Reality Check India

Feb 2012 – 2G Judgment text copy

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO. 423 OF 2010

Centre for Public Interest Litigation and others                              …Petitioners

versus

Union of India and others                                                     …Respondents

With

WRIT PETITION (CIVIL) NO. 10 OF 2011

Dr. Subramanian Swamy                                                         …Petitioner

versus

Union of India and others                                                     …Respondents

J U D G M E N T

G.S. Singhvi, J.

1.     The important questions which arise for consideration in these petitions,

one of which has been filed by Centre for Public Interest Litigation, a registered

Society formed by Shri V.M. Tarkunde (former Judge of this Court) for taking

up   causes   of   public   interest   and   conducting   public   interest   litigation   in   an

organised   manner,   Lok   Satta,   a   registered   Society   dedicated   to   political

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governance,   reforms   and   fight   against   corruption,   Telecom   Watchdog   and

Common Cause, both Non-Governmental Organisations registered as Societies

for taking up issues of public importance and national interest, Sarva Shri J.M.

Lingdoh,   T.S.   Krishnamurthi   and   N.   Gopalasamy,   all   former   Chief   Election

Commissioners,  P. Shanker, former  Central Vigilance Commissioner, Julio F.

Ribero,   former   member   of   the   Indian   Police   Service,   who   served   as  Director

General of Police, Gujarat, Punjab and C.R.P.F. and Commissioner of Police,

Mumbai, P.R. Guha, an eminent Senior Journalist and visiting faculty member

of   various   institutions   including   IIMs,   IITs,   FTII,   IIFT,   Delhi   University,

Jawaharlal Nehru University and Jamia Milia Islamia University and Admiral

R.H.   Tahiliyani,   former   Chief   of   Naval   Staff,   former   Governor   and   former

Chairman of Transparency International India and the other has been filed by

Dr. Subramanian Swami, a political and social activist, are:

(i)     Whether   the   Government   has   the   right   to   alienate,   transfer   or

distribute natural resources/national assets otherwise than by following a

fair   and   transparent   method   consistent   with   the   fundamentals   of   the

equality clause enshrined in the Constitution?

(ii)    Whether   the   recommendations   made   by   the   Telecom   Regulatory

Authority   of   India   (TRAI)   on   28.8.2007   for   grant   of   Unified   Access

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Service Licence (for short `UAS Licence’) with 2G spectrum in 800, 900

and 1800 MHz at the price fixed in 2001, which were approved by the

Department of Telecommunications (DoT), were contrary to the decision

taken by the Council of Ministers on 31.10.2003?

(iii)    Whether the exercise undertaken by the DoT from September 2007

to March 2008 for grant of UAS Licences to the private respondents in

terms   of   the   recommendations   made   by   TRAI   is   vitiated   due   to

arbitrariness and malafides and is contrary to public interest?

(iv)      Whether the policy of first-come-first-served followed by the DoT

for   grant   of   licences   is  ultra   vires  the   provisions   of   Article   14   of   the

Constitution   and   whether   the   said   principle   was   arbitrarily   changed   by

the   Minister   of   Communications   and   Information   Technology

(hereinafter   referred   to   as   `the   Minister   of   C&IT’),   without   consulting

TRAI, with a view to favour some of the applicants?

(v)       Whether   the   licences   granted   to   ineligible   applicants   and   those

who failed to fulfil the terms and conditions of the licence are liable to be

quashed?

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2.     For detailed examination of the issues raised by the petitioners, it will be

useful to briefly notice the history of the growth of telecommunications in the

country and the reforms introduced 1984 onwards.

3.     In 1839, the first telegraph link was experimented between Calcutta and

Diamond Harbour covering 21 miles.   In 1851, the telegraph line was opened

for traffic, mostly for the official work of the East India Company. In course of

time,   telegraphy   service   was   made   available   for   public   traffic.     The   Indian

Telegraph   Act   was   enacted   in   1885.     It   gave   the   exclusive   privilege   of

establishing,   maintaining   and   working   of   “telegraphs”   to   the   Central

Government.   It   also   empowered   the   Government   to   grant   licences   on   such

conditions and in consideration of such payments as it thought fit, to any person

to establish, maintain or work a telegraph in any part of India.

4.     After independence, Government of India took complete control of the telecom

sector and brought it under the Post & Telegraph Department. One major step taken for

improving telecommunication services in the country was the establishment of a modern

telecommunication manufacturing  facility  at Bangalore  under the Public Sector, in the

name of “Indian Telephone Industries Ltd.” The reforms in the telecommunication sector

started in 1984 when the Centre for Development of Telematics (C-DoT) was set up for

developing indigenous technologies and permissions were given to the private sector to

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manufacture   subscriber-equipment.     In   1986,   Mahanagar   Telephone   Nigam   Ltd.,

(MTNL) and Videsh Sanchar Nigam Ltd., (VSNL) were set up.

5.     The  New Economic Policy  of India  was announced  on 24.7.1991.  It was

aimed at meeting India’s competitiveness in the global market; rapid

growth   of   exports,   attracting   foreign   direct   investment;   and

stimulating domestic  investments. With a view to achieve standards

comparable to international facilities, the sub-sector of Value Added

Services   was   opened   up   to   private   investment   in   July   1992   for   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.

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National Telecom Policy 1994

6.     National Telecom Policy 1994 (NTP 1994) was announced on 13.5.1994.

This   was   the   first   major   step   towards   deregulation,   liberalization   and   private

sector participation. The objectives of the policy were:

(i)      affording   telecommunication   for   all   and   ensuring   the

availability of telephone on demand;

(ii)     providing   certain   basic   telecom   services   at   affordable   and

reasonable prices to all people and covering all villages;

(iii)    giving   world   standard   telecom   services;   addressing

consumer   complaints,   dispute   resolution   and   public

interface   to   receive   special   attention   and   providing   widest

permissible   range   of   services   to   meet   the   customers’

demand and at the same time at a reasonable price;

(iv)     creating   a   major   manufacturing   base   and   major   export   of

telecom   equipment   having   regard   to   country’s   size   and

development; and

(v)      protecting   the   defence   and   security   interest   of   the

country.

7.     In   furtherance   of   NTP   1994,   licences   were   granted   to   eight   Cellular

Mobile   Telephone   Service   (CMTS)   operators,   two   in   each   of   the   four

metropolitan   cities   of   Delhi,   Mumbai   (Bombay),   Kolkata   (Calcutta)   and

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Chennai  (Madras).  In the  second  phase,  in  December   1995, after  following  a

competitive   bidding   process,   14   CMTS   licences   were   awarded   in   18   state

circles,   6   Basic   Telephone   Services   (BTS)   licences   were   awarded   in   6   state

circles   and   paging   licences   were   awarded   in   27   cities   and   18   state   circles.

However,   this   did   not   yield   the   intended   results   apparently   because   revenue

realised by the cellular and basic operators was less than the projections and the

operators were unable to arrange finances for their projects.

New Telecom Policy 1999

8.           On   the   directions   of   the   Prime   Minister,   a   high   level   Group   on

Telecommunications   (GoT)   was   constituted   on   20.11.1998   to   review   the

existing telecom policy and suggest further reforms.  On the basis of the report

of   the   GoT,   a   draft   New   Telecom   Policy   1999   (NTP   1999)   was   formulated.

After   its   approval   by   the   Cabinet,   NTP   1999   was   announced   to   be   effective

from 1.4.1999.  NTP 1999 had the following objectives:

(i)       to   make   available   affordable   and   effective   communications   for

the   citizens,   considering   access   to   telecommunications   as   utmost

important   for   achievement   of   the   country’s   social   and   economic

goals;

(ii)      to   provide   universal   service   to   all   uncovered   areas   including   the

rural   areas   and   also   provide   high   level   services   capable   of

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meeting   the   needs   of   the   country’s   economy   by   striking   a

balance between the two;

(iii)    to   encourage   development   of   telecommunication   in   remote,

hilly and tribal areas of the country;

(iv)     to   create   a   modern   and   efficient   telecommunications

infrastructure   taking   into   account   the   convergence   of   IT,   media,

telecom   and   consumer   electronics   which   will   in   turn   propel

India to become an IT superpower;.

(v)      to   convert   PCOs   wherever   justified   into   Public   Teleinfo   centres

having   multimedia   capability   such   as   Integrated   Services

Digital   Network   (ISDN)   services,   remote   database   access,

government and community information systems, etc.;

(vi)     to   transform,   in   a   time   bound   manner,   the   telecommunications

sector   in   both   urban   and   rural   areas   into   a   greater   competitive

environment   providing   equal   opportunities   and   level   playing

field for all players;

(vii)    to   strengthen   research   and   development   efforts   in   the   country

and   provide   an   impetus   to   build   world   class   manufacturing

capabilities;

(viii) to         achieve         efficiency         and         transparency         in         spectrum

management;

(ix)              to protect defence and security interests of the country; and

(x)      to   enable   Indian   Telecom   Companies   to   become   truly   global

players.

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9.      NTP 1999 categorized 8 services in the telecom sector, namely; (i)

Cellular   Mobile   Service   Providers   (CMSPs),   Fixed   Service   Providers

(FSPs)   and   Cable   Service   Providers,   collectively   referred   as   `Access

Providers'; (ii) Radio Paging Service Providers; (iii) Public Mobile Radio

Trunking Service Providers; (iv) National Long Distance Operators; (v)

International   Long   Distance   Operators;   (vi)   Other   Service   Providers,

(vii)   Global   Mobile   Personal   Communication   by   Satellite   (GMPCS)

Service Providers; (viii) V-SAT based Service Providers. NTP 1999 dealt

with,   and   provided   the   framework   for,   all   these   categories   of   telecom

service providers.

10.            The policy on spectrum management as enumerated in NTP 1999

was as under:

(i)       Proliferation   of   new   technologies   and   the   growing   demand   for

telecommunication   services   has   led   to   manifold   increase   in

demand   for   spectrum   and   consequently  it   is   essential   that   the

spectrum   is   utilized   efficiently,   economically,   rationally   and

optimally.

(ii)      There   is   a   need   for   a   transparent   process   of   allocation   of

frequency  spectrum for use by a service  provider and making  it

available to various users under specific conditions.

(iii)     With   the   proliferation   of   new   technologies   it   is   essential   to

revise   the   National   Frequency   Allocation   Plan   (NFAP)   in   its

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entirety   so   that   it   becomes   the   basis   for   development,

manufacturing   and   spectrum   utilization   activities   in   the   country

amongst   all   users.   NFAP   was   under   review   and   the   revised

NFAP   was   to   be   made   public   by   the   end   of   1999   detailing

information   regarding   allocation   of   frequency   bands   for   various

services, without including security information.

(iv)     NFAP   would   be   reviewed   no   later   than   every   two   years   and

would   be   in   line   with   radio   regulations   of   the   International

Telecommunication Union (ITU).

(v)      Adequate   spectrum   is   to   be   made   available   to   meet   the   growing

need   of   telecommunication   services.   Efforts   would   be   made   for

relocating   frequency   bands   assigned   earlier   to   defence   and

others.   Compensation   for   relocation   may   be   provided   out   of

spectrum fee and revenue share.

(vi)     There   is   a   need   to   review   the   spectrum   allocation   in   a   planned

manner  so   that  required  frequency   bands are  available   to  the  service

providers.

(vii)    There   is   a   need   to   have   a   transparent   process   of   allocation   of

frequency   spectrum   which   is   effective   and   efficient   and   the

same   would   be   further   examined   in   the   light   of   ITU   guidelines.

In this regard the following course of action shall be adopted viz.:

(a)spectrum usage fee shall be charged;

(b)an   Inter-Ministerial   Group   to   be   called   Wireless   Planning

Coordination Committee, as a part of the Ministry of Communications

for   periodical   review   of   spectrum   availability   and   broad   allocation

policy, should be set up; and

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(c)massive computerization in WPC Wing would be started in the next

three months so as to achieve the objective of making  all operations

completely computerized by the end of the year 2000.

(emphasis supplied)

Establishment   of   the   Telecommunication   Commission   (for   short,   `the

Telecom Commission’) and the Telecom Regulatory Authority of India.

11.    On 11.4.1989, the Council of Ministers passed a resolution and decided

to establish the Telecom Commission. The relevant portions of that resolution

are extracted below:

“CABINET SECRETARIAT

New Delhi the 11th April, 1989

RESOLUTION

CONSTITUTION OF TELECOM COMMISSION

No.   15/1/2/87-Cab.   1.   Telecommunication   service   is   an

essential infrastructure for national development.  It has impact on

social   and   economic   activities.     Besides,   business,   industry   and

administration   depends   heavily   on   information   and   telecom   for

productivity,   efficiency   and   their   day-to-day   operations.     Its

development, therefore, is vital for nation building.

In   order   to   promote   rapid   development   in   all   aspects   of

telecommunications   including   technology,   production   and

services, the Government of India consider it necessary to set up an

organisation,   which   will   have   responsibility   in  the   entire   field   of

telecommunications.

After   careful   consideration,   the   Government   of   India   have

decided   to   establish   a   Telecommunication   Commission   with   full

executive   and   financial   powers   modelled   on   the   lines   of   the

Atomic Energy Commission.

2. Constitution of the Commission

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(a)       The   Commission   will   consist   of   full   time   and   part   time

Members;

(b)       The Secretary to the Government of India in the Department of

Telecommunications   shall   be   the   ex-officio   Chairman   of   the

Commission;

(c)       The full time Members of the Commission  shall be ex-officio

Secretary   to   the   Government   of   India   in   the   Department   of

Telecommunications.  One of these Members shall be Member

for Finance; and

(d)       The   Secretary   and   the   full   time   Members   of   the   Commission

shall be drawn from the best persons available, including from

within the Department of Telecommunications.

3. Functions

The Telecom Commission shall be responsible :

(a)       For   formulating   the   policy   of   the   Department   of

Telecommunications for approval of the Government;

(b)       For   preparing   the   budget   for   the   Department   of

Telecommunications for each financial year and getting it

approved by the Government; and

(c)       Implementation of the Government’s policy in all matters

concerning telecommunication.

4. Within   the   limits   of   the   budget   provision,   approval   by   the

Parliament,   the   Commission   shall   have   the   powers   of   the

Government of India, both administrative and financial, for

carrying   out   the   work   of   the   Department   of

Telecommunications.

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5. Chairman

(a)       The   Chairman,   in   his   capacity   as   Secretary   to   the

Government   of   India   in   the   Department   of

Telecommunications,   shall   be   responsible   under   the

Minister of Communications for arriving at decisions on

technical   questions   and   advising   Government   on   policy

and   allied   matters   of   telecommunication.                     All

recommendations of the Commission on policy and allied

matters shall  be put to the Minister  of Communications

through the Chairman.

(b)       In   case   of  any   difference   of   opinion   in   the   meetings   of

the   Commission,   the   decision   of   the   Chairman   shall   be

final,  but in financial  matters,  Member  (Finance) of the

Commission will have access to Finance Minister.

(c)       The   Chairman   may   authorise   any   Member   of   the

Commission   to   exercise   on   his   behalf,   subject   to   such

general   or   special   orders   as   he   may   issue   from   time   to

time,  such of his powers and responsibilities as he may

decide.

6. Member Finance

The   Member   of   Finance   shall   exercise   powers   of   the

Government   of   India   in   financial   matters   concerning   the

Department   of   Telecommunications   except   in   so   far   as   such

powers   have   been,   or   may   in   future   be   conferred   on   or

delegated to          the Department.

7. The Commission shall have power to frame its own rules and

procedures.     The   Commission   shall   meet   at   such   time   and

places as fixed by the Chairman.

8. The Telecom Commission shall take over all legal and statutory

authority vested with the Telecom Board.”

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12.            The Rules of Business for the Telecom Commission were also framed in

1989.  In terms of para 2 of the Rules of Business read with item 1 of Annexure

`A’   appended   thereto,   all   important   matters   of   policy   relating   to

Telecommunications   are   required   to   be   brought   before   the   Telecom

Commission.

13.            In 1997, Parliament enacted the Telecom Regulatory Authority of India

Act, 1997 (for short, `the 1997 Act’) to provide for the establishment of TRAI.

