from the list of pay Channels.
S.No. Territory/DAS- Fixed fees as Benchmark
II Cities per MOU dated Subscribers
24.04.2013
1. Ahmedabad 4884000 150000
2. Surat 2775000 150000
3. Vadodara 3996000 75000
4. New Mumbai 1998000 30000
5. Thane 8769000 120000
6. Nagpur 3885000 150000
7. Nasik 777000 20000
8. Bangalore 8214000 300000
9. Mysore 555000 30000
10. Kalyan- 2664000 75000
Dombivali
11. Pune 1332000 70000
Total 39849000 1170000
6. On 22.8.2013, the Tribunal passed an interim order on similar terms & conditions as prescribed in the order dated 18.4.2013 passed by the Delhi High Court. However, the petitioner, with the consent of the parties, was Page 6 of 17 asked to make the deposit in terms of that order before the TDSAT instead of the High Court. It was also directed that the amount deposited by the petitioner with the Delhi High Court may also be transferred to the TDSAT. The amount deposited by the petitioner as also that may be received from the Delhi High Court may be kept in the FDR for six months. Subsequently, vide order dated 23.01.2014, the interim order passed earlier by the High Court and continued by the Tribunal was modified in the following terms :-
"1. The petitioner shall submit the SLR to the respondent every month as per the provisions of the MoU and shall make payments of the monthly subscription fee @ Rs. 35/- per subscriber as per the number of its actual subscribers for that month. The subscriber base shall comprise the aggregate for all the 12 cities covered by the agreement.
2. Payments in the above terms shall be made from the month of November, 2013 onwards. The subscription fees for the months of November, December and January shall be made by February, 28, 2014 in two equal installments.
3. Subject to the above, the respondent shall continue to supply all 59 channels to the petitioner.
4. The petitioner is relieved from the obligation of making deposits in the Tribunal any further. The amount already deposited, shall be kept in a fixed deposit and shall abide by the final outcome of the petition."
7. Before we examine the matter on merits, we may briefly explain the process of migration of the re-transmission of cable television signals from the analogue to digital regime. In the analogue regime, signals received from the broadcaster or any agent of the broadcaster, by a MSO, were re- transmitted to one or more cable operators / consumers in an analogue Page 7 of 17 mode after placing the same in suitable bands and frequencies. This had an inherent dis-advantage that all the signals of all the channels were sent to the consumers whether the consumer wanted them or not. As compared to this, digital addressable system (DAS) regime provides for an electronic device (Hardware & Software) by means of which signals of the various channels can be sent in digital encrypted form which can be decoded by a device called the Set Top Box (STB) at the premises of the subscriber. Set Top Box can be authorized to decode only such channels that are wanted and requested by the subscriber through the Conditional Access System (CAS) and Subscriber Management System (SMS) available with the MSO. In the DAS regime, the number of subscribers receiving the signals of a particular broadcaster can be objectively determined using the SMS which was not possible in the analogue case. In analogue case, since all the subscribers were receiving all the signals, the subscribers who watched signals of a particular broadcaster could only be roughly estimated and this was one of the main reasons for a number of disputes. There are other advantages of the DAS regime in terms of the quality of service, etc. Telecom Regulatory Authority of India (TRAI) notified The Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012 on 30.4.2012 that set out the framework for the DAS regime. DAS areas were notified by the Central Government under sub-section (1) of Section 4A of the Cable Television Networks (Regulations) Act, 1995 (7 of 1995) that made it obligatory for Page 8 of 17 every cable operator to transmit or re-transmit programs of any channel in encrypted form through a digital addressable system in DAS areas.
8. Ms. Jaisingh, learned counsel for the petitioners submitted as under:-
(i) The MoU executed on 24.04.2013 between the parties provides for a minimum benchmark subscribers for different cities. The actual number of subscribers of the petitioners was much below the benchmark figure in the MoU. She argued that the cost per subscriber should be applied on the actual subscriber base and not on the minimum benchmark specified in the MoU.
