SHIVAM CABLE NETWORKS & ANR. Vs ESPN SOFTWARE INDIA PVT. LTD.

S B SINHA

A notice issued by the respondent herein (a distributor of ESPN Channel) dated 20th January, 2011 purported to be under Clause 4.1 of the Telecommunications (Broadcasting and Cable Services) Interconnection Regulation, 2004 as amended from time to time (The Regulations) as also a public notice dated 21.1.2011 issued in terms of Clause 4.3 thereof are in question in this Petition.

The said notice and public notice have been issued interalia on the premise that the petitioner (a) defaulted in making payments of subscription fee, (b) did not renew the agreement (c) and transgressed its area of operation.

The petitioner has approached this Tribunal against the respondent herein by filing a petition which was marked as Petition 134 (C) of 2010 wherein by an order dated 11th May, 2010, it was directed: - “Keeping in view that fact that the petitioner has made a payment for a sum of Rs.98,736/- as against the payment of Rs.97,631/- in the public notice and furthermore the petitioner has handed over a cheque for a sum of Rs.30,333/- as per the invoice raised by the respondent for the months of April and May,2010, we, subject to the following conditions, direct that the respondent may restore the supply of signals to the petitioner within 24 hours: i) The petitioner shall keep a recurring deposit of Rs.50.000/- with the respondent; ii) The petitioner file an undertaking before this Tribunal which was orally done by Mr.Bhatia before us that the petitioner shall confine its activities only in the town of Sitapur and it shall not either directly or indirectly supply the signals or cause the same to be supplied in respect of a network in which it had some interest situated at Lakhimpur. Such an undertaking may be filed before us by way of an affidavit by day-after-tomorrow.”

Indisputably the petitioner had complied with the said direction by filling of an affidavit in support thereof.

The agreement which had been entered into by and between the parties hereto expired on 13.5.2010. The petitioner by a letter dated 15.9.2010 requested the respondent to execute a subscription agreement on reasonable terms upon bringing to its notice that another network under the name and style of ‘A Cable Network’ has started operation in the town of Sitapur as a result whereof his subscriber base has decreased. The respondent asked the petitioner to contact one Mr. Dinesh Kumar. According to the petitioner despite meeting the said Mr. Dinesh Kumar, nothing happened.

Interalia on the premise that the petitioner did not transgress its area of its operation and no amount furthermore was outstanding, this petition has been filed. It was furthermore contended that the petitioner was all along ready and willing to renew the agreement.

The contention of the petitioner as regards subscriber base is that it had only about 250 subscribers; whereas according to the respondent the subscriber base of the petitioner was 1860, as would appear from the reply received from the authorities for the Entertainment Tax Act. On its own estimate however, the subscriber base of the petitioner is 5555. The said authority under the Entertainment Tax Act furnished the details of the subscriber base of the 15 cable operators who are the franchisees of the petitioner. It has further been contended that the petitioner has been supplying signals also to a hotel situated in the town of Sitapur known as Pujan Hotel.

The petitioner contends that from the conduct of the respondent it would appear that the respondent despite representations made by it did not discontinue supply of signals of its channels to its network but threatened to do so only when a big event like World Cup had taken place.

This Tribunal, keeping in view the said reply to the respondent of the Entertainment Tax officials, by an order dated 16th March, 2011 directed the respondent to supply signals to the petitioner’s network, stating:- “Taking a prima facie view of the matter and furthermore in view of the fact that the agreement between the parties hereto has expired in June, 2010, we are of the opinion that interest of justice would be subserved if without prejudice to the rights and contentions of the parties and subject to any other or further orders which may be passed by this Tribunal the petitioner is directed to pay the subscription fee on the basis of 50% of the number of subscribers as per the informations delivered to the respondent by the District Entertainment Tax Office, Sitapur being at the pages 56-61. The petitioner, therefore, during the pendency of this petition shall pay subscription fee to the respondent on the basis of subscriber base of 930.”

The petitioner, however, filed a Miscellaneous Application marked as M.A. No. 124 of 2011 contending that it was unable to pay the subscription fee on the basis of 930 subscriber base whereupon it was directed, “It is respectfully submitted that on the basis of 930 subscribers, the monthly payout of the petitioner would be around Rs. 71,824/- per month excluding the taxes whereas as on date the petitioner is paying much lesser subscription fee to the other broadcasters. It is respectfully submitted that the payment made by the petitioner to other broadcasters is as following:-

Sl. No. Name of the broadcaster Amount (in Rs. – including Service Tax) 1. Star Den Media Services Pvt. Ltd. 35,050.03 2. MSM Discovery Pvt. Ltd. 59,955.03 3. Taj Television India Ltd. 10,703.60 4. UTV Global Broadcasting Ltd. 3,667.00

It is stated at the bar that although a notice in terms of the Regulations was issued but supply of signals had not been discontinued.

