TELECOM DISPUTES SETTLEMENT & APPELLATE
TRIBUNAL
Dated 28th May, 2010
APPEAL No.17(C) OF 2006
(M.A. Nos.24 of 2007, 8
& 13 of 2008 and Caveat No.4 of 2006)
East India Hotel Ltd. …
Appellant
Versus
Telecom Regulatory Authority
of India & Ors. …Respondents
AND
APPEAL No.18(C) OF 2006
(M.A.Nos. 65, 66 of 2008 and Caveat No.5 of 2006)
The Connaught Prominent
Hotels Limited …
Appellant
Versus
Telecom
Regulatory Authority of India & Ors. …Respondents
BEFORE:
HON’BLE MR.JUSTICE S.B. SINHA, CHAIRPERSON
HON’BLE MR. G. D. GAIHA,
MEMBER
HON’BLE MR. P.K.RASTOGI,
MEMBER
|
For Appellant (In Appeal No.17(C) of 2006) |
: |
Mr.Ramesh Singh, Advocate Mr.
Nikhil Goel, Advocate |
|
For Respondent No.1 (TRAI) |
: |
Mr. Meet Malhotra,
Advocate Mr. |
|
For Respondent No.2 (Star Den Media Services Pvt. Ltd.) |
: |
Mr. Maninder Singh,
Senior Mr. Gopal Jain,
Advocate Mr. Prateek Kumar,
Advocate Ms.Garima Sharma, Advocate |
|
For Respondent No.3 (SET
Discovery Pvt. Ltd) |
: |
Mr.Aditya Narain,
Advocate |
|
For Respondent No.4 (Zee Turner Limited) |
: |
Mr. Maninder Singh,
Senior Advocate Mrs.Prathiba M. Singh, Advocate Mr.Nikhil Mehra ,Advocate Mr.Arjun Natarajan,Advocate Ms.
Nitya Thakur, Advocate |
|
For Respondent No.5 (ESPN) |
: |
Mr. N. Ganpathy,
Advocate |
|
For Respondent No.6(HAI) |
: |
Mr.Ayushya Kumar,Advocate |
|
For Appellants (In Appeal
No.18(C) of 2006) |
: |
Mr.Ramji Srinivasan,Senior
Advocate Mrs.Rukmini Bobde,Advocate |
|
For Respondent No.1 |
: |
Mr. Meet Malhotra,
Advocate Mr. |
|
For Respondent No.2 |
: |
Mr.Gopal Jain,Advocate Mr. Prateek Kumar,
Advocate Ms.Garima Sharma, Advocate |
|
For Respondent No.3 |
: |
Mr.Aditya Narain,Advocate |
|
For Respondent No.4 |
: |
Mr. Maninder Singh,
Senior Advocate Mrs.Prathiba M. Singh,Advocate Mr.Nikhil Mehra,Advocate Mr.Arjun Natarajan,Advocate Ms. Nitya Thakur,Advocate |
|
For Respondent No.5 |
: |
Mr.N. Ganpathy,Advocate |
|
For Respondent No. 6 |
: |
Mr.Arjun Garg,Advocate |
JUDGMENT
S. B. Sinha
1.
These two appeals involving common questions of law
and fact were taken up for hearing together and are being disposed of by this
common judgment.
2.
The petitioners herein are owners of hotels. They are aggrieved by a determination made by
the Telecom Regulatory Authority of India (TRAI) purported to be in terms of
Section 11(1)(a)(ii), (iii) & (iv) of the Telecom Regulatory Authority of
India Act, 1997 (the Act).
The brief
factual background involved in this matter is not in controversy.
3.
The Parliament enacted the said Act to provide for the
establishment of the TRAI and this Tribunal to regulate the telecommunications
services, adjudicate disputes, dispose of appeal and to protect the interests
of the service providers of the consumers of the telecom sector to promote and
ensure orderly growth of telecom sector or the matters connected therewith and
incidental thereof.
Section 2
provides for the interpretation section.
Section 2(j) defines service provider to mean the Government as a
service provider and includes a licensee.
Section
2(k) defines telecom services. By reason
of the provisions of the said definition of telecom services, the broadcasting
services were excluded. However, by
reason of Section3 of the Amended Act of 2003, a proviso was appended thereto
in terms whereof the Central Government was empowered to notify other services
to be telecommunication services including the broadcasting services.
4.
It is beyond any dispute that such a notification was
issued on 01.09.2004 pursuant whereto and in furtherance whereof the
broadcasting and cable services were brought within the ambit of
telecommunication services. By reason of
an order known as the Telecommunication (Broadcasting & Cable Services)
Tariff Order 2004, the TRAI sought to freeze the cable subscription charges
i.e. the tariff prevalent on 26.12.2003, till final determination by it on the
various issues concerning those charges.
5.
A new tariff order was issued on 01.10.2004 by the
TRAI, inter alia, laying down the definition of various terms such as ‘multi
service operator’, ‘broadcasting and cable operator’, ‘broadcasting services’,
‘cable service’, ‘cable television network’ and reiterated the ceiling/freeze
prescribed by the former tariff order.
In regard to the tariff, it was stated:-
“The charges, excluding taxes, payable
by –
(a)
Cable subscribers to cable operator;
(b)
Cable operators to multi system operators/
broadcasters (including their authorized distribution agencies); and
(c)
Multi system operators to broadcasters (including
their authorized distribution agencies)
prevalent as on 26 December, 2003 shall be
the ceiling with respect to both free-to-air and pay channels.”
6.
By reason of the said tariff order dated 01.10.2004 no
distinction was made between a commercial and non-commercial subscribers.
7.
The Hotel Association of
By an order
dated 17.01.2006, this Tribunal disposed of the said applications, inter alia,
holding:-
“31. We, therefore, quite easily conclude that members of Petitioner
Associations are not subscribers as contemplated under the Cable TV Network
Regulations Act.
……..
33. In view of the above, we are of the considered opinion that the
management of the hotels in Petition Nos. 32(C) and 80(C) cannot be termed as
subscribers. Similarly, various restaurants using cable service for public
viewing cannot be treated as consumers. There is no gain saying that this use
is entirely different from the domestic use of cable service. The use of cable
service at a public viewing place is to attract more customers / clients which gives it the colour of use of its
service for commercial purpose.
……..
36. Now we come to the question whether the tariff laid down by the TRAI
notification of 26th December, 2003 is applicable to the members of the
petitioner associations. The said Tariff order covers the following in its
ambit – the charges payable by (a) Cable subscribers to cable operator; (b)
Cable operators to multi service operators/broadcasters (including their
authorized distribution agencies); and (c) Multi service operators to
broadcasters (including their authorized distribution agencies). In the
petition before us we find that the commercial relationship is between the
members of the petitioner associations (viz., hotels, restaurants etc.) on the
one hand and either cable operators or broadcasters on the other. We have
already concluded that the members of the petitioner associations cannot be
regarded as subscribers or consumers. As such we are of the view that the above
tariff notification of the TRAI would not be applicable. It seems that TRAI has
found it necessary to fix the tariff for domestic purpose. We think the
Regulator should also consider whether it is necessary or not to fix the tariff
for commercial purposes in order to bring about greater degree of clarity and
to avoid any conflicts and disputes arising in this regard.
37. In view of the above, we are of the opinion that the respondents are
well within their rights to demand the members of the petitioner associations
to enter into agreements with them or their representatives for the receipt of
signals for actual use of their guests or clients on reasonable terms and
conditions and in accordance with the regulations framed in this regard by the
TRAI.”
8.
The matter was carried in appeal to the Supreme court of
9.
We may, however, notice the Explanatory Memorandum
appended thereto. Clause 4 of the
Explanatory Memorandum reads as under:
“4. In the meanwhile keeping in view the
observations of Hon’ble TDSAT and the
representation of FHRAI, the Authority has considered appropriate, in the
interim, to extend the protection of ceiling to the commercial consumers as
well……”
10.
The Supreme Court admitted the appeals on 28.04.2006
and an order of status quo as existed on that date was directed to be
maintained until further orders. It may,
however, be noticed that prior thereto, namely, on 21.04.2006, the TRAI had
issued a Consultation Paper in line with the directions issued by this
Tribunal. We may furthermore notice that
on 31.08.2006 TRAI issue tariff for CAS areas called the Telecommunications
(Broadcasting & Cable Services)(3rd)(CAS Areas) Tariff Order
2006 in terms whereof the ceiling in respect of maximum rental price payable by
a subscriber to a multi-service operator/cable operator as Rs.5 per pay channel
per month (exclusive of taxes) was determined.
The said tariff order came into effect on and from 31.12.2006. In terms of the aforementioned notification therefor, the price ceiling as on date applied to all
consumers.
11.
We may furthermore notice that after hearing the
counsels for the parties, the Supreme Court of India while reserving the order
said to be on an application filed by TRAI itself directed as under:
“We
in modification of our said order dated 28.4.2006 direct the TRAI to carry out
the processes for framing the tariff. While
doing so, it must exercise its jurisdiction under Section 11 of the Act
independently of the Act and not relying on or on the basis of any observation
made by the TDSAT to this effect.”
