ETISALAT DB TELECOM PVT. LTD. Vs UNION OF INDIA

Alliance Infrastructure Ltd. in respect of Bihar and Madhya Pradesh service areas. The said company, however, merged with the Petitioner pursuant to an order of the Bombay High Court dated 26.3.2010 granting sanction to the scheme of merger filed by the said licensee with Petitioner. The Petitioners although, thus, were licensees in respect of 15 circles, these petitions are confined to 11 circles only. 5 of the aforementioned circles fall within category `A‟ and the rest six fall in the category `B‟ as envisaged under the guidelines issued by the Respondent herein on or about 14.12.2005 relating to the Unified Excess Service License. Indisputably, the Petitioner has, inter alia, furnished performance bank guarantees of Rs.20.00 crores each for the circles of Andhra Pradesh, Maharashtra, Tamilnadu, Gujarat and Karnataka circles; whereas it furnished bank guarantees of Rs.10.00 crores each in respect of the circles of U.P. (West), U.P. (East), Haryana, Rajasthan, Punjab and Kerala. The said bank guarantees were to remain valid upto 9.1.2012. This petition, however, was filed on or about 21.11.2011 wherein the following reliefs are prayed for: “1. Declare the failure on the part of the respondent to release the performance bank guarantee in respect of Andhra Pradesh, Gujarat, Karnataka, Kerala, Punjab, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West), Maharashtra, Haryana and Tamilnadu telecom circles where Phase II roll out obligations have been fulfilled by the petitioner, as violative of Clause 21.1 of the UAS License; 2. Direct the respondent to forthwith and without demur release the performance bank guarantees referred to in Table 2 in paragraph 10 of the petition; 3. Award compensation for losses incurred by petitioner towards the additional bank charges incurred by the petitioner as well as opportunity cost on account of the money locked up as 100% margin in keeping the performance bank guarantees valid and subsisting beyond the legally required term; 4. Award costs;”

The interim prayer made by the Petitioner was heard by this Tribunal and by an order dated 10.1.2012 it was directed as under: “32. We, therefore, are of the opinion that interest of justice would be subserved if an order of injunction in mandatory form is issued in favour of the Petitioner directing the Respondent herein to return the Performance Bank Guarantees subject to the condition that in the event this Petition is ultimately dismissed, the Tribunal shall adjust the equities between the parties and/or pass such order or orders which would take into consideration the interest of the Respondent. We, however, direct that the Petitioner shall furnish an undertaking supported by an affidavit that it would, in the event this petition is dismissed or this order is otherwise modified or varied, shall furnish appropriate Bank Guarantees. The Bank Guarantees must be furnished with effect from the date of expiry of the earlier bank guarantees. This order, however, it goes without saying being interim in nature, only a prima facie view has been taken by us and thus, it would be without prejudice to the rights and contentions of the parties and subject to any other or further order that may be passed by this Tribunal.”

The Petitioner is said to have furnished the bank guarantees and undertakings in terms of the said order. The Respondent, however, filed an application for modification thereof which was marked as MA No.102 of 2012. By reason of an order dated 15.5.2012, while noticing the relevant data with regard to completion of roll out obligations on the part of the Petitioner herein, it was directed: “13.Therefore, we modify our order dated 10.01.2012 to the extent that petitioner shall reduce the PBG to the extent of 50% in respect of these 11 circles within two weeks. This order is subject to any other or further orders passed by this Tribunal. 14.The final hearing will be expedited. Let these matters be posted for hearing in the Ist week of July 2012. However, pendency of this petition shall not stand in the way of the respondent to take suitable decisions on the question as to whether the petitioner has fulfilled its roll out obligations or not. There cannot, be any doubt or dispute that if the respondent arrives at the conclusion that the roll out obligations have been complied with by the petitioner, the Performance Bank Guarantees have to be returned.”

It is not disputed that the Petitioner has complied with the said order also.

