BHARTI AIRTEL LIMITED Vs UNION OF INDIA

ORDER 1. The petitioner is a licensee, the license having been issued under Section 4 of the Indian Telegraph Act, 1885 (the Act). Admittedly it entered into an agreement on or about 20.12.2007 with Singapore Telecommunication Ltd. (STL) for the purpose of co-operating and working together in serving their mutual customers in the manner as provided for therein. 2. In terms of the said agreement the petitioner agreed to provide to the customers of STL, one of them being Interglobe Technologies Pvt. Ltd. (Interglobe) which has offices / establishments in Illinois in the United States of America and in the town of Gurgaon in India, the services of International Private Lease Circuit Service (IPLC) whereby the customers of dedicated services could make international calls directly. 3. It’s point to point private dedicated lease line/circuit links with a local work station with international work station(s) in order to share data, voice, video or any other service. 4. It is used by an entity to communicate between offices and are geographically dispersed through out the world. Indisputably the International Telecommunication Union (ITU) conceptualized ‘One Stop Shopping’ (OSS) and made recommendations in regard thereto, whereby an administration handles/coordinates between customers and other administration, in order to make it simpler for the customers using the IPLC. In terms of the said concept, an organization is allowed to place a single order with a single carrier for IPLC between two offices/locations in two different countries.

5. It is in controversy as to whether the said recommendations of ITU had been accepted by the respondent herein although admittedly in regard to equipments etc. ITU standard is followed. There cannot, however, be any doubt or dispute that the petitioner herein would be bound by the laws in India as also the terms and conditions of license granted to it in this behalf. 6. A bill is said to have been raised by `STL’ on `Interglobe’ at its Gurgaon office. The petitioner, however, admittedly raised a bill on STL at Singapore. Considering the said invoice of the STL as an example, a proceeding was initiated against the petitioner for alleged violation of Clauses 2.2(a), 9.1, 11.1, 19.2, 23.23 and 23.26 of the license agreement. 7. Inter alia, on the premise that the petitioner has violated the aforementioned conditions of license, a show cause notice was issued on or about 30.6.2010 in response whereto the petitioner showed cause on 21.12.2010. 8. Thereafter a Committee was constituted to go into the matter and make recommendations in relation thereto, comprising of; 1. Advisor (T) 2. DDG (CS)

3. DDG (DS) 4. DDG (LF II) 5. DDG (SECURITY) 6. DDG (AS) Although according to the petitioner, the said Committee satisfied itself that petitioner had not violated any conditions of license, from a copy of a subsequent report filed by the respondent before us being dated 9.9.2011 it appears that although a draft had been prepared by the said Committee, in view of superannuation of Chairperson thereof, the same was not finalized. 9. Another Committee was constituted comprising of the following: 1. Director (AS II) 2. Director (AS III) 3. Director (LF I) 4. Deputy Wireless Advisor, and 5. Director (CS III) 10. The said Committee made recommendations to the effect that penalty for a sum of Rs.50.00 crores should be levied on the petitioner, pursuant whereto and in furtherance whereof the impugned order dated 11.11.2011 has been issued. Validity and/or legality of the said order is in question before us in these proceedings.

11. The said order has been signed by one Mr. S.T. Abbas, Director, CS (III) for and on behalf of President of India, the operative portion whereof reads as under:

“16. And whereas, it has been observed that M/s BAL have submitted their reply on the basis of their OSS agreement entered into with M/s STL. In their reply to the show cause notice, M/s BAL has broadly mentioned that they had acted in compliance of OSS agreement. However, they have failed to prove the compliance of the Clause Nos. 2.2,9.1,11.1, 23.23, 23.26(vi) and 19.2 of the LD service license agreement which were stated to be violated by them as per show cause notice DOT is of the view that M/s BAL must have ensured that the PLC customers in India are being served and billed by the India ILD operators; and the foreign carrier, with whom M/s BAL has signed OSS agreement, does not acquire customers in India and does not issue bills to the customers in India on the basis of such OSS agreement. 17. Now, therefore, as M/s Bharti Airtel Limited has violated the clause no. 2.2, 9.1, 11.1, 19.2, 23.23 and 23.26 of the ILD service license, a financial penalty of Rs. 50 Crores ( Rupees Fifty Crores) is hereby imposed on M/s Bharti Airtel Limited as per clause 13.2(ii) of the terms and conditions of the ILD service license agreement. M/s Bharti Airtel Limited is directed to pay the financial penalty amounting to Rs. 50 Crores immediately and in any case within 15 days of the date of issue of this notice falling which further action will be Initiated under the terms and conditions of the ILD service license. The amount may be deposited by means of demand draft/ banker’s cheque drawn on any scheduled bank payable at New Delhi in favour of Pay & Accounts Officer (Headquarter), Department of Telecommunications, New Delhi.”

