DELHI SCIENCE FORUM AND ORS. ETC. A

v.

UNION OF INDIA AND ANR.

FEBRUARY 19, 1996

B

[AM. AHMADI, CJ, N.P. SINGH AND K. VENKATASWAMI, JJ.]

•

Indian Telegraph Act, 1885-Section 4-Establishing, maintaining and

working telegraphs-Telegraphs-Includes telephones

& telecommunication

se1vices-Power

of Central Govemment to grant licences

in favour of private C

bodies-Fiduciary duty to act with restraint-Tests laid down for exercise of

statutory discretion Central Govemment expected to put such conditions which

shall safeguard public interest.

Administrative Latt--Award of contracts-Judicial Reviett--Scope

of-Test of reasonable man.

The present writ petitions and transferred cases have been filed

questioning the power of the Central Government to

grant licences to

non-Government companies to establish

and maintain Telecommunication

System in the country and the validity of the procedure adopted by the

Central Government for the said grant. The petitioners questioned the

validity and propriety of the

new Telecom Policy itself on the ground that

it shall endanger the national security of the country, and shall not serve

D

E

that economic interest of the nation. The petitioners submitted that

telecommunication being a sensitive service should always be within the

exclusive domain and control of the Central Government and under no

F

situation it should be parted with by way of grant of licences to

non­

Government Companies and private bodies; that Central Government

which has the exclusive privilege u/s. 4 of the Indian Telegraph Act,

1885

of establishing, maintaining and working telegraphs which shall include

telephones, has no authority to

part with the said privilege to non-Govern- G

ment Companies for the consideration to be paid by them as this amounts

to

an out and out sale of the said privilege; that even though by virtue of

the proviso to sub section

(1) of section 4 the Central Government can

grant such licences, the power should have been exercised only after

framing of rules u/s 7 of the Act

and that clause (b) of the second proviso

to sub-section

(1) of section 4 shall govern the grant of the licence under H

767

768 SUPREME COURT REPORTS [1996] 2 S.C.R.

A the first proviso to sub-section (1) of Section 4 as well because both

provisos contemplate grant of licence/permit for telegraphs; that the policy

of capping would

not have been applied and no choice should have been

given to the bidder to select the circles

and in respect thereof unilateral

decision should have been taken by the Central Government;

that circle

B

'C' and North Eastern Regions had been neglected while implementing the

National Telecom

Policy; that neither there was any justification nor any

rational basis for debarring the Government Company from ~ubmitting

their bids; that there was non creation of a separate Telephone

Regulatory Authority and non delegation of the power by the Central

Government to such Authority to supervise the functioning of the new

C Telecom policy in the country.

Dismissing the Petitions

and Transferred cases, this Court.

HELD 1.1. The power

and authority of the Central Government to

grant licences to private bodies including Companies subject to conditions

D and considerations for payments flows from sub-section (1) of Section 4 of

the Indian Telegraphs Act, 1885 which vests the privilege and right in the

Central Government.

In respect of grant of any right or licence by the

Central Government or an authority, which can be held to be

'State', within

the meaning of Article 12 of

the Constitution not only the source of the

E power has to be traced, but it has also to be found that the procedure

adopted for such grant was reasonable, rational and in conformity with the

conditions which

had been announced.

Such provisions while vesting

powers in

authorities including the Central Government also enjoin a

fiduciary duty to

act with due restrain, to avoid 'misplaced philanthropy or

ideology'. (777-F-H, 778-A].

F

1.2. The Central Government while exercising its statutory

Power

under first proviso to Section 4(1) of the Act, of granting licences for

establishment, maintenance

and working of Telecommunications has a

--

fiduciary duty as well. The new experiment of granting licences to private )

G bodies has to fulfil the tests laid down by courts for exercise of statutory L

discretion. It cannot be exercised in ·a manner which can be held to be

unlawful

and which is now known in administrative law as Wednesbury

principle, which is

attracted where it is shown, that an authority exercising

the discretion has taken a decision which is .devoid of any plausible jus-

tification and Any authority having reasonable persons could not have

H taken the said decision. (778-C-E]

DELHI SCIENCE FORUM v. U.0.1. 769

1.3. The Central Government is expected to put such conditions A

while granting licences, which shall safeguard the public interest and the

interest of the nation. Such conditions should be commensurate with the

obligations

that flow while parting with the privilege which has been

ex­

clusively vested in the Central Government by the Act. whereas the first

proviso to sub-section

(1) of

Section 4 contemplates the grant of a licence, B

second proviso to the same sub-section (1) of Section 4 speaks about

permitting establishment, maintenance

and working of telegraphs other

than wireless telegraphs within any part of India. The concept of grant of

licence to establish, maintain

or work a telegraph shalJ be different from

granting permission under the second proviso to establish, maintain

or to

work a telegraph within any

part of India. They do not conceive and con-C

template the same area of operation. There is no question of clause (b) of

the second proviso controlling

or over-riding in any manner the first

proviso which does not speak of the grant of licence

by any rules made

under the said Act. The power has been granted to the Central Government

by the Act itself, and the exercise of that right, by the Central Government, D

cannot be circumscribed, limited or restricted on any subordinate

legisla­

tion to be framed under Section 7 of the Act. However it was advisable on

the

part of the Central Government to frame such rules when it was so

desired

by the Parliament. Even in absence of rules the power to grant

licence on such conditions and for such considerations can be exercised by

the Central Government but then such power should be exercised on well

settled principles

and norms which can satisfy the test of Article 14 of the .

Constitution.

If necessary for the purpose of satisfying as to whether the

grant of the licence has been made strictly in terms of the proviso comply-

ing

and fulfilng the conditions prescribed, which can be held not only

reasonable, rational,

but also in the public interest can be examined by

courts. An authority which has been empowered to attach such conditions,

as

it thinks fit, must have regard to the relevant considerations and has to

disregard the irrelevant ones. The authority has to genuinely examine the

application on its individual merit

and not to promote a purpose alien to

E

F

the spirit of the Act. In this background, the courts have applied the test of

a reasonable man i.e. the decision should not

be taken or discretion should G

not be exercised in a manner, as no reasonable man could have ever

exer­

cised. Under the changed scenarios and circumstances prevailing in the

society, Courts are not following the rule of judicial self-restraint. But

at

the same time all decisions which are to be taken by an authority vested

with such power cannot.be tested

and examined by the court. The situation H

770 SUPREME COURT REPORTS [1996] 2 S.C.R.

A is all the more difficult so far as the commercial contracts are concerned.

B

c

The Parliament has adopted and resolved a national policy towards

liberalisation

and opening of the national gates for foreign investors. The

question

of awarding licences and contracts does not depend merely on the

competitive rates offered; several factors have to be taken into considera-

tion

by an expert body which is more familiar with the intricacies of that

particular trade. While granting licences a statutory authority or the body

so constituted, should have latitude to select the best offers on terms

and

conditions to be prescribed taking into account the economic and social

interest of the nation.

Unless any party aggrieved satisfies the court that

the ultimate decision in respect of the selection has been vitiated, normally

courts should

be reluctant to interfere with the same.

