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Thursday, May 14, 2015

Section 18 of the Telecom Regulatory Authority of India Act, 1997 (hereinafter referred to as the “TRAI Act”) and three writ petitions raise common questions. Each of the appellants or the petitioners, as the case may be, in these matters (hereinafter collectively referred to as ‘LICENSEES’) is a licensee holding a licence granted under Section 4 of the Indian Telegraph Act, 1885 for providing TELEGRAPH services in the various earmarked service areas.

                                                                  Reportable

                        IN THE SUPREME COURT OF INDIA

                    CIVIL APPELLATE/ORIGINAL JURISDICTION

                        CIVIL APPEAL NO.2803 OF 2014

Bharti Airtel Ltd.                                       …    Appellant

Versus

Union of India                                     …     Respondent

                                    WITH

                        CIVIL APPEAL NO.1969 OF 2014

Vodafone Mobile Services Ltd. & Others       …     Appellants

Versus

Union of India                                     …     Respondent

                        CIVIL APPEAL NO.2072 OF 2014

Loop Mobile India                                        …    Appellant

Versus

Union of India                                     …     Respondent

                        CIVIL APPEAL NO.5376 OF 2014

Idea Cellular Ltd.                                       …    Appellant

Versus

Union of India                                     …     Respondent


                        CIVIL APPEAL NO.9116 OF 2014

Idea Cellular Ltd.                                       …    Appellant

Versus

Union of India                                     …     Respondent

                    WRIT PETITION (CIVIL) NO.1056 OF 2014

Bharti Airtel Ltd. & Others                              …    Petitioners

Versus

Union of India                                     …     Respondent


                    WRIT PETITION (CIVIL) NO.971 OF 2014

Vodafone Cellular Ltd. & Others              …     Petitioners

Versus

Union of India                                     …     Respondent

                                     AND

                    WRIT PETITION (CIVIL) NO.180 OF 2015

Reliance Telecom Ltd. & Another              …     Petitioners

Versus

Union of India & Another                           …     Respondents



                               J U D G M E N T
Chelameswar, J.

1.    These five civil appeals under Section 18 of  the  Telecom  Regulatory
Authority of India Act, 1997 (hereinafter referred to  as  the  “TRAI  Act”)
and three writ petitions raise common questions.  Each of the appellants  or
the  petitioners,  as  the  case  may  be,  in  these  matters  (hereinafter
collectively referred to as ‘LICENSEES’) is a  licensee  holding  a  licence
granted under Section 4 of the Indian  Telegraph  Act,  1885  for  providing
TELEGRAPH services in the various earmarked service areas.

2.    It appears from the judgment  of  this  Court  in  Centre  for  Public
Interest Litigation & Others v. Union of India & Others,  (2012)  3  SCC  1,
hereinafter referred to as 2G case, that the first telegraph link  in  India
was experimented in 1839 between Calcutta and Diamond Harbor separated by  a
distance of 21 miles.  By an act of the British  Parliament,  known  as  the
Indian Telegraph Act, 1885, the privilege of “establishing, maintaining  and
working  of  telegraphs”  within  the  territory  of   British   India   was
exclusively conferred under Section 4  upon  the  Central  Government  –  an
expression which bore different meanings at  different  points  of  time  in
this country, the details of which may not be necessary for the  purpose  of
this case.  However,  proviso  to  the  said  section  enabled  the  Central
Government to  licence  any  person  to  exercise  the  privilege  which  is
otherwise exclusive to the Central Government.

3.    The advancement of technology made wireless communication[1]  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 telephone[2]  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 telecommunication technology.  Strangely, there is  no  enactment  in
this country dealing with the establishment and working of telephones.   The
160 year old telegram system in this country was officially closed  on  14th
July, 2013.  Ironically, the Indian  Telegraph  Act,  1885  and  the  Indian
Wireless Telegraphy Act, 1933 still continue on the statute book. By  virtue
of the various amendments made from  time  to  time,  these  two  enactments
still continue to govern the entire activity of  establishment,  maintenance
and working of telephones and various other telecommunication services.

Electromagnetic Radiation -  Waves  -  Frequencies  -  Spectrum

5.    `Electromagnetic (EM) radiation is a phenomenon which  occurs  in  the
universe.  Sunlight is a familiar example  of  EM  radiation.    So  is  the
light from stars.   EM radiation travels in waves at different  frequencies.
    Frequency  of  a  wave  and  its  length  are  inversely   proportional.
Generally, EM radiation is classified on the basis of wavelength into  radio
wave, microwave, terahertz  (or  sub-millimeter)  radiation,  infrared,  the
visible region is perceived as light, ultraviolet, X-rays  and  gamma  rays.
Waves with frequencies ranging from 300 GHz to  3  kHz  (corresponding  wave
length ranging from 1 millimeter to 100 kilometers) are called radio  waves.
 Radio waves have the longest wave lengths in the electromagnetic  spectrum.
The entire range of frequencies in EM radiation is called EM spectrum.
“EM radiation interacts with matter in different ways across  the  spectrum.
These types of interaction are  so  different  that  historically  different
names have been applied to different parts of the spectrum, as though  these
were different types of radiation.   Thus, although these “different  kinds”
of EM radiation form a quantitatively  continuous  spectrum  of  frequencies
and wavelengths, the spectrum remains divided for practical reasons  related
to these qualitative interaction differences.”

6.    Any EM radiation (including radio waves) travels  with  the  speed  of
light in vacuum i.e. 299,792,458 meters per second.  The distance is  called
the wavelength of a Hertz radio signal (HZ).   Megahertz (MHz) radio  signal
has a wavelength of 984 feet.   Wave length of radio waves  is  measured  in
units called Hertz -a name given to the unit after Heinrich Hertz  a  German
scientist who in 1887 demonstrated the reality of radio waves the  existence
of which was theoretically predicted earlier in 1867 by James Clerk  Maxwell
(a Scottish mathematical physicist).
7.     Radio  waves  can  be  generated  artificially  and  used   for   the
transmission of sound or for passing  information.   Radio  frequencies  are
divided  into  groups  called  bands  which  have  similar  characteristics.
Artificially generated radio waves are  used  for  fixed  and  mobile  radio
communication   broadcasting,   radar   and   other   navigation    systems,
communication satellites, computer networks etc.

8.    To  prevent  interference  between  different  users,  the  artificial
generation and use of radio waves is strictly regulated by law,  coordinated
by an 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; (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.”
                                                 [Para 5 of 2G case (supra)]


10.   All services, which were opened up to private investment  referred  to
above,  are  EM  wave  based  services.  Therefore,  they  fall  within  the
definition  of  the  expression  “TELEGRAPH”[3]  occurring   under   Section
3(1)(AA) of the Telegraph Act.  Since the privilege to conduct the  activity
of establishment, maintenance and working of a TELEGRAPH could be  permitted
by the Government by private parties under a licence, there arose a need  to
regulate utilization of frequencies by the LICENSEES  for  carrying  on  the
business in TELEGRAPHS.



11.   Some of the frequencies are exclusively reserved for the  defence  and
security operations of India which, for  obvious  reasons,  cannot  be  made
accessible to private parties.

12.    The  New  Telecom  Policy  1994  (NTP  1994)  was  announced  by  the
Government of India on 13.5.1994.  In furtherance of  the  said  Policy,  22
Cellular Mobile Telephone Service (CMTS); 6 Basic  Telephone  Service  (BTS)
licences were granted to operators:

13.   In addition, paging licences were awarded in 27 cities  and  18  State
circles.

14.   These licences were bundled with spectrum within which a licensee  was
entitled to operate.   The licences were granted on the basis  of  selection
through a system of tendering.

