Shyam Telelink Ltd vs Union Of India

Sistema Shyam Teleservices Ltd. ...Appellant

Versus

Union of India ...Respondent

J U D G M E N T

T.S. THAKUR, J.

1. This appeal under Section 18(1) of the Telecom

Regulatory Authority of India Act, 1997 is directed against

an order dated 9th April, 2003 passed by the Telecom

Dispute Settlement and Appellate Tribunal whereby Petition

No.24/2001 filed under Section 14(a)(i) read with Section

14A(1) of the Telecom Regulatory Authority of India Act,

1997 has been dismissed. The factual matrix giving rise to

the appeal may be summarised at the outset.

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2. The appellant-Shyam Telelink Ltd. was granted a

licence under the Indian Telecom Act, 1885 on 4th March,

1998 for providing basic telecom services in Rajasthan

Circle. A licence agreement was executed between the

parties that, inter alia, required the appellant to start

commercial operations within twelve months from the date

on which the agreement was executed. The appellant's case

before the Tribunal so also before us is that, it was ready to

commence commercial operations in the last week of

February 1999 and had sought permission of the

respondents to do so. Permission was, however, denied on

the ground that certain technical deficiencies remained to be

removed and certain conditions for the grant of permission

remained to be fulfilled. In the meantime the Union of India

appears to have offered a Migration Package to all the

Telecom Operators in July 1999. Under this package which

was offered to the appellant-Shyam Telelink Ltd. on 22nd

July, 1999 the fixed licence fee was to stand replaced by a

revenue-sharing arrangement w.e.f. 1st August, 1999

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subject to the stipulation that atleast 35% of all outstanding

dues including interest payable as on 31st July, 1999 and

liquidated damages in full is paid by the appellant on or

before 15th August, 1999. Migration Package further

provided that the company shall have to accept all the

conditions stipulated in the package and that all proceedings

instituted by the licensee or their associations against the

Union of India shall have to be withdrawn.

3. It is not in dispute that the appellant gave an

unconditional acceptance to the Migration Package on 22nd

July, 1999 nor is it disputed that on 10th August, 1999 the

respondent advised the appellant that a sum of

Rs.6,74,90,481/- was payable towards outstanding licence

fee and interest due thereon apart from a sum of Rs.7.30

crores payable towards liquidated damages that were

provisionally determined. The appellant-company was

informed that in terms of the Migration Package at least

35% of the total licence fee along with interest amounting to

Rs.6,74,90,481/- had to be paid by it before 16th August,

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1999 and the balance dues covered by a Financial Bank

Guarantee by the 30th November, 1999. The liquidated

damages payable by the appellant-company were demanded

in full and had to be paid on or before 16th August, 1999.

4. On receipt of the intimation demanding payment of the

amounts mentioned above the appellant-company appears

to have prayed for waiver of the liquidated damages on the

ground that it could not commence commercial operations

by the stipulated date on account of certain procedural

delay. That prayer was upon consideration turned down with

the result that the appellant paid 35% of the outstanding

licence fee and interest amounting to Rs.2.36 crores on 16th

August, 1999. It also paid the full amount of Rs.7.30 crores

towards liquidated damages as demanded by the

Government.

5. Commercial operations in Rajasthan were finally started

by the appellant-company on 5th June 2000. In March 2001

a demand was raised by the respondent for payment of a

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further amount of Rs.70 lakhs as liquidated damages for the

delay in the commissioning of the service. Aggrieved by the

demand of Rs.8 crores towards liquidated damages out of

which the appellant had already paid Rs.7.30 crores on 16th

August, 1999 the appellant approached the Tribunal for

redress. As mentioned earlier the appellant's case before the

Tribunal was that it was ready to commence commercial

operations in the last week of February 1999 and had sought

permission to do so from the respondent which permission

was in an arbitrary, illegal and discriminatory manner

refused by the respondent. Recovery of the liquidated

damages was, therefore bad, argued the appellant who

demanded refund of the entire amount of Rs.8 crores

recovered towards liquidated damages from it.