[779-E-F,

780-B, E-G, 781-A, G-H, 782-A·B]

1.4. Unless it is alleged and proved that the Tender Evaluation

Committee's decision in respect of capping was because of any

bad faith

or due to some irrational consideration, the Central government cannot

D be held responsible for that decision. In none of the writ petitions there is

any allegation

of malafide against the members of the Tender Evaluation

_

Committee stating any one of them had a bias in favour of one bidder or

the other or that they have acted on dictate of any higher authority,

abdicating the functions

entrusted to them. [788-G-H]

E

F

1.5. The new Telecom Policy is based on privatisation with foreign

participation. Government undertakings like MTNL were already

functioning in Delhi and Bombay and in spite of that it was felt that

telecommunication should be handled by non-

G~vernment undertakings

with foreign participation to improve the quality of service and to cover

larger areas. There is no question of Government undertakings being

ignored

or discriminated while awarding the licences in different service

circles. The new Telecom Policy is

not only a commercial venture of the

Central Government, but the object of the policy is also to improve the

service so

that the said service should reach the common man and should

be within his reach. The different licences should

not be left to implement

G the said Telecom Policy according to their perception. While implementing

the Telecom Policy the security aspect cannot be overlooked. The existence

of a Telecom Regulatory Authority with the appropriate powers is essential

for introduction of plurality in the Telecom Sector. The National Telecom

Policy is a historic

departure from the practice followed during the past

H

century. Since the private sector will have to contribute more to the

-

DELHISCIENCEFORUMv. U.0.1. 771

development of the telecom network than DOT/MTNL in the next few A

years, the role of an independent Telecom Regulatory Authority with

appropriate powers need not be impressed, which can harness the in­

dividual appetite for private gains, for social ends. The Central Govern­

ment and the Telecom Regulatory Authority have not to behave like

sleeping trustees,

but have to function as active trustees for the public

good. [790-F-G,794-C-D]

B

2. Many administrative decisions including decisions relating to

awarding

of contracts are vested in a statutory authority or a body con­

stituted under an administrative order. Any decision taken by such

authority

or a body can be questioned primarily on the grounds: (i) C

decision has been taken in bad faith: (ii) decision is based on irrational

or irrelevant considerations (iii) decision has been taken without following

the prescribed procedure which is imperative in nature. While exercising

the power

of judicial review even in respect of contracts entered on behalf

of the Government

or authority, which can be held to be State within D

meaning of Article 12 of the

C~nstitution courts have to address while

examining the grievance of any petitioner as to whether the decision

has

been vitiated on one ground or the other. It is well settled that the onus to

demonstrate

that such decision has been vitiated because of adopting a

procedure not sanctioned

by law, or because of bad faith or taking into

consideration factors which

are irrelevant, is on the person who questions E

the validity thereof. This onus is not dischargd only by raising a doubt in

the mind of

the court, but by satisfying the court that the authority or the

body which

had been vested with the power to take decision has adopted

a procedure which does not satisfy the test of Article 14 of the Constitution

or which is against the provisions of the statute in question or has acted F

with oblique motive or has failed in its function to examine each claim on

its

own merit on relevant considerations. [781-C-F]

Robe1ts v. Hopewood, (1925) AC 578;

Prescott v. Bcnncngham Cor­

poration, [1954] 3 All ER 698; Taylor & Ors. v. Munrow,, (1960] All ER 455;

Bronley London Borough Council v. Greater London Council & Anr., (1982] G

All ER 129 and Associated Provincial Picture Houses Ltd. v. Wedncsbwy

Corp.,

[1947] Z All ER

680, referred to.

CIVIL ORIGINAL JURISDICTION : Writ petition (C) No. 691 of

1995 Etc. Etc. H

772 SUPREME COURT REPORTS [1996] 2 S.C.R.

A (Under Article 32 of the Constitution of India.)

Altaf Ahmad, Additional Solicitor General,

C.S. Vaidyanathan,

P.R.

Kumaramangalam, Shanti Bhushan, Arnn Mohan, M.H. Baig, SJ. Sorab­

jee, A.H. Desai, Gopal Subramaniam, K. Parasaran, P.P.Malhotra, Arnn

Jaitley, K.K. Venugopal, Kapil Sibal, Anil B. Divan, DR. Rajeev Dhawan,

B R.F. Nariman, Ms. Nandita Haksar, Ms. Kamini Jaiswal, Ms. l.M.A. Chari,

Ms. V. Mohana, Shivam, Ms. Kitty Kumaramangalam, S.K.' Bhattacharya,

Prashant Bhushan, A.K. Panda, P.H. Parekh, N.K. Sahoo, Ranjit Kumar,

Yatish _Mohan, Ms. Anu Mohla, Rajiv Duta, S.J. Kathawala, Y.P. Dan­

diwala, Manoj Wad, Ms. J.S. Wad, A.K. Aggrawal, P.N. Gupta, P.P. Singh,

C Hemant S}).arma, C.V.S. Rao, W.A. Quadri, Praveen Swarup, S.A. Mattoo

(Ms. P.S. Shroff, Sunil Dogra, A. Das, S.S. Shroff) for S.A. Shroff & Co.,

R. Santhana Krishnan, Sunil Kumar, S.R. Bhat, L.R. Singh, Gautam Mitra,

Ranjan Devi and Ms. Indra Swahney for the appearing parties.

D

The Judgment of the Court was delivered by

N.P. SINGH, J. The petitioners in different writ petitions have ques­

tioned the power of the Central Government to grant licences to different

non-Governmel).t companies to establish and maintain Telecommunica­

tions System in the country and the validity of the procedure adopted by

E the Central GovP,rnment for the said grant.

In February 1993, the Finance Minister in his budget speech an­

nounced Government's intention to encourage private-sector involvement

and participation in Telecom to supplement efforts of Department of

Telecommunications especially in creation of internationally competitive

F industry. May 13, 1994 National Telecom policy was announced which was

placed in the

Parliament saying that the aim of the policy was to supple­

ment the effort of the Department of Telecommunications in providing

telecommunications services. Later, guidelines for induction of private-sec­

tor into basic telephone services were announced and a Committee was set

up to draft the tender documents for basic telephone services under the

G Chairmanship of

G.S.S. Murthy. Ministry of Communications published the

'Tender Documents for provision of Telephone Service'.

It ,specified and

prescribed the terms and conditions for the basic services and it also

conceived foreign participation

but as a joint venture prescribing a ceiling

on total foreign equity so far the Indian Company was concerned was not

H to exceed 49% of the total equity apart from other conditions.

•

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DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 773

Pursuant to the notice inviting tenders, tenders were submitted for A

different circles, but before licences could be granted by the Central

Government, writ petitions were filed in different High courts

as well as

before this Court. All writ petitions filed before different High Courts were

transferred to this Court to be heard together.

Telecommunications has been internationally recognised

as a public

utility of strategic importance. The variety or Telecommunications services

B

that has become available globally in the last decade is remarkable. It is

being realised that economy

is increasingly related to the way this Telecom

infrastructure functions for purpose of processing and transmission of

C

information, which has acquired central stage in the economic world today.

