# [2008] 8 S.C.R. 729

- **Citation:** [2008] 8 S.C.R. 729
- **Court:** Supreme Court of India
- **Decided:** 2008-05-14
- **Case number:** Civil Appeal Nos. 6341-6342 Of 2003
- **Bench:** S.B. Sinha, Lokeshwar Singh Panta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2008-8-s-c-r-729-24769
- **Pages:** 46

## Headnote

Contract Act, 1872: S. 8
Agreement between patties and Department of Telecommunications - Fructifying into concluded contract - Internal c
circulars issued by the Deparlment of Telecommunications -
Applicability thereof on the contracts - Held: Parties bound
by the concluded contract - Doctrine of 'acceptance sub-silentio' not applicable - Parties not even aware of the circulars
or the letters issued from time to time - Indian Telegraph Act,
D
1885, Section 7 - Indian Telegraph Rules, Rules 434, 475A,
478, 494, 496 and 498.
Doctrines:
Doctrine of 'acceptance sub-silentio' - Applicability of.
Words & Phrases:
'Prescribed' - Meaning of.
E
In these appeals arising from the orders of Telecom
Disputes Settlement and Appellate Tribunal (TDSAT), the
F
core question involved was the effect of the application
of internal circulars issued by the Department of Telecommunications (DOT) in the contracts entered into by and
between the parties as regards the inter-connection links
provided by DOT.
G
On behalf of the appellants it was submitted that the
Rules framed under the Indian Telegraph Act are binding
on the service providers; that the lease agreement entered
into by and between the parties having categorically pro729
H
730
SUPREME COURT R!:PORTS
[2008] 8 S.C.R.
A vided that circular letters would be applicable as regards
dem.and of the payment on flat basis being higher than
the rent and guarantee (fpr short"R & G''), the impugned
judgment is not sustainable; .that from the Minutes dated
2.02.1996, it. would appear that the licensees were aware
B of the existing circular orders. Furthermore, although the
official books are for internal use, they are available in the
market having been published under the name of Swarny's
·.Treatise on Telephone Rules; that if .under the contract,
the BSNL was entitled to charge a higher amount, the
c impugned judgment is wholly unsustainable; that the
question is .•n<>twhet.her the circulars have the statutory
force or nofbut a perusal of the licence agreement would
clearly go tC? show that the licensees agreed to pay the
tariff as prescribed by DOT; i.n view of clauses 4.1 and
0 19.5 of the licence agreement, it must be held thatthe prescribed rate and period would mean that as prescribed
· by the authc)rized officer of DOT. from . time to time; that
the licencees entered into contracts with their eyes wide
open and irf that view of the matter as rates have been
E fixed by the circulars, the same are only required to be
forwarded to the Bill Department so that they can raise
bills in terms thereof; that in terms of th.e circulars, revision of rates were to be carried out by the co.nce.rned de·
. partments as would appear from the circular Nos.4·31/
86(R(Pt) dated 17.6.1988, 24-1187-PHC (Pt) 8 dated
F 13,11.1988, 1•2/89-Rlptdated 18.2.1991, 4-11190-R dated
30.9.1991 and 4~11/90-R dated 1.4;1992 and as the respondents had been paying on the basis thereof, they cannot
now be permitted to approbate and reprobate; and that
in regard to the minimum guarantee period, it was subG mitted that the agreement .refers to the Rules and the
circulars.
On behalf of the respondents, it was contended that
the parties entered into the agreement having regard· to
H the commercial representations made to them by DOT
I'"
,. •
,. ..
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
731
MOBILE CELLULAR LTD. & ORS.
wherefor a booklet has been issued. It was furthermore A
submitted that the parties were given options, viz., (i) the
licensees could purchase equipments and install the same
or take lease of the equipments installed by DOT on (a) flat
rate basis; or (b) on capital cost; (ii) the parties have entered into the agreement on the premise that the charges
B
will have to be paid on rent and guarantee basis; and that
the subsequent stand taken by the appellants herein to
raise demands on enhanced basis relying on or on the
basis of the internal circulars is wholly unsustainable.
Dismissing the appeals, the Court
c
HELD: 1. A con

## Text

_Characters 0–39,963 of 86,013. This is a partial read: ask again with offset=39963 for what follows._

[2008] 8 S.C.R. 729
BHARAT SANCHAR NIGAM LTD. & ANR.
II.
BPL MOBILE CELLULAR LTD. & ORS.
(Civil Appeal Nos. 6341-6342 Of 2003)
A
MAY 14, 2008
'
B
[S.B. SINHA AND LOKESHWAR SINGH PANTA, JJ.)
Contract Act, 1872: S. 8
Agreement between patties and Department of Telecommunications - Fructifying into concluded contract - Internal c
circulars issued by the Deparlment of Telecommunications -
Applicability thereof on the contracts - Held: Parties bound
by the concluded contract - Doctrine of 'acceptance sub-silentio' not applicable - Parties not even aware of the circulars
or the letters issued from time to time - Indian Telegraph Act,
D
1885, Section 7 - Indian Telegraph Rules, Rules 434, 475A,
478, 494, 496 and 498.
