Union Of India vs Millenium Delhi Broadcast Llp on 2 May, 2022


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Supreme Court of India

Union Of India vs Millenium Delhi Broadcast Llp on 2 May, 2022

Author: L. Nageswara Rao

Bench: L. Nageswara Rao, B.R. Gavai

                                           Non-Reportable

        IN THE SUPREME COURT OF INDIA
          CIVIL APPELLATE JURISDICTION

      CIVIL APPEAL NOS. 2332-2333 OF 2008


UNION OF INDIA & ANR.                   ... APPELLANT(S)


                        Versus

MILLENIUM DELHI BROADCAST
LLP ETC.                                ...RESPONDENT(S)




                    JUDGMENT

L. Nageswara Rao, J.

1. In the year 1999, a notice was issued by the

Ministry of Information and Broadcasting, on behalf of

Government of India inviting tenders for licensing of

private F.M. broadcasting services at 40 centres across

India. The said notice was issued pursuant to a decision

taken by the Ministry of Information and Broadcasting to

open Radio Broadcasting in the VHF FM band (87-108

MHz) with the following objectives :-

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 Open up the FM Broadcasting for

entertainment, education and

information dissemination by

commercial broadcasters.

 To make available quality programmes

with a localised flavour in terms of

content and relevance ; encourage new

talent and generate employment

opportunities directly and indirectly.

 Supplement the service of AIR and

promote rapid expansion of the

broadcast network in the country for the

benefit of the society.

Clause 8 in the Tender Document thereof relates to

license fee, auction process and license period.

According to clause 8(f), a license fee has to be paid by

each licensee every year in advance within seven days

of the beginning of the year. For the first year, balance

of the licence fee will have to be paid within 10 days of

Wireless Planning & Coordination Wing’s (for short

“WPC”) intimation that operational licence is ready to

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be issued. Failure to do so will result in forfeiture of

amount already deposited. The licence period will be

reckoned from the date of issue of operational licence by

WPC, Ministry of Communications. The Reserve Licence

Fee for Delhi and Chennai for the first year was fixed at

Rs. 125 Lakhs and Rs.100 Lakhs respectively. The

respondent bid for allotment of a channel in Delhi and

Chennai after depositing 50% of the Reserve Licence

Fee. 11 Companies were declared as successful bidders

for Delhi and Chennai. However, only 5 companies in

Delhi and 4 companies in Chennai signed an agreement

for operationalization.

2. On 27.10.2000, the respondent signed an

agreement to operationalize F.M. Stations at Delhi and

Chennai. The respondent was granted a licence to

establish, maintain and operate FM Radio Broadcasting

Station within Delhi and Chennai, on a non-exclusive

basis, for a period of 10 years . The effective date of the

licence period shall be reckoned from the date of issue

of the Wireless Operational Licence (for short “WOL”) by

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the WPC. Article 2.1 of Schedule C to the agreement

requires the licensee to complete installation of

broadcasting facility including studios, transmitter,

infrastructure etc. and commission the Applicable

System within 12 months from the date of frequency

earmarking by WPC. According to Article 2.3 of

Schedule C, the licensee was to apply for WOL for

frequency allotment and SACFA clearance within three

months from the date of issuance of letter of intent.

Article 16 of Schedule C refers to Bank Guarantee. This

article requires the licensee to furnish a Bank Guarantee

which is equivalent to the first year’s licence fee. The

said bank guarantee is valid for a period of 10 years and

has to be issued by a Scheduled Bank in the prescribed

form which shall be renewed till the expiry of licence

period. Article 14 of Schedule C refers to Dispute

Resolution and Jurisdiction. According to the said clause,

in case of a dispute or difference arising under this

licence, the same shall be referred to the sole arbitration

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of the Secretary, Department of Legal Affairs or his

nominee.

3. On 30.10.2000, respondent applied for frequency

allocation. On 29.12.2000, the respondent was allocated

frequency 94.6 by the WPC. A notice of termination of

the agreement was issued by the respondent on

27.08.2002. Thereafter, the respondent preferred an

arbitration petition before the High Court of Bombay

seeking an injunction restraining the appellants from

encashing the Bank Guarantee. The High Court of

Bombay passed an interim order dated 26.11.2002 in

favour of the respondent and directed the appellant to

keep the bank guarantee alive.

