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BSNL v. Reliance Communication Ltd., (2011) 1 SCC 394

Telecommunications Laws

Interconnection agreement

Breach of, by resorting to call masking by one of the parties - Liquidated damages' provision in interconnection
agreement - Whether provision penal in nature or merely a pre-estimation of damages likely to be suffered by wronged
party - Interconnection agreement between BSNL (appellant) and Reliance Communications (respondent) dt. 18-3-1997
subsequently modified on 28-2-2006 - Dispute arising between BSNL and Reliance that latter was camouflaging
international calls as domestic calls and handing over international calls to BSNL at local point of interconnection (PoI)
instead of handing over such calls at proper trunk exchange specified in the agreement - Further alleged, that Reliance
by resorting to such techniques was evading payment of higher access deficit charges (ADC) in respect of international
calls which it was required to pay under interconnection agreement - BSNL accordingly claiming damages under Cls.
6.4.6(a) and (b) of interconnection agreement which specified Reliance's liability in case of unauthorised calls or calls for
which calling line identification (CLI) had been tampered with or modified - Liability under Cls. 6.4.6(a) and (b) had been
capped to maximum duration of two months only - Held, compensation claimed by BSNL was pre-estimate of damages
and not penal in nature - Such an interpretation given to interconnection agreement keeping in view that telecom
services in India are operating under regulatory regime where all service providers are to be afforded level-playing field -
One party could not be allowed to take unfair advantage over the other in the matter of competition - BSNL which was
the incumbent service-provider could not be placed at disadvantaged position in the matter of competition by allowing
Reliance to cut its costs by paying lesser ADC than what was agreed to in interconnection agreement - Matter remitted to
TDSAT for fresh resolution of dispute keeping in view that Cl. 6.4.6 contemplated pre-estimation of reasonable damages
rather than penalty - S. 74, Contract Act was not violated and therefore Cls. 6.4.6(a) and (b) were enforceable in law,
(2011) 1 SCC 394-A

Contract and Specific Relief

Remedies/Relief

Remedies for Breach of Contract - Damages - Stipulated Damages, Penalty Clauses and Earnest money deposits -
Liquidated damages - Desirability of providing, in commercial contracts, particularly where commercial activities are
subject to regulatory regimes as in the case of telecom industry - Held, courts should generally not categorise liquidated
damages as penalties - This is because liquidated damages reduce uncertainty and resultantly help in reducing litigation -
Further held, terminology used for these damages, penal or liquidated, is not the decisive factor though it is one of the
factors to be taken into consideration while determining real nature of these damages whether they are penal or
liquidated, (2011) 1 SCC 394-B

Telecommunications Laws

Concepts and terminology

Telecommunications" - Concept of - Held, telecommunication is all about transferring information from one location to
another - Information may be telephone conversations, television signals, computer files and other types of data - A
channel is needed to transfer information between two locations - This channel may be wire-pair, radio signal, optical
fibre, etc. - Telecom companies receive payment for transferring customer's information while they make payments
amongst themselves to establish and maintain channels, (2011) 1 SCC 394-C

Telecommunications Laws

Interconnection agreement

Purpose of - Held, prescribes terms and conditions under which two licensees or service providers interconnect their
networks to allow their respective subscribers to have seamless access to each other's networks - It is a binding contract
between parties on commercial, technical and operational aspects of interconnection arrangement - Scope and content
of interconnection contract may vary between parties to parties, (2011) 1 SCC 394-D

Telecommunications Laws

Interconnect Usage Charges (IUC)

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Meaning of - Held, it is a payment made by one service provider to another for use of network elements to originate,
transit or terminate calls, (2011) 1 SCC 394-E

Telecommunications Laws

Interconnect Usage Charges (IUC)

Payments regarding - Held, can be divided into four heads, namely, (i) originating charges, (ii) carriage charges, (iii)
termination charges, and (iv) access deficit charges (ADC), (2011) 1 SCC 394-F

Telecommunications Laws

Access Deficit Charge (ADC)

Concept - Held, it is a fee paid by cellular, UAS, national long distance and international long distance subscribers - The
payment is in the nature of tax as no service is rendered in return - ADC payments are made to cross-subsidise
incumbent service provider (like BSNL) for developing its fixed network in non-lucrative areas - ADC payment is made on
the basis of adjusted gross revenue (AGR) of a new entrant service provider - These payments are subsequently
transferred to incumbent service provider (like BSNL), (2011) 1 SCC 394-G

Telecommunications Laws

Call Masking

Meaning of - Held, call masking takes place when a licensee deliberately alters identity of an incoming (international)
call before handing it over to another service provider at point of interconnection (PoI) - Identity of (international) calling
party is obliterated and call is made to appear as it were from a domestic/national number - Technique enables evasion
of ADC payments at enhanced rates for international calls, (2011) 1 SCC 394-H

Telecommunications Laws

Interconnection

Interconnection arrangement between two networks - Point at which interconnection takes place when there is a call
from mobile subscriber to a landline subscriber and vice-versa - Held, it is at point of interconnection (PoI) that gateway
mobile switching centre (GMSC) of mobile network of UASL gets interconnected to GMSC of landline service provider by
a facility of interconnection seeker, (2011) 1 SCC 394-I

Telecommunications Laws

Calling Line Identification (CLI)

Meaning of - Held, it means information generated by network capability which identifies and forwards the calling
number through an interconnected network, (2011) 1 SCC 394-J

Telecommunications Laws

Billing records

Purpose of their maintenance - Held, these records are necessary to settle payments amongst network operators,
(2011) 1 SCC 394-K

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