JUDGMENT : By means of this writ petition, the petitioner has challenged the validity and legality of the clause 5.1 and the clause 10(2) (ii) of the license agreement and the circulars dated 24.12.2008 (No.800-52/2008-VAS-III (Part), 23.03.2009 (No.842- 725/2005/157), 08.02.2011 (No.800-20/2010-VAS) issued by the Access Services Cell, Government of India. 2. The petitioner is a limited company incorporated under the Companies Act, 1956 and it provides GSM, Mobile Telephony Broad Band Services in several States, pursuant to the license granted by the respondent No.1, a sample copy of which is available at Annexure-1 to the writ petition. The said license has admittedly been granted under the provisions of Indian Telegraph Act, 1885 and Indian Wireless Telegraphy Act, 1933. Having the license granted in its favour, the petitioner made investment for providing the services in terms of the said license. The respondent No.1 is authorized by Section 4 of the Indian Telegraph Act, 1885 to grant Unified Access Services License in the specified service areas. It is also not in dispute that Section 20A of the Indian Telegraph Act, 1885 provides for levy of penalty for breach conditions of license. For purpose of reference, Section 20A of Indian Telegraph Act, 1885 is reproduced hereunder: “20A. Breach of condition of License. – If the holder of a license granted under Section 4 contravenes any condition in his license, he shall be punished with fine which may extend to one thousand rupees, and with a further fine which may extend to five hundred rupees for every week during which the breach of the condition continues” 3. It is also not in dispute that at the time of granting license for the North East Circle/Assam Circle on 12.05.2004, the Clause-5.1 of the said license provided as under: “5.1 The LICENSOR reserves the right to modify at any time the terms and conditions of the LICENSE, if in the opinion of the LICENSOR it is necessary or expedient to do so in public interest or in the interest of security of the State or for proper conduct of the telegraphs. The decision of the LICENSOR shall be final and binding in this regard.” By virtue of the aforesaid Clause 5.1, the Department of Telecommunications, Government of India kept on issuing circulars/letters unilaterally amending the conditions of license by altering or in essence. Initially, when the license was granted Clause 10(2)(ii) was not there. The decision of the LICENSOR shall be final and binding in this regard.” By virtue of the aforesaid Clause 5.1, the Department of Telecommunications, Government of India kept on issuing circulars/letters unilaterally amending the conditions of license by altering or in essence. Initially, when the license was granted Clause 10(2)(ii) was not there. Later on, on 24.11.2004, Clause 10(2)(ii) was put in the license agreement by way of a circular. The said Clause 10(2)(ii) reads as under: “The Licensor may also impose a financial penalty not exceeding Rs.50 crores for violation of terms and conditions of license agreement. This penalty is exclusive of Liquidated Damages (LD) as prescribed in this License Agreement.” After the said Clause 10(2) (ii) was inserted, a circular was issued being the circular dated 22.11.2006 (Annexure-2 of the Writ Petition) for subscriber/customer verification for Plan Across Nation (PAN). In the said circular, minimum penalty of Rs.1000 per violation of subscriber number verification was provided for in case any subscriber number is found working without proper verification. The relevant part of the circular dated 22.11.2006 providing for minimum penalty of Rs.1000 is reproduced below: “8. After 31st March 2007, if any subscriber number is found working without proper verification, a minimum penalty of Rs.1000 per violation of subscriber number verification shall be levied on the licensee apart from immediate disconnection of the subscriber number by the licensee.” The aforesaid Circular directed each Licensee to take re-verification of the existing subscribers on priority basis and ensure that such re-verification is completed by March 31, 2007. The letter explained that by re-verification it means that there shall be 100% check of CAF/SAF, documentary proof of identity and documentary proof of address. The letter stated that it would be ensured that the subscriber information available in service provider’s database matches with that in CAF/SAF and enclosed documents. The licensee company was also instructed to cross-verify the information by calling the respective subscribers. The Department of Telecommunications, thereafter by the letter bearing No.800-52/2008-VAS-III (Part) dated 24.12.2008 (Annexure-3 of the Writ Petition) introduced the “Scheme of Financial Penalty for violation of terms and conditions of the License Agreement in respect of subscriber verification failure cases.” By the said letter, the Department of Telecommunications introduced w.e.f. 1st April, 2009, a scheme of penalty for subscriber verification failure cases based on graded scales. The letter provided the scheme which can be gathered from the provisions reproduced hereunder: “(i) The graded scales are based on correct subscriber verification percentage i.e. the correct subscriber verification percentage of a service provider in any service area will be ascertained and based on this percentage, a financial penalty of corresponding amount for each detected case of unverified subscriber shall be levied on account of violation in respect of subscriber verification failures from the service provider in that service area. According to the scheme, the correct subscriber verification percentage vis-a-vis financial penalty per unverified subscriber shall be as per table below: Correct subscriber verification percentage in a service area Amount of financial penalty per unverified subscriber Above 95% Rs.1000/- 90% - 95% Rs.5000/- 85% - 90% Rs.10,000/- 80% - 85% Rs.20,000/- Below 80% Rs.50,000/- The respondent thereafter by the letter dated 08.02.2010 (Annexure-6 of the Writ Petition) under No.1-34/2009- SI clarified that where forged documents are submitted by customer and originals are also forged only FIR/police complaint shall be lodged by the service providers/distributors/franchisee as the case may be as per the Department of Telecommunications letter dated 23.03.2009 and no financial penalty shall be imposed if the process of verification has been followed. The letter stated that there should be prima facie case that the forgery has not been done by the service provider or its representatives. The letter clarified that in cases where verification process is not followed by the service providers, even if the documents are forged, penalty shall be imposed. The letter further stated that in cases where forgery is done by the distributor/franchisee, the respective service provider will lodge police complaint/FIR against distributor/ franchisee. If the service provider does not lodge FIR/complaint against distributor/franchisee or is himself involved in the forgery, the police complaint/FIR shall be lodged by the concerned TERM Cell against the service provider. The telecom service providers stated that the aforesaid levy was incorrect, wrong, unjust and unwarranted and accordingly represented before the Department of Telecommunications, Government of India on various occasions. The Apex Advisory Council for telecom in India also represented before the Secretary, Department of Telecommunications and Chairman, Telecom Commission against the said levy and submitted the views expressed by the industry to the government. The Apex Advisory Council for telecom in India also represented before the Secretary, Department of Telecommunications and Chairman, Telecom Commission against the said levy and submitted the views expressed by the industry to the government. The Department of Telecommunications thereafter by the office memo No.800-20/ 2010-VAS dated 04.11.2010 (Annexure-8 of the Writ Petition) issued clarification regarding decentralization of work relating to imposition of penalty to the TERM cells. The respondent no.1, namely, the Department of Telecommunications thereafter issued clarification under No.800-20/2010-VAS dated 03.02.2011 (Annexure-9 of the Writ Petition) and explained the graded penalty structure under the Scheme of Financial Penalty dated 24.12.2008. The aforesaid letter stated that penalty was to be calculated as per the rate applicable in the slab relating to the percentage of correct subscriber verification for all the failed CAFs in the audit. 4. It is also not in dispute that the license has obligated the petitioner to provide the complete list of subscribers which shall be made available by the license on their website, having password controlled access, so that authorized Intelligence Agencies are able to obtain the subscriber list at any time, as per their convenience with the help of the password. The list should be updated on regular basis. Hard copy as and when required by security agencies shall also be furnished. The clauses 41.14 and 41.15 of the said license further provide as under: “41.14 The LICENSEE shall ensure adequate verification of each and every customer before enrolling him as a subscriber; instructions issued by the licensor in regard from time to time shall be scrupulously followed. The SIM Card used in the User terminal or hand-held subscriber terminal (where SIM card is not used) shall be registered against each subscriber for his bona fide use. The LICENSEE shall make it clear to the subscriber that the SIM card used in the user terminal registered against him is nontransferable and that he alone will be responsible for proper and bona fid personal use of the service. 41.15 A format would be prescribed by the LICENSOR to delineate the details of information required before enrolling a customer as a subscriber. A photo identification of subscribers shall be pre-requisite before providing the service.” 5. By the circular dated 22.11.2006 the subscriber/ customer verification for Plan Across Nation (PAN) was introduced. 41.15 A format would be prescribed by the LICENSOR to delineate the details of information required before enrolling a customer as a subscriber. A photo identification of subscribers shall be pre-requisite before providing the service.” 5. By the circular dated 22.11.2006 the subscriber/ customer verification for Plan Across Nation (PAN) was introduced. Clause-3 of that circular has saddled the license with further obligation for purpose of verification of the documents before activating the connections. It has further provided that the license company shall authorize one representation who would be directly accountable to the license company for that purpose. Sale of pre-activated SIM cards have been completely prohibited. By Clause-4, the following has been provided as the penal measure. “4. The Licensee shall also ensure that the information about the subscriber is entered in to the Licensee’s database correctly based on the information in Customer Acquisition Forms (CAF)/Subscriber Acquisition Forms (SAF) and supporting documents. For this purpose, the Licensee shall nominate separate officials, who shall be responsible for the process of entry of subscriber information in the database, cross-checking of information from the database with that from each and every original CAF/SAF & documents. If any discrepancy is found at any stage, the mobile connection shall be deactivated immediately and in any case not later than 72 hours. Observations made by each nominated official for the above activities shall be kept in record for security at a later date.” In the said circular dated 22.11.2006 Annexure-2 to the writ petition a very stringent measure has been provided in the form of Clause-8 which reads as under: “After 31st March, 2007, if any subscriber number is found working without proper verification, a minimum penalty of Rs.1000/- per violation of subscriber number verification shall be levied on the licensee apart from immediate disconnection of the subscriber number by the licensee.” 6. By the aforesaid letter/circular dated 22.11.2006, the petitioner was directed to take up re-verification of the existing subscribers on priority basis and ensure that such verification is completed by 31.03.2007. By the said letter, it was explained that the re-verification shall apply 100% check of CAF/SAF, documentary proof of identity and documentary proof of address. The petitioner was also directed to cross verify the information ensuring subscribers’ personal appearance. By the said letter, it was explained that the re-verification shall apply 100% check of CAF/SAF, documentary proof of identity and documentary proof of address. The petitioner was also directed to cross verify the information ensuring subscribers’ personal appearance. Later on, by the letter under No.800-52/2008-VAS-III dated 24.12.2008 the scheme of financial penalty for violation of terms and conditions of the license agreement in respect of subscriber verification failure cases as afore stated has been introduced. The said letter dated 14.12.2008 is available as Annexure-3 to the writ petition. Further, the respondents by their letter dated 23.03.2009 bearing No.842- 725/2005/175 issued instruction and clarification regarding the subscriber verification. There also it has been inter alia provided that: “(viii) where CAF is found non-compliant, either proper CAF should be produced within 72 hours or else the connection deactivated and in case of failure to take action, highest penalty of Rs.50,000 shall be levied on each such connection in addition to the penalty for non-compliance during subscriber verification; and (ix) time lines prescribed for adhering to requisitions from security agencies/TERM cells.” 7. By another letter dated 30.09.2009, re-verification of the subscribers was asked to be taken in all telecom circles including J&K, Assam and North-East Telecom Service Areas. By that letter, one year time w.e.f. 01.11.2009 was provided for that purpose. In para (vi) of the said letter dated 30.09.2009 it has been further clarified that during the window period of one year, CAFs which have been re-verified, scanned, uploaded and indicated in the monthly subscriber data-base before the monthly subscriber verification audit by TERM cells shall not attract penalty if found correct during the audit. Service providers can continue re-verification even after the window period of one year but the re-verification forms would not be exempt from the imposition of penalty during the respective audit by TERM cells. It has been provided by the letter dated 08.02.2010, Annexure-6 to the writ petition, that in cases where forgery is done by the distributor/franchisee the respective service provider will lodge the police complaint/FIR against the distributor/franchisee. If service provider does not lodge FIR/complaint against the distributor/ franchisee or is himself involved in the forgery, the police complaint shall be lodged by the concerned TERM cells against the service provider. If service provider does not lodge FIR/complaint against the distributor/ franchisee or is himself involved in the forgery, the police complaint shall be lodged by the concerned TERM cells against the service provider. The telecom service provider had represented their grievances in respect of levy of financial penalty for violation of terms and conditions of the license agreement. They had categorically raised that the service providers were never discussed about such clause. They had requested the department of Telecommunication (DoT) to reconsider the amount of penalty and to reduce the same from Rs.50,000/- to Rs.1000/-. By a further letter dated 04.11.2010, Annxure-8 to the writ petition, clarifications have been made relating to imposition of penalty to the TERM cells. On 03.02.2011 by another letter, Annexur-9 to the writ petition, the DoT explained the graded penalty structure under the scheme of financial penalty dated 24.12.2008. For purpose of reference, the example that has been provided in the letter dated 03.02.2011 is reproduced hereunder: “For example, if the sample size of the CAF Audit for a month is 1000 and the number of complaint cases is 870, then the CAF audit compliance shall be 87%. The penalty slab applicable as per the letter dated 24.12.2008 for all failure cases shall be @ Rs.10,000. The total penalty shall be calculated after multiplying the total no. of failed cases i.e. 130 with the applicable penalty i.e. Rs.10,000. Thus the total penalty imposed for the CAF audit shall be 130 X 10000 i.e. Rs.13,00,000.” 8. It is also not in dispute that the petitioner along with the Association of Operators had challenged the circular issued by the respondent No.1 introducing the scheme of imposition of penalty before the Telecom Disputes Settlement & Appellate Tribunal (TDSAT). According to the petitioner, the said petition being petition No.252 of 2011 was disposed by the judgment dated 12.04.2012, Annexure-10 to this petition and the TDSAT refused to go into the constitutional validity of the circular holding in para-130 of their judgment as under: “In this case although the question of validity and/or legality of the circular, letters/guidelines are in question, constitutionality thereof is not.” 9. As such the petitioner has approached this court having regard to the law laid down by the apex court in Union of India Vs. Association of Unified Telecom Service Providers of India, (2011) 10 SCC 543 . As such the petitioner has approached this court having regard to the law laid down by the apex court in Union of India Vs. Association of Unified Telecom Service Providers of India, (2011) 10 SCC 543 . As the petitioner did not challenge the validity of the Circulars and some of the clauses of the license agreement before the Tribunal, the petitioner has filed this writ petition challenging the validity of the circulars and Clause 5.1 and Clause 10(2)(ii) of the license agreement. It may be pertinent to mention here that the apex court in the aforesaid judgment at Para 47 has held as under: “.......... The result is that the Tribunal has no jurisdiction to decide upon the validity of the terms and conditions incorporated in the license of a service provider, but it will have the jurisdiction to decide “any” dispute between the licensor and the licensee on the interpretation of the terms and conditions of the license.” The apex court has further held: “Thus, the Tribunal in its order dated 07.07.2006 has not just decided a dispute on the interpretation of Adjusted Gross Revenue in the license, but has decided on the validity of the definition of Adjusted Gross Revenue in the license. As we have already held, the Tribunal had no jurisdiction to decide on the validity of the terms and conditions of the license including the definition of Adjusted Gross Revenue incorporated in the license agreement. Hence, the order dated 07.07.2006 of the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply.” 10. From the chart provided by the petitioner at Annexure- 11, it appears that the petitioner has been imposed with penalty to the extent of Rs.339,59,75000 for the North-East Service Area and for the Assam Area for the period from April 2007 till January 2012. From the chart provided by the petitioner at Annexure- 11, it appears that the petitioner has been imposed with penalty to the extent of Rs.339,59,75000 for the North-East Service Area and for the Assam Area for the period from April 2007 till January 2012. Having situated thus, the petitioner has challenged the circulars/letters dated 24.12.2008, Annexure-3 to the writ petition, dated 23.03.2009, Annexure-4 to the writ petition, dated 08.02.2010, Annexure-6 to the writ petition and dated 03.02.2011, Annexure-9 to the writ petition as according to the petitioner those are not only unjust, unfair, unreasonable but also ultra vires the statutory provisions and in conflict with the well-laid doctrine of proportionality. Such action of the respondents infringes the petitioner’s right protected under Articles 14, 19(1) (g) and 21 of the Constitution of India. The petitioner has further questioned the constitutionality of the Clause-5.1 of the license/agreement dated 12.05.2004 inasmuch as the same is arbitrary, unilateral and without any communication or effective consultation and hence violative of Article 14 of the Constitution of India and is instrumental to confer unguided, unfettered and arbitrary power on the licensor to modify any condition of license. Since such power has been provided by Clause 5.1, it is liable to be struck down. The petitioner has further challenged the constitutional validity of Clause 10(2)(ii) of the license agreement dated 12.05.2004 inasmuch as the said clause stands contrary to the statutory provision as provided in Section 20A of the Indian Telegraph Act, 1885 and hence in view of the provisions of Section 23 of the Indian Contract Act the said clause cannot survive the test of being lawful contract. It is required to be noted that by the order dated 12.10.2012, this court passed the following order on consensus. “WP(C) 422 OF 2012. BEFORE THE HON’BLE MR. JUSTICE UB SAHA 12.10.2012 Heard Dr. A. K. Saraf, learned Sr. counsel assisted by Mr. S. K. Jain, Mr. K. Roy and Mr. A. Goyel, learned counsel appearing for the petitioner, who submits that today in the morning the respondents have submitted their affidavit-in opposition in the main writ petition as well as objection in the connected Misc. case. Thus, it would be proper for the Court to allow the petitioner some time to go through the reply and file the rejoinder affidavit. Mr. P. K. Biswas, learned Asstt. case. Thus, it would be proper for the Court to allow the petitioner some time to go through the reply and file the rejoinder affidavit. Mr. P. K. Biswas, learned Asstt. S. G. appearing for the respondents while admitting the contentions of Dr. Saraf, learned Sr. Counsel would contend that today itself they have submitted the affidavit-in-opposition in the main writ petition as well as objection in the connected Misc. case and if the interim order passed earlier is extended even after filing of the affidavit-in-opposition and objection, then the respondents will suffer like anything particularly, the national security will be affected. Considering the entire facts and circumstances, the petitioner is allowed to file the rejoinder affidavit by 22- 11-2012 in the main writ petition and the interim matter will be taken up on that date for final hearing. Till then, as agreed to by the learned Asstt. S.G., the respondents will not take any step for recovery of the amount of penalty from the petitioner. In view of the above, the interim order granted earlier by this Court is modified to the extent as indicated above. List this matter on 22-11-2012.” Hence, there had been no recovery of the penalty so determined during the period when this writ petition was pending. 