TMI Blog2015 (5) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... y the LICENSEES are primary recommendations, are not final. Even assuming for the sake of arguments that the recommendations of TRAI are final, the Government of India is not bound by the same in view of the first proviso to Section 11(1) of TRAI Act. The obligation of the Government of India arising under the second proviso thereof to seek opinion of TRAI is only to ensure that there is a rational process of decision-making where the factors relevant are examined by an expert body before the Government takes a final decision on any one of the matters enumerated Under Section 11(1)(a). The impugned decision of the Government, which in fact resulted in huge inflow of revenue in the auctions conducted during the pendency of this litigation, cannot be said to be a totally irrational or irrelevant consideration in the context of the spectrum management. In the case in hand, the LICENSEES are not compelled to pay any specific tariffs fixed by the LICENSOR (Union of India), for availing the right to use the spectrum. If the price for securing allocation of spectrum is likely to go up because of the procedure of auctioning to have access to spectrum, it goes up because of the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to as 2G case, that the first telegraph link in India was experimented in 1839 between Calcutta and Diamond Harbor separated by a distance of 21 miles. By an act of the British Parliament, known as the Indian Telegraph Act, 1885, the privilege of establishing, maintaining and working of telegraphs within the territory of British India was exclusively conferred Under Section 4 upon the Central Government - an expression which bore different meanings at different points of time in this country, the details of which may not be necessary for the purpose of this case. However, proviso to the said section enabled the Central Government to licence any person to exercise the privilege which is otherwise exclusive to the Central Government. 3. The advancement of technology made wireless communication1 possible which led to the enactment of the Indian Wireless Telegraphy Act, 1933. 4. On 28th January, 1882, Major E. Baring, Member of the Governor General's Council declared open three telephone2 exchanges in Calcutta, Bombay and Madras, marking the beginning of telephone communications in India. Over the next 133 years, there has been a mind boggling advancement in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tically predicted earlier in 1867 by James Clerk Maxwell (a Scottish mathematical physicist). 7. Radio waves can be generated artificially and used for the transmission of sound or for passing information. Radio frequencies are divided into groups called bands which have similar characteristics. Artificially generated radio waves are used for fixed and mobile radio communication broadcasting, radar and other navigation systems, communication satellites, computer networks etc. 8. To prevent interference between different users, the artificial generation and use of radio waves is strictly regulated by law, coordinated by an international body called the International Telecommunications Union (ITU). The radio spectrum is divided into a number of bands on the basis of frequency and allocated to different users. 9. Till 1991, the activity of establishment, maintenance and working of telephones was completely controlled by the Government of India. Pursuant to the New Economic Policy announced by the Government of India on 24.7.1991, some of the services in telecommunication sector were opened up to the private investment in 1992. ...the following services: (a) Electronic Mail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices (FTS). After a competitive bidding process, licenses were awarded to a CMTS operators in the four metros, 14 CMTS operators in 18 state circles, 6 BTS operators in 6 state circles and to paging operators in 27 cities and 18 state circles. VSAT services were liberalized for providing data services to closed user groups. Licences were issued to 14 operators in the private sector out of which only nine licencees are operational. The Government has recently announced the policy for Internet Service Provision (ISP) by private operators and has commenced licensing of the same. The Government has also announced opening up of Global Mobile Personal Communications by Satellite (GMPCS) and has issued one provisional license. Issue of licenses to other prospective GMPCS operators is under consideration. 17. The NTP 1999 took note of the existence of various licences granted under the NTP 1994 and made a policy statement that the Government intends to resolve the problems of existing operators in a manner which is consistent with their contractual obligations and is legally tenable .4 18. Pursuant to the policy statement, the Government of India devised a scheme for the migration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Licensing regime. As a first step, as recommended by TRAI, Basic and Cellular services shall be unified within the service area. In pursuance of this decision, the following shall be the broad Guidelines for the Unified Access Services License. (i) The existing operators shall have an option to continue under the present licensing regime (with present terms conditions) or migrate to new Unified Access Services Licence (UASL) in the existing service areas, with the existing allocated/contracted spectrum. (ii) The license fee, service area, rollout obligations and performance bank guarantee under the Unified Access Services Licence will be the same as for Fourth Cellular Mobile Service Providers (CMSPs). 