The special aspect about Telecommunications

is inter-connectivity which

is known as 'any to any requirement'. Because of the economic growth and

commercial changes in different parts of the world, need for inter-connec­

tivity means that communication systems have to be compatible with each

other and have to be actually inter-connected. Because of this, there

is a D

demand even in developing countries to have communication system on

international standards. Even after several decades of the invention of the

telephone system, in almost all countries Telecommunications was the

subject of monopoly supplied with the public network operator normally

being the

State owned Corporation or Government Department. Then it E

was not thought due to different considerations that such right could be

granted to private sectors denuding the right of the monopoly of the

Government to maintain and run the system of Ttilecommunications. The

developed countries first took decision in respect of privatisation of

Telecom which amounted to giving up the claim of exclusive privilege over

F

such system and this led to the transition from monopoly to a duopoly

policy in many countries. India, although a developing country also faced

a challenge in this sector.

By and large it was realised that this sector

needed acceleration because of the adoption of liberalised economic policy

for the economic growth of the country.

It appears that the policy makers

were faced with the implications for public welfare

vis-a-vis the sector G

being capital intensive. How the network is well maintained so as it

reaches the largest number of people at a price to be paid

by such users

which can

be held as reasonable? This issue was also inter-related with the

defence and national security of the nation. Different committees and

bodies constituted from time to time examined the Telecom policy which

H

B

c

D

E

F

G

774 SUPREME COURT REPORTS (1996] 2 S.C.R.

could

be adopted by the nation from different aspects and

~ngles.

The counsel appearing in some of the writ petitions questioned the

validity and propriety of the new Telecom Policy itself on the ground that

it shall endnager the national security of the country , and shall not serve

the economic interest of the nation. According to them, telecommunication

being a sensitive service should

always be within

the exclusive domain and

control of the Central Government and under no situation it should be

parted with

by way of grant of licences to non-Government Companies and

private bodies. The national policies in respect of economy, finance, com­

munications, trade, telecommunications and others have to

be decided .by

the

Parliament and the representatives of the people on the floor of the

Parliament can challenge and question any such policy adopted by the

ruling government. In the case of

R.K Garg Etc. Etc. v.

Union of India &

Ors., (1982] S.C.R. 947 a Constitution Bench of this Court said :

"Another rule of equal importance

is that laws relating to

economic activities should

be viewed with greater latitude then

laws touching civil rights such as freedom of speech, religion etc.

It has been said by no less a person than Holmes, J. that the

legislature should be allowed some play in the joints, because it

has to deal with complex problems which do not admit of solution

through any doctrinaire or straight Jacket formula and this

is

particularly true in case of legislation dealing with

economic mat-.

ters, where, having regard to the nature of the problems required

to be dealt with, greater play in the joints has to be allowed to the

legislature. The court should feel more inclined to

give judicial

deference to legislature judgment in the field of economic regula­

tion than in other areas where fundamental human rights are

involved."

In Morey v. Dond, 354

US 457 Frankfurter, J said:

"In the utilities, tax and economic regulation cases, there are

good reasons for judicial self-restraint if not judicial difference to

legislative judgment. The legislature after all has the affirmative

responsibility. The courts have only the power to destroy, not to

reconstruct. When these are added to the complexity of economic

regulation, the uncertainty, the liability to error, the bewildering

conflict of the experts, and the number of times the judges have

_l

DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 775

been overruled by events-self-limitation can be seen to be the path A

to judicial wisdom and institutional prestige and stability."

What has been said in respect of legislations

is applicable even in respect

of policies which have been adopted

by the

Parliament. They cannot be

tested in Court of

Law. The courts cannot express their

opinion: as to B

whether at a particular juncture or under a particular situation prevailing

in the country

any such national policy should have been adopted or not.

There

may be

vie~s and views, opinions and opinions which may be shared

and believed

by citizens of the country

including the representatives of the

people in the Parliament. But thafhas to be sorted out in the Parliament

which has

to approve such policies. Privatisation is a fundamental concept C

underlying the question about the power to make economic decisions.

What should be the role of the state in the economic development of the

nation? How the resources of the country shall be used? How the goals

fixed shall be attained? What are

to be the safeguards to prevent the

ab~se

of the economic power? What is the mechanism of accountability to ensure D

that the decision regarding privatisation is in public interest? All these

questions have

to be answered by a vigilant parliament. Courts have their

limitations-because these issues rest with the policy makers for the nation.

No direction can be given or is expected from the courts unless while

implementing such policies, there

is violation of infringement of any of the

Constitutional or statutory provision. The new Telecom

Policy was placed E

before the Parliament and it shall be deemed that Parliament has approved

the same. This Court cannot review and examine

as to whether said policy

should have been adopted.

Of course, whether there is any legal or Con­

stitutional bar in adopting such policy can certainly be examined

by the

court.

F

The primary ground of the challenge in respect of the legality of the

implementation of the policy

is that Central Government which has the

exclusive privilege under Section 4 of the Indian Telegraph Act,

1885

(hereinafter referred to as the 'Act') of establishing, maintaining and

working telegraphs which shall include telephones, has no authority to part

G

with the said privilege to non-Government companies for the consideration

to be paid by such companies on basis of tenders submitted

by them; this

amounts to an out and out sale of the said privilege.

The expression 'telegraph' has been defined in Section 3(1) :

H

776

A

B

c

D

E

F

G

H

SUPREME COURT REPORTS [1996] 2 S.C.R.

"3(1) "telegraph" means any appliance, instrument, material or

apparatus used or capable of use of 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 electro­

magnetic waves of frequencies lower than

3,000 giga-cycles per

second propagated in space without artificial guide."

Section

4 of the Act is as follows :

"4. (1) Within India the Central Government shall have the ex­

clusive privilege of establishing, maintaining and working

telegraphs : Provided that the Central Government may grant a ticence, on

such conditions and in consideration of such payments

as it thinks

fit

to any person to establish, maintain or work a telegraph within

any part of India :

Provided further that the Central Government may, by rules

made under this Act and published in the Official Gazette, permit,

subject to such restrictions and conditions

as it thinks fit, the

establishment, maintenance and working -

(a) of wireless telegraphs on ships within Indian territorial

waters and on aircraft within or above India, or Indian territorial

waters and

(b) of telegraphs other than wireless telegraphs within any part

of India.

(2) The Central Government

may, by notification in the

Official

Gazette, delegate to the telegraph authority all or any of its powers

under the first proviso to sub-section (1).

The exercise by the telegraph authority of

any power so

delegated shall be subject to such restrictions and conditions the

Central Government

may, by the notification, think fit to impose."

J_

-

'.

DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 777

There is no dispute that the expression 'telegraph' as defined in the A

Act shall include telephones and telecommunications services. Sub-section

(1) of Section 4 on plain reading vests the right of exclusive privilege of

establishing, maintaining and working telegraphs in the Central Govern­

ment, but the proviso thereof enables the Central Government to grant

licence, on such conditions and in consideration ·of such payments as it B

thinks fit, to any person to establish, maintain and work telegraph within

any part of India. It is true that the Act was enacted as early as in the year

1885 and Central Government exercised the exclusive privilege of estab­

lishing, maintaining and working telegraphs for more than a century. But

the framers of the Act since the very beginning conceived and con­

templated that a situation

may arise when the Central Government may C

have to grant a licence to

any person to establish, maintain or work such

telegraph including telephone within

any part of India. With that object in

view, it was provided and prescribed that licence may be granted to any

person on such conditions and in consideration of such payments as the

Central Government

may think fit. If proviso to sub-section (1) of Section

n·

4 itself provides for grant of licence on condition to be prescribed and

considerations to be paid,

to any person, then whenever such licence is

granted, such grantee can establish, maintain or work the telephone system

in that part

of India. In view of the clear and unambiguous proviso to

sub-section (1) of Section 4 enabling the Central Government to grant

licences for establishment, maintenance or working of telegraphs including

E

telecommunications, how can it be held that the privilege which has been

vested by

su_b-section (1) of Section 4 of the Act in the Central Government

cannot be granted to others on conditions

an:d for considerations regarding

payments? According to

us the power and authority of the Central Govern­

ment

.to grant licences to private bodies including Companies subject to

conditions and considerations for payments cannot be questioned. That

right

flows from the same sub-section (1) of Section 4 which vests that

privilege and

right in the Central Government. Of course, there can be

controversy in respect of the manner in which such right and privilege

which has been vested in the Central Government has been parted with in

favour of private bodies.

It cannot be disputed that in respect of grant of G

any right or licence by the Central Government or an authority which can

F

be held to be State within the meaning of Article 12 of the Constitution

not

only the source of the power has to be traced, but it has also to be

found that the procedure adopted for such grant

was reasonable, rational

and in confirmity with the conditions which had been announced. Statutory

authorities

have some times used their discretionary power to confer social H

778 SUPREME COURT REPORTS [1996] 2 S.C.R.

A or economic benefits on a particular section or group of community. The

plea raised

is that the Act vests power in them to be exercised as they 'think

fit'. This

is a misconception. Such provisions while vesting powers in

authorities including the Central Government also enjoin a fiduciary duty

to act with due restrain, to avoid 'misplaced philanthropy or ideology'.

Reference in this connection can be made to the cases :

Roberts v.

B Hopewood, (1925)

AC. 578; Prescott v. Bimiingham C01poration, [1954) 3

All E.R. 698; Taylor & Ors. v. Munrow, [1960) 1 All E.R. 455 and Bromley

London Borough Council v. Greater London Council and anotlw; [1982) 1

All E.R. 129.

C As such Centr,al Government while exercising its statutory power under

first proviso to section

4(1) of the Act, of granting licences for estab­

lishment, maintenance and working of Telecommunications has a fiduciary

duty

as well. The new

eiperiment has to fulfill the tests laid down by courts

for exercise of a statutory discretion.

It cannot be exercised in a

maimer

which can be held to be unlawful and which is now known in administrative

D law as Wednesbury principl~, stated inAssociated Provincial Picture Houses

Ltd.

v. Wednesbury Co1p.,

[1947) 2 All E.R. 680. The aforesaid principle is

attracted where it is shown, that an authority exercising the discretion has

taken a decision which ·is devoid of any plausible justification and any

authority having reasonable persons could not have taken the said decision.

E In the case of Bromley LBC (supra) it was said by Lord Diplock :-

F

"Powers to direct or approve the general level and structure of

fares to be charged

by the LTE for the carriage of passengers on

its transport system, although unqualified by any express words in

the Act, may nonetheless be subject

td implied limitations when

expressed to be exercisable

by a local authority such as the

GLC .....................

11

As such Central Government is expected to put such conditions while

granting licences, which shall safeguard the public interest and the interest

G of the nation. Such conditions should be commensurate with the obligations

that flow while parting

with the privilege which has been exclusively vested

in the Central Government

by the Act.

A stand

was taken that even if

It is assumed that because of the

proviso to sub-sectic~n (1) of Section 4, the Central Government can grant

H licences in respect of establishing, maintaining or working of telecom-

J_

.....

..

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 779

munications to Indian Companies registered under the Indian Companies A

Act, such power should have been exercised only after framing of rules

under Section

7 of the Act. In support of this stand, attention was drawn

to second proviso to sub-section

(1) of Section 4 which says that 'the

Central Government

may, by rules made under this Act' permit subject to

such restrictions and conditions

as it thinks fit, the establishment, main-

tenance and working -

(a) of wireless telegraphs on ships within Indian territorial waters and

on aircraft within or above India, or Indian territorial waters and

B

(b) of telegraphs other than wireless telegraphs within any part of C

India.

It was pointed out that clause (b) of the second proviso to sub-section (1)

of Section 4 shall govern the grant of the licence under the first proviso to

sub-section

(1) of Section 4 as well because both provisos contemplate D

grant of licence/permit for telegraphs within any part of India to any person

by the Central Government. At first blush this argument appears to be

attractive, but on closer examination, it appears that whereas the first

proviso

to sub-section (1) of Section 4 contemplates the grant of a licence,

second proviso to the same sub-section

(1) of Section 4 speaks about

permitting establishment, maintenance and working of telegraphs other

than wireless telegraphs within any part of India. It need not be pointed

out that the concept of grant of licence to establish, maintain or work a

telegraph shall be different from granting permission under the second

proviso to establish, maintain or to work a telegraph within any part of

India. They do not conceive and contemplate the same area of operation.

It may be relevant to point out that so far clause (b) of second proviso is

concerned, it excludes wireless telegraphs, which restriction has not been

prescribed in the first proviso. The second proviso

was introduced by Act

E

F

No. VII of 1914. From a copy of the Bill which was introduced in the

Council of the Governor General of India in respect of adding

one more

proviso to sub-section (1) of Section 4 of the Act, it appears there

was no G

clause (b). In the Statement of

Objects and Reasons of the said Amend­

ment, it was said that the second proviso was being introduced, for estab­

lishment, maintenance and working of the wireless telegraphs on ships

within Indian territorial waters. However, in the Amending Act, clause (b)

aforesaid

was also introduced enabling the Central Government, by rules H

780 SUPREME COURT REPORTS [1996) 2 S.C.R.

A to permit, subject to such restrictions and conditions, the establishment,

maintenance and working of telegraphs other than wireless telegraphs

within

any part of India. According to us, there is no question of clause

(b) of the second proviso controlling or over-riding in any manner the first

proviso which does not speak of the grant of licence by any rules made

B

under the said Act.

