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Petitioner: INFORMATION SYSTEMS ASSOCIATES LIMITED through (CEO) VS Respondent: FEDERATION JUDGMENT
Court Name: Sindh High Court Judge(s): Mushir Alam, Syed Hassan Azhar Rizvi Title:INFORMATION SYSTEMS ASSOCIATES LIMITED through (CEO) vs FEDERATION
JUDGMENT
Reported As: K.L.R. 2012 Civil Cases 187, 2012 CLC 958 Result: Petition disposed of Judgment JUDGMENT ' SYED HASAN AZHAR RIZVI, J.--- This petition under Article 199 of the Constitution of the Islamic Republic of Pakistan seeks to challenge the letter dated 5th May, 2010, the Class Licensing and Registration (Amendment) Regulations, 2008 and notices issued by the respondent No,2 to the petitioner's customers. The prayer clause reads thus:--- (a) Set aside the Impugned Letter, Impugned Regulations and the Impugned Notices as being illegal and void ab initio; (b) Direct the respondent No,2 to deal with the petitioner in a nondiscriminatory manner and enhance the scope of the CVALS Regime to include a license that will permit the petitioner to continue providing the same services to its customer as it presently does without forcing the petitioner to provide its services through interconnects and marketing agreements with Local Loop Operators, Long Distance and International Operators including PTCL or create a new category of license as was done for others; (c) Grant such further and better relief to which the petitioner is entitled in the circumstances narrated above; and (d) Grant costs of the petition." 2. In nutshell the facts of the case are that the petitioner is a public (unlisted) company engaged in the business of providing electronic data communication network and related services pursuant to
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license issued by Ministry of Communications, Government of Pakistan and validated by the respondent No,2 under subsection (7) of section 21 of the Pakistan Telecommunication (Re- organization) Act, 1996. On 1st September, 1994 the petitioner was issued a license by the respondent No,1 under the Telegraph Act, 1885 for the purpose of establishing, maintaining and operating a national and international data communication network and to provide data communication service throughout Pakistan. The initial period of the license shall be fifteen years, but the life of the license was not restricted to the initial 15 years only as, under section 22(3) of the Act, all licensees had a legitimate expectation of renewal of their licenses. At that point in time this was the only type of license that was issued to petitioner and is popularly known as the Data Network Operator in Pakistan license or a DNOP license. Upon issuance of the license the sponsors of the petitioner caused its incorporation under the Companies Ordinance, 1984 on 11-2-1996 and commenced preparation to conduct the licensed business in Pakistan. This included issuing the petitioner's share capital in a sum sufficient to import equipment of the value of approximately US$ 1,400,000 and entering into a joint venture agreement with Messrs Comsat RSI, a company incorporated in the United States and engaged in the business of manufacturing satellite equipment. 3. In the year 1996 the petitioner became operational and started operating its business in accordance with the license and for conducting its business the petitioner was using Ku-Band and C-Band Satellite Bandwidths and the Industrial, Medical and Scientific Band. It is averred in the memo of petition that the regulatory framework within which the petitioner operated remained unchanged until 1996 when the Act was enacted and became operationhl. This change did not have any material impact on the petitioner since it was a deemed licensee pursuant to section 21(5) of the Act. The only change at this time was a change in the number of the License and in the name of the licensee but the terms and conditions of the license remained the same and the license continued to be referred to as a DNOP license in the industry. It is averred in the memo of petition that in 2003 a real change came in the regulatory framework when the respondent No,1 issued the De-Regulation Policy under section' 8 of the Act. In addition to the 2003 De-regulation Policy, the respondent No,1 also issued a Broadband Policy in December, 2004, which policy also finds mention of the Class Value-added Licensed Service regime. Relevant paragraph 7.1.1 pf the Broadband Policy says about Class Licensing, which reads as under:- "7.1.1. Pursuant to section 13 of the Telecom Sector Deregulation Policy existing licenses for the Data, ISPs, and EIS will be phased out after the expiry of their current period of validity and will be converted into class license and they will be eligible to the incentives being provided in the Broadband policy. The broadband service will also fall under the class license .Regime to ensure uniformity. The existing Data, ISPs, and EIS licensees can opt to continue under their existing license till its expiry within terms and conditions of their license or to be governed under class license template regime." 