Mr. Yadav, learned counsel appearing on behalf of the Petitioner submitted that keeping in view the obligations on the part of the Respondent herein as contained in Clause 21.1 of the conditions of license, the performance bank guarantees furnished by the Petitioner ought to have been returned. Mr. Kohli, learned counsel appearing on behalf of the Respondent on the other hand, urged: (i) Having regard to the different nature of bank guarantees as provided for in Clauses 21.1, 21.2 and 21.3; it must be held that they are subject to renewal as provided for in Clause 21.4 and 21.5 thereof. (ii) Having regard to the provisions of Clause 21.5 of the said license it must be held that the bank guarantees can be invoked in the event any violation of any of the conditions of the license by the licensee takes place and, thus Clause 21.1 cannot be read in isolation. (iii) Clause 21.1 having referred to the roll out obligations on the part of the licensees as contained in clause 34 thereof, it would be evident that roll out obligations on the part of the licensee would be in respect of the entire circle for which licenses have been granted and not in respect of 50% thereof only.

(iv) The bank guarantee which is a tripartite agreement and being an independent one, the same could be invoked in case of any breach of the license agreement on the part of the Petitioner. Before, however, we deal with submissions of Mr. Kohli, we may notice the following chart wherefrom it would appear that the Petitioner has not only complied with phase I of the roll out obligations but also phase II thereof.

50% 10% 40 % Total /Phase (on (on Date of TC- CIR No of 2 Roll SS. No. round round DISTRICT TOWN MRO_CATEGORY Sectrum Registration TC-Approval Date CLE DHQ Out logic logic Allocation Date s Obligat basis) basis) ion Page No. KARNAL Assandh MRO 10 4-Dec-08 4-Mar-10 25-May-10 JIND Narwana MRO 10 4-Dec-08 4-Mar-10 25-May-10 HISAR BARWALA MRO 40 4-Dec-08 12-Aug-10 11-Nov-10 KURUKSHE SHAHBAD MRO 40 4-Dec-08 10-Feb-11 16-May-11 TRA CHARKHI 8 10 BHIWANI MRO 40 4-Dec-08 10-Feb-11 16-May-11 HA DADRI 546-561( Vol- 1 20 2 R KHARKHODA 3) Sonipat MRO 40 4-Dec-08 24-Mar-11 16-May-11 (MC) MAHENDRA MAHENDRAG MRO 40 4-Dec-08 24-Mar-11 6-Jun-11 GARH ARH KAITHAL CHEEKA MRO 40 4-Dec-08 12-Aug-10 15-Nov-10 FATEHABA Tohana MRO 40 4-Dec-08 12-Aug-10 3-Nov-10 D JHAJJAR JHAJJAR MRO 40 4-Dec-08 12-Aug-10 15-Nov-10 NAWANSHA Nawanshahr MRO 10 10-Sep-08 24-Feb-10 5-Apr-10 HR FIROZPUR ZIRA MRO 10 10-Sep-08 24-Feb-10 5-Apr-10 GURDASPU QADIAN MRO 40 10-Sep-08 13-Dec-10 28-Jan-11 R AMRITSAR JANDIALA MRO 40 10-Sep-08 13-Dec-10 28-Jan-11 479- 502(Vol- 2 PUN 21 2 9 3) FARIDKOT JAITU MRO 40 10-Sep-08 13-Dec-10 5-Jan-11 11 PATIALA SAMANA MRO 40 10-Sep-08 13-Dec-10 5-Jan-11 AMRITSAR PATTI MRO 40 10-Sep-08 13-Jan-11 28-Feb-11 MANSA BUDHLADA MRO 40 10-Sep-08 3-Aug-10 30-Dec-10