11. The respondents by filing the counter affidavit has stiffly resisted the grounds of the challenge by contending that the impugned circulars have been issued by the DoT in the interest of national security. The respondents are well authorized by the Clause 41.14 of the license agreement whereby the license has been obligated to maintain the complete list of subscribers in their website having password controlled access and to update the said list on regular basis so that at any point of time the hard copy on requisition can be furnished to the security agencies. Non-verification of a customer may endanger the security of the nation. In a Public Interest Litigation being 285/2010 in the matter of Abhishek Goenka vs. Union of India the apex court in its judgment has observed as under: “8. We have already noticed that the rapid expansion of the telecom sector and its impact on development, both, equally impose responsibility on the Government of India, the regulatory body and the various stakeholders in the telecom sector to carry out proper verification of the prepaid SIM cards and ensure national safety and security. We have already noticed that the rapid expansion of the telecom sector and its impact on development, both, equally impose responsibility on the Government of India, the regulatory body and the various stakeholders in the telecom sector to carry out proper verification of the prepaid SIM cards and ensure national safety and security. To achieve this object, it is primarily for the expert bodies and the Government of India to act and discharge their respective functions.” 12. The respondents have further asserted that in terms of the direction of the apex court, the revised customers verification guidelines were submitted before the apex court and later on by suppression of the circulars dated 08.02.2010 (impugned in this writ petition) 23.03.2009 (impugned in this writ petition), 22.11.2006, 10.05.2005, 30.11.2004, 26.04.2004, the guidelines dated 14.03.2011 was issued and that had been accepted by the apex court in the said judgment dated 27.04.2012. The respondents have further submitted that the said guidelines dated 14.03.2011 also contains various provisions to combat violation of the verification guidelines by the telecom service providers. In para-13 of the counter affidavit the respondents have categorically asserted as under: “13. It is also respectfully submitted that at least 2 circulars impugned by the petitioner i.e. circular dated 23.03.2009 and 08.02.2010 have already superseded by the Department of Telecom by the circular dated 14.03.2011 which has been issued on 09.08.2012 after acceptance of the same by the Hon’ble Supreme Court in the judgment dated 27.04.2012. The copy of the Hon’ble Supreme Court judgment dated 27.04.2012 and the instructions dated 09.08.2012 issued in compliance to this judgment are enclosed as Annexure-1 & Annexure-2.” 13. The respondents have also stated that Section 4 of Indian Telegraph Act, 1885 confers exclusive privilege in favour of the Central Government to grant licenses on such conditions and in consideration of such payment as it thinks fit. The license agreement was executed on 12.05.2004 and after eight years the petitioner cannot be permitted to challenge one or two clauses of the said agreement. They are estopped to challenge those clauses. They have sought to repel the contention that clause 10(2)(ii) of the license agreement is in violation of Section 20A of the Indian Telegraph Act. According to them, that relates to the criminal proceeding. Penalty and fine are conceptually different and those cannot be equated. They are estopped to challenge those clauses. They have sought to repel the contention that clause 10(2)(ii) of the license agreement is in violation of Section 20A of the Indian Telegraph Act. According to them, that relates to the criminal proceeding. Penalty and fine are conceptually different and those cannot be equated. Similar challenge was also thrown by Reliance Infocom Limited but their challenge was repelled by TDSAT. The judgment dated 04.03.2005 by the TDSAT was challenged in the apex court, but later on withdrawn. In para-20 of the said counter affidavit, the respondents have submitted that the writ petitioner along with other service providers had filed a petition being No.252/2011 before the TDSAT challenging various circulars including the circulars dated 24.12.2008, 23.03.2009, 08.02.2010 and 03.02.2011 and the show cause notice demanding penalty. TDSAT decided the said petition by their judgment dated 12.04.2011. Against the said judgment, appeal lies before the apex court but no appeal has been preferred by the writ petitioner or other co-petitioners. Now the petitioner cannot challenge again the circulars which were challenged in the TDSAT. 14. The respondents have also asserted that after accepting the terms and conditions of the license, the writ petitioner cannot challenge the clauses of the said license. In this regard they have referred a decision of the apex court in Union of India & another vs. Association of Unified Telecom Service Providers of India and Ors. (the judgment dated 11.10.2011 in Appeal No.5059 of 2007, Annexure-7 to the writ petition). It has been observed by the apex court as under: “40. On the other hand, we find from the long line of decisions in Har Shankar & Ors. vs. The Deputy Excise & Taxation Commissioner & Others (supra), Government of A.P. vs. M/s. Anabeshahi Wine & Distilleries Pvt. Ltd. (supra), Assistant Excise Commissioner & Anr. vs. Issac Peter & Ors. (supra), State of Orissa & Ors. vs. Narain Prasad & Ors. (supra), State of M.P. & Ors. vs. KCT Drinks Ltd. (supra), State of Punjab & Anr. vs. Devans Modern Breweries Ltd. & Ors. (supra), Shyam Telelink Limited vs. Union of India (supra) and in Bharti Cellular Limited vs. Union of India & Ors. vs. Issac Peter & Ors. (supra), State of Orissa & Ors. vs. Narain Prasad & Ors. (supra), State of M.P. & Ors. vs. KCT Drinks Ltd. (supra), State of Punjab & Anr. vs. Devans Modern Breweries Ltd. & Ors. (supra), Shyam Telelink Limited vs. Union of India (supra) and in Bharti Cellular Limited vs. Union of India & Ors. (supra), that this Court has consistently taken a view that once a licensee has accepted the terms and conditions of a license, he cannot question the validity of the terms and conditions of the license before the Court. We, therefore, hold that the TRAI and the Tribunal had no jurisdiction to decide on the validity of the definition of Adjusted Gross Revenue in the license agreement and to exclude certain items of revenue which were included in the definition of Adjusted Gross Revenue in the license agreement between the licensor and the licensee.” 15. Later on, by way of an additional affidavit on 28.01.2013, the respondents have filed a consolidated reply incorporating some additional pleas, such as, incorporation of additional clause in the license agreement is permissible in terms of clause 5.1 of the license agreement, to which the writ petitioner had constructive knowledge and having been satisfied they had signed the said agreement. On 20.11.2015, by leave of this court the respondent No.1 in particular has raised the question of maintainability of the writ petition having regard to the clause 16.2 of the general condition of the license agreement. The said clause provides that all disputes relating to this license will be subject to jurisdiction of Telecom Settlement and Appellate Tribunal (TDSAT) as per provision of TRAI Act, 1997 and the ‘disputes’ would naturally include the disputes from amendment or modification. The said appellate tribunal has been constituted for discharging the functions as catalogued under Section 14 of the TRAI Act, 1997. In para-17 of the said additional affidavit the respondent No.1 has asserted further as under: “17. That, the territorial jurisdiction of the Court and cause of action are interlinked and to decide the question of territorial jurisdiction it is necessary to find out the place where the “cause of action” arose. In para-17 of the said additional affidavit the respondent No.1 has asserted further as under: “17. That, the territorial jurisdiction of the Court and cause of action are interlinked and to decide the question of territorial jurisdiction it is necessary to find out the place where the “cause of action” arose. In the instant writ petition the license agreement dated 12th May, 2004, circular dated 24.12.2008, 23.03.2009, 08.02.2010 and circular dated 03.02.2011 were issued by the Respondent at New Delhi and as such this wit petition is not maintainable at Agartala in the High Court of Tripura.” 16. In the paragraph 4, 6 and 7 the respondent No.1 has asserted that even the petitioner has no operational office within the territorial jurisdiction of this court. In para-9 of the said additional affidavit the said respondent has stated that the licensor has not received any intimation about the opening of the petitioner’s office at Agartala, Tripura. In reply, the petitioner has categorically stated that in Union of India vs. Association of Unified Telecom Service Providers of India reported in (2011) 10 SCC 543 , the apex court has held that the tribunal has no jurisdiction to decide upon the validity of the terms and conditions incorporated in the license agreement of a service provider. The tribunal has the jurisdiction to decide the dispute between the licensor and the licensee on the interpretation of the license agreement. The petitioner has also annexed one communication of the Department of Telecommunication dated 02.05.2011 addressed to the petitioner showing the petitioner’s existing location at Agartala, Annexure-I to the reply dated 01.12.2015. 17. In this conspectus of facts that emerged, Dr. A. K. Saraf, learned senior counsel while dealing with the preliminary objection has strongly contended that this court has got the territorial jurisdiction as part of the cause of action has arisen within its jurisdiction. He has referred to the provisions of Article 226 of the Constitution of India as amended and which now reads as under: “226. A. K. Saraf, learned senior counsel while dealing with the preliminary objection has strongly contended that this court has got the territorial jurisdiction as part of the cause of action has arisen within its jurisdiction. He has referred to the provisions of Article 226 of the Constitution of India as amended and which now reads as under: “226. Power of High Courts to issue certain writs.—(1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. (2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. (3) Where any party against whom an interim order, whether by way of injunction or stay or in any other manner, is made on, or in any proceedings relating to, a petition under clause (1), without— (a) Furnishing to such party copies of such petition and all documents in support of the plea for such interim order; and (b) Giving such party an opportunity of being heard, makes an application to the High Court for the vacation of such order and furnishes a copy of such application to the party in whose favour such order has been made or the counsel of such party, the High Court shall dispose of the application within a period of two weeks from the date on which it is received or from the date on which the copy of such application is so furnished, whichever is later, or where the High Court is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court is open; and if the application is not so disposed of, the interim order shall, on the expiry of that period, or, as the case may be, the expiry of the said next day, stand vacated. (4) The power conferred on a High Court by this article shall not be in derogation of the power conferred on the Supreme Court by clause (2) of article 32.” 18. Dr. Saraf, learned senior counsel has submitted that the plea of maintainability is misconceived. On a plain reading of the aforesaid provision of Clause (2), it is clear that High Court can issue a writ even when the person or the authority against whom the writ is issued is located outside its territorial jurisdiction, if the cause of action wholly or in part arises within the court’s territorial jurisdiction. Cause of action for the purpose of Article 226(2) of the Constitution, for all intent and purposes, must be assigned the same meaning as envisaged under Section 20(c) of the Code of Civil Procedure. The expression cause of action has not been defined either in the Code of Civil Procedure or the Constitution. Cause of action is a bundle of facts which is necessary for the plaintiff to prove in the suit before he can succeed. The expression cause of action has not been defined either in the Code of Civil Procedure or the Constitution. Cause of action is a bundle of facts which is necessary for the plaintiff to prove in the suit before he can succeed. The expression ‘cause of action’ is tersely defined in Mulla’s Code of Civil Procedure as under: “The ‘cause of action’ means every fact which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court.” In Kusum Ingots & Alloys Ltd. vs. Union of India reported in (2004) 6 SCC 254 , the apex court has elaborately discussed Clause (2) of Article 226 of the Constitution, particularly the meaning of the word ‘cause of action’ with reference to Section 20(c) and Section 141 of the Code of Civil Procedure and observed as under: “9. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material fact is also known as integral facts. 10. Keeping in view the expressions used in clause (2) of Article 226 of the Constitution of India, indisputably even if a small fraction of cause of action accrues within the jurisdiction of the Court, the Court will have jurisdiction in the matter.” The apex court in the aforesaid case has further observed as under: “29. In view of clause (2) of Article 226 of the Constitution of India, now if a part of cause of action arises outside the jurisdiction of the High Court, it would have jurisdiction to issue a writ. The decision in Khajoor Singh has, thus, no application. 30. In view of clause (2) of Article 226 of the Constitution of India, now if a part of cause of action arises outside the jurisdiction of the High Court, it would have jurisdiction to issue a writ. The decision in Khajoor Singh has, thus, no application. 30. We must, however, remind ourselves that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merit. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens.” In Om Prakash Srivastava Vs. Union of India, reported in (2006) 6 SCC 207 , the apex court has held that in order to maintain a writ petition, the writ petitioner has to establish that a legal right claimed by him has prima facie either been infringed or is threatened to be infringed by the respondent within the territorial limits of the Court’s jurisdiction and such infringement may take place by causing him actual injury or threat thereof. The apex court in Om Prakash Srivastava Vs. Union of India (supra) has further held that: “7. The question whether or not cause of action wholly or in part for filing a writ petition has arisen within the territorial limits of any High Court has to be decided in the light of the nature and character of the proceedings under Article 226 of the Constitution. In order to maintain a writ petition, a writ petitioner has to establish that a legal right claimed by him has prima facie either been infringed or is threatened to be infringed by the respondent within the territorial limits of the Court’s jurisdiction and such infringement may take place by causing him actual injury or threat thereof.” The apex court has further held that there cannot be any doubt that the question whether or not cause of action wholly or in part for filing a writ petition has arisen within the territorial limit of any High Court has to be decided in the light of the nature and character of the proceedings under Article 226 of the Constitution. In State of Maharashtra and anr. vs. State of Arunachal Pradesh and ors. In State of Maharashtra and anr. vs. State of Arunachal Pradesh and ors. reported in (2003) 2 GLR 195 the Gauhati High Court has declared Rule 9 of the Maharashtra State Lotteries (Regulation) Rules, 2000 to be ultra vires being beyond the rule making power of the State. The Gauhati High Court has rejected the contention of the lack of territorial jurisdiction by holding that the said rules put a restriction as regards printing and sale of lottery tickets of the State of Arunachal Pradesh and the State of Nagaland within the State of Maharashtra and since printing of lottery tickets and organization of lottery was carried out within the jurisdiction of the Gauhati High Court, part of the cause of action has been held to have arisen within the territorial jurisdiction of Gauhati High Court. The petitioner is providing mobile cellular services in various States of the Country including the State of Tripura. The petitioner has got one of its office at Lake Chowmuhani, Krishna Nagar, opposite Lake Chowmuhani Bazar, Agartala, Tripura West- 799001. The petitioner has entered into a license agreement for providing of Unified Access Services with the Ministry of Telecommunications for the North East Service Area which includes the State of Tripura. The impugned action taken on the basis of the impugned Clause 5.1 and Clause 10(2)(ii) are also applicable in respect of the service provided within the State of Tripura. The impugned Circulars are also applicable for the North Eastern Region including the State of Tripura. A part of the financial penalty imposed on the petitioner was also in respect of the mobile subscribers within the State of Tripura. As such, a part of cause of action has arisen within the territorial jurisdiction of this Court and thereby the writ petition filed by the petitioner challenging the legality and validity of Clause 5.1 and Clause 10(2)(ii) as well as the Circulars dated 24.12.2008 (No. 80-52/208-VAS-III (Part)), 23.03.2009 (No. 842-725/2005/157), 08.02.2010 (1-34/2009-SI) and 03.02.2011 (No. 800-20/2010-VAS) before this Court is legally maintainable and the objection raised by the respondents as regard the territorial jurisdiction of this Court has no merit and thereby the said contention of the respondents is liable to be rejected. 