AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 1312
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...., which are of grave public importance, by way of public interest litigation in an organised manner. In the present writ petition filed Under Article 32 of the Constitution of India, the Petitioner challenges the decision of the Government of India, taken sometime in March 2013, allowing voice telephony to Respondent No. 2 (Reliance Jio Infocomm Ltd.) on payment of Rs. 1,658 crores entry fee. Allegation of the Petitioner is that the aforesaid amount at which the license for voice telephony is granted to Respondent No. 2 is a pittance inasmuch as in normal course grant of this license would have fetched a whopping sum of Rs. 25000 crores approximately. This insinuation is based upon a draft report of the Comptroller and Auditor General of India (CAG) which report estimated the aforesaid license fee/entry fee. It is also alleged that Respondent No. 1, while allowing voice telephony to Respondent No. 2, has not revised the Spectrum Usage Charges (SUC) matching with the charges which are paid by other operators who bought voice telephony. It is stated in the petition that whereas the other operators pay 3% to 5% revenue annually depending upon quantum of the spectrum they hold, Respond....
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.... (IBSPL) emerged as the only company to have acquired pan-India BWA spectrum. Five other companies viz. Bharti Airtel (4 Service Areas), Aircel (8 SAs), Qualcomm (4 SAs), Tikona (5 SAs) and Augere (1 SA) shared the remaining other Pan India slot (22 Serve Areas) of BWA spectrum in the country. 3. It is also averred that IBSPL had an ISP-A license since November 2007 and had just one subscriber with revenue of Rs. 16.28 lakhs during 2009-10, and its authorized share capital was Rs. 3 crore and the paid up capital was Rs. 2.51 crore. Infotel Digicomm Pvt. Ltd. (IDPL) held 99.99% share of the IBSPL at the time of submission of application in March 2010 for the BWA auction. 4. It is alleged in the petition that within hours of completion of BWA auction on 11.06.2010, IBSPL increased the authorised share capital from Rs. 3 crore to Rs. 6,000 crore. On 17.06.2010, the company authorised its Board of Directors to allot 475 crore equity share of Rs. 10 each to Reliance Industries Ltd. (RIL) and 25 crore equity share of Rs. 10 to Infotel Digicomm Pvt. Ltd. (IDPL) aggregating to the equity capital of Rs. 5,000 crore. On the same day, the company also decided to change from a private co....
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.... suggest the way forward. It is stated that Secretary (Telecom) was made Chairman of the Committee even when he was due to superannuate two months later i.e. in March, 2013. This Committee prepared its draft report on 30.01.2013 as per which the said Committee was not ready to make any recommendations on ISP (holding BWA spectrum) migration to UASL. However, still in its final report given on 13.02.2013, the Committee recommended that on payment of Rs. 1,658 crores, ISP (holding BWA spectrum) could be migrated to UASL, thereby permitting voice telephony. This recommendation was approved by Telecom Commission in its meeting on 18.02.2013. The official from the Ministry of Finance who also attended this meeting, while agreeing with the aforesaid proposal, ignored Finance Ministry's own recommendations on the 2G spectrum issue inasmuch as in the year 2007 when the then Telecom Minister wanted to award the licenses at Rs. 1,658 crores, the then Finance Secretary had objected to it. After the Telecom Commission approved the recommendation, the same was forwarded to the Telecom Minister who gave his final approval on 05.03.2013. It is this decision of migration of BWA spectrum given ....
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....ned-Voice, Data, etc., and post auction interpretation of such vital nature would appear to be arbitrary, inconsistent and not appropriate. Hence, IBSPL, now Reliance Jio Infocomm, appeared to have been accorded undue advantage of Rs. 22,842 crore i.e. the difference of the proportionate prices for 20 MHz block size in 2.1 GHz spectrum band (3G spectrum) and 2.3 GHz spectrum band (BWA spectrum) plus the Net Present Value of the entry fee for UASL at the end of FY 2009-10 (Rs. 20,653 crore plus Rs. 3,847 crore - Rs. 1,658 crore). Besides, the sanctity of the entire auction process has been rendered vitiated due to post auction interpretations and interventions after three years. It was therefore no surprise that Reliance Jio Infocomm was among the first group of companies which applied for UL immediately after introduction of the scheme and obtained the Letter of Intent (LOI). Had the spectrum blocks been specified and declared as liberalised spectrum blocks i.e. open for all technology/services in the NIA in February 2010, there was no doubt that bidders would have taken informed decision for putting up their bid and the market discovered price would have been significantly differe....
