The petitioner by way of this petition has challenged the impugned illegal action of the respondent by willful default to discharge its contractual obligations by virtue of the Memorandum of Understanding dated 27.12.2006 and subsequent agreement between the parties on 5.7.2007 effective from a retrospective date, i.e., 01.01.2007.
Factual Matrix of the case
1. The Central Government by virtue of the Notification dated 14.1.2003 introduced the Conditional Access System (CAS) in the 4 metropolitan cities of the country i.e. Delhi, Mumbai, Kolkata and Chennai. The Telecom Regulatory Authority of India (TRAI) on 14th December, 2005 issued a letter to the petitioner that the respondent amongst other cable operators had been granted permission to operate cable services in the CAS notified areas of Delhi. These directions were issued under Section 13(1)of the TRAI Act, 1997 and the operative part of the directions is as follows :
i) 'to provide signals, on request, to such of the cable operators and direct subscribers affiliated to the MSOs specified in para 1 for the reason that these MSOs are not in a state of preparedness to roll out CAS by 31st December, 2006, on the same terms and conditions to their own affiliated cable operators and subscribers;
ii) to report to TRAI on a weekly basis the number of cable operators and direct subscribers approached and the number of cable operators and direct subscribers provided signals.'
2. As per these directions the provision of giving signals by one MSO to the other MSOs/cable operators and direct subscribers were to be given under the contingencies that these MSOs/cable operators were not in a state of preparedness to roll-out CAS by 31.12.2006. These signals were to be provided on the same terms and conditions by the MSO who were prepared to launch the services in the CAS notified areas as were being offered by them to their own affiliated cable operators and subscribers.
3. Needless to say, that under such conditions the respondent and the petitioner signed a Memorandum of Understanding (MoU) on 27.12.2006 i.e. barely four days before the launch of the CAS services in which the matrix of responsibility between the petitioner and the respondent was spelled out as follows :
'1. IMCL, will provide STBs for the subscribers and operators of SBSPL.
2. By the time the parties arrive at an agreement the said STBs shall remain property of IMCL and BSPL will be the sold custodian of set top boxes and will be responsible for safe keeping and accounting of all STBs supplied to subscriber and cable operator of SBSPL.
3. The value and quantity of the STBs delivered to SBSPL by IMCL shall be mentioned in the Annexure attached to this MOU.
4. Subject to the Force Majeure, this MOU is binding on the parties.'
4. As a follow-up of this MoU, an agreement was signed on 5.7.2007 between the petitioner and the respondent which elaborated the mutual covenants and agreed verbal terms during the preceding period of 6 to 7 months after the launch of the CAS services in Delhi as follows :
1. 'IMCL shall provide STBs for the subscribers and cable operators/affiliates of SBSPL.
2. IMCL will provide Digital feed to SBSPL with encrypted pay channels and Free to Air channels in Digital Mode. The addition or deletion of channels in future shall be intimated to
SBSPL. 3. SBSPL shall be responsible for collection of pay channel subscription of all the STBs issued to SBSPL or its affiliate cable operators and will pay to IMCL on monthly basis.
4. As mutually agreed, 4000 STBs shall be provided to SBSPL on concessional basis which is 2000 boxes on Rent free basis and 2000 boxes on Rent @ 30/- per month. For all these 4000 boxes, SBSPL shall provide undertaking as prescribed by IMCL on Corporate security and will act as custodian of the same. The boxes shall remain the property of IMCL and shall be returned in case of termination of this Agreement.
5. SBSPL has undertaken that instructions received from IMCL through Electronic Mail or through Courier or through FAX or through Speed Post or through Registered Post shall be valid
and complied with without delay.
All future supplies shall be either on outright purchase as per IMCL schemes or as per Telecom Regulatory Authority of India guidelines notified from time to time.'
5. The revenue sharing arrangements were also set out in this agreement, which are as follows :-
'The parties agree that from total subscription charges/revenue received, 45% shall belong to Broadcaster, 25% to Cable Operator and 30% to IMCL or as per any amended TRAI
regulation. IMCL shall give 5% subscription charges/revenue received from its 30% share from the broadcasters to SBSPL as commission.'
6. The other important clauses which are relevant for the purpose of transaction of business between the petitioner and respondent are as follows :
OBLIGATIONS OF RESPONDENT:
'C. As required under TRAI regulations. IMCL shall strictly provide 'pay channel signals' only encrypted mode through digital box and FTA through analog. It is specifically understood,
there shall be no interference/tampering of signals of pay channels. Any violation shall be the sole responsibility of SBSPL.'
'F. SBSPL undertakes to deposit the collections received from its affiliates/subscribers to IMCL without delay on monthly basis within a mutually agreed period of time.'
7. At the time of termination of agreement the following important covenants were applicable to the parties :
'12. In the event of the Termination, SBSPL shall pay all amounts due and payable by SBSPL upto the date of termination and shall obtain No Dues Certificate from IMCL.
13. SBSPL shall, within five (5) days of the expiration or termination, as the case may be, of this Agreement in terms of the provisions mentioned herein, hand over to IMCL all properties and assets belonging to IMCL which are in the possession of SBSPL. SBSPL shall also be liable to make good
all losses or damages caused to such properties and assets belonging to IMCL in the custody of SBSPL within seven (7) days of expiration or termination of this Agreement.'
8. The main contention of the learned counsel for the petitioner are as follows:-
(i) The respondent expressed its inability to rollout in CAS area because of the non-availability of the Set Top Boxes (STB) and the digital headend for digital transmission in the CAS areas.
(ii) The signals were provided by the respondent to the petitioner alongwith the STBs from its digital headend not under Regulation 3.2 but as per the directions issued by the Telecom Regulatory
Authority of India under Section 13(1) and, thereafter, the agreement was executed on 5.7.2007 on the basis of the MoU dated 27.12.2006. This agreement noted that MOU entered on 27.12.2006 has expired and agreement would be treated to come in force with effect from 1.1.2007. No payment has been made to the petitioner by the respondent since Jan, 2007 till Nov, 2007, in spite of the supply of 13000 STBs. Out of these 13000 STB’s, 2000 STBs do not carry any rental and 2000 to 4000 STBs were to carry a rental of Rs. 30 per month. While these STBs will remain the property of the petitioner and the same shall be returned in case of termination of this agreement. The rest of the STBs were to
be provided at a monthly rental of Rs. 45 with a security deposit of Rs. 250/- per STB. This is as per the Regulation issued by the TRAI in this regard. As per the agreement the petitioner was provided digital feed for the pay channels as well as analog feed for free to air channels.