Section 7 enables the Central Government to make rules consistent

with the provisions of the Act for the conduct of

all or any telegraphs

established, .maintained or worked by the Government or

by persons

licensed under the said Act. Clause ( e) of sub-section (2) of Section 7

C prescribes that rules under the said Section may provide for conditions and

restrictions subject

to which any telegraph

line, appliance or apparatus for

telegraphic communication shall

be established, maintained, worked,

repaired, transferred, shifted, withdrawn or disconnected. There

is no

dispute that no such rules have been framed

as contemplated by Section

D 7(2)(e) of the Act. But in that event, it cannot be held that unless such

rules are framed, the power under sub-section (1) of Section 4 cannot be

exercised by the Central Government. The power has been granted to the

Central Government by the Act itself, and the exercise of that right,

by the

Central Government, cannot be circumscribed, limited or restricted on

any

subordinate legislation to be framed under Section 7 of the Act. No doubt,

E it was advisable on the part of the Central Government to frame such rules

when it

was so desired by the Parliament. Clause ( e) to sub-section (2) of

Section 7

was introduced by Amending Act 47 of 1957. If the conditions

and restrictions subject to which

any telegraph -telephone line is to be

F

G

established, maintained or worked had been prescribed by the rules, there

would have been less chances of abuse or arbitrary exercise of the said

power. That is

why by the Amending Act 47 of 1957 the Parliament

required the rules to the framed. But the question

is as to whether it can

be held that till such rules are framed Central Government cannot exercise

the power which has been specifically vested in it by first proviso

to Section

4(1) of the Act?

Even in absence of rules the power to grant licence on

such conditions and for such considerations can be exercised by the Central

Government but then such power should be exercised on well settled

principles and norms which can satisfy the test of Article 14 of the Con­

stitution.

If necessary for the purpose of satisfying as to whether the grant

of the licence has been made strictly in terms of the proviso complying and

H fulfilling the conditions prescribed,

which cai.i be held not only reasonable,

J __

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.) 781

rational, but also in the public interest can be examined by courts. It need A

not be impressed that an authority which has been empowered to attach

such conditions,

as it thinks fit, must have regard to the relevant considera­

tions and has to disregard the irrelevant ones. The authority has to genuine-

ly examine the applications on its individual merit and not to promote a

purpose alien to the spirit of the Act. In this background, the courts have

B

applied the test of a reasonable man i.e. the decision should not be taken

or discretion should not be exercised in a manner,

as no reasonable man

could have ever exercised. Many administrative decisions including

decisions relating to awarding of

contracts are vested in a statutory

authority or a body constituted under an administrative order. Any decision

C

taken by such authority or a body can be questioned primarily on the

grounds : (i) decision has been taken in bad faith;

(ii) decision is based on

irrational or irrelevant considerations; (iii) decision has been taken without

following the prescribed procedure which

is imperative in nature. While

exercising the power of judicial review even in respect of contracts entered

on behalf of the Government or authority, which can

be held to be

State D

within meaning of Article 12 of the Constitution courts have to address

while examining the grievance of

any petitioner as to whether the decision

has been vitiated on one ground or the other.

It is well settled that the onus

to demonstrate that such' decision has been vitiated because of adopting a

procedure not sanctioned

by law, or because of bad faith or taking into E

consideration factors which are irrelevant, is on the person who questions

the validity thereof. This onus

is not discharged

only by raising a doubt in

the mind of the court, but by satisfying the court that the authority or the

body which had been vested with the power to take decision has adopted

a procedure which does not satisfy the test of Article 14 of the Constitution

F

or which is against the provisions of the statute in question or has acted

with oblique motive or has failed in its function to examine each claim on

its own merit on relevant considerations.

Under the changed scenarios and

circumstances prevailing in the society, courts are not following the rule of

judicial self-restraint. But at the same time all decisions which are to be

taken by an authority vested with such power cannot

be tested and ex-G

amined by the court. The situation is all the more difficult so far the

commercial contracts are concerned. The

Parliament has adopted and

resolved a national policy towards liberalisation and opening of the na­

tional gates for foreign investors. The question of awarding licences and

contracts does not depend merely on the competitive rates offered; several

H

782 SUPREME COURT REPORTS [1996] 2 S.C.R.

A factors have to be taken into consideration by an expert body which is more

familiar with the intricacies of that particular trade. While granting licences

a statutory authority or the body so constituted, should have latitude to

select the best offers on terms and conditions to be prescribed taking into

account the economic and social interest ot tu1., nation. Unless any party

B

c

aggrieved satisfies the court that the ultimate decision in respect of the

selection has been vitiated, normally courts should be reluctant to interfere

with the same. ·

Tender documents for provision of telephone service were issued

inviting tenders in respect following Telecom Territorial Circles:

(1) Andhra Pradesh, (2) Andaman & Nicobar Islands, (3) Assam, ( 4)

Bihar, (5) Gujarat, (6) Haryana, (7) Himachal Pradesh, (8) Jammu &

Kashmir, (9) Karnataka, (10) Kerala, (11) Madhya Pradesh, (12)

Maharashtra (including MTNL Bombay), (13) North East,

(14)

Orissa,

(15) Punjab, (16) Rajasthan, (17) Tamilnadu (including Madras Metro

D Distt.), (18) Uttar Pradesh, (19) West Bengal (including Calcutta Metro

Distr.), {20) Delhi (MTNL Delhi).

In the Tender Documents the aforesaid Telecom Territorial Circles

were put under three categories

as Category A, Category B and Category

E C service areas. In Category A -

AP. Circle, Delhi (MTNL), Gujarat

Circle, Karnataka Circle, Maharashtra Circle (including Bombay MTNL),

T.N. Circle (including Madras Metro District); in Category B -Haryana

Circle, Kerala Circle, M.P. Circle, Pu~jab Circle, Rajasthan Circle, U.P.

West Circle, U.P. East Circle, W.B. Circle (Including Calcutta Metro

District); arid in Category C -Andaman & Nicobar Islands Circle, Assam

F Circle, Bihar Circle, H.P. Circle, J&K Circle, N.E. Circle, Orissa Circle

were specified.

It was said the

DOT /MTNL shall continue to operate

telephone service

in the Service Areas mentioned aforesaid. It was further

said that in respect of International, National and Inter-service Areas,

Telephone Traffic will be routed through the Long

Distance Network of

G DOT (Department of Telecommunications). The eligibility conditions for

bidders which were specified in Clause

2.1

Part I Section II of the Tender

Documents:

"2.1 ELIGIBILITY

CONDITIONS FOR BIDDERS :

H (i) Indian Company : The bidder must be an Illdian Company

-

-·

1•

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 783

registered, before the date of submission of bid, under the Indian

Companies Act,

1956. However, the bidder must not be a Govern-

ment Company

as defined in the Indian Companies Act, 1956.

(ii) Foreign Equity : Total foreign equity in the bidding Company

must not exceed 49% of the total equity.

(iii) Networth : Networth of the

bidder Company and its

promoters, both Indian and Foreign,

as reflected in the latest

audited balance sheet, must not

be less than the amount mentioned

in Table I for each category of Service Areas provided that the

networth of a foreign promoter shall not be taken into account for

this purpose

if its share in the equity capital of the bidder Company

is less than

10%. A bidder Company which meets the minimum

requirement of networth for a Service Area of one category may

bid for any number of Service Areas of that or lower category.

Total Networth of the Bidder Category of Service Areas (one

Company

or more Service Area) for

which bid can be submitted.

Rs.

50 Crores c

Rs. 200 Crores Band C

Rs. 300 Crores A, Band C

Networth in foreign currency shall

be converted into Indian

Rupees at rates valid for 16.01.1995 as declared by the. Reserve

Bank of India.

A

B

c

D

E

Networth is defined as the total in Rupees of paid up equity F

capital and free reserves.

