TaxTMI 
TaxTMI 
2015 (5) TMI 1179
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....97 (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 and Ors. v. Union of India and Ors. (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 Governm....
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....pectrum 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 ....
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....oup 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 ....
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.... may be finally decided. xxx (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. (i) 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. (ii) The license fee, service area, rol....
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....e 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. 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/renewa....
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....thority 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 t....
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....ional 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. 6. 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....
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....on of Unified Telecom Service Providers of India and Ors. (2011) 10 SCC 543, relying upon an earlier Constitution Bench judgment of this Court in State of Punjab and Anr. v. Devans Modern Breweries Ltd. and Anr. (2004) 11 SCC 26, which in turn relied upon two earlier decisions of this Court in Har Shankar and Ors. v. The Dy. Excise and Taxation Commissioner and Ors. (1975) 1 SCC 737 and Panna Lal and Ors. v. State of Rajasthan and Ors. (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 ....
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....r 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 e....
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....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....
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....he 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 teleco....
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.... 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 ....
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....ource, 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 recorded10 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 certai....
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....bed 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" ....
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....ischarge 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 ....
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....s, 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 facto....
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.... 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 touch....
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....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 economi....