12. Mr. Maninder Singh, learned senior counsel in support of the interim prayer made by the petitioner would, inter alia, contend that petitioner having followed the recommendations of the ITU and having billed STL only, the purported invoice raised by the latter itself cannot lead to an inference that the essential conditions of license have been violated by it. 13. Ms. Maneesha Dhir, learned counsel appearing on behalf of the respondent, on the other hand, urged: 1. The ITU recommendations having not been accepted by the respondent and the same being subject to any Municipal Laws of the country is not relevant for the purpose of this proceeding. 2. The petitioner having been called upon to show cause and it having shown cause, which fell for consideration before a five member Committee constituted for the said purpose and it having gone through the entire matter being of the opinion that conditions of license had been violated and/or breached by the petitioner, no exception to the impugned order can be taken as by reason of the purported agreement dated 30.12.2007 a third party interest has been created. 14. On an oral objection taken by Ms. Dhir that the petitioner had not filed the agreement dated 20.12.2007, a copy thereof has been produced before us.

Ms. Dhir also has filed before us a copy of the report of the five member Committee ( to which reference has been made by us heretobefore) as also the purchase order, the IPLC order form, the bill raised by STL and the invoice raised by the petitioner on STL. 15. Although, breaches of several conditions of license have been alleged, we may notice Clause 2.2(a) thereof which reads as under: “2.2 (a) The ILD Service is basically a network carriage service (also called Bearer) providing international connectivity to the Network operated by foreign carriers. The ILD service provider is permitted full flexibility to offer all types to bearer service from an integrated platform.ILD service providers will provide bearer services so that that end-to-end tele-services such as voice, data, fax, video and multimedia etc. can be provided by Access Providers to the customers, Except “Global Mobile Personal Communication Service (GMPCS) including through INMARSA” for which a separate license is required, other listed services at Appendix are permitted to the LICENSEE. ILD service providers would be permitted to offer international bandwidth on lease to other operators. ILD service provider shall not access the subscribers directly (except for Leased Circuits/ CUG) which should be through NLD service provider or Access Provider. Resellers are not permitted. The ILD Service Provider is permitted to provide international bandwidth on lease to Resellers who are issued license for ‘Resale of IPLC’ under Section 4 of Indian Telegraph Act, 1885” (underlining is ours for emphasis)

16. A copy of the agreement between the petitioner and the STL has been produced before us during the hearing. According to the petitioner it is in accordance with the concept of the OSS as recommended by the ITU. The agreement between the petitioner and STL may be on similar lines as OSS, but the same will have to be considered in detail at a later stage. The agreement between the petitioner and STL, however, can be the violation of the license conditions in any form. 17. From a perusal of the report of the Five Member Commitee dated 9.9.2011 it appears that the details of the services rendered and the agreement entered into by and between two international service provider or ILD service providers have been stated therein. It has not been shown therein that the Act or the conditions of license do not permit any such arrangements, on the contrary Clause 2.1 does so. “2 SCOPE Of THE LICENCE 2.1 This LICENCE is granted to provide SERVICE as defined in Para 2.2 of this LICENCE AGREEMENT, on a non-exclusive basis, and others can also be granted LICENCE for the said SERVICE. Provided further that the LICENSOR, of its own or through a DESIGNATED AUTHORITY, shall always have a right to operate the SERVICE.” According to the report submitted by the Committee, the Term Cell has provided few samples of the bills (3 in number) issued by STL to Indian customers for full circuit. S.No. Indian customer to whom bills Amount of bill were issued by M/s STL 1 Intergloble, Gurgaon for 2 USD 5547 for a period

Mbps of one month 2 Kean Worldzen, Gurgaon for 2 USD 7410 for a period Mbps of one month 3 IBM Daksh, Gurgaon for 45 USD 33000 for a Mbps period of one month