4. It is also averred in the memo of petition that in 2007 Regulations have effectively rendered licensing under the CVALS Regime illusory and meaningless for the existing DNOP Licensees. This is so because the CVALS Regime does not cover all existing activities of the data licensees, forcing them to go out of business. Regulation 22 of the 2007 Regulations provides that:-- "All existing licensees excluding Access Providers and Infrastructure Licensees may request the Authority to convert their existing licenses free of cost to the comparable category of class license for the remaining period, if the initial fee earlier paid by them is more than the initial fee for the requested category. ' In case already paid fee was less than the initial fee prescribed under these Regulations then the Licensee shall pay the difference as per the following foimula:
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' The initial fee already paid by the Licensee shall be divided into total number of years. The initial fee prescribed under these Regulations shall be divided into fifteen 15 years and per year amount already paid will be subtracted from the Initial fee prescribed under these regulations for each year. The Licensee shall pay the difference for the remaining years of his previous license. " 5. It is the case of the petitioner that the other provisions of 2007 Regulations, Regulation 22, which dealt exclusively with persons who already held a license, and informed them that on the payment of a fee the existing license would be converted to the comparable category of class license. In other words, upon the payment of a fee the petitioner's existing license would be automatically converted into a comparable class license that would permit the petitioner to continue providing the same services that were being provided under the existing DNOP License, but the petitioner did not have the DNOP License converted into a comparable class license in 2007 and continue to provide the same services under the existing DNOP License. The petitioner has been providing the ISM Band Services to its customers using the equipment installed at the distances between 3km - 5km and 17km - 25km since mid-1997. No customer has ever complained of any connectivity issues that would arise as a result of the fact that the equipment used to provide the said services was placed too far from each other. The petitioner was shocked when the respondent No,2 caused the publication of S.R.0.1114(i)2008 dated 27-10-2008 notifying the Class Licensing and Registration (Amendment) Regulations, 2008 pursuant to which it became illegal to install equipment at Hop Distances in excess of 100 meters. The petitioner immediately made representation to the respondent No,2 individually as well as through the Data Network Operators Association against the requirement of installing equipment at distances not exceeding 100 meters, but till date no decision has been taken by the respondent No,2 on the above representation. It was further urged that the impugned Regulations was made without holding any consultation or inviting any feedback from the industry or to be affected licensees, while the respondent No,2 has continued to keep the petitioner and others engaged in discussions on these representations, it started issuing the impugned notices to the petitioner's customers requiring them to forthwith stop the "illegal use of ISM Band" under threat of disconnection, hence this petition. 6. The respondent No,2 filed parawise comments to the memo of petition, wherein it has been stated, that the petitioner has no locus standi to file the above petition against the answering respondent and that the DNOP license issued to the petitioner which has already expired in September, 2009 and has not been renewed by the Authority. It has been stated that the petitioner has concealed this material fact from this Court, therefore, the petition is liable to be dismissed on this score alone. It has been stated that as per clause 13 of the license issued to the petitioner, leased channels including local leads for data communications shall be provided by the Pakistan Telecommunication Ltd.. And as per Clause 24 of the said license the operator for international data switching shall be allowed access through the corporation designated international data switching for which separate interconnect agreement shall be completed between the operator and the corporation. The said clauses clearly mention that the operator had to hire access network from PTCL and establishment of own facility of this purpose was violation of the license. It was stated that the Government of Pakistan in the year 2003 introduced and implemented De- Regulation Policy, therefore on expiry of the existing terms, fresh licenses are issued, under the terms and conditions of new regime. The new regime does not allow the data CVAS licensees to establish their own access network as under De-Regulations Policy issued by the Federal Government, it is the right of Long District International and Local Loop Operators to establish and provide required facility to value-added service providers. It was also stated that the petitioner - submitted the application for renewal of license on 7-8-2009. The technical plan was based on VSAT owned by the 'petitioner, therefore, petitioner was informed to modify the technical plan so