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....same is found to be arbitrary, malafide or contrary to the public interest, which is not the case here. A detailed history from TRAI recommendation to the decision taken by the DoT is narrated in the counter affidavit with the emphasis that the decision in question was actuated by valid economic and other relevant considerations. On that basis, Respondent No. 1 insists that neither the manner of allowing migration was irregular or illegal nor fixation of migration fee of Rs. 1,658 crore was arbitrary or against public interest or prompted to give any undue favour to Respondent No. 2. On the similar lines is the counter affidavit filed by Respondent No. 2, which has attempted to explain the factual position in much greater detail and reference thereto shall be made at the appropriate stage. 9. Oral arguments on behalf of Union of India were addressed by Mr. Ranjit Kumar, learned Solicitor General whereas Mr. Harish Salve, senior advocate put up the defence on behalf of Respondent No. 2. Ms. Niranjana Singh appeared for TRAI. It is not necessary to separately take note of their respective arguments as we intend to refer to those submissions during our deliberations on the various ....
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....nt difference in the characteristics of both the spectrums, namely, 3G on the one hand and BWA on the other hand. It may be mentioned that 3G spectrum is in Frequency Division Duplex (FDD) mode whereas the Broadband Wireless Access (BWA) spectrum as per TRAI recommendations as well as Guidelines issued by DoT is in Time Division Duplex (TDD) mode. Distinct and different features of both are highlighted in the following manner: a. FDD needs fewer base stations than TDD Since FDD devices achieve desired cell edge rates at farther distances, the number of base stations required to achieve a given area of coverage is reduced. b. In a coverage-limited system comparison using the same frequency band, the TDD system required 31% more base stations than FDD when using a 1:1 TDD system and 65% more base stations when using a 2:1 TDD system. Higher frequency bands required even more base stations. c. FDD incurs lower costs Capital expenditure (CAPEX) and operating expenditure (OPEX) costs are associated with each base station. These costs are independent of the type of duplexing technique used (FDD or TDD). Since FDD requires fewer base stations for the same covera....
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....eries and responses for auction of 3G and BWA spectrum which were published by DoT on 25.02.2010 i.e. simultaneously with the issuance of NIA, wherein it was specifically clarified that usage of spectrum including BWA spectrum is linked to the license held or to be acquired by the bidder. It was, thus, envisaged that BWA spectrum can be used for all telecom services including voice telephony linked to the relevant license, as can be gaged from some of the queries and responses thereto which are as under: Question 34: Does the BWA license allow use of voice to be offered by the BWA operators? Even in VIP form? Answer 34: There is no BWA license. Service conditions including allowing Internet Telephony will depend on whether the winner of the BWA spectrum holds UAS or ISP license. Question 71: Spectrum usage rights shall be awarded separately for specific service areas. Please clarify. Answer 71: Spectrum usage rights are based on the provisions of the applicable license and the licenses are specific to a service area. The auction is for the award of spectrum only, while award of license is a separate process. Question 72: To which entity BWA license will be given in c....
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..... Migration from BWA to UAS licence 15. Without much ado, therefore, we would like to address the aforesaid central issue that arises for consideration viz. whether a decision of Respondent No. 1 allowing the migration from BWA to UAS license was valid and legal and whether such a decision has unduly benefited Respondent No. 2 who is charged a sum of Rs. 1,658 crores for this purpose, which according to the Petitioners, is abysmally low. 16. As highlighted above, there have been technological developments in telecommunication are taking place at abnormal pace. Various policy decision taken at one point of time may, therefore, require a re-look necessitating modifications and changes therein and the circumstances may even mandate change of existing policy altogether by substituting with new policy decision depending upon the such technological advancements coupled by commercial and economic considerations. It can be supported by the fact that first Telecom Policy was announced in the year 1994, which was replaced by revised Policy of 1999 and thereafter in the year 2004 and again substituted by Telecom Policy of 2012. 17. Having regard to such features/developments, in t....
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....find place in future planning. The Authority has also made suggestions on the wider issue management of spectrum, which is now a scarce resource in the country. The future growth in telecom would largely depend on the way we manage our spectrum. 4. While forwarding its recommendations TRAI, inter-alia, considered the following: Band identification for 3G services Allocation methodology and pricing for 3G spectrum Band identification, and allocation and pricing of BWA spectrum as well as Spectrum Management Allocation methodology and pricing for BWA spectrum Spectrum Pricing Spectrum for BWA 5. The DoT examined the recommendations and had referred some of them back to TRAI as required by TRAI Act and took final views based on TRAI recommendations and DoT's internal discussions. 6. The TRAI issued another consultation paper "On Allocation and Pricing for 2.3-2.4 GHz, 2.5-2.69 GHz & 3.3-3.6 GHz bands" on 2nd May 2008 and issued its recommendations on 11th July, 2008. 7. The TRAI was clear that spectrum in 2.3-2.4 GHz band could be used for mobile services as mentioned in the preface of these recommendations itself w....