Doctrines:
Doctrine of 'acceptance sub-silentio' - Applicability of.
Words & Phrases:
'Prescribed' - Meaning of.
E
In these appeals arising from the orders of Telecom
Disputes Settlement and Appellate Tribunal (TDSAT), the
F
core question involved was the effect of the application
of internal circulars issued by the Department of Telecommunications (DOT) in the contracts entered into by and
between the parties as regards the inter-connection links
provided by DOT.
G
On behalf of the appellants it was submitted that the
Rules framed under the Indian Telegraph Act are binding
on the service providers; that the lease agreement entered
into by and between the parties having categorically pro729
H
730
SUPREME COURT R!:PORTS
[2008] 8 S.C.R.
A vided that circular letters would be applicable as regards
dem.and of the payment on flat basis being higher than
the rent and guarantee (fpr short"R & G''), the impugned
judgment is not sustainable; .that from the Minutes dated
2.02.1996, it. would appear that the licensees were aware
B of the existing circular orders. Furthermore, although the
official books are for internal use, they are available in the
market having been published under the name of Swarny's
·.Treatise on Telephone Rules; that if .under the contract,
the BSNL was entitled to charge a higher amount, the
c impugned judgment is wholly unsustainable; that the
question is .•n<>twhet.her the circulars have the statutory
force or nofbut a perusal of the licence agreement would
clearly go tC? show that the licensees agreed to pay the
tariff as prescribed by DOT; i.n view of clauses 4.1 and
0 19.5 of the licence agreement, it must be held thatthe prescribed rate and period would mean that as prescribed
· by the authc)rized officer of DOT. from . time to time; that
the licencees entered into contracts with their eyes wide
open and irf that view of the matter as rates have been
E fixed by the circulars, the same are only required to be
forwarded to the Bill Department so that they can raise
bills in terms thereof; that in terms of th.e circulars, revision of rates were to be carried out by the co.nce.rned de·
. partments as would appear from the circular Nos.4·31/
86(R(Pt) dated 17.6.1988, 24-1187-PHC (Pt) 8 dated
F 13,11.1988, 1•2/89-Rlptdated 18.2.1991, 4-11190-R dated
30.9.1991 and 4~11/90-R dated 1.4;1992 and as the respondents had been paying on the basis thereof, they cannot
now be permitted to approbate and reprobate; and that
in regard to the minimum guarantee period, it was subG mitted that the agreement .refers to the Rules and the
circulars.
On behalf of the respondents, it was contended that
the parties entered into the agreement having regard· to
H the commercial representations made to them by DOT
I'"
,. •
,. ..
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
731
MOBILE CELLULAR LTD. & ORS.
wherefor a booklet has been issued. It was furthermore A
submitted that the parties were given options, viz., (i) the
licensees could purchase equipments and install the same
or take lease of the equipments installed by DOT on (a) flat
rate basis; or (b) on capital cost; (ii) the parties have entered into the agreement on the premise that the charges
B
will have to be paid on rent and guarantee basis; and that
the subsequent stand taken by the appellants herein to
raise demands on enhanced basis relying on or on the
basis of the internal circulars is wholly unsustainable.
Dismissing the appeals, the Court
c
HELD: 1. A contract qua contract, however, must be
consensual. It must meet the statutory requirements and .
reasons under the provisions of the Indian Contract Act.
When a contract is entered into by and between the parD
ties, what is determinative is enforcement of the terms and
conditions to be governed by the contract, subject, of
course, to the application of the statute and statutory provisions. Whereas a statutory contract would be governed
by a statute, other contracts would not. [Para 18] [757-F,G]
2. Two options were available to the respondents
who intended to operate and/ or provide cellular services
E
in the State of Kerala, viz., (i) buying of equipments and
installing them, or (ii) DOT may install the equipments
which may be licensed to the cellular service providers
F
on rent and guarantee charges. Clause 4.1 of the licence
agreement inter alia states that (i) resources must be identified and (ii) the area of operation should be mutually
agreed to between the parties. It also deals with what
would be included in the said provision. The last part of G
the said clause speaks about the operation and charge
of the electronic tariff passed through these resources. It
does not cover the charges for resources/ equipments. It
does not take within its umbrage the system itself. The
tariffs in regard to equipments are, therefore, not govH
732
SUPREME COURT REPORTS
[2008] 8 S. C. R
A erned by the said clause. What it envisages may be call
charges being the operation and charge of traffic passing through the resources. If that be so, the question of
raising any demand on the basis of the circular letters did
not arise at all. [Para 20,21] [758-A-E]
B
3. Huge difference in the contractual rate and the
demand on the flat rate could be made provided the contract provided therefor. The difference admittedly was
'
based upon the internal circular letters. They might have
been published by some publisher but indisputably they
c are not statutory in nature. They have not been framed
under any statute. The Indian Telegraph Act or the Rules
framed thereunder do not provide for issuance of such
circulars. The circular letters collected at one place are
loosely called rules. They are meant for office use only. The
D directions contained in the said circular letters are relevant
for the officers who are authorized not Qnly to grant licences
>
but also enter into contracts and prepare bills. The circular
letters having no statutory force undoubtedly would not
govern the contract. If some authorities have violated the
E terms of the said circulars, they might have committed misconduct, but when a contract is entered into, the parties
shall be bound thereby. [Para 23] [760-B·E]
4. The circular letters cannot ips~:> facto be given efF
feet to unless they become part of the contract. It is assumed that some of the respondents knew thereabout,
and that in one of the meetings, they referred to the said
circulars. But, that would not mean that they are bound
thereby. Apart from the fact that a finding of fact has been
arrived at by the TDSAT that the said circular letters were
G not within the knowledge of the respondents, even assuming that they were so, they would not prevail over the
~
public documents which are the brochures, commercial
information and the tariffs. [Para 25) [763-A,B,C]
H
Sri Dwarka Nath Tewari & Ors. Vs. State of Bihar & Ors.,
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
733
MOBILE CELLULAR LTD. & ORS.