19. According to Dr. 19. According to Dr. Saraf, learned senior counsel, from a plain reading of Clause 10(2)(ii), it would be clear that the penalty to be imposed for violation of terms and conditions of the license agreement is exclusive of the liquidated damages prescribed in the license agreement. Clause 35 of the license agreement provides for liquidated damages as under: “35. Liquidated damages: 35.1 The time period for provision of the Service stipulated in this License shall be deemed as the essence of the contract and the service must be brought into commission not later than such specified time period. No extension in prescribed due date will be granted. If the Service is brought into commission after the expiry of the due date of commissioning, without prior written concurrence of the licensor and is accepted, such commissioning will entail recovery of Liquidated Damages (LD) under this Condition. Provided further that if the commissioning of service is effected within 15 calendar days of the expiry of the due commissioning date then the Licensor shall accept the services without levy of LD charges. 35.2 In case the LICENSEE fails to bring the Service or any part thereof into commission (i.e., fails to deliver the service or to meet the required coverage criteria/network roll out obligations) within the period prescribed for the commissioning, the Licensor shall be entitled to recover LD charges @ Rs.5 lakh (Rupees Five Lakhs) per week for first 13 weeks; @ Rs.10 lakhs for the next 13 weeks and thereafter @ 20 lakhs for 26 weeks subject to a maximum of Rs.7.00 crores. Part of the week is to be considered as a full week for the purpose of calculating the LD charges. For delay of more than 52 weeks the License may be terminated under the terms and conditions of the License agreement. The week shall mean 7 calendar days from (from midnight) Monday to Sunday; both days inclusive and any extra day shall be counted as full week for the purposes of recovery of liquidated damages.” Apart from the above, the License agreement contains provisions for suspension, revocation or termination of license for violation of any of the terms and conditions of the license agreement. Clause 10 of the license agreement reads as under: “10. Clause 10 of the license agreement reads as under: “10. Suspension, Revocation or Termination of License 10.1 The LICENSOR reserves the right to suspend the operation of this LICENSE in whole or in part, at any time, if, in the opinion of the LICENSOR, it is necessary or expedient to do so in public interest or in the interest of the security of the State or for the proper conduct of the TELEGRAPH. License Fee payable to the LICENSOR will not be required to be paid for the period for which the operation of this LICENSE remains suspended in whole. If situation so warrant, it shall not be necessary for Licensor to issue a notice for seeking comments of the LICENSEE for this purpose and the decision of the Licensor shall be final and binding. Provided that the LICENSOR shall not be responsible for any damage or loss caused or arisen out of aforesaid action. Provided further that the suspension of the LICENSE will not be a cause or ground for extension of the period of the LICENSE and suspension period will be taken as period spent. 10.2(i) The LICENSOR may, without prejudice to any other remedy available for the breach of any conditions of LICENSE, by a written notice of 60 Calendar days from the date of issue of such notice to the LICENSEE at its registered office, terminate this LICENSE under any of the following circumstances : If the LICENSEE: (a) fails to perform any obligation(s) under the LICENSE including timely payments of fee and other charges due to the LICENSOR; (b) fails to rectify, within the time prescribed, any defect/deficiency/correction in service/equipment as may be pointed out by the LICENSOR. (c) goes into liquidation or ordered to be wound up. (d) is recommended by TRAI for termination of LICENSE for noncompliance of the terms and conditions of the LICENSE. (e) fails to comply with FDI norms. 10.2(ii) The Licensor may also impose a financial penalty not exceeding Rs. (c) goes into liquidation or ordered to be wound up. (d) is recommended by TRAI for termination of LICENSE for noncompliance of the terms and conditions of the LICENSE. (e) fails to comply with FDI norms. 10.2(ii) The Licensor may also impose a financial penalty not exceeding Rs. 50 crores for violation of terms and conditions of license agreement This penalty is exclusive of Liquidated Damages as prescribed under clause 35 of this License Agreement.” Clauses 10.5, 10.6 and 10.7 also provide as under: “10.5 The LICENSOR reserves the right to revoke the LICENSE at any time in the interest of public by giving a notice of 60 Calendar days from the date of issue of such notice. 10.6 The LICENSOR reserves the right to take over the entire services, equipments and networks of the LICENSEE or revoke/terminate/suspend the LICENSE in the interest of public or national security or in the event of national emergency/war or low intensity conflict or similar type of situations. Further the LICENSOR reserves the right to keep any area out of the operation zone of the SERVICE if implications of security so require. 10.7 Breach of non-fulfillment of License conditions may come to the notice of the LICENSOR through complaints or as a result of the regular monitoring. Wherever considered appropriate LICENSOR may conduct an inquiry either suo-moto or on complaint to determine whether there has been any breach in compliance of the terms and conditions of the LICENSE by the LICENSEE and upon such inquiry the LICENSEE shall extend all reasonable facilities and shall endeavor to remove the hindrance of every type.” Clause 16.3 of the license agreement clearly provides that the statutory provisions and the rules made under Indian Telegraph Act 1885 or Indian Wireless Telegraphy Act, 1933 shall govern the License agreement. Clause 32 of the license agreement clearly provides that nothing provided and contained anywhere in the license agreement shall be deemed to affect adversely anything provided or laid under the provisions of Indian Telegraph Act, 1885 or any other law on the subject in force. Clause 32.1 and 32.2 of the license agreement read as under: “32.1 The provisions of the Indian Telegraph Act 1885, the Indian Wireless Telegraphy Act 1933, and the Telecom Regulatory Authority of India Act, 1997 as modified from time to time or any other statute on their replacement shall govern this LICENSE. Clause 32.1 and 32.2 of the license agreement read as under: “32.1 The provisions of the Indian Telegraph Act 1885, the Indian Wireless Telegraphy Act 1933, and the Telecom Regulatory Authority of India Act, 1997 as modified from time to time or any other statute on their replacement shall govern this LICENSE. 32.2 The LICENSEE shall furnish all necessary means and facilities as required for the application of provisions of Section 5(2) of the Indian Telegraph Act, 1885, whenever occasion so demands. Nothing provided and contained anywhere in this License Agreement shall be deemed to affect adversely anything provided or laid under the provisions of Indian Telegraph Act, 1885 or any other law on the subject in force.” From a perusal of the various clauses of the license agreement reproduced above, it is clear that the provisions of the Indian Telegraph Act, 1885 and the Indian Contract Act, 1872 are binding on the parties and the conditions of the license agreement cannot go contrary to the provisions of the Indian Telegraph Act, 1885 and the Indian Contract Act, 1872 or any other law in force. It is also clear that the license agreement provides liquidated damage and the penalty introduced by Clause 10(2)(ii) is in addition to the liquidated damages provided in the license agreement. The aforesaid clauses also reveal that the authorities have enough powers to exercise in case there is a violation of the terms and conditions of the license agreement. On the above admitted facts, import of Section 20A of the Indian Telegraph Act, 1885 needs to be looked into. From a perusal of Section 20A of the Indian Telegraph Act, 1885 it is clear that the Act provides for imposition of fine in case of breach of condition of license which may extend to Rs.1000/- and with a further fine which may extend to Rs.500/- for every week for which the breach of condition continues. Even if it is admitted, Dr. Saraf, learned senior counsel has contended, that the authorities might have the power to incorporate any condition in the license agreement, the penalty, being quasi criminal in nature, cannot be imposed by implanting a clause in the license agreement, that too without communication. Worse would be the context, if such clause is given effect to, by way of executive instruction. Saraf, learned senior counsel has contended, that the authorities might have the power to incorporate any condition in the license agreement, the penalty, being quasi criminal in nature, cannot be imposed by implanting a clause in the license agreement, that too without communication. Worse would be the context, if such clause is given effect to, by way of executive instruction. The provisions of Clause 10(2)(ii) of the license agreement is absolutely contrary to Section 20A of the Indian Telegraph Act, 1885 inasmuch as the penalty provided for in Clause 10(2)(ii) much exceeds the limit prescribed in Section 20A of the Indian Telegraph Act, 1885 and since the said provision of Clause 10(2)(ii) of the license agreement is contrary to Section 20A of the Indian Telegraph Act, 1885, the same is hit by Section 23 of the Indian Contract Act and therefore the said provision of Clause 10(2)(ii) is liable to be declared ultra vires and void inasmuch as the object of clause 10(2)(ii) turns to defeat the provision of Section 20A of the Indian Telegraph Act, 1885. In Mannalal Khetan & Ors. Vs. Kedar Nath Khetan & Ors. reported in (1977) 2 SCC 424 , the apex court held that where a contract, express or implied, is expressly or by implication forbidden by statute, no court can give its assistance to give it effect. In the aforesaid judgment, at Para 20, the apex court held as under: “20. It is well established that a contract which involves in its fulfillment the doing of an act prohibited by statute is void. The legal maxim A pactis privatorum publico juri non derogatur means that private agreement cannot alter the general law. Where a contract, express or implied is expressly or by implication forbidden by statute, no court can lend its assistance to give it effect. What is done in contravention of the provisions of an Act of the legislature cannot be made the subject of an action.” In M/S M.G. Brothers Lorry Service Vs. M/S Prasad Textiles reported in (1983) 3 SCC 61 , the apex court while considering the provisions of Section 10 of the Carriers Act, 1865 and the condition of the waybill has held as under: “13. M/S Prasad Textiles reported in (1983) 3 SCC 61 , the apex court while considering the provisions of Section 10 of the Carriers Act, 1865 and the condition of the waybill has held as under: “13. In this connection, it appears to us that on the construction of Condition 15 of the Way Bill that there was no limitation of liability expressed or intended but what was provided was that no suit shall lie against the firm unless a particular claim was made in a particular manner within a particular time. In this case there was neither any extinguishment of liability or contracting out of liability but only a special period of limitation of notice was provided other than Section 10 of the Carriers Act, 1865. 14. Section 10 of the Carriers Act as we have noted before provides that unless notice in writing of the loss or injury has been given to him before the institution of the suit and within six months of the time when the loss or injury first came to the knowledge of the plaintiff no suit shall be instituted. Condition 15 of the Way Bill in the instant case makes it imperative to give notice either within 30 days from the date of booking or from the date of the arrival of the goods at the destination by the party concerned, to sustain a suit. The date of arrival of the goods at the destination by the party may not be known to the party concerned for a long time. No claim can be made without the loss of the goods and therefore 30 days from the date of booking would become irrelevant unless loss or damage happens. Therefore, it appears to us that Condition 15 of the Way Bill was designed to avoid the liability contemplated under Section 10 of the Carriers Act, 1865 and that too in a situation where the parties had not by express contract limited their liability as contemplated under Section 6 of the Carriers Act. It appears to us, therefore that the learned Judge of the Andhra Pradesh High court was right in the view he took. The trial court and the first appellate court held that Condition 15 of the Way Bill was not violative of Section 28 of the Indian Contract Act. It appears to us, therefore that the learned Judge of the Andhra Pradesh High court was right in the view he took. The trial court and the first appellate court held that Condition 15 of the Way Bill was not violative of Section 28 of the Indian Contract Act. That view of the lower courts has not been challenged before the High Court in the second appeal. Before us also that view was not seriously challenged. It also appears to us that neither there is restriction absolutely from enforcing rights by the usual legal proceedings nor limitation of time within which such rights might be enforced in the instant case but Condition 15 was only intended to defeat or by pass the provisions of Section 10 of the Carriers Act. Section 23 of the Indian Contract Act provides that the consideration or object of agreement was lawful, unless, inter alia, it was of such a nature, that, if permitted, would defeat the provisions of any law. In the instant case, it appears to us that if Condition 15 be permitted then it will defeat the provisions of Section 10 of the Carriers Act, even in a case notice in writing of the loss or injury has been given to him before the institution of the suit and within six months of the time when the loss or injury first came to the knowledge of the plaintiff. Even in a case where the plaintiff was unaware of the arrival of the goods at the destination or was unaware of a loss or damage, the plaintiff would not have any right to institute suit if no claim was made and could not have been made within 30 days as stipulated in Condition 15 of the Way Bill. In that view of the matter, we are of the opinion that Condition 15 must be held to be void in view of Section 23 of the Indian Contract Act because its object was to defeat the provisions of the Indian Contract Act because its object was to defeat the provisions of Section 10 of the Carriers Act. In that view of the matter, we are of the opinion that Condition 15 must be held to be void in view of Section 23 of the Indian Contract Act because its object was to defeat the provisions of the Indian Contract Act because its object was to defeat the provisions of Section 10 of the Carriers Act. The conclusion, in our opinion, follows from the construction of the section and Condition 15 of the Way Bill.” The similar analogy has been advanced to hold that Clause 10(2)(ii) is clearly contrary to Section 20A of the Indian Telegraph Act, 1885 inasmuch as it provides for the penalty much in excess of what is provided for in Section 20A of the Indian Telegraph Act, 1885 and thereby the same is void and ultra vires being hit by Section 23 of the India Contract Act, 1872. Further, it has been submitted that as per Section 74 of the Indian Contract Act, 1872, financial penalty cannot ordinarily be provided in a contract. Section 74 of the Indian Contract Act, 1872 reads as under: “74. Compensation for breach of contract where penalty stipulated for.-When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.” While explaining the provision of Section 74 of the Indian Contract Act, 1872, a constitution bench of the apex court in Fateh Chand Vs. Balkishan Dass reported in AIR 1963 SC 1405 has held as under: “The section is clearly an attempt to eliminate the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrors is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrors is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.” The apex court in the aforesaid decision has clearly held that the measure of damages in case of breach of a stipulation by way of penalty is reasonable compensation, not exceeding the penalty stipulated for. It has held that the compensation has to be reasonable and the Court has the jurisdiction to award such compensation having regard to the circumstances of the case. The apex court further held that Section 74 merely dispenses with proof of actual loss or damage but the same does not justify the award of compensation when in consequence of the breach, no legal injury at all has resulted. The apex court has held further that: “The measure of damages in the case of breach of a stipulation by way of penalty is by s. 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according, to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damages"; t does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.” While explaining the manner of determination of compensation, the apex court at Para 15 of the said decision has held as under: “15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties predetermined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief' as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court, is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression "to receive from the party who has broken the contract" does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.” On the facts of the case in Fateh Chand Vs. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.” On the facts of the case in Fateh Chand Vs. Balkishan Das, the apex court has further held that the plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant and thereby there was no principle on which the compensation of the agreed price could be awarded to the victim. In this perspective, it has been held that: “16. There is no evidence that any loss was suffered by the plaintiff in consequence of the default by the defendant save as to the loss suffered by him by being kept out of possession of the property. There is no evidence that the property had depreciated in value since the date of the contract; nor wag there evidence that any other special damage had resulted. The contract provided for forfeiture of Rs.25,000/- consisting of Rs.1000/- paid as earnest money and Rs.24,000/- paid as part of the purchase price. The defendant has conceded that the plaintiff was entitled to forfeit the amount of Rs.1,000/- which was paid as earnest money. We cannot however agree with the High Court that 10 per cent of the price may be regarded as reasonable compensation in relation to the value of the contract as a whole, as that in our opinion is assessed on arbitrary assumption. The plaintiff failed to prove the loss suffered by him in consequence of the breach of the contract committed by the defendant, and we are unable to find any principle on which compensation equal to ten percent of the agreed price could be awarded to the plaintiff. The plaintiff has been allowed Rs.1,000/-which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs.24,000/-, and we can rightly presume that lie must have been deriving advantage from that amount throughout this period. The plaintiff has been allowed Rs.1,000/-which was the earnest money as part of the damages. Besides he had use of the remaining sum of Rs.24,000/-, and we can rightly presume that lie must have been deriving advantage from that amount throughout this period. In the absence therefore of any proof of damage arising from the breach of the contract we are of opinion that the amount of Rs.1,000/- (earnest money) which has been forfeited, and the advantage that the plaintiff must have derived from the possession of the remaining sum of Rs.24,000/-during all this period would be sufficient compensation to him. It may be added that the plaintiff has separately claimed means profits for being kept out of possession for which he has got a decree and therefore the fact that the plaintiff was out of possession cannot be taken into account in determining damages for this purpose.' The decree passed by the High Court awarding Rs.11,250/- as damages to the plaintiff must therefore be set aside.” The apex court again in Maya Devi Vs. Lalta Prasad reported in AIR 2014 SC 1356 has clearly held that the imposition and recovery of penalty on breach of contract is legally impermissible under the Indian Contract Act. It has been held as under: “The imposition and the recovery of penalty on breach of a contract is legally impermissible under the Indian Contract Act. As regards liquidated damages, the Court would have to scrutinize the pleadings as well as evidence in proof thereof, in order to determine that they are not in the nature of a penalty, but rather as a fair pre-estimate of what the damages are likely to arise in case of breach of the contract.” In Maya Devi Vs. Lalta Prasad while holding that duty is not to enforce the penalty clause but to award the compensation by Section 74. In the Para 18 it has been held as under: “Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon Courts by S. 74. Lalta Prasad while holding that duty is not to enforce the penalty clause but to award the compensation by Section 74. In the Para 18 it has been held as under: “Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon Courts by S. 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the Court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture.” It would be very pertinent to cull out the distinction between the liquidated damages and penalty. In Halsbury’s Laws of England, ‘liquidated damages’ has been explained as under: “1065. Liquidated damages distinguished from penalties.- The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default shall pay a stipulated sum of money to the other. If this sum is a genuine pre-estimate of the loss which is likely to flow from the breach, then it represents the agreed damages, called ‘liquidated damages’, and it is recoverable without the necessity of proving the actual loss suffered.” ‘Penalty’ has been explained in Halsbury’s Laws of England as under: “If, however, the stipulated sum is not a genuine pre-estimate of the loss but is in the nature of a penalty intended to secure performance of the contract, then it is not recoverable, and the plaintiff must prove what damages he can. The operation of the rule against penalties does not depend on the discretion of the court, or on improper conduct, or on circumstances of disadvantage or ascendancy, or on the general character or relationship of the parties. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The rule is one of public policy and appears to be sui generis. Its absolute nature inclines the courts to invoke the jurisdiction sparingly. The burden of proving that a payment obligation is penal rests on the party who is sued on the obligation.” In Corpus Juris Secundum, ‘liquidated damages’ has been explained as under: “192- Liquidated damages are a specific sum stipulated to and agreed upon by the parties in advance or when they enter into a contract to be paid to compensate for injuries in the event of a breach or nonperformance of the contract. 196-In examining whether a liquidated-damages provision is enforceable, courts consider whether the damages stemming from a breach are difficult or impossible to estimate or calculate when the contract was entered and whether the amount stipulated bears a reasonable relation to the damages reasonably anticipated. 198-Liquidated damages must bear a reasonable relationship to actual damages, and a liquidated-damages clause is invalid when the stipulated amount is out of all proportion to the actual damages.” ‘Penalty’ has been explained in Corpus Juris Secundum as under: “200- A penalty is in effect a security for performance, while a provision for liquidated damages is for a sum to be paid in lieu of performance. A term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid.” American Restatement (Second) of Contracts 1981 has as well discussed with reference the difference as under: “356. LIQUIDATED DAMAGE AND PENALTIES (1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof or loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.” In the present case, there is no dispute that what is contemplated by Clause 10(2)(ii) is by way of penalty inasmuch as the clause itself provides for the penalty provided in Clause 10(2)(ii) is exclusive of liquidated damages and as such in view of the law as declared by the apex court, according to the petitioner the aforesaid provision of Clause 10(2)(ii) for imposition of penalty is ultra vires and void. In a recent decision, the apex court in Kailash Nath Associates Vs. In a recent decision, the apex court in Kailash Nath Associates Vs. Delhi Development Authority reported in (2015) 4 SCC 136 , on considering all the earlier judgments on the issue has summarized the law on compensation of breach of contract as under: “43. On a conspectus of the above authorities, the law on compensation for breach of contract under Section 74 can be stated to be as follows:- 43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation. 43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act. 43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section. 43.4. The Section applies whether a person is a plaintiff or a defendant in a suit. 43.5. The sum spoken of may already be paid or be payable in future. 43.6. The expression “whether or not actual damage or loss is proved to have been caused thereby” means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded. 43.7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application. 44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract by the appellant. Further, we cannot accept the view of the Division Bench that the fact that the DDA made a profit from re-auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages – namely, that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall.” The apex court in that judgment has clearly held that compensation can only be given if damage or loss is suffered and if damage or loss is not suffered, the law does not provide for a windfall. From the aforesaid decisions of the apex court, according to Dr. Saraf, learned senior counsel it is clear that Clause 10(2)(ii) which provides for imposition of penalty and damages in addition to liquidated damages is in violation of Section 74 of the Indian Contract Act, 1872 and thereby the said provisions of Clause 10(2)(ii) of the license agreement and the consequential circulars dated 24.12.2008, 23.03.2009, 08.02.2010 and 03.02.2011 providing for levy of financial penalty are absolutely illegal, without jurisdiction, void and are liable to be set aside and/or quashed. It has been further submitted that the penalty regime established by the instructions by means of the impugned circulars is oppressive, irrational and perverse. The impugned instructions are oppressive because they impose certain requirements that are impossible to implement. The telecom service providers are subjected to disproportionate penalties even in cases where there is no doubt regarding the identity or address of the subscribers, based only on technical grounds. The penalty regime introduced by the Department of Telecommunications has no reasonable nexus with the object sought to be achieved and is wholly out of proportion to the alleged non-compliance of subscriber verification conditions in the telecom licenses. The penalty regime introduced by the Department of Telecommunications has no reasonable nexus with the object sought to be achieved and is wholly out of proportion to the alleged non-compliance of subscriber verification conditions in the telecom licenses. Any technical deficiencies in the verification of subscribers cannot be construed as breach of the terms and conditions of license and therefore levy of penalty by the Department of Telecommunications in exercise of powers under Section 10(2)(ii) of the license agreement is absolutely unfair, unjust, unreasonable, arbitrary and violative of the petitioner’s right under Article 14, 19(1)(g) and 21 of the Constitution of India. Before introducing the penalty regime, the Department of Telecommunications failed to consider that the service providers have to necessarily rely on the retail network existing in the country. The petitioner estimates that the total number of retailers working with the telecom service providers exceeds 1.2 million of which a majority are in the un-organized sector and are small family owned stores. The distribution and sales network comprises of such retailers, their employees, thousands of distributors, employees of distributors. While the telecom service providers have done their best to educate the retailers, the fact remains that human errors at retail outlets can and do happen in the matter of subscriber verification and these are outside the control of the service providers. Moreover, any penalty regime has to necessarily take into account the sophistication and organizational expertise available with the retailers and the Department of Telecommunications has to necessarily allow the telecom service providers to rely on the undertaking given by the retailers. The individual lapses at different levels cannot be said to be or treated as lapses of telecom service providers or be used for imposing vicarious liability or otherwise on the service providers unless there is proof that service provider has in any manner facilitated or being a part of such failure or lapses. Such submissions are made for the petitioner to drive that ‘breach’ is an act, which is deliberate in nature, not the result of systemic failure for no fault. The objective of the entire exercise is national security through the subscriber verification, but the process adopted by the TERM Cells focuses only on technicalities and minutiae and penalties are imposed even when there is no issue as such with the identity or address of the subscriber in question. The objective of the entire exercise is national security through the subscriber verification, but the process adopted by the TERM Cells focuses only on technicalities and minutiae and penalties are imposed even when there is no issue as such with the identity or address of the subscriber in question. The service providers provide traceability and much better support and cooperation to security agencies through more precise and current data. The telecom operators are providing all possible assistance to the security and law enforcement agencies through various means. The Department of Telecommunications has failed to balance the various competing interests while introducing the penalty regime. Any penalty regime has to achieve a balance between competing interests with sufficient safeguards and misuse. In the present case, the regime is based on unrealistic expectations and fails to take into account the interests of the service providers. There is no fair balance between the security requirements and the interests of the service providers. By completely disregarding commercial realities and imposing significant penalties even when there is no proven case of intentional wrongdoing, the regime is wholly disproportionate to the objectives sought to be achieved. By Clause 5.1 of the license agreement the licensor reserves the right to modify the conditions of license and clause 10(2) (ii) having been incorporated in the license agreement by virtue of Clause 5.1 of the license agreement and the petitioner having signed the said license agreement, the respondents have asserted that the petitioner cannot raise objection as regards the validity of Clause 5.1 and Clause 10(2)(ii) at this stage. The defence of waiver cannot be raised because an agreement, if waives legality, is void on the ground of public policy and would be unenforceable. It has been held by the apex court that the plea of waiver cannot be raised because as a result of giving effect to that plea, the Court would be enforcing an illegal agreement which would be contrary to public policy. The apex court in Waman Shriniwas Kini Vs. Ratilal Bhagwandas & Co. It has been held by the apex court that the plea of waiver cannot be raised because as a result of giving effect to that plea, the Court would be enforcing an illegal agreement which would be contrary to public policy. The apex court in Waman Shriniwas Kini Vs. Ratilal Bhagwandas & Co. reported in AIR 1959 SC 689 has held as under: “Assuming that be so and proceeding on the facts found in this case the plea of waiver cannot be raised because as a result of giving effect to that plea the Court would be enforcing an illegal agreement and thus contravene the statutory provisions of Section 15 based on public policy and produce the very result which the statute prohibits and makes illegal.” In the aforesaid judgment the apex court has referred to the judgment of Surajmuli Nargoremull Vs. Triton Insurance Co. reported in (1924) LR 52 IA 126, 128, wherein it has been held that: "No Court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from which a Court can be dispensed by the consent of the parties, or by a failure to plead or to argue the point at the outset: Nixon v. Albion Marine Insurance Co. (1). The enactment is prohibitory. It is not confined to affording a party a protection of which he may avail himself or not as he pleases. It is not framed solely for the protection of the revenue and to be enforced solely at the instance of the revenue officials, nor is the prohibition limited to cases for which a penalty is exigible.” In Waman Shriniwas Kini Vs. Ratilal Bhagwandas & Co. (supra) it has been held as under: “In the instant case the question is not merely of waiver of statutory rights enacted for the benefit of an individual but whether the Court would aid the appellant in enforcing a term of the agreement which Section 15 of the Act declares to be illegal. By enforcing the contract the consequence will be the enforcement of an illegality and infraction of a statutory provision which cannot be condoned by any conduct or agreement of parties.” In Corpus Juris Secundum, Vol. 92, at p. 1068, the law as to waiver is stated as follows:- "............ By enforcing the contract the consequence will be the enforcement of an illegality and infraction of a statutory provision which cannot be condoned by any conduct or agreement of parties.” In Corpus Juris Secundum, Vol. 92, at p. 1068, the law as to waiver is stated as follows:- "............ a waiver in derogation of a statutory right is not favoured, and a waiver will be inoperative and void, if it infringes on the rights of others, or would be against public policy or morals...” In Bowmakers Ltd. Vs Barnet Instruments Ltd., (1945) I KB 65, 72, the law regarding waiver has been enunciated as under: “Agreements which seek to waive an illegality are void on grounds of public policy. Whenever an illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case. A stipulation of the strongest form to waive the objection would be tainted with the vice of the original contract and void for the same reasons. Wherever the contamination reaches, it destroys.” The apex court in Waman Shriniwas Kini Vs. Ratilal Bhagwandas & Co. has held that the said statement of law is the correct position of law and observed as under: “This, in our opinion, is a correct statement of the law and is supported by high authority. Field, J. In Oscanyan v Winchester Arms Company quoted with approval the observation of Swayne, J. in Hall v Coppell: “The principle is indispensable to the purity of its administration. It will not enforce what it has forbidden and denounced. The maxim Ex dolo malo non oritur actio, is limited by no such qualification. The proposition to the contrary strikes us as hardly worthy of serious refutation. Wherever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. No consent of the defendant can neutralize its effect. A stipulation in the most solemn form, to waive the objection, would be tainted with the vice of the original contract, and void for the same reasons. Wherever the contamination reaches, it destroys.” Waiver is the abandonment of a right which normally everybody is at liberty to waive. A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right. It may be deduced from acquiescence or may be implied. Wherever the contamination reaches, it destroys.” Waiver is the abandonment of a right which normally everybody is at liberty to waive. A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right. It may be deduced from acquiescence or may be implied. Chitty on Contract, 21st Ed., p. 381: Stackhouse v. Barnston. But an agreement to waive an illegality is void on grounds of public policy and would be unenforceable.” In view of the aforesaid decisions of the apex court, it has been submitted that Clause 10(2)(ii) of the license agreement is not only contrary to Section 20A of the Indian Telegraph Act, 1885 but the same is also hit by Sections 23 and 74 of the Indian Contract Act, 1872 and therefore the same is required to be declared ultra vires and void. 20. In order to project the grounds for challenging the validity of clause 5.1 of the license agreement, Dr. Saraf, learned senior counsel has submitted that the said license agreement clearly provides that the statutory provisions and the rules made under the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 shall govern the license agreement. It is also provided in the license agreement that the license agreement shall not affect adversely anything provided or laid down under the Indian Telegraph Act, 1885 or any other law on the subject in force. As such, while exercising the authority under Clause 5.1 of the license agreement for modification of the terms and conditions of the license agreement, the respondents cannot incorporate any term and condition in the license agreement which is contrary to the provisions of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 as well as the Indian Contract Act, 1872 or any other law on the subject in force. By virtue of Clause 5.1, the licensor, reserving the right to modify at any time the terms and conditions of the license agreement the licensor cannot be held authorized to incorporate any term or condition in the license agreement which goes contrary to the provisions of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 as well as the Indian Contract Act, 1872 or any other law on the subject in force. 21. Dr. 21. Dr. Saraf, learned senior counsel has emphatically submitted that Clause 5.1 of the license agreement is ultra vires and essentially arbitrary inasmuch as clause 5.1 confers an unguided, unfettered and arbitrary powers on the licensor to modify any conditions of license. Clause 5.1 does not provide any guidance, control, safeguard and checks on the rights of the licensor to modify any terms and conditions of the license unilaterally and thereby, clause 5.1 of the license agreement suffers from the vice of arbitrariness. The same deserves to be struck down. Arbitrariness, according to the petitioner, is writ large on the face of the provisions of clause 5.1 of the license agreement and the said provision falls with the mischief which Article 14 of the Constitution is designed to prevent. The petitioner, in this regard, has relied on the decision of the apex court in State of Punjab v. Khanchand reported in (1974) 1 SCC 549 . 