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....elecom Policy-2012 recognizes that the evolution from analog to digital technology has facilitated the conversion of voice, data and video to the digital form. Increasingly, these are now being rendered through single networks bringing about a convergence in networks, services and also devices. Hence, it is now imperative to move towards convergence between various services, networks, platforms, technologies and overcome the existing segregation of licensing, registration and regulatory mechanisms in these areas to enhance affordability, increase access, delivery of multiple services and reduce cost. 11. Further, it envisages providing secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development. One of the objectives of the National Telecom Policy-2012 is "Strive to create One Nation-One License" across services and service areas... 18. From the aforesaid, it follows that a policy decision was taken by the Government not only with regard to introduction of Unified Licensing regime but it also including allowing migration to UL from UASL as well as ISP to UL regime. This meant that....
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.... legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of judiciary in out stepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields. 117. However, we hasten to add and do not wish to be misunderstood so as to infer that howsoever gross or abusive may be an administrative action or a decision which is writ large on a particular activity at the instance of the State or any other authority connected with it, the Court should remain a passive, inactive and a silent spectator. What is sought to be emphasised is that there has to be a boundary line or the proverbial "laxman rekha" while examining the correctness of an administrative decision taken by the State or a central authority after due deliberation and diligence which do not reflect arbitrariness or illegality in its decision and execution. If such equilibrium in the matter of governance gets dist....
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....e manner in which those decisions have been taken, if that manner is unfair, the decision will be tainted with what Lord Diplock labels as "procedural impropriety". 15.3. This Court in M.P. Oil Extraction v. State of M.P. (1997) 7 SCC 592 held that unless the policy framed is absolutely capricious, unreasonable and arbitrary and based on mere ipse dixit of the executive authority or is invalid in constitutional or statutory mandate, court's interference is not called for. 15.4. Reference may also be made of the judgments of this Court in Ugar Sugar Works Ltd. v. Delhi Admn. (2001) 3 SCC 635, Dhampur Sugar (Kashipur) Ltd. v. State of Uttaranchal (2007) 8 SCC 418 and Delhi Bar Assn. v. Union of India: (2008) 13 SCC 628. 15.5. We are, therefore, firmly of the opinion that we cannot sit in judgment over the decision taken by the Government of India, NPCIL, etc. for setting up of KKNPP at Kudankulam in view of the Indo-Russian Agreement. 22. When it comes to the judicial review of economic policy, the Courts are more conservative as such economic policies are generally formulated by experts. Way back in the year 1978, a Bench of seven Judges of this Court in Prag Ice and....
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....ed, this Court has added new dimension to the contours of judicial review and it has undergone tremendous change in recent years. The scope of judicial review has expanded radically and it now extends well beyond the sphere of statutory powers to include diverse forms of 'public' power in response to the changing architecture of the Government1. Thus, not only has judicial review grown wider in scope; its intensity has also increased. Notwithstanding the same, it is, however, central to received perceptions of judicial review that courts may not interfere with exercise of discretion merely because they disagree with the decision or action in question; instead, courts intervene only if some specific fault can be established - for example, if the decision was reached procedurally unfair2. 25. The raison d'etre of discretionary power is that it promotes decision maker to respond appropriately to the demands of particular situation. When the decision making is policy based judicial approach to interfere with such decision making becomes narrower. In such cases, in the first instance, it is to be examined as to whether policy in question is contrary to any statutory pr....
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....oes not confer a right to provide any telecom services, and these are governed by the terms and conditions of the licence obtained by the operator. 29. It becomes apparent from the above that the spectrum was different from license inasmuch as award of spectrum did not confer a right to provide any telecom services. Insofar as providing of telecom services are concerned, these were to be governed by the terms and conditions of the license obtained by the operator. The learned Solicitor General also handed over a comparative chart of varying points of view of the different Departments when the matter regarding migration from UASL to UL regime was being discussed and contemplated. A perusal thereof would show that there was a threadbare discussion on the issue wherein pros and cons of migration of telecom licenses to UL regime were discussed; various apprehensions expressed were considered; and ultimately consensus emerged for switching over to this regime. The discussion reveals that the Committee of the DoT in its comments proceeded on the premise that the BWA spectrum could not be used for any other purpose other than providing internet services. The other departments did not s....
