No Acts & Articles mentioned in this case
Page 1 Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE/ORIGINAL JURISDICTION
CIVIL APPEAL NO.2803 OF 2014
Bharti Airtel Ltd. … Appellant
Versus
Union of India … Respondent
WITH
CIVIL APPEAL NO.1969 OF 2014
Vodafone Mobile Services Ltd. & Others … Appellants
Versus
Union of India … Respondent
CIVIL APPEAL NO.2072 OF 2014
Loop Mobile India … Appellant
Versus
Union of India … Respondent
CIVIL APPEAL NO.5376 OF 2014
Idea Cellular Ltd. … Appellant
Versus
Union of India … Respondent
1
Page 2 CIVIL APPEAL NO.9116 OF 2014
Idea Cellular Ltd. … Appellant
Versus
Union of India … Respondent
WRIT PETITION (CIVIL) NO.1056 OF 2014
Bharti Airtel Ltd. & Others … Petitioners
Versus
Union of India … Respondent
WRIT PETITION (CIVIL) NO.971 OF 2014
Vodafone Cellular Ltd. & Others … Petitioners
Versus
Union of India … Respondent
AND
WRIT PETITION (CIVIL) NO.180 OF 2015
Reliance Telecom Ltd. & Another … Petitioners
Versus
Union of India & Another … Respondents
2
Page 3 J U D G M E N T
Chelameswar, J.
1.These five civil appeals under Section 18 of the Telecom
Regulatory Authority of India Act, 1997 (hereinafter referred to
as the “TRAI Act”) and three writ petitions raise common
questions. Each of the appellants or the petitioners, as the
case may be, in these matters (hereinafter collectively referred
to as ‘LICENSEES’) is a licensee holding a licence granted
under Section 4 of the Indian Telegraph Act, 1885 for
providing TELEGRAPH services in the various earmarked
service areas.
2.It appears from the judgment of this Court in Centre for
Public Interest Litigation & Others v. Union of India &
Others, (2012) 3 SCC 1, hereinafter referred to as 2G case,
that the first telegraph link in India was experimented in 1839
between Calcutta and Diamond Harbor separated by a
distance of 21 miles. By an act of the British Parliament,
known as the Indian Telegraph Act, 1885, the privilege of
“establishing, maintaining and working of telegraphs” within the territory of
3
Page 4 British India was exclusively conferred under Section 4 upon
the Central Government – an expression which bore different
meanings at different points of time in this country, the details
of which may not be necessary for the purpose of this case.
However, proviso to the said section enabled the Central
Government to licence any person to exercise the privilege
which is otherwise exclusive to the Central Government.
3. The advancement of technology made wireless
communication
1
possible which led to the enactment of the
Indian Wireless Telegraphy Act, 1933.
4.On 28
th
January, 1882, Major E. Baring, Member of the
Governor General’s Council declared open three telephone
2
exchanges in Calcutta, Bombay and Madras, marking the
beginning of telephone communications in India. Over the next
133 years, there has been a mind boggling advancement in the
1
Section 2.(1) ‘wireless communication’ means any transmission, omission or reception of signs, signals,
writing, images and sounds, or intelligence of any nature by means of electricity, magnetism, or Radio
waves or Hertzian waves, without the use of wires or other continuous electrical conductors between the
transmitting and the receiving apparatus;
2
Alexander Graham Bell is commonly credited with the invention of telephone. He obtained a patent in
1876 for an apparatus for transmitting vocal or other sounds electrically. There is some controversy as to
who was the real inventor of telephone. There is a very strong claim by an Italian scientist called Antonio
Meucci. A resolution was passed by the United States House of Representatives in 2002 recognising that
Meucci did pioneering work on the development of telephone and “if Meucci had been able to pay $ 10 fee
to maintain a caveat after 1874, no patent could have been issued to Bell”.
4
Page 5 telecommunication technology. Strangely, there is no
enactment in this country dealing with the establishment and
working of telephones. The 160 year old telegram system in
this country was officially closed on 14
th
July, 2013.
Ironically, the Indian Telegraph Act, 1885 and the Indian
Wireless Telegraphy Act, 1933 still continue on the statute
book. By virtue of the various amendments made from time to
time, these two enactments still continue to govern the entire
activity of establishment, maintenance and working of
telephones and various other telecommunication services.
Electromagnetic Radiation - Waves - Frequencies -
Spectrum
5.`Electromagnetic (EM) radiation is a phenomenon which
occurs in the universe. Sunlight is a familiar example of EM
radiation. So is the light from stars. EM radiation travels in
waves at different frequencies. Frequency of a wave and its
length are inversely proportional. Generally, EM radiation is
classified on the basis of wavelength into radio wave,
microwave, terahertz (or sub-millimeter) radiation, infrared,
the visible region is perceived as light, ultraviolet, X-rays and
5
Page 6 gamma rays. Waves with frequencies ranging from 300 GH z
to 3 kHz (corresponding wave length ranging from 1 millimeter
to 100 kilometers) are called radio waves. Radio waves have
the longest wave lengths in the electromagnetic spectrum. The
entire range of frequencies in EM radiation is called EM
spectrum.
“EM radiation interacts with matter in different ways across the spectrum.
These types of interaction are so different that historically different names
have been applied to different parts of the spectrum, as though these were
different types of radiation. Thus, although these “different kinds” of EM
radiation form a quantitatively continuous spectrum of frequencies and
wavelengths, the spectrum remains divided for practical reasons related to
these qualitative interaction differences.”
6.Any EM radiation (including radio waves) travels with the
speed of light in vacuum i.e. 299,792,458 meters per second.
The distance is called the wavelength of a Hertz radio signal
(HZ). Megahertz (MHz) radio signal has a wavelength of 984
feet. Wave length of radio waves is measured in units called
Hertz -a name given to the unit after Heinrich Hertz a German
scientist who in 1887 demonstrated the reality of radio waves
the existence of which was theoretically predicted earlier in
1867 by James Clerk Maxwell (a Scottish mathematical
physicist).
6
Page 7 7.Radio waves can be generated artificially and used for the
transmission of sound or for passing information. Radio
frequencies are divided into groups called bands which have
similar characteristics. Artificially generated radio waves are
used for fixed and mobile radio communication broadcasting,
radar and other navigation systems, communication satellites,
computer networks etc.
8.To prevent interference between different users, the
artificial generation and use of radio waves is strictly regulated
by law, coordinated by an international body called the
International Telecommunications Union (ITU). The radio
spectrum is divided into a number of bands on the basis of
frequency and allocated to different users.
9.Till 1991, the activity of establishment, maintenance and
working of telephones was completely controlled by the
Government of India. Pursuant to the New Economic Policy
announced by the Government of India on 24.7.1991, some of
the services in telecommunication sector were opened up to
the private investment in 1992.
7
Page 8 “……….the following services: (a) Electronic Mail; (b) Voice Mail; (c)
Data Services; (d) Audio Text Services; (e) Video Text Services; (f) Video
Conferencing; (g) Radio Paging; and (h) Cellular Mobile Telephone. In
respect of services (a) to (f), the companies registered in India were
permitted to operate under a licence on non-exclusive basis. For services
covered by (g) and (h) mentioned above, keeping in view the constraints
on the number of companies that could be allowed to operate, a policy of
selection through a system of tendering was followed for grant of
licences.”
[Para 5 of 2G case (supra)]
10.All services, which were opened up to private investment
referred to above, are EM wave based services. Therefore, they
fall within the definition of the expression “TELEGRAPH”
3
occurring under Section 3(1)(AA) of the Telegraph Act. Since
the privilege to conduct the activity of establishment,
maintenance and working of a TELEGRAPH could be
permitted by the Government by private parties under a
licence, there arose a need to regulate utilization of
frequencies by the LICENSEES for carrying on the business in
TELEGRAPHS.
11. Some of the frequencies are exclusively reserved for the
3
3.(1AA) ‘telegraph’ means any appliance, instrument, material or apparatus used or capable of use for
transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature by
wire, visual or other electro-magnetic emissions, radio waves or Hertzian waves, galvanic, electric or
magnetic means.