12.
In terms of the said order dated 19.10.2006, TRAI
inviting the comments of all stakeholders on 02.11.2006, by reason whereof two
notifications dated 21.11.2006 (the impugned notifications) were issued.
13.
By reason of the said amendment, the hotels with
rating of three stars and above, heritage hotels and other hotels, motels and
inns and commercial establishments providing for boarding and lodging and
having 50 or more rooms were excluded from the protection of price regulation
which was extended to millions of commercial establishments and minor cable
subscribers across the country. On or
about 24.11.2006, the Supreme Court of India delivered its judgment in Cable
Operators’ Association of India & Ors. Vs. UOI & Ors. - 2003(3) SCC 186. We would refer to the relevant portions of
the said judgment at an appropriate stage.
14.
These appeals were filed questioning the legality
and/or validity of the said impugned notifications dated 21.11.2006.
15.
Mr.Ramji Srinivasan, the learned senior counsel appearing on behalf
of the petitioners in Appeal No.18(C) of 2006 would contend:
(i)
The impugned orders are contrary to and inconsistent
with the judgment of the Supreme Court in so far as the TRAI failed and/or
neglected to apply its own independent mind as would appear from various paras in the Explanatory Memorandum and simply followed the
judgment of this Tribunal which was set aside.
(ii)
The TRAI was under a statutory obligation to protect
the consumers, particularly, having regard to the provisions contained in
Section 11(1)(b), Section 12 and Section 13 of the
Act.
(iii)
The TRAI, keeping in view of the fact that it has role
of a Regulator to play, has committed an illegality by refraining from
regulating the tariff in respect of the specific categories of hotels.
(iv)
The purported clarifications made by TRAI amongst the
consumers and one group of commercial consumers with the other was illegal and
without jurisdiction.
(v)
The TRAI, for the purpose of determining the said
order, has failed to state any rationale therefor. In doing so, it has failed to consider that
broadcasters being the monopolistic, the prices cannot be left to free market
forces.
(vi)
No reason has been assigned as to why other similarly
situated commercial establishments like five star nursing homes, executive
class airport lounges, shopping malls, large corporate offices would be left
out from the purview of Regulations.
(vii)
The explanation offered in relation thereto purported
to be Clause 3.2.5, 3.2.6 and 3.2.7 are based on wholly irrelevant
considerations not germane for the purpose of taking the same into
consideration and failed to take into consideration the relevant factors.
(viii)
The hotels having the star ratings and other heritage
hotels have no other options but to enter into the subscription agreement with
the respondent broadcasters on their dictate.
(ix)
The arbitrary and unreasonable discrimination being
not based on any intelligent differentio must be held
to be ultra vires Article 14 of the Constitution of
India.
(x)
Tariff being not a tax, the socio economic approach or
grant of cross-subsidies to the broadcasters is against the concept of the
power to regulate tariff.
(xi)
TRAI in passing the impugned directions have failed to
take into consideration that the broadcasters and distributors have acted in an
unreasonable and high-handed manner.
16. Mr.Ramesh Singh,
the learned counsel appearing on behalf of the respondent in Appeal No.17(C) of
2006, urged:
(a)
Section 11(2) of the TRAI Act providing for a power on
TRAI in terms whereof it may undertake the exercise for fixing different
tariffs for different classes but, cannot refuse to fix tariffs for a
particular class and it thus, must be said to have committed an illegality in
passing the impugned orders.
(b)
The judgement of this Tribunal
excluding the commercial establishments for the purpose of making the
aforementioned tariff could not have been followed by TRAI and thereby
directing a forebearance in the matter.
(c)
Despite the order of the Supreme Court, the TRAI while
going into the aforementioned exercises found that there was need therefor,
it failed to consider that it could not have refused to extend the protection
to a particular class.
(d)
Sub-section (2) of Section 11 providing for making
tariff for different persons or different classes of persons clearly go to show
that although TRAI was entitled to fix different rates for different classes,
it could not have directed forebearance in respect of
a particular class.
17.
Mr.Meet Malhotra, the learned
counsel appearing on behalf of first respondent herein, on the other hand,
urged:
I.
It is wrong to contend that the TRAI in its impugned
orders failed and/or neglected to determine the tariff independently and merely
followed the decisions of this Tribunal.
Keeping in view the fact that the owners of the Hotel Associations came
before TRAI, it started with their case and if necessary, undoubtedly would
consider to bring in the cases of others, if any
occasion arises therefor progressive steps for
protection are being taken by it. The
TRAI upon considering the cases of all concerned as also the viewpoints of the
appellants, the broadcasters, arrived at its own view which, in the facts and
circumstances of this case cannot be considered to be unreasonable or violative of Article 14 of the Constitution of India.
II.
A bare perusal of the impugned orders would clearly go
to show that not only the TRAI was not influenced in any manner by the judgment
of this Tribunal but had considered the criteria for need of protection and
inter alia in view of the fact that the appellants can negotiate on their own
having the requisite bargaining power and furthermore they can afford to pass
on the burden to their customers, prescribed forebearance
for them.
18.
Mr.N.Ganpathy, the learned counsel appearing on behalf of
the ESPN would urge:
A.
It is wrong to say that the broadcasters have been
charging the hotels on the basis of 100% occupancy and the agreement entered
into by and between the ESPN and the appellant, The Connaught Prominent
Hotels Limited, would clearly go to who that the same was entered into for 76
rooms although the appellant had 87 room situated in a very busy area of New Delhi and,
thus, has about cent per cent occupancy.
B.
The broadcasters considered the areas in question for
the purpose of fixing tariff as for example, in the hill areas occupancy may be
lesser but in metropolitan town occupancy would be more than 70 to 75%.
C.
Only two hotels being before this Tribunal and their
associations having been relegated to the position of the respondent, the hotel
owners as a class cannot be said to be aggrieved by the order of the TRAI. The consultation process being not over even
they can participate therein.
19.
Mr.Maninder Singh, the
learned senior counsel appearing on behalf of the two of the broadcasters,
namely, M/s Zee Turner Ltd. And M/s Star Den Network, submitted:
1.
Associations being not parties in their appeal, they
cannot take the benefit of any judgment of this Tribunal.
2.
The petitioners having not made any factual averments
as to how classification can be said to be invalid cannot be granted any relief. The classification being a broad one is not
hit by Article 14 of the Constitution of India nor can it be stated to be
wrongful classification as similar establishments cannot be said to have been
left out.
3.
Classifications on the basis of income status and
other relevant factors can be the basis for making valid classifications by a
legislature and the same by itself would not lead to a conclusion that the same
is illegal.
4.
TRAI being a Regulator, it was for it to consider as
to who would require protection and who would not and having regard to the fact
that it in order to arrive at a conclusion had undertaken a detailed exercise,
the classification cannot be faulted.
20.
Mr.Aditya Narain, the learned counsel appearing on behalf of the MSM
Discovery in a written submission filed before us state that in view of the
several decisions of the Supreme Court of India, it is evident that the
petitioners holding status of a definite class having the rating of three-star
and above cannot be heard to contend that the classification is bad in
law. The appellant, East India
Hotel Ltd., being a part of a big group of hotels, which are 815 in number,
cannot be said to be representing all the Hotels.
21.
The principal questions which arise for
consideration are:
(i)
Whether the TRAI having regard to Section 11(2) of
the Act has the requisite jurisdiction to direct forebearance
in relation to a class of commercial consumers;
(ii)
Whether the TRAI was justified in treating hotels
having the category of three-star and above, the heritage hotels and the hotels
above 50 rooms in a separate category;
(iii)
Whether the classification is legal and valid.
Before,
however, adverting to the aforementioned questions, we may notice the statutory
scheme.
22.
We have noticed the preamble of the Act in
terms whereof TRAI is required to protect the interest of the service providers
as also the consumers of the telecom sector.
As a Regulator, the TRAI has a very significant role to play. Its recommendations carry a great weight, and
ordinarily should be accepted by the Government of India. It was so held in Cable Operators’
Association of India & Ors. Vs. UOI & Ors. – 2003(3) SCC 186.
23.
It was obligatory on its part to consider all
aspects of the matter and cover its recommendations from all angles including
the plight of the ultimate viewers. It
started exercising its jurisdiction within a period of two weeks from the date
of issuance of the notification by the Government of India by promulgating a
freeze order which continued. The TRAI
in regard to the charges excluding taxes stated:
“The charges, excluding taxes, payable by –
(a)
Cable subscribers to cable operator;
(b)
Cable operators to multi system operators/
broadcasters (including their authorized distribution agencies); and
(c)
Multi system operators to broadcasters (including
their authorized distribution agencies)
prevalent as on 26 December, 2003 shall be
the ceiling with respect to both free-to-air and pay channels.”
1.
It only increased the tariff by 7% by an order dated 01.12.2004 and
4% more by an order dated 29.11.2005.
The definition of consumer in 2004 Regulations was a broad one being
whosoever a subscriber of the broadcaster in the country. By and large even the broadcasters adhered thereto. There appears, however, to be some dispute
in regard to the stand taken by the parties hereto as to whether the
petitioners came within the purview thereof.