6. The respondent contested the petition before the

Tribunal, inter alia, on the ground that the petitioner-

appellant was not entitled to question any demand arising

out of the agreement executed between the parties after it

had unconditionally accepted the Migration Package under

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which it agreed to deposit without demur the outstanding

licence fee as also the liquidated damages payable under the

licence agreement. The respondent also asserted that the

appellant was not ready with the commissioning of the

service as was evident from the admissions made in several

communications sent by it to the respondent. It was further

pointed out by the respondent that the computation of

actual liquidated damages could be undertaken only after

the appellant had commenced commercial operations. The

actual charges after such computation were according to the

respondent determined at Rs.29.86 crores but the demand

was restricted to Rs.8 crores in terms of the explicit

limitation prescribed under the licence. An amount of Rs.7.3

crores having already been paid under the Migration

Package, a demand for payment of Rs.70 lakhs only was

raised by the respondent. It was also asserted by the

respondent that the appellant had not disputed calculation of

the amount of Rs.7.3 crores as liquidated damages for non-

commissioning of the service at the time of Migration

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Package and paid the same with other dues. Having done

so, the Migration Package which contained a specific

stipulation that the acceptance of the package "will be

deemed as a full and final settlement of all existing disputes

whatsoever irrespective of whether they are related to the

present package or not" could not be questioned by the

petitioner-appellant. The respondent also raised the question

of limitation and assailed the maintainability of the petition

on that ground. By its order dated 9th April, 2003 impugned

in this appeal the Tribunal dismissed the petition filed by the

appellant aggrieved whereof the appellant has filed C.A.

No.7236 of 2003 before this Court.

7. We have heard learned counsel for the parties and

perused the record. A two-fold contention was urged in

support of the appeal by counsel appearing for the

appellant. Firstly, it was contended that the appellant was

ready to commence commercial operations in February 1999

i.e. within one year of the date on which the agreement was

signed between the parties. The fact that the petitioner had

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applied for the grant of permission to commence commercial

operations in Jaipur from 3rd February, 1999 was according

to the appellant sufficient to show its readiness to

commence such operations. There is, in our opinion, no

force in that contention. It is not disputed that the actual

operations started only on 5th June, 2000. The material

placed before the Tribunal clearly established that during the

intervening period the appellant had been informed by the

respondent that clearance for commencing commercial

operations could be considered only after the following

requirements of the licence agreement were complied with:

(a) Payment of next instalment of licence fee due

on 3.3.1999;

(b) Provision of Performance Bank Guarantee

(PBG) and enhanced Financial Bank

Guarantee (FBG) for requisite amount and

validity before commencement of succeeding

year on 3.3.1999;

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(c) Rectification of deficiencies pointed out by

TEC before the commencement of

commercial operations;

(d) Submission of plan in respect of providing

Direct Exchange Lines (DEL-s) and Village

Public Telephones (VPT-s) as per committed

targets failing which Liquidated Damages

(LD-s) are payable; and

(e) Establishment of a separate bank account (an

escrow account as stipulated under condition

18.6 of the Licence Agreement).

8. Material further established that the deficiencies

pointed out by the TEC could not be rectified by M/s

Qualcomm manufacturer of the equipment purchased by the

appellant forcing the latter to go for a new set of equipment

from a new vendor in December 1999 which equipment was

finally delivered and installed in April 2000. It was only after

the installation of the said equipment that fresh test

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certificates were issued by TEC on 1st June, 2000 leading to

the start of the commercial operations on 5th June, 2000.

The fact that the appellant was not ready to commence

commercial operations in February 1999 is evident from its

own letter dated 19th July, 1999 in which the appellant had

clearly admitted that the system was not yet ready for such

operations and that the appellant was engaged only in

monitoring and testing the credential of the new technology

and the related software/hardware. It is also evident from

the letter of the appellant dated 25th August, 1999 that the

appellant was not in a position to indicate any firm date for a

formal launch of the service as the system was not yet in a

position to do so. The relevant part of the letter reads as

under:

"............ at this stage we are unable to

indicate any date for formal commissioning of

the commercial launch of the service since

still there are bugs in the system provided by

our supplier. In any case the testing has to

continue for monitoring the behaviour of the

equipment even after 75% loading of the

system which is also being followed by

DoT/MTNL, while acceptance testing of the

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systems. However, we hope to commercialize

the services by middle of December 1999, as

supplier is continuously working to resolve

the bugs in the software."