Explanation.—’Radio waves’ or ‘Hertzian waves’ means electromagnetic waves of frequencies
lower than 3,000 giga-cycles per second propagated in space without artificial guide;
-Substituted and re-numbered for Section 3(1) by the Act 15 of 1961
8
Page 9 defence and security operations of India which, for obvious
reasons, cannot be made accessible to private parties.
12.The New Telecom Policy 1994 (NTP 1994) was announced
by the Government of India on 13.5.1994. In furtherance of
the said Policy, 22 Cellular Mobile Telephone Service (CMTS);
6 Basic Telephone Service (BTS) licences were granted to
operators:
13. In addition, paging licences were awarded in 27 cities
and 18 State circles.
14.These licences were bundled with spectrum within which
a licensee was entitled to operate. The licences were granted
on the basis of selection through a system of tendering.
15.On 20
th
November 1998, a Group was constituted by the
Government of India to review the then existing telecom policy
and suggest reforms. Based on the report of the said Group,
the New Telecom Policy 1999 (NTP 1999) was formulated
which became effective from 1.4.1999.
16.It took note of the fact situation as it existed on that day
9
Page 10 in the following words:
“The Government invited private sector participation in a phased manner
from the early nineties, initially for value added services such as Paging
Services and Cellular Mobile Telephone Services (CMTS) and thereafter
for Fixed Telephone Services (FTS). After a competitive bidding
process, licenses were awarded to a CMTS operators in the four metros,
14 CMTS operators in 18 state circles, 6 BTS operators in 6 state circles
and to paging operators in 27 cities and 18 state circles. VSAT services
were liberalized for providing data services to closed user groups.
Licences were issued to 14 operators in the private sector out of which
only nine licencees are operational. The Government has recently
announced the policy for Internet Service Provision (ISP) by private
operators and has commenced licensing of the same. The Government has
also announced opening up of Global Mobile Personal Communications
by Satellite (GMPCS) and has issued one provisional license. Issue of
licenses to other prospective GMPCS operators is under consideration.”
17.The NTP 1999 took note of the existence of various
licences granted under the NTP 1994 and made a policy
statement that the Government intends to resolve the
problems of existing operators in a manner “which is consistent with
their contractual obligations and is legally tenable”.
4
18.Pursuant to the policy statement, the Government of
India devised a scheme for the migration of existing
LICENSEES under the NTP 1994 to the new regime under the
NTP 1999. The Scheme known as Package for Migration of
4
Resolution of problems of existing operators
The New Policy Framework which seeks to significantly redefine the competitive nature of
industry, would be applicable to new LICENCEES.
There are, however, multiple licences that have been issued by the Government for cellular mobile
services, basic services, radio paging services, internet services etc. It is the Government’s intention to
satisfactorily resolve the problems being faced by existing operators in a manner which is consistent with
their contractual obligations and is legally tenable.
10
Page 11 Existing LICENSEES of Cellular and Basic Telecom Services
to New Telecom Policy. The terms of the policy insofar as
relevant for our purpose are as follows:-
“….. the following Package is proposed to migration of the existing
Cellular (Metros and Telecom Circle) and Basic Telecom Service
Operators to NTP-99 regime:-
(i)The cut off date for change over to NTP-99 regime will be
1.8.1999.
(ii)The licensee will be required to pay one time Entry fee and
License Fee as a percentage share of gross revenue under
the license. The Entry Fee chargeable will be licence fee dues
payable by existing LICENCEES upto 31.07.1999, calculated
upto this date duly adjusted consequent upon notional
extension of effective date as in para (ix) below, as per the
conditions of existing licence.
(iii)The Licence fee as a percentage of gross revenue under the
licence shall be payable w.e.f. 1.8.99. The Government will
take a final decision about the quantum of the revenue share to
be charged as licence fee after obtaining recommendations of
the Telecom Regulatory Authority of India (TRAI). In the
meanwhile, Government have decided to fix 15% of the gross
revenue of the Licensee as provisional license fee. The gross
revenue for the purpose would be the total revenue of the
Licensee company excluding the PSTN related call charges
paid to DOT/MTNL and service tax collected by the licensee
on behalf of the Government from their subscribers. On
receipt of TRAI’s recommendation and Government’s final
decision, final adjustment of provisional dues will be effected
depending upon the percentage of revenue share and the
definition of revenue for this purpose as may be finally
decided.
xxx xxxx xxxx xxxx
(xi)The period of licence shall be 20 years starting from the
effective date of the existing licence agreement.”
19.In the year 2003, the Central Government came out with
an Office Memorandum dated 11.11.2003 which contained
11
Page 12 guidelines for Unified Access (Basic & Cellular) Services
Licence (UAS Licences). The relevant portion of the document
reads as follows:-
“Government, in the public interest in general and consumer interest in
particular and for the proper conduct of telegraphs and telecommunica-
tions services, has decided to move towards a Unified Access Services Li-
censing regime. As a first step, as recommended by TRAI, Basic and Cel-
lular services shall be unified within the service area. In pursuance of this
decision, the following shall be the broad Guidelines for the Unified Ac-
cess Services License.
(i)The existing operators shall have an option to continue under the
present licensing regime(with present terms & conditions) or
migrate to new Unified Access Services Licence (UASL) in the
existing service areas, with the existing allocated/ contracted
spectrum.
(ii)The license fee, service area, rollout obligations and performance
bank guarantee under the Unified Access Services Licence will be
the same as for Fourth Cellular Mobile Service Providers
(CMSPs).”
20.Some of the LICENSEES migrated to the UAS Licensing
regime. Even under the said regime, the validity of licence was
initially for a period of 20 years from the effective date and
extendible by 10 years.
5
5
3. Duration of Licence
3.1 This LICENCE shall be valid for a period of 20 years from the effective date unless
revoked earlier for reasons as specified elsewhere in the document.
4. Extension of Licence
4.1 The LICENSOR may extend, if deemed expedient, the period of LICENSE by 10 years at
one time, upon request of the LICENSEE, if made during 19
th
year of the License period on terms mutually
agreed. The decision of the LICENSOR shall be final in regard to the grant of extension.
12
Page 13 21.Under the National Telecom Policy-2012 (for short
“NTP-2012”), the Government of India decided to “de-link”
licence and the spectrum for the purpose of grant of fresh
licences.
22.In the meanwhile, the grant of licence and allotment of
spectrum by the Union of India pursuant to the two press
releases issued on 10.01.2008 became subject matter of
litigation before this Court which eventually culminated into
2G Case. By the said judgment, this Court set aside all the
licences granted pursuant to the abovementioned press
releases.
23.Union of India announced the NTP–2012 in which it
sought to de-link the licences and allocation of spectrum in
respect of future licences. Shortly thereafter on 2.2.2012, the
judgment of this Court in 2G case was pronounced. On
15.02.2012, the Minister of Telecommunication & Information
Technology issued a statement. Insofar as the existing UAS,
CMTS and Basic Services Licences are concerned, it is stated
therein that (i) no more UAS licences linked with spectrum will
13
Page 14 be awarded, (ii) all future licences will be Unified Licences, (iii)
allocation of spectrum will be delinked from the licence, (iv)
The validity of existing UAS (& CMTS and Basic services)
licences may be extended for another 10 years at one time, as
per the provisions of the extant licensing regime with suitable
Terms & Conditions so as not to imply automatic continuance
of existing licence and related conditions including quantum
and price of any spectrum allocated. The relevant portion of
the full text of the statement would be considered later in this
judgment.
24. The licences granted to the various LICENSEES are due
to expire on various dates in 2014-2015.
25.Pursuant to the judgment in 2G case, the Union of India
took steps to conduct an auction of the 900 MHz band and
1800 MHz band insofar as they pertain to the certain
operators whose licenses were coming to an end in 2014.
