TATA COMMUNICATIONS LIMITED Vs UNION OF INDIA

Legality and/or validity of an order dated 11.11.2011 passed by the respondent herein levying penalty of a sum Rs.50 Crores on the petitioner purported to be for committing breaches of Clause No.2.2, 9.1, 11.1, 19.2, 23.23 and 23.26 of the ILD service license is in question in this petition.

2. The basic fact of the matter is not in dispute.

3. The petitioner, a licensee under Indian Telegraph Act, 1885, had entered into a Full Channel Service Agreement commonly known as FCS Agreement with one Singapore Telecommunications (STL), pursuant whereto and in furtherance whereof the parties were to carry out their operations within their respective territorial jurisdictions for which they hold license.

4. A show cause notice was issued by the respondent herein inter alia alleging that it had allowed STL to illegally sell ILPC circuits directly to the customers in India and obtain payments from them on an account operated in Singapore purported to be in terms of the agreement dated 1.12.2005 stating: “5. Under the agreement signed by M/s Singapore Telecommunications Ltd. (STL) with M/s TCL, M/s STL 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 customer 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 agreed 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 above observation, it is well established that M/s TCL had created the third party interest which is the violation of Clause 11.1 of ILD License Agreement. 6. As per Clause 23.26 (VI) of ILD License, each and every IPLC link provisioned to Indian customers shall be checked by the licensee for its bona fide use and to detect any misuse of it. M/s TCL had failed to check the bonafide use of IPLC link, as the links were not provided to the end user, which is violation of clause 23.26 (IV) of ILD License agreement. 7. M/s TCL 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 in-turn issued invoices to bonafide customers and collected revenue in their account operated in Singapore. Hence M/s TCL had violated the clause 9.1 of ILD agreement. 8. Clause 19.2 indicates that License shall inform/notify to the customer with respect to billing and fault rectifications. However, in this case, the agreement had been signed by the customers with M/s STL and purchase order for circuits had also been issued to M/s STL. M/s TCL had not informed/notified to the customers regarding billing and fault rectifications hence they had violated the clause 19.2 of ILD License Agreement.

5. On receipt of the said show cause notice and before showing cause, the petitioner herein sought for clarifications from all its carriers as to whether they had been dealing with the customers in India directly, inter alia, by:

1. Writing a letter to STL on 23.7.2010 seeking for informations as to whether it had contracted or billed any Indian end customer; 2. On 23-26.7.2010 sent letters to different carriers with whom it had FCS/OSS agreements for the purpose of obtaining confirmation as to whether they had contracted or billed any Indian end customer.

6. Whereas all the other carriers confirmed that they had not dealt with or invoiced any customer directly, STL by its letter dated 29.7.2010 informed the petitioner that it was not in breach of FCS agreement and it had been in discussions with the DOT and would continue to do so.

7. Prior thereto, however, the petitioner wrote another letter on or about 27.7.2010 requesting STL to furnish informations as regards the allegations made in the show cause notice that it had been providing IPLC Services to customers in India under the said agreement.

On receipt of the said letter the petitioner by a letter dated 3.8.2010 informed STL that it would not be processing any new order under the FCS agreement.

8. Cause was shown by the petitioner to the respondent herein on or about 3.8.2010 contending, inter alia, as under: “9. M/s Tata Communications Limited had enabled the illegal ILD service provider namely M/s Singapore Telecommunications Ltd. to illegally sell IPLC circuits directly to the customers in India and collect money from them to their account operated in Singapore under the garb of agreement signed by M/s TCL with M/s STL, thus also becoming an accomplice in violation of Indian Telegraph Act.” Reply: According to the market evolved FCS understanding/arrangement, STL contracts with STL’s customers based outside of India and places a back to back order with TCL for completing service provisioning in India. Also, STL bills it’s customers located outside of India and collects the charges for end to end services from such customer. TCL only raises an invoice on STL to collect charges for India end half circuit IPLC. In view of this, TCL did not enable M/s Singapore Telecommunications Ltd. to illegally sell IPLC circuits directly to the customers in India or to collect money from them to their account operated in Singapore under the garb of agreement signed by TCL with STL. TCL is not in any way an accomplice in violation of Indian Telegraph Act. The FCS agreement does not allow STL to contract and/or bill any India customer. “10. As mentioned above, M/s Tata Communications Limited has violated the clause no.2.2, 11.1, 19.2 and 23.26 of the ILD service license. M/s Tata Communications Limited is to show cause that why action should not be taken against the company including imposition of penalty under clause 13.3 (ii) for violation of terms and conditions of ILD service license. The reply must reach this office within 15 days from the date of issue of this letter”

Reply: As explained above, TCL has no role in STL’s unilateral action contrary to FCS arrangement and applicable regulations. TCL has not violated any of the clauses of its license. TCL is not responsible for the actions of STL. TCL simply continued with service provisioning in India as per the FCS agreement.”