Our attention in this behalf has been drawn to a letter issued by M/s
Zee Turner to the appellant in Appeal No.17(C) of 2006 which reads as under:
“Zee Turner
16 November 2004
THE
VIKRAM CHAUBAL
NARIMAN POINT
MUMBAI
Dear Vikram Chaubai,
As you may
probably be aware, recently, the TRAI announced an amendment of allowing for a
7% increase in subscription rates on account of inflation.
We’d like
to inform you that effective January 1, 2005 incorporating a hike of 7% the
price of Zee Turner’s existing bouquet would stand at Rs.181.90. We request you to get in touch with the
nearest Zee Turner Regional Office to sign the Agreement for the revised rate
of your existing package.
Thank you
for your interest and support for Zee Turner.
With kind
regards,
sincerely,
Zee-Turner
Ltd.”
2.
However, the broadcaster contends that the said
freeze order was never applied to the petitioners. In fact, submissions have been made before us
that the broadcasters in their agreement with the local cable operators always
kept the subscribers, where public viewing is permitted, outside the purview of
the agreements. The TRAI, however, does
not appear to have taken this aspect of the matter in its consideration. It is, however, not much in dispute that
whereas some of the big hotels have put head-ends on their roof-top upon
entering into agreements in this behalf with the respective broadcasters, a
large number of hotels like any other commercial establishments take supply
only from the local cable operators.
Although, it has vehemently been suggested by the learned counsel
appearing on behalf of the broadcasters that most of the owners of the hotels
have acted contrary to the said agreements by taking supplies of signals from
the local cable operators,
we think that at this stage, we are not concerned therewith.
3.
There cannot, however, be any doubt or dispute
that the owners of the hotels of the categories mentioned in the impugned order
of the TRAI are indisputably dependent only upon the broadcasters. They exercise monopoly. It is in the aforementioned situation, the
justifiability and workability of impugned order issued by TRAI must be
considered. This Tribunal in the
aforementioned Petitions No.32(C) of 2005 and 80(C) of 2005, were of the
opinion that the commercial subscribers do not come within the purview of the
provisions of the orders made by the TRAI.
It was so held in the following terms:-
“35……………On facts, we have noticed that the hotel managements, who are
members of the petitioner associations, receive signals either from the
broadcaster or their agents directly or from the cable operators directly which
is further transmitted to rooms and parlours for the
purpose of viewing by their guests or clients, it is at that stage that the
signals actually get consumed. Therefore, as per the judicial and dictionary
definition of the consumer referred to hereinabove, we have no doubt that the
members of the petitioner associations are not the end-users of the signals
received by them. Hence, these members of the petitioner associations on the
facts of this case cannot be treated as either subscribers or consumers for the
purpose of relief sought in this petition.
36. Now we come to the question
whether the tariff laid down by the TRAI notification of 26th December, 2003 is
applicable to the members of the petitioner associations. The said Tariff order
covers the following in its ambit – the charges payable by (a) Cable
subscribers to cable operator; (b) Cable operators to multi service
operators/broadcasters (including their authorized distribution agencies); and
(c) Multi service operators to broadcasters (including their authorized
distribution agencies). In the petition before us we find that the commercial
relationship is between the members of the petitioner associations (viz.,
hotels, restaurants etc.) on the one hand and either cable operators or
broadcasters on the other. We have already concluded that the members of the
petitioner associations cannot be regarded as subscribers or consumers. As such
we are of the view that the above tariff notification of the TRAI would not be
applicable. It seems that TRAI has found it necessary to fix the tariff for
domestic purpose. We think the Regulator should also consider whether it is
necessary or not to fix the tariff for commercial purposes in order to bring
about greater degree of clarity and to avoid any conflicts and disputes arising
in this regard.”
4.
We have also noticed heretobefore,
however, for all intent and purport TRAI while undertaking fresh exercise in
the matter as directed by the Supreme Court of India was directed to do so afresh
wholly independently, without in any way being influenced by the order passed
by the TDSAT. As directed by us, the
concerned file of TRAI was produced before us. The perusal of the same shows
that two draft tariff orders were issued on 2.11.2006 and the same were put on
website also seeking comments of stakeholders by 10.11.2006. TRAI conducted a meeting also with
broadcasters and Hotel Associations on 9.11.2006.
5.
We may at this juncture also notice the
impugned order dated 21.11.2006 of the TRAI which at page 70 of the compilation
of documents. By reason of the said
order the TRAI made the following amendment in the 2006 order, clause (ii)
whereof reads, thus:-
“Provided that the provisions of this sub-clause shall not apply to the
following types of commercial subscribers:
i) Hotels with rating of three star and above
ii) Heritage hotels (as described in the guidelines for classification of
hotels issued by Department of Tourism, Government of India)
iii) Any other hotel, motel, inn, and such other commercial
establishment, providing board and lodging and having 50 or more rooms.”
By
a reason of the said order, inter alia, in place of sub-clause (f) of Clause 2
and the entries relating thereto, the following was added:
“(f) “charges” means and includes the
rates (excluding taxes) payable by one party to the other by virtue of the
written/oral agreement prevalent on 26th December 2003. The principle
applicable in the written/oral agreement prevalent on 26th December, 2003,
should be applied for determining the scope of the term “rates".”
Amended
“(f) ‘Charges’ means and includes
(i) for all ordinary cable
subscribers and commercial cable subscribers except those specified in (ii)
below, the rates (excluding taxes) payable by one party to the other by virtue
of the written/oral agreement prevalent on 26th December, 2003. The principle
applicable in the written/oral agreement prevalent on 26th December 2003, should be applied for determining the scope of the
term “rates”.
(ii) for hotels with a rating of three star and above,
heritage hotels (as described in the guidelines for classification of hotels
issued by Department of Tourism, Government of India) and any other hotel,
motel, inn, and such other commercial establishment, providing board and
lodging and having 50 or more rooms, the charges specified in (i) above shall not be applicable and for these subscribers
the charges would be as mutually determined by the parties.
Explanation: It is clarified that in respect of programmes of a broadcaster, shown on the occasion of a
special event for common viewing, at any place registered under the
Entertainment Tax Law and to which access is allowed on payment basis for a
minimum of 50 persons by the commercial cable subscribers, the tariff shall be
as mutually determined between the parties.”
29. By reason
of Regulation 3, sub-clause(a) of clause 3 was
substituted:
“3. Tariff:
The charges ,
excluding taxes, payable by
(a) Cable subscribers to cable operator;”
Amended
“3. In the Principal Order, the existing sub-clause (a) of
clause 3 and the entries relating thereto shall be substituted with the
following sub-clause (a) and entries relating thereto;
“(a) Ordinary cable subscribers and commercial cable
subscribers (except hotels with a rating of three star and above, heritage
hotels (as described in the guidelines for classification of hotels issued by
Department of Tourism, Government of India) and any other hotel, motel, inn,
and such other commercial establishment, providing board and lodging and have
50 or more rooms) to cable operators, multi system operators or broadcasters as
the case may be.”
30. By reason
of clause 4, after the clause 3 two explanations were added:
Original
“(c) Multi system operators to broadcasters (including
their authorized distribution agencies) prevalent as on 26th December 2003
shall be the ceiling with respect to both free-to-air and pay channels.”
Amended
“4. In the Principal Order, after the
existing clause 3(c) and entries relating thereto, the following explanations
and entries relating thereto, namely Explanation –1 and Explanation –2 shall be
inserted:
“Explanation 1: for the purpose of clause 3(a) above the
question whether the commercial cable subscriber will pay the cable operator/
multi system operator/the broadcaster will be determined by the terms of
agreement(s) between the concerned parties, namely
i) broadcaster(s)
ii) MSO(s) and cable operator(s) who have been
authorized to provide signals to the commercial cable subscribers on the one
hand, and the commercial cable subscribers on the other.
Explanation 2 : for the purposes
of clause 3(b) and (c) above the charges will be modified to take into account
the payments to commercial cable subscribers where appropriate””
31. By reason of clause 5, the
existing second proviso below clause 3(c) was added:
“Provided further that in case a multi system operator or a cable
operator reduces the number of pay channels that were being shown on
26.12.2003, the ceiling charge shall be reduced taking into account the rates
of similar channels as on as on 26.12.2003.”
Amended
“5. In the Principal Order , after
the existing second proviso below clause 3(c) the following proviso shall be
inserted
“Provided further that in the case of a commercial cable
subscriber, the charges in respect of whom by virtue of clause 2(f)(ii) read with clause 3(a), is determinable as per mutual
agreement between the parties, having facilities to get broadcasting services
directly from the broadcaster, the later shall at the option of the commercial
cable subscriber be obliged to provide channels on ala carte basis. For such
consumers whenever bouquets are offered, these shall be subject to the
following conditions:
I The maximum retail price of any
individual channel shall not exceed three times the average channel price of
the bouquet of which it is a part;
Explanation: if the maximum retail price of a bouquet is
Rs.”X” per month and the number of channels is “Y” then the average channel
price of the bouquet is Rs. X dividedby Y.
II The sum of the individual maximum retail prices of the
channels shall not be more than 150% of the maximum retail price of the
bouquet.”