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that it confirms to the new regime but instead of resubmitting the proposal, the petitioner with mala fide and ulterior motives filed the present petition and obtained restraining order. 7.. The respondent No,2 in its parawise comments further stated that in the year 2006 the answering respondent introduced a new Class Value-Added Service regime according to which the existing data operators were given the choice to convert their license free of cost to the comparable category of class license for the remaining period. 'However, the petitioner, Messrs Comstar never applied for conversion of their license to the new class and opted to continue their operations under the old regime. It was also stated that establishment of access network by value- added service providers would mean infringement in the right of LDI and LL licensees thus it is violation of the policy issued by. Federal Government. It was stated that answering respondent has issued 65 licenses under the new Regime, therefore, permission granted to licensees operating under old regime to have their own network will be discriminatory and against the spirit of level playing field. It was also stated that the joint venture of the petitioner with Messrs Comsat RSI was without intimation to answering respondent, which is also violation of terms and conditions of license issued to the petitioner and nowhere in the license it is mentioned that license will be extended for a similar term. It was further 'stated that the petitioner applied for FLL license for 14 regions for deregulated band, but the request was rejected by the authority and the petitioner demanded refund of the licensee fee which was refunded accordingly. It was mentioned that wireless usage of Local Loop license is allowed if spectrum has been obtained for the bands allocated for WLL purpose. It was urged that prior to deregulation, cellular and broad band policies, licenses .Were granted to. VAS operators for delivery of additional services, over and above the basic services but after deregulation, provision of basic services and associated infrastructure became sole responsibility of LL&LDI licensees. 8. It was further urged in the comments that the De-regulation policy issued in 2003, the Broadband Policy issued in 2004 and Roadmap issued in 2005 were a notice to the petitioner to makeup/review its plan for future which has not been done by him. It was also urged that the existing regime has no negative effect on his previous terms and conditions. It is to be pointed out that as per Clause 1(1) of license terms and conditions the petitioner was to pay Royalty @ 4.0% on its annual gross sales revenue and this, rate of levy was lowered down to 0.6% from 4.0% and petitioner enjoyed this benefit. On the other hand petitioner is not willing to respect Government policies and PTA Regulations whereas Clause 30 of License terms and conditions impose such bindings on the petitioner. In fact it is felt that the petitioner has incepted his wrongdoings 4s permission. It was stated that roadmap is not for only DNOPS but for all bundled services. However, it is not out of place to mention that "Vehicle Tracking System" has been added to Comparable License which was not previously part of it. It was stated that the comparable category for the petitioner is CVAS-DATA that .Allows operating for Vehicle Tracking Services, Data Services, Internet Services and other additional services allowed by the answering respondent from time to time. It was stated that the license of the petitioner is no more in field from September, 2009 therefore services provided by petitioner are illegal and unlawful, hence petitioner misguided this Court and its petition is liable to be dismissed with cost. 9. We have heard Mr. Salman Talibuddin learned counsel for the petitioner, Mr. Sibtain Mahmud, learned counsel for the respondent No,2 and perused the material available on record. 10. Mr. Salman Talibuddin, learned counsel for the petitioner has argued that the petitioner and its business are governed under the Pakistan Telecommunication (Re-organization) Ordinance, 1995 and the Pakistan Telecommunication (Re-organization) Ordinance, 1996. He argued that petitioner was issued DNOP license on 1-9-1994 by respondent No,1 initially for a period of 15 years for the purpose of establishing, maintaining and operating a national and international data communication network and to provide data communication service throughout Pakistan. He also
