RELIANCE COMMUNICATION LTD. Vs UNION OF INDIA

Petitioner, a licensee of the respondent herein, has filed this petition questioning bills dated 25.11.2011 and 30.12.2011; whereby and whereunder penalty for a sum of Rs.88.50 lakhs was levied on the following premise :- “4. AND WHEREAS it is observed from the investigation report of TERM Cell, Rajasthan that M/s. Reliance Communications Ltd. had activated the SIMs without proper verification of the customers as detected during the surprise visit on 19th Aug. 2011 at M/s. Arihant Trading Company, Bharatpur. The Team of TERM Cell issued 186 CAFs from the premises of M/s Arihant Trading Company, Bharatpur in the presence of Sh. Nikhil Gupta, Territory Manager RCL. However Sh. Nikhil Gupta refused to sign the seizure memo as witness. The details of irregularities made in the subject case are annexed with this letter. It is clear from the TERM Cell’s report that proper verification has not been carried out by the Service provider at the time of provisioning of service to the subscribers as 177 CAFs out of the total 186 CAFs investigated are non-compliant. Hence, M/s. Reliance Communications Ltd. has violated the terms and condition of License Agreement and the instructions issued from time to time by the Licensor on the subject by providing mobile connection without proper verification.

The percentage of correct subscriber verification of M/s. Reliance Communications Ltd. for the case investigated in Rajasthan Service area has been ascertained based upon the audit report jointly signed by your authorized representative and TERM Cell, Rajasthan. M/s. Reliance Communications Ltd. subsequently submitted the physical verification report in respect of the 139 CAFs out of the 177 CAFs found non compliant. It was mentioned in the physical verification report that the customer has owned the information filled in and signature made on the CAF. But it was found that CAF of these 139 customers are incompletely filled/blank and/or unsigned. As such the statement made by the customer during physical verification has no significance and the DoT instruction issued vide 800-4/98-VAS (Vol.VI) dated July 31, 2000 stands violated as mentioned in the joint audit report. Therefore, the financial penalty of an amount of Rs.88,50,000/- (In words Rs. Eighty Eight Lakhs & Fifty Thousands only) has been circulated as per the letter No. 800-52/2008-VAS-III (Pt.) dated 24th Dec 2008 and 800-20/2010-VAS dated 18th Nov 2010 from AS cell of DoT.

This letter is being e-mailed at the address P.V.Subbarao@reliance.com. Chetan Madhani@reliance.com.”

2. By reason of an order dated 30.12.2011, the representation made by the petitioner thereagainst was rejected.

3. The factual matrix involved in this matter lies in very short complex. Petitioner entered into a Distributorship Agreement with one M/s. Arihant Trading Co. for the town of Bharatpur in the State of Rajasthan. Indisputably, the respondent had issued guidelines from time to time with regard to the mode and manner of subscriber verification before grant of connection (both pre-paid and post paid), issued by the licensee prohibiting providing of mobile connection without proper documents. It was furthermore directed that in absence of any proper document, the concerned telephones be disconnected.

4. An inspection was conducted at the office of the distributor of the petitioner by the TERM Cell of the respondent. 186 CAFs were seized. The Nodal Officer of the petitioner at Bharatpur was informed with regard to the said inspection, who nominated one Sanjiva Nand Sinha for the said purpose.

5. Petitioner contends that the said purported raid was conducted where a junior employee of the said distributor was present and when the aforementioned Shri Sanjiva Nand Sinha reached the office of its distributor, the seizure of CAFs had already taken place, which having not been shown to him, he refused to put his signature on the Evaluation Report.

6. According to the petitioner, however, telephone connections were disconnected. A First Information Report was also lodged against the said distributor. The Distributorship Agreement was also terminated.

7. Shri Sanjiva Nand Sinha put his signature on the said Evaluation Report only on 12.10.2011. Petitioner thereafter was supplied with the copies of the CAFs, whereupon actual verification at the end of the petitioner concerned.

8. Petitioner sought for some time to comply with the directives issued in the said circular. According to the petitioner, by reason of a letter dated

13.10.2011, it sought for sixty days time to carry out its part of the contractual obligations, but only fifteen days time had been granted to it by the respondent in terms of its letter dated 14.10.2011.

9. According to the petitioner, out of 186 CAFs, it could verify the bonafide of 110 customers, which were forwarded to the respondent by a letter dated 27.10.2011. By another letter dated 11.11.2011, the respondent was informed that it had found 33 other cases to be bonafide. By a letter dated 11.11.2011, the petitioner prayed for fifteen days further time.