18. It has further been mentioned by the TERM cell that there were 316 customers in the petitioner’s agreement. 19. Upon hearing the counsel for the parties, we are of the opinion that several complicated questions of fact and law would arise for consideration on this Tribunal in this petition, viz., 1. Whether there has been violation of principles of natural justice. 2. Whether the respondents while passing the impugned order were correct in opining that the petitioner has violated the conditions of license as contained in paragraph 227 thereof, inter alia, on the premise that STL has issued an invoice on an Indian end customer. 3. Whether the observation in the impugned order that the petitioner must have ensured that the IPLC customers in India are being served and billed by the Indian ILD operators is based on surmises and conjectures ? 4. Whether the respondent, although noticed the reply given by the petitioner failed to consider the same in the impugned order. 5. Whether the petitioner could have been penalized for the acts of omission and commission on the part of a third party without having knowledge thereof and thus no presumption could be raised with regard to its complicity. 6. Whether STL, who had no license to operate in India was a bonafide customer or in fact a reseller. 7. Whether the impugned order has been passed without arriving at a factual foundation in support thereof. We may deal with some of the aforementioned questions hereinafter.

20. It is not in dispute that the Committee which has submitted its recommendations did not hear the petitioner. A copy of the report of the Committee was also not supplied to it. Thus, the entire report is principally based on a single invoice relying on or on the basis whereof it was observed that total billing made by M/s STL for all the customers in India would be a significant amount. It was stated:

“M/s TCL and M/s BAL failed to curb this loss of revenue to the Government. Efforts may be made to obtain all the relevant information from the concerned companies so that the amount of loss may be determined and recovered from the licensee companies.”

21. It is not in dispute having regard to the documents filed by Ms. Dhir, that the petitioner did not raise any bill on any Indian customer. The bill was raised on STL which must have realised the stipulated amount from the `Interglobe’. Despite the same it was stated in the said report: “The entire revenue earned by M/s TCL and M/s BAL, under the said faulty agreement with STL, is a wrongful gain as it has been earned by violating the terms and conditions of the ILD service license.”

22. A faulty agreement, assuming the same to be one, is not essentially illegal. A few instances which are the basis of the entire report and that too an invoice raised by STL on a customer having offices both in USA and India, prima facie, may not lead to an inference that the petitioner made wrongful gain thereby. 23. If such OSS agreement is otherwise permissible in law, the question of any failure on petitioner’s part to curb loss of revenue to the Government, does not arise, particularly in view of the fact that according to the petitioner it had no knowledge of the invoice raised by STL. 24. The impugned order for all intent and purport is reproduction of the recommendations made by the Committee. If the earlier Committee constituted by DOT allowed the petitioner to make presentation and thus hear it orally, there was absolutely no reason as to why the second Committee could not do so. The impugned order moreover suffers from non application of mind as would appear from the following: 8. “Whereas, it came to the notice of DoT that M/s BAL has entered into an agreement dated 20.12.2007 with a non-licensed entity M/s Singapore Telecommunication Limited (STL) and extended the ILD services to M/s STL which in-turn were resold [by M/s STL] to their customers in India, M/s STL, without having any license in India, has acquired customers in India provided International Private Leased Circuits (IPLC) to the customers in India by taking Indian Half Circuit from M/s Bharti Airtel Ltd. (BAL). STL further issued bills and collected the amount for IPLC link from Indian customer (s) in their STL account operated in Singapore. To cite an example, a copy of invoice raised by M/s STL to the Indian customer namely M/s Interglobe Technologies Pvt. Ltd for IPLC circuit between Illinois, USA to Gurgaon, India is enclosed as Annexure.”

Only one invoice was sought to be annexed with the impuned order. Raising of such invoice, according to the petitioner, had been protested against.

25. The said invoice was sought to be annexed but the same did not form part of the impugned order. It is ,thus, difficult for this Tribunal to arrive at a conclusion at this stage with regard to the particulars thereof including the amount and the period for which the said invoice has been raised that the action on the part of the petitioner was malafide. 26. Although allegation was made that an invoice had been raised on an Indian end customer, the fact that `Interglobe’ was using IPLC Circuit between Illinois, USA and Gurgaon, India is prima facie not in dispute. It is one thing to say that there was some technical violation on the part of the petitioner but it is another thing to say that it through STL had not been serving bona fide customers. 27. More, significantly, the impugned order although records the summary of reply given by the petitioner, the respondent has jumped to the conclusion the petitioner had failed to prove the conditions of license mentioned therein. Only because some clauses of the conditions of license have been referred to in the show cause notice, the same ipso facto would not mean that the same were breached. 28. The purported finding is based on the view of DOT that the petitioner must have ensured that the IPLC customers in India were being served and billed by Indian ILD operators, which is not a finding of fact but based on surmises and conjectures.