22. Dr. Saraf, learned senior counsel has finally submitted that there had been no consultation at all while incorporating clauses 5.1 or subsequently while incorporating 10(2)(ii) and issuing the impugned circulars. Hence, the impugned provisions of the license agreement and circulars cannot be given effect to. In that premise, he has urged this court that the impugned Clause 10(2)(ii) may be declared ultra vires and void, being violative of Section 20A of the Indian Telegraph Act, 1885 as well as being hit by Sections 23 and 74 of the Indian Contract Act, 1872 and consequently the circulars dated 24.12.2008, 23.03.2009, 08.02.2010 and 03.02.2011 issued by the respondents are to be interfered with and set aside. 23. Mr. A. Roy Barman, learned CGC at the outset has submitted that no cause of action has arisen within the territorial jurisdiction of this High Court for this writ petition. At least, there is no such assertion in the writ petition. Mr. 23. Mr. A. Roy Barman, learned CGC at the outset has submitted that no cause of action has arisen within the territorial jurisdiction of this High Court for this writ petition. At least, there is no such assertion in the writ petition. Mr. Roy Barman, learned CGC has emphatically submitted that Clause 2 of Article 226 of the Constitution of India provides that the power conferred by Clause (1) of Article 226 of the Constitution of India to issue directions/orders or writs to any Government, authority or persons may be exercised by any High Court exercising jurisdiction in relation to the territories within which cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. He has further submitted that after signing the license agreement which contains the clause as noted under, the petitioner cannot raise the question of validity. “16.1 The LICENSEE shall be bound by the terms and conditions of this License Agreement as well as by such orders/directions/regulations of TRAI as per provisions of the TRAI Act, 1997 as amended from time to time and instructions as are issued by the Licensor/TRAI.” 24. The impugned circulars dated 24.12.2008, 23.03.2009, 08.02.2010 and 03.02.2011 have been issued in exercise of the authority created by the license agreement dated 12.05.2004 and the petitioner is obligated to act in accordance with those circulars. 25 Mr. Roy Barman, learned CGC has further submitted that in the Clause 41.14 and Clause 41.15 the obligation of verification of the service provider has been clearly stipulated. There is no challenge against those provisions. Mr. Roy Barman, learned CGC has placed reliance on a few decisions of the apex court to contend that the petitioner is stopped from raising any challenge, so raised in this writ petition inasmuch as, a person cannot be permitted to approbate and reprobate at the same time (Pradeep Oil Corporation vs. MCD reported in (2011) 5 SCC 270 ). Mr. Roy Barman, learned CGC has placed reliance on a few decisions of the apex court to contend that the petitioner is stopped from raising any challenge, so raised in this writ petition inasmuch as, a person cannot be permitted to approbate and reprobate at the same time (Pradeep Oil Corporation vs. MCD reported in (2011) 5 SCC 270 ). Moreover, without any demur the petitioner had accepted the provisions of the license agreement and now having taken the benefit under the license the petitioner should not be permitted to question the validity of the clauses and he has referred to the decision of the apex court in Union of India vs. Association of Unified Telecom Service providers of India. Mr. Roy Barman, learned CGC has placed reliance on Cauvery Coffee Traders vs. Hornor Resources (International) Co. Ltd. reported in (2011)10 SCC 420 , where a party took advantage of the benefit of an agreement and for that reason he was not permitted to question the validity. “34. A party cannot be permitted to “blow hot and cold”, “fast and loose” or “approbate and reprobate”. Where one knowingly accepts and benefits of a contact or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity; however, it must not be applied in a manner as to violate the principles of right and good conscience. (vide Nagubai Ammal v. B. Shama Rao 12, CIT v. V. Mr. P. Firm Muar 13, Maharashtra SRTC v. Balwant Regular Motor Service 14, P.R. Deshpande v. Maruti Balaram Haibatti 15, Babu Ram v. Indra Pal Singh 16, NTPC Ltd. v. Reshmi Constructions, Builders & Contractors 17, Ramesh Chandra Sankla v. Vikram Cement 18 and Pradep Oil Corpn. V. MCD 19.) 35. Thus, it is evident that the doctrine of election is based on the rule of estoppels – the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pais (or equitable estoppels), which is a rule in equity. V. MCD 19.) 35. Thus, it is evident that the doctrine of election is based on the rule of estoppels – the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pais (or equitable estoppels), which is a rule in equity. By that law, a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had.” In Joint Action Committee of Air Line Pilots’ Association of India (ALPAI) v. Director General of Civil Aviation, reported in (2011) 5 SCC 435 it has been stated that: “12. The doctrine of election is based on the rule of estoppels – the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppels by election is one of the species of estoppels in pais (or equitable estoppels), which is a rule in equity. By that law, a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had. Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily. (Vide Babu Ram v. Indra Pal Singh (1998) 6 SCC 358 ), P.R. Deshpande v. Maruti Balaram Haibatti (1998) 6 SCC 507 ) and Mumbai International Airport (P) Ltd. v. Golden Chariot Airport (2010) 10 SCC 422 : (2010) 4 SCC (Civ) 195.)” 26. Finally, Mr. Roy Barman, learned CGC has submitted that the circular containing the penalty was placed before the apex court that got the approval of the apex court in the Public Interest Litigation being Writ Petition (Civil) No.285 of 2010 in the matter of Abhishek Goenka vs. Union of India and anr., which has been disposed by the judgment dated 27.04.2012 and hence this court may not reopen the said aspect of the matter. In addition, Mr. Roy Barman, learned CGC has submitted that by not challenging the judgment dated 12.04.2012 delivered in the petition No.252 of 2011 by the TDSAT, the petitioner is debarred to raise the issues which have been decided by the said judgment. In addition, Mr. Roy Barman, learned CGC has submitted that by not challenging the judgment dated 12.04.2012 delivered in the petition No.252 of 2011 by the TDSAT, the petitioner is debarred to raise the issues which have been decided by the said judgment. TDSAT has held that the petitioners cannot be permitted to question those circulars/letters which have been acted upon and in respect thereof undertakings were made. It has been further contended that the respondents cannot be said acted illegally and without jurisdiction in delegating its powers relating to verification/inspection, imposition of penalties, making provisions for determination thereof by the authorities of the Term Cell by the appellate authority. It has been held that each individual case of imposition of penalty is required to be considered on the factual matrix involved therein and the rate of penalty to be assessed separately. 27 On keen appreciation of the submissions made for the parties, the following questions arise for decisions. 1. whether this court has got territorial jurisdiction? 2. whether Clause 5.1 of the license agreement is in conflict with the provisions of Articles 14, 19(1)(g) and 21 of the Constitution? 3. whether Clause 10.2(ii) of the license agreement is in conflict with Section 20A of the Indian Telegraph Act, 1885 and Section 74 of the Indian Contract Act and whether in view of provisions of Section 23 of the Indian Contract Act the said Clause 10.2(ii) of the license agreement is liable to be struck down? 4. whether the petitioner is estopped to challenge the validity of Clause 5.1 and 10.2(ii) of the license agreement or whether the petitioner by conduct has waived the right to challenge the validity of those clauses or circulars? Whether this court has got the territorial jurisdiction? 28. The basis of raising objection as to territorial jurisdiction of this court for the cause of action as disclosed in the writ petition is that the writ petitioner does not have any operational office within the territorial jurisdiction of this court. In para-9 of the additional affidavit the respondents have categorically contended that the licensor has not received any intimation about the opening of the petitioner’s office at Agartala. The petitioner has filed one communication of Department of Telecommunication dated 02.05.2011, Annexure-I of the reply dated 01.12.2015. In para-9 of the additional affidavit the respondents have categorically contended that the licensor has not received any intimation about the opening of the petitioner’s office at Agartala. The petitioner has filed one communication of Department of Telecommunication dated 02.05.2011, Annexure-I of the reply dated 01.12.2015. It is not in dispute that the petitioner has license to operate within the State of Tripura and as such the cause which has been disclosed can safely be held to have arisen partly within the territorial jurisdiction of this court. The law as decided by the apex court in Kusum Ingots & Alloys Ltd. vs. Union of India and Om Prakash Srivastava Vs. Union of India lays down that the petitioner has only to establish that a legal right claimed by him has prima facie either been infringed or is threatened to be infringed by the respondent within the territorial limits of the court. In Union of India vs. Anani Exports Ltd. reported in (2002) 1 SCC 567 , the apex court has observed that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application, it must be satisfied from the entire facts pleaded in support of the cause of action that those facts do constitute a cause so as to empower the court to decide a dispute which has, at least in part, arisen within its jurisdiction. While observing thus the apex court has approvingly reproduced the following passage from Oil & Natural Gas Ltd. vs. Utpal Kumar Basu reported in (1994) 4 SCC 711 . “Under Article 226 a High Court can exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or in part, had arisen within the territories in relation to which it exercises jurisdiction, notwithstanding that the seat of the Government or authority or the residence of the person against whom the direction, order or writ is issued is not within the said territories. The expression ‘cause of action’ means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the court. The expression ‘cause of action’ means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the court. Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. Thus the question of territorial jurisdiction must be decided on the facts pleaded in the petition, the truth or otherwise of the averments made in the petition being immaterial.” It is amply clear from the passage as reproduced that each and every fact pleaded does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the court’s territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. On a paradigm-shift from the general concept of place of suing, a constitutional bench of the apex court in Khajoor Singh vs. Union of India reported in AIR 1961 SC 532 has succinctly held that: “For the reasons discussed above I have reached the conclusion that while the government of India is within the territories of every High court in India the only High court which has jurisdiction to issue a writ or order or directions under Art.226 or Art.32 (2A) against it is the one within the territories under which the act or omission against which relief was sought took place.” 29. From the averments it has been established that the threat of suffering injury is prevalent or arises within the territorial jurisdiction of this court. The petitioner apprehends injury or prejudice for exercise of unfettered power provided under clause 5.1. The financial penalty clause incorporated for breach of terms and conditions, in exclusion of liquidated damages (LD) has initially threatened of the penal action. Later on, by the impugned circulars, the apprehension of the petitioner to a greater extent became real. The scheme for financial penalty for violation of terms and conditions of the license agreement in respect of subscribers’ verification failure cases has been introduced by the impugned letter dated 24.12.2008 w.e.f. 01.04.2009. Moreover, the respondents have not controverted existence of operational office of the petitioner at Agartala. The scheme for financial penalty for violation of terms and conditions of the license agreement in respect of subscribers’ verification failure cases has been introduced by the impugned letter dated 24.12.2008 w.e.f. 01.04.2009. Moreover, the respondents have not controverted existence of operational office of the petitioner at Agartala. Even, a communication of the Department of Telecommunication, Annexure-I as stated, had been sent to the said operation office at Agartala and as such, this Court is of the view that the writ petition does not suffer from lack of territorial jurisdiction. The other limb of the question of maintainability rests on the judgment and order dated 04.03.2005 delivered in petition No.252/2011 by the TDSAT. Indisputably, the petition was filed challenging the various circulars including the circulars dated 24.12.2008, 23.03.2009, 08.02.2010 and 03.02.2011. Since that judgment has not been challenged by way of an appeal in the apex court and the judgment has reached its finality, it has been strongly contended by the respondents that the petitioner should not be allowed to agitate against those circulars, consequential to the challenge to the validity of the clauses 5.1 and 10(2) (ii) of the license agreement. In this regard, the other question which has been brought within the pale of the challenge is that after accepting the terms and conditions of the license, the writ petitioner cannot be allowed to challenge the clauses of the said license for the reason that the license was executed on 12.05.2004, whereas the writ petition has been filed on 03.09.2012. Whether the principle of res judicata would apply against the petitioner, the answer must be in the negative inasmuch as in Union of India Vs. Association of Unified Telecom Service Providers of India the apex court has held in unequivocal term that the TDSAT has no jurisdiction to decide upon the validity of the terms of conditions incorporated in the license but it will have jurisdiction to decide any dispute between the licensor and the licensee on the interpretation of the terms and conditions of the license. It has been further held by the apex court that while the tribunal has no jurisdiction to decide on the validity of the terms and condition of the license, its decision on validity of the terms and conditions of the license or on the consequential relief arising there from is without jurisdiction and is nullity. Principle of res judicata cannot apply. Principle of res judicata cannot apply. Hence, the judgment dated 04.03.2005 cannot operate as the res judicata against the petitioner for filing this writ petition challenging the clauses 5.1 and 10(2)(ii) of the license agreement. Whether the writ petitioner can maintain this writ petition? The other limb of the challenge is based on doctrine of estoppel. It is the admitted position that there had been no acceptance from the writ petitioner as to the term and condition as incorporated in the form of clause 10(2)(ii) of the license agreement and the impugned circulars including the Scheme of Financial Penalty dated 24.12.2008. As the challenge is founded on, that the clauses 5.1 and 10(2)(ii) of the license agreement are against the constitutional provisions and the statutory provisions and cumulatively against the public policy and hence the doctrine of estoppel cannot operate against the writ petitioner and the writ petition calls for decision on merit and not to be scuttled at the threshold. Whether Clause 5.1 of the license agreement is in conflict with Article 14, 19(1)(g) and 21 of the Constitution of India? 30. According to the petitioner Clause 5.1 confers an unguided, unfettered and arbitrary powers to modify any conditions of license. Clause 5.1 does not provide any guidance, control, safe guards and checks on the licensor to modify any terms and condition of the agreement unilaterally. In this case even there is no precondition for consultation for incorporation of new clause or condition like clause 10(2)(ii) of the license agreement. In the sphere of law of contract the test of reasonableness or fairness of a clause is the final determinant whether the clause concerned is poised against the public policy inasmuch as the court cannot permit to enforce a clause which is opposed to the public policy. When such clause can be applied reasonably or cannot treated, for such potential the same clause be declared unenforceable? In circumstances when one of the parties is unevenly positioned, it might happen that he had knowingly consented to a most improvident bargain whether that can estop from challenging such clause. In Central Inland Water Transport Corporation Limited and Anr. vs. Brojo Nath Ganguly and Anr. reported in AIR 1986 SC 1571 , the apex court had the occasion to re-state the law as under: 81. In Central Inland Water Transport Corporation Limited and Anr. vs. Brojo Nath Ganguly and Anr. reported in AIR 1986 SC 1571 , the apex court had the occasion to re-state the law as under: 81. The position under the American Law is stated in "Reinstatement of the Law- Second" as adopted and promulgated by the American Law Institute, Volume II xx which deals with the law of contracts, in Section 208 at page 107, as follows : Section 208. Unconscionable Contract or Term If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result. In the Comments given under that section it is stated at page 107: Like the obligation of good faith and fair dealing (S 205), the policy against unconscionable contracts or terms applies to a wide variety of types of conduct. The determination that a contract or term is or is not unconscionable is made in the light of its setting, purpose and effect. Relevant factors include weaknesses in the contracting process like those involved in more specific rules as to contractual capacity, fraud and other invalidating causes; the policy also overlaps with rules which render particular bargains or terms unenforceable on grounds of public policy. Policing against unconscionable contracts or terms has sometimes been accomplished by adverse construction of language, by manipulation of the rules of offer and acceptance or by determinations that the clause is contrary to public policy or to the dominant purpose of the contract'. Uniform Commercial Code $ 2-302 Comment 1.... A bargain is not unconscionable merely because the parties to it are unequal in bargaining position, nor even because the inequality results in an allocation of risks to the weaker party. But gross inequality of bargaining power, together with terms unreasonably favourable to the stronger party, may confirm indications that the transaction involved elements of deception or compulsion, or may show that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms. There is a statute in the United States called the Universal Commercial Code which is applicable to contracts relating to sales of goods. There is a statute in the United States called the Universal Commercial Code which is applicable to contracts relating to sales of goods. Though this statutes is inapplicable to contracts not involving sales of goods, it has proved very influential in, what are called in the United States, "non-sales" cases. It has many times been used either by analogy or because it was felt to embody a general accepted social attitude of fairness going beyond its statutory application to sales of goods. In the Reporter's Note to the said Section 208, it is stated at page 112: It is to be emphasized that a contract of adhesion is not unconscionable per se, and that all unconscionable contracts are not contracts of adhesion. Nonetheless, the more standardized the agreement and the less a party may bargain meaningfully, the more susceptible the contract or a term will be to a claim of unconscionability. The position has been thus summed up by John R. Pedan in "The Law of Unjust Contracts" published by Butterworths in 1982, at pages 28-29 : ...Unconscionability represents the end of a cycle commencing with the Aristotelian concept of justice and the Roman law iaesio enormis, which in turn formed the basis for the medieval church's concept of a just price and condemnation of usury. These philosophies permeated the exercise, during the seventeenth and eighteenth centuries, of the Chancery court's discretionary powers under which it upset all kinds of unfair transactions. Subsequently the movement towards economic individualism in the nineteenth century hardened the exercise of these powers by emphasizing the freedom of the parties to make their own contract. While the principle of pacta sunt servanda held dominance, the consensual theory still recognized exceptions where one party was overborne by a fiduciary, or entered a contract under duress or as the result of fraud. However, these exceptions were limited and had to be strictly proved. It is suggested that the judicial and legislative trend during the last 30 years in both civil and common law jurisdictions has almost brought the wheel full circle. Both courts and parliaments have provided greater protection for weaker parties from harsh contracts. In several jurisdictions this included a general power to grant relief from unconscionable contracts, thereby providing a launching point from which the courts have the opportunity to develop a modern doctrine of unconscionability. American decisions on Article 2. Both courts and parliaments have provided greater protection for weaker parties from harsh contracts. In several jurisdictions this included a general power to grant relief from unconscionable contracts, thereby providing a launching point from which the courts have the opportunity to develop a modern doctrine of unconscionability. American decisions on Article 2. 