AIR 1959 SC 249; Life Insurance Corporation of India v. EsA
corts Ltd. and Others (1986) 1 SCC 264; Delhi Development
Authority & Anr. Vs. Joint Action Committee Allottee of SFS
Flats & Ors. (2008) 2 SCC 672 and New India Assurance Company Ltd. v. Nusli Neville Wadia and Anr. (2007) 14 SCALE
556 - relied on.
B
5. If the parties were ad idem as regards terms of the
contract, any change in the tariff could not have been
made unilaterally. Any novation in the contract was required to be done on the same terms as are required for
entering into a valid and concluded contract. Such an C
exercise having not been resorted to, no interference with
the impugned judgment is called for. [Para 26] [763-D]
6. For invoking clauses 4.1 and 19.5 of the licence
agreement, one may notice that the word 'prescribed' is 0
not defined. It has not been defined even in the Indian
Telegraph Act. It has not been defined in the licence. The
said provision unlike clause 18.14 does not use the words
'from time to time'. A contract entered into by the parties,
must be certain. It must conform to the provisions of the
Indian Contract Act. Ordinarily, the word 'prescribed' E
would mean prescribed by Rules. Section 7(2)(ee) of the
Indian Telegraph Act provides for the Rule making power
for the purpose of laying down the tariff. It should not be
understood that this Court is laying down a law that in
absence of any statutory rule framed under the Indian F
Telegraph Act, no contract can be entered into. In absence
of any statutory Rule governing the field, the parties would
be at liberty to enter into any contract containing such
terms and conditions as regards the rate or the period
stipulating such terms as the case may be. The matter G
might have been different if the parties had entered into
an agreement with their eyes wide open that the circular
letter shall form part of the contract. They might have also
been held bound if they accepted the new rates or the
periods either expressly or sub silentio. When on the H
734
SUPREME COURT REPORTS
[2008] 8 S.C.R.
A basis of terms of the contract, different rates can be prescribed, the same must be expressly stated. When the
word 'prescribed' is not defined, the same would mean
that prescribed in accordance with law and not otherwise.
[Para 27] [763E-H, 764-A,B]
B
7. In the instant case, the resources to be leased out
were subject to agreement. The terms were to be mutually agreed upon. The terms of contract, in terms of Section 8 of the Contract Act, fructified into a concluded contract. Once a concluded contract was arrived at, the pare ties were bound thereby. If they were to alter or modify
the terms thereof, it was required to be done either by
express agreement or by necessary implication which
would negate the application of the doctrine of 'acceptance sub silentio'. But, there is nothing on record to show
D that such a course of action was taken. The respondents
at no point of time were made known either about the internal circulars or about the letters issued from time to
time not only changing the tariff but also the basis thereof.
[Para 30] [768-8,C,D]
E
. . F
Amrit Banspati Co. Ltd. v. Union of India AIR 1966 All.104;
The Union of India v. Rameshwarlal/ Bhagchand AIR 1973
Gauhati 111 and Life Insurance Corporation of India v. Raja
Vasireddy Komalavalli Kamba AIR 1984 SC 1014 - referred
to .
Chitti on Contract, page 135 - referred to.
8.1 Indisputably, mistakes can be rectified. Mistake
may occur in entering into a contract. In the latter case,
the mistake must be made known. If by reason of a rectiG fication of mistake, except in some exceptional cases, as
for example, where it is apparent on the face of the record,
mistake cannot be rectified unilaterally. The parties who
that would suffer civil consequences by reason of such
act of rectification of mistake must be given due notice.