32. Clause 6 directs deletion of
existing clause 3A and the entries relating thereto:
“3. In clause 3 of the
Telecommunication (Broadcasting and Cable) Services (Second) Tariff Order 2004,
(6 of 2004), the existing subclause (a) and the
entries relating thereto shall be substituted with
the following: -
“(a) Ordinary
cable subscribers to cable operator.””
Amended
“6. In the Principal
Order, the existing clause 3A and entries relating thereto shall be deleted.”
33. Clause 7 provides for the
Explanatory Memorandum as contained in Annexure A thereto:
“7.
Explanatory Memorandum:
This Order
contains an Explanatory Memorandum attached as Annex- A.”
The
Explanatory Memorandum contained several heads.
Section 1
provides for Introduction and Background, clause 1.1 whereof reads as under:
“1.1 The
Authority had issued a Tariff Order on 15th January 2004, which provided that
the ceiling of cable charges shall be at the levels prevailing on 26th December
2003.for both FTA and Pay channels. This interim order was subject to final
determination. Subsequently after extensive consultations a detailed Tariff
Order was issued on 1.10.2004 (hereinafter referred to as Principal Tariff
Order) which maintaining the sanctity of the ceiling of cable charges
prevailing on 26.12.2003 provided a window for introduction of new pay channels
and conversion of existing FTA Channels to pay subject to certain conditions.
The underlying objective in both these orders was to provide relief to the
cable subscriber who has no mechanism to protect himself against the hike in
cable television charges.”
32. We may
notice that in terms of the order issued on 21st April, 2006, the
TRAI provided for a uniform ceiling of cable charges. The said philosophy had been continuing. The last sentence of clause 1.1 provide for
the underlying objective which indisputably, the petitioners were
satisfied. The matter relating to consultation
process starts at Section 2, the relevant portions whereof
read as under;
“The consultation paper also pointed out
that the question of categorization and having a separate definition for
commercial cable subscribers is closely linked to the question of approach to
tariff regulation ie. Whether it is necessary to have
tariff regulation at all or a differential set of tariff regulation for
different categories of cable subscribers. The question of categorization
depends and comes after the decision on the need or otherwise to have different
sets of tariff regulation.”
33. We may notice that no answer
thereto has been attempted to be given as to why a change in the freeze order
was contemplated. In Sections 2.3, 2.4
and 2.5, TRAI had noticed the directions in the appeals by the Supreme Court of
India. Section 3 provides for definition
of commercial cable subscribers and issues relating thereto. Clause 3.1.1 provides for the history and the
subsequent changes made in relation thereto.
We may, at this juncture, also notice that there is nothing on record to
show as to on what materials the TRAI had arrived at a conclusion that the
commercial establishments had the mechanism and wherewithal to protect
themselves.
34. The TRAI had taken into consideration
in paragraph 3.1.1 one major issue for the purpose of arriving at its
conclusion in the aforementioned order that the question for a separate
distinction or otherwise for those establishments who avail broadcasting and
cable services not for their own domestic use but for the benefit of his/her clients. This sentence, it has not been disputed,
before use has been lifted from the judgement of the
TDSAT.
35. We will consider hereinafter as to
whether the said question was a right question or the same should have been an
objective of the TRAI.
Clause 3.1.2. reads as under;
“3.1.2 However, subsequently the
question of need for categorization and applicability of the principal tariff
order of 1.10.2004 arose in respect of hotels before the TRAI when representations from a hotel association seeking relief against the
hike in cable charges by broadcasters was received well before the
matter came up before hon’ble TDSAT. While examining
the issue it was felt that the principal tariff order of 1.10.2004 needed
clarity on the real intent of applicability or otherwise to establishments who
do not use the broadcast and cable services for their own use. However, before
the decision could be taken matter had become sub-judice.
There were also a couple of references from establishments (other than hotels)
seeking clarification on the issue of applicability of tariff regulation and as
to the interpretation.”
36. One of the questions which would
arise for our consideration, was it meant to be applicable to the petitioners?
The use of
availing the broadcasting services, in common parlance, may not also have any
relevance.
The views
of the TRAI have been stated in Clause 3.1.5 from which we have to notice in extenso:
“3.1.5 The comments received from the stakeholders on the
issue of need or otherwise of a separate definition and retention of the
existing definition has been analyzed and the Authority’s views are given
below:
i) TRAI had noted that there are bound to
be more disputes between establishments who received signals for the use of
clients etc and the service providers including broadcasters and therefore the
need to bring in clarity to the interpretation of the principal tariff order.
But the TRAI before taking a final view decided to deliberate in detail through
a consultation process as envisaged under Section 11(4) of the TRAI Act 1997,
on the various issues relating commercial tariff for cable television services.
Considering that the principal tariff order of 1.10.2004 required clarity in
regard to its applicability to the commercial establishments in the context of
the underlying objective stated above there is a necessity to identify the
commercial establishments and provide for the manner of regulation of cable
charges for these establishments. In either case whether to extend the
protection of ceiling on cable charges in any form or not to extend protection
at all, would require such establishments to be identified separately. Therefore, the need to define the terms ordinary cable subscriber and
commercial cable subscriber. The views of the hotel
and its associations stating that there is no need for a separate definition is
therefore not acceptable.
ii) The distinction sought to be made in the existing
definition between an ordinary cable subscriber and commercial cable subscriber
is justified from the point of view of the underlying premise that the need and
extent of protection for a commercial establishment compared to that of an
ordinary cable subscriber is not the same.
iii) It is an admitted fact that particularly hotels who
had given details of prices paid by them that the charges paid by them is
different and higher than the ordinary cable consumer. Thus even at the ground
level the commercial establishments particularly the hotels and such other
similar establishments, as a prevailing business practice, are treated
differently.
iv) In regard to the approach one option is to adopt a
definition which is wide in scope cum inclusive in nature as done in the
existing definition which uses the criterion of usage as the basis to categorise the cable subscribers. In this approach the task
of identification of specific categories of commercial cable subscribers is done for the purpose of
extending or otherwise of the tariff regulation depending upon the assessment
of the need for protection. The other approach is to adopt a definition, which is exhaustive identifying specific categories and
sub-categories for the purpose of tariff regulation and indicating the type
of regulation intended for each such defined category. The
Authority has chosen to adopt the first approach
for the reason that it is extremely complex to
evolve objective criterion for categorization. Even in the approach to the
categorization the Authority has used the method to exclude certain categories of commercial cable
subscribers for the purpose of keeping out of the ambit of tariff regulation
thereby leaving the residual category of commercial cable subscribers within
the fold of the tariff regulation. Any approach to define specific category is
bound to leave out some and include certain unintended ones. The stakeholders
in their responses have also echoed similar views on the difficulty in evolving
criterion for categorization of cable subscribers. It would be simpler and
better to identify specific broad groups within this generic definition while
providing for the differential dispensation in tariff regulation. Such an
approach would also minimize the scope for disputes. Having a wide approach in
defining a commercial cable subscriber would ensure that all are covered; those
that do need protection could be specifically excluded. The Authority has
therefore adopted this approach of having a definition, which is wide in scope
and to identify specific groups for the purpose of tariff regulation based on
the need for protection.
v) It is not denied that the product is same whether is a
ordinary cable consumer or commercial establishments but the value derived from
the product in the case of TV channels may not be the same in the situations
where it is put to self use compared to a situation where it is meant for the
purpose of its clients, customers. The television channels or programmes, even though may not be sold as a standalone
service by commercial establishments particularly like hotels, etc. but as a
means of entertainment do possess the potential to give an enhanced value to
their packaged services. Therefore, the manner how the broadcasting services
are being used becomes relevant for differentiating between an ordinary cable
subscriber and a commercial cable subscriber.
vi) In regard to the suggestion of identifying specific
categories within the group of commercial cable subscribers for definition or
extending protection it is viewed that existing definition based on the type of
use is wide enough and would cover such specified categories as well.
vii) Considering the ground realities where 99% of the
subscribers are receiving signals through the multi system operators or cable
operators the suggestion of broadcasters that the commercial subscribers would
be required to indicate the place where the signal is required to only to
broadcasters and not to operators is not acceptable. The existing definition
gives flexibility as otherwise the restriction as suggested would create
difficulties in regard to the vast majority of current arrangements of hotels
etc with the operators.
viii) The amendments suggested for inclusion of the word
agent and intermediary (of the broadcaster) has been examined and is not
considered necessary as such intermediary would be acting only under
authorization and would representing the broadcaster even otherwise.
ix) As also expressed by some of the stakeholders the
Authority is of the view that no single approach to categorization will be ideal
and attempts of micro management will only add to the distortions in the
market, creating fresh grounds for raising disputes. On the other hand the vast
majority of commercial establishments would fall within the scope of the
existing definition yet would require protection as that of an ordinary cable
subscriber
x) It has
been pointed out that pay TV broadcasters for commercial usage should have
separate interconnect
agreements and that the Authority should direct
the broadcasters that such agreements are entered into at the price that is
being charged in the locality for an ordinary cable consumer. The Authority has
noted that largely the broadcasters entering into interconnect agreements with
the MSOs and independent cable operators exclude specified establishments such
as hotels etc from the applicability and stipulates a prior permission
requirement. Thus the issue of separate arrangement is in place and no change
is warranted in this aspect of the present arrangements.