(iii) Any equipment which could have got damaged during the process of execution of this agreement shall also has to be made good by the respondent.
(iv) The petitioner has taken up the case for the return of the STBs in the absence of the Channel Selection Form being given in lieu of the STB by the subscribers fed by the petitioner, in the CAS area, by its letter dated 16th June, 2007. Another request has also been made to return the deactivated STBs and to provide current status of the subscribers on 26th July, 2007. Further the petitioner has
taken-up the case again on 10th September, 2007 for return of the STBs in the absence of any Channel Selection Form being given by the subscriber to the respondent.
(v) Some of the Channel Selection Forms with complete details having the smart card no. and the channels which have been selected by five subscribers are also placed in the petition.
(vi) The petitioner has further brought to our notice that as per their statement of account placed at page 360 of the evidence by way of affidavit submitted by petitioner, a sum of Rs. 11.50 lakhs has
only been made by the respondent in transaction of business but the dues are Rs. 2.4745412 crores and, therefore, a sum of Rs. 2.1625283 crores after deducting share of LCO’s as 25 % of pay
channel amount i.e., of Rs.1,24,80514/-, equal to Rs.31,20,128/- is due from the respondent to the petitioner alongwith the interest @ 18% from the date the amount has become due till the date of
(vii) The respondent may be directed to return the entire equipment of the petitioner including but not limited to 10449 STBs as per the accounting sheet, date-wise, in regard to the STBs given to the
respondent. The payment which has been made in as per the agreement, in regard to the security deposit, for STB while rental and the pay channel charges as per the Channel Selection Forms
received from the various subscribers has also not been paid so far.
(viii) The learned counsel for the petitioner has submitted that in the initial stage the signals of all pay channels were given to all the subscribers because the Channel Selection forms were not possible
to be obtained and as and when the Channel Selection forms have been received, the billing has been done according to the subscriber’s choice of the pay channels as reflected in the Channel
(ix) Since the CAS was implemented in a very short period of time, the meticulous approach of obtaining the channel selection form before supplying STBs was not possible to be adhered to because
otherwise it would have been difficult to serve all the consumers since the inception of services on CAS platform.
9. The main contentions of the learned counsel for respondent are as follows:-
(i) The Respondent has no dispute in regard to signing a memorandum of understanding/agreement and also to follow-up the directions issued by the Telecom regulatory authority of India. All the terms and conditions of the memorandum of understanding shall be read as per the rules and regulations laid down by the Telecom Regulatory Authority of India and shall be implemented accordingly. If any terms or conditions were contradictory or appear to be in conflict with the regulation it will have to fall within the ambit of the regulation and if that was not possible, it would be ignored and not be acted upon.
ii) It is incorrect to state that the respondent approached the petitioner for the digital feed and set-top boxes. As the respondents cable network was encompassing a prime and prestigious area of
South Delhi, all the competing Multisystem Operators approached the respondent for using their set-top boxes and digital devices.
The respondent however agreed to go with the petitioner since he was the first to approach the respondent and he was very articulate and convincing regarding the superiority of his system and its preparedness for Implementation of the Conditional Access System. The respondent claims that he came to know about the total unpreparedness of the petitioner to implement the conditional
access system which made the position of the respondent untenable vis-a-vis its own local cable operators.
iii) There was a tremendous competition after the introduction of conditional access system in the selected areas and cut-throat competition started taking shape with a price war amongst various
service providers like DTH service providers and digital signal service providers with the help of the set-top boxes. Everybody offered a price of the set-top box which was very competitive. Finally that the cost of set-top box came down from Rs. 2000/- to Rs.500/- while some of the DTH operators started offering the settop box free within six months to one year subscription package. It is in this background that the petitioner has thrown the financial caution to the winds and distributed its set-top boxes to the cable operators with reckless abandon. The respondent got installed, with the active help of about 30 local cable operators more than 10,000 set-top boxes into subscriber homes in a short period of few months only because of the intense desire and direction of the petitioner. The petitioner asked only for a sum of Rs. 5.00 lakhs on two occasions for the cost of the set-top boxes from the
operators and the same was collected by respondent from its cable operators and given to the petitioner.
iv) When the petitioner could not provide the quality service and faced mounting complaints from the operators and chaos on the ground, respondent's director, Mr. Rajan Bakshi called the Vice
President of the petitioner company. In the course of conversation in which the said vice president was clearly under considerable stress, the said officials said that since he was not charging for the
services and was not giving any bill, the respondent and the operators should not say anything to him. The tenor of his statement was interpreted to mean that, till service is well stabilized, he would not be charging for them and this message was passed on to the cable operators. The cable operators were
completely dissatisfied with the quality of service and they were losing the customers to the DTH operators. These operators who were belonging to the petitioner for pay channels (not including the
operators of the respondent and the respondent itself) filed a complaint with the Telecommunications Regulatory Authority of India regarding the quality of service.
v) In the absence of invoice from the petitioner the operators charged the subscriber only for the basic free to air package and held onto remnants of the subscriber base by assuring the subscriber's that till the services are the stabilized no invoice for the pay channels would be given to them. In these
circumstances, neither the petitioner nor the respondent asked for any payments from the operators/subscribers.
vi) In September 2007, the petitioner began to make outrageous demands upon the respondents saying that you are responsible for the payments and that he should personally make payments for the subscriber since beginning January 2007. This is against the laid out regulations by the Telecom regulatory authority of India, which required invoice be raised in the name of the subscriber, and
the same will be collected from the subscriber by the operator, for further distribution to the various stakeholders. The bill is to be raised every month and the subscriber is required to pay within seven days of the receipt of invoice. A communication to this effect has been sent by the respondent to the petitioners on 31st August, 2007. The relevant portion of the notification which has been
issued by the Telecommunications Regulatory Authority of India on 23rd of August 2006 vide number 16 – 2/2006 – B&CS is reproduced below (page 61 of petition) for the purpose of
understanding the Billing procedure and billing related complaint in respect of the cable services in the Conditional Access System which has to be introduced since 1.1.2007. Relevant part of the Billing procedure to be followed by CAS and as per TRAI’s notification No.16-2/2006-B and CS dated 23.8.2006.