15.   On 20th November 1998, a Group was constituted by  the  Government  of
India to review the  then  existing  telecom  policy  and  suggest  reforms.
Based on the report of the said Group, the  New  Telecom  Policy  1999  (NTP
1999) was formulated which became effective from 1.4.1999.

16.   It took note of the fact situation as it existed on that  day  in  the
following words:
“The Government invited private sector  participation  in  a  phased  manner
from the early nineties, initially for value added services such  as  Paging
Services and Cellular Mobile Telephone Services (CMTS)  and  thereafter  for
Fixed Telephone  Services  (FTS).   After  a  competitive  bidding  process,
licenses were awarded to a CMTS  operators  in  the  four  metros,  14  CMTS
operators in 18 state circles, 6 BTS operators in 6  state  circles  and  to
paging operators in 27 cities and 18  state  circles.   VSAT  services  were
liberalized for providing data services  to  closed  user  groups.  Licences
were issued to 14 operators in the private sector out  of  which  only  nine
licencees are  operational.   The  Government  has  recently  announced  the
policy for Internet Service Provision (ISP) by  private  operators  and  has
commenced licensing of the same.  The Government has also announced  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 of existing LICENSEES under the  NTP  1994  to  the
new regime under the NTP 1999.  The Scheme known as  Package  for  Migration
of Existing LICENSEES  of  Cellular  and  Basic  Telecom   Services  to  New
Telecom Policy.  The terms  of  the  policy  insofar  as  relevant  for  our
purpose are as follows:-
“….. the  following  Package  is  proposed  to  migration  of  the  existing
Cellular (Metros and Telecom Circle) and Basic Telecom Service Operators  to
NTP-99 regime:-

The cut off date for change over to NTP-99 regime will be 1.8.1999.
The licensee will be required to pay one time Entry fee and License  Fee  as
a percentage share of gross  revenue  under  the  license.   The  Entry  Fee
chargeable will be licence fee  dues  payable  by  existing  LICENCEES  upto
31.07.1999,  calculated  upto  this  date  duly  adjusted  consequent   upon
notional extension of effective date as in  para  (ix)  below,  as  per  the
conditions of existing licence.
The Licence fee as a percentage of gross revenue under the licence shall  be
payable w.e.f. 1.8.99.  The Government will take a final decision about  the
quantum of the revenue share to be charged as licence  fee  after  obtaining
recommendations of the Telecom Regulatory Authority  of  India  (TRAI).   In
the meanwhile, Government have decided to fix 15% of the  gross  revenue  of
the Licensee as provisional license fee.  The gross revenue for the  purpose
would be the total revenue  of  the  Licensee  company  excluding  the  PSTN
related call charges paid to DOT/MTNL  and  service  tax  collected  by  the
licensee on behalf of the Government from their subscribers.  On receipt  of
TRAI’s recommendation and Government’s final decision, final  adjustment  of
provisional dues will be effected depending upon the percentage  of  revenue
share and the definition of revenue for  this  purpose  as  may  be  finally
decided.

      xxx        xxxx        xxxx       xxxx

(xi)  The period of licence shall be 20 years starting  from  the  effective
date of the existing licence agreement.”

19.   In the year 2003, the Central Government  came  out  with   an  Office
Memorandum dated 11.11.2003 which contained guidelines  for  Unified  Access
(Basic & Cellular) Services Licence (UAS Licences).   The  relevant  portion
of the document reads as follows:-
“Government, in the public interest in  general  and  consumer  interest  in
particular and for the proper conduct of telegraphs  and  telecommunications
services, has decided to move towards a Unified  Access  Services  Licensing
regime. As a  first  step,  as  recommended  by  TRAI,  Basic  and  Cellular
services shall be unified within the service  area.  In  pursuance  of  this
decision, the following shall  be  the  broad  Guidelines  for  the  Unified
Access  Services License.

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.

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
the Union of India pursuant to the two press releases issued  on  10.01.2008
became subject matter of  litigation  before  this  Court  which  eventually
culminated into 2G Case.  By the said judgment, this  Court  set  aside  all
the licences granted pursuant to the abovementioned press releases.

23.   Union of India announced the NTP–2012 in which it  sought  to  de-link
the licences and allocation of  spectrum  in  respect  of  future  licences.
Shortly thereafter on 2.2.2012, the judgment of this Court in  2G  case  was
pronounced. On 15.02.2012, the Minister of Telecommunication  &  Information
Technology issued a statement.  Insofar as the existing UAS, CMTS and  Basic
Services Licences are concerned, it is stated therein that (i) no  more  UAS
licences linked with spectrum will be  awarded,  (ii)  all  future  licences
will be Unified Licences, (iii) allocation  of  spectrum  will  be  delinked
from the licence, (iv) The validity  of  existing  UAS  (&  CMTS  and  Basic
services) licences may be extended for another 10 years at one time, as  per
the provisions  of  the  extant  licensing  regime  with  suitable  Terms  &
Conditions so as not to imply automatic continuance of existing licence  and
related conditions including quantum and price of  any  spectrum  allocated.
The relevant portion of the full text of the statement would  be  considered
later in this judgment.

24.   The licences granted to the various LICENSEES are  due  to  expire  on
various dates in 2014-2015.

25.   Pursuant to the judgment in 2G case, the Union of India took steps  to
conduct an auction of the 900 MHz band and 1800 MHz  band  insofar  as  they
pertain to the certain operators whose licenses were coming  to  an  end  in
2014.


26.   Each of the LICENSEES  herein  hold  licences  for  different  service
areas.  It appears from the impugned order of the  TDSAT  dated  31.01.2014,
which is a common order in  the  four  petitions  filed  by  four  different
LICENSEES (Vodafone Mobile Service Ltd., Loop Mobile  India,  Bharti  Airtel
Ltd. & Idea Cellular Ltd.).  Some of  the  LICENSEES  hold  Cellular  Mobile
Telephone Service licence (CMTS licence) while others  hold  Unified  Access
Service license (UAS licence).  Both  the  classes  of  licences  stipulated
that the licences are valid for a period of 20 years and  provide  that  the
Licensor may extend the period of licence for another 10  years  subject  to
certain conditions  specified  in  the  licence.   The  relevant  conditions
contained in both the classes of licences are broadly similar  with  certain
minor variations in the language employed.
|CMTS                              |UAS                               |
|Period of Licence:  The period of |The LICENSE shall be valid for a  |
|license shall be twenty years from|period of 20 years from the       |
|the effective date of the existing|effective date unless revoked     |
|license agreement unless          |earlier for reasons as specified  |
|terminated for the reasons stated |elsewhere in the document.        |
|therein.  The Licensor may extend |                                  |
|the period of license, if         |The LICENSOR may extend, if deemed|
|requested during 19th year from   |expedient, the period of LLICENCE |
|the effective date for a period of|by 10 years at one time, upon     |
|10  years at a time on mutually   |request of the LICENSEE, if made  |
|agreed terms and conditions.  The |during 19th year of the Licence   |
|decision of licensor shall be     |period on terms mutually agreed.  |
|final in regard to grant of       |The decision of the LICENSOR shall|
|extension.                        |be final in regard to the grant of|
|                                  |extension.                        |



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
appropriate remedy”.