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argued that petitioner uses the ISM Band in order to provide a part of its service to its customers, as communication devices using the ISM Bands must tolerate any interference from ISM equipment. He urged that the most extensive customers of the ISM Band services provided by the petitioner are banks and other financial institutions that need these services to be able to ensure wireless connectivity and provide on-line facilities that their valued customers. He vehemently urged that the equipment used by the petitioner to provide this wireless connectivity from one point to the next consists of various components installed on tower and the cost of each tower and the, components installed on it is approximate Rs,600,000/-, as such the total number of tower being operated by the petitioner is 950 and the total value is approximately Rs,285,000,000/-. He further urged that the .ISM Band Services provided (by the petitioner have been trouble free and no customer has ever complained of any connectivity issues. He contended that the respondent following the 2005 regime change road map which introduced the CVALS regime and wrote letter to the petitioner on 15-2-2007. The letter is reproduced as under:-- "The company has been issued DNOP license on 1st September, 1994 and is valid till September, 2009. It is further informed that PTA has introduced a new licensing regime in 2005. Multiple value- added services have been merged in a single license. The company may get its license converted as per CVAS regime without paying any additional charges." 11. Learned counsel for the petitioner further contended that the petitioner was shocked when the respondent No,2 caused the publication of S.R.0.1114(I)/2008 dated 27 October, 2008 notifying the Class Licensing and Registration (Amendment) Regulations 2008 pursuant to which it became illegal to install equipment at Hop Distances in excess of 100 meters. In this regard the learned counsel has referred to Regulation 15.13 of the ITU Radio Regulations, which provides that "administration shall take all practicable and necessary steps to ensure that radiation from equipment used for industrial, scientific and medical applications is minimal and that, outside the bands designated for use by this equipment, radiation from such equipment is at a level that does not cause harmful interference to a radio-communication service and, in particular, to a .Radio-navigation or any other safety service operating in accordance with the provisions of these Regulations." He contended that petitioner immediately filed representations to the respondent No,2 individually as well as through the Data Network Operators Association against said SRO as it was made. Without holding any consultation or inviting any feedback from the industry or to be the affected licensees, which is pending till date and no decision has been taken by the respondent No,2 on it. He has drawn our attention to letter written by the petitioner to respondent dated 8-6- 2009, whereby the petitioner sought two queries i,e, (1) Is it the right time to convert the license to CVAS? And (2) Or should we apply in September? It has also been stated in the said letter that petitioner's 90 days notice/intimation to PTA regarding the renewal of the DNOP license starts from the date of issuance of this letter which will fulfil the requirement of PTA. He urged that on 16-6- 2009 the respondent No,2 replied the said letter in the following words:- "Due to less remaining period of the license tenure, existing license cannot be converted to CVAS license. You are therefore requested to apply afresh for Data-CVAS License and submit all necessary documents as per the checklist of CVASIM available on PTA website please." ' He urged that CV ALS Regime was a proposed scheme that would be implemented by way of regulations to be framed under the Act and notified at some point in the future. He also urged that this appeared to be an unnecessary additional requirement since it would have the effect of requiring a person such as the petitioner to incur and pass on the consumer the additional cost of the interconnects and marketing agreements to provide the same service it was already providing at a lower cost without the interconnects and marketing agreements. 12. Learned counsel contended that admittedly no notice under sub-rule (2) of Rule 8 of the 2000 Telecom Rules was ever issued by the respondent No,2 during the life of the license of the