By Act No.2 of 2000, the 1997 Act was amended and provision was made for

establishment   of   the   Telecom   Disputes   Settlement   and   Appellate   Tribunal

(TDSAT).     Sections   11   and   13,   which   have   bearing   on   the   decision   of   these

petitions read as under:

“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)  to   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;

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(vi)      type   of   equipment   to   be   used     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)      (ii)notwithstanding anything contained  in the terms and

conditions   of   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   interconnect   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;

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(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:

Provided   that   the   recommendations   of   the   Authority   specified   in

clause   (a)   of   this   sub-section   shall   not   be   binding   upon   the   Central

Government:

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:

Provided also that the Authority may request the Central Government

to furnish such information or documents as may be necessary for the

purpose of making recommendations under sub-clauses (i) and (ii) of

clause   (a)  of  this subsection  and  that Government  shall  supply  such

information   within   a   period   of   seven   days   from   receipt   of   such

request:

Provided also that the Central  Government  may  issue  a licence to a

service   provider   if   no   recommendations   are   received   from   the

Authority within the period specified in the second proviso or within

such   period   as   may   be   mutually   agreed   upon   between   the   Central

Government and the Authority:

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

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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.

(2) Notwithstanding anything contained in the Indian Telegraph Act,

1885 (13 of 1885), the Authority  may,  from time  to time,  by order,

notify in the Official Gazette the rates at which the telecommunication

services   within   India   and   outside   India   shall   be   provided   under   this

Act including the rates at which messages shall be transmitted to any

country outside India:

Provided   that   the   Authority   may   notify   different   rates   for   different

persons or class of persons for similar telecommunication services and

where different rates are fixed as aforesaid the Authority shall record

the reasons therefor.

(3) While   discharging   its   functions  :under   sub-section   (1)   or   sub-

section   (2)   the   Authority   shall   not   act   against   the   interest   of   the

sovereignty  and integrity of India, the security  of the State, friendly

relations with foreign States, public order, decency or morality.

(4) The   Authority   shall   ensure   transparency   while   exercising   its

powers and discharging its functions.

13.  Power   of  Authority  to issue   directions.   –  The  Authority  may,  for

the discharge of its functions under sub-section (1) of section 11, issue

such directions from time to time to the service providers, as it may

consider necessary:

Provided that no direction under sub-section (4) of section 12 or under

this section shall be issued except on the matters specified in clause

(b) of sub-section (1) of section 11.”

14.        After its establishment, TRAI made various recommendations either suo

motu  or   on   the   request   of   the   licensor,   i.e.,   the   Central   Government   or   the

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Telegraph Authority.  On a reference made by the Ministry of Communications

and Information Technology on four issues including the issues of appropriate

level of entry fee, basis of selection of new operators and entry of 4th  cellular

operator,   TRAI   made   its   recommendations,   which   were   communicated   to

Secretary, DoT vide D.O. No. 250-14/2000-Fin (DF) (Vol. II) dated 23.6.2000.

Paragraphs  4.1   to   4.3,   4.5   to   4.6   and   4.11   to   4.15   of   that   letter   are   extracted

below:

“4.   For   the   purposes   of   clarity   each   issue   on   which   TRAI’s

recommendation   has   been   sought   has   been   stated   separately   and

recommendations have been given therefor.

4.1(A)   Appropriate   level   of   entry   fee,   basis   for   selection   of   new

operators and entry of fourth operator

The   issues   under   this   head   can   be   broken   under   three   main

subheads. These are :

(i)      Level of entry fee;

(ii)     Basis for selection of new operation;

(iii)    Entry of the fourth operator.

We take these issues sequentially.

4.2(1) Level of Entry Fee:-

New   operators   are   to   be   licensed   in   the   following   vacant

circles/slots:

(a)Jammu & Kashmir – Andamans & Nicobar Islands;

(b) Assam and West Bengal;

(c) DOT/MTNL as the third operator.

(d)Fourth operator in circles where migration has been permitted.

4.3   DOT/MTNL   wherever   they   come   in   as   the   third   operator   as

also the fourth operator to be introduced will be required to pay as

licence   fee   the   same   percentage   share   of   their   revenue   as

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recommended   by   TRAI   for   the   existing   CMSPs   who   are   being

allowed to migrate to revenue sharing arrangement in accordance

with NTP 99. The fourth operator will also pay an entry fee which

will be fixed through a process of bidding.

4.5 (ii) Selection of new operators:

The TRAI recommends that all new operators barring DOT/MTNL

be selected through a competitive process. This is recommended to

be   a   multi   stage   bidding   process   preceded   by   a   pre-qualification

round.

4.6 Pre-qualification

Prospective   operators   would   be   required   to   meet   pre-determined

criteria in order to qualify to bid for the licence. Pre-qualifications

will mainly be on the following grounds :-

- Financial strength and experience as Telecom Service Provider

- Minimum roll out obligation

- Technical Plan

- Business Plan

- Payment terms and other commercial conditions

It   is   recommended   that   prospective   bidders   who   meet   the   pre-

determined threshold as set out in the pre-qualification criteria be

short-listed   for   bidding   for   entry   fee   in   the   next   stage.   No

weightages need  be attached to the pre-qualification criteria.  The

criteria for pre-qualification could be developed on the following

lines:-

4.11       The Structure of the Bidding Process

Selection   from   amongst   all   those   who   pass   the   pre-qualification

round will be by a process of bidding. The bids will be carefully

structured   so   as   to   guard   against   the   possible   misuses   of   the

process such as preemptive over-bidding or cartelisation. For this

purpose,   a   bid   structure   involving   “Multi   Stage   Informed

Ascending   Bids”   is   recommended.   It   is   also   recommended   that

such   bids   be   invited   for   the   entry   fee   for   selection   of   operations

and issuing licenses to them. Although, as recommended earlier in

2

the case of NLDO, TRAI is primarily of the opinion that because

of   its   greater   relevance,   direct   impact   on   operations   and   being

equitable, revenue sharing is a better basis on which to invite bids

for   licenses,   in   the   case   of   CMSPs   this   choice   is   not   available

except   in   two   vacant   circles/slots.   The   34   incumbent   operators

have already been given licenses through a process of bidding and

it would not be correct to subject them to yet another process of

bidding, this time concerning revenue sharing. They have already

been   asked   to   pay   as   license   fee,   albeit   on   a   provisional   basis   a

fixed   amount   of   the   revenue   share   viz.   15%.   It   is,   therefore,

recommended that a fixed percentage of revenue share be paid by

all operators as the license fee and this percentage be the same for

all  the operators  barring  the  exceptions specifically  mentioned   in

the paragraph 5.9 below.

4.12    While, the detailed bid structure can be prepared at the time

bids are being called and assistance/advise of experts may be taken

in   doing   so,   based   on   the   experience   of   such   successful   bids

elsewhere,   the   basic   outlines   of   the   proposed   structure   can   be

given. Bids can be invited for more than one licence at a time. The

total number of rounds in which the bids will be finalised will be

pre-determined   and   all   bidders   should   be   eligible   to   bid   for   all

licenses   on   offer   in   each   of   the   rounds.   The   licensor,   may,

however, if it so desires, stipulate beforehand the total number of

licences that can be finally allotted to a single bidder. The TRAI’s

recommendation in this regard is that the number of licences that

can go to a single bidder need not be restricted. This will favour

the   serious   and   techno-financially   strong   bidders   and   will   help

keep the bids at operationally feasible optimal levels.

4.13    After   each   stage   of   bidding,   bids   received   will   be   made

public and all bidders (those lower than the highest bidder as well

as  the   highest   bidder)   will  be   permitted   to  raise   their  bids  in   the

subsequent   rounds   of   bidding.   The   process   will   be   deemed

complete only on the completion of the pre-determined number of

bid rounds at the end of which the highest bidder for each licence

will   have   the   claim   to   the   license   in   question.   Licences   will

become effective on payment of the amount of the winning bid for

the entry fee within a period specified in the tender document.

2

4.14    The   same   process   of   bidding   will   also   enable   selection   of

operators where two slots in the same circle are vacant viz. J & K

and   Andaman   and   Nicobar   where   no   operators   exist.   In   these

circles, two bidders may be selected and it is recommended in this

regard that while the second highest bidder in these circles may be

considered for the second slot available, he need not be asked  to

match the bid of the highest bidder. It may be provided though that

if  the   difference   between   the  first   and   the   second   highest   bids  is

substantial, say more than 25 %, fresh bids for the second slot will

be invited. Such an arrangement while being equitable will act as a

good incentive for attracting bids for these circles which have not

proved to be attractive in the past.

(III). Entry of the Fourth Operator:

4.15 DOT/MTNL, the incumbent in basic services, are to enter the

field  of cellular  mobile  services  as  the third operator in  terms  of

NTP 99 with the existing availability of spectrum. TRAI, however,

has no information about the availability of spectrum either for the

third   or   the   fourth   operator.   The   financial   analysis   conducted   by

the TRAI for the purpose of studying the revenue share which the

operators  can   part   with   as   licence   fee   assumes   entry   of  the   third

operator in the sixth year of licence i.e. in the current year and of

another i.e. the fourth operator two years later in accordance with

NTP 99. The analysis reveals that even if the business in each of

these   metropolitan   areas   and   circles   is   required   to   produce   a

reasonable IRR say 16-18 % and a decent return on the capital say

around 20%, it would still enable the operators to share upto about

25%   of   the   Gross   (adjusted)   revenue   as   the   licence   fee.   In   the

circumstances,   it   would   be   reasonable   to   assume   that   on   purely

economic  grounds, in most circles there is even at present, a fair

case for the entry of the fourth operator. In this context, however,

more   than   the   market,   the   determining   factor   has   to   be   the

availability of a spectrum and its optimal utilisation. Moreover, it

is also a matter for careful consideration that even when additional

spectrum is released, whether it should be utilised to augment the

number   of   service   providers   or   for   improving   the   quality   and

coverage of the already available services. In the GSM 900 band

the maximum frequency spectrum made available to the operators

in a large number of countries is a pair of 12.5 MHz. Against this

in India the circle operators have been given a pair of less than 5

2

MHz and the metro operators of less than 7 MHz. It is learnt that in

a number of metros and circles, no further expansion of services is

possible   unless   additional   spectrum   is   made   available   to   the

existing operators. Paucity of frequency spectrum is also adversely

affecting the quality of service in a number of service areas. In the

circumstances   a   fair   balance   between   the   two   objectives   of

increasing competition on the one hand and improving the quality,

coverage and price-efficiency of the service on the other will have

to   be   struck   so   that   the   larger   objective   of   providing   quality

services at affordable prices is not jeopardised. A sub-optimal cost

structure   and   quality   of   service   may   finally   turn   out   to   be

detrimental to the growth of tele-density notwithstanding a higher

number   of  service  providers.     Similar  views  were  expressed   also

by the BICP in their report on Cellular Mobile Services (para 20

page-V) of the report).  Accordingly, TRAI is of the opinion that a

view   can   be   taken   in   this   matter   only   after   getting   a   full   report

from the DOT on the quantum of spectrum being made available

for the CMSPs, existing as well as the proposed new entrants and

its location i.e. whether it is going to be in the 900 MHz or in 1800

MHz bands.”

(underlining is ours)

15.     On   5.1.2001,   the   Government   of   India   issued   guidelines   for   issue   of

licence for CMTS.    These guidelines envisaged a detailed bidding process for

selection of the new service providers.

16.     On 27.10.2003, TRAI made recommendations under Section 11(1)(a)(i),

(ii),   (iv)   and   (vii)   of   the   1997   Act   on   Unified   Licensing.   TRAI   referred   to

international   practises,   NTP   1994   and   NTP   1999   and   growth   of   telephone

density   –   national   objective   and   priority.   Para   7.2   of   those   recommendations

read as under:

2

“7.2   The   Guidelines   would   be   notified   by   the   licensor   based   on

TRAI   recommendations   to   include   nominal   entry   fee,   USO,   etc.

The   charges   for   spectrum   shall   be   determined   separately.   The

operator   shall   be   required   to   approach   the   licensor   mainly   for

spectrum allocation. Since, spectrum is a scarce resource, it needs

to   be   regulated   separately.   Spectrum   should   be   distributed   using

such   a   mechanism   that   it   is   allocated   optimally   to   the   most

efficient user.”

17.            Paragraphs 7.15 to 7.19 of the 2003 recommendations contained various

alternatives   for   deciding   the   benchmark   for   the   entry   fee   for   Unified   Access

Licensing   Regime.     In   paragraph   7.30,   TRAI   laid   emphasis   on   efficient

utilization of spectrum by all service providers and indicated that it would make

further recommendations on efficient utilization of spectrum, spectrum pricing,

availability and spectrum allocation procedure shortly, and the DoT may like to

issue spectrum related guidelines based on its recommendations.

18.            In   the   meanwhile,   a   Group   of   Ministers   was   constituted   on   10.9.2003

with the approval of the Prime Minister to consider the following matters:

i)         To recommend how to ensure release of adequate spectrum needed for

the growth of the telecom sector;

ii)        To   recommend   measures   for   ensuring   adequate   resources   for   the

realization of the NTP targets of rural telephony;

iii)       To resolve issues relating to the enactment of the Convergence Bill;

iv)        To chart the course to a Universal Licence;

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v)        To review  adequacy  of steps and enforcing  limited  mobility    within

the SDCA for WLL(M) services of basic operators, and recommend

the future course of action;

vi)       To   appraise   FDI   limits   in   the   telecom   sector   and   give

recommendations thereon;

vii)      To identify issues relating to mergers and acquisitions in the telecom

sector and recommend the way forward; and

viii)     To   consider   issues   relating   to   imposition   of   trade   tax   on   telecom

services by the State Governments.

19.           After considering the entire matter, the Group of Ministers made detailed

recommendations on 30.10.2003, the relevant portions of which are extracted

below:

“2.1 1
st
Term of Reference : to recommend how to ensure release of

adequate spectrum needed for the growth of the telecom sector.

2.1.1 The   GOM   was   informed   that   the   availability   of   adequate

spectrum in appropriate frequency bands, i.e. 1800 MHz in a

timely manner is crucial, for the growth of mobile telephone

services.     The   growth   of   mobile   services   and   resultant

spectrum needs are mainly in metro, major and main cities

having population above 1 million.  However, the frequency

bands   of   1800   MHz   are   extensively   used   by   Defence

services,   thus   severely   limiting   their   availability   for   the

mobile telecom operators.

2.1.2  In the above context, GoM recommended the following:

(1)       Adequate spectrum be made available for the unimpeded

growth of telecom services, modalities for which will be

jointly worked out by Wireless Planning & Coordination

(WPC)   Wing   of   Department   of   Telecom   and   Defence

services.     The   Ministry   of   Defence   would   coordinate

release   additional   spectrum   in   a   number   of   cities   for

which requirements have been projected within a month.

2

(2)            The   Ministry   of   Finance   will   provide   necessary

budgetary   support   to   Ministry   of   Defence   for

modernization   of   their   existing   equipment   to   facilitate

release   of   required   spectrum.                The   actual   fund

requirements   including   its   phasing   will   be   worked   out

between the Ministry of Defence Ministry of Finance and

the Department of Telecom in a time bound manner.

(3)            The Department of Telecom and Ministry of Finance

would   discuss   and   finalise   spectrum   pricing   formula

which   will   include   incentive   for   efficient   use   of

spectrum   as   well   as   disincentive   for   sub-optimal

usages

(4)            The allotment of additional spectrum be transparent

fair   and   equitable,   avoiding   monopolistic   situation

regarding spectrum allotment usage

(5)            The long term 15-20 years, spectrum requirements along

with   time   frames   would   also   be   worked   out   by

Department of Telecom.

(6)            As   per   the   directions   of   GoM,   a   Task   Force   has   been

constituted   under   the   chairmanship   of   Wireless   Adviser

to   the   Govt.   of   India   with   representatives   from

Department   of   Telecom,   Ministry   of   Defence   and

Ministry of Finance.  The terms of reference of the Task

Force   and   the   progress   of   its   work   so   far   are   given   in

Annexures II & III.(Page 17-18).

2.4           4
th
Term of Reference :- To chart the course to a Universal

Licence:

2.4.1 The   GoM   took   note   of   the   exercise   that   had   already   been

indicated by Telecom Regulatory Authority of India (TRAI),

in   regard   to   Unified   Licensing   Regime   in   the   Telecom

Sector Chairman, TRAI and Chairman HDFC were specially

invited made presentations before the GoM.

2

2.4.2 TRAI submitted its recommendations to the Government on

this matter on 27.10.2003.  TRAI has recommended that the

present system of licensing in the Telecom Sector should be

replaced   by   Unified   Licensing/Automatic   Authorization

Regime.     The   Unified   Licensing/Automatic   Authorization

Regime   has   been   recommended   to   be   achieved   in   a   two-

stage process with the Unified Access Regime for basic and

cellular   services   in   the   first   phase   to   be   implemented

immediately.     This   is   to   be   followed   by   a   process   of

consultation to define the guidelines and rules for achieving

a fully Unified Licensing/Authorization Regime.   TRAI has

recommended that it will enter into a consultation process so

that   the   replacement   of   the   existing   licensing   regime   by   a

Unified   Licensing   Regime   gets   initiated   within   6   months.