20. Some of the LICENSEES migrated to the UAS Licensing regime. Even under the said regime, the validity of licence was initially for a period of 20 years from the effective date and extendible by 10 years.5 21. Under the National Telecom Policy-2012 (for short NTP-2012 ), the Government of India decided to de-link licence and the spectrum for the purpose of grant of fresh licences. 22. In the meanwhile, the grant of licence and allotment of spectrum by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the classes of licences are broadly similar with certain minor variations in the language employed. Whether the minor variations in the language employed by the LICENSOR make any difference in the context of the right of the LICENSEES to seek an extension of a licence is one of the aspects which is required to be examined by us. 27. Since both the classes of licences contemplate seeking of an extension by the LICENSEE during the 19th year of the currency of the licence, the LICENSEES approached the Government of India seeking an extension/renewal of their licences. Alleging that there was no response from the Government of India, some of the LICENSEES went to the Delhi High Court filing writ petitions seeking appropriate directions to the Government of India. The said writ petitions were disposed of by an order dated 22.02.2013 of the Delhi High Court directing the Government of India to dispose of the applications of the writ Petitioners within a stipulated time frame. The High Court also observed that in the event of the Government of India's decision going adverse to the interest of the Petitioners, the Petitioners would be at liberty to take recourse to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep and careful consideration of the matter, in consultation with the expert statutory authority in the sector, the Government has framed a policy for management and dispensation of spectrum in the larger public interest. Any extension of the expiring licenses is bound to undermine the implementation of the policy and that is justification enough and sufficient for the Government to decline the extension for the licenses. 31. On behalf of the licensees, the following submissions are made: 1. The licences, such as the one under consideration in this batch of matters, are nothing but contracts between the Union of India and the LICENSEES. They secured the licences in the year 1994-95 admittedly through a transparent process of bidding. Under the terms of the said licences/contract, the LICENSEES have a right to have their claim for extension appropriately considered in terms of the contract. Therefore, the Respondents are neither entitled nor justified in calling upon the LICENSEES to participate in the auction of the spectrum to obtain the necessary spectrum to work their respective licences. Such a decision of the Respondent is violative of the contractual rights of the LICEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions of a license . The Government of India in violation of such statutory stipulation ignored the recommendation made by the authority and put the spectrum in auction. 32. On behalf of the Union of India, it is argued by the learned Solicitor General that none of the LICENSEES have any vested right for either renewal or extension of their respective licences. Under the terms and conditions of the licences, the LICENSEES are only entitled for a consideration of their claim for extension of their licences period. However, such a right is subject to the following conditions: i) There must be a request from the licensee for such an extension of the period of licence; ii) Such a request must be made during the 19th year from the effective date of the licence; iii) The extension of the licence is at the discretion of the LICENSOR as is evident from the language of the relevant clauses of the license which states that the LICENSOR may extend; iv) That condition of Clause 4.1 which says that the decision of the LICENSOR in regard to the grant of extension is final indicates that the discretion vested in the LICENSOR is absolute. 33. Learned Solicitor General also sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence including the definition ..... are part of a contract between the licensor and the licensee. 37. Therefore, now it is the settled position of law that a license granted Under Section 4(1) of the Telegraph Act such as the one granted to each of the LICENSEES herein is a contract between the LICENSOR and the LICENSEE. 38. If the licences in question are nothing but contracts, the next question would be, is there any right of extension of licence created in favour of LICENSEE under the contract? 39. From the language of the relevant clauses of the licences which are noted earlier, it is clear that the LICENSEES have no automatic right of renewal/extension on the expiry of the original tenure of the license. The contract only provided for extension of the period of license at the sole discretion of the LICENSOR subject to the condition that the LICENSEE makes an application seeking an extension during the 19th year of the currency of the licence. It appears that all of the LICENSEES did make such an application. 