(ii) Rate of Rs.35/- cost per subscriber was agreed only for Delhi and Mumbai and these cities being smaller, the rate per CPS in these cities should not be more than Rs.25/-
per subscriber.
(iii) Ms. Vandana Jaisingh further referred to an agreement between the respondent and M/s Den Networks Ltd. As per which M/s Den Networks were being charged at cost of Rs.30.50/- per subscriber.
As per the calculation of Ms. Jaisingh, the petitioners have paid an excess amount of Rs.10,10,15,653/- calculated @ Rs.35/- cost per subscriber till October, 2013. Further if the same is calculated @ Rs.30.50/- cost per subscriber, the excess amount as per the petitioner Page 9 of 17 comes to Rs.12,13,98,423/- till October, 2013. These amounts are inclusive of those deposited in the Tribunal.
9. The contention of the respondent is that in the present regulatory regime the petitioners can either opt for an RIO based subscription agreement or agreement mutually agreed between the parties.
10. The following questions arise in the dispute in the present petition:-
(i) Whether the petitioners are justified in insisting on an agreement based on terms other than those in the RIO?
(ii) If the answer to (i) is found in favor of the petitioners than, what should be the rate per subscriber or cost per subscriber (CPS)? and;
(iii) Whether the respondent can ask for a fixed fee based on benchmark number of subscribers?
11. In this regard, we may note, the following provisions of the Telecommunication (Broadcasting & Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012 which are as under:-
"5(1) A multi system operator may enter into an agreement with the broadcaster in accordance with the terms and conditions of Page 10 of 17 the Reference Interconnect Offer published by the broadcaster on such non-discriminatory terms and conditions. 5(2) Every broadcaster shall, who publishes revised Reference Interconnect Offer after the commencement of these regulations, give an option to all multi system operators to enter into an agreement in accordance with the revised Reference Interconnect Offer and it shall be open to the multi system operator to enter into fresh agreement or continue with the existing agreement.
"5(3) Every broadcaster shall, within a period of thirty days from the date of receipt of request from the multi-system operator, enter into an interconnection agreement or modify the existing interconnect agreement in accordance with the terms and conditions of the Reference Interconnect Offer published under these regulations or as may be mutually agreed.
5(6) It shall be mandatory for the broadcasters of pay channels to reduce the terms and conditions of the interconnection agreements into writing.
5(7) No broadcaster of pay channels shall make available signals of TV channels to any multi-system operator without entering into a written interconnection agreement."
(emphasis supplied) Page 11 of 17
12. From the above, it can be seen that the above regulations make it mandatory for the broadcaster of pay channels to enter into interconnection agreement with MSOs. We also note that unless the parties come to mutually acceptable terms, the agreement shall be based on the RIO terms. As a matter of fact, the very purpose of RIO is to bring transparency so that anybody willing to enter into Interconnect Agreement can do so on the Reference Interconnect Offer (RIO) terms, unless the parties are able to agree on some other mutual terms. We note that as per the Regulations, the broadcasters are required to publish the RIO. A copy of the respondent's RIO is available from pages 721-763 of the paper book.
13. We may note that reason for the new agreement arose due to the areas coming under DAS regime and in terms of the existing agreement, a new agreement had to be entered. We may also note that it was the respondent who wrote to the petitioner on 1.4.2013 to execute a fresh agreement. It is not the case of the petitioners that they were paying excessive subscription fees as per the earlier agreement dated 06.02.2013 . This agreement was also on a fixed fee basis as per which the petitioner was required to pay the amounts for various cities as given in the column 3 of the table ( table No. 2), below:-
S.No. Territory/DASII Monthly fee Fixed fees as Difference Cities payable by IMCL as per MOU per MoU dated dated 6.2.2013 (in rupees) 24.04.2013
1. Ahmedabad 4412335 4884000 471665 Page 12 of 17
2. Surat 2875001 2775000 -100001
3. Vadodara 3677659 3996000 318341
4. New Mumbai 1866012 1998000 131988
5. Thane 8189722 8769000 579278
6. Nagpur 3307683 3885000 577317
7. Nasik 750366 777000 26634
8. Bangalore 7442114 8214000 771886
9. Mysore 511000 555000 44000
10. Kalyan- 2400000 2664000 264000 Dombivali
11. Pune 240021 1332000 1091979 Total 35671913 39849000 4177087 The fixed fee payable in terms of the protem agreement dated 24.04.2013 is given in the column 4 of the Table. If we go by the calculation submitted by Ms. Jaisingh based on Rs.35/- per subscriber, without any benchmark subscriber or fixed fee, the amount payable for the months of April, 2013 to October, 2013 for DAS II cities comes to Rs.17,79,27,348/- as against Rs.24,97,03,391/- which was payable in terms of the existing agreement before the dispute. If the petitioners were paying so much in excess why was there no dispute in regard to that agreement? Why was it the respondent who insisted on a new agreement and why the petitioners did not ask for it? We fail to understand that how the respondent can be Page 13 of 17 expected to enter into a mutually acceptable agreement or accept rates which are far less than those in the analog regime for which there was an existing agreement between the parties.
