TaxTMI 
TaxTMI 
2011 (10) TMI 580
X X X X Extracts X X X X
X X X X Extracts X X X X
....censees defaulted in payment of license fee and made a representation to the Government of India, Ministry of Telecommunications for relief against the high license fee for the survival of the telecom industry. The Government of India considered the representations and after a number of deliberations with the licensees offered a new package, known as the "National Telecom Policy 1999 - Regime" giving an option to the licensees to migrate from fixed license fee to revenue sharing fee. Accordingly, letters dated 22.07.1999 were sent to different licensees offering them a change over to NTP-99 regime, which inter alia stated: "(i) The cut off date for change over to NTP-99 regime will be 01.08.1999. (ii) The licensee will be required to pay one time Entry Fee and License Fee as a percentage share of gross revenue under the license. The Entry Fee chargeable will be the license fee dues payable by existing licensees upto 31.07.1999, calculated upto this date duly adjusted consequent upon notional extension of effective date as in para (ix) below, as per the conditions of existing license. (iii) The license fee as percentage of gross revenue under the license shall be pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... paid to the Government if gross revenue had included as component of Sales Tax and Service Tax." 4. In the year 2003, some of the licensees questioned the validity of the definition of Adjusted Gross Revenue in the license agreement before the Tribunal and contended that Adjusted Gross Revenue can only relate to the revenue directly arising out of telecom operations licensed under Section 4 of the Indian Telegraph Act, 1885 (for short "the Telegraph Act") after adjustment of expenses and write offs and revenues directly not attributable to the licensed telecom activities. They also contended that miscellaneous and other items including interest income, and dividend income, value of rebates, discounts, free calls and reimbursement from USO fund etc. ought not to be included in the Adjusted Gross Revenue for the purpose of computation of license fee. The Union of India filed its reply before the Tribunal contending that the licensees having unconditionally accepted the migration package and having taken the benefit of the same are bound by the terms and conditions of the license agreement and cannot be permitted to resile from the same. In its order dated 07.07.2006, the Tribunal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was not entitled to argue the matter de novo and the earlier order dated 07.07.2006 of the Tribunal had become final. In its fresh order dated 30.08.2007 (for short `the impugned order') the Tribunal held that its earlier order dated 07.07.2006 having become final, it cannot be re-opened after the dismissal of Civil Appeal No.84 of 2007 by this Court. The Tribunal held that its finding in the earlier order dated 07.07.2006 that Adjusted Gross Revenue will include only revenue arising from licensed activity and not revenue from activities outside the license cannot be re-agitated by the Union of India. 7. Having held that Adjusted Gross Revenue will include only revenue arising from licensed activity, the Tribunal in the impugned order considered the recommendations of the TRAI regarding the heads of revenue to be included and the heads of revenue to be excluded from the Adjusted Gross Revenue and decided as follows: (i) The Tribunal accepted the recommendation of the TRAI that income from dividend even though part of the revenue does not represent revenue from licensed activity and, therefore, cannot be included in the Adjusted Gross Revenue. (ii) The Tribunal a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m part of the Adjusted Gross Revenue as these activities do not require a license. (ix) The Tribunal held that payments received on behalf of third party should not form part of the Adjusted Gross Revenue and did not accept the recommendation of the TRAI in this regard. (x) The Tribunal did not accept the recommendation of the TRAI that the revenue from TV up-linking and Internet service should form part of the Adjusted Gross Revenue as these activities are covered under a separate license. (xi) The Tribunal accepted the recommendation of the TRAI that sale of handsets or telephone equipment bundled with telecom service should be part of the Adjusted Gross Revenue because such sale comes within the licensed activity. (xii) The Tribunal accepted the recommendation of the TRAI that receipts from USO Fund will not form part of the Adjusted Gross Revenue. (xiii) The Tribunal accepted the recommendation of the TRAI that revenue receipts on account of ADC (Access Deficit Charge) should form part of the Adjusted Gross Revenue. (xiv) The Tribunal accepted the recommendation