'Subscriber in these areas should generally be billed on monthly basis and the bill should indicate the service tax registration number, entertainment tax registration number of
the multisystem operator or the cable operator, as the case may be, as applicable. The entries in the bills must be itemized to separately indicate price of individual pay channel or
bouquet of the channels and the names of channels in the bouquet, as applicable, charges for the basic service tier and the channels comprised therein, charges for the set-top box, amount of each type of tax levied and the rate thereof. This clause, however, does not preclude the cable operator/Multisystem Operator, from promoting different schemes of payment in which case the bills can be raised at such periodicity as per the scheme opted by the subscriber. 5.2 – The Subscriber's shall ensure prompt payment of all bills within seven days from the date of receipt of the bill. Any payment done after the expiry of seven days shall attract simple interest at the rate of 15% per annum on the amount of bill delayed.'
vii) It can be seen that bill has to be raised by the Multisystem Operator. It will be of interest to note the effect of mutual commitments and agreed verbal terms during the preceding period of seven months after the launch of the Conditional Access System services in Delhi in the context of the circular for Billing procedure issued on 23.8.2006.
viii) The respondent shall be responsible for collection of pay channels subscription for all the set-top boxes issued by the petitioner to the respondent or affiliate cable operators and will pay to the petitioner on monthly basis. This makes it amply clear that the collection of the nature of subscription for all the set-top boxes has to be done by the respondent and the amount due to the petitioner shall have to be paid by the respondent and not directly by the subscriber.
ix) The Respondent has no dispute in admitting that the invoices from January 2007 to September 2007 were received by them on 6th November, 2007 which included a combined invoice for the period from January 2007 to April 2007, while separate invoices for each month from May 2007 till September 2007. Some of the copies of the invoices as true copy of the original have been annexed by the respondent in its reply.
x) When these invoices were handed over to the cable operators for onward transmission to the subscriber for the collection of the amount due to them, the cable operators pointed several
mistakes in these invoices, like the channels shown in the invoices are not as per the channel selection forms and the free to air channels have been charged as pay channels. The respondent has tried to bring some of the invoices on record in which such mistakes are evident on the face of the invoice
xi) Respondent called for a meeting of the operators and requested the petitioner to send a representative to sort out these issues with the operators directly. The respondent would
contend that the meeting was held in the office of the respondent and was attended by the VP of the petitioner, Mr. Anil Malhotra and Manager Mr. Vikas Kanwar. It was made clear by all the operators that no payment has been made by the cable operators to the respondent in regard to the pay
channels in the absence of invoices from the petitioner. They agreed to pass on the invoices of the petitioner to the subscriber but all the operators insisted that payments from the subscriber would be prospective and not retrospective. It was also pointed out that the petitioner has not given a
satisfactory service and failed to provide invoices on time and on monthly basis as per Telecom Regulatory Authority of India regulations. Demanding payment from the `back date would lead to shifting of the substantial number of subscribers to DTH operators, which none of the cable operators were willing to risk.
xii) Shortly after the said meeting, the petitioner terminated its agreement with the respondent. A copy of the petitioner’s termination letter and the respondents reply has been filed by the petitioner and the respondent relies upon the same for the purpose of its reply. The petitioner has stated that subsequent
to the termination of the agreement, he took out a public notice on 6th December 2007 against the respondent while the respondent was never made aware of such a notice, and he continued to make efforts to bridge the gap between the petitioner and itself and the cable operators. The respondent
also arranged a payment of Rs. 5.00 lakhs in two installments in November and December 2007. This payment was made subject to the assurance of the petitioner that the issues raised by the operators would be resolved amicably and expeditiously. However in spite of all efforts made, the petitioner disconnected its signal to the respondent and its cable operators in January 2008.
xiii) The respondent has been made a victim of the petitioners own faults and mistakes. Over the period of time the respondent continued to collect and return the set-top boxes of the petitioner and till date has returned more than 4000 boxes to the petitioner and, therefore, the contention of the petitioner that only few boxes have been returned is not correct. The respondent also offered to reconcile the account of the set-top boxes with the petitioner at its convenience.
10. It will be necessary to go through the exchange of letters between the parties during the period of contractual relationship for arriving at the various conclusions.
The learned counsel would bring to our notice the letter dated 16.6.2007 sent to Respondent by the petitioner. The letter dated 16.6.2007 is set out below:-
'June 16, 2007
STAR Broadband (P) Ltd. 19/48, Ist Floor Malcha Marg Shopping Complex Chanakyapuri, New Delhi – 21. Sub: Request to return STBs in the absence of channel selection form.
Dear Sir, Subsequent to signing agreement with us you have taken Set Top Boxes from us alongwith blank channel selection forms and subscriber registration form(s). Despite several requests made to you about the duly filled in forms, you have failed to submit the same to our office. Please ensure that our STBs are not used for following purposes:- 1. To re-transmit pay channel signals in free to access
2. By a subscriber (s) other than the person(s) for whom STBs have been issued.
3. At a location other than the address for which STBs have been issued.
4. For re-transmission of signals received from any MSO other than the signals of IndusInd Media and Communications Ltd.
You may please note that any commission or omission of acts mentioned in para 1 to 4 invites criminal as well as civil action against you, as the case may, which shall be at your cost and
Thus please submit required filled in forms and STBs which have been deactivated in the absence of Channel Selection Forms and Subscriber Registration Forms. This be treated as most urgent and important. For further necessary action i.e submission of forms and deposition of STBs, you may please contact our Finance Department immediately. For IndusInd Media and Communications Ltd.