29. Only because a bill has been raised by the STL, the same having regard to the materials on record by itself does not lead to the conclusion that it did not have its presence in the United States of America (which as noticed heretobefore has been acknowledged in the earlier part of the impugned order) or the services rendered by the petitioner was not a part of IPLC services. 30. A surmise on the part of the licensor cannot be a substitute for proof. Moreover, no reason has been assigned as to why penalty of Rs.50.00 crores has been imposed. 31. It is, however, not clear that STL is not a bonafide customer who is using the lease line for its own purpose also or in fact it is a reseller. It is, however, true that the IPLC could be given to another ILD licence holder under section 4 of the Indian Telegraph Act, 1885 only after 14.11.2008, as per the amendment of the license conditions. In fact, STL got license in India only on 05.03.2009. Therefore, the bills and invoice raised by the STL/ a non-licensed entity may be held to be in violation of the licence condition 2.2.

32. Ms. Dhir has pointed out the violation of clauses 11.1, 9.1, 19.2, 23.26 of ILD licence etc. The relevant portions of the report of the Committee are reproduced below:

“(ii) As per clause 11.1 of the ILD License, “The LICENSEE shall not, without the prior written consent as described below, of the LICENSOR, either directly or indirectly, assign or transfer this LICENCE in any manner whatsoever to a third party or enter into any AGREEMENT for sub-LICENCE and/or partnership relating to any subject matter of the LICENCE to any third party either in whole or in part i.e. no sub-leasing/partnership/ third party interest shall be created. Provided that the LICENSEE can always employ or appoint agents and employees for provision of the SERVICE.”

This clause indicates that licensee can neither transfer license nor enter into an agreement with third party whatsoever for any subject matter of license and third party interest shall not be created.

Under the agreement signed by M/s Singapore Telecommunications Ltd. (STL) with M/s Bharti and Ms TCL, M/s Singapore Telecommunications Ltd. is signing the service level guarantee (SLG) agreement with customers, providing the fault repairing management system (FRMS), customers support services and issuing the invoices to the customers in India for IPLC link. M/s STL is also collecting the invoiced amount from the Indian customers to their foreign account operated in Singapore. It is agred in service request cum agreement form that M/s STL will show the name of the Indian customers in their phone book published in Singapore website. Hence, in view of the above observation, it is well established that M/s Bharti and M/s TCL had created the third party interest which is the violation of clause 11.1 of the ILD licence agreement.

(iii) As per clause 23.26 (VI) of ILD license, “Leased circuits should also be customers shall be checked by the licensee for its bonafide use and to detect any misuse.” This clause indicates that each and every IPLC link provisioned to Indian customers shall be checked by the licensee for its bonafide use and to detect any misuse of it. It was observed from IPLC customers list submitted by M/s Bharti that there are 316 customers in the name of M/s Singtel

A/c xxx (where ‘xxx’ is the Indian end company name like Interglobe Technologies or Kean Worldzen or IBM Daksh etc.) The customers list submitted for Delhi Metro Service Area by M/s TCL have name of the customers as “M/s Singapore Telecommunications Ltd.” or “M/s Singtel Telecommunications Ltd.” or M/s Singapore Telecom India Pvt. Ltd.” Though, all of above customers are not the bonafide user of IPLC link. Hence, M/s Bharti and M/s TCL had failed to check the bonafide use of IPLC link which is violation of clause 23.26(IV) of ILD licence agreement.

(iv) As per clause 9.1 of ILD Licence, “LICENSEE shall be solely responsible for installation, networking and operation of necessary equipment and systems for provision of SERVICE, treatment of SUBSCRIBER complaints, issue of bills to its subscribers, collection of its component of revenue, attending to claims and damages arising out of his operations.” This clause shows that the licensee shall issue invoices to the customers and collect the amount from the customers directly in their account. In this case, M/s Bharti and M/s SCL had generated the invoices to M/s STL and collected revenue from them though M/s STL is not the bonafide customer of IPLC. Further, M/s STL had issued invoices to bonafide customers and collected revenue in their account operated in Singapore. Hence, M/s Bharti and M/s TCL had violated the clause 9.1 of the ILD agreement.”

33. Some of the clauses of the License Agreement cast specific duties on the licensee in terms whereof, leased circuits were to be checked for bonafide use etc. 34. The findings of the Committee also require detailed examination at the time of hearing.

35. We, therefore, direct that subject to any other or further order that may be passed hereinafter and without prejudice to the rights and conditions of the parties, the respondent should be restrained from giving effect to the impugned order, subject to the petitioner’s depositing 10% of the demanded amount within two weeks from date. It is directed accordingly.

(S.B. Sinha) Chairperson (P.K. Rastogi) Member December 12, 2011 `anu’