9. In the light of the above admission which is the best

evidence against the appellant, it is not open to the

appellant to argue that it was ready to start commercial

operations in February 1999. The Tribunal was, therefore,

perfectly justified in holding that the commercial operations

were started only on 5th June, 2000 and that for the

intervening period such operations could not be commenced

on account of deficiencies that were attributed entirely to

the defects in the system which the appellant had installed.

The Tribunal was also justified in our opinion in holding that

the denial of permission to the appellant was neither

arbitrary nor mala fide especially when the conditions in the

licence agreement requiring the appellant to arrange and

install suitable equipment to meet the prevailing technical

specifications by Telecommunication Engineering Centre

were not complied with nor were all performance tests

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required for successful commissioning of the services carried

out by the Licensor before the services are commissioned for

public use.

10. The argument that the respondent has acted arbitrarily

and in a discriminatory manner by overlooking similar

deficiencies in the case of other service providers has also

been correctly repelled by the Tribunal on the ground that

the nature of the deficiencies found in the case of the

appellant have not been found similar to those found in

other cases where permission was granted. As a matter of

fact, the appellant was given an opportunity to implead the

other service providers so that the allegation could be

examined in detail but the appellant failed to do so nor was

any material placed on record to show that any

discriminatory treatment was meted out to it. At any rate so

long as the conditions of the agreement entitled the

respondents to decline permission to commence commercial

operations on account of failure on the part of the appellant

to comply with the conditions stipulated in the said

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agreement, which condition included a defect-free efficient

system, the fact that some other service providers were

given permission in the peculiar facts of their cases and

deficiencies allegedly noticed in their system could not make

out a case for the appellant to question the demand raised

on the basis of a package which the appellant had accepted

unconditionally and pursuant to which acceptance a

substantial part of the liquidated damages amounting to

Rs.7.3 crores had been deposited by it without any demur.

11. The Tribunal has also held and in our view correctly so

that the computation of the liquidated damages for non-

commencing of the services as well as limiting the same to a

total amount of Rs.8 crores was in conformity with the

licence conditions executed between the parties. There is

nothing before us to suggest that any error has crept in the

computation of liquidated damages nor was any such error

pointed out before the Tribunal. As a matter of fact,

according to the respondents the amount of damages works

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out to Rs.29.86 crores was limited to Rs.8 crores in explicit

terms of the limitation laid down in the licence agreement.

12. The factual aspects apart we need to remember that

the payment of liquidated damages was an essential

condition of the Migration Package which was offered to the

service providers. Unconditional acceptance of the package

including the payment of outstanding licence fee with

interest due thereon and liquidated damages was a specific

requirement of the Migration Package which was

unequivocally accepted by the appellant in terms of the

declaration made in the following words:

".. With reference to the letter No.842-

153/99-VAS (Vol.V) (Pt.) dated 22nd July,

1999 on the subject noted above, I hereby

covey unconditional acceptance on behalf of

the Licensee with regard to the package

proposed for migration of the existing

licenses to NTP 1999 Regime on the terms

and conditions in the letter under reference....

"

13. The unconditional acceptance of the terms of the

package and the benefit which the appellant derived under

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the same will estop the appellant from challenging the

recovery of the dues under the package or the process of its

determination. No dispute has been raised by the appellant

and rightly so in regard to the payment of outstanding

licence fee or the interest due thereon. The controversy is

limited to the computation of liquidated damages of Rs.8

crores out of which Rs.7.3 crores was paid by the appellant

in the beginning without any objection followed by a

payment of Rs.70 lakhs made on 29th May, 2001. Although

the appellant had sought waiver of the liquidated damages

yet upon rejection of that request it had made the payment

of the amount demanded which signified a clear acceptance

on its part of the obligation to pay. If the appellant proposed

to continue with its challenge to demand, nothing prevented

it from taking recourse to appropriate proceedings and

taking the adjudication process to its logical conclusion

before exercising its option. Far from doing so, the appellant

gave up the plea of waiver and deposited the amount which

clearly indicates acceptance on its part of its liability to pay

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especially when it was only upon such payment that it could

be permitted to avail of the Migration Package. Allowing the

appellant at this stage to question the demand raised under

the Migration Package would amount to permitting the

appellant to accept what was favourable to it and reject

what was not. The appellant cannot approbate and

reprobate. The maxim qui approbat non reprobat (one who

approbates cannot reprobate) is firmly embodied in English

Common Law and often applied by Courts in this country. It

is akin to the doctrine of benefits and burdens which at its

most basic level provides that a person taking advantage

under an instrument which both grants a benefit and

imposes a burden cannot take the former without complying

with the latter. A person cannot approbate and reprobate or

accept and reject the same instrument. In Ambu Nair v.