26.Each of the LICENSEES herein hold licences for different
service areas. It appears from the impugned order of the
14
Page 15 TDSAT dated 31.01.2014, which is a common order in the four
petitions filed by four different LICENSEES (Vodafone Mobile
Service Ltd., Loop Mobile India, Bharti Airtel Ltd. & Idea
Cellular Ltd.). Some of the LICENSEES hold Cellular Mobile
Telephone Service licence (CMTS licence) while others hold
Unified Access Service license (UAS licence). Both the classes
of licences stipulated that the licences are valid for a period of
20 years and provide that the Licensor may extend the period
of licence for another 10 years subject to certain conditions
specified in the licence. The relevant conditions contained in
both the classes of licences are broadly similar with certain
minor variations in the language employed.
CMTS UAS
Period of Licence: The period of license shall be
twenty years from the effective date of the existing
license agreement unless terminated for the reasons
stated therein. The Licensor may extend the period
of license, if requested during 19
th
year from the
effective date for a period of 10 years at a time on
mutually agreed terms and conditions. The decision
of licensor shall be final in regard to grant of
extension.
The LICENSE shall be valid for a period of 20 years
from the effective date unless revoked earlier for
reasons as specified elsewhere in the document.
The LICENSOR may extend, if deemed expedient,
the period of LLICENCE by 10 years at one time,
upon request of the LICENSEE, if made during 19
th
year of the Licence period on terms mutually
agreed. The decision of the LICENSOR shall be
final in regard to the grant of extension.
Whether the minor variations in the language employed by the
LICENSOR make any difference in the context of the right of
15
Page 16 the LICENSEES to seek an extension of a licence is one of the
aspects which is required to be examined by us.
27.Since both the classes of licences contemplate seeking of
an extension by the LICENSEE during the 19
th
year of the
currency of the licence, the LICENSEES approached the
Government of India seeking an extension/renewal of their
licences. Alleging that there was no response from the
Government of India, some of the LICENSEES went to the
Delhi High Court filing writ petitions seeking appropriate
directions to the Government of India. The said writ petitions
were disposed of by an order dated 22.02.2013 of the Delhi
High Court directing the Government of India to dispose of the
applications of the writ petitioners within a stipulated time
frame. The High Court also observed that in the event of the
Government of India’s decision going adverse to the interest of
the petitioners, the petitioners would be “at liberty to take recourse to
appropriate remedy”.
28.Pursuant to the directions of the Delhi High Court, the
applications of the petitioners were considered and rejected by
16
Page 17 the Government of India on different dates. Aggrieved by the
same, the LICENSEES approached the TDSAT. Their petitions
were dismissed by an order dated 31.01.2014. Hence, the
appeals under Section 18 of the TRAI Act. Some of the
LICENSEES approached this court directly without going to
the TDSAT by filing writ petitions invoking the jurisdiction of
this court under Article 32 of the Constitution of India.
29.TDSAT recorded that “the right to extension of the licence is undeniably
a valuable right of the licensee” but held that such a right is not an
absolute right. If the LICENSOR (Union of India) does not
deem it expedient to grant such licence, it is under no such
obligation to grant such extension. The expression ‘expedient’
in the context of the licences only means “public interest and
for public good”. Therefore, the tribunal opined that it is open
to the Central Government to refuse the extension if it is of the
opinion that the grant of extension would not be in public
interest or sub-serve public good. The tribunal also opined
that “….. for the purpose of grant of extension it is Central Government alone that is
the judge of public interest and public good. The Central Government may frame a
policy or revise and existing policy in larger public interest and in case the extension of
17
Page 18 the existing licences militates against the new policy it would be a valid and acceptable
ground for refusing extension”. The tribunal also opined that the
absence of the employment of the expression “if deemed
expedient” in the relevant clause of UAS licence, made no
difference insofar as the authority of the Government of India
for rejecting the extension of the licences.
30.In coming to such a conclusion, the tribunal took note of
the judgment of this Court in 2G case and also the
subsequent opinion of this Court dated 27.9.2012 in Natural
Resources Allocation, In Re. Special Reference No.1 of
2012, (2012) 10 SCC 1 and the Press Statement made by the
then Telecom Minister on 15.2.2012. The tribunal also noted
certain recommendations made by the TRAI on Spectrum
Management and Licensing Framework dated 11.5.2012
alongwith certain other regulations and clarifications and
concluded that:
“……… show that after deep and careful consideration of the matter, in
consultation with the expert statutory authority in the sector, the
Government has framed a policy for management and dispensation of
spectrum in the larger public interest. Any extension of the expiring
licenses is bound to undermine the implementation of the policy and that
18
Page 19 is justification enough and sufficient for the Government to decline the
extension for the licenses.”
31.On behalf of the licensees, the following submissions are
made:
1.The licences, such as the one under
consideration in this batch of matters, are
nothing but contracts between the Union of India
and the LICENSEES. They secured the licences
in the year 1994-95 admittedly through a
transparent process of bidding. Under the terms
of the said licences/contract, the LICENSEES
have a right to have their claim for extension
appropriately considered in terms of the contract.
Therefore, the respondents are neither entitled
nor justified in calling upon the LICENSEES to
participate in the auction of the spectrum to
obtain the necessary spectrum to work their
respective licences. Such a decision of the
respondent is violative of the contractual rights of
the LICENSEES.
19
Page 20 It is also the case of the LICENSEES that under
the terms of the licence, they are entitled to seek
an extension, but not a ‘renewal’ of the licence.
The employment of the word “extension” in the
licence confers a higher right than the right to
seek a renewal.
2. The principle that the State owned resources
cannot be alienated except by a process of
auction is not a principle applicable universally
and is so clarified by this Court in Natural
Resources Allocation, In Re, Special
Reference No.1 of 2012, (2012) 10 SCC 1.
3.The decision of this Court in 2G case by which
this Court found fault with the policy of the
Government of India to grant licences on the
basis of “first come first serve” without auctioning
the spectrum is applicable only to the licences
granted in 2008 but not to every licence granted
under Section 4 of the Indian Telegraph Act,
20
Page 21 1885.
4. Maximization of revenue shall not be the only
consideration for the Union of India while
deciding to hold the auction in question. Union
of India was under an obligation to ensure
continuity of telecom services to millions of
people who are already utilizing services of the
existing operators. Introducing new operators at
this stage would cause disruption in the service
to the customers and likely to create an
unhealthy competition for access to spectrum
which would eventually burden the ultimate
consumer.
5. Each of the LICENSEES has made a huge
investment in the infrastructure for the purpose
of providing services to its customers. Such
infrastructure is created by borrowing from
various banks and financial institutions. If the
licences of the LICENSEES are not extended, it
21
Page 22 would result in a huge wastage of the national
financial and material resources. If the licences
of the existing operators are not renewed, such
infrastructure would simply go waste resulting
into not only loss to the national resources but
also lead to a situation in which the recovery of
the loans obtained by various operators would
become doubtful.
6.Under the TRAI Act, the authority, constituted
under Section 3, is under an obligation to make
recommendations either suo moto or on a request
of the Central Government regarding the terms
and conditions of licence to a service provider
and efficient management of available spectrum.
The authority also has a duty to “ensure compliance of
terms and conditions of a license”. The Government of
India in violation of such statutory stipulation
ignored the recommendation made by the
authority and put the spectrum in auction.
22
Page 23
32.On behalf of the Union of India, it is argued by the
learned Solicitor General that none of the LICENSEES have
any vested right for either renewal or extension of their
respective licences. Under the terms and conditions of the
licences, the LICENSEES are only entitled for a consideration
of their claim for extension of their licences period. However,
such a right is subject to the following conditions:
i)There must be a request from the licensee for
such an extension of the period of licence;
ii)Such a request must be made during the 19
th
year from the effective date of the licence;
iii)The extension of the licence is at the discretion of
the LICENSOR as is evident from the language of
the relevant clauses of the license which states
that the LICENSOR may extend;
iv)That condition of clause 4.1 which says that “the
decision of the LICENSOR in regard to the grant
of extension is final” indicates that the discretion
vested in the LICENSOR is absolute.