of the TRAI that costs on account of port charges, interconnection set-up charges, leas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rule of res judicata or estoppel is not applicable to pure question of law relating to the jurisdiction of the court and in support of their submissions cited the decisions of this Court in Isabella Johnson vs. M.A. Susai (Dead) by LRs. [(1991) 1 SCC 494] and Chandrabhai K. Bhoir and Others vs. Krishna Arjun Bhoir and Others [(2009) 2 SCC 315] in which this Court has taken a view that an order without jurisdiction is a nullity and it is not binding on the parties. They argued that as the order dated 07.07.2006 of the Tribunal questioned the definition of Adjusted Gross Revenue in the license agreement, the order of the Tribunal was without jurisdiction and was a nullity. 9. Mr. Sorabjee and Mr. Dwivedi next submitted that the Tribunal failed to appreciate that license fee or payment made under the license agreement is really in the nature of price or consideration for parting with the exclusive privilege of the Central Government and is binding on the Central Government and the licensee and the licensee having signed the contract and agreed to the terms and conditions therein including the payment to be made cannot question the terms of the payment before the Tribunal. They submit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....act that the Central Government filed its objections to the recommendations of the TRAI before the Tribunal and hence the impugned order of the Tribunal is not sustainable in law. 12. Mr. C.S. Vaidyanathan, learned senior counsel appearing for the Cellular Operators Association, which is an association of some of the licensees, submitted that the Tribunal in its earlier order dated 07.07.2006 had merely interpreted the definition of Adjusted Gross Revenue to cover revenue from all activities of the licensee under the license and that the finding in its order dated 07.07.2006 that revenue realized from activities of the licensee which are beyond the licensed activities cannot form part of the Adjusted Gross Revenue for the purpose of license fee could not be re-agitated after Civil Appeal No.84 of 2007 filed by the Union of India against the order dated 07.07.2006 of the Tribunal had been dismissed by this Court on 19.01.2007. In support of the submission, he relied on K. Vidya Sagar v. State of U.P. and Others [(2005) 5 SCC 581] in which this Court has held that the reliefs claimed by the petitioner under Article 32 of the Constitution cannot be granted if he had claimed the same ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....State Government to levy toll at such rates `as it thinks fit' and held that it is only with reference to the meaning of the word `toll' that the State Government must justify the levy on the public by the construction of the bridge. Mr. Vaidyanathan argued that the expression `as it thinks fit' in the proviso to Section 4 of the Telegraph Act would therefore have to be interpreted in the context of the license granted by the Central Government under Section 4 of the Telegraph Act for telecom activities and as the license granted under Section 4 of the Telegraph Act is only for carrying on telecom activities, revenues realized from non-telecom activities cannot be included in the Adjusted Gross Revenue for the purpose of levy of license fee. 14. Mr. Vaidyanathan next submitted that in any case the discretion vested in the Central Government under the proviso to Section 4 of the Telegraph Act has to be exercised in accordance with law and in a reasonable manner. In support of the submission, he cited the decision in Delhi Science Forum and Others v. Union of India [(1996) 2 SCC 405] in which this Court interpreting the first proviso to Section 4(1) of the Telegraph Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his power conferred by Section 14(a)(i) of the TRAI Act that the Tribunal has passed the order dated 07.07.2006. He relied on the decision of this Court in Union of India v. Tata Teleservices (Mahrashtra) Ltd. [2007) 7 SCC 517] in support of this contention. He submitted that the order dated 07.07.2006 of the Tribunal was within the powers of the Tribunal and had become final after the dismissal of Civil Appeal No.84 of 2007 of the Union of India by this Court on 19.01.2007. 