Broad rationale key recommendations and some key policy

issues   that   have   been   addressed   by   TRAI   are   listed   in   the

Annexure IV(pages 19-21).

2.4.3 The   salient   points   of   TRAI   recommendations   in   regard   to

the   Unified   Access   Licensing   (basic   and   cellular   mobile),

are as under:

(i)      Unification of licenses to be done in two stages

(a)     Unified   access   regime   for   basic   and

cellular   services   in   the   first   phase

immediately

(b)     Unified            authorization              regime

encompassing   all   telecom   services   in   the

second phase.

(ii)     Fee   paid   by   fourth   cellular   operator   to   be

benchmark for migration of basic players to the

new access regime.

(iii)    Cellular   operators   not   to   pay   any   entry   fee   for

migration to the unified access regime while basic

operators   to   pay   the   differences   between   fourth

2

cellular   operators   licence   fee   and   the   BSO   fee

already paid by them

(iv)     Reliance Infocom required to pay Rs. 1096 crores

for   migration   in   addition   to   penalty   of   Rs.   485

crores for offering cellular type services.

(v)      Process   of   migration   to   the   new   regime   to   be

voluntary.

(vi)     The   existing   BSOs   after   migration   to   Unified

Access Licensing  Regime  may  offer full mobility

however   WLL(M)   operators   after   migration   will

be   required   to   offer   limited   mobility   service   to

such customers who so desire.

(vii)    No additional fee to be paid for any of the circles

where there is no fourth cellular operator.

2.4.4 Enhancing the scope of current Telecom Policy (NTF-99) to

provide   category   of   Unified   License   and   Unified   Access

Service License

NTP-99 recognises access service providers as a distinct class.  For

the   purpose   of   licensing,   this   has   been   sub-divided   into   cellular

fixed   and   cable   service   providers.     NTP-99   also   states   that

convergence  of both  markets  and  technologies is a  reality  that  is

forcing realignment of the industry.  This convergence now allows

operators   to   use   their   facilities   to   deliver   some   services   reserved

for   other   operators   necessitating   a   re-look   at   NTP-94   policy

framework.

For bringing into effect the regime of Unified Access Service for

basic   and   cellular   service   licenses   and   Unified   Licensing

comprising all telecom services, it would be necessary to enhance

the   scope   of   NTP-99   to   include   these   as   distinct   categories   of

licenses as pet of NTP-99.

2.4.5 TRAI recommendations on entry fee of WLL(M) based on

TDSAT judgement:

2

TRAI   has   also   submitted   its   recommendations   in   regard   to

additional   entry   fee   payable   by   basic   service   operators   for

providing WLL(M) services on which Government had sought its

recommendations based on the judgment of TDSAT dated 8/8/03

in the WLL(M) case.   TRAI has given detailed reasoning on this

matter and has recommended additional entry fee for such of the

Basic   Service   Operators   who   provide   WLL(M)   service.     The

salient features are in Annexure-V (page 22).

2.4.6 Based   on   the   above   the   GoM   has   recommended   the

following course of action

(i)      The scope of NTP-99 may be enhanced to provide

for   licensing   of   Unified   Access   Service   for   basic

and cellular license services and Unified Licensing

comprising   all   telecom   services.     Department   of

Telecommunications   may   be   authorized   to   issue

necessary addendum to NTP-99 to this effect.

(ii)       The   recommendations   of   TRAI   with   regard   to

implementation   of   the   Unified   Access   Licensing

Regime   for   basic   and   cellular   services   may   be

accepted.

DoT   may   be   authorized   to   finalise   the   details   of

implementation   with   the   approval   of   the   Minister   of

Communication   &   IT   in   this   regard   including   the

calculation   of  the   entry   fee   depending   upon   the   date   of

payment   based   on   the   principles   given   by   TRAI   in   its

recommendations.

(iii)    The   recommendations   of   TRAI   in   this   regard   to

the course of action to be adopted subsequently in

regard  to   the  implementation   of  the  fully   Unified

License Authorisation Regime may be approved.

DoT   may   be   authorized   to   finalise   the   details   of

implementation   with   the   approval   of   the   Minister   of

2

Communications & IT on receipt of recommendations of

TRAI in this behalf.

(iv)    The   recommendations   of   TRAI   in   regard   to

additional   entry   fee   payable   by   basic   service

operators for providing WLL(M) service on which

Government sought its recommendations based on

the   judgment   of   TDSAT   dated   8.8.2003   in   the

WLL(M) case may be accepted.

(v)            While there appears to be no case for giving

any compensation package to them, because of the

perception   that   the   finances   of   the   cellular

operators   are   strained   and   because   of   the   effect

these may have on financial institutions.   Finance

Ministry   would   address   the   difficulties   of   the

cellular   operators,   if   any,   separately   and

appropriately.

(vi)    If   new   services   are   introduced   as   a   result   of

technological   advancements   which   require

additional   spectrum   over   and   above   the   spectrum

already   allotted/contracted   allocation   of   such

spectrum   will   be   considered   on   payment   of

additional fee or charges, these will be determined

as per guidelines to be evolved in consultation with

TRAI.”

(emphasis supplied)

20.    The   recommendations   of   the   Group   of   Ministers   were   accepted   by   the

Council of Ministers on 31.10.2003.

21.    Thereafter, DoT issued Office Memorandum dated 11.11.2003 and made

some  additions to NTP 1999.   The same  day, DoT issued new guidelines for

UAS Licences.   Two salient features of these guidelines were that the existing

3

operators would have an option to continue under the existing licensing regime

or   to   migrate   to   new   UAS   Licence   and   the   licence   fee,   service   area,   rollout

obligations and performance bank guarantee under UAS Licence was to be the

same as the 4th CMTS.

22.     Vide   letter   dated   14.11.2003,   the   Chairman,   TRAI,   on   his   own,   made

recommendation   regarding   entry   fee   to   be   charged   from   the   new   UAS

Licensees. On 24.11.2003, the Minister of C&IT accepted the recommendation

that   entry   fee   for   new   UAS   Licensees   will   be   the   entry   fee   of   4th  cellular

operator and where there is no 4th cellular operator, it will be the entry fee fixed

by the Government for the basic operator.  A decision was also taken by him in

F. No.20-231/2003-BS-III (LOIs for UASL) at 4/N that,

“As   regards   the   point   raised   about   the   grant   of   new   licences   on

first-come-first-served basis, the announced guidelines have made

it   open  for   new   licences  to   be  issued   on  continuous  basis   at   any

time.     However,   the   spectrum   is   to   be   allotted   subject   to

availability.     This   in   effect   would   imply   that   an   applicant   who

comes   first   will   be   granted   the   spectrum   first   so   it   will   result   in

grant of licence on first-come-first-served basis.”

Although,   in   terms   of   the   decision   taken   by   the   Minister   of   C&IT,   the

applications for grant of UAS Licence could be made on continuous basis and

were required to be processed within 30 days, some applications were made in

2004 and 2006 and the same were kept pending.

3

23. On 13.5.2005,  TRAI   made   comprehensive   recommendations   on   various

issues   relating   to   spectrum   policy,   i.e.,   efficient   utilisation   of   spectrum,

spectrum   allocation,  spectrum   pricing,   spectrum   charging   and   allocation   for

other terrestrial wireless links. These recommendations were not placed before

Telecom   Commission.   Though,  the   then  Secretary,  DoT   submitted   the   file   to

the then Minister of C&IT on 16.8.2005 for information with a note that he will

go through the recommendations and put up the file to the Minister for policy

decision, the file was returned on 12.9.2006, i.e., after one year and no further

action appears to have been taken.

24. In the meanwhile, on 23.2.2006, the Prime Minister approved constitution

of a Group of Ministers, consisting of the Ministers of Defence, Home Affairs,

Finance,   Parliamentary   Affairs,   Information   and   Broadcasting   and   C&IT,   to

look into issues relating to vacation of spectrum.  Deputy Chairman,  Planning

Commission   was   special   invitee.   The   Terms   of   Reference   of   the   Group   of

Ministers, among other things, included suggesting a Spectrum Pricing Policy

and examining the possibility of creation of a spectrum relocation fund. After

five days, the Minister C&IT wrote letter dated 28.2.2006 to the Prime Minister

that   the   Terms   of   Reference   of   the   GoM   were   much   wider   than   what   was

3

discussed in his meeting with the Prime Minister. He appears to have protested

that the Terms of Reference would impinge upon the work of his Ministry and

requested that the Terms of Reference be modified in accordance with the draft

enclosed  with the letter. Interestingly, the Minister’s draft did not include the

important issue relating to Spectrum Pricing. Thereafter, vide letter 7.12.2006,

the   Cabinet   Secretary   conveyed   the   Prime   Minister’s   approval   to   the

modification  of the Terms of Reference.  The revised Terms of Reference  did

not include the issue relating to Spectrum Pricing.

25.   On   14.12.2005,   the   DoT   issued   revised   guidelines   for   UAS   Licence.

Paragraph 11 of the new guidelines reads as under:

“The licences shall be issued without any restriction on the number

of   entrants   for   provision   of   unified   access   services   in   a   Service

Area.”

In   terms   of   paragraph   14   of   the   guidelines,   the   licensee   was   required   to   pay

annual licence fee at 10/8/6% of Adjusted Gross Revenue (AGR) for category

A/B/C   service   areas,   respectively   excluding   spectrum   charges.   This   was   in

addition to the non-refundable entry fee. In terms of paragraph 19 the licensee

was required to pay spectrum charges in addition to the licence fee on revenue

share basis.    However, while calculating AGR for limited  purpose of levying

spectrum charges, revenue from wireless subscribers was not to be taken into

account.

3

26.    After   one   year   and   about   six   months,   the   DoT   vide   its   letter   dated

13.4.2007, requested TRAI to furnish its recommendations under Section 11(1)

(a) of the 1997 Act on the issues of limiting the number of access providers in

each service area and review of the terms and conditions in the access provider

licence mentioned in the letter.  Paragraph 2 of that letter is extracted below:

“2. Fast changes are happening in the Telecommunication sector. In

order   to   ensure   that   the   policies   keep   pace   with   the

changes/developments   in   the   Telecommunication   sector,   the

government   is   contemplating   to   review   the   following   terms   and

conditions in the Access provider (CMTS/UAS/Basic) license

i.      Substantial equity holding by a company / legal person in more

than one licensee company in the same service area (clause 1.4

of UASL agreement).

ii.     Transfer of licences (clause 6 of the UASL)

iii.    Guidelines   dated   21.02.2004   on   Mergers   and   Acquisitions.

TRAI in its recommendations dated 30.1.2004 had opined that

the guidelines may be reviewed after one year.

iv.     Permit   service   providers   to,   offer   access   services   using

combination  of technologies (CDMA, GSM and/or any other)

under the same license.

v.      Roll-out obligations (Clause 34 of UASL).

vi.     Requirement to publish printed telephone directory.”

27.    In   furtherance   of   the   aforesaid   communication,   TRAI   made

recommendations   dated   28.8.2007.   The   main   emphasis   of   these

recommendations  was the  principles of fair  competition,  no restriction on the

number   of   access   service   providers   in   any   service   area,   need   for   spectrum

management, measures to increase spectrum efficiency, allocation of spectrum

3

and   compliance   of   roll   out   obligations   by   the   service   providers.     It   was   also

recommended   that  in   future   all  spectrum  excluding  the   spectrum  in  800,   900

and 1800 MHz bands in 2G services should be auctioned.  In paragraphs 2.33,

2.39, 2.41, 2.54 and 2.63, TRAI repeatedly mentioned about scarce availability

of   spectrum.   Paragraphs   2.37,   2.40,   2.69   and   2.73   to   2.79   of   the   TRAI’s

recommendations dated 28.8.2007 are extracted below:

“2.37 Accordingly,   the   Authority   recommends   that   no   cap   be

placed   on   the   number   of   access   service   providers   in   any

service area.

2.40    The   present   spectrum   allocation   criteria,   pricing

methodology   and   the   management   system   suffer   from   a

number   of   deficiencies   and   therefore   the   Authority

recommends that this whole issue is not to be dealt with in

piecemeal   but   should   be   taken   up   as   a   long   term   policy

issue.   There is an urgent need to address the issues linked

with spectrum efficiency and its management.

2.69    The   Entry   fee   for   acquiring   a   UASL   license   enables   the

licensee to become eligible for spectrum allocation in certain

specified bands without any additional fee for acquisition of

spectrum   which   means   that   allocation   of   spectrum   follows

the   grant   of   license   subject   however   to   availability   of

spectrum.   There   is  only   one   direct   cost   to   the  operator  for

spectrum i.e. spectrum charge in the form of royalty.

2.73 The allocation of spectrum is after the payment of entry

fee   and   grant   of   license.   The   entry   fee   as   it   exists

today   is,   in   fact,   a   result   of   the   price   discovered

through a markets based mechanism applicable for the

grant   of   license  to  the  4th  cellular  operator.   In   today’s

dynamism   and   unprecedented   growth   of   telecom

sector,   the   entry   fee   determined   then   is   also   not   the

realistic price for obtaining a license. Perhaps, it needs

3

to be reassessed through a market mechanism. On the

other hand spectrum usage charge is in the form of a

royalty   which   is   linked   to   the   revenue   earned   by   the

operators and  to  that  extent  it  captures  the  economic

value of the spectrum that is used. Some stakeholders

have   viewed   the   charges/fee   as   a   hybrid   model   of

extracting   economic   rent   for   the   acquisition   and   also

meet the criterion of efficiency in the utilization of this

scarce   resource.  The   Authority   in   the   context   of   800,

900   and   1800   MHz   is   conscious   of   the   legacy   i.e.

prevailing practice and the overriding consideration of

level playing  field. Though the dual charge in present

form does not reflect the present value of spectrum it

needed   to   be   continued   for   treating   already   specified

bands for 2G services i.e. 800, 900 and 1800 MHz. It is

in   this   background   that   the   Authority   is   not

recommending   the   standard   options   pricing   of

spectrum,   however,   it   has   elsewhere   in   the

recommendation   made   a   strong   case   for   adopting

auction   procedure   in   the   allocation   of   all   other

spectrum bands except 800, 900 and 1800 MHz.

2.74 Some   of   the   existing   service   providers   have   already

been allocated spectrum beyond 6.2 MHz in GSM and

5 MHz in CDMA as specified in the license agreements

without charging any extra one time spectrum charges.

The maximum spectrum allocated to a service provider

is 10 MHz so far. However, the spectrum usage charge

is   being   increased   with   increased   allocation   of

spectrum. The details are available at Table 8.

2.75 The Authority has noted that the allocation beyond 6 2

MHz   for   GSM   and   5   MHz   for   CDMA   at   enhanced

spectrum   usage   charge   has   already   been

implemented. Different licensees are at different levels

of   operations   in   terms   of   the   quantum   of   spectrum.

Imposition of additional acquisition fee for the quantum

beyond these thresholds may not be legally feasible in

view   of   the   fact   that   higher   levels   of   usage   charges

have   been   agreed   to   and   are   being   collected   by   the

3

Government. Further, the Authority is conscious of the

fact   that   further   penetration   of   wireless   services   is   to

happen   in   semi-urban   and   rural   areas   where

affordability of services to the common man is the key

to further expansion.

2.76    However, the Authority is of the view that the approach

needs  to  be  different for  allocating  and  pricing  spectrum

beyond   10   MHz   in   these   bands   i.e.   800,   900   and   1800

MHz. In this matter, the Authority is guided by the need to

ensure   sustainable   competition   in   the   market   keeping   in

view   the   fact   that   there   are   new   entrants   whose

subscriber   acquisition   costs   will   be   far   higher   than   the

incumbent   wireless   operators.   Further,   the   technological

progress   enables   the   operators   to   adopt   a   number   of

technological solutions towards improving the efficiency of

the   radio   spectrum   assigned   to   them.   A   cost-   benefit

analysis of allocating additional spectrum beyond 10 MHz

to   existing   wireless   operators   and   the   cost   of   deploying

additional CAPEX towards technical improvements in the

networks would show that there is either a need to place

a cap on the maximum allocable spectrum at 10 MHz or

to   impose   framework   of   pricing   through   additional

acquisition   fee   beyond   10   MHz.       The   Authority   feels   it

appropriate   to   go   in   for   additional   acquisition   fee   of

spectrum   instead   of   placing   a   cap   on   the   amount   of

spectrum that can be allocated to any wireless operator.

