TELECOM
DISPUTES SETTLEMENT & APPELLATE TRIBUNAL
Dated
18th December, 2009
Petition
No.153(C) of 2009
M/s
Asianet Satellite Communications Ltd. ..…Petitioner
Versus
ESPN
Software Pvt. Ltd. ..….Respondent
BEFORE:
HON’BLE
MR. JUSTICE S.B.SINHA,
CHAIRPERSON
HON’BLE
MR. G. D. GAIHA, MEMBER
|
For
Petitioners |
: |
Mr.Ramji
Srinivasan, Sr. Advocate |
|
For
Respondent |
: |
Mr.N.Ganpathy,
Advocate |
JUDGEMENT
S.B.
Sinha
The petitioner is an MSO/Cable
Operator. It started its operation in
Kerela in the year 1993. It’s scale of
operation is very large as would appear from its company profile which reads as
under:
“Asianet is one of the leading CATV Company in
Company Advantages:
Asianet has a very strong subscriber base in the
affluent state of Kerala that can be cross-sold/ up sold VAS/Digital offerings,
which is backed by a State of the art network spanning 700 kms UG fiber
network, 40,000 kms of HFC, 20,000 amplifiers and benchmarked on international
quality standards. It is already
offering CATV & Broadband bundle to subscribers and progressively moving
towards “Triple Play” strategy. Unlike
most of the major players in
Growth over the last decade:
Asianet has seen a steady growth in its revenues and
EBITA over the last decade due to its various growth strategies both organic
and in organic. The graphs here depict
this strategies’ growth.”
It,
on its own showing, has about 8.50 lakhs of cable subscribers spread over a
large part of the State of
“MOU
dated
MOU
dated 08th March 2005 up to Rs.67 Lakhs @ ESS pricing of Rs.42.48/-
for (ESPN and Star Sports Services).
MOU
dated 17th June 2006 up to Rs.67 Lakhs @ ESS pricing of Rs.42.48/-
for (ESPN and Star Sports Services).
MOU
dated 04th July 2007 from Rs.80 Lakhs to Rs.1.10 Crores @ ESS
pricing of Rs.42.48/- for ESPN and Star Sports Service and @ Rs.28/- for Star
Cricket Services.
MOU
dated 04th July 2007 from Rs.80 Lakhs to Rs.1.10 Crores @ ESS
pricing of Rs.44.17/- for ESPN and Star Sports Service and @ Rs.28/- for Star
Cricket Services.”
It’s audited
balance sheet and its pay out to the channels read as under:
|
FYI |
Total
income from Cable Operation (Subscription Fee Only) as per Balance Sheet |
Total
payment made to pay channels as per Balance Sheet |
%
of Pay channel amount over collections |
|
2002-03 |
81.40 |
26.24 |
32% |
|
2003-04 |
84.60 |
29.50 |
35% |
|
2004-05 |
87.21 |
27.30 |
31% |
|
2005-06 |
103.90 |
26.98 |
26% |
|
2006-07 |
109.36 |
28.49 |
26% |
|
2007-08 |
113.67 |
33.12 |
29% |
|
2008-09 |
119.35 |
35.44 |
30% |
|
**Estimated figures of 2008-09. |
|
|
|
|
***INR and in Crores |
|
|
|
It
has, however, been accepted that in the year 2008-09, its total income from
cable operation was Rs.129.19 crores and the total payment made to the channels
as per its balance sheet was Rs.35.79 crores showing an annual growth of
40%. It is accepted that its list of subscribers
runs into 5000 pages.
The
petitioner contends that although the agreement entered into by and between the
parties would disclose that the amount of subscription fee payable by it to the
respondent is Rs.1.10 crores, but having regard to discount granted to the extent of a sum of Rs.20 lakhs, the net
amount payable by it was only Rs.90 lakhs.
According to the petitioner it had been paying the respondent on the
aforementioned basis which was being accepted by it without any demur whatsoever.
