Execution of Das agreements prior to deletion of Das phase III areas: is there a way to exit for the MSOs?

INTRODUCTION:-

The Cable Television Networks (Regulation) Amendment Act, 2011 was passed by the Parliament on 19th December, 2011.[1] The Act amends the Cable Television Networks (Regulation) Act, 1995, and repeals the Cable Television Networks (Regulation) Amendment Ordinance, 2011. The Act has mandated that all cable TV operators shall transmit TV signals in an encrypted format through a digital addressable system.

In order to completely digitalize our Country, TRAI has categorized the whole country into 4 phases wherein Digitalization has to be made mandatory as per the phase wise deadline prescribed by TRAI itself. Initially, even the last Phase i.e. Phase IV had to be digitalized by 2014 only. However, due to numerous practical difficulties, the said deadline was not feasible to be adhered. Therefore, after a series of discussions and negotiations with the Stake holders, the Telecom Regulatory Authority of India (hereinafter referred as 'TRAI') had recently issued a Press Release No.69/2015 wherein Phase-IV had to be completely digitalized by 31st December, 2016.[2] The table[3] reproduced herein will clearly show the bifurcation of the 4 phases and their respective sunset dates for Analogue signals.

As there was no doubt or uncertainty with respect to the Digitalization of the Phase-III with effect from 01.01.2016, numerous Multi System Operators (hereinafter referred as 'MSOs') executed Digital Addressable System Fixed Fee Agreements with the Broadcasters under an assumption that their areas will come under Phase-III only wherein complete Digitalization will be effected from 01.01.2016 only. By way of executing these Agreements, the MSOs had decided that they will pay a fixed amount of sum to the Broadcasters irrespective of the number of Set Top Boxes (hereinafter referred as 'STBs') they are able to seed. However, to the utter shock and surprise, the Ministry of Information and Broadcasting on the last date of the year 2015 i.e. on 31.12.2015 at the 11th hour issued a public notice wherein numerous areas which were to come under Phase-III were shifted to Phase IV list.[4] Therefore, the deadline for compulsory Digitalization of those shifted areas has automatically extended till 31.12.2016.

Due to sudden issuance of Public Notice by the MIB without any prior intimation about the same led to trapping of hundreds of MSOs as they had already executed Fixed Fee Agreements with the Broadcasters as a result of which they became compelled to make payment of the agreed fixed amount irrespective of the STBs seeded in those areas. In other words, by way of these Fixed Fee Agreements, the MSOs have become contractually obligated to pay the fixed monthly fee to the Broadcaster irrespective of the fact that whether their subscribers are opting for Digitalization or not. Thus, all these circumstances resulted in grave difficulties for the MSOs as the MSOs will be compelled to pay for Digital Signals as well as for Analogue Signals also because majority of Subscribers will still chose to opt for Analogue Signals as the same has been legally permitted in those shifted Areas. This is resulting in nothing but gradually closing of the business of numerous MSOs and many of them have even approached Telecom Disputes Settlement and Appellate Tribunal for releasing them from the fixed fee Agreements executed with the Broadcasters.

This paper will examine that whether there is any way to exit for the trapped MSOs from the fixed fee Agreements executed with the Broadcasters which are resulting in nothing but financial strangulation of the MSOs.

COMPULSORY DAS VIS A VIS VOLUNTARY DAS

Digitization of cable television in India is an important and necessary step for regulating cable television sector in India and to bring transparency in the system to benefit all stakeholders, including consumers and cable operators and therefore, TRAI is already carrying out a phase wise implementation plan for making India completely digitalized. It is important to note that there are two kinds of Digital Addressable Systems (hereinafter referred to as “DAS”) i.e. voluntary DAS and Compulsory DAS. For instance, the subscribers of Phase IV areas are free to opt for Analogue or Digital and if they opt for Digital, that will be called as voluntary DAS whereas the subscribers of Phase I and II areas have no option but to compulsorily switch over to Digital signals and this will be called as Compulsory DAS.