xi) One suggestion is that the product being same the
license fee cannot be different for different consumers and that it should be
determined on the basis of cost plus margin. Ideally a uniform price for a
product of similar quality could be a situation if there is definite functional
relationship between the cost of content and the value attached for the content
and the cost of content itself is easily amenable to evolve a standard set of
cost. In the case of broadcasting industry it may not be so. More importantly
the argument is not based on proper appreciation of the prevailing system of
determination of margin particularly in a non-CAS
environment and without considering the complexities
involved, as stated above, in costing of content.
xii) Contrary to the claims of the hotel association, the
Authority is of the view that big hotels providing variety of services have the
capacity to protect their interests and cannot be treated at the same level as
that of an ordinary cable consumer or even as that of large variety of commercial
establishments which may require protection as that of the ordinary cable
consumer. Many from this type of establishment may not be putting to use such
services for the benefit of clients, customers etc. It was pointed out by the
broadcasters that the cable charges as a portion of the revenue of the hotels
forms a very insignificant portion and this has not been contested by the
groups representing the hotels during the consultation process. In other words
the impact of keeping this identified category out of the ambit of protection
is unlikely to hurt their interests adversely.
xiii) It is noted that that the suggestion of
categorization based on the source of feed will not be a reflection of ground
realities and there can be situation where it is not possible to have head end
to receive the television signals and that such an approach would force the
hotels to go to cable operators to receive signals instead of entering into
contract with the broadcasters.”
Paragraph
14 of the said Section refers to the definition of consumer under the Consumer
Protection Act which admittedly is irrelevant.
37. Clause
3.1.6, however, may be noticed:
“3.1.6 The Authority has after examining the views put
forth and for the reasons indicated above has come to a conclusion that an
approach to definition based on specifically identifying categories would be
more complex and problematic to implement and is bound to give rise to new
grounds for dispute. Therefore, an exhaustive approach to the question of
definition would be more desirable. Those groups who may not need protection
can be excluded from the applicability of the tariff protection and group the
rest as a residual category requiring protection. Therefore, the Authority has
decided to retain the existing definition of ‘commercial cable subscribers’
contained in the tariff amendment order of 7th March. 2006”
38. Section 3.2 provides for the
conclusion. It reads “note for fixation
of commercial tariff and related issues, types of commercial establishment to
be covered and method of identification of such commercial establishments for
regulations”.
39. Clauses 3.2.1 and 3.2.2 read as
under:
“3.2.1 In terms of the facility to
choose channels of choice under a non-addressable regime the commercial cable
subscribers are in the same position as that of the ordinary cable consumer
excepting that they have the potential to settle for a negotiated settlement
with the broadcaster albeit the level of potential may not be the same across
all types of commercial cable subscribers.
3.2.2 But
the difference is that the former, particularly the hotels and other big
commercial establishments who receive the broadcasting and cable services as a
value addition to their own package of services have the potential to pass on
the burden to their own clients. There may not be a direct functional relation
between add on services such as that of the television channels and the
business strength in as much as a client of a hotel or pub or club may not come
to a hotel or club or pub etc with the sole objective of watching TV channels. But is it to be largely
admitted, despite the claims to the contrary by the stakeholders representing
the hotels, that such value added services definitely help to sustain and
strengthen business relationship of such commercial establishments with their
clients. If it had not been so, there was perhaps no need for the hotels to go
to the appellate authority or the apex court or for TRAI to be deliberating on
this issue of tariff for commercial cable subscribers particularly the hotels.”
40. Different viewpoints of the
representative of the petitioners and broadcaster have also been noted
therein. The view of TRAI reads as
under:
“3.2.6 The Authority is of the view that
it would be incorrect to draw a strict analogy between the identified group of
commercial cable subscribers comprising hotels above a given grading etc, and
hospitals as the former as a group need to be treated on a different footing.
Most importantly, the Authority has taken conscious decision for the present
not to club hospitals, educational institutions, big or small, along with the
group consisting of hotels etc above a particular grading from the perspective
of the socio economic causes such institutions are expected to serve. Moreover
it may be more difficult to evolve a reasonable objective criterion to
differentiate between two luxury hospitals. While the Authority is clear that
the intention of protection is not to facilitate profit making by even such
commercial hospitals, for the present and to begin with the Hospitals need to
be given protection.
3.2.7 The Authority is however not
closed to the option of revisiting the issue of categorization for the purpose
of tariff regulation on the basis of experience gained if necessary. It is also
to be recognized that there are a vast majority of establishments which do not
receive the signals of television channels for their own use but they may not
be commercially exploiting the services for furtherance of their own business.
In this category would come educational institutions, Government hospitals,
religious charitable and other philanthropic institutions, small shops, dhabas etc and this is not exhaustive list. During the
interactions with the broadcasters it was clear that these commercial establishments,
though in terms of the contract are not to be given signals without the prior
permission of the broadcaster have not been targeted by the broadcasters due to
sheer volume and difficulties in enforcing the agreements. Though some of the
broadcasters have appointed agents to prevent and monitor of the giving signals
by the MSOs to commercial establishments, it was still clear that this group is
not the target of the broadcasters.”
Clause
3.2.8 refers to specific comments/suggestions made by the stakeholders as also
the specific findings of TRAI. We would
only notice clauses 1,3,5,7 of the said paragraph:
“3.2.8 The Authority has also examined
the various specific comments/ suggestions made by the
stakeholders and has found that
i)
The approach to identify each category of establishment for exclusion or
inclusion for the purpose of tariff regulation is extremely complex and no such
list can be exhaustive.
iii) In regard to the request for
inclusion of clubs, malls, cinema halls, the proposal has not been agreed to
for the reasons already indicated earlier. The proposal for reduction in the
number of rooms from 50 to 25 has not been found to reasonable.
v) As was noted during the consultation process the vast
majority of commercial establishments in the group of commercial establishments
other than the identified categories are actually not being targeted by the
broadcasters perhaps for the reason of difficulties in enforcement of the
clause of prior permission.
vii) The hotels as a
group particularly big hotels in the view of the Authority do not need
protection. These are large subscribers and the broadcasters too would stand to
lose large sums of money if their negotiations with them are not successful.”
41. The
directions which were based on the said findings, are
as under:
“3.2.9. In view of the above it has been proposed that
there would be one category of commercial cable
subscribers consisting of hotels with a rating of 3 star and above,
heritage hotels, and any other hotel, motel, inn, and such other commercial
establishment providing board and lodging and having 50 or more rooms. The
Tariff in respect of this group would be as per the mutual agreement. For all
other commercial establishments which is outside this
identified category the ceiling shall be the charges as prevailing on
26.12.2003. However for the both categories of commercial cable subscribers,
the tariff for showing programmes on special event in
public viewing area shall be as per mutual agreement.
3.2.11 The group representing the
hotels have expressed concerns particularly those who fall in the identified
category of commercial establishments that the broadcasters would use the
mutual agreement route to arbitrarily increase prices. The Authority believes
that the category of commercial establishments which have been identified for
forbearance would ordinarily be in position to deal with the broadcasters on an
even keel in the negotiations. Yet the Authority is also not impervious to
their concerns. Therefore the Authority would be closely watching the movement
of prices in respect of this segment and would review its decision if
considered necessary on the basis of inputs received. Similarly, there could be
a number of similar institutions, which in terms of capacity to negotiate a
mutual agreement may be similar, and these could be revisited later and if
necessary the identified list could be reviewed. The Authority would separately be
asking the broadcasters to report their tariffs for the commercial cable
subscribers, to start with on a monthly basis, to gauge the extent of the
increase in the rates. If found necessary the Authority would intervene in this
matter
3.2.12 One of the issues raised by
the Hotel Associations and their response to the Draft Tariff Order is that
TRAI has to necessarily to fix a tariff in terms of the order of the Hon’ble Supreme Court. This point has been examined. The
Supreme Court has only directed the TRAI to carry out the process for framing
the tariff. The Tariff Order that has been proposed by the Authority includes
the fixation of tariffs for certain categories whereas for the hotels above
particular grading this has been left to mutual negotiations. It has also been
indicated elsewhere that the outcome of mutual negotiation would be closely
watched and if necessary, intervention would be made later. The Consultation
Paper that had been issued in April 2006 also clearly provides one of the
alternatives as excluding certain categories from the ambit of tariff
regulations. One of the specific questions that had been framed was whether
commercial tariff should at all be brought under the ambit of tariff
regulation. Further, it was specifically asked whether the tariff regulation
should cover all kinds of commercial establishments or whether some categories
should be left out. Thus, this objection is not valid at all.”
42. We are not concerned with the
method for fixing the rates for commercial consumers. We have referred to the said Explanatory
Memorandum in great details only because the parties have referred thereto
before us with their respective comments again and again.
It
succinctly stated the reasons for putting the petitioners’ hotels in a separate
class and excluded the same from the purview of the regulatory regime are inter
alia based on the following reasonings:
(i)
The process of excluding others would be a complex
one.