23
Page 24 33.Learned Solicitor General also submitted that even the
limited right of consideration created under the contract is
always subject to change of policy by the LICENSOR (Union of
India) and its statutory and constitutional obligations. The
Union of India as a matter of policy took a decision not to
extend the licenses of these LICENSEES, as the extension of a
license would necessarily imply the extension of the privilege
to use the spectrum which had been bundled with the original
grant. The Government took such a decision in the light of
the decision of this Court in 2G case. The prospect of the
exchequer getting a huge amount by putting the spectrum for
auction is a relevant consideration justifying the decision to
put the spectrum for auction. So long as the decision to put
the spectrum on auction is uniformly applicable to all
LICENSEES across the Board, such a policy decision of the
Government of India prevails over the right, if any of the
LICENSEES to have their claim for extension of the license be
considered either on the same terms on which the licenses
were granted or on terms which the LICENSEES are
24
Page 25 suggesting. The learned Solicitor General submitted that
even in terms of the license conditions, the extension can only
be on “mutually agreed terms and conditions” or “on terms
mutually agreed”. It is not open for the petitioners to argue
that the LICENSOR is bound to grant extension on terms
which the licensee dictates.
34.Now, we proceed to examine the submissions of the
LICENSEES.
35.At the outset, we agree with the LICENSEES that a
licence granted under Section 4 of the Act is a contract
between the Government of India and the LICENSEES.
36.In Union of India & Another v. Association of Unified
Telecom Service Providers of India & Others , (2011) 10
SCC 543, relying upon an earlier Constitution Bench
judgment of this Court in State of Punjab & Another v.
Devans Modern Breweries Ltd. & Another , (2004) 11 SCC
26, which in turn relied upon two earlier decisions of this
Court in Har Shankar & Others v. The Dy. Excise and
Taxation Commissioner & Others , (1975) 1 SCC 737 and
25
Page 26 Panna Lal & Others v. State of Rajasthan & Others ,
(1975) 2 SCC 633, this Court held -
“40. ….Thus, once a licence is issued under the proviso to sub-section
(1) of Section 4 of the Telegraph Act, the licence becomes a contract
between the licensor and the licensee. Consequently, the terms and
conditions of the licence including the definition ….. are part of a contract
between the licensor and the licensee.”
37.Therefore, now it is the settled position of law that a
license granted under Section 4(1) of the Telegraph Act such
as the one granted to each of the LICENSEES herein is a
contract between the LICENSOR and the LICENSEE.
38. If the licences in question are nothing but contracts, the
next question would be, is there any right of extension of
licence created in favour of LICENSEE under the contract?
39.From the language of the relevant clauses of the licences
which are noted earlier, it is clear that the LICENSEES have
no automatic right of renewal/extension on the expiry of the
original tenure of the license. The contract only provided for
extension of the period of license at the sole discretion of the
LICENSOR subject to the condition that the LICENSEE makes
an application seeking an extension during the 19
th
year of the
26
Page 27 currency of the licence. It appears that all of the LICENSEES
did make such an application.
40. The question which requires examination is - what are
the obligations of the LICENSOR on receipt of such an
application? The obligations of the LICENSOR flow from two
sources, (i) From the contract, (ii) from the Constitution of
India and the relevant provisions of the statute (Indian
Telegraph Act, 1885). In the event of any conflict between the
said two sets of obligations, the further question would be
which one of the conflicting obligations prevail?
41.Under the terms of the license, the LICENSOR is required
to extend the license only on “mutually agreed terms and conditions”, if
such an extension is sought in the 19
th
year of the currency of
the licence. To test the correctness of the submission that
under the contract, the LICENSOR is under an obligation to
consider the extension of licence, we take an example of a case
where the LICENSEE does not make an application in the 19
th
year but makes it just a few days before the expiry of the 20
th
year. Does the LICENSEE still have a right of consideration?
27
Page 28 In our opinion, the answer should be ‘No’ for two reasons; (i)
that such a claim is plainly unsupported by the text of the
contract, (ii) the failure to seek extension in the 19
th
year,
makes the continuance of the service to the public uncertain.
The Government of India cannot afford to remain waiting
without making alternative arrangements, Because the
disruption in the communication in the modern world may
lead to many undesirable consequences apart from causing
inconvenience to the public. Take the alternative possibility
of the LICENSEE not making an application for extension at
all because he is not interested in the extension (a very
unlikely scenario). Can the LICENSOR insist that the
LICENSEE should continue to offer the service either on the
same economic considerations or otherwise? The answer
seems to be plain and ‘No’. The language of the contract –
“mutually agreed terms” – clearly indicates so. Though it
requires an examination whether the LICENSOR i.e. the State
can compel the LICENSEE in a given case in exercise of its
authority either legislative or executive. Therefore, under
the contract neither the LICENSOR nor the LICENSEE has a
28
Page 29 right to insist that other party should continue with the
contract even if such other party is not willing to continue
except on such terms and conditions on which the other party
may desire to continue. Such terms and conditions obviously
include terms and conditions regarding the economic
stipulations subject to which either of the parties is willing to
be in the contract.
42.However, the LICENSOR being the Union of India, its
discretion to stipulate terms and conditions is regulated by
certain constitutional mandates apart from stipulations of any
law applicable.
43.Insofar as the constitutional mandate in the context of a
license under Section 4 of the Telegraph Act are concerned,
this Court in 2G case at para 85 held as follows:
“85.As natural resources are public goods, the doctrine of equality,
which emerges from the concepts of justice and fairness, must guide the
State in determining the actual mechanism for distribution of natural
resources. In this regard, the doctrine of equality has two aspects: first, it
regulates the rights and obligations of the State vis-à-vis its people and
demands that the people be granted equitable access to natural resources
and/or its products and that they are adequately compensated for the
transfer of the resource to the private domain; and second, it regulates
the rights and obligations of the State vis-à-vis private parties seeking to
acquire/use the resource and demands that the procedure adopted for
distribution is just, non-arbitrary and transparent and that it does not
discriminate between similarly placed private parties.”
29
Page 30 44.The LICENSOR/Union of India does not have the freedom
to act whimsically. As pointed out by this Court in 2G case
in the above-extracted paragraph, the authority of the Union is
fettered by two constitutional limitations; firstly, that any
decision of the State to grant access to natural resources,
which belong to the people, must ensure that the people are
adequately compensated and, secondly, the process by which such
access is granted must be just, non-arbitrary and transparent, vis-à-vis
private parties seeking such access.
45.By a statutory declaration made under Section 4 of the
Indian Telegraph Act, 1885, it is declared that the Government
of India shall have the exclusive “privilege for establishing, maintaining
and working telegraphs” (which includes telephones). The proviso to
Section 4 of the said Act authorizes the Government of India to
grant license to establish, maintain and work telegraphs
(which includes telephones) “on such conditions and in consideration of such
payments” as it thinks fit. Telephones include both wired and
wireless telephones like cellular mobile phones, the
establishment and working of which necessarily requires
30
Page 31 access to spectrum which again is controlled by the
Government of India as it is already declared to be a natural
resource by this Court. It can thus, be seen that no person
other than the Government of India has any right to establish,
maintain and work telephones. It is the exclusive privilege of
the Government of India, which could be permitted to be
exercised by others by a grant from the Government of India.
46. In other words, such licences are in the nature of largesse
from the State. No doubt, the authority of the State to
distribute such largess is always subject to the condition that
the State must comply with the conditions of Article 14 of the
Constitution i.e. the distribution must be on the basis of some
rational policy. Even the language of the proviso to Section 4
of the Telegraph Act, which stipulates that the grant of license
should be “on such conditions and in consideration of such payments as it thinks
fit”, must necessarily be understood that the conditions must
be rational and the payments forming the consideration for the
grant of license must be non-discriminatory. The conditions
contained in the licenses in question stipulate that the term of
31
Page 32 the license could be extended on mutually agreed terms, if the
Government of India deems it expedient. The obligations of
the Government of India flowing from the Constitution as well
as a statute necessarily require the Government of India to
grant licences as rightly pointed by the Tribunal (TDSAT) only
“in public interest and for public good”.
47. This Court in 2G Case after elaborate discussion on the
nature of the State’s authority to deal with the natural
resources held that “…… spectrum has been internationally accepted as a
scarce, finite and renewable natural resource which is susceptible to degradation in case
of inefficient utilization. It has a high economic value in the light of the demand for it on
account of the tremendous growth in the telecom sector. Although it does not belong to a
particular State, right of use has been granted to the States as per international norms.”