The
respondent, however, inter alia, on the premise that a sum of Rs.8,77,63,450/-
was owing and due from the petition served a notice on it in terms of its
letter dated 18.06.2009, relevant portions whereof read as under:
“Accordingly, please note that we are not in a
position to extend any more credit period & that you have been provided
with enough time to pay the same. Hence,
please treat this letter as 21 days’ notice as required under clause 4.1 of the
Telecommunication (Broadcasting and Cable Services) Interconnection Regulation,
2004, as amended by the Telecommunication (Broadcasting and Cable Services)
Interconnection(Third Amendment) Regulation, 2006 and make the payment of
Rs.8,77,63,450/- within 21 days of this letter, failing which we would be left
with no alternative but to discontinue our services provided to you
w.e.f. 09/09/2009.
Further, please be informed that your contract has
been expired and you are yet to renew the contract. In such circumstances when the contract has
expired and you have not shown any interest in discussing the terms of its
renewal, we will not be able to continue providing you with ESPN/STAR SPORTS
& STAR CRICKET services.
Lastly, please note that we are in the process of
issuing public notice to keep your customers informed of the above as required
under clause 8.1 & clause 4.1 of the Telecommunication (Broadcasting and
Cable Services) Interconnection Regulation, 2004, as amended by the
Telecommunication (Broadcasting and Cable Services) Interconnection(Third
Amendment) Regulation, 2006.”
To
the same effect a public notice was also issued on the same date. It, however, appears that a Memorandum of
Understanding was entered into by and between the parties on or about 9th
June, 2008, the relevant clauses whereof are as under:
“a. Monthly
payout for the period of 12 months from 01st March 2008 to 29th
Feb.2009 shall be Rs.1.10 Crores per month, which shall be exclusive of
applicable service tax. These amounts
are based on the declared connectivity of Asianet as on 01st March
2008.
b. The
amounts shall be payable by the 28th day of each month. The new contract shall be valid till
d. As per
ESPN the outstanding for billing up to 31st May 2008 after
considering all the payments received up to 31st May 2008 is
Rs.2,56,14,609/- will be reconciled between parties (Rupees Two Crores Fifty
Six Lakhs Fourteen Thousand Six Hundred &Nine Only) and the reconciled
figure shall be cleared before 30th June 2008. The parties will reconcile the accounts and
Asianet will given a schedule for payment of the same to be cleared before
e. Hotels
& Commercial establishments are excluded and are outside the scope of this
agreement.
f. ESPN
agrees to provide a prompt service discount ‘PPD’ of Rs.4.00 Lakhs (Four Lakhs Only) on the billing
of Rs.1.10 Crores every month provided the payments are received by ESS on or before
the 28th of every month and the minimum payment should be equivalent
or more than one months billing including applicable service tax withdraw all
such discounts without notice, this PPD is applicable only for the billing
period upto 28th Feb.2009.”
The petitioner,
however, would contend:
(i)
The respondent
themselves have revised the figure of Rs.8.77 crores to 7.21 crores without
reconciliation of account which shows malafide on its part.
(ii)
The admitted
outstanding payable to the respondent is Rs.5,97,02,258/-
(iii)
A conventional
two months credit was given by the respondent and if the same is taken into
consideration then the amount due and payable would come to Rs.3,98,48,258/- as
on 27.06.2009.
(iv)
The petitioner
has paid a sum of Rs.1.25 crores on 30.06.2009 and, thus, only a sum of Rs.2.73
crores was due to the respondent which amount was payable in the following
instalments:
Month Amount
(in crs)
July
2009 0.75
Aug
2009 0.75
Sep
2009 1.23
-------------------
Rs. 2.73
-------------------
This petition was filed on 02.07.2009,
inter alia, praying for the following reliefs:
“A.pass appropriate
orders or directions setting aside the Notice of Disconnection dated 18.06.2009
sent by the Respondent to the Petitioner and/or;
B.
pass appropriate
Orders/direction to the respondent to grant reasonable time to the petitioner
to pay the admitted payable amount of Rs.2,73,48,258 (Net of credit
conventionally permitted) as on 30th June 2009, in installments, and
or;
C.