The Telecom Disputes Settlement and Appellate Tribunal in Broadcasting Petition 84 (C) of 2013[5] and five another connected matters vide judgment dated 22.4.2014 for the very first time dealt with issue of voluntary DAS and framed the below mentioned issue for the said purpose:-

“The main issues that arise for consideration in these petitions are whether the petitioner can voluntarily provide services through DAS (Digital Addressable System) mode in areas which are not yet notified for providing DAS service; if so, whether the Digital Addressable System installed by the petitioner has any shortcomings and whether it is entitled to receive the signals from the respondents?”

The Hon'ble TDSAT finally concluded that if someone is implementing DAS voluntarily before the mandatory date, it is a laudable effort. Therefore, the Tribunal made it very clear that there is no restriction on voluntary DAS and stakeholders in the industry are free to take initiatives in order to digitalize their areas even before the mandatory date as prescribed by TRAI.

Further, the Hon'ble TDSAT in Broadcasting Petition No.473 of 2014[6] vide judgment dated 1.3.2016 also dealt with a similar issue and reaffirmed its finding that there is no restriction in the law for voluntary DAS and stakeholders in the industry are free to digitalize their areas even before due date.

However, it is very clear that though voluntary DAS is appreciable before the due date but at the same time compulsory DAS cannot be implemented before the sunset date for the respective phases as the subscribers have a right to receive Analogue signals and it is only after the sunset date, the transmission of signals in Analogue mode will be illegal. Also, it is to be kept in mind that India is a nation wherein 30 % of its total population is living below poverty line and that is the very reason that TRAI has set out a phased wise implementation programme for making our Country completely digitalized and hence, it is very clear that though voluntary DAS is an appreciable effort by the stakeholders of the Cable and Broadcasting Industry but Compulsory DAS before the due dates is an extremely difficult or almost impossible task to be achieved in our Country.

DOCTRINE OF FRUSTATION

Doctrine of frustration or as is otherwise known as of impossibility is based on the legal provision for the discharge of a contract, subsequent to its formation, in the event of change of circumstances rendering the contract illegal or physically impossible of performance.[7] It is also called a situation leading, to frustration of the adventure, covering all cases of contract.[8] This is emerged out of the necessity of various occasions making it necessary to consider the situation due to subsequent changes creating difficulties in performance. Such occasions requiring a situation of discharge or excuse of performance had to be dealt with by the courts.[9] This said Doctrine is embedded in Section 56[10] of the Indian Contract Act, 1872.

The Apex Court in the case of Satyabrata v. Mugneeram[11] was kind enough to examine Section 56 of the Indian Contract Act, 1872 and it stated that the word “impossible” in the provision has not been used in the sense of physical or literal impossibility. The performance of an act may not be literally impossible, but it may become impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor find it impossible to do the act which he promised to do.[12] It is further observed that the essential idea upon which the doctrine of frustration is based is that of impossibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable expressions. The doctrine of frustration is really an aspect or part of the law of discharge of contract by reasons of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act.[13]

There are several grounds wherein this doctrine may comes into picture such as Destruction of Subject matter, Non occurrence of contemplated event, Death or incapacity of a party and Government of Legislative intervention etc.

RELEASING MSOS FROM THE FIXED FEE AGREEMENT

Today, the situation on the ground has become worst for those MSOs who have executed Fixed Fee Agreements with the Broadcasters as the Broadcasters are pressurizing them to pay their monthly Subscription Fee irrespective of the fact that the areas of those MSOs have been shifted from DAS Phase III to DAS Phase IV and therefore, impliedly the sunset date for Analogue Signals has been extended till 31st December, 2016. It is important to note that the Subscribers of the said areas cannot be compelled to opt for Digitalization as they have a right to receive Analogue Signals until 31st December, 2016. The ground reality is that very only few hundred of subscribers are voluntarily moving towards Digitalization because Analogue signals is permitted and is running in those areas and therefore, the MSOs have been able to seed only a few STBs in those areas. However, they are compelled to pay their Fixed Monthly Subscription Fees to the Broadcasters irrespective of the revenue which they are collecting from the Subscribers. In addition to the Fixed Fee Monthly Subscription Fees which the MSOs are compelled to pay for availing Digital Feed, the MSOs also have to pay their Monthly Subscription Fees for availing Analogue Feed from the Subscribers. This is resulting in nothing but financial strangulation of the MSOs who are trapped because of the change in circumstances for which no fault can be made attributable to the MSOs. Though many of the MSOs have approached the Hon'ble Telecom Disputes Settlement Appellate Tribunal, New Delhi to get released from the said Fixed Fee Agreement executed with the Broadcasters, however, there also the Broadcasters are simply claiming their outstanding amount which have become accrued out of the said Fixed Fee Agreements.

