UNION OF INDIA Vs ASSN.OF UNIFIED TELECOM S.P.OF INDIA&ORS
Bench: R.V. RAVEENDRAN,A.K. PATNAIK
Case number: C.A. No.-005059-005059 / 2007
Diary number: 31572 / 2007
Advocates: D. S. MAHRA Vs
ABHIJAT P. MEDH
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5059 OF 2007
Union of India & Anr. … Appellants
Versus
Association of Unified Telecom Service Providers of India & Ors. … Respondents
WITH
CIVIL APPEAL NOs.179-180 OF 2008, 363 of 2008, 1229- 1230 of 2008, 2065 of 2008, 2479 of 2008, 1552 of 2009, 3868 of 2009, 7049 of 2010, 7062 of 2010, 7063-7064 of 2010, 7443 of 2010, 7446 of 2010, 7126 of 2010, 7444 of 2010, 7445 of 2010, 9646-9661 of 2010, 2030 of 2011, 2031 of 2011, 2270 of 2011, 3245 of 2011, 5450-5451 of 2011, 311-314 & 317-318 of 2008, CIVIL APPEAL Nos. 8627-8628 OF 2011 (Arising out of SLP (C) Nos. 1786-1787 of 2009) AND CIVIL APPEAL Nos. 8625-8626 OF 2011 (Arising out of SLP (C) Nos. 6641-6642 of 2010)
J U D G M E N T
A. K. PATNAIK, J.
Civil Appeal Nos. 5059 of 2007, 179-180 of 2008, 311-314, 317-318 of 2008, 363 of 2008, 2065 of 2008, 1229-1230 of 2008 and 3868 of 2009:
These are appeals under Section 18 of the Telecom
Regulatory Authority of India Act, 1997 (for short “the
TRAI Act”) against the common judgment and order
dated 30.08.2007 of the Telecom Disputes Settlement
and Appellate Tribunal, New Delhi (for short “the
Tribunal”) in Petition No. 7 of 2003.
2. The relevant facts very briefly are that with the
introduction of the National Telecom Policy, 1994
liberalizing the Telecom Sector, telecom licenses were
issued to different service providers. The licenses
granted to the service providers stipulated a fixed license
fee, which was payable by the service providers every
year. During the period 1994 to 1999, the licensees
defaulted in payment of license fee and made a
representation to the Government of India, Ministry of
Telecommunications for relief against the high license
fee for the survival of the telecom industry. The
Government of India considered the representations and
after a number of deliberations with the licensees offered
a new package, known as the “National Telecom Policy
2
1999 - Regime” giving an option to the licensees to
migrate from fixed license fee to revenue sharing fee.
Accordingly, letters dated 22.07.1999 were sent to
different licensees offering them a change over to NTP-99
regime, which inter alia stated:
“(i) The cut off date for change over to NTP-99 regime will be 01.08.1999.
(ii) The licensee will be required to pay one time Entry Fee and License Fee as a percentage share of gross revenue under the license. The Entry Fee chargeable will be the license fee dues payable by existing licensees upto 31.07.1999, calculated upto this date duly adjusted consequent upon notional extension of effective date as in para (ix) below, as per the conditions of existing license.
(iii) The license fee as percentage of gross revenue under the license shall be payable w.e.f. 01.08.1999. The Government will take a final decision about the quantum of the revenue share to be charged as license fee after obtaining recommendations of the Telecom Regulatory Authority of India (TRAI). In the meanwhile, Government have decided to fix 15% of the gross revenue of the Licensee as provisional license fee. The gross revenue for this purpose would be the total revenue of the licensee company excluding the PSTN related call charges paid to DOT/MTNL and service tax collected by the licensee on behalf of the Government from their subscribers. On receipt of TRAI’s recommendation and Government’s final decision, final adjustment of provisional dues will be effected depending upon the percentage of revenue share and the definition of revenue for this purpose as may be finally decided.”
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3. After receipt of the letter dated 22.07.1999, some of
the service providers applied and took new licenses
which provided that the licensee will have to pay a
certain percentage of the Gross Revenue as license fee
annually. After the Government of India, Ministry of
Telecommunications finally took the final decision on the
definition of Adjusted Gross Revenue, the license
agreement was amended and signed by the licensees and
the amended license agreement was effective from
01.08.1999. Clause 19 of the amended license
agreement, which defines Adjusted Gross Revenue, is
extracted hereinbelow:
“19. Definition of ‘Adjusted Gross Revenue’: 19.1 Gross Revenue:
The Gross Revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets [or any other terminal equipment etc.’, revenue on account of interest, dividend, value added services, supplementary services, access or interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any setoff for related item of expense, etc.
19.2 For the purpose of arriving at the ‘Adjusted Gross Revenue [AGR]’ the following shall be excluded from the Gross Revenue to arrive at the AGR:
I. PSTN related call charges [Access Charges] actually paid to other eligible/
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entitled telecommunication service providers within India;
II. Roaming revenues actually passed on to other eligible/ entitled telecommunication service providers and;
III. Service Tax on provision of service and Sales Tax actually paid to the Government if gross revenue had included as component of Sales Tax and Service Tax.”
4. In the year 2003, some of the licensees questioned
the validity of the definition of Adjusted Gross Revenue
in the license agreement before the Tribunal and
contended that Adjusted Gross Revenue can only relate
to the revenue directly arising out of telecom operations
licensed under Section 4 of the Indian Telegraph Act,
1885 (for short “the Telegraph Act”) after adjustment of
expenses and write offs and revenues directly not
attributable to the licensed telecom activities. They also
contended that miscellaneous and other items including
interest income, and dividend income, value of rebates,
discounts, free calls and reimbursement from USO fund
etc. ought not to be included in the Adjusted Gross
Revenue for the purpose of computation of license fee.
5
The Union of India filed its reply before the Tribunal
contending that the licensees having unconditionally
accepted the migration package and having taken the
benefit of the same are bound by the terms and
conditions of the license agreement and cannot be
permitted to resile from the same. In its order dated
07.07.2006, the Tribunal rejected the contentions of the
Union of India and held that under Section 4 of the
Telegraph Act, the Central Government can take
percentage of the share of gross revenue of a licensee
realised from activities of the licensee under the license
and therefore revenue received by a licensee from
activities beyond licensed activities would be outside the
purview of Section 4 of the Telegraph Act. The Tribunal
further held that Section 11 (1) (a) of the TRAI Act
mandates the Central Government to seek
recommendations from the Telecom Regulatory Authority
(for short ‘the TRAI’) on the license fee payable by the
licensee and as no effective constitution had been made
by the TRAI, the matter should be remanded to the TRAI
and the TRAI can consider the matter and send its
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recommendations to the Tribunal. The Tribunal however
made it clear that the TRAI will bear in mind the findings
of the Tribunal that revenue of the licensee derived from
non-license activities will not be included in the Adjusted
Gross Revenue for the purpose of determining the
license fee payable by the licensee.
5. The Union of India, challenged the order dated
07.07.2006 of the Tribunal before this Court in Civil
Appeal No. 84 of 2007 under Section 18 of the TRAI Act.
While this Civil Appeal was pending before this Court,
the TRAI sent its recommendations on the incorporation
of the Adjusted Gross Revenue which had been sought
by the Tribunal by its order dated 07.07.2006.
Accordingly, when Civil Appeal No. 84 of 2007 came up
for hearing before this Court on 19.01.2007, this Court
took the view that as the TRAI had already submitted its
recommendations to the Tribunal, there was no reason
to interfere and dismissed the appeal giving liberty to the
Union of India to urge all the contentions raised in the
Civil Appeal before the Tribunal.