(ii)
There is likelihood of more disputes between
establishments who receives signals for the use of clients and the
broadcasters;
(iii)
It was needed for bringing in clarity.
(iv)
The usage of the service is different.
(v)
They do not require any need for protection
although the code value of the contents are the same as the television channels
cannot be sold as a stand alone programme, having
regard to the commercial purpose for which the supply is taken there for more
value.
(vi)
A macro management may only add to the distortions
in the market creating fresh grounds for raising dispute.
(vii)
Uniform pricing is not possible as there is no
defined functional relationship between the cost of content and the value
attached thereto.
(viii)
The hotels providing valued service have the
capacity to pay.
(ix)
The cable charges as a portion of revenue of the
hotels forms a very insignificant portion as has been contended by the
broadcasters.
(x)
The petitioners have the potential to settle for a
negotiated settlement.
43. So far as issue relating to the
complexities involved in the exercise for the purposes of framing of tariff is
concerned, the same in our considered opinion, cannot
be said to be a good reason. The first
respondent is an expert body. It was
required to take into consideration very complex issues.
44. Mr.Meet Malhotra would contend that this Tribunal should keep in
mind the fact that where the regulatory regime in relation to the
telecommunication services grew with the market and, thus it was not a very
difficult task for the TRAI to lay down regulations regulating the industry as
and when need arose therefor; but so far as the
broadcasting and cable services industry is concerned, it was not so in view of
the fact that only in the year 2004, the Central Government came out with a
notification and thus the TRAI had no other option but to issue the first
freeze order within a couple of weeks therefrom. Although it has been conceded that for all
intent and purport, the TRAI apart from issuing the freeze orders had not been
able to lay down any tariff in respect of the channels of various broadcasters,
Mr.Malhotra would point out that TRAI had made its
best efforts to so do so firstly by laying down the maximum charge per channel
and also by responding to the need of
the broadcasters for increase thereof by issuing two notifications in terms
whereof the rate of the pay channel had been increased by 7% and 4% respectively. According to Mr.Malhotra,
TRAI had also laid down the ceiling for the free-to-air channels.
45. It may be true that having regard
to the contents of different broadcasters may be valued differently but it
appears to us, with all respect to the TRAI, that no serious attempt appears to
have been made in relation thereto. The
TRAI in a matter like the present one, was required to
apply its mind more thoroughly as to whether it was necessary to provide for a
regulatory regime be it for their domestic consumers or the commercial consumers. The Act provides therefor. But the need and extend therefore was
required to be considered. One cannot
compare selling a piece of bread in a dhaba with the
one in a five star hotel. All selling
the same product may
have to spend differently on a large number of things including hygiene. There cannot, however, be any doubt or
dispute that different rates could be fixed for the different consumers. There cannot however, be any doubt or
dispute that different types of rates can be provided for different categories
of consumers. The consultation paper
itself proceeds on the basis that even as on 17.01.2006, the TRAI noticed from
the documents furnished by the Hotel Associations that rates per room charged
vary from as low as from Rs.20/- to as high as Rs.1300/- per room per day. It has specifically been noted in paragraph
3.6 that the Authority had indicated that price control will be lifted once
there is effective competition.
46. Before, however, we proceed to
consider the other and further submissions of the learned counsel appearing on
behalf of the parties, we may place on record that ESPN Software India Pvt.Ltd. has in its written submissions categorically
stated that although the broadcasters charge from 35 to 85% of the occupancy,
the agreement entered into by and between it and the appellant in Appeal
No.18(C) of 2006 would go to show that out of 86 rooms in the said hotel, in
terms of the said agreement the said appellant is required to pay for about 76
rooms. It has furthermore been accepted
that in the event the hotels offered for 62 pay channels of Star, MSM, ESS, ZEE
TV, BBC, Neo TV, CNN, Star News Bouquet and ZEE, the appellants are required to
pay for about Rs.2099/- per month, the cost for all pay channels per day would
be Rs.68.82.
47. It is, therefore, evident that
although according to Mr.Meet Malhotra
that there are several safeguards provided for TRAI itself to keep an eye over
the development in the market, nothing has been brought on record to show that
in fact the same had been carried out.
Had it been so, it was expected of TRAI to bring on records some
materials before us to show that in fact, it had been doing so. It could not have also become oblivious of
the fact that according to broadcasters the upper limit has gone upto Rs.2099/- for all the 62 channels. What has been missed by Mr.Ganpathy
in the aforementioned submissions is that admittedly there are about 500
channels in
48. Although, it has been contended by
the learned counsel appearing on behalf of the respondents that in terms of the
guidelines issued by the Ministry of Tourism, it is not obligatory on the part
of the appellants and/or other hotels to subscribe to the pay channels as the
only requirement prescribed therefor is to provide TV
which requirement would be met by providing even free-to-air channels. We are, however, of the opinion that the said
submission is too simplistic to be accepted in as much as the ground reality
from which we cannot shut our eyes is that all hotels worth its name whether it
has been placed in the category of star hotel or not, cannot afford not to
provide the channels of the major broadcasters and that too the popular
ones. It is,
therefore, idle to contend that for the purpose of meeting the requirements of
the guidelines fixed by the Ministry of Tourism, the appellants and/or the
other hoteliers need not for all intent and purport arrive at any negotiated
settlements with the broadcasters whatsoever.
The very nature of submissions made by the learned counsel for the
respondent clearly goes to show that they cannot afford to do so. It is in fact an agreement in
desperation. Whereas on the one hand,
the respondents talk of market force vis-à-vis the bargaining power of the
hoteliers, it is beyond any controversy now that depending upon the need of
each category of hoteliers there exists such an inconsistency in the rate,
meaning thereby from Rs.20 to Rs.2100/-.
This in our considered opinion, may not lead to
a conclusion that the appellants had been very successful in utilizing their so
called bargaining power and/or their position to fend for themselves.
49. We may now consider some of the
other issues on which TRAI had relied upon to arrive at its aforementioned
decision. It is not necessary,
particularly, in the manner it has been sought to be done to bring in more
clarity to avoid any dispute. TRAI has
also while emphazising only underlying objective to
identify the commercial establishment, in our opinion, has not assigned any
cogent reason as to why a necessity was felt to change the definition. On the one hand the TRAI thought it to
provide to some sort of a relief to the cable service operators as would appear
from clause 1.1 of the Explanatory Memorandum, it failed to take into
consideration that no prohibition had been laid down from the regime of the
first freeze order framed by TRAI.
50. TRAI has also not made any serious
effort to identify different establishments separately. It reiterated the old reasons for the purpose
of considering the cases of the appellants.
In fact, the viewpoint of the Supreme Court of India had not been taken
seriously. Although it had provided on
an underlying premise as contained in clause(ii) of
Section 3.1.5, it is obviously not the case of the TRAI that all commercial
establishments are situated similarly.
No basis for taking the said purported underlying premise has been spelt
out.
51. The manner of usage, in our
opinion, although may not be very relevant for the purpose of putting a clause
of users of the cable and broadcasting services as out of the purview of the
regulatory retime, any assessment of the need for protection should have, in
our considered opinion should have been supported by other cogent and valued
reason.
52. We appreciate that all types of
service providers cannot be put in water-tight compartments for the purpose of
evolving the objective criteria of categorization. Evidently the approach of the TRAI had not
been very clear in this behalf. From
clause (iv) of Section 3.1.5, it is evident that the
broadcasters themselves wanted a wider definition. Although according to TRAI the need for
protection did not exist for the appellants, there is nothing to show as to how
the said need was assessed.
53. So far as the micro-management
vis-à-vis macro management aspect is concerned, we are of the opinion that the
question of requirement of protection having been felt so far as the cable
subscribers are concerned which is evident from clause 9, we are of the opinion
that no basis had been laid down therefor. It is true that functional relationship
between the cost of content and the use thereof may be different. But in our opinion it cannot be said that as
the task is difficult, therefore, no serious attempt in that behalf need be
resorted to.
54. Capacity to protect their own
interests which have been attributed by
the TRAI so far as the appellants are concerned, we may only point out that it
is not the case that others are not in a position to do so.
55. Whether the contention that the
appellants may pass on their portion of the revenue, in our opinion, may not be
valid act in as much as even otherwise the payment of charges for the cable
services by almost every subscriber may be except a few, had been a major part
of the total expenditures incurred by it.
56.
The economic interest, we would assume,
matters. But whether or not a turnover
would do is a matter of serious debate in a situation of this nature. We find
force in the submissions made on behalf of the appellants that others who
fulfill the said criteria were not brought within the net.
57.
Similarly, any existing potential to settle a
negotiated settlement by itself cannot be a ground as cable services cannot be
said to be an essential services. It is
true that for a sizeable section of the people having regard to the number and
nature of programmes that are broadcasted, it is
almost a household affairs and thus, may be held to be very necessary, but
constitutionalism, if taken into consideration, must lead to a legal conclusion
that it is not an essential commodity or essential service so as to consider as
to whether the same would come within the purview of the statues specifically
framed by the Parliament in this behalf.