Kelu Nair AIR 1933 PC 167 the doctrine was explained

thus:

"Having thus, almost in terms, offered to be

redeemed under the usufructuary mortgage

in order to get payment of the other

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mortgage debt, the appellant, Their Lordships

think, cannot now turn round and say that

redemption under the usufructuary mortgage

had been barred nearly seventeen years

before he so obtained payment. It is a well-

accepted principle that a party cannot both

approbate and reprobate. He cannot, to use

the words of Honyman, J. in Smith v. Baker

(1878) LR 8 CP 350 at p. 357 `at the same

time blow hot and cold. He cannot say at one

time that the transaction is valid and thereby

obtain some advantage to which he could

only be entitled on the footing that it is valid,

and at another time say it is void for the

purpose of securing some further

advantage'."

14. View taken in the above decision has been reiterated

by this Court in City Montessori School v. State of Uttar

Pradesh and Ors. (2009) 14 SCC 253. To the same effect

is the decision of this Court in New Bihar Biri Leaves Co.

v. State of Bihar 1981 (1) SCC 537 where this Court said :

"It is a fundamental principle of general

application that if a person of his own accord,

accepts a contract on certain terms and

works out the contract, he cannot be allowed

to adhere to and abide by some of the terms

of the contract which proved advantageous

to him and repudiate the other terms of the

same contract which might be

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disadvantageous to him. The maxim is qui

approbat non reprobat (one who approbates

cannot reprobate). This principle, though

originally borrowed from Scots Law, is now

firmly embodied in English Common Law.

According to it, a party to an instrument or

transaction cannot take advantage of one

part of a document or transaction and reject

the rest. That is to say, no party can accept

and reject the same instrument or

transaction (Per Scrutton, L.J., Verschures

Creameries Ltd. v. Hull & Netherlands

Steamship Co.)"

15. The decision of this Court in R.N. Goswain v. Yashpal

Dhir AIR 1993 SC 352, brings in the doctrine of election in

support of the very same conclusion in the following words :

"10. Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage". [See: Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. Ltd. (1921) 2 KB 608, at p.612, Scrutton, L.J.] According to Halsbury's Laws of England, 4th Edn., Vol. 16, "after taking an advantage under an order (for example for the payment of costs) a party may be precluded from saying that it

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is invalid and asking to set it aside". (para 1508)"

16. In America Estoppel by acceptance of benefits is one of

the recognized situations that would prevent a party from

taking up inconsistent positions qua a contract or transaction

under which it has benefited.

17. American Jurisprudence, 2nd Edition, Volume 28, pages

677-680 discusses `Estoppel by acceptance of benefits' in

the following passage:

"Estoppel by the acceptance of benefits:

Estoppel is frequently based upon the

acceptance and retention, by one having

knowledge or notice of the facts, of benefits

from a transaction, contract, instrument,

regulation which he might have rejected or

contested. This doctrine is obviously a branch

of the rule against assuming inconsistent

positions.

As a general principle, one who knowingly

accepts the benefits of a contract or

conveyance is estopped to deny the validity

or binding effect on him of such contract or

conveyance.

This rule has to be applied to do equity and

must not be applied in such a manner as to

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violate the principles of right and good

conscience."

18. For the reasons set out by us hereinabove, we have no

hesitation in holding that the appellant was not entitled to

question the terms of the Migration Package after

unconditionally accepting and acting upon the same.

19. In the result this appeal fails and is hereby dismissed

but in the circumstances without any order as to costs.

.................................J.

(MARKANDEY KATJU)

.................................J.

New Delhi (T.S. THAKUR)

October 5, 2010