H Principles of natural justice are required to be complied
.J
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
735
MOBILE CELLULAR LTD. & ORS.
t·
4
with. The fact that there was no mistake apparent on the A
face of the records is borne out by the fact that even the
officers wanted clarification from higher officers. The mistake, if any, was sought to be rectified after a long period;
at least after a period of three years. When a mistake is
not rectified for a long period, the same, in law, may not B
be treated to be one. [Para 32] [768-E-H, 769-A]
>
8.2 Furthermore, what would be the effect of such a
mistake must be determined having regard to the provisions of the Contract Act. It is not a case where the contract is sought to be terminated on the ground of a mis- c
take. Only a higher rate is sought to be enforced on the
basis of internal circulars. [Paras 33, 34] [769-A,B]
8.3 Presumption of correctness of documents is provided for in Sections 81 and 84 of the Indian Evidence D
Act. Even the contents of a newspaper, as envisaged
under Section 81 of the Indian Evidence Act, would not
be presumed to be correct. [Para 35] [769-B,C]
9.1 Prima facie, the proviso appended to Section 9
..
and Section 10 providing for a minimum guaranteed peE
riod of three years does not appear to have any application. The authorities of the DOT also did not think so. They
proceeded on the basis of and having regard to the
phraseology used in Rules 478 and 496 that minimum
period is only three months. Applicability of minimum F
guaranteed period of three years was sought to be enforced from a circular letter dated 17.6.1988 only. [Paras
38, 39] [773-F,G]
9.2 Vacillating stand has been taken by the appellants in the case of C.G. Faxemail. They sought to charge G
-;.
double of the amount as prescribed in the contract on
the basis that the service which is being provided by them
'
is close user group service. TRAI held it not to be so. TRAI,
as noticed hereinbefore, relied upon two circulars only,
namely 13.7.1985 and 22.11.1996, the latter one being afH
736
SUPREME COURT REPORTS
[2008] 8 S.C.R.
1
\j.
A ter the contract was entered into. TDSAT, apart from hold·
ing that the said circular letters are internal documents, did
not deal with the internet service providers. It thereafter
relied upon the circular letter dated 15.4.1998 and not on
the circular letter dated 3.6.1995, the former having no apB plication to a contract which was entered into prior thereto.
Even the said letter provided for three months minimum
guarantee period for long distance lease lines. Even DOT
'
raised three months demand notice on or about 26.11.1998.
Yet again, the DOT in its letter dated 13/14.1.1999 confirmed
c that paragraph A of the circular letter dated 26.11.1998 referred to Rule 496. The parties were not ad idem as to
,,
whether these circuits being long distance lease lines
would be governed by which circular. Furthermore, the
authorities of the DOT, assuming that they are applicable,
D despite the circular letters, consciously entered into contract for one year's period on which the parties had acted
thereupon. [Paras 39, 40, 41) [774-A-E]
9.3 A finding of fact has been arrived at by TDSAT
that the said circular letters are not applicable. Rule 434
E was not applicable. Appeal to this Court, in terms of SecJ
tion 18 of the Act is maintainable only on a substantial
question of law. However, these appeals do not raise any
substantial question of law warranting interference. [Paras
42, 43) [774-F,G]
F
B.K. Srinivasan v. State of Karnataka (1987) 1 SCC 658;
Ravinder Kumar Sharma v. State of Assam (1999) 7 SCC 435
and /. T. C. Bhadrachalam Paperboards v. Manda/ Revenue
Officer (1996) 6 SCC 634 - referred to.
G
CIVIL APPELLATE JURISDICTION : Civil Appeal NOs.
6341-6342 of 2003
...
WITH
(f
Civil Appeal NOs. 6375 of 2003, 1, 537 & 2015 of 2004 &
,,
H 3448 of 2006
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
737
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
Vikas Singh, ASG, Brijender Chahar, Yoginder Handoo, A
Maninder Singh, Prathibha Singh, Gaurav Sharma, Surbhi
Mehta Sumeet Bhatia, Madhurima tatia, V.K. Verma, Jyoti
Chahar, Madhu Sikri, Samir Sagar Vasishta and Virendra Singh
thakur for the Appellants.
Sunil Gupta, Shyam Divan andA.N. Haksar, Punit D. Tyagi,
B
Prantap Kalra, mahesh Agarwal, Rishi Agrawala, Amit Kumar
Sharma, E.C. Agrawala, Manjul Bajpai, Bina Gupta, Ankur
Saigal, Gaurav Singh and Meenakshi Arora for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J : 1. The core question involved in this appeal is the effect of the application of internal circulars issued
c
by the Department of Telecommunications (DOT) in the contracts entered into by and between the parties hereto in respect D
of as regards inter-connection links provided by it.
2. Civil Appeal Nos. 6341-6342 of 2003, 1 of 2004, 537
of 2004 and 2015 of 2004 involve the question of payment of
charges. Civil Appeal No. 6375 of 2003 involves the question
E
as to the effect of pre-mature surrender of fifteen leased circuits of 2 MBPS which had been obtained by BPL from DOT
during the period January 1997 to June 1998. Civil Appeal No.
3448 of 2006 involves a dispute in relation to minimum guarantee period for 2 MBPS leaded lines.
3. Judgments were delivered by the Telecom Disputes
Settlement and Appellate Tribunal, New Delhi (TDSAT) on various dates, viz., 1.04.2003, 17.02.2003, 8.09.2003 and
. 3.03.2006.
F
4. Before, however, we consider the views taken by the G
Tribunal, we may notice the facts involved in each of the case
separately.
Civil Appeal Nos. 6341-42 of'2003
DOT circulated a booklet "commercial information on
H
738
SUPREME COURT REPORTS
[2008] 8 S.C.R.
