2016 (5) TMI 1458 - SC - Law of Competition

Court Strikes Down Telecom Rules for Overstepping Legal Boundaries and Violating Fundamental Rights.

Cellular Operators Association Of India And Others Versus Telecom Regulatory Authority Of India And Others

The Supreme Court invalidated the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, deeming them ultra vires the Telecom Regulatory ... Validity of the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, notified on 16.10.2015, (to take effect from 1.1.2016), by the Telecom Regulatory Authority of India - Manifest arbitrariness and unreasonableness - violation of the fundamental rights under Articles 14 and 19(1)(g) of the Constitution - Amendment made in the exercise of powers conferred by Section 36 read with Section 11 of the Telecom Regulatory Authority of India Act, 1997 - credit only the calling consumer (and not the receiving consumer) with one rupee for each call drop (as defined), which takes place within its network, upto a maximum of three call drops per day. Held that:- The power to make the Impugned Regulation is traceable to Section 36(1) of the Telecom Regulatory Authority of India Act, 1997 - though the Regulation making power under the said Act is wide and pervasive, and is not trammeled by the provisions of Section 11, 12(4) and 13, it is a power that is non-delegable and, therefore, legislative in nature. The exercise of this power is hedged in with the condition that it must be exercised consistently with the Act and the Rules thereunder in order to carry out the purposes of the Act. Since the regulation making power has first to be consistent with the Act, it is necessary that it not be inconsistent with Section 11 of the Act, and in particular Section 11(1)(b) thereof. This is for the reason that the functions of the Authority are laid down by this Section, and that the Impugned Regulation itself refers to Section 11(1)(b)(i) and (v) as the source of power under which the Impugned Regulation has been framed - Under clause 5, the licensor reserves the right to modify the terms and conditions of the licence if in the opinion of the licensor it is necessary or expedient so to do in public interest or in the interest of security of the State or for the proper conduct of telegraphs. It may be stated that no modification of the licence has in fact been attempted or has taken place in the facts of the present case. Violation of Fundamental Rights - Held that:- One of the tests for challenging the constitutionality of subordinate legislation is that subordinate legislation should not be manifestly arbitrary. Also, it is settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation - the language of the Regulation is definite and unambiguous – every service provider has to credit the account of the calling consumer by one rupee for every single call drop which occurs within its network. The Explanatory Memorandum to the aforesaid Regulation further makes it clear, in paragraph 19 thereof, that the Authority has come to the conclusion that call drops are instances of deficiency in service delivery on the part of the service provider. It is thus unambiguously clear that the Impugned Regulation is based on the fact that the service provider is alone at fault and must pay for that fault. In these circumstances, to read a proviso into the Regulation that it will not apply to consumers who are at fault themselves is not to restrict general words to a particular meaning, but to add something to the provision which does not exist, which would be nothing short of the court itself legislating. For this reason, it is not possible to accept the learned Attorney General’s contention that the Impugned Regulation be read down in the manner suggested by him. The other string to the bow of this argument is that the Impugned Regulation would be worked in such a manner that the service provider would be liable to pay only when it is found that it is at fault. This again falls foul of constitutional doctrine. The appellants have strongly contended that a 2% allowance of call drops on the basis of averaging call drops per month has been allowed to them by the Quality of Service Regulations - Held that:- First and foremost, the 2009 Quality of Service Regulation is made under Section 11(1)(b)(v), which is the very Section which is claimed to be the source of the Impugned Regulation. Secondly, both regulations deal with the same subject matter – namely, call drops, and both regulations are made in the interest of the consumer. If an average of 2% per month is allowable to every service provider for call drops, and it is the admitted position that all service providers before us, short of Aircel, and that too in a very small way, have complied with the standard, penalizing a service provider who complies with another Regulation framed with reference to the same source of power would itself be manifestly arbitrary and would render the Regulation to be at odds with both Articles 14 and 19(1)(g) - it is clear that the Quality of Service Regulations and the Consumer Regulations must be read together as part of a single scheme in order to test the reasonableness thereof. The countervailing advantage to service providers by way of the allowance of 2% average call drops per month, which has been granted under the 2009 Quality of Service Regulations, could not have been ignored by the Impugned Regulation so as to affect the fundamental rights of the appellants, and having