pass appropriate
Orders/direction to the Respondent to determine the monthly subscription fee
payable by the Petitioner to the Respondent for the year 2009-10 on the basis
of non discrimination parity with the other Cable operators operating in the
rest of Kerala, as per the Interconnect Regulation of 2004 as modified vide
Interconnect Regulation dated 4.9.2006 and/or;
D.
pass appropriate
orders/directions to the Respondent to determine the monthly subscription fee
payable by the Petitioner to the Respondent in the digital mode and
accordingly, enter into a contract for the year 2009-10 and/or;
E.
pass appropriate
orders/directions directing the Respondent to enter into an agreement with the
Petitioner as per the monthly subscription fee as determined pursuant to the
prayer clause (C & D ) above and/or;
F.
pass orders to
allow the Petitioners to contract with the Respondent to avail the Respondent’s
bouquet of channels only in the digital transmission.”
By an order dated 03.07.2009 out of
the said purported outstanding sum of Rs.2.73 due from the petitioner, this
Tribunal directed it to deposit a sum of Rs.2.53 crores within 25 days in two
instalments; the first instalment of
Rs.1 crore was to be paid within 10 days and the balance sum of Rs.1.53 crores
within 15 days thereafter.
The
parties also proposed a meeting at
The respondent filed its reply on or
about 28.08.2009.
The matter relating to grant of interim relief came
up for consideration before this Tribunal on 16.09.2009.
By
an order of the said date the petitioner was directed “to make payment at the
rate of Rs.40 lakhs on account in future till the case is finally decided by
the Tribunal”.
A
joint survey was also to be undertaken wherefor the petitioner suggested that
supervision thereof may be carried out by an independent person like a retired
High Court Judge, to which the respondent objected to.
Mr.Srinivasan, amongst others contended:
(a)
Keeping in view
the National Revenue Survey and Indian Revenue Survey the petitioner has about
40 lakhs subscribers in the State of
(b)
According to the
petitioner, the respondent assessed that out of the total subscribers of about
60 lakhs, the petitioner is serving 26 lakhs subscribers which ex facie is
absurd as it is impossible that only 14 lakhs subscribers would be served
through other cable operators in the State.
(c)
The number of
subscribers having gone down, for the purpose of renewal of the agreement in
terms of clause 4.2 of the Regulations, the petitioner was in a position to
offer only a sum of Rs.20 lakhs per month to the respondent by way of
subscription fee which sum was fair and reasonable in the facts and
circumstances of the case.
(d)
In view of the
fact that under the Regulations supply was to be made on a non-discriminatory
terms and having regard to the public interest, the petitioner had rightly been
directed to pay a sum of Rs.40 lakhs per month by this Tribunal.
(e)
The survey
undertaken at the instance of the petitioner, namely, Geo Transtech would
clearly show that the figures disclosed by the respondent are wholly absurd
which would, inter alia, appear from the following:
In the Poonthura area,
there are only 83 dwelling units out of which 75 having cable services and only
41 of them are served by the petitioner whereas 34 subscribers are served by
others. Similarly in Valiyathura area,
the number of dwelling units are 2218 out of which 2068 are served by the
petitioner and 1118 are served by the others.
The numbers of subscribers as stated
by the respondent are as under:
“208 United
Cable Visino, Thycaud(AA01) 5080
209 Orion
Cable Network, Thycaud(AA01) 10160”
A
statement of subscription fee payable to the respondent based upon parity has
been placed before us which needs as under:
Statement
of subscription fee paid and payable to ESS, based upon parity
|
|
Connections |
Payments made to ESS |
Subscription fee payable based
upon parity (in Rs) |
|
Entire Kerala |
39.84 lacs |
Rs.62 lacs + Rs.1.10 |
----- |
|
Operators other than Asianet |
31.50 lacs |
Rs.62 lacs |
----- |
|
Asianet – Direct connections Asianet-Link connections |
6.60 lacs 1.74 lacs |
110 lacs |
6.6 x 62/31.5=12.99 lacs 2x 62/31.50=3.93 lacs TOTAL:
17 lacs (approx) |
Mr.Ganpathy, learned counsel for
respondent, on the other hand, urged:
(i)
That the figure
of Rs.1.10 crores payable by the petitioner to the respondent by way of
subscription fee was arrived on the basis that it had been serving about 1.66
lakhs subscribers @ Rs.66/- for three channels.