RUPNAGAR MORINDA MRO 40 10-Sep-08 3-Aug-10 20-Sep-10 JALANDHA KARTARPUR MRO 40 10-Sep-08 16-Aug-10 20-Sep-10 R LUDHIANA RAIKOT MRO 40 10-Sep-08 3-Aug-10 20-Sep-10 GORAKHPU KHALILABAD MRO 10 10-Sep-08 1-Apr-10 5-Aug-10 R LUCKNOW Jais MRO 10 10-Sep-08 1-Apr-10 5-Aug-10 GOLA LUCKNOW GOKARANNAT MRO 10 10-Sep-08 1-Apr-10 5-Aug-10 H LUCKNOW Beligram MRO 10 10-Sep-08 1-Apr-10 5-Aug-10 GORAKHPU Tetri Bazar MRO 10 10-Sep-08 1-Apr-10 5-Aug-10 R Unnao BANGARMAU MRO 40 10-Sep-08 3-Feb-11 5-May-11 Fatehpur BINDKI MRO 40 10-Sep-08 3-Feb-11 5-May-11 Sitapur BISWAN MRO 40 10-Sep-08 3-Feb-11 5-May-11 Kanpur Nagar GHATAMPUR MRO 40 10-Sep-08 3-Feb-11 5-May-11 411-458( Vol- 3 UPE 47 5 19 Kannauj Gursahaiganj MRO 40 10-Sep-08 31-Jan-11 5-May-11 2) Farukkhabad KAIMGANJ MRO 40 10-Sep-08 3-Feb-11 5-May-11 MOGRA 24 Jaunpur MRO 40 10-Sep-08 3-Feb-11 28-Apr-11 BADSHAHPUR Kushinanagar PADRAUNA MRO 40 10-Sep-08 31-Jan-11 28-Apr-11 Kanpur Dehat Pukhrayan MRO 40 10-Sep-08 31-Jan-11 5-May-11 GAURA Deorai MRO 40 10-Sep-08 3-Feb-11 25-Apr-11 BARHAJ MIRZAPUR AHRAURA MRO 40 10-Sep-08 3-Feb-11 25-Apr-11 Jhansi GURSARAI MRO 40 10-Sep-08 3-Feb-11 28-Apr-11 Jalaun JALAUN MRO 40 10-Sep-08 3-Feb-11 28-Apr-11 MOHAMMADA Ghazipur MRO 40 10-Sep-08 3-Feb-11 25-Apr-11 BAD

Ballia RASRA MRO 40 10-Sep-08 3-Feb-11 5-May-11 Gonda NAWABGANJ MRO 40 10-Sep-08 3-Feb-11 28-Apr-11 Balrampur UTRAULA MRO 40 10-Sep-08 3-Feb-11 25-Apr-11 Shahjahanpur Jalalabad MRO 40 10-Sep-08 3-Feb-11 25-Apr-11 Hamirpur RATH MRO 40 10-Sep-08 3-Feb-11 28-Apr-11 MEERUT MAWANA MRO 10 25-Sep-08 22-Feb-10 5-Apr-10 BIJNOR AFZALGARH MRO 10 25-Sep-08 22-Feb-10 5-Apr-10 ETAH JALESAR MRO 10 25-Sep-08 22-Feb-10 5-Apr-10 MUZAFFAR KANDHLA MRO 10 25-Sep-08 22-Feb-10 5-Apr-10 NAGAR Hardwar MANGLORE MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 Ghaziabad PILKHUWA MRO 40 25-Sep-08 9-Dec-10 21-Feb-11 VIKASNAGAR/ Dehradun MRO 40 25-Sep-08 9-Dec-10 21-Feb-11 HWY26 Moradabad BAHJOI MRO 40 25-Sep-08 9-Dec-10 21-Feb-11 JYOTIBA UP 360-378( Vol- 4 38 4 15 PHULE BACHHRAON MRO 40 25-Sep-08 10-Jun-10 21-Feb-11 W 2) NAGAR 19 BUDAUN BILSI MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 PILIBHIT BISALPUR MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 JASWANTNAG ETAWAH MRO 40 25-Sep-08 10-Jun-10 21-Feb-11 AR SAHARANP NAKUR MRO 40 25-Sep-08 10-Jun-10 21-Feb-11 UR BAREILLY NAWABGANJ MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 AGRA SHAMSABAD MRO 40 25-Sep-08 10-Jun-10 21-Feb-11 FIROZABAD SIRSAGANJ MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 UDHAM SITARGANJ MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 SINGH

