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Saturday, January 31, 2015

The Tribunal rightly held that the appellants - service providers discriminated between subscribers of the same class; one on the ground that the call ends with the private parties and another on the ground that the call ends with BSNL/MTNL. The classification of the subscribers into two categories on the basis of calls made by them from private network to another private network and from private network to BSNL/MTNL network is arbitrary as it fails to satisfy the twin test for reasonable classification laid down by this Court in State of West Bengal v. Anwar Ali Sarkar & Anr. AIR 1952 SC 75. Therefore, the Tribunal rightly dismissed the appeal.



                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.1563 OF 2007


CELLULAR OPERATORS ASSOCIATION
OF INDIA & ORS.                              ... APPELLANTS

                                   VERSUS

TELECOM REGULATORY AUTHORITY
OF INDIA & ORS.                         ... RESPONDENTS

                               J U D G M E N T


SUDHANSU JYOTI MUKHOPADHAYA, J.


      This appeal has been preferred by the  appellants  against  the  order
dated 22nd December, 2006  passed  by  the  Telecom  Disputes  Settlement  &
Appellate Tribunal, New Delhi (hereinafter referred to  as  the  'Tribunal')
in Appeal No.2 of 2006 (with M.A. No.58 of 2006).  By  the  impugned  order,
the Tribunal while dismissing the appeal disposed of the M.A.No.58  of  2006
with certain observations.

2.    The factual matrix of the case is as follows:

      Appellant Nos.2 to 10 are  private  GSM  cellular  operators  and  the
first appellant is their Association. They have been issued licences by  the
Central Government, Department of  Telecommunication  (hereinafter  referred
to as 'DoT') under Section 4 of Indian Telegraph  Act,  1885  to  establish,
maintain and  operate  cellular  mobile  telephone  services/unified  access
services  in  their  respective  service  areas.  The  first  respondent  is
Regulatory Authority established under Section 3 of the  Telecom  Regulatory
Authority of India Act, 1997 (hereinafter referred to as 'TRAI Act').

3.     The  first  respondent-Authority  issued  a  directive   dated   27th
February, 2006 wherein appellants - private mobile service providers in  the
four States of Maharashtra, West Bengal, Tamil Nadu and Uttar  Pradesh  were
directed to discontinue differential tariffs levied in  the  aforesaid  four
States for calls terminating in the network of Bharat Sanchar Nigam  Limited
(hereinafter  referred  to  as  'BSNL')/Mahanagar  Telephone  Nigam  Limited
(hereinafter referred to as 'MTNL') as compared to calls terminating in  the
network  of  other  private  operators  in   another   citing   it   to   be
discriminatory and inconsistent with the amended licence condition  notified
by the DoT on 20th May, 2005. The appellants  complied  with  the  directive
dated 27th February, 2006 and submitted compliance report to the Authority.

4.    Subsequently, by its directive  dated  22nd  March,  2007,  the  first
respondent-Authority, inter alia, directed the appellants-service  providers
to assess the total excess amount charged from  the  subscribers;  keep  the
entire amount in a separate Bank Account  and  intimate  the  Authority  the
names of the Banks in which such amount has  been  kept.  After  receipt  of
such notice dated 22nd March, 2007 the appellants preferred an appeal  under
Section 14 read with Section 14A of the TRAI Act challenging  the  direction
dated 27th February, 2006. The challenge was made on  the  ground  that  the
direction was discriminatory  and  inconsistent  with  the  amended  licence
conditions notified by the DoT on 20th May, 2005.  The main plea  raised  by
the appellants justifying  the  differential  half  of  calls  from  private
operator to another private operator vis--vis calls from  private  operator
to BSNL network was that  direct  connectivity  could  be  achieved  between
networks of private operators but it could not be achieved  between  private
operators and BSNL network.

5.    Initially, BSNL/MTNL was not party to the said appeal.   The  Tribunal
having noticed that the appeal pertains to the differential tariff of  calls
from private operator to another private operator vis--vis calls made  from
private operator to BSNL/MTNL network directed  the  appellants  to  implead
the BSNL/MTNL as respondent. After hearing the parties, the Tribunal  passed
the impugned order dated 22nd  December,  2006  dismissing  the  appeal  and
disposing of the M.A.No. 58 of 2006 with the observations and directions  as
quoted above.

