2022 (3) TMI 1629 - SC - Indian Laws

Telecom company denied refund of entry fees for quashed 2G licenses under in pari delicto doctrine

Loop Telecom and Trading Limited Versus Union of India and Anr.

The SC dismissed appeals by a telecom company seeking refund of entry fees paid for 2G licenses that were quashed in the CPIL judgment. Applying the ... Doctrine of 'In pari delicto' - Refund of the Entry Fee paid for the 2G licences, which were quashed by the Supreme Court in the CPIL judgment, under the principles of civil, contractual, and constitutional law - Jurisdiction of Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to entertain the appellant's claim for a refund of the Entry Fee - HELD THAT:- The appellant was in pari delicto with DoT and the then officials of the Union government. The appellant was the beneficiary of the “First Come First Serve” policy which was intended to favour a group of private bidding entities at the cost of the public exchequer. The contention of the appellant that it was exculpated from any wrong doing by the judgment of this Court in CPIL [2012 (2) TMI 568 - SUPREME COURT] is patently erroneous. The process leading up to the award of the UASLs and the allocation of the 2G spectrum was found to be arbitrary and constitutionally infirm. The need for an open and transparent bidding process for the allocation of natural resources was substituted by a process which was designed to confer unlawful benefits on a group of selected bidders by which the appellant benefitted. The appellant has tried to obviate these findings by relying on its acquittal by the Special Judge, CBI. It is important to note that the criminal trial before the Special Judge, CBI was limited to the question as to whether the promoters of the appellant had cheated the DoT by providing a false representation of its compliance with Clause 8 of the UASL Guidelines, since it was allegedly being controlled by the Essar group. The Special Judge, CBI acquitted the promoters of the appellant since the prosecution was unable to prove that: (i) officers of DoT considered the representation of the appellant to be false; (ii) the appellant was engaging in a sham transaction; or (iii) the appellant was actually controlled by the Essar group. Hence, the acquittal of the promoters of the appellant of these criminal charges does not efface or obliterate the findings which are contained in the final judgment of this Court in CPIL. Hence, as a beneficiary and confederate of fraud, the appellant cannot be lent the assistance of this Court for obtaining the refund of the Entry Fee. In any event, such a course of action before the TDSAT was clearly in the teeth of the judgment of this Court in CPIL. Conclusion - The appellant is not entitled to a refund of the Entry Fee. TDSAT correctly concluded it lacked jurisdiction. The set-off policy is not discriminatory or arbitrary. There is no merit in the appeals. The appeals are accordingly dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core issues considered in the judgment include:(i) Whether the appellant is entitled to a refund of the Entry Fee paid for the 2G licences, which were quashed by the Supreme Court in the CPIL judgment, under the principles of civil, contractual, and constitutional law.(ii) Whether the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had jurisdiction to entertain the appellant's claim for a refund of the Entry Fee.(iii) Whether the appellant's claim for a refund is barred by the doctrine of in pari delicto, given the findings in the CPIL judgment.(iv) Whether the set-off policy of the Union government, which allowed certain telecom service providers to set off their Entry Fee against the auction payments, constitutes discrimination or arbitrariness.2. ISSUE-WISE DETAILED ANALYSISIssue (i): Entitlement to Refund of Entry Fee- Legal Framework and Precedents: The appellant argued for a refund based on Sections 56 and 65 of the Indian Contract Act, which deal with frustration of contract and restitution, respectively. The appellant contended that the quashing of the licences amounted to frustration of the contract, entitling them to restitution.- Court's Interpretation and Reasoning: The Court held that the appellant was in pari delicto with the Union government, as the CPIL judgment found that the appellant was a beneficiary of the arbitrary and unconstitutional 'First Come First Serve' policy. The appellant was not entitled to restitution because both parties were equally at fault.- Key Evidence and Findings: The CPIL judgment highlighted that the appellant benefited from the flawed policy, which was intended to favor certain companies at the expense of the public exchequer.- Application of Law to Facts: The Court applied the principle of in pari delicto, which bars restitution when both parties are equally responsible for the illegality.- Treatment of Competing Arguments: The appellant's reliance on acquittal in criminal proceedings was rejected as irrelevant to the findings of complicity in the CPIL judgment.- Conclusions: The appellant is not entitled to a refund of the Entry Fee due to its complicity in the illegal allocation of licences.Issue (ii): Jurisdiction of TDSAT- Legal Framework and Precedents: The jurisdiction of TDSAT is governed by Section 14 of the TRAI Act, which allows it to adjudicate disputes between a licensor and licensee.- Court's Interpretation and Reasoning: The Court held that TDSAT lacked jurisdiction to grant a refund because the claim arose from the Supreme Court's quashing of the licences due to constitutional infirmities, not from a contractual dispute.- Key Evidence and Findings: The Court noted that the appellant did not seek a refund during the CPIL proceedings and failed to reserve the right to do so later.- Application of Law to Facts: The Court found that the appellant's claim did not fall within the scope of TDSAT's jurisdiction under the TRAI Act.- Treatment of Competing Arguments: The appellant's argument that the refund claim was a contractual dispute was rejected as inconsistent with the basis of the CPIL judgment.- Conclusions: TDSAT correctly concluded that it lacked jurisdiction to entertain the refund claim.Issue (iii): Doctrine of In Pari Delicto- Legal Framework and Precedents: The principle of in pari delicto prevents courts from assisting a party who is equally at fault in an illegal transaction.- Court's Interpretation and Reasoning: The Court emphasized that the appellant, as a beneficiary of the unconstitutional policy, was in pari delicto with the Union government.- Key Evidence and Findings: The CPIL judgment's findings on the arbitrary allocation of licences and the appellant's role as a beneficiary were pivotal.- Application of Law to Facts: The Court applied the principle to deny the appellant's claim for restitution.- Treatment of Competing Arguments: The appellant's argument that the fault lay solely with the Union government was rejected based on the CPIL judgment.- Conclusions: The appellant's claim for restitution is barred by the doctrine of in pari delicto.Issue (iv): Set-off Policy and Alleged Discrimination- Legal Framework and Precedents: The appellant challenged the set-off policy as discriminatory and arbitrary under Article 14 of the Constitution.- Court's Interpretation and Reasoning: The Court found no merit in the challenge, noting that the policy aimed to encourage participation in the auction and benefit the public exchequer.- Key Evidence and Findings: The policy allowed set-off for those who participated in the fresh auction, which was a reasonable classification.- Application of Law to Facts: The Court held that the policy was not discriminatory as it applied uniformly to all licensees whose licences were quashed.- Treatment of Competing Arguments: The appellant's argument of arbitrariness was rejected as the policy had a rational basis and objective.- Conclusions: The set-off policy does not violate Article 14 and is not arbitrary or discriminatory.3. SIGNIFICANT HOLDINGS- Core Principles Established: The principle of in pari delicto applies to bar restitution when both parties are equally at fault. TDSAT lacks jurisdiction over claims arising from constitutional infirmities rather than contractual disputes.- Final Determinations on Each Issue: The appellant is not entitled to a refund of the Entry Fee. TDSAT correctly concluded it lacked jurisdiction. The set-off policy is not discriminatory or arbitrary.