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Union of India vs Millenium Delhi Broadcast LLP

Civil Appeal · 2022 INSC 497Decided 2 May 2022
Civil Appeal Nos. 2332-2333 of 2008
L. Nageswara Rao · B.R. Gavai

Background

In 1999 the Government invited tenders for private FM radio licences, and the respondent won licences for Delhi and Chennai, signing an agreement in 2000 for a 10-year term and furnishing a bank guarantee equal to the first year's licence fee. Delays beyond the respondent's control: several co-bidders dropping out, a forced shift to Prasar Bharati's shared transmission infrastructure, and further delays by the appointed system integrator (BECIL): meant the government's Wireless Operational Licence (WOL), which was supposed to trigger the licence period and fee obligations, was never issued. When the government still insisted on the first year's licence fee and moved to encash the bank guarantee, the respondent terminated the agreement and challenged the invocation before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which ruled the encashment illegal; the Union of India then appealed to the Supreme Court, where the matter had been pending since 2008.

Decision Breakdown

The Supreme Court held that the bank guarantee was a performance guarantee tied to due performance of the licence, and under the agreement the 10-year licence period itself was to run only from the date WOL was issued, which never happened. Since none of the three contractual triggers for encashment (failure to pay fee within 7 days of the year's start, stopping service without a year's notice, or insolvency) was actually satisfied, particularly because the "year" for fee payment had never even legally commenced without a WOL, the Tribunal had correctly found no basis to invoke the guarantee. The Court therefore upheld the Tribunal's order, dismissed the Union's appeals, but also declined to entertain the respondent's cross-claim for a refund of the advance licence fee since that point had not been argued before the Tribunal.

Lesson Learnt

In government licensing contracts, financial obligations and guarantee clauses are strictly tied to the specific triggering events defined in the agreement: a party cannot be penalised for delay when the very event (like issuance of an operational licence) that was meant to start the clock never occurred, especially where the delay stemmed from the government's own administrative or infrastructural failures.

Official source (sci.gov.in)View Judgment (PDF)

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