40. The question which requires examination is - what are the obligations of the LICENSOR on receipt of such an application? The obligations of the LICENSOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies is willing to be in the contract. 42. However, the LICENSOR being the Union of India, its discretion to stipulate terms and conditions is regulated by certain constitutional mandates apart from stipulations of any law applicable. 43. Insofar as the constitutional mandate in the context of a license Under Section 4 of the Telegraph Act are concerned, this Court in 2G case at para 85 held as follows: 85. As natural resources are public goods, the doctrine of equality, which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question stipulate that the term of the license could be extended on mutually agreed terms, if the Government of India deems it expedient. The obligations of the Government of India flowing from the Constitution as well as a statute necessarily require the Government of India to grant licences as rightly pointed by the Tribunal (TDSAT) only in public interest and for public good . 47. This Court in 2G Case after elaborate discussion on the nature of the State's authority to deal with the natural resources held that ...... spectrum has been internationally accepted as a scarce, finite and renewable natural resource which is susceptible to degradation in case of inefficient utilization. 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 the States as per international norms. (Para 77) 48. While recognizing the power of the State to distribute natural resources this Court held that 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commercially viable. Though the prospect of securing a larger amount for the exchequer is undeniable the same would be at the cost of the consumers, as the burden will ultimately be passed on by the LICENSEE to the consumers. The LICENSEES also submitted that in view of the fact that the LICENSEES invested huge amount running into thousands of crores in the last twenty years of the working of the licenses for building the infrastructure in order to provide necessary telecom services to the people of this country, not only the LICENSEE would suffer an economic damage but the Nation also would suffer damage in terms of the wastage of the resources already created. 55. We do not doubt that the LICENSEES would necessarily have to pass on their burden to the ultimate consumers. That need not necessarily mean that there should be an enhancement in the tariffs. There is always a possibility of maintaining the tariffs at a lower level if the consumers base is sufficiently large, i.e. more the consumers base, more the turnover. Therefore, the possibility of avoidance of the need to increase the tariffs. It all depends upon the facts and figures. Adjudicating the issue without concrete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. They also flow from the Constitution and the laws of the land. Obviously, the obligations flowing from the Constitution stand on a higher footing and it is the Government of India's duty to satisfy the obligations flowing from the Constitution and the laws of the land in preference to obligations flowing from a contract. It is a well settled principle of law that where there is a conflict between obligations flowing from a contract and those flowing from the law, the obligations flowing from the contract must necessarily yield to obligations flowing from the Constitution and laws. We, therefore, reject the submission of Shri Venugopal. The fifth submission of the licensees is required to be rejected on the ground that it is too vague and without any basis in the pleadings. 59. Last issue which requires examination is the Scheme of the Telecom Regulatory Authority of India Act, 1997 and the role of the Authority7 created under the said Act and the legal efficacy of its recommendations. 60. Section 3 of the said Act contemplates the establishment of an authority called the Telecom Regulatory Authority of India (for short TRAI )8. TRAI is declared to be a body corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee by its letter dated 07.07.2009. In response, TRAI submitted a very detailed report dated 11.05.2010. 64. In the impugned judgment of the TDSAT, it is recorded10 that TRAI radically differed with the report of Subodh Kumar Committee. 65. On 10.10.2011, the Government of India (Department of Telecommunications) referred the recommendations dated 11.05.2010 back to TRAI for reconsideration. 66. The TRAI reconsidered the matter and gave certain clarifications on 03.11.2011. 67. The judgment of this Court in 2G Case was pronounced on 02.02.2012. On 15.02.2012, the then Minister of Communications Information Technology made a press statement announcing the policy of the Government of India regarding the grant of licences under the Telegraph Act, 1885 and the allocation of spectrum. 68. It may be mentioned here that the press statement mentions that such a policy statement is made after consideration of the recommendations of TRAI11. 69. In view of the statement in the policy announced on 15.02.2012 to the effect that: 1. No more UAS licences linked with spectrum will be awarded. 