302 of the UCC have already gone some distance into this new arena.... The expression "laesio enormous used in the above passage refers to "laesio ultra dimidium vel enormous which in Roman law meant the injury sustained by one of the parties to an onerous contract when he had been overreached by the other to the extent of more than one-half of the value of the subject-matter, as for example, when a vendor had not received half the value of property sold, or the purchaser had paid more then double value. The maxim "pacta sunt servanda" referred to in the above passage means "contracts are to be kept". 82. It would appear from certain recent English cases that the courts in that country have also begun to recognize the possibility of an unconscionable bargain which could be brought about by economic duress even between parties who may not in economic terms be situate differently (see, for instance, Occidental Worldwide Investment Corpn. v. Skibs A/S Avanti 1976 (1) L Rep. 293, North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. 1979 Q.B. 705, Pao On v. Lau Yin Long 1980 A.C. 614 and Universe Tankships of Monrovia v. International Transport Workers Federation 1981 (1) C.R. 129, reversed in 1981 (2) W.L.R. 803 and the commentary on these cases in Chitty on Contracts, Twenty-fifth Edition, Volume I, paragraph 486). 83. Another jurisprudential concept of comparatively modern origin which has affected the law of contracts is the theory of "distributive justice". According to this doctrine, distributive fairness and justice in the possession of wealth and property can be achieved not only by taxation but also by regulatory control of private and contractual transactions even though this might involve some sacrifice of individual liberty. In Lingappa Pochanna Appelwar v. State of Maharashtra and Anr.: [1985] 2 SCR 224 this Court, while upholding the constitutionality of the Maharashtra Restoration of Lands to Scheduled Tribes Act, 1974, said (at page 493) : The present legislation is a typical illustration of the concept of distributive justice, as modern jurisprudence know it. In Lingappa Pochanna Appelwar v. State of Maharashtra and Anr.: [1985] 2 SCR 224 this Court, while upholding the constitutionality of the Maharashtra Restoration of Lands to Scheduled Tribes Act, 1974, said (at page 493) : The present legislation is a typical illustration of the concept of distributive justice, as modern jurisprudence know it. Legislators, Judges and administrators are now familiar with the concept of distributive justice. Our Constitution permits and even directs the State to administer what may be termed 'distributive justice'. The concept of distributive justice in the sphere of law-making connotes, inter alia, the removal of economic inequalities and rectifying the injustice resulting from dealings or transactions between un equals in society. Law should be used as an instrument of distributive justice to achieve a fair division of wealth among the members of society based upon the principle: 'From each according to his capacity, to each according to his needs'. Distributive justice comprehends more than achieving lessening of inequalities by differential taxation, giving debt relief or distribution of property owned by one to many who have none by imposing ceiling on holdings, both agricultural and urban, or by direct regulation of contractual transactions by forbidding certain transactions and, perhaps, by requiring others. It also means that those who have been deprived of their properties by unconscionable bargains should be restored their property. All such laws may take the form of forced redistribution of wealth as a means of achieving a fair division of material resources among the members of society or there may be legislative control of unfair agreements. It also means that those who have been deprived of their properties by unconscionable bargains should be restored their property. All such laws may take the form of forced redistribution of wealth as a means of achieving a fair division of material resources among the members of society or there may be legislative control of unfair agreements. When our Constitution states that it is being enacted in order to give to all the citizens of India "JUSTICE, social, economic and political", when Clause (1) of Article 38 of the Constitution directs the State to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which social, economic and political justice shall inform all the institutions of the national life, when Clause (2) of Article 38 directs the State, in particular, to minimize the inequalities in income, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations, and when Article 39 directs the State that it shall, in particular, direct its policy towards securing that the citizens, men and women equally, have the right to an adequate means of livelihood and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment and that there should be equal pay for equal work for both men and women, it is the doctrine of distributive justice which is speaking through these words of the Constitution. 84. Yet another theory which has made its emergence in recent years in the sphere of the law of contracts is the test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power. Lord Denning, M.R., appears to have been the propounder and perhaps the originator - at least in England, of this theory. In Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd. 1973 (1) Q.B. 400 where the question was whether an indemnity clause in a contract, on its true construction, relieved the indemnifier from liability arising to the indemnified from his own negligence, Lord Denning said (at pages 415-6) : The time may come when this process of 'construing' the contract can be pursued no further. The words are too clear to permit of it. Are the courts then powerless? The words are too clear to permit of it. Are the courts then powerless? Are they to permit the party to enforce his unreasonable clause, even when it is so unreasonable, or applied so unreasonably, as to be unconscionable? When it gets to this point, I would say, as I said many years ago: there is the vigilance of the common law which, while allowing freedom of contract, watches to see that it is not abused': John lee & Son (Grantham) Ltd. v. Railway Executive 1949 (2) All. E.R. 581, 584. It will not allow a party to exempt himself from his liability at common law when it would be quite unconscionable for him to do so. In the above case the Court of Appeal negative the defence of the indemnifier that the indemnity clause did not cover the negligence of the indemnified. It was in Lloyds Bank Ltd. v. Bundy 1974 (3) All E.R. 757 that Lord Denning first clearly enunciated his theory of "inequality of bargaining power". He began his discussion on this part of the case by stating (at page 763) : There are cases in our books in which the courts will set aside a contract, or a transfer of property, when the parties have not met on equal terms, when the one is so strong in bargaining power and the other so weak that, as a matter of common fairness, it is not right that the strong should be allowed to push the weak to the wall. Hitherto those exceptional cases have been treated each as a separate category in itself. But I think the time has come when we should seek to find a principle to unite them. I put on one side contracts or transactions which are void able for fraud or misrepresentation or mistake. All those are governed by settled principles. I go only to those where there has been inequality of bargaining power, such as to merit and intervention of the court. He then referred to various categories of cases and ultimately deduced there from a general principle in these words (at page 765): Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on 'inequality of bargaining power'. He then referred to various categories of cases and ultimately deduced there from a general principle in these words (at page 765): Gathering all together, I would suggest that through all these instances there runs a single thread. They rest on 'inequality of bargaining power'. By virtue of it, the English law gives relief to one who, without independent advice, enters into a contract on terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought- to bear on him by or for the benefit of the other. When I use the word 'undue' 1 do not mean to suggest that the principle depends on proof of any wrongdoing. The one who stipulates for an unfair advantage may be moved solely by his own self interest, unconscious of the distress he is bringing to the other. I have also avoided any reference to the will of the one being 'dominated' or 'overcome' by the other. One who is in extreme need may knowingly consent to a most improvident bargain, solely to relieve the straits in which he finds himself. Again, I do not mean to suggest that every transaction is saved by independent advice. But the absence of it may be fatal. With these explanations, I hope this principle will be found to reconcile the cases.” 31. It has been further reverberated in Central Inland Water Transport Corporation Limited and Anr. Vs. Brojo Nath Ganguly and Anr. as under: “90. Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass us by, leaving us floundering in the sloughs of nineteenth-century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can arise in the affairs of men. One can only attempt to give some illustrations. For instance, the above principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infra-structural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances.” 32. In McDermott International Inc. Vs. Burn Standard Co. Ltd. and Ors. reported in (2006)11 SCC 181 the apex court has succinctly held as under: “58........An apparent shift can, however, be noticed from the decision of this Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (for short ‘ONGC’: [2003] 3 SCR 691. This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly: (1986)3 SCC 156 wherein the applicability of the expression 'public policy' on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/ or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act. In ONGC (supra), this Court, apart from the three grounds stated in Renusagar (supra), added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.” 33. Section 23 of the Indian Contract Act, 1872 has declared that the object of an agreement is unlawful if the court regards it as immoral or opposed to the public policy. The provision ultra vires qua Article 14 of the Constitution is not only patently arbitrary but also brings that the clause falls within the deadly hug of un-conscionability and the opposites of the public policy which renders an agreement unlawful. The provision ultra vires qua Article 14 of the Constitution is not only patently arbitrary but also brings that the clause falls within the deadly hug of un-conscionability and the opposites of the public policy which renders an agreement unlawful. Having regard to the provisions of Section 4 of the Indian Telegraph Act, 1855 which are not under challenge before this court, it is no denying that the Central Government has the exclusive privilege in respect of telegraphs and power to grant licenses but that power must be exercised in a fair and a conscionable manner. Even if it is found that the source of clause 5.1 is embedded in Section 4 of the Indian Telegraph Act, then also the clause 5.1 may not survive the test of fairness and conscionability and as such it may not conform to the public policy. 34. Dealing with the equality clause in the Constitution of the USA, Professor Willis has said: "Perhaps the best view on the subject is that 'due process' and 'equality' are, not violated by the mere conference of unguided power, but only by its arbitrary exercise by those upon whom conferred (see Plymouth Coal Co. v. Pennsylvania (1914) 232 U.S.” The theory behind this proposition is that although the conferment of discretionary power without guideline might result in its being exercised in a discriminatory manner, no one will presume that it will be so exercised. On the other hand, the presumption is that public functionaries will administer the law properly. Courts do not strike down a provision in a statute on the assumption that the person invested with power under it would exercise it "with an evil eye and unequal hand"*. The heart of the matter is that in such a case the law itself is not bad, because it is capable of being administered in an impartial and reasonable manner as this case illustrates. So long as courts are open in this country and the doctrine of abuse of power is there, there need be no apprehension that any power will be exercised arbitrarily or in a discriminatory manner merely because the power is apparently capable of being so exercised. It is perfectly open to the State Government or an honest officer to whom the power is delegated to exercise it in a reasonable and non-discriminatory manner. It is perfectly open to the State Government or an honest officer to whom the power is delegated to exercise it in a reasonable and non-discriminatory manner. Why then should the court be anxious to strike down the law? The court's power is properly invoked if a person is actually aggrieved by the exercise of the power under the law. We should not exercise our power to strike down a law on hypothetical considerations of what a bad officer might do. In determining the constitutionality of an Act, we would construe it in such a manner as to sustain it and every possible presumption will be indulged in for that purpose. Our attempt must be to preserve and not destroy. Respect for a coordinate branch of the Government as well as the presumption of constitutionality demands it. Before a duly enacted law can be judicially nullified, it must be forbidden by some explicit restriction in the Constitution. Our duty of deference to those who have the responsibility for making the laws has great relevance in this context. The attitude of judicial humility which this Consideration enjoins is not an abdication of the judicial function. It is a due observance of its limits. As Marshall said: "No. questions can be brought before a judicial tribunal of greater delicacy than those which involve the constitutionality of legislative acts". And, as laid, a just respect for the legislature requires that the obligation of its laws should not be unnecessarily and wantonly assailed. Mathew J. in his dissenting judgment in State of Punjab v. Khanchand reported in (1974) 1 SCC 549 has approvingly referred Professor Willis’s observation. In State of Punjab vs. Khanchand the challenge was against Section 2 of East Punjab Movable Property (Requisitioning) Act, 1947. Per majority the said section was struck down on the ground of being violative of Article 14 of the Constitution. Thus, the theory as propounded by Prof. Willis was not subscribed by the majority. Since the said section 2 of the Act was not severable from the rest of the Act and the other provisions were merely ancillary to the powers of requisitioning, the entire Act was declared unconstitutional by way of affirming the judgment of the Punjab High Court. The said majority view has been relied but there is distinguishable difference between the facts. The said majority view has been relied but there is distinguishable difference between the facts. In this case, Section 4 of the Indian Telegraph Act, 1885 has not been challenged. Section 4 has unequivocally granted ‘exclusive privilege’ and the power to grant a license on such conditions and in consideration of payment as it thinks fit, to any person to establish, maintain or work a telegraph within a part of India. When the statutory source provides unfettered power without any guidance though the central Government has been provided with power to frame rules for operation of this Section but there is no rule in this regard or to provide guidance, restriction, control or check in exercise of that power. As Clause 5.1 has been structured in congruity with the provisions of Section 4 of the Indian Telegraph Act it would not be apposite to hold it ultra vires inasmuch as the attempt of the court should be to preserve and not to destroy the statutory provisions, in this case, which is not even under challenge. The presumption of the constitutionality in such circumstances demands so. Even a duly enacted law can be judicially nullified, it must be forbidden by some explicit restriction. The doctrine of reading down is one of such judicial innovations. A just respect for the legislature requires that obligation of its laws should not be unnecessarily and wantonly assailed. There cannot be any amount of debate that often it is practically useless to lodge power in a public functionary without giving him a large measure of discretion for the situation which might arise in public affairs which are multifarious and very often unpredictable and unforeseen. This is particularly so when a volatile technology of communication is handled with. The security vulnerability has to be kept under close watch. A potential danger always exists while wide discretionary power is invested with a person or authority, as it might be abused or exercised in a discriminatory manner. However, much the legislature might try to hedge the power with safeguards or effective mechanism of redressal from the abuse of power, it essentially forms a question of striking the balance by way of effectively hedging the potential excess. As stated, this Court cannot take a view by declaring Clause 5.1 of the license agreement ultra vires or opposed to the public policy. As stated, this Court cannot take a view by declaring Clause 5.1 of the license agreement ultra vires or opposed to the public policy. As the license agreement is essentially within the domain of contract, before exercising the authority as provided by Clause 5.1 of the license agreement for amendment, expansion/addition, modification, alteration etc. after the license agreement had come into being on acceptance by the