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6. When the Tribunal heard the parties on the
recommendations of the TRAI, the Union of India
contended that as this Court had given liberty to urge all
the contentions raised in the Civil Appeal before the
Tribunal, the Union of India was entitled to re-open the
issue whether the validity of the definition of Adjusted
Gross Revenue in the license agreement could be
questioned before the Tribunal. The licensees, on the
other hand, contended before the Tribunal that as the
Civil Appeal of Union of India has been dismissed by this
Court, the Union of India was not entitled to argue the
matter de novo and the earlier order dated 07.07.2006 of
the Tribunal had become final. In its fresh order dated
30.08.2007 (for short ‘the impugned order’) the Tribunal
held that its earlier order dated 07.07.2006 having
become final, it cannot be re-opened after the dismissal
of Civil Appeal No.84 of 2007 by this Court. The
Tribunal held that its finding in the earlier order dated
07.07.2006 that Adjusted Gross Revenue will include
only revenue arising from licensed activity and not
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revenue from activities outside the license cannot be re-
agitated by the Union of India.
7. Having held that Adjusted Gross Revenue will
include only revenue arising from licensed activity, the
Tribunal in the impugned order considered the
recommendations of the TRAI regarding the heads of
revenue to be included and the heads of revenue to be
excluded from the Adjusted Gross Revenue and decided
as follows:
(i) The Tribunal accepted the recommendation of the
TRAI that income from dividend even though part of the
revenue does not represent revenue from licensed
activity and, therefore, cannot be included in the
Adjusted Gross Revenue.
(ii) The Tribunal accepted the recommendation of the
TRAI that interest earned on investment of savings made
by a licensee after meeting all liabilities including
liability on account of the share of the Government in
the gross revenue cannot be included in the Adjusted
Gross Revenue, but, interest on investment of funds
received by a licensee by way of deposits from customers
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on account of security against charges and on account of
concessions given in the charges payable for using the
telecom services have to be included in the Adjusted
Gross Revenue as these are related to telecom service,
which is part of the licensed activity.
(iii) The Tribunal did not fully accept the
recommendation of the TRAI on capital gains and held
that sale of assets of a licensee such as immovable
properties, securities, warrants or debt instruments are
not part of the licensed activity and, therefore, capital
gains earned by a licensee on such sale of assets cannot
form part of the Adjusted Gross Revenue.
(iv) The Tribunal accepted the recommendation of the
TRAI that gains from Foreign Exchange rates
fluctuations are also not part of the licensed activity of
telecom service providers and, therefore, cannot
constitute part of the Adjusted Gross Revenue.
(v) The Tribunal did not fully accept the recommendation
of the TRAI on reversal of provisions like bad debts,
taxes and vendors’ credits and held that all these
10
reversals have to be excluded from the Adjusted Gross
Revenue.
(vi) The Tribunal also accepted the recommendation of
the TRAI that rent from property owned by the licensee
should be excluded from the Adjusted Gross Revenue,
provided it is clearly established that the property is not
in any way connected with establishing, maintaining and
working of telecommunication.
(vii) The Tribunal accepted the recommendation of the
TRAI that income from renting and leasing of passive
infrastructures like towers, dark fibre, etc. should be
part of the Adjusted Gross Revenue as they are parts of
the licensed activity of the licensee.
(viii) The Tribunal accepted the recommendation of the
TRAI that revenue from sale of tenders, directories,
forms, forfeiture of deposits/earnest money in relation to
telecom service should form part of the Adjusted Gross
Revenue, but held that management fees, consultancy
fees and training charges from telecom service should
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not form part of the Adjusted Gross Revenue as these
activities do not require a license.
(ix) The Tribunal held that payments received on behalf
of third party should not form part of the Adjusted Gross
Revenue and did not accept the recommendation of the
TRAI in this regard.
(x) The Tribunal did not accept the recommendation of
the TRAI that the revenue from TV up-linking and
Internet service should form part of the Adjusted Gross
Revenue as these activities are covered under a separate
license.
(xi) The Tribunal accepted the recommendation of the
TRAI that sale of handsets or telephone equipment
bundled with telecom service should be part of the
Adjusted Gross Revenue because such sale comes within
the licensed activity.
(xii) The Tribunal accepted the recommendation of the
TRAI that receipts from USO Fund will not form part of
the Adjusted Gross Revenue.
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(xiii) The Tribunal accepted the recommendation of
the TRAI that revenue receipts on account of
ADC (Access Deficit Charge) should form part
of the Adjusted Gross Revenue.
(xiv) The Tribunal accepted the recommendation of
the TRAI that costs on account of port
charges, interconnection set-up charges,
leased lines sharing of infrastructure, roaming
signaling charges and content charges should
form part of the Adjusted Gross Revenue.
(xv) The Tribunal did not accept the
recommendation of the TRAI that bad debts,
waivers and discounts should form part of the
Adjusted Gross Revenue and held that such
losses incurred by a licensee should be
excluded from the Adjusted Gross Revenue.
(xvi) The Tribunal accepted the recommendation of
the TRAI that service tax payable by the
licensee should be included or excluded from
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the Adjusted Gross Revenue on accrual basis
and also accepted the recommendation of the
TRAI that interconnection usage should also
be included or excluded from the Adjusted
Gross Revenue on accrual basis.
(xvii)The Tribunal did not accept the
recommendation of the TRAI that its
recommendations with regard to items, which
are to be included or excluded from the gross
revenue, should be effective from a prospective
date and instead held that the findings of the
Tribunal with regard to items, which are
included or excluded from the Adjusted Gross
Revenue, will be effective from the date the
licensee approached the Tribunal.
8. Mr. Soli Sorabjee and Mr. Rakesh Dwivedi, learned
senior counsel appearing for the Union of India in the
different Civil Appeals before us submitted that the
Union of India had challenged the order dated
07.07.2006 of the Tribunal before this Court in Civil
Appeal No.84 of 2007 and this Court while disposing of
14
the Civil Appeal gave liberty to the Union of India to urge
all the contentions raised in the Civil Appeal before the
Tribunal. They submitted that the Tribunal was thus
not correct in coming to the conclusion that Union of
India could not re-open the issue decided in the order
dated 07.07.2006 that revenue realised from activities
beyond the licensed activities cannot form part of the
Adjusted Gross Revenue when the said issue had been
raised by the Union of India in the Civil Appeal before
this Court. They further submitted that in any case the
Union of India had taken a specific ground in ground
No.4 of the Memorandum of Appeal in Civil Appeal No.84
of 2007 that the Tribunal had no jurisdiction or power to
examine the correctness of the terms of the license
which had been unconditionally accepted and acted
upon the licensee. They submitted that it is well settled
by decisions of this Court that the rule of res judicata or
estoppel is not applicable to pure question of law relating
to the jurisdiction of the court and in support of their
submissions cited the decisions of this Court in Isabella
Johnson vs. M.A. Susai (Dead) by LRs. [(1991) 1 SCC
15
494] and Chandrabhai K. Bhoir and Others vs. Krishna
Arjun Bhoir and Others [(2009) 2 SCC 315] in which this
Court has taken a view that an order without
jurisdiction is a nullity and it is not binding on the
parties. They argued that as the order dated 07.07.2006
of the Tribunal questioned the definition of Adjusted
Gross Revenue in the license agreement, the order of the
Tribunal was without jurisdiction and was a nullity.
9. Mr. Sorabjee and Mr. Dwivedi next submitted that
the Tribunal failed to appreciate that license fee or
payment made under the license agreement is really in
the nature of price or consideration for parting with the
exclusive privilege of the Central Government and is
binding on the Central Government and the licensee and
the licensee having signed the contract and agreed to the
terms and conditions therein including the payment to
be made cannot question the terms of the payment
before the Tribunal. They submitted that this Court has
consistently taken this view while deciding matters of
exclusive privilege of the Government in Har Shankar &
Ors. vs. The Deputy Excise & Taxation Commissioner &
16
Others [(1975) 1 SCC 737], Government of A.P. vs. M/s
Anabeshahi Wine & Distilleries Pvt. Ltd [(1988) 2 SCC
25], Assistant Excise Commissioner & Anr. vs. Issac Peter
& Ors. [(1994) 4 SCC 104], State of Orissa & Ors. vs.
Narain Prasad & Ors.[(1996) 5 SCC 740], State of M.P. &
Ors. vs. KCT Drinks Ltd. [(2003) 4 SCC 748] and State of
Punjab & Anr. vs. Devans Modern Breweries Ltd. & Ors.
