New Delhi: The Supreme Court ruled on Monday that Reliance Communications Ltd (R-Com) will have to pay high penalties for wrongly passing off international calls as local calls, thereby violating an agreement with state-owned Bharat Sanchar Nigam Ltd (BSNL) on inter-connect charges.

The calls in question date back to 2004, when the company was known as Reliance Infocomm, and part of the undivided Reliance group. It became part of Reliance–Anil Dhirubhai Ambani Group(R-Adag) in 2005, after a division of assets between the Ambani brothers.

Chief Justice S. H. Kapadia held in his judgment that BSNL was entitled to charge R-Com the highest rates for all calls, including local ones, based on the principle of strict civil liability, which he decided should be applicable in the case as R-Com tried to destroy the “principles of level-playing field" by tampering with the calling line identification (CLI)." The apex court told BSNL to compute R-Com’s liability for penalties and call charges. The state-owned telco has been given the authority to levy international call rates for all R-Com calls routed through its network.

R-Com said in its submissions to the court that the calls received in its points of interconnection (POIs) were “grey market" calls. These were neither wrongly routed, nor were their CLIs tampered with, it said. The court held that telecom companies are obligated to maintain the integrity of the their points of interconnection.

The apex court judgment overrules a 24 May order of the Telecom Dispute Settlement and Appellate Tribunal (TDSAT).

Graphic: Yogesh Kumar / Mint

TDSAT had held that BSNL would have to distinguish the various kinds of calls R-Com sent through its network and determine the liability accordingly. It had said that “the amount of penalty was not commensurate with actual damage suffered by BSNL".

BSNL had imposed a penalty of around Rs100 crore on R-Com for routing international calls as local ones during 2004.

BSNL appealed the TDSAT order in the apex court.

The top court differed with the TDSAT view and its ruling of strict liability will have a significant bearing on similar disputes that are pending at different courts and tribunals across the country.

BSNL’s counsel submitted that “it is technically impossible for BSNL to trace or block a call with a tampered (masked) CLI. That, on a given day, a single POI handles millions of minutes of calls which are handed over to BSNL and, in such a situation, it is not commercially feasible to decipher which call is genuine and which call is without CLI/tampered CLI," it said.

The court accepted these reasons, put forth by Solicitor General Gopal Subramanium, and held that BSNL can levy charges on every call that R-Com sent using its network.

As per the agreement, R-Com had to pay 30 paise a minute as interconnection charges and Rs5 per minute for international calls.

An R-Com spokesperson said the company doesn’t anticipate any material liability as a result of the Supreme Court judgment.

On Monday, R-Com’s shares fell as much as 4.8% to Rs124.25, the lowest intra-day price since listing in March 2006, according to data compiled by Bloomberg.

The stock eventually ended at Rs127.70, down 2.6%, on the Bombay Stock Exchange, while the benchmark Sensex gained 1.4% to close at 19,405.10 points.

The company’s shares have slumped 27% this year, compared with a 11% gain for the Sensex.

PTI and Bloomberg contributed to this story.