Holding

Interest on the licence fee accrues only from the date the licence fee becomes due, i.e., the extended effective date, and cannot be charged for the period before that.

Summary

The Department of Telecommunication granted licences to cellular operators who were required to pay licence fees in advance and were liable to interest on delayed payments. The New Telecom Policy 1999 introduced a migration package that postponed the effective date of licence fee payment by six months, but the Department continued to demand interest from the original date. The cellular operators challenged this demand before the Telecom Disputes Settlement & Appellate Tribunal, which directed the Department to modify the interest demand. On appeal, the Supreme Court held that interest is contingent upon the licence fee becoming due; therefore, interest cannot accrue before the extended effective date. Consequently, the Court ordered the Department to adjust the demand to reflect interest calculated only from the postponed effective date, with any excess to be refunded or adjusted against future dues, and dismissed the appeal.

Issues considered

Whether interest on the licence fee can be charged for the period prior to the six‑month extension of the effective date under the New Telecom Policy 1999.
Whether the clause (ix) of the migration package applies only to the licence fee or also to interest.
Whether the Tribunal's direction to modify the demand for interest is legally correct.

Subjects

Telecom licence feeInterest on delayed paymentEffective dateNew Telecom Policy 1999Migration packageTelecom Disputes Settlement & Appellate TribunalDemand modification

Judgment

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DEPARTMENT OF TELECOMMUNICATION AND ANR. A
v.
CELLULAR OPERATORS ASSOCIATION OF INDIA AND ORS.

MARCH 4, 2003

[S. RAJENDRA BABU AND DR. AR. LAKSHMANAN, JJ.] B

New Telecom Policy, 1999:

Licence granted to Cellular Operators on terms and conditions-
'~ Charging of interest on late payment of advance licence fee-Postponement
c
of ejfer;tive date-Demand of interest by the Authority for extended period-
Challenge to-Tribunal allowed the appeal directing the Autilority to modify
demands-On appeal, held, since licence fee becoming due from a particular
date and interest is depending on ·the licence fee, the interest on licence fee
would not accrue from a date prior to the effective date of payment offee- D
Authority to modify demands by adjusting excess amount of interest towards
outstanding/future dues-Directions issued.

Appellant-Authority had granted licence to respondents-Cellular
Operators on certain terms and conditions. The licensees were required
to pay licence fee in advance by the due date/effective date and in case of E
failure to make payment of fee on due date, interest thereon would be
charged.

Appellant had introduced the New Telecom Policy, 1999 whereby
effective date of payment of fee was extended by certain period. However,
F
appellant had raised demand of interest from the prior effective date which
was challenged by the respondents before the Telecom Disputes Settlement
and Appellate Tribunal. Tribunal allowed the appeal with certain
directions on refund of interest charged for the extended period. Hence
the present appeal.
G
Disposing of the appeal, the Court

HELD: I. I. The licence fee becomes due and payable from the
effective date. When the effective date stood postponed by a period of six

- months then that is the date from which the licence fee will have to be
547 H
548 SUPREME COURT REPORTS [2003] 2 S.C.R.

A reckoned and appropriate calculation made both for purposes of licence
fee and interest. Unless the licence fee becomes due the question of
payment of interest will not arise. 1551-D-EI

1.2. The payment of interest is dependent upon the licence fee
becoming due. Interest is not independent of the licence fee and when the
B licence fee had to be paid from a par!icular date, the interest would not
accrue from a date prior to the licence fee becoming due for payment.
1551-F-GJ

1.3. The appellants should modify the demand issued to the
C respondents to the extent it is found to charge higher amount of licence
fee or interest on the principles set out in this order. The excess amount ~-
which is liable to be refunded to the respondents shall be adjusted towards
outstanding or future dues and if still any amount becomres due to them
the same shall be refunded at the relevant bank rates. (551-H; 552-AJ

D CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5050 of 2002.

From the Judgment and Order dated 9.4.2002 of the Telecom Disputes
Settlement & Appellate Tribunal, New Delhi in P.No. 10 of 2001.

E Mukul Rohtagi, Additional Solicitor General and Navin Chawla for the
Appellants.

P. Chidambaram and C.S. Vadiyanathan, Manjul Bajpai, Ms. Bina Gupta,
Praveen Thomas, Ms. Divya Roy, Ms. Shaily Yogi, Ms. Garima Dewan and
R.K. Sharma for the Respondents.
F
·The Judgment of the Court was delivered by

RAJENDRA BABU, J. Pursuant to a tender notice issued on 16.1.1995
the appellants granted licences to various cellular operators on terms and
conditions mentioned therein. The Licence Agreement provided that the
G licencee has to pay the prescribed fee in advance in terms of Schedule B
thereof and the period of licence was initially for 10 years. The licencee was
obliged to install and run the system within 12 months of the effective date
which is defined in the licence. The Agreement also provided that in case of
failure to pay the licence fee within the prescribed time interest shall be
H charged on the amount due at certain rate.
+
DEPT. OF TELECOMMUNICATION 1·. CELLULAR OP. ASSON. OF INDIA [S. RAJENDRA BABU.).] 549

The New Telecom Policy (1999] NTP 99 was introduced thereafter A
which was known as 'migration package' and was offered to various licencees
as set out in their letter dated 22.7.1999 which was accepted unconditionally
by the members of respondent No.I and other licencees on 26.7.1999. In the
NTP, under the migration package it was stated that the effective date is
postponed by about six months for payment of licence fee. Demands were B
raised on the basis that modified effective date is applicable only to licence
fee and n?t to interest that had already accrued. The amounts were also paid
by the cellular operators as demanded. Thereafter several representations
were made stating that the charging of interest is not permissible as license
fee had not become due in view of the notional extension of the effective
date. However, the appellants having stuck to their stand as set out in their C
demand, the respondent filed a petition on 26.6.200 I before the Telecom
Disputes Settlement & Appellate Tribunal [hereinafter referred to as 'the
Tribunal'] challenging, inter a/ia the demand of interest without making any
adjustment on account of notional extension of the effective date by six
months. The Tribunal accepted the stand of the cellular operators and directed
the appellants to modify their demand subject to certain other incidental D
directions. This order is in challenge before us.