(Para 77)
48.While recognizing the power of the State to distribute
natural resources this Court held that the State is bound to
“act in consonance with the principles of equality and public trust and ensure that no
action is taken which may be detrimental to public interest”. (Para 75)
49.In para 89, the Court concluded as follows:-
32
Page 33 “89.“In conclusion, we hold that the State is the legal owner of the
natural resources as a trustee of the people and although it is empowered
to distribute the same, the process of distribution must be guided by the
constitutional principles including the doctrine of equality and larger
public good.”
50.This Court further held: “ ………..State and its
agencies/instrumentalities must always adopt a rational method for disposal of public
property …….”. “It is the burden of the State to ensure that a non-discriminatory
method is adopted for distribution and alienation which would necessarily result in
national/public interest”. (Para 95)
51.This Court opined that a “duly publicized auction conducted fairly and
impartially is perhaps the best method for discharging the burden of the State to ensure
protection of public interest.”
52.The conditions of licences/contracts in whatever
language provided for consideration for the extension of a
licence are necessarily required to be interpreted in
consonance with the obligation of the LICENSOR/Union of
India under the Constitution and the laws. Otherwise, the
contract would be rendered void for being inconsistent with
public policy, the principle expressly incorporated under
Section 23 of the Indian Contract Act, 1872.
33
Page 34 53.The decision of the LICENSOR to conduct an auction for
granting access to spectrum, obviously, complies with the
second of the requirements specified by this Court in para 85
of the 2G Case judgment. The question whether such a
decision also complies with the requirements of the first of the
two facets mentioned therein is the issue in this batch of
matters. In other words, the adequacy of compensation which
the Government of India seeks to derive by holding an auction
for allowing access to spectrum is just and fair in the
circumstances.
54.The case of the LICENSEES is that such a procedure
would promote an unhealthy competition among the persons
aspiring to secure such a spectrum. The cost of such
acquisition would eventually result in burdening the
consumers, i.e. the users of the telephones. Because, higher
the amount spent by the LICENSEE in securing the spectrum
the greater the need for the LICENSEE to fix higher tariff for
the telephone services in order to make the service
commercially viable. Though the prospect of securing a larger
34
Page 35 amount for the exchequer is undeniable the same would be at
the cost of the consumers, as the burden will ultimately be
passed on by the LICENSEE to the consumers. The
LICENSEES also submitted that in view of the fact that the
LICENSEES invested huge amount running into thousands of
crores in the last twenty years of the working of the licenses
for building the infrastructure in order to provide necessary
telecom services to the people of this country, not only the
LICENSEE would suffer an economic damage but the Nation
also would suffer damage in terms of the wastage of the
resources already created.
55.We do not doubt that the LICENSEES would necessarily
have to pass on their burden to the ultimate consumers. That
need not necessarily mean that there should be an
enhancement in the tariffs. There is always a possibility of
maintaining the tariffs at a lower level if the consumers base
is sufficiently large, i.e. more the consumers base, more the
turnover. Therefore, the possibility of avoidance of the need to
increase the tariffs. It all depends upon the facts and figures.
35
Page 36 Adjudicating the issue without concrete facts and figures in
this regard only on some hypothetical basis is neither
permissible nor justified.
56.Let us examine the alternative scenario. We shall
assume for the sake of argument that the impugned procedure
adopted by the Government of India would ultimately result in
a situation where a LICENSEE would have no choice but to
charge higher amounts from the consumers in order to be
commercially viable. Whether such a result is desirable or not
is a question which falls within the realm of policy choices of
the Government of India. By all the established legal
principles - this Court would not embark upon an examination
of the wisdom of such policy choices.
57.At this stage, we must also deal with certain submissions
made by Shri K.K. Venugopal, learned senior counsel
appearing for one of the appellants. The phrase “ if deemed
expedient” occurring in Clause 4.1 of the Licence must be
understood in the light of the interpretation of the expression
“expedient” in Hotel Sea Gull v. State of West Bengal &
36
Page 37 Others, (2002) 4 SCC 1 wherein it was held by this Court to
mean “whatever is suitable and appropriate for any reason for the
accomplishment of the specified object”. It is argued that the question
of extension of licence must be decided by the Government of
India on the basis of objective and rational criteria by taking
into account relevant materials and eschewing irrelevant
material. Learned senior counsel in his written submission
6
gave certain facts and figures which according to him are
relevant in coming to a conclusion whether it would be
expedient to extend the period of licence. It is also submitted
that the phrase “on terms mutually agreed” must also be understood
to mean that the Government of India’s decision for extension
of the licences be based only on relevant and objective criteria
such as “the quality, affordability, reach of the services provided by the petitioner and
the investments made by it during the initial 20 year period, being satisfactory, the license
would be extended by 10 years at one time”. (Written Submission)
6
It is submitted that through the past 19 years and even now on a continuing basis, Writ Petitioners have
been faithfully operating their UAS license and have, as of 30 of June 2014, invested over Rs.19,545
crores setting up a state of the art mobile network in these 6 circles; in three months period between April
and June of financial year 2014 – 15 alone, the investments made by the Petitioner was Rs.544 crores, the
Petitioners are providing world class service to over 717 lakh subscribers as of June 2014, the Petitioner
has built an average subscriber market share of 23# (average for six circles – the shares range between 19#
and 32# for various circles), the petition is offering affordable tariffs and innovative services to consumers,
the Petitioner is providing direct and indirect employment to thousands of people, in last 3.5 years alone the
Petitioner has contributed over Rs.11,035 crores to the government exchequer by way of licence fee,
Spectrum charges, direct and indirect taxes, etcetera between financial year 2011-12 and financial year
2014-15 (upto June 2014). Petitioners have thus altered their position and invested thousands of Crores
based on Government promise/contract.
37
Page 38 58.We are of the opinion that the submissions of Shri
Venugopal must carry a great weight if the LICENSOR’S
(Government of India) obligations are regulated purely by the
terms of the contract. But as already noticed by us, the
LICENSOR’S obligations are not simply confined to the
contract/license. They also flow from the Constitution and the
laws of the land. Obviously, the obligations flowing from the
Constitution stand on a higher footing and it is the
Government of India’s duty to satisfy the obligations flowing
from the Constitution and the laws of the land in preference to
obligations flowing from a contract. It is a well settled
principle of law that where there is a conflict between
obligations flowing from a contract and those flowing from the
law, the obligations flowing from the contract must necessarily
yield to obligations flowing from the Constitution and laws.
We, therefore, reject the submission of Shri Venugopal.
The fifth submission of the licensees is required to be
rejected on the ground that it is too vague and without any
basis in the pleadings.
38
Page 39 59.Last issue which requires examination is the Scheme of
the Telecom Regulatory Authority of India Act, 1997 and the
role of the Authority
7
created under the said Act and the legal
efficacy of its recommendations.
60.Section 3 of the said Act contemplates the establishment
of an authority called “the Telecom Regulatory Authority of
India” (for short “TRAI”)
8
. TRAI is declared to be a body
corporate with all necessary and incidental powers under
sub-section (2)
9
. The composition and the qualification
required of the persons to be appointed as the Chairperson
and the Members of TRAI, their respective powers and other
incidental matters are prescribed in Chapter II of the Act.
61.Section 11 (which occurs in Chapter III) enumerates the
functions of TRAI. The Section authorises the authority to
make recommendations either suo motu or on requests made
7
Section 2(b). “Authority” means the Telecom Regulatory Authority of India established under sub-section
(1) of section 3.
8
“Section 3. Establishment and incorporation of Authority.— (1) With effect from such date as the Central
Government may, by notification appoint, there shall be established, for the purposes of this Act, an
Authority to be called the Telecom Regulatory Authority of India.
9
Section 3(2)The Authority shall be a body corporate by the name aforesaid, having perpetual
succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and
dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be
sued.
39
Page 40 by the LICENSOR on the various matters enumerated therein.
Relevant among them are: (i) terms and conditions of licence to
a service provider; (ii) measures to facilitate competition and
promote efficiency in the operation of telecommunications
services so as to facilitate growth in such services; (iii) efficient
management of available spectrum; and (iv) ensure compliance
of terms and conditions of licence, are some of the functions
which are relevant in the context of the present controversy.