In any case, the Authority is recommending a far stricter

norm   of   subscriber   base   for   allocation   of   additional

spectrum   beyond   the   initial   allotment   of   spectrum.  The

additional   acquisition   fee   beyond   10   MHz   could   be

decided   either   administratively   or   through   an   auction

method   from   amongst   the   eligible   wireless   service

providers.  In this matter, the Authority has taken note of

submissions of a number of stakeholders who have cited

evidences   of   the   fulfillment   of   the   quality   of   service

benchmarks of the existing wireless operators at 10 MHz

and even below in almost all the licensed service areas.

Such   an   approach   would   also   be   consistent   with   the

Recommendation   of   the   Authority   in   keeping   the   door

3

open for new entrant without putting a limit on the number

of access service providers.

2.77    The Authority in its recommendation on “Allocation and

pricing   of   spectrum   for   3G   and   broadband   wireless

access services” had recommended certain reserve price

for   5   MHz   of   spectrum   in   different   service   areas.   The

recommended price are as below:

Service Areas                             Price   (Rs.in   million)   for   2X5
MHz

Mumbai, Delhi and Category A                    800

Chennai, Kolkatta and Category B                 400

Category C                                      150

The   Authority   recommends   that   any   licensee   who   seeks   to   get

additional  spectrum  beyond 10  MHz  in the  existing  2G bands  i.e.

800,900   and   1800   MHz   after   reaching   the   specified   subscriber

numbers shall have to pay a onetime spectrum charge at the above

mentioned rate on prorata basis for allotment of each MHz or part

thereof   of   spectrum   beyond   10   MHz.   For   one   MHz   allotment   in

Mumbai, Delhi and Category A service areas, the service provider

will have to pay Rs. 160 million as one time spectrum acquisition

charge.

2.78    As   far   as   a   new   entrant   is   concerned,   the   question   arises

whether   there   is   any   need   for   change   in   the   pricing

methodology for allocation of spectrum in the 800, 900 and

1800 MHz bands.  Keeping in view the objective of growth,

affordability,   penetration   of   wireless   services   in   semi-urban

and rural areas, the Authority is not in favour of changing the

spectrum fee regime for a new entrant. Opportunity for equal

competition  has  always  been  one  of  the  prime  principles  of

the   Authority   in   suggesting   a   regulatory   framework   in

telecom services. Any differential treatment to a new entrant

vis-a-vis   incumbents   in   the   wireless   sector   will   go   against

the   principle   of   level   playing   field.   This   is   specific   and

restricted to 2G bands only i.e. 800, 900 and 1800 MHz. This

approach   assumes   more   significance   particularly   in   the

3

context where subscriber acquisition cost for a new entrant is

likely   to   be   much   higher   than   for   the   incumbent   wireless

operators.

2.79    In   the   case   of   spectrum   in   bands   other   than   800,   900   and

1800   MHz   i.e.   bands   that   are   yet   to   be   allocated,   the

Authority   examined   various  possible   approaches   for   pricing

and has come to the conclusion that it would be appropriate

in   future   for   a   market   based   price   discovery   systems.         In

response to the consultation paper, a number of stakeholders

have   also   strongly   recommended   that   the   allocation   of

spectrum   should   be   immediately   de-linked   from   the   license

and   the   future   allocation       should   be   based       on       auction.

The    Authority    in    its  recommendation   on  “Allocation  and

pricing of spectrum for 3G and broadband   wireless   access

services”     has     also     favored     auction   methodology   for

allocation   of   spectrum   for   3G   and   BWA   services.  It   is

therefore recommended that in future all spectrum excluding

the spectrum in 800, 900 and 1800 bands should be auctioned

s
o as to ensure efficient utilization of this scarce resource.    I
n

the 2G bands (800 MHz/900 MHz/1800 MHz), the allocation

through auction may not be possible as the service providers

were allocated spectrum at different times of their license and

the amount of spectrum with them varies from 2X4.4 MHz to

2X10   MHz   for   GSM   technology   and   2X2.5   MHz   to   2X5

MHz in CDMA technology. Therefore, to decide the cut off

after   which   the   spectrum   is   auctioned   will   be   difficult   and

might raise the issue of level playing field.”

(underlining is ours)

28.    The   aforesaid   recommendations   of   TRAI   were   first   considered   by   an

Internal Committee of the DoT constituted vide letter dated 21.9.2007 under the

Chairmanship  of Member, Telecommunication.    The report of the Committee

was placed before the Telecom Commission on 10.10.2007. However, the four

3

non-permanent   members,   i.e.,   Finance   Secretary;   Secretary,   Department   of

Industrial   Policy   and   Promotion;   Secretary,   Department   of   Information

Technology and Secretary, Planning Commission were not even informed about

the meeting.  In this meeting of the Telecom Commission, which was attended

by   the   officials   of   the   DoT   only,   the   report   of   the   Internal   Committee   was

approved. On 17.10.2007, the Minister of C&IT accepted the recommendations

of the Telecom Commission and thereby approved the recommendations made

by   TRAI.     However,   neither   the   Internal   Committee   of   the   DoT   and   the

Telecom   Commission   nor   the   Minister   of   C&IT   took   any   action   in   terms   of

paragraph   2.40   of   the   recommendations   wherein   it   was   emphasised   that   the

existing spectrum allocation criteria, pricing methodology and the management

system   suffer   from   a   number   of   deficiencies   and   the   whole   issue   should   be

addressed   keeping   in   view   issues   linked   with   spectrum   efficiency   and   its

management. The DoT also did not get in touch with the Ministry of Finance to

discuss   and   finalise   the   spectrum   pricing   formula   which   had   to   include

incentive for efficient use of spectrum as well as disincentive for sub-optimal

usage in terms of the Cabinet decision of 2003.

29.     In the meanwhile, on 24.9.2007, Shri A.K. Srivastava, DDG (AS), DoT

prepared a  note  mentioning  therein that  as  on that  date,  167 applications had

been received from 12 companies for 22 service areas and opined that it may be

4

difficult to handle such a large number of applications at any point of time.  He

suggested that 10.10.2007 may be announced as the cut-off date for receipt of

new   UAS  Licence   applications.    Shri  A.  Raja  who  was,  at  the  relevant  time,

Minister of C&IT did not agree with the suggestion and ordered that 1.10.2007

be fixed as the cut-off date for receipt of applications for new UAS Licence.

Accordingly, press note dated 24.9.2007 was issued by the DoT stating that no

new application for UAS Licence will be accepted after 1.10.2007.

30.    It   is   borne   out   from   the   record   that   Vodafone   Essar   Spacetel   Ltd.

(respondent No.12) had made  an application  for UAS Licence  in 2004 and 3

others,   namely,   Idea   Cellular   Ltd.   (respondent   No.8),   Tata   Teleservices   Ltd.

(respondent No.9) and M/s.  Aircel Ltd. (respondent No.11) had made  similar

applications in 2006. However, the same were not disposed of by the DoT and

they   were   included   in   the   figure   of   167.     Between   24.9.2007   and   1.10.2007,

over   300   applications   were   received   for   grant   of   UAS   Licences.   Member

(Technology),   Telecom   Commission   and   Ex-officio   Secretary   to   Government

of   India   sent   a   letter   dated   26.10.2007   to   Secretary,   Department   of   Legal

Affairs,   Ministry   of   Law   and   Justice   seeking   the   opinion   of   the   Attorney

General   of  India/Solicitor  General   of  India   on   the  issue   of  the  mechanism   to

deal with what he termed as an unprecedented situation created due to receipt of

large number of applications for grant of UAS Licence.  The statement of case

4

accompanying   the   letter   of   Member   (Technology)   contained   as   many   as   14

paragraphs. Paragraph 11 outlined the following four alternatives:

(I)   The   applications   may   be   processed   on   first-come-first-served   basis   in

chronological   order   of   receipt   of   applications   in   each   service   area   as   per

existing   procedure.   LoI   may   be   issued   simultaneously   to   applicants   (the

numbers   will   vary   based   on   availability   of   spectrum   to   be   ascertained   from

WPC   Wing)   who   fulfil   the   eligibility   conditions   of   the   existing   UASL

Guidelines   and   are   senior   most   in   the   queue.   The   time   limit   for   compliance

should   be   7   days   as   per   the   existing   provision   of   LoI   and   15   days   for

submission   of   PBG,   FBG,   entry   fee,   etc.   as   per   the   existing   procedure.

However,   those   who   fulfil   the   conditions   of   LoI   within   stipulated   time,   their

seniority of license/spectrum will be on the basis of their application date. The

compliance   of   eligibility   conditions   as   on   the   date   of   issue   of   LoI   may   be

accepted.   No   relaxation   of   this   time   limit   will   be   given   and   LoI   shall   stand

terminated after the stipulated time period (however, the applicant may have the

right   to   apply   for   new   UAS   Licence   again   as   and   when   the   window   for

submission of new UAS Licence is opened again). Subsequent applications may

be considered for issue of LoI if the spectrum is available.

4

(II) LoIs to all those who applied by 25.9.2007 (date on which the cut-off date

for receipt of applications were  made  public through press)  may  be issued  in

each   service   area   as   it   is   expected   that   only   serious   players   will   deposit   the

entry   fee   and   seniority   for   license/spectrum   be   based   on   (i)   the   date   of

application or (ii) the date/time of fulfilment of all LoI conditions.

(III) DoT may issue LoIs to all eligible applications simultaneously received up

to   cut-off   date.   Since   LoIs   will   clearly   stipulate   that   spectrum   allocation   is

subject   to   availability   and   is  not  guaranteed,   the   LoI  holders  are  supposed   to

pay   the   entry   fee   if   their   business   case   permits   them   top   wait   for   spectrum

allocation subject to availability an initial roll out using wire line technology.

(IV) Any other better approach which may  be legally tenable and sustainable

for issue of new licences.

Paragraph 13 of the statement of case is extracted below:

“Issue   of   LoIs   to   M/s.   TATA   and   others   for   usage   of   Dual

Technology   spectrum   based   on   their   applications   received   after

18.10.2007. Whether

(i) To treat their request prior to existing applicants

or

(ii) To treat their request after processing all 575 applications.”

4

31.    The   Law   Secretary   placed   the   papers   before   the   Minister   of   Law   and

Justice on 1.11.2007, who recorded the following note:

“I agree.  In view of the importance of the case and various options

indicated   in   the   statement   of   the   case,   it   is   necessary   that   whole

issue is first considered by an empowered Group of Ministers and

in that process legal opinion of Attorney General can be obtained.”

32.    When   the   note   of   the   Law   Minister   was   placed   before   the   Minister   of

C&IT, he recorded the following note on 2.11.2007 – “Discuss please”.  On the

same day, i.e., 2.11.2007 the Minister of C&IT did two things. He approved the

note prepared by Director (AS-1) containing the following issues:

(i)      Issuing of LoIs to new applicants as per the existing policy,

(ii)     Number of LoIs to be issued in each circle,

(iii)    Approval of draft LoI,

(iv)     Considering   application   of   TATAs   for   dual   technology   after   the

decision of TDSAT on dual technology, and

(v)      Authorising Shri R.K. Gupta, ADG (AS-1) for signing the LoIs on

behalf of President of India.

33.    While approving the note, the Minister of C&IT on his own recorded the

following – “LoI may be issued to the applicants received upto 25th Sept. 2007″.

Simultaneously,   he   sent   D.O.   No.20/100/2007-AS.I   dated   2.11.2007   to   the

Prime   Minister   and   criticised   the   suggestion   made   by   the   Law   Minister   by

describing it as totally out of context.  He also gave an indication of what was to

4

come in the future by mentioning that the DoT has decided to continue with the

existing policy of first-come-first-served for processing of applications received

up   to   25.9.2007   and   the   procedure   for   processing   the   remaining   applications

will be decided at a later date, if any spectrum is left available after processing

the applications received up to 25.9.2007.   Paragraphs 3 and 4 of the letter of

the Minister of C&IT are extracted below:

“3.     The   Department   wanted   to   examine   the   possibility   of   any

other procedure in addition to the current procedure of allotment of

Licences   to   process   the   huge   number   of   applications.   A   few

alternative   procedures   as   debated   in   the   Department   and   also

opined by few legal experts were suggested by the Department of

Telecom   to   Ministry   of   Law   &   Justice   to   examine   its   legal

tenability  to avoid  future legal  complications,  if any.  Ministry   of

Law and Justice, instead of examining the legal tenability of these

alternative   procedures,   suggested   referring   the   matter   to

empowered Group of Ministers. Since, generally new major policy

decisions of a; Department or inter-departmental issues are referred

to   GOM,   and,   needless   to   say   that   the   present   issue   relates   to

procedures,   the   suggestion   of   Law   Ministry   is   totally   out   of

context.

4.      Now,   the   Department   has   decided   to   continue   with   the

existing   policy   (first-come-first-served)   for   processing   of

applications   received   up   to   25th  September   2007,   i.   e.   the   date

when the news-item on announcement of cut-off date appeared in

the   newspapers.   The   procedure   for   processing   the   remaining

applications will be decided at a later date, if any spectrum is left

available   after   processing   the   applications   received   up   to   25th

September 2007.

4.      As   the   Department   is   not   deviating   from   the   existing

procedure, I hope this will satisfy the Industry.”

4

34.    In the meanwhile, the Prime Minister who had received representations

from telecom sector companies and had read reports appearing in a section of

media sent letter dated 2.11.2007 to the Minister of C&IT and suggested that a

fair and transparent method should be adopted for grant of fresh licences.  That

letter reads as under:

“Prime Minister

New Delhi

2 November, 2007

Dear Shri Raja,

A number of issues relating to allocation of spectrum have

been raised by telecom sector companies as well as in sections of

the media. Broadly, the issues relate to enhancement of subscriber

linked   spectrum   allocation   criteria,   permission   to   CDMA   service

providers   to   also   provide   services   on   the   GSM   standard   and   be

eligible for spectrum in the GSM service band, and the processing

of   a   large   number   of   applications   received   for   fresh   licenses

against the backdrop of  inadequate spectrum to cater to overall

demand. Besides these, there are some other issues recommended

by   TRAI   that   require   early   decision.   The   key   issues   are

summarized in the annexed note.

I would request you to give urgent consideration to the

issues   being   raised   with   a   view   to   ensuring   fairness   and

transparency and let me know of the position before you take

any further action in this regard.

With regards,

Yours sincerely,

Sd/-

(Manmohan Singh)

Shri A. Raja

Minister of Communications and IT

4

New Delhi.

Annexure

1.      Enhancement   of   subscriber   linked   spectrum   allocation

criteria

In August 2007, the TRAI has recommended interim enhancement

of subscriber linked spectrum allocation criteria. Service providers

have   objected   to   these   recommendations,   alleging   errors   in

estimation / assumptions as well as due procedure not having been

followed by the TRAI while arriving at the recommendations.

2.      Permission   to   CDMA   service   providers   to   also   provide

services on the GSM standard and be eligible for spectrum

in the GSM service band

Based on media reports, it is understood that the DoT has allowed

`cross   technology’   provision   of   services   by   CDMA   service

providers and three such companies have already paid the license

fee. With the deposit of the fee, they would be eligible for GSM

spectrum,   for   which   old   incumbent   operators   have   been   waiting

since   last   several   years.   The   Cellular   Operators   Association   of

India (COAI), being the association of GSM service providers, has

represented   against   this.   It   is   understood   that   the   COAI   has   also

approached the TDSAT against this.

3.      Processing   of   a   large   number   of   applications   received   for

fresh  licenses against  the backdrop of inadequate spectrum

to cater to overall demand

The   DoT   has   received   a   large   number   of   applications   for   new

licenses in various telecom circles.  Since spectrum is very limited,

even in the next several years all these licensees may never be able

to get spectrum.   The Telecom Policy that had been approved by

the   Union   Cabinet   in   1999   specifically   stated   that   new   licenses

would be given subject to availability of spectrum.

4.      In order that spectrum use efficiency gets directly linked

with   correct   pricing   of   spectrum,   consider   (i)

4

introduction   of   a   transparent   methodology   of   auction,

wherever   legally   and   technically   feasible,   and   (ii)

revision of entry fee, which is currently benchmarked on

old spectrum auction figures

5.      Early decision on issues like rural telephony, infrastructure

sharing, 3G, Broadband, Number Portability and Broadband

Wireless   Access,   on   which   the   TRAI   has   already   given

recommendations.”