(Kamal Kant Joshi) DGM-Legal Copy to:- (i) TRAI, Old Minto Road, New Delhi for information.
(ii) Mr. Sanjeev Ahuja, Deputy Commissioner (Taxes) and Nodal officer (CAS), Office of the Commissioner of Excise, Entertainment and Luxury Tax L-Block, Vikas Bhawan, IP
Estate, New Delhi – 2 for information.'
11. The learned counsel for the petitioner would bring to our notice the relevant portion of cross examination of Mr. Bakshi, who is a Director in the respondent’s company which is as follows:-
Attention of the witness is drawn to the above letter at running page 273 of the petition.
I have received this.
Yes it is correct.
Q. What action did you take in response to this letter?
A. We have sent the filled forms and returned the STBs which were returned to us by the subscribers.
Attention of the witness is drawn to another letter dated 27.6.2007 at page 274 of the petition.
The said letter is set out below:-
In pursuance of Agreement between us, we issued you Set Top Boxes as per your requisition and subscriber details. It has come to our notice that particulars of some of the subscribers as provided
by you are not correct. In this connection, we hereby call upon you to provide us complete and correct details of subscribers and update the records. You are also requested to ensure that no signal other than the signals of the records. You are also requested to ensure that no signal other than the signals of IMCL is inserted on our network and it must be ensured that no pay channel is retransmitted in non-encrypted form.
You are further requested to return our STBs immediately to us which have been deactivated in the absence of non submission of subscriber forms by you. Please also ensure that payment of invoices raised by us is made without delay. As you are aware that from time to time we have brought to your
kind notice the obligations imposed by the Standards of Quality of Service (B&C) Regulations, 2006 and further take this opportunity to call upon you to adhere to the said Regulations which are mandatory.
Please treat this as urgent and important.'
For IndusInd Media and Communications Ltd. (Kamal Kant Joshi)
Q. If you complied with request made to you by the petitioner in this letter 16.06.2007, why this letter was issued within one month.
A. I do not know. The letter speaks about the payment of invoices raised by us. But No invoices were raised on us.
Q. Have you ever written to the petitioner stating that the filled up form have been sent, deactivated STB from the subscribers have been returned and no invoices have been raised.
A. I am not sure whether the respondent have written any letter but we have communicated to them over phone.
The letter dated 10.09.2007 was also received by us. The letter dated 10.9.2007 is set out below:-
'10th September, 2007 To M/s STAR Broadband (P) Ltd. 19/48, Ist Floor Malcha Marg Shopping Complex Chanakyapuri, New Delhi – 21. Sub: Request to return STBs in the absence of channel
selection form. Dear Sir, We express our deep disappointment and concern over your non-response to our letters dated 16th June, 2007 and 26.7.2007 sent to you through registered post. In the said letters, we informed you that despite several requests from us, you failed to submit the same to our office.
We also called upon you to ensure full compliance of TRAI Regulations, Cable Television Act. It was further recalled upon that in the absence of channel selection forms, STBs issued to you be deposited at our office. You were also requested to immediately contact our Finance Department for submission of channel selection forms/deposition of STB. But to our utter dismay, till date no response has been received from you. In view of above, you are further requested to deposit our Set Top Boxes immediately at Patparganj, Delhi failing which legal action shall be initiated in appropriate forum. The details of Set Top Boxes required to return are given in the enclosed sheet.
This be treated as most urgent and important. For IndusInd Media and Communications Ltd.
(Kamal Kant Joshi) DGM-Legal
(i) P.K. Ravi, Deputy Advisor, TRAI, Old Minto Road, New Delhi for information.
(ii) Mr. Sanjeev Ahuja, Deputy Commissioner (Taxes) and Nodal Officer (CAS), Office of the Commissioner of Excise, Entertainment and Luxury Tax L-Block, Vikas Bhawan, IP Estate, New Delhi – 2 for information.'
Q. Did you respond to this letter?
A. I did by my email dated 14.09.2007 which is at page 284. It is also at page 286.
The e-mail reads as under:-
'Sub: Request to fulfill agreement obligations –urgent and most important.
I have just received your letter dated 10.9.2007 and you will receive the reply next week. As for your complaints and grievances, you yourself know that they have no meaning. We have lost thousands of subscribers due to your poor service and non-supply of signals as well as non-activation of boxes.
And this was resulted in return of thousands of boxes which have been duly returned to you (I am sending you the record soon). Another lot of boxes is being inventorized and will be sent to you next week. As you are fully aware, none of the complaints made by our subscribers have been attended to and in fact have been simply ignored by you. Our hundreds of phone calls have been simply brushed but we have never complained to anyone and even refused to sign the memorandum which was sent to TRAI Chairman by 40 of your affiliates against your service. We have asked you on innumerable occasions to sort out the faulty billing which you have sent, all to no avail.
You are therefore requested to depute someone to settle the above mentioned issues at an early date.
Q. When for the first time you intimated the petitioner about the bad quality of the signals prior to 14.09.2007.
A. I cannot give the exact date. I have made several phone calls apart from writing to the petitioner. It is matter of record if any communication in writing is there. Volunteers - 40 cable operators made a complaint about the bad quality of signals to TRAI but I was not the signatory as I thought that this is not the way by which such a problem should be redressed and can be settled amicably as it would appear from my mail dated 14.09.2007.
Attention of the witness is drawn to communication at page 285, which reads as under:-
'From: Kamal Kant Joshi Sent: Friday, September 14, 2007 6:31 PM To: Rajan Bakshi Sub: Request to fulfill agreement obligations-Urgent and Most important.
Dear Sir, This surprises us again, we wish to extend full cooperation to sort out the issues but deny each of your allegations regarding poor service, non-activation of box etc. We have 24X7 call centre and no complaint has been received from your end. Regarding return of thousand of boxes, as claimed by you, please provide details immediately, so that the same may be reconciled with our account.