NAGAR RAMPUR TANDA MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 BULANDSH DIBAI MRO 40 25-Sep-08 6-Dec-10 21-Feb-11 AHR KURNOOL YEMMIGANUR MRO 10 27-May-08 10-Feb-10 29-Apr-10 VIZIANAGA SALUR MRO 10 27-May-08 10-Feb-10 29-Apr-10 RAM ANANTAPU KADIRI MRO 40 27-May-08 5-Aug-10 15-Nov-10 R KARIMNAG KORATLA MRO 40 27-May-08 5-Aug-10 8-Sep-10 AR EAST MANDAPETA MRO 40 27-May-08 5-Aug-10 15-Nov-10 GODAVARI 12 CHITTOOR NAGARI MRO 40 27-May-08 5-Aug-10 29-Nov-10 592-615(Vol- 5 AP 23 2 10 3) ADILABAD NIRMAL MRO 40 27-May-08 5-Aug-10 15-Nov-10 KRISHNA NUZVID MRO 40 27-May-08 20-Jul-10 7-Sep-10 WEST PALACOLE MRO 40 27-May-08 17-Jun-10 14-Jul-10 GODAVARI GUNTUR REPALLE MRO 40 27-May-08 17-Jun-10 14-Jul-10 NALGONDA SURYAPET MRO 40 27-May-08 20-Jul-10 29-Nov-10 RANGARED TANDUR MRO 40 27-May-08 5-Aug-10 11-Oct-10 DI ERNAKULA 521-528( Vol- PARAVUR MRO 10 15-May-08 11-Feb-10 31-Mar-10 M 3) THIRUVANA NTHAPURA VARKALA MRO 10 15-May-08 11-Feb-10 31-Mar-10 M GURUVAYOO Thrissur MRO 40 15-May-08 21-Dec-10 10-May-11 R 6 KER 15 2 6 KAYAMKULA Alappuzha MRO 40 15-May-08 20-Jan-11 10-May-11 M 8 Kollam PARAVOOR MRO 40 15-May-08 21-Dec-10 27-Apr-11 Malappuram TIRUR MRO 40 15-May-08 21-Dec-10 27-Apr-11 Kottyam Vaikom MRO 40 15-May-08 21-Dec-10 27-Apr-11

KASARAGO KASARAGOD MRO 40 15-May-08 9-Aug-10 20-Dec-10 D TUMKUR KUNIGAL MRO 10 30-May-08 19-Feb-10 5-May-10 MANDYA MALAVALLI MRO 10 30-May-08 19-Feb-10 5-May-10 GAURIBIDANU KOLAR MRO 10 30-May-08 19-Feb-10 30-Apr-10 R RAICHUR MANVI MRO 40 30-May-08 21-Sep-10 22-Mar-11 CHAMARAJ GUNDLUPET MRO 40 30-May-08 21-Sep-10 22-Mar-11 ANAGAR CHIKMAGA BIRUR MRO 40 30-May-08 6-Aug-10 22-Mar-11 LUR GADAG NARGUND MRO 40 30-May-08 21-Sep-10 22-Mar-11 16 BELGAUM NIPANI MRO 40 30-May-08 21-Sep-10 22-Mar-11 KT 529-543( Vol- 7 30 3 13 K CHANNARAY 3) HASSAN MRO 40 30-May-08 6-Aug-10 22-Mar-11 APATTANA BIJAPUR SINDGI MRO 40 30-May-08 21-Sep-10 22-Mar-11 KRISHNARAJA MYSORE MRO 40 30-May-08 2-Sep-10 22-Mar-11 NAGAR HAVERI SAVANUR MRO 40 30-May-08 6-Aug-10 22-Mar-11 GULBARGA SEDAM MRO 40 30-May-08 16-Nov-10 22-Mar-11 BIDAR CHITGOPPA MRO 40 30-May-08 16-Nov-10 22-Mar-11 CHICKBALL BDINAPUR MRO 40 30-May-08 16-Nov-10 22-Mar-11 APUR BELLARY KAMPLI MRO 40 30-May-08 16-Nov-10 22-Mar-11 THIRUMANGA MADURAI MRO 10 22-Apr-08 15-Feb-10 4-Aug-10 LAM CHINNAMANU THENI MRO 10 22-Apr-08 15-Feb-10 4-Aug-10 R PATTUKKO PATTUKKOTT 459-478( Vol- 8 TN 33 3 15 MRO 10 22-Apr-08 15-Feb-10 4-Aug-10 TTAI AI 3) DHARAPURA Tiruppur MRO 40 22-Apr-08 16-Aug-10 15-Nov-10 M NAMAKKAL NAMAKKAL MRO 40 22-Apr-08 16-Aug-10 4-Aug-11