(emphasis supplied)

35.     The Minister of C&IT did not bother to consider the suggestion made by

the  Prime   Minister,  which was  consistent  with  the Constitutional  principle  of

equality, that keeping in view the inadequate availability of spectrum, fairness

and transparency should be maintained in the allocation of spectrum, and within

few hours of the receipt of the letter from the Prime Minister, he sent a reply

wherein he brushed aside the suggestion made by the Prime Minister by saying

that   it   will   be   unfair,   discriminatory,   arbitrary   and   capricious   to   auction   the

spectrum to new applicants as it will not give them a level playing field.   The

relevant portions of paragraph 3 of the Minister’s letter are extracted below:

“3.     Processing   of   a   large   number   of   applications   received   for

fresh  licenses against  the backdrop of inadequate spectrum

to cater to overall demand

The issue of auction of spectrum was considered by the TRAI and

the   Telecom   Commission   and   was   not   recommended   as   the

existing licence holders who are already having spectrum upto 10

MHz per Circle have got it without any spectrum charge.  It will be

unfair,   discriminatory,   arbitrary   and   capricious   to   auction   the

4

spectrum to new applicants as it will not give them level playing

field.

I   would   like   to   bring   it   to   your   notice   that   DoT   has   earmarked

totally 800 MHz in 900 MHz and 1800 MHz bands for 2G mobile

services. Out of this, so for a maximum of about 35 to 40 MHz per

Circle   has  been   allotted  to   different   operators  and  being   used   by

them. The remaining 60 to 65 MHz, including spectrum likely to

be vacated by Defence Services, is still available for 2G services.

Therefore, there is enough scope for allotment of spectrum to few

new   operators   even   after   meeting   the   requirements   of   existing

operators  and   licensees.   An   increase   in   number   of   operators   will

certainly bring real competition which will lead to better services

and increased teledensity at lower tariff. Waiting for spectrum for

long after getting licence is not unknown to the Industry and even

at   present   Aircel,   Vodafone,   Idea   and   Dishnet   are   waiting   for

initial spectrum in some Circles since December 2006.”

36.    On   20.11.2007,   the   Secretary,   DoT   had   made   a   presentation   on   the

spectrum policy to the Cabinet Secretary.  The Finance Secretary, who appears

to   have   witnessed   the   presentation,   dispatched   letter   dated   22.11.2007   to   the

Secretary, DoT and expressed his doubt as to how the rate of Rs.1600 crores

determined in 2001, could be applied without any indexation for a licence to be

given in 2007.   He also emphasized that in view of the financial implications,

the   Ministry   of   Finance   should   have   been   consulted   before   the   matter   was

finalised   at   the   level   of   the   DoT.   Secretary,   DoT   promptly   replied   to   the

Finance   Secretary   by   sending   letter   dated   29.11.2007   in   which   he   mentioned

that as per the Cabinet decision dated 31.10.2003, the DoT had been authorised

4

to finalise the details of implementation of the recommendations of TRAI and

in its recommendations dated 28.8.2007, TRAI had not suggested any change in

the entry fee/licence fee.

37.       In the context of letter dated 22.11.2007 sent by the Finance Secretary,

Member   (Finance),   DoT   submitted   note   dated  30.11.2007   suggesting   that   the

issue of revision of rates should be examined in depth before any final decision

is  taken   in   the   matter.     When   the   note   was   placed   before   the   Minister,   he

observed   that   the   matter   of   entry   fee   has   been   deliberated   in   the   department

several times in light of various guidelines and the TRAI recommendations and

accordingly   decision   was   taken   not   to   revise   the   entry   fee   and   that   the

Secretary, DoT had also replied to the Finance Secretary’s letter on the above

lines.

38.       Although,   the   record   produced   before   this   Court   does   not   show   as   to

when   the   policy   of   first-come-first-served   was   distorted   by   the   Minister   of

C&IT,   in   an   apparent   bid   to   show   that   he   had   secured   the   Prime   Minister’s

approval to this act of his, the Minister C&IT sent letter dated 26.12.2007 to the

Prime Minister, paragraphs 1 and 2 of which are extracted below:

“1.    Issue   of   Letter   of   Intent   (LOI):  DOT   follows   a   policy   of

First-cum-First Served for granting LOI to the applicants for UAS

licence,   which   means,   an   application   received   first

will be processed first and if found eligible will be granted LOI.

5

2.     Issue of Licence: The First-cum-First Served policy is also

applicable   for  grant   of licence   on  compliance  of  LOI  conditions.

Therefore, any applicant who complies with the conditions of LOI

first will be granted UAS licence first. This issue never arose in the

past as at one point of time only one application was processed and

LOI   was   granted   and   enough   time   was   given   to   him   for

compliance of conditions of LOI. However, since the Government

has adopted a policy of “No Cap” on number of UAS Licence, a

large number of LOI’s are proposed to be issued simultaneously.

In these circumstances, an applicant who fulfils the conditions of

LOI first will be granted licence first, although several applicants

will be issued LOI simultaneously. The same has been concurred

by the Solicitor General of India during the discussions.”

(underlining is ours)

39.    After 12 days, DDG (AS), DoT prepared a note incorporating therein the

changed first-come-first-served policy to which reference had been made by the

Minister of C&IT in letter dated 26.12.2007 sent to the Prime Minister. On the

same day the Minister of C&IT approved the change.

40.    The meeting of the full Telecom Commission, which was scheduled to be

held on 9.1.2008 to consider two important issues i.e., performance of telecom

sector and pricing of spectrum was postponed to 15.1.2008.

41.    On 10.1.2008 i.e., after three days of postponement of the meeting of the

Telecom   Commission,   a   press   release   was   issued   by   the   DoT   under   the

signature of Shri A.K. Srivastava, DDG (AS), DoT.  The same reads as under:

5

“In   the   light   of   Unified   Access   Services   Licence   (UASL)

guidelines   issued   on   14th  December   2005   by   the   department

regarding number of Licenses in a Service Area, a reference was

made   to   TRAI   on   13-4-2007.   The   TRAI   on   28-08-2007

recommended   that   No   cap   be   placed   on   the   number   of   access

service   providers   in   any   service   area.   The   government   accepted

this   recommendation   of   TRAI.   Hon’ble   Prime   Minister   also

emphasized   on   increased   competition   while   inaugurating   India

Telecom 2007. Accordingly, DOT has decided to issue LOI to all

the eligible applicants on the date of application who applied up-to

25-09-2007.

UAS license authorises licencee to rollout telecom access services

using   any   digital   technology   which   includes   wire-line   and/or

wireless   (GSM   and/or   CDMA)   services.   They   can   also   provide

Internet   Telephony,   Internet   Services   and   Broadband   services.

UAS licence in broader terms is an umbrella licence and does not

automatically authorize UAS licensees usage of spectrum to rollout

Mobile (GSM and/or CDMA) services. For this, UAS licencee has

to obtain another licence, i.e. Wireless Operating Licence which is

granted   on   first-come-first-served   basis   subject   to   availability   of

spectrum in particular service area.

DOT has been implementing a policy of First-cum-First Served for

grant of UAS licences under which initially an application which is

received first will be processed first and thereafter if found eligible

will   be   granted   LOI   and   then   who   so   ever   complied   with   the

conditions of LOI first will be granted UAS licence.

————–

Department of Telecom

(AS Cell)

10-01-2008″

(underlining is ours)

42.    On   the   same   day,   another   press   release   was   issued   asking   all   the

applicants  to  assemble  at  the  departmental  headquarters  within  45  minutes   to

collect the response(s) of the DoT.  They were also asked to submit compliance

5

of the terms of LoIs within the prescribed period.   The second press release is

also reproduced below:

“Department of Telecommunications

Press Release

D
ate : 10 th
J
anuary 2008

Sub : UASL applicants to depute their authorised representative to

collect responses of DOT on 10.1.2008.

The applicant companies who have submitted applications to

DOT   for   grant   of   UAS   licences   in   various   service   areas   on   or

before   25.9.2007   are   requested   to   depute   their   Authorised

signatory/Company   Secretary/   authorised   representative   with

authority letter to collect response(s) of DOT. They are requested

to   bring   the   company’s   rubber   stamp   for   receiving   these

documents to collect letters from DOT in response to their UASL

applications.   Only   one   representative   of   the   Company/group

Company   will   be   allowed.   Similarly,   the   companies   who   have

applied for usage of dual technology spectrum are also requested to

collect the DOT’s response.

All   above   are   requested   to   assemble   at   3:30   pm   on

10.1.2008 at Committee  Room,  2nd  Floor, Sanchar Bhawan, New

Delhi.   The   companies   which   fail   to   report   before   4:30   P.M.   on

10.1.2008, the responses of DOT will be dispatched by post.

All   eligible   LOI   holders   for   UASL   may   submit

compliance   to   DOT   to   the   terms   of   LOIs   within   the   prescribed

period   during   the   office   hours   i.e.   9:00   A.M.   to   5:30   P.M.   on

working days.

File No.20-100/2007-AS-I

Dated 10.1.2008

(A.K. Srivastava)

DDG(AS)

5

Dept. of Telecom

DDG(C&A): The above Press Release may kindly be uploaded on

DOT website immediately.”

43.            All the applicants including those who were not even eligible for UAS

Licence collected their LoIs on 10.1.2008.  The acceptance of 120 applications

and compliance  with the terms and conditions of the LoIs for 78 applications

was also received on the same day.

44.            Soon   after   obtaining   the   LoIs,   3   of   the   successful   applicants   offloaded

their stakes for thousands of crores in the name of infusing equity, their details

are as under:

(i)        Swan Telecom Capital Pvt. Ltd. (now known as Etisalat DB Telecom

Pvt. Ltd.) which was incorporated on 13.7.2006 and got UAS Licence

by   paying   licence   fee   of   Rs.   1537   crores   transferred   its   45%

(approximate) equity in favour of Etisalat Mauritius Limited, a wholly

owned   subsidiary   of   Emirates   Telecommunications   Corporation   of

UAE for over Rs.3,544 crores.

(ii)       Unitech which had obtained licence for Rs.1651 crores transferred its

stake 60% equity in favour of Telenor Asia Pte. Ltd., a part of Telenor

Group   (Norway)   in   the   name   of   issue   of   fresh   equity   shares   for

Rs.6120 crores between March, 2009 and February, 2010.

5

(iii)    Tata   Tele   Services   transferred   27.31%   of   equity   worth   Rs.   12,924

crores in favour of NTT DOCOMO.

(iv)     Tata Tele Services (Maharashtra) transferred 20.25% of equity worth

Rs. 949 crores in favour of NTT DOCOMO.

45.        S. Tel Ltd., who had applied for grant of licence pursuant to press note

dated 24.9.2007, but was ousted from the zone of consideration because of the

cut-off date fixed by the Minister of C&IT, filed Writ Petition No.636 of 2008

in   the   Delhi   High   Court   with   the   prayer   that   the   first   press   release   dated

10.1.2008 may be quashed. After hearing the parties, the learned Single Judge

vide his order dated 1.7.2009 declared that the cut-off date, i.e., 25.9.2007 was

totally arbitrary and directed the respondents in the writ petition to consider the

offer   made   by   the   writ   petitioner   to   pay   Rs.17.752   crores   towards   additional

revenue   share   over   and   above   the   applicable   spectrum   revenue   share.     The

observations   made   by   the   learned   Single   Judge   on   the   justification   of   fixing

25.9.2007 as the cut-off date read as under:

“Thus   on   the   one   hand   the   respondent   has   accepted   the

recommendation   of   the   TRAI   in   the   impugned   press   note,   but

acted contrary thereto by amending the cut-off date and thus placed

a   cap   on   the   number   of   service   providers.   The   stand   taken   by

respondent and the justification sought to be given for fixing a cut-

off   date   retrospectively   is   on   account   of   large   volume   of

applications, is without any force in view of the fact that neither

any justification was rendered during the course of argument, nor

any   justification   has   been   rendered   in   the   counter   affidavit   as   to

what is the effect of receipt of large number of applications in view

5

of the fact that a recommendation of the TRAI suggests no cap on

the   number   of   access   service   providers  in   any   service   area.   This

recommendation   was   duly   accepted   and   published   in   the

newspaper.   Further   as   per   the   counter   affidavit   232   UASL

applications   were   received   till   25.9.2007   from   22   companies.

Assuming   there   was   increase   in   the   volume   of   applications,   the

respondent has failed to answer the crucial question as to what was

the   rationale   and   basis   for   fixing   25.9.2007   as   the   cut-off   date.

Even   otherwise,   admittedly   232   applications   were   made   by

25.9.2007   and   between   25.9.2007   and   1.10.2007   only   76   were

applications   were   received.   It   was   only   on   1.10.2007   that   267

applications were made. Thus on 28.09.2007 it cannot be said that

large   number   of   applications   were   received.   Thus   taking   into

consideration   the   opinion   of   the   expert   body,   which   as   per   the

press note of the respondent itself was accepted by the respondent,

certainly the respondent cannot be allowed to change the rules of

the game  after the game had begun, to put it in the words of the

Apex Court especially when the respondent has failed to give any

plausible justification or the rationale for fixing the cut-off date by

merely   a  week.     Taking   into  consideration   that  on   13.4.2007  the

Government   of   India   had   recommended   TRAI   to   furnish   its

recommendation in terms of 11 (e) of the TRAI Act, 1997 on the

issue as to whether a limit should be put on the number of access

service providers in each service area. The TRAI having given its

recommendations on 28.8.2007 which were duly accepted by the

Government,   the   respondent   cannot   be   allowed   to   arbitrarily

change   the   cut-off   date   and   that   too   without   any   justifiable

reasons.”

46.    The   letters   patent   appeal   filed   against   the   order   of   the   learned   Single

Judge was dismissed by the Division Bench of the High Court vide judgment

dated 24.11.2009, paragraphs 13 and 14 whereof are reproduced below:

“13.   We   are   unable   to   agree   with   the   submission   of   the   learned

Attorney General that the parameters that would apply to revising a

cut-off date that has been earlier fixed  prior to the  receipt  of the

applications would be no different from fixing a cut-off date in the

first   place.   While   the   decision   in   D.S.   Nakara   which   has

5

subsequently been distinguished in N. Subbarayudu is about fixing

a cut-off date which might be an exercise in the discretion of the

Appellant, those decisions are not helpful in deciding the revision

of a cut-off date after applications have been received in terms of

the   previous   cut-off   date,   is   amenable   to   judicial   review   on

administrative   and   constitutional   law   parameters.     We   are   of   the

view  that  the   two  situations cannot   be  equated.  The  Government

would have to justify its decision to revise a cut-off date already

fixed, after applications have been received from persons acting on

the basis of the earlier cut-off date. It would be for the court to be

satisfied   when   a   challenge   is   made,   that   the   decision   to   revise   a

cut-off date after receiving applications on the basis of the cut-off

date   earlier   fixed   was   based   on   some   rational   basis   and   was   not

intended   to   benefit   a   few   applicants  while   discriminating   against

the   rest.   In   the   present   case,   for   the   reasons   pointed   out   by   the

learned   Single   Judge,   with   which   we   concur,   the   Appellant   has

been unable to show that its decision to revise the cut-off date after

receiving   the   application   of   the   Respondent   was   based   on   some

rational   criteria.   It   is   vulnerable   to   being   labelled   arbitrary   and

irrational.

14.   We   are   not   able   to   appreciate,   in   the   instant   case,   the

submission   of   the   learned   Attorney   General   that   the   mere

advancing of the cut-off date would not tantamount to changing the

rules   after   the   game   has   begun.   In   a   sense   it   does.   It   makes

ineligible   for   consideration   the   applicants   who   had   applied,   after

25th September 2007 but on or before 1st October 2007. Further this

ineligibility is announced after the applications have been made. In

other words, while at the time of making the application there was

no such ineligibility, it is introduced later and that too for a select

category of applicants. This cannot but be a change in the rule after

the game has begun. We do not think that the decisions relied upon

by the learned Attorney General contemplate such a situation. On

the other hand the decisions in Monarch Infrastructure (P) Ltd. and

K. Manjushree fully support the Respondent’s case for invalidation

of the Appellant’s impugned decision revise the cut-off date from

1st  October 2007 to 25th  September 2007, long after receiving the

application from the Respondent.”

