B.S.N.L versus RELIANCE COMMUNICATION LTD.

Citation: [2010] 15 S.C.R. 705 · Decided: 29-11-2010 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2010) 15 (ADDL.) S.C.R. 705 
B.S.N.L. 
v. 
RELIANCE COMMUNICATION LTD. 
'E 
(Civil Appeal No. 6706 of 2010) 
NOVEMBER 29, 2010 
[S.H. KAPADIA, CJI., K.S. PANICKER 
RADHAKRISHNAN AND SWATANTER KUMAR, JJ.] 
Telecommunication: 
Inter-connect agreement - Clause 6. 4. 6 - Interpretation 
A 
B 
c 
of - Interconnect agreement between BSNL and Reliance 
Company - Wrongly routed calls - Levy of penalty under 
Clause 6. 4. 6 - Clause 6. 4. 6, penal or pre-estimate of 
damages - Held: Clause 6.4. 6 is not penal but a pre-estimate 0 
of reasonable compensation for the loss foreseen at the time 
· of entering into the agreement Under the Interconnect 
Agreement, the Unified Access Service Licence (UASL)-
Reliance Company is obliged to maintain the integrity of its 
exchange/Point Of Interconnection (POI) - Nature of the call, 
E 
be it local or national or international, as indicated by 
corresponding Calling Line Identification (CU), is the basis 
for the levy of Interconnection Usage Charges {including 
Access Deficit Charge (ADC)] - When Gateway Bypass Scam 
takes place and international cal/(s) lands on the local POI 
which is not forwarded to the specified trunk group/POI, there 
F 
is not only bypassing of International Gateway/ POI and 
National POI but also evasion of duty to maintain billing 
records in detail at each POis - All this results in payment of 
Interconnect Usage Charges (/UC) at a lower rate and also 
leads to reduced cost for the defaulting UASL - Thus, the 
G 
defaulting UASL resorts to masking - Also, clause 6. 4. 6 
restricts the higher /UC rate made applicable for calls only 
for last two preceding months and not for last three years or 
705 
H 
706 SUPREME COURT REPORTS (2010] 15 (ADDL.) S.C R 
A longer period - Thus, order of the Tribunal that demand of 
BSNL under clause 6.4.6, is penal in nature and thus, set 
aside the impugned demand, set aside - Matter remitted back 
to the Tribunal to decide the matter de novo in accordance 
with law. 
B 
Inter-connect agreement - Obligations of Unified Access 
Service Licence (UASL)-holders under - Explained. 
The respondents.Reliance Company entered into 
BSO lnter-r..>nnect Agreement with the Department of 
C Telecommunications (now BSNL) for inter-connection of 
their networks within their respective circles. The 
Agreement dealt with local calls, national long distance 
calls and international long distance calls. The calls of 
each trunk group are connected through dedicated ports 
D and are chargeable at rates different from other trunk 
groups. The charges are levied by BSNL on Reliance at 
the rate of the existing call charges payable for that 
particular period depending on the number of calls 
handled by a particular port. The BSO regime was 
E replaced and the respondent was granted the Unified 
Access Service Licence (UASL). BSNL received several 
complaints from its subscribers in Gujarat that they were 
receiving International Long Distance Calls (ILD) calls 
with local Calling Line Identification (CU) Numbers. BSNL 
F raised its bill on Reliance (RIL) levying "penalty" with 
interest amounting to Rs. 9,89,68,892/- on the basis that 
international calls were delivered on its network as local/ 
national calls from a particular number (02813041000), 
belonging to a particular subscriber of the network of 
Reliance and thus, wrongly routed/tampered calls. The 
G Tribunal set aside the impugned demand holding that the 
impugned demand of BSNL under clause 6.4.6 of the 
Interconnect Agreement is penal in nature; that under the 
said clause unauthorized calls had to be detected by 
BSNL and that in case of such detection charges were 
H 
B.S.N.L. v. RELIANCE COMMUNICATION LTD. 
707 
to be levied on such calls at the highest applicable IUC; 
A 
that BSNL failed to draw distinction between 
unauthorized calls and calls without/modified CLI in the 
Impugned demand; that no opportunity of hearing was 
given to Reliance; and that the amount of penalty was not 
commensurate with actual damage suffered by BSNL. 
B 
Therefore, the appellants filed the instant appeal. 
Allowing the appeal, the Court 
HELD: 1.1 Inter-connection agreement prescribes 
terms and conditions under which two licensees or C 
service providers inter-connect their networks to allow 
their respective subscribers to have seamless access to 
each other's networks. It is a binding contract that binds 
each contracting party with respect to inter-connection 
arrangements including commercial,

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