6.    In appreciation of the case, it is relevant to  notice  the  following
facts:

      For grant of licences, India  was  divided  into  four  metro  service
areas of Delhi, Mumbai, Kolkata and  Chennai  and  various  telecom  circles
which were roughly contiguous to the State of India.  In  the  first  phase,
licences were  granted  for  the  four  metro  service  areas  in  1994  and
thereafter in the Circles/States in 1995 defining  the  geographical  limits
within which the licensee may operate and offer the  services.  For  Mumbai,
Chennai, Kolkata and Delhi, in the aforesaid manner, separate licences  were
issued by the DoT. Separate  and  distinct  licences  were  issued  for  the
States of Maharashtra, Tamil  Nadu  and  West  Bengal  excluding  the  three
metropolitan cities of Mumbai, Chennai and Kolkata  respectively  for  which
licences were given to MTNL. As far as State of Uttar Pradesh is  concerned,
it was divided into two Telecom circles, i.e., U.P.  (East)  and  U.P.(West)
with separate licences for U.P.(East) and U.P.(West).

7.    The first respondent-Authority has laid down  Inter  Connection  Usage
Charges (hereinafter referred to as 'IUC') with respect to the changing  for
the use of network elements of other  operators  which  include  termination
charges, carriage charges and access  deficit  charge  for  use  of  network
elements of other  operators.  These  charges  for  inter-circle  calls  are
different from  those  for  intra-circle  calls.  On  20th  May,  2005,  the
Government of India notified that inter-service  area  connectivity  between
access  providers  within  Mumbai  Metro  and  Maharasthra  Telecom  Circle,
Chennai Metro and Tamil Nadu Telecom Circle, Kolkata Metro and  West  Bengal
Telecom Circle and U.P.(East) and U.P.(West) Telecom  Circle  service  areas
respectively, is permitted subject to condition  that  the  access  provider
will operate within the existing licensed service  area  and  shall  not  be
permitted to create infrastructure outside their licensed service  area  for
the purpose of inter-service area  connectivity.  It  was  further  provided
that the access provider may take leased lines for such  connectivity.  With
the above arrangement, calls within a State  in  the  above  mentioned  four
states would be treated as intra-service area  calls  for  the  purposes  of
routing as well as ADC.

8.    The final result of the above said notification was  that  the  metros
were merged with the respective State circles and the calls from  metros  to
the remaining areas of the respective States and in case of  U.P.(East)  and
U.P.(West) circles from one to the other,  were  to  be  treated  as  intra-
circle calls.

9.    The appellants  were  charging  higher  tariff  for  calls  made  from
appellant's network in the metros to the  BSNL  and  MTNL  networks  in  the
remaining areas of  the  State  compared  to  calls  made  from  appellant's
network in the metros to another appellant's network in the remaining  areas
of the State. For example, a subscriber  on  a  private  operator's  network
calling from Mumbai to another private operator's subscriber  at  Nasik  was
being charged at low rate as compared to a call made by the same  subscriber
from the same  place  to  BSNL  subscriber  at  the  other  place.  In  this
background, the first respondent  by  Circular  dated  27th  February,  2006
observed that this differential tariff was discriminatory  and  inconsistent
with the amended licence condition notified by the DoT  on  20th  May,  2005
and, therefore, directed the  appellants  to  immediately  discontinue  such
differential tariff and asked for compliance of the same within 15 days.

10.   As noticed above, the first respondent-authority vide  Circular  dated
No.101-15/2005-MN dated  27th  February,  2006  observed  that  differential
tariff  was  discriminatory  and  inconsistent  with  the  amended   licence
conditions notified by the DoT on 20th May, 2005  and,  therefore,  directed
the appellants to immediately discontinue such differential tariff  and  ask
for compliance within 15 days.

11.   The aforesaid direction was challenged by the  appellants  before  the
Tribunal with a prayer to set aside the directions issued  by  the  Circular
No.101-15/2005-MN dated 27th February, 2006. The appellants also sought  for
an interim relief granting ex-parte stay of operation of the said  circular.