been so ignored, would render the Impugned Regulation manifestly arbitrary and unreasonable - Secondly, no facts have been shown to us which would indicate that a particular area would be filled with call drops thanks to the fault on the part of the service providers in which consumers would be severely inconvenienced. The mere ipse dixit of the learned Attorney General, without any facts being pleaded to this effect, cannot possibly make an unconstitutional regulation constitutional. The licence conditions, which are a contract between the service providers and consumers, have been amended to the former’s disadvantage by making the service provider pay a penalty for call drops despite there being no fault which can be traceable exclusively to the service provider, and despite the service provider maintaining the necessary standard of quality required of it – namely, adhering to the limit of an average of 2% of call drops per month - it is clear that the laying down of a penalty de hors condition 28, which, as we have seen, also requires establishing of fault of the service provider when it does not conform to a quality of service standard laid down by TRAI, would amount to interference with the licence conditions of the service providers without authority of law. On this ground also, therefore, the Impugned Regulation deserves to be struck down. Transparency - Held that:- Under Section 4(1) every public authority is not only to maintain all its records duly catalogued and indexed but is to publish, within 120 days from the enactment of the said Act, the procedure followed by it in its decision making process, which includes channels of supervision and accountability - Under Section 8, there is no obligation to give to any citizen information disclosure of which would prejudicially affect the sovereignty and integrity of India, the security of the State etc. Subject, therefore, to well-defined exceptions, openness in governance is now a legislatively established fact. The Impugned Regulation is ultra vires the TRAI Act and violative of the appellant’s fundamental rights under Articles 14 and 19(1)(g) of the Constitution. Issues Involved:1. Ultra vires the parent Act2. Manifest arbitrariness and unreasonableness3. Interference with license conditions4. Lack of transparencyDetailed Analysis:1. Ultra vires the parent Act:The appellants argued that the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, were ultra vires Section 36 read with Section 11 of the Telecom Regulatory Authority of India Act, 1997. The Supreme Court noted that the power to make regulations under Section 36(1) is wide and pervasive but must be consistent with the Act and the Rules made thereunder. The Court found that the Impugned Regulation did not fall under Section 11(1)(b)(i) or (v) as it neither ensured compliance with the terms and conditions of the license nor laid down any standard of quality of service. Consequently, the Impugned Regulation did not carry out the purpose of the Act and was held to be ultra vires.2. Manifest arbitrariness and unreasonableness:The Court emphasized that subordinate legislation must not be manifestly arbitrary or unreasonable. The Impugned Regulation was based on the assumption that the service provider is always at fault for call drops, which was found to be incorrect. The technical paper issued by TRAI itself recognized that 36.9% of call drops were due to consumer faults. The Regulation was thus framed without intelligent care and deliberation, making it manifestly arbitrary and an unreasonable restriction on the appellants' fundamental rights under Articles 14 and 19(1)(g). The Court rejected the argument to read down the Regulation to apply only when the fault is of the service provider, stating that such a course is not open in law.3. Interference with license conditions:The appellants contended that the Impugned Regulation interfered with the license conditions, which are contracts between the service providers and the consumers. The Court noted that the license conditions require the service provider to ensure quality of service standards as prescribed by TRAI. The Impugned Regulation, by imposing a penalty for call drops without establishing fault, interfered with these license conditions without authority of law. Therefore, the Regulation was found to be an unauthorized modification of the license conditions.4. Lack of transparency:Section 11(4) of the TRAI Act mandates transparency in the Authority's actions. The Court found that while TRAI held consultations with stakeholders, it did not adequately address the service providers' arguments regarding the various causes of call drops, some of which are beyond the control of the service provider. The conclusion that service providers are solely to blame for call drops was not supported by the consultation process, rendering the Regulation non-transparent. The Court emphasized the need for openness in governance and suggested that Parliament consider framing legislation to ensure transparency in subordinate legislation making.Conclusion:The Supreme Court set aside the judgment of the Delhi High Court, declaring the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, ultra vires the TRAI Act and violative of the appellants' fundamental rights under Articles 14 and 19(1)(g) of the Constitution. The Court highlighted the importance of intelligent care and deliberation in framing regulations and the need for transparency and openness in governance.