2. All future licences will be Unified Licences and allocation of spectrum will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICENSEES held licences so far is not only inconsistent with the terms and conditions of the policy announced on 15.02.2012 as the impugned decision is not only in consistent with the extant licensing regime but also a decision taken without consulting TRAI - a requirement which is mandatory Under Section 11(1)(a)(ii)12. The TRAI Act mandates that the Government of India shall seek the recommendations of the Authority while stipulating the terms and conditions to a service provider and TRAI failed to discharge its functions stipulated Under Section 11(1)(b)(i) which calls upon TRAI to ensure compliance of terms and conditions of licence . 70. The LICENSEES also argued that the impugned decision of the Government of India to allocate spectrum by conducting an auction is contrary to the recommendations of the TRAI dated 15.10.201413 and also contrary to the policy statement of the Minister dated 15.02.2012. The tenor of the policy is clear that the delinking of spectrum from licence would only be with reference to future and the extension of the existing licence is required to be on the basis of the extant licensing regime . In other words, the policy is only prospective an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to Section 11(1) mandates that the Government of India shall seek the recommendations of the TRAI in respect of certain matters specified under Clause (a) in respect of new licence to be issued. One of such items with reference to which such consultation is mandatory is the terms and conditions of a license to a service provider [Under Section 11(1)(a)(ii)]. PROVIDED FURTHER that the Central 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. The only other part of Section 11 which is relevant in the context of the present issue is the fifth proviso to Section 11(1) which reads as follows: 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 reconsiderat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly observed by Subodh Kumar Committee, these goals are simultaneously synergistic as well as conflicting . Therefore, the Parliament stipulated that such issues are initially examined by an expert body leaving it open to the Government to take a final decision as to which one of these various 'synergistic as well as conflicting' factors must outweigh by the other factors. Apart from that, from the language of the 2nd proviso (supra) the obligation to consult TRAI arises only in the case of new licence but not the renewal/extension of an existing licence. 77. The impugned decision of the Government, which in fact resulted in huge inflow of revenue in the auctions conducted during the pendency of this litigation, cannot be said to be a totally irrational or irrelevant consideration in the context of the spectrum management, more particularly, in the light of decision of this Court in 2G case. 78. In this context, we need to examine two more decisions relied upon by the Respondents. They are - Kerala State Electricity Board v. S.N. Govinda Prabhu and Bros. and Ors. (1986) 4 SCC 198 and Natural Resources Allocation, In Re. Special Reference No. 1 of 2012, (2012) 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch heights as to lead to the inevitable conclusion that the Board has shed A its public utility character. When that happens the Court may strike down the revision of tariffs as plainly arbitrary. But not until then. Not, merely because a surplus has been generated, a surplus which can by no means be said to be extravagant. The court will then refrain from touching the tariffs. After all, as has been said by this Court often enough 'price fixation' is neither the forte nor the function of the court. 81. We fail to understand as to how the general observation that the public utility monopoly undertaking ........ may not be driven by pure profit motive made while examining the tariffs fixed in exercise of the powers vested by a statute are relevant in the context of the present case. In our view, the decision is wholly inapplicable to the facts of the present case for the following reasons: (i) Even in the case of tariffs fixed pursuant to the powers conferred by a statute this Court held that it would not interfere unless such tariffs result in a generation of surplus revenue reaching such heights as to lead to the inevitable conclusion that the Board has shed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not conduct a comparative study of the various methods of distribution of natural resources and suggest the most efficacious mode, if there is one universal efficacious method in the first place. It respects the mandate and wisdom of the executive for such matters. The methodology pertaining to disposal of natural resources is clearly an economic policy. It entails intricate economic choices and the Court lacks the necessary expertise to make them. As has been repeatedly said, it cannot, and shall not, be the endeavour of this Court to evaluate the efficacy of auction vis-`-vis other methods of disposal of natural resources. The Court cannot mandate one method to be followed in all facts and circumstances. Therefore, auction, an economic choice of disposal of natural resources, is not a constitutional mandate. We may, however, hasten to add that the Court can test the legality and constitutionality of these methods. When questioned, the Courts are entitled to analyse the legal validity of different means of distribution and give a constitutional answer as to which methods are 135 Page 136 ultra vires and intra vires the provisions of the Constitution. Nevertheless, it cannot and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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