[(2004) 11 SCC 26]
10. Mr. Sorabjee and Mr. Dwivedi further submitted that
the definitions of Gross Revenue and Adjusted Gross
Revenue are part of the package comprising the terms
and conditions of the license and a licensee cannot take
the license on the one hand and dispute the definitions
of Gross Revenue and Adjusted Gross Revenue on the
other hand. They submitted that if the licensee wants to
operate the telecom license he has to accept the
definitions of Gross Revenue and Adjusted Gross
Revenue for the purpose of computing the fee that he
will have to pay for the license to the Central
Government. They relied on the decisions of this Court
in Shyam Telelink Limited vs. Union of India [(2010) 10
17
SCC 165] and in Bharti Cellular Limited vs. Union of
India & Ors. [(2010) 10 SCC 174] for the proposition that
a person taking advantage under an instrument which
both grants a benefit and imposes the burden, cannot
take the benefit without discharging the burden.
11. Mr. Sorabjee and Mr. Dwivedi finally submitted that
under Section 11(1)(a)(ii) of the TRAI Act, 1977, the TRAI
makes recommendations, either suo motu or on a
request from the licensor, on the terms and conditions of
license to a service provider and the first proviso to
Section 11(1) of the TRAI Act clearly states that such
recommendations of the TRAI shall not be binding upon
the Central Government. They submitted that the
recommendations of the TRAI with regard to what heads
of revenue should be included and what heads of
revenue should be excluded from the Adjusted Gross
Revenue, therefore, are not binding on the Central
Government. They submitted that notwithstanding the
aforesaid clear statutory provision the Tribunal has
considered the recommendations of the TRAI and
accepted most of these recommendations,
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notwithstanding the fact that the Central Government
filed its objections to the recommendations of the TRAI
before the Tribunal and hence the impugned order of the
Tribunal is not sustainable in law.
12. Mr. C.S. Vaidyanathan, learned senior counsel
appearing for the Cellular Operators Association, which
is an association of some of the licensees, submitted that
the Tribunal in its earlier order dated 07.07.2006 had
merely interpreted the definition of Adjusted Gross
Revenue to cover revenue from all activities of the
licensee under the license and that the finding in its
order dated 07.07.2006 that revenue realized from
activities of the licensee which are beyond the licensed
activities cannot form part of the Adjusted Gross
Revenue for the purpose of license fee could not be re-
agitated after Civil Appeal No.84 of 2007 filed by the
Union of India against the order dated 07.07.2006 of
the Tribunal had been dismissed by this Court on
19.01.2007. In support of the submission, he relied on
K. Vidya Sagar v. State of U.P. and Others [(2005) 5
SCC 581] in which this Court has held that the reliefs
19
claimed by the petitioner under Article 32 of the
Constitution cannot be granted if he had claimed the
same reliefs in a writ petition filed in the High Court
under Article 226 of the Constitution and the writ
petition had been dismissed and the Special Leave
Petition preferred against the decision of the High Court
had also been disposed of by this Court with the
directions that he may ventilate his grievance in
accordance with law. He also relied on Indian Oil
Corporation Limited v. Collector of Central Excise, Baroda
[(2007) 13 SCC 803] wherein this Court has held that if
the Revenue had not appealed against an earlier order or
not pressed an earlier appeal involving an identical
issue, it was disentitled from pressing the appeal
involving the same question in a subsequent case.
13. Mr. Vaidyanathan next submitted that the TRAI
had opined that Adjusted Gross Revenue for the purpose
of levy of license fee shall mean the Gross Revenue
accruing to the licensee by way of operations mandated
under the license, but the Central Government had
rejected this opinion of the TRAI on 10.10.2000. He
20
submitted that this Court had held in Cellular Operators
Association of India & Ors. v. Union of India & Ors.
[(2003) 3 SCC 186] that the TRAI’s recommendations
have to be given weightage because the TRAI was a
specialized body and if the Central Government rejected
the recommendation of the TRAI, it has to be based on
logical and concrete reasoning. He submitted that the
recommendations of the TRAI that only revenues arising
out of the activities carried out under the license cannot
be found fault with and, therefore, the revenue realized
from non-telecom activities cannot form part of the
Adjusted Gross Revenue. He submitted that the view
taken by the Tribunal that the revenue realized from
activities outside the license of the licensee cannot be
included in the Adjusted Gross Revenue for the purpose
of levy of license fee is absolutely correct. He submitted
that under the proviso to Section 4 of the Telegraph Act,
the Central Government has the power to determine the
conditions including the payment for grant of license ‘as
it thinks fit’, but the expression ‘as it thinks fit’ does not
give a carte blanche to the Central Government to levy
21
license fee on non-telecom activities. He cited State of
U.P. v. Devi Dayal Singh [(2000) 3 SCC 5] in which Ruma
Pal, J. writing the judgment for the Court, interpreted
Section 2 of the Indian Tolls Act, 1851 which enables the
State Government to levy toll at such rates ‘as it thinks
fit’ and held that it is only with reference to the meaning
of the word ‘toll’ that the State Government must justify
the levy on the public by the construction of the bridge.
Mr. Vaidyanathan argued that the expression ‘as it
thinks fit’ in the proviso to Section 4 of the Telegraph Act
would therefore have to be interpreted in the context of
the license granted by the Central Government under
Section 4 of the Telegraph Act for telecom activities and
as the license granted under Section 4 of the Telegraph
Act is only for carrying on telecom activities, revenues
realized from non-telecom activities cannot be included
in the Adjusted Gross Revenue for the purpose of levy of
license fee.
14. Mr. Vaidyanathan next submitted that in any case
the discretion vested in the Central Government under
the proviso to Section 4 of the Telegraph Act has to be
22
exercised in accordance with law and in a reasonable
manner. In support of the submission, he cited the
decision in Delhi Science Forum and Others v. Union of
India [(1996) 2 SCC 405] in which this Court interpreting
the first proviso to Section 4(1) of the Telegraph Act held
that the power to grant license on such conditions and
for such considerations mentioned in the proviso to
Section 4(1) of the Telegraph Act can be exercised by the
Central Government only on well-settled principles and
norms which can satisfy the test of Article 14 of the
Constitution. He vehemently argued that the judgments
of this Court for grant of exclusive privilege for liquor
license cited by Mr. Sorabjee and Mr. Dwivedi have no
application to grant of a license under the proviso to
Section 4 of the Telegraph Act.
15. Mr. Vaidyanathan submitted that the appellants
have filed Civil Appeal Nos.1229-1230 of 2008 against
the impugned order of the Tribunal because they are
mainly aggrieved with the conclusion of the Tribunal in
the impugned order that the items which are to included
or excluded from the Adjusted Gross Revenue as
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recommended by the TRAI and as accepted by the
Tribunal would be effective from the date the licensee
approached the Tribunal. He submitted that the reliefs
granted by the Tribunal to the licensees should relate
back to the date of wrongdoing and in support of this
submission he relied on Kamla Bakshi v. Khairati Lal
[(2000) 3 SCC 681]. He submitted that the Tribunal
does not possess the power of prospective overruling
and, therefore, the impugned order of the Tribunal
should relate back to the date of the license agreement.
16. Mr. Shyam Diwan, learned counsel appearing for
the Reliance Communications Ltd. in Civil Appeal Nos.
9946-9961 of 2010 submitted that the orders dated
07.07.2006 and 30.08.2007 are really declaratory in
nature and are within the powers of the Tribunal and all
licensees are entitled to benefit from the aforesaid orders
of the Tribunal and this would ensure a level playing
field for all the licensees.