A leased circuits" clearly providing for that the rent and guarantee charges for leased circuits would be on capital cost
basis and only after the guarantee period has expired, it
would be on capital cost or flat rate whichever is higher.
- Clause 7.0 of the said booklet provides for rent and guaran8 tee charges to the following effect:
"7.0 R & G Charges. R & G charges (per annum) will be
levied on percentage basis of the capital-cost for cable/
system. After the expiry of R&G period standard flat
rate rental or rental calculated on capital cost basis
,,_
C
(whichever is higher) shall be levied. A specific hiring
contract will be executed with the Guarantor
(Subscriber).
D
E
F
In contributory works the installation and maintenance
charges are levied on percentage of capital cost of the
Apparatus and Plant."
"Contribution Works" has been defined in the Posts and
Telegraphs Financial Handbook as under:
"(xi) Contribution Works - This term is applied to works
of construction or repair the cost of which is met, not out
of funds of the Department, but out of funds supplied by
private persons, local bodies, other Government
Departments, etc."
Respondents herein are providers of cellular mobile services. They did not have the requisite infrastructure. DOT had
the requisite infrastructure to provide inte!rconnecting links/
circuits and other resources.
Respondents entered into a licence agreement with the
G Government of India for operating/ providing cellular services
in the State of Kerala. Similar agreement were entered into
for inter-connection links in other parts of the country:
Basically we a.re concerned with Clause 4.1 of the said
H agreement, which reads as under:
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
739
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
"The resources required for operation of the services for A
extending them over the network of the DOT and MTNL
and any other service provider licensed by the Authority
will be mutually agreed between the parties and shall be
listed. The resources may refer to include but not limited
to physical junctions, PCM derived channels, private wires,
B
leased lines, data circuits, other communication elements.
The Licensee shall apply for and obtain from the DOT the
determined resources. The operation and charge of the
traffic passed through these resources shall be treated on
the basis of the prevalent rules and the guidelines of the c
DOT on the subject."
Allegedly, pursuant to the instructions issued by the DOT,
the respondents imported equipment worth Rs. 30 lakhs. The
said equipments were to be installed. The DOT issued a
•
letter on 2.08.1996 stating that such equipments could be D
installed and, furtrermore, suggested that the required digital microwave equipment should be installed on "contribution work" basis. However, it is beyond any cavil of doubt
that owing to resistance to the said move and resorting to
strike by the employees of DOT, the respondents were not E
allowed to install the imported equipments in their premises.
It is stated that the said equipments went waste.
By a letter dated 27.09.1996, the DOT communicated
•
that the charges for interconnection of cellular mobile telephone network would be calculated as per standard DOT
F
terms. Although it had earlier been communicated that th,e
respondent could put up its own equipment under contribution work basis, it was to be allowed to take the equipment
on rent and guarantee basis. The rent and guarantee period
was for ten years. ·Pursuant to and in furtherance of the said G
lease agreements, the DOT installed the required equipment
and raised bills on the capital cost basis of the equipment.
One of the sample bills, which had been raised being Bill
dated 5.06.1998, is as under:
A
B
c
.D
E
740
SUPREME COURT REPORTS
(2008] 8 S.C.R.
"Government of India
Department of Telecommunications
Thiruvananthapuram Telecom District
Telephone No.
Consumer No.
Bill No.
Page
BPU Cellular Mobile SVC
BILL DATE
BPL US West Cellular Communication
Services Ltd.
17.7.98
Stamp
DUE DATE
IVth floor, Co-Bank Towers,
Palayam, TVM
P.O.
31.7.98
PAY BY DATE
RENTAL
TO: 6.2.99
FROM: 7.2.98TO:
5.8.98
CALLS
FROM:
FREE
OPENING
CLOSING
METERED
CREDIT
METER RDG
METER RDG CALLS
CALLS
CALLS
1,05,315
Rent for the 20 pr PCM cable
·RENTAL
F provided
G
H
For extending one 2 MB stream
from
Hotel Sibra, MC Road to MC xge
Egpt - 61525
Cable - 43790
METERED
CALLS
TRUNK CALLS
OVERSEAS
CALLS
PHONO GRAMS
•
BHARAT SANCHAR NIGAM LTD. &ANR. v. BPL
741
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
Rent for end link at TVM. Pl.
Note this is due from Feb.
98. Bill is raised only now
Sd/- 27/7
DEBITS TAXES
GROSS AMT.
CREDITS
A
Payment approved
Sd/-
Amount payable
on or before
1,05,315
B
L. HERBERT
Head Network
(TR)"
5.8.98
Surcharge For de2000
layed payment
Amount payable if
paid on or after
6.8.98
Arrears
1,07,315
Sd/-
ACCOUNTS OFFICER
Indisputably, the Telecom Regulatory Authority of India
(TRAI) issued a tariff order covering the situations where lease
circuits were required to be provided. In the said tariff order,
c
D
E
the tariffs were applicable with effect from 1.04.1994. Moreover, these rates were applicable only if the leased circuits are
F
provided through utilization of spare capacity. It was further held
that where lease circuits were not available, as in the present
case, and the leased circuits had to be installed, the charges
would be on rent and guarantee basis. The said tariff order
was to have a prospective operation. As regards the prevailing G
tariffs, it was expressly provided that the tariffs specified in the
tariff order would replace the existing tariff from the date of implementation, which was 1.04.1999. The said tariff order was issued under Section 11(2) of the TRAI Act, 1997. Indisputably,
the amount charged by the DOT on an annual rental basis for H
742
SUPREME COURT REPORTS
[2008) 8 S.C.R.