It had also informed the respondent herein that they were surprised to know that the STL had contracted or billed any customer in India.

9. We may also notice the relevant clauses of the said agreement dated 1.12.2005: “WHEREAS VSNL and SingTel desire to provide and procure from each other half-channel international private line circuits (Services) as described in this Agreement, including the attached Annexures 1 – 8, for the purpose of cooperatively offering Full Channel Services, as described herein, to its Customers. For the purpose of this Agreement, the Party providing the Services will be referred to as the “Participating Carrier” and the Party procuring Services will be referred to as “Coordinating Carrier”.

WHEREAS the Parties represent that they hold the necessary licences and authorisations and/or have complied with all regulatory requirements to provide and procure the Services covered by this Agreement and to offer Full Channel Services as defined herein. Clause 1.2(b)

“Coordinating Carrier” (“CC”) means the Party selected by the Customer to provide a single point of contact for the ordering and billing of the Full Channel Services of the CC and those of the Participating carrier. Clause 1.2(c) “Customer” means the customer that has ordered the Full Channel Services from the CC.

Clause 1.2(d) “Full Channel Service” (“FCS”) means international full channel service offered by the CC in cooperation with the PC, including full channel (half channels combined to make one full channel), access, and end-to-end offer features that are not based on the distribution of the PC’s Services by the CC, but are provided in accordance with the structure set forth in this Agreement.

Clause 1.2(e) “Participating Carrier” (“PC”) means the party that is not performing the duties of the CC. The CC shall be responsible for payment of the amount due in the PC’s invoice for a Service, irrespective of whether the Customer has paid or not, until the effective date of a cessation order for such Service sent by the CC to the PC. The PC shall not be held to refund to the CC any amounts received by the PC from the CC in connection with such non-paid or partially non-paid invoices. The CC shall be responsible for collection of such amounts from the Customer.

Clause 4.10 Billing will commence on the date both Parties agree that a given Service meets the technical specifications (excluding premises equipment), and has been accepted by the Customer, all in accordance with the provisions of the relevant contracts and applicable tariffs. The CC will invoice the Customer for charges associated with the complete route of each Service included in the Customer’s Full Channel Service. The CC shall be the Customer’s single point of contact for billing inquiries. The Customer, will pay all charges, fees and taxes due in connection with the Services, regardless of whether such Services are provided by the PC or the CC.

Clause 4.11: The CC will coordinate obtaining the relevant customer information and the signing of Order documentation as agreed by the Parties. The Parties agree to exchange all relevant information with respect to the Customer and the Order documentation. This Agreement does not alter or modify the technical, operational or other responsibilities of the Parties in providing services under their interconnection or other service agreements nor relieve either Party, in providing its portion of the Services, from any otherwise applicable contractual or tariff responsibility to the Customer in that Party service area.

Clause 5.4 The Parties will inform each other of all the reported faults or interruptions to the Services and, within the Parties usual Services maintenance procedures will co-operate to identify the nature and origin of malfunction. In lieu of each party crediting the Customer in its service area with respect to faults or interruptions of the jointly provided Services according to its own policy or terms and conditions, the CC, also on behalf of the PC, will affect the credit in a subsequent invoice, issued to the Customer. The Parties agree that any credits due to a customer during any month, as described in Annex 3, will be borne by the parties as set forth in Annex 3. The CC shall provide the PC on a monthly basis with an overview of the credits due to customer, and shall indicate the amount due by the PC in accordance with this section 5.4 the parties agree to review the arrangement and every three (3) month thereafter, and they shall agree on any changes or revisions in writing. Clause 7.2: CC shall remain liable to customer for any damages occurring in connection with FCS, pursuant and subject to the contractual or tariffed limitations, terms and conditions applicable to such portion of the services. However, subject to the provisions of section 7.1 either party shall indemnify, defend and hold harmless the other party from any all liabilities, losses and damages due to claims arising from or in connection with the portion of the service provided to the customer by the indemnifying party.” NO PARTNERSHIP The Parties To This Agreement Are Independent Contractors Neither Party is An Agent Or Representative of The other Party Nothing in This Agreement shall be deemed to create a partnership or joint venture.”