(ii)
In view of the
fact that the petitioner had been taking over the management of other LCOs and
MSOs as a result whereof for all intent and purport it exercises a monopoly
over the urban TV viewers, whereas the others are mostly operating in the rural
areas, the amount of Rs.1.10 crores was fixed as a monthly subscription fee.
(iii)
Having regard to
the Memorandum of Understanding entered into by and between the parties as also
the notice issued under clause 4.1 and public notice under clause 4.3 of Regulations,
it would be evident that a sum of Rs.8.77 crores was owing and due from the
petitioner.
(iv)
Rebate was to be
granted only in the event regular
payment was made and not otherwise and the
petitioner having not acted in terms thereof, the question of allowing the
petitioner to continue to distribute signals to the subscribers only on payment
of Rs.40 lakhs does not and cannot arise.
Before
adverting to the rival contentions of the parties it would be pertinent to place
on record that the legality of the order of this Tribunal dated 16.09.2009 was
subject matter of a Writ Petition No.1266 of 2009 before the Delhi High
Court.
By
an order dated 26.10.2009, a learned judge of the Delhi High Court while
setting aside the said order dated 16.09.2009 directed this Tribunal to
consider the matter afresh, stating:
“This writ petition is directed against the order dated 16th
September, 2009, passed by Telecom Disputes Settlement and Appellate
Tribunal on an interim application filed by the respondent. I need
not examine and go into the merits of the contentions raised by the
parties as the matter is still pending before Telecom Disputes Settlement
and Appellate Tribunal. However, it is noted that the impugned order is a
non-speaking order and does not give any reason for directing the
respondent to make payment of Rs. 40 lacs per month from July, 2009,
till the case is finally decided. The impugned order does not
specifically state that the interim application stands disposed of and
decided. The matter is now fixed before
the learned Tribunal on 3rd December, 2009. Learned Tribunal will
re-examine the interim application filed by the respondent and pass a
speaking order on the question of the amount payable by the respondent to
the petitioner pending disposal of the petition. While deciding the said
application, the learned Tribunal will not be influenced by the
order dated 16th September, 2009, and will independently apply their own mind
with respect to the respective contentions of the parties. However, it
is clarified that his Court has not expressed any opinion on the
merits and whether the quantum fixed earlier in the order dated 16th
September, 2009, is justified or not.
Counsel for the petitioner states that they had not agreed to appointment
of a retired Judge to supervise the conduct the joint survey. Appointment of a retired judge it is
stated is likely to cause delay. Counsel for the respondent disputes the
said statements. This aspect/contention can also be raised before the
learned Tribunal. It is clarified that this Court has not stayed conduct
of the joint survey.
The writ
petition and all pending applications are disposed of.
SANJIV KHANNA,
J.
OCTOBER
26, 2009”
The
matter has been argued elaborately by the learned counsel of the parties
pursuant to or in furtherance of the said direction of the Hon’ble High Court.
Indisputably,
the parties entered into an agreement.
They were on a negotiating table for renewal thereof. The agreement between the parties came to an
end on 31.03.2009. Three months’ grace period
allowed for the purpose of negotiation for renewal of the agreement also
expired in June 2009.
It
is not in controversy that the petitioner had been serving about 8.50 lakhs
subscribers. The parties had however,
entered into an agreement only on the subscriber case of 1.66 lakhs. The number of subscribers, therefore, was a
negotiated one. The agreements entered
into by and between the parties in the earlier years also go to show that the
petitioner has a huge network of subscribers.
They enhanced the number of subscribers.
Increase in the the amount of subscription fee was accepted by the petitioner
with its eyes wide open. It is,
therefore, difficult to accept the submissions of Mr.Srinivasan, learned senior
counsel appearing for the petitioner that the number of subscribers was so
drastically reduced that the offer of the petitioner to pay a sum of Rs.20
lakhs per month to the respondent should be taken to be fair and
reasonable.