17. Mr. Ramji Srinivasan, learned counsel appearing
for the Association of Telecom Service Providers of India,
submitted that the Union of India is not right in its
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contention that the Tribunal did not have the
jurisdiction to pass the order dated 07.07.2006 holding
that revenue realized from activities by the licensee
which are beyond the licensed activities cannot form
part of the Adjusted Gross Revenue for the purpose of
license fee. He argued that Section 14 (a)(i) of the TRAI
Act conferred power on the Tribunal to adjudicate “any”
dispute between a licensor and a licensee and it is in
exercise of this power conferred by Section 14(a)(i) of the
TRAI Act that the Tribunal has passed the order dated
07.07.2006. He relied on the decision of this Court in
Union of India v. Tata Teleservices (Mahrashtra) Ltd.
[2007) 7 SCC 517] in support of this contention. He
submitted that the order dated 07.07.2006 of the
Tribunal was within the powers of the Tribunal and had
become final after the dismissal of Civil Appeal No.84 of
2007 of the Union of India by this Court on 19.01.2007.
18. Mr. Srinivasan next submitted that the fifth proviso
to Section 11(1) of the TRAI Act states that if the Central
Government having considered the recommendation of
the TRAI, comes to a prima facie conclusion that such
25
recommendation cannot be accepted or needs
modification, it shall refer the recommendation back to
the TRAI for its reconsideration and the TRAI may,
within fifteen days from the receipt of such reference,
forward to the Central Government its recommendation
after considering the reference made by the Central
Government and it is only after receipt of such further
recommendation, if any, of the TRAI that the Central
Government shall take a final decision. He submitted
that the Tribunal in its order dated 07.07.2006 has
found that the initial recommendation of the TRAI to
include only revenue derived from the licensee from the
licensed activities as part of the gross revenue was not
acceptable to the Central Government and hence the
Central Government referred the issue back to the TRAI
and the TRAI, after considering the views of the Central
Government, made some changes but in principle again
recommended that the gross revenue should be only that
revenue which was derived from the licensed activities.
He submitted that the Tribunal in its order dated
07.07.2006 has further found that this second
26
recommendation of the TRAI was not accepted by the
Central Government because it had obtained the opinion
of a renowned expert in accountancy, who advised the
Central Government that the definition of Adjusted
Gross Revenue should be such as to be less prone to
reduction of license fee liability by way of accounting
jugglery and something which is easy to verify. He
submitted that the Tribunal held in the order dated
07.07.2006 that this recommendation of the renowned
expert was not communicated to the TRAI and as a
result, the TRAI could not consider this opinion of the
renowned expert and give its views. He argued that the
Tribunal rightly held in the order dated 07.07.2006 that
the opinion of the renowned expert in accountancy not
having been placed before the TRAI has vitiated the
proceedings contemplated under Section 11(1)(a) of the
TRAI Act, which mandates the Central Government to
seek recommendations of the TRAI.
19. Mr. Srinivasan next submitted that the definition of
Adjusted Gross Revenue in the license agreement so as
to include in gross revenue items, which according to the
27
Accounting Standard 9 (nine), do not come within the
definition of revenue. He referred to the Format of
Statement of Revenue and License Fee (Appendix-II to
Annexure-II of the License Agreement) to show that the
licensee is required to give information in a statement on
various items which are not truly of a revenue nature
and which fall totally outside the licensed activities of
the telecom license.
20. Mr. Srinivasan submitted that since the Tribunal in
the impugned order confined the relief to the licensees
who had approached the Tribunal and that too with
effect from the date the licensees approached the
Tribunal, the Association of Telecom Service Providers of
India filed a Review Application before the Tribunal
praying that the relief granted by the Tribunal should be
extended to all members of the Association and that the
relief should be effective from the date of the demand
and not from the date the licensee approached the
Tribunal, but by order dated 14.09.2007 the Tribunal
dismissed the Review Application and, therefore, the
Association of Telecom Service Providers of India have
28
filed Civil Appeal Nos.179-180 of 2008. He vehemently
argued that the Tribunal ought to have granted the relief
to all members of the Association and should have made
the relief effective from the date of the agreement and not
from the date when the licensee approached the
Tribunal.
21. Mr. Gopal Jain, learned counsel appearing for M/s
Bharti Broadband, submitted that the Tribunal in its
order dated 07.07.2006 had already decided Petition No.
98 of 2005 of M/s Bharti Broadband and the Union of
India had not filed any appeal against M/s Bharti
Broadband and, therefore, the order dated 07.07.2006 of
the Tribunal so far as M/s Bharti Broadband is
concerned, had become final. He relied on a recent
judgment of this Court in State of Uttaranchal & Anr. v.
Sunil Kumar Vaish & Ors. in Civil Appeal No.5374 of
2005 saying that there must be finality to litigation. He
argued that general principles of res judicata should
apply in a proceeding before the Tribunal and the Union
of India cannot be permitted to raise the issues which
29
had been finally decided by the order dated 07.07.2006
of the Tribunal.
22. Mr. Jain next submitted that M/s Bharti
Broadband has filed Civil Appeal No.2065 of 2008
against the impugned order because it is aggrieved by
the conclusion of the Tribunal in the impugned order
that the reliefs granted in the impugned order to the
licensee will be effective from the date the licensee
approached the Tribunal. He relied on P.V. George v.
State of Kerala [(2007) 3 SCC 557] to contend that the
Tribunal does not have the power to give prospective
effect to its judgment. He argued that Bharti Broadband
should, therefore, be entitled to the reliefs with effect
from the date of demand i.e. 05.08.2005.
23. Mr. Vikas Singh, learned counsel appearing for M/s
Bharti Airtel, submitted that the order dated 07.07.2006
of the Tribunal had merged with the order dated
19.01.2007 of this Court in Civil Appeal No.84 of 2007
by which the Civil Appeal was dismissed and therefore
that in these appeals this Court cannot re-open the
issues which had been closed by the order dated
30
19.01.2007 passed in Civil Appeal No.84 of 2007. In
support of the submission, he relied on the decisions of
this Court in Kunhay Ahmed & Ors. v. State of Kerala &
Anr. [(2000) 6 SCC 359], Supreme Court Employees’
Welfare Association v. Union of India & Anr. [(1989) 4
SCC 187] and State of Manipur v. Thingujam Brojen
Meetei [(1996) 9 SCC 29]. He also relied on the decision
of this Court in Medley Pharmaceuticals Limited v.
Commissioner of Central Excise and Customs [(2011) 2
SCC 601] for the proposition that dismissal of an appeal
under Article 136 of the Constitution after grant of leave
by a non-speaking order attracted the doctrine of
merger.
24. We have considered the submissions of learned
counsel for the parties and we find that in Cellular
Operators Association of India & Ors. v. Union of India &
Ors. (supra) this Court considered the scope of the
appeal under Section 18 of the TRAI Act and held that
an appeal under Section 18 of the TRAI Act before this
Court has to be confined to only substantial questions of
law which arise out of the order of the Tribunal. We
31
have therefore formulated the following substantial
questions of law which arise for decision in these
appeals:
(i) Whether after dismissal of Civil Appeal No.84 of
2007 of the Union of India against the order dated
07.07.2006 of the Tribunal, by this Court by order dated
19.01.2007, the Union of India can re-agitate the
question decided in the order dated 07.07.2006 that the
Adjusted Gross Revenue will include only revenue
arising from licensed activities and not revenue from
activities outside the license of the licensee.
(ii) Whether the TRAI and the Tribunal have jurisdiction
to decide whether the terms and conditions of license
which had been finalised by the Central Government and
incorporated in the license agreement including the
definition of Adjusted Gross Revenue.
(iii) Whether as a result of the Union of India not filing
an appeal against the order dated 07.07.2006 of
the Tribunal passed in favour of some of the
licensees, the said order dated 07.07.2006 had
not become binding on the Union of India with
32
regard to the issue that revenue realised from
activities beyond the licensed activities cannot be
included in the Adjusted Gross Revenue.
(iv) Whether the licensee can challenge the
computation of Adjusted Gross Revenue, and if
so, at what stage and on what grounds.
25. 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
19.01.2007 against the order dated 07.07.2006 of the
Tribunal, the Union of India can re-agitate the question
decided in the order dated 07.07.2006 that the Adjusted
Gross Revenue will include only revenue arising from
licensed activities and not revenue from activities outside
the license of the licensee. For deciding this question,
we must first look at the language of the order dated
19.01.2007 of this Court in Civil Appeal No.84 of 2007.