A the systems rented out to the respondents was higher than the
rates prescribed in the tariff order.
B
DOT issued a circular dated 13.04.1999 that the tariff order would not be applicable to old cases under rent and guarantee basis.
On or about 7.05.1999, DOT informed the local office that
the charges which should be billed against the respondents
should be as per the standard DOT terms, i.e., either on capital
cost basis or flat rate basis, whichever is higher. It is on the
c said premise, the bills were raised on flat rate basis, the effect
whereof, as contended by the respondents, is that they were
required to pay annual rent of Rs. 1,62,50,000/- as against the
prevailing annual rent of Rs. 39,87,762/-. Such demands admittedly were raised only in the State of Kerala and nowhere
D else in the country. Such additional demands were raised on
the service providers. A large number of correspondences
passed between the; parties. However, we may notice that by a
letter dated 19.08.1999, DOT stated that a sum of Rs.5,77,025/
- per annum should be paid by the respondents. A detailed ca IE culation wa::; also submitted therewith. The said computation
was accept~ by the respondents. However, according to the
appellant, the demand was wrongly made at Rs.15,00,000/- per
annum as against the said demand of Rs.5,77,025/-. Questioning the basis for making such demands, a writ petition was
filed. However, ultimately the same was withdrawn.
F
Respondents filed an application in terms of Section 14
of the TRAI Act before the TDSAT inter alia on the premise that
the flat rate basis purported to be in terms of the internal circulars
having no force of law, the same could not have been the basis
G for making the demands. It, inter alia, prayed for the following
reliefs:
H
"(a) Set aside the revised demand raised by the DOT/
Respondents on flat rate basis instead of on capital cost
basis as originally charged.
....
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
743
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
(b) Direct the respondents to give retrospective effect to
A
Annexure-X i.e. DOT's new Tariff Circular 4/99 dated
13.4.99 so as to make it applicable to leased circuits
commissioned under R&G basis prior to 1.4.99 also;
(c) Direct the respondents to pay damages for the loss
sustained by the petitioner due to wasting of the NOKIA B
SDH Optimux equipment worth Rs. 30 lacs;"
The said applications have been allowed by reason of the
impugned orders.
Civil Appeal No. 6375 of 2003
The lease agreement in this case allegedly was to be for
c
a minimum period of three years. The dispute in this case relates to premature surrender of 15 leased circuits of 2 MBPS
which had been obtained by the respondent from DOT during D
the period January 1997 to June 1998. Whereas the contention of the appellant is that the minimum period during v.thich
such lease agreement has to be entered into is three years,
according to the respondent, such a stipulation was not known
to them till 26.11.1998 and the same was not also indicated in
the booklet of DOT, viz., Commercial Information on 'Leased
E
Circuits'. It was furthermore contended that the internal circulars
could not have the force of law.
Civil Appeal Nos. 537 of 2004 and 2015 of 2004
C.G. FAXEMAIL (P) Ltd. is an email provider. For its comF
mercial services, it had secured leased data circuits. A meeting of Email Service Operations was held with the Chairman of
Telecom Commission on 29.01.1996 to discuss various issues
relating to email services, the minutes whereof were issued on
02.02.1996. The minutes relating to the relevant item reads as G
under:
"Item No. 1
E-Mail service prov'iders are charged two times the rental
of the point-to-point circuit which is exorbitant. It is not
H
744
SUPREME COURT REPORTS
[2008} 8 S.C.R.
A
economically viable to provide the services at such high
tariff of the leased circuits.
tDecision
''"
It was informed that a Committee headed by Sr. DOG( CS)
B
is deliberating the tariff structure for CUG networks. The
Committee has been asked to take care of the issue and
give an early recommendation.
Action: Sr.DDG(CS)"
c
Respondents herein filed applications before TRAI as the
•
rates' which were being charged from them have been doubled,
inter alia, on the premise that they come within the purview of
close user group service. It came to the conclusion that the ser-
•
vice provided by the respondents does not come within the purD view ofclose unit group service, stating :
'·
"The DOT, v!de their letter No.106-10/94-PHC dated
13.7.1995 had issued an order stating that the leased
lines in respect of the networks set up by licensees of
Value Added Services will continue to be charged at a
E
rate, which was double the rate applicable for point to
point leased circuits of all types.
There is no doubt that E-mail services fall under the
•
category of Value Added Services and as the rental charge
F
for leased circuits provided to the network providers of
"
valued added services had been fixed by the DOT in their
order dated 13th July, 1995, we come to the conclusion
that leased circuits for E-mail providers has been charged
correctly as per the extant orders.