The petitioner in support of its case has examined its proprietor Shri Vinod Kumar; whereas the respondent has examined its Area Manager, Shri Dinesh Kumar. Shri Vinod Kumar; with his evidence has annexed an agreement purported to have been entered into by and between the respondent and the aforementioned M/s. A Cable Network in a sealed cover.

The relevant statement made by Shri VInod Kumar in his evidence in this behalf is as under:- “I state that it has come to knowledge of the petitioner that Mr. Rajinder Singh Sodhi is also a partner in A.R. Network which was earlier known as ‘A Network and has also signed an agreement for the year 2011 with Star Den Media Services Pvt. Ltd. Copy of the said agreement is exhibited herewith as EXHIBIT PW1/9 (in sealed cover).”

So far as the allegation that the petitioner has transgressed its area of operation is concerned, the respondent contended that petitioner had been supplying signals to the residents of the following villages. “a) Panchampurva approx 2 KM from Sitapur City. b) Habibpur approx 2 KM from Sitapur City. c) Neapalapur approx 2 KM from Sitapur City. d) Namishpuram approx 5 KM from Sitapur City.”

Before us a certificate issued by the Superintendent of Taxes, Nagar Palika, Sitapur has been produced from a perusal whereof it appears that the areas referred to therein namely Anand Nagar, Khop Pur, Adarsh Nagar are within the Nagar Palika Parishad and within the border area of the Sita Pur, Namish Pura, Nepal Pura and Habib Pur are within the notified area of the town and within a distance of two KMs therefrom.

It is difficult to ascertain clearly as to whether the areas in question are within the town of Sitapur or not for which the agreement had been entered into.

We would, however, presume to be so as the words “within the notified area” have been used in the said certificate.

From the conduct of the respondent, therefore, it is evident that as of now it does not intend to disconnect the supply of signals of its channels to the petitioner’s network.

The principal question centers round the subscriber base of the petitioner. For determination of the subscriber base of the petitioner, keeping in view the order of this Tribunal dated 8.4.2011 we may notice the statements of Shri Dinesh Kumar in his cross examination; the relevant portions whereof read as under: - “Q. How many MSOs are there in Sitapur? A: Two- Shivam Cable and A Network. Q. Since when A Network is operating in Sitapur? A: For the last few years. Q. When was the first agreement signed between A Network and respondent? A: I do not know. Q. What is the area of operation of A Network? A: Parts of Sitapur. Q. Can you specify which parts of Sitapur? A: Currently, I do not know. Q. What is the monthly subscription fee that A Network pays to ESPN? A: There are more than 150 customers that I am looking after, so currently I do not remember. Q. Can you check your records and tell what is the subscription fee and area of operation of A Network since it has started its operations? A: Yes, I can in 2-3 days. Q. Can you also provide us with the invoices that you raised on A Network? A: If legally required, Yes. (Ld. Counsel for the petitioner calls upon the witness to produce the invoices and the subscription agreement between A Network and ESPN) Q. Where do you sit in Lucknow? A: I sit at my distributor’s office at Nishatganj.

Q. Is Mr. Rajender Singh Sodhi your distributor? A: Yes. Q. Have you seen the earlier agreements between the petitioner and the respondent? A: No.”

The said witness, however, has shown his ignorance about the details of the distributor of the respondent, stating “Q. I put to you that Mr. Sodhi, your distributor is a partner in A Network, which has since been named as A R Network? A: I do not know. Q: I put to you that you have deliberately not signed the agreement for the current year with the petitioner in order to promote your distributors network i.e. M/s. A R Network A: It is incorrect. Q. I put to you that the petitioner has always been operating in the area permitted to it under the subscription agreement? A: It is incorrect. Q. How many times have you been to Sitapur and for what purpose? A: Two times for general purpose. (Witness is confronted with page 33 of the Evidence folder and he confirms that it is the same list of the cable operators according to the respondent).”

While we are considering the deposition of said witness we may also notice his contentions in his cross examination in regard to the area for which the agreement was entered into, “Q. Can you tell us is it written anywhere that the cable operators under declare the subscriber base to the tune of 5- 6 times to Entertainment Tax Authorities? A: I can not comment upon it. Q. Who prepared this affidavit for you?

A: I went to my counsel’s office where it was prepared and I had signed it in Delhi only. Q. Where was your affidavit prepared? A: It was prepared in chamber no. 302 at Hon’ble Supreme Court of India. Q. Where is Poojan Hotel? A: In Sitapur City. I can not exactly tell the location. Q. On what basis have you made the statement that you are aware of dealings between the petitioner and the respondent prior to October 2010 when you are not aware of the agreements executed between the petitioner and respondent prior to the agreement in dispute? A: I am aware of the last agreement which expired in May 2010. Q. I put to you that A Network has only started its operation in September 2009? A: I do not remember. Q. I put to you that the petitioner has always been operating in the entire Sitapur city prior to September 2009? A: It is correct. Vol. But in parts of Sitapur. Q. I put to you that since A Network has started its operation in Sitapur, the subscriber base of the petitioner has gone down? A: It is incorrect. Q. I put to you that you were supplying signals to the petitioner for past many years at a lumpsum agreed subscription fee which had no relationship with the number of subscribers that the petitioner was catering? A: It is correct. Q. What were the areas of operation of the petitioner as per the last agreement? A: Parts of Sitapur Town. Q. Which parts of Siapur Town are mentioned in the subscription agreement? A: I can not comment upon it.