10. Respondent, by its letter dated 18.11.2010, stated :- “This is with reference to audit conducted by TERM Cells related to subscriber verifications cases other than monthly sample CAF Audit, such as cases referred from LEAs, cases of complaints, cases discovered during investigation of bulk cases, surprise checks etc. Issues have been raised about imposition of financial penalty for the cases found non-compliant in respect of subscriber verification for such cases. In this regard, it is clarified that such cases reported separately may not be combined with the monthly sample CAF audit for the purpose of calculating overall percentage compliance. These cases may be separately investigated/audited. For the subscriber verification failure cases of these cases also, the financial penalty as prescribed in the DOT letter No. 800-52/2008-VAS-III(Part) Dated 24.12.2008 shall be applicable. The sample size may be taken as total number of reported cases or cases taken for investigation/ surprise check and compliance percentage may be calculated out of these samples only. The other conditions related to disconnection etc. as applicable in case of other CAF Audit shall also be applicable. Since the referred instruction dated 24.12.2008 is applicable w.e.f. 01.04.2009, for cases reported prior to 01.04.2009 the financial penalty may be imposed at the rate of Rs.1000/- per non-compliant case.”

11. A representation was also made on 01.12.2011.

12. By reason of an order dated 30.12.2011, the said representation was rejected, stating :- “3. After going through all relevant details and documents of the case represented by you and considering the same on merit and various ruling on the subject, undersigned comes to the conclusion that the penalty imposed on you vide letter no. TERM-RAJ/11-14/2011/159 dated Nov. 25, 2011 is in order. 4. Hence, in accordance to para (X) of DoT (AS Cell) letter No. 800-20/2010-VAS dated 4th Nov. 2010, the financial penalty imposed vide letter No. TERM-RAJ/11-14/2011/199 dated Nov. 25, 2011, hereby remain unchanged. This financial penalty of amount Rs.88,50,000/- (Rupees eighty eight lakhs and fifty thousand only) hall be deposited within one week from the date of issue of this order through a demand draft or pay order drawn on any schedule bank in favour of CAO (Cash), O/o CCA Jaipur failing which the amount of the penalty shall be recovered with applicable interest (2% above the Prime Lending Rate (PLR) of State Bank of India existing as on 01.04.2011) as per terms and conditions of the license agreement for non-payment of dues. Further, the Licensor shall be at liberty to encash the Financial Bank Guarantee in case of non-payment of above mentioned amount without any further notice to the Licensee.”

13. Another detailed representation was made by the petitioner on 13.01.2012. This Petition has been filed on or about 19.01.2012 praying, inter-alia, for the following reliefs :- (i) Set aside the Demand Notice dated 25.11.2011 and communication dated 30.12.2011 whereby the representation of the Petitioner was rejected by the Respondent; (ii) Pass ad interim ex-parte order staying the operation of the impugned Demand Notice dated 25.11.2011 and the communication dated 30.12.2011.”

14. Mr. Navin Chawla, learned counsel appearing on behalf of the petitioner would contend that although the acts of omission and commission by the distributor of the petitioner cannot be denied, this Tribunal, keeping in view the mitigating factors namely that the telephone connections have been disconnected, distributorship has been terminated and the First Information Report has been lodged, should hold that it would be unjust levying such a huge penalty.

15. Ms. Maneesha Dhir, learned counsel appearing on behalf of the respondent, would contend that it is difficult to accept:- (i) as to how such a large number of CAFs remained unverified; (iii) there is no proper explanation as to on what basis telephone connections were disconnected; and (iii) despite the fact that CAFs were found not in the hands of the petitioner, as to on what basis verification process has been initiated.

16. In this case, the record will clearly demonstrate that there has been no violation of the principles of natural justice. The fact that the aforementioned Arihant Trading Co. was appointed as a distributor by the petitioner in terms of an agreement with effect from 19.6.2006 is also not in dispute.

17. We have been taken through the joint report, from a perusal whereof it appears that although surprise inspection was conducted at the office of the distributor of the petitioner on 19.8.2011, some connections were given to the applicant way back in May, June and July 2011.

18. It may be true that most of the CAFs were received from the office of the distributor of the petitioner on or about 17.8.2011 and 18.8.2011, but we do not find any reason as to why such irregularities had been permitted to be continued for a long time.

19. Quantum of imposition of penalty calculated on the graded scale will depend upon the percentage of default, in respect of which directives were issued in terms of the circulars but not been complied with.

20. Prima-facie it appears that the contention of Mr. Chawla that the raiding party merely picked up those CAFs which were incomplete is not correct, as according to the respondent, they had picked up a bunch of the CAFs on random basis. It is also difficult to accept at this stage that there has been a complete violation of the principles of natural justice.

21. This petition involves disputed question of facts. The dispute between the parties, therefore, can be determined only at the trial.

22. Keeping in view the nature of the acts and commissions on the part of the distributor of the petitioner, we are of the opinion that no interim order, as has been prayed for by the petitioner, should be passed.

23. The prayer for interim order is, therefore, rejected.

……………… (S.B. Sinha) Chairperson

…………….. (P.K. Rastogi) Member rkc