The order dated 19.01.2007 is quoted hereinbelow:
“Heard the parties.
Pursuant to the direction of the TDSAT in the impugned order, a fresh recommendation has been made by the TRAI. In view thereof, we see no reasons to interfere. The appeal is dismissed. The appellant is, however,
33
given liberty to urge the contentions raised in this petition before the TDSAT.” (Emphasis Supplied)
It will be clear from the language of the order dated
19.01.2007 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.
26. In Civil Appeal No.84 of 2007, the Union of India
has urged 22 Grounds and Ground Nos.1 to 6 of the
Memorandum of Appeal are extracted hereibelow :
1.Because the judgment and order dated 7.7.2006 passed by the Hon’ble TDSAT is wrong, erroneous, contrary to law and deserves to be set aside.
2.Because the Hon’ble TDSAT failed to appreciate that the migration package accepted and acted upon by the respondents herein itself provided for definition of Gross Revenue and Adjusted Gross Revenue.
3.Because the Hon’ble TDSAT failed to appreciate that the license unconditionally accepted the migration package, exploited the licenses on the terms and conditions mentioned therein and thereafter challenged the definition of Adjusted Gross Revenue.
4.Because the Hon’ble TDSAT failed to appreciate that it had no jurisdiction or power to examine the correctness of terms of the license which
34
had been unconditionally accepted and acted upon by the licensee.
5.Because the Hon’ble TDSAT failed to appreciate that in fact some licensee obtained new license which contains the definition of ‘Gross Revenue’ and ‘Adjusted Gross Revenue’ which has been unconditionally accepted by the appellants.
6.Because the Hon’ble TDSAT failed to appreciate that under Section 4 of the Indian Telegraph Act, 1885 it is the exclusive privilege of the Central Government to establish, maintain and work telegraph/telecom and this privilege can be given to the private parties by granting licenses on such terms and conditions as the Central Government thinks fit and appropriate.”
Thus, as per the express language of the order dated
19.01.2007 of this Court in Civil Appeal No.84 of 2007,
Union of India could raise each of the grounds extracted
above before the Tribunal. Hence, even if we hold that
the order dated 07.07.2006 of the Tribunal got merged
with the order dated 19.01.2007 of this Court passed in
Civil Appeal No.84 of 2007, by the express liberty
granted by this Court in the order dated 19.01.2007,
Union of India could urge before the Tribunal all the
contentions covered under Ground Nos.1 to 6 extracted
above including the contention that the definition of
35
Adjusted Gross Revenue as given in the license could not
be challenged by the licensee before the Tribunal and
will include all items of revenue mentioned in the
definition of Adjusted Gross Revenue in the license.
27. The second substantial question of law which we
have to decide is whether the TRAI and the Tribunal had
jurisdiction to decide on the validity of the terms and
conditions of license including the definition of Adjusted
Gross Revenue finalised by the Central Government and
incorporated in the license. For deciding this question,
we must look at the provisions of Section 4(1) of the
Telegraph Act and the proviso thereto and the relevant
provisions of the TRAI Act which are quoted hereinbelow:
Section 4 (1) of the Telegraph Act:
“4. Exclusive privilege in respect of telegraphs, and power to grant licenses.—(1) Within India, the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs:
Provided that the Central Government may grant a license, on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of India.”
Relevant Provisions of the TRAI Act:
36
Section 2(e) “licensee” means any person licensed under sub-Section (1) of Section 4 of the Indian Telegraph Act, 1885 (13 of 1885) for providing specified public telecommunication services;
2 (ea) “licensor” means the Central Government or the telegraph authority who grants a license under Section 4 of the Indian Telegraph Act, 1885 (13 of 1885);
2 (k) “telecommunication service” means service of any description (including electronic mail, voice mail, data services, audio tax services, video tax services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means but shall not include broadcasting services:
[provided that the Central Government may notify other service to be telecommunication service including broadcasting services.]
“11(1). Functions of Authority.—(1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the functions of the Authority shall be to—
(a)make recommendations, either suo motu or on a request from the licensor, on the following matters, namely:-
(i) need and timing for introduction of new service provider;
(ii) terms and conditions of license to a service provider;
(iii) revocation of license for non-compliance of terms and conditions of license;
(iv) measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services;
37
(v) technological improvements in the services provided by the service providers;
(vi) type of equipment to be used by the service providers after inspection of equipment used in the network;
(vii) measures for the development of telecommunication technology and any other matter relatable to telecommunication industry in general;
(viii) efficient management of available spectrum;
(b) discharge the following functions, namely, :-
(i) ensure compliance of terms and conditions of licence;
(ii) notwithstanding anything contained in the terms and conditions of the license granted before the commencement of the Telecom Regulatory Authority of India (Amendment) Act, 2000, fix the terms and conditions of inter-connectivity between the service providers;
(iii) ensure technical compatibility and effective inter- connection between different service providers;
(iv) regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services;
(v) lay down the standards of quality of service to be provided by the service providers and ensure the quality of service and conduct the periodical survey of such service provided by the service providers so as to protect interest of the consumers of telecommunication service;
(vi) lay down and ensure the time period for providing local and long distance circuits of telecommunication between different service providers;
38
(vii) maintain register of interconnect agreements and of all such other matters as may be provided in the regulations;
(viii) keep register maintained under clause (vii) open for inspection to any member of public on payment of such fee and compliance of such other requirements as may be provided in the regulations; (ix) ensure effective compliance of universal service obligations;
(c) levy fees and other charges at such rates and in respect of such services as may be determined by regulations;
(d) perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act.
Provided that the recommendations of the Authority specified in clause (a) of this sub-section shall not be binding upon the Central Government.
Provided further that the Central Government shall seek the recommendations of the Authority in respect of matters specified in sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of new license to be issued to a service provider and the Authority shall forward its recommendations within a period of sixty days from the date on which that Government sought the recommendations:
Provided also that the Authority may request the Central Government to furnish such information or documents as may be necessary for the purpose of making recommendations under sub-clauses (i) and (ii) of clause (a) of this sub-section and that Government shall supply such information within a period of seven days from receipt of such request:
39
Provided also that the Central Government may issue a license to a service provider if no recommendations are received from the Authority within the period specified in the second proviso or within such period as may be mutually agreed upon between the Central Government and the Authority:
Provided also that if the Central Government having considered that recommendation of the Authority, comes to a prima facie conclusion that such recommendation cannot be accepted or needs modification, it shall refer the recommendation back to the Authority for its reconsideration, and the Authority may, within fifteen days from the date of receipt of such reference, forward to the Central Government its recommendation after considering the reference made by that Government. After receipt of further recommendation, if any, the Central Government shall take a final decision.”
“14(a)(i). 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—
(i) between a licensor and a licensee.”
28. A bare perusal of sub-section (1) of Section 4 of the
Telegraph Act shows that the Central Government has
the exclusive privilege of establishing, maintaining and
working telegraphs. This would mean that only the
Central Government, and no other person, has the right
to carry on telecommunication activities. Interpreting
the expression “exclusive privilege” of State Government
40
under the State Excise Act to sell liquor, this Court has
held in State of Orissa and Others v. Harinarayan
Jaiswal and Others [(1972) 2 SCC 36]:
“the fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Article 19(1)(g) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government – nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights.”
This position of law has been reiterated by this Court in
Har Shankar & Ors. v. The Deputy Excise & Taxation
Commissioner & Others (supra) and in subsequent
decisions of this Court.
29. 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 license 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
41
right to part with this privilege in favour of any person
by granting a license in his favour on such conditions
and in consideration of such terms as it thinks fit, a
license granted under 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. A Constitution Bench of this Court in State of
Punjab & Anr. v. Devans Modern Breweries Ltd. & Ors.
(supra), relying on Har Shankar’s case and Panna Lal v.
State of Rajasthan [(1975) 2 SCC 633], has held in para
121 at page 106 that issuance of liquor license
constitutes a contract between the parties. Thus, once a
license is issued under proviso to sub-section (1) of
Section 4 of the Telegraph Act, the license becomes a
contract between the licensor and the licensee.
Consequently, the terms and conditions of the license
including the definition of Adjusted Gross Revenue in
the license agreement are part of a contract between the
licensor and the licensee.
30. We have to, however, consider whether the
enactment of the TRAI Act in 1997 has in any way
42
affected the exclusive privilege of the Central
Government in respect of the telecommunication
activities and altered the contractual nature of the
license granted to the licensee under the proviso to sub-
section (1) of Section 4 of the Telegraph Act. Section 2(e)
of the TRAI Act quoted above defines “licensee” to mean
any person licensed under sub-Section (1) of Section 4 of
the Telegraph Act for providing specified public
telecommunication services and Section 2(ea) defines
“licensor” to mean the Central Government or the
telegraph authority who grants a license under Section 4
of the Telegraph Act. Sub-section 2(k) defines
“telecommunication services” very widely so as to
include all kinds of telecommunication activities. These
provisions under the TRAI Act do not affect the exclusive
privilege of the Central Government to carry on
telecommunication activities nor do they alter the
contractual nature of the license granted under the
proviso to sub-section (1) of Section 4 of the Telegraph
Act.
43
31. Section 11(1)(a)(ii) of the TRAI Act states that
notwithstanding anything contained in the Telegraph
Act, the TRAI shall have the function to make
recommendations, either suo motu or on a request from
a licensor on terms and conditions of license to a service
provider. The first proviso, however, states that the
recommendations of the TRAI shall not be binding upon
the Central Government. The second, third, fourth and
fifth provisos deal with the procedure that has to be
followed by the TRAI and the Central Government with
regard to recommendations of the TRAI. At the end of
fifth proviso, it is stated that after receipt of further
recommendation, if any, the Central Government shall
take the final decision. These provisions in the TRAI Act
show that notwithstanding sub-section (1) of Section 4 of
the Telegraph Act vesting exclusive privilege on the
Central Government in respect of telecommunication
activities and notwithstanding the proviso to sub-section
(1) of Section 4 of the Telegraph Act vesting in the
Central Government the power to decide on the
conditions of license including the payment to be paid by
44
the licensee for the license, the TRAI has been conferred
with the statutory power to make recommendations on
the terms and conditions of the license to a service
provider and the Central Government was bound to seek
the recommendations of the TRAI on such terms and
conditions at different stages, but the recommendations
of the TRAI are not binding on the Central Government
and the final decision on the terms and conditions of a
license to a service provider rested with the Central
Government. The legal consequence is that if there is a
difference between the TRAI and the Central Government
with regard to a particular term or condition of a license,
as in the present case, the recommendations of the TRAI
will not prevail and instead the decision of the Central
Government will be final and binding.
32. In contrast to this recommendatory nature of the
functions of the TRAI under clause (a) of sub-section (1)
of Section 11 of the TRAI Act, the functions of the TRAI
under clause (b) of sub-section (1) of Section 11 of the
TRAI Act are not recommendatory. This will be clear
from the very language of clause (b) of sub-section (1) of
45
Section 11 of the TRAI Act which states that the TRAI
shall discharge the functions enumerated under sub-
clauses (i), (ii) and (ix) under clause (b) of sub-section (1)
of Section 11 of the TRAI Act. Under clause (c) of sub-
section (1) of Section 11 of the TRAI Act, the TRAI
performs the function of levying fees and other charges
in respect of different services and under clause (d) of
sub-section (1) of Section 11, the Central Government
can entrust to the TRAI other functions. These functions
of the TRAI under clauses (c) and (d) of sub-section (1) of
Section 11 of the TRAI Act are also not recommendatory
in nature. That the functions of the TRAI under clause
(a) are recommendatory while the functions of the TRAI
under clauses (b), (c) and (d) are not recommendatory
will also be clear from the provisos 1st to 5th which refer
to the recommendations of the TRAI under clause (a) of
sub-section (1) of Section 11 of the TRAI Act and not to
clauses (b), (c) and (d) of sub-section (1) of Section 11 of
the TRAI Act. The scheme of TRAI Act therefore is that
the TRAI being an expert body discharges
recommendatory functions under clause (a) of sub-
46
section (1) of Section 11 of the TRAI Act and discharges
regulatory and other functions under clauses (b), (c) and
(d) of sub-section (1) of Section 11 of the TRAI Act. TRAI
being an expert body, the recommendations of the TRAI
under clause (a) of sub-section (1) of Section 11 of the
TRAI Act have to be given due weightage by the Central
Government but the recommendations of the TRAI are
not binding on the Central Government. On the other
hand, the regulatory and other functions under clauses
(b), (c) and (d) of sub-section (1) of Section 11 of the TRAI
Act have to be performed independent of the Central
Government and are binding on the licensee subject to
only appeal in accordance with the provisions of the
TRAI Act.
33. A reading of Section 14 (a)(i) of the TRAI Act would
show that the Tribunal has the power to adjudicate any
dispute between a licensor and a licensee. A licensor, as
we have seen, has been defined under Section 2(ea) of
TRAI Act to mean the Central Government or the
Telegraph Authority who grants a license under Section
4 of the Telegraph Act and a licensee has been defined in
47
Section 2(e) of the TRAI Act to mean any person licensed
under sub-section (1) of Section 4 of the Telegraph Act
providing specified telecommunication services. The
word ‘means’ in Sections 2(e) and 2(ea) of the TRAI Act
indicates that the definitions of licensee and licensor in
Sections 2(e) and 2(ea) of the TRAI Act are exhaustive
and therefore would not have any other meaning. As
Justice G.P. Singh puts it in his book ‘Principles of
Statutory Interpretation’ 12th Edition at pages 179-180:
“when a word is defined to ‘mean’ such and such, the definition is prima facie restrictive and exhaustive .…”.
A dispute between a licensor and a licensee referred to in
Section 14(a)(i) of the TRAI Act, therefore, is a dispute
after a person has been granted a license by the Central
Government or the Telegraph Authority under sub-
section (1) of Section 4 of the Telegraph Act and has
become a licensee and not a dispute before a person
becomes a licensee under the proviso to sub-section (1)
of Section 4 of the Telegraph Act. In other words, the
Tribunal can adjudicate the dispute between a licensor
and a licensee only after a person had entered into a
48
license agreement and become a licensee and the word
“any” in Section 14(a) of the TRAI Act cannot widen the
jurisdiction of the Tribunal to decide a dispute between a
licensor and a person who had not become a licensee.
The result is that the Tribunal has no jurisdiction to
decide upon the validity of the terms and conditions
incorporated in the license of a service provider, but it
will have jurisdiction to decide “any” dispute between the
licensor and the licensee on the interpretation of the
terms and conditions of the license.
34. Coming now to the facts of the cases before us,
clause (iii) of the letter dated 22.07.1999 of the
Government of India, Ministry of Communications,
Department of Telecommunications, to the licensees
quoted above made it clear that the license fee was
payable with effect from 01.08.1999 as a percentage of
gross revenue under the license and the gross revenue
for this purpose would be total revenue of the licensee
company excluding the PSTN related call charges paid to
DOT/MTNL and service tax calculated by the licensee on
behalf of the Government from the subscribers. It was
49
also made clear in the aforesaid clause (iii) that the
Government was to take a final decision after receipt of
the TRAI’s recommendation on not only the percentage
of revenue share but also the definition of revenue. In
accordance with this clause (iii) the Government took the
final decision on the definition of Adjusted Gross
Revenue and incorporated the same in the license
agreement. Once the licensee had accepted clause (iii) of
the letter dated 22.07.1999 that the license fee would be
a percentage of gross revenue which would be the total
revenue of the licensee company and had also accepted
that the Government would take a final decision not only
with regard to the percentage of revenue share but also
the definition of revenue for this purpose, the licensee
could not have approached the Tribunal questioning the
validity of the definition of Adjusted Gross Revenue in
license agreement on the ground that Adjusted Gross
Revenue cannot include revenue from activities beyond
the license. If the wide definition of Adjusted Gross
Revenue so as to include revenue beyond the license was
in any way going to affect the licensee, it was open for
50
the licensees not to undertake activities for which they
do not require license under clause (4) of the Telegraph
Act and transfer these activities to any other person or
firm or company. The incorporation of the definition of
Adjusted Gross Revenue in the license agreement was
part of the terms regarding payment which had been
decided upon by the Central Government as a
consideration for parting with its rights of exclusive
privilege in respect of telecommunication activities and
having accepted the license and availed the exclusive
privilege of the Central Government to carry on
telecommunication activities, the licensees could not
have approached the Tribunal for an alteration of the
definition of Adjusted Gross Revenue in the license
agreement.
35. Regarding the recommendations of the TRAI under
Section 11(1)(a)(i) of the TRAI Act, we find that the
Tribunal in its order dated 07.07.2006 has held that the
opinion of the renowned expert in the accountancy that
any other definition of Adjusted Gross Revenue would
lead to reduction of license fee liability by way of
51
accounting jugglery was not placed before the TRAI and
as a result there was no proper and effective
consultation with the TRAI and the weightage that was
due to the recommendations of the TRAI was not given
effect to. In our considered opinion, if the Tribunal
found that there was no effective consultation with the
TRAI on the opinion of the expert on accountancy, the
Tribunal could have at best, if it had the jurisdiction to
decide the dispute, directed the TRAI to consider the
opinion of the expert on accountancy and send its
recommendations to the Central Government and
directed the Central Government to consider such fresh
recommendations of the TRAI as provided in the provisos
to section 11(1) of the TRAI Act. Instead the Tribunal
has considered the recommendations of the TRAI and
passed the fresh impugned order dated 30.08.2007
contrary to the very provisions of Section 11(1)(a) of the
TRAI Act and the provisos thereto. At any rate, as the
Central Government has already considered the fresh
recommendations of the TRAI and has not accepted the
same and is not agreeable to alter the definition of
52
Adjusted Gross Revenue, the decision of the Central
Government on the point was final under the first
proviso and the fifth proviso to Section 11(1) of the TRAI
Act, 1997.
36. We may now deal with the authorities relied upon by
the Tribunal and learned counsel for the parties. In
Cellular Operators Association of India & Ors. v. Union of
India & Ors. (supra), the Cellular Operators Association
of India approached the Tribunal under Section 14 of the
TRAI Act challenging the decisions of the Government
permitting the fixed service providers to offer WLL with
limited mobility and the recommendations of the TRAI in
this regard. The Tribunal dismissed the application and
the Cellular Operators filed an appeal under Section 18
of the TRAI Act before this Court. This Court held that
WLL with limited mobility as recommended by the TRAI
could be permitted if the question of level playing field of
the Cellular Operators was duly considered and they
were duly compensated but the Tribunal had not
considered the relevant materials on this issue and had
only arrived at a bald conclusion that the Cellular
53
Operators have already been compensated in various
ways. With these findings, this Court set aside the
decision of the Tribunal and remitted the matter to the
Tribunal for reconsideration with special emphasis on
the question of level playing field on the basis of the
materials already on record. In this decision, this Court
was not called upon to consider whether a licensee
having accepted the terms of the license could challenge
before the Tribunal the validity of a clause in the terms
of license and whether the Tribunal would have
jurisdiction to decide such a challenge.
37. In Delhi Science Forum and Others v. Union of
India (supra) after the National Telecom Policy, 1994 was
announced for inducting the private sector into basic
telephone services and notice was published inviting
tenders from private parties and tenders were submitted
for different circles, but before licenses could be granted
by the Central Government, writ petitions were filed in
different High Courts as well as in this Court and all the
writ petitions filed before different High Courts were
transferred to this Court and heard together. The Writ
54
Petitioners questioned the validity and propriety of the
new telecom policy saying that it shall endanger the
national security of the country and shall not serve the
economic interest of the nation. This Court while
upholding the new Telecom Policy held that the proviso
to sub-section (1) of Section 4 of the Telegraph Act
enables the Central Government to grant license to
private bodies, but such power should be exercised on
well-settled principles and norms which can satisfy the
test of Article 14 of the Constitution. Thus, this is not a
case like the present one, in which the licensees having
accepted the terms of the license have challenged the
definition of Adjusted Gross Revenue incorporated in the
terms of the license.
38. In State of U.P. v. Devi Dayal Singh (supra), a truck
owner, Devi Dayal Singh, challenged the right of the
State Government to recover by way of toll under Section
2 of the Tolls Act, 1851, an amount for the actual
construction of the bridge. This Court held that Section
2 of the Tolls Act, 1851 which enables the State
Government to levy toll at such rates ‘as it thinks fit’ and
55
the only restriction is latent in the word “toll” itself. This
was therefore not a case of dispute between the
Government and the contractor where the contractor
had challenged a stipulation of the contract. In the
present case, on the other hand, the licensees had
accepted the terms of the license and after having taken
the benefits of the license is now trying to wriggle out
from the terms of the license and in particular the
definition of the Adjusted Gross Revenue.
39. In Union of India v. Tata Teleservices (Mahrashtra)
Ltd. (supra) cited by Mr. Srinivasan, a letter of intent was
issued to Tata Teleservices and this was accepted by
Tata Teleservices but ultimately the contract did not
come into being and the license was not actually
granted. The Union of India suffered a considerable loss
because Tata Teleservices had walked out of the
obligation undertaken by the acceptance of the letter of
intent. The Additional Solicitor General appearing for
the Union of India submitted that such a dispute would
also come within the purview of Section 14 of the TRAI
Act, going by the definition of licensee and the meaning
56
given to it in the notice inviting tenders. The Tribunal
held that expression “licensor” or “licensee” occurring in
Section 14 (a)(i) of the TRAI Act would not exclude a
person who had been given a letter of intent and 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. This was thus a case where this Court
treated a person who had accepted the letter of intent of
the licensor as a licensee, although a formal contract
had not entered into. In this case this Court has not
held that a licensee could dispute the validity of a term
or condition which was incorporated in the license
agreement.
40. On the other hand, we find from the long line of
decisions in Har Shankar & Ors. vs. The Deputy Excise &
Taxation Commissioner & Others (supra), Government of
A.P. vs. M/s Anabeshahi Wine & Distilleries Pvt. Ltd
(supra), Assistant Excise Commissioner & Anr. vs. Issac
Peter & Ors. (supra), State of Orissa & Ors. vs. Narain
Prasad & Ors. (supra), State of M.P. & Ors. vs. KCT
57
Drinks Ltd. (supra), State of Punjab & Anr. vs. Devans
Modern Breweries Ltd. & Ors. (supra), Shyam Telelink
Limited vs. Union of India (supra) and in Bharti Cellular
Limited vs. Union of India & Ors. (supra), that this Court
has consistently taken a view that once a licensee has
accepted the terms and conditions of a license, he
cannot question the validity of the terms and conditions
of the license before the Court. We, therefore, hold that
the TRAI and the Tribunal had no jurisdiction to decide
on the validity of the definition of Adjusted Gross
Revenue in the license agreement and to exclude certain
items of revenue which were included in the definition of
Adjusted Gross Revenue in the license agreement
between the licensor and the licensee.
41. The next substantial question of law which we have
to decide is whether as a result of Union of India not
filing an appeal against the order dated 07.07.2006 in
favour of some of licensees, the order dated 07.07.2006
had not become binding on the Union of India with
regard to issues which had been decided by the Tribunal
in the said order dated 07.07.2006. According to the
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learned counsel for the licensees in whose favour order
dated 07.07.2006 has been passed and against whom no
appeal was filed by the Union of India challenging the
order dated 07.07.2006, the order dated 07.07.2006 of
the Tribunal could not be re-opened because of the
principle of res judicata. In the opening paragraph of the
order dated 07.07.2006, the Tribunal has stated:
“By this batch of petitions the Association of Unified Telecom Service Providers of India, Cellular Operators Association of India and some individual Telecommunication Service Providers are questioning the validity of the definition of Adjusted Gross Revenue (AGR) in the licenses given to various telecom service providers.”
Finally, in the operative part of the order dated
07.07.2006, the Tribunal has directed as follows:
“Apart from the principal question whether the State Government can include the gross income of the licensee from non-licensed activity in the AGR; the petitioners have also challenged individually the various components of AGR as enumerated in the licence.
In view of the fact we have come to the conclusion that there has not been an effective consultation with the TRAI which is mandatory under the TRAI Act, we think we should not further delve into the exercise of finding out which component of the AGR, as defined by the Government in the conditions of licence, deserves to be retained and which component which the petitioners contend is not derived from the licensed revenue of the licensee should be excluded at this stage. We think it more appropriate that the matter should be remanded to
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the TRAI which is the 3rd Respondent herein, before whom the Government should produce the material relied by it while rejecting TRAI’s recommendation so that TRAI can consider the same and send its conclusions to this Tribunal and thereafter, this Tribunal will have the benefit of a comprehensive recommendation of the TRAI after considering the materials relied upon by the Government. While forming its conclusions the TRAI shall hear the Government as well as the licensees and consider the materials that may be placed before it by either side. In this process it is not necessary for the TRAI to hold fresh consultative proceeding unless it thinks necessary. During this proceeding before the TRAI the petitioners shall place before it their contentions in regard to the various components of AGR which they have challenged before this Tribunal and the TRAI after hearing the Government on this issue also, send its recommendations to this Tribunal preferably within three months of the receipt of this order.
Further, while considering the issue now remitted to the TRAI, the TRAI will bear in mind our finding in regard to the inclusion in gross revenue of the licensee revenue derived from non-licensed activities…...”
Thus, the Tribunal in its order dated 07.07.2006 has not
just decided a dispute on the interpretation of Adjusted
Gross Revenue in the license, but has decided on the
validity of the definition of Adjusted Gross Revenue in
the license. As we have already held, the Tribunal had
no jurisdiction to decide on the validity of the terms and
conditions of the license including the definition of
Adjusted Gross Revenue incorporated in the license
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agreement. Hence, the order dated 07.07.2006 of the
Tribunal in so far as it decides that revenue realized by
the licensee from activities beyond the license will be
excluded from Adjusted Gross Revenue dehors the
definition of Adjusted Gross Revenue in the license
agreement is without jurisdiction and is a nullity and the
principle of res judicata will not apply. In Chandrabhai
K. Bhoir and Others vs. Krishna Arjun Bhoir and Others
(supra) this Court relying on Chief Justice of A.P. vs.
L.V.A. Dixitulu [(1979) 2 SCC 34, Union of India vs.
Pramod Gupta [(2005) 12 SCC 1] and National Institute of
Technology vs. Niraj Kumar Singh [(2007) 2 SCC 481] has
held:
“an order passed without jurisdiction would be a nullity. It will be a coram non judice and non est in the eye of the law. Principle of res judicata would not apply to such cases”.
We accordingly hold that the order dated 07.07.2006 of
the Tribunal was not binding on the Union of India even
in those cases in which the Union of India did not file
any appeal against the order dated 07.07.2006 before
this Court.
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42. The last substantial question of law which we have
to decide is whether the licensee can challenge the
computation of Adjusted Gross Revenue and if so at
what stage and on what grounds. Section 14 (a)(i) of the
TRAI Act, as we have seen, provides that the Tribunal
can adjudicate any dispute between the licensor and the
licensee. One such dispute can be that the computation
of Adjusted Gross Revenue made by the licensor and the
demand raised on the basis of such computation is not
in accordance with the license agreement. This dispute
however can be raised by the licensee, after the license
agreement has been entered into and the appropriate
stage when the dispute can be raised is when a
particular demand is raised on the licensee by the
licensor. When such a dispute is raised against a
particular demand, the Tribunal will have to go into the
facts and materials on the basis of which the demand is
raised and decide whether the demand is in accordance
with the license agreement and in particular the
definition of Adjusted Gross Revenue in the license
agreement and can also interpret the terms and
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conditions of the license agreement. We, however, find
from the order dated 07.07.2006 that instead of
challenging any demands made on them, the licensees
have questioned the validity of the definition of Adjusted
Gross Revenue in the licenses given to them and the
Tribunal has finally decided in its order dated
30.08.2007 as to what items of revenue would be part of
Adjusted Gross Revenue and what items of revenue
would not be part of Adjusted Gross Revenue without
going into the facts and materials relating to the demand
on a particular licensee.
43. In the result, we allow these appeals and set aside
the impugned order dated 30.08.2007 of the Tribunal.
There shall be no order as to costs.
CIVIL APPEAL Nos. 2479 of 2008, 1552 of 2009, 7049 of 2010, 7062 of 2010, 7063-7064 of 2010, 7443 of 2010, 7446 of 2010, 7126 of 2010, 7444 of 2010, 7445 of 2010, 9646-9661 of 2010, 2030 of 2011, 2031 of 2011, 2270 of 2011, 3245 of 2011, 5450-5451 of 2011, CIVIL APPEALS ARISING OUT OF SLP (C) Nos. 1786-1787 OF 2009 AND CIVIL APPEALS ARISING OUT OF SLP (C) Nos. 6641-6642 OF 2010:
Leave granted in Special Leave Petitions.
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2. In these appeals, different orders of the Tribunal
have been impugned. The orders of the Tribunal, which
have been impugned, are based on the order dated
30.08.2007 of the Tribunal which we have set aside.
The orders impugned in these appeals are, therefore, set
aside and the matters are remitted to the Tribunal to
pass fresh orders in accordance with law.
3. The appeals stand disposed of accordingly with no
order as to costs.
.……………………….J. (R. V. Raveendran)
………………………..J. (A. K. Patnaik) New Delhi, October 11, 2011.
Reportable IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5059 OF 2007
Union of India & Anr. … Appellants
Versus
Association of Unified Telecom Service Providers of India & Ors. … Respondents
WITH
CIVIL APPEAL NOs.179-180 OF 2008, 363 of 2008, 1229- 1230 of 2008, 2065 of 2008, 2479 of 2008, 1552 of 2009, 3868 of 2009, 7049 of 2010, 7062 of 2010, 7063- 7064 of 2010, 7443 of 2010, 7446 of 2010, 7126 of 2010, 7444 of 2010, 7445 of 2010, 9646-9661 of 2010,
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2030 of 2011, 2031 of 2011, 2270 of 2011, 3245 of 2011, 5450-5451 of 2011, 311-314 & 317-318 of 2008, CIVIL APPEAL Nos. 8627-8628 OF 2011 (Arising out of SLP (C) Nos. 1786-1787 of 2009) AND CIVIL APPEAL Nos. 8625-8626 OF 2011 (Arising out of SLP (C) Nos. 6641- 6642 of 2010)
SUPPLEMENTARY ORDER
We have delivered today the judgment in these
cases and while answering the last substantial
question of law, we have held that when a particular
demand is raised on a licencee, the licensee can
challenge the demand before the Tribunal and the
Tribunal will have to go into the facts and materials
on the basis of which the demand is raised and decide
whether the demand is in accordance with the license
agreement and in particular the definition of
Adjusted Gross Revenue in the license agreement and
can also interpret the terms and conditions of the
license agreement.
2. It is stated by Mr. C.S. Vaidyanathan, learned
senior counsel for some of the licencees that demands
have already been raised on them. He submitted that
two months' time be granted to the licencees to raise
their disputes before the Tribunal and in the
meanwhile the demands should not be enforced.
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3. If the demands have been raised, we grant two
months' time to the licencees to raise the dispute
before the Tribunal against the demands and during
this period of two months, the demands will not be
enforced.
......................J. ( R.V. RAVEENDRAN )
New Delhi; ......................J. October 11, 2011. ( A.K. PATNAIK )
66