We have provided you details of STBs alongwith our letter dated 10.9.2007 which are required to be returned and if you have any grievance on that, you may please take up the issue with our Finance Department and the grievance on any point shall be sorted out immediately. All other issues relating to billing etc may also be discussed with our Finance Department. You may please meet Mr. V.B. Sharma, DGM-Finance at our Patparganj Office at your convenience.
Thanking you Kamal Kant Joshi'
Ans: Yes I responded to this.
The witness points out to e-mail dated 20.10.2007 at page 298, which reads as under:-
I am in receipt of your above mentioned mail which we reject as totally outrageous and uncalled for. As per our clear cut understanding as per law you were required to raise the bill in the name of the subscriber of your STB as per his channel choices and give the bill to us for onward transmission to him. After receiving the payment from him, we are required to remit the same to you after deducting our share of the revenue. As you are fully aware, a large no. of the boxes are placed in subscriber homes of other LCOs for which you have asked us to be the distributor. We had agreed to place
the said boxes on the clear understanding that you would be billing the subscriber direct and those who refused to pay would be deactivated and no liability would accrue on us. Till today, despite various reminders, you have been unable to generate a single valid subscriber invoice which we can present to the subscriber. We cannot even ask the LCO to make payment for the simple reason that we cannot raise any invoice upon him, it is for you to raise the invoice. I had personally introduced Mr. Tyagi to Mr. Rajeev Sehgal from MOBA and Mr. Sehgal had promised to give him all co-operation to get all the details. Despite that Mr. Tyagi did not take any details, apparently on your instructions, for reasons best known to you. The presence of a representative from IMCL would have created the right momentum for the LCOs to cooperate as payment has to be given to IMCL, not to me and the
LCO would have realized that payment would go to IMCL and not in my pocket. No payment has been realized from the LCOs for the simple reason that you have failed to raise any invoice in the name of the subscriber for handing over to the LCO. The very idea that we are personally liable for the said payments is ludicrous and against law. We provide last mile connectivity and maintenance and collect payment on your behalf on the basis of the invoice raised by you to the subscriber. It is totally wrong for you to say that we have not co-operated with you especially after gave your representative unprecedented access to our franchises, something that very few operators are willing to give. Your refusal to accept the details which Mr. Sehgal was willing to give speaks volumes for your cooperative
attitude. Your willingness to submit subscriber specific invoices based on channel choices is another shining example of your cooperation. We would like to take this opportunity to inform you that we have no interest to be your distributor and you are welcome to enter into direct agreements with the LCOs who wish to work with you.
We will provide full cooperation in providing a smooth transfer. The issue that now arises for consideration is whether you are willing to raise proper subscriber based invoices or are simply interested in entering into a confrontation. We are not responsible for your default or for the failure of your CAS/.SMS system. However, we intend to convene a meeting of the LCOs to discuss your mail and suggest that you make it convenient for a representative to attend next week. Pl. inform us a
convenient date and time or whether you are at all interested in a meeting.
It is not correct to say that the petitioner has not received any complaint with regard to bad quality.
Vol - The witness points Exhibit 1/XII at page 284, which is an email from Rajan Bakshi to Kamal Kant Joshi, dated 14.9.2007.
Attention of the witness is drawn to page 285, e-mail from Kamal Kant Joshi to Rajan Bakshi, dated 14.9.2007. Q. Is it not the answer to your email?
A. It is not a response to my email. Vol- It is a misleading document.
Q. Apart from the amount payable towards the pay channels did you own any money towards the set top boxes?
A. As any money which was to be paid, was to be paid by the subscribers through us but because the petitioner was unable to issue invoice so we are unable to collect most of the amount.
Q. Was some amount collected?
A. Some amount was collected and given to petitioner. Some amount was returned to the subscriber when they returned the STB.
We maintain books of accounts. We have some records as to how much was collected towards STB and how much has been paid to the petitioner. Vol- We have not collected any subscription fee from the customers prior to November 2007 Attention of the witness is drawn to page 292, which is an e-mail dated 16.10.2007 sent to Rajan Bakshi, which reads as under:-
'Dear Mr. Bakshi,
With reference to visit of our Executive to your office, we are sorry to inform you that he has not been extended required co-operation from your side. With a copy of this mail I am asking Mr. Kuldeep
Tyagi to once again mail you the all details of STBs and subscriber data available in our system as on date to facilitate early reconciliation of records.
You are aware that you have not paid us any money on account of Hardware and pay channels. Therefore you are requested to release a minimum amount of Rs.25 lakhs against outstanding
Your immediate action will be appreciated. V.B. Sharma'
Q. Did you respond to it?
A. The witness points to email dated 20.10.2007 at page 298 (Which has been set out at page 22 and 23 of this judgment).
Q. Mr. Bakshi did you say that you were not liable for the hardware.
A. The witness points to para 2 of email dated 20.10.2007.
Attention of the witness is drawn to page 293, which is an email dated 17.10.2007 from Rajan Bakshi which reads as follows:-
'Dear Mr. Sharma,
I am in receipt of your recent mail. Since I am out of station, I am unable to comment on your statements re non-payment of any money or non co-operation of our office staff with Mr. Tyagi. To the best of my recollection we have made advance payments of several lakhs of rupees and I had personally met Mr. Tyagi and introduced him to Mr. Sehgal in order to reconcile the records of MOBA CTN, one of the LCO’s using your boxes. Nevertheless, I will be back in office in a few days and will give you a detailed reply and settle all the issues raised in your mail after going through our records. Rajan Bakshi'
Q. Email denied that you were not liable for STB as was communicated to you by the petitioner email dated 16.10.2007 ?
A. I have not admitted anything or denied anything and I have kept the issue open.
It is incorrect to suggest that petitioner has served invoices on the respondent on a monthly basis.
