Summary
Telecom licensees disputed the inclusion of several receipts in adjusted gross revenue and the associated interest and penalties. The Court enforced the contractual definition of gross revenue, including revenue from non-licensed activities, and rejected reliance on accounting standards to narrow it. It determined the disputed revenue heads individually, preserved specified protections against double charging and upheld the contractual consequences of delayed payment.
Issues
- Whether accounting standards could restrict the contractual definition of gross revenue or reopen issues settled in the 2011 decision.
- Which disputed receipts and deductions entered the computation of adjusted gross revenue.
- Whether contractual interest, penalty and interest on penalty were recoverable.
Provisions considered
- Clauses 19.1 and 19.2, Telecom licence agreementThe agreed inclusive definition governed gross revenue without expense set-offs; the specified deductions required actual payment or passing on. (¶¶ 7, 76, 107, 154)
- Clause 22, Telecom licence agreementIndependent accounts and audit requirements supported computation and did not narrow the revenue definition. (¶¶ 54, 84)
- Clauses 20.5 and 20.8, Telecom licence agreementContractual compound interest, the stipulated shortfall penalty and interest on unpaid penalty were enforced. (¶¶ 182, 183, 192, 198)
Held
- The unambiguous licence definition, accepted with the revenue-sharing package, included licensed and non-licensed revenue. Accounting Standard 9 governed accounting and could not supersede that definition; contra proferentem did not apply. (¶¶ 63, 74, 76, 79, 83, 88, 89)
- The 2011 judgment conclusively settled the inclusion of licensed and non-licensed income. Scrutiny of a particular demand permitted examination of facts, materials and computation under the licence, rather than exclusion of heads already contractually included. The Court also independently examined the objections on merits. (¶¶ 177, 178, 181)
- Discounts and commissions, including international roaming discounts, distributor discounts on prepaid vouchers, trade and subscriber discounts, volume rebates and goodwill waivers, could not be netted off gross revenue. Invoice-reflected free-call, SMS and data benefits were included. (¶¶ 114, 115, 116, 117, 119, 120, 122)
- Foreign exchange gains were included on accrual basis. Gains on disposal of shares, capital assets and scrap were measured against the applicable book value, rather than treating the whole sale proceeds as revenue; insurance recoveries above book value likewise entered gross revenue. (¶¶ 127, 128, 129, 131, 132, 136)
- Negative prepaid balances, infrastructure-sharing receipts including expense reimbursements, and late fees once attracted were included despite non-realisation, waiver or the manner of accounting. (¶¶ 139, 145, 149, 150)
- Deduction of eligible call and roaming charges required actual payment or passing on, including between different service areas of the same licensee. An overseas branch was part of the licensee, and its income was included; non-refundable subscriber deposits were also revenue. (¶¶ 151, 154, 158, 159, 160, 161, 162)
- The Tribunal correctly excluded demands against Videocon and S. Tel for the period when the bundled spectrum had not been granted and licensed activity had not commenced. This conclusion concerned those circumstances. (¶ 163)
- Interest and dividends, inter-corporate loan interest, IP-1 registration revenue, management consultancy income and cable landing station revenue were included. Bad debts were not deductible, but later recoveries could not be charged twice; liabilities written off likewise could not occasion a second charge on amounts already brought to licence fee. (¶¶ 164, 165, 166, 167, 168, 170, 172, 173, 174, 175, 176)
- The licensees’ objections did not constitute a bona fide dispute justifying reduction of contractual interest or penalties. The agreed interest, shortfall penalty and interest on penalty were enforceable, and liability was not postponed until this judgment. (¶¶ 182, 183, 188, 189, 192, 193, 194, 197, 198)
Result
The licensees’ appeals were dismissed and the Department of Telecommunications’ appeals allowed in accordance with the findings on the individual heads. Contractual interest, penalty and interest on penalty were upheld. No order as to costs.