One cannot close its eyes from the fact that the very foundation of the executing these Fixed Fee Agreements was that both the Parties were under an impression that the shifted areas of the MSOs will be completely digitalized and will come under Phase III only with effect from 01.01.2016. However, no one was aware of the actions of the MIB that at the very last moment i.e. on 31.12.2015 and that too around midnight, the MIB will shift some of the areas from DAS III to DAS IV thereby automatically permitting Analogue Signals in those areas until 31.12.2016. The difficulties of the MSOs have to be understood in the context that there is a grave change in law by the MIB itself. It is worthwhile to state here that the areas where the complete Digitalization had to be given effect with effect from 01.01.2016 itself (as the said areas were under DAS Phase III) can continue with the Analogue Signals until 31.12.2016. As a result, complete and mandatory Digitalization of the shifted areas cannot be done by the MSOs as the same

CONCLUSION

The Agreements which were executed prior to the issuance of above said Notification by the MIB wherein the MIB has relocated DAS Phase III areas into DAS IV areas has itself destroyed the very object and purpose of the Fixed Fee Agreements executed between the MSOs and the Broadcasters. Today, the ground reality is that the MSOs are compelled to pay part of the alleged outstanding claimed by the Broadcasters under the threat of disconnection for Digital as well as Analogue. The act of MIB at the 11th hour is not at all appreciable as it has resulted in financial strangulation of numerous MSOs. Today, the ground reality is that the MSOs had become contractually obligated to pay the fixed monthly subscription fee with effect from 01.01.2016 only irrespective of the fact that whether they have been able to seed requisite number of STBs on the ground or not.

Today, the MSOs are into legal battle with the Broadcasters wherein on one hand the Broadcasters are claiming their full outstanding amount accrued in pursuance of the said Fixed Fee Agreements and on the other hand, the MSOs are struggling to prove the said Fixed Fee Agreements as void.

The MIB shall be very careful while taking such an important step and that too at the 11th hour. The MIB shifted some of the DAS Phase III Areas into DAS Phase IV Areas without coming up with any safeguards for the stakeholders involved and the same created huge chaos in the cable industry.

• [1] Sandeep Joshi, Parliament Clears Cable TV Amendment Bill, Available at:-
• http://www.thehindu.com/News/National/Parliament-clears-cable-tv-Amendment-Bill/Article2729356.Ece; Last visited on 18th August, 2016
• [2] http://www.trai.gov.in/WriteReadData/PressRealease/Document/PR-69=08122015.pdf
• [3] http://pib.nic.in/newsite/PrintRelease.aspx?relid=132762, Last visited on 27.8.2016
• [4]http://digitalindiamib.com/4th_updated_urban_area_list_for_phase_III_of_cable_TV_digitisation.pdf, Last visited on 28.8.2016
• [5] Wiretel Digital Networks Pvt. Ltd. vs. ESPN Software India Pvt. Ltd.,
• [6]Malwa Cable Operator Sangarsh Committee vs. Fastway Transmission Pvt. Ltd. & Anr.; Broadcasting Petition No.473 of 2014
• [7] C.T Xavier and others vs. P.V Joseph and another; AIR 1995 Ker 140
• [8] Ibid
• [9] Ibid
• [10]Agreement to do impossible act.-An agreement to do an act impossible in itself is void. -An agreement to do an act impossible in itself is void." Contract to do act afterwards becoming impossible or unlawful.-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
• [11]  AIR 1954 SC 44
• [12]  Ibid
• [13] Ibid