12.   The Tribunal having not granted any  interim  relief,  the  appellants
moved before the High Court in a Writ Petition,  being  W.P.(C)  No.5428  of
2006. The High Court observed that no punitive or coercive action  shall  be
taken by the first respondent Authority at  least  till  the  next  date  of
hearing before the Tribunal and disposed of the writ petition. The  Tribunal
by the impugned order dated 22nd December, 2006 held as follows:

"26.  Having gone through the documents produced by  both  the  parties  and
having heard arguments we are of the view that the appellants did  not  make
adequate effort to provide direct connectivity between the appellants'  MSCs
and the BSNL/MTNL's MSCs which would have brought tariffs at part for  calls
made within the appellants' network. We are also left  with  the  impression
that DoT and BSNL could have taken a  more  pro-active  approach  to  ensure
that the requisite leased  lines  and  Ps  of  I  were  made  available  for
establishing direct connectivity in a time bound  manner  which  would  have
helped achieving the transition sought  to  be  brought  about  by  the  DoT
notification of 20-5-2005 in a more smooth manner. Be that as it may, we  do
not  agree  with  the  argument  put  forth  by  the  appellants  about  the
protection  to  them  for  charging  higher  tariff  under  the  clause   of
forbearance. The clause  of  non-discrimination  is  very  clear  and  self-
explanatory which has been defied by the appellants.  We  do  not  find  any
merit in the appeal and the same is dismissed. M.A.  No.  58  of  2006  also
stands disposed."

13.   Learned counsel appearing on behalf of the appellants  submitted  that
the differential tariffs are because of the difference in the cost  elements
involved in the two natures of calls. Insofar as calls  terminating  in  the
network of BSNL/MTNL are concerned, as  direct  connectivity  had  not  been
established between the  appellant's  network  and  BSNL/MTNL  network,  the
appellants  were  obliged  to  pay  carriage  charges  to  BSNL   and   MTNL
(respondent nos. 2 and 3) for calls terminating on their  networks.  But  in
case of a call terminating in the network  of  the  private  operator  these
charges were not applicable as  direct  connectivity  had  been  established
between the private operators. Therefore, the cost elements involved in  the
two calls were different leading to a difference in tariffs charged  by  the
service provider for such calls from its subscribers. The above position  is
explained with the help of a Diagram to show that in  the  case  of  a  call
from a metro like Mumbai to another place like Pune, the  call  between  two
subscribes of private networks is connected directly, which in the  case  of
a call to BSNL subscriber is treated as a STD call as it is first  connected
to Nagpur and then to Pune,  which  is  the  routing  plan  for  STD  calls.
According to appellants, in STD  arrangement,  BSNL  as  the  National  Long
Distance Operator was able to recover carriage charges which  were  as  high
as Rs.1.10 per minute, which charges would no longer be payable once  direct
connectivity was established.

14.   Thus the reason for the differential tariffs as per the appellant  was
that the call between subscribers of private operators was  routed  directly
and costed as a local call while the call  to  a  BSNL/MTNL  subscriber  was
routed through another place and costed as an STD call.

15.   It was further contended that the  aforesaid  position  had  continued
right from July, 2005 in the knowledge of the first respondent  and  now  in
sudden turn around, the first respondent chose to disregard the  compulsions
under which the private operators were  constrained  to  offer  differential
tariffs and directed the private operators to discontinue  the  differential
tariff. Its net effect was to force the operators to increase their  tariffs
for  calls  terminating  on  the  network  of  other  private  operator   or
alternatively reduce the tariff for calls to BSNL/MTNL subscribers  and  pay
the difference from their own pocket. Either of these alternatives would  be
against the fundamental duties and responsibilities of the first  respondent
under the Act and the impugned  action  was  not  only  against  the  public
interest but  would  also  have  put  the  private  operators  in  a  highly
disadvantageous position.

16.   Learned counsel for the appellant further submitted that the  Tribunal
erred in law  in  not  appreciating  that  simply  prescribing  differential
tariff does not violate the mandate of Article 14  of  the  Constitution  or
result in discrimination; the same class has to be determined in  accordance
with the similarity of  features  of  its  constituents.  According  to  the
appellants, the costs involved in the nature of the two calls are  different
and, therefore, though the subscribers belong to the appellants,  they  form
a distinct class when they make a call to the BSNL Cell one  number.  It  is
also submitted that the Tribunal failed to notice that the DoT  decision  of
20th  May,  2005  explicitly  stated  that  the  tariffs  which  were  under
forbearance would continue to be regulated by market forces.