10. We may furthermore notice some of the relevant clauses of the License Agreement which have been mentioned in the impugned order “The ILD service providers are 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. 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”. “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.” “Leased circuits should also be checked for their bonafide use and to detect any misuse”. “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.” “The LICENSEE’s contractual obligations towards the CUSTOMER will include terms and conditions under which the SERVICES shall be provided or terminated. The LICENSEE shall notify to CUSTOMER all the arrangements or everything with respect to billing, repair, fault rectification, compensation or refunds etc. All complaints in this regard will be addressed/handled as per the guidelines, orders or regulations or directives issued by the LICENSOR/TRAI.” “The licensee shall adopt all means and facilitate in every manner the application of the Indian Telegraph Act, 1885 and Indian Wireless Telegraphy Act, 1933 as modified or replaced from time to time or the rules framed thereunder. The service shall be provided in accordance with the provisions of Indian

Telegraph Rules as modified and amended from time to time.”

On or about 21.4.2005 para 13.2(ii) was inserted, stating: “Para 13.2(ii): The Licensor may also impose a financial penalty not exceeding Rs.50/- crores for violation of terms and conditions of the licence agreement.”

On or about 14.11.2008 Clause 2.2(a) was amended in the following terms: “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 of bearer services from an integrated platform. ILD service providers will provide bearer services so that end-to-end tele-services such as voice, data, fax, video and multi-media etc. can be provided by Access Providers to the customers. Except “ Global Mobile Personal Communication Service (GMPCS) including through INMARSAT” for which a separate license is required, other listed services at Appendix are permitted to the LICENSEE. ILD service providers are 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. 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 the Indian Telegraph Act, 1885.”

A new clause 23.28 was also inserted:

“23.28 The lawful interception and monitoring of Resellers’ circuits shall take place at the Gateway of the ILD operator from whom the international bandwidth has been taken by the Reseller.” Clauses 23.26(i) and 23.26(ii) were deleted. Clause 23.26(iii) was amended in the following terms: “23.26(i) Active support must be extended by the service providers to the Telecom Enforcement, Resource and Monitoring (TERM) Cells of DoT for detection of clandestine/illegal telecommunications facilities. For this purpose, names of the Nodal officers & alternate Nodal Officers as communicated to the Law Enforcing Agencies for monitoring of telecommunication Traffic should also be forwarded to the respective TERM Cell of DoT, DDG (Security) DoT. The TERM Cell of DoT will contract the Nodal Officer/alternate Nodal officer, and till the time such nomination is received or in case of non-availability of such officer, the DoT TERM Cells will contract the Chief Executive Officer of the licensee, for such support/coordination.”

Clause 23.26(vi) was amended in the following terms: “23.26(iii) Leased circuits shall be checked for their bonafide use and to detect any misuse.” Similarly Clause 23.26 (vii) was amended in the following term: 23.26(iv) All the ILD operators shall transit the CLI as received from foreign callers. In case CLI is not received from the distant end (foreign party) then the ILD operator in the country shall introduce his assigned two-digit carrier identification code followed by the country code from where the call is received. In no case, the call shall be offered to BSO/CMTS without any CLI. This is to identify the origin of call and ILD operator handing the call.”

11. The petitioner made a presentation before a committee, constituted by the respondent explaining the nature of the FCS agreement with STL as also the fact that the latter had not responded satisfactorily to the questions of the petitioner regarding contacting and billing Indian end customers, as a result whereof the agreement in question was suspended with effect from 3.8.2010.

12. The said agreement was terminated by the petitioner by a notice dated 30.11.2010 after giving a final chance to STL to respond to the specific allegations set out in the show cause notice dated 30.6.2010.

13. By a letter dated 23.12.2010, the respondent herein sought for informations with regard to the following:

(i) Copies of the requisition/request letter of M/s Singapore Telecommunications for provision of Indian leg of the circuit. (ii) Copies of bills raised by M/s TCL to M/s STL for realising the charges of the circuits provisioned for M/s STL.”