Schedule B to the License Agreement provides for definition,
interpretation and transitional provisions relating to the conditions. Clause
l(j) defines 'effective da!e' as under: E
)

"Effective date" is the date by which the licensing agreement comes
into effect and the "effective date" is reckoned with effect from the
date the license agreement is signed after payment of appropriate
component of licence fee.
F
.In the present case, the effective date is 12.12.1995 which stood extended
to 12.6.1996.

The licence fee is due to be paid in a lump sum prior to signing of the
License Agreement for the first year and for the subsequent years it was
payable in quarterly instalments in advance. In NTP-99, the migration package G
provided that the licencee will be.required to be paid (I) one time entry fee
and (2) licence fee as a percentage share of gross revenue under the licence.
The entry fee chargeable will be the license fee dues payable by the existing
licencees upto 31.7.1999 duly adjusted consequent upon notional extension
of effective date as per the conditions of the existing licence. The licence fee H
550 SUPREME COURT REPORTS [2003] 2 S.C.R.

A as a percentage of gross revenue under the licence shall be payable with
effect from 1.8.1999.

The dispute between the parties is in relation to payment of interest.
While the stand of the appellants is that the relevant clause providing for the
effective date which has been extended notionally for a period of six months
B is only for the purpose of payment of licence fee and not in respect of the
interest which had accrued upon the licence fee which was to be paid under
the original licence while it is the stand of the cellular operators that inasmuch
as the effective. date for calculation of the outstanding licence fee has been
extended by a period of six monthS the interest will have to be calculated not
C from the original date but from the extended date and unless licence fee
became due the question of payment of interest would not arise.

The relevant provision of the migration package as set out in the letter
dated 22. 7.1999 are as follows.

D "(iv) A total of at least 35% of outstanding dues including interest
payable as on 31. 7. 99 and LO charge in full will have to be paid
on or before 15.8.1999. The amount paid, if any, against the
earlier demand send under letter dated 25 .1.1999 for paying 20%
or more of the outstanding dues, may be adjusted at licensee's
option. The balance dues will have to be paid on or before
E 31.1.2000 alongwith interest calculated upto the actual date of
payment.

(ix) For the purpose of calculation of outstanding licence fee upto
31.7.1999, the effective date of all the licenses of Cellular Telecom
F Circle and Basic Telephone Services will be notionally extended
by a period of six months. This date does not apply to metro
cellular licences. This is with the further condition that where
extension of effective date has been given earlier due to whatever
circumstances, further extension will be given after deducting
the period of extension already given subject to the total extension
G period not exceeding six months. In cases where extension of
period of more than six months has already been given there will
be no further change.

(x) The liquidated damages as per the existing licence agreement
shall be paid latest by 15.8.99.
H
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DEPT. OF TELECOMMUNICATION 1·. CELLULAR OP. ASSON. OF INDIA IS. RAJENDRABABU, l.] 55]

(xi) The period of licence shall be 20 years starting from the effective A
date of the existing license agreement."

The learned counsel qn either side have adverted to several decisions
but in our ·view none of these decisions have a bearing on the issues to be
decided in the present case as they turn upon the language of the License
Agreement and its provisions. B
It is no doubt true, as contended for appellants that the effective date
is defined under the original licence under clause l(j) which is to be reckoned
from the date the License Agreement is signed after payment of appropriate
component of licence fee. By reason of NTP-99 and the migration package
the effective date stood extended by a period of six months. That means the C
effective date becomes a date which is after six months thereof thus, there is
a substitution of the date of reckoning the licence fee. Whether it results in
reduction of any licence fee payable or not is not for us to examine in the
present proceeding. All that we are concerned in the present case is whether
cellular operators are liable to pay interest without reference to the extended D
effective date as demanded by the appellants. The Department's stand is that
the expression "for the purpose of calculation of outstanding licence fee"
used in clause (ix) will only cover licence fee as such and not outstanding
interest. But this argument baffles all logic. The licence fee becomes due and
payable from the effective date. When the effectjve date stood postponed by
a period of six months then that is the date from which the licence fee will E
.) have to be reckoned and appropriate calculation made both for purposes of
licence fee and interest. Unless the licence fee becomes due the question of
payment of interest will not arise. However, the learned Additional Solicitior
General submitted that there are two components, namely, the licence fee and
interest which was payable. In respect of one component the effective date p
was extended but not in respect of the other. But payment of interest is
dependent upon the licence fee becoming due. Interest is not independent of
the licence fee and when the licence fee had to be paid from a particular date,
the interest would not accrue from a date prior to the licence fee becoming
due for payment. In that view of the matter, we think the view taken by the
Tribunal is correct and no interference is called for. However, in regard to the G
relief granted by the Tribunal we think the direction should be modified. The
direction to the authorities will now read as follows:

We direct the appellants to modify the demand issued to the respondents
to the extent it is found to charge higher amount of licence fee or interest on H
+
552 SUPREME COURT REPORTS [2003] 2 S.C.R.

A the principles set out by us in this order. The excess amount which is liable
to be refunded to the respondents shall be adjusted towards outstanding or
future dues and if still any amount becomes due to them the same shall be
refunded at the ~elevant bank rates. In other respects the direction given by
the Tribunal stands maintained.

B The appeal is thus dismissed subject to the modification made in the
course of this order.

S.K.S Appeal dismissi~d.

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