4. On 02.01.2006, the respondent filed a petition

under Section 14A(1) of the Telecom Regulatory

Authority of India Act, 1997 before the Telecom Disputes

Settlement and Appellate Tribunal (for short “Tribunal” )

for the following reliefs :

“(A) Declare that Petitioners delay in

commencing broadcast on 29.08.2002 is

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condoned due to bona fide reasons as applicable

to other broadcasters in Chennai vide order of

Union Cabinet dated 13.07.2005.

(B) Hold and declare that the Applicant was not

required to deposit the balance of the first year’s

license fee on 29.08.2002 even before the WPC’s

intimation that the wireless operational license

was ready for being issued.

(C) Hold and declare that the Respondent could

not have issued the Deemed Operational Status

to the Petitioner on 29.08.2002 which would have

reduced the effective license period as stated in

the license agreement.

(D) Hold and declare that the action of the

Respondent Union of India to invoke and encash

the bank guarantee of Rs.7.125 Crores is

arbitrary, high handed and is contrary to the

license agreement and the tender document and

further restrain the Union of India from encashing

the bank guarantee.

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(E) Direct the Respondent to return the Bank

Guarantee for an amount Rs.7.125 Crores to the

Petitioner.

(F) Direct the Respondent to refund with penal

interest, the advance license fee of Rs.62.5 Lakhs

paid by the Petitioner in March 2000 and the

earnest money deposit (EMD) of Rs. 2 Lakhs paid

by the Petitioner in October 1999 keeping in mind

the condonation of delay due to bona fide reasons

as per the order of the Union Cabinet dated

13.7.2005.

(G) Direct the Respondent to compensate the

petitioner to compensate the Petitioner with a

sum of Rs.40 Lakhs which is the approximate cost

incurred by the Petitioner in keeping its Bank

Guarantee of Rs.7.125 Crores alive till date and a

sum of Rs.20 Lakhs in maintaining its operations

from March 2000 till 29.8.2002.

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(H) Pass such other relief as this Hon’ble

Tribunal may deem fit and proper in the facts and

circumstances of the case.”

5. The Tribunal, by an order dated 14.09.2007,

allowed the said petition and declared the invocation of

bank guarantee by the appellant as illegal. The Tribunal

further directed the appellants to return the bank

guarantees to the respondent. Therefore, the appellants

have approached this Court by filing these appeals

which have been pending consideration since 2008.

6. The respondent contended before the Tribunal that

the conditions for encashment of the bank guarantee

were not satisfied and therefore, the invocation of bank

guarantee by the appellants was unjustified. It was

argued before the Tribunal, that only 5 bidders were left

as 6 out of 11 successful bidders dropped out.

Resultantly, cost of co-location had to be borne by the 5

surviving bidders which originally was to be shared by

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the 11 bidders. Consequently, this resulted in high

escalation of the cost.

7. The respondent further contended that several

representations were made by the broadcasters to the

appellants for appointment of an Integrator, and for

extension of time as completion of common transmission

infrastructure within the specified timeframe was not

possible. The difficulties of the Broadcasters were

considered favourably and the appellants agreed for

extension of time. However, on 06.06.2001, the

Broadcasters were directed to utilize the facilities of

Prasar Bharati. Having no alternative, the Broadcasters

were forced to enter into an agreement with Prasar

Bharati for the usage of All India Radio’s transmission

infrastructure. On 01.05.2002, the Broadcast Engineers

Consultants of India Ltd. (BECIL) was appointed as

Integrator. In a meeting held on 08.08.2002, it was

proposed by BECIL, that the timeframe for

commissioning the co-located infrastructure be extended

by a period of 24 weeks from the date of the meeting. As

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the appellant was insisting on payment of balance 50%

licence fee for the first year though there was no

occasion for the said payment, the respondent

terminated the licence agreement on 28.08.2002 and

surrendered the frequency.

8. The respondent relied on the official Policy on

Expansion of FM Radio Broadcasting Services through

private agencies in July, 2005 wherein it was decided to

condone the delays in operationalization in the case of

nine channels in the three metros viz., Delhi, Chennai

and Kolkata. It was argued on behalf of the respondent

before the Tribunal, that there was no intentional delay

on its part in operationalizing the said FM Stations.

According to the respondent, as WOL was not issued by

WPC, the question of payment of licence fee did not

arise.

9. The appellants contended before the Tribunal that

there was no error in invoking the bank guarantee

clause as the respondent had failed to abide by the

terms of the agreement in not operationalizing the FM

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service within the time schedule. The Tribunal was

convinced that the conditions enabling invocation of

bank guarantee were not satisfied. The Tribunal further

held that the bank guarantee which was essentially a

performance bank guarantees could not have been

invoked as the stage of performance of the license

agreement did not arise.