In response thereto the customer order forms as well as copies of the bills raised by the petitioner upon STL were furnished with its letter dated 24.12.2010.

Yet again queries to the following effect were made by the respondent herein on or about 3.2.2011: “(i) Whether M/s Singapore Telecommunications Limited (STL) had submitted any document showing that the customer has been acquired outside India? (ii) How M/s TCL has satisfied itself that the customer, for which M/s STL had requested provisioning of Indian Half Circuit, has been acquired by STL outside India?”

14. In response thereto the petitioner stated as under:

A. “In view of the answer to (i) above, there was no need of such process till now to check this because Foreign Carrier signatory to FCS agreement could acquire customers only in its own licensed service area and not in India. However, post this instance we have immediately taken corrective steps which included taking confirmation in writing from all Foreign Carriers with whom we had FCS/OSS arrangements in force that they are neither contracting nor billing the customers in India under such arrangement. The same has been communicated to DoT during our Presentation. Post Presentation in our detailed response, we had provided summary of responses received from all such Foreign Carriers. According to such responses received, the case under reference appears to be one of its own kind in view of the fact that the other Foreign Carriers have confirmed they are neither contracting nor billing any India end parties under the FCS/OSS arrangement with TCL. We will be pleased to provide any additional information/clarification as may be required.”

STL, however, by a letter dated 1.4.2011 confirmed that they had not been contracting or invoicing or receiving payments from Indian end parties for the services provisioned to them by the petitioner.

15. By reason of the impugned order dated 11.11.2011, penalty of Rs.50.00 crores was imposed by respondent herein.

In the said order the factual aspects which we have noticed heretobefore as also the cause shown by the petitioner herein were stated. We may notice the operative portion of the said order: “16. And whereas, it has been observed that M/s TCL have submitted their reply on the basis of their FCS agreement entered into with M/s STL. In their reply to the show cause notice, M/s TCL has broadly mentioned that they had acted in compliance of FCS 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 ILD service license agreement which were stated to be violated by them as per show cause notice. DoT is of the view that M/s TCL must have ensured that the IPLC customers in India are being served and billed by the Indian ILD operators; and the foreign carrier, with whom M/s TCL has signed FCS agreement, does not acquire customers in India and does not issue bills to the customers in India on the basis of such FCS agreement. 17. Now, therefore, as M/s Tata Communications 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 Tata Communications Limited as per clause 13.2(ii) of the terms and conditions of the ILD service license agreement. M/s Tata Communications 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 failing 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.”

16. Dr. A.M. Singhvi and Mr. Hazarika learned senior counsel appearing on behalf of the petitioner urged: 1. Petitioner being not aware of any bill or invoice raised by STL upon any India end customer, the respondent cannot be said to be correct in contending that the petitioner became an accomplice of the STL in violation of the provisions of the Indian Telegraph Act as also Clause 23.23 of the ILD license agreement inasmuch as it was obligatory on its part to show that the acts of omissions and commissions on its part amounted to: (i) willfulness and/or intention on the part of the petitioner; (ii) its participation in the affairs of the business of STL; and (iii) act of conspiracy.

2. Having regard to the fact that both de jure and de facto the petitioner could not have been held liable for any act of omission and commission on the part of a third party, it having not been aware of raising of any direct invoice upon any customer in India, it must be held that it was impossible for petitioner to comply with the conditions of license. 3. The impugned order of penalty having been passed by way of no fault liability, and/or being a result oriented one, the impugned order is wholly unsustainable; there being no nexus with the acts of the STL vis a vis the conditions of license. 4. The impugned order must be held to be based on surmises and conjectures in so far as in paragraph 16 thereof it having been stated that “M/s TCL have ensured that the IPLC customers in India are being served and built by the Indian ILD operators. 5. Assuming without admitting that any technical violation of the conditions of license had taken place, it was not a case where penalty could have been levied having regard to the fact that there was no volition on the part of the petitioner in relation thereto. 6. In the facts and circumstances of the case, the respondent ought to have held that the petitioner having not allowed STL to continue to bill/invoice any Indian end customer and there having no connecting link between the activities of the contracting parties to the Full Channel Services agreement dated 1.12.2005, the impugned order should be set aside.