18. Mr. Srinivasan next submitted that the fifth proviso to Section 11(1) of the TRAI Act states that if the Central Government having considered the recommendation of the TRAI, comes to a prima facie conclusion that such recommendation cannot be accepted or needs modification, it shall refer the recommendation back to the TRAI for its reconsideration and the TRAI may, within fifteen days from the receipt of such reference, forward to the Central Government its recommendation after considering the reference made by the Central Government and it is only after receipt of such further recommendation, if any, of the TRAI that the Central Government shall take a final decision. He submitted that the Tribunal in its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....India filed a Review Application before the Tribunal praying that the relief granted by the Tribunal should be extended to all members of the Association and that the relief should be effective from the date of the demand and not from the date the licensee approached the Tribunal, but by order dated 14.09.2007 the Tribunal dismissed the Review Application and, therefore, the Association of Telecom Service Providers of India have filed Civil Appeal Nos.179-180 of 2008. He vehemently argued that the Tribunal ought to have granted the relief to all members of the Association and should have made the relief effective from the date of the agreement and not from the date when the licensee approached the Tribunal. 21. Mr. Gopal Jain, learned counsel appearing for M/s Bharti Broadband, submitted that the Tribunal in its order dated 07.07.2006 had already decided Petition No. 98 of 2005 of M/s Bharti Broadband and the Union of India had not filed any appeal against M/s Bharti Broadband and, therefore, the order dated 07.07.2006 of the Tribunal so far as M/s Bharti Broadband is concerned, had become final. He relied on a recent judgment of this Court in State of Uttaranchal & Anr. v. Sunil ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order of the Tribunal. We have therefore formulated the following substantial questions of law which arise for decision in these appeals: (i) Whether after dismissal of Civil Appeal No.84 of 2007 of the Union of India against the order dated 07.07.2006 of the Tribunal, by this Court by order dated 19.01.2007, the Union of India can re-agitate the question decided in the order dated 07.07.2006 that the Adjusted Gross Revenue will include only revenue arising from licensed activities and not revenue from activities outside the license of the licensee. (ii) Whether the TRAI and the Tribunal have jurisdiction to decide whether the terms and conditions of license which had been finalised by the Central Government and incorporated in the license agreement including the definition of Adjusted Gross Revenue. (iii) Whether as a result of the Union of India not filing an appeal against the order dated 07.07.2006 of the Tribunal passed in favour of some of the licensees, the said order dated 07.07.2006 had not become binding on the Union of India with regard to the issue that revenue realised from activities beyond the licensed activities cannot be included in the Adjusted Gro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eciate that in fact some licensee obtained new license which contains the definition of `Gross Revenue' and `Adjusted Gross Revenue' which has been unconditionally accepted by the appellants. 6.Because the Hon'ble TDSAT failed to appreciate that under Section 4 of the Indian Telegraph Act, 1885 it is the exclusive privilege of the Central Government to establish, maintain and work telegraph/telecom and this privilege can be given to the private parties by granting licenses on such terms and conditions as the Central Government thinks fit and appropriate." Thus, as per the express language of the order dated 19.01.2007 of this Court in Civil Appeal No.84 of 2007, Union of India could raise each of the grounds extracted above before the Tribunal. Hence, even if we hold that the order dated 07.07.2006 of the Tribunal got merged with the order dated 19.01.2007 of this Court passed in Civil Appeal No.84 of 2007, by the express liberty granted by this Court in the order dated 19.01.2007, Union of India could urge before the Tribunal all the contentions covered under Ground Nos.1 to 6 extracted above including the contention that the definition of Adjusted Gross Revenue as g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e following matters, namely:- (i) need and timing for introduction of new service provider; (ii) terms and conditions of license to a service provider; (iii) revocation of license for non-compliance of terms and conditions of license; (iv) measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services; (v) technological improvements in the services provided by the service providers; (vi) type of equipment to be used by the service providers after inspection of equipment used in the network; (vii) measures for the development of telecommunication technology and any other matter relatable to telecommunication industry in general; (viii) efficient management of available spectrum; (b) discharge the following functions, namely, :- (i) ensure compliance of terms and conditions of licence; (ii) notwithstanding anything contained in the terms and conditions of the license granted before the commencement of