58.
TRAI bringing out the commercial hospitals and
other commercial establishments have referred to socio-economic causes. Luxury hospitals which may be costlier than
three to five star hotels, in our opinion do not serve any socio-economic
purpose apart from the fact that such a consideration in the context of fixing
the tariff for cable service may be irrelevant.
Even assuming that the hospitals required protection on the ground of
socio-economic causes, we fail to see any reason as to why the luxury clubs,
malls, other commercial establishments have been found to be belonging to the
different class on that ground alone.
59.
It is difficult to understand as to why the
clubs, malls and cinema halls, where the viewers again are different from the
owners of the premises were to be treated differently and bracketted
together with the hospitals/nursing homes.
Why the restaurants have been kept out of the purview of the order is
difficult to comprehend.
60.
Even for the purpose of having headends in their own establishments which admittedly some
of the hotels have admitted, require agreements with the broadcasters.
61.
We, however, have no doubt in our mind that
the TRAI in exercise of its provisions contained in the said Act is entitled to
directed forebearance in respect of a particular
service or for a particular category of consumers. We may, however, notice the submissions of Mr.Malhotra that the hotels came up for consideration of
TRAI for the purpose of excluding them from the regulatory regime as they came
to it first. This, with the greatest of
respect cannot be a valid ground. They
represented to the TRAI because they had some grievances. Only because they had grievances, the same
cannot by itself be a ground for placing them outside the regulatory
regime. We, therefore, reiterate that
only because the appellants had a deep pocket or they can bargain or they can
pass on their burden to their customers may not by itself be a ground for
keeping them outside the protective regime.
62.
We may notice that the Supreme Court of India
in State of
“16. The more serious submission pressed tersely but clearly, backed by a
catena of cases, by Shri Viswanathan
merits our consideration. The argument is shortly this. As between two owners
of property, the presence of public purpose empowers the State to take the
lands of either or both. But the differential nature of the public
purpose does not furnish a rational ground to pay more compensation for one
owner and less for another and that impertinence vitiates the present measure.
The purpose may be slum clearance, flood control or housing for workers, but
how does the diversity of purposes warrant payment of differential scales of
quantum of compensation where no constitutional immunity as in Article 31-A, B
or C applies? Public purpose sanctions compulsory acquisition, not
discriminatory compensation whether you take A’s land for improvement scheme or
irrigation scheme, how can you pay more or less, guided by an irrelevance viz.
the particular public purpose? The State must act equally when it takes
property unless there is an intelligent and intelligible differentia between
two categories of owners having a nexus with the object, namely the scale of
compensation. It is intellectual confusion of constitutional principle to
regard classification good for one purpose as obliteration of differences for
unrelated aspects. This logic is neatly applied in a series of cases of this
Court.
18. In Durganath Sharma case4,
a special legislation for acquisition of land for flood control came up for
constitutional examination. We confine ourselves to the differentiation in the
rate of compensation based on that accident of the nature of the purpose where
the court struck a similar note. In
“There can be no dispute that the Government can acquire land
for a public purpose including that of the mahapalika
or other local body, either under the unmodified Land Acquisition Act, 1894, or
under that Act as modified by the Adhiniyam. If it
chooses the first course, then the land-owners concerned will be entitled to
better compensation including 15% solatium, the
potential value of the land etc. nor will there be any impediment or hurdle
such as that enacted by Section 372(1) of the Adhiniyam
in the way of such land-owners, dissatisfied by the Collector’s award, to
approach the court under Section 18 of that Act.
63.
Adequacy of difference or validity of
difference may also not be a ground for the said purpose has been stated by the
Supreme Court of
“32.
So far as Article 14 is concerned, the courts in
It has further been held:
“58.
Initially, our courts, while testing legislation as well as administrative
action which was challenged as being discriminatory under Article 14, were
examining whether the classification was discriminatory, in the sense whether
the criteria for differentiation were intelligible and whether there was a
rational relation between the classification and the object sought to be
achieved by the classification. It is not necessary to give citation of cases
decided by this Court where administrative action was struck down as being
discriminative. There are numerous.”
64.
The learned counsel for both the parties have
referred to a large number of case laws on the question as to whether there can
be as to whether macro classification is permissible be it on the ground of
income, the need for protection, the amount of rent and so on and so
forth.
65.
While concealing that such micro
classification is permissible in law, we must not forget that the macro
classification or sub-classification is permissible when those who are sought
to be put in different categories and classified separately must form a
homogenous group,
unless all the requisite classes forming commercial
establishments, be it on any of the grounds noticed hereinbefore are said to be
not forming a homogenous group, the classification may be permissible. Furthermore for such classification, nexus
and object sought to be achieved must be taken into consideration.
66.
We, however, as at present advised need not delve
deep into the matter. Suffice to say
that this Tribunal while exercising its jurisdiction under Section 14 read with
Section 14A of the Act need not confine itself to the ingredients of judicial review, this Tribunal exercises an appellate power. The power of judicial review of
administrative action and legislation and the power of the appellate authority
are different. The later confers a wider
power. It has been so held in Cellular
Operators Association (supra).
With
regard to jurisdiction of this Tribunal it was stated in COAI (supra):
“34. Statutory recommendations made by it are
normally accepted by the Central Government, as a result of which the rights
and obligations of the parties may seriously be affected. It was in the
aforementioned premise the Parliament thought of creating an independent expert
tribunal which, if an occasion arises therefore, may interfere with the finding
of fact, finding of law or a mixed question of law and fact of the Authority. Succinctly stated the jurisdiction of the tribunal is not
circumscribed in any manner whatsoever.”
It was
also held:
“33. The regulatory bodies exercise wide
jurisdiction. They lay down the
law. They may prosecute. They may punish. Intrinsically, they act like an internal
audit. They may fix the price, they may
fix the area of operation and so on and so forth………”
67.
The Supreme Court of India on the appeals
preferred thereagainst by the respondents’
association reversed the said findings to which we may refer a little
later.
So far as
the jurisdiction of this Tribunal, the Supreme Court of India in Hotels &
Restaurant Association Vs. Star India 2006(13)SCC753
stated as under:
“28. The
learned Attorney General has relied upon a decision of this Court in Union of
India v. Parma Nanda - (1989)II LLJ 57 SC but the said decision has no
application at all to the fact of the matter.
31. The
rule as regard deference to expert bodies applies only in respect of a
reviewing court and not to an expert tribunal. It may not be the function of a
court exercising power of judicial review to act as a super-model as has been
stated in Administrative Law by Bernard Schwartz, 3rd edition in para 10.1 at page 625; but the same would not be a case
where an expert tribunal has been constituted only with a view to determine the
correctness of an order passed by another expert body. The remedy under Section
14 of the Act is not a supervisory one. TDSAT's jurisdiction is not akin to a
court issuing a writ of certiorari. The tribunal although is not a court, it
has all the trappings of a Court. Its functions are judicial.
32. In
'Jurisdiction and Illegality' by Amnon Rubinstein a
judicial power in contrast to the reviewing power is stated thus:
A judicial power, on the
other hand, denotes a process in which ascertainable legal rules are applied
and which, therefore, is subject to an objectively correct solution. But that,
as will be seen, does not mean that the repository of such a power is under an
enforceable duty to arrive at that solution. The legal rules applied are
capable of various interpretations and the repository of power, using his own reasoning faculties, may deviate from that solution
which the law regards as the objectively correct one.
34. Statutory
recommendations made by it are normally accepted by the Central Government, as
a result of which the rights and obligations of the parties may seriously be
affected. It was in the aforementioned premise the Parliament thought of
creating an independent expert tribunal which, if an occasion arises therefore,
may interfere with the finding of fact, finding of law or a mixed question of
law and fact of the Authority.
Succinctly stated the jurisdiction of
the tribunal is not circumscribed in any manner whatsoever.
40. Even in
“102. We notice that the Commission constituted under
Section 17 of the 1998 Act is an expert body and the determination of tariff
which has to be made by the Commission involves a very highly technical
procedure, requiring working knowledge of law, engineering, finance, commerce,
economics and management. A perusal of the report of the ASCI as well as that
of the Commission abundantly proves this fact. Therefore, we think it would be
more appropriate and effective if a statutory appeal is provided to a similar
expert body, so that the various questions which are factual and technical that
arise in such an appeal, get appropriate consideration in the first stage also.
From Section 4 of the 1998 Act, we notice that the Central Electricity
Regulatory Commission which has a judicial member as also a number of other
members having varied qualifications, is better equipped
to appreciate the technical and factual questions involved in the appeals
arising from the orders of the Commission. Without meaning any disrespect to
the judges of the High Court, we think neither the High Court nor the Supreme
Court would in reality be appropriate appellate forums in dealing with this
type of factual and technical matters. Therefore, we recommend that the
appellate power against an order of the state commission under the 1998 Act
should be conferred either on the Central Electricity Regulatory Commission or
on a similar body. We notice that under the Telecom Regulatory Authority of
India Act 1997 in Chapter IV, a similar provision is made for an appeal to a
special appellate tribunal and thereafter a further appeal to the Supreme Court
on questions of law only. We think a similar appellate
provisions may be considered to make the relief of appeal more
effective.””