17. Mr.K.P.S. Kohli, learned counsel appearing on behalf of the respondent, on the other hand, urged: (a) Having regard to the Clauses 2.2(a), 5.1, 9, 11.1 of the conditions of license, it is evident that the petitioner had contractual obligations to see that the conditions of license are complied with and furthermore it ought to have been overseen by petitioner as to whether the foreign operator had been operating in India by raising invoice/bill on an India end customer. (b) STL having been realizing a heavy amount from the India end customer, not only the respondent suffered loss of revenue to which it was entitled to by way of its share of 15% of the AGR but also the country lost a huge amount by way of taxes which could be imposed thereupon as money collected from India had been sent abroad. (c) From a perusal of the impugned order dated 11.11.2011, it is evident that the licensor has applied its mind to the entirety of the facts and circumstances of the case to hold that the petitioner has violated the conditions of license. (d) In terms of the provisions of the license, the transfer and/or subletting thereof being prohibited, the petitioner could not have allowed STL to operate in India being bound by the said provisions. (e) The petitioner was bound by the provisions relating to customer services and billing conditions contained in the license.

18. Before adverting to the rival contentions of the parties as noticed heretobefore, we may place on record that Mr. Kohli submitted that action has been taken against STL for operating in India without holding a license. We may furthermore place on record that STL is said to have obtained license to operate in India sometimes in March, 2009.

19. The basic fact of the matter is not in dispute.

20. It is very much in controversy as to whether the conditions of Full Channel Services Agreement dated 1.12.2005, save and except raising of a bill/invoice by STL, by themselves were violative of the conditions of license. The provisions of the said agreement dated 1.12.2005 would clearly show the following process flow of OSS/ FCS agreement. “OSS/FCS process flow • Customer A in country A signs the full service contract (service between country A and country B) with the local licensed service provider A of country A. Service terminates at premise of customer B in country B • Service provider A of country A enters into FCS agreement with the licensed service provider B of country B for delivery of end to end service. • Customer A in country A signs the full service contract with service provider A between country A and country B. • Service provider A places a back to back order on service provider B for completion of services in country B. Services provider B completes the service in country B by terminating services at the premise of customer B. Service provider B undertakes all installation activities in relation to completion of services in country B. • Service provider A bills customer A in country A (in its own licensed territory) for full service. • Customer A makes the payment of full service to service provider A in country A. • Service provider B bills service provider A for the services delivered in country B. • Service provider A remits the charges invoiced by service provider B.

• Service provider A frontends all the queries related with the service assurance with customer A in country A. Service provider B provides the service maintenance and fault rectification in country B. • For cancellation of services, customer A places the cancellation order with service provider A. Service provider A in turn places a cancellation order on service provider B for services in country B. Services are cancelled on agreed date and billing stops.

21. The alleged violation of the condition of license is premised on the fact that STL had been billing its customers in India in breach of the FCS agreement.

22. The respondent with its show cause notice did not annex any copy of the bill/ invoice raised by STL on any Indian end customer.

It is also not denied or disputed that petitioner had been raising bill on STL in terms of the said agreement dated 1.12.2005. In the show cause notice principally four allegations were made. 1. TCL had created a third party interest being in violation of Clause 11.1 of the ILD license agreement. 2. TCL has failed to check the bona fide use of IPLC operators as the links were not provided to a user which is violative of Clause 23.26 (IV) of the ILD lease agreement. 3. STL was not a bona fide customer of IPLC.

4. M/s TCL had not informed/ notified to the customer regarding billing and call rectification and thus violated clause 19.2 of ILD license agreement.

23. We have noticed heretobefore that later on, two letters were issued by the respondent raising some queries to which the petitioner admittedly responded to.

The factual matrix involved in this matter, however, revolves round a few bills raised by STL on one IBM Daksh Business Process Services Pvt. Ltd. for the period 5.10.2008 to 24.11.2008 for a sum of USD 33,000/-.

24. The petitioner, in our opinion, has established a prima facie case in so far as it has raised several triable issues, both of fact as well as in law.

25. By reason of Clause 2.2(a) the ILD operator has been permitted full flexibility to offer all types of services from an integrated platform.

26. Indisputably, STL and other foreign operators could not have their clients in India. They could operate only within the territory for which it had been granted license. Whereas half of the circuit of the IPLC services could be completed abroad the rest of circuit required providing of services by an operator holding license under the Indian Telegraphs Act, 1885.

27. For the purpose of effectuating an international call including the aforementioned services thus, co-operation of two operators were necessary.

