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Get monopoly compensation from Trai, Bombay HC tells VSNL

The Tata-held telecom company had sued the government for loss of monopoly two years ahead of schedule.

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Eight years after the government of India ended the monopoly of Videsh Sanchar Nigam Ltd (VSNL) in international telephony, the Bombay high court has declined to hear its compensation plea. Instead, it has asked VSNL, now owned by the Tatas, to approach the Telecom Regulatory Authority of India (Trai), as mandated by the Telecom Act.

VSNL moved the Bombay high court in 2005 seeking compensation of over Rs2,560 crore for loss of monopoly two years ahead of schedule without adequate compensation.

VSNL was given a 10-year monopoly, starting April 1, 1994, on international calls. However, to bring in competition and make call rates more affordable, the BJP-led government announced a new telecom policy in 1999 which called for terminating VSNL’s monopoly in 2002.

Incidentally, 2002 was also the year in which the government privatised VSNL. The Tatas were the winning bidders, and Reliance the runners-up. The year also saw the Reliance group launch its own mobile services using the wireless-in-local loop technology.

The government offered a compensation package to VSNL in lieu of the premature termination of the monopoly. A commission was set up to determine VSNL’s losses. However, the package offered by the government was rejected by VSNL on the grounds that it was insufficient.

After much correspondence with the government, VSNL moved a suit before the Bombay high court in 2005 seeking Rs2,560 crore as compensation. The Union government, on its part, filed a notice of motion before the high court in 2006 stating that the suit was not maintainable before the court and the case should be heard by Trai.

SR Rajguru, counsel for the Union government, argued that the Telecom Act had been legislated to cover all disputes involving telecommunication services in the country.

Accepting the government’s arguments, justice Roshan Dalvi held in an order dated July 6 that the court hearing such disputes would have to bear in mind the “worldwide technical advances” in the field of telecommunications as well as the economic development of India to determine the compensation. Hence, Trai was the appropriate forum for the dispute.

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