17.   Learned counsel appearing on  behalf  of  first  respondent  submitted
that it was the duty of the appellants  to  arrange  the  leased  lines  for
establishing direct connectivity with the BSNL network as they had  done  to
connect each other's network. The  appellants  no  where  pleaded  that  the
second  respondent  denied  the  provision   of   Points   of   Interconnect
(hereinafter referred to as 'Ps of  I')  and  the  only  pleading  was  with
respect to non-grant of leased lines by BSNL. In fact, the appellants  never
approached the BSNL for provision of Ps of I.

18.   It was brought to the notice of the Court that  immediately  on  issue
of letter by the DoT when the metro circles were merged with the  respective
state circles, BSNL had issued a Circular  on  24th  May,  2005  asking  the
appellants to sign addenda  to  the  existing  interconnect  agreements  for
provision of Ps of I. However, no effort was made by the appellants to  this
effect. In another case before the Tribunal, respondent No.2 had  stated  on
affidavit that wherever the payments have been made, the Ps of I were  being
provided within 90 days. In these four service areas,  no  demand  was  ever
placed on BSNL.

19.   Similar was the stand taken by the appellants and  respondents  before
the Tribunal. The Tribunal observed  that  some  demands  for  Ps  of  I/E-1
connectivity were placed by the  appellants  on  BSNL  but  as  late  as  in
December 2005, January 2006 and February 2006. The Tribunal held that  there
was no reason that in case infrastructure for direct connectivity  could  be
created for connecting amongst themselves the networks  of  the  appellants,
the same could not be done for connecting the MSCs of  appellants'  networks
to those of BSNL/MTNL networks in the four service areas in question.

      The Tribunal rightly held that the appellant could have  made  use  of
the similar leased lines as they had between their networks  and  asked  for
Ps of I from the BSNL for the MSCs  located  in  these  four  service  areas
which was not done. No effort was made by  the  appellants  to  create  this
direct connectivity and they took recourse to the easier way of handing  the
traffic to the  BSNL  as  National  Long  Distance  Operator  and  continued
charging the consumers higher tariffs.

20.    The respondent has prescribed the tariffs for  various  calls/telecom
services under the Telecommunication Tariff Order 1999 as amended from  time
to time. As a general condition clause 6  of  the  Tariff  Order  prescribes
that  no  service  provider  shall,  in  any  manner,  discriminate  between
subscribers  of  the  same  class  and  such  classification  shall  not  be
arbitrary.  Further,  clause  2(k)  of  the  Tariff  Order   defines   "Non-
discrimination" to mean that service provider shall not, in  the  matter  of
application of tariffs, discriminate between subscribes of  the  same  class
and such classification of subscribes shall not be  arbitrary.  Clause  2(k)
and Clause 6 of the Tariff Order are reproduced herein under:

"2(k) Non-discrimination means  that  service  provider  shall  not  in  the
matter of application of tariffs, discriminate between  subscribers  of  the
same class and such classification of subscribers shall not be arbitrary.

Clause 6.   Non-discrimination:   No service provider shall, in any  manner,
discriminate between subscribers of the same class and  such  classification
shall not be arbitrary."



      In terms of the above Tariff Order, the first respondent in  September
2002, introduced forbearance in  prescribing  tariffs  as  far  as  Cellular
calls are concerned and in taking this decision the  first  respondent  took
note of the emerging market scenario and  came  to  the  conclusion  that  a
stage had been reached, when market forces could  effectively  regulate  the
cellular tariff.

21.   The question whether the non-discrimination clause  is  applicable  to
the class of subscribers making call  to  another  private  network  from  a
private network as compared to the class making call from a private  network
to BSNL/MTNL network  was  raised  by  both  the  parties.  The  appellants'
contention was that they were two different classes  since  the  routing  of
the call was different and BSNL was charging higher amount  for  the  latter
category of calls. In reply to the same, it has been  rightly  contended  on
behalf of the respondents that the same subscriber or two  subscribers  from
the same house making  calls  from  the  same  network  to  another  private
network or to BSNL network located at the same  destination  form  the  same
class. The interpretation of the respondents being  more  logical  was  also
accepted by the Tribunal. For the said  reason  the  Tribunal  rightly  held
that the action of appellants amount  to  discrimination  between  the  same
class of subscribers which is against the  basic  definition  laid  down  in
Clause 2(k) of the Tariff Order.