28. The core question which arises for consideration in this petition is as to whether the petitioner in terms of the aforementioned Full Channel Services Agreement dated 1.12.2005 has assigned and/or sublet the license in violation of Clause 11.1 of the conditions of license.

29. Prima facie, the terms of the agreement dated 1.12.2005 do not constitute violation of the said provision. Only raising of the invoice by STL to an Indian end customer has led the respondent to arrive at the aforementioned conclusion.

30. The respondent in its impugned order has opined that the petitioner had enabled the illegal ILD service provider to illegally sell

IPLC circuits directly to customers in India and thus became the accomplice of STL in violation of the provisions of Indian Telegraph Act and Clause 23.23 of the ILD license agreement.

31. The petitioner herein not only denied its knowledge of raising of the aforementioned invoice which according to it, was made known to it only in terms of the aforementioned show cause notice dated 30.6.2010. The matter prima facie might have been different, had any material been brought on record to show that the petitioner was a privy to the said raising of bill/invoice by STL. The fact, however, remain that such bills have been raised by it.

32. Subsequent conduct of the petitioner not only by issuing letters to the operators including STL and suspension of the agreement and ultimate termination thereof go to show that it, again prima facie, took such steps which were possible for it to be taken. Moreover, even STL at a subsequent stage has confirmed that it had not raised any bill/invoice on an Indian end customer. The same may or may not be correct as the veracity thereof is open to question.

33. The respondent in its impugned order, as indicated heretobefore has given only one example/instance. It is not in controversy that had the said bill been raised on the customer concerned at its foreign office, there would not have been any violation of the terms of the license dated 5.2.2004.

34. In absence of any other material and/or the record produced by the respondent, at this stage, we are of the opinion that several complicated questions of fact and law have arisen for our consideration in this matter. The petitioner has been able to prima facie show that its action was bona fide and it was not a party to any conspiracy with STSL.

35. But the question as to whether in terms of the license conditions it was bound to oversee the activities or STL is also required to be considered. It is furthermore required to be seen as to whether STL was a bona fide IPLC operator to the knowledge of the petitioner or otherwise. The petitioner in its show cause has clearly stated that there has been no violation of the Clause 2.2(a) of the conditions of license in so far as there was no question or any issue of resell. It was furthermore stated that Clause 14 of the FCS agreement clearly provided that there had been no partnership between the petitioner and M/s STL.

36. In the impugned order principally the conditions of license had been reproduced. It contains only an example as noticed heretobefore. The petitioner has also relied upon not only the conditions of the said agreement dated 1.12.2005 but also had drawn the attention of the respondent to the fact that it had been raising bill only on STL in terms of the agreement dated 1.12.2005 and thus, it is essential for this Tribunal to consider as to whether the allegations that the petitioner has created any third party interest were correct or not.

37. The question thus, as to whether the petitioner had enabled STL to illegally sell IPLC circuits and thus become an accomplice being very much in controversy and prima facie having not been established, and furthermore keeping in view the fact that it has not been shown that there has been any wilfulness/ intention or participation or conspiracy on the part of the petitioner, we are of the opinion that the petitioner has made out a prima facie case at least to the effect that it was not a case where without further application of mind, penalty to the extent ofRs.50.00 crores should have been imposed.

38. More significantly, the respondent even did not supply a copy of the bill/invoice purported to have been raised by STL on an Indian end customer to the petitioner. The same has been annexed for the first time with the impugned notice. Several other documents have also been annexed with the impugned order.

39. We have also held heretobefore that the petitioner having not been supplied with all the documents and in particular the bill/invoice raised by STL upon an Indian end customer, the principles of natural justice have been violated.

40. The respondent has not assigned any reason as to why the maximum penalty has been imposed. In a case of this nature where complicated questions of fact and law arise, the doctrine of proportionality should have been invoked.

41. We, therefore, are of the opinion that the petitioner has made out a case for passing of an order of interim injunction directing the respondent not to give effect to impugned order dated 11.11.2011, subject to its depositing 10% of the impugned demand within a period of two weeks from date. It is directed accordingly.

42. This order, however, shall be without prejudice to the rights and contentions of the parties in the main petition and/or subject to any other or further order which may be passed by this Tribunal.

43. In the event this petition is ultimately dismissed/allowed, there cannot be any doubt or dispute that this Tribunal would adjust the equities between the parties.

(S.B. Sinha) Chairperson (P.K. Rastogi) Member `anu’