G
While holding the view, however, we are constrained to
take adverse notice of the fact that the respondents R-1
4
and R-2 did not refer to proper documents and that too
even after repeated queries from the Bench."
..
Having found so, however, the members came across two
H circulars being dated 13.7.1995 and 22.11.1996 and placed
...
..
• •
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
745
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J)
the matters for further hearing. Relying on the said circulars,
A
the TRAI held :
"After the hearing was over, we came across certain
documents filed by the DOT in an earlier petition clearly
indicating that value added network licensees, which
included E-mail licensees, were to be provided leased
B
circuits. We then decided to call for a rehearing on this
issue and placed the documents on record.
These
documents are of July 13, 1995 and November, 21, 1996
bearing Nos.106-10/94-PHC and 116-4/95-PHC
respectively.
During the rehearing, the respondents C
accepted that the charging of double the rental for the
leased circuits, provided to the E-mail network licensees,
was based on the documents referred to above and not
on the basis of their earlier interpretation of E-mail as
being a CUG network.
D
The petitioners argued that since the respondents had, in
their rejoinder, interpreted E-mail as a CUG network, which
according to them was wrong, the respondents cannot be
allowed to claim double rental on grounds of another order
which they failed to refer during the first hearing. The
E
respondents, however, argued that even though they had
earlier taken the stand that E-mail service was to be
categorized a CUG network, they had also referred to
various orders issued by the DOT and a close reading of
the same would bring out the fact that the multiplication of F
rentals, provided for data circuits, had been in existence
from 1989 itself."
It was opined that they fall in the category of Value Added
Service. An appeal was preferred thereagainst before the TriG
bunal which has been allowed, opining :
"After going through the pleadings and the documents
produced we have no doubts in our mind that the
Respondents do not have much of a case. Admittedly
under the terms and conditions of the licences held by H
746
SUPREME COURT REPORTS
[2008] 8 S.C.R.
A
them the Appellants are under an obligation to pay for the
·~
resources admitted as per the rates fixed by the
Respondents. However, in the absence of· a specific
contract drawn up between both the parties to lay down
specifically the resources to be obtained and the precise
B
charges to be paid by them, one has to rely upon knowledge
as may be available in public domain and on documents
exchanged between the parties, viz., requests for making
\
available certain resources and the demand notes
'I'
•.
subsequently raised by the provider of resources. It is an
'
c
admitted fact, and it has not been contested by the
~
Respondents, that the documents relied upon for charging
double the rental '"'ere internal circulars which were not
gazetted and hence not in public domain. The Commercial
Information on Leased Circuits, which was a published
D
documents of Dot made available to all the allottees of
leased circuits and hence very much in public domain, did
~
not contain any provision under which E-Mail Service
..
Providers were to be charged double the normal rent.
Even if it is assumed that the Ap1Pellants were aware of a
E
particular circular issued in 1993 it cannot be stretched to
argue that they were aware of all the internal circulars of
DoT on this subject. We have verified from copies of the
demand notes raised by the Respondents in response to
the requests received from the Appellants that the initial
demands were in conformity with the rates and tariff as
:..
F
indicated in the brochure "Commercial Information on
'
Leased Circuits"."
Civil Appeal No. 3448 of 2006
Respondent herein requested DOT to provide land disG tance lease line on 12.8.1996 for one year. It was also stated
that further period of extension will be intimated in advance. On
·for about 21•1 September, 1996, a request was made for exten-
<
sion of the said period for one year. Demand was made for
one year only by a bill dated 26.11.1996 for Vijaywada to
H Hyderabad long distant charges and on 24.12.1996 for
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
747
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
Vijaywada to Vishakhapatnam. The contract was, thus, conA
eluded. The demands were duly paid by the respondent on
9.1.1997 and 26.12.2005. Various extensions were sought for
only after expiry of one year. Those extensions were granted by
DOT even on 14.9.1998. The details of infrastructure leased
from DOT with their validity were sent. However, some leased
B
lines were surrendered by the first respondent. Indisputably, for
the first time on 13.10.1998, the DOT intimated the respondent
that the minimum guarantee period was three years. For the
said purpose, reliance was placed on internal circulars/letters
dated 23.6.1995. Bills were raised only on 20.10.1998.
C
Civil Appeal No. 1 of 2004
This case also involves the question of payment of charges
as in the case of Civil Appeal No. 6341-42 of 2003. We, therefore, need not deal with the facts of this case.
D
,
5. The main judgment was delivered by the TDSAT in Petition Nos. 13 and 16 of 2001. It was held:
(i) "The main issue agitated before the Tribunal was whether
there were clearfy understood contractual terms existing
between the Petitioners and the Respondent for E
computation and calculation of annual rents payable by
the Petitioners to the Respondent for facilities availed of
by the Petitioners."
(ii) "An appraisal of the averments and arguments preferred
F
by both the parties does not support the contention of the
Respondents that the Petitioners were fully aware of the
internal circulars and orders of DoT regarding the manner
of calculation of rental for leased circuits under the Rent
and Guarantee Scheme."