62.On 16.06.2006, the Government constituted a Committee
headed by Shri Subodh Kumar, Additional Secretary,
Department of Telecommunications. The Committee consisted
of technical experts from different institutions, the Ministry of
Defence etc. and included representatives of the private mobile
telephone service providers. The Committee submitted its
report on 13.05.2009 which contained many
recommendations. The Committee examined the role of the
Government and the goals before the government and
recorded as follows:
“As the custodian of radio spectrum, the government must satisfactorily
address a number of goals for spectrum management. These are: efficient
utilization of the scarce resource, optimal revenue generation, for the
40
Page 41 public exchequer, sufficient competition in the telecom market, and rapid
diffusion of telecom services. These goals are synergistic as well as
conflicting.”
(emphasis supplied)
It recommended delinking of the spectrum allocation from
licensing and recommended that “the way forward should be to
move away from an administratively determined criteria to a
market-driven approach. A market-determined mechanism for spectrum
allocation will ensure that spectrum goes to the entity that put the
highest value on spectrum, and is best placed to ensure its optimal use”.
63.The Government of India thought it fit to seek the opinion
of TRAI on the recommendation of Subodh Kumar Committee
by its letter dated 07.07.2009. In response, TRAI submitted a
very detailed report dated 11.05.2010.
64.In the impugned judgment of the TDSAT, it is recorded
10
that TRAI radically differed with the report of Subodh Kumar
Committee.
65.On 10.10.2011, the Government of India (Department of
Telecommunications) referred the recommendations dated
11.05.2010 back to TRAI for reconsideration.
10
See para 32 of the impugned order
41
Page 42 66.The TRAI reconsidered the matter and gave certain
clarifications on 03.11.2011.
67.The judgment of this Court in 2G Case was pronounced
on 02.02.2012. On 15.02.2012, the then Minister of
Communications & Information Technology made a press
statement announcing the policy of the Government of India
regarding the grant of licences under the Telegraph Act, 1885
and the allocation of spectrum.
68.It may be mentioned here that the press statement
mentions that such a policy statement is made after
consideration of the recommendations of TRAI
11
.
69.In view of the statement in the policy announced on
15.02.2012 to the effect that:
“1. No more UAS licences linked with spectrum will be awarded.
2. All future licences will be Unified Licences and allocation of
spectrum will be delinked from the licence. Spectrum, if
required, will have to be obtained separately. A final view on
implementation of the Unified License Regime would be taken
after receipt of detailed Guidelines and Terms & Conditions from
TRAI for Unified Licence including migration path for all existing
licence(s) to Unified Licence.
11
“Recommendations of TRAI on ‘Spectrum Management and Licensing Framework’ of May 11, 2010
along with its further recommendations of February 08, 2011, clarifications of May 03, 2011 and response
dated November 03, 2011 were considered by the Telecom Commission. After consideration of the
recommendations of the Telecom Commission, the Department of Telecommunications has taken following
decisions: … ”
42
Page 43 3. In the event of any auction of spectrum pending finalisation of the
Unified Licensing Regime, UAS licence without spectrum may be
issued which could be subject to a requirement to migrate to
Unified licence as and when the regime is put in place. Detailed
guidelines for such UAS licence without spectrum would be
finalised after receipt of recommendations of TRAI in this regard.”
XXX XXX XXX XXX XXX
8. The validity of existing UAS (& CMTS and Basic services)
licences may be extended for another 10 years at one time, as
per the provisions of the extant licensing regime with suitable
Terms & Conditions so as not to imply automatic continuance of
existing license and related conditions including quantum and
price of any spectrum allocated.
9. On extension, the UAS licensee will be required to pay a fee which
will be Rs.2 crore for Metro and ‘A’ Circles, Rs.1 crore for ‘B’
circles and Rs.0.5 crore for ‘C’ circles. This fee does not cover the
value of spectrum, which shall be paid for separately. While
extending the licence, the licensee shall be assigned spectrum only
up to the prescribed limit or the amount of spectrum assigned to it
before the extension, whichever is less. Spectrum assigned by the
Government to the licensee in excess of the Prescribed Limit shall
be withdrawn.”
the submission of LICENSEES is that the only clear decisions
taken are that (i) in future only unified licences will be granted
and (ii) the allocation of spectrum will be delinked from the
licence. It is clear that no final policy decision was taken by
the Government regarding the method and manner of
allocation of spectrum even with respect to licences to be
granted in future. Insofar as the existing licences are
concerned, the policy of the Government is that they are
43
Page 44 required to extended for another 10 years as per the provisions
of the “extant licensing regime with suitable terms and
conditions” etc. Therefore, the decision of the Government of
India to auction the right of spectrum in the cases of those
areas where the LICENSEES held licences so far is not only
inconsistent with the terms and conditions of the policy
announced on 15.02.2012 as the impugned decision is not
only in consistent with the “extant licensing regime” but also a
decision taken without consulting TRAI – a requirement which
is mandatory under Section 11(1)(a)(ii)
12
. The TRAI Act
mandates that the Government of India “shall seek the
recommendations of the Authority” while stipulating the
“terms and conditions to a service provider” and TRAI failed to
discharge its functions stipulated under Section 11(1)(b)(i)
which calls upon TRAI to “ensure compliance of terms and
conditions of licence”.
70.The LICENSEES also argued that the impugned decision
12
Section 11. Functions of Authority—(1) Notwithstanding anything contained in the Indian Telegraph Act,
1885 (13 of 1885), the functions of the Authority shall be to—
(a) make recommendations, either suo motu or on a request from the licensor, on the
following matters, namely:—
(ii)terms and conditions of license to a service provider;”
44
Page 45 of the Government of India to allocate spectrum by conducting
an auction is contrary to the recommendations of the TRAI
dated 15.10.2014
13
and also contrary to the policy statement
of the Minister dated 15.02.2012. The tenor of the policy is
13
“2.5 ……………… In sum, the two crucial facts are:
(i) The supply of spectrum is constrained; and
(ii) The auction is unusual in that licences are expiring and this knowledge is a priori known to all
TSPs, enabling strategic decision-making on the latter’s part.
2.6 This has important consequences. First, in any situation of short supply, market prices
will rise. If any new entrant or another existing licensee enters the fray, one outcome is certain; there will
be frenzied bidding viz. a race to the top. A similar escalation of prices was witnessed in the May 2910
auction when 3G spectrum was auctioned; the short supply of 3G spectrum led to a massive increase over
the reserve price. But, as pointed out above, in the upcoming auction, the short supply of spectrum is but
one dimension of the problem. The other is that incumbent operators would be willing to pay huge sums to
retain their spectrum so as to protect their investments made in the LSA and ensure continuity of business.
And, all industrial rivals know this; whish is why even a non-serious bidder is potentially in a position to
push up the final auction price.
2.7 Second, there are only two possible outcomes of such an auction: (a) the incumbents win
back the 900 MHz spectrum albeit at significantly high prices; or, (b) one or both incumbent operators lose
the 900 MHz spectrum which is won by two or more other bidders. If an incumbent operator wins back the
900 MHz spectrum but at a very high price, it will seriously limit its ability to invest viz. given the
indebtedness of most TSPs and the availability of just a limited amount of resources, whatever extra is paid
for spectrum, in effect, reduces the amount available for investment in the LSA. The second possibility is
that the incumbent loses the spectrum. The implications here are even graver. There will be immediate
discontinuation of service in the LSA. And a huge loss in terms of the value of investment already made in
that LSA.
2.8 Once services are discontinued, and a new entrant(s) come into the LSA, they will need
time to roll-out services. This will obviously pose problems for consumers. Moreover, if existing
consumers port out under Mobile Number Portability (MNP) to another TSP in the same LSA, then, in
effect, the auction would have led to a consolidation of market power (dominance) of that TSP. (Leave
aside the fact that it effectively deprives consumers of choice of service provider).