28.   Pursuant to the directions of the Delhi High Court,  the  applications
of the petitioners were considered and rejected by the Government  of  India
on different dates.  Aggrieved by the same,  the  LICENSEES  approached  the
TDSAT.  Their  petitions  were  dismissed  by  an  order  dated  31.01.2014.
Hence, the appeals under Section 18 of the TRAI Act.  Some of the  LICENSEES
approached this court directly without going to the  TDSAT  by  filing  writ
petitions invoking the jurisdiction of this court under Article  32  of  the
Constitution of India.

29.   TDSAT recorded  that  “the  right  to  extension  of  the  licence  is
undeniably a valuable right of the licensee” but held that such a  right  is
not an absolute right.  If the LICENSOR (Union of India) does  not  deem  it
expedient to grant such licence, it is under no  such  obligation  to  grant
such extension.  The expression ‘expedient’ in the context of  the  licences
only means “public interest and for public good”.  Therefore,  the  tribunal
opined that it is open to the Central Government to refuse the extension  if
it is of the opinion that the grant of extension  would  not  be  in  public
interest or sub-serve public good.  The tribunal also opined that  “…..  for
the purpose of grant of extension it is Central  Government  alone  that  is
the judge of public interest and public good.  The  Central  Government  may
frame a policy or revise and existing policy in larger public  interest  and
in case the extension of the existing licences  militates  against  the  new
policy it would be a valid and acceptable ground  for  refusing  extension”.
The tribunal  also  opined  that  the  absence  of  the  employment  of  the
expression “if deemed expedient” in the  relevant  clause  of  UAS  licence,
made no difference insofar as the authority of the Government of  India  for
rejecting the extension of the licences.

30.   In coming to  such  a  conclusion,  the  tribunal  took  note  of  the
judgment of this Court in 2G case and also the subsequent  opinion  of  this
Court dated 27.9.2012  in  Natural  Resources  Allocation,  In  Re.  Special
Reference No.1 of 2012, (2012) 10 SCC 1 and the Press Statement made by  the
then Telecom  Minister  on  15.2.2012.   The  tribunal  also  noted  certain
recommendations made by  the  TRAI  on  Spectrum  Management  and  Licensing
Framework  dated  11.5.2012  alongwith   certain   other   regulations   and
clarifications and concluded that:

“……… show that after deep  and  careful  consideration  of  the  matter,  in
consultation  with  the  expert  statutory  authority  in  the  sector,  the
Government has framed a policy for management and dispensation  of  spectrum
in the larger public interest.  Any extension of the  expiring  licenses  is
bound  to  undermine  the  implementation  of  the  policy   and   that   is
justification enough and  sufficient  for  the  Government  to  decline  the
extension for the licenses.”


31.   On behalf of the licensees, the following submissions are made:
1.    The licences, such as the one under consideration  in  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 LICENSEES.

It is also the case of the LICENSEES that under the terms  of  the  licence,
they are entitled to seek an extension, but not a ‘renewal’ of the  licence.
 The employment of the word “extension” in  the  licence  confers  a  higher
right than the right to seek a renewal.

 The principle that the State owned resources cannot be alienated except  by
a process of auction is not a principle applicable  universally  and  is  so
clarified by this Court in Natural  Resources  Allocation,  In  Re,  Special
Reference No.1 of 2012, (2012) 10 SCC 1.

The decision of this Court in 2G case by which this Court found  fault  with
the policy of the Government of India to grant  licences  on  the  basis  of
“first come first serve” without auctioning the spectrum is applicable  only
to the licences granted in 2008 but  not  to  every  licence  granted  under
Section 4 of the Indian Telegraph Act, 1885.

 Maximization of revenue shall not be the only consideration for  the  Union
of India while deciding to hold the auction in  question.   Union  of  India
was under  an  obligation  to  ensure  continuity  of  telecom  services  to
millions of people who  are  already  utilizing  services  of  the  existing
operators. Introducing new operators at this stage  would  cause  disruption
in  the  service  to  the  customers  and  likely  to  create  an  unhealthy
competition for  access  to  spectrum  which  would  eventually  burden  the
ultimate consumer.

 Each of the LICENSEES has made a huge investment in the infrastructure  for
the purpose of providing services to its  customers.    Such  infrastructure
is created by borrowing from various banks and financial  institutions.   If
the licences of the LICENSEES are not extended, it would result  in  a  huge
wastage of the national financial and material resources.  If  the  licences
of the existing operators are not renewed, such infrastructure would  simply
go waste resulting into not only loss to the  national  resources  but  also
lead to a situation in which the recovery of the loans obtained  by  various
operators would become doubtful.

Under the TRAI Act, the authority, constituted under Section 3, is under  an
obligation to make recommendations either suo moto or on a  request  of  the
Central Government regarding the  terms  and  conditions  of  licence  to  a
service provider  and  efficient  management  of  available  spectrum.   The
authority also has a duty to “ensure compliance of terms and  conditions  of
a license”.   The  Government  of  India  in  violation  of  such  statutory
stipulation ignored the recommendation made by the  authority  and  put  the
spectrum in auction.

32.   On behalf of  the  Union  of  India,  it  is  argued  by  the  learned
Solicitor General that none of the  LICENSEES  have  any  vested  right  for
either renewal or extension of their respective licences.   Under the  terms
and conditions of the licences,  the  LICENSEES  are  only  entitled  for  a
consideration of  their  claim  for  extension  of  their  licences  period.
However, such a right is subject to the following conditions:
There must be a request from the licensee  for  such  an  extension  of  the
period of licence;
Such a request must be made during the 19th year from the effective date  of
the licence;
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;
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 submitted that even the  limited  right
of consideration created under the contract is always subject to  change  of
policy  by  the  LICENSOR  (Union  of   India)   and   its   statutory   and
constitutional obligations.  The Union of India as a matter of  policy  took
a decision not to extend the licenses of these LICENSEES, as  the  extension
of a license would necessarily imply the extension of the privilege  to  use
the  spectrum  which  had  been  bundled  with  the  original  grant.    The
Government took such a decision in the light of the decision of  this  Court
in 2G case.  The prospect of the exchequer getting a huge amount by  putting
the  spectrum  for  auction  is  a  relevant  consideration  justifying  the
decision to put the spectrum for auction.   So long as the decision  to  put
the spectrum on auction is uniformly applicable to all LICENSEES across  the
Board, such a policy decision of the Government of India prevails  over  the
right, if any of the LICENSEES to have their  claim  for  extension  of  the
license be considered either on the same terms on which  the  licenses  were
granted or on terms  which  the  LICENSEES  are  suggesting.    The  learned
Solicitor General submitted that even in terms of  the  license  conditions,
the extension can only be on “mutually agreed terms and conditions”  or  “on
terms mutually agreed”.    It is not open for the petitioners to argue  that
the LICENSOR is bound  to  grant  extension  on  terms  which  the  licensee
dictates.

34.   Now, we proceed to examine the submissions of the LICENSEES.

35.   At the outset, we agree with the  LICENSEES  that  a  licence  granted
under Section 4 of the Act is a contract between  the  Government  of  India
and the LICENSEES.

36.   In Union of India & Another v. Association of Unified Telecom  Service
Providers of India & Others, (2011) 10 SCC  543,  relying  upon  an  earlier
Constitution Bench judgment of this Court in State of Punjab  &  Another  v.
Devans Modern Breweries Ltd. & Another, (2004) 11  SCC  26,  which  in  turn
relied upon two earlier decisions of this Court in Har Shankar &  Others  v.
The Dy. Excise and Taxation Commissioner & Others,  (1975)  1  SCC  737  and
Panna Lal & Others v. State of Rajasthan & Others, (1975) 2  SCC  633,  this
Court held -
“40.   ….Thus, once a licence is issued under  the  proviso  to  sub-section
(1) of Section 4 of the  Telegraph  Act,  the  licence  becomes  a  contract
between the  licensor  and  the  licensee.    Consequently,  the  terms  and
conditions of the licence  including  the  definition  …..  are  part  of  a
contract between the licensor and the licensee.”

37.   Therefore, now it is the  settled  position  of  law  that  a  license
granted under Section 4(1) of the Telegraph Act such as the one  granted  to
each of the LICENSEES herein is a contract  between  the  LICENSOR  and  the
LICENSEE.

38.   If the licences in  question  are  nothing  but  contracts,  the  next
question would be, is there any right of extension  of  licence  created  in
favour of LICENSEE under 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 flow from two  sources,  (i)  From  the  contract,  (ii)  from  the
Constitution of India and the relevant provisions  of  the  statute  (Indian
Telegraph Act, 1885).   In the event of any conflict between  the  said  two
sets of obligations,  the  further  question  would  be  which  one  of  the
conflicting obligations prevail?

41.   Under the terms of the license, the LICENSOR  is  required  to  extend
the license only on “mutually agreed  terms  and  conditions”,  if  such  an
extension is sought in the 19th year of the currency of  the  licence.    To
test the  correctness  of  the  submission  that  under  the  contract,  the
LICENSOR is under an obligation to consider the  extension  of  licence,  we
take an example of a case where the LICENSEE does not  make  an  application
in the 19th year but makes it just a few days before the expiry of the  20th
year.   Does the LICENSEE still have  a  right  of  consideration?   In  our
opinion, the answer should be ‘No’ for two reasons; (i) that  such  a  claim
is plainly unsupported by the text of the  contract,  (ii)  the  failure  to
seek extension in the 19th year, makes the continuance  of  the  service  to
the public uncertain.   The Government of  India  cannot  afford  to  remain
waiting without making alternative arrangements, Because the  disruption  in
the  communication  in  the  modern  world  may  lead  to  many  undesirable
consequences apart from causing inconvenience  to  the  public.    Take  the
alternative possibility of  the  LICENSEE  not  making  an  application  for
extension at all because he is not  interested  in  the  extension  (a  very
unlikely scenario).   Can the  LICENSOR  insist  that  the  LICENSEE  should
continue to offer the service either on the same economic considerations  or
otherwise?  The answer seems to be plain and ‘No’.    The  language  of  the
contract – “mutually agreed terms”  –  clearly  indicates  so.    Though  it
requires an examination whether the LICENSOR i.e. the State can  compel  the
LICENSEE in a given case in exercise of its authority either legislative  or
executive.     Therefore, under the contract neither the  LICENSOR  nor  the
LICENSEE has a right to insist that other party  should  continue  with  the
contract even if such other party is not willing to continue except on  such
terms and conditions on which the other party may desire to continue.   Such
terms and conditions obviously include terms and  conditions  regarding  the
economic stipulations subject to which either of the parties is  willing  to
be in the contract.

42.   However, the LICENSOR being the Union  of  India,  its  discretion  to
stipulate terms  and  conditions  is  regulated  by  certain  constitutional
mandates apart from stipulations of any law applicable.

43.   Insofar as the constitutional mandate in  the  context  of  a  license
under Section 4 of the Telegraph Act are concerned, this Court  in  2G  case
at para 85 held as follows:
“85.  As natural resources are  public  goods,  the  doctrine  of  equality,
which 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-à-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-à-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.”

44.   The  LICENSOR/Union  of  India  does  not  have  the  freedom  to  act
whimsically.   As pointed out by  this  Court  in  2G  case  in  the  above-
extracted  paragraph,  the  authority  of  the  Union  is  fettered  by  two
constitutional limitations; firstly, that  any  decision  of  the  State  to
grant access to natural resources, which belong to the people,  must  ensure
that the people are adequately compensated and,  secondly,  the  process  by
which such access is granted must be just,  non-arbitrary  and  transparent,
vis-à-vis private parties seeking such access.

45.   By a  statutory  declaration  made  under  Section  4  of  the  Indian
Telegraph Act, 1885, it is declared that the Government of India shall  have
the  exclusive  “privilege  for  establishing,   maintaining   and   working
telegraphs” (which includes telephones).   The proviso to Section 4  of  the
said Act authorizes the Government of India to grant license  to  establish,
maintain  and  work  telegraphs  (which  includes   telephones)   “on   such
conditions and  in  consideration  of  such  payments”  as  it  thinks  fit.
Telephones include both wired and wireless telephones like  cellular  mobile
phones, the establishment and working of which necessarily  requires  access
to spectrum which again is controlled by the Government of India  as  it  is
already declared to be a natural resource by this Court.  It  can  thus,  be
seen that no person other than the Government of  India  has  any  right  to
establish, maintain and work telephones.    It is  the  exclusive  privilege
of the Government of India, which could be  permitted  to  be  exercised  by
others by a grant from the Government of India.

46.  In other words, such licences are in the nature of  largesse  from  the
State.   No doubt, the authority of the State to distribute such largess  is
always subject to  the  condition  that  the  State  must  comply  with  the
conditions of Article 14 of the Constitution i.e. the distribution  must  be
on the basis of some rational policy.   Even the language of the proviso  to
Section 4 of the Telegraph Act, which stipulates that the grant  of  license
should be “on such conditions and in consideration of such  payments  as  it
thinks fit”, must necessarily be understood  that  the  conditions  must  be
rational and the  payments  forming  the  consideration  for  the  grant  of
license must  be  non-discriminatory.    The  conditions  contained  in  the
licenses in question stipulate  that  the  term  of  the  license  could  be
extended on mutually agreed terms, if  the  Government  of  India  deems  it
expedient.   The obligations of the Government of  India  flowing  from  the
Constitution as well as a statute  necessarily  require  the  Government  of
India to grant licences as rightly pointed by the Tribunal (TDSAT) only  “in
public interest and for public good”.

47. This Court in 2G Case after elaborate discussion on the  nature  of  the
State’s authority to deal 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 detrimental to public interest”. (Para 75)

49.   In para 89, the Court concluded as follows:-
“89.  “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.”

50.      This    Court     further     held:     “………..State     and     its
agencies/instrumentalities must always adopt a rational method for  disposal
of public property …….”.   “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 national/public interest”.  (Para 95)

51.   This Court opined that a “duly  publicized  auction  conducted  fairly
and impartially is perhaps the best method for  discharging  the  burden  of
the State to ensure protection of public interest.”

52.   The conditions of licences/contracts  in  whatever  language  provided
for consideration for the extension of a licence  are  necessarily  required
to be interpreted in consonance with the obligation  of  the  LICENSOR/Union
of India under the Constitution  and  the  laws.   Otherwise,  the  contract
would be rendered void  for  being  inconsistent  with  public  policy,  the
principle expressly incorporated under Section 23  of  the  Indian  Contract
Act, 1872.

53.   The decision of the  LICENSOR  to  conduct  an  auction  for  granting
access to spectrum, obviously, complies with the second of the  requirements
specified by this Court in para 85 of the 2G Case  judgment.   The  question
whether such a decision also complies with the requirements of the first  of
the two facets mentioned therein is the issue in this batch of matters.   In
other words, the adequacy of compensation  which  the  Government  of  India
seeks to derive by holding an auction for allowing  access  to  spectrum  is
just and fair in the circumstances.

54.   The case of the LICENSEES is that such a procedure  would  promote  an
unhealthy competition among the persons aspiring to secure such a  spectrum.
 The cost of such acquisition  would  eventually  result  in  burdening  the
consumers, i.e. the users of the telephones.   Because,  higher  the  amount
spent by the LICENSEE in securing the spectrum the greater the need for  the
LICENSEE to fix higher tariff for the telephone services in  order  to  make
the service commercially viable.   Though the prospect of securing a  larger
amount for the exchequer is undeniable the same would be at the cost of  the
consumers, as the burden will ultimately be passed on  by  the  LICENSEE  to
the consumers.  The LICENSEES also submitted that in view of the  fact  that
the LICENSEES invested huge amount running into thousands of crores  in  the
last  twenty  years  of  the  working  of  the  licenses  for  building  the
infrastructure in order to provide necessary 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 facts  and  figures  in  this  regard  only  on  some
hypothetical basis is neither permissible nor justified.

56.   Let us examine the alternative scenario.   We  shall  assume  for  the
sake of argument that the impugned procedure adopted by  the  Government  of
India would ultimately result in a situation where a LICENSEE would have  no
choice but to charge higher amounts  from  the  consumers  in  order  to  be
commercially viable.  Whether such  a  result  is  desirable  or  not  is  a
question which falls within the realm of policy choices  of  the  Government
of India.  By all the established legal principles - this  Court  would  not
embark upon an examination of the wisdom of such policy choices.

57.   At this stage, we must also deal  with  certain  submissions  made  by
Shri K.K. Venugopal,  learned  senior  counsel  appearing  for  one  of  the
appellants.  The phrase “if deemed expedient” occurring  in  Clause  4.1  of
the Licence must be understood in the light of  the  interpretation  of  the
expression “expedient” in Hotel Sea Gull v. State of West Bengal  &  Others,
(2002) 4 SCC 1 wherein it was held  by  this  Court  to  mean  “whatever  is
suitable and appropriate for  any  reason  for  the  accomplishment  of  the
specified object”.  It is argued that the question of extension  of  licence
must be decided by the Government of India on the  basis  of  objective  and
rational criteria by taking into account relevant  materials  and  eschewing
irrelevant material. Learned senior counsel  in  his  written  submission[6]
gave certain facts and figures  which  according  to  him  are  relevant  in
coming to a conclusion whether it would be expedient to  extend  the  period
of licence.  It is  also  submitted  that  the  phrase  “on  terms  mutually
agreed” must also be understood to  mean  that  the  Government  of  India’s
decision for extension of  the  licences  be  based  only  on  relevant  and
objective criteria  such  as  “the  quality,  affordability,  reach  of  the
services provided by the petitioner and the investments made  by  it  during
the initial 20  year  period,  being  satisfactory,  the  license  would  be
extended by 10 years at one time”. (Written Submission)

58.   We are of the opinion that the  submissions  of  Shri  Venugopal  must
carry a great weight if the LICENSOR’S  (Government  of  India)  obligations
are regulated purely by the terms of the contract. But  as  already  noticed
by  us,  the  LICENSOR’S  obligations  are  not  simply  confined   to   the
contract/license.  They also flow from the Constitution and the laws of  the
land. Obviously, the obligations flowing from the Constitution  stand  on  a
higher footing and it is the Government  of  India’s  duty  to  satisfy  the
obligations flowing from the Constitution  and  the  laws  of  the  land  in
preference to obligations flowing from a contract.  It  is  a  well  settled
principle of law that where there is a conflict between obligations  flowing
from a contract and those flowing from  the  law,  the  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  Authority[7]
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 corporate with all necessary  and
incidental  powers  under  sub-section  (2)[9].  The  composition  and   the
qualification required of the persons to be  appointed  as  the  Chairperson
and the Members of  TRAI,  their  respective  powers  and  other  incidental
matters are prescribed in Chapter II of the Act.

61.   Section 11 (which occurs in Chapter III) enumerates the  functions  of
TRAI.  The Section authorises the authority to make  recommendations  either
suo motu or on  requests  made  by  the  LICENSOR  on  the  various  matters
enumerated therein. Relevant among them are: (i)  terms  and  conditions  of
licence to a service provider; (ii) measures to facilitate  competition  and
promote efficiency in the operation of telecommunications services so as  to
facilitate growth in such services; (iii) efficient management of  available
spectrum; and (iv) ensure compliance of terms  and  conditions  of  licence,
are some of the functions which are relevant in the context of  the  present
controversy.

62.   On 16.06.2006, the Government constituted a Committee headed  by  Shri
Subodh Kumar, Additional Secretary, Department of  Telecommunications.   The
Committee consisted of technical experts from  different  institutions,  the
Ministry of Defence etc. and included representatives of the private  mobile
telephone  service  providers.   The  Committee  submitted  its  report   on
13.05.2009 which contained many  recommendations.   The  Committee  examined
the role of the Government and the goals before the government and  recorded
as follows:
“As the custodian of radio  spectrum,  the  government  must  satisfactorily
address a number of goals for spectrum  management.   These  are:  efficient
utilization of the scarce resource,  optimal  revenue  generation,  for  the
public exchequer, sufficient competition in the telecom  market,  and  rapid
diffusion of telecom services.  These  goals  are  synergistic  as  well  as
conflicting.”
                                                         (emphasis supplied)

It recommended delinking of  the  spectrum  allocation  from  licensing  and
recommended  that  “the  way  forward  should  be  to  move  away  from   an
administratively determined criteria to a market-driven approach.  A market-
determined mechanism for spectrum allocation will ensure that spectrum  goes
to the entity that put the highest value on spectrum, and is best placed  to
ensure its optimal use”.

63.   The Government of India thought it fit to seek the opinion of TRAI  on
the  recommendation  of  Subodh  Kumar  Committee  by   its   letter   dated
07.07.2009.  In response,  TRAI  submitted  a  very  detailed  report  dated
11.05.2010.

64.   In the impugned judgment of the TDSAT, it is  recorded[10]  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
TRAI[11].

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 be delinked from the  licence.  Spectrum,  if  required,  will
have to be obtained separately.  A  final  view  on  implementation  of  the
Unified License Regime would be taken after receipt of  detailed  Guidelines
and Terms & Conditions from TRAI for  Unified  Licence  including  migration
path for all existing licence(s) to Unified Licence.

3.          In the event of any auction of spectrum pending finalisation  of
the Unified Licensing Regime, UAS licence without  spectrum  may  be  issued
which could be subject to a requirement to migrate  to  Unified  licence  as
and when the regime is put  in  place.  Detailed  guidelines  for  such  UAS
licence   without   spectrum   would   be   finalised   after   receipt   of
recommendations of TRAI in this regard.”

      XXX        XXX         XXX        XXX        XXX

8.          The validity  of  existing  UAS  (&  CMTS  and  Basic  services)
licences may be extended for another 10  years  at  one  time,  as  per  the
provisions of the extant licensing regime with suitable Terms  &  Conditions
so as not to imply automatic continuance of  existing  license  and  related
conditions including quantum and price of any spectrum allocated.

9.          On extension, the UAS licensee will be required  to  pay  a  fee
which will be Rs.2 crore for  Metro  and  ‘A’  Circles,  Rs.1 crore for  ‘B’
circles and Rs.0.5 crore for ‘C’  circles.  This  fee  does  not  cover  the
value of spectrum, which shall be paid for separately. While  extending  the
licence, the licensee shall be assigned spectrum only up to  the  prescribed
limit or the amount  of  spectrum  assigned  to  it  before  the  extension,
whichever is less. Spectrum assigned by the Government to  the  licensee  in
excess of the Prescribed Limit shall be withdrawn.”

the submission of LICENSEES is that the only clear decisions taken are  that
(i) in future only unified licences will be granted and (ii) the  allocation
of spectrum will be delinked from the licence.  It is clear  that  no  final
policy decision was taken by the Government regarding the method and  manner
of allocation of spectrum even with respect to licences  to  be  granted  in
future.  Insofar as the existing licences are concerned, the policy  of  the
Government is that they are required to extended for  another  10  years  as
per the provisions of the “extant licensing regime with suitable  terms  and
conditions” etc.  Therefore, the decision of  the  Government  of  India  to
auction the right of  spectrum  in  the  cases  of  those  areas  where  the
LICENSEES held licences so far is not only inconsistent with the  terms  and
conditions of the policy announced on 15.02.2012 as  the  impugned  decision
is not only in consistent with the “extant  licensing  regime”  but  also  a
decision taken without consulting TRAI – a requirement  which  is  mandatory
under Section 11(1)(a)(ii)[12].   The TRAI Act mandates that the  Government
of  India  “shall  seek  the  recommendations  of   the   Authority”   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  15.10.2014[13]  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  and  applying  the  same  to
existing LICENSEES would not only be contrary to the  tenor  of  the  policy
statement but also make it retrospective in operation.

71.   On the other hand, learned Solicitor General argued as follows:
“The reliance by the operators on stray observations  by  TRAI  is  entirely
misplaced.  The Petitioners have relied  on  observations  of  TRAI  without
placing its final  recommendations.   In  its  final  recommendations  dated
24.11.2014, TRAI did not recommend postponement  of  the  auction.   In  any
event, per the first proviso to Section  11(1)  of  the  Telecom  Regulatory
Authority of India Act, 1997, even the final  recommendations  of  TRAI  are
not binding on the Government.”
                                                  (written submission)

72.   We  shall  first  deal  with  the  obligation  of  the  Board  on  the
“retrospectivity of the policy”.  We assume for the sake  of  argument  that
the impugned decision of the Union of India  is  in  fact  contrary  to  the
tenor of the policy statement dated 15.02.2012.  Even  then,  in  our  view,
the impugned action cannot be faulted because the policy  statement  insofar
as it seeks to apply only for the allocation of spectrum in future would  be
contrary to the decision of this Court in 2G case and void to that extent.

73.   We now examine the other part of the submission of the LICENSEES.   An
analysis of the scheme of Section 11 of the TRAI Act is necessary.   Section
11(1)[14] imposes two legal obligations  on  TRAI.   Under  sub-section  (a)
TRAI is obliged to  make  recommendations  with  respect  to  eight  matters
enumerated therein either suo motu or on a request of the  LICENSOR.   Under
sub-section (b), TRAI is obliged to discharge  various  functions  numbering
nine specified thereunder.

74.   For example, under  Section  11(1)(a)(ii)  while  it  is  one  of  the
functions of the TRAI  to  make  recommendations  regarding  the  terms  and
conditions of a licence to a service  provider,  whereas  under  sub-section
(b)(i), it is the function of the TRAI to ensure  compliance  of  terms  and
conditions of the LICENSEES.

75.   The first proviso to sub-section 11(1) makes a  categoric  declaration
that the recommendations of the TRAI  with  respect  to  matters  enumerated
under  sub-section  (1)(a)  “shall  not  be   binding   upon   the   Central
Government”.
PROVIDED that the recommendations of the Authority specified in  clause  (a)
of this sub-section shall not be binding upon the Central Government:

No doubt, the second proviso to Section 11(1) mandates that  the  Government
of India shall seek the recommendations of the TRAI in  respect  of  certain
matters specified under clause (a) in respect of new licence to  be  issued.
One of such items with reference to which such consultation is mandatory  is
the terms and conditions of a license to a service provider  [under  Section
11(1)(a)(ii)].
“PROVIDED   FURTHER   that   the   Central   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 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.”

From the tenor of the said proviso, it can be seen that once  recommendation
is made by TRAI [with reference to matters enumerated in  clause  (a)],  the
Government of India may either accept the recommendation or may  come  to  a
prima facie conclusion that such a  recommendation  cannot  be  accepted  or
needs certain modifications.  Upon reaching  such  prima  facie  conclusion,
the Government of India is required to refer the matter  back  to  TRAI  and
TRAI is obliged to reconsider its earlier  recommendation  and  forward  its
opinion to the Government of India.   On  receipt  of  such  a  reconsidered
opinion of TRAI, the Government  of  India  is  required  to  take  a  final
decision.  In our opinion, the fifth proviso only stipulates  the  procedure
to be followed by both the bodies – TRAI and the Government of  India  –  in
the decision making process but it does not whittle down the vigour  of  the
first proviso which in no certain terms  declares  that  the  Government  of
India  is  not  bound  by  the  opinion  of  the   TRAI   insofar   as   the
recommendations made by TRAI with respect to matters falling  under  Section
11(1)(a).

76.   We do not propose to  examine  the  submission  of  learned  Solicitor
General that the recommendation of TRAI dated 15.10.2014 relied upon by  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).  As pointed out by  Subodh  Kumar  Committee,  the  Government  is
required to address the multiple  goals  for  spectrum  management  such  as
efficient utilisation, optimal revenue generation,  sufficient  competition,
obviously to avoid monopoly in the telecom market etc.  As rightly  observed
by Subodh Kumar Committee, these goals are  simultaneously  “synergistic  as
well as  conflicting”.   Therefore,  the  Parliament  stipulated  that  such
issues are initially examined by an expert  body  leaving  it  open  to  the
Government to take a final  decision  as  to  which  one  of  these  various
‘synergistic as well as conflicting’ factors  must  outweigh  by  the  other
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.  M/s.  S.N.
Govinda Prabhu and Bros. & Others, (1986) 4 SCC 198  and  Natural  Resources
Allocation, In Re.  Special  Reference  No.1  of  2012,  (2012)  10  SCC  1.
Learned counsel for the LICENSEES relied heavily on these two  decisions  in
support of their  submissions  that:  (i)  alienation  of  assets  owned  or
controlled by the State need not necessarily be only through the process  of
public auction, and (ii) profiteering should not be the prime  consideration
of the State or State-owned bodies.

79.   In Kerala State Electricity Board (supra), this Court opined  that  “a
public utility monopoly undertaking …….. may not be driven  by  pure  profit
motive – not that profit is to be shunned but that service  and  not  profit
should inform its actions. It is not the function of the Board to so  manage
its affairs as to earn the  maximum  profit”.   It  was  a  case  where  the
enhancement of electricity tariffs under the Electricity Supplies Act,  1948
was challenged.  The principal ground of attach which was  accepted  by  the
High Court was that the Kerala State Electricity  Board  acted  outside  its
statutory  authority[15].   The   judgment   essentially   turned   on   the
interpretation of the language of the Electricity Supplies Act.

80.   The said Act stipulated the principles on the basis of  which  tariffs
are required to be fixed and factors which are required  to  be  taken  into
consideration.  It also obliged the State Electricity Board to  conduct  its
operations in an economical viable  manner.   Section  51  of  the  Act,  as
amended from time to time (in 1978 and 1983) eventually stipulated –
“to provide that each Board shall have a surplus which  shall  not  be  less
than three per cent, or such higher percentage as the State  Government  may
specify, of the value of the fixed assets of the Board  in  service  at  the
beginning of the year;”

Interpreting the said section, this Court held
“We are of the view that the  failure  of  the  Government  to  specify  the
surplus which may be generated by the Board cannot prevent  the  Board  from
generating a  surplus  after  meeting  the  expenses  required  to  be  met.
Perhaps, the quantum of  surplus  may  not  exceed  what  a  prudent  public
service undertaking may be expected to generate  with  out  sacrificing  the
interests it is expected to serve and without being  obsessed  by  the  pure
profit motive of the private entrepreneur.  The  Board  may  not  allow  its
character as a public utility undertaking to  be  changed  into  that  of  a
profit  motivated  private  trading  or  manufacturing  house.  Neither  the
tariffs nor the resulting surplus may reach such heights as to lead  to  the
inevitable  conclusion  that  the  Board  has  shed  A  its  public  utility
character. When that happens the Court  may  strike  down  the  revision  of
tariffs as plainly arbitrary. But not until  then.  Not,  merely  because  a
surplus has been generated, a surplus which can by no means be  said  to  be
extravagant. The court will then refrain from 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  public  character”
and the tariffs are “extravagant”.

(ii)  Persons seeking to avail the benefit of the supply of electricity  are
left with no option but to make payments  in  accordance  with  the  tariffs
fixed by  the  Electricity  Board,  because  the  electricity  board  had  a
monopoly over the generation and distribution of electricity.

82.   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 market forces.  Because  there
are people who are willing to acquire such a right paying a higher price  on
the assessment that they would be able to carry on the  business  profitably
even  after  paying  higher  amounts  for  acquisition  of  spectrum.    The
LICENSEES are corporate houses with enormous economic power,  which  enables
them to secure adequate expert advice in the matter of  financial  planning.
We cannot believe that they would  make  any  investment  without  making  a
reasonable assessment of the possible return on  such  investment.     There
is no compulsion by the State in this regard.  Therefore, in our  view,  the
reliance placed on the Kerala State  Electricity  Board  (supra)  is  wholly
untenable.

83.   Reliance is placed on the observations made in the  Special  Reference
(supra) in paragraphs 82 and 146  in  support  of  the  submissions  of  the
LICENSEES that auction is  not  the  only  method  of  disposal  of  natural
resources.  In our opinion, the LICENSEES’ reliance on these  paragraphs  is
wholly misconceived.  These two paragraphs, instead of supporting  the  case
of the LICENSEES, are destructive of their contention.
“82.  Further, the final conclusions summarized  in  paragraph  102  of  the
judgment (SCC) in 2G case make no  mention  about  auction  being  the  only
permissible and intra vires method for disposal of  natural  resources;  the
findings are limited to  the  case  of  spectrum.  In  case  the  Court  had
actually enunciated, as a proposition of  law,  that  auction  is  the  only
permissible method or mode for alienation/allotment  of  natural  resources,
the same would have found a mention  in  the  summary  at  the  end  of  the
judgment.

146.  To summarize in the context of the present Reference, it needs  to  be
emphasized that this  Court  cannot  conduct  a  comparative  study  of  the
various methods of distribution of natural resources and  suggest  the  most
efficacious mode, if there is one universal efficacious method in the  first
place. It respects  the  mandate  and  wisdom  of  the  executive  for  such
matters. The methodology pertaining to  disposal  of  natural  resources  is
clearly an 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-à-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  will  not
compare which policy is fairer than the other, but, if a policy  or  law  is
patently  unfair  to  the  extent  that  it  falls  foul  of  the   fairness
requirement of Article 14 of the Constitution, the Court would not  hesitate
in striking it down.
                                                         (emphasis supplied)

84.   In para 82, this Court was categoric that  the  findings  of  2G  case
were limited to the case of spectrum.  Similarly, in para  146,  this  Court
observed that this Court “respects the mandate and wisdom of the  executive”
in the matter of choosing  the  most  suitable  method  of  distribution  of
natural resources.  This Court noted that this is clearly  a  matter  of  an
economic policy entailing an intricate economic choice and the  Court  lacks
necessary expertise to make such choice.  In the light  of  the  observation
in para 82 that at least in the matter of disposal of spectrum,  auction  is
the only “permissible and intra vires  method  for  disposal”.    Therefore,
the submission of the LICENSEES is required to be rejected.

85.   For all the above-mentioned reasons, we see no merit in these  appeals
and writ petitions.   Therefore, all the  appeals  and  writ  petitions  are
dismissed.   There shall be no order as to costs.


                                                             ….………………………….J.
                                                      (J. Chelameswar)


                                                             …….……………………….J.
                                         (R.K. Agrawal)
New Delhi;
May 14, 2015
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[1]     Section  2.(1)  ‘wireless  communication’  means  any  transmission,
omission or reception of signs, signals,  writing,  images  and  sounds,  or
intelligence of any nature by means  of  electricity,  magnetism,  or  Radio
waves or Hertzian waves, without  the  use  of  wires  or  other  continuous
electrical conductors between the transmitting and the receiving apparatus;
[2]    Alexander Graham Bell is commonly  credited  with  the  invention  of
telephone.  He obtained a patent in 1876 for an apparatus  for  transmitting
vocal or other sounds electrically.  There is some  controversy  as  to  who
was the real inventor of telephone.   There is a very  strong  claim  by  an
Italian scientist called Antonio Meucci.  A resolution  was  passed  by  the
United States House of Representatives in 2002 recognising that  Meucci  did
pioneering work on the development of telephone  and  “if  Meucci  had  been
able to pay $ 10 fee to maintain a caveat after 1874, no patent  could  have
been issued to Bell”.

[3]     3.(1AA) ‘telegraph’ means any  appliance,  instrument,  material  or
apparatus used or capable of use for transmission  or  reception  of  signs,
signals, writing, images and sounds or intelligence of any nature  by  wire,
visual or other electro-magnetic emissions, radio waves or  Hertzian  waves,
galvanic, electric or magnetic means.
      Explanation.—’Radio waves’ or ‘Hertzian waves’  means  electromagnetic
waves of frequencies lower than 3,000 giga-cycles per second  propagated  in
space without artificial guide;
                                  -Substituted and re-numbered  for  Section
3(1) by the Act 15 of 1961
[4]      Resolution of problems of existing operators
      The New Policy Framework which seeks  to  significantly  redefine  the
competitive nature of industry, would be applicable to new LICENCEES.

      There are, however, multiple licences that have  been  issued  by  the
Government for  cellular  mobile  services,  basic  services,  radio  paging
services, internet services  etc.   It  is  the  Government’s  intention  to
satisfactorily resolve the problems being faced by existing operators  in  a
manner which  is  consistent  with  their  contractual  obligations  and  is
legally tenable.
[5]    3.  Duration of Licence

      3.1   This LICENCE shall be valid for a period of 20  years  from  the
effective date unless revoked earlier for reasons as specified elsewhere  in
the document.

      4.  Extension of Licence

      4.1   The LICENSOR may extend, if  deemed  expedient,  the  period  of
LICENSE by 10 years at one time, upon  request  of  the  LICENSEE,  if  made
during 19th year of the  License  period  on  terms  mutually  agreed.   The
decision of  the  LICENSOR  shall  be  final  in  regard  to  the  grant  of
extension.

[6]     It is submitted that through the past 19 years and  even  now  on  a
continuing basis, Writ Petitioners have been faithfully operating their  UAS
license and have, as of 30 of June 2014,   invested  over  Rs.19,545  crores
setting up a state of the art mobile network in these 6  circles;  in  three
months period between April and June of financial year 2014 – 15 alone,  the
investments made by the Petitioner was Rs.544 crores,  the  Petitioners  are
providing world class service to over 717 lakh subscribers as of June  2014,
the Petitioner has built an average subscriber market share of 23#  (average
for six circles  –  the  shares  range  between  19#  and  32#  for  various
circles),  the  petition  is  offering  affordable  tariffs  and  innovative
services to consumers, the  Petitioner  is  providing  direct  and  indirect
employment to thousands of people, in last 3.5 years  alone  the  Petitioner
has contributed over Rs.11,035 crores to the government exchequer by way  of
licence fee, Spectrum charges, direct and indirect taxes,  etcetera  between
financial  year  2011-12  and  financial  year  2014-15  (upto  June  2014).
Petitioners have thus altered  their  position  and  invested  thousands  of
Crores based on Government promise/contract.
[7]    Section 2(b). “Authority” means the Telecom Regulatory  Authority  of
India established under sub-section (1) of section 3.
[8]    “Section 3. Establishment and incorporation of Authority.—  (1)  With
effect from such  date  as  the  Central  Government  may,  by  notification
appoint, there shall be established,  for  the  purposes  of  this  Act,  an
Authority to be called the Telecom Regulatory Authority of India.

[9]     Section 3(2)   The Authority shall be a body corporate by  the  name
aforesaid, having perpetual  succession  and  a  common  seal,  with  power,
subject to the provisions of this Act,  to  acquire,  hold  and  dispose  of
property, both movable and immovable, and to contract,  and  shall,  by  the
said name, sue or be sued.

[10]   See para 32 of the impugned order
[11]   “Recommendations  of  TRAI  on  ‘Spectrum  Management  and  Licensing
Framework’ of May  11,  2010  along  with  its  further  recommendations  of
February 08, 2011,  clarifications  of  May  03,  2011  and  response  dated
November  03,  2011  were  considered  by  the  Telecom  Commission.   After
consideration  of  the  recommendations  of  the  Telecom  Commission,   the
Department of Telecommunications has taken following decisions: … ”
[12]   Section 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)   make recommendations, either suo motu or on a request  from  the
licensor, on the following matters, namely:—

      (ii)  terms and conditions of license to a service provider;”
[13]     “2.5 ……………… In sum, the two crucial facts are:
      (i)  The supply of spectrum is constrained; and
      (ii) The auction is unusual in that licences are expiring and this
knowledge is a priori known to all TSPs, enabling strategic decision-making
on the latter’s part.

      2.6   This has important consequences.  First,  in  any  situation  of
short supply, market prices will  rise.   If  any  new  entrant  or  another
existing licensee enters the fray, one outcome is  certain;  there  will  be
frenzied bidding viz. a race to the top.  A  similar  escalation  of  prices
was witnessed in the May 2910 auction when 3G spectrum  was  auctioned;  the
short supply of 3G spectrum led to  a  massive  increase  over  the  reserve
price.  But, as pointed out  above,  in  the  upcoming  auction,  the  short
supply of spectrum is but one dimension of the problem.  The other  is  that
incumbent operators would be willing  to  pay  huge  sums  to  retain  their
spectrum so as to protect their investments  made  in  the  LSA  and  ensure
continuity of business.  And, all industrial rivals know this; whish is  why
even a non-serious bidder is potentially in a position to push up the  final
auction price.

      2.7   Second,  there  are  only  two  possible  outcomes  of  such  an
auction: (a) the  incumbents  win  back  the  900  MHz  spectrum  albeit  at
significantly high prices; or, (b) one or both incumbent operators lose  the
900 MHz spectrum which  is  won  by  two  or  more  other  bidders.   If  an
incumbent operator wins back the 900 MHz spectrum but at a very high  price,
it will seriously limit its ability to invest viz.  given  the  indebtedness
of most TSPs and the availability of just a  limited  amount  of  resources,
whatever  extra  is  paid  for  spectrum,  in  effect,  reduces  the  amount
available for investment in the LSA.  The second  possibility  is  that  the
incumbent loses the  spectrum.   The  implications  here  are  even  graver.
There will be immediate discontinuation of service in the LSA.  And  a  huge
loss in terms of the value of investment already made in that LSA.

      2.8   Once services are discontinued, and a new entrant(s)  come  into
the LSA, they will need time to  roll-out  services.   This  will  obviously
pose problems for consumers.   Moreover,  if  existing  consumers  port  out
under Mobile Number Portability (MNP) to another TSP in the same LSA,  then,
in effect, the auction would have led to a  consolidation  of  market  power
(dominance) of  that  TSP.   (Leave  aside  the  fact  that  it  effectively
deprives consumers of choice of service provider).

      2.9   What is more, there are potential  spillover  effects  to  other
sectors.  Given the larger indebtedness of many TSPs to public sector  banks
 (and private sector banks), an exit from an LSA raises  the  prospect  that
some part of that TSP’s debt could  become  a  Non-Performing  Asset  (NPA).
So, what the Government gains in terms of higher prices of spectrum  because
of short supply, may also lead to large NPAs of public  sector  banks  which
will ultimately require Government budgetary support viz. the  socialization
of public costs.

      2.10  to sum up; there is a very real risk that bidding could lead  to
an escalation of auction prices far beyond any reasonable  value.   Further,
even if the incumbents win back the spectrum, there will  be  serious  limit
to the investment ability of incumbents.   And,  if  an  incumbent  operator
loses out to a new entrant (or, another licensee),  the  discontinuation  of
services would pose  problems  for  consumers  leave  aside  the  losses  on
capital investment made by the incumbent TSP in the LSA……….”

[14]   11 Functions of Authority (1) Notwithstanding anything  contained  in
the Indian Telegraph Act, 1885 , the functions of the Authority shall be  to

      (a) 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  by  the  service  providers  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) notwithstanding anything contained in the  terms  and  conditions
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 inter-connect 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;

      (c) levy fees and other charges at such rates and in respect  of  such
services as may be determined by regulations;

      (d) perform such other functions  including  such  administrative  and
financial functions as may be entrusted to it by the Central  Government  or
as may be necessary to carry out the provisions of this Act:
[15]    The principal ground of challenge and that  which  was  accepted  by
the High Court was that the Kerala State  Electricity  Board  acted  outside
its statutory authority by  formulating a price structure intended to  yield
sufficient revenue to offset not merely the expenditure properly  chargeable
to the revenue account for the year as contemplated by  Section  59  of  the
Act but also expenditure not so properly chargeable.  Had  Section  59  been
strictly followed and  had  items  of  expenditure  not  chargeable  to  the
revenue account for the year been excluded, the revised  tariff  would  have
resulted in the generation of a surplus  far  beyond  the  contemplation  of
Section 59 of the Act.

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