G
(iii) "The Telecommunication Manual and various other
related office circulars and orders are basically for internal
and official use and unless the relevant contents thereof
are specifically made known to parties through agreements
and/or contracts it cannot be presumed that these are
H
748
SUPREME COURT REPORTS
[2008] 8 S.C.R.
A
generally known to them. We have no evidence on record
~·
to indicate that the Respondent had informed the
Petitioners in categorical terms that in terms of the
departmental rules and regulations in force, the basis of
calc1.,1lation of annual rentals on R&G basis would be either
B
capital cost or flat rate, whichever is higher."
(iv) "If the department itself was oblivious of the procedural
'
rules it had framed for its own functioning it was somewhat
-\
optimistic to presume at a later stage that the Petitioners
knew of them."
c
(v) "We also see considerable merit in the argument of the
Petitioners that non-statutory office orders and rules cannot
be superimposed on the statutory undertakings given by
the Petitioners as a part of the licensing conditions under
D
the Indian TelegraphAct and Rules framed thereunder."
(vi) "For the enforcement of such non-statutory office orders
~
and rules and make these binding, it would be necessary
to draw up specific contracts giving in clear and
unambiguous details all the terms apd conditions and the
E
responsibilities and obligations of both the contracting
parties."
(vii) "As a result of what we have discussed above we
hold that the action of the Respondent in revising the
demands after a period of two years in respect of what
" •
F
were practically existing concluded contracts between the
Petitioners and the Respondent was neither legal nor
proper. The Respondent would recompute the impugned
Demand Notes on the basis of existing concluded
contracts at pre-revised rates."
G
6. On the findings in the said case, the TDSAT in other
t·
cases also opined that internal circulars would have no effect
on the term of the concluded contract.
7. Indisputably, the matter relating to laying down of the
H telegraph lines and providing phone connections including mo-
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
749
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
bile is governed by the provisions of the Indian Telegraph Act,
A
1885. The said Act was enacted to amend the law relating to
telegraphs in India.
Section 7(2)(ee) thereof reads as under :
"(ee) the chafges in respect of any application for providing
B
I
any telegraph line, appliance or apparatus."
>
8. Indisputably, in exercise of its power conferred upon it
under Section 7 of the Indian Telegraph Act, the Central Government framed rules known as the Indian Telegraph Rules. Rule
434 provides for annual rental charges for private wires and c
non-exchange lines which prescribes a minimum period of hire
of three years. The relevant portion of Rule 434 reads as under:
"Section IX.
Charges for Private Wires
D
'
Annual Rental
1. (a) Internal Private Wires
Rs.400
(b) External private wires
Rs, Fifteen hundred
E
(with or without relay set) per kilometer chargeable
distance per annum per pair.
\
Provided that in the case of private wires exceeding five
kilometers of chargeable distance, the minimum period
of hire shall be 3 years and the security for the service
F
shall be regulated under Rule 445 and obtained from the
subscriber before the provision of the service.
2. Omitted.
-~
3. The chargeable distance of External Private Wires shall G
j
be 1.25 times of the radial distance between the two points
to be connected.
4. Rental for Private Wires given on casual basis for short
periods shall be levied on pro rata basis at one and a half H
750
SUPREME COURT REPORTS
(2008] 8 S.C.R.
A
time the rates of rentals prescribed in Sub-section 1 above.
B
The minimum period of hire should be one month."
Section X.
Charges for Non-Exchange Lines
Annual rental
1. Annual rental per pair
Rs. Fifteen hundred per
Kilometer of chargeable
distance.
C
Provided that in the case of non-exchange line!S exceeding
five kilometers of chargeable distance, the minimum period
of hire shall be 3 years and the security for the service
shall be regulated under Rule 445 and obtained from the
subscriber before the provision of the service.
D
E
F
G
2. Omitted.
3. Omitted.
NOTE 1. - The chargeable distance shall be 1.25 times of
the radial distance.
NOTE 2. - The above rentals will apply in case of NonExchange lines or Private wires falling within the local
area of a Telephone system, even if they exceed sixteen
kilometers in length by the shortest practicable route [see
also Rule 494 (1) and the note thereunder]."
Rules 4 75-A, 4 78, 498 of the Indian Telegraph Rule reads
as under:
"475-A : Notice of surrender of leased Telegraph/ Speech
Circuits: Before surrendering the leased Telegraph/
Speech circuits and terminal equipments, the party
concerned shall give notice to the controlling/ billing
authority to not less than thirty days.
478. Quoting of rentals.-(1) The rental for the exclusive
H
use of the circuits shall be quoted at the rate1; then in force.
I
~
BHARAT SANCHAR NIGAM LTD. & ANR. v. BPL
751
MOBILE CELLULAR LTD. & ORS. [S.B. SINHA, J]
-
~·
(2) Where the circuits are provided by utilizing the installa- ... A
t
I
tions, existing at the time of the application, flat rate of rentals
based on radial distance shall be charged for a period of not
less than three months (hereinafter referred to in this Part as
the minimum guarantee period.
ing:
xxx
xxx
xxx
498. Part-time use.-(1) A telephone circuit, if available
as spare, may be leased to Newspaper Establishments
or News Agencies for part-time use between 7 p.m.