The learned counsel for the petitioner would bring to our notice from the extracts of cross-examination of the main witness of the respondent, Mr. Rajan Bakshi, after referring to several important communications exchanged between the parties, that the responsibilities of the STB’s, its safe return and collection of subscription amount was the sole responsibility of the respondent and the respondent has miserably failed to carry out his function as per Mou and the agreement which finally replaced the MoU. However we notice that the e-mail dated 20.10.2007 at page 298 from respondent to petitioner, sets at rest the various issues because of failure of raising and distribution of invoices by petitioner on a monthly basis and distributing the same in Nov, 2007, i.e, 10 months after the commencement of contractual relationship. The inadequacies in the bills have also raised serious problems about the collection of amount by respondent for pay channels. There appears to be a gross violation of billing procedure spelled out by TRAI vide its letter dated 23.8.2006, No16-2/2006-Banks and subsequent difficulties, if any, for collecting the subscription amount of pay channels.
12. The learned counsel for the petitioner would bring to our notice the relevant portion of cross examination of Mr. Gupta who is the authorized representative of the respondent’s company:-
E-mail dated 1st October, 2007 at page 291 of the petition which was brought to the notice of Mr. Gupta, is set out below:-
'From: Gaurav Gupta To: Vishwabandhu Sharma Sub: Set Top Boxes issued to Star Broadband
Dear Mr. Sharma Please note that the reconciliation sheet sent by you is broadly correct.
We are still reconciling the records of franchisee. Pl. note that most of the boxes are deactivated from your end and we request you to depute an executive from your end to work with us and LCO to activate the same. Thanking you for your cooperation. Regards Gaurav Gupta'
Q. Mr. Gupta having confirmed in your email dated 01.10.2007(page 291) would it be correct to say that reconciliation sheet sent by the petitioner was found by your company to be broadly correct and you confirm the same?
A. Yes although the said email was sent by me as Mr. Bakshi was away and the matter was put up before me after my officials checked the reconciliation statement. It is not correct to suggest that I was actively involved in the dealing with the petitioner company. There are three directors of the respondent company. The third director for the respondent company is Mrs. Dolly Haryal besides me and Mr. Bakshi. It is correct that I was aware of the business dealings between the
parties when I signed the agreement.
I am aware of the contractual obligations of the company under the said agreement.
Attention of the witness is drawn to page 233, which is an Agreement dated 5th July, 2007. The relevant part of the Agreement reads as follows:-
'SBSPL undertakes to deposit the collections received from its affiliates/subscribers to IMCL without delay on monthly basis within a mutually agreed period of time.'
I am not aware as to whether the respondent has deposited the collected receipts collected from its affiliates on monthly basis.
Attention of the witness is drawn to para 2 of the affidavit.
Q. Did you make any attempt to recover the subscription fee from the subscriber on the receipt of the invoices?
A. I was not the authorized to do so. Mr. Jagdish Arora, Manager is authorized to collect the subscription fees from the subscriber. I do not know if Mr. Arora collected the subscription fee after the receipt of invoices.'
The learned counsel for the petitioner would contend that Mr. Gupta as a witness and as an official in the respondent company and being aware of the business dealings between parties has shown reluctance during cross-examination in admitting the collection of dues for the subscribers, however he has shifted responsibilities on another person who might have collected dues.
13. The learned counsel would bring to our notice the following two communications dated 14.12.2006 and 16.12.2006. 'Dated: 14.12.2006
To M/s Star Broadband Services (India) Pvt. Ltd. 19/48, Malcha Marg Commercial Complex
Chanakyapuri, New Delhi-21. Sub: Direction of TRAI dated 14.12.2006 issued from
File No.18-8/2006-B&CS. Dear Sir,
Please refer to TRAI direction dated 14.12.2006 wherein we have been directed to provide signals, on request, to your cable operators and direct subscribers affiliated to your network. Since, the Government and all the concerned authorities are taking necessary steps for the proper roll out of CAS by 31.12.2006, you are requested to enter into an agreement with us as per applicable rules(s) and regulation (s). Needless to say that the matter is urgent and requires immediate attention, so that CAS is properly implemented and subscribers do not suffer inconvenience. Thanking You
Yours faithfully For IndusInd Media and Communication Limited (Kamal Kant Joshi)
DGM-Legal' 'Dated: 16.12.2006 To Shri Kamal Kant Joshi DGM-Legal 71/1, 2nd Floor, Shivaji Marg Najafgarh Road, Moti Nagar New Delhi.
Sub: Your letter dated 15.12.2006 regarding direction of TRAI dated 14.12.2006.
With reference to your aforesaid letter, we wish to inform you that we have not received any direction dated 14.12.2006 from TRAI as stated by you. As such we are not in a position to comment on the same. We thank you for your interest in the welfare of our subscribers. Yours faithfully
(Jagdish Arora) Manager'
From these letters, the learned counsel for the respondent would urge upon us that the initiative to use the respondent’s network for CAS Rollout was taken by the petitioner and not by the respondent.
14. The learned counsel for the respondent on the other hand would further bring to our notice the relevant portion of cross-examination of the petitioner’s witness.
The relevant part of the cross examination of Mr. Anil Malhotra, Vice President (Operations) of the petitioner’s company was brought to our notice:-
'It is correct to suggest that the TRAI has laid out a procedure of obtaining the forms duly filled up by the subscribers as per their choice of channels on the basis of which the signals is to be transmitted to the set top boxes to the respondent.
We have waived a procedure for asking for the form duly filled up by the subscribers before providing the signals to the respondent.'
The learned counsel for the respondent would bring to our notice the some other relevant portions of the cross examination of Shri Anil Malhotra, Vice President (Operations) in the petitioner’s company.
'It is correct to suggest that the bill will be issued generally on the monthly basis unless there is some compulsion to issue it because of some specific package/scheme.
The bill raised to the subscriber will have a mention of amount to be paid for the channel viewed and each and every charge will be itemized in the bill.
It is correct to suggest that subscriber has to make the payment within a week’s time after the receipt of the bill. Vol – The bill raised by the MSO / petitioner for pay channels on the respondent cable operator was to be forwarded to the subscriber after inclusion of the charges for the FTA and statutory taxes by the respondent. There is no provision in the TRAI regulation to ask for payment for pay channels without raising an invoice. Vol – For set top boxes and security, if any, advance
thereof can be taken. It is correct to suggest that the invoices are required to be raised for asking for advance / security for the security boxes. If any advance is received on account of security deposit or other wise the receipts are being issued.