2.9 What is more, there are potential spillover effects to other sectors. Given the larger
indebtedness of many TSPs to public sector banks (and private sector banks), an exit from an LSA raises
the prospect that some part of that TSP’s debt could become a Non-Performing Asset (NPA). So, what the
Government gains in terms of higher prices of spectrum because of short supply, may also lead to large
NPAs of public sector banks which will ultimately require Government budgetary support viz. the
socialization of public costs.
2.10to sum up; there is a very real risk that bidding could lead to an escalation of auction
prices far beyond any reasonable value. Further, even if the incumbents win back the spectrum, there will
be serious limit to the investment ability of incumbents. And, if an incumbent operator loses out to a new
entrant (or, another licensee), the discontinuation of services would pose problems for consumers leave
aside the losses on capital investment made by the incumbent TSP in the LSA……….”
45
Page 46 clear that the delinking of spectrum from licence would only
be with reference to future and the extension of the existing
licence is required to be on the basis of the “extant licensing
regime”. In other words, the policy is only prospective and
applying the same to existing LICENSEES would not only be
contrary to the tenor of the policy statement but also make it
retrospective in operation.
71.On the other hand, learned Solicitor General argued as
follows:
“The reliance by the operators on stray observations by TRAI is entirely
misplaced. The Petitioners have relied on observations of TRAI without
placing its final recommendations. In its final recommendations dated
24.11.2014, TRAI did not recommend postponement of the auction. In
any event, per the first proviso to Section 11(1) of the Telecom Regulatory
Authority of India Act, 1997, even the final recommendations of TRAI are
not binding on the Government.”
(written submission)
72.We shall first deal with the obligation of the Board on the
“retrospectivity of the policy”. We assume for the sake of
argument that the impugned decision of the Union of India is
in fact contrary to the tenor of the policy statement dated
15.02.2012. Even then, in our view, the impugned action
cannot be faulted because the policy statement insofar as it
46
Page 47 seeks to apply only for the allocation of spectrum in future
would be contrary to the decision of this Court in 2G case and
void to that extent.
73.We now examine the other part of the submission of the
LICENSEES. An analysis of the scheme of Section 11 of the
TRAI Act is necessary. Section 11(1)
14
imposes two legal
14
11 Functions of Authority (1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 ,
the functions of the Authority shall be to –
(a) make recommendations, either suo motu or on a request from the licensor, on the following
matters, namely: -
(i) need and timing for introduction of new service provider;
(ii) terms and conditions of licence to a service provider;
(iii) revocation of licence for non-compliance of terms and conditions of licence;
(iv) measures to facilitate competition and promote efficiency in the operation of
telecommunication services so as to facilitate growth in such services;
(v) technological improvements in the services provided by the service providers;
(vi) type of equipment to be used by the service providers after inspection of equipment used in
the network;
(vii) measures for the development of telecommunication technology and any other matter
relatable to telecommunication industry in general;
(viii) efficient management of available spectrum;
(b) discharge the following functions, namely: -
(i) ensure compliance of terms and conditions of licence;
(ii) notwithstanding anything contained in the terms and conditions the licence granted before the
commencement of the Telecom Regulatory Authority of India (Amendment) Act, 2000 , fix the terms and
conditions of inter-connectivity between the service providers;
(iii) ensure technical compatibility and effective inter-connection between different service
providers;
(iv) regulate arrangement amongst service providers of sharing their revenue derived from
providing telecommunication services;
(v) lay-down the standards of quality of service to be provided by the service providers and ensure
the quality of service and conduct the periodical survey of such service provided by the service providers so
as to protect interest of the consumers of telecommunication service;
(vi) lay-down and ensure the time period for providing local and long distance circuits of
telecommunication between different service providers;
(vii) maintain register of inter-connect agreements and of all such other matters as may be
provided in the regulations; (viii) keep register maintained under clause
(vii) open for inspection to any member of public on payment of such fee and compliance of such
other requirement as may be provided in the regulations;
(ix) ensure effective compliance of universal service obligations;
(c) levy fees and other charges at such rates and in respect of such services as may be determined
by regulations;
47
Page 48 obligations on TRAI. Under sub-section (a) TRAI is obliged to
make recommendations with respect to eight matters
enumerated therein either suo motu or on a request of the
LICENSOR. Under sub-section (b), TRAI is obliged to
discharge various functions numbering nine specified
thereunder.
74.For example, under Section 11(1)(a)(ii) while it is one of
the functions of the TRAI to make recommendations regarding
the terms and conditions of a licence to a service provider,
whereas under sub-section (b)(i), it is the function of the TRAI
to ensure compliance of terms and conditions of the
LICENSEES.
75.The first proviso to sub-section 11(1) makes a categoric
declaration that the recommendations of the TRAI with respect
to matters enumerated under sub-section (1)(a) “shall not be binding
upon the Central Government”.
PROVIDED that the recommendations of the Authority specified in clause
(a) of this sub-section shall not be binding upon the Central Government:
No doubt, the second proviso to Section 11(1) mandates that
(d) perform such other functions including such administrative and financial functions as may be
entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act:
48
Page 49 the Government of India shall seek the recommendations of
the TRAI in respect of certain matters specified under clause
(a) in respect of new licence to be issued. One of such items
with reference to which such consultation is mandatory is the
terms and conditions of a license to a service provider [under
Section 11(1)(a)(ii)].
“PROVIDED FURTHER that the Central Government shall seek the
recommendations of the Authority in respect of matters specified in
sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of new
licence to be issued to a service provider and the Authority shall forward
its recommendations within a period of sixty days from the date on which
that Government sought the recommendations.”
The only other part of Section 11 which is relevant in the
context of the present issue is the fifth proviso to Section 11(1)
which reads as follows:
“PROVIDED also that if the Central Government, having considered that
recommendation of the Authority, comes to a prima facie conclusion that
such recommendation cannot be accepted or needs modifications, it shall
refer the recommendation back to the Authority for its reconsideration,
and the Authority may, within fifteen days from the date of receipt of such
reference, forward to the Central Government its recommendation after
considering the reference made by that Government. After receipt of
further recommendation if any, the Central Government shall take a final
decision.”
From the tenor of the said proviso, it can be seen that once
recommendation is made by TRAI [with reference to matters
enumerated in clause (a)], the Government of India may either
49
Page 50 accept the recommendation or may come to a prima facie
conclusion that such a recommendation cannot be accepted or
needs certain modifications. Upon reaching such prima facie
conclusion, the Government of India is required to refer the
matter back to TRAI and TRAI is obliged to reconsider its
earlier recommendation and forward its opinion to the
Government of India. On receipt of such a reconsidered
opinion of TRAI, the Government of India is required to take a
final decision. In our opinion, the fifth proviso only stipulates
the procedure to be followed by both the bodies – TRAI and the
Government of India – in the decision making process but it
does not whittle down the vigour of the first proviso which in
no certain terms declares that the Government of India is not
bound by the opinion of the TRAI insofar as the
recommendations made by TRAI with respect to matters falling
under Section 11(1)(a).
76.We do not propose to examine the submission of learned
Solicitor General that the recommendation of TRAI dated
15.10.2014 relied upon by the LICENSEES are primary
50
Page 51 recommendations, are not final. Even assuming for the sake
of arguments that the recommendations of TRAI are final, the
Government of India is not bound by the same in view of the
first proviso to Section 11(1) of TRAI Act. The obligation of the
Government of India arising under the second proviso thereof
to seek opinion of TRAI is only to ensure that there is a
rational process of decision-making where the factors relevant
are examined by an expert body before the Government takes
a final decision on any one of the matters enumerated under
Section 11(1)(a). As pointed out by Subodh Kumar Committee,
the Government is required to address the multiple goals for
spectrum management such as efficient utilisation, optimal
revenue generation, sufficient competition, obviously to avoid
monopoly in the telecom market etc. As rightly observed by
Subodh Kumar Committee, these goals are simultaneously
“synergistic as well as conflicting”. Therefore, the Parliament stipulated
that such issues are initially examined by an expert body
leaving it open to the Government to take a final decision as to
which one of these various ‘synergistic as well as conflicting’
factors must outweigh by the other factors. Apart from that,
51
Page 52 from the language of the 2
nd
proviso (supra) the obligation to
consult TRAI arises only in the case of “new licence” but not
the renewal/extension of an existing licence.