14. We may note that the intent of the DAS regime is to give choice to the subscribers to subscribe to the channels of their choice. The petitioner could have easily entered into a RIO based agreement with the respondents and offered the channels to its subscribers on a-la-carte basis with suitable margins. Ms. Jaisingh argued that the terms and conditions of the RIO were not acceptable to them and they had challenged the same before the Regulator, TRAI but no decision was taken on that. If that was so, the petitioner could have taken recourse to law before the appropriate forum but this argument cannot be used to ask the respondent to enter into an agreement whose basis is totally different from the RIO. Any agreement such as the fixed fee and CPS agreement, whose basis is different from the RIO, had to be on mutually acceptable terms only in terms of Clause 5 of the Telecommunication (Broadcasting and Cable Services) Interconnection (Digital Addressable Cable Television Systems) Regulations, 2012.
15. With regard to the submission of Ms. Jaisingh that the respondent cannot insist on a minimum benchmark, we note Clause 5(21) of the Regulations as under:
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" 5(21) No service provider shall demand from any other service provider a minimum guaranteed amount as subscription fee for the channels provided by such service provider."
We would have agreed with Ms. Jaisingh that the respondent cannot insist on a minimum guaranteed amount had the agreement been on RIO rates and as per RIO terms and conditions. We note that this rate of Rs.35/- per CPS for 59 channels of the respondent is much less than the RIO rates for these same channels. Apparently, this rate is given as a volume discount expecting the petitioners to generate a certain amount of volumes beyond which this rate is applied.
16. With regard to the issue of parity with M/s Den Networks Ltd., Mr. Bhatia, learned counsel appearing for the respondent stated that even in their case, there is a fixed fee and only beyond that CPS rate applies. He further stated that this fee is substantially higher than the petitioners.
Without going into the details of the same, we may note that these two agreements are not comparable because they pertain to different areas that have different potential and the volumes of subscribers are also different.
17. In the course of hearing, it was stated at the Bar that the petitioners have already executed agreement based on RIO with Star group with effect from 10.11.2014 and the dispute in the present petition is now only with regard to the payment for the past period.
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18. After hearing the rival submissions at quite some length and in view of the foregoing discussions, we do not find that the petitioners have made out any case for modification in the protem agreement dated 24.4.2013 signed in pursuance to the order of the Hon'ble Delhi High Court dated 18.04.2013.
19. The Registry is accordingly directed to release the amounts deposited by the petitioners with the Tribunal in terms of its order dated 22.08.2013 to the respondent. The respondent after taking into consideration the amount received from the Tribunal may raise demand for balance, if any, in terms of the MoU dated 03.04.2013 executed on 24.04.2013. The demand so raised shall be paid by the petitioners within four weeks of its receipt.
The petition is accordingly dismissed qua Petitioners No. 1 to 4 with no order as to costs. Petition for Petitioner No. 5 will be listed in due course.
......................
(Aftab Alam) Chairperson ......................
(Kuldip Singh) Member /Hkc/ Page 16 of 17 Page 17 of 17