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

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

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?

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

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.

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

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

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.

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

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

(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

(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;

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

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.

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.

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.”

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;

(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;

(ix) ensure effective compliance of universal service

obligations;

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

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

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;

(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

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

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.

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

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:

“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;

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) 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.

2.4.2 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

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:

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

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

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.

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

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.

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

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

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

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

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

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

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

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

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.

(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

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

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

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.”

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

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)

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

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

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.

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:

“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

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)

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.

(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

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

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.”

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.,

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

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.

(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

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

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

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

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.

(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

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

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.

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

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.

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

(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

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:

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

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.

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

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

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:

“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

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.

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:

“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

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

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.

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.

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

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

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

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

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

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

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.

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.

(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

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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