SALEM EDAPPADI MRO 40 22-Apr-08 16-Aug-10 4-Aug-11 THIRUVARU MANNARGUDI MRO 40 22-Apr-08 16-Jul-10 23-Sep-10 R DINDIGUL PALANI MRO 40 22-Apr-08 16-Jul-10 23-Sep-10 RAMANATH 18 KEELAKARAI MRO 40 22-Apr-08 16-Aug-10 9-Jun-11 APURAM TIRUNELVE SHENKOTTAI MRO 40 22-Apr-08 16-Aug-10 4-Mar-11 LI TIRUPATHUR( VELLORE MRO 40 22-Apr-08 16-Aug-10 22-Sep-11 VELLORE) KANNIYAK COLACHEL MRO 40 22-Apr-08 16-Aug-10 4-Mar-11 UMARI ARIYALUR ARIYALUR MRO 40 22-Apr-08 16-Aug-10 23-May-11 Karur KULITHALAI MRO 40 22-Apr-08 16-Aug-10 23-May-11 VIRUDHUN SATTUR MRO 40 22-Apr-08 16-Aug-10 9-Jun-11 AGAR TIRUVANA TIRUVETHIPU MRO 40 22-Apr-08 16-Aug-10 21-Jul-11 MALAI RAM THANJAVU PATTUKKOTT MRO 40 22-Apr-08 15-Feb-10 4-Aug-10 R AI VILUPPURA KALLAKKURI MRO 40 22-Apr-08 16-Aug-10 4-Aug-11 M CHI SURENDRA THANGADH MRO 10 25-Sep-08 22-Feb-10 16-Apr-10 NAGAR AHMADABA SANAND MRO 10 25-Sep-08 22-Feb-10 21-May-10 D BANAS DHANERA MRO 10 25-Sep-08 22-Feb-10 16-Apr-10 KANTHA JUNAGADH MANAVADAR MRO 10 25-Sep-08 22-Feb-10 16-Apr-10 PANCH KALOL- 562-591( Vol- 9 GUJ 25 3 11 MRO 40 25-Sep-08 20-Sep-10 5-Jan-11 MAHALS PANCHMAHAL 3) JAMNAGAR DHROL MRO 40 25-Sep-08 20-Sep-10 3-Jan-11 ANAND UMRETH MRO 40 25-Sep-08 20-Sep-10 5-Jan-11 BHAVNAGA 14 GARIADHAR MRO 40 25-Sep-08 20-Sep-10 4-Jan-11 R GANDHINA MANSA MRO 40 25-Sep-08 20-Sep-10 5-Jan-11 GAR

PORBANDA RANAVAV MRO 40 25-Sep-08 20-Sep-10 4-Jan-11 R MAHESANA VADNAGAR MRO 40 25-Sep-08 20-Sep-10 5-Jan-11 Patan Radhanpur MRO 40 25-Sep-08 24-Dec-10 27-Jan-11 Amreli Bagasara MRO 40 25-Sep-08 24-Dec-10 27-Jan-11 Kheda Chaklasi MRO 40 25-Sep-08 24-Dec-10 18-Feb-11 Dohad Zalod MRO 40 25-Sep-08 24-Dec-10 27-Jan-11 MANGALVED SOLAPUR MRO 10 10-Sep-08 11-Mar-10 8-Sep-10 HE BULDANA BULDANA MRO 10 10-Sep-08 11-Mar-10 13-Sep-10 NANDED KINWAT MRO 10 10-Sep-08 11-Mar-10 8-Sep-10 OSMANABA KALAMB MRO 10 10-Sep-08 11-Mar-10 13-Sep-10 D BID AMBEJOGAI MRO 40 10-Sep-08 15-Nov-10 11-Feb-11 YAVATMAL DIGRAS MRO 40 10-Sep-08 15-Nov-10 11-Feb-11 SATARA PHALTAN MRO 40 10-Sep-08 6-Sep-10 28-Apr-11 JALGAON FAIZPUR MRO 40 10-Sep-08 15-Nov-10 11-Feb-11 MA 503-520(Vol- 10 35 4 14 H AURANGAB 3) GANGAPUR MRO 40 10-Sep-08 25-Nov-10 11-Feb-11 AD 18 PARBHANI PATHRI MRO 40 10-Sep-08 25-Nov-10 11-Feb-11 BHANDARA PAUNI MRO 40 10-Sep-08 8-Oct-10 11-Feb-11 LATUR AHMADPUR MRO 40 10-Sep-08 25-Nov-10 11-Feb-11 JALNA AMBAD MRO 40 10-Sep-08 25-Nov-10 11-Feb-11 GONDIYA TIRORA MRO 40 10-Sep-08 25-Nov-10 11-Feb-11 WASHIM MANGRULPIR MRO 40 10-Sep-08 15-Nov-10 11-Feb-11 KOLHAPUR KURUNDVAD MRO 40 10-Sep-08 13-Sep-10 11-Feb-11