22.   On 20th May, 2005,  the  Government  of  India  announced  that  inter
service area connectivity between Access  Providers  within  four  States  -
Mumbai Metro & Maharashtra  Telecom  Circle,  Chennai  Metro  &  Tamil  Nadu
Telecom Circle, Kolkata Metro & West Bengal Telecom Circle and  U.P.  (East)
& U.P.(West) Telecom Circle  Service  areas  is  permitted  subject  to  the
condition that the  Access  provider  will  operate  within  their  existing
licensed service area and shall not be permitted  to  create  infrastructure
outside their licensed service area for the purpose  of  inter-service  area
connectivity.  The  access  providers  may  take  lease   lines   for   such
connectivity.  This  inter-service  area  connectivity  shall  be  only  for
terminating traffic.  Relevant extracts from  Clause  5.2  and  6.0  of  the
Circular dated 24th May, 2005 are reproduced hereunder:

"5.2. The traffic organized by mobile subscribers belonging to  one  service
area but located in another service area within same state shall be  treated
as home network traffic instead of national roaming traffic. This  principle
shall  be  applicable  for  both  charging  at  POI  as  well   as   traffic
certificates for  ADC  billing.  Further,  since  the  traffic  between  two
service areas within same state  shall  be  treated  as  intra-service  area
traffic, therefore, such traffic shall not be handed over by NLDOs to BSNL.

6.0.  The access service providers of these four states shall  be  permitted
to seek POIs with BSNL switches in the complete state irrespective of  their
service areas in which they can provide  their  services.  Concerned  access
provider shall have  to  sign  separate  Addenda  to  existing  Interconnect
Agreements with BSNL for establishing these new POIs  with  BSNL.  Till  the
time these Addendas  are  signed  and  new  POIs  established  the  existing
arrangements shall  continue  including  handover  of  such  calls  to  BSNL
through NLDOs  treating  the  traffic  as  inter  circle  and  charging  IUC
accordingly. All the traffic within a state (in these four States  only  and
in case of State of UP it also  includes  State  of  Uttaranchal)  shall  be
treated as intra circle traffic and IUC charged accordingly at  POI  (except
the traffic handed over at POIs of NLDOs) as well  as  for  the  purpose  of
traffic certificates for ADC billing. These new POIs,  as  above,  shall  be
commissioned after concerned access providers sign these Addendas  to  their
existing Interconnect Agreement with BSNL.  These  instructions  are  to  be
implemented w.e.f. 0000 hours of 25th May, 2005."



      The net effect of the aforesaid Circular was that the appellants  were
to sign the Addenda agreements with BSNL and then apply for new Ps of I  and
till  such  time  that  the  new  Ps  of  I  are  established  the  existing
arrangements were to continue.

23.   We have noticed that the appellants took advantage  of  the  aforesaid
provision. But they did not apply before the BSNL/MTNL to apply new Ps of  I
and treating the tariff as inter service charges differently from same  sets
of consumers.  The  access  providers  have  option  to  continue  with  the
existing inter-connected routing of the class  of  service  areas  but  that
cannot be a ground to discriminate, in any manner, between  the  subscribers
of the same class. The Tribunal rightly held that the appellants  -  service
providers discriminated between subscribers of the same class;  one  on  the
ground that the call ends with  the  private  parties  and  another  on  the
ground that the  call  ends  with  BSNL/MTNL.   The  classification  of  the
subscribers into two categories on the basis of  calls  made  by  them  from
private network to another private  network  and  from  private  network  to
BSNL/MTNL network is arbitrary as it fails to  satisfy  the  twin  test  for
reasonable classification laid down by this Court in State  of  West  Bengal
v. Anwar Ali Sarkar & Anr. AIR 1952 SC 75. Therefore, the  Tribunal  rightly
dismissed the appeal.

24.   We find no merit in this  appeal,  it  is  accordingly  dismissed.  No
costs.

                      ....................................................J.
                               (SUDHANSU JYOTI MUKHOPADHAYA)


                      ....................................................J.
                                      (PRAFULLA C. PANT)
NEW DELHI;
JANUARY 30, 2015.
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