Q. Have you seen the petition before signing of the affidavit? A: Yes, I have. Q. I put to you that the area of operation of petitioner is entire Sitapur Town and not parts of Sitapur, as stated by you hereinabove? A: I can not comment upon it. Q. Which are the areas outside Sitapur where petitioner is operating? A: Adarsh Nagar, Habibpur and Nepalpur. Q. I put to you that Adarsh Nagar is part of Municipal Corporation of Sitapur? A: It is incorrect. As per my knowledge, it is outside Nagar Palika limits of Sitapur. Q. I put to you that Habibpur and Nepalpur are also part of sitapur city and are regulated by Nagar Palika, sitapur? A: It is incorrect. As per my knowledge, it is outside Nagar Palika limits of Sitapur.”

From the tenor of the evidence of the said witness, it is evident that the fact that another MSO who for all intent and purport is the distributor of the respondent, has started operating in the town of Sitapur is seriously not in controversy.

Submission of Mr. Bhatia, learned counsel appearing on behalf of petitioner, is that the agreement having provided for a subscription fee by way of a lump sum amount, the subscriber base takes a back seat particularly in view of the admission made by Mr. Dinesh Kumar in that behalf cannot be accepted as it has rightly been pointed out by Mr. Ganpathy that subscriber base was very much in issue while drafting the agreement and the subscription fee was worked out only on that basis as would be evident from the statements made by the petitioner in its rejoinder, the relevant portions whereof are as under: “In fact, the petitioner was the only Multi System Operator operating in Sitapur City for 7 years and had enjoyed a much higher connectivity in the year 2009 when the agreement was executed for 250 subscribers since a new Multi System Operator has joined, the connectivity of the petitioner in Sitapur city has gone down. It is respectfully submitted that the newly appointed MSO, A Cable Network, is supplying signals to almost 15 cable operators in Sitapur City. List of cable operators of the petitioner and that of M/s. A Cable Network as on February, 2011 is annexed herewith as Annexure P-10. It is respectfully submitted that it is in fact industrial practice that the subscription agreement are entered between a Multi System Operator and a broadcaster on a negotiated subscriber base when the actual subscriber base of the MSO is known to the broadcaster, the agreement is entered into on basis of negotiations between broadcasters and MSOs.”

Subscriber base of a cable operator plays a crucial role not only for determination of the subscription fee but also for other purposes. Subscriber Line Report is required to be filed by the local cable operators in terms of the provisions of the Regulations. The positive case of the petitioner as would appear from the statements made in the rejoinder as also the evidence of it’s witness that its subscriber base has gone down. There cannot be any doubt or dispute that the basic controversy between the parties was the subscriber base. The fact that the petitioner was entitled to operate in the entire town of Sitapur has not been seriously disputed.

The petitioner for all intent and purport is a small cable operator. The town of Sitapur is not a very big town. The petitioner had been taking supply of signals of channels of various broadcasters, the details whereof are as under: Sl. No. Name of the broadcaster Amount (in Rs. – including Service Tax) 1. Star Den Media Services Pvt. Ltd. 35,050.03 2. MSM Discovery Pvt. Ltd. 59,955.03 3. Taj Television India Ltd. 10,703.60 4. UTV Global Broadcasting Ltd. 3,667.00

The respondent broadcasts only a sports channel. We would assume that the return filed by the petitioner before the Entertainment Tax Authority is correct. The universe of the petitioner of the subscriber base of the petitioner, however, cannot be taken to be the negotiated subscriber base. For the said purpose a large number of factors are required to be taken into consideration; the viewership of sports channels is one of them.

We have passed an interim order purely on an adhoc and/or provisional basis. The figure specified in the said order need not be the basis for passing a final order.

Keeping in view the changed situation particularly the area of operation of the petitioner, the limited number of viewers of a sports channel like the respondent, the fact that another MSO has started operating, we are of the opinion that the number of subscribers as on 1st July, 2011 should be determined as 650 and on the said basis the amount of outstanding as on 30th June, 2011 should be determined as Rs. 1,98,449/-.

This order, however, shall not be treated to be a precedent because of the peculiar facts and circumstances of this case.

The petitioner must pay the balance amount within a period of 6 weeks from date whereupon the respondent shall continue to supply the signals of its channels.

This petition is disposed of with the aforementioned observations and directions but without any order as to costs. ………………. (S.B. Sinha) Chairperson

………………. (G.D. Gaiha) Member

……………….. (P.K. Rastogi) Member /NS/