RAIGARH KARJAT MRO 40 10-Sep-08 6-Sep-10 28-Apr-11 NASHIK YEVLA MRO 40 10-Sep-08 15-Nov-10 11-Feb-11 CHURU BIDASAR MRO 10 23-Dec-08 16-Feb-10 2-Aug-10 BARAN ANTAH MRO 10 23-Dec-08 16-Feb-10 2-Aug-10 KARAULI HINDAUN MRO 10 23-Dec-08 16-Feb-10 2-Aug-10 SIKAR LOSAL MRO 40 23-Dec-08 16-Feb-10 2-Aug-10 SHAHPURA,BH BHILWARA MRO 40 23-Dec-08 18-Aug-10 24-Mar-11 ILWARA AJMER KEKRI MRO 40 23-Dec-08 16-Jul-10 24-Mar-11 BUNDI LAKHERI MRO 40 23-Dec-08 230Dec-10 24-Mar-11 JHALRAPATA JHALAWAR MRO 40 23-Dec-08 6-Jul-10 1-Feb-11 N 379-410( Vol 11 RAJ 33 3 13 16 DHAULPUR BARI MRO 40 23-Dec-08 6-Jul-10 1-Feb-11 2-3) PALI SADRI MRO 40 23-Dec-08 29-Jul-10 24-Mar-11 DAUSA SAGWARA MRO 40 23-Dec-08 6-Jul-10 1-Feb-11 CHITTAURG NIMBAHERA MRO 40 23-Dec-08 6-Jul-10 1-Feb-11 ARH KUSHALGARH BANSWARA MRO 40 23-Dec-08 9-Feb-11 19-Apr-11 (M) JHUNJHUNU NAWALGARH MRO 40 23-Dec-08 9-Feb-11 19-Apr-11 N KOTA SUKET (CT) MRO 40 23-Dec-08 9-Feb-11 19-Apr-11 RAJASMAN DEOGARH (M) MRO 40 23-Dec-08 9-Feb-11 19-Apr-11 D TONK NIWAI MRO 40 23-Dec-08 9-Feb-11 19-Apr-11

It is trite that a contract has to be read in its entirety.

It must be assigned a meaning which would render the mutual obligations contained in the contract to be performed in a fair and reasonable manner.

Clause 21 deals with bank guarantees. Clause 21.1 deals with the performance bank guarantee. It reads as under:

“21.1 Performance Bank Guarantee: Performance Bank Guarantee (PBG) in prescribed format shall be submitted for amount equal to Rs.20 crores (for category „A‟ service area) before signing the Licence Agreement.

Further on completion of one year from the effective date of licence and after meeting the coverage criteria stipulated for first year, the PBG shall be reduced to Rs.10/5/1 crores for category „A‟ / „B‟/ „C‟ service areas on self-certification provided by the Licensee.

Further on fulfilling the roll out obligations as stipulated in Clause 34, the balance PBG shall be released on receipt of test certificates/test certificates issued by TEC in respect of coverage.”

Reliance having been placed by Mr. Kohli also on Clauses 21.3,

21.4, 21.5 as also Clause 34 thereof; we may notice the same also:

“21.3. The Fees, charges and royalties for the use of spectrum and also for possession of Wireless Telegraphy equipment shall be separately securitized by furnishing FBG of an amount equivalent of the estimated sum payable annually in the proforma annexed, to WPC, valid for a period of one year, renewable from time to time till final clearance of all such dues.

21.4 Initially, the Bank Guarantees shall be valid for a period of one year and shall be renewed from time to time. The Licensee, on its own, shall extend the validity period of the Bank Guarantees for similar terms at least one month prior to date of its expiry without any demand or notice from the Licensor on year to year basis. Any failure to do so, shall amount to violation of the terms of the licence and entitle the licensor to encash the Bank Guarantees and to convert into a cash security without any reference to the Licensee at his risk and cost. No interest or compensation whatsoever shall be payable by the licensor on such encashment.

21.5 Without prejudice to its rights of any other remedy, Licensor may encash Bank Guarantee (FBG as well as PBG) in case of any breach in terms and conditions of the Licence by the Licensee.”

“34. Roll-out Obligations:

34.1 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.

34.2 (a) Applicable for Category "A", "B" and "C" Service Area Licence (s)

LICENSEE shall ensure that (i) At least 10% of the District Headquarters (DHQs) will be covered in the first year and 50% of the District Headquarters will be covered within three years of effective date of Licence.