(iv) Experience : The bidder must have experience· as a service

provider and a network operator of a public switched telephone

network with a minimum subscriber base in terms of DELs served

G

(excluding ISON lines and mobile telephone lines) as on

01.01.19~5

of not less than 500,000 (5 Laich) lines.

For the purpose of eligi."bility with regard to experience of a

promoter Company which has an equity of 10% or more in the

bidder Company and which

is a service provider and a network H

A

B

c

784 SUPREME COURT REPORTS (1996] 2 S.C.R.

operator of a public switched telephone network,

will also be

added to the experience of the bidder Company.

NOTE:

1. Subscriber base refers to the subscribers who are being

provided telephone service.

2. Telephone service -see Section IV.

(v) Any number of Indian Companies as well

as foreign Companies

can combine to promote the bidder Company. However, an Indian

Company cannot be part of more than one such joint venture. The

same restriction applies to a foreign Company."

Clause

2.2 required the bidder company to submit apart from other

documents mentioned therein :

D (i) Copy of Certificate of incorporation of the bidder company from

E

F

G

H

the Registrar of Companies.

(ii) Memorandum and Articles of Association of the bidder com­

pany.

(iii) Networth and experience calculation sheet

as per Annexure 1.

(iv) Annual reports for the last five financial years of the bidder

Company

as well as all the promoter Companies which have to be taken

into consideration for the purpose of evaluating networth and experience.

(v) A comprehensive detailed document containing company profile,

a

five year perspective network plan, a five year financial plan with funding

mechanism. Details of management and technical expertise etc .

.(vi) Copy of the agreement between Indian and foreign Company.

(vii) Approval of the Government of India for the terms of foreign

participation, if already taken, otherwise copy of the application submitted

to the competent authority of Government of India, in this regard to gather

with proof of submission.

(viii) Certificate from the competent authority in the Government

of

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 785

India to the effect that the total foreign equity in the bidder Company does A

not exceed 49%.

(ix) Documentary evidence in support of the experience claimed and

other items quoted

in the bid.

Clause

12 provided for the award of tenders. The relevant part is as

follows:

"The maximum number of Service Areas, a successful bidder

B

can be licensed for, is dependent upon the total networth of the

bidder. A successful bidder can

be awarded X, Y, Z numbers of C

category A, B and C areas respectively if the total networth .

calculated as per Clause

2.1. (iii) above equals or exceeds Rs.

(300X + 200Y + SOZ) Crores .......................... .

TELECOM AUTHORITY is free to restrict the number of service

areas for which any one company can be licensed

to provide the D

SERVICE.'; .

(emphasis supplied)

Section III contained different conditions including in respect of E

Security in Clause 16, Section IV provided the condition relating to tech­

nical service.

In the same Tender Documents telephone service tariff was

also specified.

Pursuant to the invitation of tenders aforesaid different Indian Com-

. panies including Indian Companies with foreign equities submitted their

F

tenders.

The Tender Evaluation Committee comprised of the following mem­

bers for evaluation of the bids for basic telephone service :

Shri

B.S. Karandikar, Member (Production)

Shri S.D. Chaturvedi, Jt. Secretary (T)

Smt. Runu Ghosh,

DDG (LF) Shri S.K. Jain, DDG (TX)

Chairman

Member

Member

Member

Member Shri M.K. Garg, DDG (VAS)

Shri O.P. Choudhary, DOG (BS) Member & Convenor

G

H

A

B

c

D

E

F

G

786

SUPREME COURT REPORTS (1996] 2 S.C.R.

All the tenders were placed before the said Committee which after

evaluating all the bids received submitted its report. We are not concerned

with the details of the said report, but it shall be proper to refer to some

salient features which have bearing on some of the issues raised in these

writ petitions. As one of the tenderers M/s HFCL -Bezeq had emerged

as the highest bidder in nine circles, the Committee reported :

"Multiple H 1 Bids

from a Single Bidder :

(1) The Committee observed that in nine Circles, .only one bidder

viz. M/s HFCL Bezeq have emerged as the highest bidder. If all

the nine Circles are awarded to this bidder,

It would result in a

kind of private monopoly with M/s HFCL emerging

as the single

largest dominant private undertaking in this sector with over 75%

share of additional D ELs over a period of three years.

(2) The main purpose of allowing the private sector to enter into

Basic Service was to complement the efforts of

DOT in reaching

the target of 'telephone-on-demand' situation by

1997, covering all

villages as early

as possible and providing telecom services of world

standard.

If we entrust the development

of telecom in so many

major Circles to only one bidder and that bidder

is not able to

deliver the number of lines promised due to inability in a short

time to mobilise the very large resources required for providing

services in so many Circles, then development of-Telecom in the

country will be

stunted;

(3) Further, Telecom being a very sensitive sector from the point

of view of national security, private foreign investment should be

more evenly distributed and the predominance of any one foreign

country (which would result from one bidder with a specific foreign

partner getting a majority of Circles) should be avoided.

' .

( 4) Taking all these factors into consideration, imposition of a limit

on the maximum number of Circles to be allotted in 'A'

& 'B'

category circles,

seems to be called for. The restriction can be as

follows:

(i) Out of category 'A' & 'B' circles bid, not more than three

H circles should be allotted to any single bidder. This restriction need

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 787

not apply to category 'C' circles which have evoked poor response A

from the bidders.

(ii) Subject to this restriction, the Hl bidder should be given

an option to choose the Circles.

(iii) The Circles which are vacated by

Hl bidder after exercis­

ing the above option

will need to be offered to the rest of the

bidders in the descending order

of their ranking for matching the

package offered by the

Hl bidder.

B

(5) The Committee felt that the gap between Hl and the H2 bids C

in such Circles referred to in para B 4 (iii) above is so wide that

there appears to

be remote possibility of any of the bidders

matching the

Hl package. In such a situation, the Department may

have to go

in for retendering for these Circles. However, the

'committee noted that

if we invite fresh bids through an open D

tender for both

technical/commercial as well as financial bids, this

process would take a very long time and the main purpose of

allowing the private section to participate in the operation of Basic

Service, which was to meet the objectives of the National Telecom

Policy would be defeated. The Committee, therefore, felt that the

E

purpose will be served by

inviting fresh financial bids only, from

among those bidders except

Hl who have already participated in

the original tender and whose bids have been found technically

and commercially compliant. The Committee observed that for this

purpose, an important issue will

be fixation of Reserve Price below

which no offer would

be accepted. The normal procedure would

have been to keep the levy quoted by the highest bidder as the

reserve price, since the highest bidder has not withdrawn his offer

but would be prevented from accepting these Circles on account

F

of the proposed restriction placed on the number of Circles to be

allotted to any single bidder. But since all bidders for a particular G

Circle would have already refused to match the highest levy before

calling

fo! fresh financial bids, no purpose would be served by

keeping that levy as a reserve price."

From the aforesaid recommendations

of the Committee it appears that it H

788 SUPREME COURT REPORTS l 1996] 2 S.C.R.

A recommended that out of category 'A' and 'B' service areas not more than

three service areas be allotted to

any bidder; no such restriction was to be

applied to category 'C' service areas which had evoked poor response from

the bidders.