It was held
“36. It is one thing to
say that TRAI recognizes the need for making such a distinction probably
pursuant to or in furtherance of the observations made by TDSAT but therefor a final decision is yet to be taken. The
Notification dated 7-3-2006 has been issued as an interim measure. By reason of
the said notification, broadcasters have been injucted
from increasing the rates. So long as a
final determination in the matter does not take place, not only the members of
the appellant Associations but also a vast number of similar commercial
subscribers would remain protected.
37. It is not disputed that the nature of
supply of TV signals is not distinct and different, It is same both for domestic consumers
and commercial consumers.”
It
was observed
“50. We, therefore, are of the opinion that it
would not be correct to contend that the commercial cable subscribers would be
outside the purview of regulatory jurisdiction of TRAI. If such a contention is
accepted, the purport and object for which the TRAI Act was enacted would be
defeated. TDSAT, with great respect,
therefore, was not correct in opining that the regulators should also consider
whether it is necessary or not to fix the tariff for commercial purposes in
order to bring greater degree of clarity and to avoid any conflicts and
disputes arising in this regard.
53. We are, however, sure that TRAI while exercising
its jurisdiction under sub-section(2) of Section 11 of
the TRAI Act shall proceed to e53. We
are, however, sure that TRAI while exercising its jurisdiction under sub-section(2) of Section 11 of the TRAI Act shall proceed to
exercise its jurisdiction without in any way being influenced by the said
observations. It must apply its mind independently.
54. It may be true that TRAI in its Tariff
order dated 7.3.2006 sought to define ordinary cable subscribers and cable
subscribers separately but the same is yet to be adopted finally. It is not conclusive. It must while laying down new tariff take
into consideration all the pros and cons of the matter. It must apply its mind
afresh as regards not only the justifiability thereof but also the workability
thereof.
56. The role of a regulator may be varied. A regulation may provide for cost, supply or
service on non-discriminatory basis, the mode and manner of supply making
provisions for fair competition providing for a level playing field, protection
of consumers’ interest, prevention of monopoly. The services to be provided for through the
cable operators are also recognized. While making the regulations, several
factors are, thus required to be taken into account. The interest of one of the
players in the field would not be taken into consideration throwing the
interest of others to the wind.
59. It is nowo also
not in dispute, as would appear from the explanatory memorandum issued by TRAI, that the interim protection has been extended also to commercial
consumers.”
68.
This Tribunal, thus, is entitled to go into
the question not only of legality or procedural irregularity and/or
reasonableness part of which but also may go into the question inter alia in a
case of this nature with regard to the justifiability. It is entitled to see not only the
justifiability of the order of TRAI but also the workability thereof.
69.
We appreciate the Authority for the great
effort it had made but then it, in our opinion, in determining the issues
between two groups of consumers have failed to take into consideration relevant
factors and took into consideration irrelevant one not germane for arriving at
a decision.
70.
We have also pointed out heretobefore
that the Authority in arriving its opinion has posed
unto itself a wrong question.
71.
We again with utmost respect may observe that
the TRAI appears to have acted in a bit haste.
72.
It floated a consultation paper only on
21.04.2006 and for long period namely from 28.04.2006 to 19.10.2006 in view of
the order of stay passed by the Supreme Court of India, it had not been able to
proceed and advisedly at its opinion within a period one month. We, however, hasten to add that expedition is
needed in the matter of decision of TRAI.
We, however, are of the opinion it would have been in a situation of
this nature could have waited for a few days more with a view to note the
reasonableness of the Supreme Court of India.
We have no doubt in our mind that the TRAI did so with best of an intention
but we have made those observations only because a peculiar situation involved
in these matters.
73.
We have noticed heretobefore
the comments made by Mr.Ramji Srinivasan
that TRAI was greatly influenced, although ordained by the Supreme Court of
India not to do so, by the decision of TDSAT.
In fact, Mr.Srinivasan has pointed out various
paragraphs to show that the TRAI in arriving at its decision at a number of
places had either used the same language which has been used by this Tribunal
or merely paraphrased the same.
74.
We appreciate the comments made by Mr.Malhotra that even assuming that in the action of TRAI
there was a method of madness but it was a bonafide
exercise of power and it acted in accordance with law, although, we do not see that the Authority
did not do so nor its approach could have been casual.
75.
The appellant approached the TRAI only because
it thought that it would be protected by it.
It a matter of record that various criminal cases were instituted by the
cable operators and/or agents of the broadcasters. The Supreme Court no doubt did not make any
comment about the criminal cases as it was concerned with an appeal preferred
from the decision of this Tribunal who had proceeded on the basis that the
orders framed by the TRAI were not applicable to the case of the commercial
establishments and, thus, the appellants herein were not entitled to any
protection. The said reasoning did not
find favour to the Supreme Court. It dealt with all the reasonings
of this Tribunal.
76.
In that view of the matter and that too in
retrospect, we have made an observation that it would have been better if the
TRAI would have taken into consideration a reasonings
of the
77.
Two other questions which have been canvassed
before us may also be taken note of.
(i)
The alleged non-compliance of the order of the
Supreme Court of India.
So far as
the same is concerned, it is accepted at the Bar that the broadcasters had
filed a contempt of court application before the Supreme Court. Notice was issued in relation thereto. Cause having been shown by the hotel owners
that there has been a substantive compliance, the contempt petitioner was
dropped. Notice was also taken that
those who had not furnished the details as per the directions issued by the
Supreme Court, have been expelled from the membership of the Association.
We,
therefore, are of the opinion that no direction in this behalf is required to
be issued as at present advised.
(ii)
The learned counsel appearing on behalf of the
broadcasters as also Mr.Meet Malhotra
have raised a contention that keeping in view the orders passed by this
Tribunal relegating the associations to the position of the respondent as they
failed and/or neglected to pay the due court fee and thus, only two individual
hotels are before us in whose favour, no order need
be passed, particularly as they have been entering into agreements with the
broadcasters.
78.
The two associations had been agitating the
case of their members form the very beginning.
They preferred appeals from the decisions of the TRAI. They preferred appeals also in the Supreme
Court of India. They along with present
appeals also filed these appeals.
However, at a later stage, at the instance of registry of this Tribunal or
at the instance of the TRAI, admittedly, an objection was raised that the said
associations having more than 3500 members, court fees should be paid as if all
of them are parties before us. An
objection was taken in relation thereto by the associations. Only, however, at a later stage, they filed
an application for relegating themselves to the category of the respondents
which according to Mr.Srinivasan was done for
avoiding time lapse. Before us, the
counsels of their associations were also present, although they have not addressed us separately
but we have satisfied ourselves thereabout.
a.
As the associations are still supporting the case
of the appellants, we are of the opinion that the contentions raised by the
learned counsel for the respondents have no merit. They are rejected accordingly.
b.
It matters not as to whether the associations are
in the category of the petitioners or the respondents but it matters that they
continue to support the appellants, whether directly or indirectly the case of
the members of their respective associations.
It is, therefore, not a case where either the associations had ceased to
represent the members and
they have lost all interest in the matter.
c.
It also is not a case where the majority of the
hotels are not interested in the subject matter of the present dispute.
d.
We, therefore, would direct that the associations
concerned may be permitted to represent their members before TRAI, in the
future proceedings.
e.
Another contention has been raised as noticed
hereinbefore by Mr.Ganpathy that the appellant in
Appeal No.18(C) of 2006 cannot be permitted to raise any contention as even for
the financial year 2010-2011, it has entered into an agreement with ESPN.
f.
It is not in controversy that this Tribunal
although did not pass any interim order staying the operation of the impugned
orders/directions issued by TRAI, but nearly directed the broadcasters not to
take any coercive steps against the appellants.
It is not in controversy that whereas the broadcasters have by and large
entered into the agreements with the owners of the hotels, they have not taken
any coercive steps in the sense that they have not disconnected the supply on
one ground or the other.
g.
We have noticed heretobefore,
however, that the parties had negotiated for arriving at a rate which is
ordinarily three to five times higher than the normal market rates offered by
the domestic consumers. As indicated
hereinbefore, TRAI itself has noticed that the rates vary from Rs.20 to
Rs.1300/-.
h.
Keeping in view the limited nature of contentions
and furthermore having regard to the nature of necessity of the owners of the
hotels for the purpose of obtaining the supplies of signals of the pay channels
from various broadcasters, we are of the opinion that neither the principle of
acquiescence nor the principle of estoppel would be
applicable in this case. The submission
of Mr. Ganpathy to the aforementioned effect is
rejected.
i.
We, therefore, are of the opinion that it is a fit
case where the impugned orders are required to be set aside. We direct accordingly. We, however, do not wish to issue any
direction with regard to the refund of any amount but we would request the
Authority to consider the case of commercial establishments once over again in
a broad based manner.
j.
These appeals are allowed but in the facts and
circumstances of the cases, there shall be no order as to costs.
..….……….J
(S.B. Sinha)
Chairperson
..….………….
(G.D. Gaiha)
Member
…….…………
(P.K.Rastogi)
Member