(ii) The licensee shall also be permitted to cover any other town in a District in lieu of the District Headquarters.

(iii) Coverage of a DHQ/town would mean that at least 90% of the area bounded by the Municipal limits should get the required street as well as in-building coverage.

(iv) The District Headquarters shall be taken as on the effective date of Licence.

(v) The choice of District Headquarters/towns to be covered and further expansion beyond 50% District Headquarters/towns shall lie with the Licensee depending on their business decision.

(vi) There is no requirement of mandatory coverage of rural areas.

34.2 (b) Applicable for Metro Service Area Licence(s)

The LICENSEE shall be required to provide in 90% of the service area Street as well as in-blinding coverage within one year of the effective date.

Clause 21.4 mandating the licensee to extend the validity period of the bank guarantee for similar terms; must, however, be read keeping in view the obligations on the part of the licensor to reduce or return the bank guarantee, as the case may be.

The said Clause uses the term `shall‟; it is, thus, imperative in character.

It was obligatory on the part of the Respondent herein to reduce the quantum of bank guarantee in the event the coverage criteria stipulated for the first year has been complied with and return the same after the roll out obligations as stipulated in Clause 34 are complied with.

Clauses 21.4 and 21.5, therefore, cannot be read so as to enable the licensor to take advantage of its own wrong.

In this case, the first year roll out obligation was not completed within a period of one year wherefor penalties have been levied on the Petitioner and deposited. The penalties levied on the Petitioner having been paid the licensor was required to reduce the quantum of bank guarantee. The Petitioner wrote several letters to that effect but no response thereto has been made.

By way of example, we may notice that by reason of a letter dated 26.5.2011, the Petitioner informed the Respondent about its completion of second phase of roll out obligations. Several reminders were given, one of them being dated 23.8.2011 reads as under:

“Your attention is invited to our afore cited letters (acknowledged copies enclosed as Annex-I,II & III) whereby we had requested DoT to release our PBGs in view of successful completion of our third year (50%) coverage roll-out obligations for the service areas of Andhra Pradesh, Gujarat, Karnataka, Kerala, Punjab, Rajasthan, UP East, UP West, Haryana and Maharashtra. Copies of the Service Test Results duly issued by respective TERM Cells for the aforesaid service areas were also submitted to DoT along-with letters.

However, we have not yet received any response from your office in this regard. We again request you to release our PBGs for the above stated LSAs in accordance with 21.1 of the UAS license(s) granted to us.”

The Petitioner has also furnished the details of its roll out obligations in the following terms:

“6. EDB has also fulfilled phase-2 (50% coverage) Rollout obligation in 11 LSAs. Service Test Results issued by respective TERM Cells certifying successful completion of phase-2 rollout obligations were submitted to DoT vide below-mentioned letters with a request to release the PBG in accordance with Clause 21.1 of the UAS License:

(a) EDB‟s letter NO.Dot/Regu/957/11 dated 26- May-2011 for AP, Gujarat, Karnataka, Kerala, Punjab, Rajasthan, UPE and UPW.

(b) EDB‟s Letter No.DoT/Regu/958/11 dated 27- May-2011 for Maharashtra (c) EDB‟s Letter No.DoT/Regu/973/11 dated 09- Jun-2011 for Haryana (d) Reminder 1 – EDB‟s Letter No. Dot/Regu/1071/11 dated 23-Aug-2011 for AP, Gujarat, Karnataka, Kerala, Punjab Rajasthan, UPE, UPW, Maharashtra & Haryana (e) EDB‟s Letter No.Dot/Regu/1099/11 dated 10- Oct-2011 for Tamil Nadu”

The Respondent has never raised any contention that the Petitioner has failed to perform its roll out obligations or committed breach of any other terms of the license agreement which is not otherwise securitized. The aforementioned chart shows that the obligations have been complied with by the Petitioner. No demand has been made. No additional amount has been specified for which other and further bank guarantees were to be furnished.

In the judgment of this Tribunal in Aircel Ltd. vs. Union of India,

Petition No.491 of 2011 wherein the ratio of the judgment in Sistema

Shyam to the following effect has been noticed:

“A bare perusal of Clause 21.1 would clearly go to show that at the first instance i.e. after one year the same has to be reduced to 50%. The period of one year has been fixed keeping in view only the roll out obligations on the part of the licensee, sofar as the coverage of the license areas are concerned.