the Telecom Regulatory Authority of India (Amendment) Act, 2000, fix the terms and conditions of inter-connectivity between the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to a service provider if no recommendations are received from the Authority within the period specified in the second proviso or within such period as may be mutually agreed upon between the Central Government and the Authority: Provided also that if the Central Government having considered that recommendation of the Authority, comes to a prima facie conclusion that such recommendation cannot be accepted or needs modification, it shall refer the recommendation back to the Authority for its reconsideration, and the Authority may, within fifteen days from the date of receipt of such reference, forward to the Central Government its recommendation after considering the reference made by that Government. After receipt of further recommendation, if any, the Central Government shall take a final decision." "14(a)(i). Establishment of Appellate Tribunal.-- The Central Government shall, by notification, establish an Appellate Tribunal to be known as the Telecom Disputes Settlement and Appellate Tribunal to-- (a) adjudicate any dispute-- (i) between a licensor and a licensee." 28. A bare perusal of sub-section (1) of Section 4 of the Telegraph Act shows that the Central Gov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uently, the terms and conditions of the license including the definition of Adjusted Gross Revenue in the license agreement are part of a contract between the licensor and the licensee. 30. We have to, however, consider whether the enactment of the TRAI Act in 1997 has in any way affected the exclusive privilege of the Central Government in respect of the telecommunication activities and altered the contractual nature of the license granted to the licensee under the proviso to sub-section (1) of Section 4 of the Telegraph Act. Section 2(e) of the TRAI Act quoted above defines "licensee" to mean any person licensed under sub-Section (1) of Section 4 of the Telegraph Act for providing specified public telecommunication services and Section 2(ea) defines "licensor" to mean the Central Government or the telegraph authority who grants a license under Section 4 of the Telegraph Act. Sub-section 2(k) defines "telecommunication services" very widely so as to include all kinds of telecommunication activities. These provisions under the TRAI Act do not affect the exclusive privilege of the Central Government to carry on telecommunication activities nor do they alter the contractual nature o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which states that the TRAI shall discharge the functions enumerated under sub-clauses (i), (ii) and (ix) under clause (b) of sub-section (1) of Section 11 of the TRAI Act. Under clause (c) of sub- section (1) of Section 11 of the TRAI Act, the TRAI performs the function of levying fees and other charges in respect of different services and under clause (d) of sub-section (1) of Section 11, the Central Government can entrust to the TRAI other functions. These functions of the TRAI under clauses (c) and (d) of sub-section (1) of Section 11 of the TRAI Act are also not recommendatory in nature. That the functions of the TRAI under clause (a) are recommendatory while the functions of the TRAI under clauses (b), (c) and (d) are not recommendatory will also be clear from the provisos 1st to 5th which refer to the recommendations of the TRAI under clause (a) of sub-section (1) of Section 11 of the TRAI Act and not to clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act. The scheme of TRAI Act therefore is that the TRAI being an expert body discharges recommendatory functions under clause (a) of sub-section (1) of Section 11 of the TRAI Act and discharges regulat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....censor and a person who had not become a licensee. The result is that the Tribunal has no jurisdiction to decide upon the validity of the terms and conditions incorporated in the license of a service provider, but it will have jurisdiction to decide "any" dispute between the licensor and the licensee on the interpretation of the terms and conditions of the license. 34. Coming now to the facts of the cases before us, clause (iii) of the letter dated 22.07.1999 of the Government of India, Ministry of Communications, Department of Telecommunications, to the licensees quoted above made it clear that the license fee was payable with effect from 01.08.1999 as a percentage of gross revenue under the license and the gross revenue for this purpose would be total revenue of the licensee company excluding the PSTN related call charges paid to DOT/MTNL and service tax calculated by the licensee on behalf of the Government from the subscribers. It was also made clear in the aforesaid clause (iii) that the Government was to take a final decision after receipt of the TRAI's recommendation on not only the percentage of revenue share but also the definition of revenue. In accordance with this....