It also recommended that while applying the above restrictions

the Hl bidder may be given an option to choose from the service areas

B

where he had offered the package with highest ranking. It is no doubt little

surprising as to how and

why Mis HFCL -Bezeq offered such high bids

in nine circles. But it

is an admitted position that in view of the recommen­

dations of the Tender Evaluation Committee capping system

was intro­

duced and aforesaid

Mis HFCL -Bezeq was allotted only three circles i.e.

Delhi,

U.P. (West) and Haryana so far categories 'A' and 'B' circles are

C concerned. In respect of the other 'A' and 'B'circles although the said Mis

HFCL -Bezeq was the highest bidder, the offer was not accepted because

in that event it would have led to a virtual monopoly, the said

Mis HFCL

-Bezeq

l]aving emerged as a single largest dominant private undertaking.

D The learned counsel appearing in different writ petitions have attack-

ed this policy of capping. However, inspite of repeated queries, none of

them could satisfy as to how in this process the said

Mis HFCL -Bezeq

had been a gainer or the nation has been a loser.

It was pointed out that

if this capping system would not have been applied, then a much higher

amount would have been received because of the high tenders submitted

E by said Mis HFCL -Bezeq for other circles which on principle of capping

was denied to the said company. It was also submitted that in any event,

no choice should have been given to the bidders to select the circles and

in respect thereof unilateral decision should have been taken by the Central

Government. As pointed out above,

the decision regarding capping and

p putting a limit in respect of category 'A' a,nd 'B' circles bid to not more

than three

was recommended by the Tender Evaluation Committee which

appears to have been accepted by the Central Government. Unless

it·is

alleged and proved that the Tender Evaluation Committee's decision in

respect of capping

was because of any bad faith or due to some irrational

consideration, according to

us the Central Government cannot be held

G responsible for that decision. It may be mentioned at the outset that in

none of the writ petitions there

is any whisper much less any allegation of

malafide against the members of the Tender Evaluation Committee stating

any one of them had a bias in favour of one bidder

or the other or that

they have acted on dictate of any higher authority, abdicating their func-

H tions entrusted to them.

--

DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 789

Some of the petitioners urged that policy of capping was applied A

after receipt of the tenders. This is not correct. In the Tender Documents

as quoted above it had been clearly stated that 'Telecom Authority is free

to restrict the number of the service areas for which one Company can

be

licensed to provide the service'. As such, it cannot be urged that the

decision regarding capping restricting the award of licence in category

'A'

and 'B' circles to one bidder to three was taken with some ulterior motive

or purpose, not being one of the terms specified and prescribed in the

tender documents.

B

It was also pointed out in respect of M/s HFCL -Bezeq that its

networth was shown at Rs. 4,622 crores, but the break up of the networth

C

of different Companies which are the partner Companies thereof, it shall

appear that one foreign Company holding only 26% equity share has shown

networth of Rs.

4,1116 crores i.e.

89.05% whereas the Indian Company

Consortium Leader

HFCL having equity share of 44% has shown its

networth was Rs. 62 crores i.e. 1.34%. As already pointed out above clause

D

2.2. of

Section II of Part I of tender documents required the bidder

Company to produce the copy of the agreement between the Indian and

Foreign Company including the approval of the Government of India for

the terms of foreign participation and certificate from the competent

authority in Government of India to the effect that total foreign equity in

the bidder Company does not exceed 49%.

It was stated during the hearing E

of writ petitions on behalf of the aforesaid M/s HFCL -Bezeq that it had

produced the copy of certificate of incorporation of the said Company from

the Registrar of Companies including Memorandum and Articles

of As­

sociation. The terms and conditions of tender documents restricted the

bidder Company that it shall not have total foreign equity in excess of 49%.

F

In the instant case, the foreign Company admittedly does not have foreign

equity in excess of 49%.

It was also pointed out on behalf of the respon­

dents that when the tender documents prescribed about the networth of

the bidder Company, it did not mean the actual investment

of that amount.

If a foreign company having equity less than 49% has networth to fulfill

the requirement of the bidder Company, its bid

had to be examined by the G

Tender Evaluation Committee as has been done in the present case.

Counsel appearing for writ petitioners and M/s

HFCL -Bezeq were heard

on the question as to whether clauses 2.1. and 2.2. of

Section II of the

Tender Documents in respect of Eligibility Conditions

had been complied

,

with by aforesaid M/s HFCL -Bezeq. Mr. Venugopal, the learned counsel H

790 SUPREME COURT REPORTS [1996] 2 S.C.R.

A appearing for the said respondent pointed out that 30.3.1995 was the date

fixed for submission

of the tenders which was later extended to 23.6.1995.

He further stated that the said respondent submitted different documents

specified in clause 2.2.

of Section II of the Tender Documents along with

the bid and as such there has

been full compliance of clauses 2.1. and 2.2.

B

None of the counsel appearing in different writ petitions challenged this

statement. The counsel for writ petitioners did not allege any bias against

the

Tender Evaluation Committee sµggesting that it has favoured the said

Mis HFCL -Bezeq so far the. grant of licence in the three circles men­

tioned above are concerned.

It can be said that the petitioners in different

writ petitions have primarily questioned the right

and propriety of the

C Central Government to grant licences to non-Government Companies. No

direct attack was made in respect

of

pro~edure for selection adopted by

the

Tender Evaluation Committee.

On behalf of petitioners it was urged that Circle 'C' and North Easter

D Regions have been neglected while implementing the National Telecom

Policy. Objections were also raised in respect of rates of charges for l.S.D.

and S.T.D.

It is not possible for this Court to issue specific directions on

those questions.

I! need not be pointed out that whenever a new policy is

implemented there

are teething problems. But they have to be sorted out.

E

On behalf of the petitioners, it was also submitted that neither there

was any justification nor any rational basis for debarring the Government

Company from submitting their bids. Although it is

not necessary for this

Court to express any opinion

on that question because according to us that

shall amount to a policy matter,

but it can be said that the

new Telecom

F Policy is based on privatisation with foreign participation. Government

undertakings like

MTNL were already functioning in Delhi and Bombay

and in spite of that it was felt that telecommunication should

be handled

by non-Government undertakings with foreign participation to improve the

quality of service and to cover larger areas. In this background, there is no

question of Government undertakings being ignored or

discriminated while

G awarding the_licences in different service circles.

The coli isel appearing· in some of the writ petitions laid great stress

on non-crea(on of a separate Telephone Reg~latory Authority after

amending the .hct and non delegation of the power by the Central Govern­

H ment to such Authority to supervise the functioning of the new Telec:Om

DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 791

Policy in the country. A

It appears that almost all the countries of the world who have·

privatised the telecommunications, have constituted Regulatory Authorities

under the different enactments. In United Kingdom under the Telecom­

munications Act

1984 a Regulatory Authority has been constituted to B

secure that

tl\e telecommunications services are provided throughout the

United Kin~m and to supervise the connected issues. Such Authority has

to promote the interests of the consumers, purchasers and other users in

the United Kingdom (including in particular those who are disabled or of

pensionable age) in respect of prices charged for and the quality and

variety of telecommunications services provided.