The interest of public has been kept in view therefor. The extent of damages by way of liquidated damages have been quantified on the basis of length of delay caused by the licensee in providing for the telecom service contemplated under the licenses.

Upon successful completion of the roll out obligations, the performance bank guarantees are to be released.”

It was further opined:

“If Mr.Mishra‟s submissions are to be accepted, no occasion would arise for reduction of the amount of the performance bank guarantee and ultimate release thereof. It cannot, therefore, be given any effect. Performance bank guarantees would, therefore, have to be kept alive for the entire term of the license i.e. 20 years.

This Tribunal in this case would assume that failure on the part of the licensee to abide by its obligation in Clause 34.1 may entail civil consequences but the amount due therefor were required to be calculated.

Such dues, if any, may fall within the purview of the financial bank guarantee as contemplated under Clause 21.2 of the license and not 21.1.”

Clause 34 along with Clauses 8 and 35 have been amended by the Respondent in terms of a circular letter dated 10.2.2009, the relevant portions whereof read as under:

“(iii) In non-metro service areas, the licensee shall ensure that in first phase of roll out obligation at least 10% of DHQs where startup spectrum has been allocated are covered within one year of such spectrum. The date of allocation of frequency shall be considered for computing a final date of roll-out obligation.

(vi) Coverage of a DHQ/town shall mean that at least 90% of the area bounded by the Municipal limits shall get required street level coverage (vii) The date of application for SACFA or date of allocation of frequency, whichever is later, shall be taken into account for the purpose of calculating average delay in SACFA clearance.

(xi) Date of registration by TEC/TERM is to be treated as date of meeting the roll-out obligation in case of coverage criterion is met for roll-out obligation on testing.”

Clause 34 speaks of compliance in two phases of roll out obligations. There is no roll out obligation for the third phase, having not been prescribed by the licensor.

The first phase providing of covering 10% of the District

Headquarters in the first year and the second phase completion of services of 50% of the District Headquarters within three years from the “effective date of licenses”.

Clause V of the circular dated 10.02.2009 clearly states that the choice is of the licensee so far as the District Headquarter/towns to be covered is concerned and the choice of further expansion beyond 50% thereof shall lie with the licensee, wherefor it shall have to take a commercial decision.

Moreover, there is no provision whereby the licensee is required to cover any rural areas.

If the submission of Mr. Kohli is to be accepted, the roll out obligations would not only be confined only to the 10% and 50% of the towns/District Headquarters in the circle but would be the entire service area, which would not only consist of the municipal towns but also rural areas.

If that was the intention of the licensor it could have said so explicitly.

The interpretation of Clause 34 has been considered in Sistema

Shyam (supra) and other cases following the same.

We, therefore, are of the opinion that keeping in view the provisions of Clause 34.2(a) and the amendment dated 10.2.2009, the submissions of Mr. Kohli cannot be accepted.

So far as the submission of learned counsel with regard to scope of bank guarantee is concerned, we may notice that clauses contained therein referred to Clause 34 of the license.

The bank guarantee despite being a tripartite document must be construed having regard to the provisions of license.

We have no doubt in our mind that the contents of the bank guarantees are required to be considered having regard to provisions of Clause 21.1 and 34 of the licenses.

We furthermore place on record that the Respondent has not complied with the directions contained in our order dated 10.1.2012 and 15.5.2012. It is now well settled that compliance with the order of a competent court of law is a facet of rule of law. The same cannot be ignored or violated.

Last but not the least we may notice the submissions of Mr. Kohli that the licenses of the Petitioner have been directed to be quashed by the Supreme Court of India in Center for Public Interest Litigation vs.

UOI (2012) 3 SCC 1 and in that view of the matter we need not pass any order at this stage. The said submission is stated to be rejected.

The TRAI as also the DoT, on the one hand say that the licenses having been kept valid till 07.09.2012 and thus, the same is binding on the licensee, on the other hand, it can contend that it need not comply with its obligations. It, therefore, does not lie in the mouth of the licensor that although the licenses are valid, it need not perform its part of contractual obligations.

In this view of the matter, the Respondent is hereby directed to return the performance bank guarantees in respect of the circles in question within one week from date. This petition is allowed to the aforementioned extent. There shall, however, no order as to costs.

(S.B. Sinha) Chairperson (P.K. Rastogi) Member July 26, 2012 `anu’