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....cense to bid, it became necessary for the Government of India to come out with a regime for grant of licenses for providing various telecom services. A policy decision was taken, as discussed in detail above, for migration to new telecom service license, i.e., Unified License (UL) for ISP licensees with BWA spectrum. In its wisdom, this decision facilitated those having data services to acquire license thereby covering voice-telephony as well. All across the Board holding BWA spectrum became entitled to migrate to UL and, therefore, there is no discrimination on the part of the government authorities nor it aims at undue favoritism to Respondent No. 2. It is not in dispute that as per the new policy/regime, Respondent No. 2 was eligible to apply for UL from BWL spectrum. Therefore, it cannot be treated as a case of back door entry of Respondent No. 2. (3) Any loss of public revenue? 34. The only other issue which needs to be adverted to at this stage is the fixation of additional fee of Rs. 1,658/- crores which was paid by Respondent No. 2 for migration to UL. The poser is: Whether such a fee fixed was abysmally low which had resulted in undue advantage to Respondent No. 2, t....
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....t of a minimum spectrum of 6.2 MHZ to each licensee as contracted spectrum). The Government had decided in 2001 when bids were invited for the 4th license that all future grants should be on market price. However, in a departure from this even in year 2007-08 the then Telecom Minister (following certain processes which was found to be flawed) invited applications for license based on a pre-determined license fee. This license fees was the same as the fee that was paid in 2001 by those who applied for the 4th telecom license. This Court found that the manner in which this decision had been arrived at was flawed and smacked of arbitrariness. It was also held that this spectrum is an extremely valuable natural resource and must only be made available at market price. The Court found that the license itself had no value, in that the real value was that of the spectrum. 38. On the other hand, insofar as present case is concerned, auction of 3G spectrum as well as BWL spectrum held in 2010 was not challenged by anybody and no fault has even been found in the same. It is the spectrum which a vital resource and that was duly auctioned. The decision now taken, which is the subject matter....
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....rovide a level playing field between the two classes licenses. The aforesaid facts would show that Respondent No. 2 has paid spectrum price of Rs. 12,847.77 crores and also Rs. 1,658 crores for migration to UL, in addition to entry fee of Rs. 15 crores, which is the prescribed fee. It, therefore, cannot be said that the fee of Rs. 1,658 crores charged from Respondent No. 2 is in any way less or that it has caused any wrongful loss to the Government and wrongful gain to Respondent No. 2 or that the Government would have fetched much more price. 41. We have already traced brief history of the development in telecommunication and, in particular, that of mobile/cellular services. Most significant development which is pointed out is as to how technological development has led to the growth of data telephony from mere voice telephony. As already stated, number of other services are provided by the service providers on these phones which are known as 'smart phones'. These services include video streaming, music streaming, social networking, instant messaging, download and save, emails, playing online games, browse/search, banking, bill payments, navigation, e-commerce and cloud....
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....future, there is a possibility of a situation when voice-telephony services may be provided free of charge to those using mobile data services by paying for those services. Whether this happens or not is anybody's guess. However, what cannot be disputed is that main source of income for mobile companies is data services and not voice telephone services. This needs to be borne in mind while testing the argument of the Petitioner. 43. Much is said on the veracity of CAG draft report by Respondent No. 1 as well as Respondent No. 2 in their attempt to show that the very basis of making calculation of alleged undue advantage of Rs. 22,842 crores (in the draft report) or Rs. 3,367.29 crores (in the final report). However, having regard to the aforesaid discussion, it may not be necessary to delve into this aspect in much greater details. It would be suffice to point out that the basic error committed by CAG was to compare 3G and BWA (4G) spectrum which mistake was realised in preparing the final report. It appears that these calculations are made by taking migration fee of Rs. 1,658 crores which were prevalent in the year 2001 and on that basis it arrived at a figure of Rs. 5025.2....
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....s noted that since BWA spectrum will be used for rural development, the SUC is kept at 1% of AGR. Further, it was also noted that since spectrum is being auctioned and the price discovery is through a market mechanism, the bidders will factor in the annual charges in their bids. Therefore, keeping BWA annual spectrum charge at 1% will have no adverse revenue implications. The aforesaid is the rationale given for fixation of 1% of AGR as SUC. 48. On going through the records, we find that the decision, namely, SUC be fixed at 1% AGR was based on relevant considerations. Not only TRAI had recommended the aforesaid charge to be fixed, there was an in depth examination of this recommendation of the TRAI by Government before accepting the same. Furthermore, it is also pertinent to note that on the basis of aforesaid decision, specific provisions were incorporated in the NIA for SUC for BWA spectrum. Clause 3.5 of the NIA, in this behalf, is as under: 49. The aforesaid discussion, thus, demonstrates that the main consideration that prevailed with the Government in keeping the SUC at 1% of AGR was that BWA spectrum was to be used for rural development. It also needs to be highlighte....