licensee, there must be effective ‘communication’ and ‘acceptance’ within the meaning of Section 3 of the Indian Contract Act when liquidating the damage. Without observing such requisite exercise, the license agreement would be void and inoperative, despite such power is available in Clause 5.1 of the license agreement. [*Willis, "constitutional Law" pp. 586-87] Whether the Clause 10(2)(ii) of the license agreement is in conflict with Section 20A of the Indian Telegraph Act, 1885 and Section 74 of the Indian Contract Act and whether in view of provisions of Section 23 of the Indian Contract Act the said Clause 10.2(ii) of the license agreement is liable to be struck down? 35. Clause 10.2(ii) has provided unbridled power to the licensor to impose “financial penalty” not exceeding Rs.50 crores for violation of terms and conditions of license agreement. That penalty is excluded of liquidated damages as prescribed in the license condition. By way of the scheme of financial penalty, penalty of corresponding amount for each detected unverified case has been prescribed in a graded manner by providing a table in the said scheme which has been produced hereinbefore. In terms of the said graded financial penalty the petitioner has been imposed penalty to the extent of Rs.339,59,7500 for the North-East service area and for the Assam area for the period from April 2007 till January 2012. This catapulted the challenge against the said clause contending that circulars/letters dated 24.12.2008, 23.03.2009, 28.02.2010 and 03.02.2011 emanating from clause 10(2)(ii) of the license agreement are unjust, unfair, unreasonable and ultra vires the statutory provisions and in conflict with the well laid doctrine of proportionality. The petitioner has emphasized that Section 20A of the Indian Telegraph Act has been taken ride of and as those provisions are opposed to the public policy, those cannot be enforced. The petitioner has emphasized that Section 20A of the Indian Telegraph Act has been taken ride of and as those provisions are opposed to the public policy, those cannot be enforced. There is no dispute that Clause 35 of the license agreement has provided for the liquidated damages in the case of failure to deliver the service or to meet the required coverage criteria/network roll out obligations within the period prescribed for the commissioning. It has been further provided in Clause 35.2 that for delay of more than 52 weeks in payment of liquidated damages as prescribed, the license may be terminated. That apart, the license-agreement contains provision for suspension, revocation or termination for license for violation any of the terms and conditions of the license-agreement. Such provisions are available in Clause 10. In addition to Clause 10 and 10.1 and clause 10(2)(1), the Clause 10(2)(ii) has been inducted. Clause 10(2)(ii) has prescribed penalty, not the liquidated damages for any breach of the license obligation. The distinction between liquidated damages and penalty has been made out having referred to the various commentaries including Halsbury’s Laws of England, Corpus Juris Secundum and American Restatement of law. If the distinction is culled out in simple words having regard to their extent, it can be stated that damages for breach may be liquidated in the agreement but that amount should be reasonable in the light of anticipated or actual loss. A term fixing unreasonably large liquidated damages is unenforceable in the public policy. Penalty is in effect a security performance, while the provisions of liquidated damages are for a sum to be paid in lieu of performance. Corpus Juris Secundum while explaining ‘penalty’ has noted that a term in a contract calling for the imposition for the penalty for the breach of the contract is contrary to the public policy and invalid. In Maya Devi vs. Lalta Prasad the apex court has held that duty is not to enforce the penalty clause but to award reasonable compensation within ambit of Section 74 of the Indian Contract Act, wherever the clause for liquidated damages is agreed upon. 36. In Maya Devi vs. Lalta Prasad the apex court has held that duty is not to enforce the penalty clause but to award reasonable compensation within ambit of Section 74 of the Indian Contract Act, wherever the clause for liquidated damages is agreed upon. 36. In Aktieselskabet Reidar vs. Arcos reported as [1927]1KB 352 it has been held that it is possible that the parties fixed an amount as liquidated damages for a specific type of breach, only then the party suffering from other type breach may sue for un-liquidated damages arising from such breach. In the Indian context, the said principle can be well accommodated in terms of Section 73 and 74 of the Indian Contract Act. Damages are said to be liquidated when they have been agreed and fixed by the parties. It is the sum which the parties have agreed by contract as payable by default as one of them indulged in. Section 74 of the Indian Contract Act applies to the liquidated damages. In all other damages where the court quantifies or assesses the damages or loss, such damages are un-liquidated and those are recovered under Section 73 with certain exceptions. Section 74 of the Indian Contract Act accommodates penalty within the well defined meaning for breach of contract and such compensation must be reasonable and not exceeding the amount so determined. In Prithwichand Ramchand Sablok vs. S. Y. Shinde AIR 1993 SC 1974 it has been held that a clause in a contract can be described as penal if the party who has to pay a certain amount of money fails to pay the amount within the time stipulated. In such a situation, the other party will be at liberty to recover the entire sum with interest and cost. Such a clause would be penal in character. It has been held by the apex court there that if half payment is made within the time stipulated, the other party waives his right to the balance amount. However, Fateh Chand vs. Bal Kisen Das has more elaborately dealt with the extent of reasonable compensation when the damage is liquidated. Clause 10.2(ii) or the financial penalty scheme as brought within the domain of the license agreement is not within the fold of liquidated damages in the license agreement. However, Fateh Chand vs. Bal Kisen Das has more elaborately dealt with the extent of reasonable compensation when the damage is liquidated. Clause 10.2(ii) or the financial penalty scheme as brought within the domain of the license agreement is not within the fold of liquidated damages in the license agreement. Even if it is understood that those penal clauses are virtually the additional clauses for liquidated damages, which they are not, then those must be subject to the reasonable compensation. There cannot be any unguided and unfettered penalty even in the garb of liquidated damages and hence clause 10(2)(ii) and the financial penalty clause as incorporated apparently for breach of terms and conditions of the license-agreement including those have been brought within the domain of the license-agreement by way of the impugned letters and circulars. Hence, the damage as liquidated thereof is subject to reasonable compensation within the ambit of Section 74 of the Indian Contract Act. This liquidated damage clauses are often wrongly described as penalty clauses. A clause which provides for liquidated damages for purpose of breach of contract are usually upheld by the courts. The courts do not uphold clauses which are intended as penalty to deter a breach of contract. To know whether a clause is a penalty clause or not, the test which determines is that the rate for liquidated damages is to be a genuine pre-estimate of the loss which might be incurred. In Cavendish Square Holding BV v. Talal EI Makdessi reported as [2015] UK SC 67 the U. K. Supreme Court has rejected the traditional test of whether a clause that has taken effect on breach, is on “genuine pre-estimate of loss” and therefore compensatory, or whether it is aimed at deterring a breach and therefore penal. The true principle, as established in the judgment, is whether the clause is out of all proportion to the innocent party’s legitimate interest in enforcing the counterparty’s obligations under the contract. If so, it will be penal and therefore unenforceable. The test now is: 1. Is there any commercial justification for the liquidated damages clause? 2. The clause must not be extravagant or oppressive. 3. The purpose of the clause must be to compensate the loss and not to deter a breach. 4. The court will also look at whether the parties to the contract are on an equal footing. The test now is: 1. Is there any commercial justification for the liquidated damages clause? 2. The clause must not be extravagant or oppressive. 3. The purpose of the clause must be to compensate the loss and not to deter a breach. 4. The court will also look at whether the parties to the contract are on an equal footing. For purpose of further elucidation the following passages from Cavendish Square Holding BV v. Talal EI Makdessi are reproduced hereunder: “35. But for all that, the circumstances in which the contract was made are not entirely irrelevant. In a negotiated contract between properly advised parties of comparable bargaining power, the strong initial presumption must be that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach. In that connection, it is worth noting that in Philips Hong Kong at pp 57-59, Lord Woolf specifically referred to the possibility of taking into account the fact that “one of the parties to the contract is able to dominate the other as to the choice of the terms of a contract” when deciding whether a damages clause was a penalty. In doing so, he reflected the view expressed by Mason and Wilson JJ in AMEV-UDC at p 194 that the courts were thereby able to “strike a balance between the competing interests of freedom of contract and protection of weak contracting parties” (citing Atiyah, The Rise and Fall of Freedom of Contract (1979), Chapter 22). However, Lord Woolf was rightly at pains to point out that this did not mean that the courts could thereby adopt “some broader discretionary approach”. The notion that the bargaining position of the parties may be relevant is also supported by Lord Browne-Wilkinson giving the judgment of the Privy Council in Workers Bank. At p 580, he rejected the notion that “the test of reasonableness [could] depend upon the practice of one class of vendor, which exercises considerable financial muscle” as it would allow such people “to evade the law against penalties by adopting practices of their own”. In his judgment, he decided that, in contracts for sale of land, a clause providing for a forfeitable deposit of 10% of the purchase price was valid, although it was an anomalous exception to the penalty rule. In his judgment, he decided that, in contracts for sale of land, a clause providing for a forfeitable deposit of 10% of the purchase price was valid, although it was an anomalous exception to the penalty rule. However, he held that the clause providing for a forfeitable 25% deposit in that case was invalid because “in Jamaica, the customary deposit has been 10%” and “[a] vendor who seeks to obtain a larger amount by way of forfeitable deposit must show special circumstances which justify such a deposit”, which the appellant vendor in that case failed to do. Should the penalty rule be abrogated? 36. The primary case of Miss Smith QC, who appeared for Cavendish in the first appeal, was that the penalty rule should now be regarded as antiquated, anomalous and unnecessary, especially in the light of the growing importance of statutory regulation in this field. It is the creation of the judges, and, she argued, the judges should now take the opportunity to abolish it. There is a case to be made for taking this course. It was expounded with considerable forensic skill by Miss Smith, and has some powerful academic support: see Sarah Worthington, Common Law Values: the Role of Party Autonomy in Private Law, in The Common Law of Obligations: Divergence and Unity (ed A Robertson and M Tilbury (2015)), pp 18-26. We rather doubt that the courts would have invented the rule today if their predecessors had not done so three centuries ago. But this is not the way in which English law develops, and we do not consider that judicial abolition would be a proper course for this court to take. Page 19 37. The first point to be made is that the penalty rule is not only a long-standing principle of English law, but is common to almost all major systems of law, at any rate in the western world. It has existed in England since the 16th century and can be traced back to the same period in Scotland: McBryde, The Law of Contract in Scotland, 3rd ed(2007), paras 22-148. The researches of counsel have shown that it has been adopted with some variants in all common law jurisdictions, including those of the United States. It has existed in England since the 16th century and can be traced back to the same period in Scotland: McBryde, The Law of Contract in Scotland, 3rd ed(2007), paras 22-148. The researches of counsel have shown that it has been adopted with some variants in all common law jurisdictions, including those of the United States. A corresponding rule was derived from Roman law by Pothier, Traité des Obligations, No 346, which is to be found in the Civil Codes of France (article 1152), Germany (for non-commercial contracts only) (sections 343, 348), Switzerland (article 163.3), Belgium (article 1231) and Italy (article 1384). It is included in influential attempts to codify the law of contracts internationally, including the Unidroit Principles of International Commercial Contracts (2010) (article 7.4.13), and the UNCITRAL Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance (article 6). In January 1978 the Committee of Ministers of the Council of Europe recommended a number of common principles relating to penal clauses, including (article 7) that a stipulated sum payable on breach “may be reduced by the court when it is manifestly excessive”. 38. It is true that statutory regulation, which hardly existed at the time that the penalty rule was developed, is now a significant feature of the law of contract. In England, the landmark legislation was the Unfair Contract Terms Act 1977. For most purposes, the Act was superseded by the Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994/3159), which was in turn replaced by the 1999 Regulations, both of which give effect to European Directives. The 1999 Regulations contain an “indicative and non-exhaustive list of the terms which may be regarded as unfair”, including terms which have the object or effect of “requiring any consumer who fails to fulfill his obligation to pay a disproportionately high sum in compensation”. Nonetheless, statutory regulation is very far from covering the whole field. Penalty clauses are controlled by the 1999 Regulations, but the Regulations apply only to consumer contracts and the control of unfair terms under regulations 3 and 5 is limited to those which have not been individually negotiated. There are major areas, notably non-consumer contracts, which are not regulated by statute. Penalty clauses are controlled by the 1999 Regulations, but the Regulations apply only to consumer contracts and the control of unfair terms under regulations 3 and 5 is limited to those which have not been individually negotiated. There are major areas, notably non-consumer contracts, which are not regulated by statute. Some of those who enter into such contracts, for example professionals and small businesses, may share many of the characteristics of consumers which are thought to make the latter worthy of legal protection. The English Law Commission considered penalty clauses in 1975 (Working Paper No 61, Penalty Clauses and Forfeiture of Monies Paid, April 1975), at a time when there was no relevant statutory regulation, and the Scottish Law Commission reported on them in May 1999 (Report No 171). Neither of these Reports recommended abolition of the rule. On the contrary, both recommended legislation which would have expanded its scope. Page 20 39. Further, although there are justified criticisms that can be made of the penalty rule, it is consistent with other well-established principles which have been developed by judges (albeit mostly in the Chancery courts) and which involve the court in declining to give full force to contractual provisions, such as relief from forfeiture, the equity of redemption, and refusal to grant specific performance, as discussed in paras 10-11 and 29-30 above. Finally, the case for abolishing the rule depends heavily on anomalies in the operation of the law as it has traditionally been understood. Many, though not all of these are better addressed (i) by a realistic appraisal of the substance of contractual provisions operating upon breach, and (ii) by taking a more principled approach to the interests that may properly be protected by the terms of the parties’ agreement. Should the penalty rule be extended? 40. In the course of his cogent submissions, Mr Bloch QC, who appeared for Mr Makdessi on the first appeal, suggested that, as an alternative to confirming or abrogating the penalty rule, this court could extend it, so that it applied more generally. As he pointed out, this was the course taken by the High Court of Australia, and it would have the advantage of rendering the penalty rule less formalistic in its application, and, which may be putting the point in a different way, less capable of avoidance by ingenious drafting. 41. This step has recently been taken in Australia. As he pointed out, this was the course taken by the High Court of Australia, and it would have the advantage of rendering the penalty rule less formalistic in its application, and, which may be putting the point in a different way, less capable of avoidance by ingenious drafting. 41. This step has recently been taken in Australia. Until recently, the law in Australia was the same as it is in England: see IAC Leasing Ltd v Humphrey (1972) 126 CLR 131, 143 (Walsh J); O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359, 390 (Brennan J); AMEV-UDC at p 184 (Mason and Wilson JJ, citing ECGD among other authorities), 211 (Dawson J); Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, 662. However, a radical departure from the previous understanding of the law occurred with the decision of the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205. The background to this case was very similar to that in Office of Fair Trading v Abbey National plc [2010] 1 AC 696. It concerned the application of the penalty rule to contractual bank charges payable when the bank bounced a cheque or allowed the customer to draw in excess of his available funds or agreed overdraft limit. These might in a loose sense be regarded as banking irregularities, but they did not involve any breach of contract on the part of the customer. On that ground Andrew Smith J had held in the Abbey National case that the charges were incapable of being penalties: [2008] 2 All ER (Comm) 625, paras 295-299 (the point was not appealed). In Andrews, the High Court of Australia disagreed. They engaged in a detailed historical examination of the equitable origin of the rule and concluded that there subsisted, independently of the common law rule, an equitable jurisdiction to relieve against any sufficiently onerous provision which was conditional upon a failure to observe some other provision, whether or not that failure was a breach of contract. They engaged in a detailed historical examination of the equitable origin of the rule and concluded that there subsisted, independently of the common law rule, an equitable jurisdiction to relieve against any sufficiently onerous provision which was conditional upon a failure to observe some other provision, whether or not that failure was a breach of contract. At para 10, they defined a penalty as follows: Page 21 “In general terms, a stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.” 