10. We have heard Mr. Nachiketa Joshi, learned counsel

appearing for the appellant and Mr. Nikhil Majithia, for

the respondent. Mr. Joshi relied upon the notice inviting

tender document and the agreement entered between

the parties to submit that there is clear non-compliance

of the time lines fixed in the licence. The respondent,

unlike the other similarly situated licensees, could not

successfully operationalize the services and

subsequently, obtained an interim order by filing a

petition under Section 9 of the Arbitration and

Conciliation Act, 1996. The respondent did not take any

steps to refer the matter to arbitration. Mr. Joshi also

found fault with the order passed by the Tribunal wherein

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the conditions prescribed in Clause 9 of the tender

document pertaining to bank guarantee were not

satisfied. He submitted that licensee had failed to

deposit the licence fee within 7 days of the beginning of

first year itself which gave rise to invocation of the Bank

Guarantee by the appellants.

11. Mr. Majithia, learned counsel appearing for the

respondent, argued that the delay in operationalizing the

services was due to unforeseen circumstances. A co-

located transmission infrastructure was to be set up for

operationalization of 11 successful bidders, the cost of

which was to be shared by all of them but as 6 bidders

backed out, the remaining 5 companies had to bear the

additional burden. Realising the difficulties faced by the

Broadcasters, Government of India decided to extend

time. In a meeting held on 06.06.2001, Ministry of

Information and Broadcasting waived the co-location

requirement and insisted the private broadcasters utilize

Prasar Bharati’s infrastructure for co-locating the

transmitters. BECIL was appointed as system

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Integrator. On 08.08.2002, the Ministry of Information

and Broadcasting informed the respondent that a

‘Deemed Operational Licence’ shall be issued pursuant

to which it would become mandatory for payment of first

year license fee. BECIL informed that it would require

another 6 months to set up the co-located infrastructure.

The respondent, having no other option, decided to

terminate the contract. Mr. Majithia supported the

judgment of the Tribunal that there was no occasion for

invocation of the bank guarantee as WOL was never

issued. According to him, there was no provision for

issuance of a Deemed Operational Licence. He referred

to a judgment of the Bombay High Court dated

26.11.2002 in an arbitration petition which dealt with

similar facts and held that the bank guarantees could

not have been invoked. It was argued on behalf of the

respondent, that the appellant should be directed to

refund 112.5 Lakhs which was deposited as reserved

licence fee and Rs.3 Lakh deposited as EMD.

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12. After considering the submissions of both the

parties and carefully examining the material on record,

we are of the opinion that the appeals deserve to the

dismissed for following reasons.

Clause 9 of the tender document enables the

appellant to encash the bank guarantee, in case of

failure on the part of the licensee either to deposit

license fee within 7 days of the beginning of each year

or if the licensee stops the service without giving one

year’s notice. The bank guarantee can also be invoked if

the licencee is declared or applies for being declared

insolvent or bankrupt. There is no dispute that the

licensee did not commence its operations and therefore

the second condition does not apply. Admittedly, the

third condition is not applicable to the facts of the case.

According to the appellant, bank guarantee was invoked

due to failure on the part of the licensee to deposit the

licence fee within 7 days of beginning of the year.

Essentially, the bank guarantee given by the respondent

is a performance bank guarantee and was intended to

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ensure the due performance of the license agreement. A

perusal of the conditions of the relevant clauses of the

agreement clearly show that according to Article 1.1 of

Schedule ‘C’ to the agreement, the license was granted

for period of 10 years which has to be reckoned from

the date of issuance of WOL by the WPC. Admittedly,

WOL was never issued by WPC. A Deemed Operational

License, which was to be issued by the appellant, was

not contemplated in the agreement. We are of the

opinion, that Tribunal did not commit any error in its

interpretation of the clause pertaining to bank guarantee

by holding that the conditions provided therein have not

been satisfied for the invocation of the bank guarantee.

13. In view of the aforesaid findings, it is not necessary

for this Court to adjudicate on the other points that have

been raised by the respondent in justifying the delay in

operationalizing the services.

14. We are not inclined to entertain the cross-

objections of the respondent seeking refund of advance

licence fee as the said point was not argued before the

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Tribunal. Thus, we reject the request of the respondent

that the appellants should be directed to refund the

advance license fee and EMD.

15. For foregoing reasons, the judgment of the Tribunal

is upheld. The appeals are dismissed.

…………………………J.
[L. NAGESWARA RAO]

………………………..J.

[B. R. GAVAI]

New Delhi,
May 02, 2022

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