Date of the Judgment: 03 October 2018
Citation: (2018) INSC 868
Judges: Kurian Joseph, J. and A.M. Khanwilkar, J.
Can the government levy penalties and interest based on notifications without providing evidence of the same? The Supreme Court addressed this question in a case involving a dispute over unauthorized use of telecom resources. The court directed a review of the penalty calculation, emphasizing the need for factual and legal basis for such levies. The judgment was delivered by a two-judge bench comprising Justice Kurian Joseph and Justice A.M. Khanwilkar.
Case Background
The dispute arose from a show cause notice issued to Tech Mahindra Business Services Ltd. (formerly known as Hutchinson Global Services Ltd.) by the Union of India on 27th February 2013. The notice alleged unauthorized use of telecom resources. Tech Mahindra challenged this notice before the High Court of Bombay. The High Court directed Tech Mahindra to deposit the amount determined as loss to the government but stated that the company could challenge the order. The High Court also stated that the company could not be directed to furnish an unconditional undertaking to deposit the amount.
Following the High Court’s order, the Union of India issued a fresh order on 14th July 2014, after hearing both sides. This order directed Tech Mahindra to pay Rs. 6,11,73,460 towards loss incurred by the government, including license fee, penalty, and interest. The calculation was based on the ceiling tariff for STMs notified by TRAI in 2005 and the interest was charged at SBI PLR plus 2%.
Tech Mahindra then challenged this order before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). TDSAT held that the Union of India had erred in calculating the loss using the ceiling rate of 2005, given that rates had been falling. TDSAT also stated that it was unfair to use the highest percentage prescribed under the UASL License to calculate the licensee fee, interest, and penalty. TDSAT directed the Union of India to calculate the loss based on payments made by Tech Mahindra to Tata Communications Ltd. for the same bandwidth and to charge an interest of 10%.
Timeline
| Date | Event |
|---|---|
| 27th February 2013 | Show cause notice issued to Tech Mahindra by the Union of India. |
| 2013 | Tech Mahindra challenges the show cause notice before the High Court of Bombay. |
| 14th July 2014 | Union of India issues fresh order directing Tech Mahindra to pay Rs. 6,11,73,460. |
| 2014 | Tech Mahindra challenges the order before TDSAT. |
| 01st July 2015 | TDSAT passes order directing recalculation of loss. |
| 03rd October 2018 | Supreme Court disposes of the appeal directing review by the Tribunal. |
Course of Proceedings
The initial show cause notice was challenged by Tech Mahindra before the High Court of Bombay. The High Court allowed the challenge to the extent that the company could not be directed to furnish an unconditional undertaking to deposit the amount. Following this, the Union of India passed a fresh order, which was then challenged before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The TDSAT found fault with the method of calculation adopted by the Union of India and directed a recalculation of the loss. The Union of India then appealed to the Supreme Court against the TDSAT order.
Legal Framework
The judgment refers to the UASL (Unified Access Services License) license, which governs the provision of telecom services. The judgment also mentions the Telegraph Rules, which provide for penalties in case of mistakes by ordinary subscribers. The Telecom Regulatory Authority of India (TRAI) notification dated 25th April 2005, which prescribed the ceiling tariff for STMs, was also considered.
The court noted that the appellant had relied on notifications that were stated to have the force of law to justify the levy of penalty and interest.
Arguments
Appellant (Union of India):
- The Union of India argued that there were valid notifications having the force of law that justified the levy of penalty and interest on the respondent.
- The appellant contended that the quantum of penalty and interest was also justified based on these notifications.
Respondent (Tech Mahindra Business Services Ltd.):
- The respondent challenged the method of calculation of loss by the Union of India.
- The respondent argued that the penalty and interest imposed were excessive and not in accordance with the applicable rules.
- The respondent contended that the calculation of loss should be based on the payments made to Tata Communications Ltd. for the same bandwidth.
| Main Submissions | Sub-Submissions | Party |
|---|---|---|
| Validity of Penalty and Interest | Valid notifications justify levy | Union of India |
| Quantum of penalty and interest justified | Union of India | |
| Method of Calculation of Loss | Method of calculation of loss is flawed | Tech Mahindra Business Services Ltd. |
| Penalty and interest imposed are excessive | Tech Mahindra Business Services Ltd. | |
| Calculation should be based on payments to Tata Communications Ltd. | Tech Mahindra Business Services Ltd. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues but the core issue revolved around the authority of the appellant to levy penalty and interest and the validity of the method used to calculate the loss.