Even
if that be so, the number of subscribers and/or the SLR would have relevance
only for the purpose of forming basis for negotiation. The fact that for the purpose of renewal both
the parties have to participate in the contract making process is beyond any
dispute. If the difference between offer
and counter-offer is so much, i.e. ranging from Rs.20 lakhs to 90 lakhs, this
Tribunal cannot arrive at a figure which would otherwise be fair and equitable;
at least at this stage. The jurisdiction
of this Tribunal at the stage of passing of an interim order is limited. Its’ decision in this behalf must be founded
on rationality.
Before
us, reliance has been placed by the parties on exchanges of some e-mails being
Annexure-13 to the petition.
The
respondent in its Email dated 01.04.2009, inter alia, stated as under:
“After lots of deliberations in the last couple of
months we had arrived at a solution of giving you a conditional offer of
temporary discount provided the following conditions are met
·
The schedule for the old
outstanding would be given which would clear the old outstanding during the
period March to May 09.
·
The monthly payments would be
made regularly along with the old outstanding schedule.
·
The outstanding as on 30th
June would be a one month Billing cycle.
Based
on the above condition we had agreed on following terms.
·
We would give a temporary
discount of Rs.16 lakhs per month on the billing for the period December 08 to
May 09.
·
The new terms of the next year
contract would be finalized in the month of June 09 where in the base amount
for the monthly billing would continue to be Rs.110 Lakhs plus taxes per month.
·
The outstanding after considering
the conditional offer would be Rs.6.62 crores as on 31st March 09
·
The Monthly Billing for the month
of April & May would be Rs.94 lakhs plus taxes.
·
The outstanding after considering
the one month Billing cycle for June 09 as closing outstanding would be Rs.8.73
crores as on 30th June 09.
·
Payment cleared in the month of
March 09 is Rs.1 Crores subjected to clearing of cheques.
·
Balance payment of Rs.7.73 crores
would be cleared in three equal payments of Rs.2.57 crores in the month of
April, May and June 09.
·
Cheques for each month would be
given in the previous month end to clear during the month.
·
If the payments are not made as
per the above terms the temporary discount would be withdrawn.”
The
said offer was, therefore, a contingent one being subject to clearance of the
arrears for the months upto December. Even
the billing cycle was for a month and not two months as contended by the
petitioner.
In
another e-mail addressed to one Mr.Vinod by Mr.Sandeep Lamba it was stated as
under:
“We are very surprised
by your mail as we are trying to find solution for the current issue of
outstanding but we are getting entangled in some other issues. I would once again make our stand clear on
the 5 points raised by us.
1.
We would revert
back with the clarification on the old issue raised by you and only once it is
clarified that it is part of the agreement we would be in a position to take
this out of the outstanding in spite you have accounted in your books.
will
wait for revertal from you. Details are
already there in the reconciliation.
1.
As per our MOU
and understanding we have given you 30 days credit for payment which means
clearly that an invoice raised on the 1st of the month has to be
cleared on the 30th of the month which means that the entire
outstanding mentioned by us would be the outstanding on the 30th
March hence we would need the payment schedule for the entire 7.94 crores as
this is legitimate outstanding. Hence we
request you to kindly give the payment schedule for 7.94 crores.
The dues are as given in the reconciliation. Schedule is given for the same. As regards the old dues we have stated that
we will give a schedule after we pay off the last 3-4 mth dues that has got
accumulated.
Our due date is the month end and we were permitted
1 month dues to be retained. This is as
per the understanding with you in July 2007.
1.
As you have
agreed to make monthly payments along with the schedule given this point is
clarified. That is already clarified by
us.
1.
With reference
to the discount we are surprised by your comments because you have been
requesting us for a short time (3-4 months) discount as you are facing tight
situation of Cash outflow in Asianet and not for giving you any benefit for the
underdeclaration situation in the market.
Further the amount of discount you are looking is simply not possible
from our end.
The reduction was sought based on our inability to
meet the high cost due to various reasons as we have been raising from time to
tome. We have been very candid in our
request for the discount to tide over our issues. We still feel that Rs.20 lacs is needed. This has been communicated to your and your
team. You may pl.suggest what you have
in mind.
