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
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
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 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 28th 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 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 14th
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 gamma rays.
Waves with frequencies ranging from 300 GHz 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).
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.
“……….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 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 20th 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 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 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:-
The cut off date for change over to NTP-99 regime will be 1.8.1999.
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.
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 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 telecommunications
services, has decided to move towards a Unified Access Services Licensing
regime. As a first step, as recommended by TRAI, Basic and Cellular
services shall be unified within the service area. In pursuance of this
decision, the following shall be the broad Guidelines for the Unified
Access Services License.
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.
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]
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 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 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 |The LICENSE shall be valid for a |
|license shall be twenty years from|period of 20 years from the |
|the effective date of the existing|effective date unless revoked |
|license agreement unless |earlier for reasons as specified |
|terminated for the reasons stated |elsewhere in the document. |
|therein. The Licensor may extend | |
|the period of license, if |The LICENSOR may extend, if deemed|
|requested during 19th year from |expedient, the period of LLICENCE |
|the effective date for a period of|by 10 years at one time, upon |
|10 years at a time on mutually |request of the LICENSEE, if made |
|agreed terms and conditions. The |during 19th year of the Licence |
|decision of licensor shall be |period on terms mutually agreed. |
|final in regard to grant of |The decision of the LICENSOR shall|
|extension. |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 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 19th 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 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 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 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.
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.
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.
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, 1885.
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.
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 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.
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.
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:
There must be a request from the licensee for such an extension of the
period of licence;
Such a request must be made during the 19th year from the effective date of
the licence;
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;
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.
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 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
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 19th year of the 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 19th 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 19th year but makes it just a few days before the expiry of the 20th
year. Does the LICENSEE still have a right of consideration? 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 19th 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 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.”
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 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 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:-
“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.
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
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. 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 & 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)
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.
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 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
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.
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.
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 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 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 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 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 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 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 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 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, from the language of the 2nd 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 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 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 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 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.
“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 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
-----------------------
[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”.
[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
[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.
[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 19th year of the License period on terms mutually agreed. The
decision of the LICENSOR shall be final in regard to the grant of
extension.
[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.
[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.
[10] See para 32 of the impugned order
[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: … ”
[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;”
[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.
2.10 to 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……….”
[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;
(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:
[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.
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