5

47.     The   Union   of   India   challenged   the   judgment   of   the   Division   Bench   in

SLP(C)   No.33406/2009.     During   the   pendency   of   the   special   leave   petition,

some compromise appears to have been reached between the writ petitioner and

the authorities and, therefore, an additional affidavit was filed along with agreed

minutes of order before this Court on 12.3.2010.  In view of this development,

the   Court   disposed   of   the   appeal   arising   out   of   the   special   leave   petition   but

specifically  approved  the findings  recorded  by  the  High Court  with regard to

the cut-off date by making the following observations:

“Taking the additional affidavit and the suggestions made  by the

learned Attorney General, this appeal is disposed of as requiring no

further adjudication.

However, we make it clear that the findings recorded by the High

Court   with   regard   to   the   cut   off   date   is   not   interfered   with   and

disturbed by this Court in the present case.”

GROUNDS OF CHALLENGE

48.     The petitioners have questioned the grant of UAS Licences to the private

respondents   by   contending   that   the   procedure   adopted   by   the   DoT   was

arbitrary,   illegal   and   in   complete   violation   of   Article   14   of   the   Constitution.

They have relied upon the order passed by the learned Single Judge of the Delhi

High Court as also the judgment of the Division Bench, which was approved by

this Court and pleaded that once the Court has held that the cut-off date, i.e.,

5

25.9.2007   fixed   for   consideration   of   the   applications   was   arbitrary   and

unconstitutional,   the   entire   procedure   adopted   by   the   DoT   for   grant   of   UAS

Licences   with   the   approval   of   the   Minister   of   C&IT   is   liable   to   be   declared

illegal   and   quashed.   Another   plea   taken   by   the   petitioners   is   that   the   DoT

violated the recommendations made by TRAI that there should be no cap on the

number   of   Access   Service   Providers   in   any   service   area   and   this   was   in

complete   violation   of   Section   11(1)   of   the   1997   Act.     The   petitioners   have

relied   upon   the   report   of   the   Comptroller   and   Auditor   General   (CAG)   and

pleaded that the consideration of large number of ineligible applicants and grant

of LoIs and licenses to them is  ex facie  illegal and arbitrary.   The petitioners

have   also   pleaded   that   the   entire   method   adopted   by   the   DoT   for   grant   of

licence   is   flawed   because   the   recommendations   made   by   TRAI   for   grant   of

licences   at   the   entry   fee   determined   in   2001   was   wholly   arbitrary,

unconstitutional   and   contrary   to   public   interest.   Yet   another   plea   of   the

petitioners   is   that   while   deciding   to   grant   licences,   which   are   bundled   with

spectrum,   at   the   price   fixed   in   2001   the   DoT   did   not   bother   to   consult   the

Finance  Ministry  and,  thereby,  violated the  mandate   of  the  decision  taken by

the   Council   of   Ministers   in   2003.   The   petitioners   have   also   pleaded   that   the

principle   of   first-come-first-served   is   by   itself   violative   of   Article   14   of   the

Constitution and in any case distortion thereof by the Minister of C&IT and the

5

consequential grant of licences is liable to be annulled. Another ground taken

by the petitioners is that even though a number of licensees failed to fulfil the

roll out obligations and violated conditions of the licence, the Government  of

India did not take any action to cancel the licences.

COUNTER AFFIDAVITS OF THE RESPONDENTS

49.      Most of the respondents have filed separate but similar counter affidavits

in both the petitions. The main points raised by the respondents are:

(i)      The petitioners are not entitled to challenge the recommendations made

by TRAI and the policy decisions taken by the Government for grant of UAS

Licences.

(ii)     The   Court   cannot   review   and   nullify   the   recommendations   made   by

TRAI in the matter of allocation of spectrum in 800, 900 and 1800 MHz bands

at the rates fixed in 2001.

(iii)    The report prepared by the CAG cannot be relied upon for the purpose of

recording a finding that the procedure adopted for the grant of UAS Licences is

contrary   to   Article   14   of   the   Constitution.   The   private   respondents   have   also

claimed that the observations made by the CAG and the conclusions recorded

by him are seriously flawed and are based on totally unfounded assumptions.

6

(iv)     The UAS Licences were given strictly in accordance with the modified

first-come-first-served   policy.   That   the   respondents   were   able   to   fulfil   LoI

conditions because newspapers had already published stories about the possible

grant of licences in the month of January, 2008.

(v)      That   those   who   had   made   applications   in   2004   and   2006   cannot   be

clubbed   with   those   who   had   applied   in   the   month   of   August   and   September,

2007  because  in  terms  of  the  existing  UASL  guidelines they  were entitled  to

licences.

(vi)     That   private   respondents   have   made   huge   investments   for   creating

infrastructure   to   provide   services   in   different   parts   of   the   country   and   if   the

licences   granted   to   them   are   cancelled   at   this   stage,   public   interest   would   be

adversely affected.

(vii)    That   the   private   respondents   have   been   able   to   secure   foreign   direct

investment   of   thousands   of   crores   for   providing   better   telecom   services   in

remote areas of the country and any intervention by the Court would result in

depriving the people living in those areas of telecom services.

(viii) The   Government   and   TRAI   have   already   initiated   action   for   levy   of

penalty/liquidated damages for non-compliance of the roll out obligations and

violation of conditions of the license. That the licensees have not violated any

6

conditions of the license and that the notices issued by TRAI alleging the same

have already been challenged before TDSAT and in most cases, interim orders

have   been   passed.   That   the   remedy,   if   any,   available   to   the   petitioners   is   to

approach the TDSAT.

(ix)    Some   of   the   respondents   have   also   questioned   the   application   of   the

policy of first-come-first-served by asserting that even though they had applied

in 2004 and 2006, and licences had been granted to them before 25.9.2007, the

allocation of spectrum was delayed till 2008 and those who had applied in 2007

were placed above them because they could fulfil the conditions of LoI in terms

of the distorted version of the policy first-come-first-served.

50.     The petitioners have filed rejoinder affidavit and reiterated the assertions

made   in   the   main   petition   that   the   grant   of   UAS   Licences   is   fundamentally

flawed and is violative of the Constitutional principles. They have also placed

on   record   report   dated   31.1.2011   submitted   by   the   One   Man   Committee,

(hereinafter   referred   to   as   `One-Man   Committee   Report’),   comprising   Justice

Shivaraj   V.   Patil   (former   Judge   of   this   Court),   which   was   constituted   by   the

Government  of  India  vide  Office   Memorandum  dated  13.12.2010  to  examine

the   appropriateness   of   the   procedure   followed   by   the   DoT   in   issuance   of

licences and allocation of spectrum during the period 2001 to 2009. They have

6

also placed on record photostat copies of the notings recorded on the files of the

DoT.

ARGUMENTS

51.      Shri   Prashant   Bhushan,   learned   counsel   for   the   petitioners   in   Writ

Petition (C) No. 423 of 2010 and Dr. Subramanian Swamy, who is petitioner-

in-person in Writ Petition (C) No. 10 of 2011 made the following submissions:

(i)             The spectrum, which is a national asset, cannot be distributed by

adopting   the   policy   of   first-come-first-served   on   the   basis   of   the

application   received   by   the   DoT   without   any   advertisement   and

without holding auction.

(ii)            The grant of licences bundled with spectrum is  ex-facie  arbitrary

illegal and violative of Article 14 of the Constitution.

(iii)           The decision of the Minister of C&IT to pre-pone the cut-off date

from   1.10.2007   to   25.9.2007,   which   eliminated   large   number   of

applications, is violative of Article 14 of the Constitution and the

6

entire   exercise   undertaken   with   reference   to   this  cut-off   date   has

resulted in discrimination vis-`-vis other eligible applicants.

(iv)    Once   the   cut-off   date   fixed   by   the   Minister   of   C&IT   for

consideration of the applications received in the light of the earlier

press release fixing the last date as 1.10.2007 has been declared to

be   arbitrary   and   unconstitutional   by   the   High   Court,   the

consequential actions taken by the DoT on that basis are liable to

be annulled.

(v)     The first-come-first-served policy suffers from a fundamental flaw

inasmuch as there is no defined criterion for operating that policy.

There   is   no   provision   for   issue   of   advertisement   notifying

obligations for grant of licence and allocation of spectrum and any

person who makes an application becomes entitled to get licence

and spectrum.

(vi)    The first-come-first-served policy was manipulated by the Minister

of   C&IT   to   favour   some   of   the   applicants   including   those   who

were not even eligible. Shri Bhushan pointed out that, out of 122

applications, 85 were found to be ineligible and those who could

obtain   information   either   from   the   concerned   Minister   or   the

6

officers of DoT about the change of the criteria for implementing

the   first-come-first-served   policy   got   advantage   and   acquired

priority over those who had applied earlier.

(vii)     The meeting  of the Telecom Commission scheduled for 9.1.2008

was   deliberately   postponed   because   vide   letter   dated   22.11.2007

the   Finance   Secretary   had   strongly   objected   to   the   charging   of

entry fee fixed in 2001.

(viii)    Shri   Bhushan   pointed   out   that   the   recommendations   made   by

TRAI   on   28.8.2007   were   contrary   to   public   interest   as   well   as

financial interest of the nation because  at the time of entry of 4th

cellular operator the same TRAI had suggested multi-stage bidding

and even for allocation of 3G spectrum the methodology of auction

was suggested but, for no ostensible reason, the so-called theory of

level   playing   field   was   innovated   for   grant   of   UAS   Licences   in

2007 on the basis of the entry fee fixed in 2001. Learned counsel

emphasized   that   the   transfer   of   equity   by   three   of   the   licensees

immediately   after   issue   of   licences   for   gain   of   many   thousand

crores shows that if the policy of auction had been followed, the

nation would have been enriched by many thousand crores.

6

(ix)          Both, Shri Prashant Bhushan and Dr. Subramanian Swamy pointed

out that although the Prime Minister had suggested that a fair and

transparent method be adopted for grant of UAS Licences through

the   process   of   auction,   the   Minister   of   C&IT   casually   and

arbitrarily brushed aside the suggestion and granted licence to the

applicants for extraneous reasons.

(x)           Shri Prashant Bhushan also questioned the grant of the benefit of

the   policy   of   dual   technology   to   Tata   Teleservices   Ltd.   by

contending   that   this   was   a   result   of   manipulation   made   by   the

service   provider.   Dr.   Subramanian   Swamy   also   raised   a   concern

regarding   the   national   security   and   pointed   out   that   some   of   the

applicants   who   have   trans-border   connections   have   received

licences   and   they   may   ultimately   prove   to   be   dangerous   for   the

nation.

52.     Shri G.E. Vahanvati, learned Attorney General referred to NTP 1994 and

NTP 1999 and submitted that the policy decision taken by the Government of

India for private sector participation, which could bring in the funds required

for expansion of telecommunication  services in different parts of the country,

cannot be scrutinized by the Court. He submitted that in the last more than 20

6

years,   the   telecom   services   have   expanded   beyond   anybody’s   expectation

because of private sector participation and it cannot be said that granting UAS

Licences   by   charging   the   entry   fee   determined   at   2001   prices   is

unconstitutional.  Learned counsel referred to the history of development in the

field of telecommunications and the concept of spectrum, and submitted that the

policy decision taken by the DoT for migration of CDMA service providers was

neither illegal nor unconstitutional.

53.    Shri   Salve,   learned   senior   counsel   appearing   for   respondent   No.   9,

pointed out that Tata Teleservices had sent an application through fax for grant

of   GSM   for   the   existing   licences   which   were   issued   on   19.10.2007   and   no

exception can be taken to this because Reliance Telecom, which had applied for

GSM   on   6.2.2006,   was   given   the   benefit   of  migration   to   dual   technology   on

18.10.2007, i.e. even before the policy was made public. Learned senior counsel

argued   that   the   decision   not   to   auction   UAS   Licences   was   based   on   the

recommendations   of   TRAI   and   as   the   petitioners   have   not   challenged   the

recommendations for two years, the exercise undertaken by the DoT for grant

of UAS Licences in 2008 and subsequent allotment of spectrum should not be

nullified.   Shri   Salve   argued   that   the   question   of   institutional   integrity   is

involved in the matter and if the Court comes to the conclusion that auction is

the   only   method   for   grant   of   licences   and   allocation   of   spectrum   then

6

everything   should   be   annulled   right   from   2001.   Learned   senior   counsel

submitted that multi-stage bidding was done only for the purpose of entry of 4th

cellular operator but, thereafter, no auction was held. He submitted that if the

spectrum was allotted free of charge till 2007, there could be no justification for

auction of licences or spectrum in 2007.

54.     Shri   C.A.   Sundaram,   learned   counsel   appearing   for   respondent   Nos.   2

and 4, heavily relied on paragraphs 7.2, 7.4, 7.12, 7.29, 7.30, 7.37 and 7.39 of

TRAI’s   recommendations   dated   27.10.2003   and   argued   that   the

recommendations   made   in   2007   were   nothing   but   a   continuation   of   the   old

policy   and,   therefore,   the   petitioners   are   not   entitled   to   question   the   method

adopted   for   grant   of   UAS   Licences   pursuant   to   the   2007   recommendations.

Learned senior counsel submitted that the policy for grant of UAS Licences and

allocation of spectrum cannot be said to be  per se  arbitrary because the same

was   decided   after   great   deliberations   and   consideration   of   international

practices.   He   also   relied   upon   the   speech   made   by   the   Prime   Minister   on

2.11.2007   and   submitted   that   the   action   of   the   DoT   should   not   be   nullified

because   that   will   have   a   far-reaching   adverse   impact   on   the   availability   of

telecommunication services in the country.

6

55.    Shri Vikas Singh, learned senior counsel appearing for respondent no. 10,

argued that the recommendations made by TRAI in 2007, which were approved

by the Minister of C&IT are in national interest because the same would attract

investment  by foreign players and would benefit the people at large. Learned

counsel emphasised that his client has already invested Rs. 6,000 crores and it

would be totally unjust if the licence granted in 2008 is cancelled. Shri Vikas

Singh also submitted that after the grant of licences and allocation of spectrum

the people have been hugely benefited inasmuch as the telecom services have

become competitive with the international market and even cheaper than that.

56.    Shri C. S. Vaidyanathan, learned senior counsel appearing for respondent

No. 8, argued that the application made by his client was pending since June,

2006 and its priority was pushed down due to the application of the distorted

version of the first-come-first-served policy. Shri Vaidyanathan pointed out that

when   the   Minister   of  C&IT   announced   that  applications  will   not  be   received

after  1.10.2007, there  was a huge  rush  of applications and a large number  of

players who had no experience in the field of telecom made  applications and

got the licences.

57.    Dr.   Abhishek   Manu   Singhvi,   learned   senior   counsel   appearing   for

respondent nos. 11 and 12, argued that his clients had made applications much

6

prior   to   2007   but   they   were   unfairly   clubbed   with   those   who   had   applied   in

2007   and   in   this   manner   the   principle   of   equality   was   violated.   Dr.   Singhvi

submitted that if the applications made prior to 2007 had been processed as per

the   existing   policy,  respondent   Nos.   11   and  12   would  have   received   licences

bundled with spectrum without competition/objection from anyone.

58.     Shri Dayan Krishnan, learned counsel for respondent No. 6, adopted the

arguments of other learned counsel and submitted that the licences granted in

2007 should not be quashed at this belated stage.

59.     Shri   Rakesh   Dwivedi,   learned   senior   counsel   for   TRAI,   referred   to

TRAI’s written submissions to justify why it had not recommended auction of

licences.   Learned  senior  counsel  extensively  referred to  the recommendations

made   by   TRAI   in   2007   and   submitted   that   even   though   it   was   specifically

suggested that the DoT should take a comprehensive decision on the allocation

of spectrum, no effort was made in that direction and the licences were granted

without determining availability of spectrum. Shri Dwivedi also submitted that

TRAI   has   already   initiated   action   for   cancellation   of   licences   of   those

respondents who have violated the terms of licence and/or failed to fulfil roll-

out obligations.

7

60.     Learned   counsel   for   both   the   sides   relied   upon   a   large   number   of

decisions. Shri Prashant Bhushan and Dr. Subramanian Swamy relied upon the

following judgements: K. Manjusree v. State of Andhra Pradesh (2008) 3 SCC

512, Monarch  Infrastructure (P) Ltd. v. Commissioner,  Ulhasnagar Municipal

Corpn. (2000) 5 SCC 287,   Home Communication Ltd. and Anr. v. Union of

India   and   Ors.   52   (1993)   DLT   168,   Jamshed   Hormusji   Wadia   v.   Board   of

Trustees,   Port   of   Mumbai   (2004)   3   SCC   214,   Chaitanya   Kumar   v.   State   of

Karnataka   (1986)   2   SCC   594,   Shivsagar   Tiwari   v.   Union   of   India,   (1996)   6

SCC   558,   Common   Cause,   A   Registered   Society   (Petrol   pumps   matter)   v.

