UNION OF INDIA Vs. MODI KOREA TELECOM LTD

JUDGEMENT

(1.) THE respondent being the successful bidder for grant of Radio Paging Service for Madhya Pradesh Circle excluding Bhopal was issued a Letter of Intent (LOI) by petitioner on 30th October 1995 indicating that the respondent has been provisionally selected for franchisee of Radio Paging Service. The respondent was told that an amount of Rs. 1102 lac was payable for the license period. The respondent was to convey the acceptance by 30th November 1995 and was also required to furnish 10% of the first year license fee in the form of a bank draft from the scheduled bank and 90% of the first year's license fee in the form of financial bank guarantee. A performance bank guarantee valid for a period of three years for an amount of Rs. 25 lac was also to be furnished by the respondent in accordance with the LOI. The respondent submitted a sum of Rs. 4.72 lac as 10% of the first year's license fee. The respondent vide letter dated 29th November 1995 sought extension of four weeks for furnishing bank guarantee. Vide letter dated 8th December 1995, the extension was granted by petitioner upto 12th January 1996, however, subject to the condition that the effective date of license shall be 30th November 1995. The respondent submitted financial bank guarantee dated 18th December 1995 for Rs. 90,70,000/- and submitted performance bank guarantee dated 18th December 1995. On 20th December 1995, the respondent informed the petitioner that the name of respondent has been changed to Modi Korea Telecommunications Ltd. and sought approval of change of name in DOT records. The respondent also sought further extension of time for giving acceptance, till change of name was brought on reocrd. By letter dated 8th January 1996, the extension was granted up to 31st January 1996 subject to condition that effective date of license shall remain 30th November 1995.

(2.) THE parties executed the license agreement on 15th January 1996 whereby respondent was granted license on non exclusive basis to establish, maintain and operate Radio Paging Service upto the subscriber's terminal connection in Madhya Pradesh Circle, except the local area served by Bhopal Telephone District and Indore Telephone District. The respondent was required to commission the Radio Paging Service within a period of 12 months from 30th November 1995. Thus, the Radio Paging Service was to be commissioned by 29th November 1996. For commissioning of Radio Paging Service it was necessary for the respondent to get allocation of appropriate radio frequency from DOT and to obtain a separate license from WPC (Wireless Planning and Coordination) Wing, Ministry of Communication and the site clearance in respect to the fixed stations and its antenna from SACFA(Standing Advisory Committee on Frequency Allocation).

(3.) THE claim of respondent before the Arbitrator was that the termination of license agreement by petitioner was illegal and unjustified and was not in accordance with the terms of the contract and the invocation of bank guarantees by petitioner was also illegal and unjustified. It was stated that since the site approval by SACFA had not been granted to the respondent, the question of starting Radio Paging Service from the due date did not arise and the contract stood terminated/ frustrated on 29th November 1996 and, therefore, no license fee became due on that date. In the alternative, it was submitted, that even if the respondent was at fault on account of delay of commissioning of Radio Paging Service, the petitioner could only claim liquidated damages to the tune of Rs. 20 lac as per the Condition 13.2, Schedule B, Part-II of the license agreement. The respondent had also relied upon Clause 18.6 of the license agreement and stated that in terms of this clause, a termination notice would have been deemed to be served on the respondent on 28th February 1997and the notice for termination dated 10th February 2000 was therefore invalid. In view of these submissions, the respondent raised following claims against petitioner before learned Arbitrator: