LAW FOR ALL : Since the appellant was in pari delicto with DoT and the then officials of the Union government and Since The appellant was the beneficiary of the ―First Come First Serve‖ policy which was intended to favour a group of private bidding entities at the cost of the public exchequer , is not entitled for refund of alleged entry fee when the policy was quashed by Apex Court

Thursday, March 3, 2022

Since the appellant was in pari delicto with DoT and the then officials of the Union government and Since The appellant was the beneficiary of the ―First Come First Serve‖ policy which was intended to favour a group of private bidding entities at the cost of the public exchequer , is not entitled for refund of alleged entry fee when the policy was quashed by Apex Court

Since the appellant was in pari delicto with DoT and the then officials of the Union government and Since The appellant was the beneficiary of the ―First Come First Serve‖ policy which was intended to favour a group of private bidding entities at the cost of the public exchequer , is not entitled for refund of alleged entry fee when the policy was quashed by Apex Court

Claim a refund of Rs.1454.94 crores representing the Entry Fee (together with interest) paid by it for 2G licences for twenty-one service areas -

On 2 February 2012, this Court by its judgment in CPIL (supra) declared that the policy of the Union government for allocation of 2G spectrum on a ―First Come First Serve‖ basis was illegal. As a consequence, the UASLs which were granted by the Union government were quashed. On 25 May 2012, the appellant instituted a petition5 before the TDSAT seeking, among other things, a refund of the Entry Fee of Rs 1454.94 crores, inclusive of interest.-

By its judgment dated 16 September 2015, the TDSAT dismissed the First Telecom Petition holding, inter alia, that: (i) The quashing of the appellant’s licences by this Court in its judgment in CPIL (supra) cannot be equated with the UASL agreements becoming void within 5 Petition No 329 of 2012 ("First Telecom Petition‖) PART A 5 the meaning of Section 65 of the Indian Contract Act 18726 . This Court quashed the UASLs since it found the Union government’s policy of ―First Come First Serve‖ to be illegal and arbitrary. Hence, the appellant cannot claim restitution under Section 65; (ii) The quashing of the appellant’s licences by this Court in its judgment in CPIL (supra) cannot be brought under the Indian Contract Act, since the UASL agreements had not become void under Sections 23 and 56 of the Indian Contract Act; and (iii) Even assuming that the appellant’s UASL agreements became void under the Indian Contract Act, its claim for restitution under Section 65 would be governed by the principle of in pari delicto potio rest condition defendentis (in equal fault, better is the condition of the possessor). A refund of the Entry Fee could not be made until the possibility of the appellant being in pari delicto was completely effaced. When the TDSAT delivered its judgment, the appellant was facing trial before the Special Judge, CBI for charges under Section 120-B and 420 of the Indian Penal Code 1860 in a case relating to the grant of UASLs. By a judgment dated 21 December 2017, the appellant was acquitted of criminal charges by the Special Judge, CBI. The Central Bureau of Investigation has filed petition for leave to appeal against the order of acquittal, which is presently pending before the Delhi High Court.

Aggrieved by the judgment of the TDSAT dated 16 September 2015, the appellant moved this Court in Civil Appeal Nos 1447-1467 of 2016. On 13 May 2016, the appellant sought liberty of this Court to withdraw the civil appeals, and to approach this Court once again if it became so necessary. Leave was accordingly granted by this Court.

The appellant then instituted another petition before the TDSAT7 raising the issue of a refund of the Entry Fee, on the ground that it had been exonerated by the Special Judge, CBI. By its judgment dated 11 December 2018, the TDSAT dismissed the Second Telecom Petition noting that the appellant had made a second attempt for claiming the same relief which had been sought earlier in the First Telecom Petition. It further held that had the TDSAT sought to provide the appellant with the remedy of approaching it after the conclusion of the trial before the Special Judge, CBI, it would have indicated it in its judgment. Finally, it was also noted that this Court, through its order dated 13 May 2016, did not grant the appellant the leave to approach the TDSAT but only to approach this Court.

The judgment dated 11 December 2018 has given rise to the filing of the second set of civil appeals 8 by the appellant. The appellant also moved a Miscellaneous Application 9 in Civil Appeal Nos 1447-1467 of 2016 seeking permission for the revival of the earlier civil appeals, which had been permitted to be withdrawn on 13 May 2016.

By an order dated 7 January 2020, the Miscellaneous Applications seeking the revival of the first set of civil appeals were allowed, keeping open all the contentions including the contentions of the respondents based on the earlier order dated 13 May 2016.

apex court held that In the present case, the appellant has been held to be in pari delicto. The decision of this Court in CPIL (supra) leaves no manner of doubt that the appellant was among the group of licensees who were found to be complicit in obtaining benefits under the ―First Come First Serve‖ policy of the Union government at the cost of the public exchequer. In such a situation and following the well-settled principles which have been enunciated above, the appellant could not be held entitled to claim a refund of its Entry Fee.

The appellant has been the beneficiary of a manifestly arbitrary policy which was adopted by the Union government and which was quashed in the decision of this Court in CPIL (supra). That being the position, the appellant would not be entitled to a refund of the Entry Fee even on the principle of restitution embodied in Section 65 of the Indian Contract Act.

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos. 1447-1467 of 2016

Loop Telecom and Trading Limited …Appellant

Versus

Union of India and Anr. …Respondents

And With

Civil Appeal No. 893 of 2019

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

A The Appeals .................................................................................................... 3

B Submissions of Counsel.................................................................................. 7

C The CPIL judgment ....................................................................................... 22

D The claim for refund of Entry Fee.................................................................. 31

E Jurisdiction of TDSAT.................................................................................... 34

F The claim founded on frustration and restitution........................................... 50

G The policy of set off ....................................................................................... 65

H Conclusion..................................................................................................... 69

PART A

A The Appeals

1 These appeals under Section 18 of the Telecom Regulatory Authority of India

Act 19971

arise from the judgments dated 16 September 2015 and 11 December

2018 of the Telecom Disputes Settlement and Appellate Tribunal2

. The appellant

claimed a refund of Rs 1454.94 crores representing the Entry Fee (together with

interest) paid by it for 2G licences for twenty-one service areas. By the judgment of

this Court in Centre for Public Interest Litigation v. Union of India3

, the 2G

licences which were granted by the Union of India, including to the appellant, were

quashed. The appellant claims to be entitled to the refund of its Entry Fee on, as it

contends, ―well settled principles of civil, contractual and constitutional law‖.

2 The appellant applied for the grant of Unified Access Service Licences

for

twenty-one service areas on 3 September 2007. A Letter of Intent was issued. The

appellant paid the circle wise Entry Fee of Rs 1.1 crores and furnished a

Performance Bank Guarantee and Financial Bank Guarantee for the twenty-one

areas. The appellant entered into UASL agreements on 3 March 2008 for the

twenty-one service areas with the respondent, which came into effect from 25

January 2008. Among the conditions which were stipulated in the UASL

agreements, those governing the duration of the licence and the Entry Fee were in

the following terms:

―TRAI Act‖

―TDSAT‖

(2012) 3 SCC 1 (―CPIL‖)

―UASL‖

PART A

―3. Duration of License

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.

[…]

18. FEES PAYABLE

18.1 Entry Fee:

One Time non-refundable Entry Fee of Rs 1.1 crore has been

paid by the LICENSEE prior to signing of this License

agreement.‖

3 On 2 February 2012, this Court by its judgment in CPIL (supra) declared that

the policy of the Union government for allocation of 2G spectrum on a ―First Come

First Serve‖ basis was illegal. As a consequence, the UASLs which were granted by

the Union government were quashed. On 25 May 2012, the appellant instituted a

petition5

before the TDSAT seeking, among other things, a refund of the Entry Fee

of Rs 1454.94 crores, inclusive of interest. The appellant has stated that on 1 June

2012 it shut down its operations after porting out all its subscribers.

4 By its judgment dated 16 September 2015, the TDSAT dismissed the First

Telecom Petition holding, inter alia, that:

(i) The quashing of the appellant’s licences by this Court in its judgment in CPIL

(supra) cannot be equated with the UASL agreements becoming void within

Petition No 329 of 2012 ("First Telecom Petition‖)

PART A

the meaning of Section 65 of the Indian Contract Act 18726

. This Court

quashed the UASLs since it found the Union government’s policy of ―First

Come First Serve‖ to be illegal and arbitrary. Hence, the appellant cannot

claim restitution under Section 65;

(ii) The quashing of the appellant’s licences by this Court in its judgment in CPIL

(supra) cannot be brought under the Indian Contract Act, since the UASL

agreements had not become void under Sections 23 and 56 of the Indian

Contract Act; and

(iii) Even assuming that the appellant’s UASL agreements became void under the

Indian Contract Act, its claim for restitution under Section 65 would be

governed by the principle of in pari delicto potio rest condition defendentis (in

equal fault, better is the condition of the possessor). A refund of the Entry Fee

could not be made until the possibility of the appellant being in pari delicto

was completely effaced. When the TDSAT delivered its judgment, the

appellant was facing trial before the Special Judge, CBI for charges under

Section 120-B and 420 of the Indian Penal Code 1860 in a case relating to

the grant of UASLs.

By a judgment dated 21 December 2017, the appellant was acquitted of criminal

charges by the Special Judge, CBI. The Central Bureau of Investigation has filed a

―Indian Contract Act‖

PART A

petition for leave to appeal against the order of acquittal, which is presently pending

before the Delhi High Court.

5 Aggrieved by the judgment of the TDSAT dated 16 September 2015, the

appellant moved this Court in Civil Appeal Nos 1447-1467 of 2016. On 13 May

2016, the appellant sought liberty of this Court to withdraw the civil appeals, and to

approach this Court once again if it became so necessary. Leave was accordingly

granted by this Court.

6 The appellant then instituted another petition before the TDSAT7

raising the

issue of a refund of the Entry Fee, on the ground that it had been exonerated by the

Special Judge, CBI. By its judgment dated 11 December 2018, the TDSAT

dismissed the Second Telecom Petition noting that the appellant had made a

second attempt for claiming the same relief which had been sought earlier in the

First Telecom Petition. It further held that had the TDSAT sought to provide the

appellant with the remedy of approaching it after the conclusion of the trial before

the Special Judge, CBI, it would have indicated it in its judgment. Finally, it was also

noted that this Court, through its order dated 13 May 2016, did not grant the

appellant the leave to approach the TDSAT but only to approach this Court.

Telecom Petition No 63 of 2018 ("Second Telecom Petition‖)

PART B

The judgment dated 11 December 2018 has given rise to the filing of the second set

of civil appeals

by the appellant. The appellant also moved a Miscellaneous

Application

in Civil Appeal Nos 1447-1467 of 2016 seeking permission for the

revival of the earlier civil appeals, which had been permitted to be withdrawn on 13

May 2016.

7 By an order dated 7 January 2020, the Miscellaneous Applications seeking

the revival of the first set of civil appeals were allowed, keeping open all the

contentions including the contentions of the respondents based on the earlier order

dated 13 May 2016. This judgment will accordingly govern both, the original set of

civil appeals which stand revived in pursuance of the order dated 7 January 2020

and the second set of civil appeals.

B Submissions of Counsel

8 Dr A M Singhvi, learned Senior Counsel appearing on behalf of the appellant,

has urged the following submissions:

(i) Since the licences of the appellant were quashed by the judgment of this

Court in CPIL (supra), the appellant is entitled to a refund of its Entry Fee

based on civil, contractual and constitutional principles;

8 Civil Appeal No 893 of 2019

9 Miscellaneous Application Nos 198-218 of 2019

PART B

(ii) The appellant paid an Entry Fee of Rs 1454.94 crores for twenty-one service

areas and the licences were valid for a period of twenty years. The appellant

was prevented from providing services under the licences because:

(a) This Court held that respondent’s ―First Come First Serve‖ policy for grant

of licences was flawed, arbitrary and illegal; and

(b) As a consequence, licences which were granted under said the policy

(including the licences of the appellant) were quashed;

(iii) The quashing of the licences by this Court amounted to a frustration of each

licence, which was in the nature of a contract, in terms of Section 56 of the

Indian Contract Act. Consequently, the appellant is entitled to a restitution of

the Entry Fee paid in terms of Section 65, as the licences were quashed not

on account of the fault of the appellant but due to the culpability of the Union

government;

(iv) The well settled principle is that no person can be prejudiced because of an

act of a court (actus curiae neminem gravabit);

(v) The substratum of TDSAT’s decision which disallowed the claim of the

appellant in view of the pending criminal proceedings has been wiped off by

the acquittal of the appellant by the Special Judge, CBI;

(vi) The set off policy of the Union government, in terms of which a set off of the

Entry Fee which was paid was granted only to those entities who participated

in the fresh round of auction which took place after the judgment of this Court

in CPIL (supra), is based on incorrect classification which lacks intelligible

PART B

differentia and nexus to its object. Further, the set off policy suffers from

manifest arbitrariness and is discriminatory. Thus, it should be struck down as

being violative of Article 14 of the Constitution;

(vii) The set off policy of the Union government allowing the grant of a set off of

the Entry Fee, albeit to certain bidders, is an admission of a debt that is due

and payable:

(a) On 12 October 2012, the respondent issued ―Queries and Responses to

an NIA‖ and in answer to Query Number 74 regarding the set off of Entry

Fee, it was stated as follows:

―A set-off is allowed against the Earnest Money and the

payment due in the event of spectrum being won in this

auction. The total amount of such set off shall be limited to

the total entry fee paid by the entity for all its licenses which

have been quashed by the Supreme Court. No interest will be

due on this amount.‖

(b) The Empowered Group of Ministers10 held a meeting on 18 October 2012,

at which a decision was taken in the following terms:

―13. The EGoM considered the letter dated 12.10.2012 from

the Minister of Information and Broadcasting regarding set-off

of entry fee against the earnest money and payment due in

the event of spectrum being won and noted that the entry fee

paid by TSPs whose licenses were quashed was for a period

of 20 years. While on one hand, the TSPs could be expected

to have paid a pro-rata amount for the period of operation of

the license, i.e. 2008-2012, on the other hand, there could be

a claim for refund with interest for the pro-rata amount for the

balance period. Therefore, the EGoM decided to allow

10 ―EGoM‖

PART B

such TSPs to adjust an amount equivalent to their full

entry fee, without any interest, against the auction

payments, both for participation and/or final payment on

successful conclusion. It was clarified that the set-off

would be permitted only to the quashed license holders

participating in the auction. Such set-off would be

allowed to the extent of total entry fee paid for all

quashed licenses on an aggregate basis without

consideration of the expired period of license, only if

they succeed in the auction…‖

(emphasis supplied)

has granted a set off of the Entry Fee to Telewings (formerly Uninor),

Videocon, Idea Cellular Limited and Sistema Shyam. In particular, a set off

has been granted to Telewings despite there being grave criminal charges

against it including, inter alia, charges under the Prevention of Corruption

Act 1988;

(viii) The proposition that the policy of the Union of India to permit the grant of a set

off of the Entry Fee amounts to an admission that a refund of the Entry Fee is

payable and due, finds support in the decision of this Court in Union of India

v. Karam Chand Thapar and Bros. (Coal Sales) Ltd.11;

(ix) The non-refund of the Entry Fee to the appellant is discriminatory for the

following reasons:

11 (2004) 3 SCC 504

PART B

(a) A set off towards the fee payable for the spectrum has been permitted to

those Telecom Service Providers12 who participated in and won spectrum

in the subsequent auction after the judgment of this Court in CPIL (supra);

(b) The licences of eight TSPs were quashed by this Court by its judgment in

CPIL (supra). There cannot be any distinction or classification in law

between the said eight TSPs and similar treatment must be afforded to all.

The classification based on their decision to participate in the subsequent

auction for refund of Entry Fee is discriminatory and has no nexus with the

object sought to be achieved by the set off policy;

and were permitted a set off of their Entry Fee towards payment for the

auction allotted spectrum. Details of the cases where a set off was granted

are:

Name of Company Year of

Auction

Amount set off Status in the 2G

Judgment

M/s Telewings

(formerly Uninor)

(bought Unitech

Licenses)

Nov, 2012 1658.57 Crores

Respondent No 3;

Penalty of Rs 5 Crores

M/s Videocon Nov, 2012 1506.82 Crores

Respondent No 5;

No Penalty Levied

12 ―TSPs‖

PART B

M/s Idea Cellular Nov, 2012 684.59 Crores

Respondent No 8;

No Penalty Levied

M/s Sistema Shyam March, 2013 1626.32 Crores

Respondent No 10;

Penalty of Rs 50 Lakhs

The remaining four TSPs, including the appellant, did not participate in the

subsequent auction for spectrum. Their details are tabulated below:

Name of

Company

Entry Fee Paid Status in the 2G

Judgment

Action taken for

refund of Entry

Fee

M/s S Tel Pvt. Ltd. 25 Crores

Respondent No 6;

Penalty of Rs 50

Lakhs

Due to low amount,

it did not seek

refund of Entry

Fee.

M/s Tata

Teleservices 9 Crores

Respondent No 9;

Penalty of Rs 5 Crores

Due to low amount,

it did not seek

refund of Entry

Fee.

M/s Etisalat DB

(Swan Telecom) 1564 Crores

Respondent No 2;

Penalty of Rs 5 Crores

Refund Claimed.

Civil Appeal

No.7331/2016

pending

M/s Loop Telecom

Ltd. (Appellant) 1454.94 Crores

Respondent No 10;

Penalty of Rs 50

Lakhs

Refund Claimed.

Present Civil

Appeal against the

order of TDSAT

PART B

(d) TDSAT afforded differential treatment to the appellant due to the pendency

of criminal proceedings against it. In any event, this ground ceases to exist

in view of the acquittal of the appellant of criminal charges on 21

December 2017 by the Special Judge, CBI. Following the appellant’s

acquittal, there is no rationale for denying refund of Entry Fee to the

appellant;

(x) The set off policy penalises a business entity for taking a commercial decision

not to participate in the subsequent auction. Whether or not an entity should

have participated in the auction of spectrum following the decision of this

Court in CPIL (supra) was entirely for each of them to determine and this

cannot form the basis for granting or denying a set off;

(xi) The non-refund of the Entry Fee to the appellant suffers from manifest

arbitrariness:

(a) The set off policy creates a separate class between similarly placed TSPs

whose licences were quashed, on the basis of whether or not a bidder or

entity has chosen to participate in the fresh auction; and

(b) A business entity may have valid reasons not to participate in the fresh

auction, for which it cannot be penalized;

(xii) The appellant ought not to be punished for the wrongdoing of the respondent:

(a) In the judgment in CPIL (supra), this Court held that the ―First Come First

Serve‖ policy of the Union government for the grant of telecom licenses

was flawed, arbitrary and illegal;

PART B

(b) This Court further imposed costs of Rs 5 crores upon those licence

holders before it who had benefitted at the cost of the public exchequer

and had offloaded their stakes for thousands of crores in name of fresh

infusion of or transfer of equity. On the other hand, costs of only Rs 50

lakhs were imposed on those licence holders (including the appellant) who

had allegedly benefited by the wholly arbitrary and unconstitutional action

of the Department of Telecommunication

13 for the grant of UASLs and the

allocation of the 2G spectrum band. Hence, no role was attributed to the

appellant for quashing of its licenses;

December 2017 by the Special Judge, CBI;

(d) Even otherwise, the pendency of criminal proceedings is not an

impediment to proceed with civil proceedings; and

(e) The respondent has already auctioned spectrum which was allocated

earlier to the appellant for Rs 10,400 crores and has thus benefited twice

from the same spectrum. The respondent cannot be allowed to unjustly

enrich itself by usurping the Entry Fee paid by the appellant. The principles

underlying the doctrine of unjust enrichment are duly fulfilled in the present

case;

13 ―DoT‖

PART B

(xiii) The provisions of the Indian Contract Act would be applicable to the claim of

the appellant:

(a) TDSAT has wrongly held that the licences were quashed by this Court in

the exercise of its constitutional powers, thereby ousting the provisions of

the Indian Contract Act;

(b) The licence granted under the proviso to Section 4(1) of the Indian

Telegraph Act 1885 14 is in the nature of a contract between the

Government and its licensees. This proposition finds support in the

judgment of this Court in Union of India v. AUSPI15;

(supra), the consequences which are envisaged in the Indian Contract Act

must follow. When a contract is discovered to be void, the

benefit/advantage received by one party under the contract ought to be

returned to the other party;

(d) The appellant, when it entered into the contract with the respondent, had

no knowledge of the fact that the ―First Come First Serve‖ policy of the

Union government would be quashed by this Court. The Union

government defended its policy before this Court, and thus ought to be

directed to refund the Entry Fee;

14 ―Telegraph Act‖

15 (2011) 10 SCC 534 (―AUSPI‖)

PART B

(e) In the absence of any legislative intervention precluding the grant of the

refund, the rights of the parties would be governed by the law of contract.

Thus, the doctrine of frustration under Section 56 and the principle of

restitution under Section 65 of the Indian Contract Act would stand

attracted in the present case;

(f) Judicial orders are declaratory and retrospective in nature. The judgment

in CPIL (supra) relates back to the validity of the licences. The appellant

had only six thousand subscribers before the licences were quashed and

was in the phase of rolling out and investing capital as a result of which it

did not acquire any substantial benefit;

(g) Since the licences were provided on a representation that they would have

a tenure of twenty years but were declared to be void within four years due

to the flawed policy of the Union Government, the appellant will be entitled

to refund of the Entry Fee with interest; and

(h) The respondent is estopped from relying upon the UASL Guidelines and

UASL agreements, which provide that the Entry Fee is non-refundable.

This is because the licences were not quashed either due to a default on

part of the appellant or its withdrawal, but due to the policy of the Union

government being found to be illegal and arbitrary; and

PART B

(xiv) The decisions

16 of this Court in the relation to the payment of Adjusted Gross

Revenue17 have no relevance to the present case.

9 Opposing the submissions which have been urged on behalf of the appellant,

Mr Vikramjit Banerjee, learned Additional Solicitor General, appearing on behalf of

the Union of India has urged the following submissions:

(i) The Entry Fee paid by the appellant is specifically made non-refundable by

the UASL Guidelines which were issued by the DoT on 14 December 2005.

Once the Letters of Intent were issued to the appellant for twenty-one service

areas, the appellant deposited the Entry Fee for each circle in accordance

with the UASL Guidelines on 10 January 2008. The appellant became eligible

for the issuance of UASLs for each of the twenty-one service areas only

thereafter. The UASL agreements which were entered into between the Union

Government and the appellant on 4 March 2008 expressly contemplated that

the Entry Fee was a one-time non-refundable fee. The Entry Fee being nonrefundable in nature, the appellant cannot now seek a refund;

(ii) The issues which are sought to be raised in the present civil appeals are

squarely governed by the judgment in CPIL (supra). The judgment of this

Court examined the validity of the licences and spectrum allocation made to

the licensees including the appellant. The judgment in CPIL (supra) found that

16 Union of India v. Association of Unified Telecom Service Providers of India and Ors., (2020) 3 SCC 525; and

Union of India v. Association of Unified Telecom Service Providers of India and Ors., Civil Appeal Nos 6328-

6399 of 2015

17 ―AGR‖

PART B

the licensees had unfairly gained access to the then Minister in-charge as well

as certain officers of the DoT in order to gain preferences. This Court found

that the grant of licences was ―stage-managed‖ to favour specific licensees,

including the appellant, as a result of which costs of Rs 50 lakhs were also

imposed on them;

(iii) While quashing the grant of the licences, the judgment in CPIL (supra) did not

grant any refund of the Entry Fee. The claim for restitution not having been

allowed by this Court in CPIL (supra), the appellant cannot seek to do so at

this stage;

(iv) After the judgment in CPIL (supra) quashing the UASLs granted to the

appellant, the appellant has ceased to be a licensee for the purposes of

Section 14(1)(a) of the TRAI Act, which empowers the TDSAT to adjudicate

disputes between a licensor and a licensee. The TDSAT did not have

jurisdiction under the provisions of Section 14(1)(a). In any event, the TDSAT

by its judgment dated 16 September 2015 rejected the appellant’s claim for

refund on the ground that it was incompetent to do so, the licences having

been quashed by the judgment of this Court. Having moved this Court in the

first set of civil appeals, the appellant withdrew the civil appeals on 13 May

2016, though with liberty to move this Court again, if it became so necessary.

Thus, in view of the order dated 13 May 2016, the appellant could have only

moved this Court and not TDSAT. However, it instituted a Second Telecom

Petition before the TDSAT. The TDSAT by its judgment dated 11 December

PART B

2018 rejected the second attempt of the appellant for claiming the same relief,

since this would essentially amount to a review of the judgment in CPIL

(supra). Thus, moving the Second Telecom Petition was not only contrary to

Section 14 of the TRAI Act but also in violation of the text and spirit of the

order dated 13 May 2016 of this Court;

(v) The decision of the EGoM dated 31 October 2012 granting set off to those

bidders who had participated and were found to be successful in the fresh

round of auctions was a one-time concession offered to TSPs whose licences

were quashed earlier, in order to ensure that telecom services were provided

to consumers in an uninterrupted manner. The decision in CPIL (supra) did

not bar licensees from participating in the subsequent auction. Since the Entry

Fees paid by licensees covered by the judgment in CPIL (supra) could not

have been refunded, the EGoM decided to adjust their Entry Fee in the

subsequent auction in the event that they were declared successful. It was

believed that this would encourage the participation of all TSPs in the

subsequent auction and increase the prospects of a higher price discovery,

thereby ultimately benefitting the public exchequer. This set off policy was

uniformly applied to all licensees covered by the judgment in CPIL (supra),

including the appellant, and thus is not discriminatory. No TSP covered by the

decision in CPIL (supra) was compelled to participate in the subsequent

auction being conducted by the DoT by the virtue of the set off policy. Rather,

the policy only sought to increase participation in the subsequent auction by

PART B

offering a concession in the form of set off of the previously paid Entry Fee, in

case they emerged successful in the fresh auction. Being a policy decision

involving industry specific issues, this Court should be circumspect in

interfering with this decision of the Union government;

(vi) The acquittal of the promoters of the appellant in the criminal case has no

bearing on the refund of the Entry Fee. The judgment of the Special Judge,

CBI acquitting the promoters of the appellant was only concerned with the

alleged violation of Clause 8 of the UASL Guidelines issued by DoT. The

acquittal has no bearing on the findings of this Court in CPIL (supra),

according to which UASL and allocation of spectrum was held to be ―stage

managed‖ and violative of the principles of public law. This precludes the

appellant from claiming any refund or restitution; and

(vii) As a matter of fact, the judgment of this Court in CPIL (supra) has imposed

costs of Rs 50 lakhs on the appellant for wrongly benefitting from the wholly

arbitrary and unconstitutional exercise of licence and spectrum allocation.

Consequently, even under the contract law, the appellant is disentitled from

claiming any refund or restitution of the Entry Fee based on the principle of in

pari delicto.

10 In the submissions made in the rejoinder, both Dr A M Singhvi and Mr Huzefa

A Ahmadi, learned Senior Counsel, have submitted that the judgment in CPIL

(supra) does not expressly or impliedly bar the refund of Entry Fee. As a matter of

fact, the TDSAT held that the decision of this Court was not conclusive in ruling out

PART B

a refund. The judgment in CPIL (supra) was reserved on 17 March 2011 and was

delivered on 2 February 2012, and the quashing of the licences could not have been

contemplated by any of the litigants. Theoretically, even if the claim for restitution

could have been made before this Court at that stage, the appellant is not precluded

from raising the claim before this Court in the present proceedings. Further, Sections

14 and 15 of the TRAI Act confer a plenary remedy before the TDSAT. Hence, the

appellant moved the TDSAT within a few weeks of the judgment in CPIL (supra). It

was urged that for the principles of constructive res judicata to apply , the bar must

be clearly evident. In a Public Interest Litigation petition, it would not be appropriate

to apply the principles of constructive res judicata against the respondent (the

appellant herein) save in an exceptional case. Elaborating on the above

submissions, Mr. Huzefa Ahmadi urged that:

(i) The right to claim restitution would arise only after the licences were quashed

by this Court and hence, the decision in CPIL (supra) does not operate as

constructive res judicata;

(ii) The relief sought before this Court in the public interest petition under Article

32 of the Constitution which led to the decision in CPIL (supra) was the

setting aside of the auction and damages. This Court did not grant damages

per se while it imposed costs on the licensees. Hence, in terms of Section 11

of the Civil Procedure Code 1908, the prayer for damages must be deemed to

have been refused; and

PART C

(iii) The ultimate direction in CPIL (supra) was that its observations would not

apply to other proceedings and hence, there was no intent to foreclose other

rights under the law.

In view of these premises, it has been urged that the petition under Article 32 which

led to the decision in CPIL (supra) did not seek the forfeiture of the Entry fee and

hence, the principles of constructive res judicata would find no application at all. This

Court having imposed costs of Rs 5 crores on one set of licensees and Rs 50 lakhs

on another group of licensees (which included the appellant), it would be wholly

disproportionate to forfeit an amount of Rs 1454.94 crores in the absence of an

implied forfeiture in terms of the earlier decision of this Court.

11 The rival submissions will now be analysed.

C The CPIL judgment

12 The decision of this Court, which was rendered on 2 February 2012, arose

from petitions under Article 32 of the Constitution. The petitions questioned the grant

of UASLs to the private respondents in those proceedings (which included the

appellant), on the ground that the procedure which was adopted by DoT was

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

of challenge, it was urged that:

PART C

(i) Since the cut-off of 25 September 2007 fixed for considering the applications

had been held to be arbitrary by the Delhi High Court (which was approved by

this Court), the procedure adopted by DoT with the approval of the Minister

for Communications and Information Technology was liable to be declared as

arbitrary and illegal;

(ii) The DoT had violated the recommendations made by Telecom Regulatory

Authority of India18 that there should be no cap on the number of access

service providers in any service area;

(iii) As noted in the report of the Comptroller and Auditor General, the

consideration of a large number of ineligible applications and the grant of

licences to them was illegal and arbitrary;

(iv) The method adopted by DoT for grant of licences was flawed because it was

based upon the recommendations made by TRAI, which were arbitrary and

contrary to public interest, since they recommended the granting of licences

at the entry fees which were determined in 2001;

(v) While granting licences which were bundled with the spectrum at a price

which was fixed in 2001, the DoT did not consult the Finance Ministry and

violated the decision taken by the Council of Ministers in 2003;

(vi) The ―First Come First Serve‖ policy violated Article 14, and its distortion by the

then Minister of Communications and Information Technology and the

consequent grant of licences was liable to be annulled; and

18 ―TRAI‖

PART C

(vii) The Union government did not take any action to cancel the licences of a

number of licensees who had failed to fulfil the roll-out obligations and

violated the conditions of the licences.

13 While dealing with the grounds of challenge, in the course of the judgment,

this Court underscored that natural resources, such as spectrum, are public goods

and the doctrine of equality and public trust must guide the State in determining the

actual mechanism for their distribution. After analysing the rationale adopted by

TRAI for recommending the allocation of the 2G spectrum on the basis of 2001

prices, this Court held:

―91. To say the least, the entire approach adopted by TRAI

was lopsided and contrary to the decision taken by the

Council of Ministers and its recommendations became a

handle for the then Minister of Communications and

Information Technology and the officers of DoT who virtually

gifted away the important national asset at throw-away prices

by wilfully ignoring the concerns raised from various quarters

including the Prime Minister, Ministry of Finance and also

some of its own officers. This becomes clear from the fact

that soon after obtaining the licences, some of the

beneficiaries offloaded their stakes to others in the name of

transfer of equity or infusion of fresh capital by foreign

companies, and thereby made huge profits. We have no

doubt that if the method of auction had been adopted for

grant of licence which could be the only rational transparent

method for distribution of national wealth, the nation would

have been enriched by many thousand crores.‖

14 This Court found a basic flaw in the ―First Come First Serve‖ policy, holding:

―94. There is a fundamental flaw in the first-come-first-served

policy inasmuch as it involves an element of pure chance or

accident. In matters involving award of contracts or grant of

licence or permission to use public property, the invocation of

PART C

first-come-first-served policy has inherently dangerous

implications. Any person who has access to the power

corridor at the highest or the lowest level may be able to

obtain information from the government files or the files of the

agency/instrumentality of the State that a particular public

property or asset is likely to be disposed of or a contract is

likely to be awarded or a licence or permission is likely to be

given, he would immediately make an application and would

become entitled to stand first in the queue at the cost of all

others who may have a better claim.‖

15 This Court held that an auction conducted after due publicity was perhaps the

best method for fulfilling the constitutional requirement of preserving equity in the

alienation of natural resources. In the absence of such a mechanism, this Court held

that alienation of natural resources/public property is likely to be misused by

unscrupulous people who are only interested in garnering maximum financial benefit

and have no respect for constitutional ethos and values.

16 In the course of its decision, this Court held, in no uncertain terms, that the

then Minister for Communications and Information Technology had acted to favour

some companies at the cost of the public exchequer:

“97. The exercise undertaken by the officers of DoT between

September 2007 and March 2008, under the leadership of the

then Minister of Communications and Information Technology

was wholly arbitrary, capricious and contrary to public interest

apart from being violative of the doctrine of equality. The

material produced before the Court shows that the Minister of

Communications and Information Technology wanted to

favour some companies at the cost of the public exchequer

and for this purpose, he took the following steps:

(i) Soon after his appointment as Minister of Communications

and Information Technology, he directed that all the

applications received for grant of UAS licence should be kept

pending till the receipt of the TRAI recommendations.

PART C

(ii) The recommendations made by TRAI on 28-8-2007 were

not placed before the full Telecom Commission which, among

others, would have included the Finance Secretary. The

notice of the meeting of the Telecom Commission was not

given to any of the non-permanent members despite the fact

that the recommendations made by TRAI for allocation of

spectrum in 2G bands had serious financial implications. This

has been established from the pleadings and the records

produced before this Court which show that after issuance of

licences, 3 applicants transferred their equities for a total sum

of Rs 24,493 crores in favour of foreign companies.

Therefore, it was absolutely necessary for DoT to take the

opinion of the Finance Ministry as per the requirement of the

Government of India (Transaction of Business) Rules, 1961.

(iii) The officers of DoT who attended the meeting of the

Telecom Commission held on 10-10-2007 hardly had any

choice but to approve the recommendations made by TRAI. If

they had not done so, they would have incurred the wrath of

the Minister of Communications and Information Technology.

(iv) In view of the approval by the Council of Ministers of the

recommendations made by the Group of Ministers in 2003,

DoT had to discuss the issue of spectrum pricing with the

Ministry of Finance. Therefore, DoT was under an obligation

to involve the Ministry of Finance before any decision could

be taken in the context of Paras 2.78 and 2.79 of the TRAI's

recommendations. However, as the Minister of

Communications and Information Technology was very much

conscious of the fact that the Secretary, Finance, had

objected to the allocation of 2G Spectrum at the rates fixed in

2001, he did not consult the Finance Minister or the officers of

the Finance Ministry.

(v) The Minister of Communications and Information

Technology brushed aside the suggestion made by the

Minister of Law and Justice for placing the matter before the

Empowered Group of Ministers. Not only this, within few

hours of the receipt of the suggestion made by the Prime

Minister in his letter dated 2-11-2007 that keeping in view the

inadequacy of spectrum, transparency and fairness should be

maintained in the matter of allocation thereof, the Minister of

Communications and Information Technology rejected the

same by saying that it will be unfair, discriminatory, arbitrary

and capricious to auction the spectrum to new applicants

because it will not give them level playing field.

PART C

(vi) The Minister of Communications and Information

Technology introduced the cut-off date as 25-9-2007 for

consideration of the applications received for grant of licence

despite the fact that only one day prior to this, a press release

was issued by DoT fixing 1-10-2007 as the last date for

receipt of the applications. This arbitrary action of the Minister

of Communications and Information Technology though

appears to be innocuous, actually benefited some of the real

estate companies who did not have any experience in dealing

with telecom services and who had made applications only on

24-9-2007 i.e. one day before the cut-off date fixed by the

Minister of Communications and Information Technology on

his own.

(vii) The cut-off date i.e. 25-9-2007 decided by the Minister of

Communications and Information Technology on 2-11-2007

was not made public till 10-1-2008 and the first-come-firstserved policy, which was being followed since 2003 was

changed by him on 7-1-2008 and was incorporated in press

release dated 10-1-2008. This enabled some of the

applicants, who had access either to the Minister or the

officers of DoT to get the demand drafts, bank guarantee, etc.

prepared in advance for compliance with conditions of the

LoIs, which was the basis for determination of seniority for

grant of licences and allocation of spectrum.

(viii) The meeting of the full Telecom Commission, which was

scheduled to be held on 9-1-2008 to consider issues relating

to grant of licences and pricing of spectrum was deliberately

postponed on 7-1-2008 so that the Secretary, Finance and

Secretaries of three other important Departments may not be

able to raise objections against the procedure devised by DoT

for grant of licence and allocation of spectrum by applying the

principle of level playing field.

(ix) The manner in which the exercise for grant of the LoIs to

the applicants was conducted on 10-1-2008 leaves no room

for doubt that everything was stage-managed to favour those

who were able to know in advance the change in the

implementation of the first-come-first-served policy. As a

result of this, some of the companies which had submitted

applications in 2004 or 2006 were pushed down in the priority

and those who had applied between August and September

2007 succeeded in getting higher seniority entitling them to

allocation of spectrum on priority basis.‖

PART C

This is a clear indicator of the complicity between the Minister and the business

entities he was acting to favour on the basis of the ―First Come First Serve‖ policy.

17 This Court found that ―everything was stage-managed to favour those who

were able to know in advance the change in the implementation of the first-comefirst served policy‖. It was in the backdrop of the above finding, that this Court issued

the following directions:

―102. In the result, the writ petitions are allowed in the

following terms:

(i) The licences granted to the private respondents on or after

10-1-2008 pursuant to two press releases issued on 10-1-

2008 and subsequent allocation of spectrum to the licensees

are declared illegal and are quashed.

(ii) The above direction shall become operative after four

months.

(iii) Keeping in view the decision taken by the Central

Government in 2011, TRAI shall make fresh

recommendations for grant of licence and allocation of

spectrum in 2G band in 22 service areas by auction, as was

done for allocation of spectrum in 3G band.

(iv) The Central Government shall consider the

recommendations of TRAI and take appropriate decision

within next one month and fresh licences be granted by

auction.

(v) Respondents 2, 3 and 9 who have been benefited at the

cost of public exchequer by a wholly arbitrary and

unconstitutional action taken by DoT for grant of UAS

licences and allocation of spectrum in 2G band and who

offloaded their stakes for many thousand crores in the name

of fresh infusion of equity or transfer of equity shall pay costs

of Rs 5 crores each. Respondents 4, 6, 7 and 10 shall pay

costs of Rs 50 lakhs each because they too had been

benefited by the wholly arbitrary and unconstitutional exercise

undertaken by DoT for grant of UAS licences and allocation of

spectrum in 2G band. We have not imposed costs on the

PART C

respondents who had submitted their applications in 2004

and 2006 and whose applications were kept pending till 2007.

(vi) Within four months, 50% of the costs shall be deposited

with the Supreme Court Legal Services Committee for being

used for providing legal aid to poor and indigent litigants. The

remaining 50% costs shall be deposited in the funds created

for Resettlement and Welfare Schemes of the Ministry of

Defence.

(vii) However, it is made clear that the observations made in

this judgment shall not, in any manner, affect the pending

investigation by CBI, Directorate of Enforcement and other

agencies or cause prejudice to those who are facing

prosecution in the cases registered by CBI or who may face

prosecution on the basis of charge-sheet(s) which may be

filed by CBI in future and the Special Judge, CBI shall decide

the matter uninfluenced by this judgment. We also make it

clear that this judgment shall not prejudice any person in the

action which may be taken by other investigating agencies

under the Income Tax Act, 1961, the Prevention of MoneyLaundering Act, 2002 and other similar statutes.‖

18 Reading the judgment of this Court in CPIL (supra), it is impossible to accept

the submission which has been urged on behalf of the appellant that the fraud in the

―First Come First Serve‖ policy lay at the doorstep of the Union government alone

and that the appellant was free from taint or wrong doing. The decision of this Court

held that the ―First Come First Serve‖ policy was writ large with arbitrariness, and

was intended to favour certain specific entities at a grave detriment to the public

exchequer. Undoubtedly, the authors of the ―First Come First Serve‖ policy were the

official actors comprised within the Union government. But equally, the decision did

not exculpate the private business entities who obtained UASLs and became the

beneficiaries of their decision. The decision of this Court concludes in no uncertain

terms that the then Minister of Communications and Information Technology wanted

PART C

to favour some companies at the cost of the public exchequer, and that as a matter

of fact the entire process was ―stage-managed‖ to favour those who had access to

the nitty-gritties of the policy in advance. As a result, the Court found that companies

which had submitted applications in 2004 or 2006 were side-lined by favouring those

who had applied between August and September 2007 and who ―succeeded in

getting higher seniority entitling them to allocation of spectrum on priority basis‖.

19 In the concluding part, the judgment in CPIL (supra) imposed costs of Rs 5

crores each on three licensees on the ground that they had benefited at the cost of

the public exchequer by a ―wholly arbitrary and unconstitutional action‖ taken by DoT

for the grant of licences and allocation of spectrum, and who had subsequently

offloaded their stakes for many thousand crores in the name of fresh infusion or

transfer of equity. On the other hand, the appellant was amongst the four licensees

who were directed to pay a cost of Rs 50 lakhs each ―because they too had been

benefited by the wholly arbitrary and unconstitutional exercise undertaken by DoT

for grant of UASL and allocation of spectrum of 2G band‖.

20 The beneficiaries of the patently unconstitutional mechanism deployed for the

allocation of spectrum were corporate entities who were favoured under the ―First

Come First Serve‖ policy. The appellant is one of them. The distinction made by the

judgment of this Court between the three licensees who were subjected to costs of

Rs 5 crores and four licensees, including the appellant, who were subject to costs of

Rs 50 lakhs was because in the case of a former their stakes had been offloaded

ostensibly in the name of a fresh infusion or transfer of equity. However, it is evident

PART D

that all these licensees were complicit in the illegal exercise of obtaining favours for

themselves by the indulgence of those in power. That, above all, was the foundation

of the decision in CPIL (supra) and the justification for quashing licences and the

allocation of the 2G spectrum. This Court then directed the TRAI to frame fresh

recommendations for the grant of licences and for the allocation of spectrum in the

2G band in twenty-two service areas by auction, as was done for the allocation of

spectrum in the 3G band. Thus, the decision in CPIL (supra) leaves no manner of

doubt that the appellant was in pari delicto along with the Union government.

D The claim for refund of Entry Fee

21 The nature of the Entry Fee has to be understood from the UASL Guidelines

which were issued by the DoT on 14 December 2005. Clause 619 of the Guidelines

required each applicant seeking a UASL for a given service area to deposit a ―nonrefundable entry fee‖ in accordance with Annexure 1, which elucidated the quantum

of the fee which was payable for different service areas. Clause 1420 indicates that

the Entry Fee was payable in addition to the annual licence fee which was payable

for holding a UASL.

19 ―6 The detail of non-refundable Entry fee, Category of service area, Financial bank guarantee, performance bank

guarantee, Net worth and Paid up equity capital required under the Unified Access Services Licence for each service

area is as per Annexure-I. The prescribed paid-up equity capital shall be maintained during currency of the licence.‖

20 ―14 In addition to the non refundable Entry fee described above, the Licensee shall also pay Licence fee annually

@ 10/8/6% of Adjusted Gross Revenue (AGR) for category A/B/C service areas respectively excluding spectrum

charges.‖

PART D

22 Letters of Intent were issued to the appellant for providing unified access

service to twenty-one service areas. The appellant deposited the circle wise Entry

Fee, in terms of the UASL Guidelines, on 10 January 2008 in the amount of Rs

1454.94 crores. It is only upon the payment of this Entry Fee that the appellant

became eligible to be issued UASLs in the twenty-one service areas. Clause 18.121

of the UASL agreement acknowledged the payment of a ―onetime non-refundable

entry fee‖ prior to the signing of the agreement. Thus, the Entry Fee was a onetime

non-refundable fee payable. According to the Union government, this was payable

by an applicant for participating in the process of obtaining the UASL and was

distinguishable from the licence fee under Clause 10.122

, which was relatable to the

actual operation of the licence.

23 In the course of its judgment dated 16 September 2015, the TDSAT dealt with

the submission of the Union of India that the Entry Fee was ―non-refundable‖ in

terms of the UASL Guidelines. Dealing with the submission, the TDSAT observed:

―To us it appears that submissions based on section 4 of the

Telegraph Act or the characterisation of the entry fee in the

UASL guidelines and the licence as ―non-refundable‖ is really

21 ―18.1 Entry Fee:

One Time non-refundable Entry Fee of Rs .1.1 Crore has been paid by the LICENSEE prior to signing of this Licence

agreement.‖

22 ―10.1 The LICENSOR reserves the right to suspend the operation of this LICENCE in whole or in part, at any time,

if, in the opinion of the LICENSOR, it is necessary or expedient to do so in public interest or in the interest of the

security of the State or for the proper conduct of the TELEGRAPH. Licence Fee payable to the LICENSOR will not be

required to be paid for the period for which the operation of this LICENCE remains suspended in whole. If situation so

warrant, it shall not be necessary for Licensor to issue a notice for seeking comments of the LICENSEE for this

purpose and the decision of the Licensor shall be final and binding.

Provided that the LICENSOR shall not be responsible for any damage or loss caused or arisen out, of aforesaid

action. Provided further that the suspension of the licence will not be a cause or ground for extension of the period of

the LICENCE and suspension period will be taken as period spent.‖

PART D

begging the question. The submissions would have carried

weight if the petitioners’ licences were cancelled or

terminated for any violation of the term of the licences or were

surrendered by it by its own accord. In the facts of the present

case the petitioner failed to get entry into…the exclusive

domain reserved by law for the State...‖

24 There is much to commend in the above line of reasoning of the TDSAT. The

Entry Fee, under the terms of the UASL Guidelines and the UASL agreements, was

a one-time non-refundable fee. The TDSAT held that the submission of the Union of

India would have credence if the licences were terminated for breach or if the

licensee were to voluntarily surrender the licence. However, this was a case where

the licence was held to be unlawful, due to its grant being in breach of the

constitutional mandate under Article 14. All the licences and the allocation of

spectrum came to be cancelled by the decision in CPIL (supra) on the ground that

the policy and the process followed by the Union government were arbitrary, and

unjustified benefits had been granted to the licensees. Thus, the TDSAT held that,

strictly speaking, the contractual term stipulating that the Entry Fee was nonrefundable would not by and in itself preclude the claim for refund on the basis of the

judgment of this Court in CPIL (supra), which held that the entire process leading up

to the award of the licences was arbitrary and constitutional. The TDSAT having

entered the above finding, for the rest of the discussion, this judgment will also

proceed on that premise.

PART E

E Jurisdiction of TDSAT

25 The appellant has objected to TDSAT’s conclusion that the appellant’s

remedy does not fall in the contractual realm between itself and the Union of India.

Since the public law remedy of restitution was neither claimed before nor granted by

this Court in CPIL (supra), the TDSAT went into the genesis of the dispute and

consequential reliefs granted by this court. . The TDSAT held that since the

challenge was focused on the arbitrary and mala fide actions that were embodied in

the policy of allotting 2G spectrum licences, the quashing of the licences was a

necessary consequence of the grant of the licences being vitiated. Thus, the TDSAT

held that ―a direction for refund [is] outside the purview of the Contract Act and an

exercise of Constitutional powers is clearly beyond the authority of this Tribunal

[TDSAT] and in that regard the petitioner must approach the Court that quashed its

licenses, that is, Supreme Court and seek appropriate reliefs‖.

26 This Court will analyse whether the TDSAT had the jurisdiction to entertain

the claim for a refund of the Entry Fee. The TDSAT is an adjudicatory body

constituted under the TRAI Act. Initially, the TRAI was empowered to regulate the

telecom sector in India and adjudicate upon disputes. The adjudicatory powers of

TRAI, specifically with respect to issuing directions to DoT, were placed in issue

before the Delhi High Court in Union of India v. Telecom Regulatory Authority of

PART E

India23. The Delhi High Court held that TRAI did not possess the authority to issue

directions to DoT. In order to overcome the effect of this position, the TRAI Act was

amended in 2000 and the TDSAT was established. TDSAT’s website24 elaborates

on the Statement of Objects and Reasons to the Telecom Regulatory Authority of

India (Amendment) Act 2000 and notes:

―In order to bring in functional clarity and strengthen the

regulatory framework and the disputes settlement mechanism

in the telecommunication sector, the TRAI Act of 1997 was

amended in the year 2000 and TDSAT was set up to

adjudicate disputes and dispose of appeals with a view to

protect the interests of service providers and consumers of

the telecom sector and to promote and ensure orderly growth

of the telecom sector…‖

The TRAI Act governs the functioning of the TDSAT. The jurisdiction of civil courts

has been ousted by Section 15. Section 16 enables the TDSAT to regulate its own

procedure, guided by the principles of natural justice. An appeal on a substantial

question of law lies to this Court under Section 18 of the TRAI Act. In the above

statutory context, the jurisdiction of TDSAT will be evaluated below.

27 Section 14(a) 25 of the TRAI Act empowers the TDSAT to adjudicate any

dispute:

23 (1998) 46 DRJ 557

24 Available at <https://tdsat.gov.in/admin/introduction/uploads/TDSAT%20INTRO.pdf> accessed on 28 February

2022

25 ―14. Establishment of Appellate Tribunal.—The Central Government shall, by notification, establish an Appellate

Tribunal to be known as the Telecom Disputes Settlement and Appellate Tribunal to—

(a) adjudicate any dispute—

PART E

(i) Between a licensor and licensee;

(ii) Between two or more service providers; and

(iii) Between a service provider and a group of consumers.

28 The scope of the TDSAT’s powers to adjudicate ―any dispute‖ was interpreted

in Cellular Operators Association of India v. Union of India26 by a three-judge

Bench of this Court. The Court held that the powers envisaged by the TRAI Act for

the TDSAT are wide and it would not be appropriate for this Court to impose

limitations on them. Chief Justice G B Pattanaik noted:

―8…Chapter IV containing Section 14 was inserted by an

amendment of the year 2002 and the very Statement of

Objects and Reasons would indicate that to increase the

investors' confidence and to create a level playing field

between the public and the private operators, suitable

amendment in the Telecom Regulatory Authority of India Act,

1997 was brought about and under the amendment, a tribunal

was constituted called the Telecom Disputes Settlement and

Appellate Tribunal for adjudicating the disputes between a

licensor and a licensee, between two or more service

(i) between a licensor and a licensee;

(ii) between two or more service providers;

(iii) between a service provider and a group of consumers:

Provided that nothing in this clause shall apply in respect of matters relating to—

(A) the monopolistic trade practice, restrictive trade practice and unfair trade practice which are subject to the

jurisdiction of the Monopolies and Restrictive Trade Practices Commission established under sub-section (1) of

Section 5 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969);

(B) the complaint of an individual consumer maintainable before a Consumer Disputes Redressal Forum or a

Consumer Disputes Redressal Commission or the National Consumer Redressal Commission established under

Section 9 of the Consumer Protection Act, 1986 (68 of 1986);

Indian Telegraph Act, 1885 (13 of 1885);..‖

26 (2003) 3 SCC 186

PART E

providers, between a service provider and a group of

consumers and also to hear and dispose of appeal against

any direction, decision or order of the Authority. The aforesaid

provision was absolutely essential as the organizations of the

licensor, namely, MTNL and BSNL were also service

providers. That being the object for which an independent

tribunal was constituted, the power of that Tribunal has to be

adjudged from the language conferring that power and it

would not be appropriate to restrict the same on the ground

that the decision which is the subject-matter of challenge

before the Tribunal was that of an expert body.

[…]

Having regard to the very purpose and object for which the

Appellate Tribunal was constituted and having examined the

different provisions contained in Chapter IV, more particularly,

the provision dealing with ousting the jurisdiction of the civil

court in relation to any matter which the Appellate Tribunal is

empowered by or under the Act, as contained in Section 15,

we have no hesitation in coming to the conclusion that the

power of the Appellate Tribunal is quite wide, as has been

indicated in the statute itself and the decisions of this Court

dealing with the power of a court, exercising appellate power

or original power, will have no application for limiting the

jurisdiction of the Appellate Tribunal under the Act. Since the

Tribunal is the original authority to adjudicate any dispute

between a licensor and a licensee or between two or more

service providers or between a service provider and a group

of consumers and since the Tribunal has to hear and dispose

of appeals against the directions, decisions or order of TRAI,

it is difficult for us to import the self-contained restrictions and

limitations of a court under the judge-made law to which

reference has already been made and reliance was placed by

the learned Attorney-General…‖

Justice S B Sinha, in his concurring opinion, further elaborated on the jurisprudence

surrounding tribunals constituted under regulatory statutes. The judgment noted that

the TDSAT was a creature of statute and was empowered to determine its

PART E

jurisdiction, subject to the constraints stipulated in the statute. The appeal to this

Court under Section 18 has been confined to a ―substantial question of law‖. Since

no such constraints have been placed on the jurisdiction of the TDSAT under

Section 14, the jurisdiction of the TDSAT was held to be broader:

―27. TDSAT was required to exercise its jurisdiction in terms

of Section 14-A of the Act. TDSAT itself is an expert body and

its jurisdiction is wide having regard to sub-section (7) of

Section 14-A thereof. Its jurisdiction extends to examining the

legality, propriety or correctness of a direction/order or

decision of the authority in terms of sub-section (2) of Section

14 as also the dispute made in an application under subsection (1) thereof. The approach of the learned TDSAT,

being on the premise that its jurisdiction is limited or akin to

the power of judicial review is, therefore, wholly

unsustainable. The extent of jurisdiction of a court or a

tribunal depends upon the relevant statute. TDSAT is a

creature of a statute. Its jurisdiction is also conferred by a

statute. The purpose of creation of TDSAT has expressly

been stated by Parliament in the amending Act of 2000.

TDSAT, thus, failed to take into consideration the amplitude

of its jurisdiction and thus misdirected itself in law…

[…]

29. If a jurisdictional question or the extent thereof is disputed

before a tribunal, the tribunal must necessarily decide it

unless the statute provides otherwise. (See Judicial Review of

Administrative Law by H.W.R. Wade and C.F. Forsyth, p.

260.) Only when a question of law or a mixed question of fact

and law are decided by a tribunal, the High Court or the

Supreme Court can exercise its power of judicial review.

[…]

34. Statutory recommendations made by it are normally

accepted by the Central Government, as a result of which the

rights and obligations of the parties may seriously be affected.

It was in the aforementioned premise Parliament thought of

creating an independent expert tribunal which, if an occasion

arises therefor, may interfere with the finding of fact, finding of

law or a mixed question of law and fact of the authority.

PART E

Succinctly stated, the jurisdiction of the Tribunal is not

circumscribed in any manner whatsoever…‖

29 Section 14 of the TRAI Act has also been interpreted in Union of India v.

TATA Teleservices (Maharashtra Ltd)27 by a two-judge Bench of this Court. In that

case, the respondent had moved the TDSAT seeking a declaration that the action of

the Union of India (the licensor) in raising a claim and recovering the amount was

unlawful. The respondent also sought a declaration that a set-off made by invoking a

condition of the licence in respect of the Maharashtra service area was illegal. The

Union of India claimed that it was entitled to make the set-off and recover damages

occasioned by the failure of the respondent to fulfil its obligations under a letter of

intent issued in respect of the Karnataka Telecom circle. The TDSAT had rejected

the claim of the Union of India that it was entitled to a legal or equitable set off and

held that it had no jurisdiction to enter a counterclaim at the instance of the Union of

India. In appeal, this Court held that either as a licensor or a service provider, the

Union government could make an application to TDSAT regarding a dispute

between it and the licensee, another service provider or a group of consumers. This

Court noted that there was no reason to whittle down the right ―of the Union

government to move the Tribunal for adjudication of its claim within the purview of

Section 14(1)‖. This Court observed that if the subject matter was capable of being

raised by way of a claim under Section 14 of the TRAI Act, it would not be logical to

27 (2007) 7 SCC 517 (―Tata Teleservices‖)

PART E

exclude the power to raise a counterclaim. Having held that the TDSAT had

jurisdiction to entertain a counter claim, the judgment dealt with the submission of

the respondent that where a licence had not actually been issued to a party by the

Union government, the dispute did not fall either under Clause (i) or (ii) of Section

14(a). The Court held that:

―19…In other words, a dispute commencing with the

acceptance of a tender leading to the possible issue of a

licence and disputes arising out of the grant of licence even

after the period has expired would all come within the purview

of Section 14(a) of the Act. To put it differently, Section 14

takes within its sweep disputes following the issue of a letter

of intent, pre-grant of actual licence as also disputes arising

out of a licence granted between a quondam licensee and the

licensor.‖

The Court observed that though the bid submitted by the respondent had been

accepted by the Union of India and a letter of intent was issued, the contract

ultimately did not come into existence since the respondent was insisting on certain

modifications and the licence was not actually granted. The Court held:

―22. We have already indicated that a specialised tribunal has

been constituted for the purpose of dealing with specialised

matters and disputes arising out of licences granted under the

Act. We therefore do not think that there is any reason to

restrict the jurisdiction of the tribunal so constituted by

keeping out of its purview a person whose offer has been

accepted and to whom a letter of intent is issued by the

Government and who had even accepted that letter of intent.

Any breach or alleged breach of obligation arising after

acceptance of the offer made in response to a notice inviting

tender, would also normally come within the purview of a

dispute that is liable to be settled by the specialised tribunal.‖

PART E

This Court also held that there was no reason to restrict the expression ―licensee‖

appearing in Section 14(a)(i) to exclude a person like the respondent to whom a

Letter of Intent had been issued, when the Letter of Intent had been accepted but an

attempt had been made to negotiate certain terms before a formal contract was

entered into and work commenced. The Court held:

―23. We see no reason to restrict the expressions ―licensor‖ or

―licensee‖ occurring in Section 14(a)(i) of the Act and to

exclude a person like the respondent who had been given a

letter of intent regarding the Karnataka Circle, who had

accepted the letter of intent but was trying to negotiate some

further terms of common interest before a formal contract was

entered into and the work was to be started. To exclude

disputes arising between the parties thereafter on the

failure of the contract to go through, does not appear to

be warranted or justified considering the purpose for

which TDSAT has been established and the object

sought to be achieved by the creation of a specialised

tribunal.‖

(emphasis supplied)

30 Relying upon the judgment in Tata Teleservices (supra), the appellant claims

that the refund of the Entry Fee falls within the purview of Section 14(a)(i) of the

TRAI Act. While evaluating the submissions, it must be noted at the outset, that

there is an inconsistency in the line of submissions urged on behalf of the appellant.

The Union of India submitted that the Entry Fee which was paid by the appellant

was a one-time non-refundable fee in terms of the UASL Guidelines and the UASL

agreement. The response of the appellant to the above submission is that the

licence was not terminated for a breach on the part of the appellant, nor did the

appellant voluntarily surrender the licence. Hence, according to the appellant, the

PART E

clause in the guidelines and the agreement precluding refund would not stand

attracted. In other words, as a result of the decision of this Court in CPIL (supra), the

entire process leading up to the award of licence for 2G spectrum was held to be

vitiated and the licences were quashed. The TDSAT has accepted this line of

submission of the appellant and held that the UASL condition in regard to the nonrefundability of the one-time Entry Fee would not per se stand attracted where the

licence was not terminated for a breach but was quashed by this Court by the

exercise of its jurisdiction under Article 32 for the reason that the entire process was

found to be vitiated and manifestly arbitrary. The basis of the claim which has been

raised by the appellant for refund is not a dispute over the terms which govern the

relationship between the parties following the issuance of a Letter of Intent but

before the grant of an actual licence, or a dispute arising out of a licence granted

between the licensor or a licensee. As a matter of fact, it is also important to note

that the appellant, as will be analyzed in greater detail later, has placed reliance on

the doctrine that an agreement which is void cannot be split up and none of the

parties to the agreement can be permitted to seek part-enforcement of a contract

through a court of law. In support of this proposition, reliance has been placed on

the decision of this Court in Tarsem Singh v. Sukhminder Singh28

. A two-judge

Bench of this Court had held that if an agreement is held to be void, then none of the

terms, ―except in certain known exceptions, specially where the clause is treated to

28 1998 (3) SCC 471 (―Tarsem Singh‖)

PART E

constitute separate and independent agreement, severable from the main

agreement‖ can be enforced separately and independently.

31 The reliance on the principle embodied in Tarsem Singh (supra) is a clear

indicator that the basis of the claim of the refund does not emanate from the

relationship between the appellant and the respondent as licensor and licensee. The

claim for restitution is based independently on the ground that upon the decision of

this Court in CPIL (supra) holding the licence to be unlawful, the appellant is entitled

to restoration of the benefit which has been obtained by the Union of India under an

agreement which is held to be void.

32 Apart from what has been stated above, the earlier analysis of the decision in

CPIL (supra) indicates that when the controversy over the allocation of 2G spectrum

and the licences was the subject matter of adjudication before this Court, the

appellant as well as the Union government were defending the allocation of the

spectrum and the grant of 2G licences. The appellant was on notice of the fact that

the award of licences in pursuance of the ―First Come First Serve‖ policy was under

challenge and the main relief which was sought in the proceedings under Article 32

was for the setting aside of the auction and the award of damages. It is in this

backdrop, that the conduct of the appellant assumes significance. The appellant did

not, in the course of the adjudication before this Court, put forth the plea for refund

of the Entry Fee in the event that the allocation of the spectrum or the grant of

licences were to stand vitiated.

PART E

33 This Court has noticed a rising trend of cases where parties have attempted

to take another bite at the cherry by initiating proceedings over various forums,

particularly to circumvent the jurisdiction of this Court which is in seisin of the matter.

A purportedly ancillary remedy is urged in another forum as a dilatory tactic or as an

attempt at forum shopping. One of us (Dr Justice D Y Chandrachud), speaking for a

two-judge Bench of this Court in Vedanta Ltd. v. The Goa Foundation & Ors.29

had disapproved of such tactics. In that case, the Court dismissed a review petition

against the decision in Goa Foundation v. Sesa Sterlite Limited & Ors.30 which

had analysed a party’s attempt to pursue litigation before the High Court in spite of a

conclusive decision of this Court which had quashed its mining leases and directed

issuances of fresh leases with fresh environmental clearances in the State of Goa.

In T P Moideen Koya v. Government of Kerala31

, a three-judge Bench of this

Court disapproved of the practice of vexatious litigation when the effect of a binding

judgement is sought to be diluted or altered in a manner that deviates from the

procedure for modification. The Court noted:

―13. It is well settled that a decision pronounced by a court of

competent jurisdiction is binding between the parties unless it

is modified or reversed by adopting a procedure prescribed

by law. It is in the interest of the public at large that finality

should attach to the binding decisions pronounced by a court

of competent jurisdiction and it is also in the public interest

that individuals should not be vexed twice over with the same

kind of litigation. While hearing a petition under Article 32 it is

not permissible for this Court either to exercise a power of

29 Review Petition (Civil) Diary No. 18447 of 2020 (9 July 2021)

30 (2018) 4 SCC 218

31 (2004) 8 SCC 106

PART E

review or some kind of an appellate jurisdiction over a

decision rendered in a matter which has come to this Court by

way of a petition under Article 136 of the Constitution. The

view taken in Bhagubhai Dullabhbhai Bhandari v. District

Magistrate [AIR 1956 SC 585 : 1956 SCR 533 : 1956 Cri LJ

1126] that the binding nature of the conviction recorded by

the High Court against which a special leave petition was filed

and was dismissed cannot be assailed in proceedings taken

under Article 32 of the Constitution was approved

in Daryao v. State of U.P. [AIR 1961 SC 1457 : (1962) 1 SCR

574] (see para 14 of the Report).‖

34 The judgment in CPIL (supra) contains a detailed enumeration of the facts

which were brought to the attention of the Court and all the submissions which were

placed on the record by the contesting parties. The submissions bear expressly on

the lack of transparency and the effort on the part of the authorities of the Union

government to benefit a select group of persons/entities who were favoured under

the ―First Come First Serve‖ policy. The decision dwelt on the benefits which the

selected entities have received — both in terms of excluding others as well as in

setting down the financial terms for the award of the licence. The determination of

the Entry Fee was an integral element of the financial terms governing the award of

the licence and was not a stand-alone feature which could be isolated from the

overall process leading up to the award of licences. Therefore, the submission of the

appellant that the right to appeal for a refund of the Entry Fee would enure after the

decision in CPIL (supra) would be a simplistic understanding of the process and the

ultimate decision of this Court. While directing the cancellation of the licences and

ordering a fresh auction, this Court imposed costs of Rs 5 crores on one set of

licensees and Rs 50 lakhs on another set, after assessing their culpability in wrongly

PART E

benefitting from the ―wholly arbitrary‖ and ―unconstitutional exercise‖ of license and

spectrum allocation. It would be an improper reading of the judgment to postulate

that the decision leaves open a claim for the refund of the Entry Fee. The payment

of the Entry Fee was one element in the overall financial conspectus which led to the

award of licences. The adjudication before this Court in CPIL (supra) must be

construed as a one composite whole from which its parts cannot be separated.

35 The appellant has argued that if the TDSAT’s conclusion on the jurisdiction

were to be accepted, it would impinge on the expanse of its jurisdiction and will

exclude certain disputes falling within the ambit of public law. However, this

argument is not a correct reading of the conclusion that TDSAT has arrived at. De

hors the decision in CPIL (supra), the appellant’s dispute over the terms of the

license with the Union of India (licensor) would fall within the jurisdiction of the

TDSAT under Section 14(a)(i), as affirmed by this Court in Tata Teleservices

(supra). The respondent’s argument that the appellant is no longer a ―licensor‖ after

the quashing of the licenses would be a restrictive reading of the jurisdiction of the

TDSAT in view of the decision in Tata Teleservices (supra). However, since the

policy on the allocation of spectrum and the licences were quashed on the grounds

of mala fides and arbitrariness in the Union government’s policy, the subsequent

enquiry into viability of the refund of the Entry Fee would have to be agitated before

the same Court.

36 Such practice has been previously followed by the TDSAT. In AUSPI (supra),

a two-judge Bench of this Court considered the decision of the TDSAT on the

PART E

definition of AGR which was upheld by this Court in the exercise of its appellate

jurisdiction under Section 18 of the TRAI Act. This Court was called upon to decide

whether a substantially similar question can be reagitated before the TDSAT after

this Court’s dismissal of the civil appeal against the TDSAT order holding that AGR

will include only revenue arising from licensed activities and not revenue from

activities outside the licence of the licensee. The Court observed that the TDSAT

had jurisdiction, only after specifically noting the order of this Court granting the

Union of India specific liberty to allege the issues before the TDSAT. This Court

noted:

―32. The first substantial question of law which we have to

decide is whether after dismissal of Civil Appeal No. 84 of

2007 of the Union of India by this Court on 19-1-2007 [Union

of India v. Assn. of Unified Telecom Service Providers of

India, Civil Appeal No. 84 of 2007 decided on 19-1-2007

(SC)] against the order dated 7-7-2006 of the Tribunal, the

Union of India can reagitate the question decided in the order

dated 7-7-2006 that the adjusted gross revenue will include

only revenue arising from licensed activities and not revenue

from activities outside the licence of the licensee.

33. For deciding this question, we must first look at the

language of the order dated 19-1-2007 [Union of India v.

Assn. of Unified Telecom Service Providers of India, Civil

Appeal No. 84 of 2007 decided on 19-1-2007 (SC)] of this

Court in Civil Appeal No. 84 of 2007. The order dated 19-1-

2007 [Union of India v. Assn. of Unified Telecom Service

Providers of India, Civil Appeal No. 84 of 2007 decided on 19-

1-2007 (SC)] is quoted hereinbelow:

―Heard the parties. Pursuant to the direction of TDSAT in the

impugned order, a fresh recommendation has been made by

TRAI. In view thereof, we see no reasons to interfere. The

appeal is dismissed. The appellant is, however, given liberty

to urge the contentions raised in this petition before TDSAT.‖

(emphasis supplied)

PART E

It will be clear from the language of the order dated 19-1-2007

[Union of India v. Assn. of Unified Telecom Service Providers

of India, Civil Appeal No. 84 of 2007 decided on 19-1-2007

(SC)] that while dismissing the appeal, the Court has given

liberty to the appellant, namely, Union of India, to urge the

contentions raised in Civil Appeal No. 84 of 2007.

34...Thus, as per the express language of the order dated 19-

1-2007 [Union of India v. Assn. of Unified Telecom Service

Providers of India, Civil Appeal No. 84 of 2007 decided on 19-

1-2007 (SC)] of this Court in Civil Appeal No. 84 of 2007, the

Union of India could raise each of the grounds extracted

above before the Tribunal. Hence, even if we hold that the

order dated 7-7-2006 of the Tribunal got merged with the

order dated 19-1-2007 [Union of India v. Assn. of Unified

Telecom Service Providers of India, Civil Appeal No. 84 of

2007 decided on 19-1-2007 (SC)] of this Court passed in Civil

Appeal No. 84 of 2007, by the express liberty granted by this

Court in the order dated 19-1-2007 [Union of India v. Assn. of

Unified Telecom Service Providers of India, Civil Appeal No.

84 of 2007 decided on 19-1-2007 (SC)] , the Union of India

could urge before the Tribunal all the contentions covered

under Grounds 1 to 6 extracted above including the

contention that the definition of adjusted gross revenue as

given in the licence could not be challenged by the licensees

before the Tribunal and will include all items of revenue

mentioned in the definition of adjusted gross revenue in the

licence.‖

37 Apart from the above, it must be noted that the appellant made no effort to

urge during the course of the submissions before the Court in CPIL (supra) that they

should be allowed a refund of Entry Fee in the event that the Court were to quash

the process and the award of licences. Significantly, the appellant did not seek the

permission of this Court at that stage to reserve their liberties of agitating a claim for

refund of Entry Fee in separate proceedings. Besides having such a course of action

open to them before the judgment was delivered, the appellants had their remedies

open in law even after the decision by seeking liberty of adopting independent

PART E

proceedings for agitating the refund of the Entry Fee. Not having done this at any

stage in, or in connection with, the proceedings relating to the decision in CPIL

(supra), the appellant cannot be permitted to do so subsequently.

38 Attempting to get over this hurdle, the appellant urged before this Court that

what could have been agitated in the course of the proceedings leading up to the

decision in CPIL (supra) can well be agitated in the present proceedings since the

coram in both cases would be the Supreme Court and the appellant is now in appeal

before this Court against the decision of the TDSAT. Such a course of action would

not plainly be open to the appellant since the jurisdiction which has been invoked

presently in the civil appeal is the appellate jurisdiction arising out of the decision of

the TDSAT to reject the claim for refund of the Entry Fee. The conduct of the

appellant indicates that on 13 May 2016, the appellant sought to withdraw the

appeals against the order of the TDSAT. The Court had recorded – ―the appellant

prays for liberty to withdraw the present appeals and instead approach this Court

once again if it becomes so necessary”. The appellant ought to have obtained

specific liberty of the Court on 13 May 2016 of pursuing proceedings before the

TDSAT, something which is conspicuous by its absence in the order which was

passed by this Court. Yet, the appellant chose to move the TDSAT by filing the

Second Telecom Petition. The TDSAT noted that the petition was a ―second

attempt‖ by the Appellant ―for claiming the same relief‖ which had been sought under

the impugned order of the TDSAT. Thus, when the appellant failed in seeking relief

on 11 December 2018, it filed an appeal against the order of TDSAT and then

PART F

moved this Court for restoration of the first set of appeals which was allowed on 7

January 2020. The course of action which has been adopted by the appellant is

anything but fair — withdrawing the civil appeals which were instituted against the

first order of the TDSAT without obtaining specific liberty or permission to move the

TDSAT, instituting a second round of litigation before the TDSAT, and then obtaining

a revival of the first set of civil appeals. A party must not be allowed to conduct

litigation in this manner. Such a course of action is subject to grave abuse since it

lays bare an effort at forum-shopping and selectively deciding where and before

whom it would pursue its remedies. It is in this backdrop, that the failure of the

appellant to be fair with the Court when it addressed its submissions in the judicial

process leading up to the decision in CPIL (supra) must be assessed. For the above

reasons we are of the view that the TDSAT has correctly come to the conclusion

that the claim by the appellant for refund of the Entry Fee could not have been

entertained.

F The claim founded on frustration and restitution

39 In this section of the judgment, we will analyse the claim of the appellant that

it is entitled to claim a refund of the Entry Fee on an application of the doctrine of

frustration and the principle of restitution. The appellant has placed reliance on the

provisions of Sections 56 and 65 of the Contract Act. The basic postulate of the

appellant is that when a licence is granted under the proviso to Section (4)(1) of the

PART F

Telegraph Act, the licence is in the nature of a contract between the government and

licensee, thus bringing it within the ambit of the Indian Contract Act.

40 In AUSPI (supra), a two-judge Bench of this Court has held:

―39. The proviso to sub-section (1) of Section 4 of the

Telegraph Act, however, enables the Central Government to

part with this exclusive privilege in favour of any other person

by granting a licence in his favour on such conditions and in

consideration of such payments as it thinks fit. As the Central

Government owns the exclusive privilege of carrying on

telecommunication activities and as the Central Government

alone has the right to part with this privilege in favour of any

person by granting a licence in his favour on such conditions

and in consideration of such terms as it thinks fit, a licence

granted under the proviso to sub-section (1) of Section 4 of

the Telegraph Act is in the nature of a contract between the

Central Government and the licensee.‖

The principle which has been elucidated in the above extract is that when the Union

government parts with the exclusive privilege which is conferred upon it by Section

4(1) of the Telegraph Act by granting a licence, the licence is in the nature of

contract between the Union government and the licensee.

41 It is on the above premise that the appellant seeks to invoke the application of

the doctrine of frustration of contract and of restoration. Section 56 of the Indian

Contract Act provides as follows:

―56. Agreement to do impossible act.— An agreement to

do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or

unlawful.—A contract to do an act which, after the contract is

made, becomes impossible, or, by reason of some event

PART F

which the promisor could not prevent, unlawful, becomes void

when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act

known to be impossible or unlawful.—Where one person

has promised to do something which he knew, or, with

reasonable diligence, might have known, and which the

promisee did not know, to be impossible or unlawful, such

promisor must make compensation to such promisee for any

loss which such promisee sustains through the nonperformance of the promise.‖

42 The doctrine of frustration is elucidated in the three-judge Bench decision of

this Court in Satyabrata Ghose v. Mugneeram Bangur & Co. 32

. Justice BK

Mukherjee, while explaining the doctrine of frustration, observed:

―10. Although various theories have been propounded by the

Judges and jurists in England regarding the juridical basis of

the doctrine of frustration, yet the essential idea upon which

the doctrine is based is that of impossibility of performance of

the contract; in fact impossibility and frustration are often

used as interchangeable expressions. The changed

circumstances, it is said, make the performance of the

contract impossible and the parties are absolved from the

further performance of the contract impossible and the parties

are absolved from the further performance of it as they did not

promise to perform an impossibility…We hold, therefore, that

the doctrine of frustration is really an aspect or part of the law

of discharge of contract by reason of supervening

impossibility or illegality of the act agreed to be done and

hence comes within the purview of Section 56 of the Indian

Contract Act. It would be incorrect to say that Section 56 of

the Contract Act applies only to cases of physical impossibility

and that where this section is not applicable, recourse can be

had to the principles of English law on the subject of

frustration…‖

32 1954 SCR 310

PART F

Thus, it was held that the applicability of Section 56 of the Indian Contract Act is not

limited to cases of physical impossibility. The Court also noted that in deciding cases

in India, the only test which must apply ―is that of supervening impossibility or

illegality of the act agreed to be contractually done‖. Thus, the Court enunciated the

doctrine underlying Section 56 by construing the word ―impossible‖ in its practical

sense, not just in its literal sense. Similarly, Section 2033 of the Indian Contract Act

envisages a situation where an agreement is void when both parties are under a

mistake as to a matter of fact.

43 In Tarsem Singh (supra), this Court was confronted with a contract being

void under Section 20 of the Indian Contract Act as the parties were under a mistake

of fact regarding the metric for assessing the area of land that was the subject of the

contract. This Court, while interpreting the expression ―discovered to be void‖, held

that these words comprehend a situation in which parties were suffering from a

mistake of fact from the very beginning but had not realized at the time of entering

into the agreement or signing of the documents that they were suffering from any

such mistake and had therefore acted bona fide while entering into such

agreements. The agreement, as the Court held, in that case was void from its

inception and was discovered to be so at a much later date.

33 ―20. Agreement void where both parties are under mistake as to matter of fact.—Where both the parties to an

agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation.—An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is

not to be deemed a mistake as to a matter of fact.‖

PART F

44 The appellant, besides placing reliance on Tarsem Singh (supra), has urged

that all judicial decisions are retrospective (unless in a particular case this Court

makes its judgment prospective) and hence, the voidness which attaches to its

UASLs would relate back to their very inception. It is on this basis that the appellant

stakes its claim for a refund of the Entry Fee based on the principle of restitution.

45 Section 65 of the Indian Contract Act recognizes the principle of restitution,

particularly when a contract is discovered to be or becomes void. It stipulates thus:

―65. Obligation of person who has received advantage

under void agreement, or contract that becomes void.—

When an agreement is discovered to be void, or when a

contract becomes void, any person who has received any

advantage under such agreement or contract is bound to

restore it, or to make compensation for it, to the person from

whom he received it.‖

46 In Pollock & Mulla’s seminal treatise on the Indian Contract Act34, it has been

noted that Section 65 does not operate in derogation of the maxim in pari delicto

potior est conditio possidentis:

―Section 65 is not in derogation of the common law maxims

ex dolo malo non oritur actio and in pari delicto potior est

conditio possidentis; and only those cases as are not covered

by these maxims can attract application of the provision of

section 65 on the footing that when an agreement in its

inception was not void and it was not hit by the maxims but is

discovered to be void subsequently, right to restitution of the

advantage received under such agreement is secured on

equitable consideration. The section has been held not to

34 R Yashod Vardhan and Chitra Narayan, Pollock & Mulla The Indian Contract and Specific Relief Acts Volume I

(16th edition, LexisNexis)

PART F

apply where both parties knew of the illegality at the time the

agreement was made, and were in pari delicto.‖

Thus, the application of Section 65 has to be limited to those cases were the party

claiming restitution itself was not in pari delicto.

47 In The Principles of Law of Restitution35, it has been noted that all claims for

restitution are subject to a defence of illegality. The genesis of this defence is in the

legal maxim ex turpi causa non oritur actio (no action can arise from a bad cause). A

court will not assist those who aim to perpetuate illegality. This rule was initially

recognized by the House of Lords in its decision in Holman v. Johnson36. Lord

Mansfield held:

―The objection, that a contract is immoral or illegal as

between the plaintiff and defendant, sounds at all times very

ill in the mouth of the defendant. It is not for his sake,

however, that the objection is ever allowed; but it is founded

in general principles of policy, which the defendant has the

advantage of, contrary to the real justice, as between him and

the plaintiff, by accident, if I may so. The principle of public

policy is this; ex dolo malo non oritur actio. No Court will

lend its aid to a man who founds his cause of action

upon an immoral or illegal act. If, from the plaintiff ’s own

stating or otherwise, the cause of action appears to arise

ex turpi causa, or the transgression of a positive law of

this country, there the Court says he has no right to be

assisted.‖

(emphasis supplied)

35 Graham Virgo, The Principles of the Law of Restitution (3rd edition, OUP) pg 710

36 (1775) 1 Cowp 341, 343; 98 ER 1120, 1121

PART F

The Principles of Law of Restitution subsequently notes that in pari delicto potior est

conditio possidentis is a way of qualifying the ex turpi causa defence37:

―This in pari delicto principle enables the court to analyse the

particular circumstances of the case to determine whether the

claimant is less responsible for the illegality than the

defendant, for then, as between the claimant and the

defendant, the just result is that the claimant should not be

denied relief, since the parties are not in pari delicto. But

where the claimant is more responsible for the illegality

or the parties are considered to be equally responsible,

the in pari delicto principle applies and restitution will be

denied.‖

(emphasis supplied)

Thus, when the party claiming restitution is equally or more responsible for the

illegality of a contract, they are considered in pari delicto.

48 In the decision of the UK Supreme Court in Patel v. Mirza38, Lord Sumption

JSC has succinctly explained the nature of the inquiry to determine whether a party

is in pari delicto:

―241 To the principle that a person may not rely on his own

illegal act in support of his claim, there are significant

exceptions, which are as old as the principle itself and

generally inherent in it. These are broadly summed up in

the proposition that the illegality principle is available

only where the parties were in pari delicto in relation to

the illegal act. This principle must not be misunderstood.

It does not authorise a general inquiry into their relative

blameworthiness. The question is whether they were

legally on the same footing. The case law discloses two

main categories of case where the law regards the parties as

37 Supra at 35, pg 711

38 [2016] 3 WLR 399

PART F

not being in pari delicto, but both are based on the same

principle.

242 One comprises cases in which the claimant’s

participation in the illegal act is treated as involuntary: for

example, it may have been brought about by fraud, undue

influence or duress on the part of the defendant who seeks to

invoke the defence…

243 The other category comprises cases in which the

application of the illegality principle would be inconsistent with

the rule of law which makes the act illegal. The paradigm

case is a rule of law intended to protect persons such as the

plaintiff against exploitation by the likes of the defendant.

Such a rule will commonly require the plaintiff to have a

remedy notwithstanding that he participated in its breach…‖

(emphasis supplied)

Thus, in determining a claim of restitution, the claiming party’s legal footing in

relation to the illegal act (and in comparison to the defendant) must be understood.

Unless the party claiming restitution participated in the illegal act involuntarily or the

rule of law offers them protection against the defendant, they would be held to be in

pari delicto and therefore, their claim for restitution will fail.

49 The position is in India is similar to that of the case of Kuju Collieries Ltd. v.

Jharkhand Mines Ltd.39

, where a Bench of three learned judges of this Court relied

on a judgment of a five-judge bench of the then Hyderabad High Court. While

construing the provisions of Section 65, this Court held:

―8. A Full Bench of five Judges of the Hyderabad High Court

in Budhulal v. Deccan Banking Company [AIR 1955 Hyd 69

(FB) : ILR 1955 Hyd 101] speaking through our brother,

39 (1974) 2 SCC 533

PART F

Jaganmohan Reddy, J. as he then was, referred with

approval to these observations of the Privy Council. They

then went on to refer to the observations of Pollock and

Mulla in their treatise on Indian Contract and Specific

Relief Acts, 7th Edn. to the effect that Section 65, Indian

Contract Act does not apply to agreements which are

void under Section 24 by reason of an unlawful

consideration or object and there being no other

provision in the Act under which money paid for an

unlawful purpose may be recovered back, an analogy of

English Law will be the best guide. They then referred to

the reasoning of the learned authors that if the view of

the Privy Council is right namely that “agreements

discovered to be void” apply to all agreements which are

ab initio void including agreements based on unlawful

consideration, it follows that the person who has paid

money or transferred property to another for an illegal

purpose can recover it back from the transferee under

this section even if the illegal purpose is carried into

execution and both the transferor and transferee are in

pari delicto. The Bench then proceeded to observe:

―In our opinion, the view of the learned authors is neither

supported by any of the subsequent Privy Council decisions

nor is it consistent with the natural meaning to be given to the

provisions of Section 65. The section by using the words

―when an agreement is discovered to be void‖ means nothing

more nor less than: when the plaintiff comes to know or finds

out that the agreement is void. The word ―discovery‖ would

imply the pre-existence of something which is subsequently

found out and it may be observed that Section 66, Hyderabad

Contract Act makes the knowledge (Ilm) of the agreement

being void as one of the pre-requisites for restitution and is

used in the sense of an agreement being discovered to be

void. If knowledge is an essential requisite even an

agreement ab initio void can be discovered to be void

subsequently. There may be cases where parties enter into

an agreement honestly thinking that it is a perfectly legal

agreement and where one of them sues the other or wants

the other to act on it, it is then that he may discover it to be

void. There is nothing specific in Section 65, Indian Contract

Act or its corresponding section of the Hyderabad Contract

Act to make it inapplicable to such cases.

A person who, however, gives money for an unlawful

purpose knowing it to be so, or in such circumstances

PART F

that knowledge of illegality or unlawfulness can as a

finding of fact be imputed to him, the agreement under

which the payment is made cannot on his part be said to

be discovered to be void. The criticism that if the

aforesaid view is right then a person who has paid

money or transferred property to another for illegal

purpose can recover it back from the transferee under

this section even if the illegal purpose is carried into

execution, notwithstanding the fact that both the

transferor and transferee are in pari delicto, in our view,

overlooks the fact that the courts do not assist a person

who comes with unclean hands. In such cases, the

defendant possesses an advantage over the plaintiff — in

pari delicto potior est conditio defendentio.

Section 84, Indian Trust Act, however, has made an

exception in a case — where the owner of property transfers

it to another for illegal purpose and such purpose is not

carried into execution or the transferor is not as guilty as the

transferee or the effect of permitting the transferee to retain

the property might be to defeat the provisions of any law the

transferee must hold the property for the benefit of the

transferor.

This specific provision made by the legislature cannot be

taken advantage of in derogation of the principle that Section

65, Contract Act, is inapplicable where the object of the

agreement was illegal to the knowledge of both the parties at

the time it was made. In such a case the agreement would be

void ab initio and there would be no room for the subsequent

discovery of that fact.‖

We consider that this criticism as well as the view taken

by the Bench is justified. It has rightly pointed out that if

both the transferor and transferee are in pari delicto the

courts do not assist them.‖

(emphasis supplied)

While upholding the view of the Hyderabad High Court, this Court held ―it [the Full

Bench of the Hyderabad High Court] has rightly pointed out that if both the transferor

and transferee are in pari delicto the courts do not assist them‖.

PART F

50 In an earlier decision of this Court in Inmani Appa Rao v. Gollapalli

Ramalingamurthi40

, a three-judge Bench held that where both the parties before

the Court are confederates in the fraud, the Court must lean in favour of the

approach which would be less injurious to public interest. Justice P B

Gajendragadkar (as he then was), speaking for the Court, held:

―12. Reported decisions bearing on this question show that

consideration of this problem often gives rise to what may be

described as a battle of legal maxims. The appellants

emphasised that the doctrine which is pre-eminently

applicable to the present case is ex dolo malo non oritur actio

or ex turpi causa non oritur actio. In other words, they

contended that the right of action cannot arise out of fraud or

out of transgression of law; and according to them it is

necessary in such a case that possession should rest where it

lies in pari delicto potior est conditio possidentis; where each

party is equally in fraud the law favours him who is actually in

possession, or where both parties are equally guilty the estate

will lie where it falls. On the other hand, Respondent 1 argues

that the proper maxim to apply is nemo allegans suam

turpitudinum audiendum est, whoever has first to plead

turpitudinum should fail; that party fails who first has to allege

fraud in which he participated. In other words, the principle

invoked by Respondent 1 is that a man cannot plead his own

fraud. In deciding the question as to which maxim should

govern the present case it is necessary to recall what Lord

Wright, M.R. observed about these maxims in Berg v. Sadler

and Moore [(1937) 2 KB 158 at p. 62] . Referring to the

maxim ex turpi causa non oritur actio Lord Wright observed

that ―this maxim, though veiled in the dignity of learned

language, is a statement of a principle of great importance;

but like most maxims it is much too vague and much too

general to admit of application without a careful consideration

of the circumstances and of the various definite rules which

have been laid down by the authorities‖. Therefore, in

deciding the question raised in the present appeal it would be

necessary for us to consider carefully the true scope and

40 (1962) 3 SCR 739 (―Inmani Appa Rao‖)

PART F

effect of the maxims pressed into service by the rival parties,

and to enquire which of the maxims would be relevant and

applicable in the circumstances of the case. It is common

ground that the approach of the Court in determining the

present dispute must be conditioned solely by

considerations of public policy. Which principle would be

more conducive to, and more consistent with, public

interest, that is the crux of the matter. To put it

differently, having regard to the fact that both the parties

before the Court are confederates in the fraud, which

approach would be less injurious to public interest.

Whichever approach is adopted one party would succeed

and the other would fail, and so it is necessary to enquire

as to which party's success would be less injurious to

public interest.‖

(emphasis supplied)

51 The principle which was enunciated in the judgment in Inmani Appa Rao

(supra) has been more recently applied in a decision of a three-judge Bench of this

Court in Narayanamma v. Govindappa41. The Court held:

―28. Now, let us apply the other test laid down in Immani

Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi,

(1962) 3 SCR 739 : AIR 1962 SC 370] . At the cost of

repetition, both the parties are common participator in the

illegality. In such a situation, the balance of justice would tilt in

whose favour is the question. As held in Immani Appa

Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962)

3 SCR 739 : AIR 1962 SC 370] , if the decree is granted in

favour of the plaintiff on the basis of an illegal agreement

which is hit by a statute, it will be rendering an active

assistance of the court in enforcing an agreement which is

contrary to law. As against this, if the balance is tilted towards

the defendants, no doubt that they would stand benefited

even in spite of their predecessor-in-title committing an

illegality. However, what the court would be doing is only

rendering an assistance which is purely of a passive

41 2019 (19) SCC 42

PART F

character. As held by Gajendragadkar, J. in Immani Appa

Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962)

3 SCR 739 : AIR 1962 SC 370] , the first course would be

clearly and patently inconsistent with the public interest

whereas, the latter course is lesser injurious to public interest

than the former.‖

52 Hence, in adjudicating a claim of restitution under Section 65 of the Indian

Contract Act, the court must determine the illegality which caused the contract to

become void and the role the party claiming restitution has played in it. If the party

claiming restitution was equally or more responsible for the illegality (in comparison

to the defendant), there shall be no cause for restitution. This has to be determined

on the facts of each individual case.

53 The appellant before us has relied upon the decision of TDSAT in S Tel Pvt.

Ltd. v. Union of India42 to establish that the blame for quashing of the UASLs lies

with the Union government alone. The issue which came up for decision before the

TDSAT in that case was whether the petitioner was entitled to the refund of the

money which it paid for allocation of 3G spectrum under licences which were later

quashed by the judgment of this Court. In that case, the petitioner had applied for

UASLs in six circles/service areas on 7 July 2007. The Government issued a press

note on 24 September 2007 prescribing a cut-off date of 10 October 2007 for

submissions of applications for a fresh UASL. On 28 September 2007, the petitioner

applied for UASLs in sixteen circles in addition to its earlier application for six circles.

42 2015 SCC OnLine TDSAT 1 (―S Tel‖)

PART F

On 10 January 2008, by another press note, the deadline for fresh licences was

retrospectively advanced to 25 September 2007. On the same day, the government

granted licences to 122 applicants, including the petitioner's previous application for

six circles, whose applications had been received prior to 25 September 2007.

Against the denial of licences for sixteen circles on the ground that the application

was made beyond the cut-off date, the petitioner moved the Delhi High Court

challenging the action of the government in retrospectively advancing the last date

for submission of applications as arbitrary. The High Court held that the decision to

fix the cut off-date for making applications, with a view to limit the number of service

providers was contrary to the decision of the TRAI which the government had

purported to accept. The government was accordingly directed to consider the

petitioner’s application which was submitted on 28 September 2007. The Division

Bench having dismissed an intra court appeal, led to proceedings before this Court.

The Attorney General stated that the application submitted by the petitioner was not

rejected but was held in abeyance and it would be considered on a first-come-firstserve basis in terms of the then prevailing policy in consultation with the TRAI. This

Court disposed of the appeal while sustaining the findings recorded by the Delhi

High Court in regard to the change in the cut-off dates. For the purpose of the

present discussion, it would not be necessary to advert to the detailed analysis in

the above case, save and except to note that the petitioner moved the TDSAT

claiming a refund of the amount which it had paid for the 3G spectrum in three

service areas. Significantly in that case, the TDSAT observed:

PART F

―In course of hearing of the case we repeatedly asked Mr.

Banerjee what blame, if any, for the quashing of its licences

extends to the petitioner. Mr. Banerjee was unable to show

anything from the Supreme Court judgment in Centre for

Public Interest Litigation or from the Government records that

might show that the petitioner was in any way responsible for

the quashing of its licences.

It is thus clear that though the petitioner’s UAS licences were

declared illegal and quashed, that was not due to any fault by

the petitioner but on account of the illegalities committed by

the Government in the issuance of those one hundred and

twenty two (122) licences. While discussing the provisions of

clauses 3.6 and 3.7 of the NIA it is noted above that those

clauses deal with a situation where the licence is

cancelled/terminated at the instance of the licensor for some

fault on the part of the licensee. The quashing of the

petitioner’s licences in the present case thus clearly does not

fall under the two clauses in the NIA. Further, as a result of

the quashing of the petitioner's licences its contract with the

Government relating to 3G spectrum got discharged on

account of frustration, as provided under section 56 of the

Contract Act, leaving it open to the petitioner to seek the relief

of restitution in terms of section 65 of the Contract Act.‖

The decision of the TDSAT to allow a refund is thus clearly postulated on the

principle that the petitioner was not at fault, but the UASLs were quashed because

of the illegalities committed by the government. Therefore, there is a clear distinction

between the facts as they emerged before the TDSAT in S Tel (supra) and the facts

of the present case.

54 In the present case, the appellant has been held to be in pari delicto. The

decision of this Court in CPIL (supra) leaves no manner of doubt that the appellant

was among the group of licensees who were found to be complicit in obtaining

benefits under the ―First Come First Serve‖ policy of the Union government at the

PART G

cost of the public exchequer. In such a situation and following the well-settled

principles which have been enunciated above, the appellant could not be held

entitled to claim a refund of its Entry Fee.

55 On behalf of the appellant, it is sought to be urged that in the auction which

followed the decision in CPIL (supra), the Union government granted fresh licences

including for the areas which were governed by the licences in favour of the

appellant at a much higher value. This argument is completely unacceptable for the

simple reason that if the Union government had held a transparent and objective

process of conducting an auction when the initial licences were granted in favour of

the appellant, a much higher value would have been realized by the public

exchequer. The appellant has been the beneficiary of a manifestly arbitrary policy

which was adopted by the Union government and which was quashed in the

decision of this Court in CPIL (supra). That being the position, the appellant would

not be entitled to a refund of the Entry Fee even on the principle of restitution

embodied in Section 65 of the Indian Contract Act.

G The policy of set off

56 According to the appellant, the set off which was granted by the Union

government in pursuance of the decision of the EGoM on 31 October 2012,

constitutes an admission of liability. In this backdrop, it has been submitted that the

policy which was adopted by the Union government by allowing a set off to licensees

PART G

whose licences have been quashed subject to their participating in and being found

successful in the fresh auction, suffers from manifest arbitrariness.

57 By the judgment of this Court in the CPIL (supra), the licensees whose

licences had been quashed were not barred from participating in the subsequent

auction for the grant of fresh licences. On 12 October 2012, the Ministry of

Communications and Information Technology issued a document titled ―Queries and

Responses to the NIA for competitive bids for allocation of spectrum issued by the

DoT‖. Among the queries, which were in the nature of Frequently Asked Questions,

Query Numbers 74 and 75 and the response were in the following terms:

―74. i) The original entry level Pan India

license fee of Rs. 1506.82 crore (along with

interest from the date of payment of such

license fee) which was paid for acquiring the

licenses, which are quashed by the Hon’ble

Supreme Court for no reason attributable to a

licensee, should be allowed to be set off

against the earnest money required to be paid

for participating in the new auction and

against the successful bid amount, in the

event of a successful bid. In the event there

would be any shortfall in the money required

to be paid by xxx on successful bid and the

licensee fee already paid to you in respect of

the quashed 21 UASL, xxx shall obviously

pay such additionally.

A set off is allowed against the Earnest

Money and the payment due in the event of

spectrum being won in this auction. The total

amount of such set off shall be limited to the

total entry fee paid by the entity for all its

licenses which have been quashed by the

Supreme Court. No interest will be due on

this amount.

ii) The bank guarantees originally submitted with

the DoT in respect of the 21 USA licenses which

are quashed by the Hon’ble Supreme Court for

no reason attributable to xxx should be allowed

to be used for the acquisition and allotment of

new licenses and spectrums towards the

requirement of the same, in the event of a

successful bid by xxx. In the event there would

be any shortfall in the bank guarantees required

to be submitted by xxx on successful bid and the

bank guarantees already submitted with DoT in

respect of the quashed 21 UASL, xxx shall

Required bank guarantees in the event of winning

of spectrum/acquisition of Unified License (Access

Services) will need to be furnished.

PART G

obviously submit such bank guarantees

additionally.

75. i) We would like to seek clarity with regards to

Government’s position on levying ―One Time

Charge‖ on the incumbent Operators before the

auction, so that we could arrive at a wellinformed decision with regards to our

participation in the auction.

This cannot be clarified at this stage

ii) The price already paid by xxx at the time of

issuance of licenses in 2008 should be

adjusted in totality towards the auction price

in case we are successful in auction else it

should be refunded in totality. (Not to be

linked Circle wise)

Please refer to response to query at Sl.no. 74.‖

(emphasis supplied)

58 On 31 October 2012, the Cabinet Secretariat of the Union government

circulated the Minutes of the Meeting of the EGoM held on 18 October 2012. The

Minutes contain the rationale for the adoption of a policy of set off in the following

terms:

―13. The EGoM considered the letter dated 12.10.2012 from

the Minister of Information & Broadcasting regarding set-off of

entry fee against earnest money and payment due in the

event of spectrum being won and noted that the entry fee

paid by TSPs whose licenses were quashed was for a period

of 20 years. While on the one hand, the TSPs could be

expected to have paid a pro-rata amount for the period of

operation of the license, i.e. 2008-2012, on the other hand,

there could be a claim for refund with interest for the pro-rata

amount for the balance period. Therefore, the EGoM decided

to allow such TSPs to adjust an amount equivalent to their full

entry fee, without any interest, against the auction payments,

both for participation and for final payment on successful

conclusion. It was clarified that the set-off would be permitted

only to the quashed license holders participating in the

auction. Such set off would be allowed to the extent of total

entry fee paid for all quashed licenses on an aggregate basis

PART G

without consideration of the expired period of license, only if

they succeed in the auction. The set off will be permitted

against the Earnest Money Bank Guarantee amount initially

and later against the amount payable for auction price,

irrespective of the number of Local Service Areas (LSAs) in

which the holder of quashed license is successful in the

auction and without requiring correlation between LSAs in

which licenses were held earlier and the LSAs in which the

holder of the quashed licenses is successful.‖

The Union government has submitted before this Court that the set off policy was

formulated in order to encourage participation of all telecom operators in the

subsequent auction, increasing the possibility of higher price discovery to the benefit

of the public exchequer. It has been urged that the set off policy was aimed at the

revival of the telecom industry in a manner which encouraged uninterrupted supply

of services. The policy sought to increase participation at a subsequent auction by

offering a concession in the form of a set off of the previously paid Entry Fee, in

case the bidder had emerged successful in the fresh auction.

PART H

The appellant did not challenge the policy per se at that stage, nor did it attempt to

enter into the fray at that stage when a fresh auction was held. In these

circumstances, the policy decision adopted by the Union government cannot be

allowed to be questioned at the behest of the appellant who sought a refund

simpliciter in proceedings before the TDSAT. As held by a Constitution Bench in R K

Garg v. Union of India43

, a greater free play in the joints must be accorded to

decisions of economic policy where the legislature or the executive is called upon to

make complex choices which cannot always conform to a straitjacket or doctrinaire

solution.

59 For the above reasons, we do not find any reason to entertain the challenge

to the set off policy at this stage at the behest of the appellant.

H Conclusion

60 For the above reasons, we have come to the conclusion that the appellant

was in pari delicto with DoT and the then officials of the Union government. The

appellant was the beneficiary of the ―First Come First Serve‖ policy which was

intended to favour a group of private bidding entities at the cost of the public

exchequer. The contention of the appellant that it was exculpated from any wrong

doing by the judgment of this Court in CPIL (supra) is patently erroneous. The

process leading up to the award of the UASLs and the allocation of the 2G spectrum

43 (1981) 4 SCC 675

PART H

was found to be arbitrary and constitutionally infirm. The need for an open and

transparent bidding process for the allocation of natural resources was substituted

by a process which was designed to confer unlawful benefits on a group of selected

bidders by which the appellant benefitted. The appellant has tried to obviate these

findings by relying on its acquittal by the Special Judge, CBI. It is important to note

that the criminal trial before the Special Judge, CBI was limited to the question as to

whether the promoters of the appellant had cheated the DoT by providing a false

representation of its compliance with Clause 8 of the UASL Guidelines, since it was

allegedly being controlled by the Essar group. The Special Judge, CBI acquitted the

promoters of the appellant since the prosecution was unable to prove that: (i)

officers of DoT considered the representation of the appellant to be false; (ii) the

appellant was engaging in a sham transaction; or (iii) the appellant was actually

controlled by the Essar group. Hence, the acquittal of the promoters of the appellant

of these criminal charges does not efface or obliterate the findings which are

contained in the final judgment of this Court in CPIL (supra). Hence, as a beneficiary

and confederate of fraud, the appellant cannot be lent the assistance of this Court

for obtaining the refund of the Entry Fee. In any event, such a course of action

before the TDSAT was clearly in the teeth of the judgment of this Court in CPIL

(supra).

PART H

61 For the above reasons, we have come to the conclusion that there is no merit

in the appeals. The appeals are accordingly dismissed.

62 Pending application(s), if any, stand disposed of.

…….…………………………...............................J.

[Dr Dhananjaya Y Chandrachud]

…….…………………………...............................J.

[Surya Kant]

…….…………………………...............................J.

[Vikram Nath]

New Delhi;

March 03, 2022

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