1.
We would need
the entire schedule payment between March-May as we have already faced 4 month
of non-payment from your side and we cannot give any more credit facilities to
you.
As mentioned earlier, the payment schedule is made
with an intention to honour the same.
Any thing beyond this would be difficult to honour. In the past also we have had similar issues
and in spite of all issues, we have tried our best to ensure that month on
month the dues were paid. Its only in
the last 3-4 mths the dues got accumulated, which we are trying to clean up. Pl. cooperate.”
There
were, thus, serious disputes and differences between the parties as regards the
terms of settlement. However, the fact
that the petitioner owed a huge amount to the respondent is beyond any
dispute.
Prima
facie, the contention of the petitioner, therefore, cannot be accepted. Furthermore, admittedly even in the month of
June 2009, the petitioner had paid subscription fee at the rate of Rs.90 lakhs. It is, therefore, difficult to hold that for
the purpose of the interim matter, the offer of the petitioner to pay only
Rs.20 Lakhs per month should be accepted.
Even otherwise the petitioner has not prayed for any interim relief
directing the respondent to accept a lower subscription fee in the petition. The petitioner even otherwise cannot be
granted a final relief at the interim stage. Purported inability to pay the agreed amount
cannot by itself lead to the conclusion that the terms are discriminatory in
nature.
Submission
of the learned senior counsel that in the earlier round of the litigation, the petitioner was directed to pay only Rs.55
lakhs out of the agreed amount of Rs.83.40 lakhs cannot be accepted.
An
interim order does not create any precedent in law. The situation, furthermore has undergone a
change. The amount of arrears has
increased.
Correctness
or otherwise of the evidence of the petitioner’s subscriber base can be judged
only at the hearing and not at this stage.
Keeping
in view the fact that there was under-declaration, it is difficult to accept
that this Tribunal without any legal basis should direct, the respondent even
as an interim measure to accept any amount which is even less than 50% of the
agreed amount.
It
is true that disconnection of signal is fraught with the loss of viewership by
a large section of sports loving people in the State of
A
commercial contract entered into by the groups who are very much alive to their
business consideration should ordinarily be given effect to.
The
parties for the purpose of grant of interim relief would ordinarily be bound by the terms of the agreement. Whether petitioner would be able pay the
agreed amount, ordinarily would not be a matter of concern for a court of law arising
out of a commercial contract. Between two parties of the status like petitioner
and the respondent, the question of showing any equity in favour of one or the
other by this Tribunal may not at this stage arise.
Furthermore
the subscription agreement has also come to an end.
If
in absence of an agreement, the petitioner intends to have the benefit of an
interim order from this Tribunal for the purpose of enabling it to run its
business, it must show its readiness and willingness at least to abide by the
terms of the agreement. Inability on its
part to pay the agreed sum or existence of any hardship would be beyond the
domain of this Tribunal.
Sentiment
and/or sympathy cannot form the basis of passing an interim order in favour of
a party who is otherwise bound by the contractual terms.
Even
the suggestion of the petitioner in regard to joint survey namely, subscriber
base vis-à-vis those of rest of Kerala cannot be accepted at this stage.
However, this Tribunal may consider
the same separately if any occasion arises therefor.
We may, however, place on record that
the Respondent is agreeable to get the accounts of other parties scrutinized by
Lt.Gen(Retd.) D.P. Sehgal , a former Member of this Tribunal.
We, therefore, are of the opinion that
the interest of justice would be subserved if we direct the petitioner to pay a
sum of Rs.90 lakhs per month in supersession of our order dated
16.09.2009. The said order appears to
have been passed by the Tribunal as all the aforementioned facts had not been
brought to its notice. The petitioner
must file an undertaking within one week from date that it would abide by this Tribunal’s
order and clear of its arrears within 60 days failing which the interim order
shall stand vacated. The petitioner
shall also pay and bear the costs of the respondent. Counsel’s fees assessed at Rs.50,000/-.
…….………J
(S.B.
Sinha)
Chairperson
……………….
(G.D.
Gaiha)
Member