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petitioner, thereby by operation of Rule 8 of the 2000 Telecom Rules, renewal of the license c f the petitioner in 2009, at the time of expiry of the, initial term of 15 years, was guaranteed. He argued that Rule 8(2) provides that if the license is not to be renewed, the Authority shall serve a written notice on the licensee of at least one fourth of the initial license term and that notice shall terminate the license on the expiration of the initial term. He contended that in choosing to favour WLL License-holders over the petitioner and other DNOP License holders, the respondent No,2 has acted in violation of its statutory obligation to protect the right of all licensees, including the rights of the petitioner in its capacity as a DNOP License-holder. He also contended that the respondents cannot refuse to renew the license of the petitioner guaranteed by the 2000 Telecom Rules. He vigorously contended in issuing the impugned letter, impugned notices and notifying the impugned Regulations the respondent No,2 has acted in violation of its statutory obligation to ensure fair competition in the telecommunication sector; all of its decisions are made in an open, equitable, non-discriminatory, consistent and transparent manner; failed to discharge its statutory obligation to promote the availability of a wide range of high quality, efficient, cost effective and competitive telecommunication services throughout Pakistan, and the rapid modernization of telecommunication systems and telecommunication services. He lastly contended that the impugned letter, impugned Regulation and impugned notices are in violation of the fundamental rights guaranteed to the petitioner under Articles 4, 18 and 25 of the Constitution, therefore the same are mala fide, illegal, ultra vires of the Act and liable to be set aside as such. 13. Learned counsel for the petitioner in support of his submissions has placed reliance on the cases of AYAZ TEXTILE MILLS LTD. v. FEDERATION OF PAKISTAN and ANOTHER (PLD 1993 Lahore 194), K.B. THREADS (PVT.) LTD. And OTHERS v. ZILA NAZIM, LAHORE and OTHERS (PLD 2004 Lahore 376) and ARSHAD MEHMOOD and OTHERS v. GOVERNMENT OF PUNJAB and OTHERS (PLD 2005 SC 193), wherein the Hon'ble Supreme Court has been held that any regulation or restriction imposed on a trade, business or profession is violative of Articles 18 and 25 of the Constitution and struck down section 69A of the Ordinance holding it to be ultra vires of the Constitution. 14. On the other hand, Mr. Sibtain Mahmud, learned counsel for the respondent No,2 has vehemently denied the submissions made by learned l counsel for the petitioner and contended that the petitioner license was expired in September, 2009, therefore the petitioner has no locus standi to file the present petition. He contended that no fundamental rights as guaranteed under the Constitution has been infringed as no interference during the tenure of petitioner's license has been caused by the respondents in any manner whatsoever. He further contended that the petitioner is no more licensee of respondent No,2 as its license has already expired in 2009, therefore, petitioner has no right to file the instant petition being a licensee of the respondent No,2. Hence the petition is liable to be dismissed on this score alone. 15. Learned counsel for the respondent has urged that license was issued to Messrs Information Systems Associates and A&MOA and amendment of the petitioner has come into existence in January, 1996 without any intimation to the answering respondent. Therefore, the transfer of license from Messrs Information Systems Associates is in a violation of Clause 1(31) and Clause 2(6) of the license, terms and conditions. He also contended that the respondent has issued 65 licenses under the new regime, therefore, permission granted. To licensees operating under old regime to have their own network will be discriminatory and against the spirit of level playing field and the petition is being contradictor to Federal Government Policy. He referred to section 22(3) of the Act, which provides that "After the expiry of the initial or renewed terms the license may be renewed on terms and conditions consistent with the policy directive, if any, of the Federal Government at the relevant time." He contented that in the present case the petitioner never bothered to get the license renewed. He urged that Authority had not refused the issuance of license to the petitioner but has shown its inability to issue the license on previous terms and conditions.
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16. Learned counsel, in order to strengthen his arguments, has submitted that in 2003-04 the Federal Government passed three major policies for promotion telecommunication services and establishment of telecommunication system in Pakistan viz: (a) Fixed line telephony; (b) Mobile; and (c) Broadband. He submitted that apart from above two policies, the third one Broadband policy was introduced with the purpose to provide high speed Internet services, growth of new service providers and encouragement of private sector investment. He submitted that under this policy Class Licensing regime was introduced and accordingly Class Licensing and Registration Regulations, 2007 were promulgated, which regime unified all value-added service into three categories i,e, voice and data and registration. He also submitted that in order to regulate the value-added services under the Broadband policy the Authority promulgated Class Licensing and Registration Regulations, 2007. He submitted that before issuance and promulgation of Class Licensing regime…
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