77.The impugned decision of the Government, which in fact
resulted in huge inflow of revenue in the auctions conducted
during the pendency of this litigation, cannot be said to be a
totally irrational or irrelevant consideration in the context of
the spectrum management, more particularly, in the light of
decision of this court in 2G case.
78.In this context, we need to examine two more decisions
relied upon by the respondents. They are - Kerala State
Electricity Board v. M/s. S.N. Govinda Prabhu and Bros. &
Others, (1986) 4 SCC 198 and Natural Resources
Allocation, In Re. Special Reference No.1 of 2012 , (2012)
10 SCC 1. Learned counsel for the LICENSEES relied heavily
on these two decisions in support of their submissions that: (i)
alienation of assets owned or controlled by the State need not
necessarily be only through the process of public auction, and
(ii) profiteering should not be the prime consideration of the
52
Page 53 State or State-owned bodies.
79.In Kerala State Electricity Board (supra), this Court
opined that “a public utility monopoly undertaking …….. may not be driven by
pure profit motive – not that profit is to be shunned but that service and not profit should
inform its actions. It is not the function of the Board to so manage its affairs as to earn the
maximum profit”. It was a case where the enhancement of
electricity tariffs under the Electricity Supplies Act, 1948 was
challenged. The principal ground of attach which was
accepted by the High Court was that the Kerala State
Electricity Board acted outside its statutory authority
15
. The
judgment essentially turned on the interpretation of the
language of the Electricity Supplies Act.
80.The said Act stipulated the principles on the basis of
which tariffs are required to be fixed and factors which are
required to be taken into consideration. It also obliged the
State Electricity Board to conduct its operations in an
economical viable manner. Section 51 of the Act, as amended
15
The principal ground of challenge and that which was accepted by the High Court was that the Kerala
State Electricity Board acted outside its statutory authority by formulating a price structure intended to
yield sufficient revenue to offset not merely the expenditure properly chargeable to the revenue account for
the year as contemplated by Section 59 of the Act but also expenditure not so properly chargeable. Had
Section 59 been strictly followed and had items of expenditure not chargeable to the revenue account for
the year been excluded, the revised tariff would have resulted in the generation of a surplus far beyond the
contemplation of Section 59 of the Act.
53
Page 54 from time to time (in 1978 and 1983) eventually stipulated –
“to provide that each Board shall have a surplus which shall not be less
than three per cent, or such higher percentage as the State Government
may specify, of the value of the fixed assets of the Board in service at the
beginning of the year;”
Interpreting the said section, this Court held
“We are of the view that the failure of the Government to specify the
surplus which may be generated by the Board cannot prevent the Board
from generating a surplus after meeting the expenses required to be met.
Perhaps, the quantum of surplus may not exceed what a prudent public
service undertaking may be expected to generate with out sacrificing the
interests it is expected to serve and without being obsessed by the pure
profit motive of the private entrepreneur. The Board may not allow its
character as a public utility undertaking to be changed into that of a profit
motivated private trading or manufacturing house. Neither the tariffs nor
the resulting surplus may reach such heights as to lead to the inevitable
conclusion that the Board has shed A its public utility character. When that
happens the Court may strike down the revision of tariffs as plainly
arbitrary. But not until then. Not, merely because a surplus has been
generated, a surplus which can by no means be said to be extravagant. The
court will then refrain from touching the tariffs. After all, as has been said
by this court often enough ’price fixation’ is neither the forte nor the
function of the court.”
81.We fail to understand as to how the general observation
that the “public utility monopoly undertaking …….. may not be driven by pure profit
motive” made while examining the tariffs fixed in exercise of the
powers vested by a statute are relevant in the context of the
present case. In our view, the decision is wholly inapplicable
to the facts of the present case for the following reasons:
(i)Even in the case of tariffs fixed pursuant to the
54
Page 55 powers conferred by a statute this Court held
that it would not interfere unless such tariffs
result in a generation of surplus revenue
reaching “such heights as to lead to the inevitable conclusion
that the Board has shed its public character” and the tariffs
are “extravagant”.
(ii)Persons seeking to avail the benefit of the
supply of electricity are left with no option but
to make payments in accordance with the
tariffs fixed by the Electricity Board, because
the electricity board had a monopoly over the
generation and distribution of electricity.
82.In the case in hand, the LICENSEES are not compelled to
pay any specific tariffs fixed by the LICENSOR (Union of India),
for availing the right to use the spectrum. If the price for
securing allocation of spectrum is likely to go up because of
the procedure of auctioning to have access to spectrum, it goes
up because of the market forces. Because there are people
who are willing to acquire such a right paying a higher price
55
Page 56 on the assessment that they would be able to carry on the
business profitably even after paying higher amounts for
acquisition of spectrum. The LICENSEES are corporate
houses with enormous economic power, which enables them
to secure adequate expert advice in the matter of financial
planning. We cannot believe that they would make any
investment without making a reasonable assessment of the
possible return on such investment. There is no compulsion
by the State in this regard. Therefore, in our view, the reliance
placed on the Kerala State Electricity Board (supra) is
wholly untenable.
83.Reliance is placed on the observations made in the
Special Reference (supra) in paragraphs 82 and 146 in
support of the submissions of the LICENSEES that auction is
not the only method of disposal of natural resources. In our
opinion, the LICENSEES’ reliance on these paragraphs is
wholly misconceived. These two paragraphs, instead of
supporting the case of the LICENSEES, are destructive of their
contention.
56
Page 57 “82.Further, the final conclusions summarized in paragraph 102 of the
judgment (SCC) in 2G case make no mention about auction being the only
permissible and intra vires method for disposal of natural resources; the
findings are limited to the case of spectrum. In case the Court had
actually enunciated, as a proposition of law, that auction is the only
permissible method or mode for alienation/allotment of natural resources,
the same would have found a mention in the summary at the end of the
judgment.
146.To summarize in the context of the present Reference, it needs to
be emphasized that this Court cannot conduct a comparative study of the
various methods of distribution of natural resources and suggest the most
efficacious mode, if there is one universal efficacious method in the first
place. It respects the mandate and wisdom of the executive for such
matters. The methodology pertaining to disposal of natural resources is
clearly an economic policy. It entails intricate economic choices and the
Court lacks the necessary expertise to make them. As has been repeatedly
said, it cannot, and shall not, be the endeavour of this Court to evaluate the
efficacy of auction vis-à-vis other methods of disposal of natural
resources. The Court cannot mandate one method to be followed in all
facts and circumstances. Therefore, auction, an economic choice of
disposal of natural resources, is not a constitutional mandate. We may,
however, hasten to add that the Court can test the legality and
constitutionality of these methods. When questioned, the Courts are
entitled to analyse the legal validity of different means of distribution and
give a constitutional answer as to which methods are 135 Page 136 ultra
vires and intra vires the provisions of the Constitution. Nevertheless, it
cannot and will not compare which policy is fairer than the other, but, if a
policy or law is patently unfair to the extent that it falls foul of the fairness
requirement of Article 14 of the Constitution, the Court would not hesitate
in striking it down.
(emphasis supplied)
84.In para 82, this Court was categoric that the findings of
2G case were limited to the case of spectrum. Similarly, in
para 146, this Court observed that this Court “respects the mandate
and wisdom of the executive” in the matter of choosing the most
suitable method of distribution of natural resources. This
Court noted that this is clearly a matter of an economic policy
57
Page 58 entailing an intricate economic choice and the Court lacks
necessary expertise to make such choice. In the light of the
observation in para 82 that at least in the matter of disposal of
spectrum, auction is the only “permissible and intra vires method for
disposal”. Therefore, the submission of the LICENSEES is
required to be rejected.
85.For all the above-mentioned reasons, we see no merit in
these appeals and writ petitions. Therefore, all the appeals
and writ petitions are dismissed. There shall be no order as
to costs.
….…………………………. J.
(J. Chelameswar)
…….………………………. J.
(R.K. Agrawal)
New Delhi;
May 14, 2015
58
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