Q. Have you ever asked for any payment on behalf of pay channel service without giving an invoice?
A. No. I have not asked anyone to collect payment for pay channel without raising any invoice on behalf of the petitioner.
The learned counsel argued that it is clear from the above; the petitioner has admitted that no payment of pay channels can be realized without invoices and the complete procedure was cut-short by the petitioner, which resulted in chaos in raising bills timely as well subsequent realization of subscription
amount. During cross examination of Mr. Anil Malhotra, the respondent’s counsel confronted him with the letter dated 4.10.2007 which has been reproduced at page 38 of this judgment.
The witness has the following response:-
'It is correct that this document alongwith the period mentioned therein were delivered on 04.10.2007 and received on 06.11.2007.
Vol- The invoices mentioned herein were sent again through this letter. The earlier invoices sent were not acknowledged by the respondent. The invoices were used to be raised on monthly basis.
It is correct to suggest that email filed as Ex. PW 1/21 was received by me. I have not replied this letter since a copy was marked to me. However, the concerned department might have respondent
to this letter. I have not controverted about the contents of the letter in any of my correspondences.
It is correct to suggest that meeting were held with the cable operators as well as respondent after the receipt of the email PW 1/21.'
From the payment point of view, the following relevant portion of the cross examination of the Vice President, Operations in the petitioner’s company was brought to our notice, by learned counsel for respondent:-
'It is correct to suggest that the cable operators mentioned during the meeting that they have not collected any dues since the implementation of CAS and also have not paid any money
for the pay channels to the respondent.
Vol – During the meeting I was not aware as to who were the cable operators and there was no privity of contract between the petitioner and the cable operators. I believe that these are cable operators of the respondent. We have given the set top boxes to the respondent and we have no business with the
cable operators.' by petitioner, the respondent has filed a statement from one of the cable operators M/s. MOBA CTN. The statement is as follows:-
'Shri Rajeev Sehgal, has stated that we allowed IMCL to install the STBs in my network at the instance of M/s Star Broadband Services India Pvt. Ltd. I lost a large number of subscribers due to poor quality of service and defective STBs. I was repeatedly assured that the service will be improved and till the service was satisfactory, my subscribers would not be billed. Infact, no bills were raised on my subscribers till Nov, 2007.
When the first set of invoices were raised, even these invoices were computer generated were in fact wrong in material particulars including the number of channels subscribed to as well as billing amount. I had made two consolidated payments in Nov, 2007 and Dec, 2007 to IMCL after obtaining assurance that the bills would be rectified and the outstanding issues would be settled amicable. Instead in Jan, 2008, the cable signals of IMCL were abruptly terminated and I was informed that
instead of resolving the issues, IMCL was demanding large sums of money to restore the signal. In view of this blackmailing attitude, I switched my network to WWIL and terminated all further dealing with IMCL.'
The cable operator has also submitted an affidavit by way of evidence and the comments during cross examination of the witness in regard to the quality of signals is as follows:-
Cross-examination of Mr._Rajeev Sehgal, Authorised Representative of the respondent Company.
'Quality of the signals was not good. I was making complaints to the respondent.
However, no complaint was made in writing about the quality of signals.
Q. Do you have any proof that the quality of signals was bad.
A. I do not have any proof in writing and the petitioner company was aware that quality of signals were bad. Sometime there would be freezing and sometime signals were go out.
In the area of Moti Bagh there were three cable operators. The subscribers / customer could have easily opted for another cable operator if the supply was not good. The disturbance faced by the customers was almost on a daily basis for about a year or so.
My consumer stayed with me for about a year despite bad signals. We had a meeting Mr. Malhotra in October 2007 in regard to bad quality of signals or non regular supply of signals.'
Regarding collection of money for pay channels, the witness has deposed as follows:-
'I have not collected any amount from my subscriber although 90% channels were pay channels.
I have merely collected the payments in respect of FTA channels. It was @ Rs. 72/- for FTA and Rs. 20/- for taxes.' The petitioner’s claims that the subscribers who received the STBs, were the customers of the respondent, has been controverted by the learned counsel for the respondent by bringing to our notice the following letter in which the invoices have been requested to be distributed:-
'4th October, 2007 To STAR BROAD BAND SERVICES PVT LTD MALCHA MARG, HANAKYAPURI, NEW DELHI Dear Indigital Franchisee Please find herewith the invoice of the following months:- Month Nos. May, 07 8911 June, 07 9325 July, 07 9391 Aug, 07 9351 Sept, 07 422 We request your cooperation to ensure that the bills are handed over to each of our CAS area customers. Please acknowledge the same.
For INDUSIND MEDIA & COMMUNICATIONS LTD.'
The learned counsel will submit to us that this communication from the petitioner to the respondent is an admission that the subscribers having set top boxes were the subscribers of the petitioner and not of the respondent because the subscribers have been addressed as 'our CAS area subscribers'.
The learned counsel for the respondent would further submit that the subscribers who were getting analog signals which belonged to the respondent.
15. The learned counsel for the respondent would contend that it has been held by the Apex court that VAT is chargeable on goods whose possession has been transferred. In the present case, the petitioner itself is levying VAT on STBs rental charges thereby acknowledging that the respondent has
transferred possession to the subscribers whom he is billing. Learned counsel for the respondent would submit that as per the invoices by the petitioner on record he is levying VAT on STB rental charges and service tax on pay channels subscription and, therefore, STB are not in the possession of the respondent.
16. The learned counsel for the respondent would further submit that the condition of obtaining a channel on selection form duly filled up, before issuance of the STBs was waived of by the petitioner itself and no invoices have been raised till 4th October, 2007 and the same were delivered in November, 2007. Conclusion
17. We find that no invoices have been issued upto 4.10.2007, i.e, upto about nine months out of a total tenure of relationship of one year. These invoices have also been delivered only in the first week of November, 2007 while the CAS was introduced w.e.f 1st Jan, 2007. It is a fact in this industry
that, without getting the invoice, no subscriber will make any payment in regard to pay channels. The distribution of the STBs have also been recklessly done without simultaneously obtaining the channel selection form duly signed by the subscriber. A large number of the STBs have been distributed for
viewing the pay channels. After the distribution and energization of STBs and without obtaining channel selection forms duly filled in, the subscribers might have availed the pay channel service, however, without raising the invoices therefore, it was difficult if not impossible to receive any subscription for these pay channels by the respondent.