Union of India (1996) 6 SCC 530 and Nagar Nigam v. Al Faheem Meat Exports

(P)   Ltd.   (2006)   13   SCC   382.   Learned   Attorney   General   and   learned   counsel

appearing   for   the   private   respondents   relied   upon   Delhi   Science   Forum   v.

Union of India (1996) 2 SCC 405, BALCO Employees’ Union (Regd.) v. Union

of India (2002) 2 SCC 333, Villianur Iyarkkai Padukappu Maiyam v. Union of

India   (2009)   7   SCC   561,   Ministry   of   Labour   and   Rehabilitation   v.   Tiffin’s

Barytes   Asbestos   &   Paints   Ltd.   (1985)   3   SCC   594,   United   India   Fire   and

General Insurance Co. Ltd. v. K.S. Vishwanathan (1985) 3 SCC 686, State of

T.N. v. M.N. Sundararajan (1980) 4 SCC 592, Sunil Pannalal Banthia v. City &

Industrial Development  Corporation of Maharashtra Ltd. (2007) 10 SCC 674,

Bombay Dyeing & Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group

7

(2006)   3  SCC   434,  Prem  Chand   Somchand   Shah  v.   Union  of  India   (1991)  2

SCC 48 and Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. (1983) 1 SCC

147.

61.     Before dealing with the arguments of the learned counsel for the parties

and adverting to some  of the precedents, we consider it necessary to mention

that during the course of hearing, Shri Prashant Bhushan and Dr. Subramanian

Swamy  heavily relied upon the CAG report as also the One Man Committee

Report.   Learned   Attorney   General   and   learned   senior   counsel   appearing   for

some   of   the   private   respondents   also   referred   to   the   One   Man   Committee

Report. However, as the CAG report is being examined by the Public Accounts

Committee   and   Joint   Parliamentary   Committee   of   Parliament   we   do   not

consider   it   proper   to   refer   to   the   findings   and   conclusions   contained   therein.

Likewise, we do not consider it necessary to advert to the observations made,

and the suggestions given by the One Man Committee because the Government

of India  has  already  taken  a  decision  to segregate  spectrum from  licence  and

allot the same  by auction.   This is evident from the following extracts of the

press statement dated 29.1.2011 issued by the present Minister of C&IT:

“In future, the spectrum will not be bundled with licence. The licence

to   be   issued   to   telecom   operators   will   be   in   the   nature   of   `unified

licence’   and   the   licence   holder   will   be   free   to   offer   any   of   the

multifarious telecom services. In the event the licence holder would

7

like to offer wireless services, it will have to obtain spectrum through

a   market   driven   process.   In   future,   there   will   be   no   concept   of

contracted spectrum and, therefore, no concept of initial or start-up

spectrum.   Spectrum   will   be   made   available   only   through   market

driven process.

While moving towards a new policy dispensation, it is necessary to

ensure   a   level   playing   field   between   all   players.   Hence   going

forward,   any   new   policy   of   pricing   would   need   to   be   applied   to

equally   to   all   players.   Additionally,   assignment   of   balance   of

contracted   spectrum   may   need   to   be   ensured   for   the   existing

licensees who have so far been allocated only the start up spectrum

of   4.4   MHz.   It   may   be   recalled   that   showcause   notices   have   been

issued   to   certain   licensees   for   cancellation.   Only   in   respect   of   the

licences that will be found valid after the process is completed, the

additional 1.8 MHz will be assigned on their becoming eligible, but

the spectrum will be assigned to them at a price determined under the

new policy.

We need to seriously consider the adoption of an auction process for

allocation and pricing of spectrum beyond 6.2 MHz while ensuring

that there is adequate competition in the auction process.

TRAI had made recommendations in May 2010 and indicated that it

would   apprise   the   Government   of   the   findings   of   a   study   on   the

question   of   pricing   of   2G   spectrum   in   future.   This   is   expected

shortly. We would examine their recommendations speedily as soon

as  they  are  received,  keeping  the  perspectives   that   I have  outlined,

while finalizing our new policy. I am confident that we will be able

to design a policy that ensures that existing licence holders get the

spectrum   they   need   and   are   entitled   to,   while   simultaneously,

ensuring that the Government also receives revenues commensurate

with the current market value of spectrum.”

62.    We   shall   now   consider   the   questions   enumerated   in   the   opening

paragraph of the judgment.

63. Question No.1:

7

At   the   outset,   we   consider   it   proper   to   observe   that   even   though  there   is   no

universally   accepted   definition   of   natural   resources,   they  are   generally

understood   as   elements   having   intrinsic   utility   to   mankind.   They   may   be

renewable or non renewable. They are thought of as the individual elements of

the   natural   environment   that   provide   economic   and   social   services   to   human

society   and   are   considered   valuable   in   their   relatively   unmodified,   natural,

form.  A natural resource’s value rests in the amount of the material available

and the demand for it. The latter is determined by its usefulness to production.

Natural   resources   belong   to   the   people   but   the   State   legally   owns   them   on

behalf of its people and from that point of view natural resources are considered

as   national   assets,   more   so   because   the   State   benefits   immensely   from   their

value.     The   State   is   empowered   to   distribute   natural   resources.     However,   as

they   constitute   public   property/national   asset,   while   distributing   natural

resources, 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.  Like any other State action, constitutionalism must be reflected

at every stage of the distribution of natural resources.    In Article 39(b) of the

Constitution it has been provided that the ownership and control of the material

resources of the community should be so distributed so as to best sub-serve the

common good, but no comprehensive legislation has been enacted to generally

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define   natural   resources   and   a   framework   for   their   protection.   Of   course,

environment   laws   enacted   by   Parliament   and   State   legislatures   deal   with

specific natural resources, i.e., Forest, Air, Water, Costal Zones, etc.

64.    The   ownership   regime   relating   to   natural   resources   can   also   be

ascertained   from   international   conventions   and   customary   international   law,

common  law and national constitutions. In international law, it rests upon the

concept   of   sovereignty   and   seeks   to   respect   the   principle   of   permanent

sovereignty (of peoples and nations) over (their) natural resources as asserted in

the 17th Session of the United Nations General Assemble and then affirmed as a

customary international norm by the International Court of Justice in the case

opposing   the   Democratic   Republic   of   Congo   to   Uganda.   Common   Law

recognizes States as having the authority to protect natural resources insofar as

the resources are within the interests of the general public. The State is deemed

to have a proprietary interest in natural resources and must act as guardian and

trustee   in   relation   to   the   same.   Constitutions   across   the   world   focus   on

establishing natural resources as owned by, and for the benefit of, the country.

In most instances where constitutions specifically address ownership of natural

resources,   the   Sovereign   State,   or,   as   it   is   more   commonly   expressed,   `the

people’, is designated as the owner of the natural resource.

7

65.    Spectrum   has   been   internationally   accepted   as   a   scarce,   finite   and

renewable   natural   resource   which   is   susceptible   to   degradation   in   case   of

inefficient utilisation.   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 States as

per international norms.

66.    In India, the Courts have given an expansive interpretation to the concept

of natural  resources  and have  from  time  to  time  issued   directions,  by  relying

upon   the   provisions   contained   in   Articles   38,   39,   48,   48A   and   51A(g),   for

protection   and   proper   allocation/distribution   of   natural   resources   and   have

repeatedly insisted on compliance of the constitutional principles in the process

of   distribution,   transfer   and   alienation   to   private   persons.     The   doctrine   of

public trust, which was evolved in Illinois Central Railroad Co. v. People of the

State of Illinois 146 U.S. 387 (1892), has been held by this Court to be a part of

the Indian jurisprudence  in M.C. Mehta v. Kamal Nath (1997) 1 SCC 388 and

has   been   applied   in   Jamshed   Hormusji   Wadia   v.   Board   of   Trustee,   Port   of

Mumbai   (2002)   3   SCC   214,   Intellectuals   Forum,   Tirupathi   v.   State   of   A.P.

(2006) 3 SCC 549 and Fomento Resorts and Hotels Limited v. Minguel Martins

(2009) 3 SCC 571.  In Jamshed Hormusji Wadia’s case, this Court held that the

State’s actions and the actions of its agencies/instrumentalities must be for the

7

public   good,   achieving   the   objects   for   which   they   exist   and   should   not   be

arbitrary   or   capricious.   In   the   field   of   contracts,   the   State   and   its

instrumentalities should design their activities in a manner which would ensure

competition and not discrimination.   They can augment their resources but the

object should be to serve the public cause and to do public good by resorting to

fair and reasonable methods.  In  Fomento Resorts and Hotels Limited case, the

Court   referred   to   the   article   of   Prof.   Joseph   L.   Sax   and   made   the   following

observations:

“53. The public trust doctrine enjoins upon the Government to protect

the   resources   for   the   enjoyment   of   the   general   public   rather   than   to

permit their use for private ownership or commercial purposes. This

doctrine puts an implicit embargo on the right of the State to transfer

public   properties   to   private   party   if   such   transfer   affects   public

interest, mandates affirmative  State action for  effective  management

of natural resources and empowers the citizens to question ineffective

management thereof.

54. The heart of the public trust doctrine is that it imposes limits and

obligations   upon   government   agencies   and   their   administrators   on

behalf   of   all   the   people   and   especially   future   generations.   For

example,   renewable   and   non-renewable   resources,   associated   uses,

ecological values or objects in which the public has a special interest

(i.e. public lands, waters, etc.) are held subject to the duty of the State

not to impair such resources, uses or values, even if private interests

are   involved.   The   same   obligations   apply   to   managers   of   forests,

monuments,   parks,   the   public   domain   and   other   public   assets.

Professor   Joseph   L.   Sax   in   his   classic   article,   “The   Public   Trust

Doctrine   in  Natural  Resources   Law:   Effective   Judicial   Intervention”

(1970), indicates that the public trust doctrine, of all concepts known

to   law,   constitutes   the   best   practical   and   philosophical   premise   and

7

legal tool for protecting public rights and for protecting and managing

resources, ecological values or objects held in trust.

55.   The   public   trust   doctrine   is   a   tool   for   exerting   long-established

public   rights   over   short-term   public   rights   and   private   gain.   Today

every person exercising his or her right to use the air, water, or land

and associated natural ecosystems has the obligation to secure for the

rest   of   us   the   right   to   live   or   otherwise   use   that   same   resource   or

property   for   the   long-term   and   enjoyment   by   future   generations.   To

say it another way, a landowner or lessee and a water right holder has

an  obligation  to  use   such   resources  in  a  manner  as  not  to  impair  or

diminish the people’s rights and the people’s long-term interest in that

property   or   resource,   including   down   slope   lands,   waters   and

resources.”

67.    In Secretary, Ministry of Information & Broadcasting, Govt. of India v.

Cricket   Assn.   of   Bengal,   (1995)   2   SCC   161,   the   Court   was   dealing   with   the

right of organizers  of  an  event, such   as  a sport  tournament,  to its live  audio-

visual   broadcast,   universally,   through   an   agency   of   their   choice,   national   or

foreign. In paragraph 78, the Court described the airwaves/frequencies as public

property in the following words:

“There   is   no   doubt   that   since   the   airwaves/frequencies   are   a   public

property and are also limited, they have to be used in the best interest

of   the   society   and   this  can   be   done   either   by   a   central   authority   by

establishing   its  own broadcasting  network or regulating  the grant of

licences to other agencies, including the private agencies.”

68.    In   Reliance   Natural   Resources   Limited   v.   Reliance   Industries   Limited,

(2010) 7 SCC 1, P. Sathasivam J., with whom Balakrishnan, C.J., agreed, made

the following observations:

7

“It   must   be   noted   that   the   constitutional   mandate   is   that   the   natural

resources belong to the people of this country. The nature of the word

“vest” must be seen in the context of the public trust doctrine (PTD).

Even   though   this   doctrine   has   been   applied   in   cases   dealing   with

environmental jurisprudence, it has its broader application.”

Learned Judge then referred to the judgments, In re Special Reference No. 1 of

2001  (2004) 4  SCC  489,  M.C.  Mehta  v.  Kamal   Nath (1997)  1 SCC   388 and

observed:

“This   doctrine   is   part   of   Indian   law   and   finds   application   in   the

present case as well. It is thus the duty of the Government to provide

complete protection to the natural resources as a trustee of the people

at large.”

The Court also held that natural resources are vested with the Government as a

matter of trust in the name of the people of India, thus it is the solemn duty of

the State to protect the national interest and natural resources must always be

used in the interests of the country and not private interests.

69.     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-`-vis   its   people   and   demands   that   the   people   be

granted equitable access to natural resources and/or its products and that they

7

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-`-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.

70.    In Akhil Bharatiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29,

this   Court   examined   the   legality   of   the   action   taken   by   the   Government   of

Madhya Pradesh to allot 20 acres land to an institute established in the name of

Kushabhau Thakre on the basis of an application made by the Trust.  One of the

grounds on which the appellant challenged the allotment  of land was that the

State   Government   had   not   adopted   any   rational   method   consistent   with   the

doctrine   of   equality.     The   High   Court   negatived   the   appellant’s   challenge.

Before this Court,   learned senior counsel appearing for   the State relied upon

the judgments in Ugar Sugar Works Ltd. v. Delhi Administration (2001) 3 SCC

635,  State of U.P.  v. Choudhary  Rambeer   Singh (2008)  5 SCC  550,  State of

Orissa   v.   Gopinath   Dash   (2005)   13   SCC   495   and   Meerut   Development

Authority v. Association of Management Studies (2009) 6 SCC 171 and argued

that the Court cannot exercise the power of judicial review to nullify the policy

framed   by   the   State   Government   to   allot   Nazul   land   without   advertisement.

8

This   Court   rejected   the   argument,   referred   to   the   judgments   in   Ramanna

Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC 489,

S.G.   Jaisinghani   v.   Union   of   India   AIR   1967   SC   1427,   Kasturilal   Lakshmi

Reddy v. State of J & K (1980) 4 SCC 1, Common  Cause  v. Union of India

(1996) 6 SCC 530, Shrilekha Vidyarthy v. State of U.P. (1991) 1 SCC 212, LIC

v.   Consumer   Education   and   Research   Centre   (1995)   5   SCC   482,   New   India

Public School v. HUDA (1996) 5 SCC 510 and held:

“What   needs   to   be   emphasised   is   that   the   State   and/or   its

agencies/instrumentalities   cannot   give   largesse   to   any   person

according   to   the   sweet   will   and   whims   of   the   political   entities

and/or   officers   of   the   State.   Every   action/decision   of   the   State

and/or   its   agencies/instrumentalities   to   give   largesse   or   confer

benefit   must  be  founded  on  a sound,  transparent,  discernible  and

well-defined policy, which shall be made known to the public by

publication in the Official Gazette and other recognised modes of

publicity   and   such   policy   must   be   implemented/executed   by

adopting   a   non-discriminatory   and   non-arbitrary   method

irrespective   of   the   class   or   category   of   persons   proposed   to   be

benefited by the policy. The distribution of largesse like allotment

of   land,   grant   of   quota,   permit   licence,   etc.   by   the   State   and   its

agencies/instrumentalities   should   always   be   done   in   a   fair   and

equitable manner and the element of favouritism or nepotism shall

not influence the exercise of discretion, if any, conferred upon the

particular functionary or officer of the State.”

71.            In Sachidanand Pandey v. State of West Bengal (1987) 2 SCC 295,

the   Court   referred   to   some   of   the   precedents   and   laid   down   the   following

propositions:

8

“State-owned or public-owned property is not to be dealt with at

the   absolute   discretion   of   the   executive.   Certain   precepts   and

principles   have   to   be   observed.   Public   interest   is   the   paramount

consideration. One of the methods of securing the public interest,

when it is considered necessary to dispose of a property, is to sell

the property by public auction or by inviting tenders. Though that

is   the   ordinary   rule,   it   is   not   an   invariable   rule.   There   may   be

situations   where   there   are   compelling   reasons   necessitating

departure from the rule but then the reasons for the departure must

be   rational   and   should   not   be   suggestive   of   discrimination.

Appearance   of   public   justice   is   as   important   as   doing   justice.

Nothing   should   be   done   which   gives   an   appearance   of   bias,

jobbery or nepotism.”

72.    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.