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., if it had the jurisdiction to decide the dispute, directed the TRAI to consider the opinion of the expert on accountancy and send its recommendations to the Central Government and directed the Central Government to consider such fresh recommendations of the TRAI as provided in the provisos to section 11(1) of the TRAI Act. Instead the Tribunal has considered the recommendations of the TRAI and passed the fresh impugned order dated 30.08.2007 contrary to the very provisions of Section 11(1)(a) of the TRAI Act and the provisos thereto. At any rate, as the Central Government has already considered the fresh recommendations of the TRAI and has not accepted the same and is not agreeable to alter the definition of Adjusted Gross Revenue, the decision of the Central Government on the point was final under the first proviso and the fifth proviso to Section 11(1) of the TRAI Act, 1997. 36. We may now deal with the authorities relied upon by the Tribunal and learned counsel for the parties. In Cellular Operators Association of India & Ors. v. Union of India & Ors. (supra), the Cellular Operators Association of India approached the Tribunal under Section 14 of the TRAI Act challenging the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ense have challenged the definition of Adjusted Gross Revenue incorporated in the terms of the license. 38. In State of U.P. v. Devi Dayal Singh (supra), a truck owner, Devi Dayal Singh, challenged the right of the State Government to recover by way of toll under Section 2 of the Tolls Act, 1851, an amount for the actual construction of the bridge. This Court held that Section 2 of the Tolls Act, 1851 which enables the State Government to levy toll at such rates `as it thinks fit' and the only restriction is latent in the word "toll" itself. This was therefore not a case of dispute between the Government and the contractor where the contractor had challenged a stipulation of the contract. In the present case, on the other hand, the licensees had accepted the terms of the license and after having taken the benefits of the license is now trying to wriggle out from the terms of the license and in particular the definition of the Adjusted Gross Revenue. 39. In Union of India v. Tata Teleservices (Mahrashtra) Ltd. (supra) cited by Mr. Srinivasan, a letter of intent was issued to Tata Teleservices and this was accepted by Tata Teleservices but ultimately the contract did not come i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng an appeal against the order dated 07.07.2006 in favour of some of licensees, the order dated 07.07.2006 had not become binding on the Union of India with regard to issues which had been decided by the Tribunal in the said order dated 07.07.2006. According to the learned counsel for the licensees in whose favour order dated 07.07.2006 has been passed and against whom no appeal was filed by the Union of India challenging the order dated 07.07.2006, the order dated 07.07.2006 of the Tribunal could not be re-opened because of the principle of res judicata. In the opening paragraph of the order dated 07.07.2006, the Tribunal has stated: "By this batch of petitions the Association of Unified Telecom Service Providers of India, Cellular Operators Association of India and some individual Telecommunication Service Providers are questioning the validity of the definition of Adjusted Gross Revenue (AGR) in the licenses given to various telecom service providers." Finally, in the operative part of the order dated 07.07.2006, the Tribunal has directed as follows: "Apart from the principal question whether the State Government can include the gross income of the licensee from non-licensed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply. In Chandrabhai K. Bhoir and Others vs. Krishna Arjun Bhoir and Others (supra) this Court relying on Chief Justice of A.P. vs. L.V.A. Dixitulu [(1979) 2 SCC 34, Union of India vs. Pramod Gupta [(2005) 12 SCC 1] and National Institute of Technology vs. Niraj Kumar Singh [(2007) 2 SCC 481] has held: "an order passed without jurisdiction would be a nullity. It will be a coram non judice and non est in the eye of the law. Principle of res judicata would not apply to such cases". We accordingly hold that the order dated 07.07.2006 of the Tribunal was not binding on the Union of India even in those cases in which the Union of India did not file any appeal against the order dated 07.07.2006 before this Court. 42. The last substantial question of law which we have to decide is whether the licensee can challenge the computation of Adjusted Gross Revenue and if so at what s....