42. Any decision of the High Court of Australia has strong persuasive force in this court. But we cannot accept that English law should take the same path, quite apart from its inconsistency with established and unchallenged House of Lords authority. In the first place, although the reasoning in Andrews was entirely historical, it is not in fact consistent with the equitable rule as it developed historically. The equitable jurisdiction to relieve from penalties arose wholly in the context of bonds de-feasible in the event of the performance of a contractual obligation. It necessarily posited a breach of that obligation. Secondly, if there is a distinct and still subsisting equitable jurisdiction to relieve against penalties which is wider than the common law jurisdiction, with three possible exceptions it appears to have left no trace in the authorities since the fusion of law and equity in 1873. It necessarily posited a breach of that obligation. Secondly, if there is a distinct and still subsisting equitable jurisdiction to relieve against penalties which is wider than the common law jurisdiction, with three possible exceptions it appears to have left no trace in the authorities since the fusion of law and equity in 1873. The first arguable exception is in re Dagenham (Thames) Dock Co; Ex p Hulse (1873) LR 8 Ch App 1022 (followed by the Privy Council in Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319), where the Court of Appeal granted a purchaser, who had been in possession for five years and carried out improvements, further time to pay the second and final installment of a purchase price on the ground that the clause requiring him to vacate and to forfeit the first installment for not having paid the second installment on time, was a “penalty”. However, James and Mellish LJJ may have been treating the clause as a forfeiture (as they both also used that expression in their brief judgments), and in any event they treated the purchaser in the same way as a mortgagor in possession asking for more time to pay. Further, as Romer LJ pointed out in Stock loser at pp 497-498, the decision could be justified by the fact that time had already been extended twice by agreement, and in any event there was no question of the vendor being required to repay the first installment. The second arguable exception is no more than an unsupported throw-away line in the judgment of Dip lock LJ in Robophone at p 1446, where he said it was “by no means clear” whether penalty clauses “are simply void”, but, on analysis, he was dealing with a rather different point (namely that discussed by Lord Atkin in the passage that follows). The third exception is the unsatisfactory decision in Jobson v Johnson [1989] 1 WLR 1026, to which we shall return in paras Page 22 84-87 below. It is relevant to add in this connection that the law of penalties has been held to be the same in England and Scotland: Stair Memorial Encyclopaedia of the Laws of Scotland, vol. 15, paras 783-801, and see Clydebank. Yet equity, although influential, has never been a distinct branch of Scots law. It is relevant to add in this connection that the law of penalties has been held to be the same in England and Scotland: Stair Memorial Encyclopaedia of the Laws of Scotland, vol. 15, paras 783-801, and see Clydebank. Yet equity, although influential, has never been a distinct branch of Scots law. In the modern law of both countries, the penalty rule is an aspect of the law of contract. Thirdly, the High Court’s redefinition of a penalty is, with respect, difficult to apply to the case to which it is supposedly directed, namely where there is no breach of contract. It treats as a potential penalty any clause which is “in the nature of a security for and in terrorem of the satisfaction of the primary stipulation.” By a “security” it means a provision to secure “compensation … for the prejudice suffered by the failure of the primary stipulation”. This analysis assumes that the “primary stipulation” is some kind of promise, in which case its failure is necessarily a breach of that promise. If, for example, there is no duty not to draw cheques against insufficient funds, it is difficult to see where compensation comes into it, or how bank charges for bouncing a cheque or allowing the customer to overdraw can be regarded as securing a right of compensation. Finally, the High Court’s decision does not address the major legal and commercial implications of transforming a rule for controlling remedies for breach of contract into a jurisdiction to review the content of the substantive obligations which the parties have agreed. Modern contracts contain a very great variety of contingent obligations. Many of them are contingent on the way that the parties choose to perform the contract. There are provisions for termination upon insolvency, contractual payments due on the exercise of an option to terminate, break-fees chargeable on the early repayment of a loan or the closing out of futures contracts in the financial or commodity markets, provisions for variable payments dependent on the standard or speed of performance and “take or pay” provisions in long-term oil and gas purchase contracts, to take only some of the more familiar types of clause. The potential assimilation of all of these to clauses imposing penal remedies for breach of contract would represent the expansion of the courts’ supervisory jurisdiction into a new territory of uncertain boundaries, which has hitherto been treated as wholly governed by mutual agreement. 43. We would accept that the application of the penalty rule can still turn on questions of drafting, even where a realistic approach is taken to the substance of the transaction and not just its form. But we agree with what Hoffmann LJ said in Else (1982) at p 145, namely that, while it is true that the question whether the penalty rule applies may sometimes turn on “somewhat formal distinction[s]”, this can be justified by the fact that the rule “being an inroad upon freedom of contract which is inflexible … ought not to be extended”, at least by judicial, as opposed to legislative, decision-making. 37. In our country, in Bharat Sanchar Nigam Limited vs. Reliance Communication Limited reported in (2011) 1 SCC 394 it has been held as under: 47. According to Chitty on Contracts "whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach. The question to be always asked is whether the alleged penalty clause can pass muster as a genuine pre-estimate of loss". (See para 26-126 of Chitty on Contracts, 30th edition) The fact that damage is difficult to assess with precision strengthens the presumption that a sum agreed between the parties represents a genuine attempt to estimate it and to overcome the difficulties of proof at the trial. 48. According to the Law of Contract by G.H. Treitel (10th edition), a clause is penal if it provides for "a payment stipulated as in terrorem of the offending party to force him to perform the contract. If, on the other hand, the clause is an attempt to estimate in advance the loss which will result from the breach, it is a liquidated damages clause. The question whether a clause is penal or pre-estimate of damages depends on its construction and on the surrounding circumstances at the time of entering into the contract". 49. If, on the other hand, the clause is an attempt to estimate in advance the loss which will result from the breach, it is a liquidated damages clause. The question whether a clause is penal or pre-estimate of damages depends on its construction and on the surrounding circumstances at the time of entering into the contract". 49. Lastly, the fact that a sum of money is payable on breach of contract is described by the contract as "penalty" or "liquidated damages" is relevant but not decisive as to categorization. 50. Applying the above tests to facts of this case, we find that the Interconnect Agreement in question should be viewed in the context of the regulatory regime. In this case, we are concerned with telecom as a service. This is the most important circumstance to be considered as one of the main surrounding circumstances to the Interconnect Agreement. Under the Interconnect Agreement, the UASL is obliged to maintain the integrity of its exchange/POI. It is important to note that each service provider, including BSNL, is a market player/stakeholder. Each UASL is entitled to a level playing field. The nature of the call be it local or national or international, as indicated by corresponding CLI, is the basis for the levy of IUC (including ADC). If by wrong routing of calls or by masking the cost of providing services is reduced, the concerned operator gets an undue advantage not only in the Indian market over other competing operators but also in the international market. 51. Billing is one of the most vital aspects of this case. With technology, an international call could fall on the local POI but then the concerned operator is responsible for the identity of the call. In the case of calls which are correctly routed, the display screen with the subscriber clearly indicates whether the call bears international or local/national CLI. Similarly, when the Gateway Bypass Scam takes place and the international call(s) lands on the local POI which is not forwarded to the specified trunk group/POI, there 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 IUC at a lower rate. All this results in payment of IUC at a lower rate. All this leads to reduced cost for the defaulting UASL which provides not only increase in its profit but also gives it an advantage in international market vis-a-vis other competitors (including BSNL) because the defaulting UASL can easily price its product in the international market at a lower rate and in that sense loss is caused to BSNL. 52. Similarly, as stated above, masking takes place as international CLI can easily be identified even when an international call lands on the local POI of the UASL, hence, the defaulting UASL resorts to masking. Hence, an international call coming from the masked number alone cannot be taken into account. Thus, in our view, clauses 6.4.6(a) and 6.4.6(b) provide for pre-estimate of damages. It is so also for one more reason. The clause, as stated above, restricts the higher IUC rate made applicable for calls only for last two preceding months and not for last three years or the longer period. These time lines is an indicia showing that Clause 6.4.6 is not penal but a pre-estimate of reasonable compensation for the loss foreseen at the time of entering into the agreement. 53. Lastly, it may be noted that liquidated damages serve the useful purpose of avoiding litigation and promoting commercial certainty and, therefore, the court should not be astute to categorize as penalties the clauses described as liquidated damages. This principle is relevant to regulatory regimes. It is important to bear in mind that while categorizing damages as "penal" or "liquidated damages", one must keep in mind the concept of pricing of these contracts and the level playing field provided to the operators because it is on costing and pricing that the loss to BSNL is measured and, therefore, all calls during the relevant period have to be seen. [See Communications Law in India by Vikram Raghavan at page 639]. Since Clause 6.4.6 represents pre-estimate of reasonable compensation, Section 74 of the Contract Act is not violated. Thus, it is not necessary to discuss various judgments of this Court under Section 74 of the Contract Act. 38. In view of BSNL vs. Reliance Communication Ltd. The dominant test is “pre-estimate of reasonable compensation”. Since Clause 6.4.6 represents pre-estimate of reasonable compensation, Section 74 of the Contract Act is not violated. Thus, it is not necessary to discuss various judgments of this Court under Section 74 of the Contract Act. 38. In view of BSNL vs. Reliance Communication Ltd. The dominant test is “pre-estimate of reasonable compensation”. If there is pre-estimate of reasonable compensation Section 74 of the Indian Contract Act is not violated but if there is no pre-estimate of reasonable compensation Section 74 of the Indian Contract Act is violated and as such the clause cannot be treated for liquidated damages and such clause is bound to be treated as penal for ensuring performance. Such penal clause cannot be enforced and hence such clause would be in conflict with the provisions of Section 23 having opposed to the public policy which term has been put to a definite meaning in ONGC Ltd. vs. Saw Pipes Ltd. It can be stated that concept of public policy concerns public good and public interest. If any provision is patently illegal, that is opposed to the public policy meaning that any clause in an agreement or the agreement as a whole could be declared unenforceable or void, if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. That apart, in Fateh Chand vs. Bal Kisen Das it has been unambiguously held that the aggrieved party is entitled to receive compensation from the party who commits the breach of the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of actual loss of damage. It does not justify the award of compensation when in consequences of the breach, no legal injury at all has been resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things or which the party knew when they made the contract, to be likely to result from the breach. This proposition is the reflection of the doctrine of proportionality. This proposition is the reflection of the doctrine of proportionality. There cannot be any doubt or dispute keeping in view the decision in Regina (Daly) v. Secretary of State for the Home Department reported in [2001] 2 WLR 1622 that in regard to the cases involving common law constitutional rights, the doctrine of proportionality must be applied. The other limb of the argument on the challenge to the validity of clause 10.2(ii) and the financial penalty scheme is that those are opposed to the provisions of Section 20A of the Indian Telegraph Act which provides for breach of conditions of license. Section 20A, as provided statutorily, cannot be challenged on the touchstone of Section 73 and 74 of the Indian Contract Act. The penal consequences as provided by clause 10(2)(ii) and the financial penalty clause are in conflict with Sections 73 and 74 of the Indian Contract Act and provisions of Section 20A of the Indian Telegraph Act and hence the said clause and provisions are un-enforceable and void in view of Section 23 of the Indian Contract Act. But the respondents may reframe the said clause by way of addition or modification or alteration in the mode of amendment or issue instruction in conformity with the provisions of Section 4 of the Indian Telegraph Act, 1885 by “pre-estimate of reasonable compensation” for breach of the license agreement or at their option they may deal with the breach in terms of Section 20A of Indian Telegraph Act. This Court categorically holds that Clause 10(2)(ii) of the license agreement and the financial penalty scheme as introduced by the impugned communication dated 14.12.2008, Annexure-3 to the writ petition and the clarification dated 03.02.2011 (Annexure-9 to the writ petition) are not within the meaning and import of liquidated damages and those are clearly penalty which fail to pass through the test of pre-estimate of reasonable compensation. That apart, this scheme or the clause 10.2(ii) of the license agreement stands opposed to Section 20A of the Indian Telegraph Act and the public policy in the manner as aforesaid. Above all, while incorporating the Clause 10(2)(ii), the requisite compliance as stated for invoking the authority as provided under clause 5.1 is conspicuous by absence. Such requisite exercise in incorporating the financial penalty clause would render the very clause or provision by letters/communication unenforceable. Above all, while incorporating the Clause 10(2)(ii), the requisite compliance as stated for invoking the authority as provided under clause 5.1 is conspicuous by absence. Such requisite exercise in incorporating the financial penalty clause would render the very clause or provision by letters/communication unenforceable. The cumulative result of such observations is that those communications dated 24.12.2008, Annexure-3 to the writ petition and 03.02.2011, Annexure-9 to the writ petition, cannot be enforced and hence those are treated void and inoperative. To recapitulate, the Government of India as the licensing authority under Section 4 of the Indian Telegraph Act would be within its competence notwithstanding this judgment to incorporate additional clause liquidating the damages that may occur for breach of instructions dated 10.05.2005, 04.06.2007, 30.04.2008, Annexure-1A to the writ petition. It is to be further clarified that the instruction dated 22.11.2006 is a composite instruction containing instruction in respect of verification of the subscribers and penal clause which provides that after 31.03.2007 if any subscriber’s number is found working without proper verification a minimum penalty of Rs.1000/- per violation of subscriber verification number shall be levied on the licensee. That instruction dated 22.11.2006 is not entirely interfered with but the financial penalty as prescribed is declared unenforceable and void, subject to the leave as granted to the licensor. However, the latter part containing immediate disconnection of the subscriber number by the licensee is not interfered with, keeping an eye on the internal security of the country. For the same reason, the impugned circulars/instructions for re-verification of the subscribers’ identity on the basis of prescribed papers/documents are not interfered with. Since the financial penalty clause which emanated from Clause 10(2)(ii) has been interfered with, the procedure as laid down to be observed by the Term Cell has become inoperative till such time the Central Government takes appropriate measures having due regard to the observations made in this judgment. The Central Government may take appropriate measure, if they are so inclined to, within a period of six months from today. The Central Government shall remain within its competence to recover the damages if those are liquidated in the new measure for breach of instruction as to verification of identify of subscribers, treating the same as breach of term or condition of the license agreement subject to compliance of the requisite of communication and acceptance. The Central Government shall remain within its competence to recover the damages if those are liquidated in the new measure for breach of instruction as to verification of identify of subscribers, treating the same as breach of term or condition of the license agreement subject to compliance of the requisite of communication and acceptance. Since this Court has interfered with the financial penalty clause and instruction, the cause for realising liquidated damage shall be treated to have arisen from the date when the new measure would be notified, if at all, by the Central Government. It is further clarified that all consequential instructions emanating from the financial penalty clause i.e. Clause 10.2(ii) of the license agreement shall stand inoperative but with severability, meaning without any effect on the content in respect of verification of the subscribers’ identity in the manner as prescribed by the Central Government. whether the petitioner is estopped to challenge the validity of Clause 5.1 and 10.2(ii) of the license agreement or whether the petitioner by conduct has waived the right to challenge the validity of those clauses? 39. In view of the observation made above there cannot be any space but to hold that the Clause 10(2) (ii) are opposed to the public policy, ultra vires and against the statutory provisions as stated. It is well settled the objection based on estoppels and waiver cannot survive when those principles are poised or pressed to operate against law. As the apex court in Union of India vs. Association of Unified Telecom Service Providers of India has held that the TDSAT has got no jurisdiction to adjudicate on the validity of the clauses of the license-agreement, their judgment cannot operate as res judicata against this writ petition. Hence, all the objections raised by the respondents as to maintainability of the writ petition are rejected. In the result, the writ petition stands allowed to the extent as indicted above. There shall be no order as to costs.