73.    Question No.2:

Although,   while   making   recommendations   on   28.8.2007,   TRAI   itself   had

recognised that spectrum was a scarce commodity, it made recommendation for

allocation of 2G spectrum on the basis of 2001 price by invoking the theory of

level   playing   field.     Paragraph   2.40   of  the   recommendations   dated   28.8.2007

shows   that   as   per   TRAI’s   own   assessment   the   existing   system   of   spectrum

allocation   criteria,   pricing   methodology   and   the   management   system   suffered

from number of deficiencies and there was an urgent need to address the issues

8

linked   with   spectrum   efficiency   and   its   management   and   yet   it   decided   to

recommend the allocation of spectrum at the price determined in 2001.  All this

was done in the name of growth, affordability, penetration of wireless services

in   semi   urban   and   rural   areas,   etc.     Unfortunately,   while   doing   so,   TRAI

completely overlooked that one of the main objectives of NTP 1999 was that

spectrum should be utilised efficiently, economically, rationally and optimally

and there should be a transparent process of allocation of frequency spectrum as

also the fact that in terms of the decision taken by the Council of Ministers in

2003 to approve the recommendations of the Group of Ministers the DoT and

Ministry of Finance were required to discuss and finalise the spectrum pricing

formula.   To say the least, the entire approach adopted by TRAI was lopsided

and   contrary   to   the   decision   taken   by   the   Council   of   Ministers   and   its

recommendations became a handle for the then the Minister of C&IT and the

officers   of the  DoT  who  virtually   gifted  away   the   important  national  asset  at

throw   away   prices   by   willfully   ignoring   the   concerns   raised   from   various

quarters including the Prime Minister, Ministry of Finance and also some of its

own  officers.     This  becomes   clear  from  the  fact   that  soon  after   obtaining  the

licences, some of the beneficiaries off-loaded their stakes to others, in the name

of   transfer   of   equity   or   infusion   of   fresh   capital   by   foreign   companies,   and

thereby made huge profits.  We have no doubt that if the method of auction had

8

been adopted for grant of licence which could be the only rational transparent

method for distribution of national wealth, the nation would have been enriched

by many thousand crores.

74.     While   it   cannot   be   denied   that   TRAI   is   an   expert   body   assigned   with

important   functions   under   the   1997   Act,   it   cannot   make   recommendations

overlooking   the   basic   constitutional   postulates   and   established   principles   and

make   recommendations   which   would   deny   people   from   participating   in   the

distribution   of   national   wealth   and   benefit   a   handful   of   persons.     Therefore,

even though the scope of judicial review in such matters is extremely limited, as

pointed   out   in   Delhi   Science   Forum   v.   Union   of   India   (supra)   and   a   large

number   of   other   judgments   relied   upon   by   the   learned   counsel   of   the

respondents,  keeping in view the facts which have been brought to the notice of

the Court that the mechanism evolved by TRAI for allocation of spectrum and

the methodology adopted by the then Minister of C&IT  and the officers of DoT

for grant of UAS Licences may have caused huge loss to the nation, we have no

hesitation   to   record   a  finding   that   the  recommendations   made   by   TRAI   were

flawed   in   many   respects   and   implementation   thereof   by   the   DoT   resulted   in

gross   violation   of   the   objective   of   NPT   1999   and   the   decision   taken   by   the

Council of Ministers on 31.10.2003.

8

75.    We   may   also   mention   that   even   though   in   its   recommendations   dated

28.8.2007, TRAI had not specifically recommended  that entry fee be fixed at

2001   rates,   but   paragraph   2.73   and   other   related   paragraphs   of   its

recommendations state that it has decided not to recommend the standard option

for pricing of spectrum in 2G bands keeping in view the level playing field for

the new entrants. It is impossible to approve the decision taken by the DoT to

act upon those recommendations.  We also consider it necessary to observe that

in today’s dynamism and unprecedented growth of telecom sector, the entry fee

determined   in   2001   ought   to   have   been   treated   by   the   TRAI   as   wholly

unrealistic for grant of licence along with start up spectrum.   In our view, the

recommendations made by TRAI in this regard were contrary to the decision of

the Council of Ministers that the DoT shall discuss the issue of spectrum pricing

with the Ministry of Finance along with the issue of incentive for efficient use

of   spectrum   as   well   as   disincentive   for   sub-optimal   usages.     Being   an   expert

body, it was incumbent upon the TRAI to make suitable recommendations even

for  the   2G  bands especially  in  light  of the   deficiencies  of  the  present  system

which it had itself pointed out. We do not find merit in the reasoning of TRAI

that the consideration of maintaining a level playing field prevented a realistic

reassessment of the entry fee.

8

76.     Question Nos.3 and 4:

There is a fundamental flaw in the first-come-first-served policy inasmuch as it

involves an element of pure chance or accident.  In matters involving award of

contracts or grant of licence or permission to use public property, the invocation

of   first-come-first-served   policy   has   inherently   dangerous   implications.     Any

person who has access to the power corridor at the highest or the lowest level

may be able to obtain information from the Government files or the files of the

agency/instrumentality of the State that a particular public property or asset is

likely   to   be   disposed   of   or   a   contract   is  likely   to   be   awarded   or   a   licence   or

permission is likely to be given, he would immediately make an application and

would become entitled to stand first in the queue at the cost of all others who

may   have   a   better   claim.     This   Court   has   repeatedly   held   that   wherever   a

contract is to be awarded or a licence is to be given, the public authority must

adopt   a   transparent   and   fair  method   for   making   selections   so   that  all   eligible

persons get a fair opportunity of competition. To put it differently, the State and

its agencies/instrumentalities must always adopt a rational method for disposal

of public property and no attempt should be made to scuttle the claim of worthy

applicants.     When   it   comes   to   alienation   of   scarce   natural   resources   like

spectrum etc., it is the burden of the State to ensure that a non-discriminatory

method   is   adopted   for   distribution   and   alienation,   which   would   necessarily

8

result in protection of national/public interest.   In our view, a duly publicised

auction   conducted   fairly   and   impartially   is   perhaps   the   best   method   for

discharging this burden and the methods like first-come-first-served when used

for alienation of natural resources/public property are likely to be misused by

unscrupulous people who are only interested in garnering maximum  financial

benefit   and   have   no   respect   for   the   constitutional   ethos  and   values.     In   other

words, while transferring or alienating the natural resources, the State is duty

bound   to   adopt   the   method   of   auction   by   giving   wide   publicity   so   that   all

eligible persons can participate in the process.

77.     The exercise undertaken by the officers of the DoT between September,

2007 and March 2008, under the leadership of the then Minister of C&IT was

wholly   arbitrary,   capricious   and   contrary   to   public   interest   apart   from   being

violative of the doctrine of equality.   The material produced before the Court

shows that the Minister of C&IT wanted to favour some companies at the cost

of the Public Exchequer and for this purpose, he took the following steps:

(i)     Soon after his appointment as Minister of C&IT, he directed that

all   the   applications   received   for   grant   of   UAS   Licence   should   be   kept

pending till the receipt of TRAI recommendations.

(ii)    The   recommendations   made   by   TRAI   on   28.8.2007   were   not

placed before the full Telecom Commission which, among others, would

8

have included the Finance Secretary.   The notice of the meeting  of the

Telecom   Commission   was   not   given   to   any   of   the   non   permanent

members   despite  the  fact  that  the  recommendations   made   by   TRAI  for

allocation   of   spectrum   in   2G   bands   had   serious   financial   implications.

This has been established  from the  pleadings and the  records produced

before this Court that after issue of licences, 3 applicants transferred their

equities   for   a   total   sum   of   Rs.24,493   crores   in   favour   of   foreign

companies.   Therefore, it was absolutely necessary for the DoT to take

the   opinion   of   the   Finance   Ministry   as   per   the   requirement   of   the

Government of India (Transaction of Business) Rules, 1961.

(iii)    The officers of the DoT who attended the meeting of the Telecom

Commission   held   on   10.10.2007   hardly   had   any   choice   but   to   approve

the   recommendations   made   by   TRAI.     If   they   had   not   done   so,   they

would have incurred the wrath of Minister of C&IT.

(iv)     In   view   of   the   approval   by   the   Council   of   Ministers   of   the

recommendations made by the Group of Ministers in 2003, the DoT had

to   discuss   the   issue   of   spectrum   pricing   with   the   Ministry   of   Finance.

Therefore,  the  DoT  was under  an obligation  to involve  the Ministry  of

Finance before any decision could be taken in the context of paragraphs

2.78 and 2.79 of TRAI’s recommendations.  However, as the Minister of

8

C&IT was very much conscious of the fact that the Secretary, Finance,

had objected to the allocation of 2G spectrum at the rates fixed in 2001,

he   did   not   consult   the   Finance   Minister   or   the   officers   of   the   Finance

Ministry.

(v)     The Minister of C&IT  brushed aside the suggestion made  by the

Minister of Law and Justice for placing the matter before the Empowered

Group of Ministers.  Not only this, within few hours of the receipt of the

suggestion made by the Prime Minister in his letter dated 2.11.2007 that

keeping   in  view   the  inadequacy  of  spectrum,  transparency  and   fairness

should be maintained in the matter of allocation thereof, the Minister of

C&IT rejected the same by saying that it will be unfair, discriminatory,

arbitrary   and   capricious   to   auction   the   spectrum   to   new   applicants

because it will not give them level playing field.

(vi)    The   Minister   C&IT   introduced   cut   off   date   as   25.9.2007   for

consideration of the applications received for grant of licence despite the

fact that only one day prior to this, press release was issued by the DoT

fixing   1.10.2007   as   the   last   date   for   receipt   of   the   applications.     This

arbitrary action of the Minister of C&IT though appears to be innocuous,

actually benefitted some  of the real estate companies who did not have

any   experience   in   dealing   with   telecom   services   and   who   had   made

8

applications only on 24.9.2007, i.e., one day before the cut off date fixed

by the Minister of C&IT on his own.

(vii)    The cut off date, i.e. 25.9.2007 decided by the Minister of C&IT

on 2.11.2007 was not made public till 10.1.2008 and the first-come-first-

served policy, which was being followed since 2003 was changed by him

on 7.1.2008 and was incorporated in press release dated 10.1.2008.  This

enabled some of the applicants, who had access either to the Minister or

the   officers   of   the   DoT   to   get   the   demand   drafts,   bank   guarantee,   etc.

prepared in advance for compliance of conditions of the LoIs, which was

the   basis   for   determination   of   seniority   for   grant   of   licences   and

allocation of spectrum.

(viii) The   meeting   of   the   full   Telecom   Commission,   which   was

scheduled to be held on 9.1.2008 to consider issues relating to grant of

licences and pricing of spectrum was deliberately postponed on 7.1.2008

so   that   the   Secretary,   Finance   and   Secretaries   of   three   other   important

Departments   may   not   be   able   to   raise   objections   against   the   procedure

devised   by   the   DoT   for  grant   of  licence   and  allocation   of  spectrum  by

applying the principle of level playing field.

(ix)     The   manner   in   which   the   exercise   for   grant   of   LoIs   to   the

applicants   was   conducted   on   10.1.2008   leaves   no   room   for   doubt   that

9

every thing was stage managed to favour those who were able to know in

advance the change in the implementation of the first-come-first served

policy.   As a result of this, some of the companies which had submitted

applications in 2004 or 2006 were pushed down in the priority and those

who   had   applied   between   August   and   September   2007   succeeded   in

getting   higher   seniority   entitling   them   to   allocation   of   spectrum   on

priority basis.

78.       The   argument   of   Shri   Harish   Salve,   learned   senior   counsel,   that   if   the

Court finds that the exercise undertaken for grant of UAS Licences has resulted

in   violation   of   the   institutional   integrity,   then   all   the   licences   granted   2001

onwards should  be  cancelled  does not deserve   acceptance  because   those  who

have got licence between 2001 and 24.9.2007 are not parties to these petitions

and legality of the licences granted to them has not been questioned before this

Court.

79.       In   majority   of   judgments   relied   upon   by   learned   Attorney   General   and

learned counsel for the respondents, it has been held that the power of judicial

review should be exercised with great care and circumspection and the Court

should not ordinarily interfere with the policy decisions of the Government in

financial   matters.   There   cannot   be   any   quarrel   with   the   proposition   that   the

Court   cannot   substitute   its   opinion   for   the   one   formed   by   the   experts   in   the

9

particular field and due respect should be given to the wisdom of those who are

entrusted with the task of framing the policies.   We are also conscious of the

fact   that   the   Court   should   not   interfere   with   the   fiscal   policies   of   the   State.

However, when it is clearly demonstrated that the policy framed by the State or

its   agency/instrumentality   and/or   its   implementation   is   contrary   to   public

interest or is violative of the constitutional principles, it is the duty of the Court

to exercise its jurisdiction in larger public interest and reject the stock plea of

the State that the scope of judicial review should not be exceeded beyond the

recognised parameters.  When matters like these are brought before the judicial

constituent of the State by public spirited citizens, it becomes the duty of the

Court   to   exercise   its   power   in   larger   public   interest   and   ensure   that   the

institutional   integrity   is   not   compromised   by   those   in   whom   the   people   have

reposed trust and who have taken oath to discharge duties in accordance with

the   Constitution   and   the   law   without   fear   or   favour,   affection   or   ill   will   and

who, as any other citizen, enjoy fundamental rights and, at the same time, are

bound   to   perform   the   duties   enumerated   in   Article   51A.   Reference   in   this

connection   can   usefully   be   made   to   the   judgment   of   the   three   Judge   Bench

headed by Chief Justice Kapadia in Centre for P.I.L. v. Union of India (2011) 4

SCC 1.

9

80.      Before concluding, we consider it imperative to observe that but for the

vigilance   of   some   enlightened   citizens   who   held   important   constitutional   and

other   positions   and   discharged   their   duties   in   larger   public   interest   and   Non

Governmental   Organisations   who   have   been   constantly   fighting   for   clean

governance   and   accountability   of   the   constitutional   institutions,   unsuspecting

citizens   and   the   Nation   would   never   have   known   how   the   scarce   natural

resource spared by Army has been grabbed by those who enjoy money power

and who have been able to manipulate the system.

81.      In the result, the writ petitions are allowed in the following terms:

(i)      The   licences   granted   to   the   private   respondents   on   or   after   10.1.2008

pursuant to two press releases issued on 10.1.2008 and subsequent allocation of

spectrum to the licensees are declared illegal and are quashed.

(ii)     The above direction shall become operative after four months.

(iii)    Keeping in view the decision taken by the Central Government in 2011,

TRAI shall make fresh recommendations for grant of licence and allocation of

spectrum in 2G band in 22 Service Areas by auction, as was done for allocation

of spectrum in 3G band.

9

(iv)     The   Central   Government   shall   consider   the   recommendations   of   TRAI

and   take   appropriate   decision   within   next   one   month   and   fresh   licences   be

granted by auction.

(v)      Respondent Nos.2, 3 and 9 who have been benefited at the cost of Public

Exchequer by a wholly arbitrary and unconstitutional action taken by the DoT

for grant of UAS Licences and allocation of spectrum in 2G band and who off-

loaded their stakes for many thousand crores in the name of fresh infusion of

equity or transfer of equity shall pay cost of Rs.5 crores each.  Respondent Nos.

4,  6,  7  and  10  shall   pay  cost   of Rs.50  lakhs  each  because  they   too  had   been

benefited  by the wholly arbitrary and unconstitutional exercise undertaken by

the DoT for grant of UAS Licences and allocation of spectrum in 2G band.  We

have not imposed cost on the respondents who had submitted their applications

in 2004 and 2006 and whose applications were kept pending till 2007.

(vi)     Within four months, 50% of the cost shall be deposited with the Supreme

Court Legal Services Committee for being used for providing legal aid to poor

and indigent litigants.  The remaining 50% cost shall be deposited in the funds

created for Resettlement and Welfare Schemes of the Ministry of Defence.

(vii)    However,   it   is   made   clear   that   the   observations   made   in   this  judgment

shall   not,   in   any   manner,   affect   the   pending   investigation   by   the   CBI,

Directorate of Enforcement and others agencies or cause prejudice to those who

9

are   facing   prosecution   in   the   cases   registered   by   the   CBI   or   who   may   face

prosecution   on  the   basis  of chargesheet(s)   which  may  be  filed   by   the  CBI  in

future and the Special Judge, CBI shall decide the matter uninfluenced by this

judgment.   We   also   make   it   clear   that   this   judgment   shall   not   prejudice   any

person in the action which may be taken by other investigating agencies under

Income Tax Act, 1961, Prevention of Money Laundering Act, 2002 and other

similar statutes.

……………………………….J.

(G.S. SINGHVI)

……………………………….J.

(ASOK KUMAR GANGULY)

New Delhi;

February 02, 2012.

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