A law ministry’s arbitral tribunal has allowed Reliance Communications (RCOM) and Reliance Telecom Limited (RTL) to withdraw from a Universal Services Obligation (USO) Fund project without any financial liabilities. The tribunal has also discharged RCOM and RTL from all contractual obligations under the project.
Under the project, which was launched in 2007, mobile companies get subsidy support from USO Fund to share mobile infrastructure and offer telephony services in rural and remote areas. USOF had selected several operators through a bidding process to set up and managing 7,871 infrastructure sites, or telecom towers, in 500 districts across 12 states. RCOM and RTL had entered into an agreement with the USOF in June 2007, under which they took responsibility for setting up nearly half of these towers.
Under the agreement, USOF had to ensure the handover of the telecom sites, in ready-to-radiate status, within one year from the date of the contract. Following the singing of the contract, USOF was to hand over telecom sites to RCOM and RTL before May 31, 2008. However, USOF failed to meet the deadline and allegedly delayed its obligation by more than 18 months, making the project unviable.
Subsequently, citing the project to be unviable, both RCOM and RTL approached USOF to exit from the project.
The tribunal has upheld the companies? contention that USOF failed to ensure delivery of a majority of telecom towers in a holistic manner and within the contractually-agreed timeline. Thus, RCOM and RTL have, as per law, a right to exit the contract.