Treatment of the Issue by the Court
| Issue | How the Court Dealt with It |
|---|---|
| Authority to levy penalty and interest | The Court noted that the appellant claimed to have valid notifications but did not provide them to the Tribunal. The Court directed the appellant to approach the Tribunal with these materials for review. |
| Method of calculating the loss | The Court did not go into the merits of the method of calculation. It directed the Tribunal to review the matter. |
Authorities
The Supreme Court referred to the judgment in Vinod Kapoor v. State of Goa and Others, (2012) 12 SCC 378, which allowed the appellant to seek review. The court also considered the UASL license, the Telegraph Rules, and the TRAI notification dated 25th April 2005.
| Authority | Type | How it was used |
|---|---|---|
| Vinod Kapoor v. State of Goa and Others, (2012) 12 SCC 378, Supreme Court of India | Case Law | Allowed the appellant to seek review. |
| UASL license | License | Governs the provision of telecom services. |
| Telegraph Rules | Rules | Provides for penalties for mistakes by ordinary subscribers. |
| TRAI notification dated 25th April 2005 | Notification | Prescribed the ceiling tariff for STMs. |
Judgment
| Submission | How it was treated by the Court |
|---|---|
| Appellant’s claim of valid notifications | The Court noted that the appellant did not provide these notifications to the Tribunal and directed the appellant to seek review with these materials. |
| Respondent’s challenge to the method of calculation | The Court did not go into the merits of the method of calculation. It directed the Tribunal to review the matter. |
The Court observed that the Tribunal had passed the impugned order in the interest of justice because the appellant had not provided the relevant materials to the Tribunal. The court held that it was for the appellant to approach the Tribunal with the relevant materials and seek review.
The Supreme Court stated that it had not considered the matter on merits and all contentions available to both the sides were left open.
The Court also directed that if no review was filed within thirty days, the amounts deposited by the respondent, after adjusting the amount already awarded by the Tribunal, shall be refunded to the respondent with the same rate of interest i.e. @ 10% per annum, within another fifteen days.
| Authority | How it was viewed by the Court |
|---|---|
| Vinod Kapoor v. State of Goa and Others, (2012) 12 SCC 378 | The court used this judgment to grant liberty to the appellant to approach the Tribunal for review. |
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the lack of evidence provided by the Union of India to support its claim for penalties and interest. The Court emphasized the importance of presenting the relevant notifications and materials before the Tribunal. The Court’s focus was on ensuring a fair process and allowing the Tribunal to review the matter with all the necessary information. The Court also took into account the fact that the Tribunal had passed the order in the interest of justice, due to the absence of such material.
| Sentiment | Percentage |
|---|---|
| Importance of evidence | 40% |
| Fair process | 30% |
| Tribunal’s order in the interest of justice | 30% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The court’s reasoning was primarily based on the procedural aspect of the case. The Court did not go into the merits of the case but focused on ensuring that the Tribunal had all the relevant materials before making a decision.
The Court did not consider any alternative interpretations, as it was primarily concerned with the procedural aspects. The final decision was to direct the appellant to approach the Tribunal with the necessary materials for review.
The Supreme Court directed the appellant to approach the Tribunal and seek review. The Court also stated that it had not considered the matter on merits and all contentions available to both the sides were left open.
The court stated, “However, we do not find that any such material was available before the Tribunal.”
The court stated, “In case there are such materials having the force of law, it is for the appellant to approach the Tribunal and seek review.”
The court also stated, “We make it clear that we have not otherwise considered the matter on merits and hence all contentions available to both the sides are left open.”
There was no majority or minority opinion as the judgment was delivered by a two-judge bench and it was a unanimous decision.
Key Takeaways
- Government bodies must provide evidence for penalties and interest levied.
- Tribunals must have all relevant materials before making a decision.
- Parties can seek review if new materials come to light.
- The Supreme Court has not decided on the merits of the case and all contentions are left open.
Directions
The Supreme Court directed the appellant to approach the Tribunal and seek review within thirty days. If no review is filed, the amounts deposited by the respondent, after adjusting the amount already awarded by the Tribunal, shall be refunded to the respondent with the same rate of interest i.e. @ 10% per annum, within another fifteen days.
Development of Law
The ratio decidendi of the case is that government bodies must provide evidence for penalties and interest levied and that Tribunals must have all relevant materials before making a decision. There is no change in the previous position of law.
Conclusion
The Supreme Court disposed of the appeal by directing the Union of India to approach the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) for a review of its order. The Court emphasized the need for the Union of India to provide all relevant materials, including notifications, to justify the levy of penalty and interest. The Court did not delve into the merits of the case but focused on ensuring a fair process and allowing the Tribunal to review the matter with all the necessary information.