18. The relationship of the parties depends upon the agreement signed on 5thJuly, 2007 for a period from 1st Jan, 2007 and upto 11th Jan, 2008 based upon the MOU which was dated 27.12.2006. The agreement after signing on 05.7.2007 has replaced the MOU dated 27.12.2006. This is the only document on which we can depend upon concluding about the duties and responsibilities of the parties. As per this agreement, the channel selection forms were to be distributed by the respondent while the petitioner was to issue the invoices. We find that duly filled in channel selection forms were not taken back from subscriber before energization of STB. The subscriber must have shown lot of reluctance at a later date for filling it up of the same and returning it to the respondent after it started availing pay channels. This channel selection form in turn was supposed to be handed over to the petitioner. In any case as soon as the channel selection form is in the possession of the petitioner it should have been acted upon by it for issuing the invoices on a monthly basis for the subsequent period from the date of receipt of the channel selection form as per the directive of TRAI. The invoices being given to the respondent by the petitioner
Please Login To View The Full Judgment!
somewhere in the first week of Nov, 2007 which was just two months prior to the expiry of the agreement is not conducive to receiving any subscription from the subscribers. 19. As regards the quality of the pay channels there is enough evidence on record to say that quality was not up to the mark and during the cross examination of the witnesses, it becomes very clear that the initial period of implementation of the CAS regime was full of hiccups and bad quality of service. 20. The respondent had been able to collect some amount if not the entire which would be apparent from the statement of Mr. Bakshi to the following effect:- 'As any money which was to be paid by the subscribers through us, but because the petitioner was unable to issue invoice so we are unable to collect most of the amount. Some amount was, thus, admittedly collected. Allegedly the same was also given to the petitioner, some amounts were returned to the subscriber when they return the STBs.' 21. The respondent is a company registered under the Indian Companies Act, 1956. Mr. Bakshi in his evidence clearly admitted (which is even otherwise statutorily necessary) that respondent maintained books of account and it had records to show how much had been collected by it towards STBs and how much was paid to the petitioner. Apart from the fact that admittedly it had collected some amount on account of Free to Air channels, Mr. Bakshi volunteered that the respondent had not collected any amount prior to November 2007 for pay channels. 22. Receipt of some payments of the amount collected from the subscribers stands accepted. It is accepted that the same was reflected in its books of accounts. How much amount was collected by it from the subscribers and / or the link operators was within its special knowledge as envisaged under Section 106 of the Indian Evidence Act. 23. On the one hand, its LCOS have raised a contention that they have not been, in the absence of invoice, had been raising any bill whatsoever, Mr. Bakshi, on the other hand, admitted that some amount have been realized but either paid to the petitioner or returned to the customers. The respondent in the aforementioned situation was obligated to prove as to how much amount was collected from the subscribers/LCOs towards the STBs, how many STBs were received by it and distributed to the customers and/or returned to it. The respondent has not produced its books of accounts for the reasons best known to it. The situation appears to be a bit anomalous. 24. If the contention of the respondent is to be accepted, (1) On the one hand, the petitioner distributed thousands of STBs free of cost which have not been returned to it, (2) It had received only some amount towards the rental of STBs (3) Although it had to maintain a huge establishment and had to pay to broadcasters, including towards share of the respondent’s subscribers, it has not received any payment, whatsoever, from the respondents, as a result of which it must have suffered huge losses. If, even the respondent and / or its link operator had not been able to recover their dues from the customers, they must have suffered huge losses as they were also required to maintain its head-end, staff and other infrastructure. According to it, it had all along been ready and willing not only to perform its part of contract but also to see that the quality of supply of signals is maintained by attending to the complaints, and/or in any event by supplying the STBs for which it had been receiving a paltry sums. 25. As regards the quality of the pay channels there is evidence on record to say that quality was not up to the mark and during the cross examination of the witnesses it becomes very clear that the initial period of implementation of the CAS regime was full of hiccups and bad quality of service. 26. As regards the STBs, there is a dispute about the actual number. According to the petitioner, 15,000 STBs were supplied while the respondent contends that only 10,000 STBs were supplied. The terms of MOU spell out rates at which these STBs were to be supplied to the respondent in a graded rate per month from the rental point of view. We have given directions about accounting of the STBs and return of the same while keeping in view the terms and conditions of the same as per the MOU. 27. We, in the aforementioned fact situation, are of the opinion that interest of justice would be subserved if a preliminary decree is passed directing the parties hereto to submit their respective accounts wherefor an independent accountant should be appointed, as a Commissioner. The responsibilities of the Commissioner will be to go through the accounts and to find out as to what amount has been collected by the respondent for the pay channels supplied by the petitioner for the period of subsisting agreement and how much amount has been paid to the petitioner out of this collection. Similarly, the Commissioner will take stock of the accounts of the STB’s inventory and arrive at as to how many STBs were supplied to the respondent by the petitioner, how many were returned and how many STBs are still to be returned. The costs and charges of the said accountant shall be borne by the parties in equal proportions. 28. The Learned Commissioner shall be entitled to scrutinize the books of accounts of both the parties, call for an explanation for the other side, if any anomaly is found therein and shall for the aforementioned purpose may call upon either of the parties to produce the primary documents and/or any other document in support of the respective entries made in their books of accounts. 29. A preliminary decree on the above terms, should be drawn up not only towards the STBs but also on account of the subscription charges. This Tribunal shall consider the question of the rate of interest and/or other costs borne by the parties at the stage of passing the final decree in case any amount is payable by either of the parties as per the terms of the agreement. 30. The Registry is directed to prepare a preliminary decree to the aforementioned effect.