It also maintains and C

promotes effective competition between persons engaged in commercial

activities connected with telecommunications in the

United Kingdom. The

Authority

is also responsible to encourage persons providing telecom­

munication services and telecommunication apparatus in the

United

Kingdom to compete effectively in the provision of such services and supply D

of such apparatus outside the United Kingdom. In United States the

Federal Communication Comn:Ussion created by the Communication Act,

1934 is a primary federal regulator of the· communication industry. The

Federal Communication Commission is currently organised into six

bureaus. As a

gener.al rule the operating bureaus are authorised to enforce

existing Commission decisions and policies. Wireless Telecommunication

E

Bureau has the responsibility to supervise all wireless technologies includ-

ing Cellular services. In Canada the Telecommunication Act which

is the

primary statute relating to telecommunications came into force in

1993

replacing variety of statutes. It contains different provisions to review the

functioning of the telecommunications and vests power in authorities in

F

respect

of supervision and implementation of the said policy. In Australia,

AUSTEL is responsible for regulation of telecommunication services,

equipment and cabling under Telecoms Act,

1991.

AUSTEL determines

standards relating to network integrity and safety, compliance with recog­

nised international standards and end-to-end quality of service. In France,

G

General Directorate for

Post and Telecommunications, 'DCPT' has the

responsibilities of determining and adapting the economic and technical

framework for post and telecommunications activities, ensuring the condi­

tions of fair competition among the various competitors in the telecom­

munications field. There are other supervisory and advisory borties assisting

the regulation of the telecommunications.

In Japan the

Tele1~Jmmunica- H

•

792 SUPREME COURT REPORTS [1996] 2 S.C.R.

A · tions Technology Council has over all responsibility to co ordinate the

services, with outside administrative bodies and various manufacturers,

users, institutes and other organisations in establishing. the standards for

Japan. Similar is the position in many other countries developed as well as

under-developed.

B

It appears that the Telecom Regulatory Authority of India Or­

dinance, 1996 has been promulgated after the hearing of the writ petitions

concluded. From the preamble

of the said Ordinance it appears that object . thereof is to establish the Telecom Regulatory Authority of India to

regulate the telecommunication services, and for matters connected there-

C with or incidental thereto.

Section 2(i) defines 'telecommunication service'.

Chapter II contains provisions in respect of the establishment of the

Telecom Regulatory Authority of India and conditions of service in respect

of Chairperson and members thereof. The Chairperson shall be a person

who is or has been a Judge of the

Supreme Court or who is or has been

the Chief Justice of a High Court. A Member shall be a person

who is

D holding the post of Secretary or Additional Secretary to the Government of India or to any equivalent post in the Central Government or the State

Government for a period of three years. The term of the Chairperson has

been fixed at five years from the date on which he enters upon his office.

So far the Member is concerned, he has to hold office for a term of five

E years from the date on which he enters upon his office or UQ.til he attains

the age of

·62 years, whichever is earlier. The other conditions have been

prescribed in

tht! said Chapter. Chapter III prescribes the powers and

functions of the said Authority. Section 11 opens with a non-obstante

clause saying that notwithstanding anything contained in the Indian

F

Telegraph Act, 1885, the functions of the Authority shall be as specified in

the said Section including to ensure technical compatibility and effective

inter-relationship between different service providers, to ensure com-

pliance of licence conditions by all service providers, to facilitate competi­

tion and promote efficiency in the operation of telecommunication services,

to protect the interest of the consumers of the telecommunication services,

to

levy fees at such rates and in respect of such services as may be

G determined by regulations. Sub-section (2) of

Section 11 says :

"Notwithstanding anything contained in the Indian Telegraph

Act,

1885, the Authority may, from time to time, by order, notify

the rates at which the telecommunication services within India and

H outside India shall be provided under this Ordinance including the

J_

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DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 793

rates at which messages shall be transmitted to any country outside A

India."

Sub-section (2) of Section 11 has also a non-obstante clause giving over­

riding effects to said sub-section over anything contained in the Indian

Telegraph Act,

1885. In view of the aforesaid sub-section, the Authority B

may from time to time by order notify the rates at which telecommunication

services within India and outside India shall

be provided. Sub-section (3)

of

Section 11 enjoins the Authority not to act against the interest of the

sovereignty, integrity of India, the security of the State, friendly relations

with foreign States, public order, decency or morality. In view of Section

12 if the Authority considers it expedient so to do, it may by order in C

writing call upon any service provider at any time to furnish in writing such

information or explanation relating to its affairs

as the Authority may

require.

It can also appoint one or more persons to make enquiry in

relation to the affairs of any service provider. The Authority can also direct

any of its officers or employees to inspect the books of accounts or other

D

documents of any service provider. The Authority has been vested with the

powers to issue such directions to service providers 'as it may consider

necessary', for proper functioning by the service provider.

Section 13 also

reiterates the said power of the Authority by saying that for its functions

under sub-section (1) of Section 11, the Authority can issue such directions

from time to time to service provider

as it may consider necessary. Chapter E IV contains provision in respect of settlement of disputes. Section 29

provides for penalty if any person violates the directions of the Authority

and Section 30 prescribes for punishment if the offence is alleged to have

been committed by a Company. With the establishment of the Telecom

Regulatory Authority of India, it can be said that an independent Telecom

F

Regulatory

.Authority is to supervise the functioning of different Telecom

service prqviders and their activities can be regulated in accordance with

the provisions

of the said Ordinance.

Section V of Tender Documents contains financial conditions.

Clause 2.0 thereof says :

"TARIFF: Tariff for the SERVICE provided by the LICENSEE

shall not be more than DOT's Tariff. Tariff

is subject to regulation

by Telecom Regulatory Authority of India, as and when such an

authority

is set up by the Government of India."

G

H

794 SUPREME COURT REPORTS [1996) 2 S.C.R.

A The aforesaid condition provides that licensee shall not charge tariff for

service more than DOT's tariff and such tariff shall be subject to regulation

by Telecom Regulatory Authority of India. This condition shall safeguard

the interest of the persons to whom services are provided by the licensees.

The new Telecom Policy is not only a commercial venture of the

B Central Government, but the object of the policy is also to improve the

service so that the said service should reach the common man and should

be within his reach. The different licensees should not be left to implement

the said Telecom Policy according to their perception. It has rightly been

urged that while implementing the Telecom Policy the security aspect

C cannot be overlooked. The existence of a Telecom Regulatory· Authority

with the appropriate powers

is essential for introduction of plurality in the

Telecom Sector. The National Telecom

Policy is a historic departure from

the practice followed during the past century. Since the private sector will

have to contribute more to the development of the telecom network than

DOT/MTNL

in the next few years, the role of an independent Telecom

D Regulatory Authority with .appropriate powers need not be impressed,

which can harness the individual appetite for private

gains,' for social ends.

The Central Government and the Telecom Regulatory Authority have not

to behave like sleeping trustees, but have to function

as active trustees for

the public good.

E

Subject to the directions given above, the writ petitions and Trans­

ferred Cases are dismissed. However, there shall be no orders

as to costs.

R.A.

Petitions and Transferred Cases dismissed.

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